Business

LONDON — China overtook India as the biggest consumer of gold in the world last year, ramping up its demand by 32 per cent from the 2012 level, the World Gold Council (WGC) reported on Tuesday.

But globally, investors pulled away from the protection of gold as the risks of inflation and renewed financial crises receded.

Last year, demand from China for gold for jewellery, coins and bars totalled a “remarkable” new record of 1,065.8 tonnes.

That was ahead of Indian demand of 974.8 tonnes, according to the council representing leading gold producers.

Global demand for gold in jewellery last year was the highest for 16 years, but investment funds were heavy sellers and the price fell by nearly a third during the year.

The price is around $1,324.80 an ounce now.

The council also estimated that about 300 tonnes of gold have slipped through its statistics because quantities of the metal are scattered obscurely throughout the supply chain in China.

Inclusion of this missing amount would take total Chinese demand up to about 1,400 tonnes.

“China is number one for the first time,” the council’s Managing Director Marcus Grubb told AFP.

India had always been the biggest market since the 1950s and 1960s, he said.

The switch of places at the top of the ranking reflects in part a decision by the Indian government to reduce the importation of gold to help reduce a huge trade deficit.

These measures triggered a 63 per cent slump in demand for gold from India in the third quarter of last year, the council said, citing official India statistics.

However, for the whole of 2013, demand from India rose by 13 per cent from the level in 2012, partly because of heavy buying before some of the restrictions took effect in July.

Chinese demand was boosted by the rise of a middle class, by rising prosperity, by high levels of savings and by a shortage of other opportunities for investment, Grubb explained.

Last year “proved to be the year of the consumer, with gold jewellery demand close to pre-crisis levels and investment in small bars and coins hitting a record high”, the council indicated in its annual report.

“The result was annual gold demand of 3,756.1 tonnes, valued at $170 billion,” it pointed out.

Referring to disinvestment by exchange-traded funds (ETFs) which use instruments based on physical gold, the council said: “The gold market became polarised in 2013, as 21 per cent growth in demand from consumers and value-seeking investors contrasted with large-scale outflows from ETFs.”

“The net result was a 15 per cent decline in full-year gold demand in a year where jewellery, bar and coin demand reached an all-time high,” it added.

According to the gold council, a sharp fall in the price of gold in the second quarter of last year had provoked “strong and swift” demand from consumers in Asia and the Middle East which spread into Western markets in the last quarter of the year.

The price of gold fell by 28 per cent last year, hit by massive withdrawals of investors’ funds from ETFs.

Gold attracts funds seeking a defence against inflation and financial crises.

As concerns on these two fronts eased, investors reduced their exposure to the protection of gold and the ETFs sold 880.6 tonnes of gold last year, the council calculated.

Central banks overall continued to be net buyers of gold last year for the fourth year in a row, but their purchases in 2013 fell by 32 per cent from the 2012 level to 368.6 tonnes.

These figures meant that demand from consumers did not match disinvestment by funds and a slowing of purchases by central banks.

The supply of gold fell by 2 per cent to 4,339.9 tonnes, mainly because the amount of gold being recycled fell by 14 per cent.

In concluding, the report said that last year there had been an “unprecedented flow of gold from Western vaults to Eastern markets, via refiners in North America, Switzerland and Dubai”.  

AMMAN — Jordan Telecom Group (JTG) announced this week that net profit fell by 37.8 per cent in 2013 to JD51.7 million compared to JD83.2 million in 2012. The group’s revenues dropped by 11.7 per cent in 2013 to JD360.3 million compared to JD408 million in 2012, it indicated in a statement e-mailed to The Jordan Times. “The drop is linked to the high competition in the market affecting both mass and business sectors, in addition to the big drop in roaming visitors’ revenues,” JTG said. “The recent decision, during July 2013, to increase the special tax on mobile services from 12 per cent to 24 per cent also had a big negative impact on the mobile revenues.” According to JTG, the subscriber base witnessed a 1.6 per cent increase reaching 4.09 million subscribers at the end of 2013 from 4.03 million subscribers at the end of 2012. Capital expenditures by the group reached JD39.2 million at the end of December 2013 compared to JD38 million at the end of 2012.

