Jordan 2014_OBG

THE
REPORTJordan
2014
ECONOMY ENERGY INDUSTRY
BANKING TOURISM CAPITAL MARKETS
REAL ESTATE CONSTRUCTION TRANSPORT
INSURANCE TELECOMS & IT INTERVIEWS
9781910068144

CONTENTS JORDAN 2014
Moving forward
Page 25
The recovery from the global downturn con-
tinued in 2013 and 2014, and the IMF has
forecast growth of 4.5% in the medium term.
After reaching a peak in 2012, the current
account deficit has started to narrow thanks
to lower energy imports and higher current
transfers.Thegovernmentisfocusedonreduc-
ingthedeficitbycuttingsubsidies,carryingout
taxreformsandreinforcingtaxadministration.
Oasis of capital
Page 43
Over the past year, the banking sector
has shown a robust performance, with
aggregate lending on the rise and net
profitsgenerallymaintainedacrossthe
board. Improvements in asset quality
suggest it has turned a corner regard-
ing troublesome loans that have per-
sisted since the global financial crisis,
and a relatively upbeat assessment of
economicgrowthprospectsbytheIMF
hasbroughtanairofoptimismin2014.
8
12
14
16
18
22
25
29
30
31
33
34
36
39
43
SNAPSHOT
Jordan in figures
COUNTRY PROFILE
Sands of time: The kingdom is a crossroads of
geography, culture and history
Evolutionary change: Political reforms continue
Viewpoint: Prime Minister Abdullah Ensour
Going coastal: Development is being stepped up
in a key port city
Interview: Crispin Blunt, MP and Chairman,
All-Party Parliamentary Jordan Group
ECONOMY
Moving forward: The emphasis is on reducing
the fiscal deficit and resetting strategies
Interview: Umayya Toukan, Minister of Finance
Interview: Ibrahim Saif, Minister of Planning and
International Cooperation
Reviews and results: Evaluating the
government’s privatisation programme
Interview: Awni Rushoud, Investment
Commissioner, Investment Commission
Small but important: Supporting the growth of
the nation’s SMEs
Trade partners: Economic ties with Iraq are
strengthening
Strong support: Foreign assistance is a
significant part of the economy
BANKING
Oasis of capital: In a turbulent region, the local
banking sector has become a safe haven
50
51
53
54
55
58
63
64
65
66
67
68
70
77
83
85
From seed to fruit: The development of the
country’s sharia-compliant banking sector
continues
Opening space: Market exits and strategy shifts
bring fresh opportunities
Interview: Ziad Fariz, Governor, Central Bank of
Jordan
Interview: Nemeh Sabbagh, CEO, Arab Bank
From the top: A closer look at the direction of
the country’s central bank
CAPITAL MARKETS
Full steam ahead: Maintaining healthy and
steady growth, the exchange is set to face any
challenges
Interview: Tarik Awad, CEO, Capital Investments
New partners: There is an improved strategy in
place aimed at attracting more foreign
investment
Stocks & bonds: Share analysis and data
provided by Capital Investments
Arab Bank: Banking
Cairo Amman Bank: Banking
Al Eqbal Investment Company: Tobacco and
cigarettes
Bank of Jordan: Banking
INSURANCE
Changing with the times: Increased competition
and new regulations transform the sector
ENERGY
Diversifying the mix: As energy demand
increases, the country turns to renewables and
other alternatives
The search continues: The lack of oil and gas
has presented major challenges, but the sector
remains important
The promise of shale: As the country seeks to
diversify its energy resources, oil shale has
significant potential
ISBN 978-1-910068-14-4
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CONTENTS JORDAN 2014
www.oxfordbusinessgroup.com/country/Jordan
6
Enhancing
connectivity
Page 91
Thetransportsectorcontinuestobenefitfrom
Jordan’sstrategiclocation,accountingfor12%
of GDP in 2013. Plans for airport renovations
and a national railroad will support further
expansion, although concerns remain over
the instability in neighbouring Iraq and Syria.
87
91
99
101
104
Interview: Mohammad Hamed, Minister of
Energy and Mineral Resources
TRANSPORT
Enhancing connectivity: Upgrading road, rail
and air networks to benefit from a strategic
regional location
Interview: Kjeld Binger, CEO, Airport
International Group
Soaring growth: Airport renovations in both
Amman and Aqaba aim to boost the aviation
sector
CONSTRUCTION & REAL ESTATE
Beyond homes: Large-scale projects in
infrastructure, tourism and real estate are set to
drive growth in the sector
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115
121
122
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126
133
141
142
145
146
149
154
155
Interview: Taha Al Zboun, CEO, Dead Sea
Development Zone
Bigger and better: Plans for a new downtown
are under way
Market forces: Regional migration and
macroeconomic growth support real estate
sales
INDUSTRY & RETAIL
On track: A new investment law is expected to
consolidate incentives for investors in the
sector
Interview: Hatem Al Halawani, Minister of Trade
and Industry
In the zone: Ambitious plans are in the works to
expand the country’s network of industrial
zones
From strength to strength: Still an international
player in the potash, phosphate and fertiliser
market
Consolidating positions: Traditional street stores
and modern retail outlets compete for business
in a growing market
TOURISM
Leaning green: Focusing on niche markets like
wellness, ecotourism and religious travel to
expand the sector
On tour: Combining quality and affordability for
attractive care
Brick by brick: Sector expansion spurs
construction
A divine path: New initiatives promote religious
tourism
Interview: Nidal Katamine, Minister of Tourism
and Antiquities
TELECOMS & IT
Holding its own: Regulators work to maintain a
balance between healthy growth and strong
competition
Long-term vision: New services are coming to
the market
Interview: Azzam Sleit, Minister of Information
and Communications Technology
Chairman: Michael Benson-Colpi
Director of Field Operations: Elizabeth
Boissevain
Regional Director: Karine Loehman
Country Director: Ece Temel
Field Operations Executive: Meltem
Okur
Field Operations Assistant: Arda Özgen
Project Coordinator: Sultan Hussam
Kanaan
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Beyond homes
Page 104
With the government looking to meet demand for more afford-
able housing and major redevelopment initiatives planned or in
the works, large-scale projects are set to drive growth in con-
struction going forward. Despite certain challenges, the sector
is expected to benefit from new real estate and tourism devel-
opments. As a result of a growing population and regional migra-
tion, sales in the real estate market have increased, especially
of residential units. Amman and Aqaba are also expected to
see several mixed-use developments in the near to mid-term.

CONTENTS JORDAN 2014 7
THEREPORT Jordan 2014
On track
Page 115
A major economic contributor in terms of
GDP and employment, the industrial sector
remains a safe harbour for investors. This
stands it in good stead, as does its greatest
resource–humancapital.Meanwhile,recent
years have seen the retail sector grow in
sophisticationanddiversity,withthearrival
of foreign brands. The shift from tradition-
aloutletstomodernonesisalsounderway.
Holding its own
Page 149
The second Middle East country to launch
GSM after Qatar, Jordan has recently seen a
surge in the use of smartphones and wire-
less data, with mobile penetration at 142%
as of end-2013. Despite steep tax hikes on
voice services in 2013, the telecoms sector
remains competitive, and new 4G services
onthewaybodewellforthecountry’srobust
IT sector, tech start-ups and e-commerce.
Leaning green
Page 133
With infrastructure upgrades ongoing,
the tourism sector continues to mature.
Tourism made up some 13% of GDP and
brought in $1.03bn in revenue in first-
quarter 2014, up 11.1% on 2013 figures.
Anationalbrandingcampaignisfocusing
on major growth segments that include
medical tourism, travel for religious rea-
sons, and adventure and ecotourism.
A healthy investment
Page 163
The private sector is taking the lead in
health care and the medical tourism
niche has expanded rapidly. Around
255,000 foreign patients came for
treatment in 2013, up from 240,000 in
2012, when total revenues were $1bn.
More investment and employees will
be needed to sustain this expansion.
156
160
163
168
174
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182
184
190
194
196
Into the clouds: A strong talent base and
infrastructure upgrades make for attractive
prospects in the IT sector
Tech heavyweight: Incentives for start-up
companies help support the development of
local tech entrepreneurship
HEALTH
A healthy investment: Limited government
resources are driving expansion of the private
health care system
EDUCATION
A focus on learning: Enrolment is high across
the board, from the primary through the
tertiary levels
Scientific method: Emphasis on research and
development aims to boost innovation in
energy and medicine
TAX
EY
Incentivising investment: Building a responsive
and efficient tax regime that balances business
promotion and revenue generation
Viewpoint: Ali Samara, Partner, EY Jordan
LEGAL FRAMEWORK
Zu’bi Advocates and Legal Consultants
A detailed insight: An overview of the kingdom’s
investor-friendly regulations from investment
incentives and corporate structures to permits
and real estate
THE GUIDE
A good night’s sleep: A rundown of some of the
kingdom’s leading hotels and resorts from
Amman to Aqaba
Listings: Telephone numbers for government
ministries, foreign embassies, travel services,
health care and more
Facts for visitors: Useful tips for business and
leisure travellers, including visa information,
operating hours, health care and attire

SNAPSHOT8
Jordan in figures
0
2
4
6
8
10
12
As % of GDP
20122011201020092008
0
4
8
12
16
20
24
Public spend as % of
total gov't spend
Health expenditure, 2008-12
SOURCE:WorldBank
Tourist nights by region of origin, 2012-13 (000)
SOURCE:MinistryofTourismandAntiquities
0
300
600
900
1200
1500
20132012
Jordanians
living
abroad
GulfArab
countries
EuropeEast
Asia &
the Paciﬁc
AmericasAfrica
SOURCE: Ministry of Education
2009/10 2010/11 2011/12 2012/13
MoE 1,129,448 1,143,008 1,154,880 1,173,976
Other gov't 13,225 14,090 14,603 15,018
Private 365,905 382,867 406,327 424,999
UNRWA 119,903 117,957 114,362 112,838
Total 1,628,481 1,657,922 1,690,172 1,726,831
Students by school type, 2009-13
SOURCE: Aqaba Port Corporation
Year Exports Imports Total No. of
(000 tonnes) (000 tonnes) (000 tonnes) vessels
2003 8240 9607 17,847 2694
2004 8771 12,265 21,036 2888
2005 7998 12,432 20,430 2933
2006 7020 10,145 17,165 2884
2007 7495 10,297 17,792 2941
2008 7787 9165 16,952 3024
2009 5899 8302 14,201 2900
2010 8056 8795 16,851 2902
2011 8975 10,209 19,184 2892
2012 7411 11,944 19,355 3083
2013 4531 11,785 16,316 2885
Cargo traffic at Aqaba Port, 2003-13
0
1.0
2.0
3.0
4.0
5.0
6.0
Internet users (m)
Q4Q3Q2Q1
0
15
30
45
60
75
90
Penetration (%)
Internet users & penetration, 2013
SOURCE:JTRC

