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PARIS — Grains, metals, meat: these are just three of the commodities being sucked in by the voracious Chinese economy which is set to be the key driver on raw materials markets this year. 

French commodity research specialist Cyclope in a report published last week argues that "in the coming months, global markets will feel even the slightest sneeze from China".

World commodity prices have surged in recent years, driven by rising demand from increasingly affluent shoppers in emerging markets and particularly China.

China has also amassed huge reserves of dollars and has the financial fire-power to buy and outbid, since many commodities are traded in dollars.

China overtook India to become the world's biggest gold-consuming nation in 2013 and the World Gold Council forecasts that its appetite could jump by about 20 per cent by 2017.

It is also close to overtaking the United States as the world's biggest oil importer, and has become a vast consumer of many agricultural commodities as more people can afford to eat meat and dairy products.

Its influence on global commodity markets has become even more important in the wake of the global economic crisis, which has hampered growth in the developed world.

China and wine 

Even sales of top French wines are being driven by Chinese demand, said Philippe Chalmin, a professor at Paris Dauphine University, who led the Cyclope report.

But growth in the Chinese economy, the world's second-biggest after the United States discounting the ranking of the European Union, is decelerating as Beijing's leaders wean the country off investment as the key driver of expansion and shift the focus towards consumer spending.

The slowdown in China last year had a huge impact on metal markets in particular, sending prices lower. 

On average, raw material prices fell by 5.0 per cent in 2013, the report indicated.

In 2014, Cyclope predicts that prices will fall even further, by an average of 4.0 per cent, despite support from an expected uptick in global growth. 

Nonetheless, "the current slowdown and future activity should not cause major adjustments", reads the report. "The slow transformation of the growth model and the further development, instead, point to a higher Chinese demand for raw materials."

A giant appetite 

China cemented its position as a key player in world cereal markets in 2013 when it resumed international wheat imports for the first time for 10 years.

China has also become the world's second-biggest buyer of world beef products, with its imports quadrupling in recent years owing to concerns about local products after numerous health scares.

If this appetite for foreign beef continues, "the global market for beef will turned upside down", the report says.

Similarly, several scandals involving tainted milk and a growing appetite for Western diets have also turned China into a "key to world dairy markets", said Chalmin.

China's influence can be even harder to gauge because its politics are so opaque, Chalmin added.

In recent months several agricultural commodities of which China is a major importer — soya, wheat and corn — have felt the effects of Beijing's policy changes.

US corn exports to China, the fastest-growing US market, have dried up rapidly since the Politburo toughened its stance on genetically-modified grain, while soya prices have been hurt by worries about possible defaults by Chinese buyers.

Coffee and cocoa are the only agricultural commodities which have been little affected by China's rise — although consumption of both of these is growing. 

However, Chinese demand is not the only factor driving food prices in the year ahead.

Agricultural commodity prices are also likely to be affected by the return of the El Nino weather system this year.

The El Nino occurs when a huge mass of warm water builds in the western Pacific and eventually shifts to the eastern side of the ocean, and can cause widespread disruption.

The UN forecasts that the return of the weather pattern could constitute a "major menace" for crop output in the Pacific and Indian Ocean.

A question mark also hangs over the next grain harvest in the Black Sea region of Ukraine, a major grain exporter which is already facing a political crisis.

Biofuels and genetically modified technology will also be key drivers for agricultural prices, as will the withdrawal of major financial players commodity trading.

"Raw materials are the tip of all the tensions of the world," Chalmin indicated.

ZARQA — The value of Al Dulayl Industrial Park (DIP) exports reached $129 million during the first four months of 2014, with, 12 per cent or $13 million, higher than the amount recorded during the same period of last year. George Khayat, DIP’s general manager, told a press conference on Saturday that the park includes 23 factories that provide 17,000 direct and indirect jobs. Khayat attributed the increase in value to the growing demand on the factories’ products that are in line with international standards and enjoy competitiveness. According to Khayat, DIP’s exports account for 48 per cent of Zarqa and Mafraq exports.

