Business

LONDON — The three biggest sovereign wealth funds (SWFs) of oil-producing countries have been selling European equity holdings since May, a study showed this week, another sign of petrodollars being withdrawn from world markets.

Asian funds have meanwhile continued to add European equities, according to the data from Nasdaq Advisory Services, which provides analysis on shareholder and investor activity.

Since May, the Saudi Arabian Monetary Authority has sold $1.2 billion worth of equities across Nasdaq’s European client base. That accounts for 13 per cent of its $9.2 billion holdings in the European companies tracked by Nasdaq.

Norway’s Norges Bank Investment Management has sold $1.1 billion, around 2 per cent of the $57.5 billion market value of its holdings, while the Abu Dhabi Investment Authority has cut some $300 million worth of shares from its $3.6 billion holding.

“Over 2015, the three largest oil-dependent SWFs have all been reducing their equity holdings in the region, with this trend accelerating over the second quarter and into the third quarter of the year,” indicated Alexander Free, an analyst with Nasdaq’s Advisory Services.

The data is based on a sample of 159 European companies, with a market value of $1.87 trillion, Nasdaq says. They range from retail and telecoms shares to financials and utilities.

Falling oil prices, Brent crude is over 60 per cent cheaper since summer 2014, are pressuring oil producers to rein in spending or liquidate assets.

Recycling

Energy-exporting countries pulled money out of world markets last year for the first time in almost two decades, halting the “recycling” of oil windfalls, BNP Paribas has said.

This year exporters will use up the $750 billion earned from oil and also dip into central bank and sovereign warchests for an additional $100 billion, according to a JPMorgan (JPM) study.

Bond purchases by sovereign and foreign exchange reserve managers will decline by $90 billion between 2014 and 2015 while equity buying will fall $200 billion, JPM indicated in a note.

Saudi Arabia’s central bank, which serves as the wealth fund of the world’s top oil exporter, has been drawing down its reserves since late 2014. Its net foreign assets fell by $6.6 billion in August as investments were liquidated to plug a budget gap.

“It’s a pretty dire situation,” Free said.

Norway is expected to make a net withdrawal from its sovereign wealth fund this year for the first time since the SWF was set up, to help pay for tax cuts designed to stimulate the economy. Its $830 billion fund is the world’s largest, holding about 1.3 per cent of global stocks.

Their withdrawal from markets may be partly offset by energy importers, however, with JPM estimating that oil savings would lead to “a positive flow change” of $90 billion for bonds and $30 billion for equities.

The Nasdaq report showed that the three biggest non-commodity-driven sovereign funds have been net buyers of European equities, particularly China’s SAFE, which holds about $35.6 billion worth of the Nasdaq sample.

SAFE started buying heavily in Europe from the first quarter of 2015, acquiring $2.1 billion of the shares tracked by Nasdaq. 

Singapore’s Temasek and GIC have also acquired a combined $1.1 billion of European equities so far this year, Free indicated.

He suggested their interest may stem from a search for better valuations as US equity prices surged to pre-crisis levels, while the European Central Bank’s money-printing programme also lent support.

AMMAN — Hikma Pharmaceuticals, a renowned Jordanian pharmaceutical manufacturer, announced on Tuesday in a press statement that it held a cornerstone laying ceremony at the site of its new headquarters in Bayader Wadi Al Seer. 

"The new headquarters, scheduled for completion by early 2018, aims at underscoring the company’s recent rapid expansion and growth," the statement said. 

Greater Amman Municipality Mayor Aqel Biltaji headed the ceremony which was attended by Said Darwazah, chairman and chief executive officer; Mazen Darwazah, vice chairman, president and chief executive officer of Middle East and North Africa (MENA) and emerging markets, Mazen Darwazah, members of the board as well as the executive team, in addition to media representatives. 

"Selected by Hikma founder, Samih Darwazah, before his passing, the building’s design represents his vision for the company and his unrelenting pursuit of continuous growth and expansion," the statement added.

As part of the ceremony, Khalil Fakhoury from Dar Al Handasah Group, the new headquarters’ designers and consultants, gave a presentation on the project and its structural phases. 

Emerging as one of the few green buildings in Jordan, the new headquarters will boast innovative green technology in efforts to increase the efficiency with which resources such as water and energy are used in order to minimise negative environmental effects. 

