Business

DAVOS, Switzerland — More than a trillion dollars of investment flows has fled emerging markets over the past 18 months but the exodus may not even be halfway done, as once-booming economies appear trapped in a slow-bleeding cycle of weak growth and investment.

While developing economies are no stranger to financial crises, with several currency and debt cataclysms infecting all emerging markets in waves over recent decades, leaders gathering for this year's World Economic Forum (WEF) in Davos in the Swiss Alps are fearful that this episode is much harder to shake off.

Seeded by fears of tighter US credit and a rising US dollar, and coming alongside a secular slowdown of China's economy and an implosion of the related commodity “supercycle”, there's growing anxiety that there will be no sharp rebound at the end of this downturn to reward investors who braved out the worst moments.

"The global backdrop and the drivers for emerging markets are very different from 2001," David Spegel, head of emerging markets at ICBC Standard Bank said, referring to the time Asia, Russia and Brazil were recovering from the crisis waves of the late-1990s.

"Back then all the stars were aligned for globalisation and emerging markets benefited the most. This time around, we just don't have those multiple catalysts," he added.

The chief catalyst in 2001 was of course China. Its entry to the World Trade Organisation (WTO) unleashed a decade-long export and investment miracle that propelled its economy from sixth place globally, to the world's second biggest.

Its ascent hauled up much of the developing world, from Latin American exporters of soy and steel to the Asian workshops which became part of its gigantic factory supply chain. But its slowdown is whacking these countries equally hard.

Exports from emerging markets, from Korean cars to Chilean copper, are declining year-on-year at the sharpest rate since the 2008-09 crisis, according to UBS.

Global trade in fact likely grew slower than the world economy for the fourth straight year in 2015, according to the WTO, a United Nations body. That contrasts with previous decades when commerce expanded at least twice as fast as world growth.

The gloomy conclusion some are reaching is that the China effect was possibly a once-in-a-lifetime shift, whose effects are now dissipating forever.

"Rather than expecting emerging markets to mean-revert towards the golden years of 2002-2007, there is a risk that in terms of trade, what we are reverting to is the environment of 1980s," UBS strategist Manik Narain said.

Flight

One feature of the "golden years" was the extraordinary amount of capital that poured into the developing world; according to the Washington DC-based Institute of International Finance (IIF) net inflows in 2001-2011 totalled nearly $3 trillion.

Some of this is starting to reverse as last year saw the first net capital outflow since 1988, a $540 billion loss, says the IIF which predicts more flight in 2016.

Other forecasters such as JPMorgan reckon nearly a trillion dollars have fled China alone since mid-2014; its central bank reserves alone declined more than $500 billion last year.

Redemptions from emerging stock and bond funds hit a record $60 billion last year, according to fund tracker EPFR Global.

IIF Executive Director Hung Tran says emerging markets' problems are not just external. They must overcome a key homegrown issue — falling productivity.

Tran estimates productivity, which provides clues on future economic growth, is growing at just 0.9 per cent a year across much of the developing world, a quarter the rate seen before 2007 and not far from richer countries' 0.4 per cent.

"Productivity advantage of emerging markets countries, which is key for attracting capital flows and investment, has collapsed," Tran said. "There is a cycle of diminishing returns on investment."

Slow-burn crisis

There are some bright spots such as India and Mexico. But with China fears on the rise and Brazil and Russia in recession for the second straight year, investment returns across the sector are unlikely to recover soon, many fear.

Emerging stock market performance has lagged developed peers for five years now, and corporate earnings have shrunk for more than four years, Morgan Stanley (MS) has calculated.

This is the longest decline in the MSCI equity index's history, MS says, noting the longest prior earnings recession in the asset class was after the 1997 crisis and lasted two years.

Richard House, head of emerging market debt at Standard Life Investments, notes the strengthening dollar is spooking investors in emerging currency bonds too.

"Fund performance hasn't been good across the industry... Local market funds have been an outflow asset class for a while and that experience is going to impact people's mindset going forward," House said.

The fear of large-scale outflows is clearly on policymakers' minds. To combat such an exodus, emerging economies may have to resort to radical measures such as coordinated securities market interventions, of the kind done in the West after 2008, Mexican central bank head, Agustin Carstens, as suggested

Ultimately though he said that to boost long-term growth, there was only one solution — tough economic reform.

Separately, , the WEF's founder is in somber mood.

Klaus Schwab, the 77-year-old chief of the world's most recognised annual economic meeting, said he's worried about Europe's future, the fallout from plunging oil prices and gaping inequalities worldwide.

In an interview with The Associated Press, Schwab said he wanted a "forward-looking" theme to dominate discussions this year, which officially runs from Wednesday through to Saturday: and has built this edition around the idea of the Fourth Industrial Revolution.

He said vast, speedy technological advances in the digital age in areas like nanotechnology and automation threaten to leave many unskilled workers without jobs or at an economic disadvantage.

