A few days ago, in a workshop sponsored by the Friedrich Neumann Foundation and the Young Entrepreneurs Association, Nasim Barham, a professor of economic geography at the University of Jordan, delivered an address based on yet another remarkable piece of research he has conducted on entrepreneurship and industrial investments in Jordan.
He directed a survey that covered 92 industrial firms in Jordan to shed new light and establish realistic and useful findings regarding industrial investments in Jordan. In testimony to the success of all the so-called incentives for investments in Jordan, the number of joint ventures in industrial enterprises is only 200.
Hardly a success! Foreign capital in these firms represented 11.6 percent of the total investment or JD88.6 million, with Arab investments comprising the majority of the investments — 10.6 percent of capital is Arab and 1.4 percent is non-Arab.
Iraqi and Syrian investments were in first and second place at 26 percent each of all Arab investments, followed in third place by Lebanese investments at 14.5 percent, Saudi at 8 percent and Egyptian at 7.2 percent. Evidently, there is an implication that Jordan is viewed as a neighboring haven by Arab investors from countries that have suffered from turmoil in the past. Moreover, when the investors were asked why they selected Jordan, 37 per cent responded they chose it because of its politically stable climate, 31 percent because of its central location and a mere 13 percent answered that their choice was affected by the available investment incentives.
The policy implication for Jordan is to stress its stability to investors, market its investment climate regionally first, and focus on attracting investors from the above countries through missions and specialized campaigns because of a greater likelihood of success. Also, we should revise investment incentives for two reasons: the present division of Jordan to three investment regions for tax breaks is old school and does not work. The whole idea of offering investors more benefits in one area rather than another is to develop it.
However, investors may prefer to pay more taxes while benefiting from the infrastructure or markets in a developed area instead of receiving incentives in the underdeveloped area. Second, as the research underlines, these incentives are less than adequate. One workshop participant compared Jordan's investment incentives to those offered by Egypt and pointed out several areas where Jordan could improve incentives. Therefore, investment promotion groups need to revise existing incentives and become more `with' it.
But why did Jordanian investors seek out joint-venture partners? 26 percent said they sought investors because they wanted to expand; 25 per cent wanted increased profitability, possibly because the cost of borrowing was too high; 15 per cent for additional expertise and know-how; 11 percent to acquire new technology; 10 percent to access capital resources; and 7 percent to gain entry into new markets. In other words, the focus of these investors is the local market and not export purposes, which does not come as a surprise since the home markets of the Arab partners are not necessarily stable, highly protected, and similar to Jordan's market.
How did the joint venture partners find out about each other? Through the chambers of trade and industry first and then through family and friends.
Surprisingly, none of the investors mentioned the traditional government establishments that brandish investment figures as if they have been behind them. And how do the Arab investors view the different departments? Unfortunately not too well. Two thirds have found the investment promotion effort acceptable, while slightly over half praised the export promotion and over 50 percent expressed dissatisfaction with the Customs Department, which should not be surprising given that Jordanian consumers and producers are overburdened with heavy taxes and duties.
The results and lessons learned from professor Barham's work should not go unnoticed. Such work should be at the core of any policy analysis because it is recent, factual and straight to the point. Many thanks to the researcher, the YEA and the Friedrich Neumann Foundation for a job well done. — ( Jordan Times )
By Yusuf Mansur
© 2000 Mena Report (www.menareport.com)