Economy of Jordan: Wikis

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Economy of Jordan [1]
1 JOD obverse.jpg
1 Jordanian Dinar
Currency Jordanian dinar (JOD)
Fiscal year Calendar Year
Trade organisations WTO
Statistics
GDP $31.01 billion (2008 est.)
GDP growth 8.31% (2008 est.)
GDP per capita $5,000 (2008 est.)
GDP by sector agriculture (3.6%), industry (10.1%), services (86.3%) (2008 est.)
Inflation (CPI) 15.5% (2008 est.)
Population
below poverty line
12.5% (2001 est.)
Gini index 38.8 (2003)
Labour force 1.615 million (2008 est.)
Labour force
by occupation
Agriculture (3.6%), Industry (10.1%), Services (77.4%) (2008 est.)
Unemployment 13.5% (2007 est.)
Main industries Clothing, Phosphate Mining, Fertilizers, Pharmaceuticals, Petroleum Refining, Cement, Potash, Inorganic Chemicals, Light Manufacturing, Tourism
External
Exports $6.521 billion f.o.b. (2008 est.)
Export goods Clothing, Pharmaceuticals, Potash, Phosphates, Fertilizers, Vegetables
Main export partners United States 22.4%, Iraq 12.9%, India 8.3%, United Arab Emirates 7.8%, Saudi Arabia 7.5%, Syria 4.9% (2007)
Imports $15.65 billion f.o.b. (2008 est.)
Import goods Crude Oil, Textile Fabrics, Machinery, Transport Equipment, Manufactured Goods
Main import partners Saudi Arabia 21%, China 9.7%, Germany 7.5%, United States 4.7%, Egypt 4.4% (2007)
Public finances
Public debt $6.597 billion (31 December 2008 est.)
Revenues $5.783 billion (2008 est.)
Expenses $7.623 billion (2008 est.)
All values, unless otherwise stated, are in US dollars
Hashemite Flag of Jordan.svg
Kingdom of Jordan
Geography

Governorates · Cities
Transport · The Mediterranean
Dead Sea · Red Sea · Amman

History of Jordan

Hashemites · Transjordan · Black September
Sykes-Picot Agreement · Mandate of Palestine · PLO

Arab-Israeli conflict

1948 War · Six-Day War
Peace treaties with: Israel

Economy

Aqaba · Petra

Demographics · Culture

Music of Jordan · Sports in Jordan
University of Jordan · Arabic · Famous Jordanians

Religion

Islam in Jordan · Christianity in Jordan

Politics

Kings · Prime Ministers · Samir Rifai
King Abdullah II

Foreign affairs

United Nations · Arab League

Jordanian Armed Forces

Land Force · Intelligence Department · Air Force
His Majesty's Special Security · Royal Special Forces

Portal: Jordan

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Jordan is a small country with limited natural resources, but has improved much since its inception as a country. Its current GDP per capita soared by 351% in the Seventies. But this growth proved unsustainable and consequently shrank by 30% in the Eighties. But it rebounded with growth of 36% in the Nineties. Just over 10% of its land is arable, and even that is subject to the vagaries of a limited water supply. Rainfall is low and highly variable, and much of Jordan's available ground water is not renewable. Jordan's economic resource base centers on phosphates, potash, and their fertilizer derivatives; tourism; overseas remittances; and foreign aid. These are its principal sources of hard currency earnings. Lacking forests, coal reserves, hydroelectric power, or commercially viable oil deposits, Jordan relies on natural gas for 10% of its domestic energy needs. Jordan used to depend on Iraq for oil until the Iraq invasion in 2003 by the United States. Jordan is also classified as an emerging market.

Since King Abdullah II's accession to the throne in 1999, liberal economic policies have been introduced which has resulted in a boom lasting for a decade continuing even through 2009. Jordan is now one of the freest and most competitive economies in the Middle East scoring higher than the United Arab Emirates and Lebanon. Jordan's developed and modern banking sector is becoming the investment destination of choice due to its conservative bank policies that helped Jordan escape the worst of the global financial crisis of 2009. With instability across the region in Iraq and Lebanon, Jordan is emerging as the "business capital of the Levant" and the "the next Beirut". Jordan's economy has been growing at an annual rate of 7% for a decade.

Jordan has more free trade agreements than any other Arab country. Jordan has FTA's with the United States, Canada, Singapore, Malaysia, the European Union, Tunisia, Algeria, Libya, Algeria, and Syria. More FTA's are planned with Iraq, the Palestinian Authority, the GCC, Lebanon, and Pakistan. Jordan is a member of the Greater Arab Free Trade Agreement, the Euro-Mediterranean free trade agreement, and the Agadir Agreement.

Jordan can point to its strong leadership from the royal family and the government as well as its highly skilled workforce as the major catalysts for this great economic growth. Increased investment and exports are the main sources of Jordan's growth. Continued close integration into the European Union and GCC markets will reap vast economic rewards for the Kingdom in the coming years.

Jordan is an emerging knowledge economy. Education reform, continued privatization and economic liberalization, and economic restructuring are ensuring the path to a knowledge-based economy.

The main obstacles to Jordan's economy is scarce water supplies, complete reliance on oil imports for energy, and regional instability.

Rapid privatization of previously state-controlled industries and liberalization of the economy is spurring unprecedented growth in Jordan's urban centers like Amman and especially Aqaba. Jordan has six special economic zones that attract significant amount of investment amounting in the billions: Aqaba, Mafraq, Ma'an, Ajloun, the Dead Sea, and Irbid. Jordan also has a plethora of industrial zones producing goods in the textile, aerospace, defense, ICT, pharmaceutical, and cosmetic sectors.

Jordan is pinning its hopes on tourism, future uranium and oil shale exports, trade, and ICT for future economic growth.

Contents

Exchange Rates

This is a chart of trend of gross domestic product of Jordan at market prices estimated by the International Monetary Fund with figures in millions of Jordanian Dinars.

Year Gross Domestic Product US Dollar Exchange Inflation Index (2000=100)
1980 1,165 0.29 Jordanian Dinars 35
1985 1,971 0.39 Jordanian Dinars 45
1990 2,761 0.66 Jordanian Dinars 70
1995 4,715 0.70 Jordanian Dinars 87
2000 5,999 0.70 Jordanian Dinars 100
2005 9,118 0.70 Jordanian Dinars 112

For purchasing power parity comparisons, the Jordanian Dinar is exchanged per US dollar at 0.359.

Jordan's population is 6,342,948[2]

Economic Overview

Since 1987, Jordan has struggled with a substantial debt burden and rising unemployment. In 1989, efforts to increase revenues by raising prices of certain commodities and utilities triggered riots in the south. The mood of political discontent that swept the country in the wake of the riots helped set the stage for Jordan's moves toward democratization.

Jordan also suffered adverse economic consequences from the 1990-91 Gulf War. While tourist trade plummeted, the Gulf states' decision to limit economic ties with Jordan deprived it of worker remittances, traditional export markets, a secure supply of oil, and substantial foreign aid revenues. UN sanctions against Iraq—Jordan's largest pre-war trading partner—caused further hardships, including higher shipping costs due to inspections of cargo shipments entering the Gulf of Aqaba. Finally, absorbing up to 300,000 returnees from the Gulf countries exacerbated unemployment and strained the government's ability to provide essential services.

King Abdullah has repeatedly emphasised that Jordan has a bright future and that it compares favourably with much of the region on key social and economic indicators. Even though inflation pushed its way up to the 13% mark in the first half of 2008, the shocks to the system are far less than in neighbouring Egypt where inflation crept up to around 23%. Jordan’s economy has come under some pressure in 2007 and perhaps more so in 2008, primarily from global increases in oil and food prices that have affected the government budget and the current account balance. While Jordan is facing enormous economic pressures, it is managing to sustain good levels of GDP growth and foreign investment. There are a number of sectors that have performed well in 2007, including minerals, pharmaceuticals and tourism. Light industry has to face stronger competition and rising energy costs. For the construction materials sector, Chinese goods benefiting from low labour costs and Gulf products capitalising on low energy costs could make life difficult for many local producers of light industrial goods. However, Jordan’s free trade agreements, investment incentives and low transport costs for shipping to major markets are still drawing producers to the country. Steel and cement producers are not expected to face the same challenges as light industry and cement production is due to rise, with two additional plants under construction and likely to provide further export income.

