Business

LONDON — China's annual demand for gold could jump around 20 per cent by 2017 as more of its increasingly wealthy population seek new ways to make money, the World Gold Council (WGC) predicted last week.

The forecast by the WGC comes after China became the world's largest gold-consuming nation in 2013, overtaking India.

Annual demand for gold in the form of jewellery, coins and bars is set to hit "at least 1,350 tonnes by 2017", the WGC indicated in a report on China.

That would represent a rise of nearly a fifth from the country's record consumption of 1,132 tonnes last year.

"The traditional appeal of gold to the Chinese people and consumers' optimistic outlook for prices should result in private sector demand from all sources climbing to at least 1,350 tonnes by 2017," the London-based council said.

Gold prices slumped by nearly a third last year as investors abandoned the perceived safe haven investment in favour of stocks and other riskier bets.

But global demand for gold in jewellery grew to its highest for 16 years as consumers in Asia and the Middle East scrambled to take advantage of the lower prices.

In China, rising demand for the yellow metal has also been driven by the growth of its increasingly-wealthy middle class, high levels of savings and restrictions on other investments.

Still, the council warned that a possible slowdown in the world's second-largest economy as it moves away from rapid export-led growth could dampen gold demand.

"China faces important challenges in moving from an investment and export-led growth model to a more balanced one in which private consumption plays a larger part," said the body.

"Although the risks associated with this economic transformation should not be underestimated, on balance this process should result in a considerably higher level of consumer spending, which ought to favour the jewellery sector," it added.

One of the report's authors, Alistair Hewitt, noted that Chinese gold demand had tripled in the decade to 2013.

And he predicted that the Chinese gold market would continue to develop over the course of the next few years, driven by cultural affinity, the increase in income and government support.

"There is a huge groundswell of people becoming wealthier, that have more money to spend on jewellery and more savings to invest," he told AFP. 

"For many people, gold is the preferred form for savings amid volatile stock markets, overvalued property and low interest rates being offered by banks," Hewitt said.

LONDON — The fragmented UK wealth management sector is shrinking as firms quit, bulk up or look to service a more profitable slice of the country's growing number of rich clients, to cope with costly new regulations.

There were 147 firms managing 554 billion pounds ($918.92 billion) of business in the sector, including private banks, private client investment managers, full service wealth managers and execution only brokers, at end-2012 according to industry data provider ComPeer.

This month saw Rathbones Brothers, Jupiter Fund Management, Pictet & Cie, Berenberg Bank and Deutsche Bank's fund arm all shaking up their operations.

New rules brought in last year, as part of global efforts to make markets safer, are squeezing the profits of the smaller players in particular. Wealth advisors have to take more exams and systems must be in place to monitor client accounts. Commission based selling was also banned.

"We see the business is becoming more regulated and the cost of that regulation is the same for a 300 million pound firm like ours and a 3 billion pound firm, and so you need extremely robust processes in place," said Charles MacKinnon, chief investment officer at Thurleigh Investment Managers.

"To be a mom and pop sitting in one room is no longer viable for this business," MacKinnon added, in the week it agreed to merge with Ingenious Asset Management to create a firm with 1.8 billion pounds in assets.

Total compliance spend in the wealth management sector rose 10.7 per cent to 153.5 million pounds between 2010 and 2012, ComPeer pointed out.

"This [regulation] puts pressure on the smaller players particularly," said Numis Securities analyst David McCann. "The large players have the advantage that they have the fixed costs largely covered already."

Among the deals this month, Rathbones bought some assets off Deutsche and Jupiter, looking to sell more generic products to the "mass affluent".

Deutsche Bank decided to focus on tailored investments for ultra-high net worth and high net worth clients — worth $100 million-plus and at least $1 million respectively, according to the Boston Consulting Group.

"It's about volume versus margin," McCann indicated. "The larger customers are likely to be much higher margin but there are just fewer of them. Both models can work."

