Greater investment of both time and money into Jordan’s local, regional and international transport networks is expected, with King Abdullah II bin Al Hussein underscoring the importance of building and maintaining effective transit systems. Major public transport projects are currently under way, along with continued expansion of land and sea links. In policy and regulation, new laws are expected to bring some much-needed reform.
Meanwhile, the country’s strategic position on historical trade routes continues to give it a comparative advantage for international transport and logistics outfits. Jordan’s location as a natural conduit for trade with Iraq and – in the future – Syria place it in good stead for contributing to any major reconstruction efforts in the region.
Yet the sector is not without challenges. The closure of the Iraqi and Syrian frontiers during years of conflict has put a strain on businesses, while the overall economic slowdown of the region has shrunk company funds. At the same time, reorganisation in public transport faces considerable political and administrative hurdles, while funding also remains problematic. Despite these challenges, however, the sector continues to expand in air, on land and by sea, with plenty of opportunities for investors to further develop this key industry.
Sector Actors
The Ministry of Transport (MoT) is the lead institution for the sector, headed by Walid Masri since January 2018, following the resignation of Jamil Mujahed, who was also the former director-general of the Public Transport Regulatory Commission, now known as the Land Transport Regulatory Commission (LTRC). The LTRC comes under the MoT and is responsible for the supervision and development of the land transport sector.
The Greater Amman Municipality (GAM) shares responsibility for movement around the capital, while in the coastal city of Aqaba, the Aqaba Special Economic Zone and its Aqaba Development Corporation are in charge of sea, air and land transport.
The Civil Aviation Regulatory Commission looks after the air segment, while two entities run the country’s rail lines: the Aqaba Railway Corporation and the Jordan Hejaz Railway Corporation. Both of these corporations are linked to the MoT, as is the Jordan Maritime Commission, although this agency is financially and administratively independent of the ministry. In addition, the umbrella of the MoT extends to the Jordan Meteorological Department, which provides weather forecast services for both the sector and the general public.
There are also a variety of professional bodies related to transport, such as the Jordanian Logistics Association, while many chambers of industry and commerce take an active role in sector debate as well. The Amman Chamber of Commerce, the Zarqa Chamber of Industry and the Jordan Chamber of Industry (JCI) are among the most vocal.
Adding Up
According to data from the Department of Statistics (DoS), the transport, storage and communications category contributed some JD1.29bn ($1.82bn) to GDP in the first three quarters of 2017. This was up from JD1.26bn ($1.78bn) in the first three quarters of 2016 and JD1.22bn ($1.72bn) over the same period in 2015. These figures represented 17.3%, 16.9% and 16.4% of total GDP between January and September in 2017, 2016 and 2015, respectively. While the category does include storage and communications, other sources support the importance of the transport sector to the national economy; data enclosed in the Jordan Economic Growth Plan 2018-22 showed that transport alone was responsible for about 9% of GDP in 2016.
The latest DoS figures on employment in the sector, dated 2014, also demonstrate the industry’s significance. That year, 21,455 people were officially employed in the transport and storage sector, and 1235 businesses were registered as operating in the domain. Many of these businesses were small and medium-sized enterprises (SMEs), with 3688 people employed by 407 companies that maintained five to 19 employees each. There were also 24 large firms – those with a workforce of more than 100 people – responsible for 12,092 jobs. In contrast, there were 717 businesses in 2014 employing just one to four people, making up the majority of enterprises. This illustrates a significant concern in efforts to reform the public transport system, with many Jordanians reliant on bus and minibus services run by individuals and their families. Haulage companies, operating on the main land artery from the Port of Aqaba to Amman, are also dominated by SMEs.
Main Routes
Other key land routes have historically been those between Amman and neighbouring Iraq, Syria and Saudi Arabia. Recent conflicts in the surrounding region, however, closed off the first two of these routes, which had been responsible for a large part of transit trade through Jordan, as well as for export goods originating in the kingdom. A functioning four-lane highway joined Amman and Damascus up until March 2015, although other cross-border routes were closed earlier. Syria was an important transit route for many goods heading to Europe, Turkey and further east.
In July 2015 the Iraqi authorities closed the Turaibil-Al Karameh border crossing after clashes in the province of Anbar. Following two years of dangerous conditions, the Iraqi border crossing reopened in late August 2017, with the highway to Baghdad back in government hands. A US security company was expected to take up control and repair of this road, but since the start of March 2018 no further details have been provided.
Another factor to be determined is the future Customs and tax framework that will apply to goods exported from Jordan. A 30% tax had been declared by Baghdad to protect domestic Iraqi industries, but this would likely result in strong adverse consequences for many Jordanian export businesses. As a response, the Jordanian government has been lobbying for certain commodities originating in the kingdom to be exempt from tax.
