Business

SEOUL — Samsung Electronics posted its first drop in annual net profit in three years Thursday and saw resurgent archrival Apple barge in on its pole position as the world's top smartphone maker.

The South Korean firm, whose key mobile phone operations have struggled in the face of intense competition from cut-price Chinese rivals, also warned that it expected 2015's "business environment... to be as challenging as 2014".

The tech giant said Thursday it recorded a net profit of 23.4 trillion won ($21.45 billion) in 2014, down 23.2 per cent from a year ago and the first decline since 2011.

Operating profit fell 11.7 per cent to 25 trillion won in the year and sales also tumbled 10 per cent to 206 trillion won.

Under growing pressure to boost shareholder returns, the company still managed to announce an increased dividend of 19,500 won a share, up from 13,800 won a year earlier.

The Samsung results contrasted sharply with the triumphant surge in the fortunes of California tech titan Apple, which reported a fourth quarter net profit of $18 billion, the largest ever made by a public company.

Apple's performance was driven by the sale of 74.5 million iPhones, which included a doubling of sales volume in the crucial Greater China region.

Samsung's fourth quarter net profit, meanwhile, was down 27 per cent at 5.3 trillion won.

Chip cushion  

The fall was cushioned by a boom in high-margin chip sales that helped offset the downturn in the key mobile sector, with operating profit in the semi-conductor division rising 35.7 per cent to 2.7 trillion won in the October-December period from a year earlier.

Samsung shares closed the day down 1.31 per cent at 1,360,000 won.

The annual profit figure marked a dramatic reversal for the company, which is also facing a once-in-a-generation leadership change after several years of stellar growth, driven by the once all-conquering mobile division.

The popularity of the iPhone 6 helped Apple catch up with Samsung to share the title of world's top smartphone vendor, market researcher Strategy Analytics said Thursday. 

Apple shipped 74.5 million handsets in the fourth quarter of last year with a market share of 19.6 per cent, on a par with Samsung, whose shipments and market share slipped markedly from a year ago.

Samsung had held the global smartphone vendor crown on its own since dethroning Apple in 2011.

Samsung's flagship Galaxy phones have suffered in the high-end market thanks to the popularity of the iPhone 6, while its dominance of the middle- and low-end handset segment has been challenged by Chinese firms such as Huawei, Xiaomi and Lenovo.

New strategy 

Samsung plans to slash the number of smartphone models it issues in 2015, while boosting production of remaining models that can be sold more cheaply to compete with Chinese rivals.

Streamlining the product mix should increase sales in the current quarter, Samsung's head of investor relations Robert Yi predicted, while nevertheless warning of a tough year ahead.

"When we look at 2015 as a whole, we fully expect the business environment... to be as challenging as 2014," Yi said.

Handset sales will be driven by growth in emerging markets including China and India, indicated Park Jin-young, vice president of Samsung's mobile unit.

Sales of tablet computers are expected to grow, largely boosted by sales of mid-priced and low-end products, Park said.

A more fundamental restructuring is assumed to be in the pipeline, with control of the family-run conglomerate's main business expected to pass from ailing patriarch Lee Kun-hee to only son Lee Jae-yong.

Needing cash to pay for what will be a massive inheritance tax bill, Lee and his siblings are expected to pare down and simplify the byzantine system of cross-holdings that link the many branches of the Samsung empire.

The anticipated reforms have helped keep Samsung on the "buy" list of many analysts, despite the recent profit downturn.

Thursday's dividend increase will help appease disgruntled shareholders who watched Samsung's stock price take a battering last year.

The company is currently in the middle of a $2 billion share buyback process announced in November.

With a market capitalisation of about $185 billion, Samsung accounts for nearly 17 per cent of the weighting on South Korea's benchmark Kospi composite index.

With its hot-selling large-screen iPhones released last year, Apple has roared back to the top of the pack with South Korea's Samsung in the smartphone market.

A separate survey by IDC analysts said Samsung had a tiny edge over Apple with 75.1 million units sold.

Apple "beat everyone's expectations", said Ryan Reith at IDC. 

Even more surprising is that Apple managed to increase the average selling price of its phones at a time when many consumers around the world are looking to low-cost handsets.

Another surprise was growth of iPhone sales in the US, "which is considered a saturated market", according to Reith, and in China, where competition is intense.

"Sustaining this growth and higher [selling prices] a year from now could prove challenging, but right now there is no question that Apple is leading the way," Reith said in a statement.

Strategy Analytics said Samsung now faces "intense competition from Apple at the higher-end of the smartphone market, from Huawei in the middle-tiers and from Xiaomi and others at the entry level."

