Business

AMMAN — Inflation in the first seven months of 2016 went down by 1.3 per cent, compared with the figure recorded during the same period last year, according to the Department of Statistics (DoS).

Main item groups that contributed to the drop were transportation, fuel and lighting, vegetables, dried and canned legumes, and nuts, according to a DoS report that was sent to The Jordan Times.

Other groups whose prices went up during the January-July period included rents, entertainment, tobacco, cigarettes and clothes.  

AMMAN — Kuwait's partial deregulation of gasoline prices is a politically and economically bold move on energy subsidy reforms, for a country where, on a per capita basis, subsidies are amongst the highest in the world, according to a recent World Bank (WB) statement.

Earlier this month, Kuwait’s government approved an increase in prices of gasoline sold locally by as much as 83 per cent, becoming the latest oil-rich Arab nation to cut subsidies as lower crude prices squeeze finances.

Energy subsidies have been a major burden on public finances, ranging from around 1.3 per cent to 5.7 per cent of the country’s gross domestic product, when environmental, health and other extra expenses are taken into account, the WB statement said. 

Because of the size, they result in major distortions, with extremely high levels of energy consumption, much higher than those driven by demographic and growth trends, and in comparison to other high income countries, the statement pointed out. 

The WB said the recent adoption of an automatic mechanism should be viewed as the first stage of a transition to a fully liberalised pricing and supply regime, which has typically been a more effective approach to avoiding subsidies and protecting the budget. The current environment of low oil prices presents an opportunity to reform energy subsidies with minimal impact on consumers while generating fiscal savings at a time when fiscal pressures are increasing. 

The decision to remove subsidies is also strategically aligned with the Kuwait’s vision to further diversify the economy and enhance its competitiveness. In the medium and long run, subsidy reforms is expected to encourage a move towards more labour-intensive industries, which is expected to lead to job creation for nationals, a particularly important consideration for Kuwait, where foreign labour has been subsidised.

The impact of higher transport fuel retail prices depends on the short run and long run responsiveness of consumers to the price shocks. International experience shows that consumption of transport fuel is less responsive to price increases than other fuels, such as electricity. 

While higher retail prices will increase the cost of running a car, Kuwait remains relatively cheap compared to markets in Europe.  On a per litre basis, the new retail gasoline price is still less than half of the cost of gasoline in Europe and is still the lowest in the GCC countries. Accordingly, car ownership and use may still increase at least in the short run.

 International experience suggests that the impact of transport fuel subsidy reforms is more effective when undertaken in conjunction with complementary policies, which Kuwait is also actively pursuing, such as strengthening public transport, which benefit all segments of the population, especially the poor. It also improves economic efficiency in other important ways, by reducing congestion and air pollution, according to the WB statement.

AMMAN — Jordanian Businessmen Association (JBA) President Hamdi Tabbaa and a World Bank (WB) delegation, chaired by Alan Moody, on Sunday discussed ways to boost the business environment in Jordan.

During a meeting at the JBA’s headquarters, the two sides reviewed means to attract more investments to the development zones and underprivileged areas, in particular. Tabbaa highlighted the JBA’s perspective of the country’s economic situation and the agreement that was recently signed with the International Monetary Fund, according to a JBA statement.

He also indicated that the JBA has submitted its recommendations to the government on the Income Tax Law, describing the legislation as confusing for investors. Expressing the WB’s appreciation of the JBA, Moody proposed that the JBA and the WB should draw up a strategy, to be submitted to the government, to maximise the private sector’s role in development and investment. 

AMMAN — Jordan Enterprise Development Corporation (JEDCO) on Sunday launched its new website www.jedco.gov.jo. Funded by the European Union, the website will work to meet beneficiaries’ needs, according to a JEDCO statement.

JEDCO acting CEO Riyad Al Khatib said that the new website will focus on success stories about economic projects, benefiting from European grants. It will also seek to raise awareness and offer guidance regarding the mechanisms and conditions required to benefit from the Governorate Development Fund.

The fund and other JEDCO programmes such as Accelerate with JEDCO, the Rural Economic Growth and Employment project, the Exports Development Project through Virtual Market Places and the European Enterprise Network as well as JEDCO’s sector-targeted services, seek to support the service sector, entrepreneurship, business incubators and industrial projects, the corporation said.

