Business

AMMAN — The Jordan Industrial Estate Company (JIEC) on Monday signed an investment agreement in the field of paper, carton and packing in the Muwaqqar Industrial Estate. The agreement, signed by JIEC Chief Executive Officer Jalal Dabai and Marwan and Mohammad Zalatemo, came after the company's announcement of incentives on land and building prices in the estate, according to a JIEC statement.

Dabai noted that JIEC's incentives target factories established out of the Kingdom's industrial estates to provide an investment attracting environment towards the industrial estates in Amman, Muwaqqar, Irbid, Karak and Mafrak. The incentives aimed at encouraging investments in the Muwaqqar and Hassan industrial estates by offering a 10 per cent discount on land values in the two estates. 

AMMAN — The Kingdom's exports of clothes in 2015 increased by 8.7 per cent, registering JD1.11 billion, compared to JD1.02 billion in 2014, Adel Tawileh, representative of the leather and textile industries at the Jordan Chamber of Industry, said on Monday.

He added the US market received 90 per cent of these products, under the free trade agreement signed between Jordan and the US.

The total investment value of the cloth sector in the Kingdom exceeds JD700 million, Tawileh elaborated, highlighting the value could be increased if the rules of origin are facilitated under the Jordanian-EU agreement, to allow the use of Chinese and southeastern Asian countries fabrics.

There are some 1,300 facilities working in the cloth sector in the Kingdom, which provides some 65,000 direct and indirect jobs, in addition to 5,000 jobs for supporting professions, he added.

GAZA CITY, Palestinian Territories — Standing by skips full of clothes, vendors call out to bargain hunters scrambling for the not-so-latest styles in the Gaza Strip.

In the Palestinian enclave plagued by poverty and sky-high unemployment, and hit by a nearly decade-long Israeli blockade, the second-hand clothes market is booming.

Adidas jackets and Tommy Hilfiger shirts are among the brands being hawked in the narrow streets of the Fras flea market or at the open-air Yarmouk market.

There are some improbable items among the piles, including what appear to be used Israeli military uniforms, reflecting the entanglement of the two neighbouring peoples' lives despite the conflict.

Second-hand clothes even thrive in the shopping streets of the most affluent neighbourhoods, says Ahmed Rajab, who runs a shop selling used brand-name garments.

"I see a parade of people from all social classes," he says, helping youngsters looking for a hipster or casual look, and mothers who have come to dress their children or find a jacket for their office-worker husbands.

Before Israel imposed a blockade of the coastal Palestinian territory in 2006 "people would not have dared say they bought second-hand", he said. "Things have changed with the economic situation."

His stock comes from Israel and Europe.

Several times each month, his suppliers and those of his colleagues holding the rare crossing permits issued by Israel pass through the heavily-fortified border into the Zionist state.

There they buy used clothes by weight at 5,000 shekels ($1,250, 1,200 euros) a tonne, says Abu Alaa, a regular at Gaza City's Fras market.

Then the merchandise is trucked in bulk into Hamas-run Gaza, where it is sorted, washed and ironed.

"People no longer ask where it came from but how much it costs," says Hamza, 23, who has come to Ahmed Rajab to buy a grey and black cardigan to go with his grey pullover and sunglasses with black frames.

Hottest European labels       

Hamza says he buys almost solely second-hand.

"That goes for all my friends, boys and girls," he added in Rajab's shop. "We all come here because you can get the hottest European labels, which are impossible to find new in Gaza."

Prices are around 10 shekels for a shirt, 30 for a jacket and 40-50 shekels for designer jeans.

That is still too much for some.

The average monthly salary for Gazans in work is just $174, but nearly half are unemployed.

Nearly 40 per cent of the 1.8 million Palestinians crowded into the narrow strip on the shores of the Mediterranean live below the poverty line.

Before the blockade, tens of thousands of Gazan families lived off the incomes of relatives working in Israel but then draconian restrictions were imposed in 2006 after Hamas captured an Israeli soldier.

Israel further tightened controls a year later when Islamist movement Hamas consolidated its rule over Gaza.

Egypt's sole border with Gaza has also remained largely closed since 2013.

