Jordan: Help from abroad

With the latest economic figures showing that 2012 will ultimately end up being part of a longer slowdown than originally thought, officials in the kingdom are now looking at ways to use foreign investment to ensure the country is primed for a rebound and long-term economic growth.

According to data released by the government at the end of September, growth for the second quarter of 2012 slowed to 2.9% year-on-year (y-o-y), a slight decrease from the 3% y-o-y growth recorded in the first quarter. The Q2 expansion appears to have been fuelled mainly by rising tourism figures, with the sector seeing a 10% rise in that period. Other sectors with healthy growth included communications and transport (6.7%) and finance-related segments (5.7%).

While the overall figures are nowhere near the 7% growth Jordan witnessed prior to the 2008 economic downturn, government officials believe the country could be primed for significant expansion by 2014. Though they predict just 2.7% total growth for this year (with the IMF publishing a slightly higher forecast of 3%), officials are discussing much larger numbers starting in 2014, largely on the back of foreign direct investment (FDI).

In an interview at September’s International Economic Alliance symposium in New York City, Shabib Ammari, the minister for industry and trade, told Reuters that while he expected FDI to shrink slightly in 2013, he could see figures for 2014 growing to between $2bn and 3bn.

“I would expect FDI for 2013 to be maybe $1.5bn – anywhere between $1bn and $1.5bn. 2014 may double this figure,” Ammari told the news agency.

The FDI will be provided by a number of different sources. In August, the IMF approved a $2bn loan for the kingdom, meant to help support the government’s finances, which were heavily impacted by the switch to oil for electricity production, due to supply disruptions on the gas link with Egypt.

Meanwhile, the EU recently authorised a $52m grant to help with Jordan’s “political, economic, social and legislative reforms”. Half of this investment is expected to be disbursed by the end of 2012, with the remainder set to enter the country in 2013.

FDI is also expected to come from several Gulf states, including a $5bn grant endorsed by the GCC in 2011. Qatar, which will provide Jordan with $1.25bn of the total, signed a framework memorandum in late September that specifies how the funds will be used to help prepare Jordan for future economic expansion. According to Jafar Hassan, Jordan’s minister of planning and international cooperation, approximately 60% of the schemes to be funded by the $1.25bn fall under the category of “local community development”; around 15% of the money will go toward energy projects and another 10% on improving transport infrastructure.

Kuwait, which also pledged $1.25bn for Jordan as part of the GCC deal, transferred $250m to Jordan’s central bank in early October. A portion of this is expected to go towards improving the electricity infrastructure, with $5m earmarked to help build five new solar and wind power generators. On completion, the plants should increase the kingdom’s renewable energy production by 200-300 MW.

The government has specifically highlighted further investment originating from the Gulf. According to Awni Rushoud, the acting CEO of the Jordan Investment Board, the government is preparing to launch a new promotional campaign in the GCC to encourage further private investment. A similar North American tour is also being planned.

“We are seeing increasing interest in the country from investors in the GCC states, as well as from businesspeople across the world,” Rushoud told The Jordan Times in an interview.

A number of Chinese firms have also begun injecting money into the economy, particularly in the renewable energy and railway segments. So far, investments amount to around $200m, though a recent promotional campaign may prompt further projects.

The size and variety of investments entering Jordan should prove useful as the country continues to ride out the longer-than-expected period of economic slowdown. Nevertheless, increased interest and investment are signs that, in the long term, the kingdom’s economic expansion appears assured.