Business

AMMAN — The private sector can be an important driver for growth and rising prosperity in the Middle East and North Africa (MENA) region if effective policies are put in place to address key challenges across the region, according to a World Bank (WB) statement. 

A report from the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank Group (WBG), looked into “What’s holding back the private sector in MENA?” It also drew lessons from the MENA Enterprise Survey (ES) of more than 6,000 firms in eight countries. 

Many of those firms cited political instability, corruption, unreliable electricity supply and inadequate access to finance as factors that were holding them back.

They also said that innovation and growth were constrained by barriers to trade and a scarcity of appropriately trained workers. In many places, they saw a disconnect between firms and formal financing channels, with the result that firms were losing growth opportunities.

The report concludes that “Strategies to support firms in enhancing their productivity, as well as the process of resource reallocation towards more productive firms, should be a high priority for public authorities in the region”.

It highlighted four specific areas where policy responses were required: to improve the business environment, to improve access to finance, to achieve better education, employment and skills, and to promote trade, competition and innovation.

The report says that achieving political stability is critical to improving the business environment. “Across many of the economies, tackling corruption and an unreliable electricity supply are also likely to be important priorities.”

“Identifying the impediments and challenges that are affecting the private sector and economic growth in the MENA region will help our institutions support policy reforms that can create a favourable business environment. 

From the beginning of our engagement in the region we focused on fostering the development of the private sector through tailored programmes, and investment in infrastructure and services, in addition to strengthening competitiveness which is key to addressing unemployment, one of the region’s biggest challenges, particularly among women, the young and educated people,” said Sergei Guriev, an incoming chief economist of EBRD.

The report shows that while banking sectors in the region are relatively large, a high percentage of firms are disconnected from formal financial channels — they do not apply for credit because they state that they have enough resources. Firms’ access to finance could be improved by developing the capacity of banks to strengthen their credit risk assessment. 

Credit guarantee schemes might be a way to alleviate collateral constraints, while strengthening secured transaction laws and making collateral registry more efficient would also help. This would support lending to small and medium-sized enterprises, without putting financial stability at risk.

“Finding a way to reconnect banks and firms is crucial to enhance growth opportunities in the region and international financial institutions have the expertise and willingness to complement domestic policies,” said Debora Revoltella, the chief economist of EIB. 

“Support for the private sector in MENA forms a key part of the EIB’s new initiative to build economic resilience in the region as well as to support countries in MENA. This Crisis Response and Economic Resilience Initiative has now been endorsed by EU leaders and will see a substantial stepping up of traditional activities, with action and investment for growth, jobs, vital infrastructure and social cohesion.”

The report sees considerable scope for improvements in policies for better education, employment and skills, particularly in relation to the employment of women and young people. 

Policies should remove distortions preventing entry into the labour market for women and provide more focused and targeted education for the young. 

They should also provide incentives to increase training intensity in firms. At the same time steps to support the emergence and growth of young innovative firms are likely to be particularly positive for the employment of young people.

“Fostering employment and entrepreneurial opportunities, particularly for young men and women, is vital to raise living standards and promote social and political stability. 

“A reorientation of the region’s education system towards learning skills that are rooted in vocational training and relevant for today's world of leapfrogging technology is essential for boosting entrepreneurship and jobs,” said Kaushik Basu, World Bank chief economist and senior vice president.

In the areas of trade, competition, and innovation, the report notes that increased productivity by firms requires greater openness to international trade, which in turn would be supported by more effective customs and trade regulations — for both imports and exports. 

Greater competition could also be promoted by reducing restrictions on firm entry and exit, and on foreign investment.

AMMAN — A delegation of Jordanian businessmen began a working visit to Montenegro on Monday to look into chances for boosting joint commercial and investment cooperation, according to the Jordan News Agency, Petra.

On their first day, the delegates met with their counterpart private sector representatives and discussed ways to expand and diversify Jordanian exports to Montenegro. Amman Chamber of Commerce President Issa Murad urged Montenegrins to start joint investment projects in the Kingdom.

At the meeting, Velimir Mijuskovic, the president of the Chamber of Economy of Montenegro, highlighted the growing economy of his country, which is currently seeking full EU membership, Petra said. 

CHENGDU, China — Britain's new Finance Minister Philip Hammond, under pressure from his peers from around the world, said on Sunday there could be more clarity later this year on how the country will exit the European Union.

Several nations called on Britain during weekend talks on the world economy to explain how the politically fraught Brexit process will unfold in order to avoid adding a new drag on the long and slow recovery from the financial crisis.

"It's right at the top of the agenda here at the G-20," Hammond said at the end of the two-day meeting of the Group of 20 leading economies in the Chinese city of Chengdu. "It's a new factor affecting the global economic outlook and it has increased the uncertainty which the world economy faces."

