Business

VIENNA — OPEC and non-OPEC producers on Saturday reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices that overstretched many budgets and spurred unrest in some countries.

With the deal finally signed after almost a year of arguing within the OPEC and mistrust in the willingness of non-OPEC Russia to play ball, the market’s focus will now switch to compliance with the agreement.

OPEC has a long history of cheating on output quotas. The fact that Nigeria and Libya were exempt from the deal due to production-denting civil strife will further pressure OPEC leader Saudi Arabia to shoulder the bulk of supply reductions.

Russia, which 15 years ago failed to deliver on promises to cut in tandem with OPEC, is expected to perform real output reductions this time. But analysts question whether many other non-OPEC producers are attempting to present a natural decline in output as their contribution to the deal.

“This agreement cements and prepares us for long-term cooperation,” Saudi Energy Minister Khalid Al Falih told reporters after the meeting, calling the deal “historic”.

Russian Energy Minister Alexander Novak told the same news conference: “Today’s deal will speed up the oil market stabilisation, reduce volatility, attract new investments.”

Last week, OPEC agreed to slash output by 1.2 million barrels per day from January 1, with top exporter Saudi Arabia cutting as much as 486,000 bpd.

On Saturday, producers from outside the 13-country group agreed to reduce output by 558,000bpd, short of the initial target of 600,000bpd, but still the largest contribution by non-OPEC ever. Of that, Russia will cut 300,000bpd.

“They are all enjoying higher prices and compliance tends to be good in the early stages. But then as prices continue to rise, compliance will erode,” said veteran OPEC watcher and founder of Pira Energy consultancy Gary Ross.

Amrita Sen from consultancy Energy Aspects said: “Compared to two months ago when the prospects of a deal were fading rapidly, this is a huge turnaround. Sceptics will argue about compliance but the symbolism in itself cannot be understated.”

Ross added that OPEC would target an oil price of $60 per barrel as anything above that could encourage rival production.

Two years of pain 

Oil prices have more than halved in the past two years after Saudi Arabia raised output steeply in an attempt to drive higher-cost producers such as US shale firms out of the market.

The plunge in oil to below $50 per barrel — and sometimes even below $30 — from as high as $115 in mid-2014 has helped reduce growth in US shale output.

But it also hit the revenues of oil-dependent economies, including Saudi Arabia and Russia, prompting the two largest exporters of crude to start their first oil cooperation talks in 15 years.

Apart from Russia, the talks on Saturday were attended by or had comments or commitments sent from non-OPEC members Azerbaijan, Bahrain, Bolivia, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan.

Novak said OPEC and the non-OPEC countries at the meeting were responsible for 55 per cent of global output. Their joint reduction of around 1.8 million bpd would account to about 2 per cent of global oil supply.

Many non-OPEC countries such as Mexico and Azerbaijan face a natural drop in oil production, and some analysts expressed doubts those declines should be counted as cuts.

Industry sources said Oman and Kazakhstan had yet to inform their foreign partners on joint oilfields about possible output cuts. Kazakhstan said on Saturday it would try to reduce output by 20,000bpd next year.

“While a lot of the countries are formalising natural declines, cuts by Russia, Kazakhstan and Oman are real. Russia and Kazakhstan were between them expected to add 400,000bpd to production next year,” Sen of Energy Aspects said.

AMMAN — The Jordanian Businessmen Association (JBA) convened a Jordanian-Turkish business forum on Saturday, with the participation of representatives of several Turkish companies.

The event seeks to boost commercial exchange between Amman and Ankara, increase joint investments and raise awareness of the favourable business environment in the Kingdom, the Jordan News Agency, Petra, reported.

Minister of State for Economic Affairs Yusuf Mansur, who inaugurated the event, said both countries can launch joint investments that can reach the entire world. JBA President Hamdi Tabbaa said that both countries' private sectors have "good relations", thanks to the Jordanian-Turkish Business Council, established in 1994.

