Business

TOKYO — A weekend gathering of G-7 finance leaders may expose a rift on issues ranging from currency and fiscal policies within the close-knit group of advanced economies, dashing Japan's hopes of mustering a coordinated policy response to spur global growth.

US Treasury Secretary Jack Lew, Federal Reserve Chairman Janet Yellen and European Central Bank President Mario Draghi will be among G-7 finance leaders gathering in Sendai, northern Japan between May 20 and 21.

Japan has failed to bridge differences with the US on the yen, with Washington dismissing Tokyo's concerns that recent yen rises are excessive and instead pushing for agreements against currency market interventions.

The rift may be evident at the weekend G-7 meeting, diminishing prospects of an agreement beyond reiterating the importance for exchange-rate stability.

There is no consensus on how much fiscal stimulus the global economy needs with Germany resisting calls from Japan and the US for bigger spending.

Japanese policymakers are taming market expectations, saying Tokyo never expected the G-7 nations to agree on joint fiscal action it sees as only possible in times of crises, such as the collapse of Lehman Brothers in 2008.

The G-7 will likely settle with a vague agreement on the need to deploy a "balanced" dose of monetary, fiscal and structural policies, officials involved in the negotiations say.

The result could be another meeting in which officials claim progress in pushing an agenda of structural reforms, rather than concrete steps to avoid a global recession.

"It's just a way to say you did something when you did very little," said Tamim Bayoumi, a visiting fellow at the Peterson Institute, a Washington think tank for international economics.

While no communiqué will be released, Japanese Finance Minister Taro Aso hopes to lay the grounds for a G-7 leaders' summit to be held next week, where measures to address stagnant global growth will be high on the agenda.

For Japan's currency mandarins, the top priority in Sendai is to garner a G-7 agreement on the importance of "exchange-rate stability”, officials who are well-acquainted with the negotiations say.

That will give Tokyo justification to intervene in the currency market if it considers any yen gains as excessive.

It may also be the most the G-7 nations can agree on, given differences between Tokyo and Washington on what is defined as excessively volatile yen moves.

On Friday, Lew said his views have not changed on Japan's currency policies since a G-20 meeting in April, when he told Aso that markets were "orderly" despite a rising yen.

He said Japan has relied too heavily on monetary policy and needed to focus more on boosting domestic demand and pursuing structural reforms.

Japan insists that recent yen gains have been speculative and that a US Treasury report including it in a new currency watch list did not constrain its currency policy. 

Aso has repeatedly threatened to intervene to stem yen upward trend.

"The United States will probably keep emphasising that countries shouldn't resort to competitive currency devaluations, while Japan will argue that excess volatility is undesirable," said a G-7 source familiar with the negotiations.

"But no country, including the US, will disagree strongly that exchange-rate stability is important," he said.

Japan had hoped to garner a G-7 agreement on the need to ramp up fiscal spending, but has received a cool response from Germany, which insists on fiscal discipline.

If the G-7 nations share their concerns over weak global growth, however, Japan's Premier Shinzo Abe may use it to justify delaying a sales tax hike and deploy fiscal stimulus to resuscitate Japan's fragile recovery, some analysts say.

AMMAN — Jordanian and Moroccan businessmen on Monday pledged to step up efforts to increase joint trade and to eliminate trade barriers.  

At a meeting that was organised by the Jordan Chamber of Commerce, Jordanian businessmen and trade officials, and an economic Moroccan delegation that is currently visiting the Kingdom discussed reviewed means to boost commercial cooperation and overcome trade- related hurdles.

Addressing the delegates, Industry, Trade and Supply Ministry Secretary General Yousef Shamali said trade figures between the two countries is still very modest, stressing the need to look into ways to increase these figures. 

During the last year, Jordan's exports to Morocco totalled around $20 million whereas its imports from Morocco were valued at $25 million, according to official figures. 

Shamali said there are broad prospects for cooperation, noting that Morocco represents a gate for Jordan to reach Africa's western markets. 

