Guidance

Overseas business risk: Jordan

Updated 31 March 2021

Below is information on key security and political risks, which UK businesses may face when doing business in Jordan.

1. General Overview

Jordan is a rapidly developing country with lots of potential. Due to regional instability over the past decade, Jordan has become an attractive home base for businesses in the MENA region. The country is regarded as a stable nation, and as a moderate beacon in a volatile region. In addition to its main natural resources, phosphate and potash, Jordan relies on its educated population, its political stability and its integration with world and regional markets.

Since 2012, Jordan has experienced a large influx of 1.4 million Syrians, mainly refugees (estimated at 655 thousand), which has been a source of economic, social and demographic pressure. Amidst this challenging environment, Jordan remains as an emerging small-scale economy, undergoing a modest pickup driven by growth in the services, tourism, trade sectors. Donors and International Financial Institutions work closely with the Government of Jordan on Economic Reform. Jordan’s ranking in 2019 reached a record low of 75 which was averaged at 104.92 in previous years.

Jordan’s current refugee population is estimated to be 1.1 million, including Syrians, Iraqis, and others. While its Constitution provides protection against extradition for political asylum seekers, Jordan has not enacted domestic legislation to deal with refugees and is not a party to the 1951 Convention on Refugees or its 1967 Protocol. The legal instrument that provides the legal framework for the treatment of refugees is a 1998 Memorandum of Understanding signed between Jordan and the UNHCR. In the absence of a legal framework to deal with refugees, the Jordanian policies in this respect are unclear. The UNHCR asserts that Jordan provides asylum for many Syrians, Iraqis, and others, recognizes them as refugees, and has granted Syrian refugees in host communities access to health, education, and other services.

Lack of inclusive economic growth, has left Jordan vulnerable to income shocks. Jordan entered COVID-19 crisis in a difficult macroeconomic position. In 2019, GDP growth per capita was around 0.5%, inflation slowed substantially, tax revenues were below 16% of GDP and the fiscal deficit was almost 5% of GDP and the current account deficit almost 3% of GDP (though external imbalances had been declining). Jordan sustained these deficits through capital inflows, most importantly from worker remittances, development assistance and debt. Public debt has increased to meet spending demands. Jordan’s economic growth is forecasted at 2.5% in 2021 according to the Minister of Finance. Debt management and unemployment continue to be major challenges to Jordan’s economy. Economic Resilience Plan is expected to be released in 2021.

2. Political Overview

Jordan has a constitutional monarch. King Abdullah II is the ultimate decision-making authority and has the power to dissolve parliament and appoint the Prime Minister. That said, the popularly elected national assembly has some input into the policy making process. The country’s political power structure is divided along lines of tribal affiliation as opposed to party politics.

Legislative power rests in the bicameral National Assembly. The National Assembly (Majlis al-Umma) has two chambers. The Chamber of Deputies (Majlis al-Nuwaab) elected for a four-year term in single-seat constituencies. The Assembly of Senators (Majlis al-Aayan) members are appointed by the king for an 8-year term. The Assembly of Senators is responsible to the Chamber of Deputies and can be removed by a “vote of no confidence”. The ongoing Arab-Israeli conflict and regional political developments faced by Jordan’s neighbouring countries have had a huge impact on the country’s economy, as a large number of Palestinians, Iraqis and Syrians fled into the country, which in turn has stretched the government’s finite resources.

Jordan remains a key partner for the UK as it sits geographically between Iraq, Israel, Syria and Saudi Arabia.

3. Economic Overview

Jordan’s multitude of Free Trade Agreements with a wide range of countries and regions has created a vehicle for both domestic and economic development, as well as greater integration with the global economy. In 2000, Jordan ascended to the WTO. Trade agreements include Free Trade Agreements with the United States of America, EFTA, EU Association Agreement, Arab Mediterranean Free Trade Agreement and soon UK-Jordan Association Agreement.

In light of the challenges, Jordan affirmed to continue developing its national economy and plan its future direction concurrently with efforts to secure decent living standards over the next ten years. This has brought about the Jordan 2025 Vision, an economic blueprint that targets the following:

• enhancing financial and monetary policies and assuring their consistency
• improving economic competitiveness
• enhancing values of high productivity and self-reliance to realize sustainable and comprehensive development

Jordan’s top exports in first quarter 2020 included potash, textiles, pharmaceuticals, phosphates, and fertilizers. Its main imports included cars, petroleum, pharmaceuticals, fabrics, manufactured goods, and machinery.

Jordan has successfully attracted significant investments, and this has resulted in the creation of Development Zones in key locations across the country. This offers specialized business clusters, reliable infrastructure, proximity to resources and markets, in addition to a package of fiscal incentives. Jordan has traditionally been seen as a hub for doing business in Iraq. Most leading Iraqi businesses have their headquarters in Jordan, and for the first time since 2015, Jordan has restored its trade links with Iraq by opening its main border crossing with the country in September 2017. This has improved and increased industrial exports while reviving both countries’ trading relationship.

COVID-19 Impact

Economic activity decelerated during Q1-2020. Jordan’s real GDP growth slowed down to 1.3% in Q1-2020 compared to 2.0% in Q1-2019. Growth on the supply side was driven by the services sector, while industry and agriculture sectors’ contribution remained nominal. Headline inflation remains muted. CPI inflation during 8M-2020 stood at 0.5%, largely reflecting substantial softening in global oil prices, while this impact is somewhat contained by a recent surge in food prices.

Commodity price shifts and changes in goods trade volumes impacted many economies through their external sectors before the pandemic reached them. The IMF expected Jordan’s current account to widen to 7% of GDP in 2020 from 2.3%. Lower international energy prices an external shocks were major causes and imports of consumer goods also contracted sharply. Current expenditure rose 2.6% above plans in the first 8 months as the GOJ prioritised social spending. But it was also driven by an 11.3% increase in interest payments, continuing a worrying trend of double-digit annual increases. A public sector wage increase was delayed until 2021 to provide room for pandemic response and capital expenditure reached a historic low.

