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BRUSSELS — Corruption across the European Union’s (EU) 28 countries costs some 120 billion euros ($162 billion) per year, almost the size of the Romanian economy, the European Commission pointed out Monday, urging member states to do more to stamp out the problem.

According to EU’s Home Affairs Commissioner Cecilia Malmstroem, the actual figure could be even higher, despite amounting to the EU’s entire annual budget or a little less than one per cent of the bloc’s total economic output.

“This is an estimation,” Malmstroem said as she presented the report, the bloc’s first, “so probably it is much higher”.

The report will hopefully “spur the political will and the necessary commitment at all levels to address corruption more effectively across Europe”, she added. “The price of not acting is simply too high.”

The report does not rank the countries as to the seriousness of the problem nor suggest legal remedies, with Malmstroem saying that could follow after talks with member states.

But “one thing is very clear — there is no ‘corruption-free’ zone in Europe,” she said.

The report reviews how existing laws and policies work and suggests what further effort could be made.

According the European Commission s survey, corruption is a problem for almost half the companies doing business in Europe, and an increasing number of EU citizens think it is getting worse.

The report places the EU, often portrayed as one of the globe’s cleanest regions, in an unflattering light. Among businesses, belief is widespread that the only way to succeed is through political connections.

Experiences of corruption vary across the 28-country bloc. Almost all companies in Greece, Spain and Italy believe it is widespread, according to the report, the first by the commission. Corruption is considered rare in Denmark, Finland and Sweden.

That mirrors the finding of Transparency International’s corruption perception index. It named Greece as the worst performer in the EU, sharing 80th place with China. Denmark was seen as the least corrupt. 

“Corruption undermines citizens’ confidence in democratic institutions and the rule of law, it hurts the European economy and deprives states of much-needed tax revenue,” said Malmstrom.

Construction companies, which often tender for government contracts, are the most affected. Almost eight in ten of those asked complained about corruption. 

Overall, 43 per cent of companies see corruption as a problem. 

Graft 

The report says belief that corruption is commonplace is also widespread among EU citizens. A growing number believe it has grown worse in recent years. They think Greece, Italy, Lithuania, Spain and the Czech Republic are the most corrupt.

Citizens also suspect corruption is common in business. Eight out of ten believe that close links between business and politics lead to corruption.

“Europe’s problem is not so much with small bribes on the whole,” said Carl Dolan of Transparency International in Brussels. “It’s with the ties between the political class and industry.

“There has been a failure to regulate politicians’ conflicts of interest in dealing with business,” he added. “The rewards for favouring companies, in allocating contracts or making changes to legislation, are positions in the private sector when they have left office rather than a bribe.” 

The report was published shortly after Romania’s former prime minister, Adrian Nastase, was sent to jail for four years for taking bribes. He was the first premier to be put behind bars since the collapse of communism in Europe in 1989.

The EU has repeatedly raised concerns about a failure to tackle high-level graft in Romania and Bulgaria, the bloc’s two poorest members. They have been blocked from joining the passport-free Schengen zone over the issue since their entry.

In October 2012, former European health commissioner John Dalli was forced to quit after an associate was accused of asking for 60 million euros from a tobacco company in return for influencing EU tobacco law.  

Separately, a report found recently that governments of major exporting nations are backsliding in their readiness to crack down on companies that use bribery to win international market share.

Thirty of the 40 developed countries that have signed up to the Organisation for Economic Cooperation and Development (OECD) Anti-Bribery Convention are barely investigating or prosecuting cases, Transparency International pointed out. 

The convention sets the gold standard for combating corporate bribery in foreign contracting. 

Those countries with active anti-bribery enforcement programmes in 2012 were the United States, Germany, United Kingdom and Switzerland, which account for 26.2 per cent of world exports, it indicated. 

That is a retreat from the prior year when 7 countries had active programmes. Italy slipped into the moderate enforcement camp, while Norway and Denmark, which have reduced their activity over the past 4 years, fell even further, it said. Only 8 countries have fully met their OECD commitments.

Russia for the first time had no enforcements of anti-bribery laws in 2012.  Those with no record of enforcement at all over the past 4 years were Estonia, New Zealand, Greece, Israel, Chile, Mexico and Ireland. 

