New $275M fund in Jordan sparks optimism for economic growth

Amman green arrow increasing
(File photo: Jordan News)
AMMAN – During a recent meeting with investors in Irbid's Chamber of Industry, Minister of Investment, Kholoud Al-Saqqaf, highlighted that the ministry has been established as the primary reference for investment in Jordan, representing investors before all government entities.اضافة اعلان

To achieve this, numerous reforms were undertaken, resulting in significant developments in economic areas. These reforms included completing regulations governing the business environment, issuing the Investment Environment Law, endorsing the general investment policy, enacting the Public-Private Partnership Law, and currently working on drafting regulations for partnership projects. The goal is to create a supportive environment for existing investments and foster conditions attractive to investors.

34.6% increase of investments
Saqqaf pointed out that the Investment Environment Law and its associated regulations offer various incentives to both local and international investors, contributing to a 34 percent increase in investments benefiting from the law during the first nine months of 2023, reaching JD878.5 million compared to JD656.9 million during the same period in 2022.

She explained that the law authorized the establishment of investment funds, with the registration of the first investment fund as the largest fund in the Kingdom, owned entirely by Jordanian banks, with a capital of JD100 million.

The government, through the Ministry of Investment, provides full support for creating investment funds, aiming to stimulate investments in priority sectors, ultimately aiding economic and developmental goals. The law also outlined a clear mechanism for investors to appeal decisions affecting their rights and guarantees.

During the meeting, Saqqaf outlined the ministry's steps to improve the business environment in the Kingdom. Initiatives included launching the "Invest in Jordan" platform to showcase the business environment and investment opportunities, executing promotional activities to reach international investors, activating the comprehensive investment service platform, and completing the automation of services related to licenses and economic activities.

Economic expert Mufleh Akel told Jordan News that the establishment of an additional financing fund alongside banks and other funding sources would significantly contribute to the development of existing industries and the creation of new ones. He emphasized the fund's potential capital of JD275 million as unprecedented, enabling investment in new projects.

Akel added that the fund's importance lies not only in its quantity but also in its potential to leverage financial resources for expanding existing projects and initiating new ones, thus generating employment opportunities and greater economic growth. He stressed the need to manage and handle the fund carefully to ensure its success and avoid significant disappointments.

Economic expert Mohammad Al-Bashir told Jordan News that the fund aims to establish industrial or commercial companies aligned with the economic modernization system. He highlighted the idea as a response to pressures from the government or governmental entities to have a regulated financial arm supporting partnerships between the private and public sectors.

Bashir emphasized that the fund serves as a financing window, creating a participatory situation for some investment projects. It can play a role in addressing the trade balance by focusing on imported goods, which has an impact on the trade deficit. Prioritizing projects related to economic reality and reducing the gap between imports and exports should be a priority.

A priority in enhancing economic growth
Economic expert Mazen Irsheid told Jordan News, "The fund can be considered a priority in Jordan's economic program due to its potential role in enhancing economic growth, diversifying income sources, and improving the citizens' standard of living for several reasons. First, boosting market confidence: This fund serves as a strong indicator of confidence in the Jordanian economy, similar to the impact when the UAE launched major investment funds such as Mubadala and ADQ, leading to significant investments and economic diversification."

Irsheid also emphasized that this fund can act as an engine for economic growth, as observed in similar cases in countries like Singapore. Sovereign wealth funds such as Temasek and GIC contributed to stimulating growth and innovation, as well as directing investments towards vital sectors like technology and renewable energy. This is analogous to China's approach through funds like the China Investment Corporation, which invests in multiple sectors to support innovation and sustainable development.

He pointed out, "Another positive aspect is that this fund reduces Jordan's reliance on external aid and foreign direct investments. It can be compared to Malaysia's experience with its sovereign fund, 'Khazanah Nasional,' which helped achieve economic independence, improve infrastructure, and create job opportunities." A multifaceted strategy addressing all facets of investment and economic development is necessary for the successful implementation of a fund with 100 percent ownership by Jordanian banks.

He stressed the importance of initially identifying investment priorities and promising sectors. Similar to Norway's focus on sustainable investments and technology through its sovereign fund, Jordan can concentrate on sectors such as technology, renewable energy, or tourism. This focus should be built on a precise analysis of Jordan's economic and competitive potential.

Afterward, strategic partnerships need to be established with investors and international institutions. Just as China invested globally through its sovereign funds, such as the Belt and Road Initiative, Jordan can enhance its economic partnerships with other countries and international organizations to attract investments and exchange expertise.

He highlighted, "To ensure effective implementation, it is crucial to develop efficient mechanisms for management and oversight, ensuring transparency and efficiency in fund administration. Transparency and good governance of investment funds are essential for building trust with the public and investors.”

Moreover, he noted that the timing coincides with a period characterized by global economic changes, similar to those witnessed in markets after the global financial crisis in 2008. Many countries sought to diversify their economies and enhance their ability to face economic shocks during that period.

Diversifying income sources
For Jordan, this fund represents an opportunity to achieve important objectives, such as diversifying income sources, stimulating growth, and reducing dependence on specific sectors. Amid political transformations, especially in the Middle East region, this fund serves as a means to enhance Jordan's economic independence. In times of political uncertainty, the importance of possessing robust economic tools that enable the state to maintain stability increases.

Furthermore, this initiative comes at a time when global interest in sustainable and socially responsible investments is growing. This trend aligns with global initiatives to achieve sustainable development goals. Through this fund, Jordan can seek investments that benefit society and the environment, similar to what countries like Denmark have done by focusing on investments in renewable energy.

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