Jordan - Economy

Economy

According to the Heritage Foundation's Index of Economic Freedom, Jordan has the third freest economy in the Middle East and North Africa, behind only Bahrain and Qatar, and the 32nd freest in the world, . Jordan's economic freedom surpasses many European countries like France and Spain and it is on par with South Korea.

Jordan is a small country with limited natural resources. The country is exploring ways to expand its limited water supply and use its existing water resources more efficiently, including regional cooperation with Israel. The country depends on external sources for the majority of its energy requirements. In the 1990s, its crude petroleum needs were met through imports from Iraq and neighboring countries. Since early 2003, oil has been provided by some Gulf Cooperation Council member countries. In addition, the Arab Gas Pipeline from Egypt to the southern port of Aqaba was completed in 2003. In 2005 the pipeline extended north to the Amman area, in 2008 it reached Syria and in 2009 to Lebanon.

Since King Abdullah II's accession to the throne in 1999, liberal economic policies have resulted in a continuing boom. Jordan is the 4th freest economy in the Middle East and North Africa, beating traditionally free economies like Israel, the United Arab Emirates and Lebanon. Jordan's developed and modern banking sector is becoming the investment destination of choice due to its conservative bank policies that helped Jordan escape the worst of the global financial crisis of 2009. With instability across the region in Iraq and Lebanon, Jordan is emerging as the "business capital of the Levant" and "the next Beirut". Jordan's economy has been growing at an annual rate of 7% for a decade. Jordan's economy is undergoing a major shift from an aid-dependent, rentier economy to one of the most robust, open and competitive economies in the region. In recent years, there has been shift to knowledge-intensive industries, i.e ICT, and a rapidly growing trade sector benefiting from regional instability. The Jordanian market is considered the most developed Arab market outside the Gulf states.

Jordan has more free trade agreements than any other Arab country. It has such agreements with the United States, Canada, Singapore, Malaysia, the European Union, Tunisia, Algeria, Libya, Iraq, Turkey and Syria, with plans to include the Palestinian Authority, the GCC, Lebanon and Pakistan. Jordan is a member of the Greater Arab Free Trade Agreement, the Euro-Mediterranean free trade area agreement, and the Agadir Agreement. Increased investment and exports are the main sources of Jordan's growth. Continued close integration into the European Union and GCC markets will reap vast economic rewards for the Kingdom in the coming years. However, the main obstacles to Jordan's economy are scarce water supplies, complete reliance on oil imports for energy, and regional instability.

Rapid privatization of previously state-controlled industries and liberalization of the economy is spurring unprecedented growth in Amman and Aqaba. Jordan has six special economic zones that attract significant amount of investment amounting in the billions: Aqaba, Mafraq, Ma'an, Ajloun, the Dead Sea, and Irbid. Jordan also has a plethora of industrial zones producing goods in the textile, aerospace, defense, ICT, pharmaceutical, and cosmetic sectors.

The Free Trade Agreement (FTA) with the United States that went into effect in December 2001 will phase out duties on nearly all goods and services by 2010. The agreement also provides for more open markets in communications, construction, finance, health, transportation, and services, as well as strict application of international standards for the protection of intellectual property. In 1996, Jordan and the United States signed a civil aviation agreement that provides for open skies between the two countries, and a U.S.-Jordan treaty for the protection and encouragement of bilateral investment entered into force in 2003. Jordan has been a member of the World Trade Organization since 2000.

In the 2000 Competitive Industrial Performance (CIP) Index, Jordan ranked as the third most industrialized economy in the Middle East and North Africa, behind Turkey and Kuwait. Jordan was in the upper bracket of nations scored by the CIP index. In the 2009 Global Trade Enabling Report, Jordan ranked 4th in the Arab World behind the UAE, Bahrain, and Qatar. The report analyzes the country's market access, the country's transport and communications infrastructure, border administration, and the business environment of the country Textile and clothing exports from Jordan to the United States shot up 2,000% from 2000 to 2005, following introduction of the FTA. According to the National Labor Committee, a U.S.-based NGO (Non-Governmental Organization), Jordan has experienced sharp increases in sweatshop conditions in its export-oriented manufacturing sector. Jordan ranked as having the 35th best infrastructure in the world, one of the highest rankings in the developing world, according to the World Economic Forum's Index of Economic Competitiveness. It even beat several developed countries like Israel, Italy, Ireland, Greece and it was only two places behind the United Kingdom.

The proportion of skilled workers in Jordan is among the highest in the region. The services sector dominates the Jordanian economy. Tourism is a rapidly growing industry in Jordan with revenues over one billion. Industries such as pharmaceuticals are emerging as very profitable products in Jordan. The Real Estate economy and construction sectors continue to flourish with mass amounts of investments pouring in from the Persian Gulf and Europe. Foreign Direct Investment is in the billions. The stock market capitalization of Jordan is worth nearly $40 billion.

Jordan is classified by the World Bank as an "upper middle income country." Per-capita GDP was approximately US$5,100 for 2007 and 14.5% of the economically active population, on average, was unemployed in 2003. Education and literacy rates and measures of social well-being are very high compared to other countries with similar incomes. Jordan's population growth rate is high, but has declined in recent years, to approximately 2.8% currently. One of the most important factors in the government's efforts to improve the well-being of its citizens is the macroeconomic stability that has been achieved since the 1990s. However, unemployment rates remain high, with the official figure standing at 12.5%, and the unofficial around 30%. The currency has been stable with an exchange rate fixed to the US dollar since 1995.

Jordan is pinning its hopes on tourism, future uranium and oil shale exports, trade, and ICT for future economic growth.

Amman was ranked as the Arab World's most expensive city in 2006 by the Economist Intelligence Unit, beating Dubai. In 2009, Amman ranked as the 4th most expensive city in the Arab World, behind Dubai, Abu Dhabi, and Beirut.

In relation to the population size, Jordan is also one of the largest suppliers of skilled labour and human capital in the world. An estimated 600,000 Jordanians or one fourth of the labour force are earning their living in foreign countries working primarily in high paying white-collar jobs. Between 1968 and 2003, the accumulated net number of emigrants amounted to over 1.1 million persons. Most of the skilled labor that left Jordan emigrated on a temporary basis to the oil producing Persian Gulf states. Since the mid 1970s, migrants’ remittances are Jordan’s most important source of foreign exchange, and a decisive factor in the country’s economic development and the rising standard of living of the population.

Jordan has the headquarters of several large-scale global corporations despite its small size. Some of these include Arab Bank, Aramex, Maktoob, Rubicon Group Holding and Kurdi Group. Since 2009, there are 2 Jordanian companies listed in the Forbes Global 2000 list, Arab Bank (Rank 708) and Arab Potash (Rank 1964). In addition, Jordan has several billionaires as well like Ziad Manasir and Eyhab Jumean.