Laying the groundwork: Free zones draw international interest


While most economic activity in Jordan is concentrat-ed in Amman, the southern city of Aqaba is playing an increasingly significant role. The city sits at the Red Sea’s north-eastern tip and roughly 300 km to the south of the capital. With a history dating back to 4000 BCE, the area has long been a centre for trade. Today, Aqa-ba is home to a range of industries, including the trans-port, logistics, real estate and tourism sectors.

Not only is Aqaba a relatively short drive away from Amman, it is also close to Egypt, Iraq, Saudi Arabia, Palestine and Israel. A majority of the economic activ-ity in the city is regional, with countries such as Saudi Arabia, Egypt and Iraq investing heavily. Some business also originates from further away, however, as both UK and US firms have made investments here.

RISING NUMBERS: While the city’s economic impor-tance has grown, so too has the city’s population. Jor-dan’s Department of Statistics indicated in its most recent annual report that the number of residents in the city of Aqaba reached 139,200 in 2012. More sig-nificantly, this figure is expected to jump to 250,000 by 2020, an increase of more than 130%, according to esti-mates made by the Aqaba Development Corporation (ADC), one of the city’s major developers.

The catalyst for Aqaba’s development began when King Abdullah II said in 2001 that the entire city of Aqa-ba would constitute the Aqaba Special Economic Zone (ASEZ). An administratively and financially independ-ent organisation, the ASEZ Authority (ASEZA) is respon-sible for the management and development of the free zone. The authority is mandated to issue permits and operation licences, register firms, and grant visitor, work and residency visas, among other responsibilities.

The ASEZ provides businesses with several investment incentives, including a flat tax of 5% on net profit; no foreign equity restrictions on investments made in the industry, retail, tourism and related sectors; no import taxes or tariffs on goods imported for individual con-sumption; no property or land taxes in some instances; flexible labour laws; and a multimodal transport hub with an airport and seaport. According to ASEZA fig-ures, the free zone covers 375 sq km of land as well as the entirety of Jordan’s 27-km coastline.

AT SEA & IN THE AIR: Two key components of the ASEZ are the seaport and the airport. The Aqaba Port areas are made up of several elements: a bulk cargo terminal known as the Main Port; a set of container ter-minals referred to as the Aqaba Container Terminal (ACT) and an industrial port in the southern part of the port area. Combined, the three facilities cover a total land area of 1.7m sq metres and a total sea area of more than 380,000 sq metres, according to the Aqaba Ports Corporation (APC). Set up in 1952 by royal decree, the APC is a governmental organisation responsible for operating, developing and maintaining the port areas.

Work on the King Hussein International Airport (KHIA) first began in the late 1960s, and the airport was offi-cially inaugurated in 1972. Originally containing a run-way, a small passenger terminal, a parking apron and a fire station, the KHIA has since been expanded. Today, the airport includes a 3000-metre runway, a cargo building with a cargo apron, a passenger apron and a passenger terminal, which was refurbished in 2002. According to the National Aviation Services, a Kuwait-headquartered firm that has been handling the KHIA’s cargo operations since 2006, the airport’s cargo ter-minal provides 6000 sq metres of warehouse space and 1500 sq metres of offices. The Aqaba Airports Compa-ny is responsible for managing and developing the KHIA. The passenger terminal at the KHIA is currently being expanded, with work set to be complete by the end of 2013, while further expansion and improve-ment efforts will take place between now and 2025.

BEHIND THE PLANS: The ADC owns both the KHIA and the Port of Aqaba. Set up in 2004, the ADC is jointly owned by the government of Jordan and the ASEZA, and is responsible for managing and operating the ASEZ’s major facilities, as well as developing the free zone by expanding or constructing new infrastructure. In addition to the seaport and airport, the ADC owns key land plots along with the management and development rights of primary infrastructure and utilities.

