Business

BRUSSELS — Europe's economy will strengthen if countries invest in efforts to cope with the refugee crisis, the president of the European Central Bank told EU lawmakers on Thursday.

The tide of migrants, the biggest movement of people in Europe since World War II, will deeply change the social texture of the continent, but "if properly managed, if there are investments in this change, the Union and the euro area will emerge stronger in due time", Mario Draghi told the economic and monetary affairs committee of the European Parliament in Brussels.

Last week, the European Commission, the EU's executive arm, said it expected some 3 million asylum seekers to arrive in the European Union by 2017, and predicted a boost for the EU's economic output in the longer term if migrants were integrated into the workforce.

Draghi said public investments were required to deal with the crisis, but that it was "premature to say by how much governments' deficits will have to expand in order to invest in this development".

"We do not have a completed analysis on this problem. We are working on it," he told the lawmakers.

The European Commission is expected next week to release a first analysis of the cost of the crisis in affected countries in Europe, which may grant fiscal leeway to euro zone states that can prove that their public finances have been hit by the migrant crisis.

In his address to the committee, Draghi also praised EU leaders' efforts to deal with the crisis. "It is evident that our leaders have shown both humanity and vision in coping with this problem," he said.  

ISTANBUL – When Turkey's government increases the minimum wage by around 30 per cent in January it will make good on an election promise to millions of workers currently struggling to make ends meet.

But unless it introduces strong countermeasures to soften the impact of such a steep rise on an uncompetitive and inflation-ridden economy, it also risks setting itself on a collision course with domestic employers and international investors.

The hike, re-affirmed by Prime Minister Ahmet Davutoglu following the November 1 vote, will be the biggest since 2003 and mean higher wages for around a fifth of the 26 million-strong workforce, according to official data.

But Turkey's labour productivity already trails far behind the European average while the government struggles to convince investors it is serious about fiscal discipline.

So for some the multi-billion-dollar plan — a campaign pledge by the ruling AK Party for the parliamentary election in which it regained an outright majority — is economically unjustifiable.

"Labour productivity does not justify any major increase in salaries," said Umit Ozlale, economics professor at Istanbul's Ozyegin University.

"The increase in productivity has stayed below real wage growth for the last years and a further increase in wages will worsen the already low competitiveness of the manufacturing sector."

The wage hike would be likely to cost Turkish companies around 26.4 billion lira ($9.2 billion), or roughly 1.5 per cent of GDP at 2014 prices, he said.

Annual growth in real wages has averaged 5 per cent over the last five years, while labour productivity increased by just 1.5 per cent a year during the same period, state statistics institute data shows.

Arguing the government should pay for the new increase, some in the private sector are already warning of ballooning costs and job cuts.

"A third of sales revenue goes to wages in the tourism industry, above that level and the alarm bells will ring," said Timur Bayindir, the head of Turkey's main hotels industry association.

"If we pass wage hikes onto our prices we lose our competitiveness in the Mediterranean region. Before new wages are implemented we may see job cuts."

Low wages, low added value 

Turkey's minimum wage earners are largely concentrated in labour-intensive industries manufacturing goods with low added value for export, such as textiles and processed food and services. Manufacturing goods make up more than 90 per cent of the country's $160 billion of annual exports.

Someone on the current minimum net monthly wage of 1,000 lira ($350) costs his employer 1,496 lira, including social security contributions.

The government could help ease the added burden by lowering those contributions, said Ibrahim Caglar, chairman of the Istanbul Chamber of Commerce.

"The rise in the minimum wage will help employees and revive markets. However, a cut of three per centage points in the social security payments would help relieve employers," he said.

Finance Minister Mehmet Simsek, an advocate of fiscal discipline, has said the government might be willing to help.

"There may be some incentives... but the majority of the burden from the wage increase will be on the private sector's shoulders" he said in a television interview last week.

'Pure populism'

Economists argue that such a big increase in the minimum wage will create a negative supply shock, meaning higher costs for employers, entrenched inflation inertia and increased unemployment, which would boost unregistered labour.

