Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Jordan: Building towards a growth strategy

83 views

Published on

In the decade 1999-2009, Jordan experienced an impressive growth acceleration, tripling its exports and increasing income per capita by 38%. Since then, a number of external shocks that include the Global Financial Crisis (2008-2009), the Arab Spring (2011), the Syrian Civil War (2011), and the emergence of the Islamic State (2014) have affected Jordan in significant ways and thrown its economy out of balance. Jordan’s debt-to-GDP ratio has ballooned from 55% (2009) to 94% (2018). The economy has continued to grow amidst massive fiscal adjustment and balance of payments constraints, but the large increase in population – by 50% between 2008 and 2017 – driven by massive waves of refugees has resulted in a 12% cumulative loss in income per capita (2010-2017). Moving forward, debt sustainability will require not only continued fiscal consolidation but also faster growth and international support to keep interest payments on the debt contained. We have developed an innovative framework to align Jordan’s growth strategy with its changing factor endowments. The framework incorporates service industries into an Economic Complexity analysis, utilizing the Dun and Bradstreet database, together with an evaluation of the evolution of Jordan’s comparative advantages over time. Combining several tools to identify critical constraints faced by sectors with the greatest potential, we have produced a roadmap with key elements of a strategy for Jordan to return to faster, more sustainable and more inclusive growth that is consistent with its emerging comparative advantages.

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

Jordan: Building towards a growth strategy

  1. 1. Jordan: Building towards a growth strategy Amman, October 2018 Harvard CID – Jordan October 15th - 18th , 2018
  2. 2. Index • What happened to Jordan? Our understanding of the situation • Changing conditions • Opportunities for productive diversification • Common features across themes and potential constraints • Sources/destinies of FDI into the region by theme • Elements of a growth strategy Harvard CID – Jordan October 15th - 18th , 2018 2
  3. 3. Index • What happened to Jordan? Our understanding of the situation • Changing conditions • Opportunities for productive diversification • Common features across themes and potential constraints • Sources/destinies of FDI into the region by theme • Elements of a growth strategy Harvard CID – Jordan October 15th - 18th , 2018 3
  4. 4. Jordan’s Growth Trajectory: Rapid acceleration (2000-2008) followed by slow down (2008-2016) 7.37.57.77.98.18.3 Ln(GDPPC) 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Years Data source: World Development Indicators Ln(GDP per capita) for Jordan g = 9.5% g = -3.1% g = -1.8%g = 2.0% g = 3.8% 1982 20081991 2000 Harvard CID – Jordan October 15th - 18th , 2018 4
  5. 5. 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Jordan: Exports of Goods and Service (1990 - 2017, constant 2010 dollars) Exports of goods and services Exports of goods The boom and slowdown are export-related 20081991 2000 Harvard CID – Jordan October 15th - 18th , 2018 5
  6. 6. The boom was not just about good luck… Harvard CID – Jordan October 15th - 18th , 2018 6 90 115 140 165 190 215 240 265 290 315 340 365 390 415 440 465 490 90 115 140 165 190 215 240 265 290 315 340 365 390 415 440 465 490 2000 2002 2004 2006 2008 2010 2012 2014 2016 Year Jordan World Figure shows exports of Jordan and international demand, fixing the export basket of year 2000 (index 100 = year 2000). Performance of Jordan’s year 2000 export basket and world exports (2000=100)
  7. 7. … the growth boom was led by sectors that did not create good employment for Jordanians (agriculture, garments, chemicals) Harvard CID – Jordan October 15th - 18th , 2018 7
  8. 8. 40 60 80 100 120 40 60 80 100 120 2000 2002 2004 2006 2008 2010 2012 2014 2016 Year Jordan World … and the bust was not a domestic shock Harvard CID – Jordan October 15th - 18th , 2018 8 Figure shows exports of Jordan and international demand, fixing the export basket of year 2000 (index 100 = year 2000). Performance of Jordan’s year 2008 export basket and world exports (2008=100)
  9. 9. The fall in exports 2014 seems to be a permanent shock that caught everyone by surprise… Harvard CID – Jordan October 15th - 18th , 2018 9 Source: Jordan Central, Bank, International Monetary Fund. 6,000 7,000 8,000 9,000 10,000 11,000 12,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Exports (million US dollars) May-12 Jun-14 Jul-17 Actual
