Business

AMMAN — Using coal at its Rashadiyeh plant marked a significant turnaround for Lafarge Cement Jordan.

Cementing its return to profitability at the end of 2014, the company boosted gross profit during the first quarter of this year by 633 per cent to JD4.4 million from JD0.6 million at the end of March 2014 despite lower sales which dropped to JD22.2 million compared to JD25 million during the first three months of last year.

After taking into consideration administrative, selling, marketing  and other expenses, Lafarge Cement Jordan turned the JD2.1 million loss recorded during the first quarter of last year into a JD1.9 million operational profit as of March 31, 2015.

With further reductions, arising from JD0.9 million (JD1 million as of March 31, 2014) in financing costs and JD0.8 million (JD1.2 million) in legal expenses among others, or further earnings arising from the sale of property, equipment and machinery for JD400,000 million among others, the company emerged from the JD4.4 million loss as of March 31, 2014 posting a JD 400,000 million  net pretax profit during the first three months of this year.

"After three years of losses, the company was able to achieve JD3.4 million net after–tax profit in 2014 compared to a JD26.2 million net loss recorded in 2013," Lafarge Cement Jordan Chairman Neil Curtis told the shareholders in the 63rd annual report.

In 2012, the net loss was JD19.7 million.

Curtis attributed last year's positive outcome to stringent measures taken by the company, foremost of which was starting to use coal at the Rashadiyeh factory at the end of 2013 in addition to continued tough controls on spending.

"Yet, the company still suffers from unfair competition because, without scientific justification, Lafarge Cement Jordan is not allowed to use coal at its Fuheis factory and, as such, the firm was compelled to discontinue production there for the past two years," he wrote in a foreword.

Toufic Tabbara, chief executive officer for cement and concrete in Jordan, indicated in a separate address that lower production costs and higher sales were the two factors that positively influenced the results last year.

"In 2014, the company strived painstakingly to maintain its position in the cement market," he said. "This perseverance reflected directly on the financial results proving Lafarge Cement Jordan's capability to emerge from financial hardships of previous years.

The chief executive officer credited the coal mill at the Rashadiyeh factory for substantially reducing Lafarge Cement Jordan's costs and boosting its competitiveness in the face of others that have been using coal for several years.

Within this context, he mentioned that production using fuel oil became unfeasible at the Fuheis plant and that shifting to coal was not allowed, describing this obstruction as unfair.  

Tabbara also described the production stoppage at the Fuheis factory as detrimental and adverse in terms of burdening the company with higher transportation costs from the Rashadiyeh plant to the main cement consumption market.

Besides the disadvantage from being unable to use coal at Fuheis, Tabbara expected a sharpening competition in 2015 as a result of global economic changes, especially the acute fall in fuel prices, and imports from neighbouring countries where energy costs are much lower.

He stressed the importance of operating cautiously and alertly this year to preserve the 2014 accomplishments, especially with the negative impact from higher electricity and water charges and from imperfect competitiveness due to the misfortune at Fuheis.

The annual report listed the following risks facing the company: Continued rise in energy prices and raw materials; allowing the continuation of clinker and cement imports; the limited Jordanian market where five companies produce cement; and the impact of economic slowdown on the cement market.

Financially, the performance last year was marked by a 24.9 per cent increase in sales which reached JD114.3 million, JD65.5 million of which came from cement business, and JD48.8 million from ready mix (concrete).

Geographically, Aqaba contributed JD5.5 million of the total sales. 

Gross profit amounted to JD20.5 million compared to a JD10.6 million loss in 2013 when costs totaling JD102.1 million exceeded sales which came at JD91.5 million.

The gross profit in 2014 turned into a JD9.1 million operational profit and a JD3.4 million after-tax profit when several expenses or income were taken into consideration, chiefly among them JD3.1 million in financing costs and JD3.8 million in legal expenses.

With the improved performance, following a JD21 million operational loss and JD27.5 million net pretax loss in 2013, Lafarge Cement Jordan doled out JD13.7 million (JD9.4 million) to the state treasury in the form of taxes and fees.

The balance sheet as of December 31, 2014 showed that accumulated losses amounted to JD22.8 million, and that the mandatory and voluntary reserves were JD27 millions and JD13.4 million respectively.

Out of JD190.3 million in total assets, JD62.6 million were current assets, mainly inventory and receivables, and JD109.3 million were fixed assets, particularly  property, equipment and machinery.

Short and long-term debt to banks totaled JD14.7 million (JD22.6 million), noting that Arab Bank, Housing Bank, Arab Banking Corporation, Jordan Kuwait Bank and Union Bank have credit lines extended to the company.

Other data showed JD20.4 million as the balance related to the obligation for employees' retirement health insurance benefits.

For a number of years until 2009, Lafarge Cement Jordan distributed JD39.4 million in cash dividends to shareholders at a rate of 65 per cent. The company's share price, which traded at JD13.800 in 2006, is at present trading at around JD1.700. 

Lafarge, a French company, owned 50.275 per cent of the Jordanian public shareholding company whose labour force comprised 575 employees at the end of last year. The Social Security Corporation had a 21.8 per cent stake, and Moroccan national Mayloud  Shoaiby had 10.3 per cent.

