Business

AMMAN — Amman Chamber of Commerce (ACC) on Monday signed a memorandum of understanding (MoU) with the Federation of Indian Export Organisations (FIEO) to boost commercial and economic cooperation between the two sides. The MoU, signed by ACC President Issa Murad and FIEO Joint Deputy Director General Chandranath Som, seeks to develop areas to increase joint commercial and investment cooperation, and to encourage Jordanian and Indian companies to set up joint ventures. Under the MoU, the two sides will work to enhance cooperation in local marketing services, including recommendations on goods’ prices and the size of demand. The ACC and the FIEO will also work together to organise exhibitions, meetings and workshops to advance and strengthen the Jordanian-Indian commercial ties, besides exchanging information on important economy-development issues. Murad described the MoU as a positive step that can develop bilateral relations between Jordan and India.

KUWAIT CITY — Kuwait's finance minister has warned that the oil-rich Gulf state will face a certain budget deficit because growth in spending has outpaced a rise in public revenues. 

"A budget deficit is inevitable... as the average annual growth in public spending was 20.4 per cent during the past decade against a 16.2 per cent average rise in revenues," mostly from oil, Anas Al Saleh told a recent special debate in parliament on government policy to diversify income sources.

"This is not only the view of the government but also that of the International Monetary Fund [IMF], the World Bank and other institutions," the minister said.

According to Finance Ministry Undersecretary Khalifa Hamada, spending had soared mainly because of a sharp rise in public wages and subsidies on services and commodities. Dependence on oil income also increased.

Between 2005 and 2013, government wages increased from $11.4 billion (8.3 billion euros) to $33.8 billion, a massive 25 per cent annually on average, he pointed out.

Subsidies also rose more than fourfold, from $4.1 billion to $18 billion during the same period, an annual growth rate of 23 per cent, Hamada indicated.

At the same time, oil income share in public revenues grew from just 85 per cent in 2001 to as high as 95 per cent in 2013, boosting Kuwait's heavy dependence on oil, the official said.

Oil income rose from $45.9 billion in 2005 to $106 billion last year.

Hamada added that if oil prices remain at the level of around $100 a barrel, Kuwait will post its first budget deficit estimated at $2.3 billion in 2017/2018 fiscal year. By 2035, the country is estimated to accumulate deficits worth as high as $633 billion.

The scenario will be much worse if the oil price drops, he remarked.

Hamada insisted it was impossible for the state to sustain growth in wages and continue subsidies, urging major cuts.

Earlier this month, the IMF warned Kuwait to contain a rapid rise in public wages and subsidies to safeguard the economy against oil price shocks.

The IMF said general subsidies, particularly on electricity and fuel, constitute a massive 7 per cent of the gross domestic product (GDP) and as high as a quarter of spending, which was around $70 billion last fiscal year.

Kuwait has boasted a budget surplus in each of the past 14 fiscal years, helping to increase its sovereign wealth fund to over $500 billion, local media said.

Separately, Kuwait will supply Egypt with 85,000 barrels of oil daily and 1.5 million tonnes of fuel for three years as part of a newly agreed commercial deal.

The supplies would be valued at market prices and delivered by the end of 2016 under the agreement struck this month, said Kuwait Petroleum Corp. marketing chief Ibrahim Al Mudhaf.

"The agreement is commercial and not political," Mudhaf was quoted as saying by the official KUNA news agency.

The deal would raise Kuwait's exports to Egypt to 85,000 barrels per day (bpd) from 65,000 previously, and to 1.5 million tonnes of diesel and aviation fuel annually from 860,000, he indicated.

The two sides were also discussing two other contracts for Kuwait to supply cooking gas and fuel oil to Egypt, Mudhaf added, noting that the agreements could be finalised within two months.

Cairo and Kuwait City were also discussing a number of oil-related investment opportunities, he remarked.

Following the ouster of  president Mohammed Morsi in July, Kuwait offered Cairo an aid package worth $4 billion.

The package included a grant of $1 billion, a deposit of $2 billion at Egypt's central bank, in addition to oil and oil products worth $1 billion.

