Business

AMMAN — Jordan and China signed a memorandum of understanding on Sunday giving the Kingdom the privilege to be among the guests of honour at the 2015 China and Arab Countries Exhibition. The memorandum included the work programme to guarantee Jordan an effective participation in the events of the exhibition. Jordan Investment Commission (JIC) Acting Chief Khaled Abu Rabei signed the memorandum on behalf of the Kingdom, according to a JIC statement sent to The Jordan Times. Industry, Trade and Supply Minister Hatem Halawani reiterated the importance of enhancing the economic relation between Jordan and China at all levels. Halawani called for conducting a joint meeting between industry and trade ministries of both countries to follow up on the the agreements resulting from the talks of His Majesty King Abdullah and Chinese President Xi Jinping. Both sides agreed to have a Chinese-Jordanian businessmen forum on the sidelines of the exhibition to promote the Kingdom.

AMMAN –– Jordan Investment Commission (JIC) recently concluded a promotion campaign to Saudi Arabia in a bid to attract more investors from the Gulf kingdom. According to a JIC statement e-mailed to The Jordan Times Sunday,  Industry, Trade and Supply Minister Hatem Halawani headed the official delegation to Riyadh, where a Jordanian-Saudi investment forum took place.  Jordan seeks to attract more Saudi investment, Halawani said in a speech, describing the Gulf state as Jordan’s largest economic partner. The minister noted that the volume of Saudi investments in Jordan is around $10 billion, spread over banking, energy, tourism and industrial sectors, said the statement.  “The investment commission is ready to make all necessary facilities for Saudi investors to carry out their projects in Jordan,” the minister said, citing the renewable energy sector as a lucrative market for investors. Khaled Abu Rabei, the commission’s acting chief, said the forum aimed at introducing available investment opportunities for Saudi businesspeople. Ahmed El Showeir, board member of Riyadh chamber of industry, said there are Jordanian businesspeople who are investing in 850 projects worth $3.6 billion.  The share of Jordnaian investors in these projects is estimated at 54.5 per cent, according to Showeir. 

AMMAN — The Ministry of Industry, Trade and Supply on Sunday launched their Facebook page (www.facebook.com/mit.gov.jo) to enhance communication with businessmen, investors and service beneficiaries. Yanal Barmawi, the official spokesperson of the ministry, said consumers can use the page to know their rights mentioned in the industry and trade laws. Barmawi added that citizens’ remarks and complaints can be received through the page, stressing that the ministry will deal with them with speed and accuracy. 

DUBAI — “Keep calm. There’s no bubble”, proclaimed a giant poster on a 40-storey building overlooking a Dubai highway, advertising a property finding portal late last year. That may have been true at the time, but the risks are rising.

A leap in bank lending to the construction industry indicates financial institutions have resumed pouring money into real estate projects in the last few months, after cutting back sharply in the wake of Dubai’s 2008 crash.

At the same time, property prices have been soaring on the back of Dubai’s economic boom, increasing the chance of the market rising to unsustainable levels.

Surging supply and unsustainable demand are a risky mix — the same combination that got Dubai into trouble six years ago, forcing state firms to reschedule tens of billions of dollars of debt and jolting financial markets around the world.

This time, authorities say they are aware of the dangers, and they have taken regulatory steps to slow demand growth. But the steps are still modest compared to those by other global cities facing the same problem, such as Hong Kong and Singapore.

“It’s too early to be calling top, but credit growth of that pace tells you that the cycle is accelerating rapidly,” said Simon Williams, HSBC’s chief economist for the region.

“Such a huge increase in lending is simply not consistent with economic order and stable asset prices. The time for policy action is now, before bubbles really get going, not when they are already in place,” he added

Demand

Dubai house prices posted the fastest year-on-year rise of any of the world’s major markets in January-March for the fourth straight quarter, soaring 27.7 per cent, according to consultants Knight Frank. Rents rose about 30 per cent on average in the same period.

The value of real estate deals in Dubai, with a population of 2.3 million, jumped 38 per cent in the first quarter to some 61 billion dirhams ($16.6 billion), the Land Department indicated.

