Fears grow for Jordan's economy

Published October 7th, 2012 - 06:39 GMT
Industry leaders are fearful over the Jordanian economy
Industry leaders are fearful over the Jordanian economy

Fearing a lengthy economic slowdown in Jordan, leaders of several sectors want policy makers to draft long-term plans to stimulate business activity.

Although they partly blame global and regional circumstances for the deceleration, representatives of construction contractors, real estate, retail and auto sectors insist that government decisions have also played a key role in brining difficult times to the Kingdom.

Business leaders point to growth rates which over the past four years were slashed by half.

Construction

Ahmad Tarawneh, president of the Jordan Contracting Construction Association (JCCA), described the past four years as the most difficult, warning that a prolonged slowdown would destroy the sector.

Tarawneh told The Jordan Times that the volume of projects used to be carried out by local construction firms had declined by 80 per cent.

Government spending cuts on capital projects have battered contractors, he said, noting that available construction schemes in the Kingdom are enough for four companies only.

According to the JCCA chief, the situation is bad enough that local firms are searching for business outside the country.

Tarawneh called on the government to give special treatment to the sector that groups around 2,000 construction firms, nearly 150 of which are considered large-sized, and is a major engine for economic activity supporting over 120 professions.

Real estate

Housing sector representatives told The Jordan Times that the real estate market is currently facing a decline in activity as authorities cancelled incentives that helped the property market recover after it was hit by the global financial crisis.

Kamal Awamleh, president of the Housing Investors Society (HIS), said demand on residential apartments slumped sharply this year due to cancelling previous decisions to exempt buyers from registration fees and taxes.

In addition to abolishing incentives on property sales, the sector may face further decline in the future as construction costs rise due to higher prices of building material, he added.

Government bureaucracy that delay the implementation of new projects is also a concern for developers, Awamleh noted.

Zuhair Omari, former president of HIS, agreed that government incentives helped the industry avoid the recession. However, he mentioned that cancelling the tax exemptions had negatively affected the purchasing power of potential buyers.

“The real estate sector did not fully recover from the repercussions of the global economic crisis, and decision makers should have been aware of that,” Omari emphasised.

Awamleh and Omari urged authorities to reinstate grant exemptions to homebuyers as the real estate sector, according to them, is the growth engine for over 35 other sectors.

Retail

According to Salah Hmeidan, president of the Garment Traders Association, the past four years have been the worst for the clothing retail market.

“The sector has been suffering a drop in sales for almost 10 years, but the past four years are the worst,” Hmeidan insisted.

The slowdown, according to Hmeidan, “is a result of accumulated mistakes made by policy makers, who are not working to put an end to the country’s economic woes”.

The incomes of the majority of Jordanians are being eroded by increasing prices of essential commodities, which turn apparel products into luxury goods, he said

Recent government decisions, such as amending the tenants law and raising custom fees on imported garment, forced traders to increase prices, he added, which according to him worsened the slowdown.

Over the past years, sector sales went down by almost 40 per cent, Hmeidan noted.

“The sharp decline in demand may push many garment traders out of business,” he cautioned.

Auto

Nabil Rumman, president of the Jordan Free Zone Investors Association, noted that used cars represent over 70 per cent of Jordan’s auto market and said the decision to impose a five-year age limit on imported autos and increase the special tax on them from 81 to 90 per cent of the value of the vehicle had caused problems for many importers and merchants.

On average, Jordan imports around 65,000 used cars each year, around 30,000 of which are more than five years old, according to Rumman, who indicated that after the government’s decisions, taken in June, the auto market slipped into an “unprecedented” slowdown in demand as prices of used cars have gone up.

Demand went down by nearly 40 per cent, he said.

The average price of a used car, mainly from South Korea, used to be around JD4,000 to JD5,000 as the vast majority of these vehicles were manufactured over 10 years ago, he added. while the average price of used cars allowed to enter the market would jump to JD8,000.


© Copyright The Jordan Times. All rights reserved.

You may also like