Business

AMMAN – Jordanian Businessmen Association (JBA) on Monday said that the Tunisian government has pledged to ease the flow of Jordanian exports into the market of the North African country, including pharmaceutical products.

According to a JBA statement, Tunisian Trade Minister Mohsen Hassen told delegation of businesspeople from Jordan that Tunisia sees Jordan as a gateway to the markets of the Gulf region and that his country is looking at making Tunisia as a gateway for Jordanian exports to the African market.

A delegation headed by Hamdi Tabbaa, JBA president on Monday concluded a business visit to Tunisia that aimed at enhancing economic and trade relations between the two countries. During that visit JBA members met also with Tunisian Prime Minister Habib Essid and Minister of Transport Anis Ghedira. 

AMMAN — Amman Stock Exchange (ASE) Chief Executive Officer Nader Azar on Monday said that 212 companies out of 225 firms listed at the Amman bourse submitted their quarterly financial reports before the end of the deadline, which was the end April.

According to ASE instructions, all companies listed in the bourse should provide their quarterly reports, reviewed by their auditors, within a month after the end of the quarter, Azar said. 

WASHINGTON — Two companies crucial to the business of US energy exploration, Halliburton and Baker Hughes, have abandoned their planned merger in the face of opposition by regulators who said it would hurt competition.

Prospects for the merger, which was valued at nearly $35 billion when it was announced in 2014, seemed especially bleak after the Justice Department sued to block the deal on April 6.

The government claimed the merger would lead to higher prices by unlawfully eliminating significant competition in markets for almost two dozen services and products crucial to finding and producing oil and natural gas in the United States.

"The companies' decision to abandon this transaction — which would have left many oilfield service markets in the hands of a duopoly — is a victory for the US economy and for all Americans," Attorney General Loretta E. Lynch said in a statement on Sunday.

The justice department said its opposition to the deal stemmed in part from fear among oil and gas companies that rely on Halliburton and Baker Hughes.

"We heard extreme statements of concern from dozens of companies and over 100 individuals," Mark Gelfand, deputy assistant attorney general in the justice department's antitrust division, told reporters Monday. He declined to identify the companies and did not detail their concerns.

As part of the agreement, Halliburton will pay Baker Hughes the termination fee of $3.5 billion by Wednesday, according to a joint release from the companies on Sunday.

"While both companies expected the proposed merger to result in compelling benefits to shareholders, customers and other stakeholders, challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action," said Halliburton Chairman and CEO Dave Lesar.

Martin Craighead, chairman and CEO of Baker Hughes, said the "outcome is disappointing because of our strong belief in the vast potential of the business combination to deliver benefits for shareholders, customers and both companies' employees”.

The Obama administration has taken credit for stopping more than 30 mergers that were abandoned after antitrust regulators sued or threatened to sue to block the deals. In dozens of other cases, the regulators reached settlements that allowed deals to go ahead, including big airline mergers.

Like other merger applicants, Halliburton said it would divest enough assets for the deal to pass antitrust scrutiny. But Gelfand said the deal was not fixable.

Gelfand said companies mistakenly believe that any merger can win approval if they agree to divest enough assets. In a “good remedy”, companies will agree to sell off entire business units, complete with management, facilities and sales forces, but Halliburton proposed to "take a couple of assets from here, a couple of assets from there”. An operator that bought such disjointed assets would have lost customers and been less competitive, he said.

Halliburton and Baker Hughes now face decisions about how to pick up the pieces and improve their companies while remaining smaller than their common rival, Schlumberger, and at a time when low oil prices have depressed drilling activity.

Baker Hughes will use proceeds of the $3.5 billion it will get from Halliburton to buy back up to $1.5 billion in stock, pay off about $1 billion in debt, and refinance a $2.5 billion credit facility. Overall, the company expects $500 million in annual cost savings by the end of the year.

Halliburton and Baker Hughes announced their plan to combine in November 2014, shortly after oil prices began to fall. Few, however, predicted the depth and duration of lower prices caused by a global oversupply of oil.

The glut slowed demand for drilling services and crushed the stock price of both companies.