There are good reasons for property prices to rise, including annual economic growth around 5 per cent and inflows of money from Arab investors seeking safety in a turbulent region.

While some prices have almost returned to their pre-crash peaks, they are well below some other global business cities. 

Prime real estate in Dubai costs between $6,200 and $7,500 per square metre, against $27,600-33,700 in Singapore, according to Knight Frank.

The volume of real estate deals has not reached its pre-crash peak but demand is showing signs of slowing. Propsquare Real Estate said sales volumes so far this year were down about 25 per cent year-on-year as prices become less affordable.

“The gap between what the seller is asking for a property and what the buyer is willing to pay is huge at the moment,” said Parvees Gafur, Propsquare’s chief executive.

Yet the Land Department described the first-quarter surge in real estate deals as “impressive” and looked forward to more.

“We expect the next three quarters to be similarly active, especially as this period follows the launch of a number of stimulating economic projects in Dubai and the disclosure of some of the preparations for the city’s hosting of Expo 2020,” said the department’s Director General Sultan Butti Bin Merjen.

The government fuelled the current property boom when it announced plans, in November 2012, for a huge development including the world’s largest shopping mall, over 100 hotels and a park almost a third larger than London’s Hyde Park.

Meanwhile, most of the more than 200 man-made islands off Dubai laid out in the shape of a world map that symbolised the 2008 property market crash remain empty after state-owned developer Nakheel’s near debt default in 2009.

Authorities have taken some steps against price speculation and “flipping”, in which investors buy and sell properties — many of them unbuilt — in quick succession. 

Late last year, Dubai doubled the fee charged on property deals to 4 per cent, while the United Arab Emirates (UAE) central bank imposed caps on mortgage lending.

Some real estate developers have taken their own action; partly state-owned Emaar Properties allows resale only after about 40 per cent of payment for a property has been made.

But these steps are minor compared, for example, to a 15 per cent fee imposed on the quick resale of property by Hong Kong and a 30 per cent fee introduced by Singapore. Last month, the International Monetary Fund warned that Dubai might need to consider such tools as well.

For now, it does not seem that the growth-hungry emirate has the will to act more aggressively. The history of the mortgage loan caps suggests it may not; the central bank watered down stricter curbs after complaints by commercial banks.

In a statement on June 9, the land department insisted that the property market was broadly healthy, and that rising prices were simply due to a strong economy.

In an annual stability report a week ago, the UAE central bank warned that the real estate market might be overheating. 

But it is unclear what further action it could take; with US interest rates still ultra-low, any rate hike in the UAE is unlikely given the UAE dirham’s peg to the US dollar.

Supply

The supply side of the equation looks equally uncertain. Plans for real estate projects worth well over $50 billion have been announced in Dubai over the past 18 months — but it is unclear how many will actually get built and how fast.

Major work is starting on some of them. After shrinking for 16 months in a row, construction loans in the UAE jumped 40.1 per cent from a year earlier in December to 181 billion dirhams, the fastest rate since June 2009, latest central bank data show.

That far outpaced growth in total bank loans, which rose just 8.8 per cent in December to 1.1 trillion dirhams. And the lending boom is probably just beginning.

“We foresee an acceleration of real estate lending as developers launch new projects, and more local and expatriate customers seek to enter the mortgage market,” credit rating agency Standard & Poor’s (S&P) said in a report last month.

A Dubai banker, declining to be named under briefing rules, noted increased risk-taking in funding to developers by local banks: 

“Some banks are offering 100 per cent financing deals to firms on a selective basis. That’s not very sustainable,” he said.

A return to the full excesses of the pre-2008 boom still looks unlikely. The crash cleared some second-tier developers out of the market, and the companies that remain still bear the balance sheet scars of the last crash; this should encourage at least some of them to be more cautious.

There are signs that developers are paying more attention to their rivals’ plans and implementing projects only in stages, proceeding with each one after reevaluating the demand outlook.

“Supply is more coordinated” than it was in the past, said Fahd Iqbal, head of Middle East research at Credit Suisse.

