Business

TUNIS — Tunisia's parliament approved on Saturday a long delayed law to attract foreign investment, which fell sharply after the uprising in 2011, in a key reform demanded by international lenders.

Initially expected for approval in 2012, the law was held back by party political conflicts and the change of governments during Tunisia's often turbulent transition to democracy after the ouster of Zine El Abidine Ben Ali.

The new law gives foreign investors more flexibility to transfer funds, including profits, out of the country, and removes tax on profits of major projects for 10 years.

It also establishes a fund for investment which will help finance infrastructure projects and funding to spur investors to launch big projects in marginalised areas of the country.

Foreign direct investment has been slow since the January 2011 revolt against Tunisia's leader Ben Ali, which marked the start of a period of upheaval, including political and social unrest and attacks by Islamist militants.

Tunisia's foreign investment fell from 3.5 billion Tunisian dinars ($1.58 billion) in 2010 to 2 billion dinars ($904 million) in 2015.

The investment law creates a high Investment Authority which will be the only party authorised to deal with foreign investors and facilitate the administrative procedures in an effort to get rid of the bureaucracy which faced projects in the past.

The North African state will host an international conference in November, offering incentives to draw in new investors to projects in Tunisia.

The investment law is just one of a raft of reforms and public spending adjustments the International Monetary Fund and the World Bank are demanding Tunisia carry out to help overhaul its subsidy-heavy economy and create growth and jobs.

AMMAN — A Jordanian delegation representing the trade and industry sectors and the Greater Amman Municipality has recently held talks in Germany focusing on boosting bilateral commercial relations.

The Jordanian delegation, headed by Amman Chamber of Commerce (ACC) President Issa Murad, held bilateral talks at the chambers of industry and trade in Berlin and Hanover, and also at the Arab-German Chamber of Commerce and Industry, according to an ACC statement. 

Meetings on economic cooperation were also held with the Arab-German parliamentary relations committee of the German parliament and with the Euro-Mediterranean-Arab Association. 

During the meetings, the Jordanian delegates briefed their German counterparts on the economic opportunities and the investment incentives that Jordan offers to investors. 

Murad said Germany is one of Jordan’s “top strategic partners", especially in the fields of trade, agriculture, education, renewable energy and tourism. 

In 2015, the Kingdom's exports to the European country stood at JD7 million, compared to JD668 million of imports from Germany, the statement said, adding that exports consist of foodstuff, chemicals, minerals, agricultural products and different machines and equipment in particular. 

WASHINGTON — Middle East economies have plunged into decline in the years of war since the Arab Spring, creating daunting economic and development challenges, according to an International Monetary Fund (IMF) report released Friday.

Nose-diving growth, soaring fiscal imbalances and decimated labour markets across the region call for newly concerted efforts from donor countries and coordination among humanitarian aid groups and development bodies, said the report, released ahead of a United Nations summit on the refugee crisis.

IMF Managing Director Christine Lagarde said that, while the world's attention had been drawn to the humanitarian impact of wars, economic disasters were also unfolding.

"Much of the productive capital in conflict zones has been destroyed, personal wealth and income losses are enormous, and human capital deteriorates with the lack of jobs and education," she wrote in a blog post accompanying the report.

The UN General Assembly on Monday is due to hold a high-level summit to coordinate international responses to the refugee and migration crisis.

The IMF report followed Thursday's release of World Bank research which said the burden of large numbers of refugees and displaced persons was largely borne on the shoulders of poor countries, a fact that likewise called for coordination between humanitarian and development aid policies.

"To varying degrees, these countries face large numbers of refugees, weak confidence and security and declining social cohesion that undermines the quality of institutions and their ability to undertake much-needed economic reforms," the IMF report said.

In a sobering analysis, it laid out the economic costs of war for countries both plagued by conflict or bordering countries that are. 

After four years of civil war, Syria's GDP has fallen by more than half. 

Yemen's economy contracted by 25-35 per cent last year alone.

Libya saw economic activity fall by 24 per cent in 2014.

