Business

AMMAN — Jordan Investment Board (JIB) acting Chief Executive Officer Awni Rushoud on Wednesday briefed a delegation representing companies from Singapore, Sri Lanka, India and the US on investment opportunities in Jordan. Rushoud said in a JIB statement sent to The Jordan Times that Jordan’s rating in international reports is among the board’s highest priorities regarding investment policies, citing the significance of such reports to investors. Rushoud also said that JIB’s understanding of investment is centred around creating job opportunities to Jordanians and upgrading the living conditions as well as lowering poverty and unemployment rates. The delegation comprised executive directors from the multinational Nike, Inc. 

DHAKA — On the outskirts of Dhaka, Babylon Garments has shortened work shifts to eight hours from the usual 10 and plans to shutter production lines as months of election-related violence disrupts transport and prompts global retailers to curb orders.

The company, which supplies shirts, trousers and other apparel for global retailers including Wal-Mart Inc., is one of the biggest players in Bangladesh’s $22 billion garment industry that has seen orders cut nearly in half in the last three months — the worst drop in two decades, according to the Bangladesh Garment Manufacturers & Exporters Association (BGMEA).

“December is usually a season when we are packed with orders to a point where we can’t take any more but look at this year — it’s a completely different story,” said Muhammad Saiful Hoque, assistant general manager of Babylon Garments, as workers sewed checked shirts for British-based Tesco Plc.

Industry officials say the unrest in the run-up to Sunday’s disputed election has been worse for business than the April collapse of Rana Plaza, an illegally built factory in which more than 1,100 workers were killed in a disaster that prompted calls for safer working conditions and more accountability on the part of the global retailers that buy Bangladesh’s clothing exports.

The disruption to Bangladesh’s garment industry, the world’s second biggest after China, as well as a shutdown by striking garment workers in Cambodia, another big supplier, means global retailers face a supply squeeze.

Garment orders are typically placed at least three months in advance.

“The impact won’t be immediately felt but the delay in shipping finished orders will hurt the global retail market around June,” indicated Shahidullah Azim, vice president of the BGMEA, which says up to $1 billion in orders are at risk in the coming weeks if the situation does not improve.

A Wal-Mart spokesman said the country sources from more than 70 countries, which allows it to plan for any potential supply chain interruptions. He added that he was not aware of any issues related to developments in Bangladesh and Cambodia.

Michael J. Silverstein, a senior partner with the Boston Consulting Group based in Chicago, described Bangladesh as a critical supplier of clothing for world markets and too large to replace.

“The majority of the customers believe Bangladesh will not go dark, for example stop shipping,” he said. “They do believe there will be delays and a need for alternative supplies.”

Crucial industry

Bangladesh’s garment industry accounts for 80 per cent of the country’s exports and is so important to the economy that it has typically been spared from the political unrest that periodically racks the South Asian nation, even though many textile tycoons are politically active.

Several factory owners are members of parliament, representing either the ruling Awami League or the opposition Bangladesh Nationalist Party (BNP), which boycotted the poll in protest at Prime Minister Sheikh Hasina’s refusal to hand power to a neutral caretaker government to oversee the vote.

More than 100 people were killed in clashes ahead of the election, with the unrest accompanied by roadblocks that have pushed up transport costs by 10 to 20 per cent, according to the BGMEA — a worry for an industry that operates on wafer-thin margins and needs to keep costs low to be competititve.

The unrest had shown no signs of abating since Sunday’s poll, with seven people killed in further violence on Monday and one reported death on Tuesday, during a 48-hour strike called by the opposition after the poll.

AKH Group, a large supplier that produces for H&M Hennes & Mauritz AB, Marks & Spencer Plc. and Fast Retailing’s Uniqlo, said it was becoming nearly impossible to meet delivery commitments.

“Trucks are stuck on the roads for days and there is very little you can do about it other than somehow pay through the roof to get them going,” AKH Group’s Deputy Managing Director Abul Kashem said.

Some shipments are costing the company as much as 1 million taka ($13,000), compared with the 20,000-30,000 taka it usually takes to send the same truckloads, as transport costs have surged due to roadblocks across the country, Kashem added.

Buyers have cut orders by 25 per cent on average and H&M, one of AKH’s biggest clients, has cut its orders by 30 per cent, he remarked. H&M, however, said it had not cut orders with AKH by 30 per cent, and so far has not been affected by the unrest.

The reason for the discrepancy was not immediately clear, although supply chains in Bangladesh are often complex, involving a series of buyers and middlemen.

