Jordan: The Elements of a Growth Strategy — Diagnosing…

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Abstract

In the decade prior to the global financial crisis of 2008-2009, Jordan enjoyed a period of impressive macroeconomic performance. The prolonged expansion was export-led, with total exports of goods and services tripling over that period. The boom was not only due to better prices for Jordan’s exports, as there were also significant gains in global market share of Jordan’s garment, agriculture and chemical exports. Throughout these years, the country ran large current account deficits that were largely financed by massive inflows of foreign direct investment (FDI) coming from the United Arab Emirates, United States, India, Bahrain and Saudi Arabia. By 2009, the size of total public debt was moderate, at 55% of the size of the economy.

The Global Financial Crisis of 2008-2009 and a series of subsequent negative external shocks affected Jordan in significant ways, throwing its economy out of balance. Conflict in neighboring countries led to reduced demand from key export markets and cut off important trade routes. FDI, which averaged 12.7% of gross domestic product (GDP) over the period 2003-2009, fell to 5.1% of GDP over the period of 2010-2017. At the same time, they brought a massive wave of migrants and refugees, resulting in a net population increase of 50.4% between 2008 and 2017. The region’s instability also brought severe negative impacts to the cost of energy. The supply of oil from Iraq in concessional terms came to an end in 2004, and the Egyptian natural gas pipeline suffered numerous disruptions in 2011, forcing Jordan to import expensive liquid fuels at a time of record prices, furthering pressures on its balance of payment and its fiscal accounts. That had a negative impact on Jordanian manufactures, which tended to be electricity-intensive.

Export growth initially only decelerated between 2009 and 2013 as global trade slowed down and Jordan’s market share gains in garment and chemical exports stagnated. Then, between 2014 and 2016, exports plummeted by 13% as trade with and through Iraq and Syria collapsed. The downturn was particularly sharp in agriculture, transport and tourism. As a consequence of these external shocks, imports fell along with exports – by 2017 they were 20% down from 2014 in real terms per capita, 44% below their 2008 peak.

The deceleration of export-led growth and the dramatic fall in imports had an important negative impact on tax revenues. To confront this situation, the country implemented a massive reduction in its fiscal impulse – domestic spending net of domestic revenue – of 8.1% between 2011-2017. This adjustment was accomplished by increasing indirect taxes, eliminating subsidies, and cutting public investment. The six-year adjustment is significantly larger than those registered in Spain (4.6% of GDP, 2009-2015) and Portugal (6.1%, 2010-2016) in a comparable period of time, and not far below the one recorded in Greece (10.7%, 2010-2016).

Executive Summary

The deceleration of export-led growth and the dramatic fall in imports had an important negative impact on tax revenues. To confront this situation, the country implemented a massive reduction in its fiscal impulse – domestic spending net of domestic revenue – of 8.1% between 2011-2017.¹ This adjustment was accomplished by increasing indirect taxes, eliminating subsidies, and cutting public investment. The six-year adjustment is significantly larger than those registered in Spain (4.6% of GDP, 2009-2015) and Portugal (6.1%, 2010-2016) in a comparable period of time, and not far below the one recorded in Greece (10.7%, 2010-2016).

¹ This calculation includes only Budgetary Central Government accounts. When the operating balance of NEPCO and the overall balance (excluding grants) of WAJ are included, the fiscal adjustment over 2011-2017 is a staggering 13 percentage points of GDP.

Amidst such a large fiscal consolidation, the economy has displayed extraordinary resilience, growing at an average rate of 2.5% over 2011-2017. However, because of the extraordinary rate of population increase, this translated into a significant contraction of per capita income – by 12% over the period 2010-2017. Unemployment has risen to 18.7%, and is particularly high among women (28.1%) and youth (39.7%).

In spite of the massive fiscal adjustment, Jordan’s debt-to-GDP ratio rose from 70.7% in 2011 to 95.5% in 2017. The fact that Jordan was forced to issue debt in Eurobond markets at increasing yields at a time when its economy was not fully stabilized suggests that the 2012 and 2015 International Monetary Fund (IMF) programs were underfunded. Continuing along this path risks causing a rising debt service burden that would make fiscal stabilization even more challenging. In order to allow the country room to implement its growth strategy, the Jordanian government needs to make sure that it will be able to finance its declining deficit and roll over its maturing debt without having to return to the Eurobond market until the economy is fully stabilized.

Given the fiscal restrictions, growth can neither depend on a fiscal stimulus, nor can it be expected to follow from fiscal discipline. At the same time, the fact that the current account deficit is already large means that growth cannot be led by increases in domestic private demand for non-tradable goods, as these will require more imports that would worsen the external balance. Thus, Jordan’s growth strategy must be driven by exports and investment that either directly or indirectly supports export growth. Resuming export growth will have a multiplier effect on the non-tradable sector, which has been negatively impacted by the drastic cut in domestic spending.

There are some significant differences between today and the conditions prevailing over the long growth acceleration of 2000-2008. Although the most noticeable change to Jordan’s labor market since 2008 has been the inflow of refugees, it is a longer-term development that defines the country’s biggest advantage: its highly educated Jordanian workforce. What is most striking is the long-term increase of highly educated women. Female tertiary enrollment rate has increased by 30 percentage points in two decades, from 20% in 1995 to almost 50% in 2015. Although the rate has plateaued for several years, this still means that every year the Jordanian labor force becomes more skilled as the working age population with a college education converges to this rate. Traditionally, public administration, education and the health sector have been the largest employment of female labor, but given fiscal restrictions it is unlikely that they can grow enough to absorb the large increase expected in qualified female labor. Thus, Jordan needs to create jobs in other tradable goods and services that tend to absorb Jordanian women and pay higher wages, such as telecommunications, information technology, or – more broadly – business services.

Secondly, energy costs in Jordan have risen substantially, as the system has adjusted to maintain stability of supply in the face of more expensive energy inputs. Meanwhile, water scarcity, which has long been a disadvantage for Jordan as an input to production, has intensified in recent years as a result of more expensive electricity (used in the filtering and transportation of water) and the demands of a larger population. Thus, in the short term, Jordan needs to pursue a strategy led by sectors that are not intensive in energy or water. At the same time – in order to drastically expand comparative advantage over time – Jordan must pursue a multi-pronged strategy to reduce the cost of electricity. The energy strategy must exploit Jordan’s natural advantages for renewable generation and leverage on new technologies to maintain grid stability. This transition will have direct positive benefits on the balance of payments and will open new opportunities for sustainably increasing water supply.

Given these factors, it should come as no surprise that service exports grew much more steadily than goods exports since 2008. Jordan’s service exports grew steadily – with a minor hiccup after the financial crisis – from US $1.6 billion in 2000 to US $7.1 billion in 2014. Travel, tourism, transportation and logistics delivered the bulk of this growth, but regional instability caused these sectors to stagnate from 2014 onwards. At the same time, Jordan has increasingly emerged as a hub for activities related to information, communications and technology (ICT). ICT, along with business services and electricity, is exceptional in that it has seen an increase in FDI into Jordan since 2008 in the midst of the overall slowdown.

The Center for International Development at Harvard University (CID) developed a tool to perform economic complexity analysis inclusive of services for the first time, and applied this tool to Jordan. Using this tool to understand existing and latent areas of comparative advantage that can be developed with relative ease by redeploying the knowhow, skills and capacities that the country already has, we have identified eight export themes that have the highest potential to drive growth in Jordan while supporting increasing wage levels and delivering positive spillovers to the non-tradable economy: 1) Business, IT and professional services, 2) Education services, 3) Healthcare services, 4) Creative industries, 5) Tourism, 6) Transportation and logistics, 7) Construction materials and services, and 8) agriculture and food processing.

The results of this analysis confirmed previous qualitative assessments by identifying a strong orientation toward high-skill, tradable services among Jordan’s most strategic sectors. Cross-checking these themes in Jordan’s economic census and survey data shows that the first four tend to support higher wage levels, require higher levels of education, and employ higher rates of women than the rest of the Jordanian economy, which also matches patterns from more mature economies. Overall, Jordan will tend to compete with richer countries in several of these high-skill, tradable services in order to serve regional and global markets, but Jordan’s unusually high human capital for its level of income provides a strong cost advantage to companies that need a place to perform relatively labor-intensive tasks. The final four themes include a mix of low and high-skill labor requirements while drawing Jordan’s unique advantages in its location and climate. Strong growth in these sectors can support new jobs for Jordanians and non-Jordanians alike.

These strategic export themes represent a mix of specific industries in which Jordan already has a relatively large presence and industries that are incipient, but where global patterns suggest that Jordan has latent capabilities. Jordan’s abilities to achieve sustainable and inclusive export-led growth will depend on maximizing the potential of both types, accelerating growth in existing industries (the intensive margin) and attracting new business models that build on Jordan’s existing knowhow and capabilities (the extensive margin). For the intensive margin, it is critical for the government to work jointly with the private sector to understand, and iteratively solve, sector-specific constraints to higher productivity and better market access. For the extensive margin, the Government of Jordan as well as donor nations can play a role in promoting foreign direct investment to jumpstart these sectors.

