Business

RIYADH — Saudi Arabia may reduce energy and water subsidies for wealthy citizens among other reforms to diversify its economy away from oil amid a sustained fall in prices, its Deputy Crown Prince Mohammed Bin Salman was quoted as saying on Wednesday.

His interview with The New York Times also appeared to suggest he could foresee oil prices dropping far below their current level of around $45 a barrel.

The newspaper paraphrased the prince's reform plans, adding: "So even if oil falls to $30 a barrel, Riyadh will have enough revenues to keep building the country without exhausting its savings," but without making clear if that figure was its own or had been mentioned by Mohammed Bin Salman.

The world's top oil exporter has previously said it was studying increases in domestic energy prices, the introduction of value-added tax (VAT) and the installation of nuclear and solar power.

Low oil prices and expected deficits in coming years have spurred a new focus on reforms in the conservative kingdom with the aims of diversifying the economy away from a dependence on crude revenue.

"The key challenges are our overdependence on oil and the way we prepare and spend our budgets," he said in the interview.

Benchmark Brent oil futures eased on Wednesday to trade around $45 per barrel as the dollar strengthened and investor focus shifted back to a deep global supply glut.

The glut arose on the back of the US shale oil revolution as well as a Saudi decision last year to persuade the Organisation of Petroleum Exporting Countries to keep the taps open to fight for market share with rival producers.

Besides reducing subsidies, the reforms might include imposing a VAT and taxes on unhealthy goods like cigarettes and sugary drinks, he was quoted as saying.

The newspaper reported that he also said he would privatise and tax mines and undeveloped land, and intended to reduce domestic oil consumption by installing nuclear and solar electricity capacity, without giving further details.

Mohammed Bin Salman, who is also defence minister, heads a supercommittee on the kingdom's economy and development as well as a National Performance Centre that oversees efficiency in all government ministries.

Under King Abdullah, who died in January, Saudi Arabia privatised big state companies, opened main sectors of the economy to private and foreign investment, joined the World Trade Organisation and reformed labour laws.

However, economists say the government can do more to strengthen the role of Saudi nationals in the private sector economy, including via education reform, and to make the government more efficient.

Separately, faced with heavy losses from low oil prices, Gulf states have embarked on belt-tightening measures to cut spending and boost non-crude revenues, but analysts warn much more needs to be done.

After more than a decade of abundant surpluses thanks to high oil prices, the six Gulf Cooperation Council (GCC) states are projected to post a combined record shortfall of $180 billion in 2015 and the drought is expected to continue for years.

Some countries have already cut subsidies, while others are considering measures to reduce their spending. 

International Monetary Fund (IMF) chief Christine Lagarde told GCC finance ministers in Qatar this month that "global energy prices could remain low for years" and urged them to adjust their budgets.

Lagarde warned that the GCC, which has relied on energy income for 90 per cent of their revenues, should reduce dependence on oil and gas.

In 2014, GCC states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) — posted a small surplus of $24 billion, down from $182 billion the previous year, according to IMF figures.

Each of Bahrain, Oman and Saudi Arabia ended 2014 in the red for the first time since the global financial crisis in 2009.

World oil prices have dropped by more than 50 per cent since June 2014 and the IMF has projected that it will result in a $275 billion drop in GCC revenues this year.

'Much larger' problem this time 

But having amassed a wealth of around $2.7 trillion over the past decade, the IMF advised GCC states to take a gradual approach to implementing reforms and diversifying the economy.

Although the measures may not be easy to enforce in countries that have long offered generous welfare systems, analysts believe this time fiscal consolidation, diversification and reforms must be deeper, long-term and sustainable.

"The magnitude of the problem is much larger this time because subsidies and salaries have immensely increased in the past few years, together they form 90 per cent of current expenditure," indicated the head of economic research at Kuwait Financial Centre (Markaz), M. R. Raghu.

"They cannot roll back on salaries because this is too sensitive," Raghu told AFP.

Spending in Gulf states, mostly on salaries and subsidies, almost doubled to $550 billion between 2008 and 2013, according to IMF statistics.

The six nations have a population of 50 million, half of them foreigners, and pump around 18 million barrels per day.