  10. 10. The GDP boom was larger than elsewhere, the bust was similar… Harvard CID – Jordan October 15th - 18th , 2018 10 0% 1% 2% 3% 4% 5% 6% 7% 8% JOR IRN MAR LBN EGY TUN DZA AnnualizedRealGDPGrowth 2000-2008 2008-2016 Note: Comparators here include other middle-income MENA countries, excluding Syria, Iraq, Yemen, Libya, and the West Bank & Gaza. Source: CID calculations based on WDI
  11. 11. 2.0% 1.8% 1.8% 1.8% 1.8% 2.1% 2.6% 3.2% 3.9% 4.4% 4.8% 5.1% 5.3% 5.5% 5.5% 5.3% 4.7% 4.0% 3.2% 2.6% 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Jordan Population (Total population and growth rates) Population growth (%) Total population Massive inflows of refugees have driven population upwards… Source: WDI Indicators Harvard CID – Jordan October 15th - 18th , 2018 11
  12. 12. In per capita terms Lebanon and Jordan experience a sharp decline Harvard CID – Jordan October 15th - 18th , 2018 12 Note: Comparators here include other middle-income MENA countries, excluding Syria, Iraq, Yemen, Libya, and the West Bank & Gaza. Source: CID calculations based on WDI -2% -1% 0% 1% 2% 3% 4% 5% JOR IRN MAR LBN EGY TUN DZA AnnualizedRealGDPpercapitaGrowth 2000-2008 2008-2016
  13. 13. Imports boomed until 2014… Harvard CID – Jordan October 15th - 18th , 2018 13 Source: Central Bank of Jordan 0 5,000 10,000 15,000 20,000 25,000 30,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Jordan: Exports and Imports of Goods and Services (1990-2017, current US$) Exports Imports Jordan: Exports and imports of goods and services (1990-2017, current US$)
  14. 14. - 5 10 15 20 25 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 inUS$billion Exports Travel Remittances Other private transfers Grants FDI Buoyed by other temporary increases… Harvard CID – Jordan October 15th - 18th , 2018 14 Jordan’s Balance of Payments: Selected accounts
  15. 15. Foreign direct investment declined sharply after 2009… Harvard CID – Jordan October 15th - 18th , 2018 15 5.4% 8.1% 14.5% 24.5% 15.0% 12.8% 9.8% 6.3% 5.1% 5.0% 5.8% 5.9% 4.3% 4.0% 11.6% 1.4% 20.1% 32.7% 6.7% 8.6% 10.6% 7.9% 9.8% 4.7% 2.8% 4.8% 1.3% 5.0% 0% 5% 10% 15% 20% 25% 30% 35% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Foreign Direct Investment: Balance of Payments vs. FDI Markets (2003-2016, percentage of GDP) FDI CBJ FDI - FDI Markets Source: FDI Markets * Leaving out 2008 Al Maabar announced US$10.0 billion in Real State Services, and 2013 ROSATOM (Russia) announced US$10.0 billion in a nuclear electric plant that did not materialize Foreign Direct Investment: Balance of Payments vs. FDI Markets (2003-2016, percentage of GDP) (US$ million) 2003-2009 2010-2016 2003-2006 CBJ BoP 12.9% 5.2% 9.0% FDI Markets 13.1% 5.2% 9.1%
  16. 16. From 2015 onwards there has been a large decrease in imports… Harvard CID – Jordan October 15th - 18th , 2018 16 0 500 1,000 1,500 2,000 2,500 3,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Jordan: Exports and Imports of Goods and Services per capita (1990-2017, constant 2010 dollars) Exports per capita Imports per capita 20.4 % 20.1 %
  17. 17. Since 2011 there has been a massive fiscal adjustment in Jordan Harvard CID – Jordan October 15th - 18th , 2018 18 -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 assharesofGDP Grants Surplus/deficit excluding grants Overall surplus/deficit Budgetary government
  18. 18. The adjustment was even larger when including NEPCO and WAJ -18% -16% -14% -12% -10% -8% -6% -4% -2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 assharesofGDP Primary fiscal balance excluding grants and net transfers to NEPCO and WAJ Combined public deficit (plus NEPCO operating balance and WAJ overall balance) Fiscal IMF performance criteria Harvard CID – Jordan October 15th - 18th , 2018 19
  19. 19. 0% 3% 6% 9% 12% 15% - 100 200 300 400 500 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 asashareofGDP 2017JD Real net expenditures per capita Net expenditures (% GDP) Net expenditures = (total expenditures – interest payments on the external debt)- (total revenues – grants) Country Period Net expenditure contraction* Greece 2010-2016 10.65 Jamaica 2009-2015 8.50 Jordan 2011-2017 8.05 Portugal 2010-2016 6.14 Spain 2009-2015 4.56 * In percentage points of GDP Sources: MOF Monthly bulletins, World Development Indicators The fiscal adjustment that has taken place in Jordan in 2011-2017 ranks among the largest 6-year fiscal contraction in recent history 8.05 pp of GDP 20 Note: This fall does not account for the removal of electricity subsidies.