Britain was plunged into its biggest political crisis in decades by the June 23 Brexit vote and so far it has resisted calls from some other EU countries to trigger quickly the two-year process for negotiating its exit from the bloc.

Prime Minister Theresa May, who has been in her job for less than two weeks, travelled to Germany and France last week to explain why she needed time to come up with an exit strategy.

The EU's top economic official, Pierre Moscovici, said the bloc understood that Britain should not be rushed but "at the same time...let's not waste time, let's not have too much uncertainty, let's act and choose as swiftly as possible."

Hammond told reporters on Sunday the two-year negotiating period, once launched, represented "quite a tight timescale" and Britain needed to go into it with clear objectives. "We have to do that before the start of the process because when we serve that notice, we need to hit the ground running," he said.

But Hammond also showed he was aware of the need for some clarity on Brexit: "What will start to reduce uncertainty is when we are able to set out more clearly the kind of arrangement we envisage going forward with the European Union."

"If our European Union partners respond to such a vision positively — obviously it will be subject to negotiation — so that there is a sense perhaps later this year that we are all on the same page in terms of where we expect to be going, I think that will send a reassuring signal to the business community and to markets," Hammond said.

May has said she does not plan to launch the formal negotiation period this year. It remains to be seen if other EU countries would enter informal talks with Britain before the formal negotiations, something they have previously ruled out.

Gov’t, Bank of England have to be ready

Financial markets have stabilised after the initial shock of the referendum result which saw the value of the pound plunge by more than 10 per cent and trillions of dollars wiped off stock markets worldwide. But economists are expecting Britain to fall into a recession, according to a Reuters poll.

Hammond said he did not think that a survey of British businesses published on Friday, which showed the sharpest fall on record in a purchasing managers index, was a sign that the economy was in already in a recession.

"What it does is underscore the hit to confidence," he said.

Hammond warned that Brexit-related volatility in markets would be a risk throughout the two-year negotiation period.

"We have to be ready as government, the Bank of England [BoE] has to be ready as monetary authority, throughout that period to respond to any instability created by that uncertainty and to ensure that the economy continues to operate smoothly," he said.

The BoE is expected to cut interest rates and possibly announce more stimulus measures on August 4. Hammond has said he could ease fiscal policy in the autumn if more help is needed.

Asked about a comment he made on Friday, that he might "reset" fiscal policy to cope with the Brexit fallout, Hammond said Britain's still high levels of debt meant it needed a new framework on its public finances to give clarity to markets.

"What that framework will look like will depend on the decisions we make about whether or not any fiscal stimulus is required on the basis of the data we will by then have available," he said.

DOHA — Qatar said on Thursday it would give $30 million to help pay the salaries of thousands of Gaza Strip public sector workers left without a full wage package since 2013.

The donation was welcomed by Hamas, the Islamist group that dominates the enclave who said it would help ease the wage shortages — that have tested already strained relations with the US-backed Palestinian Authority, based in the West Bank.

There was no immediate comment from Palestinian Authority or Israel, who have long been suspicious of Qatar's regular donations to Hamas and other Islamist groups across the region.

The emir of the wealthy Gulf state, Sheikh Tamim Bin Hamad Al Thani, said the payment of 113 million riyals was meant to "alleviate suffering and financial distress", according to Qatar's state news agency, QNA.

Hamas fighters seized control of Gaza in 2007 from forces loyal to Western-backed President Mahmoud Abbas and his Palestinian Authority, triggering years of mutual distrust.

A reconciliation pact signed in 2014 by the two sides raised hopes among Hamas that its 50,000 public sector employees' wages would be taken care of via the Palestinian Authority (PA) payroll.

But the Palestinian Authority cannot afford to pay all those extra workers, and international donors who support the PA budget, including the European Union, say they want an audit of workers and cutbacks to the bloated payroll, which costs more than $2 billion a year.

The Hamas-hired public servants have grown restive and in 2014 protested over their lack of payment which is partly due to a continued blockade imposed on Gaza by both Israel and Egypt.

"The July payment will be made in full immediately once the Qatari financial fund is received," Youssef Al Kayyali,  Hamas' deputy finance minister said.

Qatar, which hosts the largest US air base in the Middle East, has for years preserved influence with Islamist forces across the region it believes are the long-term future.

The breadth and resilience of Qatar's links to Islamist groups including Egypt's Muslim Brotherhood, which has suffered a crackdown in the aftermath of the Arab Spring, fuels suspicions in other Gulf states.

LONDON — Last week's deadly attack in Nice and attempted coup in Turkey have created fresh turmoil for European airlines already grappling with the fallout of "Brexit", with easyJet saying it was unable to give an earnings forecast and Lufthansa warning on profit.

