Business

WASHINGTON — Wars and depressed crude oil prices have diminished growth prospects for the Middle East and central Asia, and private sector productivity gains are needed to avoid a "new mediocre" for the region, the International Monetary Fund (IMF) said on Tuesday.

In a new paper, the IMF indicated that all emerging markets are facing diminished growth prospects over the next five years, but those of the Middle East and central Asian countries are expected to be 1.25 percentage points below the emerging market and developing country average.

Six years after the Arab Spring movement promised more economic inclusiveness and higher living standards, much of the Middle East remains mired in conflict, weighing on economic activity across the region as millions of refugees flee, IMF Middle East Director Masood Ahmed said in the document.

"At the same time, the new 'lower for longer' oil price reality has dampened oil-exporting countries' longer-term growth prospects and rendered their oil-centred economic growth models untenable," Masood added.

The region's oil exporters are being forced to cut spending and shrink bloated public sector employment that had been fueled by oil revenues, weighing on living standards and growth prospects, the IMF continued.

In the paper, it called for fostering a more competitive business environment to boost productivity growth, including streamlined regulations and tax codes, and reduced dominance for state-owned enterprises.

It stressed that boosting worker education, skills and professional networks is also critical for raising productivity. 

The paper suggests that the region's countries can leverage "extensive and potent" diaspora networks to help improve productivity by conveying global business knowledge and expertise and helping to raise funds for training and education.

Improving the quality of education by working with the private sector to develop a curriculum focused on the skills needed for private sector jobs can also help close the gap in worker’s talent.

The IMF said financial market development was also vital for accumulating capital — and the region had fallen behind its global peers. Easing access to finance can help develop small and medium enterprises and ensuring adequate protection of legal rights can help raise growth.

Closing gaps with global peers in regulation, education and financial market development could help lift potential growth by 1.5 percentage points in the Gulf Cooperation Council countries, by one percentage point in the Caucuses and Central Asian countries.

But the paper noted that security and stability are a precondition for such reforms to succeed.

AMMAN — The Russian-Jordanian Business Forum and the Eighth Joint Session of the Russian-Jordanian Business Council started on Monday at the headquarters of the Jordan Chamber of Commerce (JCC), and will continue until Wednesday.

During the opening session, JCC President Nael Kabariti and co-chairman of the Russian-Jordanian Business Council said that despite the Kingdom's enormous capabilities, especially with regard to agricultural products,  Jordan's trade with Russia is still small, adding that economic relations are not as strong as political ones.

He voiced hope that commercial relations and trade exchange will grow among big companies in both countries.

"Jordan is one of the best countries when it comes to tourism since it has many religious and archaeological tourist sites," Kabariti said, noting that the tourism sector should be emphasised and discussed in future meetings since it can help stimulate the economy.

Co-Chairman of the Russian-Jordanian Business Council Evgeniy G. Novistskiy said that since its establishment 10 years ago, the council completed many works and projects. 

Noting that the council has a website that connects the two countries, he added that Jordanians can access information about companies registered at the council. 

Although businesspeople from both countries conduct visits and there are around 150 companies registered at the business council, no one can claim that commercial exchange is huge, according to Novistskiy. 

He said that with the help of Russian Agriculture Minister Alexander Tkachyov,  who was attending the forum, economic and commercial exchange can grow. 

Moreover, he noted that the annual Russian Industrial Exhibition will not be held this year, but hopefully it will be in coming years.

Jordan Ambassador to Russia Zaid Al Majali said that His Majesty King Abdullah and Russian President Vladimir Putin always discussed economic relations immediately after political issues. 

He said the tourism sector should be looked at not only with regard to investment and economy but as a cultural dimension, because introducing two cultures to each other increases interactions between them and therefore increases commercial exchange. 

The private sector and the government are exerting effort to remove obstacles facing commercial exchange and help increase the figures once again, Majali said.

Deputising for the Russian Ambassador to Jordan Boris Bolotin, Oleg Levin, a counsellor at the embassy, referred to His Majesty's visits to Russia and the good political relations that started since the time of late King Hussein. 

He said that in October last year, chairwoman of the Russian Federation Council Valentina Matviyenko visited the Kingdom and in May this year, Senate President Faisal Fayez is scheduled to conduct an official visit to Russia. 