Jordan has been making progress and putting emphasis on Infrastructure projects within the past 2 years. This has constructively started with the formation of the PPP unit (late 2019) and their work with international financial institutions and donors. A priority list has been identified.

Jordan’s developing economy has major market opportunities in its energy, digital economy, education, services and healthcare sectors with a focus on emerging sectors like Agri-Tech and Cyber Security. Technology sector is the third largest contributor to Jordan’s economy and one of the fastest growing with revenues accounting for 12% of Jordan’s GDP. There are more than 500 companies in telecom, IT, online and mobile content, business outsourcing, and on-line gaming development. Jordan has more than 9 million mobile phone subscriptions. The telecommunications sector is liberalised with the internet and smart phone penetration rate at 103% and 100%, respectively.

Jordan is investing heavily in alternative and renewable energy, including wind and solar. Jordan’s 2020-2030 strategy indicates a plan to increase reliance on local energy resources to produce electricity and reach 48.5% (2030) vs. 20% (2020). The latter will be in conjunction with decreasing reliance on natural gas to generate electricity. Main areas of focus are:

i) transform into a smart grid which in turn can

ii) help in applying dynamic tariff and pricing and

iii) draft and effectively apply energy storage regulations

The renewable energy market for equipment and services is around £29 million. As for the oil sector, Jordan imports more than 90% of its market need. More than half of Jordan’s consumption is imported in crude format and is transferred to the Jordan Petroleum Refinery for processing & producing different derivatives. The cost of energy in Jordan is relatively high to neighbouring markets that is hindering the economy from taking strides towards full independency. The Energy Strategy aims to make a positive impact on production and the economy as a whole.

Jordan’s healthcare services and facilities are regionally recognized as advanced. Existing hospitals are expanding and renovating their facilities, while new private and public sector facilities continue to be established. As for the e-health programs, they are currently piloted in major hospital and healthcare units around Amman, and are based on electronic health solutions. As such, Jordan’s medical tourism is considered to be in the top five globally by the World Bank, and draws large numbers of patients to Jordan as a medical destination, generating over £850 million in revenue.

With more than 70% of Jordan’s population under the age of 30, and a relatively high population growth rate, the country has a strong and diverse talent pool, though youth unemployment remains high. In addition, English is widely spoken, especially within the business community and the younger generation, so it is an attractive market for UK companies. Covid-19 has negatively affected unemployment in the country as it has reached 24% in 2021 according to the Department of Statistics.

UK-Jordan Association Agreement

The UK has signed an association agreement with Jordan. Jordan’s domestic processes mean that the agreement will not be in effect until March 2021. From 1 January until the agreement is in effect, trade with Jordan will take place on WTO terms. This guidance provides information on aspects of trade that will change as soon as the UK-Jordan association agreement takes effect. It is for UK businesses trading with Jordan.

4. Business and Human Rights

The Jordanian Constitution and Human Rights Treaty ratifications are designed to protect the Free Trade Agreement (FTA) with the United States that committed the country to uphold core labour standards. Human Rights Watch reported that although there has been on-going efforts on reforms of the laws and regulations, abuses against basic rights such as freedom of expression persisted. According to Freedom House, Jordan’s ranking at World Report in 2020 is 37 out of 100 and classified as Partly Free.

In 2009 Better Work set up offices in Jordan to implement a partnership between United Nation’s International Labour Organization (ILO) and the International Finance Corporation (IFC) that aims to reduce poverty by expanding decent work opportunities in Jordan’s apparel industry thorough improved working conditions and increased competitiveness. Their main clients are textile factories based in Jordan’s Qualified Industrial Zones. Their goal is to enhance economic performance at the enterprise level as well as improve compliance with Jordanian labour law and international labour standards. Better Work Jordan also works on improving access to Jordan’s job market for Syrian refugees based in Jordan as part of Jordan Compact Plan.

Child labour is an issue that the Jordanian Government is actively trying to tackle. It is encouraging children to attain the right education and attend school, rather than start working at an early age. This remains as a problem area, particularly in the economically deprived areas of the country.

Whilst there has been some improvement in the area of women’s rights, the female labour participation rate is still low (lowest in the Middle East) and female unemployment rates are still high.

5. Bribery and Corruption

Over the past decade, Jordan has taken major steps to foster a business-friendly environment. As such, bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions, which form part of the offence, take place in the UK or elsewhere.

Please see the World Bank’s rankings on ease of doing Business and the Transparency Index’s Corruption Perception Index

6. Terrorism Threat

Information on political risk, political demonstrations and terrorist threats in available on the FCDO Travel Advice

7. Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

See also our safety and security advice on our travel advice

8. Intellectual Property

Jordan has worked in close coordination with Arab governments and multilateral organizations on introducing an efficient Intellectual Property (IP) system that has brought up significant changes to the region.

IP protection has been reinforced through Jordan’s continued involvement with international organisations namely; World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO); with NGOs such as the International Trademark Association (INTA), International Association for the Protection of Intellectual Property (AIPPI), International Federation of Intellectual Property Attorneys (FICPI). In addition to relevant NGOs such as the Arab Society for Intellectual Property (ASIP) and the Licensing Executives Society-Arab Countries (LES-AC).

9. Organized Crime

Organized crime in Jordan involves a little more than small-scale smuggling. The country is not a trans-shipment point for drugs and foreign firms working in Jordan should expect little or no contact with organized crime.

10. Contact

Contact the Department for Business and Trade (DBT) team in Jordan for further information.