8 Sept 2017
Jordan: Market Profile
Major Economic Indicators
- Jordan’s economy expanded by 2.1% in 2016 with GDP growth expected to edge up slightly to 2.3% in 2017.
- Consumer prices rebounded to gain by 2.3% in 2017 after two years of deflation.
- Unemployment remained high at 18.2% as of Q1 2017, compared to 14.6% in Q1 2016. Unemployment was much more prevalent among university graduates and women.
- Jordanian exports dropped by 4.1% in 2016 while imports plunged by 6.2%. The country recorded a trade deficit of US$11.7 million in 2016.
- In the first seven months of 2017, Hong Kong’s exports to Jordan surged 18.3% YOY to US$125 million, while imports from Jordan grew 19.1% YOY to US$19 million.
Current Economic Situation
Jordan is a fairly developed, yet small economy in the Middle East, with a relatively high concentration of services in its economy. Services represent about 67% of the Jordanian economy, with industry and agriculture respectively accounting for about 30% and 3% of GDP. Major industries of Jordon include tourism, IT, textile and garment manufacturing, phosphate mining, chemicals and fertilisers, and pharmaceuticals.
As a small country in the Middle East with limited natural resources, Jordan is heavily dependent on neighbouring countries for the import of water, oil and gas and raw materials. The government is keen to reduce reliance on foreign energy imports by developing renewable energy. In this regard, Jordan welcomes Chinese investment in energy facilities under the Belt and Road Initiative, especially in solar, wind and oil shale energy. The country is also reliant on foreign assistance. In August 2016, the IMF approved an extended arrangement of US$723 million under the Extended Fund Facility (EFF) in support of the country’s economic and financial reforms.
In recent years, Jordan has emerged to be a refuge for Syrians to escape from their country’s military conflicts. Some 1.4 million of Syrian refugees have fled to Jordan, which are expected to cost the Jordanian government US$2 billion annually.
Jordan’s economy managed to expand by 2.1% in 2016, and is expected to maintain a similar growth rate of 2.3% in 2017. GDP growth was mainly driven by investment in electricity and water, finance and insurance services and mining and quarrying.
Average consumer prices reversed back on an inflationary trajectory in 2017 after two years of mild deflation. Consumer price inflation is expected to rise by 2.3% in 2017, amid stronger demand from locals and a large refugees community. Meanwhile, unemployment further escalated to 18.2% in Q1 2017 compared to 14.6% in the same quarter of 2016.
The textile and garment sector is important to the Jordanian economy, as it accounts for around 10% of the country’s export earnings. Jordan is gradually developing into a garments manufacturing hub in the Middle East for international brands including Calvin Klein and Tommy Hilfiger. Chemicals and phosphate production are also becoming important export-oriented industries of Jordan.
Jordan is promoting the country as a regional information and communication technology (ICT) hub. Jordan’s National ICT Strategy (2013-2017) has stipulated targets to be reached by 2017: internet penetration (85%), revenue (US$3.15 billion), investment (US$450 million) and employment (20,000 jobs). The kingdom is also keen to develop ICT sub-sectors such as Information Technology Enabled Services (ITES) and Business Process Outsourcing (BPO).
Tourism is another major industry for the Jordanian economy. However, Jordan’s inbound tourism has been adversely affected by instability in neighbouring countries. Tourism of Jordan showed sign of recovery in the first quarter of 2017. During this period and the country received 1,106,905 tourists, up 5.4% from the same period of 2016.
About half of Jordan’s total exports are shipped to the Arab countries, with Saudi Arabia, Iraq and the UAE as the major export markets in the Middle East. The US is another major export market for Jordan and takes up almost 20% of the latter’s exports. The Jordanian dinar is pegged to the US$, which is set at a target rate of JD0.709 to US$1.
Geopolitical instability in the region has a serious impact on Jordan’s exports to Iraq and Syria, as exports to Iraq accounted for around 15% of Jordan’s total exports. Improving security situation in Iraq and preferential access to the EU will boost Jordan’s export outlook. In 2016, Jordan’s exports dropped 4.1% to US$7.5 billion. Major export items include apparel, accessories, fertilizers and pharmaceutical products. The US is Jordan’s largest export market, followed by Iraq and Saudi Arabia.
Jordan mainly imports oil, machineries and vehicles from the Saudi Arabia, China and the US. Owing to lower oil prices, imports plunged by 6.2% in 2016.