Europe's top regulator, the European Commission, raised concerns about the deal. It said that it had investigated its potential impact on competition together with regulators in the US, Brazil and Australia.

In morning trading Monday, shares of Halliburton Co. rose 86 cents, or 2.1 per cent, to $42.17, while Baker Hughes Inc. shares fell $1.59, or 3.3 per cent, to $46.77.

LONDON — It's been a long and tortuous journey, but the eurozone economy is finally back to the size it was before the global financial crisis.

The 19-country currency union, which is as a bloc the world's second-largest economy, enjoyed an unexpected acceleration in the first three months of the year, when it expanded by a quarterly rate of 0.6 per cent, official figures showed on Friday.

That's twice the previous quarter's rate and means the economy is now bigger than it was at the start of 2008, before the financial crisis triggered the deepest global recession since World War II.

While the size of the eurozone economy has recovered, however, the region still has far to go to heal fully.

That's most evident in the unemployment rate, which dipped to 10.2 per cent in March but is still 3 per centage points higher than it was in 2008. The jobs problem remains particularly acute in countries like Greece and Spain that suffered the most financially. They have unemployment above 20 per cent and about half of young jobseekers can't get work.

Meanwhile, inflation is way too low for a healthy economy, and the banks in many countries are still burdened with bad loans that keep them from lending.

Since 2008, the eurozone has had a torrid time, falling in and out of recession as the global financial crisis morphed into a regional debt crisis that at various times threatened the future of the euro currency itself. As the region bailed out Greece and several other member states and required governments to make painful budget cuts, its economy struggled to get back on track.

By contrast, other economies like the US and Britain recovered steadily. The US, for example, regained its pre-recession size back in 2011 and has seen unemployment fall sharply.

The acceleration in the eurozone's growth in the first quarter of this year may be the clearest indication yet that the region is finally moving into a higher gear — particularly as it came during a period of high global uncertainty. Financial markets were volatile due to worries that the Chinese economy would slow down sharply, dragging down global growth, and the price of oil tumbled to 12-year lows, raising concerns about the energy industry.

The eurozone's first-quarter growth rate — reported by statistics agency Eurostat on Friday alongside the unemployment figure — was above market expectations for a 0.4 per cent gain. The annualised rate of about 2.5 per cent is way more than the US equivalent of 0.5 per cent in the same period.

Though no details were offered beyond the headline numbers, it seems that the eurozone — a net importer of crude — has benefited from the fall in oil prices. The fall in the value of the euro has also helped the region's exporters, particularly in Germany. The European Central Bank's (ECB) monetary stimulus measures appear to be helping to boost lending, which is vital to business activity and growth. And governments are less focused on budget cutbacks that tend to weigh on growth.

Whether the economy will keep expanding at this rate will depend on a number of factors, many of which are external to the eurozone, such as the British vote on June 23 on whether to leave the European Union and China's performance. Within the eurozone, worries over Greece's future in the single currency bloc could flare up again and the upcoming Spanish general election may cause jitters.

"False dawns have been common since the financial crisis and nowhere more so than in Europe," cautioned Alasdair Cavalla, senior economist at the Centre for Economics and Business Research.

Though the growth and unemployment figures are on the right path, the lack of inflation remains a problem.

Eurostat said that consumer prices in the year to April fell by 0.2 per cent. That's down from the previous month's annual rate of zero and below market expectations for a more modest decline to minus 0.1 per cent. The core rate, which strips out the volatile items of food, alcohol, tobacco and energy, also declined, to 0.8 per cent from 1 per cent.

That will be disappointing for the ECB, whose primary policy aim is to keep inflation just below 2 per cent.

As a result, the market reaction to Friday's data was muted. While the growth and unemployment figures may have encouraged traders to think that the ECB will be less likely to enact a further stimulus, the inflation data suggest the opposite. The euro was steady just below $1.14 following the data.

The ECB is worried that low or subzero inflation could lead to deflation, a long-term drop in prices that can choke the life out of an economy for years. That's the primary reason why it's cut its interest rates, including its main one to zero, and launched a bond-buying programme that it hopes will stoke economic activity and lift prices in the longer-term.

