Business

BUENOS AIRES — President Cristina Fernandez's campaign to bolster the state's role in Argentina's economy took a big step forward last week when lawmakers approved a bill that will allow the government to intervene in the pricing and output levels of large companies.

The house of deputies voted 130-105 on Thursday for the so-called supply law. It enables the government to set profit margins and confiscate merchandise from private companies judged to have hiked prices unjustifiably.

The vote came despite strong opposition from big business and the nation's key grain sector. The bill has already passed the upper house of congress.

Fernandez still has to sign the measure into law. This, though, is widely seen as a rubber-stamping exercise.

Fernandez's leftist government says the bill will protect consumers from unfair price rises and stem job losses in times of crisis. The administration has shrugged off opponents' criticisms that more state intervention will stifle the economy.

The bill "creates the conditions for regulations by the state in order to prevent large firms abusing their strong positions and holding back stock without good reason," Cabinet chief Jorge Capitanich told reporters.

Capitanich said the bill would protect small- and medium-sized companies, encourage investment and boost job creation.

Leaders from the agricultural, banking, industrial and retail sectors vow to sue to get the law thrown out on grounds that it violates private property and trade rights.

‘parasitic relationship’

In a marathon debate, opposition lawmakers accused the government of suffocating growth of the $490 billion economy.

"This government has a parasitic relationship with production and work because it feeds off them but simultaneously wants to destroy them," said legislator Carlos Brown.

The supply law is one of a series of interventionist policies announced by Argentina since it defaulted on its debt in July.

Rattled by the default, markets will watch closely to see how the new rules are enforced in a country where private economists forecast inflation may top 40 per cent this year as the peso tanks and the economy shrinks.

The farm sector worries that the measure will allow the state to grab corn and wheat crops if it decides domestic food prices are too high. Economy Minister Axel Kicillof said those fears were unfounded.

"The state does not want to intrude on the economy, but it does have to regulate the economy," Kicillof told local radio while the bill was being debated.

"The government does not have the ability or the desire to control all the comings and goings of the economy, all the prices, or go confiscate grains from the silos," he said.

But Martin Fraguio, executive director of Argentina's Maizar corn industry chamber, told Reuters the bill threatened farmers.

"This puts the entire corn chain — planting, harvesting, buying and selling — at risk," Fraguio said.

Argentina is the world's No. 4 corn exporter and No. 3 supplier of soybeans.

Separately, the government expects the economy to grow 2.8 per cent in 2015 despite the recession gripping the country.

In its annual budget proposal to Congress, the government forecast the country would return to growth next year and slash annual inflation to 15.6 per cent.

Economic analysts are forecasting the economy will shrink at least 2 per cent this year.

Annual inflation has topped 20 per cent since 2007.

The South American country has seen sluggish consumption and industrial output in recent months.

Its economic woes have been exacerbated by its $1.3-billion debt dispute with two hedge funds that won a US court ruling blocking the country from servicing its debt without paying them.

The row forced Argentina into its second debt default in 13 years in July.

CAIRNS, Australia — Financial leaders of the Group of 20 (G-20) top economies remain committed to chasing higher global growth, but were divided on how to achieve it as Germany pushed back at calls from the United States and others for more immediate stimulus.

Opening a meeting of G-20 finance ministers and central bankers, Australian Treasurer Joe Hockey outlined on Saturday an ambitious agenda of boosting world growth, fireproofing the global banking system and closing tax loopholes for giant multinationals.

"We have the opportunity to change the destiny of the global economy," said Hockey, who back in February launched a campaign to add 2 percentage points to world growth by 2018 as part of Australia's presidency of the G-20.

That goal has seemed ever more distant as members from China to Japan, Germany and Russia have all stumbled in recent months. Just this week, the Organisation for Economic Cooperation and Development (OECD) slashed its growth forecasts for most major economies.

US Treasury Secretary Jack Lew called for the eurozone and Japan to do more to boost demand and revive activity, signalling out Germany as having scope to do much more thanks to its burgeoning trade surplus.

Berlin was none too pleased.

"We will not agree on shortsighted stimuli," a German G-20 delegate said, arguing that in most countries debt was still too high to allow for increased spending.

