Business

SINGAPORE — East Asia's developing economies led by China will grow slightly slower this year, with higher US interest rates and an appreciating dollar posing further risks to the region, the World Bank said Monday.

In its latest forecasts for the region, the bank said China's economy should expand by 7.1 per cent in 2015, slower than the 7.2 per cent rate projected in October and down from last year's 7.4 per cent growth.

Developing East Asia should grow 6.7 per cent, easing from 6.9 per cent in 2014, the World Bank added in the latest edition of its East Asia Pacific Economic Update.

Under the bank's definition, Developing East Asia includes 14 countries.

"Despite slightly slower growth in East Asia, the region will still account for one-third of global growth, twice the combined contribution of all other developing regions," Axel van Trotsenburg, World Bank East Asia and Pacific regional vice president, said in a statement.

Slower growth in China is likely to temper the positive effects of lower oil prices and a recovery in developed countries, but the bank said economies should take advantage of the oil price fall to push through fiscal reforms aimed at raising revenues such as cutting fuel subsidies.

"In China, engineering a gradual shift to a more sustainable growth path will continue to pose challenges for policymakers, given real sector weaknesses and financial system vulnerabilities," the bank said, adding that reforms "will depress activity in the short term".

The bank slashed its forecast for growth in the Philippines to 6.5 per cent this year from its October estimate of 6.7 per cent, but this is still higher than last year's 6.1 per cent expansion.

Indonesia growth

For Indonesia, 2015 growth is expected to come in at 5.2 per cent, slower than the bank's previous estimate of 5.6 per cent but still stronger than last year's 5 per cent expansion.

Thailand's economy is likely to mount a strong rebound and grow at 3.5 per cent this year from just 0.70 per cent in 2014 as greater political stability perks up consumer spending and investments.

But the bank said growth for Malaysia, Southeast Asia's largest oil exporter, will slow to 4.7 per cent from 6 per cent last year as the country feels the pinch from depressed crude prices, while a goods and services tax implemented this month will affect consumption.

Malaysian growth will pick up to 5 per cent in 2016, it said.

"East Asia Pacific has thrived despite an unsteady global recovery from the financial crisis, but many risks remain for the region both in the short and long run," said the bank's chief economist Sudhir Shetty.

Among the risks is a downturn in the eurozone and Japan, two of the region's top export markets, the bank said.

It also warned that higher US interest rates and an appreciating dollar "could raise borrowing costs, generate financial volatility and reduce capital flows" to the region.

The Federal Reserve is split on when to raise ultra-low US interest rates, with timing scenarios ranging from June this year to sometime in 2016, according to minutes of its last policy meeting released last week.

ISTANBUL — Turkish President Recep Tayyip Erdogan dreams of transforming Istanbul into a financial hub that can rival Dubai or Singapore, but first he needs to win over would-be investors like Ali Bahcuvan.

"I'd rather stay away from the stock market these days," said the 41-year-old internet entrepreneur. "The cost of trading has increased and that has hurt liquidity. The stocks I want to trade are all illiquid."

Market participants say interest from small investors is on the wane, thanks to higher fees and as new flotations fail to spark interest.

That's bad news for an exchange that relies on retail investors for much of its liquidity. It also raises questions about the viability of the government's drive to make Istanbul a global top-10 financial hub.

Years of solid growth have turned Turkey into a major emerging economy, but its equity market has not kept up.

The government has already introduced some regulatory changes to make Istanbul more attractive for foreign capital, including an ambitious plan to build a $2.6 billion "International Finance Centre".

But investors say more needs to be done, especially given flagging growth and nagging political worries ahead of June parliamentary elections.

"Right now, Turkey is — without much doubt — not one of the favourite emerging markets," said Mike Harris, Turkish strategist at Renaissance Capital. "That also enhances the challenge for Istanbul to be perceived as a financial centre because the economy is going through these doldrums."

Ankara needs to encourage more public listings, more equity issuance and more "truly public" companies, analysts say, especially since many listed firms are still controlled by the government or their founding families.

Erdogan has hardly helped investor sentiment, fulminating against high interest rates in comments which have raised concerns about the independence of the central bank.