Analysts at Morningstar said in a note that H&M had protected itself well from potential disruptions by using a large number of manufacturers and ordering in small batches.

A Marks & Spencer said the British high street stalwart was closely watching the situation in Bangladesh and Cambodia, but had not reduced orders and at this stage did not anticipate any effect on supplies. A Uniqlo spokesman said the company had not reduced production or orders from Bangladesh.

Lost orders

Neighbouring India has taken most of the orders that have been lost, while the rest have gone to Pakistan and China, according to data from the BGMEA.

“Rana Plaza dealt a heavy blow to the reputation of this country but that still didn’t impact the confidence of buyers and inflow of orders the way the recent crisis has,” said Babylon’s Hoque.

Babylon’s production of shirts fell to 750,000 pieces in December from 850,000 in the same period last year, and was expected to fall below 700,000 by February due to the lack of demand, he said.

Of the 12 large retailers Babylon supplies, seven or eight were placing orders in reduced quantities, while the rest have completely stopped, he added.

If deliveries are late, the supplier must pay compensation, said Rubana Huq, managing director of Mohammadi Group, which supplies Wal-Mart, H&M, Inditex’s Zara and others.

“I have just paid 12,000 euros to a client. Our goods were three weeks late. I couldn’t afford not to,” she noted.

Inditex declined comment on the situation in Bangladesh.

With as much as half of capacity idle at big factories, small manufacturers who make up a third of the industry and largely rely on subcontracted orders from bigger suppliers are especially vulnerable.

Turja Apparel, a small garment factory in Dhaka, has no orders after January 20 and owner Kazi Babul was not hopeful he would get new ones until the political situation stabilises.

He said he may shutter his factory for now. “Small factory owners have suffered heavily after the Rana Plaza collapse as no one wants to give us orders, and now the political situation has taken away the little that we were getting.”

NEW YORK — Most people around the world are optimistic that 2014 will be better than last year and that the global economy will be stronger, according to a poll released on Tuesday.

Seventy-six per cent of people in 23 countries questioned by the global research company Ipsos said they had high hopes for the new year, slightly more than in 2013. About half said last year was not great for them and their families.

“People are excited for the New Year. I think they still have a bad taste left in their mouths from 2013, with the slim majority saying it was a bad year for them and their families and people a bit worried about the economy,” Keren Gottfried, a senior research manager for Ipsos said in an interview.

But the overall optimism, she added, “shows people want to look at the world with the glass half-full.”

The poll showed that 53 per cent of people around the world believe the global economy will be more robust in 2014, with the sentiment strongest in India, China and Indonesia and weakest in Sweden, France and Italy.

Only 33 per cent of Italians had confidence in the global economy improving, slightly less than the Swedes and the French.

“Last year was definitely not a great year for a lot of people. We know economically speaking the economy has not risen globally and certainly not within the US,” Gottfried explained.

Optimism for a better 2014 was highest in Indonesia, France, Brazil, India and Argentina, where more than 85 per cent of people questioned in the online survey said they looked forward to improvement this year. Hope was lowest in Japan and Italy.

Spaniards, Argentineans, Hungarians and Mexicans were the most likely to say last year was disappointing, while the numbers were the lowest in Australia, Indonesia and Sweden, where 42 per cent or fewer people had a lousy 2013.

The poll showed personal New Year’s resolutions were popular in most countries, particularly Indonesia, Argentina, Turkey, Brazil and South Africa where 90 per cent or more people made them, compared with 56 per cent in Hungary and 38 per cent in Sweden.

Gottfried views the numbers as an indication that people are making resolutions because they want to make things better and are starting the year with excitement.

Ipsos questioned a total of 18,153 adults aged 18-64 years old in the United States and Canada and 16-64 years old in Mexico, Australia and other countries in Europe and Asia from December 4-18.

In countries where 1,000 people were questioned, the credibility interval is plus or minus 3.5 percentage points. The interval is plus or minus 5 percentage points where 500 people were polled.

ANKARA — The Turkish government, battling an escalating political crisis, turned Tuesday to limit potential damage to the economy, downplaying its effect on growth.

Finance Minister Mehmet Simsek said the crisis, which has seen the lira plunge to record lows, would likely be short-lived and Turkey’s economy would post the 4 per cent growth it has forecast.

He also dismissed the need to raise interest rates, which economists and analysts have been warning Turkey may need to do to ensure inflation and the country’s large current account deficit remain under control.

The Turkish government has been struggling to contain the political fallout from the graft probe that poses the biggest challenge to the 11-year rule of Prime Minister Recep Tayyip Erdogan.