According to the Department of Statistics, the trade balance between Jordan and Russia stood at $740.90 million in 2015 whereas in 2014 it stood at $267.84 million. 

Most important Jordanian products exported to Russia include vegetables, chocolate, medicine and cleaning materials whereas the most important imports include wood, paper, cars and car parts, according to the JCC.

The Russian-Jordanian Business Forum is part of the Third Session of the Russian-Jordanian Intergovernmental Commission for Trade and Economic, Scientific and Technological Cooperation Development and it is attended by businesspeople representing Russia and Jordan.

AMMAN — Jordan Chamber on Industry (JCI) President Adnan Abul Ragheb on Monday commended a Cabinet decision issued Sunday to provide national industries with natural gas, saying the decision will have a positive impact on production costs and competitiveness.

He described the decision as an important step towards preparing the national industries in the future to use natural gas in all forms should it be available at competitive prices in the local market.

Abul Ragheb called for exempting natural gas from all taxes in order to have industrialists shift to this power supply, noting that the Council of Ministers in January exempted this energy resource from a 30 per cent customs fee and imposed a 16 per cent special sales tax.

The Council of Ministers tasked a steering committee with following up on the implementation of this decision and identifying priorities for providing gas based on available infrastructure at targeted factories.

Energy Minister Ibrahim Saif said Sunday that the plants requiring natural gas will be connected to the network of the Jordanian Egyptian FAJR Company, which is responsible for transporting natural gas.

Also on Monday, the Jordan Exporters Association (JEA) praised the decision which, it said, would lower production costs and increase the sector's competitiveness.

JEA President Omar Abu Wishah said that factories' dependence on the natural gas, instead of the heavy fuel, would contribute to decreasing the power bill which constitutes 25 per cent of the Kingdom's total imports.

Abu Wishah noted that many factories prepared their infrastructure within the past few years and imported necessary equipment to rely on the natural gas in their production.

He also added the decision will boost the national industries' competitiveness in local and external markets through lowering production costs, especially that energy prices have direct impact on the value of all other production inputs.

AMMAN — Amman Chamber of Commerce (ACC) President Issa Murad agreed with President of the Paphos Chamber of Commerce and Industry (PCCI) Andreas Demetriades to draw a joint action plan to enhance Jordanian-Cypriot commercial and investment relations. 

The envisioned plan includes receiving a delegation from PCCI and Paphos Municipality to consider benefiting from some European grant projects aimed at developing economic and development programmes between the two countries.

The plan also includes arranging a visit by a Jordanian agricultural sector delegation to Paphos to discuss ways of enhancing agricultural cooperation and organising field visits to provide Cyprus with Jordanian agricultural products out of their season in Cyprus. 

The agreement will also consider establishing a charter line between Amman and Paphos to boost tourist cooperation, especially that the Royal Jordanian has inaugurated a direct route to the Chinese city of Guangzhou, where Chinese tourists prefer to visit Cyprus through Jordan.

Murad highlighted the importance of cooperation in promoting Jordanian products and services in Cyprus to boost the commercial exchange volume, adding that the Kingdom has a lot of products of high quality and good competitiveness rates, and accord with international technical standards.

He also said that the political and security stability in the Kingdom enhances investors' confidence in the Jordanian business environment which provides a lot of incentives for businesspeople and investors.

Jordan has several products and services that can cover a big proportion of the Cypriot market needs such as medicines, phosphate, potash and Dead Sea products, the ACI president added.

Cypriot investments in the Kingdom are mainly based in the ICT, constructions, services, consultation, electricity and electronics sectors.

AMMAN — More than 130 companies do not deserve to be enlisted on the Amman Stock Exchange (ASE) due to their low performance, lack of institutional governance and the volume of their free shares available for trade, president of the Certified Financial Analyst Society in Jordan, Jamil Anz, said Monday.

The ASE lost a lot of public confidence due to speculation practices, especially after the losses incurred by small investors who turned to deposit their money in banks or buy real estates instead of investing in the ASE, Anz added.

Noting that shares of some companies are traded at a book value less than capital or with cumulative losses that exceed capital, he indicated that  some shares have a value of JD0.100 and are still trading. Of 227 companies listed on the ASE, trading is concentrated there  30 - 40 firms that are the most active in the market, Anz added.

