Business

AMMAN — Lufthansa’s Amman route is in rude health despite continued unrest in parts of the Middle East and a tough economic climate for the aviation industry, according to the German carrier’s director of communications, Aage Duenhaupt.

“Jordan has been a safe haven”, Duenhaupt said , announcing a 5 per cent year-on-year rise in passengers number on the Amman route for 2013 during the Jordan leg of a whistle stop tour of Lufthansa’s Middle East operations.

He revealed that there has been a noticeable shift in tourist numbers travelling to Jordan in lieu of Egypt, and that Oman has also benefited from increased tourism owing to continued Arab Spring unrest.

With over a million passengers travelling from the region to Germany, Europe and beyond, 2013 has been a record year for Lufthansa’s operations, while the Amman route has accounted for 100,000 passengers in 2013, he pointed out.

With no safety or security concerns in flying to Jordan, Duenhaupt anticipates a similar 5 per cent rise in 2014 stressing that Lufthansa will be looking to develop the Amman route to attract more tourists from Germany and Europe, as well as expanding its Amman to North America — via Frankfurt — routes, which proved to be particularly popular. 

While 700 flights on the Amman route in 2014, Duenhaupt said that if all goes well and it is economically viable, Lufthansa would be open to operating more flights in future. 

While there has been some decline in tourist passengers for some regional destinations, Duenhaupt stressed that the Jordanian route has grown in terms of both tourist and business passengers and that there is “much optimism in our operations in Amman”. 

Maha Lueck, Lufthansa general manager in Jordan, said: “We have to focus on Jordan as a single destination” rather than as part of a multistop regional destination, in light of prevailing conditions in Egypt and Syria. 

Duenhaupt said Jordan’s weather, cultural heritage and safety are in its favour, while Lueck added that the country’s religious sites and that no vaccinations are needed, make it an attractive all-year tourist destination for Europeans.

According to Duenhaupt, Lufthansa carries a high proportion of business travellers to Amman, as does its Austrian Airlines subsidiary, which also benefits from strong relationships between Austria and the Middle East.

In reference to Easyjet’s recent withdrawal from Amman, Duenhaupt underlined the German legacy airline’s confidence in and commitment to the Jordanian route, and reliability for passengers, stating that “our approach is different. We have been here since 1976 and are here to stay” and that “we have always been reliable partners, not like other airlines who shift quickly if the financial environment is changing”.  

Stating that Lufthansa has a different philosophy and business model to budget carriers, Duenhaupt explained that airlines like Easyjet rely on a “monothematic” approach of flying passengers in and out of one location, with only one destination from Amman, while Lufthansa offers over 200 destinations out of Jordan. 

Duenhaupt explained that Lufthansa fills their plane differently, with a multidestination approach, where Frankfurt is a springboard or connection hub to other destinations, while Lueck added that “Lufthansa offers more connections to Europe, North America and beyond than any other carrier. 

Duenhaupt indicated that the airline’s Jordan route is popular with business travellers, who account for 30 per cent of flyers, and generating more money than the 70 per cent leisure travellers.

On the issue of airport fees and recently raised ticket taxes, Duenhaupt said Lufthansa certainly looks to minimise such costs as much as possible within an international framework, but that low cost airlines might have unrealistic expectations for exemptions. 

He added that Lufthansa is always interested in good infrastructure and that the new Queen Alia International Airport (QAIA) building seems impressive. 

Asked about his view of QAIA becoming a regional hub, Duenhaupt described the new airport as an important milestone in that direction, but that government investment is necessary. 

Citing Dubai’ and Istanbul’s meteoric rise to regional hub status in around 10 years compared to European airports’ average 30-40 years in the past, Duenhaupt wondered about how often this could happen.

DUBAI — Iran’s parliament has approved politically sensitive plans to slash subsidies on fuel and food, but delayed implementation for several months while authorities try to soften the blow to consumers by handing out food packages. 

A clause in the budget bill for next fiscal year, which starts in late March, calls for steep price increases to save 630 trillion riyals ($25.3 billion at the official exchange rate) annually in subsidy payments. 

The clause was passed by members of parliament on Tuesday, Iranian media reported, marking a political victory for President Hassan Rouhani, who took power last August after elections and has vowed to reform Iran’s chaotic finances.