One of the ADC’s central tasks is to implement ASEZ’s master plan, which runs from 2001 until 2020. Devel-oped by ASEZA, the master plan separates the ASEZ into six areas: the city of Aqaba, the port areas, the Coral Coastal zone, the southern industrial area, the airport industrial zone, and reserves and environmental areas. According to the Jordan Investment Board, a govern-mental body representing key investment initiatives in the kingdom, the ASEZ master plan stipulates that 50% of investment spending goes towards developing the tourism industry, while 13% of investments be used to strengthen the heavy industry segment and 7% of investments be targeted towards light industry. The master plan divides up the remaining 30% of intended investment expenditures among a variety of industries.

ADDING DIVERSITY: The primary goal for Aqaba is to diversify its economy beyond shipping, logistics and tourism. Planners also aim to do more than simply build the port city into an economic engine; one objective is to transform it into a cultural hotspot. This should help in efforts to develop the city’s social infrastructure, making Aqaba a more attractive place not just for indus-trial investors, but also artists and academics.

One area where many local industrial and logistics firms have set up facilities is the Aqaba International Industrial Estate (AIIE). Located east of the airport in the ASEZ, the AIIE was recently ranked 33rd out of the world’s top 600 “free zones of the future” in a list com-piled by the fDi Intelligence magazine, a bi-monthly publication put out by the UK’s Financial Times. The fund-ing, planning, developing and marketing of the AIIE is carried out by PBI Aqaba Industrial Estate (PBI Aqaba) under a 30-year concession agreement. Phase I of the AIIE covers 60 ha of land that has already been com-pleted and sold, as per figures by PBI Aqaba. The entire industrial estate stretches across 175 ha of land, and development of 30 ha of the 110-ha second phase has been completed. PBI Aqaba estimates that around 60 companies have signed a contract with the industrial area, while actual investment in the AIIE is upwards of $180m and is set to reach $600m. In addition, the industrial zone has generated 900 jobs and this num-ber is likely to hit 3000 when the AIIE is fully occupied.

Sheldon Fink, CEO of PBI Aqaba, told OBG, “Aqaba has been an attractive setup point for many international companies. The AIIE has seen a 16-18% return on invest-ment for its partners in 2012, and we expect that prof-itability will continue as development progresses.”

A WIDE OFFER: The industrial zone provides a num-ber of services including assistance with obtaining operating and building permits, as well as environmen-tal and civil defence approvals. Company registration, employment, Customs and local partnering guidance are other services provided by PBI Aqaba. Businesses are also given a number of investment options, as the AIIE offers open lots, fully serviced land and finished buildings for lease or sale.

Aqaba is expected to play a growing role in the king-dom’s energy supply with the planned addition of two new import terminals. In 2012 the Ministry of Energy and Mineral Resources (MEMR) announced the ten-dering of a greenfield oil terminal, known as the Aqaba Oil Terminal (AOT), and the planned facility is expect-ed to notably diversify the kingdom’s import capacity. With limited domestic energy sources, Jordan imports large quantities of oil from Egypt through the Arab Gas Pipeline. Geopolitical conditions in recent years, how-ever, have prompted the government to make new import options available. Although an import terminal already exists in Aqaba, it has limited capacity – a prob-lem the planned AOT should solve. According to the MEMR, the new oil terminal requires storage capacity of 120,000 cu metres, which will consist of six tanks with floating steel roofs. The tanks will import oil via pipelines connected to an oil jetty. In early 2013, a plan was announced to build an $18-bn pipeline from Bas-ra in Iraq to Aqaba that could help Jordan meet its increasing demand for crude oil.

BRINGING IN GAS: Aqaba’s energy import capacity will expand with the construction of a planned lique-fied natural gas (LNG) import terminal to be located nearby the AOT. The kingdom has imported significant amounts of gas from Egypt since 2005 through the Jor-dan Gas Transmission Pipeline. However, similar to the kingdom’s oil supply, recent geopolitical conditions have posed challenges for ensuring uninterrupted access to LNG. Government authorities have conse-quently decided to build an import terminal in order to increase both security and flexibility over gas imports.

