Improving Jordan's rankings on international indices key to unlocking private investment

Private investment is an increasingly important part of the government’s development plans as public spending in some areas is reined in amid challenging internal and external conditions. To facilitate this, Jordan is undertaking measures to make its business environment more attractive to private sector players, and is therefore keeping a keen eye on its ranking in the World Bank’s “Doing Business” report as a useful indicator of its progress.

There are promising signs that the government’s reforms have been paying off. After moving up one place in the 2017 iteration of the report, from 119th to 118th, the country jumped 15 spots to 103rd in the 2018 rankings, which were released in late 2017.

In its analysis of the World Bank’s report, the Jordan Strategy Forum (JSF), a non-profit private think tank on economic development, suggested several important reforms which could significantly improve the country’s ranking, including cutting costs at the municipal level, improving access to credit and streamlining tax procedures.

The government has already moved to implement many of the JSF’s suggestions, with the latest recommendations likely to form part of the national policy agenda for 2018. Plans to roll out a host of reforms involve online business licensing and property registration procedures, as well as legal reforms that address bankruptcy and contract litigation.

At the same time, the lending programmes launched by the Central Bank of Jordan (CBJ) and international donors in early 2017 should also support increased access to credit.

Doing Business

With its rank of 103 out of 190 countries surveyed for the “Doing Business 2018” report, Jordan was 10th among the MENA economies and above the regional average ranking of 115th. As a point of comparison, the UAE was the highest-ranked economy in the region, at 21st, followed by Bahrain in 66th place and Oman in 77th. Coming in at the bottom of the regional table were Syria (174th), Libya (185th) and Yemen (186th).

Jordan’s performance improved on four of the report’s key indices, while it saw minor declines in an equal number of indicators. Government efforts to streamline procedures mean that it now takes less time to start a business in Jordan than in the region, but costs remain higher than the MENA average.

Strengths & Challenges

According to the report, the country’s biggest strengths include connecting to the electricity grid, registering a property and undertaking cross-border trade, all categories in which it placed in the top half of the index, at 40th, 53rd and 72nd, respectively. Meanwhile, some areas, such as access to credit (159th), protections for minority investors (146th) and resolving insolvency (146th), still need improvement.

Overall, the kingdom continues to struggle to improve its position due to a backdrop of regional volatility and overlapping external and internal challenges. According to the central bank, foreign direct investment has trended downwards since 2014, falling from JD1.55bn ($2.2bn) to JD1.14bn ($1.6bn) in 2015 and JD1.10bn ($1.6bn) in 2016. Between January and September 2017 foreign direct investment stood at JD1.02bn ($1.4bn). In July 2017 the IMF predicted that the trend would change to see FDI increase to $1.7bn in 2018.

In an analysis of the survey’s rankings and distance to frontier (DTF) scores, which measure the best possible performance on a scale of one to 100, the JSF suggested that while Jordan’s outcomes leave a lot to be desired, there are some scenarios in which these numbers could be improved. Jordan’s comprehensive DTF score was 60.58% on the 2018 report, up 2.38 percentage points from 2017, the second largest change in the region, behind Saudi Arabia.

Noting that analysis of historical rankings is limited owing to a change in methodology introduced in 2015, the JSF looked at data since then to access progress and priority areas. In the starting a business category, for example, Jordan’s DTF score fell from 84.75% in 2015 to 84.4% in the 2018 report. The kingdom’s overall position in the category slid by 23 spots over the same period from 83rd to 105th.

Jordan fluctuated by 14 places in the dealing with construction permits category, from 103rd in 2015, to 96th in 2016, 109th in 2017 and 110th in 2018. The DTF score in that category oscillated between 67.85% in 2015, 68.32% in 2016 and 67.19% in 2017, before settling at 65.74% in 2018.

In the protecting minority investors category, Jordan ranked 162nd in 2015, 166th in 2016 and 165th in 2017, with a DTF score of 35% in each of those years. In 2018 its ranking improved to 146th, recording a DTF score of 40%.

In trading across borders, the country’s DTF score stood at 86.06% in both 2015 and 2016, and then rose to 86.39% in 2017. However, its comparative ranking in this category fell from 49th in 2015 to 50th in both 2016 and 2017. In 2018 Jordan dropped further to 53rd with a DTF score of 85.93%.

Jordan registered its sharpest drop in the paying taxes category, falling from 46th in 2015 to 82nd in 2016, 79th in 2017 and 97th in 2018. Its related DTF score fell from 81.49% in 2015 to 70.75% in 2018, reflecting substantial changes in tax law, which were ratified in 2014 and took effect in 2015.