He said transport constitutes a main obstacle for trade, in the absence of a direct flight line or a maritime route. 

He called on the private sector of the two countries to increase their joint trade to prompt official parties to take steps that can help provide direct flights and overcome transport issues. 

Morocco's Ambassador to Jordan, Hassan Abdul Khaleq, and Mohammad Shahoub, who is chairing the Moroccan delegation, stressed their commitment to working in a bid to achieve the desirable goals, according to the Jordan News Agency, Petra. 

The delegation's visit to the Kingdom comes on the heels of the meetings of the joint Jordanian-Moroccan Higher Committee during which the two countries agreed on the need to step up efforts to increase trade.

Underscoring trade agreements that the two countries are bound with, Jordanian representatives highlighted investment opportunities available in Jordan, citing promising sectors. 

The visiting delegation includes company representatives of different business entities and producers of footwear, garments, food stuff, cosmetics, electric cables and generators.

AMMAN — Industry, Trade and Supply Minister Maha Ali and Palestinian Economy Minister Abeer Odeh on Monday discussed means to facilitate joint trade and investments in the various economic areas. 

At a meeting in Ramallah, the two ministers discussed on-going efforts to increase the joint Jordanian-Palestinian commercial volume and to eliminate constraints.  

In the presence of representatives of Jordanian and Palestinian private sector entities, talks underscored the nearby commencement of Palestinian products' exporting, directly, using containers. 

Moreover, Ali noted that Jordan will support Palestine's bid to join the World Trade Organisation. 

Discussions also dealt with investment opportunities available in Palestine that Jordanian businessmen can benefit of, especially under the Investment Promotion Law at the industrial zones there. 

Earlier in the day, Ali and her Palestinian counterpart inaugurated an exhibition of Jordanian industries and products in the Palestinian city of Nablus. 

The exhibition is an important step towards supporting the development of the Palestine's economy. It provides an opportunity for Jordanian and Palestinian businesspeople to discuss cooperation in various fields and build up long-term partnerships, Ali told the Jordan News Agency, Petra.  

In 2015, the commercial exchange volume between Jordan and Palestine was around JD111 million, compared to JD97 million in 2014. 

The exhibition which showcases the products of 48 Jordanian companies will continue until May 18.

AMMAN — Finance Minister Omar Malhas on Monday inaugurated JIMEX 2016 that brings under one roof about 250 global exhibitors, representing more than 550 international trade marks. Exhibitors from eleven countries: India, China, Germany, South Korea, Thailand, Austria, Greece, Saudi Arabia, the UAE, Egypt and Jordan are taking part in JIMEX 2016, an industrial engineering and trading event.

This is the 5th consecutive year in which India is participating in JIMEX as a part of its endeavours to integrate itself with the global manufacturing industry, according to a statement of the Indian embassy in Amman.

DUBAI — Saudi Arabia aims to create the world's biggest sovereign wealth fund, a $2 trillion behemoth that can throw its weight around global markets, but the fund's growth abroad is most likely to be slowed down by its responsibility for aiding the economy at home.

Building the Public Investment Fund (PIF) into "the largest fund in the world by far" is a cornerstone of radical economic reforms announced by Saudi Deputy Crown Prince Mohammad Bin Salman last month to cut the kingdom's reliance on oil.

Founded in 1971 to finance development projects in Saudi Arabia and until now little known abroad, the PIF is to grow from 600 billion Saudi riyals ($160 billion) to over 7 trillion Saudi riyals, helping to make Riyadh a global "investment power", he said. 

So far, the biggest sovereign fund is Norway's, worth $852 billion.

Under the plan, Saudi Arabia would partly live off returns earned on the PIF's foreign investments, which would help offset Riyadh's loss of oil revenues, incurred as a result of low crude prices.

Yet, the PIF is also being pressed into service for a second purpose: it is to use its money to revitalise the Saudi economy and create jobs by developing new industries and pushing through stalled multibillion dollar development projects.

