Business

AMMAN — Jordan Industrial Estates Corporation (JIEC) on Monday approved a new Syrian investment to be set up at Al Muwaqqar Industrial Estate that will specialise in manufacturing chips.

The nearly JD1 million investment will provide around 50 jobs. At present, the industrial estates house 16 Syrian industrial investment projects carrying an investment volume of JD9.65 million. These provided around 500 jobs.

AMMAN — Arab Jordan Investment Bank (AJIB) on Monday signed an agreement to acquire HSBC Bank Middle East Limited banking business in Jordan. According to a statement issued by the AJIB, the bank’s business comprised at the end of September 2013 four branches with gross assets of about $1.2 billion.

The transaction is expected to be completed during the first half of 2014, the statement said.

Noting that the deal won the approval of the regulatory authorities, AJIB General Manager and Chief Executive Officer Hani Al Qadi said the acquisition is part of AJIB’s growth strategy, and the business acquired will complement its share in the Jordanian banking market.

“We look forward to working with HSBC’s local team over the next few months to ensure a smooth transition with minimal impact on clients and employees,” he added.

HSBC Bank Middle East Limited is a principal member of the HSBC Group since 1959, the bank’s unique relationship with the Middle East dates back more than a century.

Founded in London in 1889, it pioneered banking in the region.

ABU DHABI — The Abu Dhabi Fund for Development (ADFD) announced on Sunday it would extend concessional loans worth $41 million to six developing nations to implement renewable energy projects.

The ADFD financial support, in cooperation with the International Renewable Energy Agency (IRENA), will finance clean energy schemes with a total capacity of 35 megawatts to bring sustainable power to rural communities in Ecuador, Sierra Leone, the Maldives, Mauritania, Samoa and Mali, officials from both agencies said at a press conference.

IRENA Director General Adnan Amin indicated that the $41 million represent the first of seven cycles totalling $350 million in soft loans to be given by ADFD over seven years.

He said the clean energy projects will enable some communities to have power for the first time, adding they would also have access to drinking water from desalination plants powered by renewable energy.

“Financing is one of the main issues hindering renewable energy, particularly in developing countries,” Amin indicated, noting that the main objective of the partnership between IRENA and ADFD is to remove the risks of investments in promising energy schemes.

According to Adel Al Hosani, director of the operations department in the government-owned ADFD, the fund believes that not only developed countries should own renewable energy but also developing nations, noting that clean technology will enable countries facing financial shortages cut their energy bills.

Hosani said the second cycle of the funding will be $59 million, pointing out that over 80 projects valued at $800 million applied to benefit from the second round.

The announcement of the loans came on the second and final day of the IRENA general assembly which, according to officials from the inter-governmental organisation, was attended by representatives from 151 countries.

The general assembly of the Abu Dhabi-headquartered organisation was the first day of Abu Dhabi Sustainability Week (ADSW), which is being attended by more than 30,000 people from across the globe.

Three major ADSW events kicked off on Monday at Abu Dhabi National Exhibition Centre — the World Future Energy Summit, International Water Summit and the EcoWASTE summit — in the presence of several heads of states, prime ministers, ministers and industry experts. 

KUALA LUMPUR — Malaysia announced Monday it would allow foreign automakers to build smaller passenger cars in the country, a liberalising move aimed at repositioning the country as a leader in energy-efficient vehicles.

The changes, effective immediately, will for the first time allow foreign automakers to build cars with engines of 1.8 litres or less if those cars qualify as energy efficient.

Such projects will not need domestic investment partners and will enjoy incentives such as tax breaks, Trade Minister Mustapa Mohamed told reporters.

“The policies used to be there to protect (national car brand) Proton. But we have opened up the market,” he said. “We believe these policies will enable Malaysia to regain our position as one of the most dynamic hubs for Southeast Asia.”

Malaysia, the region’s third largest economy after Thailand and Indonesia, was once Southeast Asia’s automotive hub.

But it has fallen behind its two rivals through decades of industry policies that coddled Proton, which was launched in 1983.

Malaysia now produces far fewer vehicles than Thailand or Indonesia.

The government had previously shielded Proton via excise and import duties of up to 150 per cent on foreign vehicles, and other restrictions.

The policies have been blamed for contributing to sub-standard Proton models. The firm, which was state-owned until 2012, has recorded losses in recent years as its market share sank.

Consumers have also complained the policies made better built foreign cars too expensive for many Malaysian buyers.

Malaysia already allows foreign carmakers to manufacture larger vehicles in the country, after lifting foreign equity caps on such ventures in 2010.