Rouhani’s predecessor, Mahmoud Ahmadinejad, began a programme of cutting subsidies but was forced to suspend plans for further reductions in 2012 because of strong opposition in parliament.

Iran’s finances have been under heavy pressure because of international economic sanctions imposed over its disputed nuclear programme and also, Ahmadinejad’s critics say, because of his erratic management.

Last August, officials said the government faced a shortfall of one-third in the current fiscal year’s budget because of lower-than-expected revenues, and it was forced to revise its spending plans.

Parliament’s vote on Tuesday gave the government until the end of June to push through its subsidy reforms. About 83 per cent of the money saved would come from fuel price rises.

“With implementation of this bill on June 20, fuel prices will be multiplied,” member of parliament Nader Ghazipour was quoted by Iranian news agencies as saying. 

To soften the blow, the government has started handing out food packages — including two frozen chickens, 36 eggs and two packs of processed cheese — to over 15 million families earning less than five million riyals a month, Iranian media reported this week.

Rouhani’s government has become increasingly critical of the damage which the multibillion dollar subsidy programme does to Iran’s ability to invest in projects seen as vital for future growth. 

Oil industry officials complain that state-run fuel retailers, who bear the brunt of subsidy costs, cannot continue operating without changes to the system.

Iranian motorists paid an average of just $0.33 a litre ($1.25 per gallon) for fuel in 2012, compared with a global average of $1.41 per litre, according to World Bank data. 

Next fiscal year’s subsidy reforms are expected to bring the Iranian price closer to global levels, but not all the way.

The government’s proposed budget for next fiscal year envisages about $80 billion of spending, calculated with the official exchange rate. Parliament is currently reviewing the proposal clause by clause.

BRUSSELS — Corruption across the European Union’s (EU) 28 countries costs some 120 billion euros ($162 billion) per year, almost the size of the Romanian economy, the European Commission pointed out Monday, urging member states to do more to stamp out the problem.

According to EU’s Home Affairs Commissioner Cecilia Malmstroem, the actual figure could be even higher, despite amounting to the EU’s entire annual budget or a little less than one per cent of the bloc’s total economic output.

“This is an estimation,” Malmstroem said as she presented the report, the bloc’s first, “so probably it is much higher”.

The report will hopefully “spur the political will and the necessary commitment at all levels to address corruption more effectively across Europe”, she added. “The price of not acting is simply too high.”

The report does not rank the countries as to the seriousness of the problem nor suggest legal remedies, with Malmstroem saying that could follow after talks with member states.

But “one thing is very clear — there is no ‘corruption-free’ zone in Europe,” she said.

The report reviews how existing laws and policies work and suggests what further effort could be made.

According the European Commission s survey, corruption is a problem for almost half the companies doing business in Europe, and an increasing number of EU citizens think it is getting worse.

The report places the EU, often portrayed as one of the globe’s cleanest regions, in an unflattering light. Among businesses, belief is widespread that the only way to succeed is through political connections.

Experiences of corruption vary across the 28-country bloc. Almost all companies in Greece, Spain and Italy believe it is widespread, according to the report, the first by the commission. Corruption is considered rare in Denmark, Finland and Sweden.

That mirrors the finding of Transparency International’s corruption perception index. It named Greece as the worst performer in the EU, sharing 80th place with China. Denmark was seen as the least corrupt. 

“Corruption undermines citizens’ confidence in democratic institutions and the rule of law, it hurts the European economy and deprives states of much-needed tax revenue,” said Malmstrom.

Construction companies, which often tender for government contracts, are the most affected. Almost eight in ten of those asked complained about corruption. 

Overall, 43 per cent of companies see corruption as a problem. 

Graft 

The report says belief that corruption is commonplace is also widespread among EU citizens. A growing number believe it has grown worse in recent years. They think Greece, Italy, Lithuania, Spain and the Czech Republic are the most corrupt.

Citizens also suspect corruption is common in business. Eight out of ten believe that close links between business and politics lead to corruption.

“Europe’s problem is not so much with small bribes on the whole,” said Carl Dolan of Transparency International in Brussels. “It’s with the ties between the political class and industry.

“There has been a failure to regulate politicians’ conflicts of interest in dealing with business,” he added. “The rewards for favouring companies, in allocating contracts or making changes to legislation, are positions in the private sector when they have left office rather than a bribe.” 