In Davos, about two-thirds of the 2,500-plus attendees are decision makers from the business world: The boardroom, not the shop room floor, has an outsize representation in this snow-capped, ultra-chic Alpine resort. 

World leaders, including US Vice President Joe Biden, prime ministers David Cameron of Britain and Nawaz Sharif of Pakistan, and German President Joachim Gauck are set to attend.

Iranian Foreign Minister Mohammad Javad Zarif is likely to be a headline-act after international sanctions against his country were lifted over the weekend under a deal on Tehran's nuclear programme. Some business leaders will be contemplating a resumption of economic ties with the long-isolated, oil-rich Islamic republic.

Iran's oil ministry announced plans Monday to boost oil production by 500,000 barrels per day after the sanctions were lifted, and Schwab noted the possible harmful impact of even more supply on developing countries that depend on oil revenues at a time when crude prices have already slumped to their lowest level in more than 12 years.

"Of course, we will have to absorb now a larger supply dimension. What concerns me is the impact, the social impact, it has on certain countries," said Schwab. "Just think of Nigeria, which so much depends on oil, and other African countries... not to speak about what's the impact on Russia and so on."

As for Europe's struggle to manage an influx of more than 1 million refugees and migrants last year, he said the continent was at a "crossing point". Europe needs to find the right balance between its values and its capabilities of taking them in, and assuage tensions that have put the Schengen zone, which eases cross-border travel, to the test, he said.

"My concern is that Europe, at the moment, is in a phase of disintegration," Schwab said. "Europe would be completely marginalised if we break up into different nation-states again."

He said solidarity with refugees was a core European value.

"It's not a question whether we should have solidarity or not, it's how much can we afford? And here I think we haven't found the right answer yet," he added.

LONDON — Unseasonably warm weather and rising supply will keep the crude oil market oversupplied until at least late 2016 and could push the price below its current 12-year lows, the International Energy Agency (IEA) said on Tuesday.

The addition of Iranian supply to a market where production looks set to outpace consumption for a third year in a row could not come at a worse time for crude oil exporters, who are grappling with prices at their lowest in more than a decade.

Brent crude futures have fallen to their lowest level since late 2003, tumbling below $30 a barrel, after the Organisation of Petroleum Exporting Countries (OPEC) said in December it would not cut output to halt the price slide despite global oversupply.

The IEA, which issues regular reviews of the health of the energy market, said more price weakness could lie ahead as a result.

"Although we do not formally forecast OPEC oil production, in a scenario whereby Iran adds 600,000 barrels per day to the market by mid-year and other members maintain current output, global oil supply could exceed demand by 1.5 million barrels per day in the first half of 2016," the agency indicated in a monthly report.

"While the pace of stock-building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over-supply. So the answer to our question is an emphatic yes. It could go lower," it said.

Responding to Tehran's compliance with a nuclear deal, the United States and other major powers have revoked international sanctions that sharply cut Iran's oil exports.

Warm winter weather around the world cut global oil demand growth to a one-year low of 1 million barrels per day in the fourth quarter of 2015, down from a near five-year high of 2.1 million barrels per day (bpd) in the third quarter.

The IEA left its estimate of growth in global demand for 2016 unchanged from its previous monthly report at around 1.2 million bpd.

"We conclude that the oil market faces the prospect of a third successive year when supply will exceed demand by 1 million bpd and there will be enormous strain on the ability of the oil system to absorb it efficiently," the IEA said.

With the world economy slowing, the IEA added that it had cut its forecast for 2016 OPEC crude oil demand by 300,000 bpd to 31.7 million bpd.

Iran has said it will raise output by an initial 500,000 bpd now that international sanctions have been lifted, but the IEA said it believes the increase will be of a more modest 300,000 bpd by the end of the first quarter of 2016.

The IEA is sticking with its forecast for a decline of around 600,000bpd in non-OPEC output, which it said had been surprisingly resilient in the face of tumbling crude oil prices.

LONDON – The wealthiest 62 people now own as much as half the world's population, some 3.5 billion people, as the super-rich have grown richer and the poor poorer, an international charity said on Monday.

The wealth of the richest 62 people has risen by 44 per cent since 2010, while the wealth of the poorest 3.5 billion fell 41 per cent, Oxfam indicated in a report released ahead of the World Economic Forum's (WEF) annual meeting in Davos, Switzerland.

Almost half the super-rich individuals are from the United States, 17 from Europe, and the rest from countries including China, Brazil, Mexico, Japan and Saudi Arabia.

"World leaders' concern about the escalating inequality crisis has so far not translated into concrete action — the world has become a much more unequal place and the trend is accelerating," Oxfam International's Executive Director Winnie Byanima, said in a statement accompanying the report.

"We cannot continue to allow hundreds of millions of people to go hungry while resources that could be used to help them are sucked up by those at the top," Byanima added.

About $7.6 trillion of individuals' wealth sits in offshore tax havens, and if tax were paid on the income that this wealth generates, an extra $190 billion would be available to governments every year, Gabriel Zucman, assistant professor at University of California, Berkeley, has estimated.