The steep rise in expenditures greatly increased the breakeven price for oil, to $106 a barrel in the case of Saudi Arabia from under $70 a few years ago. It is higher for Bahrain and Oman.

IMF and the World Bank estimate that the direct cost of energy subsidies in the GCC was $60 billion last year.

Steps taken by the GCC states to cut spending and raise non-oil income have been modest so far.

The UAE took the lead by liberalising fuel prices in June and raised electricity charges in Abu Dhabi. Both measures are expected to save billions of dollars. 

Having the most diversified economy in the Gulf, the UAE said it has earmarked more than $80 billion for projects away from oil. 

Kuwait began selling diesel and kerosene at market prices at the start of 2015. It has cut spending by 17 per cent and is in the process of raising petrol prices and charges on electricity and water.

However, it has still awarded projects worth a record $30 billion so far this year, according to officials and experts.

Saudi Arabia, for its part, said it was considering delaying "unnecessary" projects and studying energy subsidies reforms.

Gas-rich Qatar said it is also considering some spending cuts and reducing subsidies. Oman and Bahrain, the poorest members of the GCC in terms of energy wealth, have announced similar plans.

"This is not enough. They have a long way to go," stressed Shanta Devarajan, World Bank chief economist for the Middle East and North Africa. "This is just the beginning... the measures must focus on reforms, unemployment and diversification. Much more steps are needed."

The IMF said reforms should include comprehensive energy efficiency and price alterations, expanding non-oil revenues, reviewing capital and current expenditures and reducing the government wage bill.

The IMF said Saudi Arabia, Oman and Bahrain will spend all their fiscal reserves in under five years if they fail to take additional austerity measures.

"GCC states must be serious this time... The $100 a barrel days are gone and they have to live with a $40-$50 price," Raghu said.

AMMAN — Jordan Investment Commission (JIC) President Montasser Oklah on Tuesday discussed with Jordan Customs Department (JCD) Director General Wadah Hmoud means for joint cooperation to facilitate customs operations and simplify measures to support investment, a JIC statement said Wednesday.

Oklah said some hindrances facing the JIC and the JCD must be removed through introducing necessary measures, stressing the importance of delegating more authority to the work of the commissioner general of customs at JIC's investment window, in order to serve investors and facilitate the window's work.

Oklah said that under the 2014 Investment Law, the investment window was established with the aim of offering registration, licensing, agreements, certificates and other services at one place to facilitate procedures for investors. Hmoud underlined the importance of investment and stressed the need of removing obstacles and facilitating customs measures. 

KUWAIT CITY — Kuwait has awarded projects worth a record $30 billion so far this year despite the sharp fall in oil income, officials and experts said Tuesday. 

"Up until mid-October, Kuwait has awarded record projects worth $30 billion [28 billion euros], up around $6 billion on the whole of last year," Edward James, director of analysis at Middle East Economic Digest (MEED) Projects told a conference on Kuwaiti projects. 

He said Kuwait was the only country in the energy-rich Gulf Cooperation Council (GCC) to exceed MEED forecasts in awarding projects this year. 

Projects in neighbouring Saudi Arabia and United Arab Emirates (UAE), which are the leading regional nations in projects, saw their project awarding process cut by half, James added. 

In Saudi Arabia, the value of awarded projects dived to around $33 billion and in UAE it slid to under $20 billion. 

MEED indicated that Kuwait, which gave contracts worth $24 billion in 2014, has projects worth more than $251 billion planned or underway. Of those, $137 billion worth are in the pre-execution stage and around $85 billion of them are under study, MEED pointed out. 

Key sectors include construction at $90 billion, oil and gas ($69 billion), transport ($49 billion) and power ($26 billion).

In February, parliament approved a five-year development plan that envisages spending 34 billion dinars ($112 billion) between the current 2015/2016 fiscal year and 2019/2020.

Talal Al Shemmari, a senior official at the Supreme Planning Council, told the conference that projects planned over the next five years include a metro system at $18.5 billion, a railway project as part of the GCC railway link at $6.6 billion and a power plant at $8 billion.

Under the plan, power generation will be doubled to just under 30,000 megawatts and a 25-kilometre causeway linking Kuwait City with the country's north is already under way.