The reforms could be attractive to some foreign manufacturers looking for a regional production base but should not worry Malaysia’s neighbours much, said Affin Investment’s auto sector analyst Chong Lee Len.

“It’s a positive step for the market, but not quite a ‘Big Bang’,” she remarked.

In 2012, Thailand and Indonesia produced 2.4 million and 1.1 million cars under foreign nameplates, respectively, up 67 per cent and 27 per cent from the year earlier, according to the International Organisation of Motor Vehicle Manufacturers.

Neither country has a national car project.

Malaysian factories produced 570,000 cars in 2012, up nearly 7 per cent.

About three quarters of Malaysian production were vehicles with 1.8-litre engines or smaller.

Madani Sahari, head of the trade ministry think tank Malaysia Automotive Institute, said in a briefing last week that Malaysia would focus on being an export hub due to slowing domestic sales.

Chong, however, said most manufacturers “want to build where they can sell”.

Indonesia, with its fast-growing economy of 240 million people and low vehicle ownership rates compared to more affluent Malaysia, is considered by analysts to have greater upside for automakers.

According to Mustapa, the changes would reduce car prices in Malaysia by up to 20-30 per cent over the next four years.

Separately, the head of Toyota’s Thai unit, told a news conference on Monday that Toyota Motor Corp. may reconsider investing up to 20 billion baht ($609 million) in Thailand, and could even cut production, if political unrest drags on.

Toyota is the largest car manufacturer in Thailand, producing 800,000 vehicles a year. Plans to increase its annual capacity by 200,000 vehicles a year over the next three to four years are now uncertain, he said.

“Our new investment in Thailand may not happen if the current political crisis goes on longer,” he added. “For new foreign investors, the political situation may force them to look for opportunity elsewhere. For those that have already invested, like Toyota, we will not go away. But whether we will invest [further] or not, we are unsure.”

Thailand is the biggest auto market in Southeast Asia and a regional vehicle production and export base for the world’s top car manufacturers like Honda Motor Co. and Ford Motor Co.

RIYADH/DUBAI — Stock market listings planned by two of Saudi Arabia’s biggest private hospital operators point to a boom in its healthcare industry, as political pressures prompt the government to pour huge sums into the underdeveloped sector.

Many areas of Saudi consumption, including the retail industry, housing and travel, have ballooned in the past decade because of oil-fuelled growth in national income. But healthcare has lagged, partly because of government inefficiency and bureaucracy.

Now the mediocre quality of state-run healthcare has become a political liability for the government, especially in the wake of the 2011 uprisings elsewhere in the Arab world, which underlined the risks of social discontent. Many Saudis complain about overcrowded hospitals and shortages of medications.

So the government has embarked on a drive to reform the sector, building hundreds of hospitals, providing interest-free loans to private companies and changing health insurance rules.

This could make Saudi Arabia the world’s fastest-growing major healthcare market over the next few years, helping to diversify the economy beyond oil and providing a bonanza to foreign companies selling medicines, equipment and services.

“It is a case of chronic underinvestment and reactive overexpenditure,” indicated Mohammad Kamal, an analyst at financial firm Arqaam Capital in Dubai.

Catching up

The standard of Saudi Arabian healthcare provision has long contrasted with its wealth. The kingdom, which the International Monetary Fund (IMF) ranked 30th in the world by gross domestic product per capita for 2012, has 2.2 hospital beds per 1,000 residents, according to Arqaam, lower than the global average of 3 and far below the average of 5.5 in developed countries.

Local newspapers routinely report complaints about issues such as overcrowding — with some patients receiving intravenous drips in hospital corridors — and poor hygiene and maintenance, resulting in pest infestations and infections.

Abdul Karim Al Thobeiti, a Saudi engineer working in the public sector, says he will never set foot in a state-run hospital because they are either fully booked or poorly maintained.

“If you want to make an appointment to see a doctor you have to wait for months, unless you have some connection or know someone who can pull a few strings,” Thobeiti said.

This may change as the government ramps up healthcare budgets. Spending has already jumped from $8 billion in 2008 to $27 billion last year, and Saudi asset management firm NCB Capital expects it to soar to $46 billion in 2017.

In addition to building new state-run facilities, the government is offering private companies interest-free loans covering up to a half of the cost of building new hospitals.

And, although the move has yet to be announced officially, Saudis employed in the public sector are expected to become eligible for state-funded health insurance within the next few years, Arqaam and other analysts say.

This would enable them to use private healthcare services without paying extra fees out of their own pocket.