The failure to crack down on foreign bribery in contracts, licensing, tax dodging and other forms of corruption reflects budget cuts to enforcement agencies, a lack of expert knowledge or skill on how to pursue cases and a failure to apply the laws, the global anti-corruption group said. 

“The 40 countries, which represent more than two thirds of global exports, would make it very hard to get away with bribery if they lived up to the requirements of the OECD Anti-Bribery Convention,” said Transparency International Chair Huguette Labelle. 

Transparency International urged all major exporters to join the OECD Anti-Bribery Convention, which the Group of 20 has repeatedly recommended. China, India, Indonesia and Saudi Arabia are large exporters that have not yet done so.

CAIRO — Egypt’s Central Bank has taken extraordinary steps to prop up the currency and curb a black market in foreign exchange — but in back alleys and money changing shops around the country, illicit dealing continues to thrive.

This stubborn survival shows the limits of the economic recovery since Islamist president Mohamed Morsi was ousted last July, despite inflows of billions of dollars in aid from Gulf Arab governments.

Sluggish tourism revenue and foreign investment are keeping supplies short, along with many overseas Egyptians’ preference to send money home via the black market, where they get a better exchange rate.

The Central Bank is in its second year of auctioning hard currency to satisfy demand; last month it conducted its biggest auction, selling $1.5 billion. It has also shut down some money changing firms for manipulating prices.

But dollars are eagerly sought on Cairo’s black market and currency traders at banks say they haven’t been able to meet their clients’ demand through official channels for months.

Morsi’s fall cleared the way for Egypt to obtain billions of dollars in aid from the military-backed government’s allies in the Gulf — Saudi Arabia, the United Arab Emirates (UAE) and Kuwait — although other billions have had to be returned to Qatar, which backed Morsi’s Muslim Brotherhood.

Authorities have stabilised the Egyptian pound’s exchange rate against the dollar in the official market. A slide in the Central Bank’s foreign currency reserves to near-crisis levels has also been halted, although reserves remain at half their level before the Egyptian revolution of early 2011.

But the Central Bank still appears unable to provide the economy with nearly as many dollars as it needs, while many Egyptians see the risk of further weakness in the Egyptian pound down the road. So they are willing to buy dollars at big mark-ups in the black market.

“There is always a shortage in the market that is sometimes being interrupted with these big auctions,” said Mohammed Abo Basha, Cairo-based economist at investment bank EFG-Hermes.

He estimated the monthly gap between demand and supply for dollars in Egypt at between $500 million and $700 million, assuming economic growth of between 2-3 per cent.

Official rate 

Egypt had a thriving currency black market during economic instability in 2003. It mostly disappeared as the economy strengthened, only to reappear after the 2011 revolution, which frightened off many tourists and foreign investors.

The Egyptian pound is officially trading between banks at 6.96 to the dollar, about 11 per cent weaker than it was near the end of 2012, when the Central Bank launched its auction system as a way of rationing hard currency and protecting its reserves.

Banks are required to trade dollars within set ranges around the Central Bank’s auction cut-off prices for inter-bank, commercial and retail transactions, giving authorities considerable influence over official exchange rates.

In practice, however, many Egyptian firms and individuals find it hard to obtain as many dollars as they want from commercial banks; they turn to illicit dealers, who are now quoting the exchange rate at around 7.35 pounds to the dollar.

The dealers range from street vendors in leather jackets to urbane men in suits who work from marble-halled bureaux de change. Customers include well-heeled businessmen, students studying abroad and pensioners who want to protect the value of their savings against inflation running above 10 per cent.

One street trader in Cairo, operating out of a crowded indoor market for fake designer bags, says he can obtain up to $100,000 for his clients within a week.

“I can get you a million if you want,” he grins, sitting among piles of dusty suitcases for sale.

Such dealers obtain many of their dollars from Egyptians who work abroad. Remittances are a major source of foreign currency for Egypt, but some workers send money home to their families through the black market, where they get more pounds for their dollars, than via bank accounts and the official market.

A trader at a legal bureau de change near Cairo’s Adly Street, a commercial area, remarked that his business is suffering because he quotes dollar sellers the official exchange rate — unlike some of his competitors nearby.

“My customers ask me about the price of the dollar and when I give them the official price, they don’t like it and go out,” he said. 