HONG KONG — The European Union (EU) is seeking Asian capital for a multi-billion euro investment plan it hopes will create more than a million jobs and revive growth.

Through the creation of the European Fund for Strategic Investment, presented in Hong Kong on Thursday during its first roadshow outside Europe, the EU seeks to inject 315 billion euros into a range of long-term projects from broadband infrastructure to green energy.

To attract investors, the EU has pledged 16 billion euros from its own budget in guarantees and is looking to fund around 20 per cent of each project.

Despite the problems posed by the Greek crisis and low growth, some Asian investors signalled an appetite for Europe.

"Asia right now is flush with liquidity and European companies are a bargain. It's a no brainer for Asian investors, particularly Chinese ones, to diversify into Europe," indicated Vincent Chu, Chairman of First Eastern Investment Group, who has already invested more than $300 million in the region.

According to Chu, Chinese companies are keen to get into Europe to access technology and know-how and bring these back into Asia.

Social costs

This know-how rests often with small, family-owned European firms that are however reluctant to accept Chinese investors, indicated Raymond Yip, deputy executive director at the Hong Kong Trade Development Council.

Asian investors, first of all Chinese, have already started investing in the EU, China's biggest export market.

But investments are often concentrated in a few countries, particularly the UK, and in real estate.

Under the plan, EU institutions would act as junior partners in any investment, meaning they would take the first hit were the project to run into problems.

The plan, expected to win final approval in the European Parliament by July, is already attracting interest from sovereign wealth funds in Asia and in the Gulf, a EU official told Reuters.

"We feel there are opportunities to invest in Europe," said George Yuen, a director at China's ICBC, the world's biggest bank by market capitalisation.

"Of course, one has to deal with issues such as high social costs. But we think the advantages outweigh the disadvantages," he added

Separately, the International monetary Fund (IMF) said in a report Thursday that Asian economies will lead world growth in 2015, expanding at a 5.6 per cent pace that is level with last year, as recoveries in India and Japan help to offset the slowdown in China.

IMF economists expressed concern, however, over the potential for weaker growth if policymakers in the region fail to follow through with needed changes, saying it was a time not for "alarm but it is a time for alert".

The IMF's regional economic outlook forecasts that growth in the Asia-Pacific area will moderate to 5.5 per cent in 2016.

Asian growth fell to 5.5 per cent in 2014 from 5.9 per cent in 2013, and is bound to shift lower as China's economy, the world's second largest, settles at a more sustainable level than the torrid double-digit pace of the past decade.

China's report of 7 per cent growth in the first quarter of the year was in keeping with that trend.

"You cannot expect that a country can keep 10 per cent growth forever," said Changyong Rhee, director of the IMF's Asia and Pacific Department. "The current phase of growth is in line with our forecasts, but even if it's a desirable slowdown it can have a negative impact on other countries."

Rising levels of debt and potential financial market disruptions are other risks to growth, though moves by Chinese financial regulators to rein in margin trading and umbrella trusts are a positive step, he indicated in a news conference that was broadcast online.

On a broader scale, the IMF report said its estimates show lower oil prices could help boost global growth by 0.3 percentage points to 0.7 percentage points in 2015. 

Major producers of oil and other commodities are suffering from lower exports, but for countries such as Japan, China and Thailand the lower costs are a boon both for businesses and consumers.

Growth varies widely across the region, from 8.3 per cent forecast for 2015 in Myanmar, 7.5 per cent for India and 6.8 per cent for China to 1 per cent for Japan.

Japan, the world's No. 3 economy, shows signs of recovering from a recession last year following an increase in the country's sales tax to 8 per cent from 5 per cent.

The IMF's report said that Japan's growth will remain modest but could improve with more aggressive measures to improve productivity through improved labour laws and corporate governance.

Despite its slowdown, China remains a main driver of global gross domestic product expansion, accounting for a larger share of world economic growth than the rest of Asia combined, the IMF said.

Reforms intended to make the state-dominated economy more productive, with stronger domestic consumption and services, and less dependence on trade and investment are crucial for future growth, Rhee stressed.

Full implementation of reforms would boost overall income by 5 per cent by 2020 over the economy's performance without such reforms, he said.

DUBAI — Dubai's Emirates airline said Thursday annual profit surged 40 per cent to $1.2 billion as revenues increased and fuel costs dropped.

The Middle East's largest carrier said revenues rose seven per cent to $24.2 billion with passenger numbers up 11 per cent to 49.3 million in the financial year 2014-15.

Emirates Chief Executive Officer Ahmed Bin Saeed Al Maktoum said the profit was achieved "despite a tough market and stiff competition".

The company said a significant drop in the price of jet fuel had reduced operating costs by seven per cent to $7.8 billion.

Fuel represented 35 per cent of operating costs, down from 39 per cent the previous year.

The Emirates chief described the drop in oil prices as a "welcome relief" that impacted the second half of the financial year.

A global supply glut has eroded prices by around 60 per cent since last year.

Emirates said it faced challenges including a weaker US dollar, to which the United Arab Emirates (UAE) dirham is pegged, as well as an 80-day runway closure at its hub for upgrading.

Competitors 'lobbying' 

Sheikh Ahmed also spoke of the challenge from competitors, alluding to US carriers pushing Washington to take action against fast-growing Gulf carriers over alleged state subsidies.

