Economy of Jordan
Encyclopedia
The economy of Jordan is robust and growing. Its GDP per capita soared by 351% in the 1970s, and after only a slight decline of 30% in the 1980s, grew once again by 36% in the 1990s. Jordan
is classified as an emerging market. After King Abdullah II's accession to the throne in 1999, liberal economic policies were introduced that resulted in a boom lasting for a decade, continuing through 2009. It is is now one of the freest and most competitive economies in the Middle East scoring higher than the United Arab Emirates
and Lebanon
. Jordan has a developed banking sector that attracts investors due to conservative bank policies that enabled the country to weather the global financial crisis of 2009. It 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
, Turkey
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, the Agadir Agreement, and also enjoys advanced status with the EU.
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. 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 phosphate
s, 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.
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.
For purchasing power parity comparisons, the Jordanian Dinar is exchanged per US dollar at 0.359.
Jordan's population is 6,342,948 and mean wages were $4.19 per manhour in 2009.
's annexation of the West Bank, Jordan experienced rapid economic growth due to a near doubling of arable land and a substantial increase in total water supplies as a result of the annexation. However, economic growth would continue up until Jordan's rapid defeat in the Six Day War where Israel
annexed the West Bank sending hundreds of thousands of Jordanian citizens back across the border into Jordan
proper. This loss of newly gained territory caused massive resource shortages and, ultimately, was essential in the development of social strife which culminated in the Black September
civil war. Following the civil war, Jordan returned to prosperity that lasted up until the late 1980s. Economic growth during this period was caused by the oil boom in the Persian Gulf
. The sizable Jordanian expatriate community in the Gulf then reinvested in their home country in the form of real estate and luxury goods. However, this growth was unsustainable and the newly affluent lifestyle was being sustained by high oil prices. In Queen Noor's Leap of Faith, she explained how instead of affluent Jordanians investing in the country's infrastructure, they were spending their money on expensive real estate and importing luxury goods from Europe
. This new affluent lifestyle would be hard to sustain with the end of the oil boom and the emergence of the Persian Gulf Crisis. Over 300,000 Jordanians and Palestinians were expelled from Kuwait to Jordan due to Jordan
's support for the Iraq causing high inflation and shortages. Furthermore, Jordan's favorable trade relations with Iraq had ended and years of heavily discounted and even free oil ceased. Foreign aid from the United States
and the Persian Gulf slowed down significantly. Thus began Jordan's decade of economic contraction. 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 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.
When King Abdullah II ascended to the throne in 1999, he embarked on an aggressive economic reform plan which aimed to turn Jordan
into a the regional hub for ICT
and tourism
. In 2001, Jordan became a member of the World Trade Organization
as a result of significant free market reforms. The 2003 Iraq War sent 750 thousand mostly affluent Iraqis into Jordan attracted by the kingdom's free market policies and political stability. The Iraq War accelerated the economic boom Jordan was experiencing since King Abdullah II's ascension to the throne. Amman
was transformed into a regional business center and one of the region's most desirable investment locations. The tourism
, real estate
, and ICT
sectors emerged during this period as Jordan's most competitive sectors. With hundreds of thousands of Jordanians abroad seeking property in their home country and regional investors seeking safe investments, Jordan's real estate sector became one of the region's most dynamic.
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
Jordan's economic growth slowed in 2009 as a result of the global financial crisis. In 2010, growth picked up in all major economic sectors as the Jordanian government announced a slew of incentives aimed at attracting foreign investment such as tax breaks and the establishment of new free zones.
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
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 Persian 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.
Ambitious subsequent national strategies were formulated already since Y 2000 as a private sector initiative directly led 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. http://www.oxfordbusinessgroup.com/publication.asp?country=19
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. http://www.oxfordbusinessgroup.com/publication.asp?country=19
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 445000 barrels (70,749,346.3 l). Jordan produced only 40 oilbbl/d in 2004 but consumed an estimated 103000 oilbbl/d. According to U.S. government figures, oil imports had reached about 100000 oilbbl/d 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.
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 Goilbbl of oil, enabling production of about 100000 oilbbl/d. 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.
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.
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
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. 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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
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.
, 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
.http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html
As of September 2009 it was reported that Crisis hurts Israeli factories in Irbid.
