Business

AMMAN — Jordan's commerce and industry chiefs recently sought enhanced relations with the Netherlands. 

During meetings in Amsterdam with represintatives of Rotterdam chambers of commerce and industry, Amman Chamber of Commerce (ACC) President Issa Murad and Amman Chamber of Industry (ACI) President Ziad Homsi discussed ways to enhance commercial and investment ties.

The talks addressed many issues of mutual interest that highlighted the significance for ACC and ACI to sign cooperation agreements with their Dutch peers, especially that Netherland's chambers have more than 1 million members.

The Kingdom's exports to the Netherlands in 2014 stood at JD16 million, compared to JD194 million worth of Dutch exports to Jordan in the same year, according to Murad.

Murad stressed the Jordanian private sector's keenness to enhance economic and investment cooperation, especially in terms of attracting more Dutch investments to the Kingdom in the sectors of tourism and renewable and alternative energy. 

He also noted that there are many Dutch companies that run investments in Jordan in different sectors such as construction, transport, fruits and vegetables.

Homsi reiterated the importance of enhancing bilateral economic ties and increasing Jordanian exports to the Netherlands, noting that there are many local high-quality products that are exported to Europe.

He also called for establishing joint investments between the private sectors in both countries, especially at the industrial sector, highlighting the Kingdom's investment characteristics due to the availability of modern laws that support the business environment. 

AMMAN –– Jordan will soon launch its first sovereign issue of Islamic bonds, sukuk, to finance real estate projects, Finance Minister Umayya Toukan said Monday. 

Toukan, speaking at a meeting for Prime Minister Abdullah Ensour with chief editors of daily newspapers and economic journalists, did not give details on the size of the planned Islamic Sharia-compliant issuance, but informed sources indicated that the sovereign sukuk could raise around JD400 million. 

The source said the government may enter the Islamic financial market in the coming few weeks, adding that Islamic banks in Jordan enjoy liquidity in excess of JD1.4 billion. 

Tapping the sukuk market by the government, the source said, would also encourage more corporate sukuk issues. 

Jordan's only private sector sukuk issuance was issued by Al Rajhi Cement for JD85 million in 2011. 

In 2012,  Parliament passed the Islamic Finance Sukuk Law to allow both public and private entities to issue Islamic bonds in dinars and in foreign currencies. 

In April of this year, the government chose the Islamic Corporation for the Development of the Private Sector, an arm of the Jeddah-based Islamic Development Bank, to support the country's debut for the planned domestic sukuk offering. 

The sukuk issuance will be a dinar-dominated offering. 

PARIS — After the marketing triumphs of recent years, manufacturing moved into the spotlight on the opening day of the Paris Air Show on Monday as plane makers Airbus and Boeing battle to deliver a record $1.8 trillion backlog of orders.

There was still the traditional burst of multi-billion-dollar deals in the first few hours of the aerospace industry's annual jamboree, with fast-growing Middle Eastern and Asian airlines again leading the buying.

But the sums involved were smaller than in previous years, and both plane makers and their suppliers were at pains to tell airlines they were focused on stepping up production to meet the 12,000 or so orders already stacked up for the coming decade.

Reassurance also came from Airbus as its A400M military plane made a tour of the skies following a crash last month, while a stretched version of Boeing's 787 Dreamliner delivered the wow-factor promised by its pre-show hype.

GE Aviation, whose CFM International venture with France's Safran builds engines for both Airbus and Boeing, highlighted the manufacturing challenges ahead, at a time when the plane makers are starting to look at further increases in output on top of existing plans.

CEO David Joyce said the venture already faced a steep increase in production for its LEAP engine from 40 in the first year to 600 in the second and 1,200 in year three.

"We need to prove to ourselves that we can go from 40 to 600 to 1,200, and while we do that we will learn more about our capacity as well as our efficiency," he added. "There is no conflict with the airplane companies. Our job is to make sure that when they ask for a rate, and we say 'yes', that we deliver." 