Authorities have taken legal action against some money changers, temporarily shutting down 13 last month, but the campaign has not come close to eradicating the black market — perhaps because officials realise that closing the channel entirely would cause more hardship for families and businesses.

Last December, the Central Bank took aim at a loophole in the official market by warning commercial banks that they were required to trade all foreign currencies, not just the dollar, at official rates.

But some traders remarked that this could backfire by encouraging commercial banks, finding it harder to make money on their sales of euros, to hoard foreign currency — thus driving even more customers into the black market.

Many traders believe the only sure way to stamp out the black market is for the Central Bank to increase the amount of foreign exchange it supplies. In December 2012 it launched the auctions to counter a run on the pound. 

Balance of payments 

Authorities seemed close to success in the weeks after Morsi’s overthrow, when a burst of optimism about Egypt’s political future appeared to attract some money back into the country, easing the dollar shortage.

After a very large dollar auction in September, the gap between the official and black market dollar exchange rates narrowed to just 5 or 10 Egyptian cents, a trader noted.

In the last several months, however, the gap has expanded back to around 40 cents — smaller than the roughly 90 cents seen at times under Morsi, but large enough to indicate a sizeable supply-demand imbalance.

While aid from the Gulf — $12 billion was pledged last July with billions more expected in the next few months — has stabilised Egypt’s balance of payments, it has not so far produced a recovery of the tourism industry or a resumption of big inflows of portfolio and direct investment.

This means the country’s external position is still vulnerable, and the Central Bank remains unable to flood the official currency market with as many dollars as would be needed to make the black market irrelevant.

“Not all the aid finds its way to the market. Some of it is kept at the Central Bank to replenish reserves or pay for external debt or imports,” Abou Basha indicated.

Egypt has been running a big deficit in its trade of goods and services, of $24.9 billion in the year to last June, while net inward direct investment is running at about $4 billion a year, down from around $8 billion before the 2011 revolution.

This keeps pressure on the Central Bank’s foreign currency reserves. Even with the aid from the Gulf, the reserves have rebounded only to around $17 billion, up from $13.4 billion in March 2013 but way below pre-2011 levels around $36 billion.

Tensions between Egypt and Qatar have complicated the situation. While Saudi Arabia, the UAE and Kuwait were pleased by Morsi’s fall and provided aid in response, Qatar was close to him and its financial support has decreased.

Since last September, Egypt has returned a total of $3 billion in Qatari deposits, and it plans to send back a further $3 billion when bonds mature by the end of this year, an Egyptian Central Bank source told Reuters.

“The intention of the Central Bank was to kill the black market through several special auctions,” said a currency trader at a commercial bank in Cairo, but added that this had proved impossible because of the drain of funds back to Qatar.

As long as Egypt depends so much on foreign aid to support its balance of payments, Abou Basha remarked, the dollar shortage is likely to persist. 

“With this kind of balance of payments status, the black market will not cease to exist any time soon,” he said.

AMMAN — The Housing Bank for Trade and Finance (HBTF) announced in a press statement on Sunday that it achieved an unprecedented operational profit last year. 

According to the press release, JD357 million were generated as operational profit, JD30 million or 9.1 per cent higher than the JD327 million recorded in 2012.

Net pretax profit, after taking provisions into account,  amounted to JD150.1 million at the end of last year, 6 per cent higher than the JD142.2 million posted in 2012.

The profit became JD106.9 million in 2013 after the taxes and provisions compared to JD104.5 million in the previous year.

Accordingly, the bank recommended distributing dividends to shareholders at a rate of 30 per cent.

HBTF Chairman Michel Marto affirmed the bank’s solid financial position and its strong capital base pointing in the press release to assets totalling JD7.2 billion and clients’ deposits standing at JD5.1 billion.

The bank’s net credit facility portfolio totalled JD3 billion while shareholders’ equity stood at JD1.1 billion, according to the bank’s statement on its preliminary results.

“The bank managed to achieve these figures despite a decline in the value of the Syrian lira during 2013 which affected the balance sheet of the International Bank for Trade & Finance/Syria, an affiliated bank of the HBTF,” Marto said.

The figures reflected positively on the bank’s financial soundness as capital adequacy ratio stood at 18.8 per cent, higher than the 12 per cent required by the Central Bank of Jordan (CBJ).