Jupiter decided to exit the sector completely and instead focus on its core mutual fund business, while both German private bank Berenberg and Swiss private asset manager Pictet & Cie, said they would expand their London-based operations for the super rich.

In the past, Royal bank of Scotland (RBS)-owned private bank Coutts has been rumoured to be up for sale, but new RBS Chief Executive Ross McEwan has committed to keeping and growing the business instead.

London is where most wealth managers will seek to retain a presence, given it has more dollar millionaires than any other city in the world, at 339,200, research firm New World Wealth pointed out.

"London is very much seen as a place where wealth is growing and that by definition should encourage wealth managers to have some sort of operation here," said Stuart Duncan, analyst at Peel Hunt.

"A lot of wealth managers, not just Rathbones, would like to take advantage of the opportunity to consolidate the market because there are a lot of smaller wealth managers around," he added.

AMMAN — Prime Minister Abdullah Ensour said this week that Jordan's economy is recovering and moving steadily forward despite the global financial crisis and the Syrian infighting.

During a meeting with a delegation from the Union of Arab Banks participating in the 2014 Annual Arab Banking Conference 2014, Ensour said the economic measures taken by the government to deal with the economic challenges have helped the Kingdom avert a range of difficulties. 

The prime minister hailed social security, which Jordan has succeeded to preserve, as the major goal of growth, development and prosperity noting that  economic instability is an integral part of the whole instability witnessed in many Arab states.

The premier said the Arab world ranked at the bottom of the international growth indexes despite possessing all what is needed to achieve self-sufficiency, development and prosperity, adding that this has to be a motivation for more cooperation and joint efforts.

He told the bankers that Jordan has been always forced to change plans in order to deal with the developments arising from the turbulent surroundings, beginning with the Palestinian dilemma and now the Syrian crisis, stressing that the Kingdom is in need of support from all Arab states to be able to continue its pan-Arab nationalist role.

AMMAN — Central Bank of Jordan (CBJ) Governor Ziad Fariz revealed this week that new specialised bodies are on the table to fund small-and medium-size enterprises (SMEs), if banks are unable to do so. 

Speaking at the Annual Arab Banking Conference on Wednesday, he called on the private sector to support innovative and creative projects indicating that banks’ financing of SMEs’ investment expenditures do not exceed 10 per cent.

"The increasing regional and international attention towards micro-projects and SMEs makes it imperative that banks develop measures to fund such projects," he stressed, underlining the role that banks have in development and in achieving financial stability within the objectives of economic growth. 

“By adopting CBJ policies, Jordan's banks created a more solid banking system, which enhanced their adaptability to face internal and external shocks,” the governor said.

According to Fariz, the current regional and international economic challenges compel Jordan to adhere to best economic practices in order to avoid possible economic shocks in the future.

He credited the national programme for economic reform as an efficient security that safeguarded the Kingdom's economy despite regional and international turbulences.

The governor indicated that regaining trust in Jordan's economy and the  increase in foreign reserves to their highest levels (JD8.78 billion) were the main fruits of reforms.

Fariz told participants in the conference that high fuel prices and repetitive cuts in the Egyptian gas placed a heavy burden on the local economy during the past few years. 

The increasing influx of Syrian refugees and the accompanying requirements exacerbated the situation, he remarked.

“The economic reform project, which started in cooperation with the International Monetary Fund two years ago and is to continue, addressed the increase in the government's spending and sought to diversify the Kingdom's energy sources, in addition to helping the National Electric Power Company reduce its losses," the governor concluded.

AMMAN – Tourism revenues went up by 11.1 per cent during the first quarter of this year to around $1.02 billion from $924 million generated during the same period of 2013. According to the Central Bank of Jordan (CBJ), the rise is attributed to the increase in the number of tourists from the Gulf, US, Libya, Yemen and Jordanians residing abroad. Meanwhile, expatriates’ remittances went up by 3.1 per cent during the first quarter of 2014, to $861.5 million from $836 million in the same period of last year, the CBJ reported.