The report was published shortly after Romania’s former prime minister, Adrian Nastase, was sent to jail for four years for taking bribes. He was the first premier to be put behind bars since the collapse of communism in Europe in 1989.

The EU has repeatedly raised concerns about a failure to tackle high-level graft in Romania and Bulgaria, the bloc’s two poorest members. They have been blocked from joining the passport-free Schengen zone over the issue since their entry.

In October 2012, former European health commissioner John Dalli was forced to quit after an associate was accused of asking for 60 million euros from a tobacco company in return for influencing EU tobacco law.  

Separately, a report found recently that governments of major exporting nations are backsliding in their readiness to crack down on companies that use bribery to win international market share.

Thirty of the 40 developed countries that have signed up to the Organisation for Economic Cooperation and Development (OECD) Anti-Bribery Convention are barely investigating or prosecuting cases, Transparency International pointed out. 

The convention sets the gold standard for combating corporate bribery in foreign contracting. 

Those countries with active anti-bribery enforcement programmes in 2012 were the United States, Germany, United Kingdom and Switzerland, which account for 26.2 per cent of world exports, it indicated. 

That is a retreat from the prior year when 7 countries had active programmes. Italy slipped into the moderate enforcement camp, while Norway and Denmark, which have reduced their activity over the past 4 years, fell even further, it said. Only 8 countries have fully met their OECD commitments.

Russia for the first time had no enforcements of anti-bribery laws in 2012.  Those with no record of enforcement at all over the past 4 years were Estonia, New Zealand, Greece, Israel, Chile, Mexico and Ireland. 

The failure to crack down on foreign bribery in contracts, licensing, tax dodging and other forms of corruption reflects budget cuts to enforcement agencies, a lack of expert knowledge or skill on how to pursue cases and a failure to apply the laws, the global anti-corruption group said. 

“The 40 countries, which represent more than two thirds of global exports, would make it very hard to get away with bribery if they lived up to the requirements of the OECD Anti-Bribery Convention,” said Transparency International Chair Huguette Labelle. 

Transparency International urged all major exporters to join the OECD Anti-Bribery Convention, which the Group of 20 has repeatedly recommended. China, India, Indonesia and Saudi Arabia are large exporters that have not yet done so.

CAIRO — Egypt’s Central Bank has taken extraordinary steps to prop up the currency and curb a black market in foreign exchange — but in back alleys and money changing shops around the country, illicit dealing continues to thrive.

This stubborn survival shows the limits of the economic recovery since Islamist president Mohamed Morsi was ousted last July, despite inflows of billions of dollars in aid from Gulf Arab governments.

Sluggish tourism revenue and foreign investment are keeping supplies short, along with many overseas Egyptians’ preference to send money home via the black market, where they get a better exchange rate.

The Central Bank is in its second year of auctioning hard currency to satisfy demand; last month it conducted its biggest auction, selling $1.5 billion. It has also shut down some money changing firms for manipulating prices.

But dollars are eagerly sought on Cairo’s black market and currency traders at banks say they haven’t been able to meet their clients’ demand through official channels for months.

Morsi’s fall cleared the way for Egypt to obtain billions of dollars in aid from the military-backed government’s allies in the Gulf — Saudi Arabia, the United Arab Emirates (UAE) and Kuwait — although other billions have had to be returned to Qatar, which backed Morsi’s Muslim Brotherhood.

Authorities have stabilised the Egyptian pound’s exchange rate against the dollar in the official market. A slide in the Central Bank’s foreign currency reserves to near-crisis levels has also been halted, although reserves remain at half their level before the Egyptian revolution of early 2011.

But the Central Bank still appears unable to provide the economy with nearly as many dollars as it needs, while many Egyptians see the risk of further weakness in the Egyptian pound down the road. So they are willing to buy dollars at big mark-ups in the black market.

“There is always a shortage in the market that is sometimes being interrupted with these big auctions,” said Mohammed Abo Basha, Cairo-based economist at investment bank EFG-Hermes.

He estimated the monthly gap between demand and supply for dollars in Egypt at between $500 million and $700 million, assuming economic growth of between 2-3 per cent.

