In part two of our series on Iran, we talk to President of the National Iranian-American Council, Trita Parsi, about whether sanctions posed on Iran to hinder the government’s nuclear programme will have a progressive or damaging effect.
World Finance: Are the Iranian sanctions as debilitating as we saw in Cuba for example? Trita Parsi:In many ways no. First of all, the sanctions that have been quite debilitating have only been imposed on the country for the last couple of years, and already you are starting to see that that initial sting has started to wane off a bit, which is really typical. Sanctions tend to very harsh in the beginning, and then after a while, workarounds are found and other ways to pursue trade are found. But in the case of Cuba it’s a bit different, because the Cubans never really had a strong economy to begin with, they didn’t have natural resources and other things that the outside world was in dire need of, whereas the Iranians sit on a tremendous amount of oil as well as gas, which the world is in dire need of, and as a result they’re in a much stronger negotiating position.
I’m personally very unfavourable towards the idea of sanctions, mainly because it tends to hit the weak
World Finance: How do you feel about sanctions on a country? Trita Parsi: I’m personally very unfavourable towards the idea of sanctions, mainly because it tends to hit the weak and those in society that actually have very little to do with the decision making of whatever policy it is that the sanctioning countries are trying to change. It is, in essence, collective punishment, particularly when it comes to countries such as Iran that are not true democracies, where the people have very limited ability to impact a policy. Moreover, there’s not a lot of evidence for sanctions truly working, meaning not that they impose pain, that they can do, but that they can translate the pain into a shift in policy, and a desired shift in policy. There’s very little evidence for that. The last point I would say about it, some of my hesitations about sanctions is that, the way sanctions tend to work in really hurting the middle class, is a very negative development when it comes to the prospects of democratisation. By harming the middle class in developing countries, we’re also harming their ability to move towards democracy.
Taiwan is one of the leading countries in the world when it comes to insurance penetration rates, and one of the largest markets in the Asia-Pacific region. World Finance speaks to Executive Vice President of Cathay Century Insurance, Longman Pin-Yao Lin, about how the industry is developing and the company’s place within it.
World Finance: Well Longman, the insurance sector in Taiwan is well established, so where does Cathay Century Insurance fit in and what services do you focus on?
Longman Pin-Yao Lin: In 2013, non-life insurance premium income was $4.2bn. We got a 3.7 percent increase over previous years. The growth rate of my company, Cathay Century Insurance, was nine percent.
We are committed to providing new products to meet the demands of the public and insurance customers, and we also focus on loss prevention and risk management.
World Finance: You have a strong presence in China and other parts of Asia such as Vietnam. How different is the insurance sector in these different countries and what challenges do these differences represent?
Longman Pin-Yao Lin: China’s non-life insurance market developed very rapidly under the privatisation of motor insurance pricing, and the opening to foreign insurers of the compulsory liability market.
Chinese non-life insurance will become attractive and more efficient. But it is not easy for insurers to get into the Chinese insurance market.
Chinese non-life insurance will become attractive and more efficient
The East Asian insurance market such as Vietnam is emerging – not a well-developed market. It offers a big opportunity to do business there.
The first challenge here is you should raise up the importance of insurance, and the second challenge is the laws or regulations relevant to non-life insurance is still immature. Thirdly, you would face the shortage of human resource.
We have set up our service network there for about three years now. I hope that we can acquire the recognition of the local clients through our excellent operation.
World Finance: As a relatively new insurance market, what opportunities does the Asia-Pacific insurance sector offer?
Longman Pin-Yao Lin: The penetration and the density of insurance is lower than in the other areas, but the increase in demands from middle-class societies and insurance customers is continuously growing.
World Finance: How do you safeguard policy holders’ equity?
Longman Pin-Yao Lin: We set up many kinds of risk management measures and tools, and we’re developing another programme to improve the service efficiency to protect the equity of the policy holder.
We focus on improving our managing skills, and we aim to be the leader in Taiwan’s non-life insurance market
World Finance: Now you have a strong corporate governance policy; what initiatives do you have in place and how are they aiding social development?