AMMAN — Yemen hopes a loan deal from the International monetary Fund (IMF) that will allow it to start cutting costly energy subsidies that sap expenditure and are exploited by smugglers, but are relied on by the poorest in the country, will be sealed this month, the finance minister said.

The impoverished Arabian Peninsula nation has been holding technical talks with IMF officials for several months and is expecting to hold detailed negotiations in Jordan this week, Sakher Ahmed Al wageh said.

He indicated that Yemen was seeking "substantially more" than the $560 million, over three years, that the IMF has proposed, without giving details.

"We hope before May [ends] matters will have been cleared and we will have entered the programme," Alwageh said noting that the IMF board was expected to meet in July to finalise the deal.

Alwageh added that the talks centred on cutting the energy subsidies that cost the state $3.07 billion last year, equivalent of 30 per cent of state revenues and 21 per cent of expenditure, swallowing funds Yemen needs to invest in education, infrastructure and health after its 2011 uprising.

He indicated that almost 30 per cent of total domestic fuel consumption, especially diesel, was smuggled to countries in east Africa where smugglers benefit from price differentials.

However, removing subsidies is highly sensitive in a country where a third of the 25 million population live on less than $2 a day. It has in the past led to violent disturbances, such as in 2005 when dozens were killed.

"The biggest burden will fall on the poor and that is why there must be successful solutions to ease the impact... the problem is not in eliminating subsidies but finding another package that will deal with the impact," he said.

Alwageh added that cutting the subsidies would be a requirement of the deal, along with expanding capital investment and widening those benefiting from a Social Welfare Fund that helps poor households with the money saved.

"These are measures we need to take whether we enter an IMF programme or not," he remarked

Fuel shortages

The IMF says even a small start in reducing mainly energy subsidies, say by 10-15 per cent, would be sufficient to increase the average monthly allowances paid by the Social Welfare Fund.

The IMF said this month Yemen had a more urgent need for financial aid in 2014 than last year to fund spending as currency reserves shrink and donor aid is slow to arrive in the country that came close to economic collapse after the uprising that later eased out veteran ruler Ali Abdullah Saleh.

Yemen's finances have been strained by frequent attacks on oil pipelines blamed by the government on militants and disgruntled tribesmen.

Saudi Arabia, the United Arab Emirates and Oman have supplied Yemen with fuel in the past. Nonetheless, the capital Sanaa has suffered severe fuel shortages for the past month, with Yemenis spending hours queuing to fill their vehicles with just 20 litres of petrol.

Any decision to reduce energy subsidies would have to be approved by the government and parliament.

"Of course this matter would be debated from the point of view of the national interest as to whether there is a benefit for Yemen from entering the programme or not," Alwageh said.

"Such decisions in countries going through transition are exploited and capitalised politically by playing on people's emotions that could bring some unrest. That's why everyone seeks consensus on this," added the minister, who has been in Jordan for IMF-sponsored conference in Amman.

Since a UN-backed transitional government took office in 2012, there have been signs of recovery and stabilisation, according to the IMF.

The IMF expects Yemen's budget deficit to shrink to 6.7 per cent of gross domestic product this year from 7.1 per cent in 2013, the biggest gap since 2009.

Alwageh said growth was forecast at around 4 per cent this year, a far cry from a massive 12.7 per cent contraction in 2012, while inflation had halved to around 9 per cent from a high 20 per cent at the peak of troubles in 2011.

The government's move to alter gas prices sold to Western oil firms in Yemen had boosted state coffers, he noted.

ZARQA — The newly-elected Zarqa Chamber of Industry board of directors on Wednesday elected Haydar Amireh as chairman. During its first session, the board also elected Faris Hamoudeh as deputy chairman, Jamil Wreikat as second deputy chairman, Talal Ghazawi as treasurer and Hussein Hawatmeh as secretary general. Wreikat was also appointed as deputy treasurer and deputy secretary general. The board decided to name Dina Fakhouri as the chamber’s representative on the board of Jordan Chamber of Industry.   

