Business

NEW DELHI — Limits on ATM withdrawals will be partially lifted from February 1, India's central bank said Monday, as a cash crunch sparked by the ban on high-value rupee notes eases. 

The Reserve Bank of India (RBI) capped cash withdrawals after Prime Minister Narendra Modi's shock decision in November to take all 500 and 1,000 rupee notes out of circulation — 86 per cent of the currency in the cash-reliant nation.

The move triggered long queues outside banks and ATMs which ran dry within hours as hundreds of thousands of people thronged to them every day to withdraw the initial daily limit of 2,000 rupees ($29).

The RBI later increased the amount to 4,500 rupees, and then to 10,000 rupees earlier this month as long lines and crowds at banks eased.

Limits placed on customers who have current accounts or overdraft accounts "stand withdrawn from February 01, 2017", the central bank said in a statement.

However; restrictions on customers who have the more widely used savings accounts would "continue for the present" but could be scrapped "in the near future", the statement added.

Customers with saving accounts are currently allowed to withdraw a maximum 24,000 rupees a week, either through ATMs or over the counter.

The RBI also said that banks could use "their discretion" to place their own daily cash withdrawal limits at ATMs — as was the case before the November 8 announcement.

The sweeping abolition was meant to bring billions in so-called "black", or undeclared, money back into the formal system.

Many, especially in rural India, were left without enough cash to buy food or daily essentials but Modi repeatedly defended the scheme and urged all Indians to switch to non-cash payment methods.

SAN FRANCISCO — As US President Donald Trump pushes hard for goods to be "made in America”, how realistic is it to expect Apple to stop manufacturing its iconic devices in China?

The freshly installed president vowed while campaigning that he would force Apple to bring production to US soil.

Yet, as other big companies have sought to appease the new administration with promises of jobs or investments in the United States, Apple has stayed low-profile.

Major Apple contractor Foxconn this month confirmed that it is considering a $7 billion investment to make flat panels in the US in a joint project with Japan's SoftBank.

"I have discussed with my major clients about going to [the US] and they are also willing to invest, including Apple," Foxconn founder Terry Gou told reporters in Taipei. 

Taiwan-based Foxconn has given no details, and Apple declined to comment.

Global Equities Research analyst Trip Chowdhry believed that moving manufacturing to the US, where many customers are, was more of a commonsense move than a political one.

"You need to manufacture local products in local markets," Chowdhry reasoned.

Making things locally gives better control of distribution networks and lets manufacturers customise goods for local markets, the analyst noted.

Logistics puzzle

Whether politically motivated or not, Apple is not in the same position as automakers which relocated US factories overseas to cut costs, according to IHS manufacturing processes chief analyst Dan Panzica. Apple never moved jobs offshore, it created them there.

"The Apple jobs were never here," Panzica said.

"The entire supply chain grew in China."

Apple benefits in Asia from a network that goes beyond subcontractors assembling smartphones, tablets or laptops. The California-based firm relies on a dense ecosystem of companies that make components and spare parts for its devices as well.

China also offers sources of important raw materials, along with cheap, flexible and abundant labour to keep iPhone assembly lines cranking along.

It would be "very hard to replicate" that situation with US workers without using "more robotics and less workforce”, undermining the political aim of creating jobs here, according to Endpoint Technologies analyst Roger Kay.

Exacerbating the challenge, "it makes no sense to make phones here if you have to ship all the components from China”, said technology analyst Jack Gold of J. Gold Associates.

Sacrifice profit or price

The MIT Technology Review in June considered several scenarios, from simply bringing assembly to the US to simultaneously shifting the manufacture of parts here.

The Review estimated the extra manufacturing cost of an iPhone 6S Plus at $30 to $100 as a result of those moves.

It is difficult to imagine that Apple would risk its status as the world's most profitable company to absorb such a hike in manufacturing costs.

"Apple will never lower its margins on its flagship product, the iPhone," said Ovum consumer technologies analyst Ronan de Renesse.

