Lebanese companies are taking Jordan by storm, hoping to reap some of the fruits of the country’s recent economic growth. Lebanese fashion outlets — Aishti, ABC, GS, K-Lynn, Mario Bruni —, restaurants — Diwan Al Sultan, Casper and Gambini’s, Zaatar w Zeit, Eight, Abdel Wahab and Kabab-ji — and banks — Audi Saradar, BLOM Bank — are setting up shop in the capital Amman.
“Jordan has positioned itself as the new regional business center and a main gateway to Iraq,” says Nassib Ghobril, head economist at Byblos Bank, which itself is rumored to have increased its stake in the Jordanian Al-Ahli United Bank.
In spite of the highly-charged regional political environment and the country’s lack of resources, Jordanians enjoy a high per capita disposable income. According to the IMF, Jordan’s GNI per capita was $2,660 in 2006, up from $1,790 in 2000. “The comfortable economic situation can be credited to the Jordanian’s government ability to maintain social and political stability, beefed up by a high inflow of remittances,” adds Gobril. The kingdom’s fiscal deficit reached 4.4% of GDP in 2006 and is estimated at 4.3% for 2007. Its currency, which is pegged to the dollar, has remained relatively stable despite increasing regional tensions. In addition, Jordan has graduated from a strict IMF program. Public debt amounts to $10.6 billion and 72% of GDP while external debt remains at 50% of GDP, below its target range, through swap and repayment agreements.
“This positive environment has also prompted Lebanese banks to reconsider the Jordanian market,” explains Ghobril. “There is a gap in Jordan’s banking sector when it comes to retail products, which can be filled easily by Lebanese banks.”
Lebanon falls behind Jordan
Lebanese companies seeking a more favorable business environment are looking to Jordan. According to the Doing Business in 2007 report released this year by the IMF, Lebanon falls behind Jordan in terms of the ease of doing business, starting a business, dealing with licenses, employing workers, registering properties, getting credit, registering properties, protecting investors, paying taxes, trading across borders and closing a business.
This positive business environment as well as several other factors such as the Lebanese political situation, companies’ overall expansion plan and the kingdom’s high economic growth has encouraged Lebanese companies to look into the Jordanian market. Pierre Iskandar, managing partner of GHIA Holding, whose brands include Abdel Wahab, El Paladar, Duo, Al Saraya and Shah, cites the negative impact the Lebanese current political situation has on the tourist sector. This is a concern also voiced by others such as Khaled Ramy, managing partner of Diwan Al Sultan and its subsidiary Sultan Brahim, who admitted the chain had to shut down its Aley operation due to the unstable situation and withering tourists figures.
Toufic Hayek, manager of Mandaloun, the up-market Lebanese nightclub, announced the company had started operating in Jordan four months ago. “Different factors played in our decision to open in Amman — the obvious lack of stability in Lebanon, our broader expansion plan, the country’s cultural proximity as well as logistics concerns in relation to alcohol procurement and distribution, which is relatively easy in Jordan in comparison to other MENA countries.”
As for companies’ expansion plan, Robert Fadel, ABC’s manager, explained at a recent Business Opportunities in Lebanon conference that, “the rapid regional growth offers unique opportunities, provided something new is brought to the market. ABC’s positioning fills a current gap in the regional market.” He also observed a high demand in retail business for anchor stores in new malls. ABC, which occupies a 4,184 square meter ground floor of Al-Baraka Mall located in the Al-Sweifiah District, west of Amman, will open in February 2008, and will be the first department store to be featured in Jordan.
Jordan’s economic growth has played a major part in the decision making process adopted by Lebanese companies, attributed in part to the Iraqi exodus and the regional oil riches. Over the last years, Jordan’s economy has shown robust growth rates, leaping from 4.25% in 2003 to 8.4% in 2004, before settling at around 6.5% for the last two consecutive years. By creating large economic free zones processing Asian merchandise on their way to the US, where they benefit of duty free status, Jordan has managed to increase its export level as a percentage of GDP from 41.8% in 2000 to 50.7% in 2006, according to IMF figures. Ghobril also pointed out the kingdom’s special status when it came to economic freedom, rating higher than China, Brazil and Bulgaria, among the lower level income countries.
In their quest for the Jordanian market, Lebanese companies have decided to either partner up with locals or franchise their operation. Diwan Al Sultan opted for the first business option by opening three new outlets in Jordan in partnership with a local businessman. “The chain is launching its first two branches in the Al-Wadi Dead Sea resort. The first restaurant, which can host up to 150 people, corresponds to our popular ‘Diwan El Sultan’ concept, while the other is a snack restaurant that can accommodate up to 800 people. A third restaurant is scheduled to open in Amman as of June 2008,” said Ramy.
Other Lebanese companies have opted for a franchising approach, considered by some as a more rapid and cost efficient mean of expansion. Casper & Gambini’s regional operations manager Maroun al-Hajj perceives Jordan’s development as a natural outcome of the exponential growth and demand for the restaurant’s high-quality dishes, home-blended coffee and friendly service, which was made possible through franchisee Al Amer Touristic restaurants. Another of Lebanon’s heavy weights in terms of the restaurant industry, Kabab-ji has two dine-in and three express restaurants scheduled to open over a four year period in Jordan announced Ola Saghir, the company’s franchising manager.
On their way to regional stardom, Lebanese companies have been faced with different obstacles. For Hayek, the main difficulty resided in shifting preferences and consumer behavior. “Contrary to Lebanon, where people go out every night, Jordanians tend to party two nights a week only. This has affected our estimated break-even period, even if Jordanians are on average less price conscious than Lebanese,” he states. On the other hand, Ramy did not notice any major differences in consumer behavior exhibited by Jordanians. The small divergences have, however, affected to a certain extent the company’s choice of concept. The popular oriental food eatery “Diwan al Sultan” concept was exported to Jordan, while its famous “Sultan Brahim” fish concept was not deemed suitable for the kingdom’s market where room for growth lies mostly in oriental food delivery services.
Other Lebanese restaurants have also integrated an express restaurant concept into their original framework such as GHIA’s Abdel Wahab. “The eatery is opening very soon at Villa Toscana but we have scheduled to open around four to five expresses, over the next few years,” says Iskandar. Besides the two Casper and Gambini’s branches scheduled to open in Amman, and a minimum of five branches in other Jordanian cities, al-Hajj is planning to launch a catering Service in the next coming months.
Jordanians love all things Lebanese
Jordan’s appeal to Lebanese businesses, in addition to geographic and cultural proximity, is attributed to the kingdom’s liking of all things Lebanese. “We are blessed, Jordanians simply love Lebanese brands, products and food,” said Saghir, smiling. An opinion shared by most Lebanese companies, as Jordanians believe there is a definite added value to Lebanese products, according to Iskandar.
So is Lebanon doomed ad infinitum to export its talent and innovative concepts abroad, falling behind other countries in region embracing the 21st century riches? “Business is driven by profits. At the end of the day and as much as Lebanese are survivors in the business sense of the word, investors can’t be blamed for looking into more predictable returns on their investments. Jordan’s stability is a determining factor to any expansion plan,” admits Saghir. On a more positive note, some entrepreneurs underscore that Lebanon will remain a leader in terms of handsome and innovative concepts, which because of the situation will be further developed and perfected, away from its gleaming Mediterranean shores.