Trade Policy Review

Report by

JORDAN

Revision

Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statement by Jordan is attached.

 Contents

1   Introduction.. 3

1.1   Jordan's Economic Modernization Vision 2033. 4

2   Economic Development: 5

2.1   Economic growth and environment 5

2.2   Regional challenges. 6

2.3   Trade performance. 7

2.4   Investment and investment policy. 8

3   Sectoral Developments. 9

3.1   Industrial sector 10

3.2   Agriculture. 11

3.3   Services sector 12

4   Important Developments. 13

4.1   Labour market policies. 13

4.2   Business environment 14

4.3   Government procurement 15

4.4   Women's empowerment 16

5   Foreign Trade Policy. 17

5.1   Jordan and World Trade Organization (WTO) 17

5.2   Jordan's export strategy. 19

5.3   Regional and bilateral trade liberalization. 19

6   Technical assistance needs. 20

1  Introduction

1.1.  During the review period, Jordan has made significant efforts in implementing trade-economic policies to promote economic growth, attract foreign investment, and enhance its position in the global market, capitalizing on a relatively well-developed infrastructure and a strategic geographic location. Jordan has maintained its resilience in spite of the multiple exogenous shocks, the country has faced for over a decade. These include the Arab Spring, the rise of terrorism in the region, the Syrian crisis and the overwhelming refugee influx, closure of border crossings with Syria and Iraq, COVID‑19 pandemic, and most recently the impacts of the Russian Federation-Ukraine crisis, particularly the disruption of supply chains and increased inflationary pressures.

1.2.  Notably, the gross domestic product (GDP) experienced a real growth rate of 2.8% for the first quarter of 2020. During the year 2022, the external sector demonstrated robust performance, surpassing expectations in various indicators, most notably in tourism income, which witnessed remarkable growth of 110.5%, surpassing pre-pandemic levels. Goods exports also thrived, expanding by 33.8%. Collectively, these positive developments contributed to mitigating the escalation of the current account deficit, primarily driven by the increased cost of imports due to rising commodity and global oil prices. Moreover, the overall fiscal deficit, excluding external grants, decreased by 0.8 percentage points, amounting to 4.6% of the GDP.

1.3.  During the review period, Jordan increased domestic revenues and grants by, inter alia, broadening the tax base and reducing tax evasion. This, together with measures to contain non‑priority expenditures, has created space for increased social spending and a strong rebound in capital spending during the pandemic. Jordan's public debt is sustainable and is expected to be reduced to below 80% of GDP by 2027. The structure of its foreign and domestic debt, about half of the total each, is also considered as favorable. Government of Jordan (GoJ) has been implementing critical fiscal structural reforms. In January 2022, the Cabinet approved a major customs reform which simplified and unified the tariff system by reducing the number of tariff brackets from 16 MFN rates and 31 bound rates to just four (three after 2028).

1.4.   Jordan's peg to the US dollar, backed by adequate international reserves (USD 17.3 billion in 2022), has served as an effective anchor for macroeconomic stability including through the pandemic. The Central Bank of Jordan (CBJ) has strengthened its prudential supervision of the financial sector, the banking sector has remained healthy.

1.5.  The aggregate volume of Foreign Direct Investment (FDI) in Jordan exhibiting an impressive growth rate of over 82% when compared to the levels recorded during the COVID‑19 period and the preceding year. The volume of total investments benefiting from the Investment Environment Law has exhibited a substantial increase during the first quarter of the current year, soaring by 49.1%.

1.6.  Despite the high inflation rates recorded globally and, in the region, Jordan has maintained a relatively low inflation rate compared to other countries. The inflation rate, as measured by the Consumer Price Index (CPI), averaged 1.9% between 2016 and 2022, and it reached only 1.17% in the first half of 2023. The GoJ has limited the impact on consumers of rising fuel and food prices resulting from geopolitical developments. Jordan's strategic wheat reserves, at 12 months, have so far avoided the need to import wheat at elevated prices. Moreover, Jordan's long-term stable-price import contracts for gas used in electricity generation have also helped to contain inflation, and the authorities re-introduced blanket fuel subsidies in February 2022, reversing a decade-old reform, to mitigate passthrough to households.  For 2023, the estimated average inflation rate is 3.0%.

1.7.  According to the World Bank's (WB) food security report, Jordan stands out as the least affected Arab country by food price inflation, which recorded 3.5%increase. Jordan has placed significant emphasis on ensuring food security, as evident from the recent launch of the National Food Security Strategy (2021-30) and the National Plan for Sustainable Agriculture (2022-25) in the year 2021. These strategic initiatives align with the directives of His Majesty King Abdullah, aiming to position Jordan as a regional hub for food security, thereby underscoring Jordan's commitment to fostering resilience in its food sector.

1.8.  Jordan has also been recognized for its strong export-oriented industries, such as textiles, fertilizers, detergents, sterilizers and pharmaceuticals. It has capitalized on the challenges and seized opportunities in the form of development of new industries. One important development is the addition of approximately 100 new production lines in national industries, spanning diverse sectors including food and medical supplies, in response to the COVID-19 crisis. Notably, Jordan's industries have also contributed significantly to the global fight against the pandemic by exporting around 50 million masks, 300,000 medical bibs, and 100,000 medical labels to countries worldwide. These endeavors have showcased Jordan's resilience and adaptability in transforming challenges into opportunities for economic growth and global contribution.

1.9.  Jordan continued its contribution to addressing other global challenges, for example the Climate change. Jordan has taken steps to address the challenges by ratifying the Paris Agreement and increasing its conditional greenhouse gas emissions reduction target from 14% to 31% by 2030. Notable initiatives include the endorsement of the "National Policy for Climate Change in Jordan for the years (2022-2050)," which aims to mitigate the consequences of climate change by curbing greenhouse gas emissions in all economic sectors and adapting to the impacts on critical resources like agriculture and water. This policy aligns with global efforts for climate stability and sustainable development, strengthening Jordan's resilience against climate change challenges.

1.10.  According to UN-backed report, Jordan is among the countries making progress in achieving goals related to carbon dioxide (CO₂) emissions per capita by 2030. The report ranks Jordan 62nd out of 180 countries in the "flourishing index 0.75" and 87th in the sustainability rank.

1.11.  Jordan's reform efforts have been recognized by the international institutions. It is considered as one of the freest economies in the Middle East and North Africa region.

1.12.  Jordan has made significant strides in improving its business climate, earning a spot among the top 10 global improvers in the World Bank's 2020 business rankings. The country's first-time classification as a top business climate reformer in the MENA region is attributed to three major reforms: the introduction of a new secured transactions law, amendments to the insolvency law, and the launch of a modern and notice-based collateral registry. The World Bank highlights the government's efforts to promote business activity and attract foreign investment. Notably, Jordan is one of four countries from the MENA region that accounted for almost half of the region's reforms. Jordan experienced a remarkable jump of 29 ranks in the ease of doing business ranking, moving from 104th to 75th place since 2018. This progress is regarded as one of the most significant advancements in the Kingdom's history in terms of improving the ease of doing business. Furthermore, in the "Getting Credit" category of the Doing Business report for 2020, Jordan achieved a notable rank of (4), reflecting the country's improvements in obtaining credit and the legal rights of borrowers and lenders.