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KUWAIT CITY — Kuwait’s provisional budget surplus shrunk in the first nine months of this fiscal year as spending rose 18 per cent and income was unchanged, according to official figures released Sunday.

The provisional budget surplus dropped 11 per cent to 14.34 billion dinars ($50.7 billion,37 billion euros) at the end of December compared to 16.1 billion dinars in the same period of the previous year, according to figures posted on the ministry of finance website.

Spending in the nine-month period was 9.64 billion dinars compared to just 8.16 billion dinars in the same period of the previous fiscal year.

Kuwait’s fiscal year runs from April 1 to March 31.

Revenues in the first three quarters of the 2013/2014 fiscal year came in at 24 billion dinars, slightly less than the 24.26 billion posted in the same period of the previous year.

Oil income, which makes up over 92 per cent of total revenues, dropped slightly from 22.84 billion dinars in the 2012-2013 fiscal year to 22.2 billion dinars in the current year.

Spending on development projects has been hampered by political disputes in recent years, but picked up slightly in recent months with the award of a number of mega projects worth several billion dollars.

Kuwait is projecting spending in the current fiscal year, which ends on March 31, at 21 billion dinars, with revenues at 18.1 billion dinars, leaving a deficit of 2.9 billion dinars.

Kuwait has projected a deficit in each of the past 14 fiscal years but ended with large surpluses because it assumes a conservative price for oil.

In the previous fiscal year, the emirate posted an actual surplus of 12.7 billion dinars, following a record 13.2 billion-dinar surplus in 2011-2012.

Thanks to higher than expected income driven by firm oil prices, Kuwait decided for the second year in a row to transfer 25 per cent of revenues into the emirate’s sovereign wealth fund, the assets of which are currently estimated at over $400 billion.

Kuwait has a native population of 1.2 million, in addition to 2.7 million foreigners, and pumps about 3 million barrels of oil per day.

Separately, a parliamentary investigation into a Kuwait Airways plan to buy and lease aircraft from Airbus will not affect the deal, the state carrier’s chairwoman told a local newspaper in comments published on Sunday.

Kuwait’s parliament voted on Wednesday to investigate all contracts signed by state-owned Kuwait Airways, which is attempting its biggest overhaul since the 1990 Iraqi invasion.

Such parliamentary inquiries are common in Kuwait, where lawmakers in the Gulf state’s National Assembly often question large government projects and have delayed or scuppered them in the past.

Al Anba newspaper quoted Kuwait Airways Chairwoman Rasha Al Roumi as saying the deal would be completed without being delayed.

In December, the loss-making airline signed a provisional agreement with Airbus to buy 25 new aircraft in a deal worth $4.4 billion at list prices.

The order would include the purchase of 10 A350-900 and 15 medium-haul A320neo jets. The airline also aims to lease 12 aircraft from Airbus pending delivery of the new planes.

The two companies are now going over technical and legal aspects of the deal, Al Anba said. A final contract will only be signed when an internal Kuwait Airways commission gives the green light, it added.

A Kuwait Airways spokesman was not immediately available for comment on the report.

Politics and bureaucracy have long complicated Kuwait’s plans to modernise its infrastructure and compete as a Gulf financial hub.

The carrier has one of the oldest fleets in the Middle East and wants to take out of service 11 jets from its fleet of 17, in which the planes’ average age is 18 years.

KUWAIT — Kuwait’s policymakers face the uphill challenge of convincing citizens that despite hefty oil revenues, one of the world’s richest countries per capita needs to reduce spending to avoid a potential damaging budget deficit later this decade.

Long a topic of debate, the task has now fallen to new Finance Minister Anas Al Saleh, who said shortly after his appointment in January that a plan to review the lavish subsidy system should be ready later this year.

Thanks to subsidies, it costs as little as 5.2 dinars ($18.40) to fill an 80-litre petrol tank. Electricity costs just 2 fils (less than 1 US cent) per kilowatt hour, a fraction of what it costs to produce.