Political worries 

"Valuations are attractive but there are uncertainties regarding the management of the economy after the elections," said Didem Gordon, chief executive of Ashmore Portfoy, an asset manager.

This year should have been "spectacularly positive" for Turkey because of the lower oil prices, Gordon added, but emerging market volatility and domestic politics have weighed on the markets.

At around $220 billion, Istanbul's stock market is the world's 29th largest, well behind some emerging market rivals. The Johannesburg market is worth more than four times that, even though South Africa's economy is less than half the size of Turkey's.

"There is a mismatch between the complexity and size of the Turkish economy and the size of its capital markets," consultancy Oliver Wyman said in a 2014 report, adding that the equity market could easily double in size.

Trade is concentrated on just a handful of companies, with just ten stocks accounting for 70 per cent of transactions. Many smaller companies aren't liquid enough to draw investors.

Retail investors account for 80 per cent of the trade on Borsa Istanbul, but their numbers have thinned after the bourse, which plans to list by next year, hiked its fees. Brokerages are also charging more to offset new capital requirements.

"There has been a significant increase in fees that have hit both brokerages and investors," said Metin Ayisik, the head of Turkey's brokerage industry group.

Last year, Istanbul's investor base shrank by 5 per cent to around 1 million investors, he added, noting that the bourse needs around five times that to ensure liquidity.

Istanbul is also hobbled by a buy-side industry which is small, even by emerging market standards. By contrast, South Africa has scores of money managers centred in Cape Town.

According to Oliver Wyman, Turkey could build up the buy-side industry by encouraging the engines of the economy, small and medium-sized companies, to go public.

There have been some positive signs, such as recent government incentives for retirement savings, which have boosted demand for private pension funds. But the government still needs to do more to encourage savings.

"A lot needs to change in terms of creating a strong domestic pool of assets, because then companies come to where the savings are, assuming the regulation is supportive," said Renaissance Capital's Harris. "The perception of Turkey can change on a dime if the policy makers aggressively embraced reforms."

AMMAN — 129 projects in Irbid were supported by the Jordan Enterprise Development Corporation (JEDCO) which extended them over six years  a total of JD11 million in financing within a total investment volume reaching JD19.77 million. Provided through the Governorate Development Fund, service and industry support programmes and business incubators, JEDCO expects the schemes to provide 1,001 job opportunities after completion. According to a JEDCO statement, the corporation supported establishing 88 new projects with a total funding of JD8.76 million within an investment volume of JD15.22 million, expecting a total of 710 new jobs to be created. As for developing or expanding current projects, JEDCO provided JD2.39 million to 41 schemes, with a total investment volume of JD4.55 million, expecting them to generate 291 new jobs, the statement added.

AMMAN — The number of guests who stayed at Sheraton Amman Al Nabil Hotel dropped last year to 73,462 persons, representing a 61.89 per cent average occupancy rate.

According to the annual report of Al Dawliyah for Hotels and Malls, the company that owns the hotel, average occupancy rates were as high as 71.37 per cent in 2012 and 71.53 per cent in 2010 when the number of guests totaled 87,499 persons and 85,372 persons respectively.

Illustrating diminished performance, the report indicated that that the hotel's net operational income regressed to JD5.5 million last year from JD6 million in 2013 due to lower earnings, which fell to JD16.3 million from JD16.7 million, and slightly higher operational costs which reached JD10.7 million in 2014.

The report showed that the room rate last year was slightly lower at JD162.45, down from JD163.8 charged in 2013. In 2010, the rate was JD140.98.  

Al Dawliyah Chairman Nadim Muasher told the shareholders in a foreword that specialised independent parties, comparing 12 5-star hotels in Amman, positioned Sheraton Amman Al Nabil Hotel's occupancy rate at 63.33 per cent compared to the 62.97 per cent general average and the room rate at JD158.7 compared to the JD118.63 general average.

The findings also showed a 40 per cent gross operational profit at the hotel compared with a 32 per cent general average.  

Muasher described the hotel's performance as acceptable when seen in the context of troubled and unstable regional conditions.