No further stimulus is expected from the ECB soon but if prices keep falling for longer than anticipated, then it could be forced to act again. The ECB expects prices to start picking up soon, partly because of its stimulus programmes but also because of the recent pick-up in oil prices, which should lead to higher energy bills and prices at the pump.

Tomas Holinka, an economist at Moody's Analytics, thinks that higher eurozone growth will be one reason why inflation "should return to positive territory in the second half of the year".

NEW YORK — Plunging oil prices battered oil giants' profits in the first quarter, another blow following credit downgrades, lay-offs and drilling cutbacks in the wake of a long rout.

Chevron on Friday became the latest big oil company to land in the red due to low commodity prices, reporting a loss of $725 million in the quarter ending March 31.

The second biggest US oil company pledged more belt-tightening after trimming capital spending nearly 25 per cent in the first quarter from the year-ago period, said Chevron Chief Executive John Watson.

"We continue to lower our cost structure with better pricing, work flow efficiencies and matching our organisational size to expected future activity levels," Watson said.

ExxonMobil, which was downgraded from the highest triple A credit rating earlier this week, managed to stay in the black with $1.8 billion in profits. 

But profit at the biggest oil company was 63 per cent lower than in the year-ago period and included a loss of $76 million in its normally lucrative exploration and production business. 

Both BP and ConocoPhillips reported losses earlier in the week. 

The results reflect the effects of a nearly 40 per cent drop in oil prices to under $30 a barrel for much of the first quarter amid a persistent global oversupply. 

Oil prices have since risen back to around $45 a barrel, raising hopes that the first quarter could be a low point.

"This quarter is probably going to be the trough in their earnings profiles," said Nate Thooft, a senior managing director at John Hancock Asset Management.

"Later in the year, assuming oil stays at this level, or at least stays somewhat stable, this will probably be the worst quarter for energy earnings we'll see."

While results in exploration and production were particularly ugly, profits in the refining business were also bad. Chevron saw a nearly 50 per cent decline in earnings from this area to $735 million.

Cheaper oil prices usually boost refining profits because crude is a feedstock for making gasoline. But that effect was blunted in the first quarter due to weak demand for some petroleum products, such as heating oil, because of the unseasonally warm winter.

ExxonMobil also suffered a big hit to its refining profits, but got a boost from $373 million rise in chemical earnings to $1.4 billion. Chevron does not have a chemical business.

ExxonMobil shares were up 0.4 per cent to $88.40 in morning trade, while Chevron fell 1.3 per cent to $101.03.

Losing streak 

Friday's weak earnings came on the heels of other poor results earlier in the week from other large oil companies. ConocoPhillips reported a loss of $1.5 billion, while British giant BP lost $583 million.

Both of those companies took a cautious stance on the recent rise in oil prices.

ConocoPhillips, which announced Thursday it was slashing its 2016 capital budget for a second time, said it would devote gains from higher oil prices to debt reduction before boosting its drilling budget.

"We are not in a hurry to say there is some price trigger where we are going to add back capital," said Al Hirshberg, the executive vice president for production, drilling and projects.

"We will be looking at the entire macroenvironment, looking at supply and demand fundamentals and whether we think that any price action that we get is actually sustainable or not."

BP Chief Financial Officer Brian Gilvary said the company expects "a modestly more favourable oil price environment in 2017 than we see today" and suggested the second half of 2016 could also see some gains from today's levels.

The reticence stems from the fact that oil inventories remain at lofty levels. A major summit of producers earlier last  month in Qatar reflected the concern about low prices of Saudi Arabia, Russia and others, but still fell short of an agreement to limit output.

"I don't think oil prices are going to be materially higher from here," said Thooft. "We haven't really solved the supply issue."

LONDON/TRIPOLI — Libya's National Oil Corporation (NOC) has ambitious plans to restore output to pre-2011 levels after years of violence and disruption, officials said.

