Business

AMMAN — The Joint Jordanian-Hungarian Economic Committee signed a protocol agreement following their first meeting that was held recently in Budapest, according to a statement that was received by The Jordan Times on Saturday. Under the protocol, signed by Planning and International Cooperation Secretary General Saleh Kharabsheh and Hungarian State Secretary for Foreign Affairs and External Economic Relations Péter Szijjártó, the two sides will work to boost cooperation in the fields of energy, environment, water, agriculture, tourism, transport and infrastructure. Moreover, representatives from the two countries’ private sectors convened several meetings in a bid to increase cooperation between them and eliminate obstacles hampering the export of Jordanian fruits and vegetables to Hungary. Talks also focused on efforts to encourage more Hungarian tourists to visit Jordan as well as education cooperation.

TOKYO — Japan passed last week its biggest-ever budget, a $937 billion spending package aimed at propping up growth as consumers brace for the country’s first sales tax hike in over 15 years.

A total of 136 lawmakers in the 242-member upper house, controlled by the ruling Liberal Democratic Party, voted for the package, against 102 opposition votes, a parliamentary spokesman said. 

The passage came after the lower house last month approved the 95.88 trillion yen ($937.4 billion) budget for the fiscal year starting in April.

The new budget comes as Tokyo pushes for speedy implementation of a $50 billion stimulus package specially designed to protect Japan’s fragile economic recovery, as sales taxes rise to 8 per cent from 5 per cent on April 1 — the first hike since the late nineties.

The increase is seen as crucial to bringing down Japan’s eye-watering national debt, which is proportionately the worst among rich nations. 

But there are fears it will derail Prime Minister Shinzo Abe’s policy blitz, dubbed Abenomics, aimed at kickstarting the world’s third-largest economy after it suffered years of growth-denting deflation.

“I would like to continue making strong efforts to end deflation and grow the economy,” the conservative Abe told a parliamentary session Thursday.

The proposed package — up from 92.61 trillion yen for the current fiscal year — is seen as key to paying for Japan’s snowballing health and social welfare costs. 

The country’s rapidly ageing population is putting pressure on the public purse, while low birthrates are threatening to create a demographic time bomb for the heavily indebted nation.

Japan’s projected primary balance deficit — the shortfall between what the government takes in and what it spends, apart from debt-servicing — is expected to shrink by 5.2 trillion yen to 18.0 trillion yen.

That means Japan’s national debt, now more than twice the size of the economy, will continue to rise, but at a slower pace.

Public spending projects are part of the proposed budget as well as plans to upgrade Japan’s defence forces, as China bulks up its military and fears remain over North Korea’s nuclear arms potential.

Separately, Bank of Japan (BoJ) Governor Haruhiko Kuroda on Thursday marked his first year in the job, with critics giving a mixed report card on his unprecedented monetary easing programme.

Abe hand picked the former Asian Development Bank boss to help lead Tokyo’s bid to jumpstart growth and reverse years of deflation which held back the once world-beating economy.

Within weeks of stepping into the job on March 20 last year, Kuroda had unleashed a vast asset-buying programme — similar to the US Federal Reserve’s quantitative easing — which sought to pump huge amounts of money into the financial system.

The move, which sharply weakened the yen, was meant to jerk the economy out of its slumber and create lasting inflation in a country where falling prices had become the norm. 

While deflation may sound good for consumers, it means people tend to put off buying in the hope of getting goods cheaper down the road, hurting producers.

The BoJ programme was aimed at changing that psychology.

Deflationary “expectations — a sense that prices would not increase — became entrenched”, Kuroda said in a speech last week.

“In order to escape such a situation, it has become necessary to pursue a policy that quickly and drastically changes people’s sense that prices will not increase,” he added.

The conservative Abe, who swept to power in late 2012, had openly criticised Kuroda’s predecessor Masaaki Shirakawa for not doing enough to stimulate growth, a rare public rebuke that sparked fears the BoJ’s independence was under attack.

On Thursday, Kuroda gave some credit to his BoJ predecessors, saying that earlier policy has yielded results “to some extent” during 15 years of deflation. But he noted that it “was not sufficient” to keep falling prices from becoming entrenched.