Raising forecasts

While blockbuster plane deals may be becoming more scarce, there is still plenty of demand for new aircraft, particularly from Asia and the Middle East, driven by robust local economies, low interest rates and new fuel-efficient jets.

Airbus on Monday raised its 20-year forecast for jet demand by nearly 4 per cent to 32,600. That broadly echoed Boeing's assessment of the market last week.

Unlike Boeing, Airbus sounded upbeat about prospects for four-engined superjumbos, including its A380, the world's biggest passenger plane, which has so far failed to live up to sales expectations.

"Very large aircraft are required over the next 20 years, we can't just increase efficiency," Airbus sales chief John Leahy told a news conference, pointing to airport congestion as a reason to use larger planes.

In a bid to revive interest in the A380, Airbus is in talks with customers about possibly putting new engines on the jet or making a version with about 50 more seats.

Boeing, meanwhile, said on the eve of the Air Show it was exploring a potential market of more than 1,000 jets in a niche between its single-aisle 737 and wide-body 787, but had not decided whether to invest in a new plane.

Among Monday's deals, Airbus signed up Saudi Arabian Airlines as the launch customer for its new A330-300 Regional aircraft, with the carrier committing to 20 of the planes as well as 30 A320neo jets in a deal worth about $8.2 billion at list prices.

The agreement comes after French President Francois Hollande met the head of the airline in May during a Gulf Arab leaders summit in Saudi Arabia.

France, deemed to have the toughest stance among the six world powers negotiating with Iran over its nuclear programme, has been able to nurture new commercial links with the region in the face of what some Gulf countries perceive as disengagement on the part of traditional ally the United States.

Airbus also said Garuda Indonesia signed a letter of intent to buy 30 A350 XWB jets, potentially worth around $9 billion at list prices.

The same airline, meanwhile, committed to buy up to 30 of Boeing's 787-9 Dreamliners and 30 737 MAX 8 jets in a deal that could be worth about $10.9 billion.

The US group also said Qatar Airways had ordered 10 of its 777-8X jets and four 777 freighters, valued at a total of $4.8 billion at list prices, while GE Capital Aviation Services ordered 60 Airbus A320neo aircraft valued at around $6.4 billion.

Heading into the Air Show, Airbus had a lead over Boeing in plane orders this year, with 247 versus Boeing's 175.

VIENNA — A recent announcement by the Organisation of Petroleum Exporting Countries (OPEC) that it is keeping crude output levels unchanged again, despite a collapse in oil prices, reflects the growing influence of booming US shale but analysts say the group is still the dominant player.

The 12-nation OPEC switched its production strategy in November in order to push down prices and hurt high-cost US shale producers, who need elevated prices to make their operations profitable.

OPEC ditched its traditional role of supporting higher prices to boost revenues, and instead left its output ceiling unchanged at 30 million barrels per day (mbpd), despite the collapsing oil market and a stubborn global supply glut that is fuelled partly by US shale.

The policy was extended earlier this month when the group of producers from Africa, Latin America and the Middle East decided to leave the taps open, sparking questions from some quarters about the increasing influence of US shale on the oil market.

OPEC's dozen members pump a third of the world's crude oil.

"OPEC members continue to play a key role in the current conditions of the oil market," said senior energy analyst Myrto Sokou at the Sucden brokerage in London.

"We cannot necessarily say that OPEC is losing its price influence on oil prices to the US shale production. OPEC still has very significant influence over the current crude oil prices," he added.

"However, the US shale oil production continued to increase strongly during the last few months and it is definitely something we need to keep an eye on in the near term," Sokou continued.

The United States has significantly ramped up its production of oil extracted from hard-to-reach shale, or sedimentary rock, now producing 5.0 mbpd, making the country far less dependent on imports from the crude-rich Middle East.

But Capital Economics commodities analyst Thomas Pugh also downplayed talk that the US shale boom could weaken OPEC's standing.

"I don't think it's fair to say that OPEC is losing influence to the United States," Pugh told AFP.