As much as 30 per cent of all African financial wealth is held offshore, costing about $14 billion in lost tax revenues every year, Oxfam indicated, referring to Zucman's work.

This is enough money to pay for healthcare that could save 4 million children's lives a year, and employ enough teachers to get every African child into school, Oxfam said in its report.

"Multinational companies and wealthy elites are playing by different rules to everyone else, refusing to pay the taxes that society needs to function. The fact that 188 of 201 leading companies have a presence in at least one tax haven shows it is time to act," Byanima said.

Ensuring governments collect the taxes they are owed by companies and rich individuals will be vital if world leaders are to meet their goal to eliminate extreme poverty by 2030, one of 17 Sustainable Development Goals set in September, Oxfam added.

Extreme poverty falling

The number of people living in extreme poverty has fallen by 650 million since 1981, even though the global population grew by 2 billion in that time, according to the Organisation for Economic Cooperation and Development (OECD).

Much of this change has been because of the rise of China, which alone accounted for half a billion people moving out of extreme poverty.

Most of the world's poorest no longer live in the poorest countries, but in middle-income countries like India, the OECD said in a recent report.

The inequalities are partly to do with differences in income, especially between urban and rural areas, but also differences in access to healthcare, education and jobs, the OECD added.

"The figures suggest that the biggest causes of poverty are ... political, economic and social marginalisation of particular groups in countries that are otherwise doing quite well," development economist Owen Barder is quoted as saying in the OECD report.

Barder is director for Europe at the Centre for Global Development.

Although taxes and transfers help reduce income inequality in developed countries, these systems are less robust in many developing countries, according to the OECD.

An exception is Brazil, which makes payments to more than 13.3 million poor families on condition they enrol children in school and take part in health programmes.

"That has helped to reduce rates of both child poverty as well as inequality," the OECD report concluded.

Separately, a report prepared for the Davos forum of business and political elites said that the latest industrial revolution will not only bring us 3-D printing and biotechnology advances, but the loss of 5 million jobs in the next five years.

The so-called fourth industrial revolution "will cause widespread disruption not only to business models but also to labour markets over the next five years", the WEF said announcing a study released ahead of the Davos forum this week.

Following the first industrial revolution of steam engines, then electricity and assembly lines, followed by electronics and robotics, the fourth industrial revolution will include a number of developments like big data and smart systems to transform the economy.

But that transformation will lead "... to a net loss of over 5 million jobs in 15 major developed and emerging economies," said the WEF, after analysing the potential impact on the economies of the United States, Germany, France, China, Brazil and other countries.

It sees as many as 7.1 million jobs being lost, mostly in white-collar office and administrative roles, with the creation of 2.1 million new jobs in fields such as computer engineering and mathematics.

"Without urgent and targeted action today to manage the near-term transition and build a workforce with futureproof skills, governments will have to cope with ever-growing unemployment and inequality, and businesses with a shrinking consumer base," the WEF's Executive Chairman Klaus Schwab warned in a statement.

A separate study found women will be "in the firing line" of the changes, which "may have a disproportionately negative impact on women".

While the job losses will be relatively equal, with 52 per cent of the expected 5.1 million job losses hitting men, in fact men still dominate the labour markets, so at 48 per cent the job losses among women will be relatively higher than their participation in the job market.

Moreover, women are underrepresented in the technical fields where new jobs are to be created. 

DUBAI — Iran ordered a steep increase in oil output on Monday to take immediate advantage of the lifting of international sanctions, and some foreign firms raced to sign contracts with Iran.

Others were more wary, mindful of the risk of falling foul of residual US penalties despite the lifting of nuclear-related sanctions on Saturday by the United States, European Union and United Nations.

The measures were scrapped as part of a landmark deal between Iran and world powers, rewarding the Islamic republic for scaling back its atomic energy programme in ways that US President Barack Obama said would prevent it from getting its hands on a nuclear bomb.

The agreement restores Iran's access to tens of billions of dollars in frozen assets, reopens the country to foreign investment and allows it to resume selling oil on world markets, albeit at a time when they are drowning in excess supply.

Deputy Oil Minister Rokneddin Javadi said Iran could increase output by 500,000 barrels per day (bpd) "and the order to increase production was issued today".

The sanctions revoked at the weekend had cut Iran's oil exports by about 2 million bpd since their pre-sanctions 2011 peak, to little more than 1 million bpd.

The lifting of sanctions opens up business opportunities across a host of sectors, from planes to telecoms.

"Iran is a huge market and in our focus," Kaan Terzioglu, head of Turkey's biggest mobile operator, Turkcell, said in an interview.

He added that Iran could be a target market as the company looks for regional acquisitions: "We are closely watching the Iranian market and in touch with all of its fixed line and mobile operators."

Deals and diplomacy

A clutch of German firms were among those to signal their appetite to ramp up business ties with Tehran, and the Berlin government said it planned to revive state export guarantees for companies that wanted to do so.