  20. 20. Fiscal consolidation is likely to continue Harvard CID – Jordan October 15th - 18th , 2018 21 Primary balance (including grants) required to bring down the debt from 95% of GDP in 2017 to 77% by 2025 Actual primary balance (including grants) as a share of GDP (MOF): 2016 (-0.2%), 2017 (0.7), 2018 (1.7%)
  21. 21. Our understanding: Implications for Growth Strategy Harvard CID – Jordan October 15th - 18th , 2018 22 The current predicament • The growth of output and employment is lackluster • Low female participation /employment rates Implications for a Growth Strategy • Very weak fiscal situation: • Rising Debt-to-GDP • Financed via capital markets at rising interest rates • Balance of payment crisis: • Underfinanced deficit • Currency under pressure Fiscal sustainability Accelerate Growth Lower interest rates • Growth cannot depend on fiscal impulse • Has to be driven by exports and investments that directly or indirectly increase exports • Non-tradables will benefit from the multiplier effects • Higher female participation and employment requires new kinds of female jobs • IMF Program with extraordinary access • Lower interest rates • Prevent Jordan from going back to financial markets at increasing rates
  22. 22. Our understanding of the situation: Implications for Growth Strategy Harvard CID – Jordan October 15th - 18th , 2018 23 The current predicament • The growth of output and employment is lackluster • Low female participation /employment rates Implications for a Growth Strategy • Very weak fiscal situation: • Rising Debt-to-GDP • Financed via capital markets at rising interest rates • Balance of payment crisis: • Underfinanced deficit • Currency under pressure Fiscal sustainability Accelerate Growth Lower interest rates • Growth cannot depend on fiscal impulse • Has to be driven by exports and investments that directly or indirectly increase exports • Non-tradables will benefit from the multiplier effects • Higher female participation and employment requires new kinds of female jobs • IMF Program with extraordinary access • Lower interest rates • Prevent Jordan from going back to financial markets at increasing rates
  23. 23. Index • What happened to Jordan? Our understanding of the situation • Changing conditions • Opportunities for productive diversification • Common features across themes and potential constraints • Sources/destinies of FDI into the region by theme • Elements of a growth strategy Harvard CID – Jordan October 15th - 18th , 2018 24
  24. 24. 1) Energy costs have increased with respect to the boom years NEPCO Costs and Revenues (in US cents per kW sold) 0 5 10 15 20 25 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 in ¢/kWh sold Cost of energy purchased Revenues Disruption of cheap natural gas from Egypt Diversification of supply to lower cost LNG + renewables Increasing of electricity tariffs Harvard CID – Jordan October 15th - 18th , 2018 25
  25. 25. Harvard CID – Jordan Visit August 13th - 19th , 2018 0 5 10 15 20 25 30 35 40 45 mar-08 sep-08 mar-09 sep-09 mar-10 sep-10 mar-11 sep-11 mar-12 sep-12 mar-13 sep-13 mar-14 sep-14 mar-15 sep-15 mar-16 sep-16 mar-17 sep-17 mar-18 in ¢/kW Banking Mining and quarrying Telecom Other industries Water pumping Hotels Household 1500kWh Household 1000kWh Household 600kWh Household 300kWh Household from 1-160 kwm Electricity Tariffs over Time Electricity tariffs have increased, but they are highly dispersed across industries…
  26. 26. As a result, tariffs are particularly high in the non-residential sector Non-Residential Electricity Tariffs (¢/kWh) 0 5 10 15 20 25 30 35 40 45 Banking Telecom PacificNoncontiguous Alaska Malta Cyprus Hotels Liechtenstein NewEngland Ireland NewJersey Vermont Greece PacificContiguous Portugal Moldova NorthDakota EuropeanUnion Maryland Slovakia DistrictofColumbia Bulgaria Kosovo Estonia SouthDakota Minnesota Luxembourg Michigan CzechRepublic Missouri Wyoming WestNorthCentral MiddleAtlantic Romania Arizona WestVirginia Slovenia Turkey Virginia Norway Denmark Mountain Serbia SouthAtlantic NewYork NewMexico SouthCarolina EastSouthCentral Tennessee Texas WestSouthCentral Iowa Louisiana Montana Hotels Water pumping Other industries Telecom Mining and quarrying Banking Harvard CID – Jordan October 15th - 18th , 2018 27
  27. 27. Subsidized energy over the boom years resulted in a manufacturing sector that is comparatively more intensive in energy usage Harvard CID – Jordan October 15th - 18th , 2018 28 Source: UNIDO, 2010 12% 26% 17% 17% 20% 22% 47% 24% 23% 15% 38% 37% 40% 50% 33% 40% 65% 58% 46% 46% 41% 29% 20% 36% EGY IRN SAU JOR MAR LBN ISR World Avg. Low Moderate High Share of Manufacturing Value Added by Energy Intensity, 2010
  28. 28. 0 2 4 6 8 10 12 14 16 18 mar-08 ago-08 ene-09 jun-09 nov-09 abr-10 sep-10 feb-11 jul-11 dic-11 may-12 oct-12 mar-13 ago-13 ene-14 jun-14 nov-14 abr-15 sep-15 feb-16 jul-16 dic-16 may-17 oct-17 mar-18 Electricity Tariff on Pumping Water (¢/kWh) The cost of water is tied to the cost of electricity Harvard CID – Jordan October 15th - 18th , 2018 29 Source:
  29. 29. Non-Revenue Water (%) Harvard CID – Jordan Visit August 13th - 19th , 2018 There has been an associated increase of technical and non- technical losses 40 42 44 46 48 50 52 54 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source:
  30. 30. 2) There is a significant pipeline of qualified female labor coming into the labor market… Harvard CID – Jordan October 15th - 18th , 2018 31