One critical constraint to the growth of existing high-skill service exports that emerges from interviews with existing companies and has been confirmed through econometric analysis is existing restrictions (and high transaction costs) on hiring high-skill workers from abroad that provide the necessary complements to high-skill Jordanian workers. Often, in order to operate, a company needs access to a few individuals with very specific types of experience that are not available in Jordan. This is a normal and necessary part of innovation, but Jordanian regulations restrict the hiring of high-skill foreigners in an attempt to protect Jordanian jobs. This is a problem that is actually costing untold job opportunities for Jordan’s best and brightest and keeping Jordan’s most promising tradable industries small. The Government of Jordan is now working to address this issue.

As the government focuses resources on unleashing the competitiveness of these strategic export themes, it must work in close coordination with the private sector to identify other critical constraints to the growth of these sectors and collaborate to address them.

On the extensive margin, the most powerful tool for growth is active and strategic investment promotion. We have analyzed foreign investment flows across the themes and found that in any given year, there are hundreds of companies, tens of thousands of jobs, and hundreds of millions of dollars of foreign investment across the export themes flowing to the region, and the UAE in particular, across the identified themes. If Jordan were to attract just a small share of these investment flows, it would significantly boost the development of these activities. The Government of Jordan can increasingly focus its efforts on actively communicating with targeted companies to provide specific messages on why they can thrive in Jordan and where in the country they can find the land, infrastructure, and human resources that they need.

Beyond these sector-specific interventions focused on activating stronger growth on the intensive and extensive margin of the private sector, Jordan must improve its ability to deliver targeted infrastructure investments, among other public goods and services, which will improve productivity across the board and expand its comparative advantage.

In sum, the growth strategy must be cognizant of the fiscal and balance of payments constraints that the country faces. As a consequence, it shall be export-led and leverage on the growth of these activities to generate multiplier effects on the rest of the economy. The strategy must acknowledge the worsened competitiveness in electricity and water – by promoting high-potential sectors that are not intensive in neither of these – but shall also consider that new technologies in solar and wind can leverage the country’s natural advantages in these areas to lower energy prices. The strategy must consider the rising share of high-skilled female citizens that are joining the labor force, and the fact that within a fiscal consolidation environment the industries that at present employ the bulk high-skilled female labor – education, health and the civil service – are unlikely to expand enough in order to employ the increased supply. As a consequence, it proposes to promote export services that are more intensive in high-skilled female labor.

The export-led growth strategy must recognize that key infrastructure investments will be needed that should ideally involve private sector investment. However, it is aware of the fact that project preparation efforts and a dearth of patient and more equity-like capital to invest in these projects. While all these changes are implemented, it is important to make sure that the government is able to fund itself at low interest rates in order to avoid an increase in debt service costs while the program is carried out.

1. Jordan’s Growth Trajectory

In the decade prior to the global financial crisis of 2008-2009, Jordan enjoyed a period of impressive macroeconomic performance. Gross domestic product (GDP) grew at an average of 6.5% per year – 3.4% in per capita terms – a total cumulative increase in per capita income of 38.0% between 1999 and 2009. This steep trend came to an end by 2008, a point that reveals the strongest structural break in Jordan’s growth data since 1975 (Figure 1).² From then onwards, the financial crisis and a series of negative external shocks – including the Arab Spring and the Syrian refugee crisis – slowed down growth to a yearly 2.5% over the following nine years (2009-2018).

² In identifying structural breaks in Jordan, we have relied on a combination of Kar, Pritchett, Raihan and Sen (2013) and Wald (1943), applied over growth series data coming from World Development Indicators (WDI) 1975-2017.

A comparison of Jordan’s growth performance against other middle-income countries of the Middle East and North African (MENA) region reveals that the country’s economic boom was larger than elsewhere prior to the structural break (2008), whereas the ensuing deceleration was relatively similar to its counterparts’.³ However, when viewed in per capita terms, as illustrated in Figure 2, Jordan’s (and to a lesser extent, Lebanon’s) contraction grossly outpaces the region’s, due to the massive influx of refugees driven by the Arab Spring (2011) and the Syrian refugee crisis (2014). According to World Bank figures⁴ – Jordan’s population grew from 6.5 million in 2008 to 9.9 million at the close of 2018. Failure to cope with a 52.6% increase in population between 2008 and 2018 – a trend that was particularly exacerbated after 2014 by the Syrian refugee crisis – has caused Jordan to register nine consecutive years of negative growth rates in GDP per capita, resulting in a cumulative loss of 14.0% over the past decade.

³ Comparators here include other middle-income MENA countries, excluding Syria, Iraq, Yemen, Libya, and Palestine.

⁴ We have used the World Development Indicators from the World Bank for the period 1960-2017 (https://data.worldbank.org/country/jordan, consulted on February 1st 2019). For 2018 we have relied on the population figures projected in the World Economic Outlook of the IMF for Jordan: 2.1% population growth in 2018.

The contribution to growth of different sectors (Figure 3) registered substantial differences between the economic boom and the deceleration period. In the former (2000-2008) growth was driven by a significant increase in manufacturing (1.74 percentage points or pp.); finance, insurance and real estate (1.54 pp); and transportation, storage and communications (1.00 pp). Together, these three sectors accounted for two-thirds of the average annual growth (6.9%) recorded between 2000-2008. From then onwards, within the context of a significant deceleration (compounded annual growth rate of 2.8% between 2008 and 2017), the contribution of the manufacturing sector fell to one-sixth of what it had been in the previous decade (0.3 pp), while the service sector — including financial, real estate and insurance (0.79 pp.); transport, storage and communications (0.49 pp.), and wholesale and retail (0.26 pp.) — took the lead in driving growth.

⁵ Contribution to growth is calculated as the compounded annual growth rate (CAGR) of the sector over each period, multiplied by the average weight of the sector within gross domestic product.

2. External Shocks: Impacts on Exports and Foreign Direct Investment (FDI)

Jordan’s growth trajectory from 2009 to 2018 has been negatively affected by various external shocks that had significant impacts on the country’s balance of payments. The Global Financial Crisis (2008-2009), the Arab Spring (2011), the Syrian civil war (2011), and the Daesh conflict in Iraq (2014), decelerated trade and investment flows at a global level, and in the case of Jordan, sparked a series of events that led to the closure of borders with key export markets, a massive inflow of refugees, and a disruption of the energy supply due to sabotage. The adverse effects stemming from these events impacted Jordan’s balance of payments by curtailing two key sources of foreign currency: exports and foreign direct investment.

2.1 Exports

It is important to keep in mind just how much these external shocks affected Jordan: both the economic boom and the ensuing slowdown were export-driven (Figure 4). From 2000 to 2008, Jordan’s exports grew by a factor of 3.6, expanding at a compounded annual growth rate (CAGR) of 17.3% per annum (14.1% in constant dollars). This went beyond a mere commodity boom: it entailed significant gains in market share for Jordan’s exports, in particular, for garments, chemicals, and agricultural goods. From 2008 to 2017, the more challenging external conditions and less dynamic market share gains slowed down export growth to a CAGR of 1.3% (-0.2% in constant dollars). Over this period, export performance can be broken down into two clearly differentiated sub-periods: between 2008 and 2014, export growth decelerated (3.4% per year, 1.8% in constant dollars), as global trade slowed down and Jordan’s market share gains in garment and chemical exports stagnated. After 2014, the intensification of armed conflicts in the region and the interruption of important trade routes caused exports to plummet by a cumulative 8.2% (11.5% in constant dollars). The downturn was particularly sharp in agriculture, transport and tourism.

The 2014 sharp fall in exports caught everyone by surprise. By the end of 2017, total exports of goods⁶ were 20% lower than the IMF Article IV 2014 forecast; and 33% below the Article IV 2012 forecast. These gaps are quite significant, as they represent 4.7% and 9.5% – respectively – of Jordan’s 2017 GDP.

⁶ We are using here exports of goods as a reference, as the Article IV reports from 2012, 2014, and 2017, do not forecast service exports in an individual category, but rather in net terms.

2.2. FDI

Another negative impact derived from the Global Financial Crisis and the regional instability sparked by the Arab Spring was the substantial slowdown in foreign direct investment (FDI). Throughout the years of expansion, Jordan had been running large current account deficits that were mostly financed by massive inflows of FDI. Foreign investment over the 2003-2009 period averaged US $2.1 billion – 12.9% of GDP – fueled by countries benefiting from the prolonged oil bonanza (Figure 5). The United Arab Emirates (UAE), Bahrain, Saudi Arabia and Kuwait, accounted for 50% of all FDI received by Jordan during this period. After the Global Financial Crisis – from 2010 to 2017 – FDI flows fell to an average of US $1.7 billion or 5.0% of GDP. New partners such as Malaysia, South Korea and Egypt came in to compensate for receding investment still flowing from UAE, India, the United States, Bahrain and Kuwait.