"It was another difficult year for the hotel industry," he said of 2014. "Despite the stability Jordan enjoys, the distressing regional developments had a great negative effect on the Kingdom's tourism sector."

"Even with reassurances that surface here and there, Jordan Tourism Board statistics showed that the number of one-day tourists dropped by 7 per cent, those of tourist groups regressed by 5 per cent, and the number  of European and Arab visitors declined by 4.4 per cent and 4.9 per cent respectively compared to 2013 levels," the chairman added.

According to Muasher, a phenomenon emerged when, on several occasions,  tourists and individuals cancelled reservations, and businessmen scrapped conferences and meetings in reaction to news of regional disturbances and threats.

He noted that the Dead Sea, Petra and Aqaba hotels were more bruised than all the 5-star hotels in the capital from the negative effects that befell the hotel industry.

In the foreword, the chairman mentioned higher electricity charges and other annual inflationary costs, in terms of salaries to 367 employees and procurements, as factors that sapped the gross profit.

"Electricity was one of the operational costs' most significant challenges  because higher charges overburdened us by around JD200,000," he wrote.

Muasher pointed out that the 267-room hotel paid JD1.76 million for its electricity consumption in 2014 compared to JD1.25 million in 2011, and that the  annual bill will become about JD2.5 million in 2017 if higher charges take place until then.

He said that, because the hotel sector could not absorb the higher costs through increasing room charges or occupancy rates, the company is almost ready now to start building a station to generate electricity from solar energy at a cost of around JD5.2 million.

Financially, Al Dawliyah was able to reduce its indebtedness to JD2.9 million at the end of last year from JD7.1 million in 2006, and the company expects to repay its current financial obligations to banks by the end of this year.

The balance sheet as of December 31, 2014 shows JD58.3 million in total assets, mostly property and equipment.

The assets include JD5.9 million in various investments that comprise land, buildings and shares.

With a JD43.2 million capital, Al Dawliyah's shareholders equity includes JD10.8 million in mandatory reserves and JD3.1 million of retained earnings.

According to the 2014 profit and loss statement, Al Dawliyah's net pretax profit amounted to JD2.7 million compared to JD2.9 million in 2013.

Besides the lower operational income, the report attributed the decline in net profit to the drop in the value of shares listed on the Amman Stock Exchange.

"Although the shares owned by the company are considered strategic and distinguished with a good annual return, their market value went down obliging us to take JD310,000 diminution from the dividends payable.

As such, shareholders voted this week approving the distribution of JD2.8 million as cash dividends at a rate of 6.5 per cent. In 2013, the cash dividends amounted to JD3.02 million distributed to shareholders at a rate of 7 per cent.

"We look forward to adding facilities to the hotel in order to create extra resources of income and prepare it to compete with new hotels that are expected to operate in Amman during 2015 and 2016," Muasher concluded his address.

Two new hotels are expected to start this year, and four others next year.

DOHA — Superrich Qataris are splashing out millions on "fancy" car number plates in an online auction run by a government department. So far, more than 4.2 million Qatari riyals ($1.1 million) has been pledged on just 24 separate and unique car registration numbers being auctioned by the interior ministry of the energy-rich state.

The bidding started on Tuesday afternoon and ends on Thursday night. By Wednesday, the highest single bid was 460,000 riyals for the number plate 377773. Bid prices are expected to increase over the course of Thursday.

As in Dubai, owning a distinct number plate has become a desirable status symbol for Qataris to publicly show off their wealth. Most in demand are those with fewer numbers — most ordinary Qatari registration plates have six figures — repeated digits, or those in sequence. A previous auction for "fancy vehicle numbers" at the end of last year saw one driver bid a reported 200 million riyals (almost $55 million) for the number plate 333355.

LONDON — International shipping lines are being forced to scale back or suspend port calls to Yemen as the conflict gets worse, putting pressure on supplies of food as prices rise in local markets.

Yemen imports more than 90 per cent of its food, including most of its wheat and all its rice, to feed a population of 25 million. Much of its needs had been serviced by foreign ships.