"Samsung may soon have to consider taking over rivals, such as Blackberry, in order to revitalise growth this year," it added.

Even Apple has been surprised by its growth. Chief Executive Tim Cook said during an earnings call this week that iPhone demand "has been staggering, shattering our high expectation".

IDC's Ramon Llamas told AFP that Apple is still seeing strong demand in early 2015 but that "it's going to be difficult to maintain that breakneck pace."

He said: "The fact that they attracted a number of Android users gives them growth prospects for 2015."

According to analysts, the smartphone market appears to be diverging with Apple dominating the high end and other manufacturers scrambling at the low end.

"There's been so much scepticism for so many years about Apple's ability to continue to make its unique business model work over the long term, and Apple continues to prove them wrong," said Jan Dawson at Jackdaw Research in a blog post. 

Rise in China  

IDC said overall global smartphone sales hit a new record for the quarter and for the year: 375.2 million units shipped during the fourth quarter, a 28 per cent increase from a year earlier, bringing the annual total to 1.3 billion, a gain of 27.6 per cent.

Strategy Analytics said more than a billion Android-powered phones were sold last year, representing 81 per cent of all handsets.

Chinese firms made headway in the smartphone market, led by Lenovo, which completed its acquisition of the Motorola brand last year.

IDC indicated that Lenovo sold 24.7 million units for a 6.6 per cent market share, edging out Huawei which delivered 23.5 million for a 6.2 per cent share.      The rising Chinese star Xiaomi captured the number five spot, selling 16.6 million units with a 4.4 per cent market share. Xiaomi's growth from a year ago was 178 per cent, IDC said.

But "Xiaomi's grip on the number five spot is tenuous at best, with [South Korea's] LG and [China's] ZTE following close behind," the IDC report said.

MISRATA, Libya — A power struggle between two rival governments that threatens to tear Libya apart has started to take its toll on Misrata, an important shipping and industrial hub that had shrugged off the turmoil until now.

Production at the country's biggest steel works has been cut and the port of Misrata has been forced to restrict operations.

Armed factions allied to the competing governments are fighting for control of the oil producing nation four years after the civil war that ousted Muammar Qadhafi.

Oil production has collapsed to a fifth of what Libya used to pump before the NATO-backed uprising, while wheat imports and other activity at seaports have been disrupted by clashes in the east of the country.

Misrata had so far not been affected by the unrest, since its port serves much of the country and it became a major air gateway to Libya when fighting forced Tripoli's main airport to close in the summer.

The country's third largest city is also home to the biggest free trade zone and the largest dairy products company, making it the only place with significant non-oil industrial activity in a country that relies on petroleum for most of its revenues.

But Misrata is also a power base of Libya Dawn, the  faction that seized Tripoli in summer by expelling armed rivals in a month-long battle. After Libya Dawn set up its own rival government, Misrata became part of the front line.

War planes allied to the recognised government, holed up in the east since losing the capital, have bombed Misrata's steel plant, the port and the airport. Little was hit, but the campaign has scared away shippers as well as Turkish Airlines, the last foreign carrier to serve Libya.

Forces from Misrata once formed a major rebel brigade battling alongside fighters from Zintan to topple Qadhafi. But since then, Libya has descended into factional fighting as regions and cities turn against one another.

Steel output down

In Misrata, the Libyan Iron and Steel Company, one of Africa's largest steel firms, is facing gas shortages and will have to cut production this year by shutting down two of its three direct iron reduction plants, its chairman said.

"We agreed with the electricity firm, as instructed by the government, to reduce production to 33 per cent due to gas supply problems to save natural gas and power," Chairman Mohammed Abdul Malik Al Faqih told Reuters in an interview.

Output of direct reduced iron, a key steel-making ingredient, would be just 550,000 tonnes in 2015, a further decrease from last year when it had planned to produce 1.6 million tonnes, but achieved only about 60 per cent of the target due to power shortages.

The cutbacks would affect steelmaking operations and two of the company's six furnaces would shut down.

Libya's gas production has fallen since a group allied to Libya Dawn launched an offensive to take control of the Es Sider oil terminal in the east. Forces from the eastern government still hold the facility but it became damaged and had to close. 

The Tripoli government says it was also forced to lower gas output at the Mellitah plant in the west due to the risk of air strikes.

Though security in Misrata is still better than in Benghazi or Tripoli, where gunmen killed nine people in an attack on a hotel on Tuesday, Turkish and Austrian steel contractors have pulled out staff due to the air strikes, Faqih said.

He said ships importing raw materials or fuel were increasingly reluctant to dock at Misrata, though marketing manager Ali Darrat said one ship had just arrived.