Geneva — Airlines are expected to earn $35.6 billion this year, “a record profit”, even if slightly less than original expectations, IATA Director General and CEO Alexandre de Juniac said on Thursday. 

Speaking at the IATA Media Day 2016, he said this “best performance in the industry’s history — irrespective of the many uncertainties we face”, is all the more impressive considering that the oil prices averaged at or were above $100 per barrel of Brent for three of the last six years (since 2010). He also forecast that the strong profitability will extend into next year.

“A net profit of $29.8 billion in 2017 will mean eight years in the black for the industry.  And it will be the third year in a row where the return on invested capital (7.8 per cent) will exceed the cost of capital (6.9 per cent),” he told the attendees.

But while the strongest financial performance is being delivered by airlines in North America, whose net post-tax profit will stand at $18.1 billion next year, Middle Eastern airlines have one of the lower break-even load factors. 

Average yields are low, but unit costs are even lower, “partly driven by the strength of capacity growth, forecast at 10.1 per cent this year”, according to IATA chief economist Brian Pearce.

Post-tax profit for Middle Eastern airlines is expected to slip to $0.3 billion in 2017, representing a profit of $1.56 per passenger and a net margin of 0.5 per cent, said Pearce.

The success of global aviation rests on safety, security, sustainability and global standards, but “while respecting them, airlines must run efficient businesses and generate enough surplus to reward their shareholders”, which is “difficult”, said De Juniac.

Nevertheless, “the industry has improved its financial resilience” and the airlines are in better shape to remain profitable while facing challenges, he added.

One way to deal with challenges is innovation through the use of technology.

“Smart security, fast travel, the e-Air Waybill and new distribution capability (NDC) are all examples”, said IATA CEO, who is particularly enthusiastic about NDC, expected to modernise the distribution process and enable airlines to better understand the needs of their customers. 

Airlines are catalysts for economic development. They deliver about a third of goods traded internationally — by value.

They support some $2.7 trillion of the gross domestic product (GDP), and employment levels associated with aviation have reached almost 69 million, according to IATA figures.

But while global connectivity promotes prosperity, “charges and taxes dampen demand” and that comes with an “economic cost”, said De Juniac, noting that this is “why IATA spends a lot of time fighting taxes and charges”.

The air transport association is also involved in “a constant battle to get governments to understand and fulfil the industry’s infrastructure needs”, considering that nearly 4 billion travellers are expected in 2017 and 7.2 billion in 2035, a growth that “will bring net economic benefits, but only if infrastructure development can keep pace”.

While admitting that “there is no magic solution for infrastructure”, De Juniac suggested that “when it comes to airports and air traffic management, that is best done [by governments] in consultation and partnership with airlines who are the users”.

That helps ensure “that we hit the mark on capacity, efficiency and affordability”, he said, also sounding a note of caution on infrastructure privatisation — particularly for airports.

“Governments must take great care to effectively balance public and private interests... Finding the highest bidder should not be the prime motivation. The focus must be on finding the best long-term solution to support the local and national economy. The entire process must be guided by iron-clad regulations to ensure that the privatised entity does not become an out-of-control monopoly,” he said.

“In connecting our world, aviation makes people’s lives better. It supports trade, creates business opportunities, facilitates the exchange of ideas, builds friendships across borders and develops global understanding,” he concluded.

He also expressed concern over the current protectionist rhetoric which he said “is gaining popularity and geographic scope”.

With a much revised line-up, new technology and more decidedly upmarket direction, Volvo is set to make an official comeback to Jordan early in 2017, with an eye on making significant inroads into the premium automotive segment.

In an exclusive interview with The Jordan Times, Managing Partner of GAA & Co. — Jordan’s recently appointed importer — Marwan Naffi said Volvo Jordan’s goal is to ultimately “reach at least 10 per cent market share” in the premium segment. 

Traditionally dominated by the Mercedes-Benz, Audi and BMW luxury troika globally and more decisively by Mercedes in Jordan, he said that Volvo is “ready to compete in every sense with its German premium rivals in Jordan”.