Oil output is now less than a quarter of the 1.6 million barrels per day (bpd) Libya pumped before Muammar Qadhafi fell in 2011, and the NOC in Tripoli hopes to ramp it up swiftly with the backing of a new unity government.

Full recovery could take years because of shutdowns by disgruntled workers, political rivalry and attacks by militants.

Militants hit Al Ghani, Mabrouk, and Dahra fields in the Sirte basin over a year ago, forcing the NOC to declare force-majeure on 11 fields, and there have been further attacks since then.

An NOC official in Tripoli told Reuters that at least 200,000 bpd of capacity had been damaged in attacks on oil fields in the western Sirte basin, Libya's most prolific.

It may take the NOC until late 2017 or 2018 to bring those fields back to full capacity, the official said, if it can afford the repairs.

The first phase of a three-stage recovery plan can be implemented within three months, a second NOC official in Tripoli said, allowing fields like El Sharara and Elephant, with a combined capacity of around 430,000 bpd, to come back on stream.

But other fields, including those that have been directly attacked and others that feed via pipeline to Libya's largest export terminals at Ras Lanuf and Es Sider, may take longer to bring back online, he added.

Phase two covers six to eight months down the line while the final phase covers fields that will take between eight months and several years to reopen.

Infrastructure damage at the ports could take years to repair and will delay the restart of the fields feeding to them. Another big factor is the cost of the repairs.

"All those plans depend on security. If proper and robust security at the oil facilities is not in place, then our plans will be in jeopardy," the second official said.

Earlier this year, militants attacked Ras Lanuf and Es Sider, which can handle 600,000 bpd of crude exports. The two terminals had been closed since December 2014, after an attack on Es Sider.

The latest assault left just 12 out of 32 storage tanks at the terminals operational, NOC Chairman Mustafa Sanalla told Reuters in February. It may take NOC "many years" to rebuild damaged "long lead items" at the ports, he said.

Modest, conditional ramp-up

A UN-backed unity government's move to Tripoli last month raised hopes that Libya could restart idled fields and reopen export terminals, and the NOC in Tripoli says it could quickly double production to over 700,000 bpd, if political and security conditions stabilise.

The government is still struggling to gain clear support, especially in the east. A parallel NOC in the east exported a shipment of oil independently for the first time this week, further complicating the prospects for recovery.

"We are focused now on how to resume oil production. In some places, we'll just have to open the valves," Sanalla said last week. "But first of all, we need to have stability."

Industry sources do not expect production to increase beyond 600,000 bpd within the next few months.

"If the new unity government is successful in asserting some control, then output should recover, but only slowly and with setbacks," Energy Aspects analyst Richard Mallinson told the Reuters Global Oil Forum earlier this month.

Security challenge

The NOC hopes the unity government can create a unified security force to protect oil infrastructure.

For now, security will depend on an array of armed factions including the Petroleum Facilities Guard (PFG), a semi-official corps that has blockaded ports and whose attempt in 2014 to export crude independently was thwarted by US special forces.

PFG leader Ibrahim Jathran says he supports the unity government and is ready to reopen the ports of Zueitina, Es Sider, and Ras Lanuf, and Sanalla has said the NOC would accept the PFG as part of a future, national security force.

But the blockade and the PFG's refusal to allow storage tanks to be emptied at threatened terminals have infuriated the NOC. Meanwhile a rival PFG faction, Battalion 152, has said it is loyal to eastern military commander Khalifa Haftar, whose political allies have blocked the eastern parliament from approving the unity government.

The unity government said on Sunday it feared further attacks on coastal infrastructure and oil fields, and that it had received reports that these were threatened not only by Daesh but also by Qadhafi loyalists and Sudanese rebels.

Financing could be a challenge in the short term as Libya has been hard hit by falling oil prices and has had to bear the double burden of a price crash and constrained output simultaneously. 

Sanalla has estimated the cost of lost production at more than $68 billion for the past three years, and says Libya loses $30 million every day because of shutdowns. Security worries in some areas mean the NOC has yet to assess the full cost to repair damaged facilities.

AMMAN — Finance Minister Omar Malhas on Thursday  underlined the importance of the partnership between public and private sectors and its role in stimulating the private sector's participation in economic development.