  31. 31. Enrollment ratios in tertiary education continue to increase: that is the segment of female labor with higher representation in the labor force Harvard CID – Jordan October 15th - 18th , 2018 32
  32. 32. 3) Massive inflows of Syrian refugees with different skill sets… 33Source: 2017 Employment and Unemployment Survey Jordanian and Syrian men’s labor force Jordanian and Syrian women’s labor force
  33. 33. 1.4% 0.3% 2.0% -0.8% 4.4% 3.1% 1.2% 2.2% 4.7% 4.9% 3.3% 2.1% 2.0% 1.7% 5.6% 3.3% 2.2% 2.0% 1.9% 5.8% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% United Arab Emirates Saudi Arabia Lebanon Iraq Egypt 2017 2018 2019 2020 4) Prospects of an improved neighborhood: Better growth prospects for Jordan’s most important trade and commercial partners in the Gulf Harvard CID – Jordan October 15th - 18th , 2018 34 Source: Global Economic Prospects, World Bank (2018) ”Growth in the Middle East is expected to accelerate to 3 percent in 2018 and 3.2 percent in 2019, assuming a moderation of geopolitical tensions and a modest rise in oil prices… “Iraq’s activity is expected to improve amid more favorable security conditions. • Jordanian Exports to these markets fell 30% between 2008 and 2016, going from $2.6 billion (2000-08) to $2.0 billion (2008-16) • FDI from these countries fell 40%, from $5.2 billion (2000-08) to $3.1 billion (2008-16) “Gulf economies will experience stronger growth in the region, supported by easing fiscal adjustment, infrastructure investment such as the UAE Expo 2020, and reforms to promote non- oil sector activity
  34. 34. 4) Prospects of an improved neighborhood: Higher oil prices Harvard CID – Jordan October 15th - 18th , 2018 35 Source: International Energy Agency, International Monetary Fund, World Bank. Average key crude oil spot prices, USD/barrel
  35. 35. Changing conditions: Implications for Growth Strategy Harvard CID – Jordan October 15th - 18th , 2018 36 Changing conditions Implications for a Growth Strategy • Massive inflows of Syrians • Different skill-sets • Large pipeline of qualified female labor coming into market • Higher electricity costs • Excess capacity of high-cost electricity (PPAs) • Higher cost of pumping water • Export diversification at first has to occur along sectors not intensive either in electricity or water • Technological breakthroughs allowing for low-cost renewable generation • Export excess capacity to neighbors • Exploit comparative advantage of high human capital • Employed by non-tradable sectors spurred by multiplier effects of export growth • Improved neighborhood: + Demand for Jordan exports + FDI into Jordan + Remittances - Higher prices on oil imports • Higher exports can come from improving conditions in existing activities • Diversification: Attract industries that do not yet exist in Jordan or are still nascent
  36. 36. Index • What happened to Jordan? Our understanding of the situation • Changing conditions • Opportunities for productive diversification • Common features across themes and potential constraints • Sources/destinies of FDI into the region by theme • Elements of a growth strategy Harvard CID – Jordan October 15th - 18th , 2018 37
  37. 37. Growth under Fiscal and Balance of Payments Constraints Export-led growth • Improved conditions on existing activities Tasks • Public-private problem solving to address industry- specific constraints • Build systems to learn and address evolving problems Productivity Councils Strategy • Diversification: Attract industries that do not yet exist in Jordan or are still nascent • Define sectors/industries with higher potential • Identify relevant actors that are active in the region • Contact relevant actors and learn what are the missing inputs Investment Promotion Harvard CID – Jordan October 15th - 18th , 2018 38
  38. 38. Identifying export themes that can drive growth in Jordan > Perspectives on the history of export growth in Jordan > Economic complexity analysis including service industries to bring together the good work that has been done already > Identify potential constraints to growth in key export themes > How can Jordan support the growth of industries and good jobs across the export themes? Harvard CID – Jordan October 15th - 18th , 2018 39
  39. 39. Export-led growth shocked in 2008 and again in 2014 Source: Atlas of Economic Complexity Exports in 2016 = $13.6 Billion Harvard CID – Jordan October 15th - 18th , 2018 40
  40. 40. Exports per capita: the shocks to goods were felt across the region (price shocks, demand collapse, trade route closures) Harvard CID – Jordan October 15th - 18th , 2018 41
  41. 41. Why does Jordan export like poor countries rather than rich countries? Harvard CID – Jordan October 15th - 18th , 2018 42
  42. 42. Harvard CID – Jordan October 15th - 18th , 2018 The answer: Economic Complexity
  43. 43. Jordan is not on a positive ECI trajectory: This is a problem for export growth, job growth and wage growth Harvard CID – Jordan October 15th - 18th , 2018 44
  44. 44. Decomposing ECI: Jordan is better-positioned in less complex sectors Harvard CID – Jordan October 15th - 18th , 2018 45
  45. 45. Source: Own calculations using UN COMTRADE data Jordan’s evolution versus Tunisia • 2000-08 gains in market share only in low-complexity / low-wage products • Requiring importing cheap labor and/or cheap energy as inputs • Limited global markets, limited payoff • Since 2000, diversification into electronics, machinery, transportation • Higher wages, larger markets, global value chains (incl. with France) • But some stagnation in recent years Harvard CID – Jordan October 15th - 18th , 2018 46