At Misrata's commercial port, container volumes fell last year to 174,340 twenty foot equivalent units (TEUs) from 225,929 in 2013, the latest data show, ending years of steady growth.

Some foreign shippers have diverted cargo to smaller Libyan ports such as Khoms, west of Misrata, after a warplane hit a quayside warehouse, an industry source said.

On Monday, warplanes deployed by the official government forced a Libyan fuel tanker sailing from Greece to Misrata to divert to Tobruk, an eastern city that is home to the elected parliament.

It was allowed to go back to Misrata after troops searched it for weapons.

Earlier this month, a Greek-owned oil tanker was hit by an air strike that killed two crew members, and a fishing vessel carrying fuel was also bombed by war planes from the forces of a former Libyan general now allied with the recognised government.

The United Nations is holding talks in Geneva with some of the warring factions, but the Tripoli-based government has stayed away. Misrata representatives are taking part, keen for a quick solution.

"In Misrata, 70 per cent of our people work in trade and industry," said Mohammed Al Tumi, a member of the Misrata council. "We really want to stop this war."

NEW YORK — Earnings Tuesday from American multinationals revealed a downside to the comparatively robust US economy: The drag from a rising dollar.

Dow component Procter & Gamble (P&G) cited "unprecedented" foreign-exchange fluctuations as it missed earnings expectations and slashed its profit outlook.

Chemical producer DuPont and technology giant Microsoft also highlighted the strong greenback as a headwind for earnings, adding to commentary last week from fast-food chain McDonald's and consumer goods firm Kimberly-Clark. 

"US companies are not immune to global weakness," said Christine Short, senior vice president at Estimize, a financial tech company that collects earnings research.

Foreign exchange "is going to be a big impact", she added.

The dollar has been on a tear in the wake of mostly improving data on US jobs and economic growth. That has lifted expectations that the US Federal Reserve will raise interest rates before other major central banks. 

A strong dollar has upside for US companies that import goods or raw materials from weak-currency economies and sell the goods in the US.  Analysts have said some sectors could benefit from this differential, such as clothing retailers.

However, many US multinationals face challenges due to a strong dollar, which last week hit an 11-year high against the euro, which itself has jumped against the battered Russian ruble.

The strong dollar can sting multinationals if they import goods or materials from the US or other strong-currency markets into a weak-currency state like Russia if prices to consumers are not adjusted. 

Companies also suffer when overall earnings are transposed from weak currency markets like Russia back into dollars for reporting purposes.

In P&G's case, the grim commentary on foreign exchange also reflected a negative impact from Switzerland. P&G's European headquarters is Geneva, which means it also has exposure to the Swiss franc, which has risen sharply following an unexpected move by the Swiss central bank earlier this month to abandon the franc's cap against the euro.

P&G projected 2015 earnings would be hit by 12 per cent, or at least $1.4 billion, due to currency effects.

"This is the most significant fiscal-year currency impact we have every incurred," P&G chief financial officer Jon Moeller said in a conference call with analysts.

Kimberly-Clark, another leading consumer products company, last week announced a $462 million charge in Venezuela stemming from the revaluation of its assets due to the plummeting value of bolivar. 

Kimberly-Clark Chief Executive Tom Falk predicted a negative currency earnings hit of more than 15 per cent in 2015.

At McDonald's, weak currencies in Russia and Ukraine battered earnings in 2014 and the company expects more of the same in 2015 in those countries and others.

The fast-food giant forecasts a full-year impact of 35-40 cents per share in 2015, said McDonald's chief financial officer Pete Bensen.

Raising prices abroad 

To offset the impact of the strong dollar, US companies are seeking to raise prices in badly hit markets. 

"Generally, the principle is that over time you recover the amount of the price effect," P&G's Moeller told reporters in a conference call.

That means if a good is in a market where the dollar has appreciated 20 per cent, the price of the good to consumers will also increase by 20 per cent, but the jump may not happen all once, Moeller said.

Other steps include boosting local sourcing of goods and materials in Russia, Venezuela and other hard-hit markets, he added.

However, company officials acknowledged that price increases are difficult in some cases, such as when the economy is weak, as with eastern Europe.

"This is just a bit of unchartered territory," Kimberly-Clark's Falk said. "If the Russians and some of the other Eastern European economies declined by mid-single digits, which is what some of the forecasters say, we'll see how that plays out in terms of consumer purchasing power." 

Separately, New York restaurant owner Jeremy Merrin has seen business droop in recent weeks at his Havana Central eatery in Times Square. The reason: Not enough international tourists.

