Building Jordan's Growth Strategy

Jordan:
Building towards a growth strategy
Amman, October 2018
Harvard CID – Jordan October 15th - 18th , 2018

Index
• What happened to Jordan? Our understanding of the situation
• Changing conditions
• Opportunities for productive diversification
• Common features across themes and potential constraints
• Sources/destinies of FDI into the region by theme
• Elements of a growth strategy
Harvard CID – Jordan October 15th - 18th , 2018 2

Index

Jordan’s Growth Trajectory:
Rapid acceleration (2000-2008) followed by slow down (2008-2016)
7.37.57.77.98.18.3
Ln(GDPPC)
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Years
Data source: World Development Indicators
Ln(GDP per capita) for Jordan
g = 9.5% g = -3.1% g = -1.8%g = 2.0% g = 3.8%
1982 20081991 2000

0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Jordan: Exports of Goods and Service
(1990 - 2017, constant 2010 dollars)
Exports of goods and services Exports of goods
The boom and slowdown are export-related
20081991 2000

The boom was not just about good luck…
90
115
140
165
190
215
240
265
290
315
340
365
390
415
440
465
490
90
115
140
165
190
215
240
265
290
315
340
365
390
415
440
465
490
2000 2002 2004 2006 2008 2010 2012 2014 2016
Year
Jordan World
Figure shows exports of Jordan and international demand, fixing the export basket of year 2000 (index 100 = year 2000).
Performance of Jordan’s year 2000 export basket and world exports (2000=100)

… the growth boom was led by sectors that did not create good
employment for Jordanians (agriculture, garments, chemicals)

40
60
80
100
120
40
60
80
100
120
2000 2002 2004 2006 2008 2010 2012 2014 2016
Year
Jordan World
… and the bust was not a domestic shock
Figure shows exports of Jordan and international demand, fixing the export basket of year 2000 (index 100 = year 2000).
Performance of Jordan’s year 2008 export basket and world exports (2008=100)

The fall in exports 2014 seems to be a permanent shock that
caught everyone by surprise…
Source: Jordan Central, Bank, International Monetary Fund.
6,000
7,000
8,000
9,000
10,000
11,000
12,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Exports
(million US dollars)
May-12 Jun-14 Jul-17 Actual

The GDP boom was larger than elsewhere, the bust was similar…
0%
1%
2%
3%
4%
5%
6%
7%
8%
JOR IRN MAR LBN EGY TUN DZA
AnnualizedRealGDPGrowth 2000-2008 2008-2016
Note: Comparators here include other middle-income MENA countries, excluding Syria, Iraq, Yemen, Libya, and the West Bank & Gaza.
Source: CID calculations based on WDI

2.0%
1.8% 1.8% 1.8% 1.8%
2.1%
2.6%
3.2%
3.9%
4.4%
4.8%
5.1%
5.3%
5.5% 5.5%
5.3%
4.7%
4.0%
3.2%
2.6%
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Jordan Population
(Total population and growth rates)
Population growth (%) Total population
Massive inflows of refugees have driven population upwards…
Source: WDI Indicators

In per capita terms Lebanon and Jordan experience a sharp decline
Note: Comparators here include other middle-income MENA countries, excluding Syria, Iraq, Yemen, Libya, and the West Bank & Gaza.
Source: CID calculations based on WDI
-2%
-1%
0%
1%
2%
3%
4%
5%
JOR IRN MAR LBN EGY TUN DZA
AnnualizedRealGDPpercapitaGrowth
2000-2008 2008-2016

Imports boomed until 2014…
Source: Central Bank of Jordan
0
5,000
10,000
15,000
20,000
25,000
30,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Jordan: Exports and Imports of Goods and Services
(1990-2017, current US$)
Exports Imports
Jordan: Exports and imports of goods and services
(1990-2017, current US$)

-
5
10
15
20
25
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
inUS$billion
Exports Travel Remittances Other private transfers Grants FDI
Buoyed by other temporary increases…
Jordan’s Balance of Payments: Selected accounts