War damage to Syria's physical capital amounts to $137.8 billion, or 230 per cent of pre-war GDP, the report said, and, with 470,000 killed, 6.6 million displaced and 5 million having fled, the country has lost about 50 per cent of its population.

The strains on governance, state revenues and state institutions such as central banks are profound: preliminary data indicate that Yemen, for example, missed its 2015 revenue targets by as much as 60 per cent. 

The policy temptations for governments in such situations can also be harmful: pressed by dwindling revenues, states can be tempted to control exchange rates, and bias rules and taxation in favour of friends and against foes.

The IMF report said that war-struck countries can also struggle with high inflation even as government spending collapses.

Meanwhile, public services deteriorate, with even neighbouring countries heavily impacted.

Lebanon, for example, has enrolled half the Syrian refugee population's children in its schools, swelling classroom sizes and reducing the quality of education.

All of this called for change, the report said: more humanitarian aid but also a joining of forces between relief work and development assistance. In the near-term, funding has not kept pace with needs as UN agencies have had cut services to the refugee populations in Jordan. 

But preventing poverty from rising in host countries is a pressing need, according to the report, and this requires investing in public infrastructure to create economic opportunities for the populations of the region.

If and when peace comes, reconstruction will require "sizable financing" largely surpassing damaged and indebted countries' ability to collect revenues.

BENGHAZI, Libya — Forces loyal to eastern Libyan commander Khalifa Haftar on Sunday seized at least two key oil ports from a rival force loyal to the UN-backed government, risking a new conflict over the OPEC nation’s resources.

Ahmed Al Masmari, a spokesman for Haftar’s self-styled Libyan National Army (LNA), said LNA fighters seized control of Es Sider, Ras Lanuf and Brega, but still faced resistance at the port of Zueitina and around the nearby town of Ajdabiya.

The attacks on Libya’s major oil ports by Haftar, who opposes the UN-backed Government of National Accord (GNA), pushes the North African state towards a broader battle over its oil resources and disrupts attempts to restart production.

Armed conflict, political disputes and militant attacks have reduced Libya’s oil production to about 200,000 barrels per day (bpd) from 1.6 million bpd it was producing before an uprising and fall of Muammar Qadhafi in 2011.

Haftar, a former army general who has been a divisive figure in Libya since Qadhafi was toppled, has resisted attempts to integrate him into a unified armed forces and overcome divisions between the east and west regions.

Many in western Libya and Tripoli criticise Haftar as a former Qadhafi ally bent on establishing a military dictatorship, but he has become a political figurehead for many in the east who feel abandoned by the capital.

The state-run National Oil Corporation confirmed Ras Lanuf and Es Sider were under full control of Haftar forces while Zueitina was still held by loyalist forces.

Export questions

The attacks complicate Western attempts to bring together Libya’s rival armed factions under the GNA and stabilise a country where chaos allowed militants and migrant smugglers to operate across swathes of territory.

Control by Haftar’s brigades will also raise questions for the market about the legality of crude exports by a force opposed to the internationally recognised government in Tripoli.

A government and parliament based in the east still resist the GNA’s authority in Tripoli and they have in the past threatened to try to sell crude themselves.

The ports targeted by the LNA were previously under the control of the Petrol Facilities Guard (PFG), which struck a deal with the GNA in July to end its blockade of Ras Lanuf, Es Sider and Zueitina.

A port engineer confirmed that Haftar’s forces had entered Ras Lanuf and Es Sider, Libya’s largest, and said a tank at Es Sider had been set alight in the clashes. The NOC said the blaze was in a small fuel tank for power generation.

The LNA’s claims of control could not immediately be verified and Ali Al Hassi, a PFG spokesman, said fighting was continuing at Ras Lanuf.

In recent weeks, as the PFG struck its deal with the GNA to try to restart exports, the LNA mobilised in the area leading to fears of a struggle for control.

Libya’s National Oil Corporation has been removing oil stored at Zueitina because of fears it could be lost during any clashes.

Ras Lanuf and Es Sider were badly damaged earlier this year in attacks by the Daesh terror group militants based in Sirte, where they are currently on the verge of defeat by forces aligned with the GNA backed by US air strikes. 