Scheduled to be operational in June 2014, the ter-minal will be an offshore floating, storage and regasi-fication unit (FSRU) with a maximum throughput of 13.88m cu metres per day, according to ADC figures. The FSRU will be designed for a total capacity of between 125,000 cu metres and 170,000 cu metres. While sev-eral countries are expected to supply Jordan with LNG via the planned terminal, Qatar will be the main exporter.

CREATING HAVENS: The tourism sector remains a pri-mary economic driver, with Aqaba home to a number of key projects. Ayla Oasis, for example, is a waterfront tourist development that stretches over 4300 dunums of land and includes four man-made, seawater lagoons that have increased Aqaba’s shoreline by 17 km, accord-ing to the project’s developer, the Ayla Oasis Develop-ment Company (OASIS). Construction on the lagoons as well as major infrastructure for the project, such as utilities and 25 km of roads, has been completed. Build-ing efforts are under way on the second phase of the project, which includes an 18-hole golf course, a float-ing marina with more than 300 berths, a 300-room Hyatt Regency Hotel, residential units and commercial retail space made up of shops, entertainment centres, restau-rants and cafes. As a private shareholding firm, OASIS is funded by Saudi Arabia’s Arab Supply and Trading, a group of companies with holdings in various sectors. Development of the lagoon and infrastructure phase of Ayla Oasis cost JD250m ($352m), according to OASIS estimates. A further JD200m ($281m) should be invest-ed into the second phase of the development, with most bids for this phase awarded to local contractors.

Saraya Aqaba is another key tourism project. Once completed, the project will cover 634,000 sq metres and include a man-made lagoon, providing an addition-al 1.5 km of waterfront. The project is being developed by the Saraya Aqaba Real Estate Development Compa-ny (SAREDC). According to Saraya Holdings, one of SAREDC’s primary shareholders, investment in the entire project should reach $1bn. Saraya Aqaba will be a mix of residential units, including villas, townhouses, duplex-es and apartments; several five-star hotels that will add over 1100 hotel rooms to the port city; entertain-ment facilities such as a beach club, a conference cen-tre and a water park; and a range of retail space.

MAJOR PROJECTS: Marsa Zayed is one of the largest tourism real estate projects under way in Aqaba. When complete, the development will comprise eight hotels providing 3000 rooms, over 30,000 residential units, a cruise terminal and retail, office and recreational space. The first phase includes a mosque, known as the Sheikh Zayed Masjid, the residential and retail area Al Raha Vil-lage and infrastructure projects covering 200,000 sq metres of land. Construction on phase one has already started and should be finished in 2015. According to Marsa Zayed’s developer, Abu Dhabi’s Al Maabar, the project will offer a built-up area of over 6.4m sq metres. The ADC has reported that around $10bn will eventu-ally be invested in Marsa Zayed.

Aqaba’s tourism sector should be strengthened fur-ther with the recent completion of renovation work on the Tourism Information Centre (TIC). The TIC was estab-lished in 2005 by ASEZA and provides tourists with information about guided tours and a range of attrac-tions including archaeological sites. The US Agency for International Development supplied both funding and technical support for the renovation project.

FUN FOR ALL: The Red Sea Astrarium (RSA) is a themed leisure and entertainment development that will include several hotels, an entertainment area, a Star-Trek-themed attraction and a man-made lagoon. Plans were also announced in 2012 to add a flight simulator to the resort’s list of features. Known as Wonders! the simu-lator will be constructed by Vekoma Rides Manufac-turing. The RSA project is being developed by RGH Themed Entertainment (RGHTE), which is a division of the Amman-based Rubicon Holding Group. Expected to cover 75 ha, many of the RSA’s attractions will focus on historical and cultural aspects of Jordan.

Another key project under way is the ADC Ware-housing and Industries Park (ADC WIP), or the South Project as it is also called. The 1.5m-sq-metre develop-ment, which focuses on the logistics and warehousing sectors, is located 6 km from the ACT and 12 km south-east of downtown Aqaba, according to Aqaba Nation-al Real Estate Projects Company (ANREPCO), ADC WIP’s developer. A private shareholding firm founded in 2006, ANREPCO is owned by Kuwait’s National Real Estate Com-pany (70%) and the ADC (30%). The company operates with registered capital of $36.4m, according to ASEZA.

