Business

AMMAN — Jordan Investor Confidence Index (JICI) dropped in May this year by 0.43 points to reach 95.69 points compared with 96.12 points in the previous month. 

The JICI, published on a monthly basis by the Jordan Strategy Forum (JSF), seeks to measure the confidence of investors operating in the Jordanian market through three aspects: confidence in the Jordanian dinar and the monetary system, confidence in the real economy and confidence in the Amman Stock Exchange (ASE).

Both the monetary and the stock exchange sub-indices witnessed slight declines in May, in spite of an increase in the real economy sub-index, according to a JSF statement.

Confidence in the monetary system sub-index dropped to 92.58 points in May from 93.18 points in April, mainly due to a decrease in the volume of foreign reserves at the Central Bank of Jordan by around JD200 million to JD12.074 billion in May. 

The sub-index of confidence in the ASE dropped by 0.31 points to settle at 99.54 points in May, as opposed to 99.85 points in April. The drop could be attributed to a decline in the ratio of shares bought by foreign investors to the shares sold by foreign investors from 1.25 in April 2016 to 1.18 in May, the statement indicated. 

The sub-index of confidence in the real economy went up by 0.33 points in May, reaching 103.57 points compared to 103.09 points in April 2016. 

The number of companies registered in May rose to 550 from 523 companies in April, but the total capital of the registered companies saw a slight drop. 

The Manufacturing Quantity Production Index rose by approximately 11 points to reach 167.09 points, compared with 156.11 points in the previous month. The jump was the outcome of a 40.6 points increase in the production index for the mining and quarrying sector. This was accompanied by an increase in the construction activity, as the number of construction permits and total tax collected on real estate dropped by 10.9 per cent and 19.8 per cent, respectively.

AMMAN — Six US Congress members on Tuesday visited Jordan’s first wind facility, the Tafileh Wind Farm. Touring the project, the congressional delegation from the House Committee on Energy and Commerce commended Jordan’s development in this field, according to a company statement.

"I was extremely impressed by the state-of-the-art technology that Jordan Wind Project Company employed to design and build the first renewable energy project in Jordan.

This joint partnership, which included critical support from USAID, provides essential Jordan-produced energy that will go a long way to help meet [the Kingdom's] energy needs," Congressman Joe Pitts, who led the delegation, said.

Jordan Wind Project Company Chairman Samer S. Judeh highlighted the importance of the project as a focal point in the Kingdom's southern region.

He also expressed his appreciation of the international support for the first utility scale wind farm in the region.

The construction of the 117 megawatt Tafileh Wind Farm was completed in September 2015, at a cost of $287 million.

The US has contributed to the project, as 36 blades — or 12 sets, each costing around $1.3 million — were shipped into Jordan from the US and incorporated into the wind farm.

CAIRO — Egypt hopes a $12-billion financing deal with the International Monetary Fund (IMF) will usher in an economic turnaround but real progress hinges on a tough reform package avoided for decades to stave off unrest.

The financing over three years — deemed an endorsement to attract more foreign aid — would go together with a currency devaluation and streamlining of Egypt’s bloated subsidy system.

But experts warn that the loan alone would serve as little more than an “aspirin” and a stopgap for a deep-rooted economic malaise.

In a country where many rely on state subsidised bread and imports for basic foodstuffs such as wheat, inflation has already risen at a time of low foreign currency reserves and a thriving black market exchange.

More than five years after its 2011 uprising — partly fuelled by economic disparities — that swept away veteran strongman Hosni Mubarak, the country is still reeling from the fallout.

The dire state of the economy, according to President Abdel Fattah Al Sisi, makes the long deferred economic reforms inevitable.

“All the hard decisions that many over the years were scared to take, I will not hesitate for a second to take them,” he said in speech on Saturday, days after Egypt signed the preliminary deal with the IMF.

The government has proposed a reform package to narrow the budget deficit — about 13 per cent of GDP — that includes cuts to power subsidies and a value added tax to raise revenue.

Subsidies account for 7.9 per cent of total government expenditure, according to the finance ministry.

Reforms are also planned to adopt a “flexible policy” for the Egyptian pound.

With dwindling foreign reserves, the government has been propping up the currency at 8.88 pounds to the dollar, well below the black market price, while imposing capital controls.