Tokyo’s more recent efforts appear to be gaining traction. The weaker yen boosted the profitability of exporters like Toyota and Sony, and set off a 57 per cent rally in the Nikkei 225 stock index in 2013, its best annual run in over four decades.

Growth led Group of 7 nations in the first half of last year, although the pace has slowed since, while business confidence remains high and inflation appears to be taking hold.

Recent data showed consumer prices logged their first annual rise for five years in 2013, and land prices are up in major cities for first time since the global financial crisis in 2008. Big firms have also heeded Abe’s call for wage hikes.

Kuroda gets ‘high marks’

“Generally speaking, the market has given high marks to Mr. Kuroda’s BoJ, and I agree with the consensus view,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“There were some who were sceptical about the effectiveness of his massive easing measures, but actually the yen fell while stock prices rallied. This is in sharp contrast to the BoJ’s past policies that were often criticised as too little, too late,” he added.

Some critics have dismissed the plan as a money printing exercise that will leave Japan in bigger debt. The country already has the heaviest debt burden among rich nations at more than twice the size of the economy, a figure that promises to expand as a rapidly ageing population strains the public purse.

David Beim, a finance professor at New York’s Columbia University, cast doubt on whether the BoJ’s attempts to pump money into the financial system through reserve-rich commercial banks was having much impact.

“What is in theory supposed to happen is that, as the central bank expands its balance sheet, the commercial banks expand theirs, thereby expanding the money supply... which stimulates the real economy,” he said in a recent e-mail to AFP. “But when commercial banks already have massive excess reserves, this does not happen.”

There is also growing scepticism among analysts and even some bank board members about the BoJ’s ambitious target to hit 2.0 per cent inflation by the end of next year. 

A recent poll by Kyodo News showed nearly three-quarters of Japanese people felt no effect from Abe’s spending-and-easy-money blitz.

The tax increase has boosted speculation the BoJ would be forced to further expand its easing plan to protect the economy amid fears consumers will be scared off by higher prices.

“How to deal with market expectations that the BoJ will announce fresh easing is a delicate matter. If the BoJ holds off, that may disappoint markets,” Dai-ichi’s Shinke said.

“On the other hand, if the bank announces additional easing, that means the current easing programme was not sufficient and that the economy is not living up to the bank’s expectations,” he added.

AMMAN –– A team of experts will work on drafting a “modern” investment law to be presented to the government and lawmakers. 

During a recent session at Talal Abu Ghazaleh Organisation (TAG-Org) to talk about the current investment and business environment in Jordan, experts reviewed recommendations made by a group of economists and experts and highlighted the need to improve legislations governing investments. 

TAG-Org has formed several committees to address economic issues in the Kingdom, including a special panel for investment and doing business. 

The investment panel is headed by Maen Nsour, former chief executive officer of the Jordan Investment Board. 

Talal Abu Ghazaleh, chairman and founder of TAG-Org, indicated that the team will send a formal letter to MPs to explain the flaws in the investment draft law currently being debated by the Lower House Economic and Investment Committee, saying the legislation includes several negative issues that affect the inflow of investments in the country. 

At the session, attended by former ministers, MPs and a large number of businesspeople and economists, Nsour detailed the recommendations made by the team, highlighting several obstacles hindering better investment environment in Jordan. 

Among the obstacles, he said, is the lack of harmony between economic and investment policies, the fact that there are several government agencies concerned with the investment sector, and the drop in Jordan’s ranking in international business reports. 

There is a dire need to draft “modern” investment strategies to meet the current regional and international conditions, Nsour said. 

The Lower House should also give priority to economic legislations, he added, calling for equipping investors with the necessary information that are related to the Kingdom’s economy and business climate. 

He said: “The panel had also stressed the need to establish development banks such as industrial and agricultural banks to offer long-term and cheap financing”. 

Nsour also highlighted the need to target Jordanian expatriates in order to attract them for carrying out investments in the Kingdom.

CAIRO — Egypt’s stock market has reached a new high this week despite unrest in the country, surpassing levels prior to the 2008 global economic crisis.

The stock market has experienced a steady growth this year, particularly since the military’s ouster of former Islamist President Mohammed Morsi last July. Traders say investors are reacting positively to the military-sponsored political roadmap for the country.