Apple is under pressure from investors to keep its high margins, and already faces slowing growth of iPhone sales.

So, would US consumers put their money where the political talk is and pay more for iPhones stamped "Made in the USA?"

Not all analysts were convinced.

It was seen as more likely that Apple would make a symbolic move to appease Washington, such as investing more in making Mac Pro computers here, or in a facility for higher-priced, limited-edition devices such as an "anniversary edition iPhone" to mark the handset's 10th birthday this year.

"I would be very surprised to see a major production shift to the US," Gold said while discussing Apple.

Carrots or sticks 

Breaking the US technology star's successful business model should be out of the question for the Trump administration, and there is likely to be a compromise such as "financial incentives”, according to Ovum analyst de Renesse.

Foxconn is already trying to get US states to woo it with grants of land, cheap energy, or tax breaks.

Apple could seek tax amnesty for the $200 billion or so in profits it keeps overseas in exchange for increasing local manufacturing.

The economic equation would change if Trump went on the offensive by imposing heavy customs duties on Chinese imports.

Given Apple's dependencies on partners in China, and its keen desire to gain traction in that market, Apple could find itself an early casualty in a US trade battle with Beijing.

AMMAN — Royal Jordanian (RJ) announced that it will be increasing the frequency of its flights to 14 Arab and international destinations on its route network as of summer 2017.

RJ has also rescheduled arrival and departure times providing passengers, particularly transit travellers, with the convenience of selecting from a broader array of flight options, according to an RJ statement received by The Jordan Times on Saturday. 

The network enhancement comes as part of RJ’s efforts to strengthen its presence and boost its connectivity in those cities, all while incorporating network consolidation throughout the high-demand summer season.

 This will ultimately increase RJ’s network connectivity by an additional 8 per cent, according to the statement. 

The 2017 summer operating plan will add an additional weekly flight to the already scheduled services to Munich, Berlin, Frankfurt, Barcelona, Madrid, Moscow, Riyadh, Tunis and Algiers, and two additional weekly flights to New York, Kuwait and Dammam. 

Furthermore, RJ will add three additional weekly flights to Medina, bringing the total number of weekly flights into the city to 16. 

RJ will be operating a total of 15 weekly flights to Baghdad, by adding six additional weekly trips to the existing schedule.

The commercial strategy implemented by RJ seeks to increase revenue for the airline through various means. 

Continuously meeting seasons’ demands, RJ periodically revises its route network in order to offer further flexibility, while matching aircraft capacity and flight frequency to destinations.

AMMAN — The Arab Bank Group on Saturday disclosed its 2016 results, reporting a growth of 20 per cent in net profit. 

Net operating income before provisions and taxes exceeded $1.1 billion, while its post tax net profit reached $533 million for 2016 compared to $442 million for 2015, according to a bank statement.

Excluding the effect of foreign currency devaluations, the bank has shown a consistent solid growth during 2016 as loans and advances grew by 6 per cent to reach $23.7 billion, and customer deposits grew by 3 per cent to reach $33.6 billion, according to the statement.

Sabih Masri, chairman of the board of directors said the strong performance of the Arab Bank Group confirms its success in dealing with the challenging and changing operating environment and reflects the group’s prudent operating policies.

Nemeh Sabbagh, chief executive officer, said the Arab Bank Group enjoys strong liquidity and robust capitalisation. As of 31 December 2016, the group’s loan-to-deposit ratio stood at around 70 per cent, while its capital adequacy ratio calculated in accordance with the new Basel III regulations has improved further to reach 15.7 per cent.

He added that the asset quality of the group continues to be high, and that credit provisions held against non-performing loans continue to exceed 100 per cent, excluding the value of collaterals held.

Masri said the encouraging results will continue to support the continuous improvement in the financial performance of the group and its position in the markets.

 In view of the results, the board of directors has recommended the distribution of 30 per cent in cash dividends for the financial year. 

The 2016 financial statements are subject to the approval of the Central Bank of Jordan.