Inaugurating a workshop on public-private partnership, Malhas said the government worked on providing adequate environment to attract private investments to help implement important projects in vital sectors such as water, electricity, renewable energy and transportation.

Under partnership projects, the private sector is tasked with providing necessary funds for these schemes and is responsible for bearing risks related to project establishment, operation and maintenance, in addition to providing services with high quality and competitive prices, in return for achieving proper financial revenues, the minister said.

AMMAN — The Amman Chamber of Commerce (ACC) has urged official authorities to suspend personal exemption given to products bought through the Internet claiming damage to trading companies.

The goods bought over the Internet are delivered to clients without taking into consideration the customs fees or the sales tax, under the pretext of personal exemption, ACC President Issa Murad said in a statement, adding that most of the goods are counterfeit, not allowed in the Kingdom, in addition to not meeting Jordanian standards.

The chamber explained the negative impact from such exemptions to official institutions  because they inflict damage on traders and sponsors of international trademarks committed to set standards.

The Customs Department, in reply to the ACC's official request, said the implementation of the exemptions is affiliated with personal needs and within the deserved value. The department added that the exemption of mail packages from customs fees, sales tax and other taxes applies only to goods of personal use whether foodstuffs, children's toys, shoes or clothes, on the condition that the customs value for the package being no more than JD100. Traders incur multitude of costs whereas many Jordanians view pages on social media websites offering many products. 

ISTANBUL — Turkish conglomerates are racing to add high-end apartment blocks and office towers to Istanbul's rapidly changing skyline, turning to one of the world's most profitable real estate markets for quick returns as other parts of the economy suffer.

Anadolu Holding, which has interests in banking, retail and brewing, plans to venture into real estate with two developments in Istanbul this year, while Aksoy Holding, an energy-to-tourism conglomerate, is building a luxury residential complex on the Aegean coast and plans another project in Istanbul.

Construction lies close to heart of President Recep Tayyip Erdogan, who sees big real estate projects, both public and private sector, as a showcase for Turkey's rising prosperity, as well as a vehicle for job creation and winning loyalty at the ballot box by increasing the supply of new housing.

But some economists warn that such investments risk fuelling volatile consumption-led growth and undermining government efforts to put Turkey's economy on a more sustainable path.

They say they fail to address an under-investment in manufacturing technology that could erode the global competitiveness of Turkish industrial products and exports.

"Investments in construction create a doping impact in the economy in the short run but these are not quality investments boosting productivity," said Haluk Burumcekci, an economist who runs the Istanbul-based Burumcekci Consulting.

"And in the long run such investments do not help a sustainable growth model," he added.

The government says it is committed to ensuring sustainable growth. It has pledged reforms to boost labour productivity and household savings, and make Turkey one of the world's top-10 economies by 2023. Output grew by a stronger-than-expected 4 per cent last year, but it was largely consumption-led growth.

Turkish house prices have jumped 70 per cent since 2010, according to Turkey's Association of Real Estate and Real Estate Investment Companies (GYODER). Turkey topped global rankings with price rises of 18 per cent last year alone, according to the Knight Frank Global House Index.

Strong population growth and demand from investors elsewhere in the Middle East, who see Turkey as a relative safe haven in the region, are fuelling the construction boom, despite persistent worries among some investors about a housing bubble.

Demand for new homes stands at least half a million a year, almost doubling with the need for renovating existing houses, industry executives say. They estimate more than a third of Turkey's 20 million residential buildings need refurbishment, many to meet tighter earthquake regulations.

"The potential is still there," indicated Omer Faruk Celik, head of the Real Estate Developers and Investors Association. "Even though profitability is not very high in construction, the shorter return period on investment makes it more attractive than other areas of industry." 

New projects

Anadolu Holding, best known for its beer maker Anadolu Efes, said its foray into construction was driven by a need to create cash flow and by the ease with which it could find foreign financing for such projects.