AMMAN –– A Jordanian shipping company was recently fined $500,000 by US authorities after pleading guilty of violating environmental laws in the United States.

The Justice Department and the US Coast Guard announced on May 20 that Arab Ship Management Ltd., which is based in Jordan's port city of Aqaba, has pleaded guilty to  one count of violating the Act to Prevent Pollution from Ships. 

The verdict posted on the website of the Department of Justice indicated that in accordance with the terms of the plea agreement, Arab Ship Management Ltd. was sentenced to pay a criminal penalty totalling $500,000 and be placed on probation for two years, during which time ships operated by the company will be banned from calling on ports of the United States.  

“The defendant violated environmental laws that protect our marine environment from harmful pollution,” said US Attorney for the District of Delaware Charles M. Oberly III.

“This conviction ensures that the defendant is held accountable with a criminal fine and a contribution to conservation efforts in coastal Delaware, as well as a two-year ban from United States ports.

The message to the shipping industry is clear: “environmental crimes at sea will not be tolerated”.

“This case demonstrates one way the coast guard acts to protect the environment,” said Captain Kathy Moore, US Coast Guard Commander of Sector Delaware Bay.

“Marine inspectors detected serious problems with the ship’s operations.   They dove into the details, and worked with the Department of Justice and the coast guard Investigative Service to bring this case to an appropriate resolution.”

According to court documents and statements made in court, Arab Ship Management Ltd. operated the M/V Neameh, a 6,398 gross tonne ocean-going livestock carrier.

On March 28, 2013, the US Coast Guard boarded the vessel in the Delaware Bay Big Stone Anchorage to conduct an inspection.   

The inspection and subsequent criminal investigation revealed heavy oil sludge inside the piping on the discharge side of the pollution prevention equipment leading directly overboard, where no oil sludge should be if the pollution prevention equipment is operated properly, the statement said.   

The statement added that inspectors also discovered that the vessel’s piping arrangement had been modified in a prohibited manner so as to allow oil sludge to be pumped directly overboard.   

"This prohibited piping arrangement was removed prior to the vessel’s arrival in Delaware.   Also during the inspection, coast guard officers were presented with two oil record books which are required by law to be accurately maintained onboard the vessel. 

“These two oil record books contained different and contradictory entries for the time period of November 30, 2011, through January 2, 2012, as well as fake oily waste disposal receipts," the statement concluded.

SINGAPORE — When the value of his $20 million portfolio plunged in the 2008 global financial crisis, luxury car enthusiast Gerard Tan followed a growing trend among Asia's elite investors by turning to an independent adviser for help.

His bank had put most of his cash in volatile emerging market bonds, which were hammered by the financial turmoil.

Tan, who asked that his real name not be used, kept his money in the bank, but engaged the services of an adviser unrelated to the institution in order to staunch the losses.

Six years after the crisis, a growing number of Asia's millionaires are turning to independent wealth advisers, who offer professional advice for a fee much like doctors and lawyers do.

Without pushing clients to buy financial assets, they offer an alternative to wealth managers working for private banks, which traditionally generate revenues on commission.

Banks put the focus on selling and this can sometimes lead to risks being overlooked in favour of revenue, according to analysts.

"My positions were restructured and portfolio risks were managed," said Tan, a publicity-shy father of two who owns a range of high-end cars. 

"I feel a lot more comfortable now about my market exposure," added the self-made businessman whose assets are now more than $40 million.

Shifting client base       

An exporter of manufactured goods in his 40s, Tan had heard about independent wealth advisers being quite popular in Europe and readily agreed when approached by a friend to try a Singapore-based firm.

"The concept and acceptance of independent wealth managers is certainly on the growth trend," said Justin Ong, Asia Pacific asset management leader at consultancy PriceWaterhouseCoopers (PwC).

This growth "is due to the demand for more transparency and also objective client service", he added.

Most of Asia's investing public still favour commission-based selling, but the ultrarich and "more sophisticated families" are more open to objective advice from independents, Ong indicated.