Hesham Turk, the exchange’s communications manager, said Thursday that the market’s main index, EGX30, peaked the day before to levels higher than on September 9, 2008, and was expected to make additional gains.

However, the market’s rise has not alleviated daily economic hardships for many Egyptians.

Separately, Egyptian Army chief Field Marshal Abdel Fattah Al Sisi may not look like a model democrat, but foreign and local businessmen believe he can deliver stability to open up investment opportunities in the most populous Arab nation.

Sisi, whose smiling face, framed in sunglasses and capped by a beret, appears across Egypt on posters, t-shirts and even chocolates, inspires fear in his opponents that the country will soon have a military man as its president once again.

But to investors, and many Egyptians, Sisi offers the hope of relief from three years of political turmoil that began with the Arab Spring uprising, even though he was the man who toppled Morsi.

“I think most investors would say it doesn’t appear all that democratic, but it’s more stable, so my investment will be safer,” said Gabriel Sterne of Exotix, a frontier market bank in London which handles investments in Egypt.

Once in office, he will need to deliver on the economy which he has acknowledged presents huge “challenges”, without saying  publicly how he intends to tackle them.

Sisi is regarded as a decisive figure who can take bold decisions. After two changes of government in three turbulent years, Egyptians crave economic and political calm, and Sisi is seen as the man who can deliver.

Western investors appear to agree. “He does seem to have support that has been absent from any single politician. Whatever it is, it’s a sign of stability,” said Sterne.

‘Strongman’

Egyptian Industry and Investment Minister Mounir Fakhry Abdel Nour says he realises Western governments are wary of Sisi’s change from camouflage fatigues to a president’s business suit, but he believes investors will thank him for it.

“In the West, a candidacy and maybe the election of an army officer or an ex-officer to the presidency of a developing, third world country would raise eyebrows and call to mind the image of a Pinochet rather than a George Washington,... a dictator rather than a reformer,” he said.

“[But] this country as it stands today needs a strongman that can pull it together... Law and order is good towards investment and towards the economy,” the minister added at Cairo’s ornate 19th century bourse.

Gulf aid pours in 

Serious progress on the economy remains elusive. Massive debt, a weak Egyptian pound and political uncertainty had scared away much foreign direct investment (FDI).

However, billions of dollars in aid from the military-backed government’s allies in the Gulf have improved prospects for infrastructure growth and bought time for economic reforms.

The current account ran a $757 million surplus between July and September last year, driven by a massive increase in official transfers from Gulf monarchies such as Saudi Arabia and the United Arab Emirates (UAE).

Egyptians’ household spending climbed last year. Analysts say Samsung of South Korea is likely to pour tens of millions of dollars into its local assembly plant, and Coca-Cola announced a half-billion-dollar investment in Egypt last week.

“Strong business and strong communities go hand-in-hand and our investment not only helps to create good jobs, opportunity and a better tomorrow for Egyptians but also sends a strong signal about Egypt’s future,” said Curt Ferguson, President of Coca-Cola’s Middle East and North Africa Business Unit.

Overall, FDI remains sluggish. It edged up to $1.25 billion between July and September last year from $1.16 billion in the same period of 2012. FDI totalled $3 billion in the year ending June 2013, when Egypt was in turmoil, almost $1 billion less than in the previous year.

Before the 2011 revolution which toppled autocratic president Hosni Mubarak, a former air force commander, Egypt was attracting net FDI of around $8 billion annually, according to central bank data.

But with Egypt’s stock market hitting a five-year high and the global economy in a much better state than in Mubarak’s last years in office, Sisi should enjoy an easier investment climate.

A report by Bank of America Merrill Lynch last month described a Sisi presidential bid as “market-friendly in the near term”, saying that keeping up the Gulf aid or agreeing a loan from the International Monetary Fund (IMF) was crucial.

But it sounded a warning over Sisi’s holdover of officials and policies from the Mubarak era. Mubarak enjoyed some economic successes, but his rule was widely seen as corrupt and inept.

“The Egyptian political transition is likely to be complete in 2014 but could result in a watered down version of the pre-revolution regime... This will likely weigh on growth, and keep fiscal and external financing vulnerabilities high,” it said.