MOSCOW — Russia's central bank kept its key rate steady as inflation fears outweighed any temptation to use recent ruble strength as an opportunity for a rate cut in a bid to help the economy.

Boosted by a budding recovery in the price of oil, of which Russia is a main producer, the ruble had prior to the announcement crept back up to a 2016 high after slumping on the back of falling oil prices. 

It was trading at around 68 to the dollar and 76.5 to the euro on Friday.

A stronger currency typically dampens inflationary pressures as imports become cheaper, but the central bank let caution prevail. 

"Despite certain stabilisation in financial and commodity markets and a slowdown in inflation, inflation risks remain high," it said in a statement following a regular board meeting.

The ruble's slide at the beginning of this year caused the central bank to stall on its policy of gradual reductions in the base rate, which it cut four times last year from a high of 17 per cent to the current 11 per cent.

The bank went for a mammoth rate hike in December 2014, as it battled to stave off a collapse in the currency due to a battered economy.

The reduction in the rate since has done little to help Russia's recession-hit economy, hurting from the effects of the oil price slump and Western sanctions over Ukraine.

Despite a desperate need to nudge on an economic recovery, the Bank of Russia warned that it is unlikely to cut the rates again in the near future.

"To enable the accomplishment of inflation targets, the Bank of Russia may conduct its moderately tight monetary policy for a more prolonged time than previously planned," the bank said in its statement.  

Alfa Bank said that the warning was "more hawkish" than expected as the central bank battles to reach its goals for inflation. 

Capital Economics said the statement suggested that future interest cuts are "only likely to come towards the end of the year. And even then, interest rate cuts are likely to be relatively modest".

Oil prices have firmed slightly recently on hopes key producers will agree next month to limit output amid a global supply glut, thus helping the ruble.

Separately, some Russian regions are deep in debt and heading towards default if they don't get help from Moscow.

Four years ago, Russia's federal government cleaned up its finances by shifting responsibility for a chunk of social spending to regional administrations. 

Now it faces the consequences, presenting President Vladimir Putin with difficult choices.

Moscow can bail out the regions, but to do so it may have to go deeper into debt itself at time of recession, weak oil prices and international sanctions over the Ukraine crisis.

Or it could leave them to their fate and risk unrest among workers likely to lose their government jobs if a region slashes spending or goes under, just as Russia heads into a cycle of elections culminating in a 2018 presidential vote.

Collectively, the regions, which number more than 80, ran a budget deficit of 1 trillion rubles ($14.6 billion) last year on spending of 10 trillion, according to the state Audit Chamber.

The chamber's head, Tatiana Golikova, has repeatedly urged a compromise on supporting the regions. 

"Radical changes in the treatment of regional budgets are long overdue," she told the lower house of parliament late last year.

The federal finance ministry did not respond to Reuters requests for comment, although previously it had ruled out an amnesty for regions' debts.

If the ministry refuses to help, some of the regions will be in trouble. 

"I am not saying that there is going to be a massive amount of defaults," Karen Vartapetov, an economist with Standard and Poor's (S&P) ratings agency said. "But the situation will be moving in that direction."

Russia's top level finances are relatively robust despite the economic slump. 

The federal budget deficit is within 3 per cent of the gross domestic product, proportionately less than in a number of European Union states, and sovereign debt is low.

But this is built partly on accounting that has pushed economic pain off the national balance sheet and onto the regions.

Their total debt has doubled since 2012, according to the finance ministry, after a period of very modest growth. S&P forecasts it will more than double again to 5.5 trillion rubles by the end of 2018.

That would be bearable but for the fact that the regions' revenues are shrinking and yet they must keep on spending to honour promises imposed on them by Putin.

Worst case

The worst case is Mordovia, a region in the central part of European Russia that produces little and needs funds to host rounds of the 2018 football World Cup in its capital, Saransk.

Its debt rose 30 per cent last year to 33.7 billion rubles, or 46,000 rubles for every resident, equal to two months' salary for the average worker there, according to the finance ministry data.

Mordovia's debt exceeds 180 per cent of the regional government's annual revenue and yet its Prime Minister Vladimir Volkov says it will keep on spending as ordered by the Kremlin in May 2012. 

"The objectives set in the presidential May decrees must be met," Volkov told his parliament in December, according to local agencies.