AMMAN — Moody's Investors Service said on Wednesday that although credit risks remain high for banks in Jordan, their sound capital and liquidity provide a buffer to downside risks.

Profitability will remain stable in 2017, despite higher provisioning expenses, owing to improving margins, it added in its  report, entitled "Banks — Jordan: Solid Capital Buffers, Regulatory Reforms and Higher Interest Margins Provide Support Amid Regional Turbulence”.

The closure of the Iraqi and Syrian borders with Jordan coupled with weak financial conditions in Gulf countries weigh on trade, tourism and investor sentiment in the country and on growth, as a result. Accordingly, as published previously, Moody's said it expects only a moderate uptick in real gross domestic product (GDP) growth in Jordan to
3.2 per cent for 2017.

Furthermore, rising interest rates, driven by recent and future Fed rate increases and the Jordanian dinar's peg to the US dollar, will moderate the demand for credit, especially from households, according to Moody’s report. 

Under these challenging operating conditions, Moody's expected domestic credit growth of 6 -7 per cent in 2017, down from 8 per cent in 2016.

Moreover, it added that asset risks would remain high for Jordanian banks due to credit concentration, including high exposure to the government, and rising household indebtedness. 

The Jordanian banking system's large size relative to the GDP and substantial cross-border operations would increase systemic and contagion risk. Banks' consolidated total assets stood at 278 per cent of the GDP as of the end of 2015.

However, "we expect a broadly stable return on assets for Jordanian banks of around 1.4-1.5 per cent for 2017," Alexios Philippides, assistant vice president at Moody's said. 

"Higher provisions against new non-performing loans will be largely offset by improving net interest margins as interest rates rise, as well as further operating efficiency gains."

Moreover, new regulation in Jordan will support the resilience of the banking sector. Basel III capital requirements were implemented last year and a planned 2017 amendment of the Deposit Insurance Corporation law will create a more robust bank recovery and resolution framework, bringing it in line with the Financial Stability Board's “Key Attributes”, according to Moody’s.

Sound capital and liquidity would provide a buffer to downside risks, it reiterated.

NEW YORK — The Dow Jones Industrial Average, the most famous equity index benchmark on Wall Street shot above 20,000 for the first time at the open Wednesday. 

The blue-chip stocks index quickly blew through the much-anticipated milestone in the opening seconds of trading, culminating a US rally in the wake of US President Donald Trump’s election, in anticipation he will produce pro-growth policies. 

About 15 minutes into trading, the Dow was 20,010.71, up 0.5 per cent.

The broad-based S&P 500 also rose 0.5 per cent to 2,290.43, while the tech-rich Nasdaq Composite Index gained 0.6 per cent to 5,635.10.

The S&P 500 and the Nasdaq each closed at all-time records on Tuesday.

In crossing the 20,000 threshold after many failed tries, the market regained its optimistic mindset after the rally spurred by Trump’s election stalled in mid-December and up to the January 20 inauguration.

Analysts said the shift was triggered by Trump’s announcements Tuesday to advance two major pipeline projects that had been blocked by former president Barack Obama. 

The pipeline move “wasn’t a surprise as it was consistent with campaign rhetoric, yet it was a timely reminder for a listless market of the Trump Administration’s push to increase economic activity in the US”, said Briefing.com analyst Patrick O’Hare.

The rally spurred more stock buying by investors who were caught off guard in what O’Hare dubbed “FOMO” or the “fear of missing out”.

The renewed market confidence suggests investors are shrugging off worries about Trump, which include fears he will ignite a trade war with protectionist policies and push hard on controversial social policies. 

Trump was expected later Wednesday to announce the first steps towards building a massive wall on the Mexican border, a campaign promise that pleased his political base but has been criticised by others as unnecessary and mean-spirited, as well as a misuse of funds.

ANKARA — The Turkish central bank on Tuesday hiked its headline interest rate by 75 basis points in a bid to boost the ailing lira but failed to impress markets looking for even sharper action.

