Jordan has begun ramping up efforts to increase foreign investment into the kingdom and is looking farther afield than usual to do it. With the IMF revising down its economic growth projection for the Middle East and North Africa (MENA) region from 4.6% in January to 4.1% on April 11, Jordan has held meetings with business leaders from the US, Russia, China and even Azerbaijan in the last month to encourage investment. The IMF also predicted that Jordan’s economic growth this year would be 3.3%, down from its October 2010 estimate of 4.2%.
For Jordan, foreign direct investment (FDI) is particularly important, given its limited natural resources and the structure of its economy, which is dominated by services, accounting for more than 70% of GDP. With the help of its burgeoning young population, Jordan is well placed to shift its focus to more knowledge-based industries that rely on a top-notch educational system.
To do this, Jordan has begun to reach out widely to encourage other countries’ business leaders to invest in the kingdom. In early April, King Abdullah II invited US businesses to Amman to discuss investment opportunities in the country. “This king understands that times have changed, understands what’s going on in the region [and] knows that he needs to respond to that,” Myron Brilliant, the senior vice-president for international affairs at the US Chamber of Commerce, told reporters on his recent trip to Amman.
Though US trade with Jordan has reached more than $1bn per year since the two countries signed a free trade agreement in 2001, US investment in the kingdom remains modest to date. Brilliant told media that he saw opportunities for US investors in Jordan’s infrastructure, health care and tourism segments.
At another meeting King Abdullah held with Russian President Dmitry Medvedev in Moscow in early April the two leaders discussed ways the two countries can work together, particularly in regards to energy, railways and large-scale infrastructure projects. Developing the tourism sector is of utmost importance to Jordan, King Abdullah noted, emphasising that religious tourism attracts growing numbers of Russians each year.
In a further move to enhance trade ties, Jordanian and Azerbaijani leaders signed and discussed agreements on investment promotion, development of information and communications technology, and technical cooperation in the Azerbaijani capital of Baku in mid-April. The aim is to develop joint private sector investment projects and enhance links between the two countries in the industrial, trade and tourism sectors.
Jordan is also working to establish itself as a launch pad of sorts for countries interested in expanding their businesses into Iraq. At a recent meeting with the China Council for the Promotion of International Trade, the Jordan Chambers of Commerce and Industry, and the Jordan Investment Board stressed the opportunities available in the kingdom in its energy, water, health care, logistics and education sectors, among others.
The kingdom is not ruling out opportunities closer to home, either. It is, for example, pairing with the UAE to promote tourism and tourism investment between the two countries, while also courting Kuwaiti investment, particularly in the industrial sector, via the upcoming Jordan-Kuwait Industrial Forum, set to begin in late April.
While the GCC has long been a key source of investment for Jordan, economic ties with the bloc have been at the forefront in recent weeks, with the UAE’s deputy prime minister, Mansour Ben Zayed Al Nahyan, saying on April 17 that the GCC is “seriously” considering “bringing Jordan to the centre of attention in terms of economic and development support”, according to local media.
As well as bilateral and multilateral investment arrangements, efforts are also under way to mobilise support and funding for infrastructure projects in the broader MENA region. A new Arab Financing Facility for Infrastructure (AFFI), established and supported by international financial institutions and governments in the Arab world, debuted at a forum in Amman in early April. The AFFI aims to raise $1bn in new money and put into place funding for the $40bn that will be needed annually to fill the region’s financing shortfall.
The World Bank estimates that the MENA region will need between $75bn and $100bn a year to sustain growth rates seen in recent years. The event focused on how the AAFI can face challenges facing governments in meeting infrastructure financing needs and what role private sector investment can play.
“Infrastructure will be a strong driver for growth in the region and indispensable for the increasingly critical water and energy deficit in many of its countries,” Jafar Hassan, Jordan’s minister of planning and international cooperation, told the World Bank. “Restructuring the risk-sharing mechanisms for the provision of [the] private sector and development funding for such critical development and regional infrastructure programmes is a key priority in enabling governments and the private sector in advancing such projects jointly.”
The stage has already been set for increasing investment. Starting in 2009, the government began reforming regulations for firms and improving the tax system. The government reduced entry costs, simplified the registration process, rationalised entry and exit regulations, improved contract enforcement procedures and enhanced electronic tax systems.
The World Bank has pointed out two medium-term challenges facing Jordan: lower private capital flows to developing countries and a lower global and regional growth outlook. While Jordan would be hard pressed to solve the last issue, it is clear that the kingdom is forging ahead with the first challenge: that of increasing foreign investment within its borders. With a flurry of meetings, deals and events, Jordan is on a path to highlight its investment offering and set itself apart from its peers. Now, international investors just need to take heed.