Business

RIYADH — Standard and Poor's (S&P) held its sovereign credit rating for Saudi Arabia, the world's top crude exporter, at AA-/A-1+ with a positive outlook. "In our view, Saudi Arabia's government and external balance sheets remain strong and provide an ample buffer to withstand external shocks, including a drop in oil prices," S&P said in a statement. "We are therefore affirming our 'AA-/A-1+' sovereign credit ratings on the Kingdom of Saudi Arabia," the agency said. "The positive outlook indicates that we could upgrade Saudi Arabia in the next year if we believe that the government has built on its achievements in private-sector development." It forecast per capita income of $26,000 in 2014. Saudi Arabia, on the back of high oil prices, has announced a balanced budget for this year of a record $228 billion, up from $218.8 billion in 2013. Separately, state media reported that Saudi Arabia is preparing to launch its first sovereign wealth fund to manage budget surpluses from a rise in crude prices estimated at hundreds of billions of dollars. The central bank has managed investment of the kingdom's foreign currency reserves until now, much of it in US Treasury bonds. The consultative shura council is due to discuss a draft law for the National Reserve Fund this week, state news agency SPA reported. 

ABU DHABI — $3.3 billion of investments from the United Arab Emirates (UAE) flowed into the Kingdom, according to Jordan’s Ambassador to the UAE Nayef Zidan. He said on Sunday that $1.8 billion were injected by UAE investors during the first four months of this year, noting that $1.5 billion was invested last year. 

AMMAN — Jordan Investment Commission is going to prepare a national strategy on investments for (2015 – 2017),  Khaled Abu Rabei, the commission’s  acting chief said during a field visit on Saturday. Meeting with investors and representatives of industrial investment entities at El Hassan Industrial Estate, including representatives from Jordan Industrial Estates Corporation, he said the strategy will cover all investment-related aspects, including a promotion strategy.  The commission representatives will make several visits and hold meetings with investors in the various governorates to help overcome any obstacles hampering investors’ business across the country, he added.  At the meeting, investors highlighted several issues related to their businesses at El Hassan Industrial Estate and discussions focused on ways to deal with them.  

AMMAN — India topped the list of exhibitors at JIMEX 2014,  the 11th International Machinery & Electricity Exhibition, according to Souad Al Jaghoub, the fair’s  general manager.

She told The Jordan Times that 12 Indian companies displayed products among more than 400 manufacturers and traders from China, Germany, Italy, Turkey, South Korea, Portugal, Taiwan, Greece, Saudi Arabia, the United Arab Emirates, Egypt, Lebanon, Syria and Jordan.

Highlighting the importance of exhibitions as venues for new deals and for meeting new customers, the manager of Atlas Machines India noted that during his participation in JIMEX last year, he met clients from Angola, Iraq and  Jordan.

Another managing director of a company that sells steel products, including fish plates for railways, expressed optimism that his participation would bring “good response, good business”. 

“Wherever business is available, you must go”, said Ravi Chandran, a managing director of Rasaii Flow Lines Private Ltd. Company that is specialised in petrochemicals. “It is a big market.” 

Aiman Ismail Abu Khashabeh from Monitoring for Electronics Systems, a Jordanian company that provides smart solar solution, said: “We are promoting our products and we are helping people to become more aware of new technologies”, noting that he was participating in JIMEX for the third year. EEPC India (formerly Engineering Export Promotion Council) was also participating for the third time.

“Because it is an engineering exhibition, it is difficult to get deals and to know their exact figures in four days, but our exhibitors have given a positive feedback,” said Neetu Singh, assistant director of EEPC India which helps India’s exporters reach new markets. 

“The majority has appointed agents and expressed desire to exhibit once again,” she added on Friday, the last day of the exhibition, describing it as a good platform for business.

Noting that India's exports to Jordan have doubled from $503 million in 2008
to $1.1 billion in 2013, Roshan Lepcha, India’s embassy second secretary who inaugurated the Indian pavilion, said: “Factors such as Kingdom's open and secured market policy, better incentives to foreign
investors... could be attributed as reasons for this increase in the Indian exports to Jordan in a
period of five years.”

AMMAN –– The value of commodities re-exported with a certificate of origin from the Amman Chamber of Commerce (ACC) increased to JD691 million during the first five months of this year from JD604 million in the same period of 2013. According to a statement released by ACC  this week, the chamber issued over 21,000 certificates of origin between January and May of this year compared to around 18,400 in the same period of last year. The largest share of certificates of origin were for re-exports to the United Arab Emirates, followed by Iraq and Saudi Arabia,  the statement indicated. 

FRANKFURT — The European Central Bank (ECB) rolled out Thursday an unprecedented package of measures, including negative interest rates, in its fight to head off the spectre of deflation in the euro area. 

