Major Economic Indicators
- Jordan’s economy expanded by 2.5% in 2015, easing from 3.1% in 2014.
- Consumer price continued to fall in 2015 to result in a mild deflation of 0.9% in 2015.
- The unemployment rate went up by 1.2% to 13.1% in 2015, with unemployment much more prevalent among university graduates.
- Jordanian exports dropped by 15.4% in 2015 while imports plunged by 11.4%. The country recorded a trade deficit of US$10.2 million in 2015.
- In 2015, Hong Kong’s exports to Jordan surged 30.2% to US$177 million, while imports from Jordan grew 6.9% to US$24 million.
Current Economic Situation
Jordan is a fairly developed, yet small economy in the Middle East, with a relatively high concentration of services in its economy. Services represent about 67% of the Jordanian economy, with industry and agriculture respectively accounting for about 30% and 3% of GDP. Major manufacturing industries in Jordan are textiles and garments.
In recent years, Jordan has emerged to be a refuge for Syrians to escape from their country’s military conflicts. Some 1.4 million of Syrian refugees have fled to Jordan, which are expected to cost the Jordanian government US$2 billion annually.
Despite the heavy financial burden emanating from the influx of Syrian refugees, Jordan’s economy managed to expand by 2.5% in 2015. The growth was mainly driven by investment in electricity and water, finance and insurance services and mining and quarrying.
Average consumer prices reversed the uptrend in 2014 and resulted in a minor deflation of 0.9% in 2015. Yet, renewed inflationary pressures are expected, as demand due to the local people as well as refugees will remain strong. Meanwhile, unemployment remains high, reaching 13.1% in 2015 after 11.9% in 2014.
The textile and garment sector is important to the Jordanian economy, as it accounts for one-third of the country’s export earnings and creates 60,000 jobs. Jordan is gradually developing into a garments manufacturing hub for international brands including Calvin Klein and Tommy Hilfiger. These garments are shipped to overseas markets such as the US, which absorbed US$1 billion worth of garments from Jordan in 2014.
Jordan is promoting the country as a regional information and communication technology (ICT) hub. Jordan’s National ICT Strategy (2013-2017) has stipulated targets to be reached by 2017: internet penetration (85%), revenue (US$3.15 billion), investment (US$450 million) and employment (20,000 jobs). The kingdom is also keen to develop ICT sub-sectors such as Information Technology Enabled Services (ITES) and Business Process Outsourcing (BPO).
Tourism is another major industry for the Jordanian economy. However, Jordan’s inbound tourism has been adversely affected by instability in neighbouring countries, with tourism receipts decreasing by 7% to around US$4.1 billion in 2015. Visitor arrivals dropped further from 7 million in 2014 to 6.4 million in 2015.
About half of Jordan’s total exports are shipped to the Arab countries, with Saudi Arabia, Iraq and the UAE as the major export markets in the Middle East. The US is another major export market for Jordan and takes up almost 20% of the latter’s exports. The Jordanian dinar is pegged to the US$, which is set at a target rate of JD0.709 to US$1.
Geopolitical instability in the region has a serious impact on Jordan’s exports to Iraq and Syria. Jordanian exports to these two markets dropped by 37.2% year-on-year (YOY) in the first eight months of 2015, as total exports fell by 6.7% YOY during the same period.
Qualified industrial zones
In 1997, Jordan, the US and Israel reached an agreement on establishing “Qualified industrial Zones” (QIZs) in Jordan. QIZs are designated areas where manufactured products in the zones enjoy duty-free access to the US market with no quota limit, provided that specific requirements on the rule of origins have been satisfied. Importance of QIZs has declined in the wake of the Jordan-US Free Trade Agreement concluded in 2001, under which qualified Jordanian goods entering the US market are both duty- and quota-free. The US is Jordan’s largest export market, absorbing Jordanian exports valued at US$1.2 billion in 2014.