One of the oldest Volvo importers globally, Naffi said that GAA’s long experience “will be at the disposal of the Jordanian consumer”. Asked about possible conflicts of interest and whether GAA represents any other rival brands, he stressed the company’s automotive interests as being “mono-brand” and dedicated to Volvo.

Echoing such sentiments, the iconic Swedish brand’s Turkish-based regional office cited GAA’s “professional and skilled team”, “benchmark operations” and “strong association with Volvo”.

Also interviewed by The Jordan Times, General Manager of Volvo MENA-CIS Emre Karaer said GAA’s  “expertise and dedication to our brand in Lebanon can bring out great achievements in Jordan… and ‘help build customer confidence”, when asked whether the importer’s extensive experience with Volvo would outweigh its position as a newcomer to the Jordanian automotive sector.

Expected to open for business in January, Karaer believes that Volvo’s return to the “stable and important” Jordanian market is a “significant step”, adding that Volvo’s hybrid models represent a particularly “good prospect”, owning to Jordan’s hybrid-friendly tax regime.

Absent from the Jordanian market in recent years, Volvo has, however, been undertaking a more premium and up-market direction since 2010 — according to Naffi — and much further more with the launch of the recent high-tech SPA platform models. 

Set to be priced on “par with competitors” albeit with “more options” and “state of the art safety technology features”, Naffi believes that Volvo will be competitive in the premium segment and “regain the trust of the Jordanian consumer.”

Distinguished by its Swedish character and innovative approach to safety, Naffi said that Volvo’s Scandinavian design and luxury is “all about enhancing life experience”, coupled with a calming effect.

 In terms of safety, its approach is a “holistic” one according to Karaer, who added that Volvo’s driver interface is designed to be “as simple and intuitive as possible to reduce eyes-off-road time at “critical events”. 

Asked as to how Volvo’s autonomous driving systems would fare in the real world and especially in less than ideal road environments and driving styles, Karaer said that V Volvo will be testing autonomous drive cars in real-world situations. 

Committed to the highest safety standards and ambitions in the automotive industry, Volvo will start a 100-vehicle programme, in 2017 in Gothenburg, Sweden, during which families will ride autonomous drive versions of the XC90 in “everyday life”, while similar tests will be conducted in London and China to accurately benchmark the “efficiency and practicality of autonomous driving”.

AMMAN — Civil aviation and tourism executives, accompanied by government officials, have expressed their commitment to supporting the travel industry and tourism activity in the Middle East and North Africa (MENA) region. 

Taking part in the Arab Aviation Summit, a regional aviation event which concluded at the Dead Sea on Tuesday, the gathering reflected on the progress achieved so far in this area and new trends, shaping the future of the aviation-tourism industry, according to a statement released by the organisers.

Marking the summit, held this year under the theme, "Linking Cultures, Driving Economies", the Arab Tourism Organisation of the Arab League and the Arab Aviation Summit signed a memorandum of understanding at the event, pledging to boost future cooperation. 

The summit opened with a welcome address by the Arab Aviation Summit Chairperson Adel Al Ali, in which he highlighted the relationship between aviation and tourism while encouraging a collaborative approach to the region’s travel industry to achieve further growth.

Minister of Tourism and Antiquities Lina Annab, who attended the summit, concurred that aviation and tourism cannot be seen in isolation. 

Commenting on growth in the travel and tourism sector, which is outpacing growth in other sectors in national economies, she highlighted airport infrastructure, visa processes, and taxes and other levies as issues that need to be prioritised by governments and approached collectively. 

Bandar Fahad Al Fehaid, president of the Arab Tourism Organisation of the Arab League, said there is no tourism without aviation, and no aviation without tourism. 

Addressing the gathering, Fehaid said 12 per cent of the total work opportunities in the Arab world come from the tourism industry, adding that there is significant potential to increase this.