Longman Pin-Yao Lin: We have operated this company based on two policies. One is steady growth, and the other is keep a good performance both in quality and quantity. We maintain a good performance of underwriting, we earn reliable profits, and we set the integrity, accountability and creativity to our core value.
World Finance: Finally, where are you targeting for growth?
Longman Pin-Yao Lin: In 2013 it is our 20 year anniversary, and we enter a new stage of operation. We face challenges, we face severe competition; we will continue to develop an outside channel and we will extend our sales force. We focus on improving our managing skills, and we aim to be the leader in Taiwan’s non-life insurance market.
By November 24, a historic deal may be struck to resolve the Iranian nuclear standoff, but what would that mean for the country’s economy and, in turn, the west? World Finance speaks to Trita Parsi, President of the National Iranian-American Council, to discuss
World Finance: Well Trita, as the deadline for a nuclear agreement with Iran and the permanent member of the United Security Council, plus Germany, draws closer, who needs an agreement more, Iran or the west?
Trita Parsi: Both sides will be much better off if there is a deal, and both sides will face rather dire consequences if they fail to reach some form of a compromise, and that balance of interests is probably one of the key reasons as to why the negotiations have been this successful thus far.
[B]oth sides will face rather dire consequences if they fail to reach some form of a compromise
World Finance: Well the sanctions were intended to prevent Iran gaining the technology to develop its nuclear programme and punish the government members whose assets are frozen. So how much has this impacted Iran?
Trita Parsi: Well, the sanctions have impacted the general economy in a very very negative way, and has made the life of average Iranians quite miserable. It has, however, not affected the access to supplies, etc. for the nuclear programme in a particularly strong way. The Iranian nuclear programme has proceeded throughout in spite of all these sanctions, and officials in the government actually have a much easier time getting around the sanctions than the average Iranian citizen.
World Finance: You published a study this year looking at how much sanctions on Iran had actually cost the United States, so what figures are we looking at there?
Trita Parsi: We did an econometric analysis, looking at the lost export revenue, not just the United States but other European countries suffered as a result of these sanctions, and the number we reached, which is a very conservative estimation for several different reasons, was somewhere between $135 and $175bn. The Europeans only have had sanctions since 2010, but during the first three years of those sanctions the Europeans lost twice as much money as the US did during that same period. But of course, since they’ve had sanctions during shorter periods, they haven’t lost as much. The US has had very strong sanctions on Iran at least since 1994.
World Finance: Considering that this standoff has been bad for both Iran and the west, what are the real reasons behind the Iran-US stalemate?
Trita Parsi: It is a geopolitical conflict that is at the root of this, the nuclear programme in many different ways is just a symptom of a deeper problem. But that problem has now become so deep that if they didn’t resolve the nuclear issue, it could actually have spilled over into a hot conflict, a military confrontation. That is not something that would be to the benefit of the United States, the west or Iran, and I think that is one of the reasons as to why the two sides have come to the table and negotiated in a much more serious way than they’d done before, because they both realised that they really needed an exit ramp out of this escalatory dynamic that they had found themselves in.
World Finance: Well if the talks on the 28th do not end with an agreement, what will this mean for Iran and the rest of the world?
[T]he two sides are speaking much more comfortably and more confidently about the deal than they did before
Trita Parsi: If it ends in such a way that they’re going to have to have another extension a couple more months, then the crisis may be able to be postponed. If it ends in such a way that it’s clearly not going to be able to come back to the table, then it’s going to very much depend upon who the rest of the world blames for the failure. If the failure falls around the responsibility of the Iranians, then you’re going to see an intensification of sanctions and a ratcheting up of other threats as well. In fact, Wendy Sherman the American lead negotiator put it this way, she said “if there’s a failure, the name of the game on both sides is going to be escalation. The US is going to try to intensify sanctions, the Iranians are probably going to escalate their nuclear activities. There’s no one who will be winning from that scenario.
World Finance: So finally, how likely is an agreement?