“Since its foundation almost 40 years ago, Hikma Pharmaceuticals has been guided by Samih Darwazah, towards the forefront of innovation in the pharmaceutical industry,” commented Mazen Darwazah. 

“Having experienced a period of rapid growth around the world, we’re delighted to be laying the cornerstone of our new world-class headquarters, from which we will continue to deliver on our mission to improve people’s lives. In line with our commitment towards environmental conservation, we’re looking forward to having a green headquarters, which takes us one step further in our ongoing efforts to increase our reliance on renewable energy,” he said.

AMMAN — Ubour Logistics Services is functioning at a loss as operational expenses and depreciation outstrip the company's earnings.

According to mid-year and annual financial statements, revealed in disclosures to the Jordan Securities Commission, Ubour's financial performance was in the red at the end of June 2015, June 2014 and the end of last year and 2013.

As a result, accumulated losses reached JD1.3 million at the end of June 2015, with the independent auditor indicating that the company was under weak liquidity as its current liabilities exceeded current assets by JD374,135 as of June 30, 2015.

As a Jordan-based company engaged in the field of land transportation, the company offers several types of logistics and truck transportation services for general cargo, foodstuff, commodity, cars and vehicles and containers. It employed 23 workers at the end of last year.

The auditor, Int'l Professional Bureau Consulting & Auditing, said in a report to the shareholders that it was not given  confirmations for the receivable amounts owed to the company from commercial debtors and for payables due to business creditors.

Moreover, the auditor did not receive confirmations for related party transactions involving not only payable amounts, but also receivables that have been carried forward from previous years and for which a JD82,723 provision has been taken.

Int'l Professional Bureau Consulting & Auditing added that it was unable to assess the fair value of an investment in Al Ahlia Enterprises covering 85,276 shares estimated at JD91,755 because trading in Al Ahlia shares was suspended in 2010.

"Ubour did not appraise its vehicles and we could not verify the fair value of trucks and trailers," the auditor wrote in the report, noting as well that the company did not acquire the title of vehicles which were purchased through a finance lease contract that expired on December 28, 2013.

This issue was raised during a general assembly meeting in May when a  shareholder inquired about the developments of a lawsuit filed by Ubour against Al Faouri Trading Company.

Ubour's legal counsellor told the general assembly that a lawsuit was filed against 14 former members of the company's board of directors accusing them of abuse of office, manipulating and squandering the funds of public shareholding companies and shareholders, dereliction of duties and reckless management.

He said the lawsuit was still under review and covered the following four issues:

— Buying trucks at manipulated and unreal prices and transferring money to the agent without being in hold of the trucks

— Investing and managing the surplus liquidity in a way that led to considerable loss

— Losses that ensued from the loan obtained from the Comprehensive Leasing Company

— An agreement for supplying truck spare parts and cancelling it afterwards without retrieving  the value of the agreement and the cheques that were written in favour of suppliers. 

Responding to a request for clarification about the exemption from customs granted to the company and the number of trucks entirely owned by Ubour, Vice Chairman Nidal Azar replied that the exemption had expired  and that a request was submitted to the Jordan Investment Commission for its renewal.

Azar said that out of 30 trucks owned by Ubour, only 18 were running as the remaining 12 were inoperative needing costly gearboxes.

"Why not sell the trucks and shift to another business?," asked another shareholder, Majd Jalal Abbasi.

The vice chairman answered that it was very difficult to sell the trucks in the local market because spare parts were not available, noting also that the trucks were subject to the investment promotion law.

Abbasi countered that the trucks can be sold abroad and expressed readiness to help in such a sale.

The company described competition as very tough mentioning in the 2014 annual report that it competes with specialised firms and that about 16,000 trucks, most privately owned, operated in the Kingdom.

"Most of those trucks run on the Amman-Aqaba-Amman route  to transport all kinds of Jordan's imports and that causes stiff competition in determining transport charges," the report said.

It noted that a slight improvement in transport charges occurred at the end of 2013 due to economic and political reasons surrounding the Kingdom.

Even so, the company indicated that the decision of the Transport Regulatory Commission and the Ministry of Transport limiting, to a maximum of nine, the number of monthly journeys per truck to and from Aqaba and applying  the queuing system in Aqaba Port affected its transport earnings.

The report showed that Ubour relied 100 per cent on Al Hamaydeh Transport Company to operate its trucks.

"The company contracted a domestic operator to run the trucks in exchange for JD1,320 monthly per truck," it said. "Under an agreement with the same party, a JD60,000 was to be spent on maintaining the trucks and keeping them in operation."