Stating the obvious

Though Sisi has been omnipresent on Egyptian television, he has offered few pointers on economic policy beyond stating the obvious in a speech last week: “I am saying it with the utmost sincerity. Our economic conditions are so, so difficult.”

More interestingly, he broached the issue of fuel subsidies that cost the government $15 billion a year, a fifth of the state budget, but gave no clear prescription.

The subsidies, in place for half a century, drain foreign currency that could be used to pay off debts to overseas energy companies and improve payment terms to encourage investment.

Abdel Nour hinted that Sisi may be able  to absorb the public anger that major cuts to the subsidies are likely to provoke. 

“I think he will be able and probably willing to draw on his popularity to take the difficult and often painful decisions to reform the Egyptian economy and face the fiscal problems,” he said.

Lifeline from the Gulf

Dubai firm Arabtec signed a $40 billion deal this week to build a million homes in Egypt, a possible sign of politically-inspired Gulf investment in the country’s infrastructure. Arabtec’s chief executive officer said the UAE would provide initial financing, signalling that Gulf companies’ Egyptian investments will enjoy government backing and protection.

Because many Gulf firms are partly state-backed or family-run, their more cohesive base of shareholders may be more easily convinced to plunge into Egypt when Western firms would hesitate.

“They’ve got a different variety of people they have to answer to, and not all of them work in conjunction in the West,” said Angus Blair, chairman of business and economic forecasting think-tank Signet.

Western investors, worried by repeated spasms of violence in recent years, are more sensitive and shareholders have a more short-term outlook, according to Blair.

Analysts agree that the flood of cash and confidence from the Gulf into Egypt has encouraged Western investors to follow, but are split on whether long-lapsed negotiations for an IMF loan, which would demand tough budget reforms, are the answer.

“In the end there’s nothing like a good old-fashioned IMF-type fiscal adjustment to put the position on the straight and narrow to provide long-lasting confidence, because you never know when these [Gulf] gifts finish,” said Sterne of Exotix.

But legal obstacles, not a binding international agreement to curb Egypt’s rampant corruption and soaring subsidies, may be what holds Western companies back. “Legislation is as badly needed as subsidy reform, it is just not in the spotlight,” said Moheb Malak, Cairo-based economist at Prime Securities.

A draft investment law aims to prevent third parties from challenging contracts made between the government and an investor, a move designed to attract investment.

The clauses are intended to reassure investors unnerved by previous legal challenges to such deals, some of which have left companies sold by the government in legal limbo. “Yes, Egypt needs a strongman but it needs a lot more than just a strongman, it needs to correct its investment policy,” Malak added.

MOSCOW — President Vladimir Putin told company bosses on Thursday to bring their assets home and clean up their businesses to help Russia survive Western sanctions over Crimea, and an economic downturn.

Facing a possible widening of Western sanctions that may target businessmen close to Putin, some of Russia’s oligarchs are increasingly nervous about their companies’ prospects.

Some of Russia’s largest companies are registered abroad where they may benefit from lower tax rates but also may enjoy some distance from the Kremlin and feel beyond its reach.

Without referring to Russia’s annexation of Ukraine’s Crimea region or to slowing economic growth, Putin said it would also be in the bosses’ interests to support the Russian economy.

“Russian companies should be registered on the territory of our nation, in our country and have a transparent ownership structure,” Putin told heads of Russia’s largest companies.

“I am certain that this is also in your interests,” he said, pressing home a patriotic message at a conference full of businessmen, including a front row of top oligarchs such as media mogul Alisher Usmanov and metals magnate Vladimir Potanin.

Putin waged war on the oligarchs who amassed political influence as well as vast riches under former president Boris Yeltsin, driving some out of Russia and forcing those who remained to stay out of politics.

Since then, several businessmen with ties to Putin have come to dominate the corporate landscape and are now among Russia’s richest men.

His words may have made some oligarchs nervous. Usmanov’s Internet holding group Mail.Ru is registered in the British Virgin Islands, while X5 Retail Group, owned by Mikhail Fridman, who was not at the conference, is registered in Amsterdam.

Returning to the Kremlin in May 2012 for a third presidential term, Putin has urged politicians and businessmen to return from the “offshore shadows” and stop spiriting cash out of the country, a move some critics say was a move by a weakened president to ensure loyalty among Russia’s elite.