Official rate 

Egypt had a thriving currency black market during economic instability in 2003. It mostly disappeared as the economy strengthened, only to reappear after the 2011 revolution, which frightened off many tourists and foreign investors.

The Egyptian pound is officially trading between banks at 6.96 to the dollar, about 11 per cent weaker than it was near the end of 2012, when the Central Bank launched its auction system as a way of rationing hard currency and protecting its reserves.

Banks are required to trade dollars within set ranges around the Central Bank’s auction cut-off prices for inter-bank, commercial and retail transactions, giving authorities considerable influence over official exchange rates.

In practice, however, many Egyptian firms and individuals find it hard to obtain as many dollars as they want from commercial banks; they turn to illicit dealers, who are now quoting the exchange rate at around 7.35 pounds to the dollar.

The dealers range from street vendors in leather jackets to urbane men in suits who work from marble-halled bureaux de change. Customers include well-heeled businessmen, students studying abroad and pensioners who want to protect the value of their savings against inflation running above 10 per cent.

One street trader in Cairo, operating out of a crowded indoor market for fake designer bags, says he can obtain up to $100,000 for his clients within a week.

“I can get you a million if you want,” he grins, sitting among piles of dusty suitcases for sale.

Such dealers obtain many of their dollars from Egyptians who work abroad. Remittances are a major source of foreign currency for Egypt, but some workers send money home to their families through the black market, where they get more pounds for their dollars, than via bank accounts and the official market.

A trader at a legal bureau de change near Cairo’s Adly Street, a commercial area, remarked that his business is suffering because he quotes dollar sellers the official exchange rate — unlike some of his competitors nearby.

“My customers ask me about the price of the dollar and when I give them the official price, they don’t like it and go out,” he said. 

Authorities have taken legal action against some money changers, temporarily shutting down 13 last month, but the campaign has not come close to eradicating the black market — perhaps because officials realise that closing the channel entirely would cause more hardship for families and businesses.

Last December, the Central Bank took aim at a loophole in the official market by warning commercial banks that they were required to trade all foreign currencies, not just the dollar, at official rates.

But some traders remarked that this could backfire by encouraging commercial banks, finding it harder to make money on their sales of euros, to hoard foreign currency — thus driving even more customers into the black market.

Many traders believe the only sure way to stamp out the black market is for the Central Bank to increase the amount of foreign exchange it supplies. In December 2012 it launched the auctions to counter a run on the pound. 

Balance of payments 

Authorities seemed close to success in the weeks after Morsi’s overthrow, when a burst of optimism about Egypt’s political future appeared to attract some money back into the country, easing the dollar shortage.

After a very large dollar auction in September, the gap between the official and black market dollar exchange rates narrowed to just 5 or 10 Egyptian cents, a trader noted.

In the last several months, however, the gap has expanded back to around 40 cents — smaller than the roughly 90 cents seen at times under Morsi, but large enough to indicate a sizeable supply-demand imbalance.

While aid from the Gulf — $12 billion was pledged last July with billions more expected in the next few months — has stabilised Egypt’s balance of payments, it has not so far produced a recovery of the tourism industry or a resumption of big inflows of portfolio and direct investment.

This means the country’s external position is still vulnerable, and the Central Bank remains unable to flood the official currency market with as many dollars as would be needed to make the black market irrelevant.

“Not all the aid finds its way to the market. Some of it is kept at the Central Bank to replenish reserves or pay for external debt or imports,” Abou Basha indicated.

Egypt has been running a big deficit in its trade of goods and services, of $24.9 billion in the year to last June, while net inward direct investment is running at about $4 billion a year, down from around $8 billion before the 2011 revolution.

This keeps pressure on the Central Bank’s foreign currency reserves. Even with the aid from the Gulf, the reserves have rebounded only to around $17 billion, up from $13.4 billion in March 2013 but way below pre-2011 levels around $36 billion.

Tensions between Egypt and Qatar have complicated the situation. While Saudi Arabia, the UAE and Kuwait were pleased by Morsi’s fall and provided aid in response, Qatar was close to him and its financial support has decreased.

Since last September, Egypt has returned a total of $3 billion in Qatari deposits, and it plans to send back a further $3 billion when bonds mature by the end of this year, an Egyptian Central Bank source told Reuters.

“The intention of the Central Bank was to kill the black market through several special auctions,” said a currency trader at a commercial bank in Cairo, but added that this had proved impossible because of the drain of funds back to Qatar.

