Jordan seeks to revive its slowing economy

'We have an opportunity to enter [new] markets and attract investments that will help create job opportunities.', Muhannad Shehadeh, minister of State for Investment Affairs.
December 24, 2017
Lingering woes. Money-changer exchanges currency for custo­mers at the main market at al-Zaatari refugee camp in the city of Mafraq. (Reuters)

Amman - Jordan has been battered by economic and social woes caused by tax increases, the rise of commodity prices, the heavy toll of hosting refugees and higher government expenditures.

The 2018 draft budget previews a cash subsidy of $241 million to compensate for the rise in the cost of living caused by the govern­ment’s decision to lift subsidies on several basic commodities.

The cash subsidy is destined to Jordanian families with to­tal annual income not exceeding $17,000 and individuals with an­nual income less than $8,000. Beneficiaries should not own land or real estate valued at more than $423,000 and more than one vehi­cle.

More than 5 million Jordanians are expected to benefit from the subsidy, the government said.

Despite official expectations for a better economy in 2018 support­ed by a strategy to expand to new markets, Jordanians are feeling the brunt of stagnation. The hike in prices compounded with an un­employment rate of 18.2% in the first quarter of 2017 — the highest in 25 years — reduced purchasing power considerably.

Muhannad Shehadeh, minis­ter of State for Investment Affairs and president of the Investment Commission, said the panel was working on a new strategy aimed at attracting investment and identifying the opportunities and ad­vantages that Jordan offers to local and foreign investors.

The strategy would seek to es­tablish Jordan as a centre for the provision of services for regional and international businesses and a hub for reconstruction of Syria. It previews strengthening exports, opening new markets for Jordanian products, developing the tourism sector and reinforcing the technology sector.

“According to this year’s ‘Ease of Doing Business’ report by the World Bank, Jordan has jumped 15 places to reach 103rd position, which is a positive indicator that reflects an improvement in the investment environment in the kingdom,” Shehadeh said.

Jordan is also eyeing new mar­kets for Jordanian exports in Af­rica.

“We have an opportunity to en­ter these markets and attract in­vestments that will help create job opportunities,” Shehadeh added in a meeting with Jordanian busi­nessmen heading to Tanzania, Kenya and Ethiopia.

Tax increases of up to 16% on many commodities, including dairy products, and the removal of the state subsidy on bread is se­verely affecting the daily life of the poor and middle class.

The state of the economy has forced many businesses to be shuttered.

The Jordan Chamber of Com­merce said approximately 70 clothes factories, including ten Jordanian establishments, aban­doned the Jordanian market for Egypt in the last three years, at­tracted by better opportunities for investors.

“This is not the first time some­thing like this takes place,” said Asad Qawasmi, who represents the clothes and garment industry in the chamber. “Real estate com­panies did the same by choosing Egypt, which offers many advan­tages, including tax exemption, one window system and cheap labour.”

“Jordan ended up importing goods produced by these factories while it was better and easier to keep them here,” he said.

Jordanian garment imports from Egypt increased 50% in the last three years. In the last eight months, the bill totalled $226.8 million.

Fashion is not a priority for the average Jordanian, however. Fi­nancial burdens and increased prices led to a drop in purchasing power to a point that some fami­lies just manage with what they have or seek second-hand clothes.

“We have absolutely no choice. The second-hand markets provide better prices and sell important brands so you buy a brand for less and this is an excellent way to save some money,” said Khalil, a buyer.

“Today, buying clothes is con­sidered a luxury. I have four chil­dren who go to school so you can imagine the cost of raising and feeding them and with the in­crease in prices things become a heavy burden on any employee.”

Jordan has been reeling under the burden of hosting Syrian refu­gees for the past six years. The UN Refugee Agency (UNHCR) said Jordan is the second largest refu­gee-hosting country in the world relative to its population. There are 657,000 Syrian refugees regis­tered with the UNHCR but the ac­tual number is believed to be more than 1 million.

“It is like rubbing salt in the wound,” said journalist Ziad Momani, describing the refugee situation. “Since the war (in Syria) started, hosting refugees has cost us more than $10 billion covering health care, education, employ­ment and other services. I know it is part of a humanitarian action but still, it has had a very negative effect on the society and the coun­try.”

The International Monetary Fund said Jordanian government expenditures were estimated to reach $12.3 billion by the end of 2017, compared to $11.2 billion in 2016.