Responsible for any kind of support for investors is the Jordan Investment Board
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
is classified as an emerging market. After King Abdullah II's accession to the throne in 1999, liberal economic policies were introduced that resulted in a boom lasting for a decade, continuing through 2009. It is is now one of the freest and most competitive economies in the Middle East scoring higher than the United Arab Emirates
United Arab Emirates
The United Arab Emirates, abbreviated as the UAE, or shortened to "the Emirates", is a state situated in the southeast of the Arabian Peninsula in Western Asia on the Persian Gulf, bordering Oman, and Saudi Arabia, and sharing sea borders with Iraq, Kuwait, Bahrain, Qatar, and Iran.The UAE is a...
and Lebanon
Lebanon
Lebanon , officially the Republic of LebanonRepublic of Lebanon is the most common term used by Lebanese government agencies. The term Lebanese Republic, a literal translation of the official Arabic and French names that is not used in today's world. Arabic is the most common language spoken among...
. Jordan has a developed banking sector that attracts investors due to conservative bank policies that enabled the country to weather the global financial crisis of 2009. It is emerging as the "business capital of the Levant
Levant
The Levant or ) is the geographic region and culture zone of the "eastern Mediterranean littoral between Anatolia and Egypt" . The Levant includes most of modern Lebanon, Syria, Jordan, Israel, the Palestinian territories, and sometimes parts of Turkey and Iraq, and corresponds roughly to the...
" and "the next Beirut
Beirut
Beirut is the capital and largest city of Lebanon, with a population ranging from 1 million to more than 2 million . Located on a peninsula at the midpoint of Lebanon's Mediterranean coastline, it serves as the country's largest and main seaport, and also forms the Beirut Metropolitan...
". 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
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, Malaysia, the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
, Tunisia
Tunisia
Tunisia , officially the Tunisian RepublicThe long name of Tunisia in other languages used in the country is: , is the northernmost country in Africa. It is a Maghreb country and is bordered by Algeria to the west, Libya to the southeast, and the Mediterranean Sea to the north and east. Its area...
, Algeria
Algeria
Algeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
, Libya
Libya
Libya is an African country in the Maghreb region of North Africa bordered by the Mediterranean Sea to the north, Egypt to the east, Sudan to the southeast, Chad and Niger to the south, and Algeria and Tunisia to the west....
, Algeria
Algeria
Algeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
, Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
and Syria
Syria
Syria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....
. More FTA's are planned with Iraq
Iraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
, the Palestinian Authority, the GCC
Cooperation Council for the Arab States of the Gulf
The Cooperation Council for the Arab States of the Gulf , also known as the Gulf Cooperation Council , is a political and economic union of the Arab states bordering the Persian Gulf and constituting the Arabian Peninsula, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates...
, Lebanon
Lebanon
Lebanon , officially the Republic of LebanonRepublic of Lebanon is the most common term used by Lebanese government agencies. The term Lebanese Republic, a literal translation of the official Arabic and French names that is not used in today's world. Arabic is the most common language spoken among...
, and Pakistan
Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
. Jordan is a member of the Greater Arab Free Trade Agreement, the Euro-Mediterranean free trade agreement, the Agadir Agreement, and also enjoys advanced status with the EU.
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
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
is an emerging knowledge economy
Knowledge economy
The knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to...
. 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. Just over 10% of its land is arable
Arable land
In geography and agriculture, arable land is land that can be used for growing crops. It includes all land under temporary crops , temporary meadows for mowing or pasture, land under market and kitchen gardens and land temporarily fallow...
, 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 phosphate
Phosphate
A phosphate, an inorganic chemical, is a salt of phosphoric acid. In organic chemistry, a phosphate, or organophosphate, is an ester of phosphoric acid. Organic phosphates are important in biochemistry and biogeochemistry or ecology. Inorganic phosphates are mined to obtain phosphorus for use in...
s, potash
Potash
Potash is the common name for various mined and manufactured salts that contain potassium in water-soluble form. In some rare cases, potash can be formed with traces of organic materials such as plant remains, and this was the major historical source for it before the industrial era...
, and their fertilizer derivatives; tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
; 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.