SNAPSHOT 9
Other
Construction
General trade
Industry
Public services
& utilities
Transport services
Financial services
Tourism, hotels
& restaurants
Agriculture
22.8
21.6
20.8
14
11.5
2.8
2.7
2.7
1.2
Credit facilities by economic activity, 2013 Q3 (%)
SOURCE: Bank Audi
0
0.90
1.80
2.70
3.60
4.50
5.40
To construction (JD bn)
20132012201120102009
0
6
12
18
24
30
36
% of loans to
all sectors
Bank loans to construction sector, 2009-13
SOURCE:CentralBankofJordanSOURCE:CentralBankofJordan
ASE free float index performance, 2005-13
0
1000
2000
3000
4000
5000
201320122011201020092008200720062005
Avg. Amman apt. rental rates, Q1 2014 (JD/year)
SOURCE:Asteco
0
4000
8000
12,000
16,000
20,000
3BR2BR1BR
4th
Circle
Der
Ghabar
Al
Rabiah
Um
Othainah
SweifiehAbdoun
SOURCE: Electricity Regulatory Commission * Includes Jordan Armed Forces
2010 2011 2012 2013
Household 4387 4731 5210 5344
Governmental* 806 809 863 797
Commercial 2110 2118 2314 2266
Industrial 3308 3560 3527 3567
Agricultural 563 584 585 621
Water pumping 1282 1287 1344 1452
Street lighting 315 312 301 291
Others 101 171 149 243
Total 12,871 13,572 14,293 14,581
Growth (%) – 5.4 5.3 2
Electricity consumption by sector, 2010-13 (GWh)
SOURCE: Central Bank of Jordan *Preliminary figures
Petroleum Cement Clinker Chemical Fertilisers Potash Phosphate
products acids
2009 3.54 4.08 3.06 1.43 0.72 1.12 5.15
2010 3.35 3.93 1.7 1.58 0.76 1.93 6.53
2011 3.16 – 1.21 1.41 0.72 2.26 7.59
2012 3.48 – 1.03 1.29 0.64 1.82 6.38
2013* 3.08 – 0.91 1.27 0.68 1.73 5.27
Output of select industrial segments, 2009-13 (m tonnes)
SOURCE: IMF
2012 2013 2014
GDP, current prices (JD bn) 21.97 24.01 25.90
GDP, current prices ($ bn) 30.98 33.86 36.52
Total investment (% of GDP) 21.32 20.70 20.70
Inflation, avg. consumer prices (% change) 4.65 5.46 2.96
Vol. of imports of goods & services (% change) 2.91 2.31 2.54
Vol. of exports of goods & services (% change) -0.73 5.94 5.92
General gov't revenue (JD bn) 5.05 6.09 7.10
General gov't revenue (% of GDP) 23.01 25.35 27.41
General gov't total expenditure (JD bn) 6.86 7.35 8.25
General gov't total expenditure (% of GDP) 31.24 30.61 31.85
General gov't net lending/borrowing (JD bn) -1.81 -1.26 -1.15
General gov't net lending/borrowing (% of GDP) -8.23 -5.26 -4.44
General gov't gross debt (JD bn) 17.61 21.07 23.65
General gov't gross debt (% of GDP) 80.17 87.75 91.32
Current account balance ($ bn) -5.61 -3.75 -4.71
Current account balance (% of GDP) -18.12 -11.08 -12.88
Select economic indicators, 2012-14
SOURCE: Jordan Telecommunications Regulatory Commission
Telecoms indicators, 2013
Q1 Q2 Q3 Q4
Fixed phone
Residential 252,788 249,774 244,276 243,191
Business 140,081 138,255 136,212 136,720
Total 392,869 385,029 380,488 379,911
Penetration (%) 6.1 6 6 5.5
Active mobile
Post-paid 730,051 726,830 725,178 756,583
Pre-paid 8,745,120 9,228,962 9,502,643 9,557,223
Total 9,475,171 9,955,792 10,227,821 10,313,806
Penetration (%) 147 150 155 156

11
Country Profile
A rapidly growing population of around 6.64m
Reform process achieving significant milestones
An oasis of stability in an increasingly turbulent region
Close ties with Gulf Arab states, the US and the EU
Renewed focus on development in port city of Aqaba

COUNTRY PROFILE AT A GLANCE
The population is young, with nearly 60% under the age of 24
The Hashemite Kingdom of Jordan covers a total area
of 89,342 sq km and shares 1635 km of land bor-
ders with the neighbouring states of Iraq, Israel,
Palestine, Saudi Arabia and Syria, as well as 26 km
of coastline on the Gulf of Aqaba in the south.
Topographically, the country is divided into three
main areas: the Jordan Valley (part of the Great Rift
Valley), which runs from north to south in the west-
ern part of the kingdom and is known south of the
Dead Sea as Wadi Araba; the highlands region (run-
ning roughly parallel to the Jordan Valley and Wadi
Araba, to their east); and the eastern desert plateaux
(known as the Badia). The mineral-rich Dead Sea, sit-
uated at earth’s lowest elevation on land, is named
in reference to the high salt content that prevents
any marine life from living in it. The highest point in
the country is Jabal Umm Ad Dami, which has an ele-
vation of 1854 metres and is located near the bor-
der with Saudi Arabia in the south.
CITIES: The largest city in Jordan is the capital,
Amman, located in the north-west of the kingdom.
The governorate of Amman had an estimated pop-
ulation of around 2.5m at the end of 2012, accord-
ing to figures from the Department of Statistics.
Other major cities include Irbid, an important uni-
versity town in the north of the country near the bor-
der with Syria; Zarqa, which sits north-east of Amman
and is now on the verge of forming a metropolis
with the capital, thanks to heavy industrial build-up
and population expansion; and the port and resort
city of Aqaba in the south.
POPULATION: Jordan’s population reached around
6.64m as of late 2014, according to the Department
of Statistics. The numbers have been swollen signif-
icantly by successive waves of refugees from Syria
in recent years, as well as by many Iraqis in the wake
of the 2003 US-led invasion of that country.
Thepopulationismainlyconcentratedinthenorth-
west of the country. The Amman governorate
accounted for just under 39% of the total popula-
tion in 2012, and Irbid and Zarqa governorates made
up a further 17.8% and 14.9% of the total, respec-
tively. These three governorates alone accounted
for more than 70% of the total population.
In addition, the country’s population is relatively
young, with nearly 60% of Jordanians under the age
of 24 and approximately 37% under the age of 14.
The kingdom is also heavily urbanised, with just 17.4%
of Jordanians living in rural areas.
The country is overwhelmingly Arab, though Cir-
cassians and Armenians each make up around 1% of
thepopulation,accordingtothekingdom’slatestcen-
sus in 2004, and there are also a significant number
of Jordanians of Chechen origin.
ROYAL FAMILY: The royal family is of the Hashemite
dynasty, which traces its descent back to the Prophet
Muhammad and ruled the Hijaz, including the holy
cities of Medina and Mecca in modern-day Saudi Ara-
bia, between the 13th century and the early 20th
century (while recognising the sovereignty of the
Ottoman sultan from 1517 onwards).
Under Emir Sharif Hussein, the Hashemite family
was a key ally of the UK during the First World War,
leading the Arab Revolt against the Ottoman empire.
In 1921 Hussein’s son, Abdullah, was awarded the
throne in what was then the British-controlled Emi-
rate of Transjordan, which gained independence in
1946. King Abdullah reigned from 1946 until his
assassination in 1951 and was succeeded by his son,
King Talal, who set out the kingdom’s 1952 consti-
tution that remained largely unchanged until 2011.
King Talal abdicated the following year and was
replaced in turn by his son, King Hussein, who led
the country for nearly 50 years.
Hussein’s reign saw a number of major events,
including Arabisation of the Jordanian Armed Forces
in 1956, the loss of the West Bank and East Jerusalem
to Israel in 1967, the conflict between Jordan's mil-
itary and some Palestinian militants in 1970-71, and
political reform and liberalisation in 1989 that saw
12
Sands of time
The kingdom is a crossroads of geography, culture and history

COUNTRY PROFILE AT A GLANCE
the lifting of martial law, the legalisation of politi-
cal parties and the holding of elections for the first
time in over two decades. In 1994 King Hussein
signed a peace accord with Israel.
Hussein died in 1999 and was succeeded by the
current king, Abdullah II. The king and his wife, Queen
Rania, have four children: Crown Prince Hussein,
Princess Iman, Princess Salma and Prince Hashem.
Political developments under King Abdullah include
meaningful revision of the constitution in 2011 and
concrete steps towards a maturing party-based par-
liamentary system of government, where the monar-
chy retains its constitutional role as a unifying insti-
tution and guarantor of freedoms and pluralism.
Next in line to the throne is Crown Prince Hussein.
RELIGION: Roughly 92% of Jordanians are Sunni
Muslims. There are also a number of Jordanian Chris-
tians, most of whom are Greek Orthodox, account-
ing for around 3% of the population. Christians are
free to practise their religion in Jordan and they have
their own personal status laws and church courts.
Drawing on its values of tolerance and modera-
tion, Jordan is a leader in local, regional and global
inter-faith and intra-faith initiatives that are aimed
at promoting harmony and dialogue between differ-
ent religious and ethnic groups.
The kingdom has many important biblical and pil-
grimage sites, notably Bethany-Beyond-the-Jordan,
where Jesus is said to have been baptised by John
the Baptist, and Mount Nebo, from which Moses is
said to have been given a view of the promised land.
Jordan is also home to the tombs of many of the
Prophet Muhammad’s companions, who were mar-
tyred and buried there. The kingdom has a special
place in the history of Islam as well, as it was the first
territory to which the religion spread outside of the
Arabian Peninsula. Efforts to attract more religious
visitors, both Christian and Muslim, are ongoing.
CLIMATE: Around 75% of Jordan’s territory has an
arid desert climate, though the west of the country
has Mediterranean weather and the northern high-
lands (including Amman) receive significant rainfall
andsnowinthewinter.ThehottestmonthsinAmman
are July and August, when the temperature ranges
between daily averages of 19°C and 31°C, and the
coldest month is January, when the temperature gen-
erally ranges between 4°C and 11°C. January and
February are the wettest months, with average pre-
cipitation in Amman of 63.5 mm, while the June to
August period usually sees almost no rainfall.
Water resources are extremely scare. Jordan is the
fourth most water poor country on earth, with per
capita availability of water at around 140 cu metres
per year. By way of comparison, the international
water poverty line is set at 500 cu metres per year.
LANGUAGE: Arabic is the official language of the
kingdom, the language of instruction in schools and
used in the media, literature, formal occasions and
official communications. As in all Arab countries,
the everyday spoken language – aamiyeh – differs
fromstandardliteraryArabic.Inkeepingwiththeking-
dom’s location, Jordanian aamiyeh is close to the
colloquial Arabic spoken in the rest of the Levant
region, and also has similarities to Egyptian and Sau-
di colloquial dialects, making Jordan’s local tongue
comprehensible to much of the Arabic-speaking
world. However, the local dialect varies throughout
the kingdom in terms of the vocabulary and pronun-
ciation, with aamiyeh in urban areas differing from
that spoken in rural areas and by Bedouins. English
is taught in schools throughout the country and is
widely spoken by Jordanians.
CULTURE: Jordanian culture is heavily influenced by
Bedouin tradition, of which storytelling, singing and
poetry form an important part. Prominent modern
Jordanian writers include Mustafa Wahbi Al Tal, one
of the best-known Arab poets of the 20th century.
The capital hosts a number of art galleries, such as
the National Gallery of Fine Arts and Darat Al Funun
(“House of the Arts”), and several theatres. Cultur-
al events include the Amman International Theatre
Festival, the Jerash Festival of Culture and Arts, and
the Aqaba Traditional Arts Festival.
CUISINE: The national dish is mansaf, a Bedouin
mealoflambcookedindriedyoghurtandservedwith
ricewhichisenjoyedonspecialoccasions.Otherdish-
es include maglouba, a meat, vegetable and rice
dish cooked in a pot then flipped onto a plate, giv-
ing the dish its name, which means “upside down”.
The staple Jordanian diet includes rice, hummus and
white cheese. A popular desert is kanafeh, a sweet
and syrupy cheese pastry.
Traditional hot drinks include tea, taken black with
sugar and sometimes flavoured with herbs or spices,
as well as coffee prepared in both Turkish and Ara-
bic style: the former is dense and contains unfil-
tered coffee grounds, while the latter is thinner and
heavily flavoured with cardamom. The country pro-
duces its own wine, much of which comes from the
Madaba region where many Christians reside,
although other areas now produce wine as well.
13
Local dishes include mansaf, which is eaten on special occasions, and maglouba, a meat and rice dish

