The jordanian economy in recent rankings – a comparison

Young Entrepreneurs Association, Jordan 20081

The Jordanian Economy in Recent Rankings: A Comparison

Yusuf MansurSamer Jabari

Samar El-Haj HasanAhmad Asfour


Outline

Major Economic Indicators

Jordan’s Recent Rankings

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Major Economic Indicators

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JD MillionYear 2005 2006 2007 2008 2009 Gross Domestic Debt-Central Gov. (Budgetary and Own-Budget Agencies)

2,467

2,961

3,695

5,754

7,086

% of GDP 27.6 26.7 29.3 35.7 39.8

External Public Debt Outstanding 5,056.7

5,186.5

5,253.3

3,640.2

3,869.0

% of GDP 56.7 46.8 41.7 22.6 21.7Total Debt (External &Total) 84.3 73.4 71.0 58.3 61.5

Source: CBJ June 2010


2005 2006 2007

2008 2009

Current Account -1610.6-

1223.8

-2038.

0

-1445.2

-797.2

Trade Balance (Deficit) -3556.3-

3584.7

-4574.

2

-5084.4

-4448.

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Exports 3049.7 3689.94063.

65633.0

4526.3

Imports 6606.0 7274.68637.

810717.

48975.

1 Services Balance (Net) -147.8 -44.8 22.0 249.6 521.8

Direct Foreign Investment 1407.0 2512.71859.

12005.7

1718.0

Gross Official Reserves 3,363.44,326.

14,871.

45,490.5

7,713.3

Coverage of Goods Imports & Non-Factor Services (Months)

4.7

5.1

4.7

6.2

8.2

Major Economic Indicators (External Sector)


2005 200

6 2007 2008 2009

Nominal GDP at Market Prices (JD M ) 8,925 11,093 12596

16,108

17816

Population (Millions) 5.4735.60

05.723 5.850 5.980

Per Capita GDP, Current Market Prices (JD)

1,631

1,981

2,201 2,754 2,979

Nominal GDP, Market Prices (% Change) - 24.3 13.5 27.9 10.6Real GDP at Basic Prices (% Change) - 8.0 7.4 7.2 3.2Real GDP at Market Prices (% Change) - 7.9 8.5 7.6 2.3GDP Deflator, Market Prices (1994=100) 2.0 15.2 4.7 18.8 8.1Percentage Change in CPI (2006=100) 3.5 6.25 4.7 13.9 -0.7

Major Economic Indicators (Production and Prices)


Jordan’s recent ranking in:

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1. Global Competitiveness Report

2. Doing Business Report

3. Economic Freedom of the World (Fraser)

4. Economic Freedom Index (Heritage)


Four Indices, 2005-2010: Why the differences?

0

20

40

60

80

100

120

2002 2003 2004 2005 2006 2007 2008 2009 2010

GCI

Economic Freedom Index

Ease of Doing Business

EFWI


Global Competitiveness Index

2005 (117)

2006 (125)

2007 (131)

2008 (134)

2009 (133)

2010 (139)

Global Competitiveness Index (GCI)

42 52 49 48 50 65

Basic Requirements 40 50 46 47 46 57Institutions 28 33 32 27 25 41Infrastructure 49 52 42 44 42 61Macroeconomic environment 75 103 100 111 105 103Health and primary education 53 63 53 56 57 65

Efficiency Enhancers 49 58 64 63 66 73Higher education and training 48 54 47 42 42 57Goods market efficiency 46 53 48 44 43 46Labor market efficiency - - 94 93 106 112Financial market development - - 55 48 52 54Technological readiness 55 62 63 57 61 62Market size - - 83 88 82 84

Innovation and Sophistication Factors

50 61 54 47 51 65

Business sophistication 60 67 58 47 49 66Innovation 42 64 55 51 59 68

Business Competitiveness Index

42 52 48 - - -



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2008 (134) 2009 (133) 2010 (139)

Global Competitiveness Index (GCI)

-1 +2 +15

Basic Requirements +1 -1 +11Institutions -5 -2 +16Infrastructure +2 -2 +19Macroeconomic environment +11 -6 -2Health and primary education +3 +1 +8