Vicious fighting between Hamas and secular rival Fatah in 2007 and three wars with Israel since 2008 deepened the strip's troubles.

For those on a threadbare budget, there are the street vendors of Fras or Yarmuk markets in Gaza City, where t-shirts and children's clothes change hands for as little as a shekel or two and other items are not much pricier.

"Two pairs of trousers for 15 shekels," a trader shouts. "Seven shekels a shirt."

Rami Jendiya comes to Yarmuk every weekend to outfit his family.

"In the stores you have jackets for 50 or 60 shekels," he says. "Here I can buy four for the same amount."  

Salah Al Qerem, 53, used to work in Israel.

When Israel revoked work permits for Gazans in 2006 he gave up his cabinet-making craft to take over his father's used clothing stall in Fras market.

Now he sells Israeli castoffs "of really good quality", he says.

AMMAN — Jordan Chamber of Commerce (JCC) President Nael Kabariti last week discussed with Anton Buttigieg, chief executive officer of Malta's commerce agency, ways to activate economic relations between the two countries at the private sector level. Kabariti praised the level of cooperation and coordination to organise the Jordanian-Maltese economic forum on April 11 during a scheduled official visit of Malta's prime minister to the Kingdom.

He suggested signing two agreements for cooperation and establishing a joint business council, which would play a role in enhancing cooperation and communication among the two countries' businesspeople.

For his part, Buttigieg said his country, which can be a gateway to European countries, has many opportunities to present to Jordan, stressing that the Maltese private sector seeks to discover cooperation opportunities with its Jordanian counterpart through exchanging commercial delegation visits. 

AMMAN — Real estate trading in the Kingdom increased by 6 per cent during the first two months of 2016 to JD1.1 billion, compared to JD985 million in the same period of 2015, the Department of Land and Survey (DLS) announced on Saturday.

The department’s revenues until the end of February this year reached JD53.1 million, 3 per cent higher than the JD51.5 million the DLS received in the same period of last year. DLS data showed that apartment exemptions in the first two months of 2016 went up by 20 per cent reaching JD13.4 million, compared to JD11.1 million in the same period of 2015. Iraqis came first in the number of purchases by non-Jordanians with 223 transactions, whose total value amounted to JD19.1 million; followed by Saudis with 109 real estates, JD6.7 million.

LONDON/ABU DHABI — Banks have cut credit lines for traders shipping food to war-torn Yemen, where ports have been battlegrounds and the financial system is grinding to a halt, choking vital supplies to an impoverished country that could face famine.

Lenders are increasingly unwilling to offer letters of credit, which guarantee that a buyer's payment to a seller will be received on time, for cargoes to a country plagued by a civil war between the government and Houthi militia as well as an Al Qaeda insurgency, say banking and trading sources.

"Western international banks no longer feel comfortable processing payments and are not willing to take the risk," said an international commodities trading source active in Yemen.

"What this means is traders are saddled with even more risks and have to effectively guarantee entire cargoes, usually millions of dollars, before the prospect of getting paid," added the source, who declined to be named, citing security concerns. "There are just more and more obstacles now to bringing goods into Yemen."

Traders that procure food for Yemen are mostly smaller, private firms based locally or regionally that buy the goods from international markets. Reuters spoke to several sources who declined to be identified, also citing security concerns.

The situation has worsened rapidly in the past month after Yemen's central bank stopped providing favourable exchange rates for local traders buying rice and sugar from global markets, say the sources, further hindering trading of food, which accounts for a large proportion of the country's imports.

The decision to limit such rates to wheat and medicine, deemed more nationally crucial, was a bid to preserve fast-dwindling foreign currency reserves.

The financing difficulties have been one of the factors behind falling shipments to Yemen, according to the sources. 

In January, around 77 ships berthed at ports in Yemen, according to UN data, down from around 100 ships in March last year, when the civil war escalated, and a far cry from the hundreds of ships that called every month in previous years.

The consequences could be grave for the Arab peninsula's poorest country, which the United Nations says is "on the brink of catastrophe". It relies on seaborne imports for almost all its food and 21 million out of 26 million people are in need of humanitarian support, with over half the population suffering from malnutrition.