Last month, Kuwait awarded contracts worth $13 billion to foreign firms to build a 615,000-barrel per day refinery.

Prime Minister Jaber Mubarak Al Sabah reiterated Tuesday that the drop in oil revenues will not impact development projects.

Like other GCC peers, Kuwait's economy heavily relies on oil which contributes 94 per cent of public revenues.

SHANGHAI — China is proposing a financial firm to fund projects in central and eastern Europe, Premier Li Keqiang said Tuesday, extending the Asian giant's global reach as it flexes its economic muscles.

Beijing scored a major diplomatic success earlier this year when it set up the Asian Infrastructure Investment Bank, with key European countries signing up over objections from Washington.

Shanghai is also home to a new multilateral bank dedicated to the emerging BRICS countries of Brazil, Russia, India, China and South Africa, which is expected to go into operation soon.

Li told officials from 16 central and eastern European countries gathered for a regional summit in nearby Suzhou that Beijing was "ready to work with all parties to explore the possibility of setting up a 16+1 financial company to support cooperation".

Li dangled the offer of cheap Chinese funds from both the government and commercial banks to the area, which has lagged behind more prosperous nations in the western part of the continent.

"We can provide financing for central and eastern European countries in line with your needs," state television showed him saying.

"As long as these projects use Chinese products and Chinese equipment, China is willing to provide low-cost financing support," Li stated.

The country's biggest lender Industrial and Commercial Bank of China and the government policy-directed China Export Import Bank, which serves as an export credit agency, would spearhead efforts to boost lending, Li added.

But he played down the possibility of competition with other multilateral organisations, such as the European Bank for Reconstruction and Development, saying Chinese financial institutions were encouraged to "strengthen exchanges and cooperation".

Separately, China will accelerate reforms to remove internal barriers to both foreign and domestic trade, the country's Cabinet said on Monday, a move designed to bolster domestic consumption in its slowing economy.

In a comprehensive statement on its website, China's State Council outlined plans to increase economic activity across a wide range of sectors.

China is looking to give both international and domestic investors increased access to the world's second-largest economy in a bid to promote consumption. 

The statement follows the council's October plenum, which outlined broad the state's broad strategic objectives for the next five years.

The State Council said in its statement it is seeking to "eliminate all kinds of conspicuous and hidden administrative monopolies, strengthen anti-monopoly laws" in an attempt to remove protectionist policies between various provinces.

While weakening China trade comes on the back of falling commodity prices and softening global growth, analysts also blame provincial protectionist import substitution policies for artificially suppressing Chinese demand for foreign products.

Additionally, the government said it would accelerate reform of the country's residence registration, or "hukou", system to unleash the spending potential of China's rural population, the document said. 

Rural residents will be supported to buy their own homes and small- and medium-sized cities will be encouraged to implement tailored policies, favourable to them.

All Chinese residents have a hukou that determines their access to education and other social welfare services.

University graduates who chose to settle in provincial capitals and smaller cities would be granted local residence registration, the document added.

The government also pledged to improve Internet infrastructure and e-commerce logistics of the "last mile", the final portion of a package's journey from a retailer's warehouse or store to the customer's front door.

It also said it would expand the scope of the 72-hour transit visa, improve tax rebates for tourists and attract international consumers by hosting shopping festivals, film festivals, fashion weeks and book fairs.

China pledged to boost the development of the retail, health, travel and sports sectors to lift domestic consumption, China's Cabinet said on Sunday.

The country's three anti-monopoly regulators, the Ministry of Commerce, the National Development and Reform Commission, and the State Administration for Industry and Commerce, said in September that they would widen market access for foreign firms.

NEW YORK — Pfizer Inc. on Monday said it would buy Botox maker Allergan Plc. in a record-breaking deal worth $160 billion to cut its US tax bill by moving its headquarters to Ireland.

The acquisition will create the world's largest drugmaker, with combined annual revenue of about $64 billion. It is also the biggest-ever tax inversion deal, an increasingly popular  and controversial manoeuvre aimed at helping US companies lower their taxes by reincorporating overseas.