He pointed out that while Asia's wealthy still prefer to invest in property, stocks and bonds, "passion" investments like yachts, wines or private jets are preferred by a niche segment.

According to Capgemini and RBC Wealth Management, the total assets of the Asia Pacific's 3.68 million millionaires were $12.0 trillion in 2012 and were expected to reach $15.9 trillion by 2015. That beats forecasts of $15.0 trillion for North America.

More of the rich in the United States and Europe take independent advice than those in Asia because family businesses in the West can date back 200 years or more, remarked Mandeep Nalwa, chief executive of Singapore-based Taurus Wealth Advisors.

Independent advisers manage around 30 per cent of the assets of the rich in the US and Europe, but the figure is just under 3 per cent in Asia, where most family businesses are still run by their elderly founders, he indicated.

Trust deficit 

But the low base also means there is room to expand for both private banks and independents as the region mints more millionaires, and founders of family businesses hand over management to their children.

The 48-year-old scion of an estimated $4 billion Asian fortune told AFP that patriarchs like his nearly 90-year-old father who built the business from scratch "are used to making all the final decisions", and are not inclined to rely on advisers.

But their children are likely to be Western-educated "so we tend to trust advisers more".

Nalwa noted that the 2008 crisis helped Asians realise the value of independent advice.

"The biggest affliction of the wealth management industry is a deficit of trust. Clients make a lot of money when the financial markets move up but when a crisis comes they give back most of it to the market," he said. "That deficit of trust is caused by a push towards selling product rather than giving advice."

Abhineet Kaul, principal consultant at Frost & Sullivan, stressed the need for "dedicated, independent" advice in order to help drive demand.

He sees a move towards the separation of trustee functions in which private banks remain the custodians of the money and independent wealth advisers take on the management role.

"In principle, this offers the best of both worlds," he remarked.

Independent wealth advising firms in Singapore number about 30, from about four just six years ago. Nalwa's Taurus has expanded from only two people in 2008 to 24 now, with the value of "assets under advice" totalling $900 million.

Clients range from top-earning professionals to big family businesses. 

"The crisis in 2008 shocked people to the core... Assets now need to be managed in a different manner," said Nalwa.

ST PETERSBURG, Russia — Sovereign wealth funds in China and Qatar have signalled their increased commitment to Russia, boosting Moscow's hopes of strengthening ties with Asia and the Middle East as relations with the West deteriorate.

Major sovereign wealth funds in the Middle East and Asia have invested in Russian businesses and backed its state-funded private equity fund, the Russian Direct Investment Fund (RDIF). By contrast, US financial investors in the country remain few.

"CIC has invested several billions of dollars in Russia," said Ding Xuedong, chairman of the $575 billion CIC, on the sidelines of the country's main annual investment conference in St Petersburg.

"We will continue to increase our investment in Russia, not only in the public markets, but in direct investments," he added.

Russia's RDIF separately announced that Qatar's sovereign wealth fund, the Qatar Investment Authority, is allocating $2 billion to investments with the fund.

Numerous US financiers avoided the annual investment conference in St Petersburg on advice from the White House. Washington and the European Union have imposed sanctions against various individuals deemed close to Russian President Vladimir Putin in response to the situation in Ukraine.

"In our platforms — we raised $10 billion from our partners — around 90 per cent came from Asia and the Middle East," indicated Kirill Dmitriev, the RDIF chief executive. "Those longer-term investors... take a longer-term view on Russia. They see some turbulence but realise it is impossible to isolate the sixth-largest economy in the world."

Among those present on a panel discussion last week were senior executives at Korea Investment Corporation and Kuwait Investment Authority. European funds, facing less government pressure than their US counterparts, also showed commitment to Russia.

"We think there is a lot of potential in this country," said Laurent Vigier, chief executive officer at France's CDC International Capital. "We are looking actively at the moment at opportunities in this country, and are optimistic about the medium and long term."