‘An aspirin’? 

Finance Minister Amr Al Garhy has said the country faces a funding gap of $21 billion over the next three years, and the money would be raised from regional loans and international bonds.

Experts say the IMF loan is essential to bolster foreign currency reserves, which have dwindled to $15.5 billion.

But this will not suffice on its own and may further aggravate the plight of the lower and middle classes.

The financing “is a short-term solution, but in the long term the economy is in bad shape and the deficit is dangerous”, said Ahmed Kamaly, an economics professor at the American University of Cairo.

“The loan will be like an aspirin. There is no reform package in the real sense of the term, with specific goals... It’s a raft of measures to stabilise the economy and exchange debts for other debts,” he said.

The falling reserves prompted the government to hasten the IMF negotiations, and Egypt will owe $4.4 billion in interest on foreign loans by July 2017, according to a study by the investment bank Prime Holding.

“We won’t be able to pay the foreign loan interest if we don’t get” the IMF loan, former finance minister Samir Rady said.

But the government, which has nurtured a bloated bureaucracy over the years, has other commitments as well.

In his speech on Saturday, Sisi took the unusual step of addressing public sector employment which he said has put a major burden on the state.

“If I appoint 900,000 people in the public sector because of pressure for jobs, at a time when I really don’t need anything from them... what effect will this have?” he asked pointedly.

The state statistics office CAPMAS says that in 2015 almost 5.8 million people from a total workforce of 26 million were employed by government agencies and another 800,000 in the public sector.

Radwan said that part of the IMF loan “should be used in investments that can turn a quick profit”.

But the economic reforms run the risk of fuelling discontent among lower-income Egyptians and increasing inflation.

“There must be measures that demand more of the rich, because according to official statistics... 27 per cent of the population is poor, and another 20 per cent is threatened with poverty,” said Shereen Al Shawarby, an economics professor at Cairo University.

AMMAN — The Amman Stock Exchange (ASE) on Tuesday announced that Enjaz for Development & Multi Projects Company (ATCO) has completed all required procedures to increase its listed capital from JD25 million to JD35.25 million through a strategic shareholder. On its website, the ASE said it will list the company’s new shares on August 18.

DUBAI/LONDON — OPEC will probably revive talks on freezing oil output levels when it meets non-OPEC nations next month as top exporter Saudi Arabia appears to want higher prices, according to OPEC sources, although Iran, Iraq and Russia present obstacles to a deal.

Riyadh sharply raised expectations for a global production deal on Thursday when Energy Minister Khalid Al Falih said Saudi Arabia will work with OPEC and non-OPEC members to help stabilise oil markets.

“The comments by the Saudi energy minister give a positive indication that they are willing to go for a freeze deal but the question remains: on what level?” said an OPEC source from a key Middle Eastern producer.

“Will the freeze be at January levels? And what about Iran? And then there is Nigeria, which has lost a lot of production since January,” the source added.

Only days after Falih’s remarks, Russian Energy Minister Alexander Novak was quoted as saying Russia is consulting with Saudi Arabia and other producers to achieve oil market stability, adding that the door is still open for more discussions on output freeze, if needed.

Saudi Arabia, together with Russia and the United States a rival for the position of the world’s top oil producer, boosted output to 10.67 million barrels per day (bpd) in July from 10.2 million in January, when the freeze idea first emerged.

Since 2014, Saudi Arabia, OPEC’s de facto leader, has been raising output to drive higher cost producers out of the market and win back shares from rivals such as the United States, where output soared on the back of the high oil price of the past decade.

As a result, oil prices collapsed to $27 per barrel in January from as high as $115 in mid-2014, capping output of the United States but also hitting hard Saudi Arabia’s budget and resulting in a record fiscal deficit for Riyadh.

A previous attempt to freeze output at January levels to support prices collapsed in April after Saudi Arabia said it wanted all producers, including regional rival Iran, to join the initiative.

Tehran argues it needs to regain market shares lost during years of Western sanctions, which have been only softened in January.

Over the past few months, Iran, OPEC’s third biggest producer, has boosted output close to pre-sanctions levels and has repeatedly signalled it has no plans to join the freeze initiative.