"That, of course, is the last thing the economy needs, or the last thing we should be debating," said Murat Ucer, an economist at consultancy Global Source Partners. "It is pure populism and makes terrible public policy."

A senior official suggested the government's hands were tied by the election pledge, which was designed to match a similar proposal from the centre-left opposition CHP.

"The private sector is very, very angry because we're increasing their salary cost. We're trying to find a way to share the cost... but we have to be careful about budget discipline," the official told Reuters.

Many minimum wage earners have good reason to look forward to the rise.

"An extra 300 lira will mean not going to a second job at night and not working 14 hours a day," said Mustafa Gungor, who works for a private cleaning company. "I am looking forward to it, but on the other hand I also fear losing my job."

And the extra spending power will fade sooner than he might hope, with the wage hike almost certain to fuel annual inflation that, at around 8 per cent, is already overshooting the central bank's 5 per cent target.

AMMAN — Chinese Ambassador to Jordan Gao Yusheng has proposed a set of measures Jordanian policy makers can consider to lure larger numbers of tourists from this Asian country into the Kingdom, which he said is rich of historical and tourist attractions.   

The ambassador said Jordan should be reconsidering the cost of visas on Chinese tourists coming to Jordan, increasing the number of Chinese restaurants and securing translators or offering Chinese language courses to tourist guides.

Official Chinese figures show that around 119 million Chinese tourists travelled abroad in 2014; this year, 120 million are expected to make visits outside the country. 

In 2014, only 9,000 tourists came to Jordan from this Asian country, according to Ministry of Tourism figures.

The ambassador, who was speaking at a session on the future of the Jordanian-Chinese economic cooperation organised by the Economic and Social Council (ESC), said the Jordanian-Chinese University is the first joint academic institution China has ever established abroad, Chinese Ambassador to Jordan Gao Yusheng said recently, adding that the deal would never have been reached without the intensive efforts of His Majesty King Abdullah.

In an ESC statement to The Jordan Times, Yusheng was also quoted as saying that the university will begin receiving students at its temporal premises as of the beginning the next academic year until its permanent building is completed in the Jiza region on the airport highway. 

"The university will be established on a 1,000-donum land. Under the agreement, Jordan will offer the land and infrastructure while the cost will be covered by the Chinese government," the ambassador said, adding the facility will focus on technical courses to meet the labour market needs in Jordan and the region.

He also said that China owns 45 per cent of shares in the Jordan Oil Shale Company at a value of $990 million, adding that China has signed agreements worth of $1.6 billion to implement renewable energy projects in Jordan.

Yusheng also said that China will finance 50 per cent of Jordan's nuclear plant which will be implemented by a Russian firm. "Russia was supposed to cover 100 per cent of the total cost of the project under the talks between Jordan, Russia and China. As a result of Russia's current conditions, tri-lateral talks concluded that China bears 50 per cent of the cost."

Yusheng also cited Jordan's security and stability as an added value in attracting Chinese investments, especially under the China Silk Road Route.

The New Silk Road, also known as the “One Belt One Road Initiative” is China’s current foreign policy priority. Beijing has pledged to invest more than $200 billion in Silk Road projects across the globe. This includes road, rails, oil and gas pipelines, ports and other infrastructure projects.

For his part, ESC President Munther Shraa said that Jordan's strategic location makes it a logistic route for the international trade, also citing the Kingdom's security and stability in attracting investments.

AMMAN – Policymakers, bankers and experts from development agencies  gathered on the eastern shores of the Dead Sea for two days, and discussed ways to deepen the dialogue on improving access to financial services and economic perspectives of enterprises and households. 

According to a statement issued by the Central Bank of Jordan (CBJ), said that more than 120 regional and international policymakers, alongside leaders from international organisations and the private sector convened over two days  to deepen the high-level policy dialogue, which was launched in Berlin in April 2015. 

Greater access to basic financial services promotes social well-being, stimulates growth and jobs, thus shared prosperity, the experts said, indicating that in the Arab region,  only a very limited number of households and enterprises can use adequate financial services at low cost to save, invest, make payments, or to protect themselves, according to the statement. 

Unemployment among young adults is another core challenge.