Foreign direct investment declined sharply after 2009…
5.4%
8.1%
14.5%
24.5%
15.0%
12.8%
9.8%
6.3%
5.1%
5.0%
5.8%
5.9%
4.3%
4.0%
11.6%
1.4%
20.1%
32.7%
6.7%
8.6%
10.6%
7.9%
9.8%
4.7%
2.8%
4.8%
1.3%
5.0%
0%
5%
10%
15%
20%
25%
30%
35%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Foreign Direct Investment: Balance of Payments vs. FDI Markets
(2003-2016, percentage of GDP)
FDI CBJ FDI - FDI Markets
Source: FDI Markets * Leaving out 2008 Al Maabar announced US$10.0 billion in Real State Services, and 2013 ROSATOM
(Russia) announced US$10.0 billion in a nuclear electric plant that did not materialize
Foreign Direct Investment: Balance of Payments vs. FDI Markets
(2003-2016, percentage of GDP)
(US$ million) 2003-2009 2010-2016 2003-2006
CBJ BoP 12.9% 5.2% 9.0%
FDI Markets 13.1% 5.2% 9.1%

From 2015 onwards there has been a large decrease in imports…
0
500
1,000
1,500
2,000
2,500
3,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Jordan: Exports and Imports of Goods and Services per capita
(1990-2017, constant 2010 dollars)
Exports per capita Imports per capita
20.4
%
20.1
%

Since 2011 there has been a massive fiscal adjustment in Jordan
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
assharesofGDP
Grants Surplus/deficit excluding grants Overall surplus/deficit
Budgetary government

The adjustment was even larger when including NEPCO and WAJ
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2009
2010
2011
2012
2013
2014
2015
2016
2017
assharesofGDP
Primary fiscal balance excluding grants and net transfers to NEPCO and WAJ
Combined public deficit (plus NEPCO operating balance and WAJ overall balance)
Fiscal IMF performance criteria

0%
3%
6%
9%
12%
15%
-
100
200
300
400
500
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
asashareofGDP
2017JD
Real net expenditures per capita
Net expenditures (% GDP)
Net expenditures
= (total expenditures – interest payments on the external debt)- (total revenues – grants)
Country Period
Net
expenditure
contraction*
Greece 2010-2016 10.65
Jamaica 2009-2015 8.50
Jordan 2011-2017 8.05
Portugal 2010-2016 6.14
Spain 2009-2015 4.56
* In percentage points of GDP
Sources: MOF Monthly bulletins, World Development Indicators
The fiscal adjustment that has taken place in Jordan in 2011-2017 ranks
among the largest 6-year fiscal contraction in recent history
8.05
pp of
GDP
20
Note: This fall does not account for
the removal of electricity subsidies.

Fiscal consolidation is likely to continue
Primary balance (including grants) required
to bring down the debt from 95% of GDP in 2017 to 77% by 2025
Actual primary balance (including grants) as a share of GDP (MOF):
2016 (-0.2%), 2017 (0.7), 2018 (1.7%)

Our understanding: Implications for Growth Strategy
The current predicament
• The growth of output and
employment is lackluster
• Low female participation
/employment rates
Implications for a Growth Strategy
• Very weak fiscal situation:
• Rising Debt-to-GDP
• Financed via capital
markets at rising interest
rates
• Balance of payment crisis:
• Underfinanced deficit
• Currency under pressure
Fiscal sustainability
Accelerate Growth Lower interest rates
• Growth cannot depend on
fiscal impulse
• Has to be driven by
exports and investments
that directly or indirectly
increase exports
• Non-tradables will benefit
from the multiplier effects
• Higher female participation
and employment requires
new kinds of female jobs
• IMF Program with
extraordinary access
• Lower interest rates
• Prevent Jordan from
going back to
financial markets at
increasing rates

Our understanding of the situation:
Implications for Growth Strategy
The current predicament
• The growth of output and
employment is lackluster
• Low female participation
/employment rates
Implications for a Growth Strategy
• Very weak fiscal situation:
• Rising Debt-to-GDP
• Financed via capital
markets at rising interest
rates
• Balance of payment crisis:
• Underfinanced deficit
• Currency under pressure
Fiscal sustainability
Accelerate Growth Lower interest rates
• Growth cannot depend on
fiscal impulse
• Has to be driven by
exports and investments
that directly or indirectly
increase exports
• Non-tradables will benefit
from the multiplier effects
• Higher female participation
and employment requires
new kinds of female jobs
• IMF Program with
extraordinary access
• Lower interest rates
• Prevent Jordan from
going back to
financial markets at
increasing rates