COUNTRY PROFILE OVERVIEW
The most recent parliamentary elections were held in January 2013
Despite a challenging regional environment, Jordan
continues to move ahead with the reform process it
began over a decade ago. The process has focused on
building consensus for reforms that are home-grown
andsustainable,theresultsofwhicharestartingtomate-
rialise.Jordan’sgradualandevolutionaryapproachaims
to put in place an efficient system of checks and bal-
ancesalongsideotherbuildingblocksofparliamentary
democracy, as well as expand citizens’ participation in
the process of decision-making.
PARLIAMENT:Thebicameralparliament,knownasthe
NationalAssembly,consistsofthepopularlyelected150-
seat House of Representatives (MajlisAlNuwaab) and
the Senate (Majlis Al Ayan), with a maximum of 75
seats, appointed by the king. In June 2012 the single-
vote electoral system of the lower house was changed
to a two-vote system, under which MPs are chosen
from both local constituency and electoral lists on the
national level. In the most recent elections for the
House of Representatives, which took place in January
2013, voter registration reached 70%, while voter
turnout topped 56.7%, one of the highest rates in Jor-
dan’shistory.Electionsweremonitoredbylocalandinter-
national observers and administered for the first time
by the Independent Election Commission.
GOVERNMENT: The current prime minister is Abdul-
lah Ensour, who was reappointed after the January
2013 parliamentary elections. Ensour was nominated
asprimeministerbythemajorityofparliamentaryblocs
and independents during a process of parliamentary
consultations the king held with House of Represen-
tatives, marking a shift in how prime ministers are
appointedandintroducingthefirstparliamentarygov-
ernment under King Abdullah II’s reign.
OPPOSITION: With parliament largely dominated by
independents representative of local interests in their
constituencies, the main party-based political opposi-
tion consists of the Muslim Brotherhood and its local
politicalwing,theIslamicActionFront(IAF).TheIAFboy-
cottedthelasttwogeneralelections,in2010and2013,
in protest at what it regards as an unfair election law,
andisthereforenotcurrentlyrepresentedinparliament.
However, a centrist Islamic grouping is among the
House’s active blocs, along with other leftists MPs.
REFORMEFFORTS: Over the past 15 years, Jordan has
been undergoing an extensive process of political
reform, which has been moving forward relatively rap-
idlyinrecentyears.InSeptember2011thegovernment
and parliament approved a number of constitutional
amendmentsputforwardbyacommitteesetupbythe
kinginApril2011,againstabackdropofregionalpolit-
ical unrest. In total around one-third of the constitu-
tion has been amended since 2011.
ChangesincludedtheestablishmentofanIndepend-
entElectionCommissionandaConstitutionalCourt,the
consolidationofindividualrightsandfreedoms,aswell
astheintroductionoflimitsonsomeoftheking’spow-
ers. Constitutional reforms resulted in a wave of leg-
islative reforms to ensure compatibility with the more
progressiveconstitution,includingamendingthePolit-
ical Parties Law and the State Security Court Law and
creating a teachers’ association.
As part of an effort to foster public dialogue on the
reformprocess,inSeptember2014theking,inthefifth
of a series of discussion papers that he has published
in recent years, reiterated his commitment to “a grad-
ual deepening of parliamentary government” under
the umbrella of a constitutional monarchy, with the
aim of “reaching an advanced stage where a party-
based majority bloc or coalition of blocs forms a gov-
ernment”. Jordan’s end goal in this process is to have
platform-based national political parties compete in
elections, with the majority party or coalition forming
a government and the minority acting as a shadow
government in parliament.
On the citizen side, Jordan is investing in civil socie-
ty and educational programmes to empower citizens
and build a culture of democracy in the medium to
long term. A key initiative in this field is the Democra-
cyEmpowermentProgramme(Demoqrati),whichruns
The bicameral parliament,
known as the National
Assembly, consists of the
popularly elected 150-seat
House of Representatives
and the Senate, with a
maximum of 75 seats,
appointed by the king.
In September 2014 the
king reiterated his
commitment to “a gradual
deepening of
parliamentary government”
under the umbrella of a
constitutional monarchy.
14
Evolutionary change
The political reform process continues

COUNTRY PROFILE OVERVIEW
programmessupportingsocialentrepreneurs,anopen
society, and informed and engaged citizens.
CONSTITUTIONAL AMENDMENTS: In August 2014
parliamentapprovedtwofurtherconstitutionalamend-
ments. The first gives the king full powers of appoint-
mentanddismissaloverthechairmanofthejointchiefs
ofstaffandtheheadoftheGeneralIntelligenceDepart-
ment. According to the government, the changes are
necessary to ensure the separation of powers, and to
prevent such positions and institutions from becom-
ing politicised or destabilised as Jordan moves toward
amorepoliticalparty-orientedparliament.Thegovern-
ment also reiterated that both positions will remain
under parliamentary oversight, which encompassed
Jordan’sdefenceandRoyalCourtbudgetsfor2014.The
second change extended the mandate of the Inde-
pendent Election Commission to cover administration
of all major elections and not just parliamentary polls.
This is related to plans to decentralise power so that
local issues are dealt with locally, enabling the House
of Representatives to assume wider legislative and
oversight responsibilities at the national level, without
having local services dominate the role of MPs.
Related political reforms currently being worked on
by the government include a draft political parties law
to strengthen parties. The authorities also appear set
to amend the electoral law again. In September 2014
theministerofpoliticalandparliamentaryaffairs,Khaled
Kalaldeh, said that the government was finalising a
new law that it would submit to parliament in 2015.
The government and judiciary seek to consolidate the
respect of human rights and public freedoms as a key
partofthereformprocessbyimplementingtheNation-
al Centre for Human Rights’ 2012 recommendations.
FOREIGN RELATIONS: Jordan has close ties with Gulf
states(especiallySaudiArabiaandtheUAE).Forexam-
ple, in 2011 the GCC agreed to provide the kingdom
with $5bn in support over five years.
Jordan signed a peace treaty with Israel in 1994 and
a trade agreement in 1995 – though ties remain sub-
ject to intermittent tensions – and has close relations
with the Palestinian Authority. As a direct descendant
oftheProphetMuhammad,oneofthegreatestrespon-
sibilities of the king is to protect the Arab identity of
Jerusalem and its Muslim and Christian holy sites.
Outsidetheregion,thekingdomalsomaintainsgood
relations with the US and the EU, with which it has a
free trade agreement and an association agreement,
respectively.In2011theEUadoptednegotiationdirec-
tives for a comprehensive trade agreement with Jor-
dan and three other regional states, and in 2014 it
began to work on a sustainability impact assessment
as part of this process.
Jordanhaseightfreetradeagreements,givingitmar-
ketaccesstoover350mcustomersregionallyandover
1bn worldwide, in addition to more than 35 invest-
ment protection and promotion agreements and
more than 30 double taxation avoidance agreements.
15
Jordan has eight free trade
agreements, giving it
market access to over
350m customers in the
region and more than 1bn
customers worldwide.

COUNTRY PROFILE VIEWPOINT
Prime Minister Abdullah Ensour
OurcontinuedstrategicoperationswiththeEuropean
Bank for Reconstruction and Development (EBRD)
come at a crucial time for Jordan, especially when set
against the backdrop of ongoing regional transforma-
tions. In some countries, such as Jordan, these trans-
formationshavehelpedtobringaboutanumberofpos-
itive changes associated with the shift toward
democraticruleandcitizens’participationinsettingtheir
own political, economic and social priorities.
Inothercountries,however,thesesametransforma-
tionshavehadanumberofdetrimentaleconomicand
security repercussions in the short term, as evidenced
by the occurrence of clear imbalances in economic
growthandreducedsecurity.Suchsituationshaveneg-
atively affected the daily lives and productivity of citi-
zensinpartsoftheregion.Nevertheless,wearehope-
ful that these repercussions will be short-lived. These
challenges have also been amplified by the impact of
theglobalfinancialcrisis,thefoodcrisis,andproblems
related to water security and energy. Taken together,
these realities have led to declining growth rates and
risingunemployment,issuesthatcallforextraordinary
efforts to contain these regional challenges.
Economic and political reform go hand-in-hand. We
believe that the aim of any process is to benefit citi-
zensbybolsteringtheirconfidenceinstateinstitutions
and encouraging them to participate in decision-mak-
ing.Totranslatethisintoaction,HisMajestyKingAbdul-
lah II called for the formation of a Royal Committee to
Enhance the National Integrity System aimed at mak-
ing specific, constructive and clear recommendations
to empower oversight and strengthen institutional
capacities, as well as reform administrative and finan-
cial systems and establish good governance, trans-
parencyandaccountabilityinstateinstitutions.Inaddi-
tion, the committee aims to make the management of
public funds more efficient and develop stronger reg-
ulatory frameworks for relationships among sectors.
Inspiteofthegrowthrateoureconomyhaswitnessed
over the past decade, Jordan is now facing economic
and financial challenges that have had a significant
impact on overall economic performance. The most
salient of these include reduced economic growth
rates, rising levels of inflation, an increase in the state
deficit,thebalanceofpaymentscurrentaccountdeficit,
creeping service costs, lower levels of direct foreign
investment, and ongoing poverty and unemployment.
Theprincipalcausesunderlyingthesechallengesare
attributable to the successive economic and financial
crises global and regional economies have faced in
recent years, and which continue to have a significant
impact on our economy. In addition, the nature of the
Jordanian economy – small in size, scarce in natural
resources and dependent on global imports for many
of its needs – makes it vulnerable to external shocks.
Factors include a substantial rise in oil prices, a more
thanfivefoldincreaseinelectricity-generationcostsdue
to the use of heavy fuel instead of relatively cheaper
Egyptian gas supplies, loss of key trade routes, and
dampened growth of tourism and investment due to
political and security tensions in the region.
The overall situation has been exacerbated by the
escalating crisis in Iraq and Syria, which is having a
direct negative impact, particularly since we have tak-
en in nearly 1.4m Syrians, nearly a 20% increase in Jor-
dan’spopulation.Withabout85%ofSyrianslivingout-
side of refugee camps, beyond the reach of direct UN
and other international assistance, this rapid influx of
refugees is putting a tremendous strain on our natu-
ral resources, public infrastructure and budget, and
internationalagencieshaverecentlyslashedtheirassis-
tance to Syrian refugees due to lack of donor funding.
To promote development and bolster the capacity
of the economy, the government is building on what
has been achieved, specifically by reinforcing growth
catalysts and proceeding with the economic reforms
required to keep pace with our current development.
New state employment programmes for 2013-16 cov-
er more than 1000 enterprises in 22 economic, social
and service sectors. Our overall aim is to develop and
16
Meeting challenges
Prime Minister Abdullah Ensour on partnership with the European Bank
for Reconstruction and Development