AMMAN — A Jordanian economic team, led by Saleh Kharabsheh, secretary general of the Ministry of Planning and International Cooperation, discussed this week with Sami Saqaabi, assistant secretary of Kuwait's finance ministry for economic issues and an accompanying delegation,  prospects for further cooperation between the Kingdom and the Gulf Cooperation Council. Talks also covered means to boost trade volume between both sides.  

AMMAN — Arab bankers on Wednesday blamed "Arab Spring" for the deterioration in the region's economies. 

Top executives in the banking sector called during the opening session of the Annual Arab Banking Conference for more collaborative economic projects between Arab countries to exit the consequences of political unrest in the region.

They highlighted some of the repercussions on the economies of several Arab countries due to political changes during the past three years.

Mohammad Barakat, chairman of the Union of Arab Banks mentioned the drop in direct and indirect investments, and in foreign reserves, an increase in inflation rates and public debt levels, a decline in the living conditions and basic services, and a spread of unemployment among youths as some of the results caused of the political situation in the region. 

"Some Arab countries are still going through radical transformations, accompanied by negative economic development,” he said at the conference that discusses strategies for the advancement of Arab economies. 

According to the Egyptian banker,  government spending to address rising social demands has placed growing responsibilities on countries in transition.

However, he noted that due to supportive measures taken by monetary authorities, gradual improvement is evolving in their economies this year, which might lead to an increase in economic growth,

"The economic growth in countries in transition is expected to increase from 3.4 per cent in 2013 to 5 per cent in 2014,  enabling to gross domestic product of the entire region to rise from approximately $2.74 trillion to around $2.86 trillion," he said.

Speaking on behalf of Prime Minister Abdalla  Ensour, Central Bank of Jordan (CBJ) Governor Ziad Fariz reviewed Jordan's economic reform strategy. 

He described the removal of fuel subsidies as a fiscal reform step aiming to direct subsidies to Jordanians who deserve government support. 

He also highlighted measures to improve tax collection and to diversify resources of the Kingdom’s energy imports.  

Bassem Al Salem, chairman of the Association of Banks in Jordan, said Arab countries still face the challenges of moving towards democracy noting that political uncertainties affect the economic activity in the region.

"Economic growth rates in Arab countries have dropped from 4.6 per cent in 2012 to 2.1 per cent in 2013," he said, adding that the volume of direct foreign investments plunged from $96 billion in 2008 to $47 billion by the end of 2012.

Al Salem said that, despite the economic integration potential, the region's countries share economic challenges such as rising unemployment, inadequate energy supplies and lack of financial recourses.

Pointing to an estimated population of 350 million, he urged Arab governments to develop a strategy that can achieve "economic prosperity".

"Governments should adopt clear work plans to achieve comprehensive economic development and increase productivity by facilitating the movement of workers across borders, and attracting investments in technology, in addition to developing human recourses and upgrading legislative frames that encourage investments," he said.

He also called for giving priority to "promising sectors with the most significant effect on economic development", especially those with added value, such as renewable energy and tourism as they create job opportunities and help transform Arab economies from consumerism to productivity.

According to Al Salem, banks should receive further backing from governments, whose  support should not be exclusive to small and medium-size enterprises.

"Governments should directly invest in capitals and provide guarantees for risky sectors. In addition, they should provide liquidity at reasonable rates to support low-income sectors," he said. 

Joseph Torbey, chairman of the World Union of Arab Bankers, regretted the absence of economic activities that stimulate economic growth and suggested that banks should put more efforts into attracting financial recourses and employ them better in Arab economies.

The two-day conference is organised by the Union of Arab Bankers in cooperation with the CBJ, World Union of Arab Bankers and the Association of Banks in Jordan.

SYDNEY — The Australian government Tuesday gave the go-ahead for a second international airport for Sydney, ending decades of indecision with a move predicted to boost the national economy.  