Changes in patterns of FDI flows occurred not only with regards to volume and country of origin, but also in terms of industry of destination. FDI in construction and manufacturing – which accounted for 73% of all FDI received by Jordan over the period 2003-2009 – fell by 63% and 38% respectively between 2009-2016. By contrast, the energy sector attracted US $4.4 billion – 38% of total FDI received over the period 2010-2016. ICT attracted an additional US $530 million during the aforementioned period.

3. Jordan’s Macroeconomic and Fiscal Outlook

As a consequence of the harsher economic conditions, imports in Jordan suffered a very significant decline. Between 2014 and 2017, total imports fell by 10% (Figure 6), which, in real per capita terms, represents a 20% drop below 2014 levels and a 44% decline from their 2008 peak.

In spite of the substantial decline in imports, the current account deficit remained large (Figure 7). More importantly, while until 2012 the deficit was financed predominantly through FDI, since then public external debt has played a much bigger role.

The external shocks and the lower level of growth and imports together with the security challenges in the region and the costs associated with the Syrian refugee crisis, put Jordan’s fiscal accounts under severe strain.

During the global financial crisis, Jordan’s fiscal accounts were severely hit. Between 2007 and 2011, tax revenues declined by a whopping 9.4% of GDP. The government responded with a large expenditure cut of 4.6% of GDP. As a consequence, the fiscal deficit — excluding grants — grew by 4.8% (from 7.9% to 12.7% of GDP) (Figure 8). Including grants the increase was much more moderate, only 1.7% of GDP (from 5.1% to 6.8% of GDP).⁷

⁷ The deficit we are referring to here is the Budgetary Central Government (BCG), including 25 ministries, Prime Ministry, Parliament, and 28 departments comprised in the General Budget Law. It does not include the deficit of public enterprises, an omission that is somewhat compensated by the fact that it does account for budget transfers to public enterprises.

After 2011, Jordan’s continued fiscal adjustment reduced the deficit (excluding grants) by a massive 7.6% of GDP, down to 5.1% of GDP by the end of 2017 (2.6% of GDP including grants). The very large fiscal adjustment was carried through higher indirect taxes (2.9% of GDP), decreased subsidies on goods (3.5% of GDP), and capital expenditures (1.4% of GDP). The magnitude of the fiscal adjustment in Jordan is one of the largest recorded in the world since the global financial crisis, ranking third only behind Jamaica (2009-2015; 8.5% of GDP) and Greece (2010-2016; 10.7%), but well ahead of Portugal (2010-2016; 6.1%) or Spain (2009-2015; 4.6%).

The Jordanian economy proved to be remarkably resilient, as it continued to grow – albeit at a decelerating pace – in spite of the massive fiscal drag. Between 2011 and 2017, the fiscal impulse – defined as total fiscal expenditure excluding external debt payments, minus total fiscal revenues excluding grants – dropped by 8.1 percentage points of GDP. Countries that achieved comparable fiscal consolidations such as Jamaica, Greece, Spain and Portugal suffered deep recessions while Jordan achieved positive growth.

Yet, in spite of impressive fiscal adjustment, the gross debt to GDP ratio rose from 55% of GDP in 2009 to its current level of 94% of GDP. With a nominal GDP and a nominal interest rate of 6%,⁸ the primary surplus would have to be 3.8% in order to stabilize the debt to GDP ratio and 5.7% if the goal was to reduce it to 77% by 2025. However, the primary surplus was only 1.7% in 2017.

⁸ A 5-year bond was yielding 5.96% on February 11, 2019, according to http://www.worldgovernmentbonds.com/country/jordan/, consulted on February 11th.

However, further fiscal adjustment is not the only – or even the dominant way – to bring the debt to GDP ratio down. Table 1 presents the primary surplus required to bring the debt to GDP ratio to 77% by 2025 for different combinations of nominal growth rate and nominal interest rates. As the table shows, if the nominal growth rate could be accelerated to 6% (say 4% real growth and 2% inflation) and with an interest rate of also 6%, the debt to GDP ratio could be brought down to 77% with a primary surplus smaller than the one achieved in 2017. A similar primary surplus would be needed if the nominal growth rate was only 5%, but the interest rate could be brought down from 6% to 4%. The implication is clear: the debt to GDP ratio can be put on a solid downward path if current levels of primary surplus are maintained or improved, growth is accelerated or financing is made available on softer terms.

Two important implications can be derived from this analysis. First, fiscal consolidation alone will most likely be insufficient to achieve debt sustainability in a reasonable timeframe. At current growth and interest rates, it would require significant further fiscal drag that is bound to keep growth low. Instead, the country could achieve fiscal consolidation if fiscal discipline is accompanied by a more aggressive growth strategy, accompanied by an international financial strategy aimed at reducing the average cost of its debt.

Secondly, given the need for continued fiscal discipline and the already large current account deficit, the growth strategy cannot depend on fiscal stimulus and domestic demand, but should instead be led by exports and by investments that directly or indirectly increase exports. Within such a context, considerations of comparative advantages become crucial.

4. An Export-Led Growth Strategy: Comparative Advantage Considerations

4.1 High-Cost Electricity

A significant portion of the net increase in debt registered in Jordan since 2008 has to do with the 2011 disruption in the supply of Egyptian natural gas to the energy sector during the Arab Spring. The disruption forced Jordan’s public electricity company NEPCO to substitute natural gas with diesel and heavy fuel oil at a time when oil prices were very high. The impacts can be observed in Figure 9: electricity generation costs more than doubled between 2011 and 2014, opening a significant gap in NEPCO’s revenues and costs.

The government of Jordan reacted by increasing average electricity tariffs by raising them significantly on most industrial segments, while keeping them relatively constant to the vast majority of households.⁹ At the same time, some aggressive actions were taken to move to cheaper sources of energy by developing the infrastructure needed to import liquefied natural gas (LNG). The government also launched public tenders for solar and wind generation, and entered into a series of long-term power purchase agreements (PPAs) aimed at achieving energy security.

⁹ By 2017, the electricity bill of 55% of Jordanian households fell in the lowest of four tariff brackets, which has experienced a cumulative increase of 3.1% in ten years (2008-2018). Another 38% fell into the second-to-last tariff bracket, which experienced a cumulative 2.1% tariff adjustment over the same period.

By 2015 the balance between NEPCO revenues and generation costs had been restored, but the country did not escape unscathed from the 2011-2014 crisis. First, the gaps in NEPCO’s profits and losses over those four years resulted in US $7.3 billion worth of debt, which continues to loom over the system. Second, the way in which the tariff adjustments were made left a highly dispersed and cross-subsidized tariff structure. Whereas before the crisis the ratio between the highest and lowest electricity tariff was 2.7 times, at present the ratio is 8.0 times (Figure 10).

At last – as a joint result of the long-term PPA contracts signed by Jordan and the large cross-subsidies embedded in the tariff structure – electricity costs have become a binding constraint to growth and productive diversification in Jordan. Most industries faced a doubling of their electricity costs, and in several cases a tripling or quadrupling of the price over a decade. Electricity costs have become a threat to the competitiveness of both existing firms and potential tradable industries, constraining private investment, job creation, wage growth, and the overall resilience of its economy to cope with external shocks. Figure 11 presents a comparison of non-residential electricity tariffs that Jordanian industries are facing, compared to those prevailing in the United States of America at state level, and some selected European countries. The banking sector – to quote the most salient example – in Jordan is paying tariffs that are four times higher than three quarters of the sample places in the chart. More generally, all Jordanian industries are facing electricity costs that are higher – by orders of magnitude – than those prevailing elsewhere in the world.

The spike in electricity generation costs had a significant negative impact on Jordan’s manufactures, which as a consequence of access to cheap gas had evolved to be relatively energy-intensive (Figure 12). Thus, it is unsurprising that the growth collapse came at a time of manufacturing collapse – as electricity tariffs were rising sharply.

The implications for Jordan’s growth strategy are clear: In the near term, Jordan must focus on promoting exports and investments on industries that support exports that are not intensive in the use of electricity. In the medium run, what is needed is a new energy strategy, aimed at lowering electricity generation costs by unlocking the potential of renewable energy and in particular solar, one of the country’s strongest comparative advantages. Lower energy costs will not only improve the competitiveness of Jordan’s industries, but will also reduce balance of payments pressures (by reducing the imports of fuel oil and natural gas) and have strong, positive implications for energy security (as conflicts in the region cannot alter the radiation of solar or speed of wind).

At present, solar and wind provide intermittent electricity, but storage technologies are improving at a very fast pace. Jordan’s energy strategy must allow the country to benefit from the cost savings derived from future technological improvements. This may require an update to the PPA agreements so that they can fulfill their complementary, flexible role within Jordan’s optimal energy mix.

4.2 The Odd and Changing Character of Factor Endowment: Human Capital

One of the unusual characteristics of Jordan is the fact that it is a net importer of low-skill and a net exporter of high-skill workers. This is not only due to the predominant role of foreigners in low-skill, non-tradable activities such as construction or domestic service, as low-skill foreign workers play a very large role in some of the most important export activities such as agriculture, light manufactures and tourism (Figure 13).