While other regions' problems may not be so deep, more than 90 per cent of them were in deficit last year and their debt burden will grow to an average 60 per cent of revenues by the end of next year, up from 27 per cent in 2014, according to S&P.

That leaves their governments with no cash to keep servicing their debts, raising the prospect of default for some of them.

While the federal government can fall back on its foreign currency reserves if needed to pay off sovereign debt, it has enough to cover the entire amount and still have a quarter of a billion dollars left over, the regions have no such safety net.

Moscow does offer cheap loans to the regions but these are not enough to repay their maturing debts, let alone any other spending. 

Therefore, regional governments have to turn to domestic bond issues and loans from Russian commercial banks, with borrowing aboard not an option due to the sanctions.

Putin's promises

Under his May 2012 decrees, Putin ordered that large parts of state spending on healthcare, education and utilities be transferred to regions, to keep the federal budget healthy.

Local governments were also told to raise pay for healthcare and education workers by at least 100 per cent by 2018, the year of the next presidential election. With social spending accounting for 60 per cent of regional governments' expenditure, they rushed to borrow.

At first, there seemed to be no risks. Back in May 2012, the price of oil, Russia's main export earner, was over $100 a barrel and the government expected annual economic growth of 6 per cent throughout the decade. 

Now, oil is at $40 and Russia is in recession, with the economy shrinking 3.7 per cent last year.

Due to the crisis, regions are generating much less cash and have become dependent on financial markets to refinance debts. 

Most of the loans from commercial banks are short-term, with about a third having to be repaid annually.

Last year, the federal government tried to slow the build-up of debt, and the rise in regional spending slowed to a consolidated 1 per cent in 2015, according to S&P.

But with inflation at 12.9 per cent, keeping spending flat means a cut in real terms. That won't go down well with Russians who vote in a parliamentary election in September.

Moody's rating agency estimates that the regions' total operating expenditure will increase by 2-4 per cent this year.

The government has assigned 310 billion rubles in very low-interest budget loans to the regions this year, but S&P estimates this covers only 60 per cent of refinancing needs.

"They have in fact only postponed the debt service peak to 2018-2019, when most of budget loans are due," S&P said in a report.

Uncomfortable choices

The Kremlin's fear, political analysts say, is that if regional governments cut spending, that could drive angry people into the streets to protest.

So far, there have been only small, isolated protests without any political agenda, but as the recession bites deeper, demonstrations could grow, especially in rust-belt provincial cities with few economic opportunities.

Given that risk, the Kremlin will probably choose to bail out the regions. 

"Most likely aid from the federal budget will be required and most likely [the regions] will get it," said Alexander Ermak, head debt analyst at Region brokerage.

But that would in turn force more uncomfortable choices on the government.

With federal revenues falling too, the government will have to prioritise whom it wants to support: sanctions-hit banks, the regions or state-owned enterprises.

Opting to help all of them could exhaust all the reserves Russia has built up as a safety cushion.

Vartapetov said the government must make its choice: "It will have to find a balance between the political and financial costs of dealing with the regional financial difficulties."

PARIS — The European Central Bank's (ECB) plan to buy corporate bonds to help the eurozone economy is boosting the private-sector debt market which promptly responded with a new record-sized company bond.

With interest rates near or below zero and few other monetary policy tools left in its arsenal, the ECB announced earlier this month that it would begin buying non-bank corporate bonds in addition to the government bonds it has been purchasing to stimulate the economy.

That immediately livened up the corporate debt market, with companies rushing out issues and borrowing costs falling.

Less than a week after the ECB's announcement, and months before it is to actually buy any bonds, a new record for a euro-denominated corporate bond issue was set on Wednesday when brewer Anheuser-Busch InBev said it was seeking to raise 13.25 billion euros ($14.9 billion).

That easily beat the previous record of just under 10 billion set by Swiss pharmaceutical group Roche in 2009.

In a sign of a broader response, the volume of new corporate and bank issues on Wednesday struck the highest daily level since May 2001, the Financial Times reported, citing information from data company Dealogic. 

“In our view, this highlights the current positive backdrop for primary issuance induced by the ECB's new easing measures and particularly the new corporate bond programme,” credit analysts at Dutch bank ING wrote in a note to clients.

Deutsche Telekom also returned to the market for the first time since 2013, to raise 4.5 billion euros.