Economists say such cheap prices, available to Kuwaitis and foreigners alike, encourage waste. Building managers complain of people leaving their air conditioning on while they are on holiday so that their home is cool when they return.

But any marked reduction in subsidies could erode stability since Kuwaitis have a recent history of street protests and industrial action to voice dissatisfaction with the government of the US-allied Gulf Arab state.

“There will be a revolt in Kuwait,” said Abdullah Al Shayji, political science faculty chief at Kuwait University. “Kuwaitis will cope with anything, but don’t come too close to their wallets and chequebooks. They will really put up a big fight.”

In 2012, thousands of Kuwaitis marched against changes to voting rules and voiced anger about slow economic development. Public sector workers went on strike the same year over pay.

In a sign of how sensitive the subsidy subject is, Saleh has been on the defensive since announcing his plan, stressing that it will not hurt Kuwaitis with low and middle incomes.

“The government’s behaviour is very provocative for Kuwaitis because they don’t believe it,” said Shayji.

“You shouldn’t be touching this with a 10-foot pole at this stage, this is something that could sink the government,” he added. “Each Kuwaiti believes, deep down inside, he was raised to believe: I am entitled to the oil.”

In recent years, a steady rise in the oil price has helped the Organisation of Petroleum Exporting Countries (OPEC) producer pay for its growing wage bill, subsidies, a generous welfare system and a series of one-off handouts.

Such benefits, common in the Arab Gulf, are often credited with shielding Kuwait and its regional peers from the type of unrest which swept much of the Arab world in 2011.

They are difficult to reduce, despite warnings that spending at the current rate could outpace Kuwait’s revenues as early as 2017-18, according to the worst-case scenario from the International Monetary Fund.

“With risks to oil markets skewed to the downside, so are risks to the public finances,” said Farouk Soussa, chief Middle East economist at Citigroup, who says Kuwait needs to make progress on fiscal reform.

Enlightened new generation

Kuwait’s success with the subsidies review, or lack thereof, is relevant to other Gulf states which do not charge income tax and rely on a patronage-style system of handouts.

Work on the review started late last year in Kuwait, which relies on oil for over 90 per cent of revenues. Subsidies are expected to cost 5.11 billion dinars ($18.08 billion) next fiscal year to cover items like fuel and energy.

Saleh, who is in his early 40s, is part of a younger generation of ministers tasked with exploring such controversial economic reforms. He is the fourth finance minister in less than two years.

“He is one of a number of people who understands it. There are more people in the Cabinet who understand it now,” a diplomat said.

A former commerce and industry minister, Saleh helped push through a new companies law in 2012 aimed at boosting the private sector, a challenge in a country where implementing new systems takes years if not decades.

US-educated, with a business background, Saleh is taking a path backed by predecessor Sheikh Salem Abdul Aziz Al Sabah, who initiated the review and has led calls for spending cuts.

Sheikh Salem, who ran the central bank for 25 years, warned in January that the government would be forced to take damaging measures if spending continues unabated. He remarked that Kuwait might have to devalue the dinar or dip into its Future Generations Fund, a nest egg meant for economic shocks.

But many Kuwaitis are confused by the idea of shaving subsidies given the large budget surpluses of the past decade.

“Why do they do this? We have a lot of money and it is to our advantage. We should spend it,” said 20-year-old student Samaher Usama, who like more than half of Kuwaitis is under 25.

Some Kuwaitis see the logic in raising prices for goods and services, but they question the government’s method.

“They need to make a plan over five years and then look at developing different ways of producing electricity if they want to make it more expensive,” student Reem Al Asmi, 22, said.

She suggested Kuwait develop solar energy in order to reduce dependence on oil for its own energy consumption.

Talk about subsidies angers some who think Kuwait has been too generous abroad. It gave Egypt $4 billion as part of a Gulf aid package after the ousting of Islamist president Mohamed Mursi and donated $1 billion for humanitarian aid to Syria.