  46. 46. Source: Atlas of Economic Complexity How this looks in the Product Space Jordan - Increasing concentration in Product Space around agriculture, garments and some chemical products - Drop in ECI ranking from 33rd to 55th Tunisia - Diversified into new products better connected to discover still more - Improved ECI ranking from 69th to 45th Harvard CID – Jordan October 15th - 18th , 2018 47
  47. 47. Countries in the region whose export basket once resembled that of Jordan today, became more complex following different paths Source: Own calculations using UN COMTRADE data Harvard CID – Jordan October 15th - 18th , 2018 48
  48. 48. The extensive margin of goods exports has been closed Country # of new products Exports (2016) USD per capita USD (billions) Oman 18 860 3.2 Vietnam 48 545 50.4 Thailand 70 326 21.8 Malaysia 10 149 4.7 Tunisia 44 132 1.5 Iran 6 53 4.3 Jordan 4 31 0.27 Egypt 14 4.2 0.40 Morocco 3 3.6 0.12 Iraq 2 3.3 0.12 New export products, 2000-2016 Products without RCA in 1998-2000 and with RCA in 2014-2016 Source: Own calculations using COMTRADE data Note: uses both standard RCA and population-based RCA; excludes natural resources. Product USD (millions) Women’s shirts, knit 31.3 T-shirts, knit 80.7 Derivatives of phenols 122.1 Other inorganic acids 35.8 à Consistent with electricity and water constraints binding manufacturing à Reason why JSF analysis of net exports revealed few promising diversification areas à We need to bring services into the Economic Complexity analysis Harvard CID – Jordan October 15th - 18th , 2018 50
  49. 49. Source: CID construction using Dun & Bradstreet (2016) The Industry Space: An early visualization Harvard CID – Jordan October 15th - 18th , 2018 51
  50. 50. Source: CID construction using Dun & Bradstreet (2016) Distance/Density How far/near a new industry is to the existing capabilities of your economy Opportunity Gain How well positioned a new industry is to connect you to higher complexity industries Complexity An implicit measure that reflects the level of wages that an industry can support Three Key Variables of Complexity Analysis Harvard CID – Jordan October 15th - 18th , 2018 52
  51. 51. Analytical Process for Sector Identification / Verification Harvard CID – Jordan October 15th - 18th , 2018 53
  52. 52. First Stage of Analysis Harvard CID – Jordan October 15th - 18th , 2018 54
  53. 53. Resulting of Economic Complexity: Intensive and extensive Harvard CID – Jordan October 15th - 18th , 2018 55 Business and professional services 1 2 4 5 6 7 8 3 Education services Healthcare services Tourism services Agriculture Construction IT and engineering services Creative industries Growth and Diversification Themes
  54. 54. Resulting Growth and Diversification Themes (I) Business and Professional Services Industry RCA • Pension, health, welfare funds 0.00 • Advertising agencies 0.11 • Legal services 0.13 • Accounting and auditing 0.20 • Management consulting 0.33 • Insurance, agents and brokers 0.36 • Office of holding companies 0.61 • Credit reporting services 2.19 Education Services Industry RCA • Libraries 0.10 • School and education services 1.42 • College, universities and professional schools 3.46 Healthcare Services Industry RCA • Clincs of dentists 0.01 • Clinics of health practitioners 0.01 • Clinics of doctors of medicine 0.02 • General medical-surgical hospital 0.68 • Specialty hospitals 1.14 Tourism Services Industry RCA • Museums and art galleries 0.33 • Hotels and motels 0.84 • Travel agencies 1.18 • Passenger car rental 1.49 • Amusement and recreation 1.66 • Airports, terminal services 3.55
  55. 55. Resulting Growth and Diversification Themes (II) Creative industries Industry RCA • Commercial photography 0.00 • Theatrical productions 0.02 • Commercial art and graphic des 0.06 • Publishing and printing 0.08 • TV broadcasting stations 0.41 • Motion pictures and video tape 0.41 • Newspaper publishing/printing 1.22 • Radio broadcasting stations 4.72 IT and Engineering services Industry RCA • Information Technology (IT) 0.31 • Design of security systems 0.43 • Engineering services 0.68 Construction Industry RCA • Fabricated structural metal 0.68 • General contractors 1.10 • Water, sewage, pipelines 1.10 • Highway and street construction 1.32 • Office furniture 1.33 • Flat glass 1.34 • Cold-rolled steel sheets and bars 1.58 • Wood furniture for offices 1.92 • Elevators and moving stairways 1.96 • Ready-mixed concrete 1.98 • Prefabricated wood buildings and components 3.26 • Wood kitchen cabinets 3.42
  56. 56. Resulting Growth and Diversification Themes (III) Agriculture Industry RCA • Veterinary services 0.00 • Vegetables and melons 0.00 • Finfish 0.00 • Fish hatcheries and preserves 0.00 • General farms, primarily crops 0.07 • Sheep and goats 0.07 • Dairy farms 0.11 • Livestock and animall spec farms 0.14 • Poultry and eggs 0.23 • Natural and processed cheese 0.25 • Bread and other bakery products 0.44 Agriculture (cont.) Industry RCA • Fluid milk 2.00 • Other prepared meat products 2.42 • Dried and dehydrated foods 3.09 • Meat packing plants 3.55 • Ice cream and frozen desserts 4.97 • Poultry slaughtering and process. 9.13 • Crop harvesting (with machine) 12.98 • Chocolate and cocoa products 13.23