US President Barack Obama has called inversions unpatriotic and has tried to crack down on the practice. To avoid potential restrictions, the transaction was technically structured as smaller Dublin-based Allergan buying Pfizer, although the combined company will be known as Pfizer Plc. and continue to be led by Chief Executive Officer (CEO) Ian Read.

The merger will delay by two years the Lipitor and Viagra maker's decision on whether to split itself into two. That decision, which could sell off Pfizer's lower margin unit of products facing generic competition, was expected by late 2016.

The deal enhances offerings from both Pfizer's faster-growing branded products business, with additions like Botox, and its established products unit. Still, investors had been hoping Pfizer would sell off the lower-margin business in 2017, a move now put off by the time required to integrate Allergan, Pfizer said.

Allergan CEO Brent Saunders will become president and chief operating officer of the combined company with oversight of all commercial businesses.

Read, who has long sought to slash Pfizer's US tax rate, said in a statement that the deal would help put the company on "on a more competitive footing".

The company was expected to pay about 25 per cent in corporate taxes this year, compared with about 15 per cent for Allergan. Pfizer Chief Financial Officer Frank D'Amelio said he expected a combined tax rate of 17 per cent to 18 per cent by 2017.

The deal comes some 18 months after the failure of Read's initial attempt at an inversion, a $118 billion bid to acquire Britain-based AstraZeneca Plc. that ran into staunch opposition from that company's management and UK politicians.

On a conference call with analysts, Pfizer said the merger would give it enhanced access to its tens of billions of dollars parked overseas over time and allow for more share buybacks and dividend payments.

Saunders said the combination would provide access to about 70 additional worldwide markets for Allergan products.

The merger, scheduled for completion in the second half of 2016, will deliver more than $2 billion in cost savings in the first three years, the companies indicated. It was not immediately clear how many jobs would be lost as a result.

The companies estimated the merger would increase earnings per share by 10 per cent, excluding special items, in 2019 and add by a high-teens percentage rate in 2020.

The deal values Allergan shares at $363.63 each, about 16 per cent more than their closing price of $312.46 on Friday. Pfizer shareholders would control of 56 per cent of the combined company.

Allergan shareholders would receive 11.3 shares in the combined entity for each of their shares.

Pfizer stockholders can get cash or one share of the combined company for each of their shares, but the aggregate amount of cash must range from $6 billion to $12 billion.

Plans call for four current directors of Allergan, including Saunders and Executive Chairman Paul Bisaro, to join Pfizer's 11-member board, the companies said in a joint release.

The US Treasury, concerned about losing billions of dollars in tax revenue, has been taking steps to limit the benefits of increasingly popular tax inversion deals, but it admitted last week that it would take legislation from Congress to stop such maneuvers.

Reports that the companies were in talks emerged a month ago.

Their combined medicine chest would put Pfizer staples such as impotence treatment Viagra, cholesterol fighter Lipitor and nerve pain treatment Lyrica alongside Allergan's Botox wrinkle treatment, Alzheimer's drug Namenda and dry-eye medication Restasis.

Shares of Pfizer were down 3.3 per cent, while Allergan fell 2.4 per cent.

NEW YORK — Lackluster earnings reports from retailers have raised questions about whether the 2015 holiday shopping season will bring as much of a boost to the US economy as hoped.

Apparel giant Gap and kitchen and home furnishings chain Williams-Sonoma late last week became the latest big US retailers to slash their profit forecast for the critical December quarter.

The grim forecasts raised doubts about whether an improving US jobs market and lower gasoline prices will translate into a holiday boon for retailers. Consumer spending accounts for about 70 per cent of US economic activity.

Earlier in November, Macy's also gave a dim outlook, citing a drop in sales to foreign tourists because of the strong dollar and the need to sharply discount a glut of cold-weather merchandise that has not moved due to unseasonably warm weather.

"I wish I could say it's going to get ice cold across the country," Macy's Chief Executive Terry Lundgren said in a November 11 conference call with Wall Street analysts. "But you can see in our forecast for the fourth quarter we are not expecting that."

"We're not selling lumber, so I can't carry the lumber over to 2016 and sell it at the same price next year. We're selling fashion apparel, so we're going to mark that inventory down. That will be good for consumers but it will obviously put pressure on our own margins," he added.