Rapid privatization of previously state-controlled industries and liberalization of the economy is spurring unprecedented growth in Jordan
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
's urban centers like Amman
Amman
Amman is the capital of Jordan. It is the country's political, cultural and commercial centre and one of the oldest continuously inhabited cities in the world. The Greater Amman area has a population of 2,842,629 as of 2010. The population of Amman is expected to jump from 2.8 million to almost...
and especially Aqaba
Aqaba
Aqaba is a coastal city in the far south of Jordan, the capital of Aqaba Governorate at the head of the Gulf of Aqaba. Aqaba is strategically important to Jordan as it is the country's only seaport. Aqaba is best known today as a diving and beach resort, but industrial activity remains important...
. 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
Textile
A textile or cloth is a flexible woven material consisting of a network of natural or artificial fibres often referred to as thread or yarn. Yarn is produced by spinning raw fibres of wool, flax, cotton, or other material to produce long strands...
, aerospace
Aerospace
Aerospace comprises the atmosphere of Earth and surrounding space. Typically the term is used to refer to the industry that researches, designs, manufactures, operates, and maintains vehicles moving through air and space...
, defense, ICT
Information and communication technologies
Information and communications technology or information and communication technology, usually abbreviated as ICT, is often used as an extended synonym for information technology , but is usually a more general term that stresses the role of unified communications and the integration of...
, pharmaceutical, and cosmetic
Cosmetics
Cosmetics are substances used to enhance the appearance or odor of the human body. Cosmetics include skin-care creams, lotions, powders, perfumes, lipsticks, fingernail and toe nail polish, eye and facial makeup, towelettes, permanent waves, colored contact lenses, hair colors, hair sprays and...
sectors.
Jordan is pinning its hopes on tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
, future uranium
Uranium
Uranium is a silvery-white metallic chemical element in the actinide series of the periodic table, with atomic number 92. It is assigned the chemical symbol U. A uranium atom has 92 protons and 92 electrons, of which 6 are valence electrons...
and oil shale
Oil shale
Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...
exports, trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
, and ICT
Information and communication technologies
Information and communications technology or information and communication technology, usually abbreviated as ICT, is often used as an extended synonym for information technology , but is usually a more general term that stresses the role of unified communications and the integration of...
for future economic growth.
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 and mean wages were $4.19 per manhour in 2009.
Economic Overview
Jordan was overwhelming an agrarian nation at the time of its independence in 1946. Following JordanJordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
's annexation of the West Bank, Jordan experienced rapid economic growth due to a near doubling of arable land and a substantial increase in total water supplies as a result of the annexation. However, economic growth would continue up until Jordan's rapid defeat in the Six Day War where Israel
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
annexed the West Bank sending hundreds of thousands of Jordanian citizens back across the border into Jordan
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
proper. This loss of newly gained territory caused massive resource shortages and, ultimately, was essential in the development of social strife which culminated in the Black September
Black September
The expression Black September may refer to:* Black September in Jordan, the conflict between Palestinian guerrilla organizations and King Hussein of Jordan that began in September 1970 and ended in July 1971 with the expulsion of the PLO to Lebanon....
civil war. Following the civil war, Jordan returned to prosperity that lasted up until the late 1980s. Economic growth during this period was caused by the oil boom in the Persian Gulf
Persian Gulf
The Persian Gulf, in Southwest Asia, is an extension of the Indian Ocean located between Iran and the Arabian Peninsula.The Persian Gulf was the focus of the 1980–1988 Iran-Iraq War, in which each side attacked the other's oil tankers...
. The sizable Jordanian expatriate community in the Gulf then reinvested in their home country in the form of real estate and luxury goods. However, this growth was unsustainable and the newly affluent lifestyle was being sustained by high oil prices. In Queen Noor's Leap of Faith, she explained how instead of affluent Jordanians investing in the country's infrastructure, they were spending their money on expensive real estate and importing luxury goods from Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
. This new affluent lifestyle would be hard to sustain with the end of the oil boom and the emergence of the Persian Gulf Crisis. Over 300,000 Jordanians and Palestinians were expelled from Kuwait to Jordan due to Jordan
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
's support for the Iraq causing high inflation and shortages. Furthermore, Jordan's favorable trade relations with Iraq had ended and years of heavily discounted and even free oil ceased. Foreign aid from the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and the Persian Gulf slowed down significantly. Thus began Jordan's decade of economic contraction. 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 suffered adverse economic consequences from the 1990-91 Gulf War
Gulf War
The Persian Gulf War , commonly referred to as simply the Gulf War, was a war waged by a U.N.-authorized coalition force from 34 nations led by the United States, against Iraq in response to Iraq's invasion and annexation of Kuwait.The war is also known under other names, such as the First Gulf...
