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Foreign direct investment (FDI) in Jordan

FDI in Figures

Global foreign direct investment (FDI) flows in 2021 were USD 1.58 trillion, up 64 per cent from the exceptionally low level in 2020. The recovery showed significant rebound momentum, with booming merger and acquisition (M&A) markets and rapid growth in international project finance because of loose financing conditions and major infrastructure stimulus packages. However, the global environment for international business and cross-border investment changed dramatically in 2022. The war in Ukraine – on top of the lingering effects of the pandemic – is causing a triple food, fuel and finance crisis in many countries around the world. Investor uncertainty has put significant downward pressure on global FDI in 2022, and new investment project numbers, including greenfield announcements, international project finance (IPF) deals, and cross-border mergers and acquisitions, all shifted in reverse after the first quarter of 2022 to start declining. Cross-border M&A sales were 6% lower and IPF values more than 30% lower in 2022. The outlook for global FDI in 2023 appears weak, with a significant number of economies around the world expected to enter a recession. Negative or slow growth in many economies, further deteriorating financing conditions, investor uncertainty in the face of multiple crises and, especially in developing countries, increasing risks associated with debt levels will put significant downward pressure on FDI (UNCTAD Global Investment Trends Monitor, January 2023). The negative trend reflects a shift in investor sentiment due to the food, fuel and finance crises around the world, the Ukraine war, rising inflation and interest rates, and fears of a coming recession.

Historically, the Jordanian economy has benefited from massive investment by the Gulf countries, which continued to skyrocket until 2006. However, since then FDI has declined due to the international economic crisis, followed by geopolitical instability. The situation was compounded by the health and economic crisis triggered by the Covid-19 pandemic. According to UNCTAD's 2022 World Investment Report, FDI inflows totalled USD 622 million in 2021, a decline of USD 138 million from the previous year. FDI to Jordan was diversified,  with notable investments in manufacturing, real estate and services. The total stock of FDI was estimated at USD 37.3 billion in 2021. In order to boost FDI flows, the Government has planned large-scale infrastructure projects (water, transportation, nuclear energy) for which it needs foreign and private funds. A project connecting the Dead Sea to the Red Sea was supposed to start in 2018, but was delayed because Jordan failed to reach an agreement with Israel on how to build the canal. The project was further delayed in 2019 because relations between Israel and Jordan soured on Palestine. Finally in June 2021, Jordan decided to cancel the joint project with Israel and the Palestinian Authority after years of stagnation of the plan.

Jordan is seeking to become a regional logistics hub, notably for electric and transport networks. Investments are mainly concentrated in the field of real estate (residential and commercial), financial services and large tourism projects. The country's attractiveness lies mainly in the quality of its infrastructure, its solid and dynamic banking system, as well as its level of economic openness, which has allowed the establishment of free trade zones and public-private partnerships. The Government introduced a new initiative to encourage investment, including offering investors a single-window application facility through the Jordanian Investment Commission. Problems linked to bureaucracy, corruption and investment protection are obstacles to FDI.

Jordan Foreign Direct Investment (FDI) increased by 303.9 millions USD in September 2022, compared with an increase of 176.2 million USD in the previous quarter (CEIC Data, 2023)

 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 7606221,137
FDI Stock (million USD) 36,59037,30538,380
Number of Greenfield Investments* 6711
Value of Greenfield Investments (million USD) 216426383

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Jordan Middle East & North Africa United States Germany
Index of Transaction Transparency* 4.0 6.4 7.0 5.0
Index of Manager’s Responsibility** 4.0 4.8 9.0 5.0
Index of Shareholders’ Power*** 3.0 4.7 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Jordan

Strong Points

The main advantages of Jordan are:

  • Its political stability built around King Abdullah, who remains very popular and has the support of the army
  • Its geographical location and very good international relations (with the EU, the IMF, the Gulf monarchies and the United States), which allow it to have the financial, political and logistic support of the international community
  • A growth rate above the region's standards, favoured by a significant production of phosphate and potash and by a well-developed tourism sector
  • Control of public expenditure
  • Low cost and well-educated labour in the Arab world
  • Favourable business environment
  • Modern and well-connected infrastructure
  • Special economic zones across the country (either Development Zones or Free Zones)
Weak Points

Jordan's main weaknesses in attracting FDI are:

  • Political tensions in the region with the proximity of Iraq, Syria and Israel. On the domestic front, the massive influx of Iraqi refugees, added to the large presence of Palestinian refugees, is a risk factor for social cohesion.
  • A very large structural trade deficit linked to its lack of natural resources and food products leading to a high dependence on external aid
  • Very high unemployment rate (19.1% in 2019 - Jordan's Department of Statistics, latest data available) that fuels social tensions
Government Measures to Motivate or Restrict FDI
Jordan, under King Abdallah's leadership, has developed a progressive economic liberalisation policy that favours foreign investment. The special economic areas, such as the Qualified Industrial Zone (QIZ) and the Free Zone of Agaba offer very advantageous tax regimes for companies. Also, the government has simplified the registration procedures for foreign companies by creating the Jordan Investment Commission. Finally, the Jordanian State has launched a campaign of privatisation which has benefited public and private partnerships in several sectors. Among the main measures set up by the government are:

  • Income tax exemption during 10 years, variable depending on the place and sector of activity
  • Tax exemption on income generated from the export of goods and services
  • Repatriation of  capital, profits and salaries without charges

The Jordan Economic Growth Plan 2018-2022, will put Jordan on a path of sustainable growth and double Jordan's economic growth, at a minimum, according to a report released by the Economic Policy Council. 
Furthermore, based on Jordan's "Vision 2025", the economic growth plan is expected to gradually rise from 6.5% in 2021 to 7.5% in 2025. This measure seeks to boost Jordan's economic growth. It is effectively supported by the Jordanian government, which has been cutting bureaucracy and paperwork, improving its economic legislative environment and harmonizing its economic operations. 

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Latest Update: December 2023

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