Jordan Investments

Interview with H.E Nasser Sunaa, CEO of Jordan Investment Board

According to the Minster of Finance, Jordan has been affected by the economic crisis: in the last year, the growth rate was 2.8% but it should not be less than 4% in 2010. According to the Economist Magazine, in spite of countries heavily relying on foreign direct investment and the global liquidity problem, Jordan faired better than expected. So these are the two quotes, what is your personal assessment of Jordan’s economy?

If you look at the macroeconomic indicators, we have done pretty well. As you mentioned, in 2009, we went through mayhem all throughout the globe, so the fact that Jordan still managed to achieve growth is quite an achievement. 2.8% is not an upgrade, but it is growth nonetheless. So it’s quite an achievement taking into consideration what happened globally. And as you mentioned, the projections for 2010 are in the 4 to 4.5% range for growth rate. It seems to be pretty good that the indicators so far from the beginning of the year all seem to be encouraging.

“For instance the K1 2010: if you look at the investments that have come
through the Jordan Investment Board and have benefitted
from the investment promotion law, they are 174% greater than those
registered in the same period as 2009. It is an indicator of K1
performance and if you take it in conjunction with
other indicators, you see that the signs are encouraging.”

However, there are problems such as public debt, which has been growing enormously last year…?

Yes, that’s been one of our biggest challenges; the fact that we have this deficit and the huge public debt and the government trying to tackle that with aggressive measures. It is a double challenge because it is at a time when you really need to increase government spending to create stimulus in the economy to achieve higher levels of growth, but at the same time you also don’t want to fall into the trap. So yes it is a double challenge; we really need to reduce government spending and at the same time we want to achieve economic growth.

Our largest challenge is to alleviate poverty. Jordan has a GDP of 3700 USD per capita, and those are the figures we’d like to improve and we believe it is way below the Jordanian potential. Our goal is to increase that by 50% by the year 2020.

What kind of investors would you like to see coming to Jordan, and what is your overall strategy to attract these investments?

In terms of targeting foreign direct investments, the direction and the strategy is to go after investments and sectors that have greater added value to the economy. We really need to work aggressively towards increasing the productivity of the Jordanian economy. Our aim in attracting foreign investment is three things.

First of all is capital flows of course, as well as the technology and the know-how to increase the Jordanian productivity and the overall economy, to achieve or targets of increasing GDP per capita from 3700 today to a 50% increase in 2020.

At the same time, you don’t discriminate against any sort of investors?

Of course not, because we firmly believe any investment is a good investment, even investments that do not necessarily create Jordanian jobs. Many of the investments, for example, in the government sector employ foreign labor. But nevertheless, we believe that those investments induce indirect labor as well and they help increase the economic activities in the areas they are located in.

So any investment is a good investment, but we would like to see a healthier mix of more investments in sectors that bring greater value to the Jordanian economy. ICT and pharmaceutical sectors are two in which we believe Jordan has a clear comparative and competitive advantage.

What is the current level of FDI and what is the outlook for 2010-2011? What kinds of companies are coming to Jordan, and from what sectors of the economy?

FDI has been growing. In 2006 for instance, we witnessed a huge surge of FDI into Jordan because of privatization of a few large government-owned enterprises at the time. As you know, Jordan has been moving aggressively on the liberalization and privatization front of the economy. We have privatized a lot of government owned enterprises.

In 2006 the big one was the TelCo enterprise that was the main cause for the surge of FDI. 2007-2009 has been slightly less, but overall the curve has been growing. As for the outlook, it looks encouraging.

I mentioned K1 performance, but the figures of Jordan Investment Board that we publish reflect both foreign and domestic investments, so all investments that benefit from the Investment Promotion Law through the JIB are the ones we publish and keep track of. In terms of foreign direct investment, that’s something that we normally have to wait for, as I don’t know how often the Central Bank publishes them. But all of the indicators on the macro level are encouraging. You have increased activity in terms of credit being extended by local banks, increased activity in the real estate sector as well as the 174% increase in the JIB.

Can you elaborate on your vision, and describe the key investment opportunities in Jordan for our audience who are perhaps considering investing in Jordan? What is a specific sector you would recommend them to invest in?

