Business

WASHINGTON — The International Monetary Fund (IMF) was unprepared for the debt crisis that hit Europe and was slow to press for debt relief that might have eased Greece's economic pain and allowed it to pay its bills, an IMF watchdog says.

In a report released Thursday, the Independent Evaluation Office declared the IMF's response "uneven". The watchdog also suggested that the fund's decision making was vulnerable to political pressure — a charge that IMF chief Christine Lagarde rejected.

The 2008 financial crisis left European countries with enormous debts and weak banks. As part of a so-called troika with the European Commission and the European Central Bank, the IMF bailed out Greece, Ireland and Portugal in 2010-2011.

Greece has continued to struggle with high debts. To get the bailout money, Greece agreed to budget cuts and tax increases, which drove the economy into a deep recession and made it even harder to pay its debts. The IMF was overly optimistic about Greece's economic prospects, the report said.

IMF policymakers, used to assisting poor, developing world countries, "did not foresee the magnitude of the risks" in wealthy Europe. Their "'Europe is different' mindset" prevented them from realising that investors would react to the debt problems by dumping European bonds, driving up interest rates in troubled countries and making their debt problems worse, the evaluation office said.

The IMF is not supposed to lend to countries whose debts are unsustainable. Analysts at the fund were divided over whether Greece's 2010 deal — trading bailout money for painful reforms — would leave it able to pay its bills. But the IMF went along with the original bailout "even though its sovereign debt was not deemed sustainable with a high probability", the report said.

The watchdog questioned whether IMF analysts buckled to political pressure from their troika partners, who wanted to provide the bailouts without offering Greece any debt relief.

It recommended that the IMF take steps to "minimise the room for political intervention" in the future. But IMF Managing Director Lagarde rejected the idea, saying in a statement that she did "not accept the premise of the recommendation... and thus do not see the need to develop new procedures".

The IMF is now calling for Greece's creditors to restructure the country's debts and has refused so far to go along with additional bailouts unless they include debt relief.

The Independent Evaluation Office is a Washington-based independent agency set up in 2001 to investigate IMF activities.

AMMAN — The Jordan Strategy Forum (JSF) expects next year’s economic conditions to be better than this year’s, in light of the Kingdom’s stability, a recent survey revealed.   

A survey conducted by the JSF in April, found that investors’ outlook for the coming year was positive, pointing out that this year the economic conditions were not as strong as in 2015.

More than half of the respondents, a total of 52.4 per cent, believed so, citing the lack of clear economic policies, increasing taxes and regional repercussions as main reasons for the downward trend, according to a JSF statement. 

The survey covered 490 local and foreign companies, representing different economic sectors in the country, besides members of the Amman Chamber of Industry, the Amman Stock Exchange, the Jordan Businessmen Association, the Jordan Investment Commission and the JSF.

Since the outbreak of the Syrian crisis, Jordan has hosted more than 650,000 Syrian refugees, who have fled the civil war there, with about 80 per cent living in communities, rather than refugee camps, imposing a heavy burden on the Kingdom’s resources and infrastructure. 

The JSF is a non-profit organisation, which represents a group of Jordanian private sector companies.

SANAA — Traditional mud brick tower houses have always been a source of pride to Yemenis, and over a year into a devastating civil war, they are also providing some much-needed jobs in the ancient capital Sanaa.

At his traditional mud brick factory outside the city, Ali Al-Sabahi oversees the process as it has always been done, in happier days and now in dire ones.

Workers mix clay with straw, animal dung and water and leave this to dry in the sun for several days before settling it into square moulds.

After drying once more, they are loaded into the kiln to be fired. The burning period ranges between 15 and 20 days.

Yemen, a poor country awash with weapons where the rule of law is weak, is no stranger to conflict. But the war that erupted last year brought widespread destruction in Sanaa and beyond in air strikes, led by Saudi Arabia.

The traditional houses of Sanaa, a UNESCO world heritage site said to have been founded by the son of Prophet Noah two and half millennia ago, have been spared — mostly.

Coalition air strikes killed at least six people and leveled several tower houses in the Qasimi quarter, one of the city’s oldest, in June.

The war has taken livelihoods as well as lives, but brickmaking is a rare bright spot in Yemen, which has been pushed into a humanitarian disaster by the civil war.

Working in a brick kiln in Sanaa, 25-year old Ibrahim Al Omari is able to support his parents and family with his wages.

“This work doesn’t need a certificate or qualification. It needs muscles to be able to work here,” he said.

“It’s the work we’ve inherited from past generations... I’ve been working here since I was 12.”