AMMAN — Net profit generated by Jordan Phosphate Mines Company plunged last year to JD1.159 million from JD131.7 million in 2012, according to a statement published on Amman Stock Exchange website. The company’s revenues dropped to JD573 million in 2013 from JD759.4 million in 2012, it pointed out. The company attributed the lower revenues to a drop in phosphate sales, higher production costs mainly the energy bill, an increase in mining taxes as well as the decline in international prices of phosphate.

MOSCOW — Russia’s prime minister said on Monday he hoped to raise more than $5.5 billion this year by selling stakes in state companies, reviving a delayed privatisation programme that could spur a flagging economy.

At a meeting with deputy prime ministers, Dmitry Medvedev also sounded a note of caution, saying the sale of shares in companies such as Rostelecom or shipping group Sovcomflot could happen only in good market conditions.

Launched in 2010 by then finance minister Alexei Kudrin, the $50 billion privatisation drive to reduce the state’s direct role in the economy and improve a much-criticised investment climate has been dogged by delays.

Assets have since been removed from the lists, prey to volatile markets and a tug-of-war between more liberal-minded politicians and hardliners favouring a slower approach to privatisation.

“Just this year, we have a quite serious privatisation plan to raise 200 billion rubles ($5.7 billion), and I hope that these plans will be fulfilled,” Medvedev told the meeting.

“[The approach to privatisation] should be balanced. We should not delay but at the same time we should consider the economic circumstances in the world and in the country,” he said.

Russia’s economic growth has slowed, reaching just over 1 per cent last year after hitting an average 7 per cent before the 2008/09 financial crisis. Privatisation revenues would help meet generous election promises made by President Vladimir Putin.

Last June, Russia halved its privatisation target for 2014 to around $5.5 billion after many previously planned sales were stalled because of adverse market conditions.

The results of the sales so far have been mixed.

Sberbank, Russia’s largest bank, attracted strong investor demand for its stake sale in 2012, raising more than $5 billion, and the country’s second-largest bank, VTB, last year won sovereign backing for a $3.3 billion share issue.

But a 16 per cent stake in state diamond miner Alrosa was priced at the bottom of a planned range, valued at $1.3 billion, in October.

The main sell-off pencilled in for 2014 is a stake in Rostelecom, which competes with Russia’s three main private mobile operators — MTS, Megafon and Vimpelcom. Rostelecom recently merged its mobile assets with VTB’s Tele2 Russia mobile unit into a single company, T2 RTK Holding.

Olga Dergunova, head of the State Property Agency, told the meeting Russia expected to receive 150 billion rubles from that sale and the privatisations could start in the second quarter with Sovkomflot. She did not disclose the amount expected to be sold in Rostelecom.

State capitalists such as Igor Sechin, the head of state energy company Rosneft and a long-time ally of Putin, oppose privatisation — including of his own company.

The state had been planning to sell its stake in Novorossiisk Commercial Sea Port (NCSP) by the end of 2013. Rosneft asked Putin in October to sell it the state’s 20 per cent stake.

A further stake in VTB is due to be sold in 2015.

Separately, Russia’s central bank signalled for the first time that it could tighten policies in response to a ruble plunge that has outpaced all other emerging currencies.

The central bank matched market expectations by leaving its key interest rate unchanged at 5.5 per cent for the 16th consecutive month.

It based its decision on slowing inflation and disappointing growth.

But the bank went out of its way to caution that inflation still remained a “source of uncertainty” owing to the ruble’s drop against the dollar that has exceeded 7 per cent since the start of the year.

If the negative effects of the currency collapse widen, “the likelihood rises of inflation deviating from its medium-term targets,” it said. “In this case, the Central Bank will be ready to tighten its monetary policy.”

The central bank’s guidance was issued moments after the ruble established a historic low against the euro on the Moscow Exchange.

The Russian currency made a slight recovery after the statement was issued and stood at 48.04 against the euro — stronger than the 48.39 inter-day low it hit on January 30.

The dollar was worth 35.07 rubles and also within striking distance of its historic high.