They also point to Kuwait’s potholed roads and housing shortage as evidence that the state is not using money effectively or that funds are disappearing elsewhere.

“There are influential people who take their fortune.” MP Saleh Ashour told parliament on February 4.

Some populist MPs are also part of the problem, campaigning to raise citizens’ benefits to win support from constituents.

MPs are calling for increases in allowances for housing and children. Last month they passed legislation to subsidise house-building materials.

SINGAPORE — Top Asian airlines’ profit margins are being eroded by a struggling air cargo business, even as they capitalise on increasing passenger demand, industry executives said Sunday.

Languid global economic growth and freight capacity oversupply brought on by new deep-bellied planes is hammering carriers with dedicated cargo businesses, the insiders said ahead of the Singapore Air Show.

“The biggest worry of the airlines industry right now is probably cargo,” Tony Tyler, director general of the International Air Transport Association (IATA), told reporters in the city-state.

“For the big airlines in this region [Asia] it is a very important component of their revenue mix,” he said.

Asia’s biggest aerospace and defence show opens on Tuesday and will run until Sunday.

Last week, IATA said airfreight traffic rose by 1.4 per cent in 2013 compared to the previous year, supported by rising activity from Middle Eastern and Latin American carriers.

Asia-Pacific carriers, which have nearly 40 per cent of the global freight market, however saw volumes drop 1 per cent, while capacity rose 0.8 per cent.

Passenger demand rose 5.2 per cent compared to 2013 while capacity rose 4.8 per cent. Bigger planes are catering for a growing number of passengers.

Andrew Herdman, the director general of the Association of Asia Pacific Airlines, said major regional airlines with separate cargo businesses are bearing the brunt of the slump in the industry since the 2008 global financial crisis.

“The people who are really suffering in the cargo business are the ones operating big fleets of dedicated freighters and that includes Singapore Airlines, Cathay Pacific, Korean Air, among others,” Herdman indicated.

Singapore Airlines’ freight arm SIA Cargo operates nine Boeing B747-400 freighters. Cathay Pacific has a fleet of 25 freighters while Korean Air has 26, according to the data on the carriers’ websites.

IATA’s Tyler said full-service carriers could boost revenue by capitalising on growing demand for ancillary services such as a la carte food on planes.

According to IATA, revenue from ancillary services per departing passenger is likely to rise to around 10 per cent this year, from zero per cent in 2007.

Tyler also said it was too early to tell whether the airlines industry would be affected by the recent sell-off in emerging markets.

Commercial deals potentially worth billions of dollars are expected to be announced at the six-day Singapore Air Show.

Vietnam’s first private airline, VietJetAir, is expected to announce the finalisation of an order for 62 Airbus A320 planes worth $6.1 billion, an industry source close to the deal said.

An order for 20 Airbus A380 superjumbos worth $8.0 billion by leasing group Doric Asset Management could also be announced, the source added.

Around 1000 companies are participating in this year’s edition of the event, which occurs every two years.

The total value of deals during its 2012 edition reached $31 billion, up threefold from 2010, organisers said.

Separately, low-cost carriers are flying high in Southeast Asia on the back of sharp growth in air travel, but as hundreds of new jets swarm into the region concerns are rising about its ability to absorb the record numbers of planes on order.

Southeast Asian carriers have been devouring as many new airplanes as planemakers can sell, gambling that low fares and rising disposable incomes will drive the region’s 600 million-strong population to keep flying to new destinations.

An aircraft buying binge fuelled by cheap interest rates and backed by Western export credits shows few signs of halting, with Vietnam’s VietJetAir and Thailand’s Nok Air both expected to place orders at the Singapore Air Show this week.

But after years of explosive growth, the region’s budget carriers are now facing fears of overcapacity as deliveries accelerate, airlines expand into each other’s markets and currency weakness threatens to puncture economic growth.