AMMAN — The Jordan Chamber of Industry board of directors on Thursday decided unanimously to retain Ayman Hatahet as chairman. During Thursday’s session, the board also elected Adnan Abu Ragheb as first deputy chairman, Mohammad Kharabsheh as second deputy chairman, Eyad Abu Haltam as secretary general, Mohammad Abdallat as treasurer, Abdul Wahab Abdeen as deputy treasurer and Adel Tawileh as deputy secretary general.  

WARSAW — The European Bank for Reconstruction and Development (EBRD) voted here Thursday in favour of Libya becoming a member country, a move that could see it eventually receive EBRD financing.

The bank’s board of governors approved membership for the North African country on the final day of the EBRD annual meeting in Warsaw.

“Libya has become a member of the EBRD, with a view to becoming a recipient country, which would enable Libya to benefit from the bank’s investment programmes,” said a statement.

“Any decision to grant recipient country status to Libya will be taken separately following a thorough assessment by the bank of the political, economic and operational environment in the country,” it added.

The EBRD was founded in 1991 to help ex-Soviet bloc countries such as Ukraine and conference host Poland make the transition to free-market economies and democracy.

Two years ago, it expanded its reach to invest in Jordan and three countries in North Africa — Egypt, Tunisia and Morocco — in the wake of the Arab Spring uprisings.

Libyan authorities last year sought EBRD membership as the country seeks to “implement programmes of economic reform and would contribute to its economic growth”, the London-based bank said Thursday.

However, EBRD chief economist Erik Berglof told reporters on Wednesday that the bank could not begin investing in Libya unless “basic security” was in place.

“Provided that this happens and that there is a commitment from the government to work with the EBRD, there will be very exciting opportunities,” he said.

He told a press conference: “The private sector in Libya is about five per cent so there is an enormous amount of things to do... we will enter into a process now of assessing what the needs are and that will be very interesting — the fact-finding effort both in terms of economic reforms but also looking at the political side.”

Since 2012, the EBRD has invested 871 million euros ($1.2 billion) in 34 projects across Jordan and the three North African countries in which it currently invests.

The EBRD Thursday concluded an annual conference dominated by its grim economic assessment of the Ukraine-Russia crisis by making strides towards investing in troubled nations Cyprus and Libya.

A day after the EBRD forecast a deeper Ukraine recession than many had thought possible, and warned of contagion in Russia and beyond, the bank agreed to begin investing in bailed-out eurozone nation Cyprus and took a major step towards lending to strife-ridden Libya.

“This has been a very important annual meeting,” EBRD President Suma Chakrabarti told a press conference at the end of the two-day conference in Warsaw.

“We’ve ensured that the EBRD is extremely well-positioned to support the economies of the regions where we work,” added the former senior British civil servant.

His comments came one day after the EBRD said it expected Ukraine to tumble into recession in 2014 with a contraction of 7.0 per cent — and to deliver zero growth next year.

At the start of this year, before the outbreak of the country’s crisis with Russia, the EBRD had forecast that Ukraine’s economy would grow by 1.5 per cent in 2014.

Russia meanwhile on Thursday reported a sharp slowdown to its own economic growth in the first quarter that analysts attributed to fallout from the raging crisis in neighbouring Ukraine, where pro-Russian separatists have been waging an insurgency in the east of the country.

The state statistics agency said the Russian economy grew by 0.9 per cent between January and March compared with the same period last year.

Cyprus, Libya 

in EBRD sights 

On Thursday, the bank announced that it will begin investing some half a billion euros in Cyprus to assist the island nation to recover from a “severe economic crisis”.

EBRD investments up until 2020 will complement Cyprus’ international bailout programme that is worth 10 billion euros ($13.7 billion).

Chakrabarti said the bank could expect to invest between 500 and 700 million euros in Cyprus through 2020 but stressed that the amount was only indicative at this stage.

The EBRD noted that “the Cypriot economy remains mired in a deep recession that emerged after a boom period between 2004, when Cyprus joined the European union, and 2008, when it adopted the euro”.