Mohammed Al Shamery, an official at Yemen's sole sugar refinery, in the northern city of Hodaida on the Red Sea, said the credit and currency curbs had added to the problems of bringing cargoes into the country.

The process had already been complicated by deteriorating security as well as inspections of vessels by Arab coalition warships hunting for weapons bound for Houthi fighters.

"You have to be in constant touch with the shippers and reassure them that everything is fine and sometimes send pictures of the area so they know it's safe," Shamery added.

Prices rise

A European banking source said some banks had decided to completely withdraw from offering credit lines on food trades to Yemen. "Even if a bank is willing to process a payment, which relates to food, they have to be careful," the source elaborated.

Trading sources said banks that had been involved in Yemen's food trade have included Commerzbank, Deutsche Bank  and HSBC as well as regional Middle East banks.

Commerzbank and Deutsche Bank declined to comment. HSBC said it continued to support customers trading across the Middle East and North Africa region including Yemen "subject to relevant regulatory and commercial controls".

Yemeni banks are also feeling the pressure. 

Aidros Mohammed, an official with state-run National Bank of Yemen, said since the end of last year it had stopped opening letters of credit for the trade of goods in general "as outside banks have stopped dealing with us".

Watheq Ali Hamed, the manager of a store in Sanaa, said the decision by the central bank regarding rice and sugar purchases would be felt by ordinary Yemenis.

"Prices are already going up because of the war and the rise in the cost of securing the goods," he added. "The full effects of that decision will be felt going forward. Luckily, we still have some stocks."

Slowing of imports and rising prices could pose grave problems for Yemen, where areas are at risk of famine.

The country lacks sufficient seasonal rains, has limited access to farming areas and facing rising costs of agricultural supplies, a report by a UN food agency said in January.

Port flashpoints

Major ports have been flashpoints for fighting including the southern gateway of Aden, which has been gripped by violence since President Abed Rabbo Mansour Hadi's supporters seized it from Houthi forces in July. There have also been Saudi-led air strikes close to the port of Hodaida.

Adding to the turmoil, Al Qaeda in the Arabian Peninsula has been expanding its presence in Yemen; in February it took control of the southern town of Ahwar, months after seizing the major port city of Mukalla to the east.

Two banking sources in Yemen said restrictions on moving money abroad due to the conflict was adding to trade financing difficulties. 

"We have a big problem in transferring money abroad ... so we cannot open letters of credit for traders to import," one Yemeni banker said.

Trading and banking sources also said uncertainty over who was in control of Yemen's central bank, given its headquarters in Sanaa, was adding to lenders' caution. One Middle East banking source said some institutions were steering clear of transactions while Sanaa was still under Houthi control.

The central bank could not be reached for comment.

A February 11 report by Yemen's ministry of planning and international cooperation showed total foreign reserves of Yemen's central bank had slid to $2.1 billion by the end of 2015, from $4.7 billion at the same point in 2014.

The report said a "deterioration of the national currency value and scarcity of foreign exchange" were making it difficult to finance imports.

"In light of the ongoing conflict, the private sector has undergone painful shocks," Planning and International Cooperation Minister Mohammed Al Maitami wrote. "Hundreds of thousands of workers have lost their jobs and source of income."

PHILADELPHIA/KHOBAR, Saudi Arabia — A dramatic drop in oil prices is translating into a mixed bag for motorists across the globe, from hefty savings at the pump in the United States to a rare fuel price hike in Venezuela.

Oil prices have dropped nearly 70 per cent in the past 20 months, driven down by a glut in supply. All countries have access to the same oil prices on international markets, but retail gasoline prices vary wildly, largely because of the taxes and subsidies imposed on them.

That has meant the impact of diving oil prices has been uneven around the world.

In the United States, for example, drivers have enjoyed the fall as average gasoline prices tumbled to $1.64 a gallon ($0.43 a litre) last month from $3.37 a gallon ($0.89 a litre) two years ago. That has spurred a road renaissance of sorts as Americans hit the highways in greater numbers.