The website will allow visitors to access any of JEDCO’s services electronically by filling out the relevant service application without the need to visit JEDCO. The corporation is the national umbrella for economic enterprise development in Jordan, including start-ups and entrepreneurships.  

LONDON — Britain will fill a gap of as much as £4.5 billion ($5.8 billion) in funding for agriculture, universities and its regions that will open up when Britain leaves the European Union, Finance Minister Philip Hammond said.

Scientists, farmers and others who got EU funding were facing uncertainty after Britain voted on June 23 to quit the EU. Hammond reassured them on Saturday that the British government would pick up the tab.

The new guarantee over funding comes as Britain faces the looming prospect of a recession following the Brexit vote. Companies are expected to put off investment and consumers to cut their spending as Britain and the EU work out their new relationship.

Hammond told reporters that Britain needs about £4.5 billion a year to fill the gap left by the end of EU funding, although Britain's actual exit date may be some way off. Prime Minister Theresa May has said she will not start the two-year process of leaving this year.

"We recognise that many organisations across the UK which are in receipt of EU funding, or expect to start receiving funding, want reassurance about the flow of funding they will receive," Hammond said in a statement.

According to Full Fact, an independent fact-checking agency, the British government paid about £13 billion to the EU last year, after its automatic rebate, and got back £4.5 billion in funding.

"Clearly if we stopped making contributions to the European Union there will be money available to be invested in our own economy," Hammond said when reporters asked about Britain's funding arrangements after Britain's departure from the EU.

Hammond's funding guarantee, which covered structural and investment funds and Horizon research funding, was welcomed by organisations representing recipients of EU funding and by the employer organisation, the British Chambers of Commerce.

"I hope that this short-term certainty will help to deliver longer-term confidence and this is exactly what farm businesses need now," said Meurig Raymond, the president of the National Farmers' Union.

The Royal Society, a London-based group of scientists, said the reassurance on EU grants would help Britain-based research continue to attract the best talent.

"Today's announcement sends a strong message that Britain remains open and collaborative," Royal Society President VenkiRamakrishnan said.

Hammond said projects signed before Britain's Autumn Statement financial update will continue to be funded by Britain after it formally leaves the EU and the UK would match the current level of agricultural funding until 2020.

AMMAN — Exports of East Amman Industrial Zone (EAIZ) have continued to drop because its conventional markets have been closed due to regional instability and because of the closed borders with Iraq and Syria.

The zone’s exports in the first seven months of 2016 dropped to JD194 million compared with JD203 million, the figure recorded in the same period of the previous year, a report released by EAIZ Investor Association on Saturday indicated.

Chemical industries and cosmetics’ exports accounted for JD56 million, followed by food supplies, agricultural and livestock exports at JD51 million. Launched in 1960s, EAIZ currently houses 1,860 small- and medium-size facilities that provide 26,000 jobs, according to the Jordan News Agency, Petra.

CAIRO –– The International Monetary Fund (IMF) has reached an initial agreement with Egypt for $12 billion in funding over three years, the fund said on Thursday.

The Egyptian government hopes the deal will provide a lifeline amid a dollar shortage, dwindling foreign reserves and an economy battered by years of unrest.

The agreement, which will have to be ratified by the IMF and Egyptian authorities, will require Cairo to undertake economic reforms.

“Egypt is a strong country with great potential but it has some problems that need to be fixed urgently,” a statement from the fund said quoting the head of its delegation to Egypt, Chris Jarvis.

Jarvis said in a press conference that the IMF was looking to Egypt’s parliament to pass a value added tax law.

The IMF’s Extended Fund Facility is aimed at countries with payment imbalances and tepid growth to aid structural reforms, according to the fund’s website.

Analysts have said the IMF also pushed for a more flexible exchange rate for the Egyptian pound, which the government has been propping up amid capital controls.

The shortage has affected imports and created a flourishing black market trade that the government fought unsuccessfully.

Jarvis said the goal was to have no foreign currency shortage and to create a “balance between supply and demand”.

President Abdel Fattah Al Sisi has been preparing public opinion for the economic reform measures, including further subsidy cuts.

Although the funding is spread out over three years, the IMF will be looking for a quick implementation of the reform measures.

“The IMF would like to see change right now, not delayed,” said Angus Blair, president of the economy think tank Signet.