  57. 57. Our list of themes/sectors bears some resemblance to those comprised at Jordan 2025 and previous work done at JIC Sector / Priority High Med Business Services ü Chemicals ü IT ü Leisure and tourism ü Infrastructure (RE transport, logistics) ü Advance engineering ü Consumer products ü Financial services ü Healthcare services ü Life sciences ü Agri/food Creative industries Education JIC Investment Promotion (2016) Sector / Priority Digital/Business Services Tourism and events Transport and logitiscs Construction/engineering Financial services Healthcare services Life sciences Education services Jordan 2025 (2014) Harvard CID (2018) Sector / Priority Business/Professional Ser. IT Tourism Construction/engineering Business/Professional Ser. Healthcare services Agriculture and food Creative services Education services
  58. 58. Index • What happened to Jordan? Our understanding of the situation • Changing conditions • Opportunities for productive diversification • Common features across themes and potential constraints • Sources/destinies of FDI into the region by theme • Elements of a growth strategy Harvard CID – Jordan October 15th - 18th , 2018 60
  59. 59. Data source: Employment and Unemployment Survey, 2017 With the exception of agriculture and construction, most of the themes belong to higher-wage sectors that employ Jordanians… 1 1 Numbers in circles correspond to those assigned to sector themes 2 3 5 4 6 6 7 8 Harvard CID – Jordan October 15th - 18th , 2018 61
  60. 60. Data source: Employment and Unemployment Survey, 2017 … and are more intensive in women employment The vision: ü Expand tradable industries that can pay good wages ü That can employ more Jordanians ü That can employ more women ü This will expand demand for non- tradables, resulting in job growth and wage growth – including for refugees Harvard CID – Jordan October 15th - 18th , 2018 62
  61. 61. These export themes build on Jordan’s comparative advantage Note: Red line denotes average for all industries Source: Employment and Unemployment Survey, 2017 0 10 20 30 40 50 60 70 80 90 100 Water collection, treatment and supply Processing and preserving of fruit and vegetables Business support service activities n.e.c. Television programming and broadcasting activities Repair of computers and communication equipment Hospital activities Architectural and engineering activities and related… Accounting, bookkeeping and auditing activities Computer programming, consultancy Percent of Workers with a College Degree and Above Harvard CID – Jordan October 15th - 18th , 2018 63
  62. 62. These export themes can employ high rates of women Harvard CID – Jordan October 15th - 18th , 2018 64
  63. 63. High fragmentation of operators and ownership (75% individually-owned) Private sector operators Government licensing not tied to quality of service Operators do not abide by schedules, aiming to fill up bus capacity rather than run on time Unreliable service - Very low usage of public transportation - Increasing congestion - High travel time and costs - Ultimately a tax on work and school - Greater constraints for women - Informal “solutions” - Disconnected cities Erratic travel times Government sets routes and fares and awards licenses Addressing urban transportation problem would support all of the export themes – Need to escape vicious cycle Harvard CID – Jordan October 15th - 18th , 2018 65
  64. 64. 0 10 20 30 40 50 60 Male Female Averagecommutetimeinminutes Average commute times for Jordanians by gender and marital status single married Source: 2016 Jordanian Labor Market Panel Survey This is critical for a gender-inclusive growth strategy Harvard CID – Jordan October 15th - 18th , 2018 66
  65. 65. Egyptian Syrian Iraqi Other Arab Non-Arab -.4 -.2 0 .2 .4 Wage premium (additional % to wage) Wage Premium for Non-Jordanian Professionals Note: Wage premium calculated through a Mincer regression that controls for education levels, experience, gender, and industry fixed effects. Estimate and 95% confidence interval are shown. Source: Own calculations using Employment and Unemployment Survey, 2017 Egyptian Syrian Iraqi Other Arab Non-Arab -1 0 1 2 3 Wage premium (additional % to wage) Wage Premium for Non-Jordanian Technicians & Associate Professionals More complex themes will require firms to have easier access to global knowhow and talent, to complement the skills of Jordanians Harvard CID – Jordan October 15th - 18th , 2018 67
  66. 66. How can Jordan both have and need skills? Substitutes Complements Harvard CID – Jordan October 15th - 18th , 2018 68
  67. 67. How can Jordan both have and need skills? Substitutes Complements Harvard CID – Jordan October 15th - 18th , 2018 69
  68. 68. • Several high-skill industries and occupations are closed to foreigners. As of 2016 regulations, this includes: o All engineering specialties o All medical specialties o All education jobs, regardless of specialty o Except under agreement by the Civil Service Bureau and relevant boards/unions o Regulations also discourage hiring in many other occupations, including: administrative duties, accountants, communications jobs, and the electricity sector • Hiring of Non-Arabs is also discouraged (1996 Labor Law) • This keeps Jordan’s most promising industries small. When the best companies need to access top global talent, they tend to move to Dubai. • Growth strategy requires easing the restrictions on high-skill immigration and using a number of specific visa categories to leverage high-skill immigration: talent visas; visas for professionals, investors, entrepreneurs and multinationals employees; as well as other incentives (permanent residency, a path to citizenship, etc.) The status quo restricts those who are complements Harvard CID – Jordan October 15th - 18th , 2018 70