The government is also pushing ahead with the establishment of economic zones to attract new industry and services to less developed areas of the country where problems of unemployment and poverty are particularly acute. Gulf economic growth should ensure more job opportunities for Jordanians in the Gulf and help to support living standards for many Jordanian families. However, its domestic developments will be the key to improving conditions. The government will push ahead with major projects such as the housing initiative, the economic zones, and attracting knowledge-intensive investments that require high-skilled labour and vocational programmes in the hope of creating more jobs and helping to counteract the impact of higher living costs, while at the same time hoping that global developments do not make its job even harder.[1]

Macro-economic trend

Although the population is highly educated, its high growth rate (3.4% in the late 1990s, but 2.8% since 2003 and declining) and relative youth (more than 50% of Jordanians are under 16) make it difficult for the economy to generate jobs and sustain living standards. However, campaigns to boost female education and awareness about contraceptives have since gradually if somewhat belatedly reduced population growth. It is expect to remain over 2.5% till the end of the decade.

Jordan's geographic disposition and sole port of Aqaba puts it far from other markets makes its exports expensive to deliver. The problem is further compounded by complicated government procedures and bureaucratic culture. A further problem remains emphasis on large scale foreign investment and limited programmes to enhance local enterprise and productivity. This in turn means that several industries in Jordan are protected by the government and run near local monopolies (these include the Jordan Refinery Company among others, where steel and cement imports are limited) and government levies on raw materials generally translate to higher costs of production. A further problem can be found in local small and medium sized enterprises local and regional outlook rather than an orientation towards broader export markets.

Political disputes among its traditional trading partners—Iraq, Saudi Arabia, and the Gulf states—frequently restrict regional trade and development. King Abdullah II has encouraged his government to liberalise the economy, improve economic ties in the region, and seek opportunities in the global information economy.

While the Amman Stock Market (ASE) started well in 2007 and the market was up by 11% at the end of the first quarter, it started to decline and was down by 6% at the end of the second quarter and by another 1% at the end of the third quarter. Analysts were generally being cautious about expectations for the full year, with some thinking a 5-10% improvement would be a solid achievement. They were taken by surprise as key sectors such as minerals and banking picked up strongly in the last quarter of the year and carried the market with them. The resurgence in confidence and liquidity in the region as the price of oil began to fall also contributed to the positive turn. At the end of 2007 market capitalisation was up to JD29.2bn ($41.5bn), a rise of 39% over 2006 and equivalent to 289% of Jordan’s GDP as a result of better prices, capital increases and a strong appetite for initial public offerings. The number of companies that are listed on the market has increased from 161 in 2003 to 245 by the end of 2007. While inflation and the credit crunch mean that 2008 will be a challenging year, the Jordanian market is less volatile than neighbouring markets and there are hopes that the effective presence of strong regulators and good reporting will help to mitigate the global financial crisis.[2]

Industries

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Agriculture, forestry, and fishing

Despite increases in production, the agriculture sector’s share of the economy has declined steadily to just 2.4 percent of gross domestic product by 2004. About 4 percent of Jordan’s labor force worked in the agricultural sector in 2002. The most profitable segment of Jordan’s agriculture is fruit and vegetable production (including tomatoes, cucumbers, citrus fruit, and bananas) in the Jordan Valley. The rest of crop production, especially cereal production, remains volatile because of the lack of consistent rainfall. Fishing and forestry are negligible in terms of the overall domestic economy. The fishing industry is evenly divided between live capture and aquaculture; the live weight catch totaled just over 1,000 metric tons in 2002. The forestry industry is even smaller in economic terms; approximately 240,000 total cubic meters of roundwood were removed in 2002, the vast majority for fuelwood.[3]

Mining and minerals

Potash and phosphates are among the country’s main economic exports. In 2003 approximately 2 million tons of potash salt production translated into US$192 million in export earnings, making it the second most lucrative exported good. Potash production totaled 1.9 million tons in 2004 and 1.8 million tons in 2005. In 2004 approximately 6.75 million tons of phosphate rock production generated US$135 million in export earnings, placing it fourth on Jordan’s principal export list. With production totaling 6.4 million tons in 2005, Jordan was the world’s third largest producer of raw phosphates. In addition to these two major minerals, smaller quantities of unrefined salt, copper ore, gypsum, manganese ore, and the mineral precursors to the production of ceramics (glass sand, clays, and feldspar) are also mined.[3]

Industry and manufacturing

A recycling project situated a few km outside Amman. The men who work there are usually Egyptian immigrants who work for a few hundred pounds a month in a dangerous working environment, full of toxic fumes where they are required to carry out hard manual tasks.

The industrial sector, which includes mining, manufacturing, construction, and power, accounted for approximately 26 percent of gross domestic product in 2004 (including manufacturing, 16.2 percent; construction, 4.6 percent; and mining, 3.1 percent). More than 21 percent of the country’s labor force was reported to be employed in this sector in 2002. The main industrial products are potash, phosphates, pharmaceuticals, cement, clothes, and fertilizers. The most promising segment of this sector is construction. In the past several years, demand has increased rapidly for housing and offices of foreign enterprises based in Jordan to better access the Iraqi market. The manufacturing sector has grown as well (to nearly 20 percent of GDP by 2005), in large part as a result of the United States–Jordan Free Trade Agreement (ratified in 2001 by the U.S. Senate); the agreement has led to the establishment of approximately 13 qualifying industrial zones (QIZs) throughout the country. The QIZs, which provide duty-free access to the U.S. market, produce mostly light industrial products, especially ready-made garments. By 2004 the QIZs accounted for nearly US$1.1 billion in exports according to the Jordanian government.[3]

Jordan’s free trade agreement (FTA) with the US – the first in the Arab world – has already made the US one of Jordan’s most significant markets. By 2010 it will have barrier-free export access in almost all sectors. A number of trade agreements with countries in the Middle Eastern and North African regions and beyond should also reap increasing benefits, not in the least the Agadir Agreement, which is seen as a precursor to an FTA with the EU. Jordan also recently signed an FTA with Canada. Furthermore, Jordan’s plethora of industrial zones offering tax incentives, low utility costs and improved infrastructure links are helping incubate new developments. The relatively high skills level is also a key factor in promoting investment and stimulating the economy, particularly in value-added sectors. Despite the fact that Jordan has few natural resources it does benefit from abundant reserves of potash and phosphates, which are widely used in the production of fertilisers. Exports by these industries are expected to have a combined worth of $1bn in 2008. Other important industries include pharmaceuticals, which exported around $435m in 2007 and $260m in the first half of 2008 alone, as well as textiles, which were worth $1.19bn in 2007. Although the value of Jordan’s industrial sector is high, the kingdom faces a number of challenges. Because the country is dependent on importing raw materials, it is vulnerable to price volatility. Shortages in water and power also make consistent development difficult. Despite these challenges, Jordan’s economic openness and long-standing fertiliser and pharmaceutical industries should continue to provide a solid source of foreign currency.[3]

Jordan has a plethora of industrial zones and special economic zones aimed at increasing exports and making Jordan an industrial giant. The Mafraq SEZ is focused on industry and logistics hoping to become the regional logistics hub with air, road, and rail links to neighboring countries and eventually Europe and the Gulf. The Ma'an SEZ is primaril industrial focusing on satisfying domestic demand and reducing reliance on imports. With a national rail system under construction, Jordan expects trade to grow significantly and Jordan will mostly become the trade hub of the Levant and even the Middle East region as a whole due to its geography.

Telecoms and IT

Telecommunications is a billion-dollar industry with estimates showing that core markets of fixed-line, mobile and data service generate annual revenue of around JD836.5m ($1.18bn) per year, which is equivalent to 13.5% of GDP. Jordan's IT sector is the most developed and competitive in the region due to the 2001 telecom liberalization. Market share of the mobile sector, the most competitive telecoms market, is currently fairly evenly divided between the three operators, with Zain, owned by MTC Kuwait, maintaining the largest share (39%), followed by France Telecom’s brand Orange (36%) and Umniah (25%), which is 96% owned by Bahrain’s Batelco. End of year figures for 2007 show that the market trend is towards greater parity, with Zain’s share falling in the space of a year from 47% in 2006 and the other two operators picking up subscribers. The increased competition has led to pricing that is more favourable to consumers. Mobile penetration is currently around 80%.