Index

1) Energy costs have increased with respect to the boom years
NEPCO Costs and Revenues (in US cents per kW sold)
0
5
10
15
20
25 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
in ¢/kWh sold
Cost of energy purchased Revenues
Disruption of
cheap natural gas
from Egypt
Diversification of
supply to lower
cost LNG +
renewables
Increasing of electricity tariffs

Harvard CID – Jordan Visit August 13th - 19th , 2018
0
5
10
15
20
25
30
35
40
45
mar-08
sep-08
mar-09
sep-09
mar-10
sep-10
mar-11
sep-11
mar-12
sep-12
mar-13
sep-13
mar-14
sep-14
mar-15
sep-15
mar-16
sep-16
mar-17
sep-17
mar-18
in ¢/kW
Banking
Mining and quarrying
Telecom
Other industries
Water pumping
Hotels
Household 1500kWh
Household 1000kWh
Household 600kWh
Household 300kWh
Household from 1-160
kwm
Electricity Tariffs over Time
Electricity tariffs have increased, but they are highly
dispersed across industries…

As a result, tariffs are particularly high in the non-residential sector
Non-Residential Electricity Tariffs (¢/kWh)
0
5
10
15
20
25
30
35
40
45
Banking
Telecom
PacificNoncontiguous
Alaska
Malta
Cyprus
Hotels
Liechtenstein
NewEngland
Ireland
NewJersey
Vermont
Greece
PacificContiguous
Portugal
Moldova
NorthDakota
EuropeanUnion
Maryland
Slovakia
DistrictofColumbia
Bulgaria
Kosovo
Estonia
SouthDakota
Minnesota
Luxembourg
Michigan
CzechRepublic
Missouri
Wyoming
WestNorthCentral
MiddleAtlantic
Romania
Arizona
WestVirginia
Slovenia
Turkey
Virginia
Norway
Denmark
Mountain
Serbia
SouthAtlantic
NewYork
NewMexico
SouthCarolina
EastSouthCentral
Tennessee
Texas
WestSouthCentral
Iowa
Louisiana
Montana
Hotels
Water pumping
Other industries
Telecom
Mining and quarrying
Banking

Subsidized energy over the boom years resulted in a manufacturing
sector that is comparatively more intensive in energy usage
Source: UNIDO, 2010
12%
26%
17%
17%
20%
22%
47%
24%
23%
15%
38%
37%
40%
50%
33%
40%
65%
58%
46%
46%
41%
29%
20%
36%
EGY
IRN
SAU
JOR
MAR
LBN
ISR
World
Avg.
Low Moderate High
Share of Manufacturing Value Added by Energy Intensity, 2010

0
2
4
6
8
10
12
14
16
18
mar-08
ago-08
ene-09
jun-09
nov-09
abr-10
sep-10
feb-11
jul-11
dic-11
may-12
oct-12
mar-13
ago-13
ene-14
jun-14
nov-14
abr-15
sep-15
feb-16
jul-16
dic-16
may-17
oct-17
mar-18
Electricity Tariff on Pumping Water (¢/kWh)
The cost of water is tied to the cost of electricity
Source:

Non-Revenue Water (%)
Harvard CID – Jordan Visit August 13th - 19th , 2018
There has been an associated increase of technical and non-
technical losses
40
42
44
46
48
50
52
54
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source:

2) There is a significant pipeline of qualified female labor coming
into the labor market…

Enrollment ratios in tertiary education continue to increase: that is the
segment of female labor with higher representation in the labor force

3) Massive inflows of Syrian refugees with different skill sets…
33Source: 2017 Employment and Unemployment Survey
Jordanian and Syrian men’s labor force Jordanian and Syrian women’s labor force