Trita Parsi: Some of the problems that existed in earlier rounds appears to have been resolved, the two sides are speaking much more comfortably and more confidently about the deal than they did before, and also their messaging to the domestic audiences has shifted, and that’s a very critical point, because neither side was going to go on a campaign of selling the deal until they had at least a very likely deal, and since they have started that selling campaign, I draw the conclusion that they’re much closer a deal than many people may have thought.
After a disastrous 17 months under modern retail guru Ron Johnson, recent times have seen a renewed focus for American department store JCPenney – with sales rising under incumbent CEO Myron (‘Mike’) Ullman. But a quick glance at the rise masks the darker side, and despite optimistic forecasts, incoming CEO – Home Depot executive Marvin Ellison, set to take the helm in August 2015 – has a lot of work to do before the struggling, 1,100-store retail giant can return to profitability. A large part of this comes down to whether he can learn to tread the fine line between tradition and innovation – that is, whether he can strike a balance between Johnson’s forward-thinking approach and Ullman’s successful pricing strategies.
In its prime, middle-market department store chain JCPenney was one of the retail industry’s biggest players. “You could certainly compare them to businesses like Macy’s,” says Dwight Hill, partner at American retail consulting firm McMillan Doolittle. The retail giant was floating up there in the dizzy heights of other $18bn department stores in the 1990s and early 2000s, when American consumers were hungry for red-tape deals and convenient, all-in-one shops. But as the age of the internet got into full swing, shopping habits began to change.
Then-CEO Ullman continued to draw in value-conscious customers on the hunt for a bargain. His strategy was to flood customers with coupons, slash prices with constant sales and fill the shop floor with red pen markdowns. He also formed unprecedented partnerships with the sophisticated likes of cosmetics retailer Sephora, fashion designer Ralph Lauren and clothing line Liz Claiborne. When news of a 10-year exclusive deal with the latter was released in 2009, the design company’s stocks shot up by 28 percent and JCPenney’s reached a 52-week high; Ullman was creating buzz in the nationwide chain.
Sources: Valuewalk, JCPenney, Nomura. Notes: Figures for 2014, Nomura estimate
Catastrophic decline
Ron Johnson, the entrepreneurial mind behind Apple’s innovative retail strategy as its Senior Vice President between 2000 and 2011, believed JCPenney’s reputation was dwindling – its former golden days losing out to images of dowdiness. Sales had only risen 0.7 percent from December 2010 to 2011, against a 2.7 percent increase the year before, while in the same year competitor Macy’s enjoyed a 5.4 percent rise.
Replacing Ullman after seven years at the helm in 2011, Johnson spotted an opportunity and ran with it – a little too rapidly. He decided to apply Apple’s experiential approach, including its signature empty stores and quirky in-shop features like the Genius Bar, which he was the brain behind, to JCPenney. His vision, as declared in the company’s annual report that year, was to “return to the golden age of department stores, when retailers offered truly special experiences that customers loved.”
“He had a grand plan that he was going to turn JCPenney into some sort of upmarket store,” says Neil Saunders, Managing Director of retail research agency and consulting firm Conlumino. Scrapping discounts in favour of everyday low costs, Johnson slashed prices by around 40 percent, restricted sale tags to a few select items and introduced two dedicated discount days per month. He also implemented specialty shop-in-shops, introduced designer brands like Levi’s and got rid of staff formal dress codes in favour of a far more casual approach.
Q2 sales, 2014
$2.8bn
JCPenney
$6.27bn
Macy’s
$119.3bn
Walmart
The transformations came at a hefty cost; he projected a monthly expenditure of $80m on the ambitious project, which included plans to open new stores and introduce monthly services such as free haircuts and ice cream giveaways in the summer, mirroring Apple’s emphasis on the experience. His aim was to capture a younger target audience and bring the store in line with a technologically advancing world. “One of the key challenges is, how do you take a 110-year-old company and make it relevant?” he asked in the 2011 report.
However, ditching the coupon-based strategy Ullman had implemented, while reducing stock to create a more minimalist atmosphere, backfired and the company fell into decline and revenue loss. “The unfortunate reality was that he underestimated the level of addiction the American consumer has to sales and discounts,” says Hill. “When you factor down the prices and the promotions, the prices were probably about the same. But it was the psychological factor.”