The event, entitled Financial Inclusion and Employment in the Arab Region, was organised by the CBJ, the Arab Monetary Fund (AMF) and the German Society for International Cooperation (GIZ). 

The focus of the two-day event was on strategies for financial inclusion and on financial sector reforms that enable small and medium enterprises (SMEs) to flourish, as they are major contributors to employment and economic growth.

The conference witnessed the CBJ officially initiating the process of developing the financial inclusion strategy for Jordan in cooperation with other relevant stakeholders, said the statement, adding the AMF and GIZ will assist the Kingdom and other partner governments across the region in their policy change processes towards more inclusive financial sectors.

The CBJ said that Jordan takes the regional lead in speeding up policies to enable more people and firms to make use of a range of affordable financial services.

AMMAN – There are 29 private jets registered in Jordan, representing only 3.7 per cent of the Middle East's fleet, according to Gama Aviation.

The global aviation services company said, in a report sent to The Jordan Times this week that 65.5 per cent of the private jets are medium to large-sized aircrafts, adding six of the fleet in Jordan were delivered between 2010 and 2014. 

In regards to the region, the UK-based company, said there are currently 792 business aircrafts, 176 of which were delivered between 2010 and 2014. 

Compared to the rest of the world, the Middle East has a much bigger focus on mid to larger sized business aircraft as nearly 59 per cent of its fleet is classified as medium to heavy, and 11 per cent as business jet airliners.  The figures ratios to the global fleet are 29.8 per cent and 1 per cent respectively, said the report.

The region's share of the global business fleet was estimated by Gama Aviation at 30.9 per cent as there are 47,507 private jets internationally. 

Saudi Arabia has the biggest fleet of business aircraft in the Middle East, with 188 (23.7 per cent of the region’s total), followed by Turkey (157 and 18.5 per cent) and the UAE (135 and 17 per cent).  These three countries also accounted for 71 per cent of all business aircraft deliveries between 2010 and 2014, the analysis of Gama Aviation said.

“The Middle East business aviation market is rapidly developing and is one of our major focus areas, which is why we are expanding our operations at the Sharjah International Airport," said Martin Ringrose, Gama Aviation’s managing director for the Middle East region, adding the company expects to see the number of business aircraft in the region — especially the larger ones, to increase.

Gama Aviation is exhibiting at the Dubai Airshow which started on November 8 and runs until Thursday.

A recent research from Global Jet Capital, a provider of financing solutions for large-cabin, long-range private jets, revealed there are around 62 aircraft of this size for sale in the Middle East, with a combined value of around $646.9 million.

Indicating that there four mid and heavy jets are listed for sale in Jordan, the research of Global Jet Capital, e-mailed to The Jordan Times, said there are some 19 of aircraft are registered in Saudi Arabia, and 18 are in the UAE are for sale with the remainder is spread out across the Middle East. 

The finding said around 11 per cent of the fleet in the Middle East is currently on the market for sale. 

The aviation finance specialist, which said it has around $1 billion to lend to clients to purchase relevant business aircraft in the Middle East and elsewhere around the world. 

“Over the long term we expect to see growth in the sale of mid to large sized business jets in the region, and we are well positioned to meet the finance demand to help facilitate this. Many potential clients will be looking to upgrade to a more modern aircraft, but as the region’s wealth increases, we expect to see more first-time buyers,” said Shawn Vick, executive director of Global Jet Capital. 

AMMAN — Inflation in the first 10 months of 2015 went down by 0.7 per cent, compared to the same period of 2014, the Department of Statistics (DoS) announced Wednesday.

Main item groups that contributed to the drop are transportation (14.4 per cent), fuel and lighting (12.9 per cent), beverages (1.6 per cent), beverages (1.1 per cent) and personal objects (3.4 per cent), according to a DoS report sent to The Jordan Times.

In contrast, main item groups that witnessed an increase in their prices during the past 10 months included rents (5.1 per cent), fruits and nuts (6.3 per cent), tobacco and cigarettes (3.7 per cent), and education (3.3 per cent).

DoS also noted that average consumer prices went down by 1.2 per cent in October 2015, compared to the same month of 2014.