Prime Minister Tony Abbott confirmed that Badgerys Creek in western Sydney will be the site of the new airport, with planning to start immediately and construction from 2016.

"It's a long overdue decision which to be honest, has been shirked and squibbed [dodged] by successive governments for far too long," the prime minister told reporters.

Sydney's Kingsford Smith Airport is the main gateway into Australia but suffers from capacity limits, with a former transport minister describing it as "built in an age when planes were small and few".

Abbott said without a second airport Sydney would be "grievously underserviced", adding that the current airport would not be able to cope with forecast growth in passenger numbers in coming decades.

Badgerys Creek, about 45 kilometres west of Sydney's central business district, has long been proposed as a second airport site but had previously been shelved due to fears of a local voter backlash.

Abbott, who swept to power in elections last September vowing to be known as an "infrastructure prime minister", indicated that the development would proceed on a "roads first, airport second" basis.

Jobs boost  

The cost of the estimated Aus$2.5 billion ($2.35 billion) airport will be met mainly by the private sector, and the first flight was realistically not likely until the mid-2020s, he said.

As a first step, the government will offer the owner of Kingsford Smith Airport, Southern Cross Airports Corporation, the right of first refusal in relation to an airport at Badgerys Creek.

According to Abbott, the project would be good for economic growth and jobs, and could drive an increase in national gross domestic product of almost Aus$24 billion by 2060.

The government projects will create about 4,000 jobs in the construction phase, and go on to produce 35,000 jobs by 2035, increasing to 60,000 over time.

Australia's biggest airline Qantas welcomed the government's announcement, with Chief Executive Alan Joyce saying a second airport was a vital piece of economic infrastructure for Australia.

"The role of second airports has been well-established in several of the world's major capitals," Joyce said. "Sydney is the key gateway for air traffic in and out of Australia and the benefits of having two major airports will be felt nationwide."

Kingsford Smith Airport, which is only eight kilometres from the city centre, handled 36.9 million travellers in 2012 and passenger numbers are forecast to increase to 74.3 million by 2033.

It accounts for 40 per cent of international arrivals into Australia each year and 50 per cent of international air freight.

Kingsford Smith is subject to restrictions between 11pm — 6am, but Abbott left the door open to the new airport being free of a curfew given that so many fewer people lived near Badgerys Creek.

Abbott said the decision recognised the growth of Sydney's western suburbs, an area which is expected to see its population rise from two million to three million people in the next 20 years.

"A dedicated Western Sydney airport will service local aviation needs and be a much-needed relief valve for Sydney Airport," he said. "It will be a major catalyst for investment, jobs growth and tourism in the region for decades to come."

However, some are still expected to disagree with the plan. Stephen Bali from the No Badgerys Creek Airport Inc. told the ABC that "large segments across western Sydney will be fighting against this".

Badgerys Creek has been a potential airport site since 1986 and the federal government has bought about 1,800 hectares (4,446 acres) in the area.

The New South Wales state government has kept the surrounds largely free of development since then.

MILAN/LONDON — Israel's drive to export its new-found natural gas could help to rebuild strained ties with old regional allies Egypt and Turkey, but could deprive Europe of a precious alternative to Russian gas.

Israel has in recent months already signed energy deals with Jordan’s Arab Potash Company and the Palestinian Authority, though relations with the Palestinians are at a low ebb, and now needs to expand its export horizons to cash in on its huge energy discoveries.

If all goes well, the latest developments could see first pipelines being laid between Israel and Turkey as soon as 2015, and gas cooperation between Israel and Egypt is also emerging, which would allow export access to Asia's major markets.

A growing population and soaring demand have left Egypt's own liquefied natural gas export (LNG) plants in need of new supply, as domestic shortages eat into seaborne exports through the Suez Canal to the world's most lucrative market in Asia.

This has put Israel's previous plans to pump its gas reserves into a future export plant in Cyprus on the back burner, dealing a major blow to the indebted Mediterranean island's ambitions to become a global player in the gas market.