By the same token, many high-skill Jordanians tend to migrate to other countries for work while those that stay behind face very high unemployment rates. This suggests that the country’s export basket does not take advantage of the high-skilled human capital endowment that the country has built up.

This situation has an important gender dimension to it. By international standards, participation rates are low in Jordan across the board, but they are particularly low for low-skill women. While more than 58% of men with less than complete high-school education participate in the labor force, only 5.5% of women do. By contrast, men and women with post-graduate degrees participate at similar rates of around 73% (Figure 14).

This means that while women in Jordan are on average slightly more educated than men, the composition of the female labor force is dramatically more skilled than that of men, mainly because less educated women participate so little. So, while only 23% of men in the labor force have a university degree or higher, the rate is 60% for women. But this supply of female labor is largely wasted, as high-skill women face unemployment rates that are between two and three times higher than that faced by men with equivalent education (Figure 15).

This situation is related to the fact that Jordanian women participating in the labor force have been largely restricted to a specific set of occupations in mostly high-skill industries. At present, education, healthcare, and public administration represent 30% of total employment but hire 68% of all employed Jordanian women and 81% of women with a post-graduate degree. The high concentration of employment in these three sectors suggests that these industries provide what are considered to be traditional female jobs.

While other economies are not exempt from having patterns of proportionally high female employment in certain industries, women tend to sort into a more diverse set of fields in other countries, a process that is still nascent in Jordan. In the United States, for example, 78% of healthcare and social assistance and 68% of education services employees are women. Yet 57% of legal services and 56% of finance and insurance employees are also women.

A possible explanation for the very high rate of female unemployment is that a disproportionate number of Jordanian women compete, or are queuing for, the same few, desirable or “traditional” jobs mentioned above. This queueing hypothesis is further supported by the unusually long duration of unemployment for Jordanian women. Long-term unemployment (more than one year) affects 72% of unemployed Jordanian women, compared to 58% of Jordanian men. This is not due to unusually high wage expectations, as the self-reported median reservation wage for unemployed women was 300 JOD in 2016, while median wages of employed Jordanian women was 350 JOD.¹⁰

¹⁰ Idem.

Moreover, education, health services and public administration have not grown fast enough to hire the pipeline of women who finish university education. Looking ahead, these three sectors could not possibly grow fast enough to provide more than a small fraction of the jobs that educated Jordanian women will be looking for. If we conservatively assume that tertiary enrollment and labor force participation rate by gender remain constant for the next ten years, the labor force will change massively towards high-skill workers: from 28.1% in 2017 to 40.5% in 2027. The share of men in the labor force with university degrees will climb from 20.2% to 30.3% but the share of women will increase from 56.7% to 68.3%. The total number of women with university degrees will increase by 85.7% and that of men by 77.2%. There is no conceivable scenario in which education, healthcare and public service will hire more than a fraction of them. To illustrate this point, we note that between 2010 and 2016, education and healthcare added about 3,000 female jobs a year. In the coming decade, we expect an increase in the supply of women with university education of 16,000 per year. Unless the country changes its areas of comparative advantage to reflect the growing endowment of educated and increasingly female workers, the accumulated human capital will be wasted (Figure 16).

Therefore, the growth strategy needs to pay special attention to high-skill export activities that can hire more women. Figure 17 provides an indication of which sectors could include such activities. The figure shows employment of each industry group in Jordan along two dimensions: the share of jobs in the sector filled by Jordanians versus non-Jordanians (on the horizontal axis), and the proportion held by women (in the vertical axis). Industry groups are shown as circles that are sized according to their total employment. Red circles show that an industry group pays a median wage that is below the national median wage, while blue circles show a median wage above the national median. It is clear from the figure that industry groups in the upper left corner are strategic for creating more job opportunities for high-skill Jordanian women. These industry groups include not just education and healthcare, but finance and insurance, professional, scientific and technical activities, and information and telecommunications.

This is a first indication that tradable service sectors should be an area of focus, because they are intensive in a factor of production that is already in excess supply and will be increasingly so in the coming years.

4.3 Complementary High-Skill Immigration

One significant reason why the Jordanian economy does not more closely reflect its factor endowment of human capital is self-imposed by the country’s immigration policy. Jordan’s immigration system has historically been very liberal for low-skill workers, while being very restrictive for high-skill workers. This starves the economy of specific skills and experience that could be secured from the global labor market that would complement the skills and training of highly educated Jordanians. Econometric evidence and firm interviews provide strong evidence that this policy constraint is suppressing growth of high-skill, tradable services in Jordan that would otherwise be poised to grow.

Over the long-term, Jordan’s immigration policy has implicitly treated all foreign workers as if they are substitutes – assuming that one more job filled by a foreigner means one less Jordanian job – rather than recognizing the critical role that complements play in the Jordanian economy. This policy focus is especially evident within Jordan’s list of closed professions to foreigners, last updated in 2016. However, in the presence of labor complementarities – when one job filled by a foreigner with a specific skillset in short supply in Jordan allows for the creation of several Jordanian jobs – this policy focus can become a significant constraint on growth. This is, in fact, the reality that labor market evidence in Jordan makes clear.

In effect, Jordan’s immigration policy is meant to achieve both national security and economic security, but by restricting access to the foreign workers that are complements, it is actually causing economic insecurity.

The presence of complementarities in key sectors that are tradable, support high wages and employ higher than average rates of college graduates and of women, can be exemplified by the experience of a few specific companies, while the prevalence of the trend can be understood through econometric tests. To understand the nature of complementarities, take the example of the global software company, Expedia, and its operations in Jordan. Expedia opened a software development branch in Jordan in 2017 and, by the middle of 2018, employed around 100 high-skill Jordanian software engineers, around half of whom were female. However, in order to put these skilled Jordanians to work, Expedia reported that they struggled to hire two foreign workers with global experience in Expedia’s business model that they could not supply in Jordan due to immigration policy restrictions. This constraint was overcome in the case of Expedia, allowing the company to create approximately 50 local jobs for every high-skill foreigner that it brought into the country, but it is unknown how many similar investment opportunities fall through because companies choose other countries in which to invest where they do not face the delays and transaction costs that the Jordanian system creates. This scale of complementarities of high-skill foreign workers was found within other companies providing high-skill, tradable services that CID interviewed in Jordan.

Econometric tests using microdata from the 2017 Employment and Unemployment Survey confirm that this pattern is widespread in the Jordanian economy. Figure 18 shows the wage premium of foreign workers in Jordan versus their Jordanian counterparts, controlling for education and potential years of experience, for workers within the same occupation categories for four of Jordan’s largest sectors by employment: manufacturing, wholesale and retail trade, accommodation and food service, and construction. The survey data for these large sectors of the economy show that foreigners in most low-skill occupation categories – including “elementary workers”, “craft and related trade workers” and “services and sales” workers – receive a negative wage premium versus their Jordanian counterparts. In other words, these foreigners are paid less and tend to be substitutes. However, there is a large and statistically significant positive wage premium among the occupation category of “professionals”. The point estimates range from around 10% more in wholesale and retail trade to 35% more in manufacturing, suggesting strong complementarities.

Though not usually thought of as high-skill on the whole, these four sectors of the economy – which are responsible for nearly half of private sector employment in Jordan – depend on specific skills of foreign professionals to fulfill some key tasks. If companies were not able to hire these foreigners in several professional and technician positions, it would result in Jordanians losing jobs. When the analysis is duplicated for professionals in key high-skill sectors where wages and female employment rates are higher than average, the results (Figure 19) show high point estimates for the wage premia paid to foreigners but with large statistical uncertainty. This is the result of immigration policy itself. Because foreign workers are restricted in many of these activities, very few foreigners appear in the annual survey. Because very few foreign workers are present, the ability of these sectors to expand and employ more high-skill Jordanians, including women, is constrained. The consequence is high unemployment and high rates of emigration for skilled Jordanians.

Estimating the wage premium paid to foreign professionals across all sectors of the economy and by nationality of origin (Figure 20) shows that complementary foreign professionals are coming from both Arab and Non-Arab countries, but the effect is especially strong for Non-Arabs. This mirrors the fact that – in order for companies from outside the Arab World (like Expedia) to set up operations in Jordan – they will often need to bring some of their workers from outside the Arab World as well. While this logic may be straightforward, it runs against the logic of Jordan’s 1996 Labor Code, which stresses that Arab “experts, technical specialists and workers” be given priority over other foreigners.