But, the report added, the maintenance could not be achieved as hoped for because spare parts were not available locally and had to bought from the Isuzu agent in Saudi Arabia.

Nevertheless, Ubour's management aims to enhance the performance of the company with new trucks in order to double income and try to lower losses as much as possible.

"The management looks to higher profitability through renewing current operations contract and securing new transport deals," it continued. 

Financially, Ubour's balance sheet as of June 30, 2015, showed net property and equipment at JD1.8 million out of JD2 million in total assets.

Notes accompanying the balance sheet also showed that the company was sued for JD92,400 and that shares within the company's portfolio of financial assets were under lien.

At the end of 2014, Abbasi, Azar, Mohammed Marwan Al Haddad, and Waheed Khalil Fazaa' were the main Ubour shareholders.

AMMAN — Amman Chamber of Commerce's (ACC) board of directors and Pafos Mayor Phedon Phedonos on Tuesday discussed ways to develop commercial and investment relations between Jordan and Cyprus at the private sector level.

At a meeting, held at the ACC headquarters, both sides discussed the possibility of signing a cooperation agreement between ACC and its peer in Pafos on the sidelines of a scheduled visit of the Cypriot president to Jordan next month.

They also discussed marketing Jordanian products and services in Cyprus to enhance the trade exchange volume, especially that the Kingdom has several goods of high quality and technical standards, in addition to discussing cooperation in the fields of energy and natural gas.

ACC President Issa Murad called for increasing the trade exchange volume between the two countries, noting that Jordan's imports from Cyprus during the first seven months of this year stood at JD6 million, while the Kingdom's exports to the European island were very little.

Jordan has several products and services that can cover the needs of the Cypriot market, such as medicines, phosphate, potash, fertilisers and Dead Sea products, he noted.

The ACC president also called for establishing joint investment projects, stressing that the Kingdom's political and security stability enhances investors' trust in the business environment, which provides a lot of incentives for businesspeople. 

Phedonos noted that there are a lot of Jordanian investors in Pafos and they enjoy all necessary support and facilities, stressing the importance of attracting investors from Pafos to Jordan to have mutual relations with reciprocal benefits. 

It is essential for Jordan and Pafos to sign an agreement to avoid dual taxation, noting that his city is a signatory to such agreements with 55 countries, the city mayor added.

He also referred to a visit by a Cypriot business delegation to the Kingdom on November 9, in synchronisation with the Cypriot president visit, to hold meetings with Jordanian counterparts to enhance commercial exchange between the two countries. 

AMMAN — Ras Al Khaimah Free Trade Zone executives on Monday offered Jordanian investors and businesses the opportunity to start operations at the zone.

The executives met with over 100 Jordanian investors and businesspeople, and reviewed with them  investment opportunities in the zone. 

Ramy Jallad, acting chief executive officer of Ras Al Khaimah Investment Authority, said the potential is high for attracting investors from Jordan to open companies in the zone, which offers a wide variety of incentives and facilities.

At present,  more than 8,500 companies registered in the zone operate in 50 different fields that include industry, services, IT, commerce, consultations, among others.

Of the total , there are about 250 Jordanian companies whose businesses include  garment, export and import services, IT, general services, among others, Jallad told reporters Monday.

There are also 250 Jordanian companies that also operate outside the zone, said Jallad.

Sheikh Ahmad Bin Saqr Al Qasimi, chairman of the RAS Al Khaimah Investment Authority, highlighted the incentives offered by the zone, stressing that attracting more investments will help increase the $1 billion annual trade exchange between Jordan and the United Arab Emirates (UAE).

Al Qasimi emphasised that there is a large room for increased economic cooperation between the two sides.

Reviewing benefits of starting businesses in the zone, Al Qasimi said cost of living in Ras Al Khaimah is at least 25 per cent less than in other emirates in the UAE. In addition, there are exemptions from taxes in the country.

The UAE, he said, is signatory to several agreements with several countries across the world to avoid double taxation.

Al Qasimi added that the cost of starting a business in the zone is 25-50 per cent less than that in other zones in the UAE.

Noting that  the zone was created in 2000, he described it as one of the fastest growing zones in the UAE.

Also Monday, the authority signed a memorandum of understanding with the Jordan Chamber of Commerce to enhance cooperation between the zone and the chamber, and holding regular mutual meetings to further deepen ties.