According to the JCI, the Iraqi market used to absorb around 20% of Jordan’s exports, making it one of the kingdom’s primary export destinations. Maintaining customers in Iraq and beyond – Iraq acted as a transit route for goods bound for Iran, Turkey and elsewhere – was an expensive business for Jordanian transporters in the years of the border closure. The land route to Iraq involved travel via Saudi Arabia and Kuwait, adding time and cross border fees. Volumes therefore plummeted. “Aqaba Port used to discharge on average 8000 twenty-foot equivalent units (TEUs) to Iraq every month up until 2012,” Ghada Qandah, market analyst for the Kawar Group, told OBG. “Due to political reasons since then, annual volumes have dropped to 5000-6000 TEUs.” This extra cost over land has had some positive effects for sea haulers, however, with the maritime route from Aqaba to Umm Qasr in southern Iraq picking up some of the trade volume.
The Population Factor
The conflicts in neighbouring states have also led to a major influx of people fleeing their homes, with the UN High Commissioner for Refugees having registered some 733,000 refugees and asylum seekers in Jordan as of September 2017. In the following month approximately 654,000 refugees from Syria were registered with the UN agency in Jordan.
This has led to a significant surge in the national population, with the DoS estimating the total at 10m people for 2017 versus the 2015 census of 9.6m. The 2015 census put the population of the capital at 3.9m, or around 45% of the total, while the nearby city of Zarqa accounted for 1.3m people, and Irbid 1.6m. These three cities are located in the north of the country, with urban sprawl knitting them ever closer together. The population is sparser in the centre and south of the country, with the governorate of Tafielah home to 75,069 people, Ma’an to 77,914 and Aqaba with 160,240.
For transport and logistics companies, this distribution poses particular challenges, especially as Aqaba, in the far south, is the country’s sole international port. Privately run city transport, for example, tends to be concentrated in the north, where the higher population densities are able to make it profitable. Not only is there a lack of private transport in the south, but there is also a gap in the wider public transport system. “Public transport between the south and the northern area of the country remains too weak to support the attractiveness of Aqaba for skilled workers and entrepreneurs located in the north,” Hakam Abul Feilat, general manager of Aqaba Logistics Village, told OBG.
Concerning the movement of goods, many cargo shipments travel the road from Aqaba to Amman, but lorries sometimes have to return empty due to the smaller domestic market in the south. This unequal distribution of people and the goods they demand lead to a rise in costs.
A further issue is the current regulation that aims to ensure that the many individual truckers working the Aqaba-Amman route all get a fair share of the business. “Each truck is allowed to make the journey eight times per month,” Wael Khoury, sea freight director of Kuehne & Nagel, told OBG. “In peak seasons, however, they need to do more, and you find that by halfway through the month they’ve all used up their eight-journey allowance. Then they have to pay extra to find other truckers and the cost is passed on to the consumer.” Transport and logistics companies would like to see some increased flexibility in the rules governing truckers on the route, with 2018 likely to see some pressure put on the government regarding this point.
Slowing Circumstances
The economic slowdown that began in 2014 has continued to put pressure on transport companies’ bottom lines. The DoS and the Central Bank of Jordan figures for GDP show a growth rate of 2.74% between 2012 and 2013, followed by 3.23% between 2013 and 2014. Growth then slipped to around 2.62% for 2014-15, and then further to 2.17% in 2015-16. Data from the Ministry of Finance (MoF) cites GDP growth of 2% for 2016 with a slight increase, up to 2.2%, in 2017. The IMF forecast that real GDP growth will hit 2.5% in 2018.
The slowing economy is the joint result of regional instability and the slump in global oil and gas prices. The latter has benefitted Jordan’s energy import bill, as the kingdom has little oil and gas reserves of its own, but has badly affected countries in the Gulf, where many Jordanians work. The value of remittances sent home by these workers has dropped as a result. The GCC countries are also a major source of grants and donations to Jordan, and fiscal tightening in the Gulf has led to a reduction in their flow. According to data from the MoF, total foreign grants fell from JD1.2bn ($1.69bn) in 2014 to JD886m ($1.25bn) in 2015, and then to JD836m ($1.18bn) in 2016. By the end of 2017 total foreign grants dropped further to JD708m ($998m).
Plans & Projects
Tackling these considerable challenges was recently given heightened priority by King Abdullah II and his government. He pointed out the vital role that transport has in the development of all sectors of the economy, and its effect on the quality of life of many Jordanians.
This was first given greater emphasis in the kingdom’s long-term development plan, Jordan 2025, which proposes a national transport sector strategy that combines regulatory changes with infrastructure developments. An outline for that proposal was drawn up by a team of international consultants contracted by the MoT. Launched in May 2015, the plan envisages a greater role for railways to remove freight from the roads, particularly along the Aqaba-Amman and Amman-Syria transport corridors. Better maintenance and safety enhancements of roads were also highlighted, as was boosting public transport, with plans for a bus rapid transit (BRT) system in Amman, and between Amman and Zarqa. The aviation network was also targeted for expansion, with the Queen Alia International Airport (QAIA) in Amman and Aqaba’s King Hussein International Airport (KHIA) being the main recipients of development works under the plan.
