Jordan to build new financial centre

The National Jordanian Financial Centre will be built on a site close to the present ASE in the Arjan area of the capital. It will cover around 740,000 square feet and will also comprise a regional training facility which will be set up by the Jordan Securities Commission. The centre will look to follow the best international practices and will be developed including the latest electronic trading systems and infrastructure.

ASE tempts investors

The government's plan for the financial centre to act as a magnet for further investment from outside Jordan certainly seems to be well-founded if the current level of interest in the ASE is anything to go by. For a start, the kingdom's stock market offers no restrictions on foreign ownership and investors, particularly from within the Arab region. Investors have also been increasingly attracted by the stability and security offered by Jordan, when set against the political chaos and turmoil affecting nearby countries like Lebanon and Iraq.

Despite the fact that the ASE, just like every other bourse in the Middle East, dropped like a stone last year, foreign investors now own over 45 per cent of all listed shares. The ASE actually fell by 33 per cent in 2006 and, as a result, market capitalisation plunged by more than 20 per cent. But, since 2003, the ASE has still seen its capitalisation triple to its present level of $31bn thanks largely to serious investment coming from the Gulf.

New banks for Jordan

The move to encourage more foreign investment in the finance sector, and also to attract other Arab firms to list on Jordan's capital markets, by establishing the financial centre will have been given a timely boost by the decision last month of the Kuwait Finance House (Bahrain) to launch a new $50m bank in Jordan.

Kuwait Finance House (Jordan) will be a wholly owned subsidiary of KFH-Bahrain and it will become part of the bank's network which covers Kuwait, Bahrain, Turkey and Malaysia. KFH-Jordan will focus on activities such as investment banking, investment advisory and acquisitions. The new bank will also crucially look to encourage additional foreign direct investment into the kingdom.

KFH-Bahrain's announcement came at around the same time that Jordan Dubai Capital, Dubai International Capital and the Dubai Islamic Bank agreed a strategic partnership with Jordan's Industrial Development Bank, under which they will acquire a major stake at the IDB via a capital increase exceeding $100m. It is clear that foreign banks and service providers see major potential in Jordan's financial sector and the establishment of the new centre should offer a focus for more companies to set up in the country.

Serious competition?

Once the financial centre is ready within a few years, it will not of course be the only such institution within the Middle East. The Gulf region, the source of so much of Jordan's foreign investment, has seen the development of ambitious financial centres in several countries in order to create more diversified economic profiles. The Dubai International Financial Centre, the Qatar Financial Centre and the Bahrain Financial Harbour all offer 100 per cent foreign ownership and either tax free, or very low tax, environments.

These three centres, despite targeting slightly different parts of the market, with Dubai and Bahrain being more service based economies and Qatar being rich in natural resources, are unquestionably vying to be the pre-eminent financial hub in the Arabian Peninsula at the very least.

But Jordan's location could be its key advantage, as its geographic detachment from the Gulf means its financial centre would be more logically regarded as a hub for the Levant region. Indeed, there is every likelihood investors and financial service providers from the GCC region would continue to plough funds into Jordan as a means of further diversifying their investment portfolios.