  69. 69. Jordan can draw on proven tools used by other countries UAE Israel United States Singapore ü Easy processes in free trade zones to sponsor foreign employees ü In 2017, announced new special visas to attract more foreign professionals to accelerate innovation ü Has a path to residency for investors ü 90% of its population is foreign-born ü Immigration was critical to the creation of the tech. industry ü Incubator programs and relaxing of its visa regime to address shortages of high-tech workers ü Over 22% of its population is foreign-born ü H1-B visa program allows US-based companies to hire globally. Note: Only 43% of STEM workers in Silicon Valley are US- born and only 18% were born in California (a state with a population of nearly 40 million). ü Investor visas ü Entrepreneur visas ü Visas for people with unique skills and experience ü Over 46% of its population is foreign-born Activist Immigration Policies to Attract Talent Harvard CID – Jordan October 15th - 18th , 2018 71
  70. 70. Several export themes require little energy and water Export Themes Energy Intensity Water Intensity Business and Professional Services Low Low Engineering and IT Services Low Low Education Services Low Low Creative Industries Low Low Healthcare Moderate* Moderate* Tourism Moderate High Construction Services Moderate High Agriculture and Food Moderate High * Assumed levels. Quantitative analysis not yet conducted for Healthcare sector Source: Energy Intensity originally provided by UNIDO, expanded to service industries by the Board of Investment, Sri Lanka. Water Intensity provided by the Board of Investment Sri Lanka. See BOI (2018) Harvard CID – Jordan October 15th - 18th , 2018 72
  71. 71. An Electricity Strategy to Expand the Productive Frontier • Increase capacity utilization through electricity exports to Syria and Lebanon (flip on the switch) • Invest now in low-cost generation: o By using cheap gas from the region (Egypt and Israel) o By capitalizing on Jordan’s comparative advantage in renewables à Allow high-intensity users to produce their own electricity • Develop the regional market as a means support the exit from expensive PPAs (by selling the expensive PPA energy abroad). Harvard CID – Jordan October 15th - 18th , 2018 73
  72. 72. Index • What happened to Jordan? Our understanding of the situation • Changing conditions • Opportunities for productive diversification • Common features across themes and potential constraints • Sources/destinies of FDI into the region by theme • Elements of a growth strategy Harvard CID – Jordan October 15th - 18th , 2018 74
  73. 73. Productivity Taskforces Investment Promotion Two Tools to Deliver Export-Led Growth Investment Promotion: An active approach to attracting business investment targeted to diversify Jordan’s exports and provide more good jobs. Productivity Taskforces: Improving public-private problem solving to help Jordan’s most promising industries grow. Harvard CID – Jordan October 15th - 18th , 2018 75
  74. 74. Productivity Taskforces Investment Promotion Two Tools to Deliver Export-Led Growth Investment Promotion: An active approach to attracting business investment targeted to diversify Jordan’s exports and provide more good jobs. Productivity Taskforces: Improving public-private problem solving to help Jordan’s most promising industries grow. Harvard CID – Jordan October 15th - 18th , 2018 76
  75. 75. Business Services Data source: fDi Markets, Financial Times (as of March 2016) 16 • 984 Companies with FDI in region since 2008 but none in Jordan o Top Source Countries: § UK: 262 (27%) § US: 232 (24%) § France: 52 (5%) § Germany: 41 (4%) § UAE: 40 (4%) § India: 36 (4%) • 35% of projects targeted to serve the regional market (versus 21% domestic market, and 43% unspecified) Avg. jobs = 21 Avg. investment = $10 million Harvard CID – Jordan October 15th - 18th , 2018 77
  76. 76. Software & IT Services Data source: fDi Markets, Financial Times (as of March 2016) 10 • 426 Companies with FDI in region since 2008 but none in Jordan o Top Source Countries: § US: 131 (31%) § UK: 41 (10%) § France: 39 (9%) § India: 36 (8%) § Germany: 27 (6%) § UAE: 12 (3%) • 52% of projects targeted to serve the regional market (versus 17% domestic market, and 30% unspecified) Avg. jobs = 45 Avg. investment = $12 million Harvard CID – Jordan October 15th - 18th , 2018 78
  77. 77. Headquarters Data source: fDi Markets, Financial Times (as of March 2016) 4 • 218 Companies with FDI in region since 2008 but none in Jordan o Top Source Countries: § US: 53 (24%) § UK: 38 (17%) § Germany: 16 (7%) § France: 11 (5%) § Switzerland: 11 (5%) § Japan: 7 (3%) • 79% of projects targeted to serve the regional market or global market Avg. jobs = 93 Avg. investment = $24 million Harvard CID – Jordan October 15th - 18th , 2018 79
  78. 78. Tourism Data source: fDi Markets, Financial Times (as of March 2016) 14 Avg. jobs = 152 Avg. investment = $109 million Avg. jobs = 227 Avg. investment = $66 million Harvard CID – Jordan October 15th - 18th , 2018 80
  79. 79. Healthcare Data source: fDi Markets, Financial Times (as of March 2016) Avg. jobs = 148 Avg. investment = $24 million Avg. jobs = 50 Avg. investment = $23 million Harvard CID – Jordan October 15th - 18th , 2018 81
  80. 80. Education Services Data source: fDi Markets, Financial Times (as of March 2016) Avg. jobs = 77 Avg. investment = $23 million Avg. jobs = 23 Avg. investment = $7 million 1 Harvard CID – Jordan October 15th - 18th , 2018 82
