How developed is Jordan’s logistics and supply chain sector for export-oriented companies, and what measures could be taken to improve and streamline processes?
MICHAEL SAYEGH: The transport sector is still quite traditional and relies on trucks for the movement of goods between the production location and the port of export. At present, the shipping lines that link the port of Aqaba to other ports and countries are not sufficient. This is causing delays in the delivery because we need to use different ports in order to reach our final destination.
The number of ports that are directly linked to the port of Aqaba is very limited. As a result, we experience higher freight costs from the factories to the port. We believe in the need to establish a railway that can link the various parts of Jordan with the port of Aqaba. In addition, we need to find new maritime links to be able to deliver exports to new markets.
Given that some traditional export markets are now limited because of unrest, what new export markets are Jordanian manufacturers considering?
SAYEGH: One of the main problems for Jordan’s industry is the small size of the local market. Therefore, we have traditionally relied heavily on neighbouring markets like Saudi Arabia, Syria and Iraq. Unfortunately, due to the current regional turmoil, the latter two markets have been closed for exports of Jordanian products.
Another very important market for Jordanian industry is the EU. However, due to obstacles and procedures in the EU-Jordan agreement, exports are weak or non-existent in many cases. While recent amendments to the rules of origin (ROOs) represent a positive step, it does not seem likely that much will change.
Unfortunately, the effects of the amendments will be minimal, primarily due to factors such as political pressures on Jordan, the application of quotas with regard to employment of Syrian workers, and the fact that the relaxation of ROOs will be geographically limited to certain development zones. All these conditions contribute to a poor export performance with regard to the EU market.
What do you identify as the most significant impediments to Jordan’s industrial competitiveness?
SAYEGH: Industry in Jordan has increasingly started to look to the African continent – especially North and East Africa – as part of its search for newer and more compatible export markets. However, a number of shipping restrictions mean that the results have been limited for the time being. Overall, as mentioned earlier, the most significant obstacles are the small size of the local market and the closing of neighbouring markets.
In addition, procedures and bureaucracy from some of Jordan’s official bodies can tend to slow down processes and have a negative impact on exports. Even trade agreements, which are supposed to help increase the level of exports, are having a detrimental effect on Jordanian industry due to the gulf in competitiveness that exists between Jordan and many of the countries with which it has such agreements. It is difficult to compete, for example, with Egypt and Saudi Arabia, where labour, energy costs and other fees are significantly lower.
Lastly, there needs to be a policy shift within government that encourages state agencies to use Jordanian products when planning and purchasing. It seems like an obvious inefficiency for the government to be spending budgeted resources on purchasing products from abroad.
We cannot escape from the fact that exports are one of the most important sources of revenue for industry in Jordan. At the moment, exports are in need of better external support, via tax-cuts, lower shipping costs and concerted efforts to streamline the amount of red tape involved in official procedures.
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