Nevertheless, the risks may be substantial in the next few years. Any sudden loss of confidence by a large proportion of foreign investors, or sharp tightening in US monetary policy, could ignite a pull-back in the market, S&P said in its report.

“What happened in 2013 was unsustainable. It is a big question mark whether or not we are going to have a sustained levelling off or whether it is going to pick up again,” said Farouk Soussa, Citigroup’s chief economist for the region.

“In Dubai, things change quickly. If they build... all these big projects... then I think we can start to get more concerned about another massive cycle in the property sector that might be unsustainable,” he added.

RABAT –– Morocco has raised one billion euros ($0.7 billion) on the international market in a 10-year bond at 3.5 per cent, Finance Minister Mohamed Boussaid said on Friday. The bond marks the kingdom's "return" to the Euro market and involves British, French, German, Gulf Arab and other investors, Boussaid told AFP. The 3.5 per cent loan rate is less than that obtained on the dollar market in 2012-2013, showing the "confidence in Morocco's economic and political stability”, he said. Boussaid said Rabat had taken out the bond because "market conditions allow it to consider this venture with much confidence". The kingdom showed during the global financial crisis that it had a "resilient economy" and had begun reforming and consolidating its public finances, Boussaid said.

DETROIT — Ignition switches once again are causing problems for General Motors (GM).

This time the company is recalling nearly 512,000 Chevrolet Camaro muscle cars from the 2010 to 2014 model years because a driver’s knee can bump the key and knock the switch out of the “run” position, causing an engine stall.

That disables the power steering and brakes and could cause drivers to lose control.

GM said Friday that it knows of three crashes and four minor injuries from the problem. A spokesman said the
airbags did not go off in the crashes, but GM hasn’t determined if the non-deployment was caused by the switches.

GM said the Camaro switches met its specifications — unlike those at the centre of a recall of 2.6 million small cars. That problem has caused more than 50 crashes and at least 13 deaths.

Company spokesman Alan Adler said the problem occurs rarely and affects mainly drivers who are tall and sit close to the steering column so their knees can come in contact with the key.

The Camaro switches are completely different from those in the small cars with ignition switch problems. The Camaro switches, he said, were designed by a different person, and meet GM standards for the amount of force needed to turn the cars on and off.

Currently the Camaro key is integrated like a switchblade into the Fob, which contains the buttons that let people electronically lock doors and open the trunk. GM will replace the switchblade key with a standard one, and a separate Fob attached by a ring so it will dangle from the key. Adler said with the change, if the driver’s knee hits the Fob, it doesn’t come in contact with the key.

“You can hit the key Fob all daylong and it’s not going to have any impact on the ignition,” he said.

The problem was discovered during internal testing of ignition switches after the company recalled the switches in small cars such as the Chevrolet Cobalt and Saturn Ion earlier this year, GM said. Adler said the Camaro ignition problem was the only one found in testing of all GM models.

GM knew for more than a decade that the small-car switches were faulty, yet didn’t recall them until early this year. The problem has brought federal investigations, lawsuits and a $35 million fine from the National Highway Traffic Safety Administration.

GM also announced three other recalls on Friday, bringing the total number of vehicles recalled by the company to about 14.4 million in the US and 16.5 million in North America. Earlier this year GM passed its old US full-year recall record of 10.75 million vehicles set in 2004.

MOSCOW –– Russian natural gas exporter Gazprom will halt supplies to Ukraine if it fails to pay off $1.95 billion of its gas debts by Monday, chief executive Alexei Miller said on Thursday.

His remarks signalled Gazprom has ruled out extending the deadline for a third time to increase the chances of resolving a pricing dispute at talks and averting cuts in supplies that could also disrupt deliveries to the European Union.

The gas pricing disagreement is central to Russia’s crisis in relations with Ukraine, which has led to the worst standoff with the West since the end of the Cold War.

No agreement has been reached in several rounds of talks brokered by the European Commission. As the latest talks hit an impasse, Gazprom set June 16 as the deadline for Ukraine to pay off part of its debt.

“If Ukraine pays for no [gas] volumes at all, it means that... gas shipments to Ukraine will be zero,” Miller said in televised comments.

