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Jordan: The National Export Strategy, A Compass Pointing To International MarketsMonday, July 14, 2014 > 09:14:51
Jordan launched the 2014-2019 National Export Strategy last month, in cooperation with the International Trade Centre (ITC). The strategy, if implemented, should ultimately elevate the quality of Jordan’s products and open the gates of the global market to Jordanian manufacturers. Sahar Aloul sat with the ITC Executive Director Arancha Gonzalez and found out how close Jordan really is to that threshold.
Historically, Jordan has averaged an export value of JD1.3 billion since 1973. Jordanian exports have reached over 120 global markets, with industrial exports valued at JD1 billion, making up 90% of the Kingdom's total exports during the first quarter of this year. Not to rain on the exporting community's parade, with national debt hovering around the JD20 billion mark (or 80% of the GDP), the 150,000 small- to medium-size enterprises (SMEs) that make up 95% of the economy need to get their act together to plump up their exports balance. Jordan is considered among the most open economies in the Arab world, with trade accounting for 88.5% of the GDP in 2012.
More significantly, in the past couple of decades, Jordan has signed and ratified to a total of 20 trade agreements with regional and international outreach spanning over 53 markets covered by the Greater Arab Free Trade Agreement (GAFTA) and the Agadir Agreement, as well as the EU Association Agreement and the US, Turkey, Singapore and Canada FTAs. All with one end result in sight: to boost exports and lift the economy.
With all these agreements meant to carry Jordanian producers to international markets, exports have not managed to even wobble the trade balance; the country continues to struggle with consolidating new markets, increasing exports with higher technological value, and dealing with a chronic commercial trade deficit. According to the Central Bank of Jordan, that deficit reached an all time low of JD946.4 million in September of 2013. “All these trade agreements signed and those negotiated are enablers, they provide opportunity; the secret is in their implementation,” explains International Trade Centre (ITC) Executive Director Arancha Gonzalez to Jordan Business. “A trade agreement does not guarantee outcomes, it provides for opportunities.” In order for opportunities to be taken advantage of and new markets to be created, the stars need to be aligned for local businesses in terms of quality standards, certification, among other factors. Gonzalez's organization helps do exactly that.
The ITC, a subsidiary organization of the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD), helps developing and transition economies promote their exports. The two bodies were involved over the past four years in creating a five-year national export strategy for Jordan. The plan is part of the Enhancing Arab Capacity for Trade program (Enact), designed to provide technical assistance to Jordan, Egypt, Morocco, Algeria and Tunisia, to develop an integrated, competitive and diversified export sector. “The strategy is a GPS to help SMEs navigate towards international markets. It tells you where to go and how to get there, but you still have to drive,” Gonzalez explains, “It is a result of many concerted efforts constructed bottom up, not something the ministry lands on SMEs or ITC on ministries; a bottom-up effort putting the private and public sectors around the table discussing what steps need to be taken to get to destination from regional to international.”
According to Gonzalez, the strategy, launched in the presence of the Minister of Industry and Trade Hatem Halawani and representatives of chambers of commerce and private- sector companies, provides Jordan with a national vision for exports, allowing the public and private sectors, as well as civil society, to take full advantage of trade. “The strategy offers Jordan a unique opportunity to help its enterprises grow, sustain their export relationships and climb up the technology ladder, thereby driving Jordan’s competitiveness,” through a set of macro and microeconomic interventions.
According to Gonzalez, reaching competitiveness requires a stable macroeconomic environment, namely a good education system and infrastructure; moreover, a set of micro interventions also need to be in place, and the two need to go together for the competitiveness to kick in. “International markets demand quality; one cannot export if one doesn’t meet a certain minimum requirement of international quality standards. This is where work needs to be done in Jordan,” explains the ITC chief. “This requires investment and concerted efforts on the part of the government, especially to get infrastructure, labs and testing facilities that will help producers demonstrate they are meeting those standards.”
She also counts logistics and trade facilitation as micro interventions that need to be addressed, especially in a country that does not benefit from energy resources. Producers must optimize logistics and the flow of goods and services to increase the appeal of Jordanian products to international markets. Gonzalez also called on the government to cut down on red tape and reduce the cost of doing transactions through single window automized customs procedures.
Another micro intervention that would increase quality is vocational technical training. “Levels of education in Jordan are very high, but the country suffers what many developed countries suffer as parents encourage their kids to pursue university degrees, whereas the market now has a higher demand for [vocational] skills,” Gonzalez explains, “We need people who make sure that the nuts and bolts of our economy work.”
The last step is trade and market intelligence, Gonzalez points out by saying that many companies in Jordan do not know what all the trade agreements signed by the government offer them in terms of export and trade opportunities. “These are the four main underlining issues; fixing them will help the export development strategy move SMEs to the next level,” assures the international expert.
Gonzalez also touched on the participation of women in the economy, as Jordan continues to fare poorly in that area with only 14.1% of the country's women population working. “From an economic angle, it does not make sense to deprive the country of half of its labor force,” she exclaims. “Statistically, women entrepreneurs reinvest 90% of their revenue into their families and communities. Men on the other hand invest 40%,” she explains. “For a country that is trying to move up the development ladder, promote growth and reduce poverty, women are a huge factor.”
The Canadian-funded strategy identified six priority sectors: fresh fruits and vegetables; prepared and preserved meat; electrical wires and cables; paints; management consulting; and architecture and engineering services. According to ITC, these sectors have significant potential to promote technological development and export growth. In recent years, the services sector in Jordan has driven the highest share of value-added industries to the country’s GDP – close to 70%, followed by manufacturing with around 20%.
However, with all the lengthy and often complicated routes towards international markets, specifically quality standard certification, many SMEs are defeated at the starting line. “Quality should not be viewed as a hurdle, but as a huge opportunity,” insists Gonzales. One example she refers to is the “halal” food market opportunity identified as a high potential sector by the strategy for Jordanian manufacturers. “The halal market is exploding in the region and beyond; if a producer can certify their product as halal, they will all of a sudden have a huge market opportunity…it can jump into," she says, “the difference between what the market provides for a normal meat process product is much lower than for halal food, so it becomes quite worthwhile for all certifying all the quality standards.
So what should we expect if the national export strategy is implemented? According to ITC, trade would be mainstreamed into national policies and planning, improved policy and institutional frameworks that support development and competitiveness of the export sector, and an integrated network of stakeholders with influence and interest in the export sector, creating a move away from poor systematic dialogue and the traditional lack of trust between the public and private sectors.
“SMEs competitiveness is a key factor to lift the Jordanian economy, and it is essential to make sure the strategy is implemented. The ITC is absolutely committed in helping the implementation of this strategy and take actions that have been identified,” Gonzalez says, concluding her interview with Jordan Business.