The ADC WIP offers investors 60,000 sq metres of warehousing units, 15,000 sq metres of factory build-ings, office space located at the development’s admin-istration building, and 500,000 sq metres of serviced and developed land plots, as per ADC figures. ANREPCO has also created an extensive ecosystem for its clients, including telecoms, electricity, water, sewage and fire-fighting services. ANREPCO has reported that over 30 large outside investments have been secured, with the majority of these for warehouse units for import and export activities, open storage, and space for light and medium industrial activities. Occupation at the ADC WIP rose by more than 35% in 2012.

More work remains to be done to improve Aqaba’s competitiveness, however, according to Ahmad Halaiqah, the CEO of ANREPCO, told OBG. “The one-stop-shop model has been successful but for sustained growth, Aqaba needs more cohesion between the pri-vate and public sector for more streamlined Customs procedures and updated regulations.”

HEALTH SECURITY: The health industry is another expanding sector. Construction on the Prince Hashem bin Abdullah II Hospital (PHAH), for example, was near-ing completion at the time of publication. The $70m PHAH campus stretches across 150,000 sq metres, with residential units making up a third of the total campus. The hospital will provide 200 beds and cover 37,000 sq metres. A range of facilities such as spe-cialised clinics (6900 sq metres), general clinics (4300 sq metres), emergency services space (1350 sq metres) and offices (2200 sq metres) will be included in the hospital. Funding for the project has been provided by the Kuwait Fund for Arab Economic Development.

WATER: As Aqaba’s economy and population grows, procuring water for the city has become key. The Aqa-ba Water Company (AWC) supplies water to the ASEZ and the Aqaba governorate, reaching a population of 130,000. A limited liability firm with an operating cap-ital of JD20m ($28.1m), the AWC was set up in 2004 and is owned by the Water Authority of Jordan (85%) and the ADC (15%). It currently has about 30,000 cus-tomers, up over 127% since its founding in 2004. The majority of water consumption in Aqaba comes from industrial and tourism activities. Residential water use makes up less than 30% of the total. Aqaba, as well as much of the kingdom, procures its water supply from the Disi Aquifer, which is located underground in south-ern Jordan and north-western Saudi Arabia.

Demand for water in Aqaba is expected to jump sub-stantially in 2015 when the majority of high-water-using real estate projects in the city will likely come on-line. The Jordan Red Sea Project (JRSP), a large desalination plant set to be built in Aqaba, should help to meet rising water demands. A private company, known as the JRSP Company, will implement the proj-ect. Bids to carry out the master planning phase were submitted by several companies in 2012, though the tender had not been awarded at the time of writing. Construction of the JRSP was scheduled to begin in ear-ly 2013, though the project was delayed until a new Jordanian government was formed in March 2013.

Aqaba also recently overhauled its water delivery system. The distribution network, which was mod-ernised in 2006, runs for 600 km and reaches 100% of Aqaba’s citizens. The new system uses ductile iron and polyethylene, which is more suitable for the soil in the area. Water distribution throughout the Aqaba Gover-norate is monitored by the Supervisory Control and Data Acquisition system, which has resulted in contin-uous supply, improved efficiency and reduced costs.

OUTLOOK: Aqaba has seen major growth in recent years and the economy is set to strengthen further. Sev-eral projects are expanding key areas of the economy, namely industry, tourism and real estate. Further steps are being taken to support the community with greater hospital bed capacity and new water supply. “The fact that the entire city of Aqaba is a special economic zone has created a vibrant atmosphere for investment,” said Sahl Dudin, the managing director of Ayla Oasis. “The pace of growth will not be as rapid and some strategic adjustments will need to be made as the market matures. That being said, the local economy is growing steadily and continues to hold tremendous potential,” he added.

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