A Cypriot LNG export plant was due to deliver at least five million tonnes a year to Europe and Asia, allowing Europe to reduce its growing dependency on Russia, which has become of particular concern since the crisis in Ukraine cast a Cold War chill over East-West relations.

Israel's new plans throw Cypriot developments into doubt as investors would require more gas than Cyprus has on offer to make returns on multibillion-dollar investments. 

"If Israel has really ditched Cyprus as a partner to develop the region's gas resources, then we [Cyprus] really do have to find quite a lot more gas if we want to become a viable exporter, and that would inevitably throw our plans back by several years," said one source involved in developing Cyprus' gas reserves. 

Gateway alliances 

The possibility of sanctions on Russia's energy sector in response to Moscow's annexation of Crimea and troop build-up along Ukraine's eastern border have underscored Europe's acute need to diversify its oil and gas sources.

Israel plans to export gas by pipeline and through several floating LNG production plants, which cool gas to liquid form, so they can ship it to the world's largest markets.

At stake for Israel is a $150 billion tax take should export deals be agreed by a consortium operating its gas fields. Its strategic re-alignment effectively places a tantalisingly close new gas province out of Europe's reach.

"Ultimately Egypt and Turkey need energy, and the fact that we have it is creating a regional convergence of interests," an Israeli diplomatic source told Reuters.

Egypt offers a way for the US-Israeli group of companies developing Israel's giant Leviathan gas field to reach the Asian market, where LNG fetches about twice the price Europeans pay.

"If the companies operating the fields in Israel could reach an agreement with the companies that are operating those  facilities, it seems it would benefit Egypt, Israel and all the companies," said Eugene Kandel, head of the national economic council at the Israeli prime minister's office.

Egypt and Israel have had only limited economic cooperation since signing a landmark peace accord in 1979. Political turmoil in Egypt in recent years has further limited cooperation between the neighbouring countries.

Talks between the Leviathan consortium — Israel's Delek Drilling, Ratio, and Avner Oil, and US-headquartered Noble Energy — and Egyptian authorities are focusing on feeding Israeli gas into the country's idled LNG export facilities.

Britain's BG Group, which runs one of Egypt's under-utilised LNG plants and is among the world's top LNG trading firms, is in talks with the Leviathan partners.

The favoured option is to build a sub-sea pipeline from Leviathan to link up with BG Group's offshore pipeline network in Egyptian waters, allowing Israeli gas to feed directly into its LNG plant at Idku, according to industry sources.

If realised, this would not only revive output at Idku but also mean that Israel's first LNG exports would take place from an Egyptian plant.

Previous land-based pipelines between Egypt and Israel were repeatedly bombed by groups opposed to links with Israel, but a subsea pipeline would be much harder to target.

Egypt is struggling to meet rising domestic demand for energy, and a fall in domestic output and power blackouts have stirred dissent in the Arab world's most populous state.

Israeli gas could help ease domestic shortages, take the sting out of the energy-related unrest that contributed to the overthrow of former president Mohamed Morsi, and lighten Egypt's $6 billion debt burden to energy majors like BG Group.

As part of a twin-track export policy, Israel also aims to ship LNG to distant Asian and South American markets through a floating plant to be moored above the Leviathan field.

"We definitely want to strengthen the economic ties with our neighbours, but we also don't want to be too exposed to possible upheavals in the region, so Israel has to have outlets that do not limit us to the region," Kandel said.

Turkish rapprochement 

Once close allies, ties between Israel and Turkey were severely damaged following a deadly raid by Israeli commandos on a Turkish yacht carrying pro-Palestinian activists trying to defy an Israeli blockade on the Gaza Strip in 2010.

Poor relations remain a barrier to a deal on gas, though the sides are talking.

"High-level negotiations on resolving political issues, and lower-level negotiations aimed at making progress on energy have always been held," said a senior Turkish energy official. "Normalisation on the relations will pave the way for investment and cooperation on energy."

