The Euro-Jordanian Economic Relations

In 1997, some agreements (called Euro-Mediterranean Agreement Association) were signed with the EU. These agreements replace those signed in 1977. They came into effect on May 1st 2002. They aim at establishing a free-trade area between the EU and Jordan in 2010 and have a social, political and cultural component.
free-trade area is founded on a simplification of the accumulated rules of origin prevailing in the former agreement.

Jordan suffers from a substantial structural trade deficit, with imports twice exports. Iraq was Jordan’s most important trade partner. At the present time, Jordanian exports are turned towards the Gulf region.

Trade relations between the EU and Jordan are stable: in 2001 and 2002 less than 5% of the country’s exports went to the EU (EUR 160 million) and about one third of its imports (1 800 EUR million) came from the EU. Thus, Jordan has a trade balance surplus when it comes to the region’s countries but is confronted with a trade deficit with the West.

Within the framework of the MEDA program during the period 1996-2000, Jordan received EUR 289 million in the form of non-refundable aids (more than 70 % disbursed) and EUR 283 million in the form of loans.
The financing focused on structural adjustment operations, promoting small and medium-sized enterprises, regulations and privatization reforms, the water sector and protecting the cultural heritage of Jordan. In 2001, and within the MEDA framework, EUR 20 million were devoted to the support of legislative and privatization reforms.

Sources: the European Community website (http://europa.eu.int), the Jordanian Embassy in Washington (http://www.jordanembassyus.org)

The growing sectors

• Transportation and communication
• Housing
• Internet and communication technologies
• Fruits and vegetables: equipment
• Energy
• Water
• Tourism
• Clothing and fashion
• Health

Because of its geographical location, Jordan is used by many countries as a distribution center to the Arab countries. From east to west, Jordan is surrounded by the two largest oil providers: Iraq and Saudi Arabia. To the north, Syria allows connection with Turkey and Europe.
The west of Jordan is turned towards the Palestinian National Authority (PNA) and Israel.

Thus, it is necessary to possess a good transport fleet of tankers.

Moreover, the port of Aqaba plays an important role of a revolving place with neighboring countries. Because of the port’s depth, it is possible for ships with large tonnage to arrive.
The port links countries in the Far East with those in the Middle East. It is equipped with modern facilities (equipment for ships of roll-on/roll-off type, conventional ships and container ships).

Jordan has three airports as well, which means the management of around 1.8 million passengers and 65 000 tons of goods per year. In the future, Aqaba’s port is assumed to play the role of the region’s hub.

All these infrastructures require maintenance, goods and passengers management centers, besides all the professions related to transportation: whether maritime or aerial (management of containers, forwarding agents, charters…etc.).

As we have previously seen, the road network is developed but until now, management of automobile flow does not exist. Finally, the development and modernization of public transportation remain the real priority for the Greater Amman area.

In 2001, the construction sector contributed 5.5% to GDP, against 5% in 2000. Construction projects represented USD 846 million in the year 2003, with an increase of 20% in comparison to the year 2000.

Private construction is an important lever in the sector. In fact, Jordan enjoys a high demand for housing because of a considerable population growth in addition to a growing urbanization.

Certain banks have taken measures to decrease interest rates on loans dedicated to housing in order to give the poorest access to property.

In 2000, the government set up a USD 70.5 million-support program dedicated to state employees.

The government has given priority to the communication and information sectors. For the moment, the Internet penetration rate remains low and limited to west Amman.

The introduction of France Telecom into the capital of Jordan Telecom Company has given a new launch. There are nine licensed access providers, among them are:

a. Nets (Batelco Bahrain)
b. Cyberia (Lebanon)
c. Wanadoo (a France Telecom wholly-owned subsidiary)

Thus, the telecommunication sector has a real future ahead, since the introduction of the Internet, and more generally, modern techniques are essential in a world where “speedy” information is one the main elements of a company’s efficiency.

Source: Economic Department of the French Embassy/Amman.

Jordanian fruit and vegetable production covers the local market (more than 5 million consumers) and generates substantial export flows, especially towards the Gulf countries. It offers as well the possibility of export towards Europe during the off-season. This is why it is important for exports to comply with European standards.

In December 2001, Jordanian fruit and vegetable exports increased by 8%, in comparison with the same month in 2000, attaining USD 15.6 million. The exported quantity amounted to 40 423 tons. Vegetables accounted for 94.1% and fruits for 5.9%. Middle East countries remain the principal destination, where the UAE is the most important client, followed by Syria.

However, production capacity remains disabled by the lack of equipment, particularly when it comes to grading or packaging machines. On the whole, it remains at the cottage industry stage.

Source: Economic Department of the French Embassy/Amman.

Jordan does not have any energy resources at its disposal. Now, and since the fall of the previous regime in Iraq, the contract that was signed with this country is void, which has the consequences of depriving Jordan from Iraqi oil.