"Our competitors challenge us everyday and some are lobbying their government to restrict us," he said in a clear reference to big US carriers — Delta, United and American Airlines.

The carriers allege that the Gulf Big Three: Emirates, Qatar Airways and Abu Dhabi's Etihad have received government subsidies worth $40 billion.

They accuse the Gulf three of enjoying interest-free loans, subsidised airport charges, government protection on fuel losses and below-market labour costs that are considered unfair subsidies by the World Trade Organisation. 

"On this front, our position has always been clear: we embrace competition because it is good for the consumer ... industry and ... also us," he told reporters. "We just have to stay ahead of our competition." 

Sheikh Ahmed charged that the "noise" was coming from legacy carriers which "thought nobody can overtake them".

The three Gulf carriers have seized a large chunk of global travel, turning their hubs into major stops on transcontinental routes.

The US carriers do not differentiate between what is a subsidy and what is "legitimate" for a state-owned carrier, according to Qatar Airways Chief Akbar Al Baker.

Etihad Airways Chief James Hogan had said his company was a "David" battling the US "Goliaths", accusing the three US carriers of themselves hiding behind protection.

Emirates operates a fleet of 219 passenger aircraft and 14 freighters, serving 144 destinations in 81 countries.

The airline operates the world's largest fleets of Airbus A380s and Boeing 777s.

The carrier said Europe was the highest revenue contributing region with $6.9 billion, up 7 per cent from the previous year, followed by Asia and Australasia, which grew 3 per cent to $6.7 billion.

Revenue from the Americas jumped 20 per cent to $3.0 billion.

Emirates President Tim Clarke said this week that the Dubai carrier will deliver a "sledgehammer" response to a report accusing major Gulf airlines of receiving unfair government subsidies.

"Having read the report, you could drive a bulldozer through just about everything... We will deal a sledgehammer to that report as far as Emirates and Dubai is concerned," Clark said at a conference in Dubai.

Clark did not say when any formal response would be delivered, but Sheikh Ahmed told reporters in Dubai it would be fair if it had two years to put together a reply since the US carriers took that long to produce their report.

Clark, who previously said he would resign if the report proved accurate, invited the heads of the three US carriers making the accusations to follow suit if they are disproved.

"If you are wrong, and we show you to be wrong... will you resign? What will do when this rebuttal comes back at you and shows the political entities that you've managed to orchestrate to come behind you that you are fundamentally wrong?" he said.

More than 250 members of Congress signed a letter urging the US departments of state and transportation to seek consultations with Qatar and the UAE over the allegations.

Clark said the argument of stealing market share was weak as many of the destinations in the Middle East, Africa and Asia were minimally served by US carriers.

"We have never been subsidised. We have never received from the government of Dubai any kind of... special treatment," Clark said, adding that the airline's growth had been achieved without state intervention or state funding but instead came from its own cash flow, debt issuance and earnings.

The airline has also played up its purchases from US and European manufacturers, such as last month's $9.2 billion engines order from Rolls-Royce.

Separately, Sheikh Ahmed said he is pressing ahead with a global expansion that could include more US routes.

Sheikh Ahmed said in an interview with the Associated Press that several American cities have asked Emirates to launch routes connecting them with its ever-expanding hub in Dubai.

He declined to name the potential destinations, citing competitive reasons and confidentiality agreements, but said the carrier is looking to accommodate the requests "in a very short period of time".

"We always learn we cannot stop and this is really the direction of the UAE government and the Dubai government. The minute you stop, somebody will pass you," he told The Associated Press. "In terms of expansion, we will continue."

The airline is looking to increase services "on every continent" — it operates multiple routes into all except Antarctica — by adding additional routes and increasing frequencies on more than 140 existing ones, he said.

The carrier recently announced plans for daily flights to Orlando, its 10th US passenger destination. That should begin September 1.

Emirates says it carried more than 2.3 million passengers to and from the US last year.

Jill Zuckman, a spokeswoman for a coalition known as the Partnership for Open and Fair Skies that includes the three big US airlines and a number of labour unions, responded to Sheikh Ahmed's comments by saying that Emirates and other Gulf carriers "aren't simply growing" by adding routes to the US.

"They are racing against the clock to dump more subsidised capacity into US markets and divert passengers away from the US airlines," she said in an statement.

Dubai Airports, which must keep pace with Emirates' breakneck growth, announced Tuesday that construction will begin later this year to expand Dubai's second airport, Al Maktoum International at Dubai World Central, so it can handle 26 million passengers a year, up from 6 million now.

Officials are eager to shift more airline traffic to that new facility even as they expand the older Dubai International Airport, now the world's busiest airport for international traffic.

Emirates needs the extra space. The carrier plans to take on 27 new aircraft this year alone and is recruiting thousands of staff to fill newly created positions and to replace those left vacant by departing employees.

It is also planning to roll out new offerings for the lucky few who fly in first-class, Sheikh Ahmed said.

"Whatever you do for today is not good for tomorrow, and this is why we have to keep on moving," he said.

AMMAN — The Amman Chamber of Commerce (ACC) issued 12,772 certificates of origin during the first fourth months of 2015. United Arab Emirates accounted for the highest share with 2,529, followed by 2,165 for Saudi Arabia, and 1,092 for Iraq, ACC statistics showed.