"We're fighting a double-whammy," said Merrin, who owns three restaurants and is on the board of the New York State Restaurant Association. "Not only is the dollar going up and making things more expensive, Europe as a whole is not doing well."

International tourists to the United States spend more than $200 billion annually on travel, hotels, dining and shopping, but growth in 2015 is expected to decelerate as would-be visitors balk at the stronger dollar and grapple with weaker economies at home.

"That could impact the length of their stay and the composition of their spending in the United States," said David Huether, senior vice president, research, at the US Travel Association, which sees the influence of the stronger dollar becoming more severe in 2015's second half.

Travel experts hope some of the drop in spending in the United States will be made up for by increased tourism from China, where visitors can now get a visa that lasts 10 years. 

Lower gas prices and a stronger US economy also may encourage more domestic travel, they said.

Still, some retailers, including Tiffany and Co., are already feeling the impact.

"The strong dollar has created headwinds for foreign tourists in the United States," said Mark L. Aaron, vice president of investor relations at Tiffany, which warned of slower sales to tourists at its flagship New York store.

"Tiffany is the first poster child of this issue," said Craig Johnson, president of consulting firm Customer Growth Partners. "A lot of retailers might be hit to some degree."

He added that the trend could slow the growth of other successful luxury brands that depend heavily on tourists. 

"We believe that Michael Kors and Kate Spade will still be showing solid growth, but not the robust, double-digit we've seen over the last couple of years," he indicated.

Kate Spade did not respond to a request for comment. Michael Kors declined to comment.

Rising dollar

The dollar has climbed about 15 per cent against the yen and the euro over the past six months. It is up about 6 per cent against the won.

Chris Gaffney, senior market strategist at EverBank Wealth Management in St. Louis, expects the strong dollar will affect a number of US sectors that serve foreign tourists, including airlines, hotels, and retail. 

Companies with tourism operations abroad could see relief because "for American tourists, Europe is on sale," he said.

Morningstar equity analyst Paul Swinand said department store chains with a large presence in some of the "gateway cities" could see a 1 per cent or 2 per cent slip over the next year because of lower tourist spending.

A 10 per cent appreciation in the dollar typically results in about 2 per cent fewer international visitors annually, indicated Adam Sacks, president of consulting company Tourism Economics, which expects the number of international visitors to climb by 3.5 per cent in 2015, compared with 5 per cent annual growth over the past 10 years.

Growth in the number of foreign tourists coming to the United States had already started to slow last year, largely because of economic problems in home countries. 

The number of Japanese visitors through last October was 4 per cent lower than the previous year, according to the most recent Department of Commerce numbers. The number of Venezuelans was off 18 per cent, but Mexican and Chinese tourists both were up more than 20 per cent.

"Despite the higher dollar, the Chinese have saved money to travel," said Evan Saunders, chief executive and co-founder of Attract China, which is expecting many more Chinese tourists this year.

He added that the Chinese tourists his company works with are eager to try everything from Shake Shack to outlet malls. 

"They want to do what they have seen in TV shows or American movies," he remarked.

AL OUR, Egypt — Facing grim economic prospects at home, desperate young Egyptians are seeking jobs in Libya, a country sliding into lawlessness where armed groups battle for control and dozens of their compatriots have been kidnapped.

Tackling unemployment in Egypt, where half of the rapidly growing population is under 25, is one of the toughest challenges facing President Abdul Fattah Al Sisi.

He rules a country that has seen two presidents deposed in the past four years. The 2011 popular uprising that toppled autocrat Hosni Mubarak was fuelled by anger over joblessness.

Affording a home and getting married is still difficult under Sisi for many young men unable to make a living.

The political and social unrest since Mubarak was ousted has deterred foreign investors and tourists from Egypt, the world's most populous Arab nation with 90 million people. This has exacerbated the jobs crisis, and the unemployment rate has climbed from 8.9 per cent to 13 per cent in that time.

Thousands of Egyptians have travelled to neighbouring Libya in search of jobs since 2011, despite their government advising against going to one of the most dangerous countries in the region.

They can be seen working in building sites, factories, restaurants and shops in cities across Libya, which has descended into chaos since a revolt toppled Muammar Qadhafi four years ago and where two rival governments vie for power.

In the Egyptian village of Al Our, about 200km south of Cairo, it is easy to see why young men take the risk.

There are no paved roads, clean drinking water or adequate health care, the kind of conditions that have driven young men to give up on the state and join militant groups in the past.

Jobless men sit beside a canal filled with stinking and stagnant water.