Buyout blues

Private equity firms have in general found Russia a tricky place to invest, citing concerns about corporate governance, the rule of law and finding a lack of opportunities. US giant TPG is the notable exception, making several times its money on its investment in supermarket chain Lenta.

"The history of private equity in Russia is about 20 years old — in that period we have had at least two tsunamis of global political events and upheaval, and we are now in the middle of the third," said Drew Guff, founding partner of New York-based Siguler Guff & Co, which has invested in Russia for many years.

"There were at one point 30 different private equity funds raising money [in Russia] at the same time. And then the global crisis of '98 came and the tsunami wiped out many of the competitors," he added.

According to Anatoly Chubais, the architect of Russia's post-Soviet privatisations, a problem is that limited partners (LPs) — the investors in private equity firms — use foreign money rather than Russian investors. 

He indicated that the solution was a major restructuring of non-government pension funds.

"It's ironic when the entire private equity industry that exists here, while investing in Russia, makes almost no use of Russian LPs," Chubais said. "It is totally wrong and the situation could be radically changed."

China commitment

CIC, which invests in Russia directly as well as via a joint venture with the RDIF, has a minority stake in Russian potash company Uralkali, and has done deals with the RDIF to invest in projects such as infrastructure for senior citizens and forestry.

"Our exposure to Russia is relatively small, which means the potential is big," said Xuedong, who is particularly focused on agriculture and energy. "We focus on the long term and on increasing our exposure to Russia."

According to Xuedong, infrastructure will provide lucrative opportunities in the coming 10 to 20 years.

Stressing that Russia should "renew and update" its infrastructure, he added that using government money for such projects would not be sufficient and other instruments, such as public-private partnerships, could be used.

"Governments should sell some of the businesses... to private investments and the money received for the sale of such businesses could be rechanneled into projects," Xuedong suggested. "If we take this approach, we could speed up the infrastructure development rates."

Still, some were sceptical that Asian investors would commit heavily given Russia's slowing growth and the risk of recession.

"I suspect most Asian and Middle East investors are going to look at this picture, and see the same things that everyone else does — that you had growth slowing before the annexation of Crimea and the conflict with the West," said Bernard Sucher, board member of Russian investment group Aton.

AMMAN — Trade deficit dropped during the first quarter (Q1) of this year by 4.6 per cent due to higher exports. According to data issued by the Department of Statistics (DoS), the deficit dropped by JD113.5 million to JD2,327.5 million from JD2,441 million recorded during Q1 of 2013.

Subsequently, the percentage of the total exports coverage of imported goods rose by 3 per cent to 38.5 per cent compared with 35.5 per cent.

Total exports rose by 8.5 per cent to JD1,456.3 million compared to JD1,342.4 million. Fertilisers’ exports increased  by 88.6 per cent, followed by vegetables and fruits’ at 23.9 per cent, garments’ at 13.6 per cent and pharmaceuticals’ at 2 per cent.

The country’s imports of machinery, vehicles and spare parts rose while the value of imported crude oil and its derivatives as well as that of electric appliances dropped, according to the DoS figures. National exports rose noticeably to the countries of the Greater Arab Free Trade Area, including Iraq.

Exports to the North American Free Trade Agreement countries, including the US, went up, as well as those to the European Union countries, including Italy while national exports to Asian non-Arab countries, including Indonesia dropped.    

AMMAN — A 20-member business delegation from the Federation of Indian Export Organisations (FIEO) will arrive in Amman on Monday for a three-day visit to look into ways to further trade cooperation between the two countries.

In association with the Amman Chamber of Commerce and the Indian Embassy in Amman, the FIEO is organising B2B meetings this week in a bid to expand the two-way cooperation, according to a statement of the Indian Embassy in Amman.

During a recent meeting with representatives from the Jordan Investment Board, an embassy official said the Indian government is working to strengthen its commercial and economic relations with Jordan.

AMMAN — Several Jordanian hospitals, medical laboratories and representatives of medical equipment are participating this week in Medicare Iraq Erbil 2014, the 5th International Exhibition for the Medical & Healthcare Industry.