“This is the only region in the world where airlines have more orders than current fleet and there’s more to come,” said Brendan Sobie, chief analyst at industry consultancy CAPA.

Airlines in Southeast Asia are estimated to have a fleet of 1,800 by the end of this year, he added, while their order book is set to surpass the 2,000 mark. Asia-Pacific planes on order make up 36 per cent of the world total and the figure is rising, says Airbus.

Already last year, available capacity grew faster than passenger demand in countries such as Malaysia, the Philippines and Singapore, putting pressure on yields or the average revenue per passenger for every kilometre flown.

That could extend further in 2014 as carriers in Southeast Asia take delivery of about 230 aircraft worth over $20 billion this year, at a rate close to one new jet every working day.

One such aircraft is a short-haul Boeing 737 now making its way to the region and due to reach Singapore’s SilkAir in time to be shown off at the February 11-16 air show.

The arrival of the airline’s first Boeing symbolises a price war between planemakers generated by Asia’s order boom, after SilkAir ditched its previous supplier Airbus.

Order now, pay later

One reason many airlines have been ordering at once is that engine improvements now allow significant fuel savings.

Ample liquidity provided by money-printing central banks has also made it easier to fund the relatively small upfront payments needed to place headline-grabbing plane orders.

But bankers warn the race to buy efficient aircraft in anticipation of high demand could spell trouble for the sector.

“When you run an airline, for reasons which are both economic reasons and prestige, you want a new kit, so you order an aircraft. And if your neighbour orders aircraft, so you order aircraft,” said Bertrand Grabowski who heads German bank DVB’s aviation and land transport finance divisions.

“I wouldn’t call it irrational exuberance but clearly everybody in Asia is ordering aircraft more than they really need,” Grabowski told Reuters in an interview.

Most of the aircraft orders come from the region’s two fastest growing airlines — Malaysia’s AirAsia Bhd, run by entrepreneur Tony Fernandes, and Lion Air, co-founded by Indonesian businessman turned politician Rusdi Kirana.

Both carriers have placed orders for hundreds of Boeing and Airbus aircraft valued at tens of billions of dollars as they race to get Asians flying in a region set to overtake the United States as the biggest aviation market.

Others ordering aircraft include Cebu Pacific, Tiger Airways, 40 per cent owned by Singapore Airlines Ltd., Garuda Indonesia’s low-cost unit Citilink, and the Qantas Airways Ltd.-owned Jetstar and its affiliates such as Singapore-based Jetstar Asia.

In the event that any airline cannot complete an order, there are others waiting in the wings to take their slot.

New deals

While Fernandes has dismissed speculation of an aircraft order bubble in Asia, AirAsia’s profits have taken a knock due to a gruelling price war in its home market, stoked by Lion affiliate Malindo and competition from Malaysian Airlines.

AirAsia has termed competition in Malaysia and Thailand as “irrational”.

Kirana, the head of Lion Air which does not disclose profits, believes consolidation in the sector is “inevitable” given the large number of companies in the low-cost market.

Recently, Tiger Airways agreed to sell its Philippine operations to dominant carrier, Cebu Pacific, and AirAsia’s Philippine unit bought into smaller Zest Air.

Such concerns are unlikely to get much of a public airing at this week’s aerospace event, where deals may be signed for between 100 and 200 jets worth $10-20 billion — albeit far below the record $200 billion seen in Dubai in November.

Manufacturers are perennially upbeat and Boeing is expected to reiterate confidence in long-term Asian demand this week.

“Nobody is going to place a future order unless they know that whatever they are taking in today is being absorbed in the market at a reasonable yield and a reasonable load factor level,” said Dinesh Keskar, Boeing Commercial Airplanes’ vice president, Asia-Pacific and India sales.

“I wouldn’t say the party is ending in the near-term but the rate of growth will slow down,” he added.

AL SAFF, Egypt — When Egypt announced plans for a minimum wage late last year, the government hoped to lift living standards and calm street turmoil that has helped topple two presidents in three years.