According to the data, the value of goods exported via the ACC  totalled JD402 million during January-April 2015 compared to JD542 million during the same period in 2014. Exports to Iraq topped the list, at JD147 million, follwed by JD82 million to the UAE, and JD29 million to Saudi Arabia. 

LONDON — Oil prices rose to 2015 highs on Wednesday, as a month-long rally gained further impetus from the first fall in US crude stocks since the beginning of January.

Brent crude was up $1.60 to $69.12 a barrel by 1442 GMT, after hitting a 2015 peak of $69.63.

US crude traded $1.54 higher at $61.89 a barrel, near an intraday high of $62.58.

"Bulls are in control of the market," said Tamas Varga and Stephen Brennock, analysts at London brokerage PVM Oil Associates, in a note on Wednesday.

The US government's Energy Information Administration (EIA) said crude stocks fell 3.88 million barrels to 487.03 million barrels, the first stock draw since the beginning of January and more than double the 1.5 million barrel draw reported by the American Petroleum Institute on Tuesday.

Stocks at the key delivery point of Cushing, Oklahoma fell for a second straight week by 12,000 barrels to 61.67 million barrels, easing fears of storage hitting tank tops.

"It's a big bullish crude draw," said Dominick Chirichella, senior partner at the Energy Management Institute in New York. "Lower imports seem to be the main driver for the draw down." 

Oil prices also had support from the dollar, which fell by more than a per cent against a basket of currencies, on course for a fourth straight weekly loss.

A weaker dollar makes dollar-priced commodities such as crude oil more attractive for holders of other currencies.

While Yemen is only a small oil producer, it sits on major shipping routes and any conflict involving its neighbour Saudi Arabia, the world's leading oil exporter, shakes the market.

Oil's rise in May followed a 20 per cent rally for Brent and 25 per cent for US crude prices in April, despite indications that the Organisation of the Petroleum Exporting Countries (OPEC) may keep production unchanged at current high levels at a meeting next month.

While oil futures rebound with vigour, traders warned of a deep disconnect with the physical market where a lack of demand has left tens of millions of barrels unsold.

Analysts from London-based Energy Aspects consultancy said the bull market would run out of momentum, citing "dire" fundamentals in the near term.

"We maintain our view that even though $70 seems likely in the short term, a downward correction is still on the cards," they said in a note.

While oil futures prices rebound with vigor as analysts cite strong demand, the physical crude market tells a much more cautionary tale.

Tens of millions of barrels are struggling to find buyers in Europe with traders of West African, Azeri and North Sea crude blaming poor demand.

The deep disconnect between the oil futures and physical markets looks similar to the events of June 2014 when the physical market weakness became a precursor for a futures price crash.

"Being large physical buyers of crude we have a direct pulse of the market and feel immediately when it is well supplied, as is happening now," Dario Scaffardi, executive vice resident and general manager of independent Italian refiner Saras, told Reuters.

 "In the short-term, futures prices do not necessarily reflect accurately the physical market," he said.

Benchmark Brent oil futures prices more than halved between June 2014 and January 2015 after OPEC refused to cut output and instead chose to undercut more expensive producers, including a booming US shale oil sector.

But since January's lows of $46 per barrel, prices have risen back to $69 per barrel on Wednesday on fears the output in the United States would fall deeper than expected and on signs of a faster-than-expected demand rise across the world.

However, data from OPEC and the International Energy Agency show the world is still pumping 1.5 million barrels per day more crude than it consumes. Traders say they are seeing increased evidence of crude barrels struggling to find a home.

Traders in Azeri Light crude, usually one of Europe's favourite grades due to its high quality, said some 10 cargoes from the May tanker loading programme are struggling to find buyers, just two days before June volumes are due to go into the market.

As a result, the Azeri price premium to benchmark dated Brent is the weakest since December, when it hit a five year low.

In the North Sea, Norwegian Ekofisk crude fell to its weakest since August last year due to a significant number of unsold May cargoes, despite June programme already trading.

The worst situation, however, is in Angolan and Nigerian crude, which has struggled in the past two years due to the US oil boom.

Traders said around 80 million barrels of Nigerian and Angolan crude oil are on the market with at least a dozen May-loading cargoes still available.

Indian refiners, which had bought large quantities of Nigerian oil in March and April, are now turning to cheaper Iraqi Basra and Venezuelan crudes.

"Near term oil market fundamentals continue to look dire, particularly in the Atlantic Basin, with Nigerian, Mediterranean and North Sea differentials all weak," analysts from Energy Aspect said on Wednesday.

Pushing the mythic rock uphill

There is no guarantee oil futures will definitely follow the physical market as they did after June 2014.

A number of unknowns could take oil prices either way. A failure to reach a nuclear deal between Iran and the West in June will reduce the likelihood of increased supplies from the Islamic Republic and therefore give prices some support.

The ex-boss of BP, Tony Hayward, said last month the withdrawal of capital and workforce from the US shale oil industry was so steep that a new oil price bull market may come much quicker than expected.

Others argue that shale producers have become much more efficient in recent months and can switch production back on as soon as prices reach $70 per barrel.