Despite the threat of destruction, a decades-long spread of concrete construction and tight wartime budgets, the appeal of the ancient art remains strong.

“The brick’s flexibility and ease to be customised for geometric shapes makes it attractive for customers for construction and decoration,” said brickmaker Mohammed Al Amari.

Through his efforts the city’s homes might yet maintain its distinctive beauty — its ochre walls glow amber and their whitewashed shining white at sunset — for generations.

AMMAN — The Amman Stock Exchange (ASE) on Tuesday said it will continue to receive the biannual financial statements of listed companies, for the period ending on June 30,  through July 31.

In a statement, the ASE said trading in the shares of companies that fail to submit their financial statements on time will be suspended for one trading session, in accordance with related-regulations.

SAN FRANCISCO — Yahoo sealed a deal Monday to sell its core business to telecom giant Verizon for $4.8 billion, ending a two-decade run as an independent company for the Internet pioneer.

The agreement announced by the two companies after months of negotiations comes following a years-long decline for the iconic firm that introduced many people around the world to the Internet.

Verizon chief executive, Lowell McAdam, said Yahoo would be integrated into its recently acquired AOL unit to create "a top global mobile media company, and help accelerate our revenue stream in digital advertising".

The acquisition, expected to close in early 2017, pending shareholder and regulatory approval will exclude Yahoo's cash, certain patent holdings, and its big share in China's Alibaba Group and stake in Yahoo Japan. 

The deal will, however, turn over the popular Yahoo News, Mail and other online services used by more than a billion people worldwide.

Marissa Mayer, CEO of Yahoo, said in a statement: "Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL."

She told a conference call that the agreement is "an exceptional outcome for Yahoo shareholders" and that Verizon was chosen because it "believed in us the most".

With the sale of its core, Yahoo will be left as a separate investment company that will change its name after the transaction.

The deal comes with Yahoo, a onetime leader in the online space, coping with years of decline and struggling to keep up with rivals like Google and Facebook.

Mayer said in a blog post that Verizon "brings clear synergies to the table" with its goal of reaching a global audience of two billion by 2020.

"Joining forces with AOL and Verizon will help us achieve tremendous scale on mobile," she said.

"It's incredibly compelling." 

Yahoo will operate independently until the acquisition and then fall under the aegis of the AOL unit chief, Tim Armstrong, a former Google colleague of Mayer.

"Yahoo has been a long-time investor in premium content and created some of the most beloved consumer brands in key categories like sports, news and finance," Armstrong said in the statement.

Mayer's future role with Yahoo was unclear. 

In an e-mail to employees, she wrote that "I'm planning to stay... It's important to me to see Yahoo into its next chapter." 

But it was not clear if she would remain after the transition. According to documents filed with regulators, Mayer would get a severance package of $55 million if removed within a year of a change of control.

Mayer arrived in 2012 from Google seeking to revitalise Yahoo, which at its peak had a market value of over $100 billion.

The company was founded in 1994 by two Stanford University students, Jerry Yang and David Filo, as "Jerry and David's Guide to the World Wide Web". It went public in 1996 in one of the most hotly anticipated stock offerings of the time — surging 270 per cent in the first day of trading.

Yahoo remains a major force online, but has lagged its rivals in its ability to "monetise" its audience through advertising that is linked to customers' browsing and other online activities.

The research firm eMarketer estimated that Yahoo's share of the digital advertising market would fall this year to around 1.5 per cent, with Google getting some 30 per cent and Facebook 12 per cent.

Several other bidders have been in talks, according to reports, including Quicken Loans founder Dan Gilbert, who was being backed by billionaire Warren Buffett.

But Verizon appeared to be the leading candidate because of its ability to integrate AOL's advertising technology into Yahoo services.

Technology analyst Jack Gold of J. Gold Associates said the deal makes sense with companies such as Verizon and AT&T seeking to move beyond their role as mere carriers.

Verizon, he said "is looking at ways to stay competitive primarily with AT&T" and that Yahoo gives it "the ability to expand into the online content arena" and a large base of users.

But Roger Kay of Endpoint Technologies Associates said Verizon should keep its goals more modest and may get a small benefit from the Yahoo brand.

"I don't think they have enough juice to take down Google and Facebook," Kay said.

With better operating efficiencies and lower costs, "they'll be lucky if they get their money back" from the deal, he said.

Shebly Seyrafi at FBN Securities said Verizon could be looking at a broader internet strategy and may become "a serial acquirer which could then spur bidding wars for other Internet properties".

This could mean Verizon may "eventually bid for Twitter" or private companies such as Snapchat or Pinterest, Seyrafi said in a note to clients.