Although one in four Egyptians lives below a poverty line of $1.65 a day, many workers say the 1,200 Egyptian pound ($170) minimum wage introduced in January is too little too late in a nation whose rulers have long favoured the elite over the poor.

“Some people spend half that on their pet dogs every day,” said Ibrahim Hussein, who earns 800 pounds a month as a private security guard, barely enough to support his three children.

Flush with more than $12 billion in aid from Gulf Arab states, the army-backed government is using some of the cash to defuse unsatisfied demands for reform and social justice.

Many Egyptians backed the army’s overthrow of President Mohamed Morsi in July and the ensuing crackdown on his Muslim Brotherhood in which about 1,000 of his supporters were killed.

And many are mesmerised by Field Marshal Abdel Fatah Al Sisi, the army chief who ousted Egypt’s first freely elected leader after mass protests against his rule. Sisi is soon expected to announce he will run for president — and win.

But once the euphoria fades, Sisi in his turn could face what some have dubbed the revolution of the hungry unless eradicating poverty and social ills becomes a higher priority.

“Setting the minimum wage is a first step in the path to social justice... The government must not forget or stop at the minimum wage only,” said campaigner Ashraf Al Taalabi.

“If the people do not feel they have social justice there will be a third revolution to achieve that goal,” he added.

Corruption, cronyism and stark inequalities in wealth fuelled the 2011 revolt that overthrew autocratic president Hosni Mubarak, when labour unions joined vast crowds demanding “bread, freedom and justice” for the nation of 85 million.

Cauldron of discontent

Three years later, impoverished cities like Al Saff, 60 kilometres south of Cairo, still await signs of a fairer deal.

Many queue for hours each day to buy state-subsidised bread in slums disfigured by garbage and raw sewage, while the rich and powerful inhabit luxury villas in gated communities.

“The minimum salary should be 3,000 pounds,” said Sayed Hussein, a physics teacher who sells rice and noodles at night to supplement his income. “If it doesn’t get resolved, we will all take to the streets. If this continues I will suffocate.”

The minimum wage applies to 4.9 million public employees and will cost the state an extra 18 billion pounds a year, swelling a budget deficit set to hit around £200 billion this year.

But the government has presented no long-term plans to boost revenue to correct the fiscal imbalance, analysts say, instead pinning its hopes on two stimulus packages of $4.3 billion each.

These rely indirectly on Gulf aid, so if Saudi Arabia, the United Arab Emirates and Kuwait become less generous, that could force spending cuts, risking a backlash in the streets.

Egyptians depend on food and energy subsidies which account for a quarter of all state spending. Successive governments have hesitated to cut the subsidies for fear of public anger, mindful of the 1977 bread riots that challenged president Anwar Sadat. Bread shortages also provoked unrest under Mubarak in 2008.

As well as subsidies and the minimum wage rise, budget strains include a new constitutional obligation to allocate some 6 per cent of spending on education, health and research.

Longing for change

According to Moheb Malik, an economist at Prime Securities, the government would struggle to meet its financing needs.

“There will have to be a cut somewhere and they can’t cut wages,” he said. “That leaves the subsidies, which are huge.”

The government hopes the wage rise will appeal to people like Ali Abdul Megid, 33, who works 16 hours — school bureaucrat by day, truck driver by night — without escaping poverty.

Like others he wants the government to tackle entrenched social inequality, not just throw some money at problems.

“I long for change, reform and for everyone to take their rights in this country so that the son of a minister is equal to the son of a doorman,” he said, sitting on a stool near a dirt road, tearful as he recalled how he started working at age 12.

Egypt has no easy options. Political upheaval has scared off tourists and investors, helping push foreign reserves to a low of $15 billion last year, barely three months’ import cover.

The government’s expansionary policies may fuel inflation, which hit 11.9 per cent in December and could cancel out any benefits from the higher minimum wage, adding to frustrations.

