Are SMEs the cure-all solution for Jordan's economy?
As you walk down the bustling, cosmopolitan center of Amman, you can see cafes and small businesses thriving on the mix of locals, ex-pats and tourists. But the busy streets belie the real story: a Jordanian economy struggling with long-term problems. Whilst the economy in the Kingdom is growing at 3% - a rate that many Western economies would be green with envy over - all is not well in the arid, natural resource-less nation.
“The economy of Jordan is needing a kick start”, said one delegate, speaking privately to us at the recent Jordan Economic Breakfast Series co-hosted by the Young Entrepreneurs Association and the Friedrich Naumann Foundation. The delegate explained that some international donors are not pleased with the rate of growth. According to him, much more needs to be done to create a viable economic system.
Delegates received a keynote speech from HE Yarub Qudah, CEO of the Jordanian Enterprise Development Corporation (JEDCO). Qudah explained the role the corporation plays in promoting Small and Medium sized Enterprises (SMEs) in Jordan - which make up 97% of the Kingdom’s overall business. They also contribute more than half of Jordan’s GDP and three quarters of all jobs created, according to Qudah.
However, whispers of dissent remain and the progress of SMEs does not tell the full story of the Kingdom’s economy. The public sector in Jordan is one of the country’s largest employers, as in many Middle Eastern states. It’s not only the stability of a government job that appeals to graduates and the unemployed: there is also a level of prestige attached to it that you don’t find in private companies.
With this in mind, JEDCO are suggesting that the Jordanian government promote private business as an alternative to the over-subscribed public sector. At the Economic breakfast, not everyone was convinced. Although most agreed that JEDCO’s aims were laudable, many thought them unfeasible without structural reform.
The banking system in Jordan is one of the biggest barriers to SMEs as it remains incredibly risk averse, making it difficult for start-ups to gain the much needed starting capital, even if JEDCO are able to offer a minority stake out of their $300 million 2012-2016 budget.
Other delegates explained that whilst supportive of JEDCOs aims, the reality for a business in Jordan, especially outside the more affluent areas of Amman, is to confront a local economy affected by the pressures of global and regional financial climates. So until the Jordanian economy is more stable and structural reforms are made, Qudah’s idea of the SME-lead economy is one that will sadly remain a mirage in the Jordanian desert.
By Matthew Woodcraft
- Saudi SMEs v overseas enterprises. Who is the winner?
- Why does inflation continue to rise in the UAE?
- With Sisi likely to take over, how will Egypt's 'military economy' look like?
- Will future talks between the IMF and Egypt help the country's economy?
- Is Iran's economy already thriving amidst limited sanctions relief? Apparently so!