When it comes to energy, independence is an undeniable asset in order for a country to shield itself from increases in the world’s raw material prices and from political jolts of supplying countries.

This project lies within a vast program aimed at supplying all the Jordanian economy with Egyptian natural gas from Sinai, and which would reduce the cost of energy in the country.

Besides, the ambition is to serve all the Middle East countries as well.

France is well established in the Jordanian energy sector. Thus, the Jordanian Central Electricity Generating Company (CEGCO), which is owned by the Jordanian government, has entrusted the French ALSTOM with the realization of the works of conversion of natural gas in 5 boilers of the Aqaba thermal station, for an amount of EUR 15 million.

Water remains Jordan’s principal challenge. In fact, the country is desperately short of this vital raw material and it has to face population growth.

French companies have already gained a foothold in this sector (the consortium ONDEO Services/ONDEO Degrémont USA/MORGANTI USA was declared contractor of design, construction, and exploitation of the new As-Samra treatment plant for processing the waste water of Greater Amman). Still, there are many projects needed to meet the population’s future needs.

General overview of tourism sector in Jordan:

Jordan has an undeniable interest in the tourist activity. It offers two perspectives: major cultural sites, which are either religious (Mount Nebo, Baptism site) or purely historical (Petra, Wadi Rum) and the seaside station in Aqaba.

In addition, tourism allows global enrichment: a tourist consumes other services than those offered by the trip operator or the hotel. The tourist uses the telecommunication network, transportation, etc. Thus, tourist activity is spread all over the economy.

As a result of the combined effects of the beginning of the Intifada (2000), to September 11th 2001, to the slowdown of the world economy, and to the second Iraqi war, the tourist sector was particularly affected.

Some figures:

The tourist sector constitutes one of the country’s four main resources (in addition to capital repatriation by Jordanian expatriates, international aid, and the mining sector). It generated some 700 million USD of revenues (7.6% of GDP) and employed 22 800 individuals in 2001.

In 2002, and during the first ten months, Jordan received around 1 406 000 visitors. This means an increase of 6.3%, in comparison to the same period in 2001.

Competition among Mediterranean countries is weaker than is thought to be. In fact, each country is specialized in a form of tourism. Thus, visitors to Jordan have the choice between a cultural, a religious, or a seaside trip (Aqaba). But Mediterranean countries produce tourists as well. Jordan is an attractive country for French visitors. With a little more than 22 000 visitors during the first ten months of the year 2003, France still ranks second after the UK, and equal to Germany as a country of origin of European tourists, with a portion of 16% of total arrivals.

Over the period 2001-2002, it was Arab “tourism” that prevented the Jordanian tourism sector from collapsing. In fact, the number of tourists coming from Arab countries had substantially increased as it passed, in annual terms, from 863 445 to 1 013 524 during the first ten months of 2002, as a consequence of the deterrent effect of attacks on trips in destination to occidental countries after September 11th 2001, and to the medical tourism, which characterizes a substantial portion of this clientele. In addition to that, pilgrimage to Mecca constitutes an important currency contribution.

Source: Economic Department of the French Embassy/Amman.

The following table summarizes the relative information about the influx of arrivals in 2000, 2001 and during the first ten months of 2002, according to country of origin:

	Years		January-October
Country of origin	2000	2001	2002 (10 months)	2002/2000	2002/2001
North America	126 411	74 568	63 309	-45.9%	-5.6%
Europe	326 574	207 332	142 238	-51.9%	-25.3%
The Pacific & Eastern Asia	59 990	41 516	41 133	-22.8%	9.9%
Non-Arab Africa	6 372	4 516	4 767	-16.6%	+21%
Arab countries	770 795	963 051	1 013 524	+45.8	+17.4%
Israel and the Palestinian National Authority	136 737	186 275	141 161	+16.6%	-12%
All countries of origin	1 426 879	1 477 697	1 406 132	+9.1%	+6.3%

Source: Jordan Ministry of Tourism-Statistics Department

The economic potential of this sector lies essentially in the high quality range, taking into consideration local production and foreign competition. However, because of the good image of French products, all middle-of-the-range products have a good chance in the local market. In addition, many commercial centers are being established in the country, offering opportunity to brands wishing to penetrate the local market.

It is a potential sector for the quality of its practitioners, personnel, and equipment. Thus, many families, coming from the Gulf countries or from North Africa, turn to Jordan in order to obtain treatment for their relatives. In fact, because of more difficulty in obtaining visas to US and of more administrative harassments, Arabs from Gulf countries more gladly stay at Jordanian hospitals.

The Jordanian production is limited to what concerns hospital furniture and production of consumables. Imports principally come from US, UK, Italy, Japan and to a lesser degree, France. Purchases are carried out through international invitations to tender. The bidding companies must have a local agent, who himself imports medical material.