The memorandum of understanding also includes holding joint activities for promoting investments.

AMMAN — Amman Chamber of Commerce (ACC) President Issa Murad on Monday called for benefiting from the "fruitful" results of Indian President Pranab Mukherjee's visit to Jordan in the economic, commercial and investment fields.

 Murad also highlighted the importance of investing the visit to develop current relations between Jordan and India which date back to six decades, adding it is important to build on the agreements and memoranda of understanding signed during the visit to move to a strategic cooperation. 

Amman and New Delhi has established "excellent" economic relations over the past decades, which can be seen in the trade exchange volume which annually reaches around $2 billion.

Mukherjee's visit to the Kingdom is really important, especially that India is a significant commercial partner to Jordan and the biggest importer of local phosphate and potash, Murad said, noting that Indian investments in the Kingdom exceeds $2 billion. 

He referred to the tourism, education, fabrics, fertilisers, phosphate and potash sectors as main fields both countries can cooperate on, in addition to Jordan's opportunity to benefit from India's ICT sector. 

The ACC president referred to His Majesty King Abdullah's affirmations during the meeting with Mukherjee, where he called for facilitating the procedures for Jordanian exports to penetrate the Indian market and establishing joint projects in fertilisers, ICT, pharmaceuticals and defence industries.

Inaugurating the Jordan India Fertilisers Company (JIFCO) in Eshidiya is a proof of profound partnership between the two countries, which was also seen in launching a joint scheme between the Indian Farmers Fertiliser Cooperative Limited and the Jordan Phosphate Mines Company, he added. 

His Majesty and the Indian president on Saturday inaugurated JIFCO Phosphoric Acid Complex at Eshidiya, which is considered the biggest comprehensive unit to produce this acid in the world with a total investment volume of $800 million.

In 2014, the trade exchange volume between the two countries reached JD1.33 billion, while in the first half of 2015, it stood at JD640 million, Murad added.

Compound fertilisers and raw phosphate are Jordan's major exports to India, while food stuff, leather, fabrics, meat and agricultural products are main imports for Jordan from India.

AMMAN — Rum-Aladdin for Engineering Industries seems to be going down the voluntary liquidation road when shareholders hold an extraordinary general assembly meeting next week, or later, if postponed.

Chairman Mohammed Taha Harahsheh told the Jordan Securities Commission in a disclosure that an extraordinary general assembly meeting on October 18 will discuss taking the company into voluntary liquidation.

A public shareholding company founded in 1993, the company manufactures, assembles and trades electrical and electronic home appliances, such as air conditioning units, gas cookers, heaters, metal furniture, radiators, washing machines, steel and aluminum ladders.   

Earlier this year, the shareholders agreed to restructure the company's capital and received the approval of the minister of industry and trade to this effect.

The restructuring entailed lowering the JD10 million registered capital to the JD7.2 million paid up capital and then down to JD3 million to write off JD4.2 million of losses that, at the end of 2013, accumulated to JD4.8 million.

The next step, as stipulated in the minister's approval, would be to increase the capital by JD7 million in order to provide the company with liquidity from strategic shareholders and/or  to capitalise the amounts payable to creditors by converting them into shares.

The price per share in this course of action should not be less than JD0.750, meaning that the capital would rise by JD7 million to JD10 million at a JD0.250 discount per share, the minister wrote in March 2015 noting that legal requirements were not fulfilled until March 29, 2015.

On April 26, another extraordinary general assembly meeting was held and shareholders amended the price per share from JD0.75 to JD0.5.

Even so, the consolidated interim financial statements and the auditor's review covering the six months ended June 30, 2015 showed accumulated losses at JD5.3 million, paid up capital at JD7.2 million and JD1.9 million as payments into account to increase capital.  

Current liabilities totaled JD7.5 million, of which JD3.4 million were short-term loans, JD2.4 million were amounts due to creditors and JD1.4 million were overdue expenses and other payables.

The auditor mentioned in the review that the company did not provide confirmations from banks regarding account balances and amounts outstanding of all related loans. 

It said that Rum-Aladdin for Engineering Industries did not record during the period all interests due on loans extended by local banks, because the company did not receive any account statements from them.

The auditor also could not verify the worth of inventory in the warehouses, noting that it, therefore, was unable to determine if there should have been any impairment in the value.