One priority for a prosperous Jordan is therefore to resolve constraints to firms accessing high-skill and highly experienced foreign labor and to encourage entrepreneurs and businesses to set up operations in Jordan. Currently, critical restrictions apply on foreign workers in certain occupations and sectors as of 2016. The most glaring mismatch between the list of closed professions and the needs of the economy is engineering specialties, but the closed list includes several other categories that tend to include professionals: medical specialties, all of education, administrative duties, accountants, communications jobs, and the electricity sector. Although exceptions can reportedly be made via an individual review process through a panel at the Ministry of Labor, the reliance on this process is completely incompatible with the potential growth rate of high-skill, tradable sectors in which Jordan should have a comparative advantage. The majority of global companies are not willing to deal with the delays, uncertainty and, ultimately, cost of this system. They will simply choose another country in which to invest instead. This causes Jordan to lose out on jobs for Jordanians and for potential sources of export growth.

5. Understanding Economic Complexity Inclusive of Services

For Jordan to grow its way out of the Balance of Payments constraint that the economy currently faces, it will need to maximize the growth potential from its greatest asset, its human capital, with an awareness of factors of production that are currently scarce and expensive. The theory of Economic Complexity – introduced by Hausmann, Hidalgo et al. (2011) – is based on the observation that structural transformation advances through the slow accumulation of productive capabilities and through learning-by-doing. One way to operationalize the concept is by using different measures of technological proximity between pairs of products, i.e. how similar are the capabilities and skills required to manufacture one product to those needed to manufacture the other.

The central idea is that places reveal their stock of productive know-how by the goods and services they are able to produce successfully and that future diversification of places tends to occur into products that are similar to those that they already produce. Places with higher agglomeration of productive knowhow will be able to manufacture more goods (more diversity) over time and goods that are increasingly more difficult to make (higher complexity). By the same token, places with little agglomeration of know-how, will only be able to produce a small number of goods of little technological sophistication, that on average many other places are able to make (high ubiquity). The basic tenets of complexity theory are expressed in indicators of economic complexity for places (economic complexity index, ECI) and products (product complexity index, PCI).

Several studies have been completed that study Jordan’s diversification opportunities using the tools of Economic Complexity, including a two-part study by the Jordan Strategy Forum in 2017. These studies reveal that Jordan’s ECI, as measured by its goods exports, has been falling over the last 20 years. This results in relatively few new diversification opportunities, and raises the question of what opportunities would emerge if services were included.

5.1. Incorporating Goods and Services: Dun and Bradstreet Dataset

Services are of great importance for Jordan. In fact, exports of services by the country grew steadily from US $1.7 billion in 1995 to US $4.8 billion in 2008. Despite the strong impacts of the Global Financial Crisis (2008-2009) on the country’s economy, service exports only experienced a minor hiccup and in the following years went on to grow up to US $7.1 billion (2014).¹¹ Service exports continued to expand from 2009 to 2014 when goods exports stagnated. At present (2016), they account for nearly 45% of total exports, which is relatively high when compared to benchmark countries (Figure 21).

¹¹ Travel, tourism, transportation and logistics delivered the bulk of this growth. At the same time, Jordan has increasingly emerged as a hub for activities related to information, communications and technology (ICT).

In order to incorporate services into the complexity profile of Jordan we used the Dun & Bradstreet database (2015), which has representative employment information with broad international coverage and high industrial disaggregation for both goods and services. In doing so, some significant adjustments and adaptations to the original methodology were required.

We estimate the productive capacities of places according to their relative intensity of employment in different industries. In doing so, we implicitly assume that the combination of capital and labor used to develop a certain industry is similar across countries. We compute proximity metrics between two industries based on the probability of co-production, both at the country and at the establishment level. That is to say that two products require similar capabilities if we observe with a relatively high frequency that they are manufactured (or rendered, in the case of services) within the same country, or within the same establishment.

Based on these proximities we construct the Industry Space (Figure 22). Here, each node represents an industry, and the lines connecting them to those that are relatively adjacent from a technology standpoint. Different colors illustrate the sectors of the economy, which – as in the original product space – tend to cluster.

The relative position of Jordan in the Industry Space is shown in Figure 23, where we have highlighted in colors those industries where the country exhibits revealed comparative advantage (RCA), i.e. its share of employment in the industry is higher than the share of that industry in world employment. In general, we can conclude that it is somewhat sparsely populated and concentrated in manufacturing and wholesale trade (colors blue and yellow). Although a large part of the country’s presence in the Industry Space is given by these categories, in relative terms Jordan exhibits a high presence in others such as, public administration, transportation, communications and public utilities, and finance, insurance and real estate.

5.2. Identifying Sectors with High Potential

The process outlined here aims at providing a roadmap for export diversification for policy makers to rethink and target their productive development policies. Ultimately, target sectors should emerge from an iterative and dynamic process carried out jointly by the public and private sectors, taking into account the stock of productive knowledge, the considerations of shifting comparative advantages described above, and the particular constraints that might be hindering growth for the country in general, or some of these sectors in particular.

The specific process followed to identify and prioritize high potential industries is summarized in Figure 24 and explained below. In general, it relies heavily on the theory of economic complexity, which offers analytical rigor and impartiality. However, it also considers other relevant factors that influence the viability and desirability of the various options. Among them, some factors capture global employment and investment patterns, while others leverage information about Jordan’s advantages and constraints in its factor endowments. It is here where the connection between growth diagnostics and complexity analysis becomes particularly significant.

First, the process selects those industries that can be regarded as tradable,¹² a focus that is far from arbitrary. Given the prospects of continued fiscal consolidation, growth cannot depend on fiscal stimulus. At the same time, the fact that the current account deficit is already large means that growth cannot be led by increases in domestic private demand for non-tradable goods, as these will require more imports that would worsen the external balance. As stated before, Jordan’s growth strategy must be driven by exports and investment that either directly or indirectly supports export growth. Jordan’s abilities to achieve sustainable and inclusive export-led growth will depend on maximizing the potential of existing industries (the intensive margin), and attracting new business models that build on Jordan’s existing knowhow and capabilities (the extensive margin).

¹² The definition of which industries are tradable and which are not is not something in which there is consensus and, therefore, it is an aspect that can be discussed. For the purposes of this work, the industries belonging to the Wholesale Trade, Resale Trade, and Public Administration divisions (SIC1) are considered as non-tradable. So are the ones belonging to the following major groups (SIC2): Personal Services, Local & Interurban Passenger Transit, Real Estate, Membership Organizations, Social Services, Private Households, and US Postal Service. All other industries (apart from Federal Reserve Banks) are regarded as tradable and, therefore, selected for the next steps of the process.

Basándose en métricas de complejidad económica, las industrias se seleccionan del conjunto de “transables”. Este es el pilar central de la metodología, ya que es en esta etapa cuando se definen las industrias que serán priorizadas posteriormente. La idea principal consiste en identificar industrias cercanas que puedan aprovechar el know-how ya existente para avanzar en su camino hacia mayores niveles de complejidad y desarrollo. Sin embargo, los países suelen enfrentar un trade-off importante: las industrias más complejas o aquellas con el mejor posicionamiento estratégico en el Espacio Industrial tienden a estar más alejadas de las capacidades existentes, mientras que las industrias menos complejas tienden a estar más cerca.

Ante este trade-off, la metodología intenta equilibrar estas diferentes consideraciones asignando pesos positivos a tres métricas distintas. Por un lado, la variable “distancia” (el inverso de la proximidad) mide qué tan similares son esas industrias en términos de know-how a las ya presentes en el país. Por otro lado, el “índice de complejidad del producto (PCI)” mide qué tan compleja o sofisticada es una determinada industria y, la “ganancia de oportunidad de complejidad (COG)”, en qué medida puede abrir el camino hacia otras industrias más complejas (valor estratégico).

Dada la necesidad de diversificarse hacia exportaciones de mayor complejidad económica, al ponderar las diferentes métricas de complejidad se ha otorgado mayor importancia a las industrias ausentes (el margen extensivo) que están por encima del promedio de complejidad actual. En concreto, PCI y COG juntos reciben un peso del 60%, mientras que la distancia recibe el 40% restante. Para las industrias en las que Jordan exhibe actualmente RCA (el margen intensivo), el indicador de distancia es cero y su valor estratégico ya ha sido capturado (el país “ya está allí”). Por lo tanto, en el margen intensivo, solo se considera el PCI.

Como se señaló anteriormente, los patrones de co-producción para calcular la distancia entre industrias, gracias a la granularidad de los datos provenientes de Dun & Bradstreet, pueden medirse en varios niveles. Debido a las limitaciones en la disponibilidad de la base de datos, no es evidente en qué nivel el indicador tiene una mayor capacidad para predecir las trayectorias de diversificación de los países.¹³ Por esta razón, la metodología considera los dos enfoques diferentes —medir la proximidad a nivel de país y a nivel de establecimiento— y selecciona 50 industrias ausentes/emergentes en cada caso.

Una vez allí, las industrias seleccionadas mediante el filtro de complejidad económica —independientemente de si se encuentran en el margen extensivo o en el intensivo— se clasifican en grupos de industrias relacionadas. Este proceso se ve facilitado por la existencia de varios sistemas de clasificación, pero también implica algunas decisiones discrecionales. Los grupos que concentran la mayor parte de las industrias seleccionadas se agregan luego en temas de exportación.