Inventory levels at auto dealers, furniture stores, home improvement centres and department stores all rose in September, lifting the inventory-to-sales ratio in that month to the highest level since May 2009, according to a report by consultancy IHS.

IHS projects a 3.5 per cent rise in holiday retail sales in 2015 compared with last year.

Growth of 3.5 per cent is "a pretty strong forecast", said economist Chris Christopher, noting that the economic effects are mixed.

"Consumers are benefitting, but retailers are having a hard time," he said.

Black Friday changes

Chris Morran, deputy editor at the Consumerist, an independent consumer advocacy site, predicted no major changes to overall sales in 2015.

"There hasn't been a drastic change in the jobs picture. There hasn't been a huge increase in wages," he said.

Much bigger than any change in overall sales will be the role of online commerce this holiday shopping season, which kicks off in force the day after Thanksgiving, known as "Black Friday".

The focus on e-commerce means stores are no longer emphasising opening up on Thanksgiving night and are stretching out the season of holiday promotions. Amazon has had "Black Friday" specials since November 1.

"People have become a lot more savvy and realise that a lot more of these Black Friday doorbusters are just junk," Morran said.

Online has been embraced much heartily than before by retail giants like Wal-Mart stores, which this year for the first time will make the more than 90 per cent of its "Black Friday" discounts available online.

Fewer in-store specials reduces the chance of dangerous crowds that have sometimes led to serious injury, including the 2008 fatality of one Walmart worker stampeded to death.

Walmart will also offer online-only specials on Thanksgiving Day of high-definition television, Star Wars gaming headsets and other goodies "so customers can shop while the turkey is in the oven", the company said in a November 12 announcement of its Black Friday plans.

Morran sees the current moves by retailers as part of a transition period that will see most of the Black Friday focus online within five years. That will be more convenient for consumers and enables retailers to keep fewer stores at maximum staffing level.

"Consumers aren't doing badly and stores are learning," Morran said.

Walmart's smaller big-box rival Target is also playing up online shopping, as well as a "clicks and mortar" approach to shopping that, for example, lets customers pick up online orders curbside "without ever leaving the car", the company said.

Target is also offering free shipping at for online orders between November 1 and
December 25.

But these efforts are also adding to the pressure on retail industry profits, said Efraim Levy, an analyst at S&P Capital IQ who follows retailers.

Companies must develop apps and other technologies, build warehousing centers for online deliveries and manage a new trove of electronic data. In Target's case, offering unlimited free shipping on orders as low as $5 means "you're losing money", Levy said.

AMMAN — Jordan's total exports during the first nine months of 2015 amounted to JD4.16 billion, a 7.2 per cent drop from the level recorded during the same period of 2014, the Department of Statistics (DoS) announced Monday. 

National exports were 7.3 per cent lower at JD3.6 billion of the total, whereas re-exports came at JD0.6 billion, a 6.5 per cent decline. 

The statistics also showed a 13.1 per cent fall in imports during the first nine months of 2015 to JD10.58 billion.

Consequently, the trade balance registered a JD6.42 billion deficit, bringing in the gap down by 16.5 per cent during the first nine months of 2015, compared to the same period of 2014.

Export of clothes, potash and phosphate went up by 10.1, 0.2 and 10.2 per cent respectively, while the export value of fruit and vegetables, pharmaceuticals and fertilisers dropped by 3.9, 7.4 and 26.4 per cent in the first three quarters of 2015.

Imports that registered an increase in their values during the January-September period of 2015, compared to the same period of 2014, included machinery (13.7 per cent); vehicles, motorbikes and their spare parts (14.2 per cent); electric devices (22.9 per cent); and jewellery and precious minerals (53 per cent), DoS data revealed.

Imports of raw oil and its derivatives declined by 48.7 per cent, and imports of iron and its products also dropped by 9.3 per cent, during the first nine months of 2015, compared to the same period of 2014.

KUALA LUMPUR — Southeast Asian leaders on Sunday symbolically declared the establishment by year-end of a European Union (EU)-style regional economic bloc, but diplomats admitted it will be years before the vision of a single market can be realised.