1.4%
0.3%
2.0%
-0.8%
4.4%
3.1%
1.2%
2.2%
4.7%
4.9%
3.3%
2.1% 2.0%
1.7%
5.6%
3.3%
2.2%
2.0% 1.9%
5.8%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
United Arab
Emirates
Saudi Arabia Lebanon Iraq Egypt
2017 2018 2019 2020
4) Prospects of an improved neighborhood: Better growth prospects
for Jordan’s most important trade and commercial partners in the Gulf
Source: Global Economic
Prospects, World Bank (2018)
”Growth in the Middle East is
expected to accelerate to 3
percent in 2018 and 3.2
percent in 2019, assuming a
moderation of geopolitical
tensions and a modest rise in
oil prices…
“Iraq’s activity is expected to
improve amid more
favorable security
conditions.
• Jordanian Exports to these markets fell 30% between 2008 and 2016, going from $2.6
billion (2000-08) to $2.0 billion (2008-16)
• FDI from these countries fell 40%, from $5.2 billion (2000-08) to $3.1 billion (2008-16)
“Gulf economies will
experience stronger growth
in the region, supported by
easing fiscal adjustment,
infrastructure investment
such as the UAE Expo 2020,
and reforms to promote non-
oil sector activity

4) Prospects of an improved neighborhood: Higher oil prices
Source: International Energy Agency, International Monetary Fund, World Bank.
Average key crude oil spot prices, USD/barrel

Changing conditions: Implications for Growth Strategy
Changing conditions Implications for a Growth Strategy
• Massive inflows of Syrians
• Different skill-sets
• Large pipeline of qualified
female labor coming into market
• Higher electricity costs
• Excess capacity of high-cost
electricity (PPAs)
• Higher cost of pumping water
• Export diversification at first has to occur
along sectors not intensive either in
electricity or water
• Technological breakthroughs allowing for
low-cost renewable generation
• Export excess capacity to neighbors
• Exploit comparative advantage of
high human capital
• Employed by non-tradable sectors spurred
by multiplier effects of export growth
• Improved neighborhood:
+ Demand for Jordan exports
+ FDI into Jordan
+ Remittances
- Higher prices on oil imports
• Higher exports can come from improving
conditions in existing activities
• Diversification: Attract industries that do
not yet exist in Jordan or are still nascent

Index

Growth under Fiscal and Balance of Payments Constraints
Export-led growth
• Improved conditions on
existing activities
Tasks
• Public-private problem
solving to address industry-
specific constraints
• Build systems to learn and
address evolving problems
Productivity
Councils
Strategy
• Diversification: Attract
industries that do not yet exist
in Jordan or are still nascent
• Define sectors/industries
with higher potential
• Identify relevant actors that
are active in the region
• Contact relevant actors and
learn what are the missing
inputs
Investment
Promotion

Identifying export themes that can drive growth in Jordan
> Perspectives on the history of
export growth in Jordan
> Economic complexity analysis
including service industries to
bring together the good work
that has been done already
> Identify potential constraints to
growth in key export themes
> How can Jordan
support the growth of
industries and good jobs
across the export themes?

Export-led growth shocked in 2008 and again in 2014
Source: Atlas of Economic Complexity
Exports in 2016 = $13.6 Billion

Exports per capita: the shocks to goods were felt across the region
(price shocks, demand collapse, trade route closures)

Why does Jordan export like poor countries rather than rich countries?

Harvard CID – Jordan October 15th - 18th , 2018
The answer: Economic Complexity

Jordan is not on a positive ECI trajectory: This is a problem for
export growth, job growth and wage growth

Decomposing ECI: Jordan is better-positioned in less complex sectors

Source: Own calculations using UN COMTRADE data
Jordan’s evolution versus Tunisia
• 2000-08 gains in market share only in
low-complexity / low-wage products
• Requiring importing cheap labor and/or
cheap energy as inputs
• Limited global markets, limited payoff
• Since 2000, diversification into
electronics, machinery, transportation
• Higher wages, larger markets, global
value chains (incl. with France)
• But some stagnation in recent years

Source: Atlas of Economic Complexity
How this looks in the Product Space
Jordan
- Increasing concentration
in Product Space around
agriculture, garments and
some chemical products
- Drop in ECI ranking
from 33rd to 55th
Tunisia
- Diversified into new
products better connected
to discover still more
- Improved ECI ranking
from 69th to 45th

Countries in the region whose export basket once resembled that
of Jordan today, became more complex following different paths
Source: Own
calculations using UN
COMTRADE data