“Don’t give me a salary rise with your right hand, then raise prices on me with your left,” said another school administrator, Ahmed Al Deek, who began moonlighting three years ago to support his family.

When he lost a finger sawing in a carpenter’s shop, he vowed to stop working there. But tough times have forced him to go back.

“This exhausts us,” he said. “We have to be able to live on our salaries. We want to live decently.”

Mohammed Hosni started work as a bricklayer aged 14. Now he also drives a tuk-tuk, a three-wheeler cab, to feed his extended family, but buying an apartment remains a distant dream.

“People know the country is going through a tough time and the economy is weak,” he said. “But if we don’t see change the people will rise up again.”

ISTANBUL — Standard & Poor’s (S&P) cut its outlook on Turkey’s ratings to negative from stable on Friday, saying that it saw risks of a hard economic landing and that the country’s policy environment was becoming less predictable.

A corruption investigation shaking Prime Minister Recep Tayyip Erdogan’s government along with sharp falls in the lira currency and rising inflation have raised concerns about political and economic stability in the run-up to elections this year.

“Turkey appears to have suffered an unanticipated erosion of institutional checks and balances and governance standards,” S &P said in a statement, citing in particular concerns about the independence of the central bank.

The credit ratings agency cut its outlook to negative on its unsolicited “BB+” long-term foreign currency and “BBB” long-term local currency ratings.

Nevertheless, it said Turkey’s low and largely lira-denominated debt provided it with significant buffers against economic turbulence.

The central bank ramped up interest rates last month to halt a slide in the lira despite opposition from Erdogan, a vocal opponent of higher borrowing costs who has railed against what he terms an “interest rate lobby” of speculators seeking to stifle growth and undermine the economy.

“We believe that any constraints on the independence and transparency of the central bank pose a risk to an economy that has traditionally relied on significant external financing needs,” S&P said.

Turkey is dependent on foreign capital flows to finance its gaping current account deficit, running at around 7 per cent of national output.

S&P lowered its projection for Turkish gross domestic product growth this year and next to 2.2 per cent from 3.4 per cent. It said the increasingly uncertain policy environment could weigh on the country’s economic resilience and long-term growth potential.

The lira was trading at 2.2170 against the dollar by 1844 GMT, weakening from 2.206 late on Thursday, but still some way off its record low of 2.39 hit on January 27.

“Based on the fundamental story that has played out over the past few weeks, the cut is justified. But I can’t help thinking that this is a backward-looking move,” said Benoit Anne, emerging market strategist at Societe Generale.

“The central bank has been sending the right signal to the market that it takes financial stability risks quite seriously. Now we still need to get some kind of solution on the political front, but that is going to take a lot of time,” he added.

S&P’s fellow ratings agencies Fitch and Moody’s have BBB- and Baa3 ratings on Turkey, respectively, both with stable outlooks.

Reputation at risk

Erdogan has overseen strong economic growth since coming to power in 2002, transforming Turkey’s reputation after a series of unstable coalition governments in the 1990s ran into repeated balance of payments problems and economic crises.

But his increasingly authoritarian style, from a heavy-handed police crackdown on street protests last summer to his reaction to the corruption investigation in recent weeks — purging the police and judiciary — has unnerved investors.

Erdogan is committed to maintaining growth as Turks prepare to vote in local elections in March and a presidential race in August, and has said his economic team is working on “a Plan B or a Plan C” for the economy.

But he has given no details, leaving investors guessing as to what might be in the pipeline. His ministers have ruled out capital controls to defend the lira.

Fitch and Moody’s have both said that last month’s huge interest rate hike of around 500 basis points could dampen economic growth but left their ratings and outlooks unchanged.

The central bank said it had tried to “front-load” its monetary tightening with the hike but said it may tighten liquidity further if needed.

Turks appear to be betting against it.

Foreign portfolio outflows have remained relatively steady in recent weeks, suggesting much of the strong dollar demand is coming from Turkish firms and households, stocking up on hard currency as a potentially turbulent election period approaches.