Today, the overwhelming majority, about 83 per cent, of Saudi Arabia’s 8.4 million health insurance holders are expatriates whose employers are legally obliged to cover their insurance costs, according to Arqaam.

The insurance reform could swell the pool with more than a million Saudi public servants and about five million of their dependents, Arqaam estimates. This implies a surge in demand for private Saudi healthcare firms, which are turning to the stock market to finance expansion.

Sulaiman Al Habib Medical Group and Almana General Hospitals will seek to list their shares on the local bourse in 2014 or early 2015, bankers told Reuters in November.

Some companies have already tapped the market. Dallah Healthcare raised 540 million riyals ($144 million) in an initial public offering (IPO) of shares at the end of 2012, while National Medical Care Co. conducted a 175 million riyal IPO last March.

Major global players are also looking for ways to boost their presence. General Electric (GE), one of the biggest manufacturers of medical equipment, has said it will build an assembly facility in Saudi Arabia.

“Looking ahead at 2014, we continue to see a buoyant healthcare sector for the kingdom,” said Mazen Dalati, chief executive of GE Healthcare in the country.

Strong demand

The development of a private healthcare industry is good news for the Saudi government as it tries to diversify the economy and boost employment of citizens in the private sector to make the country less vulnerable to a big drop in oil prices.

Higher state spending will not necessarily translate into quick improvements, however, as shown by the slow progress in the last few years of Saudi Arabia’s $67 billion housing programme, which was stalled by red tape and weak coordination between ministries.

Analysts doubt in particular that the government will meet its own hospital construction targets.

For private providers, human resources could become a bottleneck, especially if the government presses ahead with a plan to gradually replace foreign workers, who hold more than half the jobs in the sector, with Saudi nationals. Today, 20 per cent of workers at healthcare companies are required to be Saudi citizens.

The government is looking for ways to reduce the shortage of qualified personnel, including through partnerships with foreign firms such as GE.

Reflecting such obstacles, healthcare firms’ stock prices have lost steam since the post-IPO rallies commonly enjoyed by new Saudi listings. While the overall stock market has risen 16 per cent since June, shares in Dallah are up just 11 per cent, and National Medical Care has lost 8 per cent.

Future expansion of healthcare facilities, however, will be driven not just by increased government spending but also by fundamental factors such as the continuing growth of Saudi Arabia’s young population and the high incidence of lifestyle-related diseases.

One in every three people in the country is obese, according to the local Obesity Research Centre, whose researchers are looking into whether Saudis are genetically predisposed to the condition.

“Saudi Arabia has an exceptionally high incidence of diabetes, heart disease and congenital disorders,” indicated John Sfakianakis, chief investment strategist at Saudi investment firm MASIC. “The insurance sector changes will provide extra demand for sure.”

AMMAN — A conference on the private sector and its role in guiding growth and development will be held on Thursday at the Dead Sea.

Organised by the Jordan Enterprise Development Cooperation (JEDCO) in cooperation with “Mubadara”, a parliamentary group, the two-day event will provide a platform for representatives of the public and private sectors, the European Union and international organisations working in the area of financing and development to discuss means to promote entrepreneurship.

JEDCO Chief Executive Officer Yarub Qudah said participants will also discuss ways to develop small-and medium-sized businesses, which reached 156,728 in 2011, 97 per cent of the total projects operating in the Kingdom.

He added that discussions will also focus on the role of the government and private sector in creating work opportunities, in addition to presenting drafts on the national strategy and law governing microbusinesses.

RABAT — Morocco said on Friday it had ended subsidies of gasoline and fuel oil and had started to cut significantly diesel subsidies as part of its drive to repair public finances.

But the government, keen to avoid the kind of social unrest that toppled several other North African regimes during the Arab Spring, said it would continue to subsidise wheat, sugar and cooking gas used by poorer Moroccans.

The cash-strapped North African kingdom is under pressure from the International Monetary Fund (IMF) and the World Bank to cut spending and reform subsidies, taxation and its pension system. The demands are linked to a two-year, $6.2 billion precautionary credit line agreed by the IMF in 2012 for Morocco.

“Gasoline and fuel oil are no longer among the products subsidised by the government,” the general affairs ministry said in a statement carried by the state news agency MAP.

Morocco is the most advanced among North African countries in its reform of public subsidies and already started last year to partially index energy prices to international market levels.

Morocco said subsidies for diesel would decline from a level of 2.15 dirhams per litre this month to 0.80 dirham by October.

