When bombers struck three hotels in Amman on 9 November, the business community and officials rallied to condemn “Jordan’s 9/11”, while analysts predicted the attack would damage the country’s position as an economic hub and business centre. A political response was necessary, and King Abdullah rapidly appointed a new prime minister and cabinet. But in economic terms – particularly in the kingdom’s booming construction sector – regional investors have been undeterred, with investment continuing to flood in.
Kuwaiti companies appear to be in the vanguard of major new investments in real estate and construction, as well as industry and upcoming privatisations. “Land [prices have] tripled in the last two-to-three years, with Iraqi businessmen using Amman as their base,” says a senior representative of the local Arabian Seas Insurance Company (ASIC),which recently signed a strategic partnership with Kuwait’s Global Investment House (GIH). “I would say that, despite recent events, Jordan is still classed as a safe area to do business, with at least 20 five-star hotels and large residential complexes having been earmarked for development.”
GIH plans to use its latest acquisition to target the real estate sector. “We signed a strategic partnership with GIH that will see an increase in our capital from JD 4 million [$5.6 million] to JD 21 million [$29.6 million]. It’s part of a three-stage expansion programme in which GIH plans to turn the company into a leading insurance and investment company to target the real estate market,” says the representative.
But that’s not all. GIH seems set on putting down firm roots in the kingdom. ASIC, in which GIH aims to be the majority stakeholder, is in addition to the Kuwaiti company’s announcement in early November that it would set up a $141 million investment company targeting projects across the kingdom. An initial public offering (IPO) is planned for early next year in which GIH will offer 40 per cent of shares in the new company.
GIH seems set to expand its interests to the construction and real estate sector. Following the Dubai cityscape exhibition in September, Aqaba Development Corporation (ADC), the development arm of the Aqaba Special Economic Zone Authority (ASEZA), signed memorandums of understanding (MoUs) aimed at further development of the zone. Omar Kuka, GIH executive vice-president of corporate finance and treasury, announced plans to establish an integrated business park and a convention centre over 150,000 square metres at the entrance to Aqaba. The project is the first of a series, totalling $50 million-100 million, centred around the once sleepy port town on the Red Sea.
Hot on the heels of GIH is the Kuwait-based National Real Estate Company (NREC), which signed an MoU with ADC to establish a joint venture (JV) company to invest up to $113 million in the zone over 10 years. The first project will be to develop, manage and operate two business parks: one in the north of the zone near King Hussain International Airport, with a total built-up area of 540,000 square metres; and the other, covering 1.5 million square metres, in the southeast, offering warehousing, showrooms, and offices over an area of 110,000 square metres.
ADC officials put GIH and NREC’s current interest in Aqaba down to a successful promotional campaign on a visit to Kuwait earlier in the year, but interest in the kingdom goes much deeper and is good news for Jordan’s long-term development plans.
A fellow Gulf investor neatly spells out Amman’s advantages. “The fundamentals are in place in Jordan, which has FTAs [free trade agreements] with the US and Europe, a privatisation programme and a highly skilled labour force. There will continue to be major capital coming from Iraq, Syria and the Gulf,” says Yousef al-Essa, general manager of Bahrain-based Addax Investment Bank. The bank recently acquired a 10 per cent stake, valued at $28 million, in Jordan Dubai Capital, the investment fund set up by Dubai International Capital (DIC), the investment arm of Dubai Holding.
Another company that seems set on developing long-term construction projects in the kingdom is Kuwaiti-Jordanian Holding Company (KJHC), which has a capital of $122 million and is 85 per cent owned by Kuwaiti investors including National Bank of Kuwait and Kharafi National Group.
One of KJHC’s first projects appeared on the radar in early April, with the announcement of its plans to establish an estimated $200 million cement works. “The plan is to concentrate on the export market in the neighbouring countries of Iraq and Syria while also focusing on the construction boom in the local market,” says Reem Badran, chief executive officer of KJHC.
The company is also evaluating design proposals for a planned $25 million slaughterhouse on a 100,000-square-metre plot in the capital, to be developed with Greater Amman Municipality. Construction of the slaughterhouse is likely to be carried out on a build-operate-transfer (BOT) basis, says Badran.
And in September, along with GIH and NREC, KJHC signed an MoU for a JV project in Aqaba. The plan is to set up a utility company to provide water and wastewater services to major tourism development projects in the zone. It will look at water treatment, desalination, sewerage and maintenance projects.
There are even plans to take advantage of the upcoming expansion of Queen Alia International Airport. KJHC has shown interest in the planned privatisation, for which a feasibility study has just been completed by the local Arabtech-Jardaneh, with the UK’s Vector acting as consultant.
Back in Amman, other Kuwaiti companies are already taking advantage of the capital’s booming major projects sector. Kuwait Projects Company (Kipco) signed an MoU in November with the local Abdali Investment & Development Company(AIDC)to invest $400 million in the planned regeneration of the $1,000 million Al-Abdali district. Real estate contracts for Al-Abdali are expected to be finalised in early 2006. At least 23 investors have expressed interest in the project, with Kuwaiti companies making a strong showing, according to a project source.
The dire predictions following the tragic events of 9 November have not materialised, and the kingdom seems set to continue to attract interest in its burgeoning construction sector from its admirers – especially in Kuwait.