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WARSAW — The European Bank for Reconstruction and Development (EBRD) voted here Thursday in favour of Libya becoming a member country, a move that could see it eventually receive EBRD financing.

The bank’s board of governors approved membership for the North African country on the final day of the EBRD annual meeting in Warsaw.

“Libya has become a member of the EBRD, with a view to becoming a recipient country, which would enable Libya to benefit from the bank’s investment programmes,” said a statement.

“Any decision to grant recipient country status to Libya will be taken separately following a thorough assessment by the bank of the political, economic and operational environment in the country,” it added.

The EBRD was founded in 1991 to help ex-Soviet bloc countries such as Ukraine and conference host Poland make the transition to free-market economies and democracy.

Two years ago, it expanded its reach to invest in Jordan and three countries in North Africa — Egypt, Tunisia and Morocco — in the wake of the Arab Spring uprisings.

Libyan authorities last year sought EBRD membership as the country seeks to “implement programmes of economic reform and would contribute to its economic growth”, the London-based bank said Thursday.

However, EBRD chief economist Erik Berglof told reporters on Wednesday that the bank could not begin investing in Libya unless “basic security” was in place.

“Provided that this happens and that there is a commitment from the government to work with the EBRD, there will be very exciting opportunities,” he said.

He told a press conference: “The private sector in Libya is about five per cent so there is an enormous amount of things to do... we will enter into a process now of assessing what the needs are and that will be very interesting — the fact-finding effort both in terms of economic reforms but also looking at the political side.”

Since 2012, the EBRD has invested 871 million euros ($1.2 billion) in 34 projects across Jordan and the three North African countries in which it currently invests.

The EBRD Thursday concluded an annual conference dominated by its grim economic assessment of the Ukraine-Russia crisis by making strides towards investing in troubled nations Cyprus and Libya.

A day after the EBRD forecast a deeper Ukraine recession than many had thought possible, and warned of contagion in Russia and beyond, the bank agreed to begin investing in bailed-out eurozone nation Cyprus and took a major step towards lending to strife-ridden Libya.

“This has been a very important annual meeting,” EBRD President Suma Chakrabarti told a press conference at the end of the two-day conference in Warsaw.

“We’ve ensured that the EBRD is extremely well-positioned to support the economies of the regions where we work,” added the former senior British civil servant.

His comments came one day after the EBRD said it expected Ukraine to tumble into recession in 2014 with a contraction of 7.0 per cent — and to deliver zero growth next year.

At the start of this year, before the outbreak of the country’s crisis with Russia, the EBRD had forecast that Ukraine’s economy would grow by 1.5 per cent in 2014.

Russia meanwhile on Thursday reported a sharp slowdown to its own economic growth in the first quarter that analysts attributed to fallout from the raging crisis in neighbouring Ukraine, where pro-Russian separatists have been waging an insurgency in the east of the country.

The state statistics agency said the Russian economy grew by 0.9 per cent between January and March compared with the same period last year.

Cyprus, Libya 

in EBRD sights 

On Thursday, the bank announced that it will begin investing some half a billion euros in Cyprus to assist the island nation to recover from a “severe economic crisis”.

EBRD investments up until 2020 will complement Cyprus’ international bailout programme that is worth 10 billion euros ($13.7 billion).

Chakrabarti said the bank could expect to invest between 500 and 700 million euros in Cyprus through 2020 but stressed that the amount was only indicative at this stage.

The EBRD noted that “the Cypriot economy remains mired in a deep recession that emerged after a boom period between 2004, when Cyprus joined the European union, and 2008, when it adopted the euro”.

Ukraine, Russia shedding investment 

On Monday, the Kiev government joined the EBRD and economic grouping the Organisation for Economic Cooperation and Development OECD in signing a memorandum of understanding that promises an anti-corruption drive.

The EBRD insists that tackling corruption in Ukraine has become increasingly urgent as the country struggles for foreign investment along with Russia.

In Warsaw, the bank said that private-sector capital outflows in Russia had reached $64 billion (47 billion euros) in only the first quarter of this year, exceeding the annual amount for 2013.

The EBRD’s latest annual gathering took place almost 25 years after the fall of the Berlin Wall and a decade since eight former communist nations, including Poland, became members of the European Union.

The institution has 66 shareholders, comprising 64 countries plus the European Union and the European Investment Bank.

The bank’s head said that lending to Russia could drop as the economy slows, while it may step up loans to countries at risk of economic damage from the Russia-Ukraine crisis.