AMMAN — The private sector can be an important driver for growth and rising prosperity in the Middle East and North Africa (MENA) region if effective policies are put in place to address key challenges across the region, according to a World Bank (WB) statement. 

A report from the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank Group (WBG), looked into “What’s holding back the private sector in MENA?” It also drew lessons from the MENA Enterprise Survey (ES) of more than 6,000 firms in eight countries. 

Many of those firms cited political instability, corruption, unreliable electricity supply and inadequate access to finance as factors that were holding them back.

They also said that innovation and growth were constrained by barriers to trade and a scarcity of appropriately trained workers. In many places, they saw a disconnect between firms and formal financing channels, with the result that firms were losing growth opportunities.

The report concludes that “Strategies to support firms in enhancing their productivity, as well as the process of resource reallocation towards more productive firms, should be a high priority for public authorities in the region”.

It highlighted four specific areas where policy responses were required: to improve the business environment, to improve access to finance, to achieve better education, employment and skills, and to promote trade, competition and innovation.

The report says that achieving political stability is critical to improving the business environment. “Across many of the economies, tackling corruption and an unreliable electricity supply are also likely to be important priorities.”

“Identifying the impediments and challenges that are affecting the private sector and economic growth in the MENA region will help our institutions support policy reforms that can create a favourable business environment. 

From the beginning of our engagement in the region we focused on fostering the development of the private sector through tailored programmes, and investment in infrastructure and services, in addition to strengthening competitiveness which is key to addressing unemployment, one of the region’s biggest challenges, particularly among women, the young and educated people,” said Sergei Guriev, an incoming chief economist of EBRD.

The report shows that while banking sectors in the region are relatively large, a high percentage of firms are disconnected from formal financial channels — they do not apply for credit because they state that they have enough resources. Firms’ access to finance could be improved by developing the capacity of banks to strengthen their credit risk assessment. 

Credit guarantee schemes might be a way to alleviate collateral constraints, while strengthening secured transaction laws and making collateral registry more efficient would also help. This would support lending to small and medium-sized enterprises, without putting financial stability at risk.

“Finding a way to reconnect banks and firms is crucial to enhance growth opportunities in the region and international financial institutions have the expertise and willingness to complement domestic policies,” said Debora Revoltella, the chief economist of EIB. 

“Support for the private sector in MENA forms a key part of the EIB’s new initiative to build economic resilience in the region as well as to support countries in MENA. This Crisis Response and Economic Resilience Initiative has now been endorsed by EU leaders and will see a substantial stepping up of traditional activities, with action and investment for growth, jobs, vital infrastructure and social cohesion.”

The report sees considerable scope for improvements in policies for better education, employment and skills, particularly in relation to the employment of women and young people. 

Policies should remove distortions preventing entry into the labour market for women and provide more focused and targeted education for the young. 

They should also provide incentives to increase training intensity in firms. At the same time steps to support the emergence and growth of young innovative firms are likely to be particularly positive for the employment of young people.

“Fostering employment and entrepreneurial opportunities, particularly for young men and women, is vital to raise living standards and promote social and political stability. 

“A reorientation of the region’s education system towards learning skills that are rooted in vocational training and relevant for today's world of leapfrogging technology is essential for boosting entrepreneurship and jobs,” said Kaushik Basu, World Bank chief economist and senior vice president.

In the areas of trade, competition, and innovation, the report notes that increased productivity by firms requires greater openness to international trade, which in turn would be supported by more effective customs and trade regulations — for both imports and exports. 

Greater competition could also be promoted by reducing restrictions on firm entry and exit, and on foreign investment.

AMMAN — A delegation of Jordanian businessmen began a working visit to Montenegro on Monday to look into chances for boosting joint commercial and investment cooperation, according to the Jordan News Agency, Petra.

On their first day, the delegates met with their counterpart private sector representatives and discussed ways to expand and diversify Jordanian exports to Montenegro. Amman Chamber of Commerce President Issa Murad urged Montenegrins to start joint investment projects in the Kingdom.

At the meeting, Velimir Mijuskovic, the president of the Chamber of Economy of Montenegro, highlighted the growing economy of his country, which is currently seeking full EU membership, Petra said. 

CHENGDU, China — Britain's new Finance Minister Philip Hammond, under pressure from his peers from around the world, said on Sunday there could be more clarity later this year on how the country will exit the European Union.

Several nations called on Britain during weekend talks on the world economy to explain how the politically fraught Brexit process will unfold in order to avoid adding a new drag on the long and slow recovery from the financial crisis.