Analysts at VTB Capital estimate that emerging market currencies have lost 1.5 per cent of their value against the dollar since the start of the year.

This makes the ruble the emerging world’s worst performer. The South African rand is second-from-bottom on the list with losses of 4.5 per cent.

Economists have concluded that the central bank purchased more than $8 billion (5.8 billion euros) of foreign currency on the Moscow market in January in an effort to stem the ruble fall.

This was the largest volume since the closing months of Russia’s 2008-2009 economic collapse.

Emerging markets have suffered from the Federal Reserve’s launch of monetary tightening measures that have seen investors flee riskier assets in anticipation of higher rates of return on US bonds.

Some policy makers in the Kremlin had spent recent months advocating an interest rate cut that could spur growth from just 1.3 per cent last year — the second-slowest pace of Vladimir Putin’s 14-year rule as both president and prime minister.

Many thus read Friday’s statement as a vow by Russia’s regulators to ignore political pressure and redouble their focus on their new mandate of fighting inflation risks.

“The meeting represents a statement of intent by the central bank and will dash any remaining hopes [including from within the Kremlin] that the bank might loosen policy aggressively in the face of continued economic weakness,” said Neil Shearing of the Capital Economic consultancy.

“This in turn will shift the emphasis back on to the government, and the need for a new wave of economic reforms that is now needed to revive growth,” he added.

But market players remained apprehensive and several complained that the central bank did not make its commitment to a stronger ruble explicit enough.

“The market has reached a consensus that the central bank does not intend to support the national currency by raising key interest rates,” Moscow’s Nord Capital financial advisory said in a research note.

Its economists accused regulators “of fuelling market fears and then squandering resources on currency interventions”.

FRANKFURT/PARIS — Europe’s corporate profits are still eroding but investors are at last starting to see glimmers of hope, with revenues picking up, domestic demand recovering and good news from exposure to the United States making up for bad news in emerging markets.

Recent weakness in emerging markets — which hit a number of European multinationals such as Nestle, AB InBev and Holcim — could delay the long-awaited European earnings recovery, but probably won’t derail it.

European companies have been aggressively reducing costs and cleaning up their balance sheets in the past few years. They are slowly starting to reap the benefits as global growth recovers, driven by the improved momentum in developed countries.

Half way into Europe’s earnings season, headline numbers are still dire: Restructuring costs and currency factors helped drive profits nearly 5 per cent lower in the quarter compared to the fourth quarter of 2012.

But a pickup in corporate revenue, up 2.3 per cent, is fuelling investors’ hopes that the worst days are over.

Results have been good compared to analyst expectations, with 58 per cent of companies reporting profits in line or higher than forecasts — Europe’s best score since the third quarter of 2012, according to Thomson Reuters StarMine data. And surveys of business such as the Purchasing Managers’ Indexes (PMI) are upbeat.

“The European PMIs for January were very good, especially the figures for Germany. There’s no doubt things are getting better in Europe,” said Ollie Beckett, fund manager at Henderson Global Investors, which has £70.8 billion ($118 billion) in assets under management.

“Europe has just been through two-three years of severe cost cutting, so as soon as the European economy picks up a bit, it will spark a big bounce in profits,” he added.

Positive signals

Domestic demand is the key to a recovery. Data showed last week that the eurozone economy grew 0.3 per cent in the fourth quarter of 2013, more than expected, after a 0.1 per cent rise in the third quarter.

Companies across the region — including cancer drugmaker Roche, telecom major Vodafone and the world’s biggest steelmaker ArcelorMittal, recently cited early signs of improvement in Europe which should bolster earnings.

“Europe is still tough but there are a number of lead indicators,” Vodafone Finance Director Andy Halford told reporters this month, and ArcelorMittal forecast European steel demand would return to growth this year.

Banks including Spain’s Santander, the eurozone’s biggest lender, France’s Societe Generale and Dutch group ING have also reported improved earnings as they shed bad debts and losses they suffered in the global financial crisis.

Even the overall year-on-year fall in profits was not necessarily bad news for investors: Much of it was due to one-off restructuring charges, which should leave companies in a better position in the future.