The extensive margin of goods exports has been closed
Country
# of new
products
Exports (2016)
USD per
capita
USD
(billions)
Oman 18 860 3.2
Vietnam 48 545 50.4
Thailand 70 326 21.8
Malaysia 10 149 4.7
Tunisia 44 132 1.5
Iran 6 53 4.3
Jordan 4 31 0.27
Egypt 14 4.2 0.40
Morocco 3 3.6 0.12
Iraq 2 3.3 0.12
New export products, 2000-2016
Products without RCA in 1998-2000 and with RCA in 2014-2016
Source: Own calculations using COMTRADE data
Note: uses both standard RCA and population-based RCA; excludes natural resources.
Product
USD
(millions)
Women’s shirts, knit 31.3
T-shirts, knit 80.7
Derivatives of phenols 122.1
Other inorganic acids 35.8
à Consistent with electricity and
water constraints binding
manufacturing
à Reason why JSF analysis of
net exports revealed few
promising diversification areas
à We need to bring services into
the Economic Complexity
analysis

Source: CID construction using Dun & Bradstreet (2016)
The Industry Space: An early visualization

Source: CID construction using Dun & Bradstreet (2016)
Distance/Density
How far/near a new
industry is to the
existing capabilities
of your economy
Opportunity Gain
How well positioned
a new industry is to
connect you to
higher complexity
industries
Complexity
An implicit measure that reflects the level of wages that an industry can support
Three Key Variables of Complexity Analysis

Analytical Process for Sector Identification / Verification

First Stage of Analysis

Resulting of Economic Complexity: Intensive and extensive
Business and
professional services
1
2
4 5
6
7
8
3
Education services
Healthcare services
Tourism services
Agriculture
Construction
IT and engineering
services
Creative industries
Growth and
Diversification
Themes

Resulting Growth and Diversification Themes (I)
Business and Professional Services
Industry RCA
• Pension, health, welfare funds 0.00
• Advertising agencies 0.11
• Legal services 0.13
• Accounting and auditing 0.20
• Management consulting 0.33
• Insurance, agents and brokers 0.36
• Office of holding companies 0.61
• Credit reporting services 2.19
Education Services
Industry RCA
• Libraries 0.10
• School and education services 1.42
• College, universities and
professional schools
3.46
Healthcare Services
Industry RCA
• Clincs of dentists 0.01
• Clinics of health practitioners 0.01
• Clinics of doctors of medicine 0.02
• General medical-surgical hospital 0.68
• Specialty hospitals 1.14
Tourism Services
Industry RCA
• Museums and art galleries 0.33
• Hotels and motels 0.84
• Travel agencies 1.18
• Passenger car rental 1.49
• Amusement and recreation 1.66
• Airports, terminal services 3.55

Resulting Growth and Diversification Themes (II)
Creative industries
Industry RCA
• Commercial photography 0.00
• Theatrical productions 0.02
• Commercial art and graphic des 0.06
• Publishing and printing 0.08
• TV broadcasting stations 0.41
• Motion pictures and video tape 0.41
• Newspaper publishing/printing 1.22
• Radio broadcasting stations 4.72
IT and Engineering services
Industry RCA
• Information Technology (IT) 0.31
• Design of security systems 0.43
• Engineering services 0.68
Construction
Industry RCA
• Fabricated structural metal 0.68
• General contractors 1.10
• Water, sewage, pipelines 1.10
• Highway and street construction 1.32
• Office furniture 1.33
• Flat glass 1.34
• Cold-rolled steel sheets and bars 1.58
• Wood furniture for offices 1.92
• Elevators and moving stairways 1.96
• Ready-mixed concrete 1.98
• Prefabricated wood buildings and
components
3.26
• Wood kitchen cabinets 3.42

Resulting Growth and Diversification Themes (III)
Agriculture
Industry RCA
• Veterinary services 0.00
• Vegetables and melons 0.00
• Finfish 0.00
• Fish hatcheries and preserves 0.00
• General farms, primarily crops 0.07
• Sheep and goats 0.07
• Dairy farms 0.11
• Livestock and animall spec farms 0.14
• Poultry and eggs 0.23
• Natural and processed cheese 0.25
• Bread and other bakery products 0.44
Agriculture (cont.)
Industry RCA
• Fluid milk 2.00
• Other prepared meat products 2.42
• Dried and dehydrated foods 3.09
• Meat packing plants 3.55
• Ice cream and frozen desserts 4.97
• Poultry slaughtering and process. 9.13
• Crop harvesting (with machine) 12.98
• Chocolate and cocoa products 13.23

