Jordan's attractions keep growing in the region

For any asset manager based in the Middle East, Jordan offers some great assets for taking.

Although, unlike most of its neighbours, Jordan is poor in natural resources, what it lacks in resources it makes up for in political and economic stability, and a strong, determined and committed leadership.

Some of the other factors that are leading regional asset managers to that country are its highly educated, skilled and competitively priced workforce apart from the favourable investment environment itself.

Jordan's population in 2004 was around 5.5 million and growing at a high 2.2 per cent per year. The population is young, with 70 per cent (3.8 million) below the age of 30 years, and highly educated with the highest literacy rate (89.7 per cent adult literacy) in the region.

The government places high priority on universal education spending around $100 million annually on education.

Asset managers such as Abraaj Capital have closely tracked Jordan in recent years.

The country's adoption of rapid economic reforms and liberalisation of legal and regulatory system, including privatisation of major state owned enterprises, have not only earned it kudos, but have also translated to increased foreign direct investments.

Jordan's efforts at reducing bureaucratic constraints, lifting foreign ownership restrictions and amending intellectual property laws, tax, customs, banking, stock market, and companies' laws in a concerted effort to attract regional and international investment into the country have also had a positive bearing on the economy.

In fact, the kingdom was only the fourth country to sign a Free Trade Agreement with the United States and according to the Heritage Foundation/Wall Street Journal Index of Economic Freedom, Jordan ranked 45th worldwide and 3rd among 18 countries in the Middle East with only Bahrain and the UAE scoring higher.

Further, the development of Special Economic Zones, Industrial Estates and Qualified Industrial Zones has significantly boosted Jordan's ability to attract high levels of foreign investment.

Such agreements and zones provide investors with unique access to large markets (such as the US and Europe) at extremely favourable quota and customs regulation.

The vision of the government is to render Jordan the centre of attraction for investments in the Middle East and the hub for export-oriented industries in the region.

King Abdullah has made a determined effort to change the role of government from a major player in the economy into a facilitator of competitive markets and provider of an attractive investment environment.

Over the last decade, Jordan has developed excellent relationships with most regional governments and major international powers that have contributed in no small way toward the political and economic stability of the kingdom.

The government's consistent track record on free market reforms and investor friendly regulations has convinced investors to disassociate Jordan from its unstable surroundings.

Jordan's stability has stimulated economic growth during the past few years and should continue to do so in the future, despite the political instability in the neighbourhood.

Real per capita GDP growth in 2003 was around 2.8 per cent, which was the highest since the early 1980s. Over the last 4 years, real GDP has shown a healthy average annual growth rate of about 5 per cent and the exchange rate for the Jordanian dinar has remained stable.

The resilience of the Jordanian economy is clearly indicated by the GDP growth of 7.7 per cent in the first quarter of 2005 despite a drawn out conflict in Iraq the kingdom's sole supplier of oil at highly subsidised prices as well its single largest export market.

Inflation has been reduced from 25.6 per cent in 1989, and an average of 3.8 per cent between 1992 and 1997, to 1.7 per cent in 2001 and remains stable to this date.

The Amman Stock Exchange is already up more than 50 per cent year to date and was the highest growing Arab index in 2004 gaining 59.1 per cent in the year.

The upturn in real estate values and the high growth in the Amman Stock Exchange have boosted the wealth effect, which is reflected positively on general consumption and investment expenditures in the country.

Looking ahead

The country has over the past few years worked closely with the IMF, practiced careful monetary policy, made substantial headway with the privatisation drive, invested heavily in infrastructure, and undertaken regulatory and policy reform to attract local and foreign investment into the country.

It is expected that Jordan will continue on its path of economic liberalisation, enactment of pending laws and removal of lingering constraints to private enterprise development.

Regional instability will remain the key obstacle facing Jordan for the immediate future.

There is still work to be done, including the removal of bureaucratic procedures that still pose a constraint on development and corporate and income tax rates, which are considered high by most players, especially when compared to its neighbouring countries.

However, Jordan has had great success in transforming its vulnerability to its advantage and making the kingdom the premier choice for setting up businesses within the region.

This has been achieved through a stable currency, a relatively stable political environment, and a gradual yet steady approach to reform and stimulants of growth, all of which are not easy to find in neighbouring countries, including Lebanon and Egypt.

The advancement of the kingdom through difficult times has been noteworthy, and with the government's commitment to liberalisation and open markets, the future appears to be even brighter.

The writer is a vice-president at Abraaj Capital.