Jordan’s foreign investment challenge

“This is the beauty of the premises. It’s set up for an IT intensive operation,” said Maher al-Khaiyat, a marketing manager at Microsoft Jordan, as he points to the wired tiles below the US firm’s newly-leased office in the park’s builtup area of 112,650 square metres.

“We don’t need to build any infrastructure. It’s all there.”

Located between the Levant and Iraq, resource-poor Jordan is marketing itself as a Middle East services hub, promoting its political stability, well-educated workforce and economic reforms that have opened up most sectors to private investment.

The country is setting up new free zones and business parks like the KHBP, which is a converted military base, but businessmen say it has yet to create conditions that can lure businesses away from Dubai, the nearby Gulf Arab business hub.

“Gulf investors have a lot of cash and are looking for viable ventures. I think Jordan has a lot of attractive projects but we are not moving fast enough in offering them to investors,” prominent industrialist Ghassan Nuqul said.

Nuqul, vice chairman of Amman-based Nuqul Group, a major regional exporter of hygienic paper products, said constant changes in laws deterred investors.

“We need consistency in laws to assure investors,” Nuqul said reflecting frustrations of many entrepreneurs.

New tenants
Underlining Nuqul’s concerns, official figures show that foreign investments more than halved to 214 million dinars ($302m) in the first nine months of this year from 523 million dinars in the same period of 2009, as the country suffers its second consecutive year of economic recession.

Rather than catching up, Jordan appears to be losing ground to other Middle East countries such as Egypt, which boasts 5.1 percent growth for 2009/10, or Lebanon, which expects to grow five percent in 2011 despite the persistent political uncertainty.

Lacking the oil resources that abound in the Gulf, Jordan also cannot emulate the massive investments those countries have made to propel themselves within living memory from fishing villages and trading outposts into bustling cities.

In response, Jordan has cut corporate tax and introduced other incentives to encourage entrepreneurs and boost inflows.

Prospective tenants at the military-style KHBP include Google and the private security firm formerly known as Blackwater, government sources said. The government is also courting Abu Dhabi investment vehicle Aabar to buy an equity stake in the $1.5bn project, the sources said.

Nasser Sunnaa, chief executive of Jordan Investment Board, the country’s investment promotion agency, sees more foreign investors already based in the Middle East moving their offices to Jordan, where salaries, rents and the general cost of doing business is lower than Dubai and other Gulf locations.

“This positioning of Jordan as a gateway to the region with good governance and skilled human capital is finding a good echo with foreign investors,” Sunnaa said.

Without oil, however, Jordan cannot offer the ultimate incentive available in the United Arab Emirate – no tax at all.

For a country which for many years exported its skilled manpower to the Gulf region, the need to generate jobs at home through foreign investment is increasingly urgent as the government fights rising unemployment.

“We need the type of foreign investments to help us create the jobs that employ more Jordanians,” said Finance Minister Mohammad Abu Hammour, whose office in downtown Amman overlooks a sprawling capital, where almost a third of the population reside and income gaps between rich and poor are widening.

Proof of sluggish economic activity is evident on the streets of Amman, with many of the commercial properties built during the boom years now plastered with “for rent” signs.

Many Jordanians say that in a global economy where the competition for investment is ever more intense, Jordan cannot rely simply on its reputation as an island of stability in a regional sea of political volatility and violence.

“Security and stability is a main factor but not the only one that brings investments,” Nael Raja Al-Kabariti, chairman of the Jordan Chamber of Commerce, a powerful business lobby, said. “There are many countries in the region that are giving much more to attract investors so competition is tough.”