We believe that Jordan is a great investment opportunity in many sectors. I mentioned ICT and pharmaceutical sectors where we clearly have a strong comparative and competitive edge, and I would also say tourism is a very vibrant and promising sector. These are the kinds of industries we are after and we believe that we have the competencies to attract these kinds of investments.

How do you differentiate from other countries around you; why should people pick Jordan over any other country in the region?

I would say what would differentiate Jordan from other countries, especially regional countries, are three core competencies that Jordan enjoys as a country. First is the economic political safety, security, and stability. Second is the skilled human capital that the country enjoys. Third is the market access agreements, and that is what positions Jordan as a gateway to the region and beyond.

Jordan as a market is a small market with a population of 6 million and a GDP of 3700 per capita, so the level of disposable income is not great, but Jordan is a gateway to the Middle East and even beyond that because of the free trade agreements with the US and Canada, the EU, and the Arab world. In total, those market access agreements give Jordanian goods and services access to markets in excess of 1 billion consumers.

And that is what positions Jordan to be an ideal location to do business in this part of the world.

Can you give us an example of a success story of a foreign investor coming to Jordan and giving positive feed back?

The French, for example, have had great success in Jordan. You have Orange that has invested in TelCo and a couple of regional offices that have chosen to set up their base here for the region in Jordan. There is the French Alstom that is in power generation that has set up in Jordan, and there are 6 major Japanese companies that have set up regional offices here in Jordan, mainly eyeing Iraq.

We believe Jordan is a good springboard for doing business with Iraq. Jordan however has the stability and security that Iraq does not.

How transparent is operating in the Jordanian market? In terms of administration, how much red tape is there on the market?

Relatively speaking, that’s one of the strong points of the country. Again I stress relatively, because compared to other countries in the region we fair much better. It’s a stable country. You have political stability and security. You have good governance here as well as a zero tolerance policy for corruption.

Red tape is there, the government is aggressively fighting that, and we have managed to achieve pretty good results and progress. Not enough, but we have done pretty good in reducing the red tape here in the country.

How would you characterize your major challenges?

One of the major challenges was what we spoke about earlier which is how to create economic growth while the whole world is going through tough recessionary times and at the same time making budget cuts. So our best vehicle towards economic growth is attracting foreign direct investment.

And there has been growth in FDI because companies and big nulti-nationals are looking for areas outside their geographies to invest in and thereby they gain from the cost competitive advantages Jordan has provided.

How do you address the challenge? We’ve already named the challenge which is obviously the growth but how do you tackle it?

Through our investment promotion activities and strategies. We are following a targeted approach.  The main pillars of this strategy are identifying the sectors and Jordan’s competitive advantages, and what the valued proposition for Jordan in those particular sectors are. Also, effectively communicating that and going after targeted investors, companies, and countries.

Can you mention some of these targets? What geographical areas are you focused on and which international investors would you like to see come to Jordan?

In the advanced economies, we are going after companies in pharmaceuticals. We are talking about North America, Europe, and Japan. And Korea as well. in ICT for example. We are talking to the big names in ICT, and we already have Microsoft and Dell who have presence here in Jordan.

We have Yahoo through the acquisition of Al Maktoob. Hewlett-Packard has recently set up operations here in Jordan. So those are the kinds of names we are targeting so that they can come here and leverage the skilled capital that Jordan has. We have a lot of good local talent in the ICT field. We have great talent in pharmaceutical and health care.

Can we also say you are cost competitive compared to your neighbors?

Yes. Yes we are.

What is your final message about Jordan to our international audience? What are your strategic goals and visions for Jordan in the long term, perhaps the next three years?

We see Jordan mainly as an economy in transition. It’s not factor driven, it’s efficiency driven because we believe now that we have the resources and great infrastructure in Jordan, in terms of physical and informational infrastructure. We have the skilled human capital and how it depends on attracting foreign investments.

I think the future is bright for Jordan. We have all the components; it’s just a matter of effectively communicating what Jordan has. I would also like to stress the three core competencies that Jordan enjoys. This region is a very important region in terms of wealth and natural resources but is also one of the fastest growing regions in the world in terms of population growth and GDP growth.

Multi-nationals must take this region quite seriously. If you want to do business with the Middle East and North African, Jordan should be among your countries to choose from. It’s not number one, but is definitely in the top three because of the security, stability and skilled human capital. Through Jordan, you can easily access the local market, the Gulf market, and even beyond that.