EBRD funding in Russia slumped last year to 1.8 billion euros ($2.5 billion) from 2.6 billion in 2012 due to what the development bank termed “difficult investment conditions”.

Chakrabarti, said it could now drop again this year.

“It could impact on our business volumes in a country the size of Russia if the economy keeps slowing because investment then slows,” Chakrabarti told reporters.

But the bank had no plans at the moment to stop its funding to Russia in reaction to Russia’s annexation of Crimea and the situation in eastern Ukraine.

“There are some shareholders that are seriously concerned at, as they perceive it, Russia’s behaviour in eastern Ukraine,” Chakrabarti said.

“That may play out in the EBRD, it hasn’t yet,” he added. “The shareholders bought into my argument that the EBRD has been a force for good in Russia. We will see what the future holds, but not yet.”

Chakrabarti himself has pulled out of an international  conference Russia is holding in St Petersburg this month. He said he had an urgent engagement elsewhere, but gave no details.

Meanwhile, he said, the bank would look in the next few months at increasing its investments in central and eastern Europe. Governments in the region fear the Ukraine crisis could hurt their economies and Chakrabarti said there was high demand for EBRD loans, which come on attractive terms.

“In the next few months we will look if we can do a bit more in the region,” he said. “There is high demand for more EBRD resources, this is absolutely accurate...  Energy security comes up a lot in the conversations at the moment.”

AMMAN — The Income and Sales Tax Department (ISTD) announced in press statement on Wednesday that a benchmarking review of the Jordanian tax system in 2013 shows improvement over the period 2010-2012 in at least 32 performance indicators. Published by ISTD, in collaboration with USAID’s Fiscal Reform II Project, the review points to improvement of Jordan’s tax system measured against international standards regarding tax policy, tax administration, and the structure and organisation of ISTD. It serves to be both a status report and a measurement tool of the tax system’s performance. “ISTD-administered tax revenues for 2013 increased by 8.8 per cent [from JD3.03 billion to JD3.3 billion] compared to 2012,” the study revealed. “Nevertheless, ISTD maintained a high productivity efficiency rate, keeping the cost of collection rate lower than the international benchmark.” According to the review, customer satisfaction improved, albeit at a slower pace, increasing from 66 per cent in 2012 to 67 per cent in 2013. To control tax arrears, the data base was refined, debts were prioritised, bad debts under certain amounts were written off, tax pre-assessments were more carefully raised, enforcement procedures were improved, and a sizeable amount of tax arrears was collected. 

AMMAN — Amman Chamber of Commerce President Issa Murad on Wednesday urged French businessmen to visit Jordan to further explore strategic investment and economic opportunities available in Jordan. During a meeting with Vincent Toussaint, the commercial attaché at the French embassy in Amman, Murad underlined the strong relations between the two countries, noting that France is currently one of Jordan’s most important commercial partners. Murad called on the French businessmen to support small and medium-scale enterprises in the Kingdom, and he stressed the need for boosting cooperation between the Jordanian and the French private business sectors. Toussaint asserted his country’s commitment to developing economic relations with Jordan. 

AMMAN — The Amman Chamber of Industry board of directors on Wednesday decided unanimously to retain Senator Ziyad Homsi as new chairman, a post he held during the previous term. In a session held on Tuesday, the board also appointed Adnan Gheith as deputy chairman, Ahmad Khudari as secretary general, Qasem Abu Salha as the treasurer, Saad Yassin as deputy secretary general and Eyad Abu Haltam as deputy treasurer. The board elected Fathi Jaghabir as the industrial sector’s representative on the council of Greater Amman Municipality.

AMMAN — Egypt will speed up structural economic reforms this year, led by cuts in energy subsidies, regardless of whether it strikes a deal on International Monetary Fund (IMF) financial aid, Finance Minister Hany Kadry Dimian said this week.

The economy has been hammered by three years of upheaval that followed the 2011 toppling of president Hosni Mubarak, and the government will give priority to crucial tax increases and politically risky cuts to generous state subsidies for fuel.

“We need to get the wheel moving again and this will requires us to reestablish confidence in the Egyptian economy, primarily through comprehensive structural reform measures,” Dimian told Reuters in an interview on the sidelines of an IMF conference in Amman.

He said Egypt had an “ambitious programme to streamline energy subsidies coupled with tax reforms that helps broaden the tax base and promote a fully fledged value-added tax system,”

Dimian, who took office last February, said the first phase of the energy reforms could begin as early as next autumn, when the government introduces a smart card that would control the amount of fuel distributed at a subsided price.