According to the balance sheet as of June 30, 2015, the inventory amounted to JD4.3 million (mostly raw materials) out of JD5.7 million in total current assets. JD1million were receivables after taking impairments into account.

Property and equipment, totaled JD6.6 million.

"The company's land and everything built on it are hypothecated in favour of the banks, the Income and Sales Tax Department, and the Social Security Corporation," the auditor wrote in the notes accompanying the 2014 financial statements.

It added: "The vehicles are held under lien in security for suits filed against the company."       

The auditor noted that JD1.3 million, an amount owed as interest by Middle East Complex for Engineering and Electronics and Heavy Industries, was reversed and a confirmation of the receivable balance after deducting the interest was not obtained.

The income statement revealed a sharp decline in sales from JD0.5 million during the first six months of last year to JD0.1 million during the January-June period of 2015.

This drop translated into a JD0.3 million loss when all costs were taken into consideration compared to a JD0.6 million loss during the first six months of last year.

The troubles of the Rum-Aladdin for Engineering Industries appear to lie in operational losses as the cost of production in 2014 amounted to JD1.3 million, only to generate JD0.7 million of sales.

Similarly, in 2013 the cost of production was JD0.7 million while sales amounted only to JD0.4 million.

Such operational deficit resulted in a JD0.9 million loss last year. In 2013, the financial performance was positive with a JD0.6 million profit that was achieved on the back of JD1.2 million gained from selling property and equipment.

The 2014 annual report showed capital investment at about JD265 and market share at around 35 per cent, mentioning as well that the Saudi and Iraqi markets account for 57 per cent of overall sales.

The report acclaimed marketing and technological achievements, stressing capabilities and drive towards higher efficiency, operational competence, competitiveness and investment growth.     

At the end of last year, 33 employees worked at the head office and factory of Rum-Aladdin for Engineering Industries in Amman's Sahab neighbourhood.

Salim Abdul Rahman Hassan Hamdan, Talal Ibrahim Mohammed Al Awadi, Taha Harahsheh and Fuad Khamis Abdul Rahman Al Jamal were the major shareholders in the company at the end of last year.

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

Main item groups that contributed to the drop were transportation (14.2 per cent), fuel and lighting (12.5 per cent), beverages (1.6 per cent) and personal objects (3.6 per cent), according to a DoS report sent to The Jordan Times.

An increase in prices during the nine-month period included rents (5.2 per cent), fruits and nuts (6.4 per cent), tobacco and cigarettes (3.8 per cent) and education (3.5 per cent).

DoS also noted that average consumer prices went down by 1.2 per cent in September 2015, compared to September 2014.

The DoS report  highlighted that the inflation rate in September 2015 went down by 0.3 per cent, compared to the previous month.

DoS started calculating the inflation rate considering 2010 a base year instead of 2006, starting from January 2015 to conform to international classifications and approaches.

WASHINGTON — US President Barack Obama took a dig at China Saturday as he defended the new Trans-Pacific Partnership (TPP) free-trade deal, which excludes Beijing.

In his weekly address to the nation, Obama said the 12-country accord concluded last week after five years of negotiations features the strongest labour and environmental standards in history, which he said will level the field in international trade.

Once approved by all the signatories, the TPP could be the largest regional trade pact ever.

"Without this agreement, competitors that don't share our values, like China, will write the rules of the global economy," Obama said. "They'll keep selling into our markets and try to lure companies over there, meanwhile they're going to keep their markets closed to us." 

Spanning about two-fifths of the global economy, the TPP aims to set the rules for 21st century trade and marks one of Obama's key diplomatic and economic achievements.

He hopes it will encourage investment and press China to shape its behaviour in commerce, investment and business regulation to TPP standards.

But the deal has faced opposition from activists, who argue it favours big business over consumers and governments, and US congressional leaders have already expressed reservations even before the details have been released.

Hillary Clinton, who as secretary of state under Obama promoted the negotiations aimed at sealing the TPP and is now the Democratic frontrunner in the race for the 2016 presidential election, has come out against it.

Clinton said Wednesday that given what she knows about the deal it falls short of her "high bar" for creating American jobs, raising wages and advancing US national security.

Under the deal, 98 per cent of tariffs will be eliminated on everything from beef, dairy products, wine, sugar, rice, horticulture and seafood through to manufactured products, resources and energy.

Countries involved are the US, Canada, Japan, Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Left outside the TPP, China and India approach this week's talks for a huge Asia-wide equivalent with fresh urgency, lest competitor nations steal a march on export access.