EasyJet, Europe's No. 2 low-cost carrier behind Ryanair, has in the past given a forecast profit range for the 12 months ended September 30 at this time of the year, but said on Thursday security worries, weaker consumer confidence and currency volatility were all dragging on its peak summer season.

Lufthansa said late Wednesday its core earnings for 2016 would be below last year's, downgrading its previous forecast.

The German airline blamed repeated attacks in Europe which have dampened advance bookings for long-haul travel to the continent, plus what it called greater political and economic uncertainty since March.

Shares in Lufthansa slumped 7.5 per cent on Thursday, while those of Britain-based easyJet were down 6 per cent.

While Lufthansa did not refer to specifics, easyJet said last week's truck attack in Nice, France, that killed 84 people, and a failed coup in Turkey, would affect its fiscal fourth quarter, though it couldn't say by how much.

Asked whether this was the most difficult operating environment easyJet had faced since she took the helm in 2010, Chief Executive Carolyn McCall said: "Definitely. I think that will be true for all airlines over the last ten years. The reason for it is there are so many different things."

She also cited Britain's vote last month to leave the European Union, plus easyJet's high level of cancelled flights due to air traffic strikes in France.

The "Brexit" vote has caused the value of the pound to fall by about 10 per cent, making it more expensive for Britons to travel abroad, and prompted consumer uncertainty. Britain is easyJet's biggest single market.

Turbulent times 

Many European airlines have seen a hit to demand from a string of deadly attacks in Europe, including one last November that killed 130 people in Paris, as well as attacks in popular holiday destinations for Europeans such as Tunisia and Egypt.

In June, after the Brexit vote, British Airways-owner IAG also warned on profit.

Analysts currently expect easyJet's pretax profit for the year ending September 30 will drop 14 per cent to £592 million, according to the average of forecasts.

The company's bigger rival, Ryanair has this year also seen bookings dampened by security concerns, but at its last update in May, it was still expecting profit growth of 13 per cent for the year ending March 2017.

Ryanair has proportionately less exposure than easyJet to both France and Britain.

EasyJet also faces longer term concerns over its reliance on the EU set-up to fly the routes it does, whereas Ryanair is based in Ireland, which remains part of the EU.

Ryanair will report first-quarter earnings on July 25.

Since the Brexit vote on June 23, easyJet shares have lost a third of their value, while Ryanair's are down 17 per cent.

Delta Air Lines Inc.'s decision to sell fewer seats from the United Kingdom this winter also highlights the threat Brexit and new airline competition pose to US airlines, which have raked in cash from transatlantic flights.

The HAGUE — Dutch retail giant Ahold said Thursday it expected a mega-merger with Belgian rival Delhaize to be completed by Saturday, pending approval from US regulatory authorities.

“Ahold and Delhaize announce that they expect to complete their intended merger on July 23, 2016, if regulatory clearance has been obtained from the United States Federal Trade Commission by that date,” Ahold said in a statement.

“Subject to the completion of the merger... Ahold Delhaize is expected to start trading on Euronext Amsterdam on Monday, July 25,” it added.

Based in Zaandam just outside Amsterdam, Ahold announced in June last year it was merging with Delhaize to create one of the world’s largest retail companies with a turnover of more than 54 billion euros ($59 billion).

It agreed last week to sell 86 US-based stores to receive approval from competition authorities.

Analysts have said the merger with Delhaize will give rise to the fifth-largest distributor in the fiercely contested US market and the fourth-largest in Europe.

The two groups see themselves as complementary in the US market, where Ahold present mostly the northeast with its Stop&Shop, while Delhaize’s Food Lion is prevalent in the southeast.

In Europe, the two companies seldom overlap in the Netherlands and Belgium.

DUBAI, United Arab Emirates — State-owned Saudi Aramco says it has signed a deal for a new gas project that will be worth more than 50 billion Saudi riyals ($13.3 billion) when complete in 2019, aimed at meeting the kingdom's growing domestic demand for energy.

The company on Wednesday said the project will help lessen dependence on oil for power generation and will accommodate 4,500 training, temporary and permanent jobs for Saudis. The Fadhili project will process gas from onshore and offshore fields.

Highlighting the deal, Saudi Aramco President and CEO Amin Nasser said: “Saudi Aramco’s multi-billion dollar investment in Fadhili will considerably increase the share of gas in the Kingdom’s energy mix and fits in with our long term strategy to lower emissions,” according to the company’s website.  

A training centre is expected to be established at the project’s area, in collaboration with governmental agencies focused on human resource development. Al Fadhili training programme, to be set up in partnership with project contractors, will provide Saudi nationals with opportunities to gain work experience and technical skills. 

The Fadhili project will increase Saudi Arabia’s natural gas production to 17 billion standard cubic feet per day by 2020, in line with the country's National Transformation Plan, according to the company’s website.

The plan, released in June, aims to wean the Saudi economy off its dependence on oil, according to the Saudi government.  

