A.T. Kearney says Jordan needs to step up efforts to attract foreign direct investments

A fast-growing population combined with reduction in government bureaucracy and the introduction of financial and tax incentives have translated into investor optimism and increased investments in the Middle East, as indicated by the most recent Foreign Direct Investment Confidence Index released by global management consultancy A.T. Kearney.

While FDI in the Middle East accounted for approximately $60bn in 2006, the UAE is a main example of a few Middle Eastern countries aggressively attracting FDI through its increasingly liberal and international economy and more specifically through the successful implementation of attractive free zones. This has resulted in the UAE's rise to an impressive 8th place on the A.T. Kearney global FDI Confidence Index with 2006 FDI in the UAE amounting to $8.4bn.

'Despite Jordan pursuing a set of economic development strategies to promote national economic development, it has a long way to go,' said Dr. Dirk Buchta, Vice President and Managing Director of A.T. Kearney Middle East.

In comparison to neighbouring countries such as Lebanon, Jordan has performed relatively well attracting over $3bn of FDI in 2006 (over 100% increase from 2005) as reported by UNCTAD. However, it greatly lags behind the UAE, having not nearly attracted half the amount comparably. Furthermore, a majority of the 2006 FDI increases into Jordan were attributed to a few major privatization initiatives that attracted large interest from regional (mainly Gulf) investors leaving not nearly enough to be directed to Greenfield initiatives.

With its lack of abundant natural resources and its limited ability to provide attractive tax exemptions and other incentives, Jordan has struggled to differentiate itself from other global FDI benefiting countries in attracting long-term, value creating investments and must urgently determine how to remain competitive to secure larger shares of future global FDI spends going towards competitive and sustainable economic programs.

Currently the driving force behind Jordan's economic development strategy is to reduce the most challenging problems facing its economic, employment and social situation.

'The investment drive so far has included the development of a large number of investor-friendly economic zones - including public free zones, private free zones, and a special economic zone in Aqaba. However, the drive to finance economic development projects and the challenges in setting up the right infrastructure and skills are some of the most pressing obstacles facing Jordan's ambitions,'

added Dr. Dirk Buchta.

With over 80 free zones already established and operating in the Middle East and Gulf regions, Jordan's desire to implement a similar economic drive must be laser-focused, leveraging the potential that currently sets it apart from other neighbouring countries.

'On the positive side, Jordan's stable political environment, its high quality logistics infrastructure, availability of local skilled labour and its strategic location at the intersection of three continents with potential access to over a billion consumers already sets it on the right path to receiving increased investor interest' said Maktoum Al Maktoum, Associate Director of A.T. Kearney Middle East.

Jordan's potential for foreign investment is there and evident by trends in its inward FDI figures. So far it has shown its commitment by implementing sound investment laws and incentives to create an attractive business environment. With the recent successful elections and a progressive new government in place, an investment-focused and coherent economic strategy to elevate Jordan's FDI targets is vital. What's more, the effectiveness of implementing this strategy will only come from a serious effort to create differentiated and sustainable investments in an inventive and unique manner suitable to the long term viability of Jordan as a potential center of modernity and economic leadership in the region.