The jordanian economy in recent rankings – a comparison

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The jordanian economy in recent rankings – a comparison

  1. 1. Young Entrepreneurs Association, Jordan 2008 1 The Jordanian Economy in Recent Rankings: A Comparison Yusuf Mansur Samer Jabari Samar El-Haj Hasan Ahmad Asfour
  2. 2. Young Entrepreneurs Association, Jordan 2008 Outline  Major Economic Indicators  Jordan’s Recent Rankings 2
  3. 3. Young Entrepreneurs Association, Jordan 2008 Major Economic Indicators 3 JD Million Year 2005 2006 2007 2008 2009 Gross Domestic Debt-Central Gov. (Budgetary and Own-Budget Agencies)   2,467   2,961 3,695   5,754   7,086 % of GDP 27.6 26.7 29.3 35.7 39.8 External Public Debt Outstanding 5,056.7 5,186.5 5,253.3 3,640.2 3,869.0 % of GDP 56.7 46.8 41.7 22.6 21.7 Total Debt (External &Total) 84.3 73.4 71.0 58.3 61.5 Source: CBJ June 2010
  4. 4. Young Entrepreneurs Association, Jordan 2008 4 2005  2006  2007  2008  2009 Current Account -1610.6 -1223.8 -2038.0 -1445.2 -797.2 Trade Balance (Deficit) -3556.3 -3584.7 -4574.2 -5084.4 -4448.8 Exports 3049.7 3689.9 4063.6 5633.0 4526.3 Imports 6606.0 7274.6 8637.8 10717.4 8975.1 Services Balance (Net) -147.8 -44.8 22.0 249.6 521.8 Direct Foreign Investment 1407.0 2512.7 1859.1 2005.7 1718.0 Gross Official Reserves 3,363.4 4,326.1 4,871.4 5,490.5 7,713.3 Coverage of Goods Imports & Non- Factor Services (Months)   4.7   5.1   4.7   6.2   8.2 Major Economic Indicators (External Sector)
  5. 5. Young Entrepreneurs Association, Jordan 2008 5    2005  2006  2007  2008  2009 Nominal GDP at Market Prices (JD M ) 8,925 11,093 12596 16,108 17816 Population (Millions) 5.473 5.600 5.723 5.850 5.980 Per Capita GDP, Current Market Prices (JD) 1,631   1,981    2,201  2,754  2,979 Nominal GDP, Market Prices (% Change) - 24.3 13.5 27.9 10.6 Real GDP at Basic Prices (% Change) - 8.0 7.4 7.2 3.2 Real GDP at Market Prices (% Change) - 7.9 8.5 7.6 2.3 GDP Deflator, Market Prices (1994=100) 2.0 15.2 4.7 18.8 8.1 Percentage Change in CPI (2006=100) 3.5 6.25 4.7 13.9 -0.7 Major Economic Indicators (Production and Prices)
  6. 6. Young Entrepreneurs Association, Jordan 2008 Jordan’s recent ranking in: 6 1. Global Competitiveness Report 2. Doing Business Report 3. Economic Freedom of the World (Fraser) 4. Economic Freedom Index (Heritage)
  7. 7. Young Entrepreneurs Association, Jordan 2008 Four Indices, 2005-2010: Why the differences? 0 20 40 60 80 100 120 2002 2003 2004 2005 2006 2007 2008 2009 2010 GCI Economic Freedom Index Ease of Doing Business EFWI
  8. 8. Young Entrepreneurs Association, Jordan 2008 Global Competitiveness Index   2005 (117) 2006 (125) 2007 (131) 2008 (134) 2009 (133) 2010 (139) Global Competitiveness Index (GCI) 42 52 49 48 50 65 Basic Requirements 40 50 46 47 46 57 Institutions 28 33 32 27 25 41 Infrastructure 49 52 42 44 42 61 Macroeconomic environment 75 103 100 111 105 103 Health and primary education 53 63 53 56 57 65 Efficiency Enhancers 49 58 64 63 66 73 Higher education and training 48 54 47 42 42 57 Goods market efficiency 46 53 48 44 43 46 Labor market efficiency -  -  94 93 106 112 Financial market development - - 55 48 52 54 Technological readiness 55 62 63 57 61 62 Market size - - 83 88 82 84 Innovation and Sophistication Factors 50 61 54 47 51 65 Business sophistication 60 67 58 47 49 66 Innovation 42 64 55 51 59 68 Business Competitiveness Index 42 52 48 - - -