"Production in the two regions is managed very differently. OPEC can take strategic decisions to manage output to manipulate prices, whereas US production is controlled by hundreds of small firms who manage production based on market conditions," he indicated.

He added: "Obviously OPEC as a group still controls a much larger share of the market than the US, but if the US could act as one oil producer, in the same way that the Gulf states do, it would make it significantly more powerful."

Fawad Razaqzada, technical analyst at trading website FOREX.com, conceded that the group was less powerful than it used to be, due in part to strong oil output in non-OPEC member Russia, but it still remained a "dominant force".

"OPEC is clearly in defence mode as it tries to maintain market share by pumping more oil than is needed," Razaqzada said. "The group is losing some influence to the US shale oil market and to a lesser degree Russia, but it still remains a dominant force, just not as powerful as before."

Over the past five years, the United States has enjoyed a shale oil and gas boom, revolutionising the global energy sector but adding to the global glut that has plagued the market.

That boom caught OPEC ministers by surprise, Iraq's Oil Minister Adel Abdul Mahdi admitted in Vienna.

"We were two years late on evaluating shale oil, that's why it came almost as a shock," Abdel Mahdi told reporters. "It should not have been a shock given that we knew they were working on [extracting] shale oil. Now this is the reality and we have to take it into consideration."

In recent years, OPEC has shrugged off talk that the US shale energy revolution would weaken the influence of the group but ministers changed tack this month, arguing that it was a phenomenon that was to be welcomed as part of the global energy landscape.

Plagued by demand worries and oversupply, the oil market collapsed 60 per cent between June 2014, when West Texas Intermediate (WTI) crude stood at about $106 per barrel, and late January, when it hit a six-year low of under $45.

Prices have since recovered, but only to around $60, but analysts argue shale oil exploration is still profitable at this level.

"It has been a remarkable revolution in the United States," said Chevron Chief Executive John Watson last month.

"We are producing close to 5 million barrels per day that no one expected, and shale oil will be a balancing mechanism to some degree over the next few years," he added.

AMMAN — Talal Abu Ghazaleh Group International (TAGI) and the UNDP on Sunday launched the "Partnership forum between the UN and the business sector" during a meeting held at the Talal Abu-Ghazaleh Knowledge Forum.

The partnership forum aims at having a comprehensive, sustainable economy that presents services to citizens and societies through businesspeople in cooperation with the public sector, according to a TAGI statement.

Talal Abu Ghazaleh said the establishment of the forum is a joint initiative between TAGI and the UN to enhance human development.

Edward Kallon, UN Resident and Humanitarian Coordinator in Jordan, said the forum was launched at the right time especially that the World Economic Forum stressed the importance of the public-private sectors partnership.

UNDP Country Director Zena Ali Ahmad reviewed the scopes of cooperation between the two sectors through the forum, which will be open for business companies, associations, and chambers of trade and commerce to join it.

AMMAN — Investment Commission (IC) President Muntaser Oqlah on Saturday called on Dutch businesspeople and investors to benefit from the investment opportunities Jordan offers.

At a meeting with a Dutch delegation representing the foreign and economy ministries, Oqlah said the next phase will include a new strategy for investment and business environment, stressing the IC's readiness to support Dutch investors willing to establish projects in the Kingdom.

Amman Chamber of Commerce President Issa Murad stressed the importance of joining Jordanian-Dutch efforts to find new joint markets, noting that there are many Dutch companies in Jordan and that such partnerships can help both countries enter new non-traditional markets, according to an IC statement.

The Dutch delegates expressed interest in developing economic, commercial and investment relations with the Kingdom, through encouraging their companies to establish projects in Jordan.

AMMAN — Earnings generated by the Arab International Food Factories and Investment Company amounted to JD790 during the first quarter of this year.

During the first quarter of last year, the company generated JD300.

In both periods,  the firm's losses came at JD0.4 million after accounting for administrative and general expenses, benefits to employees, and depreciation. 