Daimler said its trucks division had signed letters of intent with joint venture partners in Iran in order to re-enter the market, where it was selling up to 10,000 vehicles a year until 2010.

Herrenknecht, a family-run German tunnelling company that helped to build the Tehran metro in the 1990s, said it expected Iran to put up new projects for tender, and it was ready to pounce on the opportunity.

Commerzbank said it was reviewing the possibility of returning to Iran, less than a year after agreeing to pay $1.45 billion to US authorities for sanctions violations partly linked to the country.

Switzerland's Zurich Insurance said it would look into insurance cover for corporate customers doing business with Iran. The head of British Airways' parent company IAG  said it hoped to start flying to Tehran "in the very near future".

Russia, another party to last year's nuclear deal, said it was looking to sell military helicopters to Iran and export more grain. 

India's national aluminium company NALCO said it would soon send a team to Iran to explore setting up a smelter complex worth about $2 billion, taking advantage of cheap and plentiful gas there.

In a burst of diplomatic activity that will provide opportunities for discussing investment deals, Chinese President Xi Jinping will visit both Iran and its regional archrival Saudi Arabia this week.

In Rome, a diplomatic source said Iranian President Hassan Rouhani would travel to Italy and France next week on his first trip to Europe since the lifting of sanctions.

The nuclear deal removed restrictions that stifled Iran's economy for most of this decade — on banking, money transfers, insurance, trade, transport and technology procurement.

This will allow Iran to satisfy pent-up demand for goods and services that it had trouble obtaining at affordable prices under sanctions, from aircraft to factory machinery, medicines and some consumer goods such as cosmetics and branded clothing.

In an indication of the scale of potential deals, the  transport minister said at the weekend that Iran intended to buy 114 civil aircraft from Airbus — a deal that could be worth more than $10 billion at catalogue prices. Airbus said on Saturday it had not yet held commercial talks with Iran.

Opportunities and risks

Entering the Iranian market is not without risks: indebted local banks, a primitive legal system, corruption and an inflexible labour market. Many foreign companies will remain wary that sanctions could "snap back" if Tehran is later found in breach of the nuclear agreement.

"A lot of work has been done to get to where we are now. A similar and sustained effort will be required in the future."   

UN nuclear watchdog chief, Yukiya Amano, said on a visit to Tehran. "We must maintain the momentum."

US companies look set to lag rivals from other countries in restoring trade with Iran, because Washington will retain broad sanctions that predate the nuclear crisis and were imposed over other issues such as terrorism and human rights abuses.

But US business with Iran may still increase, after the US Treasury said on Saturday that it would permit foreign subsidiaries of American companies to trade with Iran, a channel that big multinationals may be able to exploit.

A big foreign investment presence may take longer to rebuild than trade ties. Some firms may want to wait until they see the stance of the next US president towards Iran; many will worry about "reputational risk", or exposure to legal action from shareholders or lobby groups, if they invest there.

KUWAIT CITY — Share prices in the energy-rich Gulf states nosedived Sunday following the sharp decline in oil prices as Iran prepares to resume crude exports after the lifting of sanctions.

The plunge in the first day of trading in the Muslim week also follows heavy losses in global bourses on Friday, when Gulf exchanges were closed for the weekend.

The price of oil, which contributes more than 80 per cent to Gulf states' revenues, shed more than 20 per cent this year to drop below $30 a barrel. This follows a plunge of 65 per cent in the past two years.

The expected return of Iran to the oil market, following the implementation Saturday of its historic nuclear deal with world powers, will only worsen the production glut that has been the main reason for the oil price dive.

All seven Gulf bourses saw a wave of panick selling, sending indices to multi-year lows.

Big investors joined small dealers in dumping shares in fear of a further slump.

"The majority of Gulf firms depend on their governments, which depend on oil revenues. No one knows the bottom of oil prices," Kuwaiti analyst Ali Al Nemish said.

"The Iranian impact on the markets appears to be somewhat inflated because Iranian crude exports will not be huge initially," Nemish added.

Negative territory 

The bourses of Saudi Arabia, Qatar and Abu Dhabi have already lost in the past two weeks more than they dropped in the whole of 2015.

The Saudi Tadawul All-Shares Index, the largest Arab market, fell by over 7.2 during trading but recovered slightly to finish down 5.44 per cent on 5,520.41 points, close to a five-year low.

The leading petrochemicals sector dipped 5.1 per cent, while banks lost 3.7 per cent.

Since the start of 2016, the TASI has dropped 20.1 per cent, more than all of its losses last year. 

The Qatar Exchange, the second largest in the Gulf after Saudi Arabia's, plunged 7.2 per cent to close trading just above the 8,500-point mark, last seen in April 2013. 

All the listed firms were in the red and the bourse has so far dipped 18 per cent this year, more than the 15 per cent it lost in 2015.

The Dubai Financial Market dropped 6 per cent at the opening but recovered slightly to close the day down 4.64 per cent on 2,684.9 points, a three-year low.  

Blue-chip properties giant Emaar shed 4 per cent and the leading construction firm Arabtec sank the maximum allowed 10 per cent.