The head of oil trading house Vitol, the world's largest, Ian Taylor, said he saw another dip in oil prices soon.

On the demand side, the biggest unknown is whether China will resume buying large volumes of oil for its strategic reserve in the second half of the year.

However, an increasing number of market watchers agree that the fundamentals point to what should be a more bearish market, at least until either supply is cut or demand increases.

"We cannot help but compare the current price strength to the myth of Sisyphus," said Tamas Varga from PVM oil brokerage.

"The top of the current bull mountain might not be close but unless there is a fundamental change in the physical supply/demand balance, the rock might start rolling back down shortly again just like it did in the second half of 2008 and 2014 only for the bulls to start the arduous uphill battle all over again," he added.

DOHA — Qatar is to build seven "cities" to house more than a quarter of a million migrant labourers building major infrastructure and projects for the 2022 World Cup, officials said Tuesday.

Government officials said all seven should be built by the end of 2016 and that the largest, "Labour City" for 70,000 people and complete with its own 24,000-seat cricket stadium, will begin housing workers in the next few weeks.

The move to construct more modern facilities comes amid continued criticism of the accommodation provided by Qatar for the vast number of migrant workers and with Doha admitting that sub-standard and illegal living conditions are still being used.

In total, 258,000 workers, some 25 per cent of Qatar's migrant labourer population, will be housed, officials said. Abdullah Bin Saleh Al Khulaifi, labour and social affairs minister, described the new accommodation centres as the "future".

"That's the blueprint," he said of Labour City. "There are in the pipeline [several] cities around the nation. I know our people want to have better accommodation for their labourers."

Khulaifi added that Qatar has effectively doubled its number of housing inspectors to 300, and that should increase to 400 soon.

DUBAI — Gulf oil exporters must reduce spending, including subsidies and diversify their economies to cope with lower revenues caused by the sharp drop in crude prices, the International Monetary Fund (IMF) said.

The wealthy monarchies, however, should "not react in a knee-jerk way to lower oil prices", the IMF Middle East and Central Asia chief Masood Ahmed told AFP in an interview Monday.

They would be better off to "adjust gradually" using the large financial reserves they have accumulated during several years of bumper oil receipts, he said in Dubai. 

But as oil prices have dropped lower than budgeted breakeven levels, "it is important that they gradually, but in a determined way... reduce their spending [and] consolidate their fiscal position," Ahmed added.

Oil prices have shed half of their value since June 2014, and are expected to be lower than the breakeven point for Gulf countries in the next three to four years.

The Gulf Cooperation Council (GCC) includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE), economies all heavily dependent on energy revenues. 

A combined budget surplus for 2014 of $76 billion (68.5 billion euros) is expected to turn into a deficit of $113 billion this year, the IMF indicated in its latest regional report. 

"They need to act to reinforce their efforts to diversify their economies to become less dependent on oil," said Ahmed, pointing out that many have already taken such measures.

"The UAE is more advanced in terms of diversification. The others also are in varying degrees trying to encourage private sector activity outside the oil area," he added. 

Curb subsidies 

GCC countries were also urged to cut energy subsidies in a bid to minimise public spending and trigger a change in consumer behaviour.

"Most GCC countries still have the domestic sale price for energy products below the international prices... We think that over time it is important to tackle the issue of energy subsidies to reduce them," Ahmed stressed.

Gulf states should also contain salary growth in the public sector, which usually employs nationals as opposed to the private sector that depends on millions of foreigners.

In addition, GCC countries would need to prioritise investment projects that "most advance the development agenda”, said Ahmed.

Oil-export revenues for GCC countries are forecast to be $280 billion lower this year than a year ago.

With the exception of gas-rich Qatar and Kuwait, all GCC states are expected to face budget deficits this year, said Ahmed, noting that this could persist for two or three years.

"The important thing to recognise is that GCC countries have built up financial buffers that put them in a very strong position to be able to use these savings to finance expenditure and to have a gradual decrease in spending over the coming years," he added.

This in turn would minimise the economic impact of the drop in oil prices.  

GCC states are estimated to have foreign reserves of about $2.5 trillion.

"The impact on [economic] growth is quite limited," said Ahmed.

The IMF has forecast GCC countries to grow as a group at 3.4 per cent in 2015, one percent down from earlier predictions, mainly because of a slowdown in non-oil growth in response to lower oil prices. 

The forecast did not account for fallout from the conflict in Yemen, where a Saudi-led coalition launched in March an air campaign against Iran-backed Shiite rebels in support of exiled President Abdel Rabbo Mansour Hadi.

Ahmed said it was too early to assess the impact of the campaign on Saudi Arabia, which is leading daily air strikes, but said the kingdom's financial buffers will help meet the cost.

"It will be one source of additional pressure," he said, adding however that the "Saudi government has the financial reserves to be able to underwrite the budget deficit."   

Separately, Saudi Arabia is restructuring the world's biggest energy company, Saudi Aramco, in a move apparently aimed at letting it operate more at arm's length from the powerful oil ministry.

Analysts expected technocrats to get a freer hand in running the state-owned giant. Some said the restructuring might be the first step in a shake-up of the Saudi energy sector and could possibly pave the way for a prince to take over the ministry itself, which is traditionally run by industry experts rather than members of the royal family.