But with sanctions imposed by the United States and European Union (EU) on officials, his demands are carrying more weight, ensuring there will be little public sympathy for oligarchs who may be stung by widening punitive measures.

“Our task is not only to limit the possibilities of offshore schemes,” Putin said. “We understand perfectly well that little can be achieved through prohibitions. The main direction of our work is in something else: it is necessary to increase the attractiveness of the Russian jurisdiction, improve the business climate, and strengthen legal guarantees and the protection of property.”

Fear of sanctions to come

The conference, days after Putin signed a treaty on bringing Ukraine’s Crimea region into Russia, was surprisingly upbeat despite the threat of deeper sanctions by the United States and EU, Russia’s top trading partner.

Many Russians have been swept up in nationalist fervour since Moscow annexed Crimea. But bubbling under the surface, there were some doubts as to what lay ahead.

Putin’s moves in Ukraine have wiped $50 billion off Russia’s stock market this month, sent the rouble down 9 per cent since the beginning of the year and further weakened Russia’s poor investment climate.

The economy grew 0.7 per cent in January, a slowdown from 1 per cent the previous month and analysts expect it to slow further as the impact of the crisis in Ukraine is felt.

“The integration of the global economy has reached such an extent that any split in economic ties cannot happen without consequences,” said Usmanov, a close ally of the Kremlin. “Therefore we do not need sanctions.”

Potanin, who owns a stake in the world’s largest nickel and palladium producer Norilsk Nickel, noted that he had worked out a contingency plan, just in case. 

“Sanctions are a double-edged sword, it’s not clear who will be more hurt,” he said.

Most business owners know that this time the government will not prop them up, as it did during the 2008/2009 global financial crisis when Russia burnt through billions of dollars from its reserves to support its largest companies.

“We will watch how the situation develops, in what direction both our economy and the situation in the financial sector go,” Finance Minister Anton Siluanov told the same conference.

Siluanov said the government would, if necessary, support Russia’s most important companies and institutions, but it did not have the resources to offer help to the majority of companies.

“We do not want to be helping company owners all the time,” he remarked.

Putin was clear that Russia’s economy would develop on its own terms, and would do his best to reward loyal companies.

He said Russia should find ways to help Russian companies win contracts with state companies while holding competitive auctions with foreign companies to please what he called the more liberal economists in this room.

And while he knew business would like more flexibility in reducing the workforce, he would always consider the “social aspects” of these “difficult problems” — a clear reference to Russia’s monocities which are dependent on certain industries.

“We will do this,” he said. “I hope you understand me correctly.”

AMMAN — International General Insurance Holdings (IGIH) announced this week in a press statement that it generated $31.26 million net earnings for the 2013 financial year. The amount is a 24 per cent increase over the $25.25 million recorded in 2012. Wasef Jabsheh, vice chairman and chief executive officer of IGIH, said in the statement: “2013 was another year where we have been able to achieve record profit. These results clearly demonstrate that our business strategy, underwriting guidelines, and risk management have worked positively in our favour.” He added: “Although we expect 2014 to be a fairly tough year due to increased competition, we are re-aligning our business strategies and approaches to meet the challenges of market cycles and uphold our corporate mission.”

AMMAN –– Amman Chamber of Commerce (ACC) President Issa Murad on Wednesday called on Chinese firms to take advantage of investment opportunities available in Jordan and to take part in mega-projects the Kingdom plans to carry out, a chamber statement said. At a meeting with Chinese Ambassador to Jordan Gao Yusheng, Murad described China as one of Jordan’s major trade partners, indicating that nearly 30 per cent of goods imported to the Kingdom are from China. Trade volumes between the two countries reached $3.6 billion in 2013, he noted. The ACC president called for constant coordination between the chamber and the embassy, particularly with regards to problems facing Jordanian businesspeople who import from China, according to the statement. 

DAMASCUS — Syria has suffered damage estimated at $31 billion as a result of its three-year civil war, Prime Minister Wael Al Halqi has said, a figure nearly equivalent to its gross domestic product (GDP).

“The damage caused by the war in Syria stands at 4.7 trillion Syrian pounds,” or $31.3 billion (22.5 billion euros), Halqi told the ruling party’s Al Baath newspaper.