At the event, CNBC Arabia led an interview panel discussion on "Why Arab travel and tourism is a vital economic and cultural driver”, featuring Abdel Wahab Teffaha, secretary general of the Arab Air Carriers Organisation.

AMMAN — An agreement will be signed on Wednesday on how to maximise benefits from the Jordan-US Free Trade Agreement (FTA), according to Mohammed Bataineh, chairman of the American Chamber of Commerce in Jordan.

Speaking at a meeting with a US private sector trade delegation on Tuesday, he said the FTA helped boost the trade exchange from $350 million 10 years ago to over $3 billion; yet he conceded that there was still much more that could be done to ensure maximum benefits. 

“It is underutilised and still there is more room for potential for increased cooperation,” he told the attendees at the meeting with the visiting delegates, led by the US Department of State’s Special Representative for Commercial and Business Affairs Ziad Haider. 

He indicated that Jordan is a good stepping stone into the region and that many opportunities have not been tapped yet, under the country’s free trade accord with the US, the Kingdom’s top trading partner. 

“Ties between the US and Jordan are strong and strategic at all levels, and the FTA was a game changer… Garment is a major sector under the FTA deal, but there are many other sectors that can benefit from the FTA such as pharmaceuticals and engineering,” he said, indicating that the agreement to make the best use of the FTA will be signed with the USAID.

The delegation’s visit comes on the heels of the White House Call to Action for private sector engagement to support the global refugee crisis. The visiting delegation includes representatives of companies in the areas of food and beverage, energy and financial solutions.

On the sidelines of the meeting, in an interview with The Jordan Times, Haider reiterated that ties between the US and Jordan are strong and strategic, saying there is further room for development.

He underscored the importance of the FTA, saying it is in Jordan’s favour.

“We are here to build on the strong economic foundation,” he said, stressing that there is more potential to expand cooperation and trade in other areas.

Around 82 per cent of Jordan’s imports to the US are from the garment sector, he told The Jordan Times.

As the Kingdom is under pressure from regional crises n Syria and Iraq, coupled with an influx of Syrian refugees, “we are keen to attract more investments into Jordan and boost trade exchange”, he said. 

Highlighting promising sectors, he said those include ICT, pharmaceuticals and renewable energy.

BAGHDAD — Iraq's private banks are pinning hope on the oil-rich government to bring back into the black their balance sheets severely affected by the Daesh terror group take over of parts of the country.

In an interview with Reuters on Monday, Iraqi Private Banks' Association President Ali Tareq said that several lenders would not be able to pass a stress test of international standards at their current level of capitalisation.

“Collectively, banks have lost nearly 100 branches in hot areas with all their assets, funds, buildings, everything without any compensation,” he said. “If a stress test is held currently, it should take into consideration the current situation of the country and the Iraqi banking sector.”

The weakness of the private banks does not affect the banking sector as a whole, dominated by state-owned banks feeding on business from the oil-rich country's government.

But it is a setback for government efforts to develop the private sector and reduce the OPEC nation's reliance on oil.

As a way to reinvigorate private lenders, the central bank may offer them the possibility of setting up a 500 billion Iraqi-dinar fund that will invest in the government's “strategic infrastructure projects” like housing, transport and sewage projects, Tareq said.

The government would thus provide the banks with a steady stream of business that will help restore their balance sheets.

“The central bank is in the final steps, it has sent a letter to the participant banks to determine their shares, all banks are allowed to participate,” Tareq said. “Other than levying interest, the banks will be engaged in long-term, guaranteed projects.”

Other than damage to the assets of the banks and the banks clients, the militants' sweeping advance across northern and western Iraq also caused a rush on liquidity that weakened the leaders. People got worried that they would no longer be able to access their money deposited in banks. Iraq relies almost entirely on cash for day-to-day transactions.

Iraq has been prey to war and insurgency since the overthrow of president Saddam Hussein in 2003. As a result, Iraqis are reluctant to use banks in case violence prevents them accessing their cash or restrictions are placed on withdrawals.