Beijing is a key driver of the Regional Comprehensive Economic Partnership (RCEP), a proposed 16-nation free-trade area that would be the world's biggest such bloc, encompassing 3.4 billion people.

"Member countries will be under pressure to fast-track negotiations for RCEP," said a senior official in India, which is keen to avoid being excluded from major trade accords.

While China's rivalries with India and Japan will complicate progress, it has incentive to get things moving.

China's central bank estimates the world's second-largest economy could forfeit a 2.2 per cent boost to gross domestic product if Beijing does not join the TPP, according to a commentary by the bank's chief economist, Ma Jun, published in the official Shanghai Securities News on Friday.

China stands to lose ground to manufacturing competitors such as Vietnam, which as a TPP member will have greater duty-free access to the United States and other member nations, said Tu Xinquan, a professor at the University of International Business and Economics in Beijing.

"It's not that there is a competition between the RCEP and the TPP, but overall, because of the pressure put on by the TPP, there's hope for a faster end to negotiations for more liberalised trade in the region," Tu added.

RCEP was first conceived by the 10 members of the Association of Southeast Asian Nations (ASEAN), but China is increasingly prominent as backer of the proposed pact.

While RCEP has largely been seen as an alternative to US-led trade plans, some say that view is evolving.

China may ultimately look to steer RCEP talks towards a broader pact that would encompass TPP into a Free Trade Area of the Asia-Pacific (FTAAP), said Kim Young-gui, head of regional trade studies at the Korea Institute for International Economic Policy in Seoul, an idea first put forward by the Asia-Pacific Economic Cooperations (APEC) grouping.

Seven countries — Australia, Japan, Malaysia, New Zealand, Singapore, Vietnam and Brunei — are in both TPP and RCEP.

"New Zealand views TPP and RCEP as complementary stepping stones to the vision of a Free Trade Area of the Asia Pacific," said a ministry of foreign affairs and trade spokesperson.

The TPP deal aims to liberalise commerce in 40 per cent of the world's economy.

Raising standards?

Obama wants TPP to help boost US influence in East Asia and counter the rise of China, but Beijing officially welcomed the pact, saying it hoped the deal would promote Asia-Pacific trade.

"We hope that regardless of whether it is the TPP or the RCEP, they both can supplement, promote and be beneficial to strengthening the multilateral trade system," said Chinese foreign ministry spokeswoman Hua Chunying.

Prime Minister Shinzo Abe of Japan, a key player in TPP, held out the prospect of bringing China into the deal in future, saying it would increase the pact's strategic significance and improve regional stability.

Washington does not dismiss the possibility, though China would need to undertake reforms to meet the standards of commerce envisioned by the TPP.

"It is not designed to encircle China," Deputy US Secretary of State Antony Blinken said in Seoul earlier this month when asked if Washington sees the TPP deal as a way to check China. 

"To the contrary, if China is interested in pursuing membership and it is able to meet the standards, we would welcome that," he added.

Those standards include minimum labour rights and principles for currency management that RCEP is unlikely to demand of Beijing.

A Japanese foreign ministry official said TPP would accelerate the pace of RCEP and could have some impact on "raising the level of the outcome of the negotiations", but the "very diverse group" had different ideas on what might be desirable.

The 16 RCEP countries will present their offers for market opening when they meet in Busan in South Korea on Monday, with an aim to make "best efforts" towards reaching agreement by year-end, a South Korean official close to the negotiations said.

Negotiators are expected to share their lists of offers for tariff reductions on goods and service sectors.

Song Yeong-kwan, a research fellow at the state-run Korea Development Institute, believes agreement nevertheless remains years away.

"Some countries have tensions with China, so it will not be easy, and the process could be a bumpy ride," Song said.

LIMA — The Group of 20 (G-20) major economies have endorsed a package of measures to tackle corporate tax avoidance, but questions remain about whether countries will follow through on the plans or leave loopholes multinationals can exploit.

G-20 finance ministers agreed to back proposals drawn up by the Organisation for Economic Cooperation and Development (OECD) which aim to shake up rules dating back almost a century that govern taxation of profits from international commerce.

The ministers reached the agreement against a backdrop of concern about weak economic growth, tight government finances and media reports on the tax structuring used by companies including Starbucks and Google that have spurred public anger in Europe and the United States in recent years over tax avoidance.

