Today, Monday, the Jordan Strategy Forum recommended the necessity of adopting the necessary remedial measures to increase foreign direct investment flows to supplement the Jordanian economy.

The forum said, in a policy paper entitled “Opportunities to Attract Foreign Investment: Investment Climate, Governance and Ease of Business Implementation”, that the post-Coronavirus pandemic phase will witness intense competition to attract foreign investments, which requires a detailed and quick review of the basic indicators that attract investment.

The forum indicated that the outcomes of the tripartite summit between Jordan, Iraq and Egypt, which was held in Baghdad on Sunday, will contribute to reviving the economies of the three countries by attracting joint investments in vital sectors such as energy, transport and trade exchange, stressing that the summit is a favorable opportunity with an effective impact in bringing about change. Significant level of foreign investment and boosting national exports

The paper indicated that the ratio of investments to the gross domestic product decreased to 17.5 percent, indicating that the percentage is low compared to other countries undergoing similar development conditions such as Morocco, where this ratio is 28.7%, and in Lebanon 20.4 percent. The paper also indicated that the Corona pandemic will exacerbate the level of challenges facing the Jordanian economy on the economic and social levels, which are represented in modest growth rates, rising and high unemployment rates, and the persistence of the public budget deficit.

The forum clarified that the Jordanian economy needs to increase the volume of investments, whether from local sources or through foreign direct investment flows, as it is considered a major driver and a key factor in achieving the goals of economic growth and development, as this can be reflected in enhancing the value of national exports and creating job opportunities In addition to the transfer of knowledge and technology from multinational companies to local companies, which in turn will contribute to improving the production process and developing modern management methods.

With regard to the Jordanian experience in attracting foreign direct investment; The paper indicated that the total fixed capital formation in Jordan (private and public) witnessed a downward trend during the past decade; The percentage in the private sector decreased significantly from 22.5 percent in 2010 to 14 percent in 2019; On the other hand, the fixed capital formation rate for the public sector ranged between 3 and 4 percent.

The paper also showed that the total fixed capital formation relative to the gross domestic product in Jordan is relatively low compared to the Arab and international countries. Which requires the need to look at the roots of the problem that caused this.

The forum attributed the decline to three main factors; The first is related to the investment climate, the second is the lack of clarity in the future vision, and the third is the decline in the percentage of savings that can be mobilized to generate more investments.

The paper indicated that the average annual rate of the flow of foreign direct investment to the gross domestic product in Jordan during the period (2000-2010) amounted to 10.3 percent, as a percentage of the gross domestic product, as the main reason for the rise of this percentage is due to the privatization programs that Jordan witnessed during That period; On the other hand, net foreign direct investment flows (relative to GDP) have witnessed a significant decline since 2010; Its percentage reached 1.9 percent in 2019.

In its paper, the forum presented a roadmap based on three main indicators: the governance index, the index of restricting foreign direct investment, and the index of ease of doing business.

The forum stressed the importance of using these indicators to assess the grades and ranks achieved by Jordan. This is to determine what the Jordanian government should do to improve governance and reduce FDI restrictions in order to enhance its flows to the Jordanian economy.

The forum pointed out that good governance is accompanied by a rise in per capita income and productivity levels. While mismanagement (such as corruption) entails additional costs for investors; Also, foreign direct investments usually have large fixed costs, which makes them particularly vulnerable to uncertainty in the event of poor policy implementation or weak law enforcement and protection of property rights; In addition, good governance creates a level playing field, that is, it does not give certain advantages to companies or individuals and promotes equality of results, equal opportunities and more efficient allocation of economic resources.

The forum indicated that strict legal barriers to foreign direct investment, and other operational restrictions, would discourage foreign direct investment; As barriers and restrictions imposed may limit market access or increase transaction costs compared to the competing positions of foreign firms in each of the particularly restricted sectors.

With regard to doing business; The forum noted that domestic firms’ business regulations affect foreign direct investment by collecting and analyzing comprehensive quantitative data to compare the business regulation environment across economies over time.

In this context, the Forum referred to the Doing Business report, explaining that it encourages economies to compete towards more efficient regulation, provides measurable and reformable standards, and serves as a resource for academics, journalists, private sector researchers and those interested in the business climate in each economy.