AMMAN — A Korean trade delegation, from Jeonbuk city, met last week with representatives of Jordanian companies and discussed ways to boost business cooperation, in the presence of Korean Ambassador to Jordan Lee Bom-yon.

The visiting delegation included representatives of 10 companies specialised in manufacturing and exporting various industrial and medical equipment.

The visit was organised by Korea Business Centre in Amman (KOTRA), the commercial office of the embassy of the Republic of Korea.

The meetings are aimed at building business partnerships and creating deals to strengthen economic and investment relations between the two countries, a KOTRA statement said.

The delegation’s visit to Jordan coincided with the recent launch of the “Jordan-Korea Business Council”. 

AMMAN — Kazakh officials agreed to the establishment of a factory for Hikma Pharmaceuticals in the central Asian country with a starting capital of $150 million, Deputy Prime Minister for Economic Affairs and Minister of Industry, Trade and Supply Jawad Anani said on Saturday.

In a statement following the Jordanian-Kazakh Joint Committee’s fourth meeting that concluded in Astana on Thursday, Anani said this is an important step for Jordanian pharmaceuticals to penetrate the Kazakh market and other neighbouring markets, the Jordan News Agency, Petra, reported.

Both sides also agreed to examine the possibility of establishing an air shipping company to increase the commercial exchange volume, and the possibility to export to nearby markets.

At the meetings, Anani said Jordan attaches great importance to economic and trade cooperation with Kazakhstan and he urged the private sector in Amman and Astana to benefit from the “distinguished bilateral ties” between them. 

ALGIERS — Algeria’s energy minister says there is a consensus among OPEC and non-OPEC members about the need to stabilise the oil market to support prices, state news agency APS reported.

Noureddine Bouterfa was speaking after meeting his Saudi counterpart Khalid Al Falih and OPEC Secretary-General Mohammed Barkindo in Paris late on Friday.

Bouterfa has travelled to Qatar, Iran and Russia this week to push for stabilising the oil price between $50 and $60, and said he was “confident” about the outcome of an OPEC meeting, scheduled to be held in Algiers on September 26.

Bouterfa said Algeria would submit a proposal to steady prices at the meeting. “Our discussions with our partners show that there is a consensus around the necessity of stabilising the market. That is already something positive,” Bouterfa said.

“We are in contact with the members and the secretary-general of OPEC and that is part of this work of achieving a consensus and I am optimistic.”

“There is support from Saudi Arabia, Qatar, Iran, Venezuela, Kuwait and from non-OPEC countries, notably Russia.”

Algeria is hosting a meeting of the International Energy Forum alongside the OPEC meeting later this month, and Bouterfa said he had discussed both sessions with Falih and Barkindo in Paris.

Algeria is among the oil producers to have taken a heavy hit from the halving of oil prices over the past two years.

Moves towards clinching a global deal on stabilising crude output come five months after talks for such a deal failed when Saudi Arabia insisted Iran join the pact.

Tehran says it supports any measures to stabilise the market, but it has stopped short of indicating whether it would join a global deal before its production reaches 4 million barrels per day, the level at which it says it was pumping before the imposition of Western sanctions in 2012. 

AMMAN — Jordan and Kazakhstan agreed on Thursday to boost their cooperation in the field of renewable energy through increasing expertise exchange and working together on capacity building. 

The agreement was stipulated in the minutes of the Joint Committee’s fourth meeting, signed by Deputy Prime Minister for Economic Affairs and Minister of Industry, Trade and Supply Jawad Anani and Kazakh Deputy Prime Minister and Agriculture Minister Askar Mirzahmetov. 

Both countries also agreed to increase their cooperation in the areas of small- and medium-scale enterprises, agriculture, education, science, health and culture, according to the Jordan News Agency, Petra.

Anani said Jordan attaches great importance to economic and trade cooperation with Kazakhstan, stressing that the agreements signed will be implemented right away to serve the interests of the two countries and to bolster economic collaboration. 

He urged the private sector in Jordan and Kazakhstan to benefit from the “distinguished bilateral ties”, as well as the agreements that have been signed. 