"This is a reaction of people who cannot stand anymore that they pay their fair share of taxes, that they contribute to fiscal consolidation while companies, especially multinationals, can avoid tax," European Economic Affairs Commissioner Pierre Moscovici told Reuters.

The practice of so-called Base Erosion and Profit Shifting (BEPS) has allowed companies to move profits out of the countries where money is earned and into jurisdictions such as Luxembourg, Ireland or Bermuda that do not tax them.

The agreement endorsed by the G-20 ministers late on Thursday aims to close the gaps in existing international rules.

The plans include provisions to give governments a global picture of the operations of multinational companies, and minimum standards on so-called "treaty shopping" to put an end to the use of conduit companies to channel investments.

"The challenge is consistent implementation," said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration.

Technology companies are seen as the most adept at exploiting loopholes, but drug makers, medical device groups, banks, fast-food groups and retailers all commonly use contrived arrangements to cut their tax bills.

Tax advisers agree the measures could force many companies to restructure their operations and rethink how they fund themselves.

However, multinational enterprises (MNEs) will try to exert influence over the way the plans are implemented.

"The implementation phase now starts and MNEs and their advisers will have to continue to make their voice heard in the implementation phase to limit negative impacts on business," said Keith O'Donnell, board member at Taxand, which provides tax advice to multinational businesses.

"If certain states don't implement or implement partially, MNEs may be able to take advantage of this," he added.

The crackdown on corporate tax avoidance has been led by governments, who asked the OECD to develop the plans.

British Finance Minister George Osborne urged OECD chief Angel Gurria to put pressure on countries to enact the measures.

"I think he should call out countries that are not implementing what has been signed up to and hold our feet to the fire," Osborne said after the meeting of G-20 ministers in Lima.

G-20 leaders must now give final approval at a summit in November in Turkey, although the initiative was swiftly dismissed as lacking bite by one prominent critic.

The 15-point plan aims to tackle low tax bills for the likes of Google, Apple and McDonald's, which have managed to sharply reduce their taxes while remaining within the law, provoking public outrage in recent years.

Turkish Deputy Prime Minister Cevdet Yilmaz, who announced the G-20 decision, called it a "historic moment" for the fight against tax evasion.

He said the plan addressed a "very comprehensive set of issues" including profit-shifting across borders, corporations' use of no-tax status in multiple countries and the digital economy.

"These are very complicated issues that required an extensive technical effort and a hard-to-build consensus in some cases," he told a press conference in Lima,

But the work on consensus-building has only just begun.

Preventing companies from shifting profits to low-tax jurisdictions and debt to high-tax jurisdictions will require "a very large group of countries", particularly developing nations, to get on board with the plan, Yilmaz said.

International charity Oxfam has criticised the plan as a "toothless" package that will do nothing to stop poor nations being cheated out of billions of dollars.

"Rich governments are all bark and no bite when it comes to corporate tax dodging," said Oxfam's Manon Aubry when the plan was announced Monday.

But the OECD said it would give governments across the board a much-needed fiscal boost.

"Base erosion and profit shifting is sapping our economies of the resources needed to jump-start growth, tackle the effects of the global economic crisis and create better opportunities for all," said OECD Secretary General Gurria.

Globalisation loopholes

The man who supervised the drafting of the plan, the OECD's Pascal Saint-Amans, has said it means "playtime is over" for tax-dodging multinationals.

The OECD calculates that national governments lose $100 billion to $240 billion a year, or four to 10 per cent of global tax revenues, because of companies that game the system.

The plan, which applies to international companies with revenues of at least 750 million euros, seeks to make them pay tax in the country where their main business activity is based.

"It's not about paying low or high taxes, it's about paying your taxes," said Osborne.

The OECD has called for a multilateral deal by the end of 2016 enabling countries to update bilateral tax treaties in line with the new plan without the need to renegotiate them one by one.

The plan comes nearly a year after the "LuxLeaks" revelations that some of the world's biggest companies, including Pepsi and Ikea, lowered their tax rates to as little as one per cent in secret pacts with tax authorities in Luxembourg.

Luxembourg's Finance Minister Pierre Gramegna joined the calls for governments around the world to sign up for the new plan.

"We need a level playing field, which means we have to implement it all together and at the same pace," he said. "That is not the end of the story," said German Finance Minister Wolfgang Schaeuble.

"If there is no implementation it remains an impressive amount of paper," he added.