  9. 9. Young Entrepreneurs Association, Jordan 2008 Global Competitiveness Index 9   2008 (134) 2009 (133) 2010 (139) Global Competitiveness Index (GCI) -1 +2 +15 Basic Requirements +1 -1 +11 Institutions -5 -2 +16 Infrastructure +2 -2 +19 Macroeconomic environment +11 -6 -2 Health and primary education +3 +1 +8 Efficiency Enhancers -1 +3 +7 Higher education and training -5 0 +15 Goods market efficiency -4 -1 +3 Labor market efficiency -1 +13 +6 Financial market development -7 +4 +2 Technological readiness -6 +4 +1 Market size +5 -6 +2 Innovation and Sophistication Factors -7 +4 +14 Business sophistication -11 +2 +17 Innovation -4 +8 +9
  10. 10. Young Entrepreneurs Association, Jordan 2008 10 Indicator Rank/139 (2010-2011) Rank/133 (2009-2010) Rank/134 (2008-2009) 1st Pillar: Institutions 1.03 Diversion of public funds 41 34 35 1.04 Public trust of politicians 43 31 33 1.07 Favoritism in decisions of gov. officials 44 33 34 1.08 Wastefulness of government spending 42 26 26 1.09 Burden of government regulation 50 18 18 1.14 Business costs of crime & violence. 21 17 14 1.16 Reliability of police services. 24 17 20 Global Competitiveness Index
  11. 11. Young Entrepreneurs Association, Jordan 2008 11 Indicator Rank/139 (2010-2011) Rank/133 (2009-2010) Rank/134 (2008-2009) 2nd pillar: Infrastructure   2.03 Quality of railroad infrastructure 98 84 91 2.08 Fixed telephone lines 100 94 87 3rd pillar: Macroeconomic Environment Rank/139 (2010-2011) Rank/133 (2009-2010) Rank/134 (2008-2009) 3.01 Government budget balance* 136 - - 3.02 National savings rate* 23 39 115 3.04 Interest rate spread 47 35 30 3.05 Government debt* 106 106 112 3.06 Country credit rating* 79 - - Global Competitiveness Index
  12. 12. Young Entrepreneurs Association, Jordan 2008 12 Indicator Rank/139 (2010-2011) Rank/133 (2009-2010) Rank/134 (2008-2009) 5th pillar: Higher Education and Training   5.03 Quality of the educational system 55 33 27 5.04 Quality of math and science education 53 38 37 5.05 Quality of management schools 83 53 45 6th pillar: Goods Market Efficiency   6.01 Intensity of local competition 46 30 24 6.02 Extent of market dominance 58 42 34 6.03 Effectiveness of anti-monopoly policy 51 37 38 6.05 Total tax rate 32 26 20 6.08 Agricultural policy costs 65 51 55 6.10 Trade tariffs 98 113 112 6.12 Business impact of rules on FDI 45 37 44 6.15 Buyer sophistication 85 66 83 Global Competitiveness Index
  13. 13. Young Entrepreneurs Association, Jordan 2008 13 Indicator Rank/139 (2010-2011) Rank/133 (2009-2010) Rank/134 (2008-2009) 7th pillar: Labor Market Efficiency 7.03 Rigidity of employment 60 54 48 7.04 Hiring and firing practices 92 94 109 8th pillar: Financial Market Development 8.03 Financing through local equity mkt 33 6 22 8.06 Restriction on capital flows 35 31 44 8.07 Soundness of banks 51 37 58 9th pillar: Technological Readiness 9.04 Internet users* 82 67 76 Global Competitiveness Index
  14. 14. Young Entrepreneurs Association, Jordan 2008 14 Indicator Rank/139 (2010-2011) Rank/133 (2009-2010) Rank/134 (2008-2009) 11th pillar: Business Sophistication   11.01 Local supplier quantity 60 34 30 11.03 State of cluster development 71 46 41 12th pillar: Innovation   12.01 Capacity for innovation 96 74 66 12.02 Quality of scientific research institutions 98 70 51 12.03 Company spending on R&D 116 108 79 12.04 University-industry collaboration in R&D 99 68 60 12.05 Gov’t procurement of advanced tech products 57 48 33 12.07 Utility patents per million population 76 90 63 Global Competitiveness Index