COUNTRY PROFILE VIEWPOINT
strengthenJordan’seconomicandsocialenvironment,
such that we ensure sustainable progress and the fair
distribution of development gains.
In addition to capital enterprises, government pro-
grammes aim to improve the legislative and organisa-
tionalsystemtostimulateeconomicgrowthandlever-
age the strengths of the private sector, while giving it
a greater role in the economic process and attracting
direct foreign investment. The relevant pieces of leg-
islation,whicharebeingpreparedincloseconsultation
with the private sector, include the investment law,
whichwasrecentlyapprovedbytheCabinet;alawgov-
erning partnerships between the public and private
sectors;thebusiness,bankruptcyandliquidationreor-
ganisation law; a law guaranteeing rights to moveable
property; a draft law for the development of entrepre-
neurship and small and medium-sized enterprises
(SMEs); the income tax law, which is being finalised in
parliament; and a draft law on attracting and develop-
ing venture capital funds. The investment programme
andnewlegislationaimtodevelopinfrastructurefacil-
ities and boost the role of the private sector within a
clear and transparent organisational framework.
Jordan’s position as a gateway to the wider region
enables investors and entrepreneurs to access a mar-
ket of more than 1bn consumers. Further, our highly
developed and modern infrastructure and logistical
facilities also assist in providing access to these mar-
kets and pave the way to transform the kingdom into
a logistical and trade hub for the MENA region. Add to
this the tech-savvy human capital and the significant
numberofeducatedandtrainedpersonnelatthelocal
level, the availability of which helps to provide an envi-
ronment conducive to attracting new investments,
expandingexistingonesandencouragingpartnerships
acrossavarietyofsectors.Inaddition,incentivesoffered
byJordan’seconomic,specialandindustrialzonesmake
it the perfect location to open a business.
Lookingforward,HisMajestyKingAbdullahhasasked
the government to draw up a 10-year economic blue-
print for Jordan that is responsive to citizens’ needs. In
consultation with all major stakeholders and through
anactivecitizenshipapproach,by2015weaimtodeliv-
er a blueprint that will address new realities and cre-
ate the conditions for a prosperous, resilient, inclusive
economy with opportunity for all and progress for this
generation and the next. All of this is a reflection of
the Jordanian government’s belief in the importance
of cooperation with private sector investors to find
lasting solutions to the difficulties we face. This is par-
ticularlypertinenttotheenergyandwatersectors,giv-
en the challenges to further expansion and growth.
TheEBRD’sdecisiontoexpanditsoperationsincoun-
tries south-east of the Mediterranean is an important
one. Jordan looks forward to ongoing discussions with
EBRD officials on a variety of levels regarding how to
direct cooperation and make the best possible use of
resources in high-priority areas. This includes support
for the implementation of the work programmes laid
outunderthecurrentgovernment’srulefrom2013to
2016, particularly the large-scale projects to be car-
ried out in partnership with the private sector, in a
manner that will contribute to balanced growth that
encompasses the various segments of society.
Support for the Jordanian private sector through
increased EBRD investments in infrastructure projects
will also help the government to handle challenges,
especially in electricity production and the water and
energy sectors, which have been exacerbated by the
growing influx of refugees from Syria. Hence, we wel-
comeandanticipategreaterprivatesectorinvestments
in the areas of renewable energy, water and water
treatment plants, and transport, among others.
Lastly, support for SMEs, which helps stimulate the
Jordanian economy by creating jobs, is a high-priority
areagoingforward.Thiswillinvolveprovidingassistance
tohelpsecurefundingfortheseenterprises,whichwill
in turn alleviate the bottle-necks preventing Jordanian
start-ups from growing and empower local entre-
preneurship, especially among women and youth.
17

COUNTRY PROFILE ANALYSIS
Aqaba is increasingly prominent in Jordan’s economic landscape
The last year was a good one for the Jordanian con-
struction sector, which registered an 8.3% expansion
in 2013 compared to the previous year’s relatively
static performance. Much of this improved showing
canbeattributedtoincreasedstatespendingonlarge
infrastructure projects and sizeable tranches of for-
eign investment, both of which have provided a fil-
lip to overall GDP. Yet the most interesting aspect of
Jordan’s construction data for 2013 is that it shows
that the centre of building activity has shifted from
the capital Amman to the port city of Aqaba.
As Jordan’s only seaport, this coastal city, situat-
ed at the northern end of the Gulf of Aqaba, has been
a central component of the country’s economy. As
well as serving as the access point for the bulk of
Jordan’s imports, it became a major site for imports
of Iraqi goods until this trade route was closed off
by the Gulf War of 1990-91. More recently, it has
re-emerged as a useful route into Iraq, due to the
traffic-relateddelaysoftenexperiencedatthatcoun-
try’s Umm Qasr port. In 2013, Jordanian exports and
re-exports to Iraq totalled JD987m ($1.39bn), near-
ly four times greater than the value of imports Jor-
dan received from Iraq, at JD252.9m ($357.25m).
DEVELOPMENTPLANS:Since 2001 the city has tak-
en on even greater prominence in the economic
landscape, thanks to the creation of the Aqaba Spe-
cial Economic Zone Authority (ASEZA), an independ-
ent body tasked with managing ASEZ, through which
the government aims to develop the city as a region-
al hub for trade, tourism, and logistical services. A
master plan created in 2002 maps out an ambitious
vision for the city, including: a newly designed Aqa-
ba Town; three port areas (a main port, a container
port and the Southern Industrial port); the Coral
Coastal Zone, featuring residential, hotel and enter-
tainment facilities; and two industrial zones – the
Southern Zone and the Airport Zone.
INVESTORBENEFITS:Incentives offered to investors
locating in ASEZ include a flat 5% income tax rate
on net profit, exemptions from a range of taxes,
duty-free import of goods in commercial quantities,
fullrepatriationofprofitsandcapital,fullforeignown-
ership and the ability to utilise up to 70% foreign
labour. Kamel O Mahadin, the chief commissioner of
ASEZA, told OBG, “Investors have realised that Aqa-
ba as a multi-sectoral investment destination has
staying power and stability, and that we are capa-
ble of accommodating any kind of investment needs.
We have become a driving force for the economic
growth and development of the kingdom.”
The zone covers 375 sq km, being developed over
two decades from the 2001 publication of the mas-
ter plan. Much of the focus so far has been on the
27-km coastline, where tourism facilities, port infra-
structure and mineral-related industries are well
established. The first phase of Aqaba Container Ter-
minal’s berth expansion project was completed in
2013. The expansion, which includes new cranes
and gantries, is set to boost annual capacity to 1.5m
twenty-foot equivalent units and reflects the king’s
vision of making Aqaba a key regional logistics hub.
The signing of a memorandum of understanding
between the ASEZA and Turkish free zones repre-
sented another major development over the past
year.Underthedeal,thepartieswillexchangeexpert-
ise, draft joint plans to improve the investment cli-
mate, and work to increase Jordanian and Turkish
investment in the zone. In addition, ASEZA just signed
another memorandum of understanding with a
French company to build a dry port in Aqaba, which
will enable the city to operate as a centre for trans-
shipment of sea cargo to inland destinations.
GREEN FOR GO: As with most economic zones of
this scale, ASEZ is being developed in line with strin-
gent environmental guidelines based on interna-
tional best practice. However, the location of Jordan’s
new project means that environmental issues play
an even greater role in its development than in sim-
ilar projects globally. The coastline of the northern
A master plan created in
2002 maps out an
ambitious vision for the
city, including a newly
designed Aqaba Town,
three port areas, the Coral
Coastal Zone and two
industrial zones.
Aqaba Special Economic
Zone is being developed in
line with stringent
environmental guidelines
based on international best
practice.
18
Going coastal
Development is being stepped up in a key port city

COUNTRY PROFILE ANALYSIS
tip of the Gulf is well known for the richness of its
reefs and marine life. Extensive coral communities
extend across many kilometres of the proposed
development site’s coastline in a series of reefs
arrayed beyond the shallow lagoons that line the
shore. Some 118 genera and 161 species of fish
have been recorded in these fertile waters, as well
as a range of echinoderms, algae and amphipods,
many of which are endemic to the Gulf of Aqaba.
SUSTAINABILITY: Mindful of the biodiversity that
exists in close proximity to what will be an area of
intense development, the government is working
through the ASEZA to mitigate any adverse impact
of the new zone. Its principal conservation and pro-
tection efforts are brought together in the creation
oftheAqabaMarinePark,whichhasbeenestablished
to “conserve and manage the natural near-shore
marine environment of the Aqaba south coast region
with its rich biodiversity, while allowing for certain
touristic uses at sustainable levels”.
IN THE ZONE: The park is 7 km in length, extending
southwards from the passenger terminal, with a
marine boundary 350 metres west of the mean high-
water mark. It is made up of a number of zones: the
Strict Reserve Zone will act as an area for non-inva-
sive research and provide a completely protected
environment; the Beach Recreation and Swimming
Zone will allow for activities such as swimming and
diving from demarcated access points; the Diving and
Snorkelling Zone is designed to permit a safe envi-
ronment for these activities, with entry to dive sites
restricted to a number of shore entry points and to
predetermined mooring points for boat access; and
the Beach Zone will be established on the terrestri-
al territory of the park, and will be dedicated to sim-
ple beach use by individuals.
LNG FACILITY: It is likely that Aqaba will continue
to account for a large proportion of the nation’s
construction activity. In late 2013 the government
released more details of a planned liquefied natu-
ral gas (LNG) facility, to be built 18 km south of the
city. This facility is considered essential for Jordan’s
fuel security in the wake of service disruptions on
the Arab Gas Pipeline due to unrest in Egypt. The Min-
istry of Energy and Mineral Resources first called for
expressions of interest in providing consultancy serv-
ices for a techno-economic study of the facility in
2011, and an array of regional and global players
made it to a shortlist via a prequalification stage,
including PwC, Halcrow International Partnership,
GL Noble Denton, Arup Gulf, Clyde & Co and PKF.
AN ENABLING ENVIRONMENT: Once completed,
the development will feature a single-berth jetty
designed to berth a floating storage regasification
unit (FSRU) and take gas from it. LNG transfer will
be carried out on a ship-to-ship basis, utilising
hydraulic arms fitted to the FSRU, while berthing
and mooring dolphins will make up the marine struc-
ture. A number of related onshore works will enable
operations at the facility and provide a connection
to the existing Jordan Gas Transmission Pipeline. The
development of the terminal area, including roads
and two buildings, also forms part of the contract.
The project is being overseen by the Aqaba Devel-
opment Corporation, launched by ASEZA in 2004 to
run the seaport, airport and strategic parcels of land,
and in November 2013 it awarded a joint venture –
between Irish firm BAM International and the Jor-
dan-based MAG Engineering and Contracting – an
engineering, procurement and construction con-
tract to build the new terminal.
The substructure works for the terminal building
were nearing completion in August 2014, and the
substructure works for the administration building
had begun. BAM has also successfully driven the
first pile for the LNG jetty, which will ultimately
include a 100-metre trestle on steel piles and a
20x20-metre concrete offloading platform. The proj-
ect is being developed according to schedule, and
the latest estimate envisions a handover to Aqaba
Development Corporation as early as April 2015.
21
Investors locating in Aqaba benefit from a range of tax incentives and duty-free imports of goods
In 2013 the government
released more details of a
planned liquefied natural
gas facility, to be built 18
km south of the city. The
facility is considered
essential for Jordan’s fuel
security in the wake of
service disruptions on the
Arab Gas Pipeline.
The government hopes to make the city a regional trade hub