US-led reconciliation efforts in recent months could be boosted by the promise of gas.

"There is clearly significant potential for turning East Mediterranean's new gas wealth from a potential source of conflict to a catalyst for regional cooperation," said Oxford Research Group analyst Sara Hassan. "Turkey will want at least to be seen as trying to leverage better conditions for Palestinians alongside any potential deal."

Peace talks to resolve the generations-old conflict between Israel and the Palestinians are close to collapse, with the Israeli government beginning to impose new economic sanctions on president Mahmoud Abbas' West Bank Palestinian Authority amid mutual recriminations about the deadlock.

Talks between the Leviathan consortium and Turkish counterparts are focusing on building a 10-billion-cubic-metre (bcm) sub-sea pipeline at an expected cost of $2.2 billion, giving Israel access to a major emerging market and one of Europe's biggest power markets by 2023.

"We think construction phase for a pipeline to transport Israeli gas to Turkey could begin in the second half of 2015," a Turkish energy official said.

A separate yet-to-be-built pipeline linking Europe with the Caspian through Turkey in 2019 could eventually also open up a new market for Israeli gas in western Europe.

An envisaged 25-year supply deal would steady Turkey-Israel ties and boost economic links, while Turkish sanctions against Israel would be lifted and ambassadors reinstated, he said.

"The Turkish market for natural gas is the only growing one [in the region], and the drive to diversify away from Russia will justify Israeli gas to join Azeri, Iranian and Kurdish gas," said Mehmet Ogutcu, chairman of London-based Global Resources Corporation consultancy.

"The Turks realise that if this gas project is implemented without their involvement, they will not be a game-player in East Med. Hence, the Turkish private sector could be encouraged to take the lead and politicians follow them at a later stage," according to Ogutcu. 

Cyprus cut loose

Already, the gas finds are spurring progress in talks to resolve an even longer-standing dispute over territory between Turkey and Cyprus, across whose maritime boundary any Israeli gas pipeline would have to travel to reach Turkey.

Cyprus has been divided since the north of the island was occupied by Turkish troops in 1974.

"It does look as if natural gas could help to bring the two sides closer to a settlement since Turkey's primary aim is securing the resources to meet skyrocketing demand," said Nicolo Sartori, energy and defence analyst at the Institute for International Affairs in Rome.

"Efforts to get the Eastern Mediterranean gas pipeline have stepped up over the past few months, with the US playing a very hands-on role," said Ogotcu. "The Cyprus settlement is on top of the agenda as it will allow Cyprus to use this pipeline and add its surplus Aphrodite gas."

That could persuade Cyprus to give its consent to a pipeline that went through waters claimed by both the Greek-speaking and Turkish halves of the island. Since last year's downgrade of gas reserves at Cyprus' flagship Aphrodite field, it does not have enough gas to underpin its planned LNG export plant at Vassilikos.

Cypriot officials had counted on additional supplies from Israel to make the export project feasible, encouraged by the fact that Noble and Delek, two of Leviathan's main developers, also own Aphrodite.

Deepening Israeli reluctance to share its gas with a rival Cypriot project has stalled those talks.

AMMAN — The unemployment rate during the first quarter of 2014 went down slightly compared to the same period of last year, according to the latest survey conducted by the Department of Statistics (DoS). Unemployment reached 11.8 per cent in January-March 2014 compared with 12.8 per cent during the same period in 2013, the DoS report said, indicating that the unemployment rate is particularly high, at 18.1 per cent, among holders of postgraduate degrees. Unemployment stood at 26 per cent for male holders of university and postgraduate degrees against 76 per cent for female degree holders, the survey showed. The highest unemployment rates  were registered among the 15-19 and 20-24 age groups, standing at 36.6 per cent and 27.9 per cent respectively. The highest unemployment rates were registered in Tafileh and Zarqa governorates, reaching 18.9 per cent and 8.1 per cent respectively.