Samuel Alham lived with his wife and three children, his three siblings and their children, and his elderly parents in a small cement house. Like many young Egyptians, he dreams of one day buying a small plot of land to build his own home.

The 30-year-old's decision to go to Libya to work as a plumber was costly. In December, he was kidnapped on his way back to Egypt.

'How can people eat?' 

"I want my son. He went to support his children. He did nothing wrong," said Alham's weeping mother.

He is among 27 Egyptians, low-paid workers, who have been kidnapped in Libya since August, 13 of them this month.

Their Christian faith may have put them at greater risk. Militants claiming allegiance to Islamic State, the group that has seized swathes of Iraq and Syria, have said they are responsible for the abductions of the "crusaders".

Al Our is in Minya Province, a traditional stronghold of the Muslim Brotherhood, a movement which Sisi has cracked down on since, as army chief, he ousted its president Mohamed Morsi from power in 2013 after protests against Mursi's rule.

The government has said it plans to invest in Minya, a hotbed of militancy under Mubarak in the 1990s, and other parts of southern Egypt after decades of neglect.

But just outside Al Our, cars with Libyan licence plates are a reminder of the tough decisions forced on its residents.

Abanob Ayyad, in his early 20s, was unable to make ends meet or support his younger siblings, let alone save money to buy an apartment so he could get married.

So he tried his luck in Libya, as a construction labourer.

The funds Ayyad sent home to pay for his brother and sister's college education ended abruptly this month when militants stormed his home in the Libyan city of Sirte and dragged him away along with 12 other Egyptian labourers.

"There is no work that can help here. How can people spend, eat, learn," said his mother Aziza Younan. "The country does not help them or treat them fairly... what can they do?" 

Flight into unknown

At the World Economic Forum in Davos last week, Sisi said Egypt aimed to lower unemployment to 10 per cent by 2020. He has announced major infrastructure projects such as a second Suez Canal and major roadworks designed to create jobs.

But those promises have yet to stir hope in villages like Al Our.

"I have made all attempts to get a job for my son, either in the government or the private sector, but in vain," said Bushra Shehata, whose son has been looking for a job since graduating from college nine years ago.

"People need connections to get a job," he added, echoing a common complaint made under successive Egyptian leaders.

More than 100 relatives of the 27 kidnapped workers protested outside the United Nations offices in Cairo last week after meeting Egyptian foreign ministry officials.

Holding up pictures of their loved ones, they urged the government to help secure their release. One tearful man was desperate for information about his son and three nephews.

Officials have said they are doing their best to help.

But across town, more and more Egyptians lined up to buy tickets at Libyan Airlines offices.

One of them, a furniture painter who came back from Libya five months ago hoping for work in Egypt, said he had no choice but to return despite the growing risks.

Heavily armed gunmen stormed a luxury hotel in Tripoli favoured by Libyan officials and visiting delegations on Tuesday, killing at least nine people, including foreigners, before blowing themselves up with a grenade.

"We are going and it is God who is protecting us," said the painter, before rushing to the airline ticket counter when his number was called.

ZAGHREB — Damir Hajduk likens paying off his mortgage to the tale of Sisyphus in Greek mythology, condemned forever to push a boulder uphill, only for it to roll back down again and again.

"You keep paying and the debt never goes down," said the 47-year-old Croatian father of three. "After ten years of monthly payments, if we calculate in the [local currency] kuna, today I owe more than the principal I originally took."

Hajduk is one of 60,000 borrowers in Croatia, and many hundreds of thousands across ex-Communist central and eastern Europe, who took out home loans denominated in Swiss francs in the early 2000s, attracted by far lower interest rates than the double-digits offered on mortgages in historically unstable local currencies.

It came back to haunt them when the global crisis that began in 2008 drove up the value of the franc as a safe-haven currency for investors.

Some respite came when the Swiss National Bank (SNB) imposed a cap to rein in the currency, a policy that lasted three years until it was abruptly abandoned ealier this month, stunning financial markets, and Hajduk.

The drama raises fresh questions over the lending practices of European banks, already dragged through the mud during the financial crisis, and the vigilance of their state regulators.

"No one cautioned or warned us about anything; they were saying the franc is a stable currency and there wouldn't be any big oscillations," said Hajduk.

The value of the franc has jumped 18 per cent against the kuna since last week, and 20 per cent against Poland's zloty. Some borrowers have seen their monthly mortgage instalments increase by hundreds of euros, threatening banks with a fresh wave of defaults.

‘Gullible’ 

More than half a million homeowners are affected in Poland, central Europe's biggest economy, where the stock of loans denominated in Swiss francs was worth $36 billion in November, or 8 per cent of national output.