Ukraine, Russia shedding investment 

On Monday, the Kiev government joined the EBRD and economic grouping the Organisation for Economic Cooperation and Development OECD in signing a memorandum of understanding that promises an anti-corruption drive.

The EBRD insists that tackling corruption in Ukraine has become increasingly urgent as the country struggles for foreign investment along with Russia.

In Warsaw, the bank said that private-sector capital outflows in Russia had reached $64 billion (47 billion euros) in only the first quarter of this year, exceeding the annual amount for 2013.

The EBRD’s latest annual gathering took place almost 25 years after the fall of the Berlin Wall and a decade since eight former communist nations, including Poland, became members of the European Union.

The institution has 66 shareholders, comprising 64 countries plus the European Union and the European Investment Bank.

The bank’s head said that lending to Russia could drop as the economy slows, while it may step up loans to countries at risk of economic damage from the Russia-Ukraine crisis.

EBRD funding in Russia slumped last year to 1.8 billion euros ($2.5 billion) from 2.6 billion in 2012 due to what the development bank termed “difficult investment conditions”.

Chakrabarti, said it could now drop again this year.

“It could impact on our business volumes in a country the size of Russia if the economy keeps slowing because investment then slows,” Chakrabarti told reporters.

But the bank had no plans at the moment to stop its funding to Russia in reaction to Russia’s annexation of Crimea and the situation in eastern Ukraine.

“There are some shareholders that are seriously concerned at, as they perceive it, Russia’s behaviour in eastern Ukraine,” Chakrabarti said.

“That may play out in the EBRD, it hasn’t yet,” he added. “The shareholders bought into my argument that the EBRD has been a force for good in Russia. We will see what the future holds, but not yet.”

Chakrabarti himself has pulled out of an international  conference Russia is holding in St Petersburg this month. He said he had an urgent engagement elsewhere, but gave no details.

Meanwhile, he said, the bank would look in the next few months at increasing its investments in central and eastern Europe. Governments in the region fear the Ukraine crisis could hurt their economies and Chakrabarti said there was high demand for EBRD loans, which come on attractive terms.

“In the next few months we will look if we can do a bit more in the region,” he said. “There is high demand for more EBRD resources, this is absolutely accurate...  Energy security comes up a lot in the conversations at the moment.”

AMMAN — The Income and Sales Tax Department (ISTD) announced in press statement on Wednesday that a benchmarking review of the Jordanian tax system in 2013 shows improvement over the period 2010-2012 in at least 32 performance indicators. Published by ISTD, in collaboration with USAID’s Fiscal Reform II Project, the review points to improvement of Jordan’s tax system measured against international standards regarding tax policy, tax administration, and the structure and organisation of ISTD. It serves to be both a status report and a measurement tool of the tax system’s performance. “ISTD-administered tax revenues for 2013 increased by 8.8 per cent [from JD3.03 billion to JD3.3 billion] compared to 2012,” the study revealed. “Nevertheless, ISTD maintained a high productivity efficiency rate, keeping the cost of collection rate lower than the international benchmark.” According to the review, customer satisfaction improved, albeit at a slower pace, increasing from 66 per cent in 2012 to 67 per cent in 2013. To control tax arrears, the data base was refined, debts were prioritised, bad debts under certain amounts were written off, tax pre-assessments were more carefully raised, enforcement procedures were improved, and a sizeable amount of tax arrears was collected. 

AMMAN — Amman Chamber of Commerce President Issa Murad on Wednesday urged French businessmen to visit Jordan to further explore strategic investment and economic opportunities available in Jordan. During a meeting with Vincent Toussaint, the commercial attaché at the French embassy in Amman, Murad underlined the strong relations between the two countries, noting that France is currently one of Jordan’s most important commercial partners. Murad called on the French businessmen to support small and medium-scale enterprises in the Kingdom, and he stressed the need for boosting cooperation between the Jordanian and the French private business sectors. Toussaint asserted his country’s commitment to developing economic relations with Jordan. 