The move could save around 1 per cent to 1.5 per cent of the country’s $262.8 billion gross domestic product (GDP) this year alone, he indicated.

The IMF estimates Egypt’s energy subsidies amount to three times the spending on education and seven times the expenditure on health.

Heavy spending on energy subsidies takes a heavy toll on the economy, consuming a fifth of all state spending, but raising energy prices could trigger protests.

Dimian recently said that spending on energy subsidies next year will be 10 per cent to 12 per cent above the 130 billion Egyptian pounds ($18.6 billion) budgeted for in the current fiscal year unless immediate reforms are made.

The reforms will happen regardless of whether a deal is worked out with the IMF after a presidential election in Egypt this month, Dimian noted.

“We will be evaluating the situation to see if there is a need to conclude this programme of financial support [with the IMF] or whether we just confine ourselves to the reforms we conclude [on our own],” he said.

The IMF and Egypt have sporadically discussed a loan worth up to $4.8 billion to help the economy, which was hurt by political turmoil that drove away tourists and foreign investors, two major sources of foreign currency.

Masood Ahmed, the IMF’s director for the Middle East and North Africa, said the world body had sent two technical missions to Egypt so far to discuss tax reforms, and was ready to extend aid once the government decided it was needed.

“At the moment, the Egyptians have not asked for financing from the IMF, but we have indicated to them that we would be ready to provide financial support as soon as Egyptian authorities feel that would be useful,” Ahmed said on Tuesday.

Aid from the Gulf has reduced the pressure on Egypt to reach a deal with the IMF that would require economic reforms the government might find politically risky, analysts say.

Dimian said Egypt’s economy could not keep to relying on the billions of dollars of Gulf aid in the form of cash transfers, oil shipments and central bank deposits extended after the army toppled Islamist president Mohamed Morsi last year.

“The aid came at a decisive time, but from the point of view of designing economic policies, these policies are not designed at all on the continuation of this aid,” Dimian said.

The cash injections are keeping the economy afloat and allowing Egypt to increase some spending on investments, but analysts say the government still needs a long-term plan to ensure financial stability.

According to Dimian, the priority of economic decision makers was tackling structural imbalances to restore the investor confidence crucial to sustainable growth.

The 2014 growth forecasts remained around 2 to 2.5 per cent, down from a target of 3 to 3.5 per cent. But growth could rise to between 3 and 3.25 per cent in 2015, fuelled by faster economic activity and much less aid from the Gulf, Dimian said

“Growth might go better, but this is what how we read it for the time being,” he said.

Economic growth had been running at 6 per cent to 7 per cent before the protests, although even that pace was barely enough to produce work for the youths entering the job market.

DOHA — Qatar unveiled plans for labour reforms on Wednesday after persistent criticism from rights group over its treatment of workers, but it set no timetable and the changes would still leave employees without a minimum wage or trade unions.

Qatar has the highest proportion of migrant workers per population in the world.

Pressure on the Arab country, host of the 2022 soccer World Cup, grew after Britain’s Guardian newspaper reported in September that dozens of Nepali construction workers had died, and that labourers were not given enough food and water. Qatari and Nepali officials denied the report.

The proposed reforms include replacing a contentious sponsorship law, known as “kafala”, in which workers need their employer’s permission to change jobs, with a system based on employment contracts, officials said in Doha. 

An exit permit law requiring workers to obtain an employer’s consent to leave Qatar will also be reformed.

Officials announced the steps in response to a review of  labour legislation by a British-based law firm, which made a number of recommendations including the creation of a minimum wage for each category of construction worker.

The review, by law firm DLA Piper, also noted that Qatari law does not provide a right to freedom of association and collective bargaining for migrant workers.

The reforms envisaged do not include the creation of trade unions or the establishment of a minimum wage. Officials at Wednesday’s press conference said that wages were dictated by supply and demand in the market.

Under the reforms, workers will have their wages paid electronically to avoid late payments. And the country would adopt a “unified accommodation standard”, a measure apparently aimed at improving the quality of migrant workers’ housing, which is often spartan or squalid.

The officials also propose raising to 50,000 riyals ($13,700)  from 10,000 riyals a fine for employers holding the passport of an employee, a common practice among most construction firms and other companies in Qatar. Currently the fine is rarely enforced.

Reforms ‘soon’

“Let it be clear the current kafala system will be replaced with a system based on employment contracts, and that will govern the relationship between the employer and employee,” said Abdullah Saqr Al Mohannadi, director of the human rights department at the ministry of interior.