The participation, organised by Jordan Enterprise Development Corporation (JEDCO), seeks to expand participants’ business network and to help them reach a larger audience of medical professionals, distributors, dealers and suppliers. Around 200 Arab and global medical companies are taking part in the event.

In 2013, the joint Jordanian-Iraqi commercial exchange volume totalled around JD1.2 billion, with the imported goods totalling JD269 million whereas the exports totalled JD883 million. 

SHANGHAI/TEL AVIV — China's Bright Food Group Co Ltd has struck a deal to buy control of Israel's largest food company, gaining new products and technology as it chases rivals that have overtaken it in China's fast-growing cheese and dairy markets.

State-owned Bright Food said on Thursday it would buy 56 per cent of dairy firm Tnuva from private equity house Apax, under the terms of a preliminary accord.

Bright Food did not disclose the sum, but Israel's Mivtach Shamir Holdings, another major shareholder in Tnuva, said the deal valued all of the dairy company at about $2.5 billion, up from $1 billion when Apax and Mivtach took control in 2008.

The deal, the latest in a multi-billion dollar overseas acquisition spree by Bright Food, will give the Chinese firm access to new cheese products and the Israeli firm's technological know-how in dairy production, trade sources and analysts said.

Best known for its cottage cheese, Tel Aviv-based Tnuva had 2013 revenue of 7.17 billion shekels ($2.05 billion) from the sale of a range of cheeses, as well as milk, yoghurt, meat and eggs.

The sale of one of Israel's leading companies has been strongly criticised by some Israeli lawmakers.

"What normal country puts its food security and its entire milk industry in the hands of China?" said opposition member of parliament Shelly Yachimovich, who called for Tnuva instead to be floated on the Tel Aviv Stock Exchange.

But Israel's government has recently been encouraging more Chinese investment in the country.

The deal is one of the biggest ever in Israel's consumer goods market. While large foreign acquisitions of Israeli high-tech firms are common, companies focused on its small domestic market are viewed as less attractive.

The investment comes as increasingly affluent Chinese consumers opt to pay more for imported goods in the wake of safety scandals in local food supply chains, attracting the attention of global food giants as well as China's producers.

The Chinese cheese market will be worth 2.7 billion yuan ($433.13 million) this year, doubling to 5.3 billion yuan by 2018, according to consultancy Euromonitor.

"China is still a niche market but there's lots of room for growth. We're getting increasing interest from international clients who are interested in China," said Matthieu David-Experton, Shanghai-based chief executive officer at Daxue Consulting.

"The imported aspect is key because it makes it a more premium product in China and plays into the food safety trend," he added.

High tech

Mivtach said it was holding talks with Bright Food as to whether it will join Apax in the deal and sell its 21 per cent stake in Tnuva. Mivtach has a "tag-along" option giving it the right to sell its stake together with the Apax sale.

Bright Food will pay Apax slightly less than $1 billion in cash for its 56 per cent stake and will assume Apax's share of bank loans totalling 1.9 billion shekels, said a source with knowledge of the deal. If it also buys Mivtach's stake, then Bright Food will take on the full loans amount. No deal with the banks has been reached yet.

One option being considered by Bright Food is to bring in a partner, Chinese state-supported private equity firm Sailing Capital Management, to buy Mivtach's stake, the source added.

A group of kibbutzim, or cooperative farms, own the rest of Tnuva. Bright Food said it would look to strengthen cooperation with smaller shareholders, rather than buy them out, and hopes to close the deal by the end of the year.

As China's cheese market has developed, Bright Food has lost out. The country's dominant cheese producer with a quarter of the market by value in 2009, it dropped down to 8.3 per cent last year, according to Euromonitor data.

The deal could also give Bright Food access to Tnuva's dairy processing technology, increasing its dairy output, analysts said. Bright Food was China's fourth-biggest dairy producer last year by retail value.

"Israel is a country with highly developed agriculture and animal husbandry techniques. Tnuva, as Israel's largest food company, has a long history, and various products and large market share," a Bright Food spokesman indicated in a text message to Reuters.