These figures, seemingly strange and dismal, are not really reflective of the company's strength, broadness and scope of business.

According to the 20th annual report, Arab International Food Factories and Investment Company achieved JD2 million net profit last year, 53.8 per cent higher than the JD1.3 million posted in 2013.

The board of directors mentioned in the annual report, disclosed to the Jordan Securities Commission, that the main objective of Arab International Food Factories and Investment is producing baby food and investment, but the company is now concentrating its business only on investment.

Reflecting this concentration, the report showed that only three employees work at the company whose capital investment as of December 31, 2014 stood at JD252,628.

"As the company has no activity other than investment in shares, it is very difficult to specify its competitive situation in this sector," the report said.

"The firm's activity is also limited to the local market and does not have any functions outside Jordan," it added.

Chairman Abdullah Abu Khadija, who owns a 27.9 per cent stake in the company, wrote in the report's  foreword that 2014 was a good year for the company as the noticeable increase in earnings, compared to 2013, reflected positively on the profit.

The report also listed Abu Khadijeh as chairman of  the Arab International Company for Education and Investment, which is among the major shareholders in the Arab International Food Factories and Investment with a 46 per cent stake.

He expressed hope that the profit would be raised in 2015 in order to enhance the firm's financial position.   

The report showed that the company's profits rose steadily from JD0.5 million in 2010 to JD1 million in 2011 and then to JD1.2 million in 2012.

Shareholders also benefited from cash dividends as they received JD1.3 million each year in 2014 and 2013 at a rate of 12 per cent.

In preceding years, shareholders received JD0.7 million in cash dividends at a rate of 7 per cent, JD0.8 million at a rate of 8 per cent; and JD1 million at a rate of 10 per cent.

According to the balance sheet at the end of last year, the financial assets at fair value amounted to JD35.1 million and investments in affiliated companies totalled JD0.5 million out of JD36 million in total assets.

Of the JD35.1 million, JD33.8 million is the fair value of shares listed on the Amman Bourse and JD1.3 million are investments in non-listed shares of limited liability companies.

At the end of the previous year, financial assets at fair value amounted to JD29.4 million and investments in affiliated companies totalled JD0.4 million out of JD30.1 million in total assets.

Net value of property and equipment was JD0.2 million in both years.

Shareholders equity comprised JD10 million capital, JD21.1 million as a reserve for the fair value of financial assets, JD3 million in retained earnings, and JD1.4 million in mandatory reserve.

According to the board of directors' report, Abdullah Abu Khadija is also chairman of Ibn Al Hayatham Hospital, Al Ittihad Schools, and First Finance Company, all of which are public shareholding companies listed on the Amman Stock Exchange.

In addition, Abu Khadija heads the administration board of Al Omana'a Portfolio and Investment Company which operates as a brokerage firm at Amman Bourse.

KARAK — The new investment law includes mechanisms, procedures and authorisations that encourage investors to consider Al Hussein Industrial Estate in Karak for their projects, Industry, Trade and Supply Minister Maha Ali said Thursday.

During a visit to the estate, Karak Chamber of Commerce and the Civil Consumer Corporation in the governorate, she added the law did not include any changes on incentives to ensure attracting more investments that provide more jobs to local workforce.

The minister indicated that the Jordan Enterprise Development Corporation has implemented 56 development schemes in Karak, some 140 kilometres south of Amman, during the past six years, and that the Governorate Development Fund implemented 21 projects that were financed with JD14 million.

Ali said that there is an intention to invest in the solar energy sector to reduce the costs of using energy in the Kingdom.

JOHANNESBURG — A $1.2 trillion free-trade area stretching across 26 African countries from Cape Town to Cairo is a stepping stone to uniting the poorest continent as one commercial bloc within the next two years, Africa’s top trade official said on Thursday.

The Tripartite Free Trade Agreement (TFTA) was signed into effect in Cairo this week, amalgamating three of Africa’s main trading blocs: the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA).