JCPenney saw its former customer base fade into the midst of its competitors and its losses hit almost $1bn, with revenue plunging by nearly 27 percent to $12.99bn between February 2011 (when Ullman was still CEO) to February 2012 (see Fig. 1).
The situation was so dire that Johnson, the same man so fervently celebrated for his Apple successes, was ousted in April 2013, just 17 months into his term. Shares had dropped 51 percent, its market capitalisation had plummeted from $6.84bn to $3.49bn according to a report by CNBC, and its comparison store sales slumped (see Fig. 2). “He just tried to turn JCPenney into something it wasn’t, and the result was catastrophic,” says Saunders.
According to a report by Yahoo!, investors didn’t hesitate to celebrate when Johnson was fired; stock shares saw a relatively sharp increase (almost 13 percent) in after-hours trading following the news. JCPenney was forced into making a quick decision, and former success story Ullman was called upon to step in and save the ailing department store. His strategy was to destroy everything that Johnson had implemented and take Penney “back to the future”.
“There was a complete backlash against what Ron was attempting to achieve, and there was very much a focus on going back to the way JCPenney was before,” says Hill. Other former Apple executives left, he got rid of the brands that weren’t working and hauled back the discounts – much to the temporary damage of the business’ margins.
JCPenney continued to suffer and in May 2013 resorted to a five-year $2.25bn loan from Goldman Sachs in order to secure essential funding for the business; the move assured investors that the store would avoid defaulting on its $200m bond debt repayment due for October 2015.
In early 2014 the crisis continued. The company closed 33 stores and made 2,000 staff cuts as part of the turnaround strategy. Ullman started to implement a second layer of initiatives including a renewed emphasis on the retailer’s private brands, a reinvigoration of the home department (which suffered under Johnson) and increased online activity.
Sources: Valuewalk, JCPenney, Nomura. Notes: Figures for 2014, Nomura estimate
The turnaround
After months of slogging away to restore the retail chain’s former glory, through a (somewhat uniquely) regressive process, the market began to refocus its attention on the business. Reuters said in May 2014 that the CEO’s turnaround strategy was paying off, with the company reporting a 6.2 percentage point increase in same store sales in the first quarter of the year. That marked the second consecutive quarter rise after nine quarters of falling sales. Going back to the pre-Johnson model saw JCPenney’s shares rise by over 25 percent in after-hours trading.
In August this year JCPenney reported a six percent rise in second quarter same store sales, with total sales amounting to $2.8bn. The Financial Times reported that while competitor Macy’s suffered from a six percent decline in shares in one week in mid-August, JCPenney had the smallest fall at 1.8 percent. Gross margins grew, from 30.8 to 33.1 percent year on year, as a result of a reduction in the number of discounted items. “Clearance sales were less than 15 percent of the total sales for the quarter, in line with historical rates,” the company’s CFO Ed Record said in a conference call to discuss JCPenney’s second quarter performance, stating his belief that they were “on track to re-establish JCPenney as a leading moderate department store in America.”
Then in September 2014 the business struck a $400m unsecured bond. Reuters reported that JCPenney would have been able to pay off its three outstanding debts (totalling $685m) without it, with credit rating agency Moody’s stating that the firm had $847m available cash as of August 2014. A source said the deal was a positive move to prove the company’s ability to draw on debt capital.
Despite the excitement surrounding JCPenney, that bond highlighted the company’s continued reliance on debt. Add that to the fact the company reported a net loss of $352m in May, and in October lowered its third quarter sales guidance, and the picture isn’t quite so rosy. Although some praised Ullman on his strategy, his reputation wasn’t completely without its flaws. When it was announced that he was returning as CEO in 2013, stock dropped 21 percent in after-hours trading and Hill says Ullman was a last resort.
Innovation is key if JCPenney wants to gain further ground in an increasingly competitive and technologically focused market
There are further flaws. As Saunders points out, the supposedly strong rates of sales growth over the past three quarters are relative to sales figures that plummeted to an all-time low. “It’s very easy to see strong sales growth when you’ve had a 20 or 30 percent decline,” he says.