Since the beginning of this year, Dubai has dropped 15 per cent.

The Abu Dhabi Securities Exchange also slumped 4.24 per cent but remained above the 3,700-point mark. All sectors were down with banks and real estate shedding above 5 per cent.

Dubai and Abu Dhabi bourses are the lowest since September 2013.

The Kuwait Stock Exchange dropped 3.2 per cent to just above the 5,000-point mark, levels only seen in May 2004.

The small market of Oman dropped 3.2 per cent to below the 5,000-point mark for the first time since mid-2009. Bahrain dropped 0.4 per cent. 

Since the beginning of 2016, the seven stock markets have shed more than $130 billion of their market capitalisation, which now stands at about $800 billion.

All Gulf stock exchanges ended 2015 in negative territory, led by Saudi Arabia, after the sharp decline in oil prices.

PARIS — With global growth moribund, multinational firms have been waiting with bated breath for the lifting of international sanctions against Iran for access to a country in desperate need to modernise.

After nearly a decade of limited access to the outside world, many sectors of the Iranian economy need new equipment including the oil and gas industry, railways and airlines. 

Plus there are 80 million Iranian consumers, many of them keen to buy cars and other goods.

Delegations of officials and business executives from Germany, France and Italy have headed to Iran to prepare the ground to win back some of the market share lost to emerging nations like China and Turkey, or countries like Russia and Japan which kept friendly nations with Tehran.

Germany's BGA foreign trade federation believes that country will have a difficult time reclaiming its former status as Iran's largest trade partner as Chinese firms have swooped in during sanctions.

Deputy Foreign Minister Zhang Ming of China, the top buyer of Iranian crude, said during a recent visit that Beijing intends to fully exploit the potential for cooperation with Tehran in the manufacturing sector and construction of infrastructure.

US companies like Boeing and General Electric are also interested by the opportunities in Iran, but are handicapped by the fact Washington has not had diplomatic relations with Tehran for 35 years and will keep certain sanctions in place.

Meanwhile, the Iranians are looking for foreign firms to help modernise the country's infrastructure, which has suffered from a lack of investment and technology as the economy was largely cut off from the outside world for the past decade.

A resumption of trade should also help put the Iranian economy, which suffers from high unemployment and hyperinflation, back on its feet.

Oil sector still attractive 

The slump of global oil prices to under $30 per barrel, partially due to expectations of Iranian crude flooding back onto markets, is not good news for Tehran as it means less money flowing into government coffers.

Nevertheless, with the country holding the world's fourth-largest oil reserves and currently pumping a million barrels per day less than it did before sanctions, the Iranian energy sector is still attractive for foreign firms and Tehran is looking for $25 billion in investment in the oil and gas sectors.

"The infrastructure and energy sectors offer the best opportunities for our firms," Italy's economic development ministry said recently.

Russia, which has maintained close relations with Iran, has a leg up on the competition and is willing to put money on the table to achieve its goal of boosting its annual trade turnover with Tehran from $1.6 billion currently to $10 billion. 

Russian President Vladimir Putin offered to open up a $5 billion credit line to Iran during a visit to Tehran in November.

Not only has Russia recently sold long-range S-300 surface-to-air missiles to Iran, but it has received orders to build two new reactors at the Bushehr nuclear power plant.

State-owned Russian Railways is after work electrifying Iranian rail lines.

Russian gas giant Gazprom and the country's number two oil firm Lukoil are looking not only for production opportunities, but to stocking and transporting energy as well.

Certain Western oil companies, like France's Total and Italy's Eni, are after joint venture contracts where their Iranian partner will retain majority control.

"We will be well placed to examine the opportunties in the gas, oil and petrochemicals and fuel distribution sectors, but all of that will be subject to good contractual conditions," said Total's Chief Executive Patrick Pouyanne recently.

'Promising market' 

The automobile sector is also attractive as the rate of car ownership in Iran is just 100 per 1,000 people, six times less than in Europe, and consumers have had limited access to new vehicles under Western sanctions.

France Renault has already negotiated a minority stake in Iranian auto manufacturer Pars Khodro, according to Iranian officials.

"Iran is a very promising market," Renault Chief Executive Carlos Goshn said on the sidelines of the Detroit auto show last week. "Today, it's more than 1 million cars, it has the potential to go to 1.5 or 2 million."

In the food and agriculture sector it may be harder going due to the "strong involvement of public firms and semi-public owners of farm land", according to a French agriculture ministry report.

Germany hopes it will be able to export 5 to 10 billion euros of goods to Iran in the coming years, in particular machine tools.

Siemens has already announced a preliminary deal with Tehran to improve rail infrastructure.

Iranian President Hassan Rohani has scheduled a visit to Italy and France at the end of January.

That could prove beneficial for Airbus, which is based in the southern French city of Toulouse, as Iranian airlines need to renew their fleet of aircraft.

Iran "...is potentially a huge market for Airbus and our competitors", Airbus Chief Executive Fabrice Bregier was quoted as saying recently by the Financial Times, adding the company had already made some contacts.