  81. 81. Construction Services Data source: fDi Markets, Financial Times (as of March 2016) 2 • 117 Companies with FDI in region since 2008 but none in Jordan o Top Source Countries: § UK: 38 (32%) § US: 26 (22%) § Netherlands: 7 (6%) § Spain: 7 (6%) § UAE: 5 (4%) • 40% of projects targeted to serve the regional market (versus 23% domestic market, and 35% unspecified) Avg. jobs = 31 Avg. investment = $8 million Harvard CID – Jordan October 15th - 18th , 2018 83
  82. 82. A Massive Pipeline of UK-to-UAE Investment Note: Companies listed are all UK-based and known to have invested in the UAE but not in Jordan based on fDi Markets (2003-2016), select categories ** This is an opportunity for the London Conference. But it requires both preparation and follow- through. Harvard CID – Jordan October 15th - 18th , 2018 84
  83. 83. Jordan already has a strategy and a plan. Is it working? Harvard CID – Jordan October 15th - 18th , 2018 85
  84. 84. Productivity Taskforces Investment Promotion Two Tools to Deliver Export-Led Growth Investment Promotion: An active approach to attracting business investment targeted to diversify Jordan’s exports and provide more good jobs. Productivity Taskforces: Improving public-private problem solving to help Jordan’s most promising industries grow. Harvard CID – Jordan October 15th - 18th , 2018 86
  85. 85. What are Productivity Taskforces? Source: Peru’s Ministry of Production (2016), Ghezzi (2016) • They are temporary, public-private working groups that are formed to enhance productivity for a specifically targeted vertical sector (such as forestry, textiles or aquaculture) or horizontal factor of production (such as logistics or capital markets). • They to identify what the government is doing that it shouldn’t (as excessive red tape, bad regulations, excessive tax distortions, etc.) and the things that is not doing but it should (absent regulations, inadequate public services, missing infrastructure, etc.). • They provide an order of priority for policymaking, not concentrating in the profitability of the firms but on their productivity. Harvard CID – Jordan October 15th - 18th , 2018 87
  86. 86. Index • What happened to Jordan? Our understanding of the situation • Changing conditions • Opportunities for productive diversification • Common features across themes and potential constraints • Sources/destinies of FDI into the region by theme • Elements of a growth strategy Harvard CID – Jordan October 15th - 18th , 2018 88
  87. 87. Elements of a Growth Strategy TRADABLES Harvard CID – Jordan October 15th - 18th , 2018 89
  88. 88. TRADABLES Elements of a Growth Strategy Harvard CID – Jordan October 15th - 18th , 2018 90
  89. 89. TRADABLES Elements of a Growth Strategy Harvard CID – Jordan October 15th - 18th , 2018 91
  90. 90. TRADABLES PUBLIC ADMINISTRATION NON-TRADABLES FISCAL CONSTRAINT TO GROWTH BALANCE OF PAYMENTS CONSTRAINT TO GROWTH Elements of a Growth Strategy Harvard CID – Jordan October 15th - 18th , 2018 92
  91. 91. TRADABLES LOW SKILL HIGH SKILL Jordanian Non-Jordanian Elements of a Growth Strategy Non-Jordanian Jordanian Harvard CID – Jordan October 15th - 18th , 2018 93
  92. 92. Elements of a Growth Strategy TRADABLES LOW SKILL HIGH SKILL Jordanian Non-Jordanian Non-Jordanian Jordanian 94 Refugees & migrant workers High Cost Electricity Water Scarcity Regional Markets & Trade Routes Urban Mobility Costs (Affecting all Tradable goods) Underlying constraints Pipeline of highly educated labor (esp. women) Largely constrained And also by…
  93. 93. Elements of a Growth Strategy TRADABLES LOW SKILL HIGH SKILL Jordanian Non-Jordanian Non-Jordanian Jordanian 95 Refugees & migrant workers High Cost Electricity Water Scarcity Regional Markets & Trade Routes Urban Mobility Costs (Affecting all tradable goods) Pipeline of highly educated labor (esp. women) High-skill immigration reform Business and Professional Services Engineering and IT Services Education Services Healthcare Tourism Creative Industries Construction Services Agriculture and Food Export Themes Low cost electricity strategy Procurement to spur innovation Investment Promotion 2.0 Productivity Taskforces
  94. 94. Elements of a Growth Strategy TRADABLES LOW SKILL HIGH SKILL Jordanian Non-Jordanian Non-Jordanian Jordanian 96 Refugees & migrant workers High Cost Electricity Water Scarcity Regional Markets & Trade Routes Urban Mobility Costs (Affecting all tradable goods) Pipeline of highly educated labor (esp. women) High-skill immigration reform Business and Professional Services Engineering and IT Services Education Services Healthcare Tourism Creative Industries Construction Services Agriculture and Food Export Themes Low cost electricity strategy Procurement to spur innovation Investment Promotion 2.0 Productivity Taskforces More Themes
  95. 95. TRADABLES PUBLIC ADMINISTRATION NON-TRADABLES FISCAL CONSTRAINT TO GROWTH BALANCE OF PAYMENTS CONSTRAINT TO GROWTH GROWTH ACROSS THE EXPORT THEMES; MORE JOBS, BETTER WAGES FOR JORDANIANS INCREASED DEMAND; JOB & WAGE GROWTH (INCLUDING FOR REFUGEES) Elements of a Growth Strategy Harvard CID – Jordan October 15th - 18th , 2018 97
  96. 96. TRADABLES PUBLIC ADMINISTRATION NON-TRADABLES TAX REVENUE BALANCE OF PAYMENTS CONSTRAINT TO GROWTH GROWTH ACROSS THE EXPORT THEMES; MORE JOBS, BETTER WAGES FOR JORDANIANS INCREASED DEMAND; JOB & WAGE GROWTH (INCLUDING FOR REFUGEES) FISCAL SUSTAINABILITY & BETTER PUBLIC SERVICES Elements of a Growth Strategy Harvard CID – Jordan October 15th - 18th , 2018 98
  97. 97. Thanks! Harvard CID – Jordan October 15th - 18th , 2018 99

×