COUNTRY PROFILE INTERVIEW
Crispin Blunt, MP & Chairman, All-Party Parliamentary Jordan Group
To what extent are you concerned by the seeming
movementtowardgreatersectarianismwithinthe
region, in particular the rise of the Islamic State in
Iraq and Al Sham (ISIS)?
BLUNT: Too many regional players have used sectari-
anismforpoliticalpurposes,includingBasharAlAssad
in Syria and Nouri Al Maliki in Iraq. ISIS is the most
extreme display of this trend to win over discontented
Sunni Arabs, exploiting their grievances. It bears some
resemblance to the European Thirty Years’ War, which
laid waste to much of the continent with people killing
for their faith. Unhappily, the use of force against ISIS
is proving necessary given the requirement for states
to deliver security and stability to their citizens. Piec-
ing back together the ethnic and sectarian fabric of
thesecountriesmayprovetobethetoughestchallenge
of all. Kurdish separation is something that looks as
thoughitwillhavetobeaccommodated,whicharguably
is part of the move towards greater sectarianism.
Given Jordan’s geographic location, what strategic
role can the kingdom play when working with its
international partners on conflict resolution?
BLUNT: Jordan finds itself at the centre of crises in
Palestine, Syria and Iraq, with massive numbers of
refugees from all three countries. The implications for
thissmallbuttraditionallystablekingdomareenormous.
Its historic role has been as a key Western ally and a
sourceofwisecounsel.TheseriousnessofISIS’sthreat
to Jordan can be measured by the decision to partici-
pate in airstrikes in Syria even though there is a risk of
making Jordan a target, while its stability is threatened
by the vast numbers of refugees inside the country.
Can Jordan serve as an example of peace and
progress in a region awash with conflict?
BLUNT:Jordanhasaproudrecordofrelationsbetween
MuslimsandChristiansgoingbackcenturies.Thisiscon-
tinued by the excellent work on interfaith dialogue by
eminent figures like Prince Hassan bin Talal. However,
we risk overstating the ability of a small country, such
as Jordan, to influence the outcome of major rifts in
larger regional states, including Syria and Iraq.
HowareJordan’salliesassistingwithadministering
to the financial costs of the growing number of
refugees within the kingdom?
BLUNT:Jordanalreadyhasover618,000UN-registered
Syrian refugees with perhaps over 1m Syrians in total.
The overall level of UN funding for Syrian refugees is
running at 44% of the ask ($1.6bn out of $3.7bn). Giv-
en this shortfall, it is vital that every donor country ful-
fils its fair share. According to Oxfam, the UK is doing
just that with 141% against GDP, whereas the US is
doing 60%, France 33% and Russia 1%. However, given
its close relationship with Jordan, I hope the UK will do
even more. We should appreciate the enormous strain
on UN agencies and non-governmental organisations
operating in Jordan. The Syria crisis is also taking place
alongside other crises in Iraq, South Sudan and Gaza.
Thesheernumberofrefugeeshasstrainedcommunal
relationswithinJordan,affectedemploymentandrental
prices, as well as depleting crucial water resources.
The 2002 free trade agreement between Jordan
andtheEUisdueforreview.Howcanitbestrength-
ened beyond a basic free trade package?
BLUNT: It is welcome that Jordan is the first Mediter-
raneanpartnercountrywithwhomtheEUhasconclud-
edtechnicalnegotiationsleadingto“advancedstatus”
within the European Neighbourhood Policy. An essen-
tial part of Jordan’s stability will be the growth of its
economy.Withunemploymentat12%,accordingtooffi-
cial Jordanian figures, and regional turbulence, this is
crucial.Thekingdomneedsahealthytradeagreement
with the EU to assist its economy and cater to a young
population. In 2013 total trade with the EU amounted
to €3.3bn, and the union was Jordan’s second-largest
source of imports (17.6%) after Saudi Arabia (23.6%)
and the fifth-largest destination for exports (4.5%).
22
Tackling challenges
OBG talks to Crispin Blunt, MP and Chairman, All-Party Parliamentary
Jordan Group

23
Economy
IMF forecasts growth of 3.5% in 2014, 4.5% in mid term
Government committed to reducing fiscal deficit
Review of past privatisations guiding future moves
Supporting small and medium-sized enterprises
Trade with regional neighbours presents opportunities

ECONOMY OVERVIEW
GDP growth is forecast at 3.5% for 2014 and 4.5% in the medium term
The kingdom’s economic journey from its emergence
as a new state in 1946 to the regional business and
financial hub that it is today is a remarkable one. Over
thisbriefspanJordanhasundergoneanumberofdevel-
opmentalphases,fromaninitialfocusonmassivepub-
lic investment in basic utilities, health and education
tothegrowthofanindustrialandmanufacturingbase,
the first attempts to attract sizeable foreign invest-
mentandthesuccessivetranchesofeconomicreform
by which Jordan has kept pace with the evolution of
the global economy. During this time the nation has
overcomeregionalunrest,andhasestablisheditselfas
a safe destination for those displaced by conflicts in
theMiddleEast.Thelatestphaseofdevelopmentsees
the Jordanian government tackle long-term structural
issuesintheeconomy.Ithasalreadysucceededintak-
ing important – if sometimes unpopular – steps to cut
deficits, roll back subsidies and tackle inefficiencies;
these moves are now beginning to be repaid with
strengthened international support.
In early 2014 the king wrote a public letter to the
prime minister in which he directed the government
to draft a new 10-year blueprint for economic devel-
opment. As of August 2014, interested parties, from
ministries and agencies to private sector think tanks
suchastheJordanStrategyForum,beganworkingwith
the government. With a the first national conference
taking place in September 2014, the outcome of this
collaborative effort will be of great importance to the
futuredirectionofthenation’seconomicdevelopment.
PERFORMANCE:LookingatJordan’skeymacroeconom-
ic indicators, the economy has shown a gradual recov-
ery since the global economic downturn resulted in a
drop in growth to 2.3% in 2010 from the previous rate
of6%ormorethathadbeensustainedforsomeyears.
Since that time, the nation’s GDP has shown a modest
2.8% year-on-year (y-o-y) expansion, according to the
IMF,withthefundanticipatinggrowthof3.5%for2014,
rising to 4.5% in the medium term. Moreover, after
reachingapeakin2012,Jordan’scurrentaccountdeficit
has started to narrow thanks to lower energy imports,
higher current transfers (mostly in the form of grants
from GCC countries) and private receipts.
The capital markets have also shown signs of a
reboundfollowingtheeconomicdownturn.According
toAmmanStockExchange(ASE)data,theASEFreeFloat
Indexatthecloseof2013showeda5.5%y-o-yincrease,
to reach 2065.8 points. The share turnover ratio, an
important indicator of market activity, grew to 38%
during 2013, compared to the 33.9% posted for 2012.
This incipient recovery has resulted in renewed opti-
mism in relation to the ASE’s ability to act as a catalyst
for economic growth in the country.
Nevertheless, trading values and volumes remain
muted in comparison to the pre-crisis era, and many
stakeholdersfeelthatJordan’scapitalmarketswillneed
to undergo a process of reform if they are to achieve
their full potential (see Capital Markets chapter).
CHALLENGES: Despite promising signs that Jordan’s
economy has turned a corner, substantial challenges
remain. Many of Jordan’s economic issues are related
to population pressures. The country has absorbed
successive waves of refugees including Palestinians,
Iraqis and Syrians, many of which brought immediate
benefitsintheformofcapitalandexpertise.Themore
recent arrivals from Syria, however, have proved to be
more of an economic challenge. While much interna-
tional aid has been directed towards Syrians forced to
flee into neighbouring states such as Jordan, the esti-
mated $1.1bn granted to the Syria Regional Response
Plan by July 2014 represented only around 30% of
refugee requirements, according to the Office of the
UN High Commissioner for Refugees.
Thispopulationinfluxtookplaceagainstabackdrop
ofrisingenergyprices,whichweretheresultoftheinter-
ruption of natural gas supplies from Egypt. While the
expected completion of oil terminals and a liquefied
naturalgasfacilityintheRedSeaportofAqababymid-
2015 is expected to lower the cost of energy imports,
the nation’s energy bill continues to be a key concern.
Recently, the government
has made attempts to
tackle long-term structural
issues in the economy; it
has taken steps to reduce
deficits and cut subsidies,
for instance.
25
Many of the economic
challenges facing the
country are related to
population pressures, with
Jordan seeing successive
waves of refugees. Energy
prices have also risen with
the interruption of natural
gas supplies from Egypt.
Moving forward
The emphasis is now on reducing the fiscal deficit and resetting
national strategies

ECONOMY OVERVIEW
Also, since 2009 unemployment has remained at
between 12% and 13%. While employment increased
by just over 1% from 2011 to 2013, the size of the
workingagepopulationroseby6%overthesameperi-
od, meaning the ratio of employment to the working
age population has continued to decline – to 32%.
PUBLIC FINANCE: These challenges have weighed
heavilyonthenation’sbalancesheet.Despitetheslight
narrowing of the fiscal deficit in 2013, it amounted to
9.1% of GDP for the year. Tax receipts account for the
bulk of domestic revenue in Jordan, contributing 73%
of the total for the first 11 months of 2013. Jordan’s
positionintheregionanditsstrongrelationswithboth
Gulf nations and Western powers enable it to attract
grants and funding to narrow the gap between its rev-
enue income and public expenditure demands. In the
first11monthsof2013itstotalrevenuecombinedwith
grantsamountedto$7.21bn,whileexpendituresreached
$8.76bn. Much of this figure – some $7.76bn – is
accounted for by current expenditures, such as the
costly social benefits which form part of the govern-
ment’s social protection measures. However, the gov-
ernment has had some success in reducing current
expenditures in its tackling of fuel subsidies, which
decreased by $746m, or 64%, over the period. This
improvementcomesonthebackofagovernmentdeci-
sion to end fuel subsidies, a politically sensitive move
but one that is considered essential to the country’s
long-termeconomicsustainability.Jordan’sambitionto
reduceitsdebt-to-GDPratio–whichstoodat83.9%in
2013 – has been made more challenging by external
factorssuchastheinterruptionofEgyptiannaturalgas
supplies due to that country’s political crisis and the
ongoingcivilwarinSyria,whichhasfloodedJordanwith
refugees. These events have served to further under-
line Jordan’s reliance on foreign grants as it attempts
to meet its expenditures bill. The reduction of this
dependency is essential for Jordan’s economic health
in the long run (see analysis).
On the monetary level, a renewed appetite for the
Jordanian dinar (JD) has allowed the Central Bank of
Jordan (CBJ) to adopt an accommodative stance in
2013 and into 2014 with a significant rise in the CBJ’s
foreign currency reserves, an increased demand for
JD-denominated assets and an encouraging trend of
de-dollarisation, while a growth in JD deposits result-
ed in a wider yearly expansion of the monetary supply.
Against this relatively buoyant backdrop the CBJ was
able to lower its rediscount rate in two 25-basis-point
steps in late 2013, from 5% to 4.5%, which it followed
withanother25-basis-pointreductioninJanuary2014
toreacharediscountrateof4.25%.Shouldtheforeign
reserve size be maintained and the reduction in dol-
larisation continue, the CBJ may find itself in a position
to further reduce interest rates in a bid to stimulate
growth.Weighingagainstthispossibility,however,isthe
prospect of stubbornly high core inflation.
STRATEGY: Since the creation of the state, the gov-
ernmenthasundertakenshort-,medium-andlong-term
strategicplanstoguidethecountry’seconomicdevel-
opment.Planningatthenationallevelbeganinearnest
in 1952 with the creation of the Jordan Development
Board(JDB),whichdraftedthefirstfive-andseven-year
plans–thelatterinterruptedbytheSix-DayWarin1967
and the influx of many refugees from the West Bank
andJerusalem.ResponsibilityfordraftingJordan’sdevel-
opment strategy subsequently shifted to the National
Planning Council, which issued a series of five-year
plans throughout the 1970s, 1980s and 1990s. Since
then,severalinvestmentagencieshavebeenestablished,
among the most important of which are the Jordan
InvestmentBoard(JIB),theJordanEnterpriseDevelop-
mentCorporationandtheDevelopmentandFreeZones
Commission. These and other bodies, however, are set
to be merged with the promulgation of a new invest-
ment law, various drafts of which have been proposed
and withdrawn over the last decade. Under the new
legislation, expected to come into force before end-
2014, the JIB, the Industrial Zones and Free Zones Cor-
porations, as well as the promotional functions of the
26
In 2013 the kingdom’s fiscal deficit totalled 9.1% of GDP
In the first 11 months of
2013 total state revenue
combined with grants
amounted to $7.21bn, while
expenditures reached
$8.76bn.
SOURCE: IMF
2012 2013 2014
GDP, current prices (JD bn) 21.97 24.01 25.90
GDP, current prices ($ bn) 30.98 33.86 36.52
Total investment (% of GDP) 21.32 20.70 20.70
Inﬂation, avg. consumer prices (% change) 4.65 5.46 2.96
Vol. of imports of goods & services (% change) 2.91 2.31 2.54
Vol. of exports of goods & services (% change) -0.73 5.94 5.92
General gov't revenue (JD bn) 5.05 6.09 7.10
General gov't revenue (% of GDP) 23.01 25.35 27.41
General gov't total expenditure (JD bn) 6.86 7.35 8.25
General gov't total expenditure (% of GDP) 31.24 30.61 31.85
General gov't net lending/borrowing (JD bn) -1.81 -1.26 -1.15
General gov't net lending/borrowing (% of GDP) -8.23 -5.26 -4.44
General gov't gross debt (JD bn) 17.61 21.07 23.65
General gov't gross debt (% of GDP) 80.17 87.75 91.32
Current account balance ($ bn) -5.61 -3.75 -4.71
Current account balance (% of GDP) -18.12 -11.08 -12.88
Select economic indicators, 2012-14