Qualified Industrial Zones
In 1997, Jordan, the US and Israel reached an agreement on establishing “Qualified industrial Zones” (QIZs) in Jordan. QIZs are designated areas where manufactured products in the zones enjoy duty-free access to the US market with no quota limit, provided that specific requirements on the rule of origins have been satisfied. Importance of QIZs has declined in the wake of the Jordan-US Free Trade Agreement concluded in 2001, under which qualified Jordanian goods entering the US market are both duty- and quota-free.
In recent years, Jordan has further opened up its economy to attract foreign direct investment (FDI). The Investment Promotion Law provides tax exemption on fixed assets from foreign investors for three years and duty-free import of raw materials into Jordan. Further, the Jordanian government has been active in creating free trade zones (FTZs) including the Aqaba Special Economic Zone. More details of the investment regulations and incentives in Jordan can be found on the website of Jordan Investment Board.
Foreign Direct Investment
Despite regional instability intensifies, Jordan has recorded stable FDI inflow in recent years. Jordan’s cumulative FDI reached US$32.15 billion as at end-2016, up 5% from US$ 30.63 billion the year earlier. Turkey, the US and France were the major FDI sources for Jordan. China’s cumulative FDI in Jordan reached US$33 million as at end-2015, increasing 5% YOY.
Jordan joined the World Trade Organisation (WTO) in April 2000, and has been pursuing an open trade regime.
Jordan has bound its MFN tariffs on almost all products and tariffs are levied on an ad valorem basis. The applied MFN tariffs generally range between 0 and 30%, but some products such as lighters, tobacco products, alcohol, and alcoholic beverages face a tariff up to 200%. Jordan has reduced its simple average applied MFN tariff rate from 14.7% in 2000 to 10.2% in 2014, with average rates of 17.4% for agricultural products (WTO definition) and 8.9% for non-agricultural products. Customs duties are assessed on the basis of the c.i.f. value of imports on the registration date of the customs valuation form. In 2015, there were 6,767 tariff lines in Jordan's applied MFN tariffs, out of which 33.7% of agricultural products and 56.4% of non-agricultural products were duty-free.
With the challenges to Middle East and European countries brought by the Syrian refugees, the EU is engaging in deeper diplomatic and trade cooperation with Jordan. In 2016, the EU committed to increasing aid to Jordan and easing origin rules for Jordanian goods. This allows products with a minimum Jordanian content of 30% to enter the EU under the EU-Jordan FTA over the next ten years. Such change offers positive long-term prospects for Jordan’s exports to the European market.
Jordan has not applied anti-dumping measures or countervailing duties, though safeguard measures are in place. Greater details of customs regulations can be found on the website of Jordan Customs.
Free Trade Agreements
Jordan has signed preferential trade treaties, including a number of free trade agreements (FTAs) with its major trading partners.
Jordan has signed FTAs with the US, Canada, Turkey, MERCOSUR (which includes Argentina, Brazil, Paraguay and Uruguay), Egypt, Morocco, Tunisia (the Agadir Agreement), the EFTA states (which includes: Switzerland, Norway, Iceland and Liechtenstein), and Singapore. Jordan is a member of the Pan Arab Free-Trade Area (PAFTA) Treaty, with members including: Egypt, United Arab Emirates (UAE), Bahrain, Jordon, Tunisia, Saudi Arabia, Sudan, Syria, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Morocco, and Yemen. These treaties are in force.
Jordan has an associate agreement with the European Union, and this agreement provides for the establishment of a free trade area, with negotiations now underway.
Jordan concluded an Air Services Agreement with Hong Kong in 2004.
Hong Kong's Trade with Jordan
Hong Kong's total exports to Jordan in the first seven months of 2017 surged 18.3% YOY to US$125 million. Major export items to Jordan included telecom equipment and parts (US$63 million, 50.6% of total, +43.4 %), knitted or crocheted fabrics (US$10 million, 7.7% of total, +4.9% YOY), and miscellaneous manufactured articles (US$7 million, 5.4% of total, +29.6% YOY).
In the first seven months of 2017, Hong Kong's imports from Jordan were up by 19.1% YOY to US$19 million. Major imports items were watches and clocks (US$11 million, 56.6% of total, +25.7% YOY) and other articles of apparel, of textile fabrics (US$5 million, 24.9% of total, +23.8% YOY).
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.