"It's great. It used to pain me to fill up my car, but now it's no big deal," said Patsy Gehring, a 59-year old who lives in Philadelphia. She says she notices the low pump prices every time she fills up her 2014 Honda Civic and is considering driving instead of flying on an upcoming trip to Florida.

"I'm probably going to end up driving. I'd prefer to fly, but gas prices are so cheap it just makes sense," she added.

The decline in prices at the pump has been more muted in countries like Indonesia, China and India, which have tried to reduce subsidies and absorb some of the gains from lower oil prices as taxes or levies, Barclays indicated in a research report.

Overall, retail fuel prices in Asia, which is home to three of the world's four largest energy importers, have fallen only about 35 per cent despite the almost 70 per cent decline in oil prices since July 2014, Barclays said.

‘No choice’

In China, the wholesale gasoline price ceiling, which is set by the country's central planning commission, has fallen 29 per cent since February 2014. But in January, regulators set a floor on price cuts, saying they would no longer adjust prices down when oil prices are below $40 a barrel. 

One benchmark oil price, Brent crude, was trading at around $36 a barrel lasy week.

Meanwhile, the Chinese government has also raised the consumption tax on fuel three times six since the slide in oil prices began. In Beijing, motorists appeared resigned to the limited benefit.

"When you look at oil prices, you can see the price at the pump should be a lot lower," said a 35-year-old man driving a black Audi A6, who gave his surname as Gao.

In Hong Kong, which has the world's most expensive gasoline at $6.69 per gallon ($1.76 per litre) according to www.globalpetrolprices.com, the slow downward march in prices has not impressed car owner Simon Lam. 

"It's been at this price range for so long and we have no choice but to accept that," he said.

A different story is being played out in two major oil producing countries, Saudi Arabia and Venezuela, where prices at the pump have actually risen due to cuts in subsidies, imposed to compensate for the economic hit from the oil price crash.

Venezuela in February increased pump rates for the first time in nearly 20 years. Its 95 octane gasoline rose more than 6,000 per cent from 0.097 bolivars to 6 bolivars per litre. (From 0.36 bolivars to 22.7 bolivars per gallon.) 

While that is $0.60 at the strongest official exchange rate, it is far less at the weakest official rate and just $0.006 on the black market, making it the cheapest fuel in the world at that rate.

The price is so low, especially in the face of raging inflation, that many Venezuelans support raising fuel rates even more.

"Gasoline is too cheap here. A litre of water is still more expensive than a litre of fuel. I have family abroad in Ecuador, and there it's very expensive, here it's nothing! They should have increased it a bit more," said taxi driver Raul Ramirez as he filled up his car at a Caracas gas station recently.

Similarly, Saudi Arabia, with its finances also hit hard by the oil slump, in December raised the price of 95 octane gasoline to 0.90 riyal ($0.24) per litre from 0.60 riyal. (From 2.27 to 3.40 riyal per gallon)

That still keeps Saudi Arabia among the countries with the cheapest gasoline prices in the world, so motorists are not complaining too much.

"It is still cheap, still reasonable — people can afford it," said a 40-year-old as he filled up at a gas station in Khobar near the state oil company's headquarters. "You don't usually tip the guy at the pump but in Saudi Arabia you do because petrol is so cheap.”

DOHA — Credit cards on the limit, huge bank borrowings and a struggle to repay loans: these are the personal debt problems of some Qataris despite the Gulf state's reputation for fabulous wealth.

Generous government salaries and free healthcare, funded by vast natural gas reserves in a country with only about 300,000 citizens, do not always translate into healthy bank balances for ordinary Qataris.

Instead, they can come under intense social pressure to live way beyond their means, spending lavishly on everything from the latest smart phones and designer fashions to family weddings. Now their problems are deepening as diving global energy prices mean even the Qatari welfare state is becoming less generous.

Many are borrowing enormous sums from local banks to finance lifestyles they cannot afford, according to a study by Qatar University.

"The idea of Qataris being a small, lucky, happy few — it's a myth," said Laurent Lambert, of the university's Social and Economic Survey Research Institute. 