  15. 15. Young Entrepreneurs Association, Jordan 2008 Economic Freedom Index (Heritage) Year Rank Overall Score Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Freedom From Corruption Labor Freedom Participating Countries 2010 52 66.1 65.6 78.8 83 55.1 73.2 65 60 55 51 74.2 179 2009 51 65.4 68.9 78.8 83 56.9 80.2 50 60 55 47 74.1 179 2008 42 64.1 56.3 74.8 83.7 53.2 80.4 50 60 55 53 74.6 157 2007 29 64.5 54.9 74.2 83.2 57.4 83.5 50 60 50 57 74.6 141 2006 36 63.7 56 62.2 78.2 58.3 84.4 50 70 50 53 74.8 130 2005 27 66.7 70 62.4 79.2 63.5 81.8 70 70 50 46 73.9 127 15
  16. 16. Young Entrepreneurs Association, Jordan 2008 Economic Freedom Index (Heritage) Year Rank Overall Score Business Freedom Trade Freedom Fiscal Freedom Government Spending Monetary Freedom Investment Freedom Financial Freedom Property Rights Freedom From Corruption Labor Freedom 2010 +1 +0.7 -3.3 0 0 -1.8 -7 +15 0 0 +4 +0.1 2009 +9 +1.3 +12.6 +4 -0.7 +3.7 -0.2 0 0 0 -6 -0.5 2008 +13 -0.4 +1.4 +0.6 +0.5 +4.2 -3.1 0 0 +5 -4 0 16 Note: No major adverse developments occurred in Investment Freedom in 2009/2010 Same as to Corruption or Labor
  17. 17. Young Entrepreneurs Association, Jordan 2008 BUSINESS FREEDOM  The overall freedom to establish and run a business is somewhat restricted by Jordan’s regulatory environment. Starting a business takes an average of 13 days, compared to the world average of 35 days, and obtaining a business license requires less than the world average of 218 days. Closing a business, however, is difficult. Despite efforts at reform, bureaucratic obstacles and delays persist. 17 Economic Freedom Index (Heritage)
  18. 18. Young Entrepreneurs Association, Jordan 2008 TRADE FREEDOM  Jordan’s weighted average tariff rate was 5.6 percent in 2007. Import bans and restrictions, import taxes and fees, licensing requirements, export subsidies, weak enforcement of intellectual property rights, and inefficient customs administration add to the cost of trade. Ten points were deducted from Jordan’s trade freedom score to account for non- tariff barriers. ????? Weighted average tariff rate is higher than 5.6% in 2007. 18 Economic Freedom Index (Heritage)
  19. 19. Young Entrepreneurs Association, Jordan 2008 FISCAL FREEDOM  Jordan has moderate tax rates. The top income and corporate tax rates are 25 percent (35 percent for banks and financial institutions). Other taxes include a value-added tax (VAT) and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 21.1 percent. ???? 19 Year 2005 2006 2007 2008 2009 Tax as % of GDP 19.8 19.2 19.6 17.1 16.2 Economic Freedom Index (Heritage)
  20. 20. Young Entrepreneurs Association, Jordan 2008 GOVERNMENT SPENDING  Total government expenditures, including consumption and transfer payments, are relatively high. In the most recent year, government spending equaled 38.7 percent of GDP.  Some 19 companies were slated for privatization in 2008. Fiscal policy has been stable and effective.  ????? See Most Recent GCI  Expenditure reductions, the result of removing barley and fuel subsidies, will be offset by higher capital spending and lower tax revenues.  Barley subsidies are still in effect 20 Economic Freedom Index (Heritage)
  21. 21. Young Entrepreneurs Association, Jordan 2008 MONETARY FREEDOM  Inflation has been high, averaging 11.8 percent between 2006 and 2008. Most controls have been eliminated, but the government sets prices for electricity, telecommunications, and water. Five points were deducted from Jordan’s monetary freedom score to account for policies that distort domestic prices. 21 Inflation Rate 2006 2007 2008 Average Inflation Rate (% Change in GDP) 15.2 4.7 18.8 12.9 Inflation Rate(% Change in CPI) 6.25 4.7 13.9 8.28333 Telecom prices are not all set by government, only the fixed lines, competition sets the prices Economic Freedom Index (Heritage)