El primer tipo de factor exógeno considerado —y el que tiene mayor peso— tiene que ver con las consideraciones de demanda. La teoría de la complejidad económica es principalmente un análisis de la oferta, basado en la superposición entre las capacidades productivas requeridas para desarrollar una nueva industria y las que ya están disponibles. Si bien estos elementos desempeñan un papel decisivo para determinar la probabilidad de éxito de una industria, no dicen nada sobre la demanda potencial de la misma. Desafortunadamente, dado el enfoque más amplio que incluye tanto bienes como servicios en el análisis, no existe una medida directa compartida de la demanda. Por lo tanto, nos basamos en medidas indirectas que buscan capturar el tamaño relativo de la demanda global para las diferentes industrias. La primera corresponde al empleo mundial total, es decir, asumimos que las industrias que enfrentan una mayor demanda necesitan emplear a más personas para satisfacerla.¹⁴ Aunque un mayor número de empleos puede no reflejar siempre una mayor demanda, se espera que el riesgo de que esto no sea así sea bajo en el caso de las industrias transables, que son el foco de este análisis.

Nuestro segundo proxy para la demanda son los flujos mundiales de inversión extranjera directa (IED). En este caso, la lógica es que los inversores invierten más en las industrias que se espera que enfrenten una mayor demanda. Para construir esta medida se utilizó información de la base de datos fDi Markets. Aunque esta información está disponible para un sistema de clasificación diferente al utilizado aquí y para un nivel de agregación menos granular, se desarrolló una correspondencia que permite asignar flujos de inversión extranjera directa a las industrias de interés.

Un segundo tipo de factor exógeno corresponde a la “fortaleza” en los países de referencia de Jordan. La lógica subyacente es que si una industria se ha desarrollado con éxito en contextos similares, entonces debería ser relativamente más viable en Jordan. De esta manera, un alto nivel de fortaleza no garantiza el éxito de la industria, pero sí lo hace más probable. En concreto, tanto el empleo total como la intensidad relativa promedio del empleo (RCA) en los países de referencia se consideran para medir este factor. Dado que corresponde a una consideración de oferta, una dimensión que ya está bien abordada, al factor de fortaleza se le asigna un peso menor que al factor de demanda.

Los factores de demanda y fortaleza son exógenos a Jordan. Sin embargo, otros factores con capacidad para afectar la viabilidad de las diferentes industrias son específicos del país (factores endógenos). En términos generales, el crecimiento de las exportaciones en Jordan no solo debe aprovechar la demanda mundial y las tendencias de especialización, sino también las ventajas comparativas del país. Al mismo tiempo, debe evitar (al menos inicialmente) los sectores que son intensivos en los factores que representan una restricción vinculante para el crecimiento económico en Jordan.

Como se destacó anteriormente, una fuerza laboral altamente educada es una de las ventajas comparativas del país. En este contexto, el aumento a largo plazo de las mujeres con alta educación ha sido particularmente notable. Por otro lado, nuestro diagnóstico de crecimiento señala el alto costo de la energía y la escasez de agua como dos de las restricciones vinculantes más importantes en Jordan. Si bien esta etapa del análisis aún está por completarse, la estrategia de crecimiento deberá priorizar inicialmente las industrias que tienden a emplear mano de obra altamente calificada y mujeres, así como aquellas que muestran una baja intensidad de uso de electricidad y agua.

Las industrias que surgieron de este análisis han sido agrupadas en ocho temas,¹⁵ que proporcionan una hoja de ruta para la transformación estructural y la diversificación de exportaciones de Jordan durante los próximos años. La Figura 25 describe los ocho temas de exportación y la Figura 26 identifica las industrias dentro de cada tema que tienen el mayor rango dentro del proceso descrito anteriormente. Dentro de cada tema, se han destacado en negrita las industrias en las que Jordan ya tiene ventajas comparativas reveladas, pero puede seguir creciendo (el margen intensivo). Todas las demás son industrias que o bien no existen en Jordan, o bien exhiben una intensidad de empleo menor a la que esperaríamos dado su puntaje general.

Figura 25. Temas de Exportación

Figura 26. Jordan: Temas de Exportación – Las 10 Principales Industrias

Nota: En negrita, aquellas industrias en las que Jordan tiene una ventaja comparativa revelada.
Fuente: Elaboración propia basada en Dun & Bradstreet y fDi Markets.

Tema	Industrias
Servicios Empresariales, de TI y Profesionales	Oficinas de Sociedades de Cartera, n.e.c. / Servicios de Ingeniería / Servicios de Consultoría de Gestión / Servicios de Contabilidad, Auditoría y Teneduría de Libros / Agentes, Corredores y Servicios de Seguros / Servicios de Mantenimiento de Edificios, n.e.c. / Servicios Legales / Servicios de Detectives, Guardias y Transporte de Valores / Servicios de Suministro de Personal / Agencias de Publicidad
Servicios Educativos	Colegios, Universidades y Escuelas Profesionales / Escuelas y Servicios Educativos, n.e.c. / Colegios Universitarios e Institutos Técnicos / Escuelas Vocacionales, n.e.c. / Servicios Educativos
Servicios de Salud	Hospitales Generales Médicos y Quirúrgicos / Servicios de Salud y Afines, n.e.c. / Consultorios y Clínicas Dentales / Hospitales Especializados, Excepto Psiquiátricos / Consultorios y Clínicas de Profesionales de la Salud, n.e.c. / Servicios de Atención Médica Domiciliaria / Laboratorios Médicos / Planes de Servicios Hospitalarios y Médicos / Centros Ambulatorios Especializados, n.e.c.
Turismo	Hoteles y Moteles / Servicios de Entretenimiento y Recreación, n.e.c. / Agencias de Viajes / Parques de Atracciones / Alquiler de Automóviles / Hoteles y Alojamientos para Organizaciones / Operadores Turísticos / Casas de Huéspedes y Pensiones / Campamentos Deportivos y Recreativos / Museos y Galerías de Arte
Industrias Creativas	Estaciones de Televisión / Periódicos: Publicación y/o Impresión / Producción de Películas y Videos / Estaciones de Radio / Productores Teatrales y Servicios Teatrales Misceláneos / Publicaciones Periódicas: Publicación y/o Impresión / Arte Comercial y Diseño Gráfico / Representantes de Publicidad de Radio, TV y Editores / Servicios Afines a la Producción Cinematográfica / Fotografía Comercial
Servicios de Transporte	Transporte de Carga, Excepto Local / Aeropuertos, Campos de Aviación y Servicios de Terminal Aeroportuaria / Alquiler de Vagones de Ferrocarril / Transporte Aéreo No Programado / Remolques de Camiones / Embalaje y Empaque / Servicios de Transporte Marítimo, n.e.c. / Transporte Marítimo de Pasajeros, n.e.c. / Servicios de Mensajería, Excepto por Aire / Almacenamiento y Depósito Refrigerado
Construcción	Construcción Pesada, n.e.c. / Contratistas de Oficios Especializados, n.e.c. / Construcción de Carreteras y Calles / Trabajos Eléctricos / Plomería, Calefacción y Aire Acondicionado / Construcción de Líneas de Agua, Alcantarillado, Comunicaciones y Energía / Carpintería / Concreto Premezclado / Elevadores y Escaleras Mecánicas / Vidrio Plano
Agricultura y Alimentos	Pan y Otros Productos de Panadería / Harina y Otros Productos de Molienda de Granos / Productos de Chocolate y Cacao / Embutidos y Otros Productos Cárnicos Preparados / Sacrificio y Procesamiento de Aves de Corral / Queso Natural, Procesado e Imitación / Helados y Postres Congelados / Azúcar de Remolacha / Frutas, Verduras y Mezclas de Sopa Secas y Deshidratadas / Plantas de Empaque de Carne

6. Integrando estos elementos en un marco para una estrategia de crecimiento

Hoy Jordan enfrenta una situación desafiante que pone a prueba una vez más su resiliencia, fortaleza y carácter nacional. No es la primera vez y —dada la historia de la región— lo más probable es que tampoco sea la última. En 1999, cuando Abdulá II se convirtió en rey, el país enfrentaba un conjunto similar de desafíos. La economía de la región sufría las consecuencias de la invasión iraquí de Kuwait. La mayoría de los países del Golfo recortaron drásticamente sus préstamos, subvenciones e inversiones en Jordan, y la crisis también presionó las remesas. La imposición de sanciones a Irak no solo perturbó el comercio con un mercado de exportación crítico, sino también el suministro de petróleo que Jordan había estado recibiendo en términos concesionales. El crecimiento, que registró un promedio del 7,1% entre 1990-1995 (2,0% per cápita), se desaceleró al 2,9% entre 1995-1999 (0,6%). El gobierno tuvo que recurrir al endeudamiento externo, lo que elevó las ratios de deuda respecto al PIB hasta el 100% a finales de 1998.