As long as Egypt depends so much on foreign aid to support its balance of payments, Abou Basha remarked, the dollar shortage is likely to persist. 

“With this kind of balance of payments status, the black market will not cease to exist any time soon,” he said.

AMMAN — The Housing Bank for Trade and Finance (HBTF) announced in a press statement on Sunday that it achieved an unprecedented operational profit last year. 

According to the press release, JD357 million were generated as operational profit, JD30 million or 9.1 per cent higher than the JD327 million recorded in 2012.

Net pretax profit, after taking provisions into account,  amounted to JD150.1 million at the end of last year, 6 per cent higher than the JD142.2 million posted in 2012.

The profit became JD106.9 million in 2013 after the taxes and provisions compared to JD104.5 million in the previous year.

Accordingly, the bank recommended distributing dividends to shareholders at a rate of 30 per cent.

HBTF Chairman Michel Marto affirmed the bank’s solid financial position and its strong capital base pointing in the press release to assets totalling JD7.2 billion and clients’ deposits standing at JD5.1 billion.

The bank’s net credit facility portfolio totalled JD3 billion while shareholders’ equity stood at JD1.1 billion, according to the bank’s statement on its preliminary results.

“The bank managed to achieve these figures despite a decline in the value of the Syrian lira during 2013 which affected the balance sheet of the International Bank for Trade & Finance/Syria, an affiliated bank of the HBTF,” Marto said.

The figures reflected positively on the bank’s financial soundness as capital adequacy ratio stood at 18.8 per cent, higher than the 12 per cent required by the Central Bank of Jordan (CBJ).

The return on assets ratio came at 1.5 per cent while the return on equity rights was 10.2 per cent. Moreover, the bank’s liquidity rate stood at 159 per cent, which is higher than the rate required under the CBJ’s requirements. 

The bank currently has 119 branches across Jordan and several affiliates in some other Arab countries.   

The HBTF was established in 1973 as a public shareholding limited company to provide housing finance and after 24 years of operations, the bank was licenced to operate as a comprehensive bank, providing full commercial and investment banking services.

AMMAN –– Capital Bank on Sunday promoted Ignite as a new training service to small- and medium-sized enterprises (SMEs).

According to executives, the service seeks to boost the sector and help Jordanian firms enter new markets. 

Haytham Kamhiyah, the bank’s general manager, explained at a press conference that Ignite will offer training to founders and directors of SMEs on strategic planning for growth, efficiency, export, marketing and preparing financial statements that would enable them to access credit. 

After selecting 15 executives representing firms that employ between 5 and 50 people, the programme will be implemented on three phases, Kamhiyah said, noting that the first phase on business development starts on April 6 till April 8. 

The second phase on boosting SMEs role and implementing strategic plans will be held in June, while the final stage on improving talents will be on August 31 to September 2. 

According to the banker, Capital Bank seeks through the programme to attract more clients and to serve the Kingdom’s economy as SMEs represent nearly 95 per cent of businesses in the country. 

The programme will be implemented in cooperation with Migrate, a Jordanian business solution company, and the Inspirational Development Group from Britain. 

Trainers will be of international reputation as they have served in large financial institutions such as Barclays Bank and HSBC, Kamhiyah remarked.   

Responding to a question on limited access to credit for SMEs, Kamhiyah said that the Central Bank of Jordan has launched a credit line for small- and medium-sized businesses that entails extending long-term financing for industrialists, the tourism sector and renewable energy investors. 

He acknowledged that SMEs still find difficulties in accessing “cheap” credit, but said that “businesses are sometimes to blame for not providing bankable documents”.

Iraqi Market 

Answering a question on the bank’s operations in Iraq and the potential for Jordanian companies in the market of the neighbouring country, Kamhiyah described Iraq as a huge market, noting that Capital Bank has eight branches in various cities.

He said the bank plans to expand its branches network there, calling on Jordanian businesspeople to enter the Iraqi market, which he said holds “large” opportunities for companies in all sectors. 

“The presence of Jordanians in Iraq is still lower than it should be, may be except for pharmaceuticals,” he said. 

There are “huge” opportunities for Jordanian construction firms in Iraq due to expansion in infrastructure projects, he added.