Efficiency Enhancers -1 +3 +7Higher education and training -5 0 +15Goods market efficiency -4 -1 +3Labor market efficiency -1 +13 +6Financial market development -7 +4 +2Technological readiness -6 +4 +1Market size +5 -6 +2

Innovation and Sophistication Factors -7 +4 +14Business sophistication -11 +2 +17Innovation -4 +8 +9


Indicator Rank/139 (2010-2011)

Rank/133 (2009-2010)

Rank/134 (2008-2009)

1st Pillar: Institutions1.03 Diversion of public funds 41 34 351.04 Public trust of politicians

43 31 33

1.07 Favoritism in decisions of gov. officials

44 33 34

1.08 Wastefulness of government spending

42 26 26

1.09 Burden of government regulation

50 18 18

1.14 Business costs of crime & violence.

21 17 14

1.16 Reliability of police services.

24 17 20




Rank/133 (2009-2010)

Rank/134 (2008-2009)

2nd pillar: Infrastructure 2.03 Quality of railroad infrastructure 98 84 912.08 Fixed telephone lines 100 94 873rd pillar: Macroeconomic Environment

Rank/139 (2010-2011)

Rank/133 (2009-2010)

Rank/134 (2008-2009)

3.01 Government budget balance* 136 - -3.02 National savings rate* 23 39 1153.04 Interest rate spread 47 35 303.05 Government debt* 106 106 1123.06 Country credit rating* 79 - -




Rank/133 (2009-2010)

Rank/134 (2008-2009)

5th pillar: Higher Education and Training

5.03 Quality of the educational system

55 33 27

5.04 Quality of math and science education

53 38 37

5.05 Quality of management schools 83 53 456th pillar: Goods Market Efficiency

6.01 Intensity of local competition 46 30 246.02 Extent of market dominance 58 42 346.03 Effectiveness of anti-monopoly policy

51 37 38

6.05 Total tax rate 32 26 206.08 Agricultural policy costs 65 51 556.10 Trade tariffs 98 113 1126.12 Business impact of rules on FDI 45 37 446.15 Buyer sophistication 85 66 83




Rank/133 (2009-2010)

Rank/134

(2008-2009)

7th pillar: Labor Market Efficiency

7.03 Rigidity of employment 60 54 487.04 Hiring and firing practices 92 94 1098th pillar: Financial Market Development

8.03 Financing through local equity mkt

33 6 22

8.06 Restriction on capital flows 35 31 448.07 Soundness of banks 51 37 589th pillar: Technological Readiness

9.04 Internet users* 82 67 76




Rank/133

(2009-2010)

Rank/134

(2008-2009)

11th pillar: Business Sophistication 11.01 Local supplier quantity 60 34 3011.03 State of cluster development 71 46 4112th pillar: Innovation 12.01 Capacity for innovation 96 74 6612.02 Quality of scientific research institutions

98 70 51

12.03 Company spending on R&D 116 108 7912.04 University-industry collaboration in R&D

99 68 60

12.05 Gov’t procurement of advanced tech products

57 48 33

12.07 Utility patents per million population

76 90 63



Economic Freedom Index (Heritage)

YearRan

k

Overall

Score

Busines

s

Freedo

m

Trade

Freedo

m

Fiscal

Freedo

m

Governme

nt

Spending

Monetar

y

Freedo

m

Investme

nt

Freedom

Financi

al

Freedo

m

Propert

y

Rights

Freedom

From

Corrupti

on

Labor

Freedo

m

Participati

ng

Countries

2010 52 66.1 65.6 78.8 83 55.1 73.2 65 60 55 51 74.2 179

2009 51 65.4 68.9 78.8 83 56.9 80.2 50 60 55 47 74.1 179

2008 42 64.1 56.3 74.8 83.7 53.2 80.4 50 60 55 53 74.6 157

2007 29 64.5 54.9 74.2 83.2 57.4 83.5 50 60 50 57 74.6 141

2006 36 63.7 56 62.2 78.2 58.3 84.4 50 70 50 53 74.8 130

2005 27 66.7 70 62.4 79.2 63.5 81.8 70 70 50 46 73.9 127

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YearRan

k

Overall

Score

Business

Freedom

Trade Freed

om

Fiscal Freed

om

Government

Spending

Monetary

Freedom

Investment

Freedom

Financial

Freedom

Property

Rights

Freedom From Corrupti

on

Labor Freed

om

2010

+1+0.7

-3.3 0 0 -1.8 -7 +15 0 0 +4 +0.1

2009

+9+1.3

+12.6

+4 -0.7 +3.7 -0.2 0 0 0 -6 -0.5

2008

+13

-0.4 +1.4 +0.6 +0.5 +4.2 -3.1 0 0 +5 -4 0

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Note: No major adverse developments occurred in Investment Freedom in 2009/2010Same as to Corruption or Labor