After a promising start, Jordan’s ICT development has fallen off pace, but an ambitious new government strategy, which will take the sector through to 2011, aims to bring Jordan back up to speed. The ICT sector currently accounts for over a tenth of the kingdom’s GDP. This figure includes foreign investment of $210m. Total domestic revenue from the sector in 2006 amounted to $580m—growth of almost 40% from the previous year. However employment growth in the sector was low: up 6.8% from 10,032 to 10,172 in 2006. The government is working to address this problem by developing ICT training and working to increase the overall penetration of ICT in Jordanian society, under the new ICT National Strategy 2007-2011.The new policy outlines a number of objectives for the country to reach within the next three years, including almost doubling the size of the sector to $3bn, developing 35,000 jobs and pushing internet penetration up to 50%. Jordan’s ICT sector still has a way to go to meet its ambitious goals, but the new strategy puts the country back on track. [4]

Energy

see also: Oil shale in Jordan

Energy remains perhaps the biggest challenge for continued growth for Jordan’s economy. Spurred by the surge in the price of oil to more than $145 a barrel at its peak, the Jordanian government has responded with an ambitious plan for the sector. The country’s lack of domestic resources is being addressed via a $14bn investment programme in the sector. The programme aims to reduce reliance on imported products from the current level of 96%, with renewables meeting 10% of energy demand by 2020 and nuclear energy meeting 60% of energy needs by 2035. The government also announced in 2007 that it would scale back subsidies in several areas, including energy, where there have historically been regressive subsidies for fuel and electricity. In another new step, the government is opening up the sector to competition, and intends to offer all the planned new energy projects to international tender. [5]

Unlike most of its neighbors, Jordan has no significant petroleum resources of its own and is heavily dependent on oil imports to fulfill its domestic energy needs. In 2002 proved oil reserves totaled only 445,000 barrels. Jordan produced only 40 barrels per day in 2004 but consumed an estimated 103,000 barrels per day. According to U.S. government figures, oil imports had reached about 100,000 barrels per day in 2004. The Iraq invasion of 2003 disrupted Jordan’s primary oil supply route from its eastern neighbor, which under Saddam Hussein had provided the kingdom with highly discounted crude oil via overland truck routes. Since late 2003, an alternative supply route by tanker through the Al Aqabah port has been established; Saudi Arabia is now Jordan’s primary source of imported oil; Kuwait and the United Arab Emirates (UAE) are secondary sources. Although not so heavily discounted as Iraqi crude oil, supplies from Saudi Arabia and the UAE are subsidized to some extent.[3]

In the face of continued high oil costs, interest has increased in the possibility of exploiting Jordan's vast oil shale resources, which are estimated to total approximately 40 billion tons, 4 billion tons of which are believed to be recoverable. Jordan's oil shale resources could produce 28 billion barrels of oil, enabling production of about 100,000 barrels per day. The oil shale in Jordan has the fourth largest in the world which currently, there are several companies who are negotiating with the Jordanian government about exploiting the oil shale like Royal Dutch Shell, Petrobras and Eesti Energia.

Natural gas is increasingly being used to fulfill the country’s domestic energy needs, especially with regard to electricity generation. Jordan was estimated to have only modest natural gas reserves (about 6 billion cubic meters in 2002), but new estimates suggest a much higher total. In 2003 the country produced and consumed an estimated 390 million cubic meters of natural gas. The primary source is located in the eastern portion of the country at the Risha gas field. The country imports the bulk of its natural gas via the recently completed Arab Gas Pipeline that stretches from the Al Arish terminal in Egypt underwater to Al Aqabah and then to northern Jordan, where it links to two major power stations. This Egypt–Jordan pipeline supplies Jordan with approximately 1 billion cubic meters of natural gas per year.[3]

The state-owned National Electric Power Company (NEPCO) produces most of Jordan’s electricity (94%). Since mid-2000, privatization efforts have been undertaken to increase independent power generation facilities; a Belgian firm was set to begin operations at a new power plant near Amman with an estimated capacity of 450 megawatts. Power plants at Az Zarqa (400 megawatts) and Al Aqabah (650 MW) are Jordan's other primary electricity providers. As a whole, the country consumed nearly 8 billion kilowatt-hours of electricity in 2003 while producing only 7.5 billion kWh of electricity. Electricity production in 2004 rose to 8.7 billion kWh, but production must continue to increase in order to meet demand, which the government estimates will continue to grow by about 5% per year. About 99 percent of the population is reported to have access to electricity.[3]

Transport

The transportation sector on average contributes some 10% to Jordan’s GDP, with transportation and communications accounting for $2.14bn in 2007. Well aware of the sector’s importance to the country’s service and industry-oriented economy, in 2008 the government formulated a new national transport strategy with the aim to improve, modernise and further privatise the sector. With no imminent solution to the ongoing security crisis in Iraq in sight, prospects for the Jordanian transport sector as a whole look bright. The country will arguably remain one of the major transit points for both goods and people destined for Iraq, while the number of tourists visiting Jordan is set to continue to increase. The main events to follow in the near future are the relocation of Aqaba’s main port, a national railway system, and the construction of a new terminal at QAIA. Volatility in fuel prices is almost certainly going to have negative effects on operational costs and as such may hamper the sector’s average annual growth of around 6%. However, uncertain fuel prices also offer a great deal of incentive to boost private investments in alternative modes of transport such as public buses and improved trains.[6]

Media and Advertising

Although the state remains a major influence, Jordan’s media sector has seen significant privatisation and liberalisation efforts in recent years. Based on official rack rates, research firm Ipsos estimated that the advertisement sector spent some $280m towards publicity in Jordan’s media, 80% of which was spent on newspapers, followed by TV, radio and magazines. The biggest event of 2007 was the cancelled launch of ATV, the kingdom’s first private broadcaster. As a result, the state-owned Jordan TV (JTV) remains the country’s sole broadcaster. In recent years, Jordan has also seen a spectacular rise in the number of blogs, websites and news portals as sources of news information. The increasing diversification of Jordan’s media is a good sign and should boost advertising revenues and private initiatives.

Recording growth of 30%, 2007 turned out to be yet another outstanding year for Jordan’s advertising industry. Following nearly a decade of double-digit growth, however, most publicity specialists expect to see a relative slowdown in 2008. Unlike 2007, no major campaigns were planned for the first part of 2008. Additionally, the Jordanian advertising had some catching up to do with the rest of the region in terms of average expenditure per capita. As the sector matures, it is only normal for growth figures to gradually decrease. Since 2000 total ad spend increased from $77m to $280m in 2007, an increase of 260%. The Jordanian telecoms sector was the biggest ad spender in 2007, accounting for around 20% of the market, followed by banking and finance sector (12%), services industry (11%), real estate (8%) and the automotive sector (5%). In the next year, particularly if there is a downturn, it will become increasingly important for the sector to develop good vocational training and to begin to take advantage of new media markets.[7]

Services and tourism

Services accounted for more than 70 percent of gross domestic product (GDP) in 2004. The sector employed nearly 75 percent of the labor force in 2002.[3]

The banking sector is widely regarded as advanced by both regional and international terms. Overall results for Jordan’s banking sector in 2007 were good, with the total profits of the 15 listed banks up 14.89% to JD640m ($909m). Jordan’s strong growth of 6% in 2007 was reflected in a 20.57% expansion in net credit to JD17.9bn ($25.4bn) by the end of the year. Trade, construction and industry saw most improvement. Many banks suffered from the sharp correction in the Amman Stock Market in 2006, encouraging them to focus on core banking business in 2007, and this was reflected in a 16.65% rise in net interest and commission income to JD1.32bn ($1.87bn). They were fortunate, however, that the stock market also picked up in 2007 and total portfolio income losses decreased. Also, although Jordan’s banking sector is small by global standards, it has attracted strong interest from regional investors in Lebanon and the GCC. New regulations introduced by the CBJ, in addition to historical political stability, have helped to create a favourable investment environment. High demand for low-income housing, as well as infrastructure improvement, should mean a positive outlook for Jordan’s banking sector. Its conservative policies helped Jordan avoid the global financial crisis of 2009, Jordanian banks was one of the only countries that posted a profit in 2009.[8]

Contributing an estimated JD477.5m ($678.05m), or 4.25% of Jordan’s GDP, according to figures from the Central Bank, the construction sector performed strongly in 2007 and is set to continue to do so going forward, despite rising fuel and materials costs. While the construction of high-end properties will come to a relative slowdown, the sector’s main growth will be recorded in the low- and middle-class market segments. In 2007 the Great Amman Municipality (GAM) completed its master plan for the capital, which is expected to grow from 700 km2 today to 1700 km2 by 2025. Amman is to change from a predominantly horizontal to a largely vertical city, as the urban blueprint allows for the construction of various clusters of high-rises. Other significant developments outside Amman include the rapid residential build-up of Zarqa, the ongoing transformation of Aqaba into a commercial and tourist centre, and the construction of a series of high-end hotels and tourist resorts along the Dead Sea. Finally, in terms of infrastructure, a new airport terminal, the Amman ring road, as well as a light rail between the capital and Zarqa are being constructed.

