Jordans industrial firms have been squeezed by rising energy prices
Lacking hydrocarbons endowments, Jordan has focused on developing its industrial sector, which accounts for about 30 per cent of GDP. Data shows that the industrial sector is behind overall GDP growth. According to Banque Audi, the industrial sector posted a real growth equivalent to 0.6 per cent of GDP in the first nine months of 2013. This is lower than both the 1.5 per cent the sector achieved in the same period in 2012, and the countrys overall GDP growth rate last year, which was 1.3 per cent.
Tight financing is one obstacle facing industrial companies. Credit facilities extended to industrial activities grew by 5.3 per cent in the first nine months of 2013, compared with 9.5 per cent in 2012.
Amman has attempted to promote industry as a value-added, export-oriented sector, with a series of dedicated industrial zones. A slew of free trade agreements have boosted foreign demand for Jordanian goods, and the authorities have sought to incentivise foreign investment.
However, economic policy has not always been favourable to Jordans industrial sector. Rises in fuel prices and electricity tariffs have squeezed businesses. Jordans Chamber of Industry warned in 2011 that a 16 per cent hike in power prices for firms using more than 750kW, as well as heavy fuel oil prices being increased to $712 a tonne, would cause factories to close. In 2014, industrial firms have campaigned against a proposed 7.8 per cent increase in electricity tariffs for companies using more than 10,000 kWh a month.
Manufacturing covering chemicals, plastics, furniture, food and packaging accounts for the majority of Jordans industrial base, with mining and quarrying accounting for much of the remainder. Jordans main manufacturing exports include garments and textiles, jewellery, electrical appliances, machinery and equipment, furniture, chemicals, minerals and plastic products. Pharmaceuticals is another major focus, accounting for about 20 per cent of total exports, and defence-related manufacture is a growing focus.
Jordan Industrial Estates Corporation, set up in 1980, attempts to play a catalytic role in providing a competitive industrial investment tool.
Jordans industrial sector has lagged in its overall economic growth, with exports falling by 1 per cent in 2013 to $5.58m (although manufacturing showed a better performance, rising by 11 per cent in the same period). Mining projects have experienced particular difficulties, with rising prices that reflect higher costs. Phosphate production a key industrial component saw a 17.4 per cent drop in output in 2013 to 5.27 million tonnes. Only fertilisers, which grew by 6 per cent to 678,000 tonnes, saw a significant increase.
The sector is well organised, and the industrial zones have concentrated activities in export-focused clusters. Government policies are crafted to support the private sector. At the same time, the kingdoms relatively fragile economic position has proved detrimental to the industrial sector. Attempts to curb subsidies and shrink the budget deficit have not been fruitful for the sector, which has seen previously subsidised energy prices raised in recent years.
Nonetheless, some of the largest industrial entities are still expansion focused. Last year, for example, Jordan Phosphate Mines Company announced plans for two new downstream production facilities.