BUSINESS FREEDOM

The overall freedom to establish and run a business is somewhat restricted by Jordan’s regulatory environment. Starting a business takes an average of 13 days, compared to the world average of 35 days, and obtaining a business license requires less than the world average of 218 days. Closing a business, however, is difficult. Despite efforts at reform, bureaucratic obstacles and delays persist.

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TRADE FREEDOM

Jordan’s weighted average tariff rate was 5.6 percent in 2007. Import bans and restrictions, import taxes and fees, licensing requirements, export subsidies, weak enforcement of intellectual property rights, and inefficient customs administration add to the cost of trade. Ten points were deducted from Jordan’s trade freedom score to account for non-tariff barriers.

?????Weighted average tariff rate is higher than

5.6% in 2007.

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FISCAL FREEDOM Jordan has moderate tax rates. The top income and

corporate tax rates are 25 percent (35 percent for banks and financial institutions). Other taxes include a value-added tax (VAT) and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 21.1 percent.

????

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Year 2005

2006

2007 2008 2009

Tax as % of GDP 19.8

19.2

19.6 17.1 16.2



GOVERNMENT SPENDING Total government expenditures, including

consumption and transfer payments, are relatively high. In the most recent year, government spending equaled 38.7 percent of GDP.

Some 19 companies were slated for privatization in 2008. Fiscal policy has been stable and effective.

????? See Most Recent GCI Expenditure reductions, the result of removing barley

and fuel subsidies, will be offset by higher capital spending and lower tax revenues.

Barley subsidies are still in effect

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MONETARY FREEDOM Inflation has been high, averaging 11.8 percent between 2006

and 2008. Most controls have been eliminated, but the government sets prices for electricity, telecommunications, and water. Five points were deducted from Jordan’s monetary freedom score to account for policies that distort domestic prices.

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Inflation Rate 2006 2007 2008 Average

Inflation Rate (% Change in GDP) 15.2 4.7 18.8 12.9

Inflation Rate(% Change in CPI) 6.25 4.7 13.9 8.28333

Telecom prices are not all set by government, only the fixed lines, competition sets the prices



INVESTMENT FREEDOM

Foreign and domestic investments receive equal treatment. There is no formal screening, but there are minimum capital requirements. Additionally, foreign investments may not exceed 50 percent in sectors like construction, wholesale and retail trade, transport, import and export services, and advertising.

Foreigners may not invest in investigative and security services, sports clubs, stone quarrying, customs clearance services, and land transportation.

Excessive bureaucracy, red tape, a judicial system susceptible to political pressure, and inconsistent enforcement of regulations inhibit investment.

Residents and non-residents may hold foreign exchange accounts. There are no restrictions or controls on payments, transactions, transfers, or repatriation of profits. Certain real estate purchases require approval.

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FINANCIAL FREEDOM Jordan’s fairly well developed financial sector is dominated by banking.

Along with financial-sector policies that are intended to enhance competition and efficiency, the government has brought supervision and regulation into line with international standards.

More than 20 banks, including nine domestic commercial banks and eight foreign banks, operate in Jordan.

The Arab Bank dominates the sector, accounting for about 60 percent of total assets. Government-encouraged consolidation among smaller banks has progressed.

The government owns no commercial banks but does own five specialized credit institutions focused on agricultural credit, housing, rural and urban development, and industry.

The insurance sector is small but open to foreign competition. Capital markets are not fully developed but are fairly robust by regional standards. An anti–money laundering bill went into effect in July 2007.

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23 banks, 15 commercial, 8 foreign, 3 specialized credit institutions, Arab Bank 25% of assets in 2008



PROPERTY RIGHTS

Interest in property (moveable and real) is recognized, enforced, and recorded through reliable legal processes and registries.