Separately, Turkish households and firms are hoarding dollars, suggesting they have little faith the lira will be spared a further emerging markets sell-off despite a massive rate hike.

Locals’ foreign exchange holdings rose 2 per cent to $122 billion in the week to January 24, jumping 13 per cent year-on-year, according to data from the central bank, suggesting they are not selling dollars as they did in the past in currency crises to benefit from a cheaper lira.

“Corporates have started buying foreign exchange for hedging purposes as they think the lira will not appreciate,” said a senior foreign exchange manager at an Istanbul bank.

“Moreover, individual investors and households — who used to sell as much as $10-15 billion whenever the lira depreciated — are hoarding dollars and even increasing their holdings, piling extra pressure on the lira,” he added.

Ratings agency Moody’s said the pressure on the currency was likely to persist despite the central bank’s actions, which it said had also significantly weakened Turkey’s growth prospects.

“Locals continue to accumulate foreign exchnage,” indicated Istanbul-based TEB-BNP Paribas strategist Erkin Isik, estimating Turks’ total foreign exchange holdings had risen some $5 billion in the past three weeks.

“It will be more difficult for the central bank to reverse this mood of local investors, if global risk sentiment remains weak,” he said.

Race against time

The currency slump means Turks now need more than twice as many lira to buy dollars as they did at the currency’s peak six years ago.

The lira’s slide has also left Turkish firms with foreign debts badly exposed, forcing them to scrap some investments at a critical time.

Turkey’s leading business group TUSIAD estimates that within just one month Turkish firms’ foreign debt has risen 25-30 per cent due to the currency weakness and higher risk premiums which push up borrowing costs.

The higher borrowing costs have also raised concerns about banking sector profits.

AMMAN –– Jordan and the European Union (EU) on Thursday called on Arab Mediterranean countries to join Agadir free trade agreement between the Kingdom, Egypt, Tunisia and Morocco.

Jordan encourages other Arab countries on the Mediterranean to join the Agadir Agreement as it would boost economic integration between Arab states, said Industry, Trade and Supply Secretary General Maha Ali.

She made the remarks at a press conference to announce the third phase of financial support offered by the EU to the Agadir Technical Unit (ATU).

EU Ambassador to Jordan Joanna Wronecka said the agreement, established in 2004 and named after the Moroccan city of Agadir, aims at boosting trade between southern Mediterranean countries, which would also facilitate trade with the European countries.

She added that the accord would cover a market of 120 million people, noting that the gross domestic product of member countries is estimated at 150 billion euros.

Since the agreement went into effect in 2006, the EU has been supervising its implementation due to belief it would accelerate economic development of the region, Wronecka continued.

The EU ambassador indicated that trade between state members of Agadir Agreement went up by 51 per cent between 2006 and 2009, noting that regional instability and the global financial crisis curbed the uptrend in commercial exchange.

She pointed out that the financial support by the EU for the agreement’s technical unit is estimated at 12 million euros.

ATU Executive President El Aid Mahsoussi said the agreement seeks to liberalise trade between member countries and to promote investments between each other in addition to boosting economic ties with European countries on the northern part of the Mediterranean.

He added that the unit is working to achieve a protocol for rules of origin in compliance with European standards, an issue he said would facilitate commerce between Euro-Mediterranean countries.

Mahsoussi continued that the ATU seeks to expand trade liberalisation in the services sector between member states, achieve more coordination between customs departments and establish a mechanism for intellectual property in the industrial sector among other objectives related to certificates of origin and international trade.

Mahsoussi said the Agadir Agreement is open to further membership by all Arab countries that are members of the Arab League and the Greater Arab Free Trade Area, and linked to the EU through an Association Agreement or an FTA.

The agreement’s purpose is to facilitate integration between Arab states and the EU under the broader EU-Mediterranean process.
In November 2008, the members of the Agadir Agreement signed a protocol on trade in textiles.