AMMAN — The Amman Chamber of Industry board of directors on Wednesday decided unanimously to retain Senator Ziyad Homsi as new chairman, a post he held during the previous term. In a session held on Tuesday, the board also appointed Adnan Gheith as deputy chairman, Ahmad Khudari as secretary general, Qasem Abu Salha as the treasurer, Saad Yassin as deputy secretary general and Eyad Abu Haltam as deputy treasurer. The board elected Fathi Jaghabir as the industrial sector’s representative on the council of Greater Amman Municipality.

AMMAN — Egypt will speed up structural economic reforms this year, led by cuts in energy subsidies, regardless of whether it strikes a deal on International Monetary Fund (IMF) financial aid, Finance Minister Hany Kadry Dimian said this week.

The economy has been hammered by three years of upheaval that followed the 2011 toppling of president Hosni Mubarak, and the government will give priority to crucial tax increases and politically risky cuts to generous state subsidies for fuel.

“We need to get the wheel moving again and this will requires us to reestablish confidence in the Egyptian economy, primarily through comprehensive structural reform measures,” Dimian told Reuters in an interview on the sidelines of an IMF conference in Amman.

He said Egypt had an “ambitious programme to streamline energy subsidies coupled with tax reforms that helps broaden the tax base and promote a fully fledged value-added tax system,”

Dimian, who took office last February, said the first phase of the energy reforms could begin as early as next autumn, when the government introduces a smart card that would control the amount of fuel distributed at a subsided price.

The move could save around 1 per cent to 1.5 per cent of the country’s $262.8 billion gross domestic product (GDP) this year alone, he indicated.

The IMF estimates Egypt’s energy subsidies amount to three times the spending on education and seven times the expenditure on health.

Heavy spending on energy subsidies takes a heavy toll on the economy, consuming a fifth of all state spending, but raising energy prices could trigger protests.

Dimian recently said that spending on energy subsidies next year will be 10 per cent to 12 per cent above the 130 billion Egyptian pounds ($18.6 billion) budgeted for in the current fiscal year unless immediate reforms are made.

The reforms will happen regardless of whether a deal is worked out with the IMF after a presidential election in Egypt this month, Dimian noted.

“We will be evaluating the situation to see if there is a need to conclude this programme of financial support [with the IMF] or whether we just confine ourselves to the reforms we conclude [on our own],” he said.

The IMF and Egypt have sporadically discussed a loan worth up to $4.8 billion to help the economy, which was hurt by political turmoil that drove away tourists and foreign investors, two major sources of foreign currency.

Masood Ahmed, the IMF’s director for the Middle East and North Africa, said the world body had sent two technical missions to Egypt so far to discuss tax reforms, and was ready to extend aid once the government decided it was needed.

“At the moment, the Egyptians have not asked for financing from the IMF, but we have indicated to them that we would be ready to provide financial support as soon as Egyptian authorities feel that would be useful,” Ahmed said on Tuesday.

Aid from the Gulf has reduced the pressure on Egypt to reach a deal with the IMF that would require economic reforms the government might find politically risky, analysts say.

Dimian said Egypt’s economy could not keep to relying on the billions of dollars of Gulf aid in the form of cash transfers, oil shipments and central bank deposits extended after the army toppled Islamist president Mohamed Morsi last year.

“The aid came at a decisive time, but from the point of view of designing economic policies, these policies are not designed at all on the continuation of this aid,” Dimian said.

The cash injections are keeping the economy afloat and allowing Egypt to increase some spending on investments, but analysts say the government still needs a long-term plan to ensure financial stability.

According to Dimian, the priority of economic decision makers was tackling structural imbalances to restore the investor confidence crucial to sustainable growth.

The 2014 growth forecasts remained around 2 to 2.5 per cent, down from a target of 3 to 3.5 per cent. But growth could rise to between 3 and 3.25 per cent in 2015, fuelled by faster economic activity and much less aid from the Gulf, Dimian said

“Growth might go better, but this is what how we read it for the time being,” he said.

Economic growth had been running at 6 per cent to 7 per cent before the protests, although even that pace was barely enough to produce work for the youths entering the job market.