At the group's annual summit, held this year in Kuala Lumpur, the heads of the Association of Southeast Asian Nations (ASEAN) signed a declaration that the bloc hailed as "a milestone in the integration process".

The 10 leaders then put an aural exclamation mark on the agreement by banging once in unison on a traditional drum from each of their nations.

However, diplomats have admitted Sunday's declaration has no practical effect, and was largely meant to avoid having ASEAN, regularly criticised for its lack of concrete achievements, miss its own deadline of 2015.

Several years ago, ASEAN set a 2015 target for launching the ASEAN Economic Community (AEC), a single market with a free flow of goods, capital and skilled labour across borders.

The summit's host, Malaysian Prime Minister Najib Razak, urged his counterparts to step up efforts to realise a vision that many experts view as difficult, if not impossible, to achieve.

"We now have to ensure that we truly create a single market and production base with freer movement of goods and services with common standards, far greater connectivity and removal of barriers," Najib said.

Achievement of that vision will cause foreign investment in the region to "expand exponentially".

The AEC is aimed at marshalling the combined economic force of a resource-rich and growing market of more than 600 million people to enhance its trading clout and help it compete with the likes of China for foreign investment.

Changing the 'mental map'

Great progress has been made on lower-hanging fruit like slashing tariffs and removing other hurdles such as clashing customs systems.

But significant non-tariff and other barriers remain in a region marked by extremes in development levels, democratisation, and institutional capability.

A Southeast Asian diplomat conceded the single market vision is many years away but argued the declaration will help change ASEAN's "mental map" and provide momentum.

"We hope this will help the people and governments to think more and more on the basis of regional interests rather than purely national interests," the diplomat said.

ASEAN includes wealthy Singapore, one of the world's most developed countries, oil-rich Brunei, developing states like Malaysia, Indonesia, Thailand, the Philippines and Vietnam, and poorer nations like Cambodia, Laos and Myanmar.

Its members range from free-wheeling to controlled democracies, communist-ruled states and an absolute Islamic monarchy.

Najib on Saturday acknowledged much work remained, saying "non-tariff barriers, which affect daily life and employment across our nations, are too extensive".

Although ASEAN's plans were inspired by Europe, officials insist they want to pursue integration in a way suitable to the region's circumstances, and have ruled out a common currency.

US President Barack Obama praised the AEC and pledged American support.

Speaking Saturday, he called the declaration a "major step toward integrating economies and greater regional stability".

AEC will bolster income and employment, and provide the region with stronger economic muscle in facing the other giants, indicated Michael G. Plummer, a professor of international economics at the Europe Centre of Johns Hopkins University, based in Bologna, Italy.

"ASEAN integration will help balance the economic power of China and India," Plummer said. "Individually, ASEAN countries are, perhaps, too small to be important players in the economic and security game, but as an integrated group of more than half-a-billion people, they would be in the major league."

"The AEC is arguably the most ambitious economic integration programme in the developing world," Plummer added. "But implementation of the AEC is increasingly uphill. Much remains to be done and the region faces many challenges in finishing. The AEC is a process."

It falls short in more politically sensitive areas such as opening up agriculture, steel, auto production and other protected sectors. 

ASEAN citizens will be allowed to work in other countries in the region, but will be limited to jobs in eight sectors, including engineering, accountancy and tourism. This accounts for only 1.5 per cent of the total jobs in the region, and host countries still can put up constitutional and regulatory hurdles restricting the inflow of talent.

Intra-regional trade has remained at around 24 per cent of ASEAN's total global trade for the last decade, far lower than 60 per cent in the EU.

According to Plummer, progress has been slow in services liberalisation. Cross-border flow of investment is also restricted by large exclusion lists and caps on foreign ownership. 

Government procurement and curbing monopolies by state-owned enterprises are highly sensitive and untouched, he indicated.

Although the four poorer economies — Cambodia, Laos, Myanmar and Vietnam — have until 2018 to bring down tariffs, economic integration could further reinforce income equalities in the region, he said.

AEC "is not the finished article. Neither is it officially claimed to be. There is much work to be done", said Mohamad Munir Abdul Majid, chairman of a council that advises ASEAN on business matters. 