For example, ThyssenKrupp posted a better than expected quarterly operating profit on Friday, despite a net loss because of one-off charges related to the sale of a stake in Finnish steelmaker Outokump.

Big banks like BNP Paribas and Credit Suisse saw profits hit by costly legal settlements, but that removes future litigation risk.

There is still ample room to recover. Europe’s corporate profits overall are still 23 per cent below their peak of 2008, while US corporate profits have rebounded to 23 per cent above their 2008 peak, according to Thomson Reuters Datastream data.

“Just a bit of economic growth would be enough to spur a big rebound in corporate profits because of improved operating leverage,” said Mathieu L’Hoir, strategist at AXA Investment Managers, which manages 536 billion euros ($727 billion).

“In Europe, profit margins are still around 5.5 per cent, versus 9 per cent before the economic crisis, while in the US, margins are already back to 9 per cent. A rise to 7.5 per cent in margins in Europe would spark a 40 per cent bounce in profits,” he indicated.

Even troubled southern Europe, where demand collapsed at the start of the eurozone debt crisis, is starting to show signs of recovery, some analysts say.

“A strong domestic growth recovery is likely to be the largest source of upside surprise for the Southern European economies,” Deutsche Bank strategists said this month.

Roller-coaster ride
in emerging markets

But an improving European economy has not filtered through to everyone yet, with food makers and retailers in particular still hurting as shoppers’ disposable income is squeezed by subdued wage growth and austerity measures.

Nestle has warned that 2014 would be another challenging year as weaker emerging markets demand adds to pain from pricing pressure at home.

Europe’s No.1 retailer Carrefour saw its sales in Europe shrink last quarter due to a tough market environment from Italy to Poland, in addition to being hit by a deterioration in Brazil and China, the two major emerging markets it has earmarked for expansion.

“We’re just coming out of a deep recession, and you’re going to need a longer than normal period of decent growth in gross domestic product before you are likely to see significant earnings improvements,” Macquarie analyst Daniel McCormack warned.

“Also, demand from emerging markets is more sluggish than expected. Growth there is weaker, and there is less pent-up demand than in the last cycle,” he indicated.

European bluechips are more exposed to emerging market weakness than American and Japanese peers. According to data from MSCI, companies listed on the MSCI Europe index have about 24 per cent exposure to emerging markets, versus 15 per cent for MSCI USA and 14 per cent for MSCI Japan.

Swiss engineering group ABB, among those saying it saw more encouraging growth in many parts of Europe, has cut its medium-term sales outlook, citing a more cautious stance on emerging markets.

In addition, many European companies’ sales and earnings have been hurt by the drop of currencies from the Japanese yen to the Indian rupee or the Australian dollar against the euro.

HeidelbergCement, the world’s fifth-biggest cement maker, has for instance warned that exchange rate fluctuations would continue to impact its earnings this year after a weaker Indonesian rupiah and Australian dollar caused it to fall short of its own targets for 2013.

But for many European companies, bad news from emerging markets is offset by good news from exposure to the unexpectedly robust United States. Belgian supermarket group Delhaize, which makes about 60 per cent of its revenues in the United States, surpassed expectations for sales growth there in the fourth quarter.

Overall, global investors are increasingly positive about Europe’s prospects, reflected in huge inflows into the region.

Data from Thomson Reuters Lipper shows that US-based funds have poured $4.1 billion into European equities since the start of the year, $778 million in the past week alone, a 33rd straight week of net inflows — marking the longest streak of weekly inflows since Lipper started to monitor flows in 1992.

TRIPOLI — Small businesses are prospering in Libya’s major cities even as the economy at large is being throttled because of security problems and industrial action which has shrunk lifeline oil revenues.

Its financial woes combined with lawlessness has so far discouraged the return of multinationals, three years after the outbreak of an armed revolt which toppled long-time dictator Muammar Qadhafi.

Post-war reconstruction has been slow, with major infrastructure projects on the back-burner even as Libyans endure more and more frequent power cuts, especially in the west of the country.

