To what extent are financial support and investment volumes from the GCC being affected by lower oil prices?
FAWAZ GHANEM: The rising expenditures of GCC governments coupled with falling oil prices have impacted the GCC region in a major way.
Overall, lower oil prices are good for Jordanian consumers and businesses, and for Jordan’s economy as a whole. This is because energy imports constitute the heaviest burden on the economy, and lower oil prices have translated into a slimmer energy bill. However, if prices remain low, this may represent a significant downside for the kingdom’s economy due to the lower investment volumes and subsidies provided by countries in the GCC region.
In my opinion, the biggest impact of lower prices on Jordan comes from the side effects caused by lower expatriate remittances. At present, there are approximately 300,000 Jordanians in Saudi Arabia and 200,000 in the UAE, who remit $3.75bn each year back home. These remittances represent almost 10% of our GDP.
In what ways might the recently announced Saudi Fund for Development spur on further investment from elsewhere?
GHANEM: The agreement between Jordan and Saudi Arabia stipulates that Saudi Arabia would invest in the kingdom, particularly in the energy, tourism and infrastructure sectors, in addition to providing an investment environment that would attract local and international investors.
According to my knowledge, the fund will have the right to possess, invest in and develop projects, such as a national railway network, an electricity interconnectivity project with Saudi Arabia, and a pipeline to transfer crude oil and fuel derivatives to the Jordan Petroleum Refinery Company. As such, I believe the main beneficiaries will be the transport, energy and infrastructure sectors.
Given Jordan’s geographic location and the instability in neighbouring states, how is investor confidence being impacted? Is there a “safe haven” effect?
GHANEM: Jordan is a small country that has received waves of refugees from Palestine, Iraq, Yemen, Libya and Syria over the past decades. These waves had serious repercussions on the kingdom’s infrastructure, services and main sectors. The aforementioned has definitely had an overall negative impact on investor confidence and foreign direct investment.
GCC investors recognise and commend the safe-haven nature of Jordan in comparison to our neighbours, but investors have the entire world to invest in, and being a safe haven is simply not enough to encourage them to make serious investments in the country.
What do you identify as the most undervalued sectors within the Jordanian economy in terms of attractiveness to investors?
GHANEM: I personally like the training, education and health care sectors, and believe there are numerous opportunities in the kingdom for investors to capitalise on. These sectors, however, have not attracted the level of investment that they should from foreign investors despite their relatively high profit margins and predictability of cash flows.
How sophisticated are the capital markets in Jordan, and in what ways could they be enhanced to encourage further economic development?
GHANEM: Jordan’s capital markets are developing, and their level of sophistication is gradually improving. I also believe that the regulatory environment in the kingdom is sound, and there are serious attempts taking place to widen the types of financial securities offered in the markets.
Jordan has recently passed the long overdue Islamic Finance Sukuk (Islamic bonds) Law that aims at encouraging companies to issue sukuk. However, the law unfortunately did not address a number of structural and legal aspects, and it could have been a much better law. As for fixed-income securities, these are also considered a promising market with good growth potential.
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