. 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
Gulf of Aqaba
The Gulf of Aqaba is a large gulf located at the northern tip of the Red Sea. In pre twentieth-century and modern sources it is often named the Gulf of Eilat, as Eilat is its predominant Israeli city ....
. Finally, absorbing up to 300,000 returnees from the Gulf countries exacerbated unemployment and strained the government's ability to provide essential services.
When King Abdullah II ascended to the throne in 1999, he embarked on an aggressive economic reform plan which aimed to turn Jordan
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
into a the regional hub for ICT
Information and communication technologies
Information and communications technology or information and communication technology, usually abbreviated as ICT, is often used as an extended synonym for information technology , but is usually a more general term that stresses the role of unified communications and the integration of...
and tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
. In 2001, Jordan became a member of the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
as a result of significant free market reforms. The 2003 Iraq War sent 750 thousand mostly affluent Iraqis into Jordan attracted by the kingdom's free market policies and political stability. The Iraq War accelerated the economic boom Jordan was experiencing since King Abdullah II's ascension to the throne. Amman
Amman
Amman is the capital of Jordan. It is the country's political, cultural and commercial centre and one of the oldest continuously inhabited cities in the world. The Greater Amman area has a population of 2,842,629 as of 2010. The population of Amman is expected to jump from 2.8 million to almost...
was transformed into a regional business center and one of the region's most desirable investment locations. The tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
, real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
, and ICT
Information and communication technologies
Information and communications technology or information and communication technology, usually abbreviated as ICT, is often used as an extended synonym for information technology , but is usually a more general term that stresses the role of unified communications and the integration of...
sectors emerged during this period as Jordan's most competitive sectors. With hundreds of thousands of Jordanians abroad seeking property in their home country and regional investors seeking safe investments, Jordan's real estate sector became one of the region's most dynamic.
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
Jordan's economic growth slowed in 2009 as a result of the global financial crisis. In 2010, growth picked up in all major economic sectors as the Jordanian government announced a slew of incentives aimed at attracting foreign investment such as tax breaks and the establishment of new free zones.
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.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.Industry and manufacturing
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.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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
Jordan
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
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 Persian 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 led 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. http://www.oxfordbusinessgroup.com/publication.asp?country=19
Energy
- See also: Energy in JordanEnergy in JordanEnergy in Jordan describes energy and electricity production, consumption and import in Jordan. Jordan is among the highest in the world in dependency on foreign energy sources, 96% of the country's energy needs come from imported oil and natural gas from neighboring Arab countries. This complete...
, Nuclear energy in JordanNuclear energy in JordanJordan has signed memorandums of understanding with the United States, United Kingdom, Canada, France, Japan, China, Russia, Spain, South Korea, Argentina, Romania, and Turkey...
, Oil shale in JordanOil shale in JordanOil shale in Jordan represents a significant resource. Oil shale deposits in Jordan underlie more than 60% of Jordanian territory, with the total resources estimated at 40 to 70 billion tonnes of oil shale. The deposits include a high quality marinite oil shale of Late Cretaceous to early...
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. http://www.oxfordbusinessgroup.com/publication.asp?country=19
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 445000 barrels (70,749,346.3 l). Jordan produced only 40 oilbbl/d in 2004 but consumed an estimated 103000 oilbbl/d. According to U.S. government figures, oil imports had reached about 100000 oilbbl/d 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.
In the face of continued high oil costs, interest has increased in the possibility of exploiting Jordan's vast oil shale resources
Oil shale reserves
Oil shale reserves refers to oil shale resources that are recoverable under given economic restraints and technological abilities. Oil shale deposits range from small presently non-economic occurrences to large presently commercially exploitable reserves...