"Many do not have the income to match the lifestyle and a small percentage are significantly poor by local standards and struggling to make ends meet," he indicated.

Widespread personal debt, while familiar throughout the Gulf where loosely-regulated banks and extravagant living are commonplace, does not yet appear to threaten Qatar's overall financial system.

Of the 75 per cent of Qatari families in debt, most owe more than 250,000 riyals ($68,700), according to a 2014 Qatar National Development Strategy report, only a handful default on their loan payments, an offence punishable by prison.

But recent layoffs of some state employees and petrol price increases, reforms hastened by the sinking energy market, have refocused attention on indebtedness and the problems it could present to social cohesion if citizens start to press their relatives and the government heavily for help.

‘Fever’

While Qatar has a total population of 2.4 million, most are foreign workers who have less access to the cheap loans available in a country where a conventional banking system operates alongside, but separately from, Islamic financial institutions.

Likened to a "social curse" by Qatari commentators and a "fever spreading from house to house", over-indebtedness among the much smaller local population is a raising national concern.

Radio talk shows air interviews with distressed civil servants who complain of becoming mired in debt after borrowing from banks without understanding the costs of repayment.

In Friday sermons, Muslim clerics rail against those who finance holidays to Europe and lavish wedding parties with loans that can devour salaries and lead to depression and divorce.

Part of the problem, some Qataris say, is that the country's economic boom during the era of high energy prices that lasted until mid-2014 rapidly pushed up standards of living — and expectations of what it means to be both wealthy and successful.

"You cannot have a bad watch on your wrist, a second-hand car, or an old telephone. You need to have the latest models so as not to appear 'poor'," said Mohammed Al Mari, a former traffic policeman who works in the charity sector.

"People end up pretending they have money just to keep up. There is this social pressure," he added.

Al Mari said that while he has managed to pay off debts and save money during his career years, he knew of a recent university graduate who was struggling. "He buys the latest iPhone because his peers have it but then, at the end of the month, he sells it back to pay his bills," he added.

Al Mari recalled how a Qatari woman had recently flown to neighbouring Dubai to purchase a counterfeit designer handbag.    

"Her friend had bought a bag that she wanted but couldn't afford," he said.

As well as a culture of extravagance and conspicuous consumption among some, others decry Qatar's "welfare syndrome" that has led a generation to believe it can live carelessly and be bailed out by relatives or a paternalistic government.

Spreading wealth

Part of a strategy by Gulf Arab governments to distribute some of their newly-discovered wealth, loans were extended to citizens in the 1960s and '70s and again in the early 2000s to help them buy shares in the state's multi-billion dollar energy enterprises.

Liberal lending by local banks, flush with funds from a fast-growing economy, was later extended to households wanting for instance to build a holiday home or buy a new car. These were handed loans, often several times their annual salary, with virtually no collateral.

"It was a free for all. Anyone could borrow basically as much they wanted," said Mohamed Al Kubaisa, a Qatari sociologist and newspaper columnist.

After concerns grew about the proliferation of loans and of Qataris unable to pay them back, the central bank imposed in 2011 a cap of two million riyals on consumer credit secured only against borrowers' salaries, with a maximum repayment period of six years.

Later that year, as Arab Spring protests spread across the region, the government raised state employees' salaries by 60 per cent and by 120 per cent for military personnel.

In a similar move neighbouring Saudi Arabia, which like Qatar escaped major Arab Spring unrest, boosted welfare spending sharply in an apparent attempt to secure social peace.

Also in 2011, the United Arab Emirates set up a fund to help cover low-income citizens' debts. Wielding oil-funded state largesse, Kuwait has occasionally paid off citizens' personal loans in response to popular pressure.

Qataris are divided over how to tackle the debt problem.

Those who see fault in the reckless spending habits of individuals advocate imposing upper limits on spending for marriage ceremonies and other social occasions, with penalties for those who violate.

Others say the government should more strictly regulate the banks, for which personal loans remain a lucrative business, and help launch more share offerings to encourage citizens to enjoy long-term benefits such as bonus issues and regular dividends.