The monetary policy committee of the bank said the overnight lending rate was being lifted to 9.25 per cent from 8.5 per cent, coming on the heels of a rate hike in November last year. 

But the committee kept its one-week repurchasing (repo) rate unchanged at 8 per cent and the overnight borrowing rate was kept at 7.25 per cent.

But with markets hoping for even more and taken aback by the absence of any move in the repo rate, the lira initially lost 1.95 per cent in value against the dollar after the announcement.

It later stabilised to trade at 3.76 to the greenback, a loss in value of 0.3 per cent on the day but well short of the rally many had hoped for after the meeting.

Some economists expected interest rates to be increased by 100 basis points — or a full percentage point — after the lira lost seven per cent of its value against the dollar in the first four weeks of 2017 alone.

The lira's recent performance has been the worst of any emerging markets currency, alarming the government ahead of a referendum expected in April on changing the constitution to give President Recep Tayyip Erdogan more power.

The bank opened the door to further hikes, warning in a statement that a "significant rise in inflation" was expected in the short term.

Inflation was reported at 8.5 per cent in December, compared with 7 per cent the previous month.

"The committee decided to strengthen the monetary tightening in order to contain the deterioration in the inflation outlook," it said. 

It added: "If needed, further monetary tightening will be delivered."

'Not ready for
decisive hikes' 

Economists said the decision showed the bank was not convinced by the need for radical rate hikes to halt the plunge in value of the lira and would prefer employ other tactics.

The lira has since January 10 pared losses after the bank took measures to increase the amount of liquidity in the market, boosting demand for the lira.

The decision showed the bank was not ready to deliver "decisive, orthodox hikes even so soon after [the lira] hit all-time lows in a move that seemed on the verge of turning disorderly", Inan Demir of Normura International said in a note.

"We feel the bank still thinks that this Turkish lira depreciation will be a temporary one and its impact on inflation will be temporary," said Ozgur Altug, chief economist at BGC partners in Istanbul.

Finansbank economist Gokce Cilek said it would take "another round of sharp depreciation" for interest rates to be hiked further, saying the bank would be content for now with non-interest rate tools.

Economists also complained that policymaking was needlessly confusing at a critical time, with the date of the next monetary policy meeting unknown and the bank still employing an array of multiple interest rates.

William Jackson, senior emerging markets economist at Capital Economics, said there were "worrying signs" the bank is making the "already-convoluted monetary policy setup even more complicated".

The ruling Justice and Development Party has dominated Turkish politics since winning its first majority in 2002. The economy's strong performance and investment in public infrastructure has been a pillar of its success.

Hurriyet daily's well-connected columnist Abdulkadir Selvi said the economy would be the first priority on the government's agenda as the country headed to the referendum.

"The aim of the government is to breathe life into the economy before the referendum to calm the public," Selvi wrote Tuesday.

SEOUL — The world's biggest smartphone maker Samsung blamed faulty batteries on Monday for the fires that led to the recall of its flagship Galaxy Note 7 device.

Internal and independent investigations "concluded that batteries were found to be the cause of the Note 7 incidents", the South Korean company said in a statement.

The giant conglomerate was forced to discontinue the device —originally intended to compete with Apple's iPhone — after a chaotic recall that saw replacement phones also catching fire.

The debacle cost the company billions in lost profit and reputational damage.

Samsung acknowledged Monday that it provided the specifications for the batteries, adding: "We are taking responsibility for our failure to ultimately identify and verify the issues arising out of battery design and manufacturing.”

"We have taken several corrective actions to ensure this never happens again."

Samsung announced a recall of 2.5 million units of the oversized Galaxy Note 7 in September 2016 after several devices exploded or caught fire.

When replacement phones also started to combust, the company eventually decided to kill off the Note 7 for good.

Monday's English-language Samsung statement referred only to "incidents" but in Korean it spoke of "damage by fire".