ECONOMY OVERVIEW
Jordan Enterprise Development Corporation will be
merged into one body, the Investment Commission.
In terms of overall strategy, the nation’s develop-
ment is governed by the National Agenda 2007-17.
Conceived by King Abdullah ibn Al Hussein II in 2005,
the agenda aims to provide a basis for progress along
theaxesofsociety,politicsandeconomics,andindoing
so addresses such areas as government and policies
(including investment, fiscal and labour policy), basic
rightsandfreedoms,andservice,infrastructureandthe
developmentofindividualeconomicsectors.Whilethe
NationalAgendaremainsinplace,thealteredeconom-
ic landscape in the wake of the global economic crisis
has resulted in a need for some strategic adjustment.
KEYSECTORS:Afortunatecharacteristicoftheecon-
omy, as far as government planners are concerned, is
its relative diversity. Unlike some of its regional peers,
Jordan’s lack of hydrocarbon resources has compelled
it to take a broader approach to its economic develop-
ment, the results of which are apparent in the nation’s
GDP mix. In the first nine months of 2013, the finance,
realestateandbusinessservicessectorwasthelargest
contributor to GDP (aside from government services),
according to Bank Audi, accounting for 20.3% of total
GDP.Theimprovedperformanceofthebankingsector
was noteworthy over the year, with lenders posting
asset growth on the back of rising deposits (see Bank-
ingchapter).Thesecond-largestnon-governmentcom-
ponent in the GDP mix was manufacturing activity,
which contributed 19.2% to the total. The strong per-
formance of manufacturers mitigated a slowdown in
the industrial sector resulting from limited investor
appetite to launch new projects. At 14.3%, transport
and communications activity accounted for the third-
largest GDP component over the period, and with a
growth rate of 4% represented one of the more buoy-
ant areas of the economy. Similarly, trade, restaurant
and hotels – the fourth-biggest GDP component at
11.5% – showed a promising expansion of 3.6% over
the period. Other significant contributors to the GDP
mixincludeconstructionwith5%,agriculturewith3.1%,
and mining and quarrying with 2.5%.
TRADE: The kingdom has sought to capitalise on its
varied economic output to increase its trading activi-
ty. The government’s trade policy over recent decades
has been an expansive one, in which it has established
exportplatformsaimedatincentivisingforeigninvest-
mentandestablishedarangeoffreetradeagreements
(FTAs).AsamemberoftheGreaterArabFreeTradeArea,
companies exporting from Jordan are granted advan-
tageous access to markets in 17 states in the Middle
East and North Africa. Jordan is also a signatory to the
Agadir Agreement which, interalia, aims at harmonis-
ing general and sectoral economic policies in member
countries with regard to foreign trade, agriculture,
industry, financial and taxation systems. In 2004 Jor-
danandSingaporesignedanagreementthatisdesigned
to promote economic relations and bilateral trade in
27
Accounting for 20.3% of
GDP in the first nine
months of 2013, the
finance, real estate and
business services sector
was the largest contributor
to GDP. The second-largest
non-government
component was
manufacturing, with 19.2%.

ECONOMY OVERVIEW
goods and services, as a result of which goods of Jor-
danian origin can enter the Singaporean market free
fromCustomsdutiesandcharges.AsimilarFTAhasexist-
edbetweenJordanandCanadasince2009,andin2011
a revised FTA between Turkey and Jordan came into
effect. Jordan also became a member of the WTO in
2000, ratified an FTA with the US in 2001 and an Asso-
ciation Agreement with the EU in 2002.
In terms of trade volumes, Jordan exported around
JD2.4bn($3.4bn)worthofgoods(includingre-exports)
inthefirstfivemonthsof2014,upfromaboutJD2.3bn
($3.2bn) over the same period in 2013, according to
theDepartmentofStatistics.Clothingexportswerethe
largest single shipped commodity, accounting for
JD325.8m ($460.2m) of the total. Next in order of size
wasvegetablesandfruits(JD215.7m,$304.7m),followed
by crude potash (JD196.9m, $278.4m) and pharma-
ceutical products (JD177.8m, $251.2m).
Importsalsogrewoverthesameperiodfroma2013
figureofJD6.3bn($8.9bn)toJD6.7bn($9.5bn)in2014.
ThisresultedinatradedeficitofnearlyJD4.3bn($6.1bn)
forthefirstfivemonthsof2014,upfromJD4bn($5.7bn)
for the same period in 2013.
Reducing this structural trade deficit is a key priori-
ty for Jordan’s economic planners. The largest single
imported commodity in recent years has been crude
oil, purchases of which are at an elevated level due to
the present shortage of natural gas. Other sizable
imports include machinery, electrical appliances and
parts (JD410.9m, $580.4m), vehicles and motorcycles
(JD354.8m,$501.2m),andironore(JD326.2m,$460.8m).
INVESTMENT:BoostingJordan’sexportsandreducing
its reliance on imported goods will require investment
across the board. The broad sectoral mix of Jordan’s
economyformsthebasisofitsfutureeconomicexpan-
sion and, given the nation’s structural budget deficit,
attractingprivateinvestmenttotheseareasisanessen-
tial objective of any strategy. Thanks to the govern-
ment’s policy of economic liberalisation, a significant
portionoftheeconomyhasbeenopeneduptodomes-
tic and foreign investment in recent decades. This
processbeganwithaprivatisationprogrammelaunched
in 1996. Initially overseen by the Executive Privatisa-
tionUnit(EPU),thefirstsignificantdivestmentwasthe
Public Transportation Corporation in 1998. The prom-
ulgation of the Privatisation Law in 2000 saw a raft of
state bodies opened up to the private sector, such as
the Jordan Cement Company, the Arab Potash Compa-
ny, the Jordan Phosphate Mines Company, the portfo-
lio of the Jordan Investment Corporation, the Jordan
Telecommunications Company (which was privatised
infourphases)andtheflagcarrierRoyalJordanian.The
2000 law also reconfigured the EPU as the Executive
Privatisation Commission and established the Higher
Ministerial Committee for Privatisation, chaired by the
prime minister. The result of these efforts was a con-
siderable rise in foreign direct investment (FDI) to Jor-
dan as well as a reduction of the fiscal burden many of
these state enterprises placed on the nation’s coffers:
according to an OECD report published in 2013, FDI
inflows to the country grew from an average of 0.2%
of GDP in the early 1990s to 10% of GDP during 2000-
11. The OECD’s report was commissioned to mark the
country’s November 2013 signing of the OECD Decla-
rationonInternationalInvestment,whichcommitsthe
kingdom to a process of investment liberalisation,
responsible business conduct and the establishment
of full legal parity between domestic and foreign com-
petitors. Its findings revealed a number of strengths
andweaknessesinthecurrentinvestmentframework.
On the positive side of the ledger, Jordan has creat-
edaninstitutionalfocusforforeigninvestment,signed
a total of 53 bilateral investment treaties, adheres to
the norms of international arbitration, established a
trade policy geared towards greater integration with
theglobaleconomyandmadesignificantprogresswith
regard to anti-corruption policy.
Challenges that remain, according to the OECD,
include a complex legal investment regime with
instances of regulatory overlap; an intricate array of
incentives characterised by various schemes, zones
andpreferentialareas;andanumberofrestrictionson
foreign investment in areas such as telecommunica-
tions, transport and wholesale trade. For its part, the
Jordanian government has recognised the need for a
more streamlined investment framework in its prepa-
rationsforanewinvestmentlaw.Meanwhile,attention
is turning to how the government can more effective-
ly work with the private sector in the development of
large projects. With most of the saleable state assets
already divested, the nation has had an opportunity to
assess the merits of the privatisation programme
through the work of the Privatisation Evaluation Com-
mittee.Oneofthekeyfindingsofthisbodyisthatthere
is an urgent need for the drafting of a new law to gov-
erntherelationshipbetweenthepublicandprivatesec-
torswheretheycombineinprojectdevelopment.Anew
public-private partnership (PPP) investment model
beingdevelopedbyagovernmentadvisorycommittee
is thus likely to be the principal instrument by which
the government will harness private capital for the
major development work of the future (see analysis).
OUTLOOK: The coming years promise to be interest-
ing ones for the Jordanian economy. One of the most
pressing questions concerns Jordan’s ability to attract
private sector development for major projects in the
longtermnowthattheeraofprivatisationsisconclud-
ed and the nation enters the next phase of large-scale
private sector participation through PPP projects.
The implementation of the regulations of the new
investment law will be of principal interest, while the
king’s request for a fresh 10-year national strategy is
clearlyofgreatconsequencetotheeconomicoutlook.
While Jordan’s reliance on international grants may
not be desirable in the long term, in the shorter term
they allow the country to set about its programme of
fiscalconsolidationwhilesafeguardingthesocialsecu-
rity of its citizens. Economic planning in the short and
medium term is likely to remain focused on reducing
thefiscaldeficitwiththestrategyoffurtherreductions
in subsidies, the completion of income tax reforms
and a reinforcing of the country’s tax administration.
28
Much of the economy has
been opened up to
domestic and foreign
investment in recent
decades. Foreign direct
investment inflows
increased from an average
of 0.2% of GDP in the early
1990s to 10% of GDP
during 2000-11, according
to the OECD.
Reducing the trade deficit
is a main priority. The
largest single imported
commodity in the past few
years has been crude oil,
purchases of which are
higher due to the recent
shortage of natural gas.