Small businesses have been leading the way in post-Qadhafi Libya, with shops and boutiques in Tripoli and other cities boasting the latest in luxury brands.

“These investments are thanks to partnerships with foreign investors,” said chamber of commerce chief Idriss Abdul Hadi.

Such joint ventures have “promoted investment in the private sector at a time when the oil crisis has slashed the state budget, not allowing spending on planned development projects,” he added.

Economic experts, however, stress that trade and services play a secondary role in the overall Libyan economy, with only little value added.

The oil crisis dates back to last July when striking workers and pro-autonomy demonstrators in eastern Libya began blockading the country’s main terminals.

The action sent production shooting down to as low as 250,000 barrels per day (bpd), compared with 1.5 million bpd before the strike.

In early January, launch of production at Al Sharara field in the south after protesters in the area lifted their blockade allowed the country’s total output to recover to 570,000 bpd.

The oil sector accounts for 70 per cent of the gross domestic product (GDP), 95 per cent of state revenues and as much as 98 per cent of Libyan exports.

Only last week, protesters shut down oil and gas pipelines to the Millitah plant from Al Wafa field in southwest Libya.

Their action brought output back down to 460,000 bpd, National Oil Company spokesman Mohammed al Hrari told AFP.

Diversification and private sector

The World Bank, in a report issued last month, stressed “the urgent need for economic diversification in order to ensure long-term financial and economic stability”.

It called for reforms “to generate a vibrant private sector”, warning that “lack of access to financing, uncertainty in the legal environment and a fragile security situation” were key obstacles.

Ahmed Belras Ali, director of Libya’s stock market, warned of “a climate of fear among businessmen”.

“The stock market has lost an estimated 30 per cent of its value because of falling share prices,” he indicated.

Ali said hopes were pinned on the private sector, “which can serve as an engine of the economy, with the current weakness of state structures”.

Libya has lost more than $10 billion in revenues because of the crisis, according to estimates from the oil ministry and the World Bank.

Prime Minister Ali Zeidan has even warned that “the government could have difficulties paying salaries”.

AMMAN –– The government may take a decision soon restricting investments in the housing sector to Jordanian developers only.

Kamal Awamleh, president of Jordan Housing Developers Association (JHDA), told The Jordan Times on Sunday that the association has urged the government to ban foreign and Arab investors from developing residential projects in the Kingdom due to issues related to post-sale maintenance contracts.

“For example, several Iraqi investors built housing projects and left to settle in other countries,” Awamleh said, explaining that several buyers have complained to JHDA from construction faults after developers left the country.

He added that the association has called on the government to restrict investments in the property market to Jordanian companies only, or to allow foreigners and Arabs to enter into partnerships with Jordanian investors who should own at least 51 per cent equity in such joint firms.

“This would be a fair decision to protect homebuyers,” Awamleh continued, noting that there are 2,700 companies registered at JHDA.

According to Awamleh, the real estate market is still on uptrend.

He referred to official data which showed that trading in the property market reached JD6.3 billion in 2013.

Indicating that although prices of residential apartments went up by around 10 per cent in 2013 compared to the previous year, Awamleh said that more apartments were sold last year.

According to Department of Land and Survey data, a total of 30,380 residential apartments were sold in 2013, a 19 per cent increase over the 25,434 units sold in 2012.

The JHDA president called on the government to open the door for investors to import cement from neighbouring countries such as Saudi Arabia and Egypt as prices of domestic prices have increased sharply over the past year.

Another factor that could contribute to lowering the prices of residential units, Awamleh mentioned shortening the 10 months period for the Greater Amman Municipality (GAM) to grant approval for licences, describing the period as “too long”.

“If the government allows us to import cement from cheaper markets and GAM slashes the period for granting licences, housing prices could go down by at least 15 per cent,” he claimed. 

DUBAI, United Arab Emirates — Dubai and luxury are nearly synonymous. The city is home to the world’s tallest tower, massive man-made islands in the shape of palm trees and a fleet of police cars that includes a Ferrari, a Lamborghini and a $2.5 million Bugatti Veyron.

