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Jordan’s FTA — an untapped goldmine

aqaba container terminal
(File photo: Jordan News)
aqaba container terminal

Hamzeh S. Al-Alayani

The writer is a board member of a Jordanian public-sector government investments management company and a regular commentator on regional energy and industrial matters.

The war in Ukraine, which is reshaping the global geopolitical situation and making energy prices in Europe soar, is also forcing EU countries to find alternative energy sources. EU electricity and natural gas prices are now close to 10 times their historical average in the decade leading up to 2020.اضافة اعلان

Wild swings in energy prices and persistent supply-chain troubles threaten Europe, battered by skyrocketing gas prices. European companies that make steel, fertilizers, and other feedstock driving economic activity are shifting operations to other countries, attracted by more stable energy prices and muscular government support.

European companies look mainly to Central and Eastern Europe, and Asia as possible production locations. However, MENA is become a more critical nearshore destination because of the ease of maneuverability and flexibility. It is an excellent opportunity to pitch Jordan as a nearshore hub for EU industries, to attract investments in fertilizers, ICT (including data centers), textiles, pharmaceuticals, agriculture, and R&D. Furthermore, Jordan can provide off-grid power generation solutions.

Jordan could be well positioned to jumpstart new engines of growth by capitalizing on its high potential for climate-resilient economic growth and its environment policy. The Kingdom ranked 75th out of 190 economies in the World Bank’s 2020 Ease of Doing Business rating. This ranking places it near the top in the MENA region, and among the top 10 economies worldwide in terms of improvement.

The World Economic Forum’s 2019 Global Competitiveness Report ranks Jordan 70th of 141 countries overall, but 35th in intellectual property protection, 37th in its legal framework’s adaptability to digital business models, 24th in ease in finding skilled employees, and 31st in digital skills among the active population.

Key opportunities to accelerate the economic transformation over the long term include capitalizing on Jordan’s advantage as a hub for high-skill service industries. Investments would help maximize new opportunities for international telework, expanding exports of higher complexity goods to critical markets, and forging several pathways of green growth, especially since Jordan was the first country in the region to launch a climate policy.

To seize these opportunities, Jordan should invest in three areas: sustainability, digitalization, and skills. Bold moves in all three fields would benefit companies, consumers, suppliers, and the overall EU and Jordan economies.

To do so, there is need of a paradigm shift in the growth strategy, prioritizing activating “agents of change” around crucial growth opportunities.

The EU and Jordan enjoy rock-solid strategic relations, which will act as a catalyst for public and private investments, helping the Kingdom offer its full investment potential to the EU to carry out its Economic and Investment Plan.

Jordan is equipped with tax consolidation, intellectual property, marketing, and growing R&D.
It is an excellent opportunity to pitch Jordan as a nearshore hub for EU industries, to attract investments in fertilizers, ICT (including data centers), textiles, pharmaceuticals, agriculture, and R&D. Furthermore, Jordan can provide off-grid power generation solutions.
At 17.4 percent of GDP, manufacturing is one of Jordan’s largest sectors, employing about 217,000 people. Jordan hopes to double that number in the next 10 years, to achieve economic prosperity. Actions to crowd in agents of change are inexpensive, and the private sector can lead the growth.

Many have identified sector opportunities with quality, niche manufacturing, reflecting precise shifts in foreign investment patterns in Jordan. They were less linked to regional and neighboring markets, which tend to reduce volatility and exposure to regional shocks.

Jordan and the US have a small but strong trade relationship. Approximately 22.3 percent of Jordan’s exports ($1.75 billion in 2020) go to the US, making the US Jordan’s largest trade partner. Two-way trade and investment are facilitated by the US-Jordan Free Trade Agreement (FTA), the first the US reached with an Arab country.

Besides the US, Jordan has FTAs with the 17 members of the Greater Arab Free Trade Area, bilateral trade agreements with several Arab neighbors, an economic association agreement with the EU, a free trade agreement with EFTA (Iceland, Liechtenstein, Norway, and Switzerland), and free trade agreements with Canada and Turkey.

Jordan has competitive advantages in both cost and skillset. There is an abundance of engineers in Jordan, which has one of the highest per capita rates of engineers in the world. And yet, despite having an educated workforce, the Kingdom has low labor costs relative to the West. Therefore, Jordan needs to reposition itself to where it is competitive and can add value, especially since it is closely located to trade routes like the Suez Canal.


Hamzeh S. Al-Alayani is a board member of a Jordanian public-sector government investments management company and a regular regional energy and industrial commentator.


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