Egypt has been in tentative negotiations for an IMF loan since the ouster of president Hosni Mubarak in a 2011 uprising that set off years of political turmoil culminating in the military overthrow of his Islamist successor two years later.

Mohamed Morsi’s ouster in 2013 unleashed a bloody police crackdown on Islamists and extremist attacks that have decimated tourism, a key dollar earner for Egypt.

With tourist revenues and foreign remittances down, the country’s foreign reserves have fallen to $15.5 billion (13.9 billion euros).

AMMAN — Credit facilities extended by banks and financing institutions reached JD22.17 billion by the end of May 2016, registering a 9.6 per cent increase over the JD20.23 billion during the same period of 2015, the Central Bank of Jordan (CBJ) announced Thursday.

The CBJ said that JD21.88 billion were extended by licensed banks, while the state-owned Agricultural Credit Corporation and Cities and Villages Development Bank facilitated loans valued at JD133 million and JD114.1 million respectively, according to the Jordan News Agency, Petra.

The central bank said the value of the credit facilities it extended were around JD43 million.  

AMMAN — Assets of branches of Jordanian banks operating in Palestine increased by 2.8 per cent in the first six months of 2016 to JD4.26 billion, compared to JD4.15 billion in the same period of 2015, the Central Bank of Jordan said Thursday in a statement carried by the Jordan News Agency, Petra. 

SHANGHAI — A Chinese city has suspended preliminary work on a proposed 100 billion yuan ($15 billion) nuclear waste processing plant, following protests by local residents concerned about health risks.

Reports that Lianyungang — a coastal city about 500km north of Shanghai — was set to be chosen as the site for the project sparked protests that began at the weekend.

The project, to be run by the state-owned China National Nuclear Corporation (CNNC) in collaboration with France’s Areva, is due to start construction in 2020 and scheduled to be completed by 2030.

“The Lianyungang Municipal People’s Government has decided to suspend site selection and preliminary work on the nuclear recycling project,” the local government said in a notice posted on its website.

It did not give further details.

In a report published on Monday by the official local newspaper, the Lianyungang Daily, the local government said “no final decision had been made” on the location of the plant.

It threatened to take legal action against “illegal elements” it accused of “fomenting social disorder” and spreading rumours about the project.

Lianyungang, in the province of Jiangsu, is the location of the Tianwan nuclear project, which currently consists of two Russian-designed reactors. Two more units are now under construction and there are plans to expand further.

An Areva spokeswoman in Paris said the company could not comment on the protests or on the choice of a site for the plant. She added the company had completed negotiations about the technical aspects of the project in June 2015 and was now in commercial negotiations. There is no deadline for the project.

The negotiations between CNNC and Areva are about the price of a technology transfer, as the plant will not be built and operated by Areva but by CNNC.

China wants to build a nuclear fuel reprocessing plant modelled on Areva’s installations in La Hague, western France, as well as a MOX fuel plant modelled on Areva’s plant in Melox, southern France.

La Hague takes the plutonium out of spent uranium burned in EDF’s French plants, which Melox blends with uranium to produce new fuel rods for pressurised water nuclear reactors.

The Chinese plant is expected to have a reprocessing capacity of 800 tonnes per year, compared to a maximum capacity of 2,700 tonnes in La Hague.

CNNC could not be reached for comment, but an official with the firm told state newspaper Science Daily on Tuesday that Lianyungang was just one of several candidates and the central government would make the final decision on the plant’s location.

China has ambitions to become a world leader in nuclear power. It had 30 reactors in commercial operation by the end of June this year, amounting to 28 gigawatts (GW) of capacity. It is aiming to raise that to 58GW by the end of 2020.

However, it is struggling to resolve bottlenecks in the industry, including fuel processing, waste recycling, grid access and a shortage of qualified staff.

China’s reactors could instead take the US route and bury waste underground, said Li Ning, a nuclear scientist and Dean of the School of Energy Research at Xiamen University.

“But the [Lianyungang] government gave in so quickly, and from that perspective, it does not bode well for the nuclear industry,” he said.

High-profile government-driven publicity campaigns designed to promote nuclear power have not stopped Chinese citizens from taking action against nuclear projects in the past.

In 2013, residents in the city of Heshan in Guangdong province took to the streets to protest against a uranium processing plant scheduled to be built in the city. The project was eventually cancelled.

“These actions are happening more frequently, on a larger scale and in a more agitated way,” Li said.