The PIF will "help unlock strategic sectors requiring intensive capital inputs. This will contribute towards developing entirely new economic sectors and establishing durable national corporations", the reform plan reads.

For example, the government will transfer ownership of Riyadh's floundering King Abdullah Financial District to the PIF, sources told Reuters.

The PIF may also get involved in areas such as mining, shipbuilding and developing six industrial cities. The government says it is examining ways to salvage the industrial city scheme, plagued for a decade by delays and a lack of enthusiasm among potential tenants.

The result, say bankers and consultants familiar with Saudi official thinking, is that in the initial years at least, the PIF's resources and management attention are likely to focus more on domestic projects than foreign markets. 

The PIF did not respond to requests for comment while Sven Behrendt, head of German consultancy GeoEconomica, said the PIF's foreign role, where it would face pressure to maximise returns by taking risks, would contrast with its domestic role as a strategic investor, where returns would be secondary as projects could not be allowed to fail for political reasons.

"If you look around the world, you will see there are only a few funds that have this double mandate. Usually it's one or the other.

"The two approaches require different investment philosophies — different capabilities, different management skills and different evaluation criteria... It's difficult to square."

Assets

Bankers and consultants in touch with the PIF say the fund, under new Secretary General Yasir Al Rumayyan, a former chief executive of Saudi Fransi Capital, is still designing its operations and structure, while looking to hire managers within the kingdom and abroad.

To build up the fund, the government has been transferring corporate assets and land to it; including ownership of state oil giant Saudi Aramco. But that simply makes the PIF a large holding company rather than a fund that can funnel large sums into new investments.

A total of $579 billion in net foreign assets held by Saudi Arabia's central bank (SAMA), which has traditionally served as Riyadh's sovereign fund, will not be transferred to the PIF, the sources said.

So to raise money that the PIF can reinvest, Riyadh plans to sell shares in PIF companies over coming years — a complex process that will depend on the appetite of foreign investors for Saudi assets in an era of cheap oil.

The sales will include up to 5 per cent of Aramco; the Saudi deputy crown prince estimated the company was worth over $2 trillion, implying that the offer could raise $100 billion.

A number of bankers and consultants are sceptical of the figure, however, saying it will depend on factors such as Aramco's dividend policy, political risk and willingness to disclose sensitive information to investors.

Some analysis suggests all of Aramco might have a market value of $250-460 billion, excluding the value of refining assets and guaranteed access to oil, according to Washington-based consultancy Foreign Reports.

In any case, the PIF looks set to have much less than $2 trillion to play with in global markets for the foreseeable future, limiting its contribution to Saudi state finances.

Norway's sovereign fund returned an average 5.6 per cent in 1998-2015, before costs and inflation. Earning that on $100 billion raised from selling Aramco shares would deliver about $5 billion annually — not much against a state budget deficit near $100 billion.

Shanker Singham, head of British-based consultancy competere, said the PIF might successfully imitate Singapore's Temasek, which in addition to investing abroad has played a strategic role in the economy by managing major state assets.

"The fund could achieve substantial returns by investing in commercial projects at an early stage when no commercial investor can go in," he said. 

"It could use its money to make unbankable projects bankable."

The PIF might also try to make foreign investments that secured expertise or market access for projects in Saudi Arabia. For example, it might buy a stake in a foreign mining firm to support the reform plan's emphasis on growing the mining sector.

But if the PIF is deployed for Saudi geopolitical ends — for example, to try to win commercial or political influence abroad, it could hurt its ability to make money, Singham added.

Saudi officials say investment decisions are made on exclusively commercial grounds.

AMMAN — Jordan scored 55 out of 100 in the 2015 Open Budget Index (OBI), according to the results of the International Budget Partnership organisation (IBP) Open Budget Survey.

The OBI assigns a score to each country based on the information it makes available to the public throughout the budget process.

Jordan's score was 10 per cent higher than the average figure of the index which covered 102 countries, the Jordan News Agency, Petra, reported on Sunday.

The Kingdom ranked first among Arab countries, followed by Tunisia, Morocco and Yemen which scored 42, 38 and 34 respectively, Petra added.  