Morocco has budgeted for 30 billion dirhams worth of food and energy subsidies for 2014, down from 42 billion last year and more than 53 billion dirhams in 2012.

But the subsidy reductions could hurt the fragile economy, which is heavily reliant on tourism, agriculture and remittances from Moroccans living abroad.

Morocco’s main Islamist opposition movement, Justice and Spirituality, urged leftist groups last year to join protests against the subsidy cuts. But so far there has been little sign of widespread public discontent over the measures.

On Thursday, Tunisia’s outgoing government suspended planned energy price hikes, its second policy reversal in two weeks after popular protests forced it to scrap a tax increase envisaged under its 2014 budget.

Three years after the uprising, Tunisians are chafing under high living costs and a lack of economic opportunities.

“We have decided to suspend the increase in energy prices planned for the 2014 budget,” Tunisian Finance Minister Ilyas Fakhfakh told the state news agency TAP.

He said revenues from the planned increase had been expected to total 220 million dinars in 2014.

BAGHDAD — Iraq will seek legal redress and take other measures to punish Turkey and Iraqi Kurdistan, as well as foreign companies, for any involvement in Kurdish exports of “smuggled” oil without Baghdad’s consent, Iraq’s oil minister said on Friday.

Abdul Kareem Luaibi told reporters the government was preparing legal action against Ankara and would blacklist any companies dealing with oil piped to Turkey from Iraq’s autonomous northern region without permission from Baghdad.

The Kurdistan Regional Government (KRG) said earlier this month that crude had begun to flow through the pipeline, and exports were on track to start at the end of January.

It invited bidders to register with the Kurdistan Oil Marketing Organisation.

The KRG’s ministry of natural resources and a spokesman for the KRG did not immediately respond to requests for comment.

Officials at Turkey’s foreign ministry and oil ministry were not available for immediate comment.

Luaibi said it was not in Turkey’s interest to jeopardise bilateral trade worth $12 billion a year, saying Baghdad would consider boycotting all Turkish companies and cancelling all contracts with Turkish firms if the oil exports went ahead.

“Turkey must consider its commercial ties and its interests in Iraq,” he stressed. “Turkey should know this issue is dangerous. It touches the independence and unity of Iraq.

“If Turkey allows the export of oil from the region, it is meddling in the division of Iraq, and this is a red line,” the minister added.

Baghdad has already blacklisted some companies for signing contracts with the KRG and last year threatened to sue Anglo-Turkish energy company Genel, the first firm to export oil directly from Kurdistan. That threat has not yet materialised.

Luaibi said the finance ministry had been told to calculate how much should be deducted from Iraqi Kurdistan’s 17 per cent share of the federal budget if the region failed to meet a government-set target for authorised crude exports via Iraq’s State Oil Marketing Organisation this year of 400,000 barrels per day (bpd).

‘Clear violation’

This target is well beyond Kurdistan’s current export capacity of around 255,000 bpd. Kurdish ministers walked out of a federal Cabinet session on Wednesday in protest at the draft state 2014 budget, which contains the target.

Industry sources do not expect Kurdistan’s oil exports to reach 400,000 bpd until the end of this year or early 2015.

According to Luaibi, preparations are under way to sue the Turkish government for allowing Kurdistan to pump oil through the export pipeline without the approval of Baghdad.

He called this “a clear violation of the agreement signed between the two countries... governing the export of Iraqi oil through Turkey”.

“All companies...were notified not to deal with the [Kurdish] region to buy any quantity of oil which is considered as smuggled,” he said. Any firms which did so risked legal action and an Iraqi government boycott.

“The ministry of oil will never deal with them at all,” he emphasised.

Luaibi reiterated Baghdad’s stance that it has sole rights to manage energy resources, saying this was vital to Iraq’s stability and that any breach would have “dire ramifications”.

Kurdish Prime Minister Nechirvan Barzani had been due to visit Baghdad for talks on the dispute, rooted in disagreement over how to exploit Iraq’s vast oil resources and share the proceeds. It was not clear whether his visit would go ahead.

Kurdistan used to export crude to Turkey through a pipeline controlled by Baghdad, but stopped the flow a year ago after the central government withheld payments to oil companies operating in the northern enclave. Baghdad said it would not pay as the KRG had not met its previous export target of 250,000 bpd.

Since then, the Kurds have been trucking smaller quantities of crude to Turkey and collecting the revenues directly, while laying their own pipeline, which was completed late last year.

Iraqi Prime Minister Nouri Al Maliki said that Kurdistan’s missed export targets had cost Iraq $9 billion in lost revenue in recent years.