Moscow said Ukraine had piled up more than $4 billion in debts to Gazprom, which also delivers gas to the EU, half of it through pipelines that cross Ukraine.

Russia almost doubled the gas price for Ukraine to $485 per 1,000 cubic metres from April 1 after Ukraine’s Moscow-leaning president was toppled in February.

Ukraine wants Moscow to stick to the price of $268.5 agreed for Kiev at the end of last year after Yanukovych ditched plans to forge closer ties with the European Union.

Moscow has offered to cut it to $385 by eliminating an export duty of $100 per 1,000 cubic metres. This would be in line with the average price for Russian gas in Europe.

LONDON –– Egypt is pressing ahead with plans to develop a new wheat storage facility and expand port operations at two terminals in the Suez area as the country looks to bolster strategic food reserves and attract investment, a top port official said.

President Abdel Fattah Al Sisi, who as armed forces chief toppled Islamist President Mohamed Morsi last July following mass protests, was sworn in on Sunday and seeks to fix Egypt’s economy while overcoming political divisions after a long period of turmoil and bloodshed.

Egypt plans to boost its storage capacity in the strategic wheat sector to reduce reliance on imports and cut its 32 billion Egyptian pound ($4.5 billion) overall food import bill. A government minister said this week Egypt wants to be a “global logistics hub” for grain storage.

Hassan Falah, chairman of the Red Sea Ports Authority, said it had recently issued a tender to develop a wheat storage site with a capacity of 2 million tonnes at the port of Adabiya. He declined to disclose the value of the project.

“There are a number of Egyptian banks who are willing to fund the project with any investors and one of them is the National Bank of Egypt,” Falah said on a trade visit to Britain this week. “In six months, the winner of the tender will be known.”

The National Bank of Egypt could not immediately be reached for further comment.

Falah said Adabiya would add to grain storage facilities at other ports in Damietta, along Egypt’s Mediterranean coast, and Safaga, which is situated along the Red Sea.

“Adabiya is in the middle and it is preferred to shorten the distance and can serve cities and governorates in different areas,” Falah told Reuters via an interpreter.

Egypt is also making progress in increasing local storage capacity with the help of one of its major Gulf Arab backers, the United Arab Emirates. The UAE has committed to funding the construction of 25 silos to boost storage capacity by a further 1.5 million tonnes.

Falah said Port Tawfik, also situated in Suez and another terminal within his port authority, had issued a tender to develop a multipurpose port there.

“In the pipeline and under study are expansion projects for yachts and cruise ships at the port,” he added.

Authorities have mounted a crackdown on the Muslim Brotherhood, once Egypt’s most well-organised Islamist group, and its supporters since Morsi was deposed, killing hundreds and arresting thousands. Sisi still faces a violent threat from militants based in the Sinai peninsula, who are believed to have access to weapons smuggled from chaotic Libya.

In May, the army said it had seized 15 tonnes of a material used to make explosives in a town straddling the Suez Canal, a vital source of foreign exchange for Egypt and the fastest shipping route between Europe and Asia.

Falah, who retired from the Egyptian navy as a rear admiral in 2007, said there were no security issues with Suez.

“There are multiple checkpoints throughout Suez. The Suez area is secure,” he said.

Sisi’s plans include creating a Central Sinai governorate, or administrative area, carved out of the North and South Sinai. North Sinai has seen countless militant attacks on policemen and soldiers since Morsi’s ouster.

“A new governorate will be created in the Sinai area,” Falah said. “This will mean there will be a lot of improvements in the security situation. It will be much better and not worse.”

TOKYO –– Toyota on Wednesday recalled 2.27 million vehicles globally over a defect that could see airbags fail to deploy in a crash and also posed a fire risk, dealing another blow to the Japanese giant’s safety record.

The world’s biggest automaker said the latest call back involved 20 models, including its Corolla sedan, Yaris subcompact and Noah minivan, and covered about 1.62 million cars overseas and 650,000 in Japan.

Some of the affected overseas cars were already included in a recall last year, but had not had their airbag inflator replaced, Toyota said.

