What do you identify as the main obstacles holding Jordanian industry back from moving up the value chain?
SALIM KARADSHEH: Industry in Jordan is facing a number of challenges, which is impacting its performance. On the local level, energy is the main challenge. However, I believe that the government is taking steps towards resolving this issue for the sector. Regionally, the turbulence in many countries is having a significant impact on our opportunities for foreign trade.
Furthermore, industry in Jordan suffers from the lack of a government strategy to promote it, the lack of applied research and collaboration with universities to enhance innovation, unstable and high energy prices compared to the region, a small domestic market that does not allow economies of scale, and an expensive route to market from the Red Sea port of Aqaba – especially following the closure of land borders to Iraq, Syria and Lebanon.
How will the recent EU-Jordan trade agreement impact the industrial sector?
KARADSHEH: The EU’s encouragement of trade with Jordan has little impact on our industry, as the barriers to trade are a devalued euro and British pound versus the Jordanian dinar, which is pegged to the dollar, and the high freight costs to access the markets.
I find it easier to tap European markets from Egypt, which has port access on the Mediterranean and a devaluing local currency. Nevertheless, other industries may have an advantage from the changes in the rules of origin.
What is the industrial sector doing to help the goals of the London donor conference, particularly with regard to job creation?
KARADSHEH: Job creation requires faster growth in GDP than in population. This has not been the case in Jordan for a few years now that border closure, petrodollar shrinkage and refugee influx impacted GDP growth negatively as well as accelerated population growth.
Any attempt to create jobs for refugees without strong GDP growth amounts to swapping employment of Syrians for others such as Jordanians or Egyptians. In our industry we see this taking place with the emergence of Syrian start-ups that are offering basic products at very low margins in order to compete with established Jordanian firms.
With the absence of the major export markets of Iraq and Syria, what is the Jordanian industrial sector doing to find new markets?
KARADSHEH: The weak global economy does not enable Jordan’s industry to capitalise on unmet demand in untapped markets. Europe’s growth is close to zero and the US dollar has strengthened against the euro over the past two years, giving a disadvantage to Jordanian exports.
Chinese products are being sold at dumping or close to dumping prices. Turkey, Malaysia, Egypt and others are benefitting from devaluations in their currencies and are also desperate to unload surplus capacities.
As a result, Jordanian industries have had to cut costs and live with smaller volumes at lower prices. The same is true regionally and applies to multinational companies.
What more needs to be done to further incentivise investment in Jordan’s manufacturing industries?
KARADSHEH: Jordan needs to reach agreement with the World Trade Organisation on a level of Customs protection for its industry, in order to level the field in energy and currency disadvantages and to account for the loss of market stemming from the geo-political situation. Universities need to be incentivised to create income from applied research. Jordanian products that meet quality standards need to be promoted to ensure creation of local jobs.
Economic courts need to be set up to take action on issues such as unfair trading and labour disputes. Unfair advantages enjoyed by Syrian start-ups that in effect shift value from established Jordanian firms ought to be fixed. Government should move faster to supply industry with gas. Income tax evasion should be removed. Taxes and laws should not be changed frequently – a level of stability in those can help industry plan in the medium term.
The public sector should privatise the shops, schools, hospitals and other economic activities it is operating. The proceeds should be used to lower the debt and to rehabilitate labour and direct them to focus on areas where Jordan has an advantage, such as solar energy, medical tourism, pharmaceutical industry and services, while starting to collect income tax from the now-privatised businesses.
There are a lot of things that can be done to improve industry, but a general policy and a comprehensive strategy is the starting point.
Jordan Vision 2025 aims to achieve economic and social development. According to the vision, the industrial sector is expected to increase its contribution to the GDP as well as offer more job opportunities. However, to achieve this, the government needs to put in place strategies and policies to help the development of modern infrastructure and the business environment.