“Analysts have got very excited about these numbers… and I’m a bit more cautious. I think we’ll start to see some pretty weak levels of performance, maybe as we move into next year and come up against strong comparatives.”
JCPenney indeed continues to fall behind the big names it once contended with. Macy’s $6.27bn second quarter sales this year dwarf JCPenney’s celebrated $2.8bn – and that’s before someone like Walmart is even considered (boasting sales of $119.3bn for the same quarter). “Ron’s effects are still being felt because it did a lot of damage and it’s going to take a lot of time to win back customers and get them spending,” says Saunders.
JCPenney aimed to cut capital expenditures to a tight $250m in 2014. That’s an ambitious goal given that capital expenditures amounted to $1bn back in the golden days of 2007, and Saunders believes a continuation of those cutbacks in the long-term would have a negative impact. “It’s fine to cut that capex in this period of transition when the business is trying to swing back into profitability, but unfortunately the price of doing business in retail at the moment is that you do need to spend money to innovate,” he says. “Over the medium and long term if you maintain a lower level of investment it eventually catches up with you and you will pay – it will cost in terms of sales.”
Innovation is key if JCPenney wants to gain further ground in an increasingly competitive and technologically focused market, but it’s also what brought the business down in the first place. Like other retailers, the company is caught between a rock and a hard place. It needs to strike a balance between maintaining convention and embracing innovation; between recapturing a more traditional demographic and attracting a younger and more technologically advanced one. JCPenney’s success hangs on Ellison’s ability to walk the line between the two.
Striking a balance
Johnson’s failure went some way in showing the risks a tech giant can take that a non-tech one can’t. Available funds are first and foremost the make or break. While Apple had strong gross margins, Penney didn’t; while tech shoppers are driven to a store for a specific product, department store customers aren’t; and while Apple can empty its shop floors to create a pristine, design-driven brand, JCPenney can’t.
But Hill believes that such innovation combined with the right pricing strategy – something Johnson is widely conceived to have got wrong – could take JCPenney to the next level. “The key issue with the Johnson administration was not that they came up with these innovative approaches to retail. It’s the fact they did not test.” He cites simple moves such as providing wi-fi so customers can search merchandise information in-store as the way forward, and believes experiential shopping could sit well with clothing stores. “With Apple you get to immerse yourself in the experience – that could certainly live within a department store environment, particularly in the home area.”
That’s a reality big-name retailers are starting to realise. British store Marks & Spencer recently opened an e-boutique in the Netherlands, where customers can view clothing samples in the shop on a digital clothing rack via a life-sized screen and then order products online. Sunglasses brand Chilli Beans launched a flagship concept store in Brazil, where customers can try the brand’s full range in a modern environment that also offers quirks like breakfast, a beer machine and stage shows.
Other large retailers are, like JCPenney, struggling in a changing consumer market; British supermarket chain Morrisons has hit the news repeatedly this year for its decline, while global player Tesco has likewise struggled. Tesco saw a 2.4 percent drop in sales last Christmas from the previous year in like-for-like sales and, according to recent reports, overstated its first and second quarter profits this year by around £250m ($405.8m). These retailers need to adapt their business model in order to regain consumer trust and survive at a challenging time.
Ullman was starting to implement basic innovation through a multi-channel strategy that combined online and store-driven sales; that seemed to be having some effect, with CFO Ed Record reporting a 16.7 percent increase in online sales in the second quarter compared to the previous year. Those sales were still in the negative, however, and those initiatives need to be accelerated by Ellison when he steps in next year if JCPenney is to return to profitability.
Moving forward
Both Hill and Saunders are optimistic about JCPenney’s future in the long-term. But Ellison needs to go beyond the back to basics strategy taken by Ullman and use the type of experiential and technologically advanced approaches promoted by Johnson, to bring the business forward in an increasingly innovative market. If he can combine them with the right pricing strategy and testing to avoid the pitfalls of both his predecessors, then he may be able to bring Penney back to profitability.