The return on assets ratio came at 1.5 per cent while the return on equity rights was 10.2 per cent. Moreover, the bank’s liquidity rate stood at 159 per cent, which is higher than the rate required under the CBJ’s requirements. 

The bank currently has 119 branches across Jordan and several affiliates in some other Arab countries.   

The HBTF was established in 1973 as a public shareholding limited company to provide housing finance and after 24 years of operations, the bank was licenced to operate as a comprehensive bank, providing full commercial and investment banking services.

AMMAN –– Capital Bank on Sunday promoted Ignite as a new training service to small- and medium-sized enterprises (SMEs).

According to executives, the service seeks to boost the sector and help Jordanian firms enter new markets. 

Haytham Kamhiyah, the bank’s general manager, explained at a press conference that Ignite will offer training to founders and directors of SMEs on strategic planning for growth, efficiency, export, marketing and preparing financial statements that would enable them to access credit. 

After selecting 15 executives representing firms that employ between 5 and 50 people, the programme will be implemented on three phases, Kamhiyah said, noting that the first phase on business development starts on April 6 till April 8. 

The second phase on boosting SMEs role and implementing strategic plans will be held in June, while the final stage on improving talents will be on August 31 to September 2. 

According to the banker, Capital Bank seeks through the programme to attract more clients and to serve the Kingdom’s economy as SMEs represent nearly 95 per cent of businesses in the country. 

The programme will be implemented in cooperation with Migrate, a Jordanian business solution company, and the Inspirational Development Group from Britain. 

Trainers will be of international reputation as they have served in large financial institutions such as Barclays Bank and HSBC, Kamhiyah remarked.   

Responding to a question on limited access to credit for SMEs, Kamhiyah said that the Central Bank of Jordan has launched a credit line for small- and medium-sized businesses that entails extending long-term financing for industrialists, the tourism sector and renewable energy investors. 

He acknowledged that SMEs still find difficulties in accessing “cheap” credit, but said that “businesses are sometimes to blame for not providing bankable documents”.

Iraqi Market 

Answering a question on the bank’s operations in Iraq and the potential for Jordanian companies in the market of the neighbouring country, Kamhiyah described Iraq as a huge market, noting that Capital Bank has eight branches in various cities.

He said the bank plans to expand its branches network there, calling on Jordanian businesspeople to enter the Iraqi market, which he said holds “large” opportunities for companies in all sectors. 

“The presence of Jordanians in Iraq is still lower than it should be, may be except for pharmaceuticals,” he said. 

There are “huge” opportunities for Jordanian construction firms in Iraq due to expansion in infrastructure projects, he added.

AMMAN — A public-private-partnership (PPP) advisory committee is currently working to enhance the  investment climate and increase the competitiveness of the Aqaba Special Economic Zone (ASEZ).

Kamel Mahadin, chief commissioner of the Aqaba Special Economic Zone Authority (ASEZA), heads the new committee which includes Samer Asfour,  director of economic affairs department at the Royal Court, members from the public and private sectors, besides local community representatives.

The chairman said  on Sunday that the momentum was empowered by His Majesty King Abdullah’s directives which stressed the importance of team work and coordination among all parties in Aqaba to implement strategic projects, attract investments and create more jobs to improve the living standards for the citizens there.

Noting that the committee has started to work on the means to implement the Monarch’s vision following his recent visit to  the port city, Mahadin said the main task was evaluating the current situation in Aqaba to come up with a clear vision for the future of the city, paving the way to transform it to a world class business hub, leisure destination and economic development zone.

According to the ASEZA chief, members of the committee discussed during a recent meeting current investment atmosphere in Aqaba, focusing on compatibility of the investment regulations with the Monarch’s vision.

The committee stressed the need for a thorough review of the draft investment law to ensure that it achieves its objectives, Mahadin, who served as water and irrigation minister several years ago, said.

He added that within its mandate and goals to eliminate impediments, the committee reviewed the investment map and determined the saturation level in each sector, to further offer competitive and feasible investment opportunities in accordance with the ASEZA’s master plan.

The members also underlined the importance of the PPPs as   comprehensive long-term gains to touch the life of all segments in the Jordanian society, he noted.

Committee members emphasised the need to encourage the private sector to implement corporate social responsibility programmes to ensure sustainability of the development process as well as engagement of all social segments.