He did not say whether he was referring exclusively to property damage or to some broader measurement.

The Economist Intelligence Unit has forecast that GDP will reach $34 billion this year.

In January, Local Administration Minister Omar Ghalawanji valued the losses at $21.6 billion.

Meanwhile, Halqi said the budget allocated for reconstruction this year stands at 50 billion pounds, up from 30 billion pounds last year.

“The current priority for the government is to return security and stability by giving our armed forces the means to fight terrorism,” said Halqi, referring to rebels seeking to topple President Bashar Assad.

“There is also a need to give people the basic commodities they need to meet their needs,” Halqi added, noting that Syria has enough wheat in store to feed the population for a year.

The prime minister also said the state pays £609 billion a year in salaries to civil servants, and that it spends $300 million a month on refined petroleum products.

A Syrian NGO says at least 146,000 people have been killed in the country’s war and that nearly half the population has been displaced.

Separately, a sizable but silent portion of those who live in Damascus and oppose the government say their constant fear of the police state is a flashback to some of the worst years Syrians endured before the war.

People continue to disappear into state detention centres. If they are released, they speak of torture and humiliation, sending ripples of fear through their community.

Among the merchants, almost everyone believes openly opposing the government carries great risks, including torture, death, or “inviting attention to the business”.

During a recent meeting of Damascene merchants, talk turned to the case of a colleague detained by Syria’s powerful and dreaded state security apparatus.

The man in question, it seemed, had overheard someone cursing President Bashar Assad, but failed to turn them in.

“Imagine that! They took him and beat him to a pulp and called him a mute devil for not reporting his colleague,” one merchant said. “Imagine the life we’re living now!”

While it is hard to verify the specific case, the discussion demonstrates the climate of fear and intimidation prevalent in the capital three years after the revolt against four decades of Assad family rule broke out.

For some time after the uprising erupted in the southern city of Deraa on March 18, 2011, it looked like the revolt would shatter the barriers of fear that long defined the relationship between Syria’s police state and its citizens.

Nowadays in government-controlled areas of Damascus that is far from the case. Armed men outnumber civilians on some corners, barricades prevent people from entering some streets and military hardware sits conspicuously between trees.

One affluent merchant said he held out as long as he could against painting the shutters of his shop the colours of the Syrian flag — a show of support for the government increasingly common in recent months — but he eventually had to give in.

“Was I going to be the odd one out? They [state security] probably would have ignored me, but they would have sent the tax department or some other authority to find some violation to shut me down. No thanks,” he said.

‘Assad is staying’

Violent crime in the capital is rare, but the city teems with armed men both in and out of uniform who often work long shifts for low pay.

With few provisions from the government, the men instead supply themselves from nearby grocers who would not dare demand full payment. The men stop taxis and name their own prices; the drivers do not protest.

In some cases, gunmen have posed as state security agents, demanded entry into private homes and burgled them. Police are too afraid to pry into a crime that might involve the intelligence apparatus, and the incidents go uninvestigated.

At petrol stations, a “security ID” issued for military, state security or other official business will get you to the front of the line, as well as into a specially reserved “military lane” at the checkpoints that have proliferated throughout the city.

The IDs — and their counterfeits — have become so popular that the cars in the military lanes now sometimes outnumber those in the regular queue. “Everyone in this country is somebody,” one driver remarked.

But for many Damascenes the most difficult aspect is the sense that very little of this will change anytime soon. One middle-aged woman who supported the uprising echoed many when she voiced her resignation.

“Assad is staying and he’s stronger than us and there’s nothing we can do about it,” she said.

LONDON — Britain shook up the Bank of England (BoE) on Tuesday, breaking the all-male grip at the top as it appointed two new deputy governors and a chief economist who has been highly critical of the banking industry.

The biggest single change in senior staff since the BoE gained independence in 1997 sees International Monetary Fund (IMF) official Nemat Shafik become its new deputy governor for markets and banking — the first woman in a top policy role since 2010.

Ben Broadbent, up until now an external member of the bank’s monetary policy committee (MPC), will step up to become deputy governor for monetary policy.

In a third move, executive director for financial stability Andy Haldane swaps jobs with chief economist Spencer Dale.