Bright Food has been making ripples globally in the past few years, with deals to buy Australian branded food business Manassen Foods, and British breakfast cereal maker Weetabix that valued the firms at A$500 million ($460.85 million) and 1.2 billion pounds ($2.03 billion) respectively.

In January, Bright Food bought Australian dairy company Mundella Foods, while previous purchases included New Zealand's Synlait Milk Ltd.

Bright Food owns four Chinese mainland-listed companies including Shanghai Jinfeng Wine Co, Shanghai Haibo Co, Shanghai Maling Aquarius Co and Bright Dairy & Food Co.

Separately, Australian energy giant Woodside Petroleum said this week that it has pulled out of the massive Leviathan gas joint venture off the coast of Israel — one of the largest deposits found in the world.

The company said it had terminated an early-stage agreement with the Leviathan partners, led by US oil producer Noble Energy, to take a 25 per cent stake worth an estimated $2.5 billion in the discovery.

According to Woodside Chief Executive Peter Coleman, negotiations between the parties, which started in late 2012, failed to reach an acceptable outcome on development and supply agreements.

"All parties have worked very hard to secure an outcome which would be commercially acceptable, but after many months of negotiations it is time to acknowledge we will not get there under the current proposal," he said.

"While Woodside's commitment to growth is strong, even stronger is our commitment to making disciplined investment decisions,” Coleman added. "I would like to acknowledge and thank the Leviathan Joint Venture participants and the Israeli government for working with us."

Talks were drawn out as the Israeli government drew up a policy for gas exports. It finally approved the export of up to 40 per cent of what it extracts from Leviathan and another field, Tamar, off its Mediterranean coast.

At the time, Israeli Prime Minister Benjamin Netanyahu said the exports would bring in some $60 billion to state coffers during the next 20 years.

Woodside signed a non-binding memorandum of understanding in February this year outlining its intention to take a stake in the project, running all the downstream gas production operations, with Noble in charge of upstream processing.

The Leviathan field's size is estimated at 535 billion cubic metres of natural gas, along with 34.1 million barrels of condensate, and has been hailed as the largest gas deposit found in the world in a decade.

RBC Capital Markets analyst Andy Williams said it was good that Woodside walked away when the numbers did not add up. 

"It all comes down to the economics," he said. "If it doesn't work for you then you cut it and go."

Woodside has been under pressure to find new sources of growth after the Perth-based company and partners including Royal Dutch Shell and BP last year delayed the multi-billion-dollar Browse gas-export project off Western Australia.

Analysts said the company would likely use the money saved to target acquisitions elsewhere or return cash to shareholders via a special dividend.

AMMAN –– Jordan moved up three places from 56th to 53rd out of 60 economies ranked in the latest world competitiveness report by a Swiss business school.

The International Institute for Management Development (IMD) on Thursday released its 2014 World Competitiveness Yearbook Ranking, based on a survey of 4, 300 international executives. 

Jordan was among three regional countries included in the ranking, with the United Arab Emirates, which came in the 8th place, and Qatar, which ranked 19th. 

The US retained top worldwide spot in the 2014 ranking, followed by Switzerland, Singapore, Hong Kong and Sweden. 

Executives surveyed in the report had a better ranking for Jordan's image abroad that encourages business development as Jordan's economy came in the 31st spot scoring 6.03 out of 10, the report indicated. 

In general, there is a strong correlation between a country's overall competitiveness ranking and its international image as a place to do business, the study said. 

The IMD noted that most big emerging markets had slid in the 2014 rankings due to slowing economic growth and foreign investment, and continuing problems with inadequate infrastructure. 

"China [down 2 places to 23] falls partly owing to concerns about its business environment, while India [down by 4 to 44] and Brazil [down by 3 to 54] suffer from inefficient labour markets and ineffective business management," the IMD pointed out in a statement. 

Turkey (down by 3 to 40), Mexico (down by 9 to 41), the Philippines (down by 4 to 42) and Peru (down by 7 to 50) also fell.