According to Mahadin, the committee also called for revisiting ASEZ’s master plan and strategies with more focus on the opportunities and incentives in Aqaba, as the city is witnessing development of a comprehensive port community plan, which includes creating and enhancing port facilities, particularly ports designated to handle energy products.

The committee includes representatives from ASEZA, Aqaba Development Corporation, major developers in Aqaba from the tourism, real-estate, transport and logistics and industrial sector.

AMMAN — The Central Bank of Jordan (CBJ) on Saturday announced that the use of the International Banking Account Number (IBAN) is mandatory, effective Sunday, February 2, 2014, as part of the information that accompanies all forms of money transfers. Money transfer orders that do not carry an IBAN will not be accepted, the bank said, urging all holders of banking accounts, including individuals and institutions to acquire an IBAN from the banks where they have their accounts to ensure that their banking money transfer transactions are completed without any delays.  

AMMAN — Jordan and Turkey will begin on Sunday high-ranking talks on bilateral relations, according to a Ministry of Planning and International Cooperation statement sent to The Jordan Times. Senior officials from both countries will enter brainstorming sessions on how to enhance joint cooperation in various fields, especially in sustainable development and education, the statement said. Jordan’s delegation to the negotiations with the Turkish Agency for International Cooperation and Development will be headed by Planning and International Cooperation Minister  Ibrahim Saif.  

BAGHDAD — Iraq’s top minister responsible for energy affairs on Saturday criticised the autonomous Kurdish region’s push towards exporting oil independently of Baghdad, calling it a grey area lacking in transparency.

Deputy Prime Minister Hussein Al Shahristani’s remarks are the latest salvo in a long-running row between the central government and the northern Kurdish region over energy sales and, by extension, the extent of federalism in Iraq.

“The most prominent challenge is that we have not reached a national agreement to extract and market oil from all of Iraq’s territory,” Shahristani said in a speech in Baghdad at an event looking at the past decade for Iraq’s energy industry.

“The situation with the Kurdistan region is still stuck. This file is not resolved, in spite of some progress having been made. We hope it will end soon,” he added.

Shahristani continued: “We have a grey area — we do not know how much oil the region is extracting, what price they are selling at, and where the revenue goes.”

Baghdad argues that all oil sales must be overseen by the central government, and regards any independent exports as tantamount to smuggling.

US Vice President Joe Biden spoke with Kurdish President Massud Barzani by telephone Friday to discuss reaching an agreement with the central government on oil sales.

“The vice president and President Barzani both confirmed the need for close cooperation between the Kurdistan regional government and the Iraqi government to reach agreement on a way forward on the matter of energy exports and revenue sharing,” the White House said.

Iraq has threatened to boycott Turkish companies and cancel contracts after the Kurdish region last month announced its first shipment of crude sent directly to Turkey, without passing through pipelines controlled by Baghdad, had gone on sale, with more expected to follow.

Kurdistan, which enjoys a high level of autonomy from Baghdad and has its own security forces, government and flag, has also drawn Baghdad’s ire for signing contracts with foreign energy firms without its approval.

Last week, a Baghdad official said the Iraqi government has hired a law firm to target any buyer of what it considers illegally exported Kurdish crude oil, toughening its tactics in a struggle to halt the northern region’s drive for economic independence.

For the past year, the Kurdish Regional Government (KRG) has trucked about 60,000 barrels per day (bpd) of crude to Turkish ports, avoiding the Baghdad-run Iraqi pipeline system as it tries to gain more control over oil revenues.

The central government threatened to sue over the shipments in a long-running dispute that talks between Baghdad and Erbil have so far failed to settle, but it took no legal action.

However, Baghdad is now preparing to act because it says the Kurds have raised the stakes by building a new pipeline linking their semi-autonomous landlocked region to Turkey.

Iraq’s oil ministry instructed legal firm Vinson and Elkins about two months ago to pursue anyone who buys oil pumped down the pipeline to the Turkish city of Ceyhan, near the Mediterranean, a senior Iraqi oil official said.

“This is not a game. Anyone who buys this oil is doing something illegal,” added the official, who asked not to be named. “We will target the companies because they are the ones who will monetise and pay for the Kurdish oil. How else can it get onto the market?”

Vinson and Elkins, which has represented the Iraqi government in the past, declined to comment. 