Our list of themes/sectors bears some resemblance to those
comprised at Jordan 2025 and previous work done at JIC
Sector / Priority High Med
Business Services ü
Chemicals ü
IT ü
Leisure and tourism ü
Infrastructure (RE
transport, logistics)
ü
Advance engineering ü
Consumer products ü
Financial services ü
Healthcare services ü
Life sciences ü
Agri/food
Creative industries
Education
JIC Investment Promotion (2016)
Sector / Priority
Digital/Business Services
Tourism and events
Transport and logitiscs
Construction/engineering
Financial services
Healthcare services
Life sciences
Education services
Jordan 2025 (2014) Harvard CID (2018)
Sector / Priority
Business/Professional Ser.
IT
Tourism
Construction/engineering
Business/Professional Ser.
Healthcare services
Agriculture and food
Creative services
Education services

Index

Data source: Employment and Unemployment Survey, 2017
With the exception of agriculture and construction, most of the
themes belong to higher-wage sectors that employ Jordanians…
1
1
Numbers in circles correspond to those assigned to sector themes
2
3
5
4
6
6
7
8

Data source: Employment and Unemployment Survey, 2017
… and are more intensive in women employment
The vision:
ü Expand tradable
industries that can
pay good wages
ü That can employ
more Jordanians
ü That can employ
more women
ü This will expand
demand for non-
tradables, resulting in
job growth and wage
growth – including
for refugees

These export themes build on Jordan’s comparative advantage
Note: Red line denotes average for all industries
Source: Employment and Unemployment Survey, 2017
0 10 20 30 40 50 60 70 80 90 100
Water collection, treatment and supply
Processing and preserving of fruit and vegetables
Business support service activities n.e.c.
Television programming and broadcasting activities
Repair of computers and communication equipment
Hospital activities
Architectural and engineering activities and related…
Accounting, bookkeeping and auditing activities
Computer programming, consultancy
Percent of Workers with a College Degree and Above

These export themes can employ high rates of women

High fragmentation of
operators and ownership
(75% individually-owned)
Private sector operators
Government licensing not
tied to quality of service
Operators do not abide by
schedules, aiming to fill up bus
capacity rather than run on
time
Unreliable service
- Very low usage of public
transportation
- Increasing congestion
- High travel time and costs
- Ultimately a tax on work and
school
- Greater constraints for
women
- Informal “solutions”
- Disconnected cities
Erratic travel times
Government sets routes and
fares and awards licenses
Addressing urban transportation problem would support all of
the export themes – Need to escape vicious cycle

0
10
20
30
40
50
60
Male Female
Averagecommutetimeinminutes
Average commute times for Jordanians by gender and marital status
single married
Source: 2016 Jordanian Labor Market Panel Survey
This is critical for a gender-inclusive growth strategy

Egyptian
Syrian
Iraqi
Other Arab
Non-Arab
-.4 -.2 0 .2 .4
Wage premium
(additional % to wage)
Wage Premium for Non-Jordanian
Professionals
Note: Wage premium calculated through a Mincer regression that controls for education levels, experience, gender, and
industry fixed effects. Estimate and 95% confidence interval are shown.
Source: Own calculations using Employment and Unemployment Survey, 2017
Egyptian
Syrian
Iraqi
Other Arab
Non-Arab
-1 0 1 2 3
Wage premium
(additional % to wage)
Wage Premium for Non-Jordanian
Technicians & Associate Professionals
More complex themes will require firms to have easier access to
global knowhow and talent, to complement the skills of Jordanians

How can Jordan both have and need skills?
Substitutes
Complements

• Several high-skill industries and occupations are closed to foreigners. As of 2016
regulations, this includes:
o All engineering specialties
o All medical specialties
o All education jobs, regardless of specialty
o Except under agreement by the Civil Service Bureau and relevant boards/unions
o Regulations also discourage hiring in many other occupations, including:
administrative duties, accountants, communications jobs, and the electricity sector
• Hiring of Non-Arabs is also discouraged (1996 Labor Law)
• This keeps Jordan’s most promising industries small. When the best companies need
to access top global talent, they tend to move to Dubai.
• Growth strategy requires easing the restrictions on high-skill immigration and
using a number of specific visa categories to leverage high-skill immigration:
talent visas; visas for professionals, investors, entrepreneurs and multinationals employees;
as well as other incentives (permanent residency, a path to citizenship, etc.)
The status quo restricts those who are complements

