Muhannad Shehadeh


  • Jordan witnessed a significant drop in Foreign Direct Investment flow in the past decade. Realized investments flowed mostly to one sector.
  • The slowdown in growth and deepening of unemployment were tightly linked to the decline in FDI
  • FDI decreased by 45% over past three years despite the improvement in the Doing Business ranking for Jordan as it advanced 45 places.
  • Administrative and bureaucratic obstacles are not the key constraint facing the flow of FDI to the Kingdom. The key challenge is the absence of significant investment projects that offer competitive returns and stable rules that guarantee consistency.
Jordan advanced 45 places in the Doing Business Report over the past three years to move to the 69th position out of 190 countries listed. However, during that same period FDI flow declined by 45%.
Bureaucracy and scattered decision points may be an important factor in lowering FDI growth, but these factors are in no way the sufficient reasons behind such significant decline. Case in point is that Egypt was able to attract the highest ratio of FDI among Arab countries in 2019 while ranking 114 in the Doing Business report.
Key to attracting FDI in developing countries remains the cost and return of investment. This has become a major challenge for Jordan in view of the increased cost of inputs in the production process, namely the cost of energy, transport and even labor.
This has been particularly critical, in view of the competition between countries in the region and the ability of others to offer competitive solutions in terms of energy, transport and skilled labor.

The challenge of attracting FDI and establishing major investment opportunities

A principle driver for FDI over the past 7 years in Jordan was renewable energy. The sector witnessed significant development with the establishment of clear regulations, smooth decision-making processes, and lucrative investment opportunities through power purchase agreements and partnerships with the private sector.
Successful investment projects that were achieved in the past ten years or more, such as the international airport expansion and the new port system, must and can be replicated across different other sectors and projects.
The national railway (or phases of it), the Green Corridor and further infrastructure development in the energy sector, building a network of toll roads, and Restructuring NEPCO, are a few examples.
The problem is not the lack of funding or investment opportunities. The Saudi Investment Fund, the Qatari earmark of funds for Jordanian investments among other important windows of funding are not tapped. This is fundamentally because of the inability or unwillingness of the government over the past 30 months to put together major, well-prepared investment projects.


Jordan’s Income Tax law has been amended three times in the last four years along with various changes in regulations and policy decisions that had significant impact on foreign investor confidence.
Despite the need to keep modernizing and updating the legislative framework for business in areas of e-commerce, property rights, money laundering, etc. continuous changes to the legislative platform underlines the lack of coordination with the private sector stakeholders and weakness in projecting the right models and proper planning by public sector officials.

Developing Jordan’s investment identity in the aftermath of COVID-19 and its global impact

Jordan cannot be anything and everything in terms of investment and business and its priorities need to be clearly outlined on a competitive basis. This will require focus on service sectors and tourism in view of employment opportunities and cost effectiveness, as well as local development spillover.
Another area of focus is a modern agro industry with clusters that can attract regional investments, and finally the technology sector and programming industry. This sector is currently performing far below its potential considering the high number of graduates in this area among university students (5600 per year) and the adequate infrastructure in the Kingdom that attracts world players such as AMAZON.
Jordan has to be realistic about global trends in 2021 as the UN expects FDI to decrease by 40% with most of the impact on developing countries. The decrease for the region is expected at 15% and for Jordan at 7-10%.
This comes when Jordan has seen its FDI levels drop to less than 50% for the period 2010-2019 compared to the decade 2000-2010.


Policy Recommendations

1. Jordan should have a coherent investment narrative focused on key areas where it has the strongest competitive edge. As this has not been self-evident in the past, it has to be constructed within a comprehensive framework.

2. The tourism sector must be prioritized and salvaged after the world emerges from COVID-19. This requires lowering sales taxes by half on the industry and allowing major hotels to use renewable energy. Other incentives for investors may include long-term land use rights in targeted areas and with employment benchmarks, as well as incentivizing family owned and SME in bed and breakfast and lodge tourism in the Governorates.

3. Providing water sources for Coops that provide efficient and modern agro production models.

4. Reviving national infrastructure projects, especially those that have been shelved or have been on hold for some time after preliminary or advanced work has been finalized (toll roads, railway Aqaba-Amman phase, New City project, NEPCO restructuring for investment)

5. Applying the one stop shop in the Investment Commission by amending overlapping legislation that has undermined its effective functioning.

6. Establishing a national investment fund with private sector participation for national infrastructure projects

7. Issuing government bonds with fixed returns to individuals for national mega projects.

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