Separately, German industry expects a steep rise in exports to Iran following the lifting of international sanctions, and Economy Minister Sigmar Gabriel said on Sunday he would seek to drum up trade on visit Tehran in early May.

"That was faster than expected," said Reinhold Festge, head of German engineering trade group VDMA, adding that now diplomats had delivered it was the turn of companies and banks to seize the new opportunity.

For decades before sanctions were imposed, Germany was Iran's biggest trading partner. The gap in Iranian imports from Germany and other Western countries has largely been filled by Chinese, Korean and Middle Eastern competitors.

Germany's Chambers of Commerce and Industry (DIHK) said it expected exports to Iran to double to 5 billion euros ($5.5 billion) in the coming years and reach twice that figure in the long term.

This could compensate, at least partially, for waning demand for German goods from China, Russia and other emerging markets.

"German companies have lost important market share in Iran. We must revive German-Iranian ties as quickly as possible," DIHK head Volker Treier said.

Gabriel, who led the first top level German government visit to Tehran in 13 years in July, will head back  to Iran in early May to co-chair an economic conference with his counterpart Ali Tayyebnia.

The revival of trade will take some time, but the lifting of sanctions provide a sound basis for this, Gabriel said in a statement on Sunday. "This gives us the opportunity to open a new chapter in German-Iranian trade ties." 

German machinery, auto, chemicals, healthcare and renewable energy firms are likely to be the biggest beneficiaries of the opening up of the Iranian market.

The VDMA engineering trade group plans to open an office in Tehran in the first half of this year to help companies sell machinery in Iran.

Tehran has already announced plans to buy 114 civil aircraft from Franco-German manufacturer Airbus, a deal possibly worth more than $10 billion at catalogue prices.

Last week, Siemens signed deals to work on Iran's railway infrastructure while Daimler announced plans for its commercial vehicle division to return to Iran.

BEIJING — Chinese President Xi Jinping launched a new international development bank seen as a rival to the US-led World Bank at a lavish ceremony on Saturday, as Beijing seeks to change the unwritten rules of global development finance.

Despite opposition from Washington, US allies including Australia, Britain, German, Italy, the Philippines and South Korea have agreed to join the Asian Infrastructure Investment Bank (AIIB) in recognition of China’s growing economic clout.

“Asia’s financing needs for basic infrastructure are absolutely enormous,” Xi said in a speech at the launch, adding the bank would aim to invest in projects that were “high-quality, low-cost”.

In order for Asia to continue to be the most dynamic region for global growth, it needs to invest in infrastructure and connectivity, Premier Li Keqiang said, during the afternoon session of the opening ceremony.

The AIIB is expected to lend $10 billion-$15 billion a year for the first five or six years and will start operations in the second quarter of 2016.

Even so, no specific infrastructure projects would be announced “for the time being”, AIIB President Jin Liqun told Reuters on the sidelines of the launch.

Diplomatic coup

Luxembourg Finance Minister Pierre Gramegna said the establishment of the AIIB was “further proof of the rebalancing of the world economy”.

A successful AIIB that sets itself apart from the World Bank and the International Monetary Fund (IMF) would be a diplomatic triumph for China, which opposes a global financial order it says is dominated by the United States and does not adequately represent developing nations.

The AIIB will require projects to be legally transparent and protect social and environmental interests, but it will not force borrowers to adopt the kind of free-market practices favoured by the IMF, sources told Reuters in September.

By not insisting on some free market economic policies recommended by the World Bank, the AIIB is likely to avoid the criticism levelled against its rivals, which some say impose unreasonable demands on borrowers.

It could also help Beijing stamp its mark on a bank regarded by some in the government as a political as much as an economic project.

Baikuntha Aryal, joint secretary at Nepal’s ministry of finance, said the Himalayan country was hoping the AIIB would fund roads, hydropower and urban development projects.

“The AIIB is specifically for infrastructure so we see it as a supplement to projects in Nepal funded by the ADB [Asian Development Bank] and World Bank,” he added.

China has an initial subscription of $29.78 billion in authorised capital stock in the AIIB, out of a total of $100 billion. It invested another $50 million on Saturday.      

AMMAN — The Jordan Enterprise Development Corporation (JEDCO) delegation, in coordination with the secretariat general of the Gulf Cooperation Council (GCC), will be paying a working visit to the United Arab Emirates, Qatar and Oman between January 16 and 22.

The visit aims at discussing cooperation in fields related to supporting business entrepreneurship, developing small- and medium-sized projects, making direct contacts with JEDCO counterparts and studying the possibility of implementing joint schemes.

JEDCO Chief Executive Officer Hana Uraidi said the visit also aims at highlighting the common concepts for best practices in programmes related to supporting entrepreneurship and small- and medium-sized projects.

During the visit, JEDCO will review its 2016-2018 vision and the role of the Governorate Development Fund in financing these programmes and schemes, Uraidi noted.

