Our continued strategic operations with the European Bank for Reconstruction and Development (EBRD) come at a crucial time for Jordan, especially when set against the backdrop of ongoing regional transformations. In some countries, such as Jordan, these transformations have helped to bring about a number of positive changes associated with the shift toward democratic rule and citizens’ participation in setting their own political, economic and social priorities.
In other countries, however, these same transformations have had a number of detrimental economic and security repercussions in the short term, as evidenced by the occurrence of clear imbalances in economic growth and reduced security. Such situations have negatively affected the daily lives and productivity of citizens in parts of the region. Nevertheless, we are hopeful that these repercussions will be short-lived. These challenges have also been amplified by the impact of the global financial crisis, the food crisis, and problems related to water security and energy. Taken together, these realities have led to declining growth rates and rising unemployment, issues that call for extraordinary efforts to contain these regional challenges.
Economic and political reform go hand-in-hand. We believe that the aim of any process is to benefit citizens by bolstering their confidence in state institutions and encouraging them to participate in decision-making. To translate this into action, His Majesty King Abdullah II called for the formation of a Royal Committee to Enhance the National Integrity System aimed at making specific, constructive and clear recommendations to empower oversight and strengthen institutional capacities, as well as reform administrative and financial systems and establish good governance, transparency and accountability in state institutions. In addition, the committee aims to make the management of public funds more efficient and develop stronger regulatory frameworks for relationships among sectors.
In spite of the growth rate our economy has witnessed over the past decade, Jordan is now facing economic and financial challenges that have had a significant impact on overall economic performance. The most salient of these include reduced economic growth rates, rising levels of inflation, an increase in the state deficit, the balance of payments current account deficit, creeping service costs, lower levels of direct foreign investment, and ongoing poverty and unemployment.
The principal causes underlying these challenges are attributable to the successive economic and financial crises global and regional economies have faced in recent years, and which continue to have a significant impact on our economy. In addition, the nature of the Jordanian economy – small in size, scarce in natural resources and dependent on global imports for many of its needs – makes it vulnerable to external shocks. Factors include a substantial rise in oil prices, a more than fivefold increase in electricity-generation costs due to the use of heavy fuel instead of relatively cheaper Egyptian gas supplies, loss of key trade routes, and dampened growth of tourism and investment due to political and security tensions in the region.
The overall situation has been exacerbated by the escalating crisis in Iraq and Syria, which is having a direct negative impact, particularly since we have taken in nearly 1.4m Syrians, nearly a 20% increase in Jordan’s population. With about 85% of Syrians living outside of refugee camps, beyond the reach of direct UN and other international assistance, this rapid influx of refugees is putting a tremendous strain on our natural resources, public infrastructure and budget, and international agencies have recently slashed their assistance to Syrian refugees due to lack of donor funding.
To promote development and bolster the capacity of the economy, the government is building on what has been achieved, specifically by reinforcing growth catalysts and proceeding with the economic reforms required to keep pace with our current development. New state employment programmes for 2013-16 cover more than 1000 enterprises in 22 economic, social and service sectors. Our overall aim is to develop and strengthen Jordan’s economic and social environment, such that we ensure sustainable progress and the fair distribution of development gains.
In addition to capital enterprises, government programmes aim to improve the legislative and organisational system to stimulate economic growth and leverage the strengths of the private sector, while giving it a greater role in the economic process and attracting direct foreign investment. The relevant pieces of legislation, which are being prepared in close consultation with the private sector, include the investment law, which was recently approved by the Cabinet; a law governing partnerships between the public and private sectors; the business, bankruptcy and liquidation reorganisation law; a law guaranteeing rights to moveable property; a draft law for the development of entrepreneurship and small and medium-sized enterprises (SMEs); the income tax law, which is being finalised in parliament; and a draft law on attracting and developing venture capital funds. The investment programme and new legislation aim to develop infrastructure facilities and boost the role of the private sector within a clear and transparent organisational framework.
Jordan’s position as a gateway to the wider region enables investors and entrepreneurs to access a market of more than 1bn consumers. Further, our highly developed and modern infrastructure and logistical facilities also assist in providing access to these markets and pave the way to transform the kingdom into a logistical and trade hub for the MENA region. Add to this the tech-savvy human capital and the significant number of educated and trained personnel at the local level, the availability of which helps to provide an environment conducive to attracting new investments, expanding existing ones and encouraging partnerships across a variety of sectors. In addition, incentives offered by Jordan’s economic, special and industrial zones make it the perfect location to open a business.
Looking forward, His Majesty King Abdullah has asked the government to draw up a 10-year economic blueprint for Jordan that is responsive to citizens’ needs. In consultation with all major stakeholders and through an active citizenship approach, by 2015 we aim to deliver a blueprint that will address new realities and create the conditions for a prosperous, resilient, inclusive economy with opportunity for all and progress for this generation and the next. All of this is a reflection of the Jordanian government’s belief in the importance of cooperation with private sector investors to find lasting solutions to the difficulties we face. This is particularly pertinent to the energy and water sectors, given the challenges to further expansion and growth.
The EBRD’s decision to expand its operations in countries south-east of the Mediterranean is an important one. Jordan looks forward to ongoing discussions with EBRD officials on a variety of levels regarding how to direct cooperation and make the best possible use of resources in high-priority areas. This includes support for the implementation of the work programmes laid out under the current government’s rule from 2013 to 2016, particularly the large-scale projects to be carried out in partnership with the private sector, in a manner that will contribute to balanced growth that encompasses the various segments of society.
Support for the Jordanian private sector through increased EBRD investments in infrastructure projects will also help the government to handle challenges, especially in electricity production and the water and energy sectors, which have been exacerbated by the growing influx of refugees from Syria. Hence, we welcome and anticipate greater private sector investments in the areas of renewable energy, water and water treatment plants, and transport, among others.
Lastly, support for SMEs, which helps stimulate the Jordanian economy by creating jobs, is a high-priority area going forward. This will involve providing assistance to help secure funding for these enterprises, which will in turn alleviate the bottle-necks preventing Jordanian start-ups from growing and empower local entrepreneurship, especially among women and youth.
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