"There is a disparity between what is officially recorded as having been achieved... and what the private sector reports as their experience," he added.

There are also other hurdles, such as corruption, uneven infrastructure and unequal costs of transportation and shipping. 

A wide economic gulf divides Southeast Asia's rich and middle income economies — Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines — and its four less developed members, communist Vietnam and Laos, Myanmar and Cambodia.

The AEC was envisaged in 2002 — and a blueprint created in 2007 — to face competition from China and India for market share and investments. 

While China's economic growth is expected to slow to an average of 6 per cent annually over the next five years, India's expansion is likely to pick up to 7.3 per cent in the same period, according to the Organisation of Economic Cooperation and Development.

The AEC is one of the three pillars of the ASEAN community, which was created by the signing of the declaration Sunday. The other two pillars are political-security and socio-cultural.

MUMBAI — Hundreds of layoffs at several Indian start-ups have sparked fears the bubble is starting to burst for the country's e-commerce companies, amid claims by analysts that many of them are overvalued.

Restaurant search website Zomato, food delivery app TinyOwl and property portal Housing.com are all letting staff go, and experts are warning of echoes of the dot-com boom which crashed spectacularly in 2000.

"The valuation bubble is bursting. The valuations had reached levels where they were ridiculous and could not be justified at any level," said Arvind Singhal, chairman of management consulting firm Technopak.

Wealthy investors boosted by low interest rates have been lining up to lavishly back India's booming start-ups, with the government hailing the sector as proof of the country's entrepreneurial spirit.

Prime Minister Narendra Modi views online start-ups as key to providing jobs to aspirational young Indians, seeking to fuel the sector through a government campaign, "Start up India, Stand up India".

In September, he visited Silicon Valley calling on deep-pocketed investors to turn their attention to India's thriving start-up ecosystem, with large tech hubs in the cities of Bangalore, Hyderabad and Mumbai.

Yet despite the billions of dollars invested in recent years, most of India's online start-ups are yet to turn profits and investments are largely based on speculative future earnings.

"Investors are not looking objectively at the sector. They are just seeing a few success stories and ignoring the failures, just like they did in the dot-com era," indicated Paras Adenwala, investment consultant at Capital Portfolio Advisors in Mumbai.

Adenwala is concerned that once the United States' central bank starts moving on interest rates, as it has long been tipped to do, investors will be less generous with their cash, making the situation worse.

"You will see a lot of these start-ups falling by the wayside once the US Federal Reserve starts raising rates and funding dries up," he said.

Dramatic scenes 

Recent events at TinyOwl, Zomato and Housing.com suggest that not all is well.

There were dramatic scenes at TinyOwl's offices in Pune, in the western Indian state of Maharashtra, earlier this month when disgruntled staff refused to leave the building after losing their jobs.

They also held hostage a member of top management, who laid off 300 employees, preventing him from leaving for two days as they demanded the immediate payment of their severance deals.

TinyOwl co-founder and Chief Executive Harshvardhan Mandad said the redundancies had been necessary to get the start-up on a more sustainable footing.

"This has involved some difficult decisions for us as well, but we believe it's an integral step for the sustainability and growth of the business," Mandad added.

Housing.com recently fired 600 employees, according to widespread reports, and on Thursday announced there would be a "reorganising of the company", although it declined to confirm the layoffs.

Zomato, a so-called "unicorn" startup because it is valued at more than $1 billion, is laying off 10 per cent of its 3,000-strong staff worldwide, mostly in the United States.

An official for the New Delhi-headquartered company, which operates in 22 countries, said "the restructuring that led to the redundancies was based on a business call".

"I do not think that the pace of growth has suddenly slowed. Is the market correcting? Perhaps it is, and I guess it's about time that happened as well," added the official, who asked not to be named.

Some signs of consolidation are already evident in the highly competitive market.

Grofers, a "hyperlocal" grocery app that allows customers to order goods from corner shops online, last month made two acquisitions in a week, taking over its shuttered competitor Townrush and meal delivery service SpoonJoy.

And earlier this month Mumbai-based CarTrade, a portal for selling used autos, acquired its rival CarWale for an undisclosed sum.