AMMAN — Industry and Trade Minister Maha Ali on Tuesday urged Cypriot businesspeople to consider investment opportunities available in Jordan and ways to benefit from them, in the best interest of the two countries.  

Speaking at the opening of the Jordanian-Cypriot Business Forum, Ali highlighted the incentives offered to investors and sectors where there are numerous investment opportunities, such as ICT, healthcare, education and renewable energy.  

She added that the event represents a chance to increase cooperation between the two countries, especially in the areas of trade and investments, according to a ministry statement. 

The minister underlined the need for joint efforts to increase trade and to stimulate the private sector to benefit from the available opportunities.

Also speaking at the forum, Cypriot President Nicos Anastasiades thanked the Amman Chamber of Commerce and the city of Pafos for organising the event, highlighting economy, transport, trade and tourism as fields for expanding cooperation, the Jordan News Agency, Petra, reported.

He urged businesspeople from the two countries to explore opportunities for joint investments.

Anastasiades said he looks forward to holding talks with His Majesty King Abdullah on Wednesday to discuss regional developments and bilateral ties, according to Petra.

Ali highlighted challenges in Jordan in light of regional conditions, mainly the socioeconomic repercussions of the crisis in Syria, noting that the Kingdom currently hosts around 1.4 million Syrians.

Due to border closures, Jordan has not been able to reach conventional markets and is currently looking into ways to penetrate non-conventional ones, she said, according to the ministry statement.

Ali highlighted the country’s efforts to open new markets for Jordanian products and reach new consumers, within the framework of free trade agreements signed with its  commercial partners.

WOLFSBURG, Germany — Fitch ratings agency on Monday cut Volkswagen's (VW) credit rating by two notches, saying that a widening pollution cheating scandal has exposed weak corporate governance at the German auto giant.

"We believe that the emergence of a fraud of this magnitude, going either unnoticed or uncorrected by top management for so long is not consistent with a rating in the 'A' category," said Fitch.

The agency added that it had therefore downgraded Volkswagen to "BBB+" over the "corporate government, management and organisational issues highlighted by the ongoing emission test crisis".

VW is engulfed in a huge pollution scandal that was initially centred on so-called defeat devices, sophisticated software fitted into diesel engines to skew the results of tests for nitrogen oxide emissions.

The carmaker has admitted to fitting 11 million diesel engines worldwide with the rogue software, triggering both regulatory and criminal investigations in several countries, including Germany and the United States.

But last week, Volkswagen revealed that beyond the nitrogen oxide scam, it had also understated carbon dioxide emissions of 800,000 vehicles, including petrol cars.

The latest revelations give rise to "the possibility of further problems still to be uncovered", said Fitch, as it put VW on negative watch.

In a protest Monday, environment group Greenpeace added a "C" and "2" on either side of the company's circular logo at the entrance of a factory in Wolfsburg, forming "CO2", and hung a banner bearing the slogan "The Problem" next to it.

Consumers want vouchers 

As Volkswagen prepared to recall millions of cars to remove the defeat devices, Germany's transport ministry said Monday that out of the 2.4 million affected cars in the country, around 540,000 would require hardware repairs.

Volkswagen had earlier said that the repair work required for the 11 million cars could range from a simple software tweak to a major engine overhaul.

VW's former chief executive Martin Winterkorn quit in September at the height of the storm over the pollution cheating. 

According to press reports, targets on technical performance and costs set by Winterkorn had pushed engineers to resort to fitting cheating devices in the vehicles.

Volkswagen has said the carbon emissions cheating was revealed by the group's employees. "The question of how we got there is the subject of an investigation," the group said.

Meanwhile, Germany's consumer association wants auto giant Volkswagen to give compensation vouchers to German customers affected by its massive pollution cheating scandal, as the company has offered to do in North America.

"The group must assume its responsibilities," said Klaus Mueller, president of the Federation of Associations for the Protection of Consumers, in an interview with the Rheinische Post newspaper on Monday.

"A voucher is the minimum that the company can give to compensate affected consumers,"
he added.

Mueller's call came after a US website reported that VW is planning to offer pre-paid cards worth up to $1,250 (1,160 euros) to affected American customers as part of a "goodwill package".

