Situated at the confluence of three continents, Jordan has developed in recent decades into a modern country that meshes ancient heritage and Middle Eastern hospitality with high standards of education and advanced communication technology. Business organizations in Jordan benefit from a geography that places them at the continent's crossroads. Jordan presents an ideal gateway to the Middle East & North Africa (MENA) region and the rest of the world. It shares borders with five MENA countries, Iraq, Syria, Saudi Arabia, Israel, and the Palestine National Authority territories.
The multi-border characteristic of Jordan reinforces its accessibility, giving it competitive leverage over neighboring "core" MENA countries, who possess less exposed boundaries. The Kingdom's terrain extends to approximately 90,000 sq.km., providing a diverse range of landscapes.
The Badia plains lie to the east with hills and mountains in the center. The fertile rift valley cleaves the length of the country forming a natural boundary to the west into which the Jordan River flows and converges at the Dead Sea, the lowest point on earth. The port of Aqaba, at the southern tip of the Kingdom, gives Jordan an access to the Red Sea, among which other MENA ports are located.
Access to Foreign Markets
In addition to benefiting from Jordan's proximity and high caliber human resources, multinational companies setting up operations in Jordan can draw on the country's favorable trade relations with neighboring, regional and international markets. Jordan enjoys economic privileges with many international markets and economic blocs. Numerous trade protocols and counter trade agreements are in effect with Lebanon, Syria, Iraq, Yemen, Saudi Arabia, Bahrain, Tunisia, Egypt, Morocco, Sudan, and Israel. These accord Jordanian products substantial duty-free import quotas and other benefits.
To maximize Jordan's leverage over other neighboring countries in the MENA region, Jordan's trade relations with various international markets are facilitated by the Generalized System of Preference (GSP), which grants Jordan beneficial access to the world's major markets, including North America, Japan, Australia, Scandinavia and other non-EU countries.
The system provides duty-free access as well as substantially reduced import tariffs. Jordan will soon become a party to the Euro-Med Partnership whereby it will enjoy a free trade zone status with the EU countries. This will become effective once the agreement is signed by both parties this year. According to the agreement, industrial products manufactured in Jordan and exported to the EU will be exempted from customs tax and fees.
In addition, numerous industrial and agricultural products will enjoy privileged access to the EU markets through various ranges of custom tax exemptions and quota limits.
Future Regional Markets
Jordan is ideally positioned, both politically and geographically, to capitalize on the development of the peace process in the MENA region. Business organizations have incentives to base their operations in Jordan which offers a competitive vantage point from which to enter neighboring markets. The Jordanian economy is on its way to normalizing relations with all the countries of the region. This will ultimately lead to economic and political integration benefiting the region as a whole. The Jordanian economy stands to benefit from a revolutionary boost in economic activity upon the eventual lifting of the international sanctions against Iraq. Prior to the Gulf crisis, Iraq was Jordan's primary trading partner, accounting for 20% of Jordan's exports. This trend is expected to return once the sanctions are lifted. Eventually, the volume of trade between the two countries is expected to exceed that of the pre-Gulf crisis era.
Foreign companies with a foothold in Jordan will have an advantage over other competitors once the Iraqi market re-opens. The handover of responsibilities to the PNA for the Gaza Strip and the West Bank means that these territories will soon open up a new market for Jordanian goods and services. This will offer a substantial boost to economic growth over the next decade.
Jordan has been a major beneficiary of its peace agreement with Israel. With a highly educated workforce, which is significantly more cost competitive than Israel's, Jordan has witnessed an increase in the influx of foreign investments as multinational companies established regional bases in Jordan. In May 1996, Jordan and Egypt signed bilateral economic co-operation agreements aiming at liberalizing trade by setting up a free trade zone.
The agreements will gradually eliminate customs duties, dual taxation and other trade barriers. Cooperation between the two countries in trade and investment promotion has been increasing as a result of these agreements. For businesses and industries, the MENA region is spurring managers to rethink their strategies. Consequently, businesses without a base in Jordan are challenged to redirect their strategies in the context of the fast-paced developments in the Kingdom.
Competitive Labor Costs
In 1996, Jordan had a population of 4.44 million inhabitants, of which Jordanians constituted 92% and non-Jordanians 8%. The population's gender breakdown was almost equal with 52% males and 48% females. Jordan has a relatively young population, with 41% of its inhabitants below the age of 15. The workforce (age bracket 15-64) represents 56% of population, and 3% are 64 and above.
Jordan has an 85% literacy rate, one of the highest in the region and among developing countries. More than 17% of Jordanians go on to receive higher education. Today, Jordan has close to 20,000 graduates with postgraduate degrees. Jordan, with its large pool of high caliber intellectual and professional expertise, is a major supplier of brainpower to neighboring MENA countries.
