Background

Jordan is located in a strategically important location between Europe, the Arab countries and Asia. The resilience of Jordan's economy is underpinned by broad-based growth. The medium-term economic outlook looks positive, including a rapid private sector credit growth.

Jordan's real GDP (at market exchange rates) and population have been growing rapidly in recent years. Population in 2013 was estimated to be 6.459 million people, up from 6.3 million in 2012. The urban population represents 83% of the total population. GDP per capita in 2012 was USD 4,900 (current USD at market exchange rates) and income inequality is relatively low by international standards. Jordan's growth in GDP is expected to continue, with the IMF expecting real GDP growth of 4.5% per year to 2019. However, the economy faces a number of risks, in particular spill overs from conflict in neighbouring countries as well as the prospect of high energy costs (IMF, 2014a). There are also pressures from unemployment, which has been persistently high (more than 12%) for the last decade, and government debt, which has almost tripled in absolute value since 2003.

Road density is quite high compared to other countries in the region, 141 vehicles per Km compared to 37 in Egypt, 38 in Morocco and 68 in Tunisia. The railway network is small at 294 Km (compared with 5,195 for Egypt, 2,109 in Morocco and 1,119 in Tunisia). The transport sector contributes 12% to Jordan's GDP (Ministry of Transport, 2011), and is growing at a rate of 6% a year. Investment in the road sub-sector alone is expected to reach more than USD 1.8 billion over a 25 year period (Jordan Investment Board, 2012).

Private sector participation is quite developed in the sector, mainly in the form of concessions for large-scale projects. Moreover, according to the World Bank PPI Database, the transport sector accounts for the second largest share (24%) of all private investment in Jordan's infrastructure sectors.

The government launched a National Strategy Plan for 2012-14, which sets a number of goals and outlines some priority projects, such as:

• establishing the Jordan railway corporation;

• developing the terminals at the Iraq-Jordan border; and

• seeking bilateral agreements to liberalise air travel.

The government also plans to develop a long-term national sector strategy covering the period up to 2030 (Ministry of Transport, 2011).

Policy Framework

The government has put in place a number of sectoral policies and an overall economic development programme that specify investment needs and strategies for infrastructure development. The 2011-2013 Executive Development Programme, for instance, indicates that JOD 3.4 billion (about USD 4.8 billion) is needed for infrastructure upgrades over three years. This is equivalent to 55% of the projected expenditure for all sectors in Jordan.

Jordan's legal investment regime is governed by a series of laws and regulations:

• the interim Investment Law No. 68 of 2003, which contains general provisions for treatment and protection of investment and describes procedures to benefit from incentives and obtain licenses;

• the provisions on sectors, incentives and exemptions of the Investment Promotion Law No. 16 of 1995;

• Regulation No. 54 of 2000 which lists the sectors restricted to foreign investment;

• interim Law No. 67 of 2003 which deals with the organisation of the Jordan Investment Board.

Consequently, Jordan presents a rather complex legal investment regime, with a corpus of laws not all easily accessible, some being temporary and overlapping. The regime suffers from deficiencies in terms of legal coherence, transparency and predictability for investors and does not help governmental efforts to enhance investor confidence.

The authorities are aware that the legal and institutional investment framework needs to be clarified, unified and improved. Non-Jordanian investors benefit from the same treatment as Jordanian investors, subject to exceptions. For registration purposes, non-Jordanian investments must have at least JOD 50,000 of capital (equivalent to about USD 70,000). Statutory restrictions apply in a large number of sectors and their scope and application in practice are not always clear.

Challenges

• Current Regional Unrest

Ongoing unrest in neighbouring countries may heighten investor risk perceptions thereby inhibiting investment or resulting in higher required rates of return with a subsequent impact on value for money.

• Limited access to Finance

Local financial markets are not well developed and domestic commercial banks are often not interested in long-term infrastructure finance. This results in a dependency on foreign investors and IFIs to fund infrastructure development..

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Project Pipeline

• Queen Alia Airport Expansion1

• Aqaba Port Expansion

• Amman-Zarqa Bus Rapid Transit (BRT)

• Jordan National Railway Project (JNRP)

• Jordan Road Master Plan