The high-level corruption scandal centring on allegations of bribery for construction projects as well as illicit money transfers to sanctions-hit Iran has rattled Erdogan’s Islamic-leaning government ahead local polls in March and presidential elections in August.

The probe, which has seen dozens of top businessmen and political figures including the sons of three ministers arrested, has pushed the government to sack hundreds of police involved in corruption investigations.

After touching a new record low 2.19 lira to the dollar on Monday, the Turkish unit rebounded Tuesday following the Simsek’s comments to 2.16.

Stocks, which have also slumped, rose by 0.84 per cent.

Simsek acknowledged on CNN-Turk television that the government is facing a “significant challenge” in the political arena, “but we think this will not go on for a long time”.

He downplayed the economic impact.

“There could be a slowdown to some extent in the first quarter. But I believe that as uncertainty lessens and the environment calms, growth could still be around 4 per cent,” Simsek said.

The government has been forecasting that growth will pick up from an expected rate of 3.6 per cent in 2013 to 4 per cent for this year.

Simsek also rejected the need to raise interest rates, saying it could contain the current account deficit “by limiting loan growth”.

He said Turkish authorities had already managed to contain credit growth, one of the main causes of Turkey’s trade and investment imbalance, without raising interest rates.

The Turkish government is taking non-traditional measures to limit demand for imports that is behind the large current account deficit of 7.5 per cent of the gross domestic product (GDP).

It has announced a crackdown on excessive consumer debt that will see tighter limits imposed on credit cards, including restrictions on what people may purchase.

But while the central bank has not raised its official policy rate of 4.5 per cent, it has become effectively inoperative in recent months, with bank’s increasingly only able to borrow from the central bank at the overnight rate of 7.75 per cent.

The Turkish central bank has been selling off its dollar reserves to support the lira, but has so far not raised official interest rates.

Higher interest rates would help attract foreign investment, but slow economic growth.

Foreign analysts are not as confident that Turkey’s economy will escape unscathed.

Fitch ratings agency, while it maintained Turkey’s sovereign credit rating at BBB-, the lowest invest-grade rating, warned Tuesday the economy remained vulnerable.

“If the corruption scandal drags on, it could weaken the government and undermine its ability to take timely policy measures that would maintain economic stability,” it said.

With limited reserves, the central bank may raise interest rates.

“The recent fall in the lira may now force its hand,” said William Jackson, an economist at London-based Capital Economics. “On balance, we think it is more likely than not that policymakers will raise the [overnight] lending rate” at this month’s monetary policy committee meeting.

HAVANA — Cubans hoping to snap up imported cars last week after the relaxation of restrictions dating back half a century had a shock with prices way out the reach of anyone but the elite.

The communist regime s easing of ban on car imports, marked the end of an era that made icons of Cuba’s vintage automobiles.

Opening Cuba’s domestic car market to imports was expected to have fateful consequences for the lovingly maintained 1950s Chevys, Fords and Pontiacs that have survived a 50-year-old US embargo.

But there was anger and disappointment when prospective buyers in Havana laid eyes on the prices of new and used vehicles, AFP reporters said.

A swish Peugeot 4008 SUV was going for $239,500 at the Sasa dealer in the capital — nearly five times what it costs in Europe.

Used vehicles were also available in the capital, but at prices that most people in Cuba can only dream of.

A 2010 Hyundai Sonata was going for $60,000 and a Volkswagen Passat in the same year had a price tag of $67,500.

“I was thinking of buying a car, and I had about $20,000 to spend, but it’s impossible,” one disappointed buyer, Dorian Lopez, said, staring incredulously at a Sasa price list.

“With these prices, I not only cannot buy, but I cannot even dream,” lamented the Cuban musician Alfred Thompson, at another dealer, in the west of Havana.

The official newspaper Granma said last month that the imported cars would be sold at market prices, a step designed to gradually free up retail sales of all manner of vehicles — automobiles, vans, trucks and motorcycles — and end the practice of granting some Cubans special permission to bring in vehicles as a privilege.

The changes are a long-awaited element of President Raul Castro’s attempts to gradually liberalise Cuba’s Soviet-style economy.

“It is monstrous. They say that the cars are for sale in Cuba, but it is a lack of respect for the people, no one can buy at this price, it’s impossible,” said Bernardo Garcia, 35.

No official figures are available on Cuba’s automobile fleet, but experts believe there are around 60,000 American cars still circulating on the island.

Mixed in with them are Soviet-made Ladas and Moskvich cars made in the 1970s and ‘80s and more modern, usually Asian-made, vehicles imported by the government.