ISTANBUL — Turkish businessman Tekin Acar had contracts to open branches of his leading cosmetics chain in ten new shopping malls this year. A few days ago he cancelled nine of them after sharp falls in the lira meant he would struggle to afford the rents.

Turkey's currency has lost around a quarter of its value since the middle of last year, causing havoc for retailers selling imported goods or paying rent pegged to the US dollar.

Many have already been suffering from a sharp economic slowdown and dwindling tourism numbers after a spate of deadly bombings.

Foreign brands in Turkey are also suffering. Dutch clothing chain C&A, Britain's Topshop, German cosmetics firm Douglas and US-based dietary supplement retailer GNC have disappeared from shopping centres in recent months.

Retail spaces in some of Istanbul's biggest malls stand empty.

"Since many brands have closed up stores one by one, people don't notice it," said Acar, who founded the cosmetics chain that bears his name in 1979 and has 76 stores across Turkey.

"In my 46-year career, it's the first time I'm having trouble paying my rent, utilities and salaries. I've put all my income from other businesses into this, I've increased capital but it isn't enough. I'm not George Soros, this is it for me."

Hundreds of malls sprung up across Turkey in the past two decades, symbols of the rapid consumption-led growth that helped build President Recep Tayyip Erdogan's reputation when he was prime minister from 2003-2014.

But that growth has left structural weaknesses in the economy, and the suffering retail sector and wider economic malaise come at an awkward time for Erdogan. He is expected to seek popular support in a spring referendum for bolstering the powers of his office and can ill-afford a sharp slowdown.

Acar's business has been further hit by a hike last week in import taxes on some cosmetics and by restrictions on the products for which credit card payments can be taken in installments, part of a drive to boost Turkey's savings rate.

Many of the new malls were financed with dollar and euro loans and their owners, who have seen their debt burden rise as the lira fell, charge rent in hard currency to offset the risk.

The payback period for shopping mall developers in Istanbul has risen in recent years to an average of 22 years from 15-16, largely due to exchange rate risk and uncertainty about rental incomes, according to Hulusi Belgu, head of the Turkish Council of Shopping Centres (AYD).

His association estimates that $53 billion has been invested in the country's 377 shopping malls over the past few decades, 70 per cent of it financed through debt, much of it dollar and euro-denominated.

There was "constant demand" from retailers to seek rent reductions because of the weaker lira, Belgu told Reuters, and mall developers — despite their own financial pressures — were having to do their best to help.

"In the end, the mall investors look at the rent to turnover ratios and act accordingly. We pull the rents to healthy ratios that allow [the retailers] to survive," he said.

Falling confidence

The lira has fallen as much as 10 per cent against the dollar since the start of 2017, making it the world's worst performing major currency. That comes on top of double-digit falls both last year and the year before.

Erdogan has urged Turks to sell dollars to prop up the lira, calling for a "sense of national mobilisation", while the central bank has taken steps to tighten lira liquidity.

Financial market investors say only a sharp interest rate hike when the central bank meets on January 24 will put a floor under the lira's losses, although Erdogan has long been opposed to such a move, fearing it will further slow growth.

The lira's fall has been a major blow to middle-class Turks, for whom life is largely dollar-denominated. Fuel prices and private school fees, clothing and electronics have all risen in price with the lira's decline, denting consumer sentiment.

Economic growth in the third quarter, the latest data available, turned negative for the first time in seven years and is forecast at just 3.2 per cent for 2016, a far cry from the high single-digit rates on which Erdogan built his reputation as prime minister from 2003-14.

"It's crucial for retailers to reduce the cost of rent during tumultuous times as the decline in sales puts a stress on our financials and rent is among the largest fixed costs for our sector," said Ahmet Can Tarkan, head of Dilasima Group, a boutique fashion retailer.

Dilasima, which operates 43 stores in five cities, imports Italian brands including MaxMara, Furla and Marella, meaning its cost of goods has risen in lira terms, as well as its rents.