The legal system protects the acquisition and disposition of all property rights. The judiciary is generally independent, but the king is the ultimate authority.

Despite a law passed in 2001 to limit its influence, the Ministry of Justice significantly influences judges’ careers. Expropriation is unlikely.

Jordan’s record in protecting intellectual property rights has improved.

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Still no registry for movable property


FREEDOM FROM CORRUPTION

Corruption is perceived as present. Jordan ranks 51st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008.

Influence peddling and a lack of transparency have been alleged in government procurement and dispute settlement.

The use of family, business, and other personal connections to advance personal business interests at the expense of others is endemic and seen by many Jordanians as a normal part of doing business.

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LABOR FREEDOM

Labor regulations are relatively flexible. The non-salary cost of employing a worker is

moderate, but dismissing an employee is not easy. Regulations on work hours are not rigid.

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Doing Business IndexDoing Business 2005 2006 2007 2008 2009 2010

Ease of Doing Business 73 74 78 80 101 100Starting a Business 127 133 133 133 119 125Dealing with Construction Permits

68 71 70 71 116 92

Employing Workers 30 45 30 45 48 51Registering Property 110 106 110 109 105 106Getting Credit 76 80 83 84 125 127Protecting Investors 114 105 118 107 114 119Paying Taxes 16 19 18 19 22 26Trading Across Borders 85 51 78 59 77 71Enforcing Contracts 72 128 75 128 129 124Closing a Business 79 84 84 87 96 96Participating Countries 135 155 175 178 181 183

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Doing Business Index

Doing Business 2008 (178) 2009 (181) 2010 (183)

Ease of Doing Business +2 +21 -1Starting a Business 0 -14 +6Dealing with Construction Permits +1 +45 -24Employing Workers +15 +3 +3Registering Property -1 -4 +1Getting Credit +1 +41 +2Protecting Investors -11 +7 +4Paying Taxes +1 +3 +4Trading Across Borders -19 +18 -6Enforcing Contracts +53 +1 -5Closing a Business +3 +9 0

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Reforms 2009-2010 Jordan eased the process for dealing with construction permits by extending the services of

the one-stop shop in Greater Amman to medium-size commercial construction projects. Contract enforcement was improved by setting up special commercial courts and equipping

them with computer-aided case management systems. In addition, a higher threshold for the lower conciliation court is expected to result in better distribution of cases.

Taxpaying for businesses was eased with the introduction of an online filing and payment system and a simplification of form filing. Transfer fees for registering property were cut from 10 percent to 7.5 percent of a property’s value.

Business start-up was eased by offering a single reception service for company registration at the Company Registrar.

Trade was made more efficient by implementing a risk-based inspection regime of post-destination clearance for preapproved traders as well as by reducing to 30 percent the share of containers subject to physical inspection.

In addition, implementation of new software allowing online submissions of customs declarations has reduced customs clearance times by two days for exporters and three days for importers.

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Doing Business Index


Economic Freedom of the World Index (Fraser) 2007-2008 Rating

2007Rank 2007

Rating 2008 Rank 2008

Change in Rating

Change in Rank

Overall Score 7.41 31 7.18 40 -0.23 +9

Area 1: Size of Government: Expenditures, Taxes, and Enterprise

6.08 80 5.03 80 -1.05 0

Area 2: Legal Structure and Security of Property Rights

6.55 41 6.56 35 0.01 6

Area 3: Access to Sound Money 9.19 41 8.38 60 -0.81 +19Area 4: Freedom to Trade Internationally 7.72 27 7.67 24 -0.05 3Area 5: Regulation of Credit, Labor, and Business

7.5 23 7.45 26 -0.05 +3

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So, which Index should a country heed?

All? The most diverse in coverage is the GCI

The most practically relevant is the Ease of Doing Business

Based on the inaccuracies discerned, the least reflective is the Economic Freedom Index (Heritage)

EFIW is historically accurate

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What’s next? Countries should establish their own; definitely Jordan

should!

It is more relevant to have own reference, and more accurate.

Private sector should do it, not government, latter implements, and held accountable.

Be open, provide access (online), engaging, transparent, and acountable

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Thank you

04/09/23 33

The jordanian economy in recent rankings – a comparison

Business

Transcript of The jordanian economy in recent rankings – a comparison