Private banks suffered a lot more than the state owned banks that relied on government liquidity and transactions to stay afloat throughout the 36 years of wars and sanctions that the country went through.

Iraq's state-owned banks — Rafidain, Rasheed, Agriculture, Industrial, Real Estate and the Housing Fund — control together 86 per cent of total deposits or $48 billion, while the 45 private banks share the remaining 14 per cent, or $7 billion, said Tareq.

“There were many withdrawals of deposits by citizens because the circumstances at the time required that they have liquidity,” said Tareq. “Bank transactions were dealt a heavy blow at the same time, as lending and letters of credit” to the private sector “decreased as the government executed fewer projects”, he added.

SAN FRANCISCO — Apple has revealed it is investing heavily in autonomous vehicles in a letter asking the government to make it easier to develop self-driving cars.

The company is “excited about the potential of automated systems in many areas, including transportation,” Apple said in a November 22 letter to the National Highway Traffic Safety Administration (NHTSA) offering Apple’s opinion about draft regulations for the sector.

“Apple looks forward to collaborating with NHTSA and other stakeholders so that the significant societal benefits of automated vehicles can be realised safely, responsibly, and expeditiously,” the company’s director of product integrity Steve Kenner wrote.

Apple issued the letter because it is “investing heavily in machine learning and autonomous systems”, an Apple spokesman said in an e-mail to AFP.

“There are many potential applications for these technologies, including the future of transportation, so we want to work with NHTSA to help define the best practices for the industry.”

Rumours about Apple’s ambitions in the sector have circulated for years.

The company has a separate organisation called “Project Titan” that is developing automotive projects.

Although Apple has never officially confirmed the project, several of CEO Tim Cook’s comments have fuelled speculation.

After a $1 billion investment in a Chinese ride-hailing service called Didi Chuxing, he spoke of “some strategic things that the companies can do together over time”.

However, in early September, The New York Times reported that the group had narrowed its ambitions, laying off dozens of staff as part of the project’s “reboot”. 

Instead of designing and producing a complete self-driving car, the group will now concentrate on developing underlying technologies for autonomous vehicles.

In its letter, Apple urges the NHTSA not to penalise new participants in the sector by restricting the testing of cars under development on public roads, for which established automakers generally have exemptions.

“To maximise the safety benefits of automated vehicles, encourage innovation, and promote fair competition, established manufacturers and new entrants should be treated equally,” it says.

Apple also encourages data sharing, particularly for accidents, saying that would enable the industry to “build a more comprehensive dataset than any one company could create alone”.

Most major auto manufacturers and many technology groups are currently developing autonomous vehicles, considered to be the future of the automobile, along with electric power, with first production models promised for around 2020.

AMMAN — Airport International Group (AIG) has announced that as of the end of October 2016, the Queen Alia International Airport (QAIA) has welcomed 6,383,193 passengers, recording a 4.4 per cent increase compared to the same period in 2015. 

Moreover, year-to-date (YTD) aircraft movements (ACM) increased by 2.9 per cent to settle at 62,553 ACM while YTD cargo traffic figures increased by 2.2 per cent to reach 84,124 tonnes, the AIG, the Jordanian company responsible for the rehabilitation, expansion and operation of the QAIA said in a statement. 

In October this year, 532,542 passengers passed through the QAIA, resulting in an 8 per cent decrease compared to the same period of last year, during which the airport welcomed 578,867 passengers, the statement indicated. Additionally, QAIA registered 5,630 ACM as opposed to 6,129 ACM in 2015, indicating an 8.1 per cent year on year fall. Meanwhile, cargo rose by 0.9 per cent as QAIA handled 8,837 tonnes as opposed to 8,758 tonnes during the same month in 2015.  

“We are now experiencing a lull in airport activity, which is typical of this time of the year. 

Nonetheless, we look forward to witnessing the usual surge that takes place towards the end of the year during the Christmas and New Year holidays, when vacationers choose to travel again,” Airport International Group CEO Kjeld Binger said.