Germany has been under intense pressure to allow the eurozone to ease back on fiscal austerity and to boost its own economy through more government spending or tax cuts.

More than 900 individual growth proposals had been submitted and analysed by officials, said Canadian Finance Minister Joe Oliver, the co-head of a G-20 working group on growth.

"We believe that these actions in total — and if implemented, and that is key — would come very close to 2 per cent," he told Reuters.

French Finance Minister Michel Sapin was certainly putting the accent on near-term stimulus.

"I want to repeat and say again that the immediate concern with the shorter term is very much expressed," he said was his message to his G-20 colleagues. "The immediate concern is really to recover growth while global growth in 2014 is still subdued."

Geopolitics a thorn

The outlook for activity has not been helped by geopolitical tensions, from fighting in the Middle East to the strife between Russia and Ukraine.

Hockey said Australia, as the G-20 host this year, had sought feedback from other G-20 members on whether Russia should attend the meeting of leaders in Brisbane in November.

There had been calls from some quarters to block President Vladimir Putin from attending the summit given Russia's actions in Ukraine and the downing of airliner MH17.

The overwhelming consensus was that the door be left open to continue engagement with Russia, said Hockey.

Geopolitical tensions were also high on the agenda when financial policymakers of Japan, China and South Korea held their first trilateral meeting in more than two years in Cairns on Friday.

Another risk discussed was the Ebola epidemic as Sierra Leone began a three-day lockdown to try and stem the disease.

World Bank Group President Jim Yong Kim on Friday warned of the economic danger if fear of the disease caused consumers and travellers to change their behaviour.

So serious was the situation, he said, that the United Nations was taking a leading role. Sources indicated the G-20 communique on Sunday would include the need for international cooperation in fighting the outbreak.

"The [UN] Secretary General is handling Ebola as if it were sort of an outbreak of war, where instead of sending peacekeeping troops, we're going to send in people who are going to be battling Ebola," Kim said.

Tax troubles

Also on the drawing board at the G-20 are plans to stem the loss of revenue from multinationals shifting their profits to low-tax countries, potentially reclaiming billions of dollars.

Taxation arrangements of global companies such as Google Inc., Apple Inc. and Amazon.com Inc. have become a hot political topic following media and parliamentary investigations into how many companies reduce their bills.

The OECD has unveiled a series of measures that, if implemented by members, could stop companies from employing many commonly used practices to shift profits into low-tax centres.

Since countries began targeting cross-border loopholes five years ago, an additional 37 billion euros ($47.5 billion) in tax had been recovered, OECD Secretary General Angel Gurria pointed out, indicating that firms were estimated to be holding $2 trillion in low- or no-tax countries.

"The whole world needs to go after tax cheats," Hockey said about the measures, which he hopes will be adopted by at least 44 countries.

MOSCOW — Russia approved a fragile budget on Thursday that promises to cover generous social spending and control borrowing, but relies on high oil prices and reserves to try to overcome the economic damage of Western sanctions.

For months, Russian officials have played down the impact of the punitive measures imposed by the European Union (EU) and United States over Moscow's policy on Ukraine which have curbed access to foreign capital, hurt investment and sent the ruble to lows.

But in the 2015-2017 budget, the tightest since the 2008 global crisis, the government may for the first time in six years be allowed to tap its rainy day reserves — a sign it will struggle to cover social promises by President Vladimir Putin.

Admitting that macroeconomic stability was a "fragile" thing, Prime Minister Dmitry Medvedev told his ministers the state will not borrow excessively and will keep spending tight.

"This is the first time when work on the federal budget, the three-year budget, took place in such difficult circumstances, when an economic slowdown was exacerbated by the implementation of sanctions," Medvedev said.

"The main problem that we face today is the high level of uncertainty when it comes to how fast trust will return, how soon businesses become interested in investing, how the consumer market grows and what steps our partners will take," he added.

The economy is expected to grow 0.5 per cent at best this year, down from forecasts of 2.5-3 per cent at the beginning of the year.

The budget foresees a struggle to tame inflation and a  falling ruble, and depends on an optimistic assumption for the price of oil, Russia's main source of income, at $100 per barrel. Urals, the country's chief crude blend, stood at around $95 per barrel on Thursday.