Part of the sum can be used only at VW dealers for the purchase of a new car or accessories, while the remainder can be spent elsewhere, according to the site "The Truth About Cars".

VW confirmed that it was offering vouchers to customers in the United States and Canada, without giving details of the sums involved.

A spokesman said the company was developing "an individual package for each market" and that for Germany, consultations were ongoing with the authorities.

LONDON — A sales push by Saudi Arabia into north Europe's refineries, a step into rival Russia's backyard, piles fresh pressure on oil prices already struggling against oversupply.

Stung by Russia's success in supplanting it in the giant Chinese market, Riyadh has embarked on a charm offensive in Europe, cutting its prices for December by more than it has in any other region to their lowest since 2009 during the financial crisis.

Saudi Arabian barrels rarely venture north of the Mediterranean, into the home turf for Russian, African and North Sea crudes. 

As a result, the kingdom's success in luring away buyers of rival Russian Urals crude in Poland and Sweden is having an outsized knock-on impact on the market for a wide range of other crudes in the region.

Refiners averted a price drop from a similar build up of surplus oil in spring, snapping up cheaper crude to feed a surge in gasoline demand.

But this time there is a glut of refined fuel too. The crude surplus is matched by an overhang in oil products which means refineries will not be able to come to the rescue by absorbing the extra.

"The first half of next year looks like a distinctly dangerous period for oil bulls," brokers PVM Chief Executive David Hufton indicated in a note. "It could be the period when tank tops are reached, leading to a price meltdown."

Homeless barrels are again collecting in the Atlantic market, this time dragging crudes of all kind into a price war that is making $50 a barrel an increasingly impenetrable barrier for benchmark Brent futures.

"There isn't any denying that the fundamentals are pretty bearish," said Citi analyst Chris Main. "You've got an overhang of cargoes, and it will weigh on the benchmark."

Saudi Arabia's fresh European sales have displaced only a small amount of Urals, a heavy grade that has not faced much threat from the year's excess that has centred on lighter US shale oil. But they suggest a new front in the battle for market share between the two giant producers.

Saudi Oil Minister Ali Al Naimi on Sunday said demand for oil worldwide would soon reflect the attractiveness of current prices, noting Asia as key to the growth.

Urals heads east

Russia's post-Soviet high of 10.78 million barrels per day (bpd) of oil production helped triple the discount of Urals versus dated Brent in just three months to reach 17-month lows.

And as Iran prepares to ramp up sales when and if Western sanctions are lifted next year, the overhang is only likely to aggravate further.

Discounted Urals cargoes are now muscling out British Forties crude, the largest of the four North Sea streams that make up the dated Brent benchmark.

At least three of the seven supertanker (VLCC) fixtures booked from the North Sea to Asia in November are loading Russian, rather than the North Sea crudes that typically sail.

"What is amazing is to see Forties is still pretty weak despite all the barrels that are going to the Far East," Petromatrix analyst Olivier Jakob said. "If we did not have those VLCCs going to Asia, it would be a bloodbath."

Forties price differentials are close to their lowest in five months, having traded at a discount to the dated Brent benchmark more often in 2015 than at any time in the last 20 years, and differentials for a string of crude oil grades now stand at multimonth lows.

Azeri crude price differentials have also more than halved over the past month to an annual low, while premiums for Nigeria's Qua Iboe have also lost half their value.

A physical excess of more than 60 million barrels of Nigerian oil, and North Sea output at two-year highs, along with nearly full diesel, gasoil and jet fuel tanks in Europe that have already pushed cargoes into floating storage, will only add to the pressure.

Separately, the oil and gas minister of Oman didn't pull any punches at ameeting this week after the United Arab Emirates (UAE) said it would increase its oil production despite low worldwide prices, 

"This is [a] man-made crisis in our industry we have created. ... And I think all we're doing is irresponsible," Mohammed Bin Hama Al Rumhy said as his Emirati counterpart forced a smile next to him.

Even among friends, the bottoming-out of oil prices, which are down more than 50 per cent since the middle of last year, has strained budgets and relationships alike across the Gulf and other oil-producing countries.