As well as simplifying Africa’s alphabet soup of overlapping trade zones, the TFTA should boost woefully low levels of intra-regional trade, key to the continent’s economic well-being, African Union (AU) Trade Commissioner Fatima Haram Acyl said.

At the moment, trade between African nations accounts for around 10 per cent of the 54-nation continent’s total commerce, a ratio that has been in gradual decline over the past decade and which compares unfavourably to 25 per cent in southeast Asia.

Enforcing tariff cuts could take five years or more but Acyl said the success of Africa’s deepest free-trade zone, the EAC of Kenya, Tanzania, Uganda, Rwanda and Burundi, suggested the local share of total trade could double in a decade.

“Just removing the trade barriers should increase it to 22 per cent,” Acyl, a Chadian, told Reuters at an AU summit in Johannesburg. “East Africa has been able to do it.”

The TFTA does not include Nigeria, Africa’s biggest economy after revisions to its gross domestic product (GDP) calculations last year, but the inclusion of heavyweights South Africa, Egypt, Angola and Kenya mean it accounts for 60 per cent of continental output.

Negotiations to broaden the new bloc to incorporate West Africa, where the major economies besides Nigeria are Ghana and Ivory Coast, open on June 15 and are expected to wrap up within two years, Acyl said.

That timeline depends on negotiators learning lessons from the pitfalls encountered during the seven years of TFTA talks, she added. “It’s ambitious but we’re not building from zero.” 

Few question the economic power of freer trade but sceptics say improving Africa’s infrastructure, there is no tarred road leading from Egypt to sub-Saharan Africa, for instance, might make a bigger difference.

African trade also remains centred on the three countries that have an appreciable manufacturing base, South Africa, Kenya and Egypt, and it is hard to see the TFTA breaking down those structures.

There is even a possibility the TFTA will create another layer of confusion for businesses already contemplating a continent with eight regional trading zones.

However as a statement of political intent, analysts said it was a welcome, long-term force for good.

“Even a marginal increase in cross-border trade could make a difference for small isolated economies,” said Capital Economics analyst John Ashbourne. “And it will provide a real boost to AU efforts to build a continent-wide economic community.”

The TFTA deal, which must still be fine-tuned and ratified, caps five years of talks to set up a framework for preferential tariffs to ease the movement of goods in an area home to 625 million people.

Analysts say it could have an enormous impact on African economies, which account for only about 2 per cent of global trade despite strong growth.

Egyptian President Abdel Fattah Al Sisi, President Robert Mugabe of Zimbabwe and President Omar Al Bashir of Sudan were among those who signed the pact at a summit in the Red Sea resort of Sharm El Sheikh.

“What we are doing today represents a very important step in the history of the regional integration of Africa,” Sisi said as he opened the summit.

“We have told the word today... of our desire to adopt practices that are necessary to increase trade among ourselves... We will do whatever is possible to activate this agreement,” he later said, wrapping up the summit.

World Bank President Jim Yong Kim said that with the launch of the TFTA “Africa has made it clear that it is open for business”.

Bolster intra-regional trade 

“The geographical area covers the Cape [of Good Hope] to Cairo... The agreement paves the way for a continental free trade area that will combine the three biggest regional communities,” Ethiopian Prime Minister Hailemariam Desalegn said.

And Mugabe said the deal would create a “borderless economy” that would rank 13th in the world in terms of GDP.

“The establishment of TFTA will bolster intra-regional trade by creating a wider market” that would “increase investment flow... and enhance regional infrastructure development,” a final statement said.

“On the ground, it means jobs being created... or else there could be an Africa spring far worse than the Arab Spring,” COMESA Secretary General Sindiso Ngwenya, who led the negotiations among the three blocs, told AFP.

Negotiators drafted the deal this week in Sharm El Sheikh, and said it addresses such concerns as management of trade disputes and protection for small manufacturers once the TFTA comes into force.

The TFTA has been widely welcomed by world business leaders, with experts pointing out that only 12 per cent of Africa’s trade is between countries on the continent. 