Anadolu Efes has suffered in Turkey from rising taxes and regulation on alcohol, and in Russia, one of its biggest markets, from a diplomatic and trade row since Turkey shot down a Russian warplane near the Syrian border last year. It reported losses of 512 million lira ($180 million) and 198 million lira in 2014 and 2015 respectively.

Its parent firm will invest up to 850 million lira ($300 million) for its first real estate project in Istanbul and plans to launch another by the end of the year, Ali Baki Usta, the general manager of AND Gayrimenkul, its real estate arm, told Reuters.

Aksoy Holding, meanwhile, has been hit by losses at its fuel retailer Turcas Petrol in 2014 and 2015, mainly due to heavier regulation. Its tourism business, which includes luxury hotels, has also suffered as Turkey's deteriorating security situation deters foreign visitors.

"We wanted to diversify our portfolio, and real estate still offers potential for growth," the group's Chief Executive Batu Aksoy said. It will invest $200 million in an upscale real estate project in the Aegean resort of Bodrum and plans another in Istanbul.

Fellow conglomerate Kosifler Group, which distributes luxury vehicles including Jaguar and Land Rover in Turkey and has also built hotels, is planning residential and office developments in two upmarket districts of Istanbul.

"The return on investment in tourism takes too long. We won't invest in hotels anymore and will launch new projects in construction," said board member Selim Kosif.

'Competition fierce'

If Turkey is to escape a middle-income trap, in which rising wages erode competitiveness and it struggles to increase the value of its industrial products and exports, it needs to boost its savings rate, raise productivity and reform areas, including its education system and labour market, economists say.

The construction boom may inflate growth rates in the short term, but will not address those structural issues, they say.

A desire for rapid economic growth has led to Erdogan's repeated calls for lower interest rates despite Turkey's high inflation.

"The push for lower interest rates may be related to trying to increase the contribution of the construction sector to growth," said Muammer Komurcuoglu, an economist at Istanbul brokerage Is Investment. "But growth through consumption is one-off."

The share of manufacturing in the country's $720 billion economic output fell to 23 per cent last year from a peak of 35 per cent in 2010, when the economy grew 9.2 per cent. The contribution to growth from the private sector has, meanwhile, been negligible since 2012, while domestic consumption has become the main driver.

Some in the construction industry also warn that companies pushing into the sector may find quick returns difficult to come by.

"Competition is fierce," indicated Haluk Sur, executive member of the Real Estate Investment Trusts Association, pointing out that profit margins had halved to around 10 per cent over about the last five years.

"Those who hope for easy money in construction may be disappointed," he said.

Mohammad Hourani

AMMAN — It is time for privatisation of Arab stock exchanges and cross-borders trading that will help exchanges grow at current difficult regional conditions, financial markets experts said Wednesday.

Around 70 per cent of the exchanges across the world are currently privatised and for-profit and this is the trend. Therefore, it is the time for Arab exchanges to move forward towards privatisation, Marwan Batayneh, chairman of the board of directors of the Amman Stock Exchange, said at the opening of the Arab Federation of Exchanges Annual Conference 2016 in Amman.

"Moving ahead towards privatisation should be done in line with well-studied and regulated manner," added Batayneh at the conference, which attracted industry representatives from several countries across the world.

In a speech delivered on behalf of Prime Minister Abdullah Ensour, Jordan Securities Commission Chief Commissioner Mohammad Hourani said maximum levels of cooperation between exchanges are needed at this stage to overcome challenges.

Stressing that exchanges play a key role in boosting economic growth, Hourani added that financial media also needs to play a constructive not a destructive role, which helps ensure transparency and objectivity.

There are 16 exchanges in the Arab world with variations in sizes of each one, he continued, stressing that electronic linkage of these exchanges is a necessity and will help boost investment and trading.

In a session at the event, Bart Chilton, senior policy advisor at DLA Piper LLP (US), stressed the importance of adopting financial technologies in exchanges, which he said plays an important role in advancing them.

This, however, should be done in tandem with the regulators, he added, noting that financial technologies are going to be disruptive.

Several topics on challenges facing exchanges in the region and globally, as well latest solutions and trends are going to be discussed during the two-day event.