The new legislation also eliminates the “Letters of Authorisation” issued each year to a few thousand privileged Cubans to enable them to buy a car.

“We were miserably deceived, it is an abuse, it has been two years since I have the letter but that is for millionaires, not the people,” said Mayra Echarpe, 57, of the national centre for popular music in Havana.

Separately, privately-owned small retailers in Cuba are defying a government order to stop selling imported clothing or face stiff fines.

Imported clothing is in high demand in Cuba because foreign apparel is cheaper and of higher quality than threads sold in state-run stores.

“We have been here for three years selling without a problem and abiding by the law, and now they say that this is over?” asked Nadia Martinez, 32. “We are not going to close our business.”

Martinez has a government licence to work as a seamstress, but in practice runs a modestly successful business selling imported clothes on Galiano Street, one of Havana’s busiest commercial avenues.

The clothes are not imported by the government, but rather brought in by Cubans traveling to places like Ecuador, Mexico, Spain and the United States.

Until now, the government had seemed to look the other way as she stretched the scope of her legal employment. But it now appears it may regulate away her economic success story.

Castro expanded the list of government-approved self-employment occupations in 2010 as part of a very gradual reform of its Soviet-style economy.

Castro announced that over the following years he would also be slashing the country’s five-million strong bureaucracy — this on an island with a population of about 11 million — as a cost-cutting measure.

Today more than 430,000 Cubans work for themselves or in small businesses. Authorised job categories include restaurant owners, barbers, electricians, plumbers, mechanics and other skilled trades.

Privately owned beauty salons and family-owned restaurants known as “paladares” proliferated, often operating from the back of people’s houses.

The government, however, remains the country’s largest employer, and central planners still try to control the cash-strapped economy.

Deputy Labour Minister Marta Elena Feito recently announced that the government would fine businesses and people found selling imported apparel or re-selling clothing that originated in state-run stores.

Authorities have long tolerated the clothing vendors, and even though Feito said the measures would be enforced “immediately”, no vendor has been forced to shut down.

“We’re waiting for them to come explain the unexplainable to us, because closing us down cannot be a solution,” said Ledibeth Sanchez, 29, another Galiano Street vendor.

A few blocks away Carlos Medina, 44, works at the “Fashion Passions” boutique on Dragones Street. The well-stocked store sells jeans, blouses, T-shirts and imported dresses.

“Everything was going very well and suddenly they change it all,” said Medina. He remarked that vendors and store employees are fretting about being potentially being forced to shutter.

“Nobody has notified us, but if they give us the order to close, we’ll close,” he said in a resigned tone.

Omara Cambas, 46, a former Communist Youth national leader, opened the “Catwalk Workshop” clothing boutique in the Havana neighbourhood of El Vedado few months ago.

“This measure would affect us a lot — the fact is, I’d be without work,” said Cambas.

A key reason so many people have joined the ranks of self-employed — aside from state job cuts — is that state salaries average around $20 a month. Though people may not have to pay for housing here, that is not enough for most to put food on the table for their families or buy clothing.

Since 1962, Cuba has been under a full US trade embargo. But US goods routinely move through third countries or are resold by people traveling into Cuba.

AMMAN –– Trading in the Kingdom’s real estate market surged by 15 per cent from JD5.6 billion in 2012 to JD6.3 billion in 2013, official figures showed Sunday.

According to Department of Land and Survey (DLS) report, released Sunday, government revenues from the sector went up by 11 per cent to JD354 million last year from JD319 million in 2012.

The DLS figures showed that a total of 30,380 residential apartments were sold last year, a 19 per cent increase over the 25,434 units sold in 2012.

Nearly 90 per cent of the housing units were purchased by Jordanians, the report indicated, noting that non-Jordanian residents bought only 3,180 apartments valued at JD269 million.

Kamal Awamleh, president of Jordan Housing Developers Association, said the volume of trading was in line with investors’ expectations as demand for residential apartments was strong last year.

“2013 was a very good year for the housing sector,” Awamleh said, adding that prices of residential properties remained stable during the year.

He expects the sector to keep its strong performance in 2014 if prices do not go up sharply, indicating that increases in cement prices over the past five months may hurt the industry as developers may be burdened by higher costs.

Higher demand for small apartments

The department’s figures show homebuyers in Jordan still prefer relatively small-sized residential units.

Nearly two thirds of the apartments sold in 2013 were sized less than 150 square metres (sq.m.) each. Awamleh attributed the demand for such properties to the fact that buyers wanted to benefit from government incentives.

According to government regulations, a buyer of an apartment sized 150 sq.m. or less does not pay registration fees and taxes on the first 120 sq.m. of the property.

