Jordan is setting out its stall as an industrial center in the Middle East, from which companies will have privileged access to export markets and a favorable business climate. To this end, it is increasing the number of new economic zones and industrial parks, following the success of the Aqaba Special Economic Zone (ASEZ). These developments should encourage further investments, thereby creating jobs for Jordan’s growing population and tackling high unemployment in poorer areas.
The ASEZ has to a large extent been a flagship for Jordan’s economic development and a model for further economic zones. The zone was launched in 2001 and offers a range of tax and tariff incentives to businesses, as well as a more favorable repatriation and operating regulatory environment. The 375 sq km zone drew in $8 billion worth of investment in its first five years, an amount that officials rather conservatively estimate will increase to $22 billion by 2020.
The flagship is now being joined by other zones with the same aim of stimulating investment, particularly in added-value export and high-tech sectors.
The largest of these is Al-Mushatta Industrial City, near Amman’s Queen Alia Airport, which has completed its first stage of development. It is unusual in that it is an entirely private project, owned by Investors & Eastern Arab for Industrial and Real Estate Investments (IEAI). Some 40% of the leasable space at Al-Mushatta has already been allocated. Jordan Ta’ameer Holding, Medicare for Medical Solutions, JOFCO Fire Fighting & Safety Equipment Certified Manufacturer, DHL and Elba House, which makes prefabricated houses and large vehicles, have reserved space.
Qualified industrial zones
Al-Mushatta has been designated a qualified industrial zone (QIZ), one of 10 industrial parks which are allowed quota-free access to the US market. The US has been Jordan’s primary export market since 2003, two years after Jordan became the first Arab country to sign an FTA with the Americans. There are QIZs located in Amman, Irbid and Zarqa which can export quota and duty-free to the US if the products in question meet the “laws of origin” insisted on by the American government. These stipulate that at least 35% of the value of the product must originate from the Jordanian QIZ, the Palestinian Territories or Israel, and at least 8% of the contents is by an Israeli manufacturer.
Mohammed Turk, CEO of IEAI, thinks that with the new SEZ and QIZ projects, “Jordan has the ability to establish itself as an export base for medium to high end products, particularly for the growing US market.”
While the private sector is developing in Al-Mushatta, there are also a number of state economic zone projects underway around the country. Many of these are designed to stimulate economic activity and promote job creation in less prosperous regions. Jordan suffers from persistently high unemployment, with official figures of around 15% and unofficial ones of up to 30%. Some areas have unemployment rates as high as 70%.
The World Bank and the Jordanian government have identified 20 “poverty pockets”, where more than 400,000 people live in areas where unemployment officially exceeds 25%. With a fast-growing population and the influx of Iraqi refugees, job creation is a pressing priority for the government. This is where the authorities believe that economic zones can come into their own.
One such public project is the $750 million King Hussein bin Talal Economic Zone in Mafraq, in the northeast. This is archetypal of the projects that the government wishes to create now. While Aqaba is the country’s second city, towns like Mafraq are considerably smaller and less well-known. The zone in Mafraq alone is forecast to provide around 32,000 jobs on completion, an important boost to the region.
Similarly, in Tafileh, the poorest governorate in the country, the Tafileh Industrial Estate is under construction, with the aim of creating up to 2,000 jobs. The project is being overseen by Jordan Industrial Estates Corporation (JIEC), a semi-governmental organization which says that zones it operates have created more than 41,000 jobs so far. JIEC has other projects in Zarqa and Madaba.
Economic zones are not without their critics. Some say that they distort markets unnecessarily, and that in many of the areas there is little reason for a large amount of economic activity, and that population mobility would be a more laudable goal. Certainly, underemployment for the sake of cutting jobless figures would be counterproductive. However, given the jobs they have created thus far, and the realistic limits of expanding lively centers such as Aqaba and Amman, the zones are likely to play an important role in Jordan’s regional development and job creation.