ECONOMY INTERVIEW
Umayya Toukan, Minister of Finance
How is the government maintaining fiscal disci-
pline in regards to repaying its IMF loans?
TOUKAN: We have an agreement in place with the
IMF to restore fiscal balance. Planning a budget is not
the easiest task when we are faced with exceedingly
uncertain regional tensions. Our budgetary difficul-
ties are largely due to the global economic crisis, the
Arab Spring and, of course, disruptions in the flow of
naturalgasfromEgyptianpipelines.Thesechallenges
thatwehavefacedathomehaveresultedinourbudg-
et deficit increasing to unsustainable levels, well
beyond what we intended or foresaw. At the end of
2012 we began an IMF structural adjustment pro-
grammethatdealswiththedistortionshamperingour
economy and our fiscal balance. It is imperative that
we reduce our expenditures and raise our revenues.
In 2014 we expect the budget deficit to be 4-4.5%
of GDP. In 2015 we would like to see this decrease to
3%. Our debt levels have been on the rise, especially
since2011,andouroveralldebtishoveringataround
80-83%ofGDP.Accordingtothestructuraladjustment
programme, we would like to see our debt reduced
to 60% of GDP. Though this will be difficult to achieve,
inordertodoso,wemustseeGDPgrowthrisebeyond
the current level of 3% to closer to 6% or 7%.
If we are able to manage this sort of growth, we
willseerevenuesincreasefromtaxandnon-taxchan-
nels. As economic activity increases, revenues will
naturally follow, which should see the budget deficit
decrease. Furthermore, higher GDP growth should
serve as a catalyst for employment growth, thereby
helpingreduceunemployment,whichcurrentlystands
ataround12%.Ibelievethatgrowthmustbeachieved
through the private sector. Sound fiscal and mone-
tarypoliciesmustensurethattheprivatesectorfinds
itself in an environment that can foster growth.
Good governance, security and political stability
are important factors towards this end. If we commit
toourreforms,theeconomywillpickupsoonerrather
thanlater,butwemustremainpatientandwithresolve.
Giventheneedforbudgetcuts,howcanyouhave
aminimalimpactonthevulnerablebutalsoavoid
too heavily affecting the key economic drivers?
TOUKAN: Some say that the social safety net of
JD1.5bn($2.1bn)istoogenerous.Thegovernmentsub-
sidises a number of goods and services for the need-
iestinsociety,includingenergy,food,healthandedu-
cation. We operate under criteria to make sure that
the most vulnerable have basic economic rights.
In saying this, it would be impossible not to see a
connectionwithournationalbudgetdeficit.Wemade
a mistake in prior years, especially regarding energy,
by subsidising the commodity as a whole and not
based on means. We have since reversed that policy,
and this has lifted some of the burden on the budg-
et deficit. Taxing successful industries could be seen
as penalising them, but that is relative. Given our cur-
rent circumstances, this must apply.
In 2009 we lowered taxes on banks from 35% to
14%, but we were experiencing high growth levels. If
the economy is rapidly growing, one can afford to
lower taxes because fiscal revenues will be accrued
to meet budget expenditures. In a slowdown, the
opposite must occur, because fiscal revenues will fall
short of budget expenditures.
What impact is regional instability having on the
economy, and how difficult is it to plan a budget?
TOUKAN: I can unequivocally say that regional insta-
bilityisneveralong-termbenefitbut,intheshortterm,
it could work to the advantage of a country. Howev-
er, this is short-sighted thinking.
With all things being equal, stability would lead to
growth in fiscal revenues across the board. In plan-
ning a budget during these times of instability, we
must widen our margins of error. If we assume that
GDP growth will be 3% and that, historically, fiscal
revenues amount to roughly 20-25% of GDP growth,
then we can predict the figures that need to be
allocated per sector and plan the budget accordingly.
29
Structural adjustments
OBG talks to Umayya Toukan, Minister of Finance

ECONOMY INTERVIEW
Ibrahim Saif, Minister of Planning and International Cooperation
Whatimpactcouldthe$5bnGulfCooperationCoun-
cil (GCC) grant have on the Jordanian economy?
SAIF:Overthepastfewyears,Jordanhassufferedfrom
successive shocks that have negatively affected its
macroeconomic situation. The global financial crisis
and the regional situation as a result of the Arab upris-
ings have had an adverse impact on its growth, fiscal
balance and balance of payments. The Syrian conflict
has also impacted key economic sectors and contin-
ues to pose a serious risk to growth.
The grant of $5bn pledged by the GCC countries –
$1.25bn each from Kuwait, Saudi Arabia, the UAE and
Qatar – presents an opportunity to spur growth in the
country and support the government’s capital invest-
ment projects over a five-year period, while also pro-
viding the needed financing to move forward with a
number of new strategic projects. The grant is expect-
ed to boost economic growth by improving infrastruc-
ture, expanding domestic demand and creating links
between many sectors in the economy.
Growth over the past two years has stemmed from
the onset of a large fiscal consolidation programme.
Real GDP growth reached 2.8% in 2013, on par with
2.7% in 2012 and 2.8% in 2011 yet still low compared
to the 6.5% average during 2000-09. The sectors that
saw robust activity included those catering to Jordan-
ianconsumptionandthebasicneedsofSyrianrefugees.
The capital spending boost the fund provides will be
instrumentaltostimulatingoureconomyinthesechal-
lenging times. Economic activity is expected to accel-
erate in 2014, boosting GDP growth to 3.5%.
Which areas need investment most in Jordan? Will
the fund be divided up accordingly?
SAIF: The GCC grant was distributed among a number
of priority sectors, financing more than 114 ongoing
andnewprojectsinthebudgetlawthatwillhelpimprove
service delivery and boost economic activity. About
63.5% of it will go to ongoing capital investment proj-
ects in the budget, and the remaining 36.5% will help
financenewstrategicprojectsinenergyandtransport.
Thiswillacceleratetheimplementationofprojectsand
enable ministries and public institutions to improve
and expand basic services, while also ensuring equi-
tabledistributionoftheseservicesamongdifferentgov-
ernorates, thus reducing regional disparities.
The transport sector received 30% of the grant for
upgrades to road and transport networks, which are
essential to trade and to attracting investment. The
energysectorreceived20%forprojectsthatwilldiver-
sify Jordan’s energy mix, which is critical to building
resilience and improving the country’s balance of pay-
mentsandpublicfinances.Anothervitalsectoriswater,
where about 11% went to projects aimed at introduc-
ing new water resources, improving the water supply
and reducing water loss from the networks. The edu-
cationandhealthcaresectorseachreceived11%,with
a focus on improving and expanding public services.
Theremainingallocationsweredirectedtothegovern-
ment’s Executive Governorates Development Pro-
gramme and projects in the local development sector,
with the aim of improving basic services and existing
infrastructure,andpromotingeconomicopportunities.
HowhastheGCCfundchangedtheministry’srole?
SAIF:OneofMoPIC’smandatesistobethefocalpoint
for donors, international organisations and interna-
tional finance institutions. This entails negotiating,
coordinating and managing foreign aid (grants, loans,
technical assistance) and following up on the imple-
mentationofdonor-fundedprojectsandprogrammes.
One such programme is the GCC grant, which the
prime minister has appointed MoPIC to manage and
oversee. A management unit was created to supervise
its implementation and ensure that these funds are
speedily and effectively used. This unit, chaired by
MoPIC,includesmembersfromitsownrelevantdepart-
ments and from the Ministry of Finance and the Gen-
eral Budget Department, who all meet regularly to
review the programme’s progress and make decisions.
30
Grant fathers
OBG talks to Ibrahim Saif, Minister of Planning and International
Cooperation (MoPIC)

ECONOMY ANALYSIS
The firms surveyed came from a wide range of economic sectors
The privatisation of state companies is almost always
a process fraught with competing concerns. How-
ever, while controversies attached to the sale of
state assets are ubiquitous, Jordan is unique in the
region in its assessment of its privatisation pro-
gramme. The last year has seen the completion of a
painstaking evaluation process of nearly 20 privati-
sation deals carried out over recent years, the results
of which have been crucial in neutralising the phe-
nomena of rumour, claim and counter-claim which
often attend such government decisions. Just as
importantly, the findings of the report allow the
nation’seconomicplannerstomoreeffectivelyimple-
ment the next phase of the government’s long-term
strategy of harnessing the power of the private sec-
tor to develop the nation’s economy.
THEEVALUATION: The Privatisation Evaluation Com-
mittee (PEC) was established in March 2013 as a
result of a royal directive, and was tasked with assess-
ing the privatisation efforts that successive Jordan-
iangovernmentshadembarkeduponsince1989.The
committee was headed by Omar Razzaz, the chair
of the King Abdullah II Fund for Development, and
included a number of leading figures from the local
business community, none of whom were directly
involved with any of the privatisation deals under
examination, as well as representatives from the
International Finance Corporation, the Islamic Devel-
opment Bank and the European Bank for Recon-
struction and Development.
The committee was granted six months from the
time of its first meeting to complete its review, which
included an examination of 19 companies that had
gone through the privatisation process as well as a
large number of documents and policy papers that
had been generated by the government’s implemen-
tation of its decades-old strategy.
The companies surveyed came from a wide range
of sectors, such as mining, telecommunications, avi-
ation, water and electricity, and included some of
Jordan’s most prominent institutions – with the flag-
ship carrier Royal Jordanian Airlines being perhaps
the most internationally recognisable of them.
Each deal was evaluated according to eight fun-
damental questions, namely: what was the govern-
ment’s rationale for privatising the company? Were
the proper administrative, constitutional and legal
procedures followed throughout the process? Was
the company assessed properly before the decision
was made? Did the performance of the privatised
company improve after the process was completed?
Were the public and the employees of the concerned
company given enough information regarding the
process? What was the overall effect of the process
on the employees of the company? How did the pri-
vatisation of the company affect the wider econo-
my? And, how were the revenues accrued as a result
of the privatisation deal utilised?
FINDINGS: The findings of the privatisation pro-
gramme report proved to be mixed. In some cases,
such as that of Royal Jordanian Airlines, both the
rationale for the privatisation and the ensuing
process were held to be proper, while in others the
application of the policy was found wanting. The
privatisation of a prominent phosphate company,
for example, was discovered to have been brought
about through direct negotiations with a single
investor rather than through a properly established
tender process, while in other cases the committee
found that there had been legal violations during the
execution of privatisation deals. The report also
determined that the government would have bet-
ter served the interests of the nation by maintain-
ing strategic interests in some sectors considered
central to the economy, such as mining and cement.
ON THE PLUS SIDE: On the positive side of the bal-
ance sheet, the report found that the government’s
privatisation programme had boosted the perform-
ance of the companies in question, provided more
jobs for Jordanians and brought the state around
31
Established in March 2013
and granted six months
from its first meeting to
complete the review, the
Privatisation Evaluation
Committee assessed the
privatisation efforts that
successive Jordanian
governments had
embarked upon since 1989.
Reviews and results
Evaluating the government’s privatisation programme