The DLS statistics revealed that out of the 30,380 apartments sold last year, 20,084 were sized 150 sq.m. or less.

Land transactions down

Other data pointed to a sharp drop in land purchases in the Kingdom last year, going down by 21 per cent when compared with 2012.

While a total of 86,778 land transactions were registered in 2012, the official data showed that 68,201 transactions were made last year.

Mohammad Muhyeddine, manager of a real estate agency in Amman, attributed the decline in demand for land to rising prices across the Kingdom, and not only in the capital.

Land prices in Amman have gone up by nearly 40 per cent between 2012 and 2013, he pointed out, indicating that land values in other cities also increased by almost 15 - 20 per cent.

RIO DE JANEIRO — Brazil has imposed a hefty 6 per cent increase on the surcharge paid by its citizens when making credit cards purchases overseas.

The increase raised the tax from 0.38 per cent to 6.38 per cent.

The tax also applies to cash withdrawals from overseas bank machines and purchases made when using travellers checks.

The measure is expected to add some $205 million to government coffers this year.

The tax also aims to reduce the amount that Brazilians spend overseas, thereby bolstering domestic industry and reducing a budget deficit which the O Globo daily said stands at $72.7 billion.

According to government figures, Brazilians spent $23.1 billion overseas between January and November of 2013, a 14 per cent increase over the same period in 2012.

Brazil may have cut the number of people living in poverty in recent years but inequality persists and better education is needed, according to the Organisation for Economic Cooperation and Development (OECD).

“Successful policies to spread the benefits of economic growth more widely have substantially reduced poverty and income inequality,” the OECD said.

In a new report, the OECD added: “Wider access to education has allowed more Brazilians to move into an expanding number of better-paid jobs.

“However, the quality of education has not kept pace with the impressive expansion of the system. There are severe shortages in physical school infrastructure,” it indicated.

Recent years of growth and the introduction of the Bolsa Familia social welfare programme has helped to lift around 40 million people out of poverty in a decade.

But the OECD lamented that the country still had to reform its bureaucracy and fiscal policies to deal with a “fragmented” tax system.

“The tax system... is characterised by a low degree of progressiveness which limits its redistributive impact,” the organisation said.

It added that barely half of the population worked in the formal economy and had access to credit.

The organisation, grouping the world’s 34 most industrialised countries, concluded: “There remains much to do. Brazil still has one of the highest levels of inequality in the world” and would take two decades to reach where the United States is today.

Separately, Brazil will shun creative accounting as it bolsters its fiscal situation in 2014 and increases transparency, Finance Minister Guido Mantega was reported as saying.

Brazil is seeking to bolster sagging growth which has suffered in the global downturn of recent years while also combating above-target inflation and low competitiveness.

But Mantega said in an interview that the government expects its fiscal position to improve as it hikes taxes.

“We did not violate any regulations but let’s say it was blurry, even confused,” Mantega told Estado de Sao Paulo newspaper.

Brazil had had to raid its sovereign fund to stay inside the limits as it struggled to respect budgetary rules in 2012.

“This is going to change. It has already changed,” Mantega said regarding the country’s accounting practices.

“All governments take measures such as ours,” by stretching the boundaries where possible as the accounting year ends and, for example, including expected dividends from state-owned firms.

“Was it wrong? No, but it was forced. So we are going to lay bare everything we are doing,” Mantega said.

Brazil was the subject of a mid-year sovereign credit downgrade warning.

But Mantega said he believed ratings agencies would maintain Brazil’s rating of BBB, the second-lowest investment grade level, even if that was placed on negative watch in 2013 by Standard & Poor’s.

Agencies are expected to hold fire pending the outcome of next October’s presidential election, which leftist incumbent Dilma Rousseff is favoured to win.

“My hypothesis is that our data will be favourable to maintain our rating,” said Mantega.

Asked if the government had the market’s confidence Mantega said Brazil had struggled to achieve a primary surplus in 2013, but would hit a $31.5 billion surplus.

A primary surplus means the government spending less than its overall revenue, albeit exluding interest payments on government debt.

Despite struggling with creaky infrastructure, “the Brazilian economy is becoming more competitive”, Mantega insisted, while noting the global crisis of the past six years had knocked growth off course everywhere, including China, with Brazilian growth of 6.1 per cent in 2007 sliding to around 2.5 now.

In the hope 2014 will see the World Cup hosts’ economy move ahead, Mantega said some taxes could rise, including the country’s Programme for Investment, allowing a scaling back of subsidies from the treasury to the state development bank.