The kingdom continues to perform well in the getting electricity category, moving up from 55th in 2015 to 60th in 2016, 48th in 2017 and 40th in 2018. The getting credit category highlighted the area most in need of improvement in previous reports, where it ranked 185th, with a DTF score of 0% from 2015 to 2017. However, in 2018 this category was underscored as an area in which reform was making it easier to do business, and the country climbed 26 places to rank 159th with a DTF score of 25%.

Comparative Costs

The JSF identified several reforms that would support a significant improvement in ranking, pointing out that should its reform programme be implemented, the kingdom could have placed 78th on the 2018 report, with a comprehensive DTF score of 66.87%.

According to JSF’s analysis, the high cost required to complete certain processes in the starting a business index acts as a major hindrance. For example, the cost of commencing operations is equal to 24.2% of per capita income, compared with the MENA and OECD high-income country average of 18.6% and 3.1%, respectively. Bringing costs down to 15% would see the country’s ranking in this category move from 105th to 92nd, and a corresponding improvement in DTF from 84.4% to 85.55%.

In the dealing with construction permits index, the JSF reports that Jordan is not regionally competitive when it comes to the costs of completing procedures (as a percentage of warehouse value), which at 12% is higher than the MENA (4.3%) and OECD high-income (1.6%) country average. If this cost were reduced to 8%, Jordan’s rank and DTF score in this category would have moved up from 110th to 72nd and from 65.72% to 70.74%, respectively.

Taxes & Credit

Other JSF recommendations include simple reductions in bureaucratic processes. For example, citizens spent an average of 128 hours each year making 25 separate tax payments – an average of 5.1 hours per payment. Reductions in the number of payments from 25 to 15 could have boosted the kingdom’s ranking in this index from 97th to 77th and the DTF score from 70.75 to 74.92.

Other areas will require more comprehensive reforms. Getting credit remains a major concern, indicating one of the primary barriers to market entry and existing business potential. The introduction of lending programmes for underserved businesses in 2017 is designed to help alleviate these issues, but will take time to have an impact. The kingdom’s over-reliance on outside investment for private sector growth makes the “Doing Business” report ranking especially important, with a poor score a potential factor in deterring local and foreign investment and entrepreneurship.


Recognising the importance of improving the kingdom’s score, the government has moved to implement several of JSF’s recommended reforms.

In March 2017 the Council of Ministers endorsed the first set of a series of reform measures to improve regulations around the issuance of construction licences, vocational licences, property registration, tax collection and contract execution. Reforms to borrowing, insolvency and bankruptcy procedures were also planned, as well as measures to improve investor protection.

Public bodies including the Royal Committee for Developing the Judiciary and Enhancing the Rule of Law will also be involved in the legal restructuring of contract execution and litigation frameworks as they pertain to business and investment activities, Imad Fakhoury, the minister of planning and international cooperation, told local media in March 2017. Fakhoury reported that legislators were working on a number of legal reforms with the goal of improving the business climate, including new bills governing securities, transfer of assets, real estate ownership, and insolvency and bankruptcy.

Supporting its target of creating a paperless government by 2020 (see ICT chapter), the government also plans to replace procedures for trade and vocational licensing, currently done in person, with an online system requiring only a trade licence, rather than both trade and professional vocational licences.

Land ownership registration procedures will also be shifted to an online platform, with plans to build a network connecting the Department of Lands and Survey with the Greater Amman Municipality. Other services planned for online delivery include property registration procedures, social security subscriptions and payment systems.


According to Fakhoury, the government also plans to carry out urgent executive measures, including enhanced documentation, to address incidences of default and to improve banks’ risk-management activities. Jordan ranked 142nd and 146th in the resolving insolvency category on the 2017 and 2018 “Doing Business” reports, respectively. The long-term goal is drafting a single, unified insolvency law, which the kingdom currently lacks.

According to the European Bank for Reconstruction and Development, Jordan’s Commercial Code and Companies Law support an insolvency framework focused on liquidation, offering limited opportunities for reorganisation. Secured creditors are not included in a compromise or settlement procedure without their consent, and in the event of an asset sale, are paid after taxes and salaries.

Credit Access Reforms

Improving access to credit will entail a broader approach, although the government is putting significant attention in this area. The formal opening of the first comprehensive credit agency in December 2015, which includes microfinance institutions, has supported the expansion of credit. The bureau was established by the Italy-based credit management firm CRIF and licensed by the CBJ to bolster lending to small businesses.

More recently, in March 2017 the central bank announced plans to establish two new banking companies concentrating on financing medium-sized enterprises and generating jobs: the Trade Banks Company for Investment and the Islamic Investment Company, with JD100m ($141.1m) and JD25m ($35.3m) of capitalisation, respectively. Moreover, the CBJ will assist small and medium-sized enterprise lending with a JD100m ($141.1m) export credit programme, as well as allocate $49m into a fund focusing on innovative firms and start-ups in partnership with the World Bank (see Financial Services chapter).

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