Even then, Saunders believes the era of department stores is over. “They’ve had their heyday and they’re a shopping format that was very relevant to American consumption and we’re not at that point any more,” he says.
But according to Hill, department stores still account for around $180m of a US retail market worth over $4bn, and online sales still only make up approximately 10 to 12 percent of retail sales in the US – which means in-store continues to represent around 90 percent of all transactions. With that in mind, a market surely remains for ailing retailers like JCPenney – the challenge is how to approach it.
The recapitalisation wave continues among Greece’s banks. One of the latest and biggest institutions to grab headlines is Eurobank. World Finance speaks to Stavros Ioannou, Senior General Manager, to discuss more.
World Finance: There have been recapitalisation efforts across southern Europe, can you tell me about the impact they’re having?
Stavros Ioannou: When we talk about the Greek banking system, we talk about four systemic banks, actually, today. All these banks have raised more than €8.9 bn, and they have perfect core Tier 1 ratios, that they rank from 14-15 percent to 17.8 percent. Actually, Eurobank is having the highest core Tier 1 ratio, and this was a tremendous opportunity for institutional investors to visit Greece and come to Greece and invest money which of course has given a big boost to the Greek banking sector. I can give you three or four examples just to understand how well this recapitalisation has affected the economic situation in Greece. One is that we are noticing lately a big deposit boost. Actually we used to have deposits of a €215 bn once upon a time, then this has dropped to €150 bn, and then this back to €164 bn. So the deposit sentiment is coming back, it’s rebalancing. The second one could be the de-leveraging. We have in the last two or three years experienced a very steep de-leveraging, which again is coming back now from the worst that we could have, which was -9.3 percent, as we speak we are at around minus three percent. So this shows that at least the people have again the courage to borrow money. And the last thing which is also important for the Greek banks is about the transparency that is coming out through the AQR tests, because I’m sure you know that the ECB is taking control of the situation, and so we feel also that this transparency will boost even more this kind of markets.
When we talk about the Greek banking system, we talk about four systemic banks, actually
World Finance: There is the average Greek person. Tell me, how have they been responding to some of these efforts?
Stavros Ioannou: What are the things that someone could see and could understand that faith is coming back, is that, of course, their deposits are increasing back, which I said earlier, which means that they have more trust in the banking system that they used to have in the past. The other part that is very important for them is that unemployment is coming down, so we have unemployment from 27.6 percent to come down to 27.1. It’s not a big decrease, but as you know unemployment rates are decelerating steeply when growth is there, when six or 12 months from growth have come down. Still in Greece, as you know, we are experiencing a minus GDP, but what I have to say, you know very well that the contraction of GDP in the last five or six years was almost 25 percent, which was big. Lately, in the first quarter of 2014, we had only -1.1 percent, in the second one we have -0.3 percent, and hopefully all the macro-economists, and the macro-economists of the bank as well, foresee that the third quarter may be and should be the first positive quarter on GDP.
World Finance: Now I now that Moody’s has recently lifted its outlook on the Greek Banking sector form negative to stable. How has that contributed to your ongoing momentum?
Stavros Ioannou: Moody’s are changing positively their evaluations, and for us it was really extremely important to see this kind of thing. Don’t forget that when the crisis came into the picture, we had a big deceleration of our levelling in these kind of companies. For Moody’s, I have to tell you that they were even in some instances much more optimistic than what the Greek situation was, which seems that they have faith, they have trust. Of course, these kinds of organisations, as you know, they base always their valuations on real data, and what I have referred earlier on in saying about unemployment, about consumption, about these kind of indicators which are extremely important indicators, I think they have been checked thoroughly by Moody’s and they have arrived to that result.
Moody’s are changing positively their evaluations, and for us it was really extremely important to see this kind of thing
World Finance: Now I know you’re not going to stay stagnant, of course you’re going to continue to keep growing. Can you tell me about some of the large scale restructuring efforts that are on the horizon?
Stavros Ioannou: One of the things that we have touched upon and we will continue to touch upon is the troubled assets. Troubled assets are for us a very important sector. What we have done in Eurobank is that we have consolidated all the non-performing and the remedial management together, so we are focusing on that. We have very noticeable results in the second quarter, which we have already published, and we feel also that in the months to come, in the quarters to come, we’ll be able to do even more good things.