Despite recording a relative slowdown compared to the expansion of recent years, Jordan’s construction and real estate market continued to grow in 2007. Trading totaled JD5.6bn ($8bn), up from JD5.2bn ($7.4bn) in 2006, according to Jordan’s Land and Survey Department. Although the years of astounding growth—some 75% in 2004 and 48% in 2005—seem to have passed, the future looks bright for real estate, as demand continues to outstrip supply, while Jordan remains a very attractive investment destination for foreign businesses, second-home buyers and Jordanians working abroad. With Jordan’s continuing sharp population growth, as well as its strategic location at the heart of the Middle East, the kingdom’s main market drivers indicate a bright future for years to come. Although a number of class-A office space developments are currently under construction, it will take a few years to close the gap between demand and supply. The Amman retail market may become more saturated in the short term. Consequently, developers may turn to other cities to build supermarkets and malls.

Jordan’s insurance market, with 29 companies operating in a country of just 5.7m people, is saturated, despite regulatory encouragements for mergers and acquisitions. In terms of market share based on premiums, motor coverage accounts for 42.4%, medical insurance 18.6%, fire and property damage 17%, life 9.8%, marine and transport 7.9% and other insurance the remaining 4.3%. The insurance sector made up 2.52% of GDP in 2006, up from 2.43% in 2005. Current plans call for increasing the sector’s GDP contribution to 7% in the short term and 10% in the long term. The sector holds great potential but remains underdeveloped. Region-wide price increases and a lack of consumer understanding of products are two major challenges. In addition, cultural considerations, including religion, make improving market penetration difficult. The cost of living has also risen, and the IMF forecasts that the inflation rate will reach 9% in 2008. Salaries have remained unchanged, however, leaving consumers with less disposable income. Other than mandatory motor coverage, insurance products are considered a luxury by average Jordanians, who must often prioritise spending. There will likely only be a few changes to the market in the coming year. Members of the sector would like to see greater coordination among the regulators and those working for the kingdom’s legal system in order to improve insurance laws.[9]

The state of the tourism sector is widely regarded as below potential, especially given the country’s rich history, ancient ruins, Mediterranean climate, and diverse geography. Despite personal appeals by the king and an increasingly sophisticated marketing campaign, the industry is still adversely affected by the political instability of the region. More than 5 million visitors entered Jordan in 2004, generating US$1.3 billion in earnings. Earnings from tourism rose to US$1.4 billion in 2005. The fact that the bulk of Jordan’s tourist trade emanates from elsewhere in the Middle East should contribute to the industry’s growth potential in the years ahead, as Jordan is relatively stable, open, and safe in comparison to many of its neighbors.[3] The tourism sector remains an important element of the Jordanian economy, directly employing some 30,000 Jordanians and contributing 10% to the kingdom’s GDP. Despite a decline in Arab and Gulf visitors, 2007 marked a year of steady growth for the tourism sector. Revenues jumped 13% to nearly $2.11bn during the first 11 months, up from $1.86bn for the same period in 2006. The sector is overseen by the government’s National Tourism Strategy (NTS), which was established in 2004 to take the industry through 2010. NTS aimed to double tourism revenues during the period and to increase tourism-related jobs to 91,719. The first goal has already been met but the second one might be more of a challenge: between 2004 and 2007 the total number of people employed in the sector rose from 23,544 to 35,484. This is impressive growth, but less than half the 90,000-or-more goal. NTS hopes to place Jordan as a boutique destination for high-end tourists. The strategy identifies seven priorities or niche markets: cultural heritage (archaeology); religious; ecotourism; health and wellness; adventure; meetings, incentives, conventions and exhibitions (MICE); and cruises. The Jordan Tourism Board’s (JTB) marketing budget has increased in the past year from JD6m ($8.52m) to JD11.5m ($16.3m). These are positive times for tourism in Jordan, with steady growth and major projects in the pipeline. The sector has to make improvements of infrastructure and marketing, but overall the industry has been improving for the past several years.[10]

External trade

Jordanian exports in 2006

Since 1995, economic growth has been low. Real GDP has grown at only about 1.5% annually, while the official unemployment has hovered at 14% (unofficial estimates are double this number). The budget deficit and public debt have remained high and continue to widen, yet during this period inflation has remained low due mainly to stable monetary policy and the continued peg to the United States Dollar. Exports of manufactured goods have risen at an annual rate of 9%. Monetary stability has been reinforced, even when tensions were renewed in the region during 1998, and during the illness and ultimate death of King Hussein in 1999.

Expectations of increased trade and tourism as a consequence of Jordan's peace treaty with Israel have been disappointing though not unexpected. Security-related restrictions to trade with the West Bank and the Gaza Strip have led to a substantial decline in Jordan's exports there. Following his ascension, King Abdullah improved relations with Arabic states of the Persian Gulf and Syria, but this brought few real economic benefits. Most recently the Jordanians have focused on WTO membership and a Free Trade Agreement with the U.S. as means to encourage export-led growth.

Investment

Jordan's economy has skyrocketed for almost a decade since King Abdullah II instituted liberal economic reforms with billions invested in Jordan every year from the Gulf, Europe, and America. The main centers of investment are Amman, Aqaba, and the Dead Sea. Significant foreign capital is also invested in Jordan's industrial zones and SEZs.

The stock market capitalisation of listed companies in Jordan was valued at $37,639 million in 2005 by the World Bank.[11]

As of September 2009 it was reported that Crisis hurts Israeli factories in Irbid[4].

Salaries

Jordan has the second highest salaries outside the Persian Gulf states, with only Lebanon having higher salaries. 41% of Jordanians earn above $1000 per month, 30% of Jordanians earn between $500 and $1000 per month and 29% earn under $500 a month. In addition, Jordan's salaries are relatively higher than most middle-income nations. Also, approximately 700,000 Jordanians work in the wealthy Persian Gulf states, with Saudi Arabia and the United Arab Emirates being the most popular, and send home 3 billion dollars every year, approximately $4,000 per person.[5]

Aqaba

Though a town of only 100,000 people, Aqaba is setting an example of how to attract investment. In a decade, domestic and foreign investment into the Aqaba region has increased dramatically and the town’s population is set to double over the next 10 years. Certainly, the town benefits from some natural advantages. Located at the southern tip of the country, between Saudi Arabia and Israel on the shores of the Red Sea, the city is close to the Suez Canal, with easy access to key trade centres in both the Middle East and Africa. Aqaba is also the kingdom’s only deep-water port town, taking up most of Jordan’s scant 27 km (17 mi) of coastline. The Aqaba Special Economic Zone (ASEZ) has been responsible for most of this development since it opened in 2001.