The delegation includes a representative of the Planning and International Cooperation Ministry and representatives of the Kingdom’s embassies in each country.

BENGALURU — Economic growth is losing momentum across emerging and developed economies as is inflation, with trouble in China now the biggest worry for 2016, according to the overwhelming majority of hundreds of economists polled by Reuters around the world.

That comes despite several trillion dollars' worth of stimulus and ultra-easy monetary policy from major central banks over the last half decade, and coincides with a growing sense of fear that is gripping world financial markets.

The benchmark S&P 500 US stock index closed below 1,900 for the first time since September on Wednesday, crude oil has fallen over 70 per cent since mid-2014, below $30 a barrel and US 10-year Treasury bond yields are back to two-month lows.

Elwin de Groot, senior market economist at Rabobank, warned that the world could no longer rely on China for support, as it did after the global crisis erupted on financial markets in 2007-08 and spread to developed economies.

"One of the lessons learned from past crises is that one ought to take the market seriously. Very seriously. From that viewpoint, the start to the year is a screaming warning sign," he said.

"One reason why the market is watching China so intensely is that all big economic regions have their own issues, so a weaker China means no spender of last resort," he added.

Throughout the years of crisis and recovery, the world's second largest economy has helped to cushion the world economy through breakneck borrowing and infrastructure spending, which has only recently begun to taper off.

Concerns about China's slowdown easily topped the list of what hundreds of economists said they were most worried about for the global economy this year, even though a majority said the risk of a global recession this year is "insignificant".

Prospects for rapid acceleration remain slim.

Global growth forecasts in the poll of 3.3 per cent this year and 3.4 per cent next year are lower than three months ago, with the most optimistic prediction looking significantly more modest this time around compared with previous years.

Performance in developed economies is expected to be modest at best. Not only have growth forecasts been trimmed, economists have chopped their inflation outlook across the board for most countries, with lower highs and lower lows.

Waning optimism about US and Britain

The poll also showed the outlook for those few developed economies which have perked up enough to warrant higher interest rates or at least discussion of them, particularly the United States and Britain.

"The US recovery looks set to continue but the pace is expected to be unspectacular," indicated Janet Henry, global chief economist at HSBC, who believes the US Federal Reserve (Fed) will have to scale back the policy tightening it has in mind.

"The Fed is still projecting 100 basis points of rate rises in 2016. We are forecasting that they will actually move more cautiously rather than risk having to make the Great Reversal," she said.

The latest Reuters poll predicts only three follow-up increases this year after the first Fed hike in almost a decade last month, held back partly by a strong dollar and tame inflation.

With British inflation nowhere near the Bank of England's 2 per cent target, and not expected to get there until sometime in 2017, the central bank is expected leave policy unchanged until at least July, later than previously thought.

Sterling has tumbled sharply on expectations that the first move could be even further out, possibly not until 2017.

And while very low inflation and modest growth will probably define the eurozone economy for the next two years, there are only slim chances the European Central Bank will increase its monthly bond purchases.

"More dramatic and substantial policy easing is only likely to come as a response to a significant deterioration in the outlook," according to analysts at Goldman Sachs.

Emerging economies a significant risk

Battered emerging markets, from which investors have been fleeing in droves, look set for another very tough year.

Economists as a whole may have rated the risk of a global recession as "insignificant", but a slim majority of them based in emerging markets said "significant".

China's reported economic growth is expected to slow to 6.5 per cent in 2016 from a forecast 6.9 per cent in 2015, prompting the government to ease policy further. Many suspect the real growth rate is lower than that.

This moderating growth will raise pressure on policymakers to do more, especially as a renewed plunge in Chinese stock markets and a slide in the yuan currency have stoked concerns among global investors.

India is one of the few exceptions in emerging markets with a stable outlook, and is likely to maintain a faster growth rate than China over the next few years. The most pessimistic forecast for growth next year in India matches the most optimistic figure for China, 7 per cent.

"For most of the emerging world, the growth revisions are clearly downwards," indicated  HSBC's Henry. "This includes the large Asian economies, including China and India, though the bigger cuts have come through in Latin America, particularly Brazil."

The worst recessions of 2016 will happen in Latin America and there is little policymakers can do to avoid this as commodities prices flounder. Economists slashed growth forecasts for most of the region.

Separately, ratings agency Standard & Poor's (S&P) said Wednesday that the "alarming" outlook for emerging countries hit by collapsing oil prices is more worrying than China's economic slowdown.

"We are much more worried about the prospects for emerging countries outside of China, and in particular raw material producing countries", than the Asian giant's economic woes, leading S&P economist Jean-Michel Six told a news conference.

He said falling oil prices that had been a "blessing" for consumers in developed nations had now turned into "bad news" for the world economy.

And he highlighted the risks of falling oil prices that have now slumped close to $30 a barrel for "the growth and geopolitical prospects in the emerging countries" heavily dependent on commodity prices and especially oil.

"We are in a zone of uncertainty and weakness which is becoming alarming," indicated Six, who is chief economist for Europe, the Middle East and Africa.

