Business

AMMAN — In response to brutal Israeli attacks on Gaza, Jordan Chamber of Commerce (JCC) President Nael Kabariti called on Jordanian traders and importers to boycott Israeli goods and ports. These remarks were made at a meeting between JCC board of directors and a delegation representing the Palestinian union of commercial, industrial and agricultural chambers. The meeting aimed to discuss mechanisms to support Gazans and rehabilitate what was destroyed. Kabariti stressed the importance of conducting a study on destroyed commercial projects and factories in Gaza to find suitable funds through Arab and Islamic chambers of commerce to contribute to their restoration. He also underscored the establishment of the Palestinian products exhibition in the Kingdom, stressing that JCC will be the sponsor and donor for this exhibition. He said JCC and the Palestinian union will contact the Jordanian and Palestinian governments to hasten the establishment of the joint free zone to expand commercial exchange and economic relations between the two countries. A joint committee was formed to make a work mechanism to execute the plans agreed on in the meeting. 

AMMAN — Cumulative debts owed to Jordan Petroleum Refinery Company (JPRC) reached JD1.07 billion. 

JPRC Chief Executive Officer Abdel Karim Alawin told Energy Minister Mohammad Hamed that National Electric Power company (NEPCO) and Royal Jordanian were the main debtors among other institutions which have not paid anything for more than one year.

Alawin was giving a presentation to Hamed who on Saturday visited the company to check on its operations and future projects. 

JPRC’s chief warned that unless the government formulates a reformed subsidy structure for gas and petroleum derivatives, and rectifies the issue of debt accumulation, the operations of the refinery will be greatly hampered. 

Alawin indicated JPRC refines 14,000 barrels of light Arab oil daily, noting that the maintenance, replacing reactors and developing work systems are continuing in line with building new reservoirs for liquefied gas with a capacity of 8,000 tonnes, for petrol with capacity of 40,000 cubic metres and plane fuel with a 20,000-litre capacity. 

He said JPRC entirely stopped using lead in petrol in 2007, before the oil derivatives market liberalisation, and started installing a unit to extract sulfur from diesel at a cost of 16 million euros, scheduled to operate in the fourth quarter of 2014.

He added that Jordan’s imports of crude oil and its derivatives during the first half of this year increased to 3.8 million tonnes compared with 3 million tonnes during the same period in 2013.  

The Kingdom’s consumption of diesel increased by 34.1 per cent, reaching 1.7 million tonnes compared with 1.2 million tonnes during the same comparison period, around 54.4 per cent of which were consumed by NEPCO. 

JPRC’s data, Alawin said, showed that fuel oil consumption increased by 9.7 per cent, rising from 823,000 tonnes to 903,000 tonnes during the same period, mostly for generating electricity purposes at about 86.5 per cent of the total amount.

Costs of oil imports cost rose by 21.8 per cent reaching JD2.3 billion compared with JD1.9 billion during the same period.  

Regarding the expansion, he said there are three alternatives: The first entails adding some facilities to the refinery to produce a lead-free petrol in a way other than the current one and improving the quality of diesel at a cost of $400 million.

The second alternative is a limited expansion to the current refinery to improve the quality of the products and transforming heavy fuel at an expected cost of $900 - $1,100 million.

According to Alawin, the third alternative is a comprehensive expansion to increase production, develop the quantity and transform heavy fuel at an investment of $2 billion to meet the full needs of the Kingdom’s oil.

Hamed said the stop of supplies of the Egyptian gas largely contributed to increasing the oil bill in addition to the halt of the Iraqi oil since the end of 2013.

ROME — The conflict in Gaza has caused serious damage to crops, herds and fishing as well as greenhouses and irrigation systems, bringing food production to a halt and sending prices sharply higher, the United Nations food body said on Thursday.

The Rome-based Food and Agriculture Organisation (FAO) said in a statement that virtually the entire local population of about 1.8 million was dependent on food aid and significant long term help would be needed for local farms to recover.

Ciro Fiorillo, head of FAO's office in the West Bank and Gaza Strip, said specialists had been able to make a series of field visits to the coastal Palestinian enclave to prepare a detailed assessment of the damage during the latest ceasefire.

He said bomb damage, water and electricity shortages and financial problems, as well as the uncertainty about a possible resumption of military activities had caused major problems.

"Under the most recent ceasefire, many farmers and herders are now able to access their lands, however resumption of food production faces serious obstacles", he added.

Food prices have shot up for many items since the start of hostilities, with egg prices up 40 per cent, potatoes up 42 per cent and tomatoes up as much as 179 per cent.