"We try not to reflect small appreciations in foreign currencies onto prices but we can only absorb increases up to 5 per cent," he said. "We need to be able to replace our goods with new merchandise every 6 months, so we do push up prices when the appreciation is higher than 5 per cent."

For more affordable brands, passing on the rising costs to more price-sensitive consumers is far harder.

C&A sold its stores to DeFacto, a Turkish retailer, last June amid what it described as "challenging" market conditions.

Topshop said it had closed its physical stores in Turkey due to lease expirations, but was servicing the market online and was looking for new sites. Parent company Arcadia Group, which also owns brands including Dorothy Perkins and Miss Selfridge, is still active in Turkey.

GNC said in October it had closed 85 stores in the country, while Douglas, which first opened in Turkey in 2006, said it closed its 11 stores the same month. A Douglas spokeswoman said the company withdrew because it did not expect its small market share to show a major improvement "in the foreseeable future".

Despite being at loggerheads over rent, what mall developers and retailers do agree on is that the lira's volatility, rather than its weakness alone, is the biggest challenge.

"In the long term, we're more concerned about consumer morale than the appreciation in foreign currencies. The consumer will be willing to pay a higher price in lira terms if they feel confident about the state of Turkish economy," Tarkan said.

"Stability in foreign exchange rates is key to creating that confidence among consumers."

SAN FRANCISCO — Apple on Friday sued Qualcomm, accusing the California chipmaker of abusing its market power to demand unfair royalties, echoing charges filed days earlier by US antitrust regulators.

Apple said in the court filing that it has been overcharged "billions of dollars" by its chipmaking partner's "illegal scheme."

Apple also claimed Qualcomm owes it a billion dollars but is refusing to pay in retaliation for the iPhone maker's cooperating with South Korean antitrust regulators looking into the chipmaker's actions in that country.

"For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with," Apple said in an e-mail statement.

"To protect this business scheme Qualcomm has taken increasingly radical steps, most recently withholding nearly $1 billion in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them."

The suit charges Qualcomm of building a business model on using its rights to older, legacy technology considered telecommunication industry standards to raise royalties when Apple innovates with features such as TouchID fingerprint recognition or digital wallets in mobile devices.

"Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined," Apple said.

Antitrust woes 

Apple noted in the suit that Qualcomm's business practices have come under scrutiny by antitrust regulators in an array of countries for selling its smartphone chipsets only to makers agreeing to its "preferred licence terms" for essential mobile telecom patents.

Apple asked for a jury trial, and for damages, including Qualcomm paying the company what it owes plus giving up excessive royalties it has raked in.

Qualcomm did not immediately respond to an AFP request for comment.

The Apple filing came three days after the US Federal Trade Commission filed suit in federal court in California claiming Qualcomm abused its market power in as part of its "unlawful maintenance of a monopoly in baseband processors”, which are devices that enable cellular communications in phones and other products.

Qualcomm rejected the agency's case as "significantly flawed", arguing that reasoning at the heart of the civil complaint is wrong.

South Korea's anti-trust watchdog last month slapped Qualcomm with a record fine exceeding $850 million for abusing its dominant market position as a maker of baseband chipsets used in mobile phones.

Room for rivals

Apple relies on Qualcomm for chip-based modems that enable iPhones and iPads to communicate with telecommunication networks.

Apple undoubtedly knows of the antitrust tide rising against Qualcomm and would like to help provide room for rival chipmakers to flourish, perhaps letting Intel improve its position, according to analyst Patrick Moorhead of Moor Insight and Strategies.

"I think Apple is not comfortable in feeling that they have only one source and are taking this opportunity to go after Qualcomm," Moorhead said, referring to the mobile device modems.

"Qualcomm is being looked at on every continent on the planet; this is probably, strategically, the right time for Apple to do this."

While the legal case alleges exclusionary contracts and the idea of being overcharged for licensing, it may well be powered by Apple wanting to ramp up competition to Qualcomm so it can negotiate better deals, the analyst said.

Modem chips are separate from processors that act as the brains or graphics engines for mobile devices.