Singhal, the Technopak chairman, sees the job cuts as part of an inevitable "evolution" of startups, where the early movers lacked well thought-out business models but successors will learn from their mistakes.

"It will encourage new start-ups with clearer plans," he said.

PARIS – France can withstand the financial shock of the Paris attacks, analysts say, despite people deserting big stores, shunning concert halls and cancelling hotel bookings.

Beyond the incalculable human cost, the experience of attacks in New York in 2001, Madrid in 2004, London in 2005 and Mumbai in 2008 shows the economic impact may be fleeting.

The November 13 jihadist shooting and bombings in the French capital, which killed 130 people and wounded hundreds more, led to an immediate 80 per cent plunge in concert ticket sales, an association of promoters said.

Shoppers also fled Paris’ iconic department stores Printemps and Galeries Lafayette, which reported customer numbers tumbling by between 30 and 50 per cent. 

Hotels, too, reported a slump in bookings.

Such reactions are likely to be transitory, however, analysts said.

After the March 11, 2004 Madrid train bombings, which killed 191 people and wounded nearly 2,000, the capital’s Complutense University estimated the cost to the city’s economy at 0.16 per cent of annual economic output and the cost to the country at 0.03 per cent of output.

In Britain, consumer confidence took a hit when four coordinated suicide attacks on three London underground trains and a bus killed 56 people. But a budding economic recovery continued, said analysts at BNP Paribas.

“In the similar attacks in Madrid and London, the impact on country-wide statistics and overall consumer confidence was relatively small,” said a report by Goldman Sachs.

‘Massive human cost’       

The Paris attacks differed, however, because they came only 10 months after gunmen attacked satirical weekly Charlie Hebdo, killing some of France’s most beloved cartoonists in a rampage that left 17 dead there and elsewhere in the city.

“While the terrorist attacks on Paris came at a massive human cost to the city and to France more widely, the sanguine reaction of the financial markets to the atrocities and past experience of similarly tragic events suggest the economic impact is likely to be limited,” BNP Paribas analysts Dominic Bryant and Gizem Kara said in a report.

“As this is the second attack on Paris in less than 12 months, however, there is some risk of a greater reaction than elsewhere, particularly as the French economic recovery has been relatively tepid,” they said.

In Mumbai, India, where gunmen stormed luxury hotels, the main railway station and other sites in November 2008, killing 166 people, businesses reported a plunge in profits and a wave of cancellations by tourists.

“The business climate was affected for several months,” said Ashutosh Data, economist at IIFL Institutional Equities.

“But the situation returned to normal after three to six months because, as terrible as the attacks may be, there was not a feeling that the country was becoming unstable,” he said. 

‘A major risk’       

Investors, too, are unlikely to shun France, said Muriel Penicaud, managing director of Business France, which promotes French business

“An investment is always a long-term decision linked to corporate strategy,” Penicaud said.

“The risk of an attack is a big concern in Europe and beyond Europe,” she added. “The need to invest in countries with talent, infrastructure, markets, remains very important to companies’ strategies.”

Consumption is recovering after the Paris attacks but the impact on tourism may last longer, said Philippe Gudin, analyst at Barclays.

“Attacks against civilians in a European country are likely to weigh on consumer confidence, a major risk in a situation where the main driver of growth in Europe is consumer demand, with other components of demand still very subdued,” Gudin said in a report.

“Tourism could be hurt more durably,” he said, with a likely impact on economic activity in the final quarter of 2015. “Longer term impacts are more uncertain,” he added.

It is still too early to draw conclusions about the longer term impact, the analyst cautioned, citing an apparently growing international threat of attacks by Daesh jihadists.

Gudin noted in particular the twin bombings in Beirut this month that killed 44 people and the bomb attack on a Russian passenger jet over Sinai last month that claimed the lives of all 224 people aboard, both claimed by the Daesh jihadist network.

“In addition to the Paris attacks, other recent terrorist attacks including the attacks in Beirut and its suspected downing of a Russian passenger airliner in Egypt show that the threat from Daesh is intensifying and spreading and that geopolitical risk is a growing downside risk to global growth,” Gudin said.

“Therefore, any comparison with previous terrorist attacks such as in Madrid in 2004 and London in 2005 is not necessarily relevant.”