Borrowing costs have come down sharply.

The return to investors on bonds issued by French yoghurt giant Danone due in 2020 fell from 0.39 per cent on March 9, a day before the ECB's announcement, to 0.25 per cent a week later.

The yield on bonds maturing in 2021 issued by German manufacturing giant Siemens similarly slid from 0.3 per cent to 0.25 per cent.

Details of the ECB's plan have yet to be decided, although it is to begin mid-year and the central bank will only purchase euro-denominated debt with an investment-grade rating from credit ratings agencies.

Effect will spread

The corporate debt market has already benefitted indirectly as ECB purchases of government bonds have pushed investors into the corporate market, lowering borrowing rates.

But the ECB wading into the corporate market directly will cut risk further as it offers reassurance in case of a return of angst about the economy.

Competition for assets will increase, thus likely lowering borrowing costs for companies even further, and the effect will probably spread as investors look to also buy assets outside the ECB's scope of action.

In fact, that's what the central bank hopes will happen.

ECB executive board member Peter Praet said in an interview with Italian daily La Repubblica on Friday that "the initial effect of our purchases will spread to other assets and other markets".

Analysts at Citi Research called the purchasing of corporate debt an important broadening of the ECB's policy toolkit. 

"This appears to place more emphasis on liquidity- and credit-easing relative to interest rates," said Citi analysts. 

Despite interest rates coming down and access to low-cost central bank funding, commercial banks haven't stepped up lending, which has been holding up growth.

In addition to the corporate bond purchases, the ECB also announced earlier this month a programme to effectively pay banks if they step up their lending.

Enough bonds for ECB? 

Analysts are however concerned about some of the practical aspects of the plan to buy corporate bonds.

"Nobody knows how the ECB will do it," said bond market analyst Rene Defossez at Natixis. "The problem is that there isn't a considerable stock as the market is much smaller than for that of sovereign debt."

Some 400 to 500 billion euros of bonds meet that criteria, according to a study by the German lender Deutsche Bank.

Valentine Ainouz, a credit strategist at Amundi, a top asset management firm, expressed concern "the ECB may find it difficult to buy on the secondary market" where already-issued corporate bonds are traded.

"It is thus possible that it moves into the primary market" and buy bonds directly when they are issued, which is something it cannot legally do with government debt, she said.

But primary market purchases could see the central bank accused of picking winners and losers among eurozone companies.

For its part, Deutsche Bank said it believes "meaningful execution risks remain" and that the "ECB might turn out to purchase significantly less than the market may be expecting at the moment".

AMMAN — Battered by war which has inflicted incalculable damage on industry, infrastructure and economy, Syria's currency hit new lows last week after Russia said it was reducing its military support to President Bashar Assad.

The Syrian pound has fallen to 475 to the dollar on the black market, a 90 per cent drop since March 18, 2011, when security forces fired on protesters in the city of Deraa, sparking an uprising which descended into civil war.

Backed by financial and trade support from Iran, Syria's government succeeded in stabilising the pound early in the conflict.

But the slide accelerated as it lost control of territory and border crossings, trade collapsed, Western sanctions bit, Gulf Arab investment dried up, major cities were devastated and half the population was displaced.

The collapse of the currency has driven up inflation and aggravated wartime hardship, as Syrians struggle to afford basics such as food and power. Government budget spending in pounds has more than doubled, but in dollar terms has crashed.

Russia's surprise military intervention in September turned the tide of war in Assad's favour, but only briefly stemmed the currency's decline, and Moscow's declaration on Monday that it was pulling forces out of the country hit the pound again.

Panic

"In the last few days it came under further pressure because of the Russian announcement," a Damascus-based businessman said. "There was a lot of panic."

At the start of the uprising, the pound was around 47 to the dollar.

"Today, the [official central bank] intervention rate is around 406 but it reached 475 pounds in the black market," Hani Al Khoury, a financial consultant based in Damascus, said late on Thursday.

He said official efforts had prevented an even graver depreciation.

"Compared to the extent of the crisis and its devastating impact on the economy, the pound could have been far more affected," he told Reuters by telephone.

Infusions of money from Iran and dollar remittances from Syrians working abroad have also helped prevent an even steeper freefall, bankers say.