Brazil is an "extremely serious" case after falling into recession last year, the S&P official warned, pointing to the multi-faceted impact on it from US monetary policy, China, commodity prices as well as its economic policy and governance.

China, on the other hand, where concern about its economy has rattled global markets since New Year, is less worrying, he said.

He described a slowdown in an economy in the throes of transitioning from export-led investment to a domestic consumer focus as welcome. 

"It would be desirable for the Chinese authorities to abandon the seven per cent [of gross domestic product] target [for growth]," he added.

NEW YORK — General Electric Co. (GE) will move its global headquarters to Boston, tapping the city's technology talent and likely lowering its tax bill as the industrial conglomerate seeks to lift profit and emphasise digital capabilities.

The maker of aircraft engines, locomotives, power turbines and household appliances will move to temporary quarters by next summer, and permanently settle about 800 workers in the Seaport district by 2018, GE indicated.

“We want to be at the centre of an ecosystem that shares our aspirations as a leader in digital-industrial activities,” GE Chief Executive Jeffrey Immelt said in a statement.

"Greater Boston is home to 55 colleges and universities. Massachusetts spends more on research and development than any other region in the world, and Boston attracts a diverse, technologically-fluent workforce focused on solving challenges for the world," he added. "We are excited to bring our headquarters to this dynamic and creative city."

GE noted that the move would have no material financial impact, with costs offset by state and city incentives and the sale of its current headquarters offices in Fairfield, Connecticut, and its offices at 30 Rockefeller Plaza in New York City.

Massachusetts will provide up to $120 million in grants and other incentives and the city will provide property tax savings of up to $25 million. The state funds must be spent on public infrastructure, including site preparation, building acquisition costs and road and building improvements, GE indicated.

GE also is eligible for $1 million in workforce training grants, and up to $5 million to foster relations between the company, research institutions and universities.

Boston Mayor Martin Walsh said GE's decision resulted from "the city's willingness and excitement to work creatively" to attract the company, bringing 800 high-paying jobs to the city.

The move also will lower GE's tax bill. Even though Massachusetts is often called "Taxachusetts", it ranked 25th in a 2016 Tax Foundation survey of positive business tax climates among US states. Connecticut ranked 44th, near the bottom.

Connecticut's corporate income tax rate is nominally 7.5 per cent, but GE likely pays an effective rate of 9 per cent due to surcharges on growth income, versus 8 per cent in Massachusetts, said Jared Walczak, a policy analyst at the Tax Foundation, a nonpartisan think tank.

Connecticut also has many corporate tax structures that are less favourable than other states', such as rules that could put more of GE's global sales within Connecticut's grasp, and those probably also tipped the decision, Walczak added.

"Given the cost of corporate relocation, I suspect that GE anticipates substantial tax savings from the move," he continued.

Long search

GE's decision caps a search that intensified last summer as Connecticut lawmakers passed a budget that increased taxes by $1.2 billion over two years, drawing protests from some of the state's biggest corporations.

The same month, Immelt said in an e-mail to employees that he asked a team to examine the company's options to relocate the headquarters to a state with a "more pro-business environment".

But talent also was a draw. GE said on Wednesday it had been thinking about a new location for more than three years and considered 40 potential sites this year. Those included Atlanta; Austin, Texas, and Nashville, Tennessee, according to people familiar with the matter.

"This wasn't only about dollars and cents but what Boston and New England brings to the table," said John Fish, chief executive officer of Suffolk Construction Company, New England's largest building company.

The 124-year-old company is undergoing a major restructuring to emphasise digital and industrial capabilities. 

Earlier on Wednesday, GE said it would cut up to 6,500 jobs in Europe over the next two years, including 765 in France and 1,300 in Switzerland, as it restructures and integrates its acquisition of Alstom's energy business.

With 800 employees, the Boston headquarters will be the same size as Fairfield, but its makeup will change, GE remarked. 

The new office will employ about 200 administrators and 600 "digital industrial product managers, designs and developers", GE added.

Those workers, spread among the company's GE Digital, Current, robotics and life sciences divisions, will share technology developments across business units, GE continued, helping develop software to run the machinery the company manufacturers.

GE had been based in Fairfield since 1974. The planned move is a blow to Connecticut, which in December reduced corporate taxes to thwart criticism that the state is unfriendly to business. Fairfield's 2013-2014 annual report listed GE's headquarters with an assessed value $74.7 million and ranked it the city's largest
property tax payer.

GE has about 5,700 employees in Connecticut, including about 800 people employed at the Fairfield headquarters. It was not immediately clear how many employees will remain in Connecticut.

"Of course we are disappointed, and we know that many in Connecticut share that frustration," Connecticut Governor Dannel Malloy said. "While GE's headquarters may be leaving, I have been assured that the company will continue to have many employees working here in Connecticut."

GE's presence in the state had been shrinking because much of it was related to its finance arm, GE Capital. The company is selling off the bulk of GE Capital as part of its restructuring.