It covers 375 km2 and offers a basket of tax and tariff incentives, as well as full repatriation rights and more flexible operating regulations. There is a 5% flat tax on most economic activities, no tariffs on imported goods, no currency restrictions and no property taxes for corporate land. Additionally – and somewhat controversially, given Jordan’s past issues with unemployment – companies based in ASEZ are allowed to employ up to 70% foreign workers in their operations. Jordan’s investment profile has been growing nationally, but according to the Jordan Investment Board (JIB), the ASEZ has exceeded investment targets by 33%. By 2006 it had already brought in around $8bn in investment, some $2bn more than the original target of $6bn by 2020. ASEZ expects to attract a further $12bn spread across a number of sectors, including tourism, finance and industry. The Development Law of 2008 set in place a universal framework for special development areas based on the Aqaba model.[12]

See also

References

Notes

Bibliography

  • Brand, Laurie. Jordan’s Inter-Arab Relations: The Political Economy of Alliance Making. New York: Columbia University Press, 1994.
  • Country Profile: Jordan 1995-96. London: The Economist Intelligence Unit, 1995.
  • International Monetary Fund Jordan Page
  • Jeffreys, Andrew ed. Emerging Jordan 2003. London: The Oxford Business Group, 2002.
  • Maciejewski, Edouard and Ahsan Mansur eds. Jordan: Strategy for Adjustment and Growth. Washington, D.C.: International Monetary Fund, 1996.
  • Piro, Timothy. The Political Economy of Market Reform in Jordan. Lanham, Maryland: Rowman & Littlefield Publishers, 1998.
  • Prados, Alfred and Jeremy Sharp. Congressional Research Service. Report for Congress. Jordan: U.S. Relations and Bilateral Issues. Washington, D.C.: Library of Congress, 2006.
  • Robins, Philip. Jordan to 1990: Coping with Change. London: The Economist Intelligence Unit, 1986.

External links


Economy of Jordan [1]
File:1 JOD
1 Jordanian Dinar
Currency Jordanian dinar (JOD)
Fiscal year Calendar Year
Trade organisations WTO
Statistics
GDP $31.01 billion (2008 est.)
GDP growth 8.31% (2008 est.)
GDP per capita $5,000 (2008 est.)
GDP by sector agriculture (3.6%), industry (10.1%), services (86.3%) (2008 est.)
Inflation (CPI) 15.5% (2008 est.)
Population
below poverty line
12.5% (2001 est.)
Gini index 38.8 (2003)
Labour force 1.615 million (2008 est.)
Labour force
by occupation
Agriculture (3.6%), Industry (10.1%), Services (77.4%) (2008 est.)
Unemployment 13.5% (2007 est.)
Main industries Clothing, Phosphate Mining, Fertilizers, Pharmaceuticals, Petroleum Refining, Cement, Potash, Inorganic Chemicals, Light Manufacturing, Tourism
Ease of Doing Business Rank 100th[2]
External
Exports $6.521 billion f.o.b. (2008 est.)
Export goods Clothing, Pharmaceuticals, Potash, Phosphates, Fertilizers, Vegetables
Main export partners United States 22.4%, Iraq 12.9%, India 8.3%, United Arab Emirates 7.8%, Saudi Arabia 7.5%, Syria 4.9% (2007)
Imports $15.65 billion f.o.b. (2008 est.)
Import goods Crude Oil, Textile Fabrics, Machinery, Transport Equipment, Manufactured Goods
Main import partners Saudi Arabia 21%, China 9.7%, Germany 7.5%, United States 4.7%, Egypt 4.4% (2007)
Public finances
Public debt $6.597 billion (31 December 2008 est.)
Revenues $5.783 billion (2008 est.)
Expenses $7.623 billion (2008 est.)
All values, unless otherwise stated, are in US dollars
Hashemite
Kingdom of Jordan
Geography

Governorates · Cities
Transport · The Mediterranean
Dead Sea · Red Sea · Amman

History of Jordan

Hashemites · Transjordan · Black September
Sykes-Picot Agreement · Mandate of Palestine · PLO

Arab-Israeli conflict

1948 War · Six-Day War
Peace treaties with: Israel

Economy

Aqaba · Petra

Demographics · Culture

Music of Jordan · Sports in Jordan
University of Jordan · Arabic · Famous Jordanians

Religion

Islam in Jordan · Christianity in Jordan

Politics

Kings · Prime Ministers · Samir Rifai
King Abdullah II

Foreign affairs

United Nations · Arab League

Jordanian Armed Forces

Land Force · Intelligence Department · Air Force
His Majesty's Special Security · Royal Special Forces

Portal: Jordan

Jordan is a small country with limited natural resources, but has improved much since its inception as a country. Its current GDP per capita soared by 351% in the Seventies. But this growth proved unsustainable and consequently shrank by 30% in the Eighties. But it rebounded with growth of 36% in the Nineties. Just over 10% of its land is arable, and even that is subject to the vagaries of a limited water supply. Rainfall is low and highly variable, and much of Jordan's available ground water is not renewable. Jordan's economic resource base centers on phosphates, potash, and their fertilizer derivatives; tourism; overseas remittances; and foreign aid. These are its principal sources of hard currency earnings. Lacking coal reserves, hydroelectric power, large tracts of forest or commercially viable oil deposits, Jordan relies on natural gas for 10% of its domestic energy needs. Jordan used to depend on Iraq for oil until the Iraq invasion in 2003 by the United States. Jordan is also classified as an emerging market.

Since King Abdullah II's accession to the throne in 1999, liberal economic policies have been introduced which has resulted in a boom lasting for a decade continuing even through 2009. Jordan is now one of the freest and most competitive economies in the Middle East scoring higher than the United Arab Emirates and Lebanon. Jordan's developed and modern banking sector is becoming the investment destination of choice due to its conservative bank policies that helped Jordan escape the worst of the global financial crisis of 2009. With instability across the region in Iraq and Lebanon, Jordan is emerging as the "business capital of the Levant" and "the next Beirut". Jordan's economy has been growing at an annual rate of 7% for a decade.

Jordan has more free trade agreements than any other Arab country. Jordan has FTA's with the United States, Canada, Singapore, Malaysia, the European Union, Tunisia, Algeria, Libya, Algeria, and Syria. More FTA's are planned with Iraq, the Palestinian Authority, the GCC, Lebanon, and Pakistan. Jordan is a member of the Greater Arab Free Trade Agreement, the Euro-Mediterranean free trade agreement, and the Agadir Agreement.

Jordan can point to its strong leadership from the royal family and the government as well as its highly skilled workforce as the major catalysts for this great economic growth. Increased investment and exports are the main sources of Jordan's growth. Continued close integration into the GCC markets will reap vast economic rewards for the Kingdom in the coming years.

Jordan is an emerging knowledge economy. Education reform, continued privatization and economic liberalization, and economic restructuring are ensuring the path to a knowledge-based economy.

The main obstacles to Jordan's economy is scarce water supplies, complete reliance on oil imports for energy, and regional instability.

Rapid privatization of previously state-controlled industries and liberalization of the economy is spurring unprecedented growth in Jordan's urban centers like Amman and especially Aqaba. Jordan has six special economic zones that attract significant amount of investment amounting in the billions: Aqaba, Mafraq, Ma'an, Ajloun, the Dead Sea, and Irbid. Jordan also has a plethora of industrial zones producing goods in the textile, aerospace, defense, ICT, pharmaceutical, and cosmetic sectors.

Jordan is pinning its hopes on tourism, future uranium and oil shale exports, trade, and ICT for future economic growth.

Contents

Exchange Rates

This is a chart of trend of gross domestic product of Jordan at market prices estimated by the International Monetary Fund with figures in millions of Jordanian Dinars.

Year Gross Domestic Product US Dollar Exchange Inflation Index (2000=100)
1980 1,165 0.29 Jordanian Dinars 35
1985 1,971 0.39 Jordanian Dinars 45
1990 2,761 0.66 Jordanian Dinars 70
1995 4,715 0.70 Jordanian Dinars 87
2005 9,118 0.70 Jordanian Dinars 112

For purchasing power parity comparisons, the Jordanian Dinar is exchanged per US dollar at 0.359.

Jordan's population is 6,342,948[3]

Economic Overview

Since 1987, Jordan has struggled with a substantial debt burden and rising unemployment. In 1989, efforts to increase revenues by raising prices of certain commodities and utilities triggered riots in the south. The mood of political discontent that swept the country in the wake of the riots helped set the stage for Jordan's moves toward democratization.

Jordan also suffered adverse economic consequences from the 1990-91 Gulf War. While tourist trade plummeted, the Gulf states' decision to limit economic ties with Jordan deprived it of worker remittances, traditional export markets, a secure supply of oil, and substantial foreign aid revenues. UN sanctions against Iraq—Jordan's largest pre-war trading partner—caused further hardships, including higher shipping costs due to inspections of cargo shipments entering the Gulf of Aqaba. Finally, absorbing up to 300,000 returnees from the Gulf countries exacerbated unemployment and strained the government's ability to provide essential services.