Iran is believed to have deposited hundreds of millions of dollars in the country's depleted reserves.

The government has also clamped down on currency exchanges in an effort to narrow the gap between official and black market rates. But in recent weeks, the official rate has fallen as fast as the black market, showing the limits of central bank influence.

Dollarisation

The pound's fall has pushed Syrian traders to switch their financing increasingly into foreign currency, Khoury added, a trend which may have been accelerated by the flows of billions of dollars of international humanitarian aid into the country.

"The Syrian economy has been dollarised — the import side and the financing side, along with savings and the aid coming from outside," he indicated.

That, combined with the continued pressures caused by the war, meant that whatever steps authorities take, the pound "is bound to continue to gradually drop".

"In every street in Damascus there is a different rate," the Damascus businessman said. "In Homs, Aleppo, Damascus, the black market rate varies."

He held out little hope of recovery for the currency without an end to hostilities. "Can you say whether the Geneva peace talks will succeed, or whether the armed groups will stop fighting?" he said.

Recently, Syrian businesswoman Reem Abu Dahab displayed her workshop's lacy pink and white nightgowns at a stall in a Beirut exhibition hall hoping to attract increasingly elusive buyers.

Syria's textile industry was once one of the country's economic bright spots, with its products coveted throughout the region and beyond.

But the sector, like the economy in general, has been devastated by the war that erupted in March 2011, with factories destroyed, workers displaced and sanctions hampering trade.

The migrant crisis and outflow to Europe have also depleted its workforce.

"Buyers used to come from all around the world but the war has scared them and now very few come to Syria," said Abu Dahab, surrounded by products made in a small workshop in Damascus.

Abu Dahab's family once owned a factory in Harasta, a Damascus suburb ravaged by fighting between rebels and the regime.

But it was completely destroyed in the war, and now the business is run out of a small workshop in the capital.

"We had 100 employees, today only 30 of them are still working for us," said Abu Dahab, who was one of around 100 Syrian textile manufacturers at a trade fair set up in Beirut.

Before Syria's conflict began, textiles represented some 63 per cent of the industrial sector's total production.

The sector was worth 12 per cent of gross domestic product (GDP), employed a fifth of the workforce and exports netted around $3.3 billion (3 billion euros) a year, according to the Syrian Economic Forum think-tank.

But by 2014, private sector textile exports had fallen by half, with the industry particularly affected by fighting in Aleppo city, the country's former commercial hub and home to many textile factories.

Factories destroyed, workers gone

"Seventy per cent of [textile] factories were closed or destroyed by the war," said Feras Taki Eddine, president of the Syrian Textile Exporters Association, next to a mannequin in black underwear and stockings.

In addition, many businesses lost machines and employees.

"Some of the machines were destroyed and some were stolen. Thieves took them to Turkey. I had 220 machines before, now I only have 10," said AlaaAldeen Maki, owner of Dream Girl Lingerie, an Aleppo-based business.

"Most of my employees emigrated because of the situation and some because they were forced to join the army for military service," he added.

When the war arrived in Aleppo in mid-2012, eventually dividing the city between government control in the west and rebel control in the east, some businesses relocated to small workshops in the city's safer areas.

Others, based in the relative safety of Damascus, have done whatever they can to survive.

Muhanad Daadush owns the country's biggest lingerie and pyjama factory, located in the capital.

He still employs 450 people, many of who sleep in the factory during upticks in violence.

"I had 72 workers sleeping at the factory" at one point, he told AFP at his stall, surrounded by bras of all hues and comfortable cotton sleepwear. "They started at six in the morning, worked until 11, then slept. They would only go home to their families from Thursday night to Saturday morning."

'Still alive'

For all its challenges, Syria's textile industry continues to enjoy a reputation of quality in the region, and the Beirut fair attracted some 500 buyers, mostly from the Middle East.

Fadi Baha was in town from Egypt, where he owns a chain of stores.

"I buy Syrian textiles because of their quality. It's better than Turkish or Chinese merchandise and almost competitive price-wise," he told AFP. "I like how Syrian manufacturers create a unique mix between Eastern and European styles."

But while regional buyers continue to purchase Syrian textiles, clients from further afield were nowhere to be seen.

Daadush Lingerie once exported 70 per cent of its products to Europe, but its owner said only 10 per cent now goes there.