Authorities have tried to raise awareness about the depth of the problem, launching a campaign titled "Debt is Disgraceful" in 2013 that saw donations collected to help pay money owed by debtors in prison or others threatened with criminal charges.

But some Qataris say that absolving people of their debts sets an unhealthy precedent.

"If you remove a person's debt, you also absolve them of their personal responsibility to repay the debt," said Mustafa Al Khamisi, who owns an audit firm. 

"That is really dangerous, because if you start eroding a person's responsibility towards society, you start eroding society itself," he added.

BRASILIA — Brazil's economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, official data showed on Thursday, setting the stage for what could be the country's deepest recession on record.

Gross domestic product (GDP) shrank 3.8 per cent last year, capped by another steep contraction in the fourth quarter, according to Brazilian statistics agency IBGE. It was the worst performance of any Group of 20 nation in 2015.

It was also Brazil's largest annual contraction since 1990, when the country was struggling with hyperinflation and a debt default. The outlook for 2016 is nearly as bad, with a central bank survey forecasting a 3.45 per cent contraction.

Back-to-back annual drops of that magnitude would amount to the longest and deepest downturn since Brazil began keeping records in 1901.

Brazil is "replicating the lost decade of the '80s in just two years", Goldman Sachs economist Alberto Ramos indicated in a research report. He added that the economy was close to an outright depression given that its contraction began nearly two years ago.

A paralysing political crisis, rising inflation and interest rates and a sharp drop in prices of key commodity exports have formed a toxic cocktail for Latin America's largest economy. The disastrous burst of a major mining dam and the biggest oil strike in 20 years added further strain in 2015.

Last year's contraction matched market expectations in a Reuters poll. Yields on interest rate futures rose after the data was published, also reflecting a split central bank decision to leave interest rates unchanged on Wednesday.

Stocks on the Sao Paulo exchange gained, as did the country's currency, the real.

Brazil's government said the poor data had been expected and added that it was focused on boosting the economy this year. 

"We want 2016 to be a year of recovery for jobs, employment, income, with economic growth," Labour Minister Miguel Rossetto said.

However, a private survey on Thursday showed services activity in February fell at the steepest pace on record, suggesting the economy had yet to hit bottom.

"We will probably see a similar contraction this year. There are no growth engines yet. The only one could be exports. But Brazil's economy is relatively closed, so we don't see that taking us out of this hole," said Joao Pedro Ribeiro, Latin America economist with Nomura Securities.

Costly stimulus

Brazil, once the world's seventh-biggest economy, has been underperforming since 2011, the year leftist President Dilma Rousseff took office. A sharp increase in government spending and subsidised credit underpinned the labour market until 2014, at the cost of fuelling inflation and eroding government finances.

The recession took root just as Rousseff started to roll back the costly stimulus policies, hiking taxes and interest rates and slashing investments in oil production. 

A corruption scandal at state-run oil producer Petroleo Brasileiro SA  and major construction firms also froze work at many infrastructure projects across the country.

Rousseff's popularity plummeted to record lows last year, fueling street protests and calls for her impeachment.

"Despite all the rhetoric from Rousseff last year about boosting private investment, it's abundantly clear that investors, both foreign and domestic, are staying away in their droves," said Michael Henderson, lead economist with consulting firm Verisk Maplecroft in England.

The downturn has been so severe that Brazil's economy will probably only regain its previous size by 2019, as it grapples with a much larger debt load, according to a Reuters poll.

DUBAI/DOHA — Low oil prices are forcing Gulf Arab states to borrow to prop up their economies and are now taking their toll on the region's banks too, complicating their efforts to raise capital required by regulators.

The impact of crude's fall from more than $100 to below $30 a barrel in less than 18 months has already been felt by oil and gas revenue dependent Middle Eastern countries which have had to borrow to prop up their economies.

And international investors have been avoiding the Gulf region's debt in recent months as a result, concerned about slower economic growth and substantial budget deficits.

This has had a knock-on effect on banks from Doha to Muscat, with the ensuing slump in stock prices and bond market volatility making it impossible for them to raise new capital so far this year, a situation which is unlikely to ease in the near future as they will have to compete with governments needing to borrow billions of dollars to pay their bills.