The country's 2015 OBI is very much as its 2012 result, when it scored two notches higher, according to the survey results carried on the IBP website.

In terms of budget transparency, the survey's results said the government provides the public with "limited" budget information.  

With regard to public participation, the survey said the government is "weak" in providing the public with opportunities to engage in the budget process.

In its recommendations, the survey said Jordan should prioritise the following actions to improve budget transparency.

These include producing and publishing a mid-year budget review and increasing the comprehensiveness of the executive budget proposal by, for example, presenting more details on macro-economic forecasts and on issues beyond the core budget.

It also suggested increasing the comprehensiveness of the end of year report by, for example, presenting more details on planned versus actual performance.

To improve budget participation, it recommended establishing credible and effective mechanisms such as public hearings, surveys and focus groups to capture a range of public perspectives on budget matters.

As for improving oversight, the IBP survey said the country should try to ensure that the executive’s budget proposal is provided to legislators at least three months before the start of the budget year.

In general, the IBP Open Budget Survey 2015 revealed that the vast majority of people live in countries that have inadequate systems for ensuring accountable budgets. 

Most countries surveyed provide insufficient information for civil society and the public to understand or monitor budgets, and only a small fraction of countries have appropriate mechanisms for the public to ensure their participation in budget processes. 

Formal oversight institutions also frequently face limitations in performing their function of holding governments to account, according to the survey findings.

Through its survey, the IBP seeks to promote public access to budget information and the adoption of accountable budget systems, as it believes that government budgets are at the core of development.  

The International Budget Partnership collaborates with civil society around the world to use budget analysis and advocacy as a tool to improve effective governance and reduce poverty.

AMMAN — Exports of the  free trade zones during the first quarter of 2016 amounted to around $1 billion, supported by machinery and oil products exports, the Jordan News Agency, Petra, reported on Sunday. 

Free Trade Zone Corporation (FTZC) President Nasser Shraideh said that the free trade zone' exports' volume could reflect the size of the FTZC investments, despite surrounding conditions.

According to the corporation's figures, the free zones exported machinery during the first quarter were valued at JD619 million.

AMMAN — Saudi Arabia suffered another cut to its credit rating on Saturday as Moody’s Investors Service downgraded the kingdom, along with Bahrain and Oman because of the slump in oil prices, according to the Agence France-Presse (AFP).

Moody’s has lowered its long-term rating for Saudi Arabia to A1, which denotes low credit risk, down from Aa3, saying lower energy prices have adversely affected the profile of the top oil exporter, the AFP reported.

Meanwhile, Moody’s raised the rating for Ireland’s sovereign debt by one notch to A3 from Baa1, adding that the outlook on the long-term rating remains “positive”.

Furthermore, Moody’s cut Poland’s outlook from stable to negative over “fiscal risks” posed by its right-wing government, but left its investment grade unchanged.

Today’s rating actions concludes the rating review for downgrade that Moody’s initiated on March 4, 2016.

With regard to Saudi Arabia, “a combination of lower growth, higher debt levels and smaller domestic and external buffers leave the kingdom less well positioned to weather future shocks”, the AFP noted.

However, ambitious plans announced by Riyadh to diversify its economy could lead to a credit rating upgrade in the future, Moody’s said, as cited by the AFP.

Fellow agencies Standard and Poor’s and Fitch have also downgraded Saudi Arabia in recent months, according to the AFP.

Crude oil price collapse, from above $100 in early 2014 to around $46 on Friday, has intensified Saudi efforts to diversify the economy away from oil which makes up the majority of its revenue.

The ratings agency has also lowered its rating for Bahrain to Ba2, which indicates substantial credit risk, from Ba1, with a negative outlook.

The main driver for the rating downgrade is Moody’s view that the credit profile of the Bahraini government will continue to weaken materially in the coming years, despite its fiscal consolidation efforts, according to Moody’s website.