And the rising costs of production, difficult trading environment and shrinking workforce, all mean competitors from Turkey and China are increasingly able to pinch clients from Syria's textile industry.

Manufacturers blame shrinking exports in part on sanctions slapped on Syria after the government began its crackdown on dissent following anti-government protests five years ago.

TakiEddine said Europe should be bolstering trade with Syria to keep citizens at work in their home country.

"It should be in Europe's interest to facilitate trade, because Syrian workers without jobs now want to leave to Europe," he added.

Several vendors said they were committed to staying open, ensuring jobs for Syrians and the industry's survival.

"It's important for us to show that Syrian industry is still alive," said TakiEddine.

KUWAIT CITY — Weak oil prices pose a threat to Gulf Arab states' currency pegs against the dollar, but the energy-rich region is unlikely to abandon the policy yet, analysts say.

Bahrain, Oman, Qatar, Saudi Arabia and the United Arab Emirates all keep the values of their currencies fixed against the greenback, while Kuwait has a link to a basket of currencies including the dollar.

But doubts are growing about whether the policy still makes sense.

The slide in oil prices has battered the economies of the six Gulf Cooperation Council (GCC) member states at a time when an improving American economy and prospects of higher US interest rates are lifting the dollar.

To maintain the currency pegs, all GCC members except Qatar raised their interest rates in December, tracking the US Federal Reserve, even though their economies needed exactly the opposite.

The Gulf states now face a dilemma of whether to keep the pegs or opt for a flexible exchange rate regime, allowing their currencies to fall against the greenback.

"Maintaining a peg is a costly affair. The central bank has to be willing to buy or sell its currency in the open market to maintain the peg, which could deplete forex reserves," said M.R. Raghu, head of research at Kuwait Financial Centre.

"Oil exports, which account for about 80 per cent of [GCC] government revenues, have fallen by 70 per cent since mid-2014, thus making the currency peg vulnerable as it reduces the foreign exchange reserves," Raghu added.

For now, GCC states, with the exceptions of Bahrain and Oman, have huge reserves to defend their pegs.

But some speculators are betting that the Gulf states, particularly Saudi Arabia, will be unable to maintain the currency links indefinitely.

Jan Randolph, director of sovereign risk analysis at IHS Global Insight, believes the contrasting performances of the US and Gulf economies will increase pressure on the pegs.

Monetary policies are also expected to diverge, "stimulating in the GCC and gradual tightening in the United States", Randolph said.

GCC states need weak currencies and low interest rates to boost their waning economies, especially to develop non-oil export sectors, Randolph indicated.

The longer the economic divergence continues, "the more sense it makes to move to a more flexible exchange rate regime", he added.

Maintaining the dollar pegs brings financial stability and certainty to GCC economies amid regional geopolitical tensions.

It also helps contain inflation and boost confidence for foreign investment.

Falling living standards 

Oil producers like Russia, Kazakhstan, Azerbaijan, and Nigeria have already devalued their currencies, raising oil revenues in local currency terms which helped to curb their current account and budget deficits.

But there is a cost.

Devaluation "typically causes higher inflation and often results in falling living standards, which can undermine social stability", Standard and Poor's said in a recent report.

Analysts say that if GCC states de-peg from the dollar, some currencies risk falling by 20 per cent or more.

That would boost oil revenues and the value of GCC fiscal reserves in their sovereign wealth funds in terms of local currencies, said Sebastian Henin, head of asset management at Abu Dhabi-based The National Investor.

The hospitality sector of the Gulf emirate of Dubai would also benefit as it becomes a more affordable tourist destination and more attractive to non-oil businesses, Henin indicated.

That is why some analysts and speculators anticipate that the United Arab Emirates could be the first to end its dollar link.

Another risk of abandoning the dollar peg is a capital flight from the Gulf, Raghu remarked.

"Capital outflows would be exacerbated as investors would like to move their assets to other markets. This would increase volatility and financial uncertainty in the region," he said.

Raghu thinks an end to the peg would happen "only as an extreme measure".

Mohamed Zidan, chief market strategist at ThinkForex, a Dubai-based brokerage firm, said the peg regime "is costly and hurting the economy".

"GCC states are defending it now for stability, but if the low oil price continues, they will opt for a managed floating regime within five years," he added.