“I do not see any real chance,” a source familiar with Iranian oil thinking said on Saturday in reference to the prospect of a freeze deal in September.

OPEC members will meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria on September 26-28.

“However, if prices go down further, some OPEC members will try to send positive signals to the market to keep prices at least at current levels,” the source added.

Iraq output gains

Iranian Oil Minister Bijan Zanganeh said in parliament last week he wanted to take the country’s output to 4.6 million bpd within 5 years — much above the current 3.6 million bpd and pre-sanction levels of 3.8-4.0 million bpd.

But since the collapse of freeze talks in April, Iran is no longer the only obstacle to the deal.

Iraq, OPEC’s second largest producer, which in April was saying it would support the deal, has since agreed with oil majors on new contract terms to develop its massive fields, which will allow output to rise further next year by up to 350,000bpd.

Nigeria and Libya could present further complicating factors, delegates said. Nigeria’s output hit its lowest in over two decades this year due to attacks on oil sites and Libya is pumping a fraction of the pre-conflict level — raising the question of what level they should limit supplies at.

While Nigeria supported April’s freeze initiative, Libya declined to join the talks.

Russia, which back in April was ready to freeze production in the first coordinated action with OPEC since 2001, also signalled it was no longer very keen on a dialogue and would continue boosting output.

Its output currently hovers near an all time high of 10.85 and Russian officials expect it to edge up further next year.

Even Saudi Arabia itself has raised its output to record levels in July, which Falih has explained was due to rising seasonal domestic demand and customers asking for more oil worldwide.

These increases arise as countries which usually do not join any global actions such as North American producers are expected to add more barrels. The International Energy Agency expects non-OPEC output to rise by 300,000bpd next year after a decline of 900,000bpd in 2015 as North American output stabilises.

Hence, persuading countries such as Iran, Iraq and Russia to return to output controls will be a difficult task for Riyadh, but a worst option would be to raise expectations of a deal that doesn’t happen, like in April.

“No agreement will collapse the market, and OPEC,” said the first OPEC source.

AMMAN — Inflation in the first seven months of 2016 went down by 1.3 per cent, compared with the figure recorded during the same period last year, according to the Department of Statistics (DoS).

Main item groups that contributed to the drop were transportation, fuel and lighting, vegetables, dried and canned legumes, and nuts, according to a DoS report that was sent to The Jordan Times.

Other groups whose prices went up during the January-July period included rents, entertainment, tobacco, cigarettes and clothes.  

AMMAN — Kuwait's partial deregulation of gasoline prices is a politically and economically bold move on energy subsidy reforms, for a country where, on a per capita basis, subsidies are amongst the highest in the world, according to a recent World Bank (WB) statement.

Earlier this month, Kuwait’s government approved an increase in prices of gasoline sold locally by as much as 83 per cent, becoming the latest oil-rich Arab nation to cut subsidies as lower crude prices squeeze finances.

Energy subsidies have been a major burden on public finances, ranging from around 1.3 per cent to 5.7 per cent of the country’s gross domestic product, when environmental, health and other extra expenses are taken into account, the WB statement said. 

Because of the size, they result in major distortions, with extremely high levels of energy consumption, much higher than those driven by demographic and growth trends, and in comparison to other high income countries, the statement pointed out. 

The WB said the recent adoption of an automatic mechanism should be viewed as the first stage of a transition to a fully liberalised pricing and supply regime, which has typically been a more effective approach to avoiding subsidies and protecting the budget. The current environment of low oil prices presents an opportunity to reform energy subsidies with minimal impact on consumers while generating fiscal savings at a time when fiscal pressures are increasing. 

The decision to remove subsidies is also strategically aligned with the Kuwait’s vision to further diversify the economy and enhance its competitiveness. In the medium and long run, subsidy reforms is expected to encourage a move towards more labour-intensive industries, which is expected to lead to job creation for nationals, a particularly important consideration for Kuwait, where foreign labour has been subsidised.

The impact of higher transport fuel retail prices depends on the short run and long run responsiveness of consumers to the price shocks. International experience shows that consumption of transport fuel is less responsive to price increases than other fuels, such as electricity. 

While higher retail prices will increase the cost of running a car, Kuwait remains relatively cheap compared to markets in Europe.  On a per litre basis, the new retail gasoline price is still less than half of the cost of gasoline in Europe and is still the lowest in the GCC countries. Accordingly, car ownership and use may still increase at least in the short run.

