Jordan

Jordan is situated in a pivotal point of the Middle East with Syria to the north, Iraq to the east, Saudi Arabia to the south and Israel and the West Bank to the west. There are only 27km of coastline; Aqaba lies at the northern tip of the Red Sea; Aqaba is 330km south of Amman. Jordan is a constitutional monarchy with a representative government and has enjoyed a tradition of political stability. The National Assembly is bi-cameral; the Senate has 55 members and the House of Representatives has 110. The King, His Majesty King Abdullah II, has with wide-ranging powers although his veto can be overridden by a two-thirds majority of the National Assembly.

The origin of Jordan lies in the creation of the Emirate of Transjordan in 1921, following the collapse of the Ottoman Empire in 1918, as a territory under the British Mandate accorded by the League of Nations. By mutual agreement, Transjordan became the independent Hashemite Kingdom of Jordan in 1946, a constitutional monarchy under the rule of the Hashemite royal family. The present king, His Majesty King Abdullah II, assumed his powers in 1999 on the death of his father, King Hussein.

Jordan has good diplomatic and trade relations with all its other neighbours. Jordan works hard to achieve peace in the region, and to build regional networks which provide mutual benefit in infrastructure and investment. Iraq is re-emerging as a major trading partner after years of conflict, and investment links with the wealthy Gulf countries are an important element in Jordan’s growth.

Jordan has close and historic ties with the United Kingdom, with the Hashemite Kingdom of Jordan being under British control from the end of World War Two until 1928 following the signing of a treaty which meant while the UK recognised Transjordan’s independence under Emir Abdullah, matters of “finance, military and foreign affairs” would remain in the hands of the British. Jordan became fully independent in 1948, but its ties to Britain have remained strong with the UK sending troops to Jordan in the 1950s and 1970s to help maintain security in the kingdom. Tourism has also grown in recent years, with the Foreign and Commonwealth Office (FCO) reporting that 87,000 British nationals visited Jordan in 2012.

Sizeable contracts have been signed with BP, Shell and Rio Tinto in the last couple of years which have greatly boosted bilateral trade and Jordanians are always keen to do business with UK companies, although there is increasing competition from Asia and regional markets. Exports to Jordan amounted to £232m in 2012, down 9% from £255m in 2011. Imports between January and December 2012 were £32m.

Since King Abdullah’s accession to the throne in 1999, Jordan has taken significant steps forward with regards to moving it towards a market-based, competitive economy that is attractive to foreign investors. Banking, tourism, ICT, mining, hospitals, agriculture and industry have all seen reform and growth with investment laws granting specific investments incentives to many sectors. In 2012, the Jordan Investment Board approved 489 projects worth approximately US$2.26bn, – reflecting a 58% increase over 2011 figures. At least US$1.79bn of these projects were reportedly concentrated in the industrial sector across 218 projects. 51% of these JIB-approved projects involved foreign investment.

Jordan is ranked 98^th out of 185 countries on the World Bank’s 2013 Doing Business Report in terms of ease of doing business. This places the country behind the regional average (98) and regional competitors such as Turkey (71^st) and the UAE (26^th). The 2012-13 World Economic Forum’s survey highlights that although Jordan improved its position by seven places to 64^th / 144 economies when compared to the previous year’s results, improvements still need to be seen in areas such as labour market efficiency, the banking system, improving productivity in a variety of sectors and addressing ongoing barriers to international trade and investment. According to the WEF, ‘tariff barriers remain high in international comparison and regulatory barriers to FDI remain in place’. Jordan has nevertheless improved some areas of doing business such as reducing the minimum capital required to start a business, establishing a ‘one stop shop’ for company registration and facilitating cross border trade through implementing a new ‘risk assessment’ inspection regime for preapproved traders, thereby cutting to 30% the number of containers requiring inspection.

In most cases, doing business in Jordan requires local representation such as an agent or distributor.

The appointment of a local partner/representative will only be the first step. Jordan is a market in which family structures dominate the business environment and where personal relationships therefore are important. This requires an investment primarily of time and personal presence. Likewise, product training for the agent’s workforce is important, as are regular updates on developments, modifications, competitor activity etc. Therefore regular visits to the market, especially during the early stages are an important part of a successful interaction with the agent/distributor.

Jordan is making the right moves to establish itself as an important regional and international trading hub, strategically located in the centre of the Middle East. Jordan receives significant grants from the EU. It is the third largest recipient of US Government assistance in the world. Though still a developing country, Jordan’s labour force is well educated with literacy rates of over 90%.

Amman is the capital and is the largest commercial centre (with a population of 2.22 million). The main financial area in Amman is Shmeisani while other business and residential facilities are spread across the city. Sweifieh is fast becoming a major commercial area whilst a new downtown is being created in Abdali, the aim being to have a new town centre with combined shopping, office and residential facilities. A number of international conferences have been held at the Dead Sea, which is fast developing as an important tourism resort for Jordan. Special Economic Zones have been established (6 development Zones to-date) in various less developed regions; the most advanced is Aqaba, which has attracted over US$20 billion of investment since its creation in 2001.

Opportunities are particularly notable in the following sectors:

• Life Sciences,
• Construction
• Transport
• Education and skills
• ICT
• Energy (power generation and renewable energy)

Strengths of the market

• Political Stability and Security
• A strategic and central location
• Skilled and talented human capital
• Robust economic growth
• English is widely spoken & accepted as the language of business
• A favourable business environment with competitive rates for doing business and attractive incentives

What are the challenges?

• Changes of Parliament tend to take place every couple of years which leads to changing Ministers who will often alter policy and amend regulations. It is advisable to always ask for the latest version of laws and regulations and to seek legal/taxation advice before entering into a joint venture or partnership.

• Whilst it is not essential to have a partner in Jordan, it is very much easier to do business with someone working on behalf of your company, on the ground. Many tenders are discussed for months before they are formally made public and so most people in the industry will be aware of the opportunities and can capitalise on this understanding of the market by preparing for projects or tenders.

• Companies should be aware of the risks of getting established with the wrong partner; it can be very difficult and expensive to part ways; Jordanian courts will usually come down on the side of the local partner and going to arbitration can take months and will also prove costly.

Jordan’s small, service orientated economy has been tested in recent years as a result of the regional instability associated with the Arab spring, which hit its neighbour Egypt particularly hard. As a result of disruptions to supplies of natural gas coming from Egypt, power generation plants were forced to switch to more expensive alternatives which have amounted to some US$4bn since 2011. Jordan has negotiated a stand-by arrangement with the IMF for US$2.1bn.  Tourism, a drop in worker remittances, and foreign direct investment have all been affected by unrest in the region too.

As a result of these difficulties, Jordan’s average growth rate of 6% a year over the last decade has dropped, with the average annual growth rate in 2011-12 falling to 2.7%. Jordan’s economy is expected to grow by 3.5% in 2013.