World Finance: Well certainly an exciting time for Eurobank. Stavros, thank you so much for joining me today.
Listed on the Forbes Middle East Top 500 companies in the Arab world, Jordan’s Capital Bank has cemented its place at the centre of commerce in the region. World Finance speaks to its CIO, Mr. Yezan Haddadin, about the maturation of Jordan’s local banking sector and how these trends impact the investment field.
World Finance: Now 2013 of course has brought healthy growth in the banking sector, with total assets of all banks at about $60.5bn. How’s growth today?
Mr. Yezan Haddadin: Well, growth continues to be healthy in 2014, with the most recent IMF estimates for real GDP growth for the year estimated at about 3.5 percent versus 2.8 percent, which is the level we realised in 2013. Growth has been supported by government spending, by an accommodating monetary policy by the Central Bank of Jordan, and by the increase in the number of people who are seeking refuge in Jordan as a result of some of the regional instability surrounding us. With the equity capital markets not fully recovered in Jordan, the banking sector continues to be the primary source of financing and has benefited from this growth, with the increase in the level of asset for the first six months of 2014 up three percent.
World Finance: Has that growth positively impacted the investment arm of your bank?
[T]he past three years have proven that Jordan is a safe haven. We are seeing a recovery in the investment environment
Mr. Yezan Haddadin: In general terms, the investment environment in the region has been challenging over the past few years as a result of the political and security instability in the surrounding countries. Jordan, despite having a stable political environment, has been impacted by what’s happening in the region. However, the past three years, I think have proven that Jordan is a safe haven. We are seeing a recovery in the investment environment.
World Finance: Now your bank has been involved in a number of very innovative projects, particularly the Tafila Wind Farm drew a lot of headlines in the region. Why is it important for you to get involved in such projects?
Mr. Yezan Haddadin: The Tafila Wind Farm project represents the first utility scale wind farm in the Middle East. It also represents a big step in terms of securing energy independence for Jordan and securing a local source of energy at attractive prices. It puts Jordan on the map in terms of renewable energy, and the successful financing of Tafila wind farm bodes well for what we see as a robust pipeline of additional renewable energy projects that are expected to come online in the next few years.
World Finance: You’ve also been in Iraq since 2005. Tell me about some of the companies that you’ve built investment portfolios around.
In Iraq there is generally strong demand for basic infrastructure and goods and services
Mr. Yezan Haddadin: In Iraq there is generally strong demand for basic infrastructure and goods and services as a result of 30 years of under-investment due to periods of wars and economic sanctions. So if you look at the investment landscape in Iraq you will find a need and an interesting investment opportunity in almost every sector, including healthcare, education, construction and housing, and of course oil and gas, which has attracted the bulk of investment activity in the country, and the sheer size of the oil and gas sector in Iraq has attracted investors to come in and set up ancillary businesses such as logistics, drilling, equipment leasing, lodging and hospitality services for people working in the sector. So those are the sectors that we’re actively looking at, those are the sectors that we’re focused on. I would add to that the basic infrastructure projects that we’re seeing implemented there.
World Finance: Now, with regard to political instability, can you tell me how recent events in Iraq have in any way impacted investor sentiment?
Mr. Yezan Haddadin: In some areas there’s been a complete halt to whatever projects that we were looking at and considering. In other areas there has been a delay, things are still moving at a much slower pace. Fundamentally we believe that the macroeconomic picture in Iraq has not changed and therefore the investment sentiment with respect to the long term potential of the country has not changed. Iraq today is going through a very serious process of state building. Iraq represents a very unique opportunity in the form of a hydrocarbon led growth story, similar to what we witnessed in Saudi Arabia in the 1960s and 1970s, similar to what we saw in Russia in the 1990s. Our view, it’s not a matter of if, but a matter of when, and we’re very bullish on the medium to long term prospects in Iraq.
World Finance: Lots of exciting developments to watch out for. Mr. Haddadin, thank you so much for joining us today.