Jordan can draw on proven tools used by other countries
UAE Israel United States Singapore
ü Easy processes in free
trade zones to sponsor
foreign employees
ü In 2017, announced
new special visas to
attract more foreign
professionals to
accelerate innovation
ü Has a path to residency
for investors
ü 90% of its population
is foreign-born
ü Immigration was
critical to the
creation of the tech.
industry
ü Incubator programs
and relaxing of its
visa regime to
address shortages of
high-tech workers
ü Over 22% of its
population is
foreign-born
ü H1-B visa program
allows US-based
companies to hire
globally.
Note: Only 43% of
STEM workers in
Silicon Valley are US-
born and only 18%
were born in California
(a state with a
population of nearly 40
million).
ü Investor visas
ü Entrepreneur visas
ü Visas for people
with unique skills
and experience
ü Over 46% of its
population is
foreign-born
Activist Immigration Policies to Attract Talent

Several export themes require little energy and water
Export Themes
Energy
Intensity
Water
Intensity
Business and Professional Services Low Low
Engineering and IT Services Low Low
Education Services Low Low
Creative Industries Low Low
Healthcare Moderate* Moderate*
Tourism Moderate High
Construction Services Moderate High
Agriculture and Food Moderate High
* Assumed levels. Quantitative analysis not yet conducted for Healthcare sector
Source: Energy Intensity originally provided by UNIDO, expanded to service industries by the Board of Investment, Sri Lanka.
Water Intensity provided by the Board of Investment Sri Lanka. See BOI (2018)

An Electricity Strategy to Expand the Productive Frontier
• Increase capacity utilization through electricity exports to Syria and
Lebanon (flip on the switch)
• Invest now in low-cost generation:
o By using cheap gas from the region (Egypt and Israel)
o By capitalizing on Jordan’s comparative advantage in renewables
à Allow high-intensity users to produce their own electricity
• Develop the regional market as a means support the exit from expensive
PPAs (by selling the expensive PPA energy abroad).

Index

Productivity
Taskforces
Investment
Promotion
Two Tools to Deliver Export-Led Growth
Investment Promotion:
An active approach to attracting business investment targeted
to diversify Jordan’s exports and provide more good jobs.
Productivity Taskforces:
Improving public-private problem solving to
help Jordan’s most promising industries grow.

Productivity
Taskforces
Investment
Promotion

Business Services
Data source: fDi Markets, Financial Times (as of March 2016)
16
• 984 Companies with FDI in region
since 2008 but none in Jordan
o Top Source Countries:
§ UK: 262 (27%)
§ US: 232 (24%)
§ France: 52 (5%)
§ Germany: 41 (4%)
§ UAE: 40 (4%)
§ India: 36 (4%)
• 35% of projects targeted to serve the
regional market (versus 21% domestic
market, and 43% unspecified)
Avg. jobs = 21
Avg. investment
= $10 million

Software & IT Services
10
§ US: 131 (31%)
§ UK: 41 (10%)
§ France: 39 (9%)
§ India: 36 (8%)
§ Germany: 27 (6%)
§ UAE: 12 (3%)
regional market (versus 17% domestic
market, and 30% unspecified)
Avg. jobs = 45
Avg. investment
= $12 million

Headquarters
4
§ US: 53 (24%)
§ UK: 38 (17%)
§ Germany: 16 (7%)
§ France: 11 (5%)
§ Switzerland: 11 (5%)
§ Japan: 7 (3%)
regional market or global market
Avg. jobs = 93
Avg. investment
= $24 million

Tourism
14
Avg. jobs = 152
Avg. investment
= $109 million
Avg. jobs = 227
Avg. investment
= $66 million

Healthcare
Avg. jobs = 148
Avg. investment
= $24 million
Avg. jobs = 50
Avg. investment
= $23 million

Education Services
Avg. jobs = 77
Avg. investment
= $23 million
Avg. jobs = 23
Avg. investment
= $7 million
1

Construction Services
2
§ UK: 38 (32%)
§ US: 26 (22%)
§ Netherlands: 7 (6%)
§ Spain: 7 (6%)
§ UAE: 5 (4%)
• 40% of projects targeted to serve
the regional market (versus 23%
domestic market, and 35%
unspecified)
Avg. jobs = 31
Avg. investment
= $8 million

A Massive Pipeline of UK-to-UAE Investment
Note: Companies listed are all UK-based and known to have invested in the UAE but not in Jordan based on fDi
Markets (2003-2016), select categories
** This is an
opportunity
for the
London
Conference.
But it requires
both
preparation
and follow-
through.