"It seems that the Russian government is quite comfortable with the oil price and with its reserves, but the proper effect of the sanctions comes with a lag," said Vladimir Miklashevsky, an economist at Danske Bank.

At a meeting with senior officials, Putin indicated that Russia's best response to sanctions was to boost the domestic market.

"God will judge them, it's their decision," he said at a meeting with government and central bank officials. "Our main goal is to make use of one of the major competitive advantages of Russia: A large domestic market. Fill it with competitive, high-quality goods, which make up the real sector of the national economy."

What investment?

The health of the Russian economy and the ability to supply the market with goods and cash has depended in post-Soviet years on investment, both foreign and domestic.

After returning to the presidency two years ago, Putin ordered the government to shake up state-run industries and to take measures to raise capital investment to no less than 25 per cent of annual economic output in 2015.

But after sanctions, capital outflows are expected at $100 billion this year and capital investment is expected to decline by 2.4 per cent.

Economy Minister Alexei Ulyukayev said the arrest of  billionaire Vladimir Yevtushenkov on money laundering charges had hurt, not helped, Russia's business climate. These marked the first critical comments by an official since the chairman of Sistema, a telecoms-to-oil conglomerate, was put under house arrest on Tuesday.

"This is certainly reflected in the investment climate. It is clear that the suspicion that there is some economic motive behind this complicates investors' decision-making," Ulyukayev told reporters, adding that the situation could spur capital flight.

Social spending

The budget sees slower public wage increases, but nonetheless allocates 57 per cent of its spending to social causes, chiefly supporting Putin's main electorate — pensioners and state sector employees.

Slower wages rises, economists say, are the price Russia must pay for not introducing a sales tax in the next three years. 

"We ... note that the decent growth in public wages has been the only factor keeping the headline real wage growth from falling into negative territory," Dmitry Polevoy, chief economist for Russia at ING, said in a note.

Medvedev assured the country's 40 million retired people that 2.5 trillion rubles ($65 billion) in the next three years will go towards pension payments, subsidies and various allowances. 

"We will continue to increase the salaries of state employees: teachers, medical personnel, social workers, academics," he said.

ING estimates that nominal private sector wage growth slowed to 6.6 per cent year-on-year in June, falling well short of both annual inflation — which is now at 7.7 per cent — and the equivalent figure for public sector workers at 12.2 per cent.

The weighted-average nominal wage in the public sector, such as public administration and education, stood at 35,200 rubles against 23,000 rubles in the private sector.

"We strongly doubt this is fundamentally justified, given all the concerns on public sector productivity and extensive inefficiencies," Polevoy said. 

Finance Minister Anton Siluanov said on Wednesday that infrastructure spending including new railway tracks that bypass Ukraine would total 500 billion rubles ($13 billion). He gave no details of the project.

LONDON — Developing nations are leading a revival of interest in nuclear power, say atomic plant builders, but orders remain elusive as more safety features post-Fukushima have inflated investment costs.

Three-and-a-half years after Japan's reactor accident shook confidence, around 25 countries are thinking of turning nuclear to sustain strong growth and provide cleaner and reliable power.

"It's not so much growth in the developed countries but we're seeing a lot of other countries that are wanting to develop nuclear. We're finding money in places we didn't even know existed," Danny Roderick, chief executive of Toshiba-owned  nuclear reactor maker Westinghouse, told Reuters at a nuclear industry conference last week in London.

Rival reactor designer GE Hitachi Nuclear Energy, a joint venture between the US and Japanese companies, said it has held meetings with officials from India, Mexico and Vietnam, among others.

Countries as diverse as Bangladesh, Turkey or Jordan, are also considering building nuclear plants and around 160 reactors are expected to come online over the next decade, according to the World Nuclear Association.

On paper, that should provide plenty of work, but the industry continues to lick its wounds in the aftermath of a devastating earthquake in Japan in March 2011, which caused triple meltdowns and hydrogen explosions at Tepco's Fukushima Daiichi nuclear plant.

The accident put a break on much of the world's nuclear plans as governments re-assessed the risks of running nuclear reactors and some, such as Germany, decided to part ways with nuclear altogether. 

Looking East? 