Croatia's is equivalent to 7.5 per cent of the gross domestic product (GDP). Serbia and Romania are also embroiled.

Hungary, the country that stood to lose most, escaped by the skin of its teeth, after the government of Prime Minister Viktor Orban ordered that all foreign-currency loans be converted into forints at the tail end of last year to end the ordeal of borrowers.

Hungary had been guilty of failing to regulate the banks well enough; Poland was stricter, and Serbia banned the practice of issuing loans denominated in Swiss francs in 2011. But the damage was done.

"It should have been banned a long time before that," said former Serbian central bank governor Dejan Soskic. "We were always advocating that participants in the system should not borrow in a currency which is not their source of income."

Soskic added that it was "illogical" to think borrowers were not aware of the risk, and Serbia's finance minister, Dusan Vujovic, this week called them "gullible".

But a former central bank official, who declined to be named because of his current post, told Reuters: "The fact is we don't know how much borrowers were warned [by banks] about the currency risk at the time they were taking loans in Swiss francs."

Poland's government, facing close-run elections this year, has ordered an investigation into the practice, to verify that the banks' activities "do not affect the legally protected interests of borrowers-consumers".

Lawsuits have already been launched on behalf of thousands of borrowers in Serbia and Croatia over interest rate hikes during the global crisis.

In 2013, a Croatian court ruled against eight commercial banks, saying they had overcharged holders of loans denominated in Swiss francs and failed to provide them with enough detail to make an informed decision. The banks dispute this.

‘Absurd situation’

In Croatia, No. 2 lender Privredna Banka Zaghreb (PBZ), majority-owned by Italy's Intesa Sanpaolo and with 6.5 of its loan portfolio denominated in Swiss francs,  said that "from the very beginning" it had pointed in loan contracts to the possibility of exchange rate movements, and had offered to convert loans into kuna at the first sign of turbulence in 2007.

Raiffeisenbank, which has some 270 million euros worth of loans indexed in Swiss francs in Croatia, said in a statement to Reuters that it had "regularly and conscientiously" informed clients of the risks.

Austria's Erste, the third biggest bank in Croatia, said it had told clients that "no one could predict the currency movements in the next 10, 15 or 20 years", had provided graphs showing past movements and "continuously" offered options to make repayments easier.

In Poland, a spokesman for BCP's Polish arm Millennium, with franc-denominated loans worth 18.8 billion zlotys (4.45 billion euros) in September, said its clients were "absolutely sufficiently informed about risks linked to foreign exchange loans" and were shown a simulation of how instalments may change with rate changes.

The Polish unit of Commerzbank, mBank, and Getin Noble Bank did not immediately respond to requests for comment.

"It's too easy just to blame the banks; they were selling their financial product," said independent Croatian analyst Damir Novotny. "On the other hand, the government, which is in charge of consumer protection, should have warned citizens not to take loans in Swiss francs because their earnings are not in that currency."

In Serbia, Belgrade pool hall owner Dragan Cuca, 50, took out a mortgage indexed in Swiss francs from Unicredit Bank in 2007.

"I took 55,000 Swiss francs that totalled 37,000 euros at the time. Six months ago I got a statement from the bank saying my remaining debt in euros was 41,000, and after the recent franc strengthening my debt in euros would be around 47,000," he told Reuters.

Faced with the prospect of a spike in defaults, and a fight to hold onto power in elections, governments in Poland and Croatia in particular are looking at a range of measures to alleviate the burden on borrowers.

Croatia has returned the rate of the Swiss franc against the kuna to the level it was at before the Swiss National Bank abandoned its cap, and says it will also consider following Hungary's example of forcing a conversion of the loans.

Poland appears to have succeeded in pressing banks to ease interest rates on Swiss franc-denominated loans. But it may have to take bolder steps long-term, depending on the effects of Thursday's announcement by the European Central Bank of a government bond-buying programme to pump hundreds of billions in new money into the sagging eurozone economy.

Initial signs were promising, as currencies in central and eastern Europe firmed on optimism that some of the money would spill over into their own financial markets.

Some, like Poland's deputy finance minister, are resigned simply to paying more. "I have a mortgage in Swiss francs and I was taking advantage of this while my friends were paying higher instalments as they had Polish zloty loans," Izabela Leszczyna told TOK FM private radio. "Now it's the other way around, and I pay higher instalments." 

RIYADH — World oil prices have fallen too far, the president of state-owned energy giant Saudi Aramco said Tuesday, stressing it was for the market not OPEC producers to shore them up.

"It's too low for everybody," Khalid Al Falih told a conference. "I think even consumers start to suffer in the long term."