Baghdad turned a blind eye to small trading companies that have bought barrels via regular tenders and trucked them across the border. Those tenders are still taking place. 

But while the trucked amounts are relatively modest, Baghdad realised the Kurds were serious about independent exports when they sent test shipments down the pipeline in early December. 

“You can’t compare general trucking of 60,000 barrels or less to significant exports through a pipeline system,” the senior Iraqi official said. “We have a bilateral, international agreement with Turkey — ratified by parliament — that does not allow the Iraq-Turkey pipeline to be used by a third party without the consent of the Iraqi government.”

The central government insists it has the sole right to export Iraqi resources, including those from the northern Kurdish region which gained de facto autonomy after US-led invasion in 1991.

The KRG says its right to exploit and export reserves under its soil is enshrined in Iraq’s federal constitution, which was drawn up following the Gulf War of 2003, and has passed its own hydrocarbons legislation.

So far, the talks between Baghdad and the Kurdish authorities in Erbil have borne little fruit, and once the storage tanks are full, Turkey must decide whether to turn off the taps or export the oil in defiance of Baghdad.

Turkish Energy Minister Taner Yildiz said on Thursday that around 220,000 barrels of Kurdish oil has been stored so far in tanks in Ceyhan. It remains unsold, and Iraq’s threat of legal  action appears intended to deter would-be buyers. 

Yildiz told Reuters in an interview that Turkey would stand by a consensus reached in December between Ankara, Baghdad and Erbil to seek the central government’s permission, but not its blessing, in exporting KRG oil. 

Oil companies baulk 

The central government has raised the pressure on the Kurds to reach a deal, threatening to cut their share of the annual budget if they independently export oil. 

On the legal front, lawyers said Baghdad would struggle to make a case stick and any litigation would be complicated by questions of jurisdiction, but the threat could deter companies reluctant to deal with the negative headlines.

“Instead of going after the KRG, they are going after people who will lift oil from them. They are trying to say to existing companies: ‘Your deal is in jeopardy’,” said one lawyer who advises oil firms.

“It is a good strategy because no lifter wants to be in this situation. It is bad for the annual report as you have to disclose any litigation. You could get small lifters who will take the risk of incurring Baghdad’s wrath, but if you are lifting 400,000 bpd you are by definition not small,” he added.

Executives from oil majors have said they won’t touch KRG crude before the Kurds and Baghdad reach an agreement for fear of losing larger contracts with the central government. 

“If Baghdad says ‘no’, I don’t think anyone like us will go. No one big will go,” an executive from one oil major said.  “Even for larger trading companies... who buy a lot of oil from Baghdad, the choice is easy. Why would they take the risk of losing that business?”

Even so, some regular buyers of Kurdish oil are likely to be interested if the Kurdistan Oil Marketing Organisation (KOMO) starts tenders for the Ceyhan oil.

“You don’t need to be such a heavyweight to lift oil from Ceyhan. Someone will be interested,” said an executive from an oil company active in Kurdistan. “They are pushing for a deal on two tracks but you can’t store oil forever. I hope they reach a deal before storage capacity is reached.”

Room for understanding

The storage is far from exhausted, potentially allowing time for talks to progress. Sources said Turkey has allocated three tanks with a capacity of 2.5 million barrels each for the Kurdish oil, just a fraction of which has so far been filled.  

Many industry executives active in Iraq believe both sides are engaged in a game of brinkmanship ahead of Iraqi elections due this year and that a deal will eventually be clinched.

Shahristani said last month Baghdad had proposed that the KRG pay the oil companies operating in the region out of its 17 per cent share of the national budget, accept that national oil company SOMO would market the crude and deposit all revenue into the Development Fund of Iraq, based in New York.

The Kurds, however, are still insisting on marketing their own oil and say the proposal does not give them enough money to pay the operators. Shahristani said the KRG would respond soon.

“There has to be a reconciliation between Baghdad and Erbil. A lot of this is grandstanding ahead of this year’s elections,” said one oil industry source active in the north. “Behind the scenes there is a lot more cordiality, and dialogue is still going on. They both want the money.”

Shahristani said the Kurds had promised not to start exporting while negotiations were still continuing. 

One industry source in Arbil doubted the Kurds would go ahead with a tender for the Ceyhan oil soon, having promised one in January. 

“Negotiations with Baghdad continue and they will play it quiet for now,” he said.