Now, to boost its glamour factor and economy, the city has its eyes set on the multibillion dollar a-year global fashion industry, which is currently dominated by the US, Europe and Japan.

But in the Middle East, Dubai is the powerhouse, raking in almost half of the region’s market share of retail spending.

As people in other parts of the Arab world grapple with protests, violence and turmoil, Dubai’s modern skyscrapers, over-the-top glitz and flair for opulence provide the well-heeled a seemingly endless supply of indulgence and distraction.

Real estate services firm CBRE ranks Dubai as the second most important destination for international retailers, after London. A little more than half of all major international retailers have outlets in Dubai, and a third of all luxury spending in the Middle East happens here, according to consulting firm Bain and Company.

But the city’s officials want more. They want Dubai to evolve into a hub of creativity that attracts the region’s best designers.

Construction has already begun on a massive project called the Dubai Design District, or D3. The site is dedicated to the fashion industry and will house design studios, boutique hotels, high-end apartments and, of course, a promenade for shopping.

The first phase of construction on the 1.7 million-square-metre site will cost around $1 billion and be ready by 2015, said Amina Al Rustamani, chief executive officer of Tecom Investments, which is developing D3.

She says the idea is to bring creative minds together under one umbrella.

“So the idea was like, OK, why can’t we create a SOHO destination for these designers to be in, one place where you have specific events and activities and promotion for tourists to come and see really what is special that Dubai could offer to them?” she added.

With foreigners making up roughly 90 per cent of its population, Dubai’s designers say the city is great for new brands and entrepreneurs who want the world to take notice. The port city’s location links trade routes from east to west.

“Dubai is a melting pot. There are over 200 nationalities here, so there’s always a different target audience to cater to without even leaving the country,” said Shaimaa Gargash, one of three Emirati sisters behind the three-year-old fashion label House of Fatam.

Of $7.6 billion spent in the Middle East on fashion in 2012, just under a third was spent in Dubai alone, according to Bain and Co.

Local designers say there is a misconception that Arab women in the Gulf — who traditionally wear long black robes over their clothes and matching black scarves over their hair and even faces — are not daring when it comes to what they wear underneath and in front of other women.

“They are actually more adventurous than people think,” said Lamia Gargash, one of the founders of House of Fatam.

Lebanese designer Zayan Ghandour says fashion is not merely a luxury, but a necessity in this part of the world.

One of three women who own Sauce, a highly sought-after brand of boutique stores with six branches in the United Arab Emirates, Ghandour says the majority of her customers are Gulf Arab women who are not afraid to experiment with bright colours, bling and the latest trends.

“The lady in this part of the world takes her fashion very seriously,” she said.

Saudi designer Lama Taher says her brand, Lumi, is selling out across the region because Arab women have learned to value locally made products, rather than only wearing international luxury brands.

“They love to flaunt their beauty, but there are different ways to do it and different platforms. It can be in public, or in [private] gatherings and parties and events,” the 27-year-old said.

Capitalising on the growing interest in local brands, D3 will be built up over the next decade to act as a gateway for emerging designers from South Asia to North Africa.

“We believe Dubai Design District will be different than what you hear about in Milan or Paris. ... We want to create our own identity,” Al Rustamani said.

If Dubai wants to offer something unique and authentic, it will have to attract designers from outside the UAE, says Egyptian jeweller Azza Fahmy.

Fahmy, who has been approached by D3 as an adviser, is an icon among young Arab artisans for successfully infusing Egyptian and Islamic art into wearable, modern pieces. She created a line of jewellery for the British Museum inspired by the Muslim Hajj pilgrimage, and her jewellery will be on the runway Sunday during London’s Fashion Week, for designer Matthew Williamson’s show.

Fahmy says D3 needs more than just buildings to come alive. Ancient metropolises like Cairo and Damascus — where thousands of years of history and civilisation are on display in the bazaars, architecture, poetry and cuisine — inspire artists, she said.

“You need to collaborate with the countries around you that already have culture and civilisation, each helping one another,” she said.

For Dubai, fashion means business.

The retail industry makes up a third of Dubai’s economy, according to the Oxford Business Group. Shopping is tax free and the United Arab Emirates (UAE) is home to around 40 malls.