Saudi Arabia and Arab allies have launched air strikes against the Iran-allied Houthi movement, which has taken most of the country and forced President Abd-Rabbu Mansour Hadi to flee to Riyadh.

The coalition has deployed naval vessels to intercept ships carrying arms to the rebels, although merchant ships are meant to have free passage.

Most ports appear to be under Houthi control or are disputed by combatants. Many shipping companies are now unwilling to risk their vessels, industry sources say.

"Many of the owners and container lines are refusing to go to Yemen. You can still call at a number of ports but the fear factor is growing," an international commodities trade source involved in Yemen indicated.

The world's largest global shipping association, BIMCO, said: "If a port is taken/held by the Houthis and a ship is seen to be supplying the rebels, the ship could be at risk from air strikes or indeed naval action from the coalition."

Another commodities trader said his vessel carrying wheat was held up for days by coalition ships before being allowed through into Yemen. The impact is being felt by local people in the Arab world's poorest country.

"The price of a 50-kilogramme bag of wheat has risen from 5,000 Yemen riyals ($23) to 6,300 riyals," indicated Muhammad Saad, 37, from the capital Sanaa, which is under Houthi control. "People are buying wheat in big quantities because they fear shortages."

Fahd Al Dhabhani, a government employee from Sanaa added: "We are living a disaster from all sides. The price of wheat and flour have risen in a big way. There is no more petrol even on the black market."

Port calls

The world's top container group, Maersk Line, said it had suspended all calls to Yemen.

The world's number 2 ship container line, MSC, said it had taken the decision to divert vessels bound for Yemen "to alternative, and more secure, ports in the region".

The world's third biggest container group, CMA CGM said separately it was not making direct port calls to Yemen, only booking slots on other vessels that still called at the Port of Hodaida.

Others such as Taiwan's Evergreen Line had also suspended  shipping services "to prevent risk to the Line's vessels and its customers' cargoes".

The processing and distribution of wheat and other staples have already been disrupted. Aid agencies have warned that Aden faces a humanitarian catastrophe.

"The port of Aden is virtually closed, but for some oil shipments which berthed at Aden Refinery. Dry cargo shipments have been stopped because no stevedores are available due to armed clashes," shipping and logistics agency GAC said.

GAC remarked that other ports such as Saleef, and Hodaida on the Red Sea remained open.

Nevertheless, an explosion at a dairy factory at Hodaida was adding to the risks. In another blow, Al Qaeda in the Arabian Peninsula captured the eastern port of Mukalla last week.

Container group United Arab Shipping Company said it had suspended all cargo bookings. Precious Shipping, one of Thailand's largest dry cargo ship owner, said it would not allow any of its fleet into Yemeni waters.

At least four oil and natural gas tankers that were headed to Yemen have been diverted due to the chaos.

So far, there have not been any major disruptions to the Bab Al Mandeb waterway off Yemen through which nearly 4 million barrels of oil are shipped daily to Europe, the United States and Asia.

Iran sent two warships to the Gulf of Aden this week to  protect Iranian shipping. Iran's Supreme Leader Ayatollah Ali Khamenei said air strikes by the Saudi-led coalition amounted to "genocide".

"Iran's warships are not likely going to initiate any hostilities, but could serve to run interference with warships of other navies that might attempt to prevent Houthi rebels onshore from resupplying," said Michael Frodl, of US based consultancy C-Level Global Risks.

Separately, APR Energy Plc. said it had ceased operations in Yemen due to escalating conflict in the country, the second setback for the company in the Middle East in the last few months.

Shares in the company were down as much as 5 per cent in early trading on the London Stock Exchange.

APR Energy, which rents out turbines and generators to overcome power shortages, said it had taken the decision after "much careful consideration" and following a "detailed assessment of the well-publicised conflict in the country".

Jacksonville, Florida-based APR's focus on emerging markets has left it exposed to political risk in countries such as Yemen, where it has been operating since 2012.

The Middle East accounted for 12 per cent of the company's contracted capacity and 7 per cent of group revenue, according to the company's 2013 annual report.

APR Energy suspended power generation in Libya last November and said in January that it would move its assets out of the country as the government there failed to ratify its contract.