Jordan logró adaptarse y salir de este desafío en una posición económica más sólida que nunca. Lo hizo mediante una combinación agresiva de consolidación fiscal, financiamiento internacional —un programa con el Fondo Monetario Internacional y una reestructuración de sus pagos de deuda con el Club de París— y una agresiva estrategia de crecimiento basada en exportaciones (apoyada por la adhesión a la Organización Mundial del Comercio en abril de 2000). Como se mostró al inicio de este documento, la estrategia de tres vertientes impulsó a Jordan hacia un período de crecimiento acelerado, con exportaciones de bienes y servicios que se triplicaron entre 2000-2008, y el ingreso per cápita creciendo un 34,3% acumulado en el mismo período. Jordan logró esta transición mediante la evolución de sus propias políticas para responder a un mundo cambiante y a través del apoyo colaborativo de la comunidad internacional.

Los desafíos actuales de Jordan son similares en naturaleza, pero mucho mayores en magnitud. Una secuencia de shocks grandes y persistentes —la Crisis Financiera Global, la Primavera Árabe, la crisis de refugiados sirios y el conflicto de Daesh en Irak— ha desequilibrado su economía. Como ocurrió en crisis anteriores, el país recurrió a la emisión de deuda externa para sostener el gasto público, lo que elevó las ratios de deuda respecto al PIB del 55% en 2009 al 94% a finales de 2017. El país suscribió un Acuerdo Stand-By con el Fondo Monetario Internacional (FMI) en 2012, que se convirtió en un Servicio Ampliado del FMI en 2015. Con el apoyo del FMI, Jordan ha implementado varias reformas significativas orientadas a reducir el déficit público. Se ha llevado a cabo una gran consolidación fiscal, impulsada principalmente por impuestos indirectos, eliminación de subsidios y grandes recortes en la inversión pública.

Varios factores han impedido que la ratio de deuda respecto al PIB de Jordan disminuya a pesar del gran ajuste fiscal. En primer lugar, el hecho de que Jordan necesitara emitir cantidades significativas de deuda externa entre 2011 y 2015 sugiere que el programa del FMI estaba subfinanciado. Como consecuencia, Jordan tuvo que recurrir a los mercados financieros internacionales en un momento en que su economía estaba lejos de estabilizarse, lo que resultó en rendimientos elevados. En segundo lugar, a pesar del ajuste del déficit fiscal, el déficit de cuenta corriente ha sido persistentemente grande y continuó ampliándose desde 2014. En tercer lugar, la respuesta fiscal procíclica —ajustando el gasto fiscal con la economía en desaceleración— deprimió aún más el crecimiento, en un momento en que Jordan ha asumido la extraordinaria carga adicional sobre sus servicios gubernamentales y la funcionalidad de su mercado laboral que conlleva albergar a más de un millón de refugiados.

A pesar de los esfuerzos significativos, es probable que la necesidad de consolidación fiscal continúe. Para llevar la deuda externa a una senda sostenible, Jordan necesita seguir una estrategia de financiamiento internacional orientada a reducir el costo de los fondos, al tiempo que promueve una estrategia de crecimiento más agresiva. Dado el escenario de consolidación fiscal continuada, la estrategia de crecimiento no puede depender de la demanda interna, sino que debe estar liderada por las exportaciones y las inversiones que directa o indirectamente las incrementen. Para que la economía no transable pueda expandirse, Jordan debe ampliar sus exportaciones, y esto requerirá adaptarse a los cambios ocurridos dentro de Jordan, en la región y también en la economía global desde su anterior boom exportador. Además, durante el período anterior de alto crecimiento y expansión de exportaciones (2000-2008), gran parte del crecimiento de las exportaciones dependió de sectores de baja cualificación que generaron poco empleo para los jordanos (prendas de vestir y agricultura) y/o dependieron de energía de bajo costo (productos químicos básicos). Estos motores del crecimiento exportador pasado se ajustan mal a las ventajas comparativas en dotación de factores que Jordan disfruta hoy.

El camino a seguir para Jordan que se desprende de este documento puede verse esquemáticamente en la Figura 27 a continuación. Comprender las oportunidades de crecimiento de la economía transable requiere primero reconocer las características del mercado laboral asociado en términos generales. Los empleos en la economía transable son una combinación de empleos de baja cualificación, enfocados principalmente en las exportaciones de bienes, y empleos de mayor cualificación, que se adaptan mejor a las exportaciones de servicios. Los empleos de baja cualificación en la economía transable son ocupados actualmente en una alta proporción por no jordanos y tienden a pagar salarios por debajo del promedio, mientras que los empleos de alta cualificación pagan salarios más altos y son ocupados en gran medida por jordanos. El país tiene actualmente un excedente de mano de obra (visible en las altas tasas de desempleo) entre su creciente oferta de personas altamente educadas, especialmente mujeres, y su oferta de extranjeros con menor educación, en particular refugiados sirios.

Es importante que Jordan enfoque las políticas y el apoyo internacional de maneras que ayuden a crecer a todas las partes de la economía transable, pero es especialmente importante prestar atención a aquellas partes de la economía transable que pueden sostener salarios más altos. Los empleos transables de alto salario proporcionan un impulso directo a la demanda de bienes y servicios no transables porque una mayor parte de esos salarios termina pagando servicios de comercio minorista, restaurantes, viajes y transporte en la economía no transable. Si bien los empleos de alto salario son estratégicos porque pueden absorber mayores tasas de participación laboral femenina, los beneficios indirectos en la economía no transable son especialmente importantes para ampliar las oportunidades de trabajo flexible para trabajadores de menor cualificación, incluidos los refugiados.

Figura 27. Un Esquema de la Estrategia de Crecimiento de Jordan

Las ventajas comparativas de Jordan en exportaciones están influenciadas por las restricciones y oportunidades dentro del país y por las condiciones en la región y la economía global. Los responsables de política deben ser conscientes de estos factores y utilizar este conocimiento para orientar la formulación de políticas en torno a la resolución de las restricciones prioritarias que han dejado las ventajas comparativas latentes sin realizarse, y aprovechar las nuevas oportunidades que surgen a medida que cambian las condiciones. Una restricción significativa —como se discute en este documento— es el alto costo de la electricidad. Sin embargo, ahora están emergiendo nuevas oportunidades que pueden permitir a Jordan liberar esta restricción aprovechando sus abundantes recursos naturales para la generación renovable de bajo costo. Este es un componente crítico de una estrategia de crecimiento para Jordan en el mediano plazo, pero es necesario que las exportaciones se expandan en el corto plazo en actividades que sean menos intensivas en el uso de energía y electricidad.

Aunque no se discuten en este documento, otras restricciones significativas en Jordan señaladas en la Figura 27 incluyen la escasez general de agua y las ineficiencias en la movilidad urbana derivadas de sistemas débiles de transporte público. Dada su escasez, el costo del agua como factor de producción está impulsado por el costo de la electricidad para bombearla. Mientras tanto, el transporte público de baja calidad en los centros urbanos se manifiesta en mayores costos laborales en casi todas las actividades económicas y obliga a las empresas que necesitan ser competitivas globalmente a concentrarse en áreas geográficas reducidas (como alrededor del King Hussein Business Park en Amán o cerca de la Universidad de Ciencia y Tecnología de Jordan fuera de Irbid) para acceder a la mano de obra que necesitan.

El análisis de Complejidad Económica descrito en la Sección 5 de este documento —que incluye las exportaciones de servicios por primera vez— exploró cuantitativamente qué temas de exportación son más estratégicos para Jordan e incluyó consideraciones sobre las ventajas y desventajas descritas anteriormente. El análisis identificó ocho temas de exportación como los más estratégicos dado las capacidades exhibidas por la economía jordana y las tendencias globales de la demanda. Las industrias a nivel detallado emergieron en los siguientes temas: (1) servicios empresariales, de TI y profesionales, (2) servicios educativos, (3) servicios de salud, (4) industrias creativas, (5) turismo, (6) transporte y logística, (7) materiales y servicios de construcción, y (8) agricultura y procesamiento de alimentos. Estas industrias van desde aquellas que ya tienen una ventaja comparativa revelada (RCA) hasta aquellas que aún no existen en Jordan, o existen con una intensidad mucho menor a la esperada, dadas las capacidades y el know-how existentes en Jordan. Maximizar las oportunidades de crecimiento en todo este espectro exige una combinación de acciones gubernamentales y apoyo internacional.

La mayoría de estos temas de exportación representan actividades intensivas en mano de obra altamente educada, y no intensivas en agua o electricidad. Este es el caso de los servicios de TI y profesionales, educación, salud, industrias creativas y servicios de construcción en particular. Todas estas industrias de servicios de alta cualificación enfrentan una restricción urgente que Jordan se ha autoinfligido mediante su política migratoria actual. Para que estas industrias prosperen, las empresas necesitan poder acceder al talento global. Como se describe en la Sección 4.3, facilitar el acceso al talento extranjero no se espera que reduzca las oportunidades laborales para los jordanos en estas industrias, sino más bien que les permita expandirse significativamente, creando muchos más empleos jordanos que empleos extranjeros. Si no fuera así, las empresas no estarían intentando hoy entrar en Jordan para aprovechar los talentos y las ventajas de costos que ofrece la mano de obra jordana.