The Dubai Mall received more than 75 million visitors last year, nearly half of them tourists, said the mall’s developer, Emaar Properties.

To back the growing retail market, Emaar is planning to add 304,000 square metres of retail space to Dubai Mall.

Another big outlet, The Mall of the Emirates, wants to double its sales and is investing $1 billion over the next five years to add new stores and restaurants.

The expansions are in line with Dubai’s plans to increase tourism. The city will host the world Expo in 2020, and officials forecast the six-monthlong event will attract 17.5 million visitors from outside the Emirates.

Fashion market analyst Cyrille Fabre of Bain and Co. says tourism and fashion drive one another in the UAE. Shopping is the third-largest reason people come to Dubai, he said last year at an event called Fashion Forward that brings together local designers, buyers and industry insiders.

“Fashion is a big tourist attraction and as the fashion industry grows, tourism grows and vice versa,” he added.

AMMAN — Transport Minister Lina Shbeeb and her Iraqi counterpart Hadi Al Amiri on Saturday weathered the liquidation of the Iraqi Jordanian Land Transport Company with a determination to boost economic and commercial integration in various fields.

Land transport activity is continuing at 80,000 trucks per year, Shbeeb indicated at a press conference. The company’s general assembly meetings were set to discuss difficulties facing the liquidation committee in selling remaining assets of land, used trucks and different spare parts.

The Iraqi official noted that Iraq’s council of ministers has recently approved extending an oil pipeline to Aqaba, stressing that Iraq is looking into all means that can boost joint cooperation with Jordan.

Shbeeb said coordination is continuing on a railway project, noting that a Chinese company expressed interest in getting acquainted with the studies on the project feasibility in order to finance it.

On Saturday, Prime Minister Abdullah Ensour received Al Amiri and stressed the importance of following up on the agreements reached during the meetings of the Joint Jordanian-Iraqi Higher Committee, which convened in Baghdad recently. The minister officially informed Ensour of the Iraqi Cabinet’s approval of extending an oil pipeline between Iraq and Jordan. 

TURAIF, Saudi Arabia — Billboards on the highway outside Turaif, a remote desert town in the far north of Saudi Arabia, foretell a glittering future of glass offices and palm-shaded residential streets. A future that won’t rely on Saudi oil.

Early this month, an array of government ministers gathered in a tent near this barren outpost, 1,100 kilometres from Riyadh, to sign contracts to develop an industrial complex around a phosphate mine, with a new railway link to a Gulf port and total investments estimated at more than $9 billion.

The Waad Al Shimal Project, or “Northern Promise”, is part of a wider strategy in the kingdom, the world’s largest oil exporter, of building downstream industries and boosting the private sector instead of simply exporting raw materials.

It follows in the footsteps of Jubail and Yanbu, massive industrial cities on the Gulf and Red Sea coasts that were built in the 1980s as Saudi petrochemical production grew.

Riyadh is also pushing the King Abdullah Economic City near Jeddah, run by Emaar Economic City, as a private sector scheme along the same lines.

“I think this approach is something that will help diversify the economic base,” said Paul Gamble, director, sovereign risk, at Fitch Ratings. “It will help diversify export revenues. It will have an impact on employment, though not a large one. The one thing it doesn’t address is diversifying budget revenues.”

Recent diversification efforts through industrialisation have had little impact on official figures showing the size of the oil industry relative to the wider economy as increased crude revenues have outpaced growth in non-oil sectors.

Oil and gas accounted for 49.7 per cent of the gross domestic product (GDP) in 2012, up from 37.7 per cent in 2002, the most recent central bank data shows, as the price of Brent crude quadrupled over the period.

But many analysts expect oil prices to fall in the next few years as the United States ramps up shale oil production, which will shine a light on the virtues of diversification.

“We started out exporting crude oil, then we moved into refining, then we moved into gathering gas and creating a petrochemical industry. Then we moved into large-scale mining. The benefit of it is that it has large downstream industries,” Economy Minister Mohammed Al Jasser told reporters at Turaif.