King Abdullah has repeatedly emphasised that Jordan has a bright future and that it compares favourably with much of the region on key social and economic indicators. Even though inflation pushed its way up to the 13% mark in the first half of 2008, the shocks to the system are far less than in neighbouring Egypt where inflation crept up to around 23%. Jordan’s economy has come under some pressure in 2007 and perhaps more so in 2008, primarily from global increases in oil and food prices that have affected the government budget and the current account balance. While Jordan is facing enormous economic pressures, it is managing to sustain good levels of GDP growth and foreign investment. There are a number of sectors that have performed well in 2007, including minerals, pharmaceuticals and tourism. Light industry has to face stronger competition and rising energy costs. For the construction materials sector, Chinese goods benefiting from low labour costs and Gulf products capitalising on low energy costs could make life difficult for many local producers of light industrial goods. However, Jordan’s free trade agreements, investment incentives and low transport costs for shipping to major markets are still drawing producers to the country. Steel and cement producers are not expected to face the same challenges as light industry and cement production is due to rise, with two additional plants under construction and likely to provide further export income.

The government is also pushing ahead with the establishment of economic zones to attract new industry and services to less developed areas of the country where problems of unemployment and poverty are particularly acute. Gulf economic growth should ensure more job opportunities for Jordanians in the Gulf and help to support living standards for many Jordanian families. However, its domestic developments will be the key to improving conditions. The government will push ahead with major projects such as the housing initiative, the economic zones, and attracting knowledge-intensive investments that require high-skilled labour and vocational programmes in the hope of creating more jobs and helping to counteract the impact of higher living costs, while at the same time hoping that global developments do not make its job even harder.[1]

Industries

Agriculture, forestry, and fishing

Despite increases in production, the agriculture sector’s share of the economy has declined steadily to just 2.4 percent of gross domestic product by 2004. About 4 percent of Jordan’s labor force worked in the agricultural sector in 2002. The most profitable segment of Jordan’s agriculture is fruit and vegetable production (including tomatoes, cucumbers, citrus fruit, and bananas) in the Jordan Valley. The rest of crop production, especially cereal production, remains volatile because of the lack of consistent rainfall. Fishing and forestry are negligible in terms of the overall domestic economy. The fishing industry is evenly divided between live capture and aquaculture; the live weight catch totaled just over 1,000 metric tons in 2002. The forestry industry is even smaller in economic terms; approximately 240,000 total cubic meters of roundwood were removed in 2002, the vast majority for fuelwood.[4]

Mining and minerals

Potash and phosphates are among the country’s main economic exports. In 2003 approximately 2 million tons of potash salt production translated into US$192 million in export earnings, making it the second most lucrative exported good. Potash production totaled 1.9 million tons in 2004 and 1.8 million tons in 2005. In 2004 approximately 6.75 million tons of phosphate rock production generated US$135 million in export earnings, placing it fourth on Jordan’s principal export list. With production totaling 6.4 million tons in 2005, Jordan was the world’s third largest producer of raw phosphates. In addition to these two major minerals, smaller quantities of unrefined salt, copper ore, gypsum, manganese ore, and the mineral precursors to the production of ceramics (glass sand, clays, and feldspar) are also mined.[4]

Industry and manufacturing

project situated a few km outside Amman. The men who work there are usually Egyptian immigrants who work for a few hundred pounds a month in a dangerous working environment, full of toxic fumes where they are required to carry out hard manual tasks.]]

The industrial sector, which includes mining, manufacturing, construction, and power, accounted for approximately 26 percent of gross domestic product in 2004 (including manufacturing, 16.2 percent; construction, 4.6 percent; and mining, 3.1 percent). More than 21 percent of the country’s labor force was reported to be employed in this sector in 2002. The main industrial products are potash, phosphates, pharmaceuticals, cement, clothes, and fertilizers. The most promising segment of this sector is construction. In the past several years, demand has increased rapidly for housing and offices of foreign enterprises based in Jordan to better access the Iraqi market. The manufacturing sector has grown as well (to nearly 20 percent of GDP by 2005), in large part as a result of the United States–Jordan Free Trade Agreement (ratified in 2001 by the U.S. Senate); the agreement has led to the establishment of approximately 13 qualifying industrial zones (QIZs) throughout the country. The QIZs, which provide duty-free access to the U.S. market, produce mostly light industrial products, especially ready-made garments. By 2004 the QIZs accounted for nearly US$1.1 billion in exports according to the Jordanian government.[4]

Jordan’s free trade agreement (FTA) with the US – the first in the Arab world – has already made the US one of Jordan’s most significant markets. By 2010 it will have barrier-free export access in almost all sectors. A number of trade agreements with countries in the Middle Eastern and North African regions and beyond should also reap increasing benefits, not in the least the Agadir Agreement, which is seen as a precursor to an FTA with the EU. Jordan also recently signed an FTA with Canada. Furthermore, Jordan’s plethora of industrial zones offering tax incentives, low utility costs and improved infrastructure links are helping incubate new developments. The relatively high skills level is also a key factor in promoting investment and stimulating the economy, particularly in value-added sectors. Despite the fact that Jordan has few natural resources it does benefit from abundant reserves of potash and phosphates, which are widely used in the production of fertilisers. Exports by these industries are expected to have a combined worth of $1bn in 2008. Other important industries include pharmaceuticals, which exported around $435m in 2007 and $260m in the first half of 2008 alone, as well as textiles, which were worth $1.19bn in 2007. Although the value of Jordan’s industrial sector is high, the kingdom faces a number of challenges. Because the country is dependent on importing raw materials, it is vulnerable to price volatility. Shortages in water and power also make consistent development difficult. Despite these challenges, Jordan’s economic openness and long-standing fertiliser and pharmaceutical industries should continue to provide a solid source of foreign currency.[2]

Jordan has a plethora of industrial zones and special economic zones aimed at increasing exports and making Jordan an industrial giant. The Mafraq SEZ is focused on industry and logistics hoping to become the regional logistics hub with air, road, and rail links to neighboring countries and eventually Europe and the Gulf. The Ma'an SEZ is primaril industrial focusing on satisfying domestic demand and reducing reliance on imports. With a national rail system under construction, Jordan expects trade to grow significantly and Jordan will mostly become the trade hub of the Levant and even the Middle East region as a whole due to its geography.

Telecoms and IT

Telecommunications is a billion-dollar industry with estimates showing that core markets of fixed-line, mobile and data service generate annual revenue of around JD836.5m ($1.18bn) per year, which is equivalent to 13.5% of GDP. Jordan's IT sector is the most developed and competitive in the region due to the 2001 telecom liberalization. Market share of the mobile sector, the most competitive telecoms market, is currently fairly evenly divided between the three operators, with Zain, owned by MTC Kuwait, maintaining the largest share (39%), followed by France Telecom’s brand Orange (36%) and Umniah (25%), which is 96% owned by Bahrain’s Batelco. End of year figures for 2007 show that the market trend is towards greater parity, with Zain’s share falling in the space of a year from 47% in 2006 and the other two operators picking up subscribers. The increased competition has led to pricing that is more favourable to consumers. Mobile penetration is currently around 80%. Ambitious subsequent national strategies were formulated already since Y 2000 as a private sector initiative directly lead by his majesty the king of Jordan. Information technology association in Jordan ( int@j ) was established to kick off a private sector process that would focus on preparing Jordan for the new economy through IT and shall reflect the national objectives towards automation and modernization in co-operation with the ministry of information technology in Jordan the ( MOICT ). The latest strategy will take the sector through to 2011, aims to bring Jordan to precise objectives. The ICT sector currently accounts for over a 14 % ( indirect ) of the kingdom’s GDP. This figure includes foreign investment and total domestic revenue from the sector . Employment growth in the sector was progressive and reached up to 60.000 ( indirect ) by 2008. The government is working to address employment issues and education related to sector by developing ICT training and opportunities to increase the overall penetration of ICT in Jordanian society. The policy outlines a number of objectives for the country to reach within the next three years, including almost doubling the size of the sector to $3bn, and pushing internet user penetration up to 50%. The early founder of Int@j and its first chairman of the board is Karim Kuwar and early activists who drove the national strategic objectives and helped formulate an action plan through the developing pillars were Marwan Juma Jordan's minister of ICT, Doha Abdelkhaleq on labour and education. Humam Mufti on advocacy and Nashat Masri on Capital and finance amongst others. [3]