Another document with goals for the transport sector is the Jordan Economic Growth Plan (JEGP) 2018-22. Produced by the government’s Economic Policy Council, this document aims for a combined growth of 12% in the transport and ICT sectors over the plan period. The JEGP noted transport “offers the quickest potential dividend from a normalisation of security within the region”, but also highlights the domestic need to develop public transportation as a tool in the integration of different governorates and growth areas around the country.
The strategy’s target of expanding capacity of the QAIA to handle 12m passengers per year was met in 2016, and in 2017, a total of 7.9m travellers passed through the main airport. Additionally, the JEGP plans boost the role of Marka International Airport, and strengthen KHIA for tourist flights and cargo shipments to the city’s special economic zone. “Now that QAIA’s annual capacity has been boosted to 12m passengers, we need to increase the focus on marketing Jordan as a local hub to reach 10m passengers over the medium term,” Kjeld Binger, CEO of Airport International Group, told OBG.
Beyond air, aims include increasing the capacity of the Port of Aqaba; growing and reorganising public transport with the BRT; providing incentives, such as tax breaks, for public transport operators; bringing in smart systems and other technologies for safety and traffic control; upgrading and improving the land cargo transportation fleet; bringing in more private sector investment and enterprises; and building human resources capabilities in the sector.
The JEGP also allocated specific sums for certain targets. The BRT system was allocated JD110m ($155.2m), JD24m ($33.9m) of which comes from a GCC grant; Marka International Airport was expected to receive JD80m ($112.9m); JD60m ($84.6m) was to be invested in KHIA; and the construction of an airport at Shuna that will transport both passengers and agricultural goods was allocated JD321m ($452.8m). Some JD2.1bn ($2.96bn) was allocated for the development of a national railway network, consisting of 942 km of cargo-based line. A dry port at Ma’an was listed as well, with investment of JD50m ($70.5m), bringing the grand total for transport initiatives to JD2.7bn ($3.8bn).
On the Bus
The BRT system is perhaps the most visible sign of change in the capital’s transport network. Dedicated lines will see high-capacity buses speed along some of Amman’s busiest transport corridors, linking to a number of key hubs where other modes of transport intersect. The vehicles can carry up to 120 passengers each and will arrive every three minutes on the busiest routes.
Two lines covering a total distance of 25 km are being constructed for the first phase of the project. The first line runs from Swuayleh to Al Mahatta, while the second begins at the National Museum and joins line 1 at Sports City.
Work on the project – a GAM initiative – has not been without its challenges, though. After ground was broken in 2009, construction halted in 2011 over feasibility and funding concerns. Work resumed in 2015-16, after which GAM adjusted the $152m funding agreement for the project with the French Agency for Development, placing it on a firmer financial footing. The lines also involve the construction of several dedicated structures, such as bridges, over- and underpasses, and special passenger stations. This all adds to the cost and time of construction. Remaining tenders for building work are expected to be awarded by the end of the first quarter of 2018, but as of end-March 2018, no updates had been provided. The system is expected to be running by the first half of 2020, eight years later than the initial projected launch date of 2012.
There is also strong demand to extend the system to the neighbouring city of Zarqa, which would help bring together the country’s major commercial, residential and industrial conurbations. The MoT estimated in 2015 that around 100,000 people commute between Zarqa and Amman each day. The government has approved funding for this project, with the national authorities carrying out the scheme instead of GAM. Designs for the AmmanZarqa network were completed in early 2018, with a construction tender set to follow shortly thereafter.
The Amman-Zarqa BRT supersedes plans for a light rail connection on the basis that the BRT will likely carry a maximum passenger load of 67,000 per day. According to a 2017 report by the Centre for the Study of the Built Environment, Jordan had a ratio of 0.2 buses per 1000 people versus a preferred ratio of one per 1000 people.
New Law
The kingdom has also moved forward with a new passenger transport law. This regulation aims to address several long-standing challenges in the sector, such as fragmentation and the lack of secure funding. Passed in May 2016, the law established, for the first time, an independent fund for passenger transport. The law stipulates that the body will be funded with a tax of JD0.02 ($0.03) on every litre of gasoline and diesel sold in the country, along with licence and permit fees to be handed out to passenger transport operators. Private motorists, therefore, partly subsidise the public transport sector, with fuel-inefficient cars, trucks and buses required to contribute a higher fee.
This addresses a major trend in the sector, namely that public transport has tended to be left unfunded by the state. Consequently, profitable routes are operated by private companies, while other, perhaps nationally vital but less popular routes are left with poor or non-existent services.