Dale had been a favourite to become deputy governor but will lose his MPC seat from June when he takes over Haldane’s role on the financial policy committee, which regulates banks.

Haldane has been unusually outspoken for a central banker, criticising banks for trying to dodge regulation and addressing anti-capitalism protesters.

The changes — made by BoE Governor Mark Carney and the government — are part of an overhaul to break down barriers between the bank’s monetary policy and bank regulation wings.

The biggest loser from the upheaval is markets director Paul Fisher who will have to give up his MPC seat to Shafik from August 1. Fisher has been under fire from lawmakers over the BoE’s handling of alleged manipulation of London’s currency market.

“The bank needed a pretty major shake-up and it is certainly getting one,” said Jonathan Portes, director of Britain’s National Institute for Economic and Social Research.

According to Portes, the new appointments should breathe fresh life into the central bank’s macroeconomics team — which had a patchy forecasting record and was too inward-looking — and that Shafik had the right temperament to tackle market abuse.

“She’s pretty tough and at the moment you need someone who is prepared to be fairly tough with the London financial sector,” he said.

But Domenico Lombardi, a former IMF board member who now works for Canadian think tank CIGI, warned that she was likely to face a steep learning curve when she arrives at the BoE.

“She will have some catch-up to do, because clearly banking and markets were not at the core of her responsibilities at the IMF,” he remarked.

New deputy governors

Prior to Tuesday’s announcement, Carney had overseen the appointment of outsiders to two other top positions at the bank.

Broadbent was formerly a senior economist at Goldman Sachs — Carney’s employer before he became a central banker. He will succeed Charlie Bean, who retires at the end of June.

Broadbent has said the failure of troubled banks to lend money to more efficient firms is one of the reasons behind Britain’s weak economic productivity since the financial crisis.

Shafik — who holds Egyptian, US and British nationality — has a background in development economics, working at the World Bank and as the top civil servant at Britain’s overseas aid department before becoming deputy managing director at the IMF.

According to an IMF statement e-mailed to The Jordan Times Tuesday, IMF Managing Director Christine Lagarde said: “I know I speak for all colleagues at the fund when I say that Minouche [Shafik] will be missed. The fact that she is leaving us to take up such an important post is testimony to her broad command of policy issues, her superb leadership and communications skills, and her global reputation.”

Shafik oversaw much of the fund’s country work in Europe, including the programmes with Greece and Portugal, as well as Arab countries in transition, the statement said, adding that she also led the efforts to integrate the IMF’s work on capacity building and technical assistance.

 “I have highly valued Shafik’s contribution as part of the senior team and I have greatly appreciated her advice, candour, and loyalty. She is a dear colleague and, I am proud to say, a dear friend as well,” Lagarde noted.

Shafik will stay on until mid-June as special adviser to the managing director, the IMF said.

She joined the fund as deputy managing director in April 2011  after resigning her position as permanent secretary of the UK Department for International Development. Holding a M.Sc. in Economics from the London School of Economics and a D.Phil. in Economics from Oxford University, she has also served as the youngest ever vice president at the World Bank where  she helped get private money into infrastructure projects.

Shafik will be responsible for the BoE’s eventual exit from its quantitative easing policy, under which it amassed 375 billion pounds ($624 billion) of government bonds. 

She will also steer a review of the way the central bank gathers intelligence on markets, which has come under scrutiny recently after claims that London traders manipulated key foreign exchange rates.

Since taking office in July, Carney has been keen to increase the number of women in senior roles at the BoE.

BNP Paribas economist David Tinsley said the appointments were a surprise, and would add “a degree of raised uncertainty”  about when the central bank would start to lift interest rates from their record low of 0.5 per cent.

Little is known about Shafik or Haldane’s views on monetary policy, though Portes said she had been sympathetic to the IMF’s move away from its highly orthodox policy prescriptions.

Broadbent and Dale both voted against the bank’s final expansion of asset purchases in July 2012, while Fisher was part of a dovish minority under former governor Mervyn King who wanted more asset purchases up until King’s departure in June.

Broadbent is the first external member of the MPC to take up a position as deputy governor. He will be responsible for the BoE’s analysis of Britain’s economy, as well as bank notes.