Energy

see also: Oil shale in Jordan

Energy remains perhaps the biggest challenge for continued growth for Jordan’s economy. Spurred by the surge in the price of oil to more than $145 a barrel at its peak, the Jordanian government has responded with an ambitious plan for the sector. The country’s lack of domestic resources is being addressed via a $14bn investment programme in the sector. The programme aims to reduce reliance on imported products from the current level of 96%, with renewables meeting 10% of energy demand by 2020 and nuclear energy meeting 60% of energy needs by 2035. The government also announced in 2007 that it would scale back subsidies in several areas, including energy, where there have historically been regressive subsidies for fuel and electricity. In another new step, the government is opening up the sector to competition, and intends to offer all the planned new energy projects to international tender. [4]

Unlike most of its neighbors, Jordan has no significant petroleum resources of its own and is heavily dependent on oil imports to fulfill its domestic energy needs. In 2002 proved oil reserves totaled only 445,000 barrels. Jordan produced only 40 barrels per day in 2004 but consumed an estimated 103,000 barrels per day. According to U.S. government figures, oil imports had reached about 100,000 barrels per day in 2004. The Iraq invasion of 2003 disrupted Jordan’s primary oil supply route from its eastern neighbor, which under Saddam Hussein had provided the kingdom with highly discounted crude oil via overland truck routes. Since late 2003, an alternative supply route by tanker through the Al Aqabah port has been established; Saudi Arabia is now Jordan’s primary source of imported oil; Kuwait and the United Arab Emirates (UAE) are secondary sources. Although not so heavily discounted as Iraqi crude oil, supplies from Saudi Arabia and the UAE are subsidized to some extent.[4]

In the face of continued high oil costs, interest has increased in the possibility of exploiting Jordan's vast oil shale resources, which are estimated to total approximately 40 billion tons, 4 billion tons of which are believed to be recoverable. Jordan's oil shale resources could produce 28 billion barrels of oil, enabling production of about 100,000 barrels per day. The oil shale in Jordan has the fourth largest in the world which currently, there are several companies who are negotiating with the Jordanian government about exploiting the oil shale like Royal Dutch Shell, Petrobras and Eesti Energia.

Natural gas is increasingly being used to fulfill the country’s domestic energy needs, especially with regard to electricity generation. Jordan was estimated to have only modest natural gas reserves (about 6 billion cubic meters in 2002), but new estimates suggest a much higher total. In 2003 the country produced and consumed an estimated 390 million cubic meters of natural gas. The primary source is located in the eastern portion of the country at the Risha gas field. The country imports the bulk of its natural gas via the recently completed Arab Gas Pipeline that stretches from the Al Arish terminal in Egypt underwater to Al Aqabah and then to northern Jordan, where it links to two major power stations. This Egypt–Jordan pipeline supplies Jordan with approximately 1 billion cubic meters of natural gas per year.[4]

The state-owned National Electric Power Company (NEPCO) produces most of Jordan’s electricity (94%). Since mid-2000, privatization efforts have been undertaken to increase independent power generation facilities; a Belgian firm was set to begin operations at a new power plant near Amman with an estimated capacity of 450 megawatts. Power plants at Az Zarqa (400 megawatts) and Al Aqabah (650 MW) are Jordan's other primary electricity providers. As a whole, the country consumed nearly 8 billion kilowatt-hours of electricity in 2003 while producing only 7.5 billion kWh of electricity. Electricity production in 2004 rose to 8.7 billion kWh, but production must continue to increase in order to meet demand, which the government estimates will continue to grow by about 5% per year. About 99 percent of the population is reported to have access to electricity.[4]

Transport

The transportation sector on average contributes some 10% to Jordan’s GDP, with transportation and communications accounting for $2.14bn in 2007. Well aware of the sector’s importance to the country’s service and industry-oriented economy, in 2008 the government formulated a new national transport strategy with the aim to improve, modernise and further privatise the sector. With no imminent solution to the ongoing security crisis in Iraq in sight, prospects for the Jordanian transport sector as a whole look bright. The country will arguably remain one of the major transit points for both goods and people destined for Iraq, while the number of tourists visiting Jordan is set to continue to increase. The main events to follow in the near future are the relocation of Aqaba’s main port, a national railway system, and the construction of a new terminal at QAIA. Volatility in fuel prices is almost certainly going to have negative effects on operational costs and as such may hamper the sector’s average annual growth of around 6%. However, uncertain fuel prices also offer a great deal of incentive to boost private investments in alternative modes of transport such as public buses and improved trains.[5]

Media and Advertising

Although the state remains a major influence, Jordan’s media sector has seen significant privatisation and liberalisation efforts in recent years. Based on official rack rates, research firm Ipsos estimated that the advertisement sector spent some $280m towards publicity in Jordan’s media, 80% of which was spent on newspapers, followed by TV, radio and magazines. The biggest event of 2007 was the cancelled launch of ATV, the kingdom’s first private broadcaster. As a result, the state-owned Jordan TV (JTV) remains the country’s sole broadcaster. In recent years, Jordan has also seen a spectacular rise in the number of blogs, websites and news portals as sources of news information. The increasing diversification of Jordan’s media is a good sign and should boost advertising revenues and private initiatives.

Recording growth of 30%, 2007 turned out to be yet another outstanding year for Jordan’s advertising industry. Following nearly a decade of double-digit growth, however, most publicity specialists expect to see a relative slowdown in 2008. Unlike 2007, no major campaigns were planned for the first part of 2008. Additionally, the Jordanian advertising had some catching up to do with the rest of the region in terms of average expenditure per capita. As the sector matures, it is only normal for growth figures to gradually decrease. Since 2000 total ad spend increased from $77m to $280m in 2007, an increase of 260%. The Jordanian telecoms sector was the biggest ad spender in 2007, accounting for around 20% of the market, followed by banking and finance sector (12%), services industry (11%), real estate (8%) and the automotive sector (5%). In the next year, particularly if there is a downturn, it will become increasingly important for the sector to develop good vocational training and to begin to take advantage of new media markets.[6]

Services and tourism

Services accounted for more than 70 percent of gross domestic product (GDP) in 2004. The sector employed nearly 75 percent of the labor force in 2002.[4]

The banking sector is widely regarded as advanced by both regional and international terms. Overall results for Jordan’s banking sector in 2007 were good, with the total profits of the 15 listed banks up 14.89% to JD640m ($909m). Jordan’s strong growth of 6% in 2007 was reflected in a 20.57% expansion in net credit to JD17.9bn ($25.4bn) by the end of the year. Trade, construction and industry saw most improvement. Many banks suffered from the sharp correction in the Amman Stock Market in 2006, encouraging them to focus on core banking business in 2007, and this was reflected in a 16.65% rise in net interest and commission income to JD1.32bn ($1.87bn). They were fortunate, however, that the stock market also picked up in 2007 and total portfolio income losses decreased. Also, although Jordan’s banking sector is small by global standards, it has attracted strong interest from regional investors in Lebanon and the GCC. New regulations introduced by the CBJ, in addition to historical political stability, have helped to create a favourable investment environment. High demand for low-income housing, as well as infrastructure improvement, should mean a positive outlook for Jordan’s banking sector. Its conservative policies helped Jordan avoid the global financial crisis of 2009, Jordanian banks was one of the only countries that posted a profit in 2009.[7]

Contributing an estimated JD477.5m ($678.05m), or 4.25% of Jordan’s GDP, according to figures from the Central Bank, the construction sector performed strongly in 2007 and is set to continue to do so going forward, despite rising fuel and materials costs. While the construction of high-end properties will come to a relative slowdown, the sector’s main growth will be recorded in the low- and middle-class market segments. In 2007 the Great Amman Municipality (GAM) completed its master plan for the capital, which is expected to grow from 700 km2 today to 1700 km2 by 2025. Amman is to change from a predominantly horizontal to a largely vertical city, as the urban blueprint allows for the construction of various clusters of high-rises. Other significant developments outside Amman include the rapid residential build-up of Zarqa, the ongoing transformation of Aqaba into a commercial and tourist centre, and the construction of a series of high-end hotels and tourist resorts along the Dead Sea. Finally, in terms of infrastructure, a new airport terminal, the Amman ring road, as well as a light rail between the capital and Zarqa are being constructed.