Jordan's human resources offer a range of distinct regional services in the engineering, medical and educational sectors. There are close to 35,000 engineers in Jordan and more Ph.D. graduates each year than in Israel. Jordan is currently focusing on identifying niches for its service-oriented economy, based on unique skills and expertise.
A notable improvement in the quality and diversity of the labor force took place in recent years with the return of expatriates from the Gulf countries who brought with them a great deal of experience and knowledge, especially in the field of information technology.
Local and international information technology firms are capitalizing on the growing number of educated young Jordanians that are skilled in systems design, programming and other related processes. The workforce in Jordan is abundant, experienced and highly competitive in terms of salaries and wages. According to the Yearbook of Labor Statistics, Jordan's manufacturing labor cost per hour is significantly lower than that of other countries. It is equivalent to 5% of Japan's, 7.4% of the United States', 9.4% of the United Kingdom's, 10.6% of Israel's, 37.5% of Bahrain's, and close to that of India and China.
According to prevailing laws, there is no minimum wage in Jordan. A work day consists of about 8 hours. Overtime is payable at 125% of basic pay. Some banks and large organizations pay two months salary as a bonus annually. All companies employing more than five persons must register with the Social Security Corporation and must collect social security contributions which amount to 5% of the employee's basic salary and remit it to the corporation along with the company's contribution of 10%.
The abundance and cost-effectiveness of human resources in Jordan provides incentives for foreign entrepreneurs and investors to establish regional offices and joint ventures that capitalize on profitable investment opportunities.
Over the last two decades Jordan has been increasingly developing into a regional platform, reflecting its strategic location, and competitive leverage. Today, over 1,070 international businesses and regional offices, and 550 registered commercial agents representing international firms operate in Jordan.
Abundance of Land and Space
Approximately 38% of the population live in the capital Amman, 18% in Irbid, 15% in Zarqa, and 2% in Aqaba. Considerable amount of land is still uninhabited, presenting space and room for expansion and for the establishment of new businesses. Land and building costs are even cheaper outside the major cities. Foreign investors may purchase real estate in Jordan, subject to prior approval of the Council of Ministers. Reciprocity is required for granting such approval in the investor's country. Moreover, the approval is granted only if real estate is intended for residence or business purposes.
Trading in real estate by non-Jordanians is not permitted. The price of land for commercial use in West Amman ranges from US$ 300 to US$ 1500 per square meter. On the other hand, the price of land for residential use ranges from US$ 40 to US$ 500 per square meter.
Areas of land outside the capital are available at considerably cheaper prices. There are approximately 90,000 vacant apartments in the Kingdom, representing around 20% of total available apartments. The number of available vacant business offices is approximately 800. Such an abundance of space is scarce in other congested cities of the region like Cairo, Beirut, Dubai and Tel Aviv.
Business entities in West Amman are usually located in the commercial centers of downtown, Shmeisani, Gardens Street, Sweifieh and Al-Hussein. Office space is plentiful and the quality is high. Annual rent for office space in West Amman ranges from US$ 60 to US$ 140 per square meter. Retail stores are available for rent in West Amman with key money ranging from US$ 20,000 to US$ 200,000 and an annual rent of US$ 7,000 to US$ 15,000 depending on the location and the age of the building.
Conducive Investment Climate:
With the aim of creating a lucrative and friendly environment for foreign investors, the Government has reformed its investment law and streamlined procedures, granting increasingly attractive incentives of tax and customs duty exemptions. Tax exemptions offered by Jordan are in the higher bracket when compared with other countries of the MENA region.
International investors seeking to diversify their portfolios are offered excellent opportunities in terms of customs tax holidays, income tax exemptions and unrestricted transfer of capital and profits in most major sectors.
Regional offices and offshore firms are treated on an equal footing with Jordanian firms, and are entitled to the same privileges extended to local businesses. The Investment Promotion Law divides the Kingdom into three zones depending on the degree of economic development. Investment incentives covering income and social service taxes exemptions are granted to projects depending on the type of activity and the classification of the zone the project is located in.
Exemptions range from 25% to 75%. In addition, imported capital goods are exempted from customs duties and fees. Some imported raw and intermediate materials pay reduced customs duties and charges. Investment profitability is measured not only in bottom line, but also in terms of political security, strategic logistics of location, abundant supply of skilled workers, and the government's willingness to reform and modify the investment structure.
Jordan competes and often excels in meeting these key factors. The emerging Jordanian market has yet to be fully exploited, and entrepreneurs will undoubtedly reap high dividends.