And while Emirati officials at the annual Abu Dhabi International Petroleum Exhibition and Conference said Monday they believed prices will head back up into next year, others offered a more pessimistic view.

"It's a movement of an era of scarcity to one of abundance; it's a movement from a world of unexpectedly strong demand and tight supplies to a world of ample supplies, even oversupplies, and weaker demands," said Daniel Yergin, vice chairman of IHS and the author of a Pulitzer Prize-winning book on the history of oil.

"OPEC's not the only balance of the market. The United States is back in the role of swing producer, a role it hasn't exerted in six decades," he indicated.

Fluctuating oil prices are nothing new, but this time the US has found itself roaring back into the industry with the mass production of shale oil and reduced dependence on imports.

US shale, a weakening economy in China and other factors have pushed prices down. 

On Monday, Brent crude, a benchmark for international oils, was at $47.63 in London, down from well over $100 a barrel last year.

While the US production has dialed back due to low prices, even more oil will soon enter the market, including an expected flood of Iranian exports once sanctions are lifted under a landmark nuclear deal.

Despite that, the Emirati energy minister said he believed prices would rise in 2016, even as his country planned to ramp up production to 3.5 million barrels of oil a day from a current 2.9 million.

The Emirates was the world's sixth-largest oil producer in 2014, according to the US Energy Information Administration. 

That 3.5 million barrel production will come in the "next two to three years", said Abdulla Nasser Al Suwaidi, the director general of the Abu Dhabi National Oil Co.

"We are hopeful that we will see in 2016... a correction," Emirati Energy Minister Suhail Mohammed Al Mazrouei said. 

"Don't ask me how big, that's for the market to decide. Don't ask me who is going to play that role. It's not going to be OPEC only. This is an international effort. Everyone has a role to play," he added.

But speaking in Qatar at the same time, Saudi Prince Abdul Aziz Bin Salman Bin Abdul Aziz, deputy minister of petroleum and mineral resources, cautioned against making too many cuts amid the swing in prices.

"As we saw back in 2008, high oil prices proved to be unsustainable, and the price fell sharply following the great financial crisis. But this works in the opposite direction," the prince said, according to a copy of his speech carried on the state-run Saudi Press Agency. 

"A prolonged period of low oil prices is also unsustainable, as it will induce large investment cuts and reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise," he added.

None of that placates Oman's Al Rumhy, whose country is the biggest Mideast oil producer outside of OPEC with around 1 million barrels a day. 

Oman has been highly skeptical of OPEC, led by Saudi Arabia, which has kept its own production high, further depressing prices.

"It's like you and your wife at home, cooking for 10 people and you eat a little bit and the rest of it you throw it in the dustbin," Al Rumhy said. 

"I cannot justify that, that this loss is by the grace of God. This loss is because we are not responsible. We are waiting for the cyclone that is hitting us to change course. And it will not happen," he added.

His comments drew sustained applause in Abu Dhabi, with his Emirati counterpart responding that the low prices are everyone's responsibility. 

Yet even afterward, surrounded by reporters, Al Rumhy kept up his criticism, while smiling and saying: "They're my friends."

AMMAN — The Arab Monetary Fund, the Central Bank of Jordan and the GIZ announced in a press satement on Monday that a conference on financial inclusion and employment in  Arab countries will be launched today.

The conference is in partnership with the European Union, the Alliance for Financial Inclusion, and the Consultative Group to Assist the Poor.

"The conference will discuss a number of topics and themes related to the importance of financial inclusion for the region in job creation through the identification of the role of national strategies in financial inclusion, the policies and requirements to support access to finance for small and medium enterprises, as well to the need for the development of innovative financial services," the statement indicated.

Specific panels will tackle issues related to the new financing instruments and channels, non-financial services for small and medium-size enterprises (SMEs), digital finance for SMEs alternative risk management, gender finance; secured lending,credit registries and credit guarantee schemes.

A training workshopwill be organised on Wednesday to reinforce the capacity building of the participants from Arab central banks in the development and implementation of national strategies for financial inclusion, and the identification of the necessary steps to do so.