Citing unnamed sources, Saudi-owned Al Arabiya TV reported on Friday that Aramco would be separated from the oil ministry of the top member of the Organisation of Petroleum Exporting Countries (OPEC). Aramco officials could not be immediately reached for comment but Arabiya's reports closely reflect official thinking.

According to Mohammad Al Sabban, a former senior adviser to oil minister Ali Al Naimi, the move would strengthen Aramco. 

"This decision will bring more flexibility to the company to take decisions on a commercial basis, and keep full financial control," he said.

Conventional thinking is that the ruling Al Saud family views the oil minister's job as so important that giving it to a prince might upset the dynasty's delicate balance of power and risk leaving oil policy hostage to princely politicking.

But Ehsan Ul-Haq, oil analyst at KBC Energy Economics, said it was highly likely that Prince Abdul Aziz Bin Salman, a son of King Salman, could be appointed to replace 79-year-old Naimi, who has been oil minister since 1995.

The king promoted Prince Abdul Aziz, long a member of Saudi Arabia's OPEC delegation, to deputy oil minister from assistant oil minister earlier this year. Some diplomatic and Saudi sources have suggested his years of experience might overcome the hurdles to a royal becoming oil minister.

"They are trying to rearrange Aramco and restructure the whole company. They are also trying to restructure the oil ministry and name Prince Abdul Aziz as minister of energy," said an industry source in Saudi Arabia.

"So that way, Aramco will be totally business-oriented, not an arm of the petroleum ministry," he added.

Major reshuffle 

Aramco was once US-based and run by Americans but has long been a Saudi state corporation. It dwarfs all others in the industry, with crude reserves of 265 billion barrels, more than 15 per cent of all global oil deposits.

It produces over 10 million barrels per day, three times as much as the world's largest listed oil company, ExxonMobil , while its reserves are more than 10 times bigger. If Aramco were ever to go public, it would probably become the first company to be valued at $1 trillion or more.

As part of a major reshuffle on Wednesday, King Salman moved Khalid Al Falih from chief executive to chairman of Aramco and also appointed him health minister, changes that may indicate Falih will not become oil minister, Ul-Haq said.

"[Falih's] shift to the health ministry suggests that he might not follow Naimi. His appointment to the chairman of Aramco, on the other hand, is only ceremonial," he added.

Aramco's senior vice-president Amin Al Nasser has been named acting chief executive until further notice, the company said on its Twitter account on Friday. Earlier, it had posted a statement saying Aramco has a new 10-member supreme council headed by the kingdom's deputy crown prince.

"The Saudi Supreme Economic Council agrees on Deputy Crown Prince Mohammed Bin Salman's vision of restructuring oil giant Aramco," Arabiya reported on its Twitter account. "Restructuring of Saudi Aramco includes separation from the petroleum ministry."

The Supreme Economic Council, formed by King Salman earlier this year, replaces the Supreme Petroleum Council, which used to help set the kingdom's oil policy.

The new council is headed by Deputy Crown Prince Mohammed, another son of the king, a move seen by analysts as laying the ground for a generational shift in how Riyadh develops its energy and economic strategies.

The main tenets of Saudi oil policy, including maintaining the ability to stabilise markets via an expensive spare-capacity cushion and a reluctance to interfere in the market for political reasons, are set by the top members of the ruling Al Saud family.

Oil minister Naimi, who has seen several oil price crashes during his tenure, was the driving force behind OPEC's decision in November not to cut production to support prices, which have halved since June 2014, but rather maintain its market share.

On Thursday, Naimi was quoted as saying that King Salman's appointment of two new heirs would help stabilise world oil markets by strengthening political stability in the kingdom.  

DUBAI — Dubai attracted more than 13 million visitors last year, official figures released on Monday showed, as the cash-flush emirate looks to reap the rewards of its growing tourism sector.

A total of 13.2 million foreigners headed to Dubai in 2014, an increase of 8.2 per cent compared with the previous year, its tourism department said. It said it hoped to attract 20 million tourists a year to Dubai by 2020, when the city will host a World Expo.

Figures released in March showed that hotels in the emirate posted a 9.8 per cent rise in revenues to $6.5 billion (5.8 billion euros) last year — the sector's best annual result since the 2009 financial crisis.

Turmoil in most of the traditional tourism destinations across the Middle East appears to have helped Dubai capitalise on its reputation as a safe haven for tourists and businesses.

Dubai's economy contracted 2.4 per cent in 2009 when it rattled global markets over its debt crisis before receiving a $10-billion bailout from Abu Dhabi, its oil-rich partner in the Emirates, and reaching restructuring deals with lenders.

AMMAN — Accumulated losses at Consultant and Investment Group, the public shareholding company that operates the Istishari Hospital in Amman are about 51 per cent of the paid-up capital as they reached JD11.23 million at the end of March 2015.

According to auditor Deloitte and Touche (Middle East)-Jordan, the company is also in a liquidity bind with a JD1.4 million deficit in working capital.

"These figures raise concern about the ability of the company to continue [operations], consequently depending on the success of future activities and executing the management's plan to rectify the financial position," Deloitte wrote in a review report.