ECONOMY ANALYSIS
JD1.7bn ($2.4bn) in revenues, of which JD1.5bn
($2.1bn) went to paying off the kingdom’s debts.
The PEC’s findings echoed an earlier report com-
missioned by the World Bank which examined pri-
vatisations carried out between 1998 and 2008.
According to the World Bank’s appraisal, this tranche
of privatisations brought $2.3bn in sales proceeds
which were used to buy Paris Club debt at a dis-
counted price, bringing about a reduction of gov-
ernment debt from 100% of GDP in 2000 to 60% in
2008 and thereby greatly enhancing macroeconom-
ic stability. Additionally, the report also found that
privatised companies showed substantial gains in
financial performance, while consumers benefitted
from improvements in service.
With regard to employees of these companies,
the government’s policy of avoiding involuntary
retrenchments protected jobs in most cases, with pri-
vatised companies showing only a 2% reduction in
employment which was more than offset by some
25,000 new jobs in expanding fields such as telecom-
munications and IT. Moreover, employees of these
privatised companies were also found to have made
real wage gains in most cases, as well as benefitting
from improved benefits and training opportunities.
THE NEW ERA: The aim of the PEC was not to appor-
tion blame or seek redress for any infringements of
the law or policy committed during the privatisation
of state entities, but to shed light on the process so
that lessons could be learned from it.
Speaking at a press conference at the report’s
launch, Razzaz stated that a lack of information and
facts had resulted in a state of uncertainty and scep-
ticism among the public regarding the question of
privatisation, and that the most important issue
henceforth is to “follow up on the findings of the
report and to be transparent with the public when
they consider future deals”.
An important recommendation of the report
addressed the legislative framework that surrounds
private sector activity in the kingdom. According to
its findings, there is now an urgent need for the
drafting of a new law to govern the relationship
between the public and private sectors where they
combine in project development.
Now that the government has divested itself of
the bulk of state assets considered suitable for pri-
vatisation, planners are turning their attention to
what might be described as new era of private sec-
tor activity – the principal instrument of which will
be the public-private partnership (PPP).
CRUCIAL WORK: Following on from the PEC’s rec-
ommendations, the government has already set up
a PPP advisory committee, which is headed by Kamel
Mahadin, chief commissioner of the Aqaba Special
Economic Zone Authority, and comprised of repre-
sentatives of the public and private sectors, as well
as local community figures.
The work of the advisory committee is crucial to
the future of PPP activity in Jordan, which currently
lacks an adequate legal framework. This legislative
lacunae threatens to inhibit the development of
some economic sectors, especially those outside
the water and power arenas where much of the gov-
ernment’s attention has hitherto been focused and
sector-specific PPP protocols have been established.
For example, there is currently no provision on a
sector-wide basis by which the right of private devel-
opers to collect fees are established. A dedicated PPP
law that codifies issues such as this is therefore of
central importance from a strategic point of view if
Jordan is to effectively utilise private sector capital
in its economic development.
Just as important, however, is the codification of
the rights of citizens, which require reassurance that
their interests are safeguarded in any future PPP
developments. Here, as with the government’s ear-
lier programme of privatisation, there is much room
for mistrust and discontent if transparency is sacri-
ficed for expediency. Presenting honest data and
addressing mistakes is key to keeping public support.
32
The Privatisation Evaluation Committee examined 19 companies that had been privatised in recent years
PPPs are seen as a promising way to boost private sector activity
While the committee’s
report found that the
privatisation programme
had boosted the
performance of the firms
surveyed, provided more
jobs for Jordanians and
brought the state around
$2.4bn in revenue, it also
stated that legal violations
had taken place in some of
the deals.

ECONOMY INTERVIEW
Awni Rushoud, Investment Commissioner, Investment Commission
What sort of changes were involved in the transi-
tion from the Jordan Investment Board to the new
Investment Commission?
RUSHOUD: The major change is that we have unified
various investment divisions – including the Jordan
InvestmentBoard,thedevelopmentzonesandthepro-
motion department of the Jordan Enterprise Develop-
mentCorporation–andwrappedthemallintothenew
Investment Commission. The streamlining of these
organisations should make our activities more trans-
parent to foreign investors, which in turn should pique
their interest in investing here.
Another major change will be a faster investment
approval process, which is key to investors’ decision-
making in general. When investors take risks in foreign
countries, they are looking for transparency and a lev-
el playing field. We want to simplify the entire process
and make Jordan more investor friendly. It is important
forinvestorstoknowbasicfactsandnotbuyintostereo-
types.Theymustknowthattheycanown100%oftheir
investments, that they will have total ability to repatri-
ate all capital from investment projects, and that the
oddsarenotstackedagainstthem.Wemustalsowork
hard to ensure investors of the strength of our institu-
tions, especially the legal framework.
Now that the new investment law is in place, how
do you see Jordan’s inward investment changing?
RUSHOUD:Weareoptimisticthatthenewinvestment
law will enhance opportunities to invest in the king-
dom. Already, 2013 was a good year for investment,
whichhadamajorimpactonGDPgrowth.Wehaveseen
exports increase by 1-9%, and foreign direct invest-
ment (FDI) rise by 20%, from JD1.65bn ($2.33bn) to
JD1.93bn ($2.72bn). Along with this general rise, it is
important to note the high degree of value-added
investments in the service industries.
ThelargestinvestorsintoJordanover2013camefrom
Syria,IraqandtheUS.Thiscanbeseenasanaturalcon-
sequence of simmering tensions and upheavals from
ourneighbours,somethingwehaveseenbeforeatdif-
ferenttimesinourhistory.Jordanisoftenviewedasan
oasis of peace in an unstable region.
Moving into 2014 and beyond, I am optimistic that
FDI will continue on a path of steady growth. We will
be shifting our efforts away from traditional markets
like the US and toward newer and more dynamic mar-
ketslikeChinaandSouthKorea.Wewillalsofocusmore
attention on the EU, as we believe there is greater
potential to enhance investment ties and prospects.
Which sectors in Jordan are the most attractive to
foreign investors, both now and going forward?
RUSHOUD: The new investment law should enhance
prospectsforallsectors,andhelpusdiversifyawayfrom
traditionalonessuchastourismandhealthcare,where
pharmaceuticals make up 40% of our exports.
It is no secret that, apart from oil shale, Jordan is
starvedofnaturalresources,sotherehasbeenasharp-
er focus on renewable energy, especially solar. Jordan
hasabout300daysofsunlightayear,andwearelook-
ingtodiversifyourenergymixwithanewroadmaplaid
out by the Ministry of Energy and Mineral Resources.
We have become too dependent on liquefied natural
gasfromEgypt,whichhasprovenharmfultoournation-
al debt given the unpredictability of supply. This is part
of the reason a pipeline from Iraq is being built, which
should secure us 20,000 barrels per day of crude. Fos-
tering an alternative energy culture will help ease our
long-term energy concerns. It is hoped that in time up
to20%ofourenergycancomefromrenewablesources.
Others hope for even more, but the important thing is
to capitalise on this wave now, and not later.
WearealsoseeingarenaissanceinIT.Jordan,though
only 2% of the MENA population, is the source of more
than60%ofdigitalcontentinArabic.Thereisalsogreat
potentialingamingandautomation,whichshouldhelp
propel us towards a services-based economy. Jordan is
revered for having the region’s brightest human capi-
tal. This bodes well for building a knowledge economy.
33
Oasis of stability
OBG talks to Awni Rushoud, Investment Commissioner, Investment
Commission

ECONOMY ANALYSIS
Small companies provide 96% of goods exported from the country
Itishardtooverstatetheimportanceoftheroleplayed
byJordan’ssmallandmedium-sizedenterprises(SMEs)
inthewidereconomy.Thenation’shistoricalroleassafe
haven in a politically turbulent region has seen it wel-
come migrants from far and wide, most notably Pales-
tine,Iraqand–morerecently–Syria.Manyhavebrought
their capital with them, and deployed their business
know-how to establish shops and small companies in
Amman and other urban areas, activities which have
served to enlarge the nation’s economy. The succes-
sive population inflows over recent decades have also
resulted in more demand for goods and services, and
a virtuous circle of sorts has been created with new
arrivals feeding into both the demand and supply
streamsoftheeconomy.Whileinsomeinstances,such
aswiththepresentinfluxofrefugeesfromneighbour-
ing Syria, immigration has presented the government
with humanitarian challenges, for the most part the
economy – and in particular the SME segment – has
benefitted from Jordan’s status as a preferred destina-
tion for those escaping regional strife.
According to the Jordan Enterprise Development
Corporation (JEDCO), a body established by the state
in 2006 to help enhance the competitiveness of the
nation’senterprises,99%ofallemployersareSMEs,and
52%oftheprivatesectorworkforcemakesitslivingwith-
intheSMEsegment.Inaddition,SMEsalsoaccountfor
virtually all of the net new jobs in Jordan, and provide
96% of all goods exported from the country.
TECHNICAL ASSISTANCE: Given the prominence of
SMEsintheJordanianeconomy,itisnotsurprisingthat
a large number of government-backed programmes
have been established in order to assist their growth.
Each of them is tasked with a different goal in relation
to SME development. JEDCO’s principal objective is to
boost SME exports and substitute imports with equiv-
alent or better local products and services – a partic-
ularly important ambition in the context of a national
tradedeficitwhichgrewby8.6%inthefirst11months
of 2013 to reach $1.2bn. As well as its Export Promo-
tion Programme, the organisation administers the Jor-
danUpgradingandModernisationProgrammeandthe
Jordan Services Modernisation Programme (JSMP),
whichaimtoenhancethequalityofservicesandprod-
uctsprovidedbylocalSMEs.TheJSMPinitiativeisfund-
ed by the EU, and is an example of the government’s
success in establishing partnerships with internation-
al governments and institutions as it strives to boost
theperformanceoftheSMEsector.Otherinternation-
alagreementshavebroughttangiblebenefitsinrecent
years.TheNationalFundforEnterpriseSupportisajoint
effort between the governments of Jordan and Japan,
and assists SMEs with the implantation of develop-
ment projects – with an emphasis on areas such as IT
systems,consultingandhumanresourcedevelopment.
More international assistance comes in the form of
the US Agency for International Development (USAID)
Jordan Economic Development Programme, a broad
economic development initiative focused on private-
sector growth and implemented in Jordan by USAID
and Deloitte Consulting. The Tatweer project is a sec-
ond initiative funded by USAID, and it is managed by
the Business Development Centre, with the aim of
boosting SMEs’ competitiveness and export capacity.
FINANCIALCHALLENGE: Access to finance for SMEs
is an issue in most economies, but obtaining granular
detail as to the nature of the problem is usually a chal-
lenge.MostSMEswillrespond,ifasked,thattheywould
prefereasieraccesstocreditinordertogrowtheirbusi-
nesses,whilebankstendtocounterthatSMEsarefre-
quently unable to meet their requirements in terms of
accountingstandards,levelsoftransparencyandstrate-
gic planning – all of which are necessary for proper,
risk-based lending. In Jordan, at least, a recent survey
bytheJordanStrategyForumhasdirectedsomemuch-
needed light at the question of how much demand
there might be in the SME segment for greater access
to business loans. According to the survey’s findings,
only 42% of SMEs find the current provision of finan-
cial services, such as loans, warranties and letters of
Numerous state-backed
schemes have been set up
to assist the growth of
SMEs, which account for
99% of the nation’s
employers.
34
Small but important
Supporting the growth of the nation’s SMEs

Jordan 2014_OBG

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