 International experience suggests that the impact of transport fuel subsidy reforms is more effective when undertaken in conjunction with complementary policies, which Kuwait is also actively pursuing, such as strengthening public transport, which benefit all segments of the population, especially the poor. It also improves economic efficiency in other important ways, by reducing congestion and air pollution, according to the WB statement.

AMMAN — Jordanian Businessmen Association (JBA) President Hamdi Tabbaa and a World Bank (WB) delegation, chaired by Alan Moody, on Sunday discussed ways to boost the business environment in Jordan.

During a meeting at the JBA’s headquarters, the two sides reviewed means to attract more investments to the development zones and underprivileged areas, in particular. Tabbaa highlighted the JBA’s perspective of the country’s economic situation and the agreement that was recently signed with the International Monetary Fund, according to a JBA statement.

He also indicated that the JBA has submitted its recommendations to the government on the Income Tax Law, describing the legislation as confusing for investors. Expressing the WB’s appreciation of the JBA, Moody proposed that the JBA and the WB should draw up a strategy, to be submitted to the government, to maximise the private sector’s role in development and investment. 

AMMAN — Jordan Enterprise Development Corporation (JEDCO) on Sunday launched its new website www.jedco.gov.jo. Funded by the European Union, the website will work to meet beneficiaries’ needs, according to a JEDCO statement.

JEDCO acting CEO Riyad Al Khatib said that the new website will focus on success stories about economic projects, benefiting from European grants. It will also seek to raise awareness and offer guidance regarding the mechanisms and conditions required to benefit from the Governorate Development Fund.

The fund and other JEDCO programmes such as Accelerate with JEDCO, the Rural Economic Growth and Employment project, the Exports Development Project through Virtual Market Places and the European Enterprise Network as well as JEDCO’s sector-targeted services, seek to support the service sector, entrepreneurship, business incubators and industrial projects, the corporation said.

The website will allow visitors to access any of JEDCO’s services electronically by filling out the relevant service application without the need to visit JEDCO. The corporation is the national umbrella for economic enterprise development in Jordan, including start-ups and entrepreneurships.  

LONDON — Britain will fill a gap of as much as £4.5 billion ($5.8 billion) in funding for agriculture, universities and its regions that will open up when Britain leaves the European Union, Finance Minister Philip Hammond said.

Scientists, farmers and others who got EU funding were facing uncertainty after Britain voted on June 23 to quit the EU. Hammond reassured them on Saturday that the British government would pick up the tab.

The new guarantee over funding comes as Britain faces the looming prospect of a recession following the Brexit vote. Companies are expected to put off investment and consumers to cut their spending as Britain and the EU work out their new relationship.

Hammond told reporters that Britain needs about £4.5 billion a year to fill the gap left by the end of EU funding, although Britain's actual exit date may be some way off. Prime Minister Theresa May has said she will not start the two-year process of leaving this year.

"We recognise that many organisations across the UK which are in receipt of EU funding, or expect to start receiving funding, want reassurance about the flow of funding they will receive," Hammond said in a statement.

According to Full Fact, an independent fact-checking agency, the British government paid about £13 billion to the EU last year, after its automatic rebate, and got back £4.5 billion in funding.

"Clearly if we stopped making contributions to the European Union there will be money available to be invested in our own economy," Hammond said when reporters asked about Britain's funding arrangements after Britain's departure from the EU.

Hammond's funding guarantee, which covered structural and investment funds and Horizon research funding, was welcomed by organisations representing recipients of EU funding and by the employer organisation, the British Chambers of Commerce.

"I hope that this short-term certainty will help to deliver longer-term confidence and this is exactly what farm businesses need now," said Meurig Raymond, the president of the National Farmers' Union.

The Royal Society, a London-based group of scientists, said the reassurance on EU grants would help Britain-based research continue to attract the best talent.

"Today's announcement sends a strong message that Britain remains open and collaborative," Royal Society President VenkiRamakrishnan said.

Hammond said projects signed before Britain's Autumn Statement financial update will continue to be funded by Britain after it formally leaves the EU and the UK would match the current level of agricultural funding until 2020.