Falih also said American shale oil production is important for the world's long-term energy future and Saudi Aramco has marked an additional $7 billion for its own shale projects.

Saudi Aramco is the world's largest oil company in terms of crude production and exports.

The kingdom is the leading exporter and top producer in the Organisation of the Petroleum Exporting Countries (OPEC).

In November, the group decided to maintain its output ceiling at 30 million barrels per day, deepening the global price drop which began in June.

Oil was then trading at more than $100 a barrel but on Tuesday international benchmark Brent crude for March delivery was fetching just $48.28 in Asian trade.

Saudi Oil Minister Ali Al Naimi has been quoted as saying it is unfair to expect the group to reduce output if non-members, who account for most of the world's crude production, do not.

Falih reiterated that policy, saying: "Saudi Arabia will not single-handedly balance the market on a downturn."

The company's production has been steady over the past few years, while domestic demand rose and exports gradually declined, he said.

"So the reason for the imbalance in the market absolutely has nothing to do with Saudi Arabia," Falih told the Global Competitiveness Forum.

'The next frontier' 

Falih said "it will take time" for the current excess supply to be removed.

He declined to speculate on the price at which the market will ultimately settle.

"It will be the price that will balance supply and demand. I think we're going to just wait for the forces of supply and demand," he said.

Saudi Arabia, the only producer with significant spare capacity, had traditionally acted to stabilise the market by adjusting output.

Technological innovations have unlocked shale resources in North America and raised US oil output by more than 40 per cent since 2006, but at a production cost which can be three or four times that of extracting Middle Eastern oil.

In an increasingly competitive market, analysts have said the kingdom is content to see shale oil producers suffer from low prices.

But Falih said: "US shale is needed, is welcome, on the global scene," because the world will require more energy resources for a growing population.

The economy is still going to be driven by oil and gas for generations, he added.

Falih noted that US shale innovation had led the way for Saudi Arabia to pursue similar techniques.

"Saudi Aramco has invested already $3 billion in developing our unconventional gas. We just earmarked an additional 7 [billion]. This is the first time I share this publicly," he told the forum.

"Saudi Arabia will be the next frontier after the US where shale and unconventional will make a contribution to our energy mix, especially gas," he concluded.

RIYADH — Saudi Arabia's new leadership will push forward efforts to diversify the growing but oil-dependent economy, while easing procedures for investors, senior officials said on Monday.

"The smooth transition of power to King Salman is a testament of the stability and the commitment that our leadership has," Abdul Latif Al Othman, governor of the Saudi Arabian General Investment Authority (SAGIA), told a conference.

Salman acceded to the throne of the world's leading oil exporter on Friday after his half-brother King Abdullah died aged about 90.

"King Salman has been a strong supporter of promoting the kingdom as an investment destination," Othman told the Global Competitiveness Forum.

The annual event, organised by SAGIA, brings together high-ranking Saudi officials with world business leaders.

Among those attending is Eric Schmidt, executive chairman of tech giant Google. 

Oil makes up about 90 per cent of Saudi government revenues but Othman said the kingdom aims to expand the health, transport and mining sectors, along with information and communications technology.

"Already we've identified healthcare and transportation investments valued at $140 billion in the coming five years," Othman indicated.

There was also a plan to "transform" the financial services, tourism and real estate sectors while focusing on education and "innovation", he said. "Now we have one of the most tech-savvy populations in the world."

'Fast-track'  

Critics have complained of the administrative obstacles to doing business in Saudi Arabia but Civil Service Minister Abdul Rahman Al Barrak told the gathering that "fighting red tape... is a priority".

Othman noted that after detailed study the government has been trying to address investors' concerns.

"We've introduced a fast-track process that will enable investors to obtain licences within five days," he said.

During King Abdullah's "transformative" rule, Saudi Arabia joined the Group of 20 of major world economies as well as the World Trade Organisation.

"Foreign direct investment grew at an average rate of 10 per cent [and] increased by fivefold to reach $220 billion," Othman pointed out. "Productivity growth in the private sector has averaged an impressive 8.4 per cent annually since 2005."

A 50 per cent fall in world oil prices since last June has left Saudi Arabia projecting its first budget deficit since 2011, emphasising the need to diversify.

"We expect that the government will continue spending in the near future because we have great surpluses," despite lower projected revenues, the civil service minister said.

The kingdom's reserves are estimated at $750 billion.

The chairman of the Capital Market Authority told the forum that Saudi Arabia is on track to open its stock market to foreign investors by the end of June.