GAM is currently responsible for channels within its municipal boundaries and the LTRC manages those outside the Amman area. The new law envisages the decentralisation of some of the LTRC’s responsibilities to regional municipalities and governorates. Advocates hope that this will lead to services more closely tailored to local needs.
The new law also addresses another key issue in public transport. “Over 85% of the public transport fleet is individually owned and operated,” Hazem Zureiqat, transport consultant at engineering consultancy Engicon, told OBG.
This fragmentation of ownership has become a barrier to development. Individual operators tend to crowd particular routes, working against the production of regular schedules and services. On the one hand, individual owners benefit from tax exemptions and this discourages larger operators from entering the market, resulting in a lack of services. On the other hand, small operators often have difficulty obtaining finance to upgrade and improve services.
Many outfits are experiencing increased financial pressures, as heavier traffic congestion means fewer journeys and passengers are hitting their bottom lines. The new regulation tackles some of these issues by requiring individual owner-operators working the same route to either merge with others or join larger companies within five years of the law coming into effect. To sweeten this deal, owner-operators are to receive benefits like the lifting of Customs duties on new vehicles.
As of March 2018, however, the new law was still awaiting implementation of its fund. The levy on petrol to fund public transport had been postponed, raising questions on overall viability.
Desert Highway
Enhancing the kingdom’s Highway 15, also known as the Desert Highway, is another key project currently under way. Development work will span 220 km from the QAIA, south of the capital, to Mreigha-Ras Al Naqab, north of Aqaba. The highway has been the scene of several fatal accidents over the last few years, including a three-vehicle crash in 2017 that resulted in the death of eight people. This, along with increased traffic volume and road deterioration from the effects of an extreme desert climate, highlight the need for an upgrade.
A vital artery for the country, the highway carries goods to and from Jordan’s only international seaport. In February 2016 the Cabinet approved a $65m grant for its upgrade, to be further supported by a $105m loan agreement signed by the Ministry of Planning and International Cooperation and the Saudi Fund for Development (SFD) in March 2017.
The upgrade is being implemented in six stages and each of the sections was put up for tendering in 2016. A requirement of the tendering process was that bidders need to be a consortium composed of one Saudi contractor and two Jordanian firms, with bidding attracting seven such groups in May 2017. Announced at the official launch of the project in September 2017, it was expected that work on the highway will be completed by mid-2019.
Ongoing Initiatives
The Ministry of Public Works and Housing (MPWH) also implemented a raft of road-related projects in mid-2017, with 13 plans for the Irbid and Mafraq areas. Funded by the German Development Bank, with a JD3m ($4.2m) loan, work included road cleaning, building protective walls and clearing drains.
Mafraq is also seeing construction of a road extending 8 km to the west to connect with the city of Rihab. The JD8m ($11.3m) project was expected to be completed by end-2017, however, as of early 2018, no updates had been provided.
Other MPWH projects include the Zarqa road expansion, which runs to the Jordan Petroleum Refinery; the 38-km Kathraba-Jordan Valley Road scheme, connecting the Karak Governorate to the south of the valley; and work on the Waqqas road.
Another project is the construction of a 22-km ring road around Salt, a town 35 km north-west of Amman. A soft loan agreement worth $46.27m was signed in August 2017 for the road, provided by the Arab Fund for Economic and Social Development. The Jerash-Amman highway is undergoing reconstruction after a landslide blocked the road in early 2017, and Amman itself is seeing a string of intersection improvement projects – including tunnels on Airport Road – worth JD61.5m ($86.8m), with financial support from the SFD.
At the same time, the government has been moving ahead with plans to develop two land ports: one in the Madouneh area, east of Amman, and the other at Ma’an, 220 km south of the capital. In May 2017 the Cabinet approved the plan for the first site, which will become a combined transport, shipping, storage, packing and distribution centre. The tender for a Customs facility in the same area has been floated by the MPWH, with some JD90m ($127m) allocated for both land ports in the 2017 budget. Each facility will be tied to the proposed national railway network (see analysis).
Outlook
While much is being done domestically, the transport sector’s prospects also depend on the stability of neighbouring states. The reopening of the Iraqi border in 2017 will likely prove a major stimulus to trade activity, and an easing of the conflict in Syria could lead to a resumption of land transport between the two nations.
Internally, the new public transport law is being pushed for final implementation and projects such as the BRT will see services begin rolling out in the near term. Tenders for road transport projects are likely to continue to foster partnerships between foreign and local investors, while airport development plans should also generate significant interest. Domestic movement and population growth will continue to fuel demand, but transport bottlenecks may be disruptive to overall economic growth.
Due to these reasons, the importance of the transport sector is being heightened by King Abdullah II, with the country embarking on the implementation of its five-year economic development strategy.
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