“The involved vehicles were equipped with front passenger airbag inflators which could have been assembled with improperly manufactured propellant wafers,” it said in a statement.

“[That] could cause the inflator to rupture and the front passenger airbag to deploy abnormally in the event of a crash.”

A company spokesman in Tokyo said it had received a complaint from a Japanese customer who said his passenger seat was burned from the defect. No serious injuries or accidents had been reported, he added.

In April, Toyota recalled 6.39 million vehicles globally over a string of problems, and another 520,000 last month, mostly in North America, over several issues including cable corrosion that could lead unused spare tyres to fall off. 

In February, it recalled 1.9 million units of its signature Prius hybrid cars, after recalling millions of other models in recent years over a possible fire risk and other safety issues.

Despite logging record sales and bumper profits, Toyota has been fighting to protect its reputation as US rival GM scrambles to contain a deadly ignition-linked scandal. Nissan and Honda have also issued major recalls in recent years.

In March, Toyota agreed to pay $1.2 billion to settle US criminal charges that it lied to regulators and the public as it tried to cover up deadly accelerator defects, which caused vehicles to speed out of control and fail to respond to the brake.

Toyota eventually recalled 12 million vehicles worldwide in 2009 and 2010.

As part of the settlement, the automaker admitted that it lied when it insisted that it had addressed the “root cause” of the problem by fixing floor mats that could trap the accelerator.

In the United States, General Motors has been sideswiped by accusations that it hid a decade-long ignition and airbag problem linked to 13 deaths. 

On Tuesday, GM chief executive Mary Barra said the company has not yet figured out how much its deadly, faulty car ignitions will cost the Chevrolet and Cadillac maker.

GM has already set aside $1.7 billion to cover some of the costs of recalling 2.6 million cars with the problem ignition switches, Barra said at the company’s annual shareholders meeting.

But it faces the possibility of having to spend billions more to answer lawsuits from car owners and victims of crashes tied to the ignition problem, as well as their relatives.

TRIPOLI –– Libya’s government, suffering from dwindling oil revenues, will allow its ministries to begin spending the $50 billion budget it submitted to parliament at the start of the year, even though lawmakers have not voted on it.

The move might force the central bank to use more of its reserves as the budget is not backed up by oil revenues which have fallen to $1 billion a month, a quarter of what Libya used to make in the past.

Ten months of protests at oil facilities have reduced oil output to around 200,000 barrels a day, down from 1.4 million bpd in July when protests started.

The OPEC producer’s parliament has failed to agree on a 2014 budget proposal worth around 60 billion Libyan dinars ($50 billion), according to lawmakers.

Public finances could worsen in next few weeks after acting Oil Minister Omar Shakmak said on Wednesday Libya had started directing crude from its two offshore fields to supply the Zawiya refinery, key to provide the capital with petrol. This will bring exports closer to zero as the two fields had been the last unaffected by protests so far.

The Cabinet of caretaker Prime Minister Abdullah Al Thinni said in a statement late on Tuesday that it considered the budget draft, submitted in January, as valid after parliament had exhausted the legal limit of fours months to vote on it.

“The government considers the budget approved,” it said.

Mohamed Abdullah, head of parliament’s budget committee, signalled support. He told Reuters the General National Congress was willing to work with the finance ministry to use the budget without formal vote as long as recommendations from lawmakers were included.

Other deputies said parliament, heavily divided, should still vote on the budget.

“In my opinion the budget should be adopted as soon as possible,” said Hamed Al Hattah, a lawmaker from the south.

The central bank holds around $110 billion in foreign reserves but only part of the money is cash, the rest held in overseas bonds, deposits or equity stakes.

Libya is in turmoil as the government and parliament struggle to control militias who helped oust Muammar Qadhafi in 2011 but now defy state authority, and seize oil ports at will.

Cutting the budget is difficult as more than half of the budget goes on subsidies and salaries for a greatly overstaffed and inefficient public service, a legacy of Qadhafi who put most adults on the payroll to discourage opposition.

The government has been reluctant to cut back as it struggles to impose authority on a country awash with arms.