A final date will be announced after relevant regulations are issued but it "will be before the end of the first half of 2015", said Mohammed Al Sheikh, chairman of the Capital Market Authority.

Penny-stock players, however, will not be welcome on the expanded Tadawul All-Shares Index, the largest Arab bourse.

"We really want to attract large, sophisticated, experienced institutional investors and the requirements actually show that," Sheikh told the forum.

Britain's Peter Mandelson, now Lord Mandelson, a former European trade commissioner, told the forum that Saudi Arabia's accomplishments are "impressive, but there is still a long way to go".

AMMAN —  Energy service companies and individual consumers want to save money by putting in new lighting, air conditioning, heating and ventilation systems, but often cannot afford them under current lending terms, an energy and finance specialist told a gathering this week. According to a press statement from the USAID Energy Sector Capacity Building (ESCB) Activity, Tom Dreessen presented for discussion suggestions for new energy efficiency loan products which would make it easier for banks to lend funds, and easier for customers to borrow. These could include extending loan payment periods, thus reducing monthly payment, increasing credit lines for borrowers, and reducing or eliminating the need for additional collateral. The gathering, co-sponsored by the Association of Banks of Jordan USAID's ESCB Activity, was attended by senior officials from 20 major banks. The USAID ESCB Activity aids government and private sector energy sector agencies to support adoption of renewable energy and energy efficiency.

AMMAN — Jordan Investment Commission (JIC) President Montaser Oqlah on Monday acquainted Li Jianhua, Ningxia committee secretary at the Communist Party of China, with the economic reforms that Jordan has achieved. Oqlah said these reforms contributed to achieving important developments in economic fields by amending some laws and signing agreements with Arab and foreign countries that provided Jordan with new export markets. The new investment law will provide investment incentives such as exemptions from customs fees and sales tax in an automatic way to save time on investors, Oqlah said, stressing that JIC is ready to provide Chinese investors with all facilities to establish their projects in Jordan. Jianhua expressed his appreciation for Oqlah’s briefing on the investment environment in the Kingdom, noting that the Chinese-Jordanian relations have developed during the past few years. He also said that His Majesty King Abdullah’s participation in the 2015 Chinese and Arab Countries Exhibition will add value to the event which is considered a good opportunity for Jordan to promote investment.

LONDON — Oil prices at current levels may have reached a floor and could move higher very soon, the secretary-general of the Organisation of petroleum Exporting Countries (OPEC) said on Monday, 

In his first public comment that oil's second-biggest decline on record may have run its course, Abdulla Al Badri also warned of a risk of a future price spike to $200 a barrel if investment in new supply capacity is too low.

"Now the prices are around $45-$50 and I think maybe they reached the bottom and will see some rebound very soon," Badri told Reuters on the sidelines of a conference at Chatham House.

The 12-member OPEC pumps about a third of the world's oil and until last year had a policy of adjusting its supply to support prices.

Oil prices have fallen almost 60 per cent since June to below $49 a barrel on global oversupply. Prices kept falling after OPEC's surprise refusal in November to cut its output to retain market share against rival suppliers.

Defending OPEC's decision, Badri warned that any oil supply cut would lead to spare production capacity, a lack of investment and an eventual shortage and price spike that could exceed that of 2008, when oil hit its record high above $147 a barrel.

"Suppose we cut production, and then we'll have spare capacity," he said. "Producers, when they have excess capacity, they will not invest."

"If they do not invest there will be no more supply, if there is no more supply there will be a shortage in the market after three to four years and the price will go up and we'll see a repetition of 2008," Badri indicated.

"Maybe we will go to $200 if there is a real shortage of supply because of the lack of investment," OPEC's secretary general added.

Oil's decline in 2014 was its second-biggest ever, after the collapse in 2008 which followed the record high.

Non-OPEC help?

Some OPEC members, including Venezuela, have continued to call for output cuts. Its President Nicolas Maduro earlier this month visited several OPEC countries, and non-member Russia.

While praising Maduro's efforts, Badri noted that there was no imminent prospect of OPEC and non-OPEC producers sitting down to discuss cutbacks.

"It will take some time," he said. "It will take another four to five months and we will not see some concrete efforts before the end of the first half of the year due to the reason that we will see how the market behaves at the end of the first half of 2015."

Badri further defended OPEC's decision in November to leave its output target unchanged.

"It was a collective decision," he added. "Everybody participated in the decision, there are some remarks and some reservations but at the end of the day all the ministers agreed to this."

Asked about the prospect of a change in oil policy in top OPEC producer Saudi Arabia under its new king, Badri said: "Saudi Arabia is a stable country, is a stable government, and I think things will be normal."