In particular, the rating agency expects Bahrain’s government debt burden and debt affordability to deteriorate significantly over the coming two to three years.

Moody’s lowered its rating for Oman to Baa1, which denotes moderate credit risk, from A3, warning the Sultanate was “vulnerable to an oil price shock” given its heavy reliance on energy revenues.

Meanwhile, Moody’s Investors Service confirmed the Aa2 long-term issuer ratings of the UAE, and assigned a negative outlook. 

Moody’s negative outlook to the rating reflects the lack of clarity around the formulation and implementation of government policies to reverse the large deficits and the deterioration in the net asset position, according to Moody’s.

These have been created by lower oil prices, in the absence of which the UAE’s fiscal buffers will erode over time, exerting downward pressure on the rating, according to the global ratings agency.

Moody’s has also confirmed Kuwait’s Aa2 government issuer rating and has assigned it a  negative outlook

The decision to confirm Kuwait’s rating reflects Moody’s assessment that the negative impact of the low oil price is manageable because of Kuwait’s robust government balance sheet, characterised by low levels of government debt and large domestic and external assets.

This is in addition to Kuwait’s high per capita wealth; and its low fiscal and external breakeven oil prices, which limit the deterioration in fiscal and current account balances. 

In addition, Kuwait has extraordinarily large hydrocarbon reserves at very low production costs. 

As a result, Moody’s expects that Kuwait’s economic and fiscal strength are likely to remain consistent with an Aa2 rating.

With regard to Ireland, Moody’s cited confidence in the eurozone member’s ability to further cut its deficit after finally forming a government.

While a UK exit from the EU would have negative repercussions on Ireland, given the close economic ties, the risk would be manageable for the Irish economy, Moody’s said in a statement.

As for Poland’s outlook, Moody’s change in this regard was the first in over a decade and comes after a deeper ratings cut in January by Standard and Poor’s, which blamed the government led by the Law and Justice Party for “weakening institutions”.

Moody’s, however, said it would keep Poland’s foreign debt grade at A2, reflecting “the country’s economic resilience”.

Poland has a large, diversified economy that has shown robust real gross domestic product growth in recent years, despite being exposed to significant external headwinds at the time of the global financial and euro area debt crises, Moody’s reported. 

Poland’s finance ministry welcomed the unchanged rating following market speculation about another downgrade.

AMMAN — Industry, Trade and Supply Minister Maha Ali and Pierre Dubreuil, the executive vice president of financing at Business Development Bank of Canada (BDC), on Saturday examined ways to increase cooperation between the Jordan Enterprise Development Corporation (JEDCO) and the BDC.

At a meeting with Dubreuil, who is currently visiting the Kingdom, Ali and Dubreuil reviewed scheduled meetings with private sector representatives to boost cooperation. Ali said JEDCO needs to benefit from the bank's expertise, especially in implementing small- and medium-scale enterprises.

The BDC offers financing and consulting services, besides supporting entrepreneurs, in particular. Canada is an important commercial partner for Jordan, she said, underscoring the Free Trade Agreement (FTA) signed between both countries, the Jordan News Agency, Petra, reported.

Fully implemented in 2010, the FTA which grants Jordanian goods duty-free access to the Canadian market has also been accompanied by agreements on labour cooperation, the environment, and foreign investment protection and promotion. 

AMMAN — A Moroccan trade delegation will start a two-day visit to the country on Monday to look into ways to expand Moroccan-Jordanian commercial cooperation, the Jordan News Agency, Petra, reported on Saturday.

The Jordan Chamber of Commerce (JCC), in cooperation with the technical unit of the Agadir Agreement will organise B2B meetings for the visiting delegation to discuss business opportunities with their Jordanian counterparts.

According to JCC President Nael Kabariti, the commercial sector wants to boost its investment cooperation with Morocco and increase joint commercial exchange.

The delegates include producers of different products, including footwear, garments, food stuff, cosmetics, electric cables and generators. Currently, the Jordanian-Moroccan annual commercial exchange volume does not exceed $45 million, according to Petra.