Britain’s finance ministry also named Anthony Habgood as chairman of the Court of Directors, which supervises the central bank. Habgood is chairman of brewer Whitbread and publishing company Reed Elsevier.

Habgood succeeds David Lees, whose term expires on July 1.

LONDON — Vodafone has agreed to buy Spain’s largest cable operator Ono for 7.2 billion euros ($10 billion), the latest hefty deal in a European telecoms sector starting to rebuild as the region recovers from a recession.

The British group said on Monday it would use some of the $130 billion proceeds from the sale of its US arm to acquire Ono, with a superfast cable network and 1.9 million customers, to create a stronger challenger to market leader Telefonica.

The deal for private equity-owned Ono is Vodafone’s third purchase of a European fixed-broadband asset in two years, following similar moves in Britain and Germany, enabling it to offer fixed-line and mobile services, pay-TV and broadband, while saving money on building and operating its networks.

The agreement, which comes as the French market undergoes a similar transformation, could also spark more consolidation within Spain as players such as France’s Orange seek out acquisitions to avoid falling behind.

Orange has been linked with Jazztel, Spain’s fourth biggest telecoms operator, while Yoigo, owned by Sweden’s Teliasonera, is also seen as a likely target, analysts say.

Shares in Vodafone were up 1.4 per cent in midday trading, outperforming the FTSE 100 index, and shareholders have generally been supportive.

“Historically, Vodafone has been a pure mobile operator,”  Henri Tcheng, a partner at consultants BearingPoint said. “But the future of telecoms includes convergence between very high-speed broadband, mobile and fixed so I would describe this as a compulsory move for Vodafone.

“It is quite a high valuation, but in any given country the cable operator is in a unique place for mobile operators. So even if it is expensive, it is not a bad deal,” he added.

Ono, which had been in the process of preparing for a stock market flotation, has 1.9 million customers on its network that covers 70 per cent of Spain, or 7.2 million households out of a total of around 16 million.

Having built the network later than other cable and telecom companies, Ono can achieve broadband speeds of up to 200 megabits per second, or up to 20 times the average of rival networks.

And its footprint in more rural areas fits well with the superfast network Vodafone is currently co-building with Orange in major cities including Barcelona and Madrid. Vodafone said on Monday it would not commit to a second stage of the roll-out with Orange.

The British group, which is ramping up spending on its European networks to boost speeds, said the deal would enable it to save around 240 million euros per year, before integration costs, by the fourth full year after completion.

It also expects to generate revenue of around 1 billion euros as it seeks to cross-sell its mobile offering to Ono’s cable customers, and vice versa.

Stabilise the market 

The planned savings and the appeal of the superfast network, which will also enable the British group to offload some of its mobile traffic and stop paying so much to rent lines from Telefonica, helped soften the blow of the hefty multiple the group is paying compared with typical telecoms valuations.

A 7.2-billion-euro price tag implies a multiple of 10.4 times the target’s operating free cash flow, broadly in line with recent deals in the European cable sector.

But it is almost double the 4-billion-euro value assigned by bankers to Vodafone’s current mobile business in Spain, which with almost 14 million customers at the end of December dwarfs its new acquisition.

“Vodafone has seen revenues and core earnings from its Spanish operation decline by an aggregate of 38 per cent and 60 per cent between 2010 and 2014 estimations,” Jefferies analyst Jerry Dellis said in a note to clients.

“Securing a more credible fixed to mobile convergent offering on a faster timescale than a self-build could deliver is vital to stabilising that momentum,” he added.

According to the Spanish regulator, Vodafone had almost 25 per cent of the mobile market, and the deal which includes Ono’s 1.1 million mobile customers is likely to increase that by almost 2 percentage points. Orange has around 23 per cent of the market.

In the provision of fibre, Vodafone would now be number one.

Analysts said they expected regulators to approve the deal without requiring Vodafone to make any concessions.

The deal for Ono will be financed from existing cash resources and committed but undrawn bank facilities. Morgan Stanley advised Vodafone on the deal while Deutsche Bank acted as the lead financial adviser to the shareholders of Ono.

Ono is 54 per cent owned by investment funds Providence Equity Partners, Thomas H. Lee Partners, CCMP Capital Advisors and Quadrangle Capital.