Jordan mainly imports oil, machineries and manufactured products from the Saudi Arabia, China and the US. Owing to lower oil prices, imports plunged by 11.8% in 2015, thus helping Jordan narrow its trade deficits despite the decline in exports caused by regional conflicts.
In recent years, Jordan has further opened up its economy to attract foreign direct investment (FDI). The Investment Promotion Law provides tax exemption on fixed assets from foreign investors for three years and duty-free import of raw materials into Jordan. Further, the Jordanian government has been active in creating free trade zones (FTZs) including the Aqaba Special Economic Zone. More details of the investment regulations and incentives in Jordan can be found on the website of Jordan Investment Board.
Foreign direct Investment
Despite regional instability intensifies, Jordan has recorded stable FDI inflow in recent years. Jordan’s cumulative FDI reached US$28.73 billion as at end-2014, up 7.5% from US$ 26.67 billion the year earlier. Turkey, the US and France were the major FDI sources for Jordan. China’s cumulative FDI in Jordan reached US$31million as at end-2014, increasing 32% YOY.
Jordan joined the World Trade Organisation in April 2000, and has been pursuing an open trade regime.
Jordan has bound its MFN tariffs on almost all products and tariffs are levied on an ad valorem basis. The applied MFN tariffs generally range between 0 and 30%, but some products such as lighters, tobacco products, alcohol, and alcoholic beverages face a tariff up to 200%. Jordan has reduced its simple average applied MFN tariff rate from 14.7% in 2000 to 10.2% in 2014, with average rates of 17.4% for agricultural products (WTO definition) and 8.9% for non-agricultural products. Customs duties are assessed on the basis of the c.i.f. value of imports on the registration date of the customs valuation form. In 2015, there were 6,767 tariff lines in Jordan's applied MFN tariffs, out of which 33.7% of agricultural products and 56.4% of non-agricultural products were duty-free.
With the challenges to Middle East and European countries brought by the Syrian refugees, the EU is engaging in deeper diplomatic and trade cooperation with Jordan. In 2016, the EU committed to increasing aid to Jordan and easing origin rules for Jordanian goods. This allows products with a minimum Jordanian content of 30% to enter the EU under the EU-Jordan FTA over the next ten years. Such change offers positive long-term prospects for Jordan’s exports to the European market.
Jordan has not applied anti-dumping measures or countervailing duties, though safeguard measures are in place. Greater details of customs regulations can be found on the website of Jordan Customs.
Free trade agreements
Jordan has signed preferential trade treaties, including a number of free trade agreements (FTAs) with its major trading partners.
Jordan has signed FTAs with the US, Canada, Turkey, MERCOSUR (which includes Argentina, Brazil, Paraguay and Uruguay), Egypt, Morocco, Tunisia (the Agadir Agreement), the EFTA states (which includes: Switzerland, Norway, Iceland and Liechtenstein), and Singapore. Jordan is a member of the Pan Arab Free-Trade Area (PAFTA) Treaty, with members including: Egypt, United Arab Emirates (UAE), Bahrain, Jordon, Tunisia, Saudi Arabia, Sudan, Syria, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Morocco, and Yemen. These treaties are in force.
Jordan has an associate agreement with the European Community, and this agreement provides for the establishment of a free trade area. Free trade area between Jordan and EU is in the progress of negotiation.
Jordan concluded an Air Services Agreement with Hong Kong in 2004.
Hong Kong's Trade with Jordan
Hong Kong's total exports to Jordan in 2015 surged 30.2% YOY to US$177 million. Major export items to Jordan included telecom equipment and parts (US$62 million, 53.1% of total, +122.7%), knitted or crocheted fabrics (US$19 million, 10.5% of total, +1.9% YOY), and woven cotton fabrics (US$14 million, 8.1% of total, -10.2% YOY).
In 2015, Hong Kong's imports from Jordan were up by 6.9% YOY to US$24 million. Major imports items were watches and clocks (US$18 million, 64.4% of total, +22% YOY) and other articles of apparel, of textile fabrics (US$43 million, 17.4% of total, +24.3% YOY).
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.