Jordan already has a strategy and a plan. Is it working?

Productivity
Taskforces
Investment
Promotion

What are Productivity Taskforces?
Source: Peru’s Ministry of Production (2016), Ghezzi (2016)
• They are temporary, public-private working
groups that are formed to enhance
productivity for a specifically targeted vertical
sector (such as forestry, textiles or aquaculture)
or horizontal factor of production (such as
logistics or capital markets).
• They to identify what the government is
doing that it shouldn’t (as excessive red tape,
bad regulations, excessive tax distortions, etc.)
and the things that is not doing but it should
(absent regulations, inadequate public services,
missing infrastructure, etc.).
• They provide an order of priority for
policymaking, not concentrating in the
profitability of the firms but on their
productivity.

Index

Elements of a Growth Strategy
TRADABLES

TRADABLES

TRADABLES
PUBLIC ADMINISTRATION
NON-TRADABLES
FISCAL CONSTRAINT TO GROWTH
BALANCE OF PAYMENTS
CONSTRAINT TO
GROWTH

TRADABLES
LOW
SKILL
HIGH
SKILL
Jordanian
Non-Jordanian
Non-Jordanian
Jordanian

TRADABLES
LOW
SKILL
HIGH
SKILL
Jordanian
Non-Jordanian
Non-Jordanian
Jordanian
94
Refugees &
migrant workers
High Cost
Electricity
Water
Scarcity
Regional Markets
& Trade Routes
Urban Mobility Costs
(Affecting all Tradable goods)
Underlying constraints
Pipeline of highly
educated labor
(esp. women)
Largely
constrained
And also
by…

TRADABLES
LOW
SKILL
HIGH
SKILL
Jordanian
Non-Jordanian
Non-Jordanian
Jordanian
95
Refugees &
migrant workers
High Cost
Electricity
Water
Scarcity
Regional Markets
& Trade Routes
(Affecting all tradable goods)
Pipeline of highly
educated labor
(esp. women)
High-skill
immigration
reform
Engineering and IT Services
Education Services
Healthcare
Tourism
Creative Industries
Agriculture and Food
Export Themes
Low cost electricity
strategy
Procurement to
spur innovation
Investment
Promotion 2.0
Productivity
Taskforces

TRADABLES
LOW
SKILL
HIGH
SKILL
Jordanian
Non-Jordanian
Non-Jordanian
Jordanian
96
Refugees &
migrant workers
High Cost
Electricity
Water
Scarcity
Regional Markets
& Trade Routes
(Affecting all tradable goods)
Pipeline of highly
educated labor
(esp. women)
High-skill
immigration
reform
Engineering and IT Services
Education Services
Healthcare
Tourism
Creative Industries
Agriculture and Food
Export Themes
Low cost electricity
strategy
Procurement to
spur innovation
Investment
Promotion 2.0
Productivity
Taskforces
More
Themes

TRADABLES
NON-TRADABLES
FISCAL CONSTRAINT TO GROWTH
BALANCE OF PAYMENTS
CONSTRAINT TO
GROWTH
GROWTH ACROSS THE
EXPORT THEMES;
MORE JOBS, BETTER
WAGES FOR JORDANIANS
INCREASED DEMAND;
JOB & WAGE GROWTH
(INCLUDING FOR
REFUGEES)

TRADABLES
NON-TRADABLES
TAX
REVENUE
BALANCE OF PAYMENTS
CONSTRAINT TO
GROWTH
GROWTH ACROSS THE
EXPORT THEMES;
MORE JOBS, BETTER
WAGES FOR JORDANIANS
INCREASED DEMAND;
JOB & WAGE GROWTH
(INCLUDING FOR
REFUGEES)
FISCAL SUSTAINABILITY & BETTER PUBLIC SERVICES

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Building Jordan's Growth Strategy

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