Even though foreign direct investment (FDI) inflows are poised to rise sharply in the second half of 2012, the Jordanian government is treading cautiously against the background of a still fragile global economy and daily concerns over the level of regional instability on its own doorstep.
The Jordan Investment Board (JIB) has estimated that capital inflows for 2012 will be 60% higher than in 2011, with the projected increase carrying overseas investments well over the $2bn threshold. According to Awni Rushoud, acting CEO of the JIB, a raft of new projects is expected to be approved during the coming months, largely due to a targeted campaign promoting Jordan as an investment destination, with particular focus on Gulf states, the US, South Korea and Spain.
“There are many investors from various countries interested in establishing projects in Jordan, as they know that the Kingdom is the right place to start a business in the region,” Rushoud told local media. “We should not forget that Jordan has signed free trade agreements with many countries worldwide, which gives investors based in Jordan access to markets of over 1bn consumers.”
While Jordan is able to offer stability, security and safety, Rushoud did acknowledge that the Kingdom has not been able to take full advantage of these positive attributes due to the ongoing turmoil in the region, with the fighting in Syria cutting trade routes and undermining confidence.
If Jordan does achieve the levels of FDI that Rushoud has forecast, it will mark the reverse of a four-year trend. According to data released by the UN Conference on Trade and Development (UNCTAD), Jordan and a number of other countries in the Middle East and North Africa region have seen FDI plunge. In its World Investment Report 2012, UNCTAD reported that Jordan had attracted just under $1.47bn in FDI in 2011, down from $1.65bn in 2010 and less than half the $3.5bn in 2006.
To encourage the Jordanian economy to recover more quickly, the International Monetary Fund (IMF) announced on July 25 that it had reached a preliminary $2bn standby agreement with Amman that will be used to support reforms to the economy, thus helping to stimulate growth and overseas investment. Central to the programme is a commitment by the government to implement structural reforms aimed at improving the business environment, enhancing transparency and fostering trade.
In its statement, the IMF made it clear that many of the problems besetting the Jordanian economy and the flow of inbound investments were not of the Kingdom’s own making. “Jordan’s economy has been hit by exogenous shocks that were outside the government’s control,” said Kristina Kostial, the IMF’s mission chief for Jordan, in a statement issued in Amman. “At the same time, regional tensions and the global economic downturn adversely affected tourism, worker remittances and FDI. As a result, growth has slowed.” The IMF’s executive board is expected to give its final approval to the standby deal, which is set to run for a three-year term.
Another factor Jordanian officials believe will help stimulate FDI is the $5bn fund agreed to in 2011 by Saudi Arabia, the UAE, Kuwait and Qatar, which will serve to back development programmes in the Kingdom. In an address to a workshop on promoting investments in Jordan in early July, Jafar Hassan, the minister of planning and international cooperation, said the GCC funds could prime the pump for a further $12bn worth of FDI in the water, energy and transportation sectors.
While the timing of the funding, and to what projects it will be directed, has yet to be finalised, the promise of fiscal support from the Gulf states could help sway other investors.