But these proposals would now have to go through the Shura Council, a consultative body, as well as Qatar’s chamber of commerce and government departments prior to their conversion into law, said Muhammad Ahmed Al Atiq, assistant director general of expatriate affairs at the ministry of interior.

“God willing, we hope that this will happen soon, but its hard to put a timeframe,” he added.

Unions are banned in Qatar, the world’s top exporter of liquefied natural gas, and workers who strike in protest are often deported.

In response, the International Trade Union Confederation (ITUC) said the announcements gave no guarantee for workers in Qatar.

“No moves were announced to stop the death and injury toll amongst the migrant workforce,” it noted in a statement. The ITUC has said more than 1,200 men have died in preparations since the World Cup was awarded to Qatar in 2010. Qatar has said no construction workers have died working on a World Cup site.

According to DLA Piper’s report, Qatar has 1.39 million migrant workers, which makes its the highest migrant to citizen ratio in the world, with migrant workers making up 85 per cent of the population. 

DLA’s report also found that the prescribed accommodation standards, which allow a maximum of four people in a room, are not being met by some contractors.  

SHANGHAI — China’s vast “shadow banking” sector is now valued at $4.4 trillion, according to the government’s premier research group the Chinese Academy of Social Sciences (CASS) as it warned of potential risks to the financial system.

Shadow banking in China encompasses a huge network of lending outside formal channels and beyond the reach of regulators, including activities by online finance platforms, credit guarantee companies and microcredit firms.

The system is worth 27 trillion yuan ($4.4 trillion), equivalent to nearly one fifth of the domestic banking sector’s total assets, according to a report by the Institute of Finance and Banking under CASS — China’s highest academic research organisation in the social sciences.

The figure is slightly lower than an earlier estimate by ratings agency Moody’s, which put shadow banking activities at $4.8 trillion in 2012, more than half of the country’s gross domestic product (GDP).

“What matters most is not the scale of the shadow banking system,” CASS said in a statement for the launch of the report provided to AFP on Tuesday.

“Once big risks arise from the shadow banking system, they could rapidly spread to the banking segment and the real economy through the monetary and credit markets, posing systemic financial risks,” it explained.

China’s financial markets were rocked by several debt defaults earlier this year.

In one case, a $160 million investment product structured by Jilin Province Trust, and backed by a coal firm failed to make capital and interest payments.

A $500 million investment product structured by China Credit Trust avoided default in January after an unknown party made good on principal payments to hundreds of investors, though they did not receive pledged interest.

Chinese authorities have shown tolerance towards individual defaults, calling them unavoidable, but have pledged to keep potential risks in check.

Analysts say the defaults could benefit the market in the long term by raising awareness of risk and making investors more selective.

Separately, China’s central bank hinted recently that it was willing to accept some debt defaults in the $1.8 trillion wealth management market, as the world’s second-largest economy struggles to curb bad debts that pose a risk to the financial system.

“Under the premise of preventing systematic risks, allowing some default cases to happen naturally in compliance with market forces will... help rectify behaviours of product issuers and investors, and benefit the healthy development of the wealth management market,” People’s Bank of China Deputy Governor Pan Gongsheng said at a forum in Shanghai. 

Pan’s remarks echoed those by Premier Li Keqiang earlier this year after the country’s first-ever default on a domestic corporate bond sparked concerns that other firms could follow suit. 

Li said authorities “pay very high attention” to financial and debt risks, but certain individual cases of such defaults were “hardly avoidable”. 

China’s wealth management product market ballooned to 11 trillion yuan ($1.8 trillion) in early 2014 from two trillion yuan in 2011, Pan pointe out. 

“Guaranteed repayment... although it will ensure short-term stability, won’t help the market to effectively differentiate risks and will eventually lead to accumulated risks,” he said.

In early March, Shanghai-based Chaori Solar Energy Science & Technology Co said it was unable to make bond interest payments of 89.8 million yuan, sending it into a landmark default. 

Earlier this year, the domestic financial market was gripped by worries over other financial products issued by trust companies, which have drawn comparisons to the American “junk bonds” of the 1980s. 

Authorities have in the past intervened to avoid default risks but are now more willing to accept such incidents, which may ultimately benefit the market by raising awareness of risk and making investors more selective, analysts have said.

AMMAN –– Telecom operator Zain Jordan is expected to transfer JD192 million to the Treasury in the coming two days for the Fourth Generation (4G) frequencies it obtained last month and for other frequencies to expand its third generation (3G) network, a government official said. 