As of July this year, 67 reactors were under construction globally, with 56 of those in Asia and eastern Europe, according to the World Nuclear Industry Status Report 2014, whose lead authors are industry consultants Mycle Schneider and Antony Froggatt.

For US-based Westinghouse, opportunities in eastern Europe and new orders from China will be key to filling its order book, while GE Hitachi will seek to benefit from interest from nuclear newcomers across the globe.

"There certainly is some interest by some of the emerging markets compared to where we were 10 years ago," Preston Swafford, chief executive of Canadian reactor maker Candu Energy, told Reuters.

France's Areva, struggling with a slump in core earnings, is pinning its hopes on fresh orders for Britain's nuclear new build programme, as well as from Turkey, India and Saudi Arabia.

Russia's recent gas supply restrictions to some European buyers and the threat to oil supplies from conflicts in Iraq and Libya have increased the need for diversified energy supplies, especially in the West.

For Russian state nuclear energy corporation Rosatom, sanctions against Russia amid diplomatic disputes over violence in Ukraine will likely add to its struggle to sell new reactors.

Rosatom's deputy director general of international business and development, Kirill Komarov, told Reuters that emerging markets in South Asia, China, India, South Africa, Latin America and North America will be of high importance over the next 20 years.

Rising costs

However, many countries have scaled back more ambitious development plans and some have been cancelled or halted, Schneider and Froggatt said in the World Nuclear Industry Status Report 2014.

"Construction costs are a key determinant of the final nuclear electricity generating costs and many projects are significantly over budget," they indicated.

The United Nations' atomic agency has cut its projections for nuclear capacity growth to 2030 for a fourth consecutive year, reducing its forecast to 8 per cent for the least optimistic scenario, compared with 17 per cent last year.

The global financial crisis in 2009 had already constrained funding for these huge projects and stricter safety requirements after Fukushima have also pushed up construction costs.

The latest cost estimates have risen to around $8,000 per installed kilowatt (kW) for a new nuclear plant, from $1,000/kW ten years ago, according to the industry status report.

"Fukushima served as a wake up call and it took the industry the past three years to digest and incorporate the lessons learned," said George Borovas, head of the global nuclear practice at law firm Shearman and Sterling.

AMMAN — The Amman Chamber of Industry's (ACI) announced on Wednesday that certificates of origin it issued for exports increased slightly during the last eight months compared with the same period of 2013, reaching JD2.7 billion compared with JD2.6 billion during the same period of last year. Despite a decrease in exports to Iraq, the country topped the list of markets that import Jordanian products, standing at JD575 million compared with JD693 million in the first eight months of last year. Saudi Arabia came second importing around JD369 million worth of national products, followed by India at JD252 million and the US at JD248 million. Exports included cosmetics, chemical and manufacturing industries, medical and pharmaceutical supplies as well as foodstuff, agricultural produce and carton.

AMMAN — Amman Chamber of Commerce (ACC) Vice President Ghassan Kharfan on Wednesday called for increasing trade exchange between Jordan and Taiwan. During a meeting with a delegation representing Taiwanese exporters and importers, he stressed the need to form joint committees comprising members of the two countries' private sectors to boost bilateral cooperation. Kharfan noted that the trade imbalance was evident as  the Kingdom imports from the East Asian country amounted $362 million last year whereas Jordanian exports  from Taiwan came at $20 million.

AMMAN — that the question of energy is the biggest challenge for the economy and public finance. The government is aware of the increase in public debt and it has to meet its pledges, regarding the issues of energy and water, he said. The government has taken measures to alleviate the cost of these two vital commodities on the low-income bracket, through cash subsidies and the Social Safety Net, he added. Toukan remarked  the ministry will work to include further financial figures in its monthly bulletin for more transparency and disclosure. 

LONDON — The banking sector's long and painful restructuring accounted for a further 1.2 per cent fall in staff numbers at Europe's biggest lenders in the first half of the year, data compiled by Reuters shows, with little prospect of an upturn any time soon.

Forced to hold more capital against risky assets since the imposition of new regulations after the financial crisis, Europe's top lenders have been shrinking steadily to counter the resulting loss of profitability in some areas of their business  while a crackdown on proprietary trading has cut off a valuable source of supplementary revenue.