‘One trade regime’

In 2013, the UN Conference on Trade and Development stressed that Africa must focus on creating more space for the private sector to play an active role if it is to boost intra-continental trade.

Analysts say although the continent’s growth in the past 15 years outstripped global GDP expansion by nearly three percentage points, falling commodity prices, power shortages, political instability and corruption are still holding back its economies.

Egypt’s Industry and Trade Minister Mounir Fakhri Abdul Nour said the TFTA would help Africa boost trade and investment, while also building infrastructure and production capacities.

Egypt itself expected to export about $5 billion worth of goods in the next five years to TFTA countries.

Officials said companies would benefit from an improved and harmonised trade regime, which would reduce costs by eliminating overlapping trade rules.

“What we have realised is that having one trade regime is better than the costly multiple trade regimes,” said Ngwenya.

“The ultimate goal is to expeditiously establish a single free trade area... then establish a single customs union and then merge” the three blocs, he added.

LONDON — The Swiss franc has emerged as a big winner from Greece's debt problems, overtaking the Japanese yen as investors' favourite safe haven currency despite Switzerland offering the world's lowest interest rates.

Fund managers have increased their Swiss franc holdings in recent weeks, attracted by the Alpine economy's current account surplus and by falling annual consumer prices that mean investors can still eke out a positive return even with benchmark rates at -0.75 per cent.

The franc  and the yen are traditionally favoured during times of market stress or economic uncertainty. Usually the yen is the more sought-after, since it is more liquid. However, data from Swiss bank UBS shows that in the past three weeks the franc has emerged as the best-bid major currency.

"There is no doubt that between the yen and the Swiss, the yen has lost out," said Niels Christensen, FX strategist at Nordea. "In a risk-off environment, especially on worries about Greece, we are not seeing as much of a reaction from the yen as we are seeing for the Swiss franc."

The franc this week hit its highest against the yen  since late-January, just days after the Swiss National Bank abruptly abandoned a 1.20 francs per euro cap on January 15, sending the currency soaring.

It also imposed negative interest rates to discourage inflows. At -0.75 per cent, they are the lowest in the world, though Denmark has since cut to the same level.

However, the negative rates have done little to deter investors, especially those seeking safety, with recent SNB data suggesting portfolio investments and repatriation by large Swiss investors back to Switzerland remain robust.

The Swiss franc's latest rise coincides with a bout of sustained weakness in the yen. Speculators, asset managers and long-term sovereign funds have been selling the yen in the past few weeks on worries that the Bank of Japan may have to resort to additional monetary easing to boost inflation.

And while the dollar has in the last three months gained 3.5 per cent against the yen, also reflecting expectations of tighter monetary policy from the Federal Reserve, it has lost more than 5 per cent against the Swiss franc.

Similarly, the euro has gained 6.5 per cent against the yen  but has lost about 2.3 per cent against the franc.

More Swiss strength

Latest data from the Commodity Futures Trading Commission showed that while speculators were betting on the yen falling, they remained favourable towards the franc.

In the derivatives market, risk reversals — a gauge of demand for options on a currency rising or falling — show a sustained bias for euro weakness against the franc.

UBS currency strategist Geoffrey Yu said the recent franc buying, which was mainly driven by asset managers, reflected worries over Greece and waning optimism that global growth was picking up and curbing the risk of deflation.

David Bloom, head of currency strategy at HSBC, reckons the franc could even hit parity against the euro, from around 1.04 francs now.

"We have our doubts that euro/Swiss franc will push higher on a sustained basis should Greece secure an agreement with its creditors. In fact, the options market hints at a greater fear factor that euro/Swiss franc could fall sharply on a 'Grexit' scenario," he said.

He said that those betting against the Swiss franc will have to battle large investors from Switzerland who have been steadily repatriating funds back into the country.

"Switzerland's persistent current account surplus creates ongoing demand for the franc, especially while global growth prospects are so poor," he said.