Finance Ministry Secretary General Omar Zu’bi told The Jordan Times that Zain Jordan –– a unit of Kuwaiti-based Mobile Telecommunications Co. –– will transfer JD142 million for the 4G frequencies licence and JD50 million for 3G network expansion. 

Last month, the mobile operator executives said it would introduce 4G services that enable data transfer rates of up to 150 megabits per second by the end of this year. 

The government had invited the country’s three operators — Zain Jordan, Orange Jordan and Umniah — to submit requests to acquire frequencies to provide 4G services after it turned down bids from two companies.

The government received offers from KULACOM Jordan and a US-based company called “Ameriphone” to provide 4G services, but the bids were rejected as they were not in line with the tender’s conditions.

Mobile penetration in Jordan reached 156 per cent at the end of 2013, with 10.3 million mobile subscriptions, according to official figures.

AMMAN –– Prime Minister Abdullah Ensour on Monday called on Arab policy makers to work together to arrive at remedies for the economic challenges facing the region. 

Addressing participants at the high-level regional conference organised by the government, the International Monetary Fund (IMF) and the Arab Fund for Economic and Social Development, the premier said challenges facing Jordan are not different from those in other regional countries. 

"Our region is undergoing fundamental economic and political transitions. Regional policy dialogue among policy makers is no longer an option," Ensour told participants during a lunch hosted by the government, urging development stakeholders to engage in practical discussions to agree on key priorities that aim at raising the living standards of the people. 

Earlier on the day, the prime minister and IMF Managing Director Christine Lagarde were panelists in a session titled "economic transitions in the Arab world: What are today's challenges?"

At the session, Ensour said rich regional countries need to offer more financial and economic assistance to less fortunate neighbours, adding that when both groups grow richer they would both enjoy stability, and avoid dangers caused by poverty and unemployment. 

Lagarde indicated that creating more employment for the youth requires a comprehensive approach that involves reforms in many areas, including redefining the role of the state away from being an employer to becoming an enabler for a dynamic private sector, creating education systems that provide bridges to productive employment, designing labour market regulations that protect workers without constraining employers and establishing a business climate conducive to greater competitiveness.

"Reforms in all these areas will take time, but we have to start the process now. In the short run, and if sufficient additional external financing can be mobilised, scaling up public investment could make an important and visible contribution to reducing unemployment," she said.

AMMAN — Beneficiaries from microfinance services need a comprehensive framework that extends beyond financing to necessary rehabilitation, training and guidance to support micro-projects, Reem Badran, chairman of the board of directors at the National Microfinance Bank (NMB), said Monday. 

Badran was speaking during a ceremony, held under the patronage of Prime Minister Abdullah Ensour, to launch NMB’s initiative to support productive projects “from micro into small”.  

Ensour honoured Fatmeh Alwan, Alia Shawabkeh, Dirgham Abu Khourma, Fawzia Ramadneh, Samar Samardali and Tirez Samawi, who managed to achieve success through the loans they received from NMB. 

According to Badran, NMB was able to document 100 projects that managed to grow from micro-projects into small and medium-size projects, or have the potential to reach this category. 

She indicated that NMB, since its opening in 2006, has offered more than $200 million in loans to 205 borrowers, 90 per cent of whom were women beneficiaries. 

The bank’s branches have increased from nine in the past year to 20 this year, spread over all governorates in the Kingdom, Badran noted. 

NMB is committed to graduating 2,000 beneficiaries from this initiative in the coming five years with the support and cooperation of the Arab Gulf Programme for Development (AGFUND) which will copy this NMB experience in similar banks under AGFUND  in Yemen, Bahrain, Syria, Lebanon, Palestine, Sudan and Sierra Leone, she said.

AGFUND Deputy President Yousef Bassam briefed the audience on the characteristics of AGFUND, which was established in 1980 by an initiative of HRH Prince Talal Bin Abdul Aziz. 

Bassam said that AGFUND focused on comprehensive programmes to achieve a growth based on equality through five programmes: early childhood development, women empowerment, improving civil community roles, youth investment through founding Arab Open University and money integration to fight poverty. 

AGFUND established banks for the poor in nine countries to achieve social security, fight poverty and providing job opportunities through establishing productive projects, Bassam added. 

The ceremony was attended by Abdulatif Hamad, managing director of Arab Fund for Economic and Social Development, members of NMB and Arab workers in the development sector.