FAO indicated that there had been substantial direct damage to the 17,000 hectares of croplands in Gaza and the area had lost around half its population of poultry either through direct hits on shelters or by lack of feed or water.

Around 64,000 sheep and goats needed feed and water, while the fishing sector had lost 234.6 tonnes of potential catch in from July 9-August 10, around 9.3 per cent of the annual catch.

According to FAO, some 19,000 people in Gaza rely on farming for their livelihoods, with a further 6,000 living from livestock raising and another 3,600 dependent on fishing.

It said it could begin distributing fodder to sheep and goats as well as 4,000 water tanks as soon as a permanent ceasefire was established.

AMMAN — Despite higher earnings from sales, data published by Jordan Phosphate Mines Company (JPMC) showed a JD6.7 million loss during the first six months of this year.

Midyear financial results revealed that JPMC’s sales reached JD328 million, a 13.8 per cent increase over the JD288 million recorded during the January-June period of 2013.

According to the company, sales of crude phosphate went up by 21 per cent and fertiliser exports surged by 61 per cent. But the rise was  shattered by low prices on the international market. 

Data showed that JPMC enjoyed a rise in cash flow from operational activities as the amount reached JD26.3 million during the first half of 2014, compared to JD3 million during the same period of 2013.

Operational profit shot up by 41 per cent, reaching JD10.6 million, compared to JD7.5 million, and the company's assets also rose by 4.4 per cent to JD1.16 billion at the end of June compared to JD1.11 at the end of last year.

Although  profit before tax and provisions amounted to JD8 million at the end of June 2014, down from JD10.3 million at the end of June 2013, the company ended the first half of this year in the red.  

JPMC noted that JD13 million allocated as “incentives for employees” besides taxes, the gross profit turns into a JD6.7 million loss.    

JMPC's Chairman Amer Majali attributed the lower profitability, despite the increase in output and sales during the first six months of the year, to the decline in prices on the international market and higher expenditure  linked to the rise in labour agreements' costs. 

He listed work-stoppages and strikes as well as the increase in costs of production inputs such as raw materials, electricity and water prices and mining fees as other negative factors  

However, Majali underlined that all indicators, including the production and sales, continue to improve as planned. 

He noted that the company is currently embarking on plans to reduce production costs, while increasing operational efficiency to generate more profit during the second half of the year. 

According to JPMC Chief Executive officer Shafiq Ashqar, strikes held for almost three weeks in the second quarter of the year have negatively affected the company's financial situation for the first half of 2014.

Experts estimated the losses as a result of the strike at around $45 million, said Ashqar, who noted that this amount would have increased the company's profits by no less than $12 million.  

AMMAN — Emirates announced in a press statement on Wednesday that the airline has been operating a third daily flight between Dubai and Amman since the beginning of this month.

It said in the statement that since Emirates started flying to Amman in 1986, the airline transported 3.44 million passengers.

AMMAN — The Department of Statistics (DoS) announced on Wednesday that the inflation rate reached 3.2 per cent during the first seven months of this year.

The DoS attributed the rise to higher rents, besides an increase in the prices of clothes and shoes, tobacco, transport and education.

This rise was coupled with a decrease in the prices of meat and poultry, hygienic products, oil and fat as well as telecommunications, the DoS said in a statement received by The Jordan Times. 

AMMAN — The American Chamber of Commerce in Jordan (AmCham) held a seminar this week during which it  discussed American tax regulations for expatriates and businesses.

“Organised to inform expats and those with American business interests about new US tax policies, the event brought together experts from the US Embassy, Jordanian banks and business advisory firms,” the chamber said in a press statement received by The Jordan Times.

It added that the US ambassador and AmCham chairman familiarised attendees with the details of recent changes to American tax policy.

According to the statement, Adli Qandah, director general of the Association of Banks in Jordan, gave remarks on complying with the Foreign Account Tax Compliance Act (FATCA) from a banking perspective. He was joined by Fouad Kraishan and G.F. Joey Musmar, from Capital Consulting and Miller Musmar, business advisory firms specialising in tax, audit and accounting.

“The aim of this seminar was to provide American citizens and green card holders with the information to remain in compliance with US tax laws, and to take advantage of exclusions available for expats,” Kraishan said.

Presentations also included tax planning for foreign businesses and investors in the US, and tax planning for US business overseas.

BERLIN — Beset by low air fares and relentless competition, airlines around the world are waking up to the value of their frequent flyer programmes (FFPs) and realising they can boost profits as well as brand profile.

A multitude of global carriers, preserved by complex cross-border ownership rules that curb dealmaking, means that simply selling tickets is no longer lucrative. Industry body IATA predicts a 3.5 per cent drop in fares this year and for airlines' net profit margins to reach just 2.4 per cent.