The profit and loss statement at the end of this year's the first quarter showed a decline in gross profit to JD400,000 from JD700,000 at the end of March 2014, reflecting lower operational earnings which were down to JD2.8 million (JD3.1 million at the end of March 2014).

After taking into consideration administrative and selling expenses, finance costs and depreciation, the net result for the first three months of 2015 was a JD500,000 (200,000) loss.

In 2014, the loss was JD1.6 million, 220 per cent more than the JD500,000 posted in 2013. 

According to the company's balance sheet as of March 31, 2015, net receivables amounted to JD1.7 million (JD1.9 million on March 31, 2015), after setting aside JD3.2 million in both quarters as provisions for doubtful assets.

In other words, gross receivables before deductions were JD4.9 million (JD5.1 million), including JD2 million in both periods owed to the company by the Libyan government and Libyan hospitals.

The Palestinian Authority and the Jordanian Ministry of Health were the other two debtors specified in the list as owing the company JD400,000 and JD200,000 respectively.

Although these amounts owed by the Libyan, Palestinian and Jordanian parties have been due for more than 360 days, the company allocated only JD1.6 million as provisions for doubtful assets , including JD1 million to cover the Libyan debts.

"We could not verify the Libyan receivables because the company's management was unable to specify the party that should be contacted in light of the conditions prevailing in that country," the auditor said.

Deloitte also was unable to determine if the JD2.2 million, representing JD3.2 in total provisions for doubtful assets less the JD1 million provision for Libyan dues, were enough.

It noted in this regard that no statement could show the tenor of the JD2.9 million, that represent the JD4.9 million in receivables less the JD2 million of Libyan dues.

In the company's 19th annual report, Chairman Mazen Albashir listed difficult economic conditions, an increase in indebtedness, weak liquidity and limited bed capacity at the Istishari Hospital as main challenges.

"The considerable increase in electricity charges and in the cost of fuel was beyond expectations and greatly impacted our 2014 financial performance as the rise in expenses was not offset by higher hospital charges," the chairman said.

He added: "The challenges we faced in 2014 were immense in terms of operational costs which went up due to higher energy prices."

Albashir indicated that energy prices last year were 21 per cent above the level in 2013,  resulting in a JD1.24 million bill that represented 12 per cent of the 2014 total operational costs.

According to the chairman, the remaining operational costs surged by JD900,000, or 10 per cent above the amount in 2013, due to salary increases, higher prices of medicines and medical supplies besides costly maintenance.         

He attributed the cash liquidity squeeze on the inability to collect the dues from Libya and Palestine because of  political considerations despite intensive efforts to that end.

To address the various constraints, the auditor mentioned that the company's management intends to restructure the capital by writing off the accumulated losses against the issuance premium, amounting to JD2.4 million, and increasing the capital which has been raised several times before and now stands at JD22 million.

"The plan is to recommend to the general assembly of shareholders an increase in the company's capital by around JD8 million through a public flotation," the auditor said.

In the annual report's foreword, the chairman stressed that the path to financial improvement and profitability was to implement a previous resolution, adopted by the shareholders, to increase the company's capital for the hospital's expansion.

"First steps were buying the lands adjacent to the hospital in order for the expansion plan to proceed," he indicated. "To ensure the success, it is imperative that the capital be restructured and losses be written off through raising the capital."

Notes accompanying the balance sheet as of March 31,2015 show that the company obtained in 2012 a JD2.8 million loan from Bank of Jordan to partly pay for purchases of lands surrounding the hospital within the plan for future expansion. The last instalment of this loan is due in 2016.

Combined with another JD2 million credit, known as advances under current account, the company's outstanding bank debt stood at JD2.4 million at the end of this year's first quarter

This indebtedness burdened the company with JD300,000 in financing costs last year.

Other financial data valued the company's capital investment as of December 31, 2014 at JD15.3 million and the  property and equipment a as of  March 31, 2015 at JD15 million.

Noting that annual operational earnings hovered around JD13 million in the last two years, a breakdown of last year's income reveals that revenue from medical interventions was highest at JD3.6 million, followed by JD3.2 million from other unspecified departments.

The income from the pharmacy totaled JD2.5 million, from medical supplies JD2.4 million, and from hospital admissions JD1.4 million.    

Bank of Jordan, Capital Bank and Tawfiq Shaker Khader Fakhoury top the list of shareholders as they respectively own 35.6 per cent, 13.3 per cent and 8.9 per cent of Consultant and Investment Group, whose workforce comprises 560 employees manning the Istishari Hospital.

BEIRUT — Lebanon's land exports to Gulf Arab markets have been choked off, leaving millions of dollars in goods stranded after the closure of a vital crossing on the Syrian-Jordanian border last month.

The Nasib border point was the last remaining gateway for Lebanese truck drivers transporting agricultural and industrial products to Iraq and Gulf countries.

After Syrian rebels seized Nasib on April 1, these exports came to an abrupt halt.

"Exports by land have stopped entirely," said Ahmad Alam, whose company exports Lebanese fruit and vegetables to Arab countries.

Goods transported overland made up 35 per cent of all of Lebanon's exports, economic analyst Nassib Ghobril indicated.

According to customs authorities, Lebanese exports to Gulf Cooperation Council states in 2014 amounted to $920 million (821 million euros). Another $256 million was exported to Iraq.