Its goals include creating more than 450,000 jobs outside the government sector by 2020, having the private sector fund 40 per cent of projects during the period, so as reduce the financial pressure on the state

It also seeks to increase goods and services produced locally so as to reduce imports and create more job opportunities. 

 The company said the deal was signed on Wednesday with India's Larsen & Toubro, Saudi KAD, Saudi Electricity Company and France's Engie.

Saudi Aramco is also exploring future opportunities of environmental significance at Fadhili, which may include a helium recovery plant and a CO2 recovery unit to reduce emissions.

GENEVA — The United States is worried that China is retreating from pledges to open its economy to market forces as it tries to cope with a slowdown in growth, US trade diplomat Chris Wilson told the World Trade Organisation (WTO) on Tuesday.

China is undergoing a regular two-yearly review of its trade policies at the WTO this week, in which the body's other 162 members get to quiz its officials and critique its policies.

Wilson, the deputy chief of the US mission to the WTO, said China's leaders had endorsed a number of far-reaching reform pronouncements, including that the market would be "decisive" in allocating resources, and it was clear that serious efforts were being made.

"Over the past year, however, as growth in China's economy has slowed, the United States has sensed an increasing reluctance among China's economic planners to pursue further reforms," he said, according to a published transcript.

"In addition, more and more US enterprises have been expressing concern about a less welcoming business and regulatory environment for foreign enterprises."

The United States hoped the developments were temporary and China would aim for a more transparent, predictable and welcoming regulatory environment, but that this would be impossible as long as the state supported and favoured domestic industries, Wilson said.

China's support for its bloated steel and aluminium industries clearly showed that state intervention would never be as efficient as the market, he said.

Other US concerns included quotas and duties on China's raw material exports, manipulated value-added tax rebates on exports, thin agricultural imports despite strong demand, and prohibitions on foreign investment in China's movie market, the world's second-biggest.

Wilson was speaking less than a week after the United States launched a WTO complaint to challenge China's export duties on key metals and minerals.

That complaint was expanded on Monday when the European Union joined the legal action against China.

Washington and Brussels have also clashed with Beijing over China's demand to be treated as a market economy at the WTO, which would make it harder to challenge China's cheap exports.

Another concern cited by Wilson was the "Made in China 2025" initiative, which aims to ensure Chinese-made components and materials account for 70 per cent of China's manufacturing inputs by 2025.

So-called "local content requirements" have become a hot issue at the WTO, where they are closely scrutinised in case they are used to illegally promote domestic firms at the expense of foreign suppliers. 

JAKARTA — Rising temperatures caused by climate change may cost the world economy over $2 trillion in lost productivity by 2030 as hot weather makes it unbearable to work in some parts of the world, according to UN research published on Tuesday.

It showed that in Southeast Asia alone, up to 20 per cent of annual work hours may already be lost in jobs with exposure to extreme heat with the figures set to double by 2050 as the effects of climate change deepen.

Across the globe, 43 countries will see a fall in their gross domestic product (GDP) due to reduced productivity, the majority of them in Asia including Indonesia, Malaysia, China, India and Bangladesh, researcher Tord Kjellstrom said.

Indonesia and Thailand could see their GDP reduced by 6 per cent in 2030, while in China GDP could be reduced by 0.8 per cent and in India by 3.2 per cent.

"Current climate conditions in tropical and subtropical parts of the world are already so hot during the hot seasons that occupational health effects occur and work capacity for many people is affected," said Kjellstrom, a director at the New Zealand-based Health and Environment International Trust.

He said the increasing need for rest "is likely to become a significant problem" as climate change makes the hottest days hotter and leads to longer periods of excessively hot days.

Kjellstrom authored one of six papers on the impact of climate change on health that were put together by the United Nations University's International Institute for Global Health in Kuala Lumpur and published in the Asia Pacific Journal of Public Health.

Kjellstrom warned that the lowest-paid workers — those in heavy labour, agricultural and manufacturing — were most at risk of exposure to extreme heat.

He urged countries to take "decisive action" to tackle global warming.

"Failure will cause the frequency and intensity of disasters to worsen dramatically beyond 2050, and the situation at the end of this century will be especially alarming for the world's poorest people," the researcher said.

The other papers in the series showed around 2.1 million people worldwide died between 1980 and 2012 due to nearly 21,000 natural catastrophes such as floods, mudslides, extreme heat, drought, high winds or fires.

In Asia Pacific, 1.2 billon people have been affected by 1,215 disasters — mostly flood, cyclones and landslides — since 2000.

In April, 175 countries signed a Paris climate deal to restrain the global rise in temperatures to "well below" 2oC above pre-industrial levels.

The first three months of 2016 have broken temperature records and 2015 was the planet's warmest year since records began in the 19th century.