The company warned last month that it expected 2014 net income to be significantly below current market expectations.

APR Energy also said on Thursday that it had received a notice from a customer in the South Pacific for early termination of a 60 megawatt contract.

The contract will now end in the third quarter of this year, three months ahead of its original termination date. It did not name the customer.

RAMALLAH — The Palestinian Authority said on Wednesday it had received a $100 million loan from Qatar to help pay civil servants salaries and alleviate an economic crisis triggered by a row with Israel over taxes.

President Mahmoud Abbas issued a statement thanking Qatar for the loan. Israel collects taxes on behalf of Abbas's Palestinian Authority but suspended payments of some $130 million a month in January to protest at moves by the Palestinians to join the International Criminal Court (ICC).

Following widespread criticism by Western allies, Israel earlier this month released some of the frozen tax revenue, but withheld a portion of the cash, saying it was money Palestinians owed for utilities and health care supplied by Israel. Abbas said the deductions amounted to a third of the total sum that Israel owed and refused to accept any of the money, threatening to go to the ICC over the issue.

An official at Prime Minister Benjamin Netanyahu's office confirmed that Israel had deducted money to cover the Palestinians' electricity, water and health bills and was "willing to transfer back to the Palestinian Authority the sum that was returned whenever it wishes".

LONDON — Oil prices fell towards $57 a barrel on Wednesday after the largest weekly build in US crude inventories since 2001 and as Saudi Arabia reported record output in March.

The US Energy Information Administration (EIA) reported that US stocks of crude oil rose in the week to April 3 by 10.9 million barrels — the largest weekly build since March 2001 — to a record 482.39 million barrels.

A Reuters poll of analysts had forecast a build of 3.4 million barrels.

"The report is very bearish with the large crude oil inventory build and the somewhat surprising rise in gasoline inventories," said John Kilduff, partner at Again Capital LLC. in New York.

Brent May crude was down $2.06 at $57.04 a barrel by 1444 GMT and US May crude dropped $2.34 to $51.64 a barrel.

Both benchmarks posted strong gains in the past two sessions but are still down about 50 per cent since June last year.

Adding to the global oil supply, Saudi oil minister Ali Al Naimi said late on Tuesday that Saudi output would likely remain around 10 million barrels per day (bpd) after posting a record high of 10.3 million bpd in March.

Naimi also said the kingdom stood ready to "improve" prices but only if producers outside the Organisation of the Petroleum Exporting Countries (OPEC) joined the effort.

Iraq and Libya also increased their output for March, further adding to OPEC production, which came to about 31.5 million bpd last month, according to analyst Olivier Jakob at Swiss-based Petromatrix.

"With such a level of OPEC production it will be difficult to escape large stock-builds throughout the year," he said in a note.

Iranian oil officials are in Beijing this week to discuss oil sales and Chinese investments in Iran, just days after Tehran and world powers reached a framework nuclear deal.

Still, any significant increase in Iranian oil exports is unlikely until 2016, analysts have said.

Separately, Libya's OPEC governor said OPEC should change course and cut oil supply by 800,000bpd or more to prevent an expected return of Iranian exports from weighing on prices.

The comments underline how the halving of oil prices from $115 a barrel in June on global oversupply is hurting OPEC's less wealthy members outside the Gulf and suggests the 12-nation group remains divided over the impact of its 2014 policy shift to defend market share, not prices.

"OPEC members, as a unit, need to re-evaluate their strategies," Samir Kamal, Libya's OPEC governor and head of planning at the North African country's oil ministry, told Reuters by email.

They "need to reach an agreement to bring down the production levels by at least
800,000bpd, especially now that an agreement has been reached with Iran which is expected to increase its production", he said.

A framework deal announced last week to curb Iran's nuclear work could eventually allow Tehran to boost oil exports, which have been cut by almost half since 2012 due to Western sanctions.

Four years after the ousting of leader Muammar Qadhafi, Libya is struggling with two rival governments. Kamal represents Libya on OPEC's board of governors, a body that influences but does not decide OPEC policy.

When the producer group last met in November, Libya was among member countries calling for a cut in production.