As airlines dig around for new ways to make money, many of them are finding it buried deep in their marketing departments.

Dating back to American Airlines' launch of AAdvantage in 1981, FFPs were originally used to encourage a customer to spend their money with just one carrier by offering free flights as rewards once enough miles had been collected.

Nowadays, however, the programmes, with their rich customer data, have become a currency of their own as airlines realise their value to companies such as credit card providers, hire car companies and hotels. An example: Delta commanded $675 million from American Express for its Skymiles in 2011-2013, according to Euromonitor analyst Nadejda Popova.

Those are not the only kind of deals to which airlines have turned, increasingly inventive as profits nosedive. In 2012, Germany's ailing Air Berlin sold a 70 per cent stake in its Topbonus programme to Etihad for 185 million euros ($247.72 million), more than the market value of the German company as a whole at the time. In 2013, an initial public offering (IPO) for Smiles helped Brazil's Gol bring down net debt.

Now, industry watchers expect more such deals, spin-offs and stock market listings as airlines try to unlock more value from these businesses — and in turn drive more new revenues.

Brazil's Valor Economico newspaper recently reported that the country's third-largest airline Azul Linhas Aereas could follow in the steps of rivals TAM and GOL by floating its TudoAzul FFP as a way of raising funds in the capital market, citing the programme's director.

"The visibility you get from establishing it as a separate unit and the additional focus that it then has in terms of becoming profitable in its own right pushes it to generate revenue from sources other than the core FFP," Jonathan Wober, chief financial analyst at CAPA — Centre for Aviation, an independent aviation market analysis group.

Valuation

Given that airlines often don't report separate figures, it's hard to say precisely what FFPs are worth. But the figures that are available show how richly valued they are.

When Air Canada spun off 12.5 per cent of its FFP in 2005 it was valued at C$2 billion ($1.82 billion), or around 20 times its then annual profit of C$99 million. More recently, analysts have put a value of up to $2.5 billion on the loyalty division of Quantas — almost 10 times the unit's annual profit — as Qantas prepares to float or sell part of it under a restructuring.

There are benefits for those airlines that do make money too. Deutsche Lufthansa's new Chief Executive Carsten Spohr said last month that giving its FFP Miles & More an independent profile would lift the entire group's profitability and provide money needed for new planes.

Analysts at KPMG say it's worth an airline putting a programme into a separate unit first before attempting a stock market flotation.

"For IPOs there are a lot of requirements when it comes to transparency. I would recommend letting the programme report results for one or two years first so the market has access to numbers," Magnus Schenk, a transactions director at KPMG in Frankfurt, told Reuters.

Rich data

It's no surprise that investors are interested in FFPs for their data. What makes FFPs particularly sexy is the detail in that data: Not just a rich seam of customers, but a rich seam of rich customers.

"It's extremely powerful data, especially as it tends to be slanted towards the premium segment," said Marc Allsop, senior vice president and head of global business development at Aimia, which has stakes in a number of FFPs and runs other loyalty schemes including the Nectar supermarket plan in the UK and Italy.

Allsop indicated that in the UK, 41 per cent of those who are a member of an airline loyalty scheme have an annual income of above £90,000 ($151,164).

Still, he said, airlines face a tougher task than retailers when it comes to leveraging their data, because people fly far less often than they shop.

A way around this would be to keep tracking their customers once they leave the airport.

"Airlines sell tickets, tell people when they can check in, lead them on board and to their destination city. Then the next time passengers hear from them is when it's time to check in again," Stefan Auerbach, head of airline solutions at Lufthansa Systems, told an aviation conference in Frankfurt.

Instead, they could be using smartphone technology to track their customers as they travel onwards, gathering more information on their spending to tailor offers to their preferences, and increase the possibility that customers take them up, thus bringing in more revenue.

Costing new flyers

Aimia's research showed that while 73 per cent of consumers were part of supermarket loyalty schemes, just 12 per cent were members of airline schemes.

Carriers such as Lufthansa and Emirates hope to attract more flyers, and make infrequent customers more regular, by offering the option to buy miles — to reach reward thresholds — or by offering smaller items like songs via iTunes to persuade them to cash in their points.

More customers, more profits? Maybe. Amid the scramble to boost their FFPs, airlines also have to remember to manage the trillions of unused award miles out there to make sure they don't suddenly get swamped with requests that could burden their yields, or how much profit they get per seat.

For despite airlines offering customers the chance to buy anything from language classes to cases of wine with their points, most people still just want to use their points for a free flight or an upgrade.