A dozen of the region's banks have announced capital raising plans as they try to meet local regulatory requirements, which in some cases are above the levels set by the Basel III banking accord, and top up reserves after years of lending growth.

These plans are now on ice and Gulf banks have to decide whether to attempt to borrow at a higher cost or hold out and risk falling short of more stringent regulatory requirements, which come into force over the next three years.

Another potential complication is that the flight of international buyers means banks will have to turn to local investors to buy their debt or equity. The problem here is that banks themselves are the largest regional debt investors.

Gulf banks reinforced their capital buffers in the wake of the global financial crisis so are not in any imminent danger, according to bankers and analysts.

However, they don't have the same funds to deploy as before as Gulf governments have withdrawn some of their deposits to bridge budget shortfalls, which as in Europe during the eurozone crisis, has exposed the interlinked relationship between governments and banks when bond markets fall.

The trend is perhaps most prevalent in Qatar, where half its commercial lenders have announced capital plans, including the largest conventional and Islamic banks, respectively Qatar National Bank and Qatar Islamic Bank.

"Market volatility has absolutely impacted plans for raising capital-boosting sukuk [Islamic bonds] but we are in a good position," QIB Chairman  Jassim Bin Hamad Al Thani told Reuters at the bank's annual general meeting.

QIB's total capital adequacy ratio (CAR), a key indicator of its health, stood at 14.1 per cent at the end of December, above Qatar's minimum requirement of 12.5 per cent, even though its total lending jumped 46.1 per cent in 2015.

Although Basel III's core equity minimum is 7 per cent, rising to 9.5 for the biggest global banks, most countries have set levels well above this, with Kuwait requiring 13 per cent.

But further increases are due which would eliminate the bank's room for manoeuvre. The 15.125 per cent minimum CAR set by Oman for 2019 would put most lenders there below or close to the limit at current capital levels.

Pricing Gulf

Gulf secondary bond markets have been particularly volatile since the start of the year, with the yields on perpetual bonds issued by banks to boost their capital widening significantly as prices have fallen.

This has forced high-net-worth individuals and private banks, traditionally major holders of perpetual bonds, to sell and will discourage them from buying back in, Ram Mohan Nataraja, portfolio manager at Invest AD, said.

"The usual latent demand will also be much lower, given the overall volatile market conditions," he added.

Although the relative illiquidity of these instruments accentuates such moves, they are generally considered riskier investments than regular bank bonds and this was apparent in some of their recent price movements.

Burgan Bank,, Kuwait's third-largest lender by assets, sold perpetual bonds in September 2014 with a 7.25 per cent coupon. These yielded 9.476 per cent on January 11, before spiking to 11.525 per cent on February 3.

Even National Bank of Kuwait, which boasts one of the highest credit ratings of any Gulf bank, saw trading on its 5.75 per cent bond issued in April 2015 jump from 5.92 per cent at the start of the year to 7.27 per cent on January 22.

These moves suggest that enticing investors to buy new capital-boosting bonds will require banks to pay higher, more attractive coupons, something that will grate with Gulf bond issuers who are traditionally regarded as extremely price-sensitive.

But limited options mean price is likely to trump pride.

Slumping stock markets, Dubai's bourse dropped 39 per cent between mid-July and mid-January, while Saudi Arabia's index is down 10.1 per cent year-to-date, means equity investors would be loathe to plough money into rights issues.

So-called contingent-capital bonds have never been sold in the Middle East, while convertible bonds are also a rarity.

And while retaining earnings would give bank reserves a minor lift, it would cut into shareholder dividend payments which are already in the sights of local regulators.

The United Arab Emirates central bank told its lenders to get approval before disclosing payouts for 2015, while Oman's regulator warned it could intervene on dividends to support capital ratios.

Banks seem poised to wait for better markets to place capital-boosting bonds and sukuk, according to bankers, although time is limited.

Saudi Arabia, Qatar and Oman are among the countries expected to issue bonds and the start of the holy month of Ramadan in June may mark the start of a three-month market shutdown for the Middle East's long summer break.