The desert stretches in all directions from the spot where he spoke to an unbroken horizon, but when complete, Waad Al Shimal will be a major producer of phosphate products including the industrial fertiliser ammonia, animal feedstock, plastics and detergents.

The project could make its biggest shareholder, half state-owned Saudi Arabian Mining Company (Maaden), a significant player in the global minerals industry, modelled perhaps on Saudi Basic Industries Corporation (SABIC), which was built from nothing in the 1980s and is now one of the world’s biggest industrial chemical companies.

SABIC is not only Saudi’s main source of non-oil exports, but provides the raw materials for a host of downstream factories in Jubail and Yanbu.

“There [will be] many industries that also have high employment value in the region,” Finance Minister Ibrahim Alassaf told Reuters.

A measure of the importance attached to job creation at Waad Al Shimal is that the kingdom’s technical training institute plans a new college nearby, to educate 300 graduates a year for white-collar jobs in industrial fields.

Saudis increasingly work in technical fields that were once the preserve of expatriates, something government labour reforms are aimed at encouraging.

However, many companies still say they prefer to hire foreigners, who cost less and often have more experience.

Mineral production has been largely neglected by the Saudi oil ministry and for decades has been restricted mostly to small-scale gold mining.

The government set up Maaden in 1997 and opened the sector to private and foreign investors in 2001.

“Saudi Arabia is hardly explored. We expect very high potential for additional mineral resources. Saudi Arabia is virgin. There is a lot of activity and interest in the development of minerals,” Oil Minister Ali Naimi told reporters.

Maaden was part privatised in 2008, floating half its shares on the Saudi bourse, and it moved towards large-scale minerals developments supported by extensive state-funded infrastructure.

The thinking behind Maaden and other former state-owned companies set up with an eye to privatisation was as a means of distributing wealth and bringing private-sector nous to development projects.

“They have so many foreign partners for these big projects, which gives more confidence in the due diligence process, and therefore their chances of success,” said Fitch’s Gamble.

A first project, Maaden Phosphate Company (MPC), started up in 2011 in partnership with SABIC, had capacity to produce 11.6 million tonnes a year (t/y) of ore at Al Jalamid in the Northern Borders region, supplying a 3-million-t/y diammonia phosphate (DAP) plant at Ras Al Khair on the Gulf coast.

Last year, Maaden inaugurated a second major development, a $10.8 billion aluminium joint venture with US-based Alcoa, with an alumina refinery, aluminium smelter and rolling mill at Ras Al Khair.

It currently imports raw material, but will eventually use bauxite from a mine at Al Ba’itha near Quiba in Qassim Province scheduled to start up this year with output of 4 million t/y.

The phosphate mine at Al Jalamid, the bauxite mine at Qassim and the processing facilities at Ras Al Khair are connected by a new rail network built by state-owned Saudi Arabian Railways that will be extended to Waad Al Shimal.

The government built the port and some other facilities at Ras Al Khair, but Maaden developed a power and water desalination plant for its aluminium and phosphate projects.

Waad Al Shimal, a joint venture with SABIC and US phosphate and potash producer Mosaic, builds on these earlier developments with a mine at Umm Wual near Turaif and nine large processing facilities.

In December, Maaden said it had secured $4.2 billion financing commitments from banks, while government bodies would supply $3 billion. First production is expected in 2016. Government agencies will also pay for rail and port expansions.

Engineering, procurement and construction contracts for the main facilities have already been awarded, with the largest jobs going to Daelim Industrial Co., Spain’s Intecsa Industrial, SNC Lavalin, Sinopec Engineering Group and Hanwha Engineering & Construction Co.

The engineering consultant is Fluor Corp., and the project manager is Bechtel.

Saudi Arabia is already a major exporter of urea and ammonia, two of the most common artificial fertilisers, via Saudi Arabia Fertilisers Co. (SAFCO), a unit of SABIC.

“It’s about using what they have and producing value-added goods instead of just exporting the raw material. Around that is an industrial cluster strategy that you hope will create jobs and industries you never had before,” said John Sfakianakis, chief investment strategist for Saudi investment company Masic.