But all those potential exports are now effectively stuck in Lebanon, he remarked.

"The Nasib crossing was the only way for Lebanese products to be exported by land. Since it closed, there are no more land crossings now," Ghobril said.

Before the Syrian crisis erupted in 2011, Lebanese products travelled frequently through Lebanon's neighbour, then on to Iraq to the east or to Jordan and Saudi Arabia in the Gulf to the south.

The agriculture ministry says that agricultural products make up 6 per cent of gross domestic product and 17 per cent of total exports.

Agriculture hit hardest

As Syria's war worsened, its border crossings with Iraq closed, leaving Lebanese truckers with only one option: Nasib.

Omar Al Ali, head of Lebanon's Refrigerated Truckers Syndicate, indicated that about 250 trucks would cross from Lebanon into Syria every day before the conflict.

That number dropped to 120 daily because of growing instability along Syria's major highways, and with Nasib closed, just a few trucks destined for the shrinking Syrian market only leave Lebanon every day.

Although one crossing along the Syria-Iraq border remains open, Ali said it is too dangerous to use.

According to Ghobril, Lebanon's land exports have been affected the most by the Syrian crisis, apart from tourism.

Road closures have hit agricultural exports the hardest, since they rely predominantly on land routes and cannot be easily transported by air or sea.

"Our trucks transported our agricultural and industrial products. This is what carried Lebanon's economy," Ali said, adding that the losses could be in the millions of dollars.

"Now we have 900 refrigerated trucks that are just sitting inside Lebanon," with others stuck in the Gulf, he told AFP.

Alam said he lost at least $1 million in the three weeks after Nasib's closure.

According to the agriculture ministry, the sector employs 20 to 30 per cent of the Lebanese workforce.

Livelihood on hold

Many truckers can now be found discussing their plight at their syndicate's offices in Bar Elias in east Lebanon.

Khaled Araji, 55, is just one of hundreds of Lebanese who used to drive goods through Syria to the Gulf, and whose livelihood has now on hold indefinitely.

"I just spend my time in the house. I've worked in this business for more than 30 years, and if I don't see the [truck's] refrigerator every day, I can't relax. This job is in my blood," Araji said.

According to Ali, truck drivers made $1,500 a month "to provide for their families by generating activity in other sectors. All of this has stopped now”.

To make up for routes through Syria being closed, the Beirut government is looking at exporting these goods by sea.

According to Ghobril, this alternative "requires more time than by land, and it's definitely more expensive, but it's still better than nothing".

But Alam downplayed the effectiveness of maritime transport, saying some green produce would not stay fresh long enough for the journey.

In his warehouse in Bar Elias, young men and girls pack oranges, apples and fresh lettuce, whose prices have dramatically dropped, into crates and boxes for export by air.

As the peak harvest seasons in August and September draw closer, exporters and truckers are hoping for a speedy solution to the problem.

But Agriculture Minister Akram Chehayeb, speaking after a Cabinet meeting on the crisis last week, was not hopeful.

"Unfortunately, we have become an island," he said.

Separately, hundreds of Jordanian importers and exporters lost millions of dollars worth of goods when rebels pillaged the vast free trade zone that straddled the Jordanian-Syrian border, most of it on the Syrian side.

Car importer Mohammed Bustnje says he was among the lucky ones, losing only tens of thousands of dollars when looters sacked his offices and made off with televisions, air conditioning units, even doors and windows.

Bustnje said he had had a premonition there would be trouble at the 700-hectare Jordanian-Syrian Free Zone, and moved all the vehicles he had warehoused there into Jordan.

"Thank God," he said, "because the rest of the importers lost hundreds of cars" in looting after rebels seized the Syrian side of the crossing.

Nabil Romman, chairman of the Jordanian investment commission for the zone which contains not only warehouses but even assembly plants for some goods, said there were more than 1,000 traders doing business there — Syrians, Jordanians, even Iraqis — with a combined inventory of more than $1 billion (917 million euros).

He estimated that $100 million in goods was stolen.

Knock-on effect 

More recently, however, the security situation has become more stable, there are reports that Jordanian traders are now able to get into the zone and are gradually bringing goods out.

Romman said the "Nasib crossing is a vital artery between us and Europe. Seventy per cent of what we eat, of everything we import and export, passed through Syria”.

Goods were brought in and exported by sea from Lebanon, or even travelled overland through Turkey farther north.

Mohammed Daud, president of the Jordanian truckers' union, estimates that the long-term damage from lost trade with not only Syria, but also Iraq, could reach $500 million.

He said around 2,500 trucks crossed the Syrian border daily before the civil war. That number was down to "a couple hundred when the border was closed. Now it is zero”.

Prime Minister Abdullah Nsur said recently week that Jordan was in a "state of siege".

Not only is it effectively cut off from Syria to the north, it has also seen commerce with Iraq severely curtailed because of the conflict between the government and the Daesh group there.

Economist Mazen Al Rashid said "the longer the borders are closed, the more serious the consequences will be for the Jordanian economy".

"The decline in exports could exacerbate the trade deficit, which would force Jordan to borrow more to cover the difference," he added.

Economist Yussef Mansur said the only solution now is to consider trade by sea.