  22. 22. Young Entrepreneurs Association, Jordan 2008 INVESTMENT FREEDOM  Foreign and domestic investments receive equal treatment. There is no formal screening, but there are minimum capital requirements. Additionally, foreign investments may not exceed 50 percent in sectors like construction, wholesale and retail trade, transport, import and export services, and advertising.  Foreigners may not invest in investigative and security services, sports clubs, stone quarrying, customs clearance services, and land transportation.  Excessive bureaucracy, red tape, a judicial system susceptible to political pressure, and inconsistent enforcement of regulations inhibit investment.  Residents and non-residents may hold foreign exchange accounts. There are no restrictions or controls on payments, transactions, transfers, or repatriation of profits. Certain real estate purchases require approval. 22 Economic Freedom Index (Heritage)
  23. 23. Young Entrepreneurs Association, Jordan 2008 FINANCIAL FREEDOM  Jordan’s fairly well developed financial sector is dominated by banking. Along with financial-sector policies that are intended to enhance competition and efficiency, the government has brought supervision and regulation into line with international standards.  More than 20 banks, including nine domestic commercial banks and eight foreign banks, operate in Jordan.  The Arab Bank dominates the sector, accounting for about 60 percent of total assets. Government-encouraged consolidation among smaller banks has progressed.  The government owns no commercial banks but does own five specialized credit institutions focused on agricultural credit, housing, rural and urban development, and industry.  The insurance sector is small but open to foreign competition. Capital markets are not fully developed but are fairly robust by regional standards. An anti–money laundering bill went into effect in July 2007. 23 23 banks, 15 commercial, 8 foreign, 3 specialized credit institutions, Arab Bank 25% of assets in 2008 Economic Freedom Index (Heritage)
  24. 24. Young Entrepreneurs Association, Jordan 2008 PROPERTY RIGHTS  Interest in property (moveable and real) is recognized, enforced, and recorded through reliable legal processes and registries.  The legal system protects the acquisition and disposition of all property rights. The judiciary is generally independent, but the king is the ultimate authority.  Despite a law passed in 2001 to limit its influence, the Ministry of Justice significantly influences judges’ careers. Expropriation is unlikely.  Jordan’s record in protecting intellectual property rights has improved. 24 Economic Freedom Index (Heritage) Still no registry for movable property
  25. 25. Young Entrepreneurs Association, Jordan 2008 FREEDOM FROM CORRUPTION  Corruption is perceived as present. Jordan ranks 51st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.  Influence peddling and a lack of transparency have been alleged in government procurement and dispute settlement.  The use of family, business, and other personal connections to advance personal business interests at the expense of others is endemic and seen by many Jordanians as a normal part of doing business. 25 Economic Freedom Index (Heritage)
  26. 26. Young Entrepreneurs Association, Jordan 2008 LABOR FREEDOM  Labor regulations are relatively flexible.  The non-salary cost of employing a worker is moderate, but dismissing an employee is not easy.  Regulations on work hours are not rigid. 26 Economic Freedom Index (Heritage)
