How can we gauge Jordan's success in attracting investments?
What triggers these investments, and do they materialize after extravagant
celebrations? Luckily, there is a solution: the gross fixed capital formation
(GFCF) measure.
اضافة اعلان
GFCF: A new added value to the GDP
GFCF indicates the portion of new value added to the GDP
that is invested, rather than consumed. It reflects the amount invested in a
country within a year, encompassing both foreign and domestic investments.
Notably, it does not deduct depreciation of fixed assets. GFCF provides
insights into the growth of investment stock, encompassing various sectors such
as infrastructure, education, healthcare, and more.
Typically, higher GFCF rates correlate with faster economic
growth. Tracking the historical data offers valuable perspective, enabling a
comprehensive understanding of the past, present, and future trajectory.
Some growth, and a drop
Data reveals that gross fixed capital formation increased
from JD179 billion in 1976 to JD5804 billion in 2019, experiencing a remarkable
growth of 31 times. However, considering the concurrent economic growth, it's
important to analyze GFCF as a percentage of the GDP. In 1976, GFCF accounted
for 32 percent of the GDP, which declined to 18 percent by 2019, signifying a
significant drop.
Typically, higher GFCF rates correlate with faster economic growth. Tracking the historical data offers valuable perspective, enabling a comprehensive understanding of the past, present, and future trajectory.
Notable year-on-year growth rates occurred in 1977 (51
percent), fueled by increased revenues in oil-producing countries; in 1981 (52
percent), following the return of Jordanians from the Gulf; in 1992 (55
percent) after the first Gulf War, and in 2008 (52 percent) due to investments
from affluent Iraqis post-Second Gulf War. From 2004 to 2008, the average
annual growth rate stood at 29 percent.
Domestic policy failure can be attributed
Conversely, several years experienced negative annual growth
in GFCF, including 1978, 1982-1985, 1991, 1997, 2000-2001, 2006, 2012, 2016,
and 2019. Explaining the decline in each of these years would require extensive
analysis, but domestic policy failure can be attributed. The period of GFCF
decline from 1982 to 1985 should have raised concerns among experts and
policymakers, but it went unnoticed. Intriguingly, during the Nsour cabinet
era, which advocated for increasing energy prices, the average growth was
stagnant at 0 percent.
The period of GFCF decline from 1982 to 1985 should have raised concerns among experts and policymakers, but it went unnoticed. Intriguingly, during the Nsour cabinet era, which advocated for increasing energy prices, the average growth was stagnant at 0 percent.
The data highlights how investments in Jordan fluctuate in
response to regional crises. The cyclical change in investment legislation
every four years since 1952 has had limited impact on the country's capital. It
is clear that outdated practices are ineffective, necessitating new strategies
and decisive actions. Let us not delay in pursuing them.
Yusuf Mansur is CEO of the Envision Consulting Group and
former minister of state for economic affairs.
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