"I would rather spend 160,000 miles for a Lufthansa business class ticket than to take the same miles for five nights at a middle range hotel somewhere," said Dennis Glosik, an airline blogger and frequent flyer with Lufthansa.

GAZA CITY — With thousands of homes reduced to rubble and its infrastructure in ruins, Gaza's reconstruction will cost billions and require at least an easing of Israel's blockade to allow in building materials.

Cement will be key among these materials, but its import will be controversial since it has been at the heart of an underground war between Israel and Hamas.

From Beit Lahiya in the north to Rafah in the south, Israel's latest offensive has left swathes of the Gaza Strip in ruins.

Families come during brief lulls in the fighting to sift through the debris of their homes for possessions, waiting to start rebuilding their lives.

In front of his apartment, reduced to a grey mass of dust, rubble and twisted iron, Jamal Abed drags on a cigarette as he thumbs his prayer beads.

"They destroyed everything here, there's nothing we can do," he says.

He knows he could spend months, even years, without somewhere to live because his home will have to be completely levelled before it can be rebuilt.

But for reconstruction to start, there has to be a negotiated end to the fighting.

There also has to be cement, lots of it, and the Palestinian enclave is suffering a chronic shortage of this crucial construction material.

Israel first imposed a blockade on Gaza in summer 2006. It was significantly tightened a year later after the Islamist movement Hamas seized control of the enclave, with Israel imposing severe restrictions on the entry of cement, gravel and steel.

Israel said the restrictions were aimed at stopping militants from building bunkers and other fortifications.

'100 years to rebuild' 

James Rawley, the UN's resident and humanitarian coordinator has warned that failure to lift the blockade could cause more conflict in Gaza in the future.

If the measures are not removed, "not only will we see very little in the way of reconstruction, but I am afraid that the conditions are in place for us to have another round of violence like we're seeing now," he told AFP on Sunday.

In 2010, Israel eased restrictions on imports of food and construction materials after international outrage over a botched Israeli raid on a Gaza-bound flotilla trying to break the blockade left 10 Turkish activists dead.

Since Hamas took power in 2007, Israel has launched two major offensives on Gaza. Both caused widespread devastation to the battered enclave.

Gazans have been largely able to circumvent the restrictions of the blockade by importing cement through cross-border smuggling tunnels from Egypt.

But after the Egyptian military overthrew Hamas' Islamist ally, president Mohammed Morsi, in July 2013, the new regime of Abdul Fatteh Al Sisi has cracked down on the tunnels, destroying over 1,600 of them and dealing a death blow to the smuggling industry.

Since then, Gaza's reconstruction has been dependent on the materials Israel has allowed in, with supplies only permitted for international construction projects.

"It would take 100 years to rebuild Gaza with the current rate of construction material being allowed in," said Sari Bashi, co-founder of Israeli NGO Gisha which campaigns for Palestinian freedom of movement and trade.

"In the years in which cement has been banned from entering Gaza, Israel did not manage to prevent tunnels from being dug," she said. "It is a policy that is overwhelmingly harming civilians in Gaza with little to no security benefit for Israel".

Cementing the truce? 

The UN estimates more than 11,800 homes have been destroyed or rendered uninhabitable, more than twice the number that were destroyed in a previous attack.

At the time, the international community pledged $4.5 billion (3.4 billion euros) to rebuild Gaza's shattered infrastructure.

This time round, the Palestinians say they need up to $6 billion to fix hospitals, roads, schools, water facilities and factories hit by shelling and bombing.

Mahir Al Tabaa, head of Gaza's chamber of industry and commerce, says that "more than 350 industrial buildings" have been destroyed in the fighting, including 50 key factories.

The issue of cement is set to be one of the key challenges for the two sides as they struggle to reach an agreement.

Israeli officials have recognised the importance of rebuilding Gaza but they do not want to lift the blockade — the main demand of the Palestinians.

"There will be no agreement without the blockade being lifted, without cement entering Gaza," said Daifallah Al Akhras, a senior Palestinian official. "How do you expect us to rebuild without cement?"

AMMAN — Exports from East Amman Industrial Zone dropped by less than 2 per cent during the first seven months of 2014 compared to the same period of last year, affected by the regional political developments. Society of East Amman Industrial Investors Chairman Iyad Abu Haltam on Monday said the zone’s exports reached JD214 million compared to JD218 million during the same comparison period. He noted that exports to Iraq, despite the deteriorated security situation there, increased by 7 per cent growing to JD98 million compared to JD92 in the same comparison period. Chemical industries and cosmetics topped the zone’s export list at JD45 million, followed by engineering, electricity and information technology sector at JD44 million, while the supply, food, agricultural and animal products came third at JD41 million.