, which are estimated to total approximately 40 billion tons, 4 billion tons of which are believed to be recoverable. Jordan's oil shale
Oil shale
Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...
resources could produce 28 Goilbbl of oil, enabling production of about 100000 oilbbl/d. The oil shale in Jordan
Oil shale in Jordan
Oil shale in Jordan represents a significant resource. Oil shale deposits in Jordan underlie more than 60% of Jordanian territory, with the total resources estimated at 40 to 70 billion tonnes of oil shale. The deposits include a high quality marinite oil shale of Late Cretaceous to early...
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
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
, Petrobras
Petrobras
Petróleo Brasileiro or Petrobras is a semi-public Brazilian multinational energy corporation headquartered in Rio de Janeiro, Brazil. It is the largest company in Latin America by market capitalization and revenue, and the largest company headquartered in the Southern Hemisphere by market...
and Eesti Energia
Eesti Energia
Eesti Energia AS is a state-owned energy company in Estonia with its headquarters in Tallinn. The company operates in Estonia, Latvia, Lithuania, Finland and Jordan. In Estonia the company operates under the name Eesti Energia, while using the brand name Enefit for international operations...
.
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
Arab Gas Pipeline
The Arab Gas Pipeline is a natural gas pipeline in the Middle East. It exports Egyptian natural gas to Jordan, Syria and Lebanon, with a separate line to Israel. It has a total length of at a cost of US$1.2 billion.-Arish–Aqaba section:...
that stretches from the Al Arish terminal in Egypt underwater to Al Aqabah
Aqaba
Aqaba is a coastal city in the far south of Jordan, the capital of Aqaba Governorate at the head of the Gulf of Aqaba. Aqaba is strategically important to Jordan as it is the country's only seaport. Aqaba is best known today as a diving and beach resort, but industrial activity remains important...
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.
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.
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19Media 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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
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.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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
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. 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.http://www.oxfordbusinessgroup.com/publication.asp?country=19
External trade
Expectations of increased trade and tourism as a consequence of Jordan's peace treaty with Israel
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
have been disappointing though not unexpected. Security-related restrictions to trade with the West Bank
West Bank
The West Bank ) of the Jordan River is the landlocked geographical eastern part of the Palestinian territories located in Western Asia. To the west, north, and south, the West Bank shares borders with the state of Israel. To the east, across the Jordan River, lies the Hashemite Kingdom of Jordan...
and the Gaza Strip
Gaza Strip
thumb|Gaza city skylineThe Gaza Strip lies on the Eastern coast of the Mediterranean Sea. The Strip borders Egypt on the southwest and Israel on the south, east and north. It is about long, and between 6 and 12 kilometres wide, with a total area of...
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
Persian Gulf
The Persian Gulf, in Southwest Asia, is an extension of the Indian Ocean located between Iran and the Arabian Peninsula.The Persian Gulf was the focus of the 1980–1988 Iran-Iraq War, in which each side attacked the other's oil tankers...
and Syria
Syria
Syria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....
, but this brought few real economic benefits. Most recently the Jordanians have focused on WTO
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
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 Persian Gulf, Europe, and America. The main centers of investment are AmmanAmman
Amman is the capital of Jordan. It is the country's political, cultural and commercial centre and one of the oldest continuously inhabited cities in the world. The Greater Amman area has a population of 2,842,629 as of 2010. The population of Amman is expected to jump from 2.8 million to almost...
, Aqaba
Aqaba
Aqaba is a coastal city in the far south of Jordan, the capital of Aqaba Governorate at the head of the Gulf of Aqaba. Aqaba is strategically important to Jordan as it is the country's only seaport. Aqaba is best known today as a diving and beach resort, but industrial activity remains important...
, and the Dead Sea
Dead Sea
The Dead Sea , also called the Salt Sea, is a salt lake bordering Jordan to the east and Israel and the West Bank to the west. Its surface and shores are below sea level, the lowest elevation on the Earth's surface. The Dead Sea is deep, the deepest hypersaline lake in the world...
. 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
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
.http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html
As of September 2009 it was reported that Crisis hurts Israeli factories in Irbid.
Responsible for any kind of support for investors is the Jordan Investment Board
Jordan Investment Board
Jordan Investment Board is the national investment promotion agency of the Hashemite Kingdom of Jordan. The organization was founded in 1995, the year the Investment Promotion Law was introduced, and is responsible for acquiring and providing professional consulting services to foreign and...
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.http://www.oxfordbusinessgroup.com/publication.asp?country=19