ECB Chief Mario Draghi insisted that the 18 countries that share the euro are not actually on the brink of deflation, a potentially crippling downward spiral of falling prices.

But action was needed to kick-start ailing lending in the region, Draghi argued.

Thus, the ECB entered unchartered waters, taking one of its key interest rates into negative territory for the first time.

The ECB lowered all three of its key interest rates: the benchmark refi refinancing rate was cut to 0.15 per cent from 0.25 per cent, the interest rate on the marginal lending facility was trimmed to 0.40 per cent from 0.75 per cent.

And the deposit rate, the rate at which the central bank pays commercial banks for depositing their unused cash, was reduced from zero per cent to minus 0.10 per cent.

This means that banks will be charged for parking funds at the ECB in the hope they might lend it on to businesses and consumers instead.

Rates can’t go lower 

Draghi admitted that interest rates cannot go down any further.

“For all the practical purposes we have reached the lower bound,” he said.

But on top of the rate cuts, Draghi unveiled a series of measures to spur bank credit, which has been contracting for months now.

And “if required, we will act swiftly with further monetary policy easing”, Draghi pledged.

The ECB already pumped vast amounts of liquidity into the banking system at the end of 2011 and the beginning of 2012 using so-called Long-Term Refinancing Operations.

But at that time, banks did not lend the cash on to the small and medium-sized companies that form the backbone of the eurozone economy.

So this time, the ECB is targeting the loans so as to encourage banks to lend to households and non-financial corporations.

Draghi said the ECB was also working on US Federal Reserve-style bond-buying by purchasing asset-backed securities from banks.

And the ECB has decided to stop “sterilising” the liquidity injected from its Securities Markets Programme, under which the ECB purchased bonds from troubled “peripheral” eurozone countries, he said.

All in all, the combination of measures would “provide further monetary policy accommodation and support lending to the real economy,” Draghi said.

ECB action ‘strongly welcome’ 

In Washington, the International Monetary Fund “strongly welcomed” the ECB’s “very pro-active stance”. 

Analysts were similarly cheered, but cautioned that the initial euphoria might evaporate.

“Taken together, today’s package of policy measures is a strong one, underlining the ECB’s determination and willingness to act,” said ING DiBa economist Carsten Brzeski.

“However, as so often during the euro crisis, first-glance-enthusiasm doesn’t  always last,” he warned. “The ECB has no guarantee that the economy and lending to the private sector can really be kick-started. The ECB is still dependent on banks. To some extent, the wish is still father to the thought,” 

Markit economist Chris Williamson was more hopeful. 

“It will take some time to gauge the longer term effectiveness of the measures,” he said. “The effectiveness of a negative deposit rate is uncertain and the [new liquidity measures] may also have only a limited impact on actual lending.”

But more importantly, “it is probably the lift to business and consumer confidence that will result from the decisiveness of the policy action that will do the most to help the economic recovery find its legs”, Williamson added.

Tom Rogers at EY Eurozone Forecast was “moderately encouraged” by the ECB action.

“But we remain concerned that the ECB is continuing to understate the risk of a prolonged period of low inflation or falling prices,” he warned. 

ROME — An overhaul to slim down and speed up Italy's overweight bureaucracy will help boost "all-out structural reforms", Finance Minister Pier Carlo Padoan said this week.

"All the other reforms will come from this one. Coming up with good laws is useless if they cannot then be implemented," Padoan said at a press conference in Rome.

The public administration reform promoted by Prime Minister Matteo Renzi's government is currently being debated in parliament.

"Italy's growth is still weak and has to be reinvigorated with all-out structural reforms," Padoan added, after gross domestic product (GDP) shrank by 0.1 per cent in the first quarter.

He noted that Italy's privatisation programme, which according to some estimates could raise up to 12 billion euros a year, would add 0.7 percentage points to GDP growth per year.

Padoan said the key theme for Italy's presidency of the European Union (EU) starting next month would be "jobs and growth" and called the ongoing debate over the need or not for budget austerity "sterile and even dangerous".

He said Italy will focus on improving the EU's internal market, structural reforms and financing growth, as well as measures to ensure long-term investment in Europe's economy.

"I want concrete results to help the next European Commission," said Padoan, a former chief economist at the Organisation for Economic Cooperation and Development.

WASHINGTON — The United States and Tunisia signed this week a $500 million loan guarantee agreement that will help Tunisia raise money at affordable rates from commercial capital markets.

The US Treasury said the guarantee is aimed at helping the country rebuild its economy in the wake of the 2011 popular uprising that overthrew dictator Zine Al Abidine Ben Ali.

"The loan guarantee agreement is designed to support Tunisia as it pursues important reforms that will provide the foundation for economic growth and prosperity," the Treasury said.