Despite recording a relative slowdown compared to the expansion of recent years, Jordan’s construction and real estate market continued to grow in 2007. Trading totaled JD5.6bn ($8bn), up from JD5.2bn ($7.4bn) in 2006, according to Jordan’s Land and Survey Department. Although the years of astounding growth—some 75% in 2004 and 48% in 2005—seem to have passed, the future looks bright for real estate, as demand continues to outstrip supply, while Jordan remains a very attractive investment destination for foreign businesses, second-home buyers and Jordanians working abroad. With Jordan’s continuing sharp population growth, as well as its strategic location at the heart of the Middle East, the kingdom’s main market drivers indicate a bright future for years to come. Although a number of class-A office space developments are currently under construction, it will take a few years to close the gap between demand and supply. The Amman retail market may become more saturated in the short term. Consequently, developers may turn to other cities to build supermarkets and malls.

Jordan’s insurance market, with 29 companies operating in a country of just 5.7m people, is saturated, despite regulatory encouragements for mergers and acquisitions. In terms of market share based on premiums, motor coverage accounts for 42.4%, medical insurance 18.6%, fire and property damage 17%, life 9.8%, marine and transport 7.9% and other insurance the remaining 4.3%. The insurance sector made up 2.52% of GDP in 2006, up from 2.43% in 2005. Current plans call for increasing the sector’s GDP contribution to 7% in the short term and 10% in the long term. The sector holds great potential but remains underdeveloped. Region-wide price increases and a lack of consumer understanding of products are two major challenges. In addition, cultural considerations, including religion, make improving market penetration difficult. The cost of living has also risen, and the IMF forecasts that the inflation rate will reach 9% in 2008. Salaries have remained unchanged, however, leaving consumers with less disposable income. Other than mandatory motor coverage, insurance products are considered a luxury by average Jordanians, who must often prioritise spending. There will likely only be a few changes to the market in the coming year. Members of the sector would like to see greater coordination among the regulators and those working for the kingdom’s legal system in order to improve insurance laws.[8]

The state of the tourism sector is widely regarded as below potential, especially given the country’s rich history, ancient ruins, Mediterranean climate, and diverse geography. Despite personal appeals by the king and an increasingly sophisticated marketing campaign, the industry is still adversely affected by the political instability of the region. More than 5 million visitors entered Jordan in 2004, generating US$1.3 billion in earnings. Earnings from tourism rose to US$1.4 billion in 2005. The fact that the bulk of Jordan’s tourist trade emanates from elsewhere in the Middle East should contribute to the industry’s growth potential in the years ahead, as Jordan is relatively stable, open, and safe in comparison to many of its neighbors.[4] The tourism sector remains an important element of the Jordanian economy, directly employing some 30,000 Jordanians and contributing 10% to the kingdom’s GDP. Despite a decline in Arab and Gulf visitors, 2007 marked a year of steady growth for the tourism sector. Revenues jumped 13% to nearly $2.11bn during the first 11 months, up from $1.86bn for the same period in 2006. The sector is overseen by the government’s National Tourism Strategy (NTS), which was established in 2004 to take the industry through 2010. NTS aimed to double tourism revenues during the period and to increase tourism-related jobs to 91,719. The first goal has already been met but the second one might be more of a challenge: between 2004 and 2007 the total number of people employed in the sector rose from 23,544 to 35,484. This is impressive growth, but less than half the 90,000-or-more goal. NTS hopes to place Jordan as a boutique destination for high-end tourists. The strategy identifies seven priorities or niche markets: cultural heritage (archaeology); religious; ecotourism; health and wellness; adventure; meetings, incentives, conventions and exhibitions (MICE); and cruises. The Jordan Tourism Board’s (JTB) marketing budget has increased in the past year from JD6m ($8.52m) to JD11.5m ($16.3m). These are positive times for tourism in Jordan, with steady growth and major projects in the pipeline. The sector has to make improvements of infrastructure and marketing, but overall the industry has been improving for the past several years.[9]

External trade

Since 1995, economic growth has been low. Real GDP has grown at only about 1.5% annually, while the official unemployment has hovered at 14% (unofficial estimates are double this number). The budget deficit and public debt have remained high and continue to widen, yet during this period inflation has remained low due mainly to stable monetary policy and the continued peg to the United States Dollar. Exports of manufactured goods have risen at an annual rate of 9%. Monetary stability has been reinforced, even when tensions were renewed in the region during 1998, and during the illness and ultimate death of King Hussein in 1999.

Expectations of increased trade and tourism as a consequence of Jordan's peace treaty with Israel have been disappointing though not unexpected. Security-related restrictions to trade with the West Bank and the Gaza Strip have led to a substantial decline in Jordan's exports there. Following his ascension, King Abdullah improved relations with Arabic states of the Persian Gulf and Syria, but this brought few real economic benefits. Most recently the Jordanians have focused on WTO membership and a Free Trade Agreement with the U.S. as means to encourage export-led growth.

Investment

Jordan's economy has skyrocketed for almost a decade since King Abdullah II instituted liberal economic reforms with billions invested in Jordan every year from the Gulf, Europe, and America. The main centers of investment are Amman, Aqaba, and the Dead Sea. Significant foreign capital is also invested in Jordan's industrial zones and SEZs.

The stock market capitalisation of listed companies in Jordan was valued at $37,639 million in 2005 by the World Bank.[10]

As of September 2009 it was reported that Crisis hurts Israeli factories in Irbid[5].

Responsible for any kind of support for investors is the Jordan Investment Board

Aqaba

Though a town of only 100,000 people, Aqaba is setting an example of how to attract investment. In a decade, domestic and foreign investment into the Aqaba region has increased dramatically and the town’s population is set to double over the next 10 years. Certainly, the town benefits from some natural advantages. Located at the southern tip of the country, between Saudi Arabia and Israel on the shores of the Red Sea, the city is close to the Suez Canal, with easy access to key trade centres in both the Middle East and Africa. Aqaba is also the kingdom’s only deep-water port town, taking up most of Jordan’s scant 27 km (17 mi) of coastline. The Aqaba Special Economic Zone (ASEZ) has been responsible for most of this development since it opened in 2001.

It covers 375 km2 and offers a basket of tax and tariff incentives, as well as full repatriation rights and more flexible operating regulations. There is a 5% flat tax on most economic activities, no tariffs on imported goods, no currency restrictions and no property taxes for corporate land. Additionally – and somewhat controversially, given Jordan’s past issues with unemployment – companies based in ASEZ are allowed to employ up to 70% foreign workers in their operations. Jordan’s investment profile has been growing nationally, but according to the Jordan Investment Board (JIB), the ASEZ has exceeded investment targets by 33%. By 2006 it had already brought in around $8bn in investment, some $2bn more than the original target of $6bn by 2020. ASEZ expects to attract a further $12bn spread across a number of sectors, including tourism, finance and industry. The Development Law of 2008 set in place a universal framework for special development areas based on the Aqaba model.[11]

See also

References

Notes

Bibliography

  • Brand, Laurie. Jordan’s Inter-Arab Relations: The Political Economy of Alliance Making. New York: Columbia University Press, 1994.
  • Country Profile: Jordan 1995-96. London: The Economist Intelligence Unit, 1995.
  • International Monetary Fund Jordan Page
  • Jeffreys, Andrew ed. Emerging Jordan 2003. London: The Oxford Business Group, 2002.
  • Maciejewski, Edouard and Ahsan Mansur eds. Jordan: Strategy for Adjustment and Growth. Washington, D.C.: International Monetary Fund, 1996.
  • Piro, Timothy. The Political Economy of Market Reform in Jordan. Lanham, Maryland: Rowman & Littlefield Publishers, 1998.
  • Prados, Alfred and Jeremy Sharp. Congressional Research Service. Report for Congress. Jordan: U.S. Relations and Bilateral Issues. Washington, D.C.: Library of Congress, 2006.
  • Robins, Philip. Jordan to 1990: Coping with Change. London: The Economist Intelligence Unit, 1986.

External links


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