Of the 25 of Europe's 30 largest listed banks that disclose employee numbers for the six months to the end of June, including Barclays, Deutsche Bank and UBS , headcount fell at 16. Though nine of the banks added staff, total jobs across the group fell by 21,135.

About half of the drop is attributable to Dutch lender ING  no longer including Indian offshoot ING Vysya Bank in its headcount figures, but it remains clear that banks are becoming less significant employers.

The trend is even more pronounced in the United States, where the four biggest banks by assets — JPMorgan, Bank of America, Citi and Wells Fargo — cut 23,300 jobs in the first half of the year. That takes the total for the past 12 months to more than 52,000 — about 5 per cent of their combined workforce.

The pace of decline in Europe was slightly slower than in 2013 when the 25 banks together cut about 63,000 jobs over the full year, but financial services recruiters say that more swinging cuts cannot be ruled out.

"Banks in 2014 do not hesitate to shut down businesses that are loss-making... there's [no longer] any shame in that," said Jason Kennedy, chief executive of Kennedy Group, a recruitment firm specialising in investment banking and hedge funds.

"New-age banks have fewer people, less product and are less profitable," he added.

Calculations by Reuters show that while European banks improved their balance sheets by 530 million euros ($685 million) in the first half, profitability remained well below targets.

Vicious circle

Royal Bank of Scotland, which was bailed out by the British government in 2008, made some of the deepest cuts. Its workforce shrank by 5,000 as it reduced the number of contractors it employs, streamlined operations and sold the Chicago-based division of its US bank Citizens.

According to recruiters, most job cuts have come in investment banking, which has been hit hard by the tougher capital rules and low interest rates.

British lender Barclays has axed 2,700 jobs at its investment bank this year as part of a wider cull of 19,000 roles over three years.

Back-office roles also remain at risk, while greater use of mobile banking poses a threat to branch staff. Deutsche Bank analysts have forecast that Britain will need only 500 bank branches in 10 years' time. Britain's six largest banks currently have nearly 8,000 branches.

Recruitment specialist Kennedy noted that job losses could be exacerbated by a recent focus on cuts at managing director level. He said that such moves limit promotion prospects and, combined with a European Union bonus cap, sap motivation and productivity, making further cuts more likely.

"[Bankers] think, 'I'm not going to get paid any more if I work 20 hours [a day]... why should I go crazy?' Revenues are coming down because of that and it's a vicious circle," he indicated.

Even if the economic outlook picks up, banks are unlikely to go on any hiring sprees as they adjust to the new shape of their organisations and keep a wary eye on market volatility caused by wider geopolitical concerns, such as the situation in Ukraine.

"I would like to think by the early part of next year we're probably going to start to see some forward momentum, however... it's still a little bit of a crystal ball way of seeing things," said Miles Stribbling, a director at recruitment firm Phaidon International.

Those that bucked the trend by hiring staff were likely to have done so to beef up regulatory compliance functions, Stribbling added.

Nordea, the Nordic region's biggest lender, strengthened its IT services with almost 300 extra staff and Sweden's Swedbank boosted headcount by 417 to expand advisory services for bond issues and corporate finance.

AMMAN — A  Korean  delegation representing eight companies specialised in manufacturing and exporting of medical equipment and materials, held  business  meetings  with  their Jordanian counterparts on Tuesday. The  visit   is  organised  by  Korea  Business  Centre in Amman,  the  commercial  office  of  the  embassy  of  the Republic of Korea.

AMMAN — The Jordanian commercial sector has achieved positive growth indications since the beginning of the year despite economic circumstances and regional political conditions, Amman Chamber of Commerce (ACC) President Issa Murad said Monday. He indicated that national exports increased by 8.6 per cent and import by 9.2 per cent during the first half of the year. National exports reached JD2.5 billion during the January-June period of 2014 compared to JD2.3 billion during the same period of 2013, while imports increased to JD8.3 billion compared with  JD7.6 billion during the same comparison period. Murad noted that the electricity sector increased by 18 per cent, agriculture and fishing sector rose by 10.6 per cent and the financial, insurance and real estate sector grew by 9.7 per cent. He said that the value of projects that benefited from the Investment Law reached JD537 million during the first five months of 2014, mainly in industrial, hotel, agricultural, hospital, transport and entertainment fields.