It was the second US loan guarantee for the North African country. In 2012, Washington offered a guarantee of up to $485 million, which helped the country access capital markets for the first time since 2007.

Separately, the Tunisian government is expected in the coming few days to raise subsidised petrol prices by 6.3 per cent in the coming days and also decrease subsidies for bread, sugar and other basic materials to trim its worsening budget deficit.

Subsidies are a sensitive political issue in Tunisia where bitter anger over rampant unemployment, economic deprivation and social injustice exploded into a mass revolt in 2011 that triggered the Arab Spring uprisings in other countries.

"We will raise the price of sugar. There will be a slight increase in the price of bread," Trade Minister Najla Harouch told reporters on the sidelines of an economic conference.

Harouch did not give any details or date for increases.

Finance Minister Hakim Ben Hamouda told local radio last month that the government would raise the price of petrol to 1.670 dinars ($1.03) a litre from 1.570. The last increase was in March 2013.

Prime Minister Mehdi Jomaa's government is tackling the Tunisia's budget deficit by seeking international aid and looking at subsidy cuts to reduce high public spending.

But Jomaa is wary of balancing fiscal needs against the risk that austerity measures may spark popular protests among Tunisians already worried about high costs.

"We will not cancel subsidies. There are proposals for a slight raise in prices," the trade minister said.

Dialogue

An economic dialogue between the government and opposition parties is scheduled to start soon, in large part to address the issue of how best to reduce subsidies.

But the Popular Front, a coalition of nine secular parties have said they will boycott the conference because key decisions have already been made and that the dialogue is the government's way of pushing through painful decisions.

Tunisia's planned subsidy reforms and public spending cuts should help reduce the budget deficit by 1.5 billion dinars or $927 million in 2014, Jomaa indicated recently.

Jomaa, whose caretaker administration is governing until elections later this year, told reporters the budget financing needs were 3.5 billion dinars ($2.16 billion) through the end of this year.

The government has said growth should reach 3 per cent this year, on the basis of tourism figures, forecasts for the wheat harvest and phosphate production, and that the budget deficit will be 7.5 to 8 per cent of the gross domestic product.

AMMAN — About 100 merchants representing different trade and service sectors participated this week in a specialised workshop on labour inspection, employment and issues related to guest workers.The workshop, organised by Amman Chamber of Commerce (ACC) in cooperation with the Ministry of Labour, aimed at listening to the sector’s issues regarding guest workers, and inspection mechanisms the ministry follows and finding out appropriate procedures to deal with problems facing the sector. ACC President Issa Murad stressed the importance of  communication between the private and public sectors to solve problems facing businesses in a way that benefits the national economy. Murad said ACC is keen on employing the local workforce and providing services through the labour office which was opened in the ACC headquarters two months ago.

AMMAN –– Politicians and economists on Tuesday blamed the "Arab Spring" for worsening economic problems in Arab countries. 

At the 6th Jordan Afaq Economic Forum, experts said uprisings in several Arab states have negatively affected trade exchange between regional countries. 

Senate President Abdur-Ra'uf S. Rawabdeh described trade between Arab states as "very modest", saying Arab economies depend on consumption more than production.

The status quo requires genuine political and economic partnerships between countries in the region, said Rawabdeh in his speech to inaugurate the two-day event titled "Arab Economies, Disputes and Crises". 

"Things would have been much better if there was an integrated Arab economy," he added. 

Economist Omar Razzaz,  chairman of the King Abdullah II Fund for Development, called on decision makers in Arab countries to look into challenges hindering economic integration in the region, stressing the need to invest in innovation. 

Most global fortunes grew due to investments in innovation and creativity and it is time for Arab states to build such investments, Razzaz said. 

Amman Chamber of Commerce President Issa Murad said political instability in neighbouring countries such as Syria and Egypt have affected the Jordanian economy, adding that troubles in Libya forced many Jordanian professionals to return to Jordan, affecting the volumes of remittances. 

Khaldoun Nusair, chairman of Afaq group which organised the event, said the Arab Spring has badly hit Arab economies, which were still struggling with the repercussions of the international financial crisis. 

According to economist Mohammad Halaiqa, violence-hit Syria needs at least $150 billion to rebuild its economy.

Halaiqa said other countries in the region need no less than five years to exit political differences that had their toll on the economies. 

On the impact of regional instability on Jordan, Halaiqa said the Syrian crisis and the influx of refugees put large pressure on the Kingdom's resources, which he noted are already limited.

He added that troubles in the northern neighbour hit trade between Jordan and Turkey, Lebanon and eastern Europe. 

Trade exchange between Arab states declined over the past years by nearly 12 per cent due to instability, he remarked. 

Participants also blamed the Arab Spring for the decline in investment and tourism inflows in Arab countries.