OPEC meets again on June 5 to set policy. Although they did not oppose the group's no-cut decision of last year, other non-Gulf OPEC members such as Venezuela and Iran have expressed misgivings about it and sought supply reductions.

A group of 18 African oil producers, many of which are not OPEC members, is lobbying for output curbs to boost prices that it says have fallen to levels that threaten to spark social unrest.

But without support from Saudi Arabia and the other Gulf OPEC members, a rethink is unlikely. Saudi Arabia has increased production to a record high and Kuwait has said OPEC will not change policy at the June meeting.

NEW YORK — Boeing is fighting tough efforts by rival Airbus to score big gains in the market for long-haul jets, a segment of the massive aircraft market that the US giant has dominated.

Neck-and-neck with Boeing in sales of single-aisle, 150-200 passenger jets, Airbus has badly lagged its US archrival in wide-body aircraft with 250-450 seats.

But Airbus has high hopes for its new A350, which it says is "setting a new standard of efficiency in its class" with a lightweight, carbon fiber composition that can save up to 25 per cent in fuel consumption.

Airbus believes the A350 can compete with Boeing's classic 777 aircraft as well as the its heavily-touted 787 Dreamliner, which also boasts carbon fiber construction to cut weight.

But Boeing executives say they are confident the US company's lead will stick.

Airbus "still don't have the market coverage we do, especially on the upper end of the market", said Boeing marketing vice president Randy Tinseth. "You see it with the orders. You see it with the market share. They are just not doing that well."

Tinseth said Airbus would need to develop a new version of its A350 with 450 seats to compete with the Boeing 777-9X.

But some analysts see a more competitive landscape than Boeing is letting on.

"If you exclude the 777-9X, the other models can run the same routes with the same capacity and a similar level of performance," said Michel Merluzeau, an analyst at Frost & Sullivan.

Airbus has "got a foot in the market of the 787 and a foot in the market of the 777", Merluzeau added.

Jumbo jet demand rising 

The appeal of long-haul aircraft is the same for both of the world-leading aircraft makers: greater profits.

Whereas Boeing's smaller 737 line sells for $78-$113 million, the 787 is listed at $218-$297 million and the 777 at $269-$388 million.

A new round of jumbo plane orders is expected from carriers seeking to cut their fuel costs. Demand for the bigger planes will reach 7,800 units worth about $1 trillion in the coming 20 years, according to Airbus.

Boeing currently leads with about 55 per cent of the market. It has logged 1,105 orders for the 787 against 780 for the Airbus 350, according to the most recent figures.

But Airbus has had some major wins of late. In November, US carrier Delta Air Lines announced a firm order for 25 new A350 widebodies.

"You can't debate the fact that it is a massive endorsement of your product line," said Airbus chief operating officer for customers, John Leahy.

Airbus Chief Executive Fabrice Bregier has set a goal of winning more than half the global market.

To win market share, it is offering aggressive commercial terms to carriers, as suggested by Airbus accounts: in 2014, Boeing had a profit margin of 10.7 per cent per order compared with 6 per cent at Airbus.

Boeing remains a step ahead in the race for delivering large planes, producing ten 787s per month since the middle of 2014 with plans to reach 12 per month in 2016.

Airbus plans to produce 15 of the A350 in 2015 with output reaching 10 per month in 2018.

"Boeing should be able to maintain its market share through the end of this decade," said an analyst note from Trefis.

Recent successful launches by Boeing in the 777 and 787 lines should allow it to "maintain its lead over Airbus in the wide-body airplane segment", Trefis added.

AMMAN — Finance Minister Umayya Toukan on Tuesday said financial reforms should take social justice into consideration.

Delivering an address at a meeting of the Council of Arab Ministers of Finance in Kuwait, he stressed the importance of assuring citizens that the tax system is fair, as that helps boosts taxpayers’ confidence in the system and guarantees  it will achieve social and economic goals.

At the meeting, Toukan highlighted Jordan’s experience in financial reform programmes, which helped improve the Kingdom’s economic indicators. The meeting is part of the annual joint meetings of Arab financial institutions held in the Kuwaiti capital.