"It's right at the top of the agenda here at the G-20," Hammond said at the end of the two-day meeting of the Group of 20 leading economies in the Chinese city of Chengdu. "It's a new factor affecting the global economic outlook and it has increased the uncertainty which the world economy faces."

Britain was plunged into its biggest political crisis in decades by the June 23 Brexit vote and so far it has resisted calls from some other EU countries to trigger quickly the two-year process for negotiating its exit from the bloc.

Prime Minister Theresa May, who has been in her job for less than two weeks, travelled to Germany and France last week to explain why she needed time to come up with an exit strategy.

The EU's top economic official, Pierre Moscovici, said the bloc understood that Britain should not be rushed but "at the same time...let's not waste time, let's not have too much uncertainty, let's act and choose as swiftly as possible."

Hammond told reporters on Sunday the two-year negotiating period, once launched, represented "quite a tight timescale" and Britain needed to go into it with clear objectives. "We have to do that before the start of the process because when we serve that notice, we need to hit the ground running," he said.

But Hammond also showed he was aware of the need for some clarity on Brexit: "What will start to reduce uncertainty is when we are able to set out more clearly the kind of arrangement we envisage going forward with the European Union."

"If our European Union partners respond to such a vision positively — obviously it will be subject to negotiation — so that there is a sense perhaps later this year that we are all on the same page in terms of where we expect to be going, I think that will send a reassuring signal to the business community and to markets," Hammond said.

May has said she does not plan to launch the formal negotiation period this year. It remains to be seen if other EU countries would enter informal talks with Britain before the formal negotiations, something they have previously ruled out.

Gov’t, Bank of England have to be ready

Financial markets have stabilised after the initial shock of the referendum result which saw the value of the pound plunge by more than 10 per cent and trillions of dollars wiped off stock markets worldwide. But economists are expecting Britain to fall into a recession, according to a Reuters poll.

Hammond said he did not think that a survey of British businesses published on Friday, which showed the sharpest fall on record in a purchasing managers index, was a sign that the economy was in already in a recession.

"What it does is underscore the hit to confidence," he said.

Hammond warned that Brexit-related volatility in markets would be a risk throughout the two-year negotiation period.

"We have to be ready as government, the Bank of England [BoE] has to be ready as monetary authority, throughout that period to respond to any instability created by that uncertainty and to ensure that the economy continues to operate smoothly," he said.

The BoE is expected to cut interest rates and possibly announce more stimulus measures on August 4. Hammond has said he could ease fiscal policy in the autumn if more help is needed.

Asked about a comment he made on Friday, that he might "reset" fiscal policy to cope with the Brexit fallout, Hammond said Britain's still high levels of debt meant it needed a new framework on its public finances to give clarity to markets.

"What that framework will look like will depend on the decisions we make about whether or not any fiscal stimulus is required on the basis of the data we will by then have available," he said.

DOHA — Qatar said on Thursday it would give $30 million to help pay the salaries of thousands of Gaza Strip public sector workers left without a full wage package since 2013.

The donation was welcomed by Hamas, the Islamist group that dominates the enclave who said it would help ease the wage shortages — that have tested already strained relations with the US-backed Palestinian Authority, based in the West Bank.

There was no immediate comment from Palestinian Authority or Israel, who have long been suspicious of Qatar's regular donations to Hamas and other Islamist groups across the region.

The emir of the wealthy Gulf state, Sheikh Tamim Bin Hamad Al Thani, said the payment of 113 million riyals was meant to "alleviate suffering and financial distress", according to Qatar's state news agency, QNA.

Hamas fighters seized control of Gaza in 2007 from forces loyal to Western-backed President Mahmoud Abbas and his Palestinian Authority, triggering years of mutual distrust.

A reconciliation pact signed in 2014 by the two sides raised hopes among Hamas that its 50,000 public sector employees' wages would be taken care of via the Palestinian Authority (PA) payroll.

But the Palestinian Authority cannot afford to pay all those extra workers, and international donors who support the PA budget, including the European Union, say they want an audit of workers and cutbacks to the bloated payroll, which costs more than $2 billion a year.

The Hamas-hired public servants have grown restive and in 2014 protested over their lack of payment which is partly due to a continued blockade imposed on Gaza by both Israel and Egypt.

"The July payment will be made in full immediately once the Qatari financial fund is received," Youssef Al Kayyali,  Hamas' deputy finance minister said.

Qatar, which hosts the largest US air base in the Middle East, has for years preserved influence with Islamist forces across the region it believes are the long-term future.

The breadth and resilience of Qatar's links to Islamist groups including Egypt's Muslim Brotherhood, which has suffered a crackdown in the aftermath of the Arab Spring, fuels suspicions in other Gulf states.