Mirzahmetov said the committee’s meetings highlighted the possibility of cooperation in several important areas in a number of sectors, including health, education, industry and trade. 

He noted that the two countries have a mutual interest in cooperating in agricultural and commercial areas, in particular.

ALGIERS — Algeria’s energy minister will meet his Saudi counterpart and OPEC’s secretary-general in Paris on Friday as part of moves towards clinching a global deal on stabilising crude output to support oil prices, an Algerian official and OPEC sources said.

Algeria will host the informal meeting with Saudi Energy Minister Khalid Al Falih and OPEC’s Mohammed Barkindo, said the Algerian official, who asked not to be identified.

A source at the Organisation of the Petroleum Exporting Countries confirmed the meeting as part of a push for an output deal, with producers battered by a glut-induced halving of oil prices over the past two years.

“There is a strong move towards a deal between OPEC and non-OPEC to at least freeze production,” the source told Reuters.

“It seems we are going in this direction. But if we are going to freeze, we have to use secondary sources to gauge production levels. We can’t allow each country to use a different method,” the source said.

“Iran must agree to be in line with other producers and use secondary sources.”

Tehran says it supports any measures to stabilise the market. However, it has stopped short of indicating whether it would join a global deal before its production reaches 4 million barrels per day (bpd), the level at which it says it was pumping before the imposition of Western sanctions in 2012.

The sanctions ended in January this year.

Iran has been the main factor preventing an output deal between OPEC and non-OPEC Russia as Tehran has said it should be excluded from any such agreement before its production recovers.

The OPEC source said Iran’s production before sanctions had never exceeded 3.75 million bpd according to secondary sources, which include consultants and industry media that estimate output independently.

Iran has said it is producing slightly more than 3.8 million bpd. It signalled on Tuesday it was prepared to work with Saudi Arabia and Russia to prop up prices, although Tehran has begun to bargain with OPEC on possible exemptions from any output cap.

The OPEC source said major oil producers were trying to convince Tehran to come onboard, adding there was an initial understanding that only Libya could be offered an exemption.

“Now there is a push to smooth things out and solve any problem,” the OPEC source said, adding there had been no agreement yet on any level at which to freeze production.

“This will be discussed in Algeria,” the source said.

Algeria is hosting meetings of the International Energy Forum and OPEC on September 26-28. Energy Minister Noureddine Bouterfa travelled to Moscow on Thursday, following recent trips to Qatar and Iran.

OPEC and Russia are expected to revive talks for a global deal on production in Algeria. A similar initiative failed in April after Saudi Arabia insisted Iran join the pact.

DUBAI/RIYADH — The Saudi Arabian government has ended talks aimed at saving construction giant Saudi Oger, which is now facing the prospect of a multi-billion-dollar debt restructuring to stave off collapse, according to sources aware of the matter.

Oger, owned by the family of former Lebanese prime minister Saad Hariri, was one of two mega-contractors charged with implementing the grand infrastructure and development plans of the kingdom, building everything from defence installations to schools and hospitals.

The fall in oil prices since mid-2014, and the consequent sharp state spending cuts, have weighed heavily on the kingdom’s construction industry but in particular Oger, given its size and reliance on government contracts.

The numbers are stark: the government owes Oger about 30 billion riyals ($8 billion) for work it has completed, according to a Saudi-based source with knowledge of the matter, in a sign of the strain on state finances.

This huge backlog of payments has left Oger struggling to meet its obligations, including 15 billion riyals of loans, billions of riyals owed to contractors and suppliers, and 2.5 billion riyals to workers in back and severance pay, according to the source and a second Saudi-based source.

Oger and the Saudi finance ministry both did not respond to requests for comment for this story.

The sources declined to be named due to the sensitivity of the matter.

It is unclear why Riyadh might have ended the talks aimed at saving a company whose collapse would send shockwaves through the Saudi banking system and wider economy.

The 15 billion riyals of loans equate to around two-thirds of the combined profits of all Saudi banks in the first half of 2016 — though the lenders’ strong capital positions and low levels of non-performing loans would mean writing off this debt would not threaten the system.

A collapse of Oger could also trigger a wave of defaults among its huge network of sub-contractors and suppliers, which are also Oger creditors.