  27. 27. Young Entrepreneurs Association, Jordan 2008 Doing Business Index Doing Business 2005 2006 2007 2008 2009 2010 Ease of Doing Business 73 74 78 80 101 100 Starting a Business 127 133 133 133 119 125 Dealing with Construction Permits 68 71 70 71 116 92 Employing Workers 30 45 30 45 48 51 Registering Property 110 106 110 109 105 106 Getting Credit 76 80 83 84 125 127 Protecting Investors 114 105 118 107 114 119 Paying Taxes 16 19 18 19 22 26 Trading Across Borders 85 51 78 59 77 71 Enforcing Contracts 72 128 75 128 129 124 Closing a Business 79 84 84 87 96 96 Participating Countries 135 155 175 178 181 183 27
  28. 28. Young Entrepreneurs Association, Jordan 2008 Doing Business Index Doing Business 2008 (178) 2009 (181) 2010 (183) Ease of Doing Business +2 +21 -1 Starting a Business 0 -14 +6 Dealing with Construction Permits +1 +45 -24 Employing Workers +15 +3 +3 Registering Property -1 -4 +1 Getting Credit +1 +41 +2 Protecting Investors -11 +7 +4 Paying Taxes +1 +3 +4 Trading Across Borders -19 +18 -6 Enforcing Contracts +53 +1 -5 Closing a Business +3 +9 0 28
  29. 29. Young Entrepreneurs Association, Jordan 2008 Reforms 2009-2010  Jordan eased the process for dealing with construction permits by extending the services of the one- stop shop in Greater Amman to medium-size commercial construction projects.  Contract enforcement was improved by setting up special commercial courts and equipping them with computer-aided case management systems. In addition, a higher threshold for the lower conciliation court is expected to result in better distribution of cases.  Taxpaying for businesses was eased with the introduction of an online filing and payment system and a simplification of form filing. Transfer fees for registering property were cut from 10 percent to 7.5 percent of a property’s value.  Business start-up was eased by offering a single reception service for company registration at the Company Registrar.  Trade was made more efficient by implementing a risk-based inspection regime of post-destination clearance for preapproved traders as well as by reducing to 30 percent the share of containers subject to physical inspection.  In addition, implementation of new software allowing online submissions of customs declarations has reduced customs clearance times by two days for exporters and three days for importers. 29 Doing Business Index
  30. 30. Young Entrepreneurs Association, Jordan 2008 Economic Freedom of the World Index (Fraser) 2007- 2008   Rating 2007 Rank 2007 Rating 2008 Rank 2008 Change in Rating Change in Rank Overall Score 7.41 31 7.18 40 -0.23 +9 Area 1: Size of Government: Expenditures, Taxes, and Enterprise 6.08 80 5.03 80 -1.05 0 Area 2: Legal Structure and Security of Property Rights 6.55 41 6.56 35 0.01 6 Area 3: Access to Sound Money 9.19 41 8.38 60 -0.81 +19 Area 4: Freedom to Trade Internationally 7.72 27 7.67 24 -0.05 3 Area 5: Regulation of Credit, Labor, and Business 7.5 23 7.45 26 -0.05 +3 30
  31. 31. Young Entrepreneurs Association, Jordan 2008 So, which Index should a country heed? All?  The most diverse in coverage is the GCI  The most practically relevant is the Ease of Doing Business  Based on the inaccuracies discerned, the least reflective is the Economic Freedom Index (Heritage)  EFIW is historically accurate 31
  32. 32. Young Entrepreneurs Association, Jordan 2008 What’s next?  Countries should establish their own; definitely Jordan should!  It is more relevant to have own reference, and more accurate.  Private sector should do it, not government, latter implements, and held accountable.  Be open, provide access (online), engaging, transparent, and acountable 32
  33. 33. Thank you 01/29/15 33

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