The humanitarian aspect of the company’s woes is perhaps most pressing: Oger’s pay backlog is affecting thousands of workers from South Asia contracted by the firm, many of whom have been left in desert camps. Several camps had stopped receiving food, electricity, maintenance and medical services from the firm, workers told Reuters last month.

Options discarded

Oger has had close links with Saudi authorities since it was established in 1978 by Hariri’s father Rafiq, a former Lebanese premier whose strong ties to the Saudi royal family helped make it the go-to construction firm for key projects, along with Saudi Binladin Group.

The decline in oil prices has changed this arrangement, with Saudi Arabia delaying infrastructure projects and payments for existing work: a development which has also caused Binladin severe financial difficulty.

One mid-level Oger manager said the ministry of finance had not made payments on his multi-billion-riyal government project for nearly a year.

In total, according to the first Saudi-based source, Oger is owed 10 billion riyals which the government has already approved payment of, but for which the money has not been transferred, and more than 20 billion riyals for work completed and subsequently billed to the state.

The situation facing Oger — one of the kingdom’s largest private-sector firms — reflects the complex and entrenched role the government plays in the economy, with problems partly caused by one part of the state apparatus being addressed by another.

Talks between the company and Saudi authorities to find a solution to Oger’s financial problems have been taking place this year, though the exact start date is unclear.

The discussions had explored and then discarded a number of options, including the government buying into the company and the sale of real estate assets or a stake in Oger to Nesma, another Saudi construction firm, according to the sources plus two other banking and industry sources.

It was not clear why the options were rejected and whether the decision was driven by Oger or Riyadh.

The first Saudi-based source said the last plan on the table had been for Oger to sell investments such as Oger Telecom — which owns majority stakes in Turk Telecom and South African operator Cell C — and a 20 per cent holding in Jordan’s Arab Bank, with Saudi state-linked entities likely buyers.

However, around the time of the holy month of Ramadan, Oger was informed by the government it was ending all negotiations, according to the first two Saudi-based sources. Ramadan lasted a month up to July 6.

No reason was given for why the government walked away, and some sources said there was still belief among creditors the state was open to further negotiations.

However, the government had been “aggressive” in its negotiations with Oger, according to one banking source, which would make striking a deal much harder if they returned with the same approach.

The relationship between Riyadh and the Hariris, and also the kingdom and Lebanon, is not as close as it was. The political deadlock in Beirut has allowed the Hizbollah political and militia movement — which is backed by Saudi Arabia’s arch-rival Iran — to wield increasing influence in the country.

Anxious creditors

While a deal may still be possible, the attention of company executives and creditors is increasingly switching to how the company can save itself, with sources indicating a debt restructuring seems the only viable option.

Should it go down this route, it is likely to appoint advisers and ask banks for a standstill agreement — which would protect it from new legal action to allow for debt talks to take place — later this year, according to the two Saudi-based sources.

Creditors are becoming increasingly anxious though.

Samba Financial Group in July became the first lender to seek a court judgement against Oger to reclaim its dues, according to the second Saudi source.

It has the second-largest exposure to Oger among lenders behind National Commercial Bank, according to the source and a separate banking source.

Samba did not respond to requests for comment.

Much of Oger’s bank debt is held by Saudi banks, although Lebanese, Gulf and international banks are also exposed — mostly through a $1.03 billion loan that is due to mature in February.

The move by Samba could precipitate further legal claims against Oger from banks, according to industry and banking sources, although laws governing companies in distress in the kingdom are opaque and largely untested, making enforcing such court actions tricky.

The only real precedents for Oger would be the debt woes of conglomerates Saad Group and Ahmad Hamad Al Gosaibi and Brothers (AHAB). In that case, bank creditors secured court judgements recognising their claims but a negotiated solution is still to be secured, more than seven years after the initial default.

Any Oger debt restructuring though would dwarf those of Saad and AHAB in magnitude, said the second Saudi-based source.

Despite its complexities, bank creditors would likely accept a formal restructuring process instead of forcing Oger’s liquidation, said banking and industry sources.