Estos temas de exportación también comparten amplias oportunidades para servir a la región. Los servicios empresariales, de TI y profesionales incluyen la oportunidad para Jordan de expandirse mucho más rápidamente como base para los servicios de back-office de empresas multinacionales y servir como punto de entrada para las empresas globales al Medio Oriente. A través de estos temas, también surge una oportunidad para que Jordan sea un lugar que proporcione los servicios necesarios (construcción, salud, educación) a los vecinos de la región que salen de conflictos y para crear las innovaciones habilitadas por TI del futuro que resuelvan los problemas apremiantes de la región.

Otros temas de exportación, incluido el turismo y, en particular, la agricultura y el procesamiento de alimentos, se sitúan en el extremo de baja cualificación y salarios más bajos del espectro. Su expansión incluiría un crecimiento del empleo distribuido de manera más equitativa entre jordanos y extranjeros. En el corto plazo, estos temas continuarán enfrentando más desventajas en el costo del agua y la electricidad porque son más intensivos en estos insumos que los otros temas. Sin embargo, son extremadamente importantes para los volúmenes de exportación, el empleo total y la inclusividad del crecimiento en las regiones de Jordan. En los últimos años, Jordan ha visto que los esfuerzos de promoción del turismo han dado frutos a medida que la región ha experimentado cierta mejora en la estabilidad, pero es posible un crecimiento mucho mayor. Mientras tanto, las exportaciones agrícolas y de alimentos sufrieron un golpe significativo debido a los shocks regionales de los últimos años. El crecimiento a largo plazo en este tema puede requerir nuevos actores del sector privado y esfuerzos gubernamentales creativos para construir cadenas de valor que dependan menos de la región y adaptarse a desafíos a largo plazo como la escasez de agua y los nuevos desafíos de un clima cambiante.

Más allá de las restricciones específicas que enfrenta cada tema y las diferentes industrias dentro de cada tema, hay tres formas amplias en que el Gobierno de Jordan puede apoyar una transformación en el crecimiento: (1) promoción de inversiones activa y dirigida; (2) mecanismos mejorados de colaboración público-privada para resolver problemas específicos de la industria; y (3) mejores capacidades para priorizar y ejecutar proyectos de inversión pública.

Para las industrias de alto potencial que no existen o existen con baja intensidad, recomendamos dirigir los esfuerzos de promoción de inversiones en torno a estos ocho temas de exportación y concentrar los recursos gubernamentales en la orientación de empresas con alta probabilidad basada en sus decisiones de inversión pasadas y sus objetivos empresariales declarados. La tarea debe recaer en los hombros de la Corporación de Inversiones de Jordan (JIC), que puede requerir nuevos recursos y una nueva mentalidad institucional para comprometerse de manera continua e iterativa con los inversores potenciales en las industrias de alto potencial para facilitar nueva inversión extranjera directa.

Para promover un crecimiento más rápido en los sectores existentes, recomendamos instituir mecanismos nuevos y más sólidos de resolución de problemas específicos de la industria entre el sector público y privado. Una herramienta para esto que se utiliza en otros países pero que ha sido infrautilizada en Jordan es la presencia de “Grupos de Trabajo de Productividad”, que son grupos de trabajo compuestos por individuos del sector privado y público, que se reúnen regularmente para identificar las restricciones más vinculantes que impiden el pleno potencial de las industrias clave. Dichos grupos de trabajo definidos en torno a varios de los temas de exportación identificados tendrían el potencial de acelerar significativamente el crecimiento de las industrias existentes al revelar restricciones al crecimiento de la productividad que están ocultas para el gobierno a menos que trabaje en colaboración con el sector privado.

Finalmente, a pesar del financiamiento disponible para una serie de inversiones públicas en infraestructura a gran escala, Jordan exhibe un patrón de desarrollo lento de la infraestructura necesaria, incluyendo en agua, energía y transporte. En el futuro, el Gobierno de Jordan debe desarrollar nuevas capacidades para priorizar, avanzar y financiar proyectos de infraestructura bankables. Dicha capacidad es esencial para apoyar la movilización de capital privado y mejorar la eficiencia y celeridad de la inversión pública. Existen varios arreglos institucionales desarrollados en otros países, así como a nivel subnacional en Jordan, que podrían aprovecharse a nivel nacional.

La promoción de exportaciones y la inversión relacionada con las exportaciones a través de estos diversos esfuerzos tendrá impactos indirectos en el sector no transable, un impulso que hoy no puede provenir del presupuesto fiscal. Un crecimiento más rápido, junto con una estrategia de financiamiento internacional orientada a reducir el costo de los fondos —evitando que Jordan emita deuda en los mercados internacionales mientras su economía no esté completamente estabilizada— son los elementos clave para sacar la economía de la crisis y poner al país en un camino de crecimiento sostenible.

Figuras

Figura 1. (LN) PIB per cápita
Figura 2. Crecimiento del PIB y PIB per cápita (países seleccionados)
Figura 3. Contribución al crecimiento del PIB por sector (puntos porcentuales)
Figura 4. Jordan: Exportaciones de bienes y servicios
Figura 5. Inversión extranjera directa (2003-2017)
Figura 6. Exportaciones e importaciones de bienes y servicios
Figura 7. Déficit de cuenta corriente, IED y deuda pública externa
Figura 8. Jordan: Saldo fiscal presupuestario (2005-2017)
Figura 9. Costos e ingresos de NEPCO
Figura 10. Tarifas de electricidad (2008-2018)
Figura 11. Tarifas de electricidad por industria (2008-2018)
Figura 12. Participación del valor agregado manufacturero por intensidad energética (2010)
Figura 13. Fuerza laboral de Jordan por industria
Figura 14. Participación en la fuerza laboral por género y escolaridad
Figura 15. Desempleo por nivel educativo para hombres y mujeres jordanos
Figura 16. Estructura de la fuerza laboral (real y proyectada)
Figura 17. Mercado laboral jordano (2017)
Figura 18. Diferencias salariales de extranjeros versus jordanos en cuatro grandes sectores
Figura 19. Diferencias salariales de extranjeros vs. jordanos en sectores de alto salario
Figura 20. Diferencias salariales de profesionales por nacionalidad
Figura 21. Jordan: Exportaciones por categoría (1995-2016)
Figura 22. Espacio Industrial (2015)
Figura 23. Jordan: Orientación en el Espacio Industrial (2015)
Figura 24. Proceso de identificación/validación de sectores
Figura 25. Temas de Exportación
Figura 26. Jordan: Temas de Exportación – Las 10 Principales Industrias
Figura 27. Un Esquema de la Estrategia de Crecimiento de Jordan

Tablas

Tabla 1: Superávit fiscal primario, crecimiento y rendimientos necesarios para alcanzar el 77% de deuda respecto al PIB para 2025

Referencias

Balassa, B. (1965). “Trade liberalization and revealed comparative advantage”. The Manchester School, Volumen 33, Número 2, mayo de 1965, pp. 99-123.

Hausmann, Ricardo, and Bailey Klinger (2006). “Structural Transformation and Patterns of Comparative Advantage”. CID Working Paper.

Hausmann, Ricardo, Cesar Hidalgo, Sebastián Bustos, Michele Coscia, Sarah Chung, Juan Jimenez, Alexander Simoes, and Muhammed Yildirim (2011). “The Atlas of Economic Complexity”. Puritan Press. Cambridge MA.

International Monetary Fund (2012). Jordan: Staff Report for the 2012 Article IV Consultation, May 22, 2012.

International Monetary Fund (2014). Jordan: Staff Report for the 2014 Article IV Consultation, Third and Fourth Reviews Under the Stand-By Arrangement, Request for Waivers of Nonobservance of Performance Criterion and Applicability of Performance Criteria, June 9, 2014.

International Monetary Fund (2017). Jordan: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Jordan. June 24, 2017.

International Monetary Fund (2018). Jordan: Preliminary Macro-Framework. December 11th, 2018.

Kar, S., Pritchett, L., Raihan, S., and Sen, K. (2013). “Looking for a break: Identifying transitions in growth regimes”. Journal of Macroeconomics, Vol. 38, pp. 151-166.

Wald, A. (1943). “Tests of Statistical Hypotheses Concerning Several Parameters When the Number of Observations is Large”. Transactions of the American Mathematical Society, 54, (1943), pp. 426-482.

¹³ Para probarlo, se requerirían varias observaciones en el tiempo. Desafortunadamente, CID actualmente solo tiene acceso a la base de datos de Dun & Bradstreet de un año (2015).

¹⁴ Este es un caso en el que la comparación entre industrias pertenecientes a diferentes sujetos puede ser injusta porque diferentes sectores pueden requerir empleo en diferentes proporciones. También pueden estar sujetos a diferentes niveles de representación en la base de datos. Puede seguir siendo injusto comparar industrias dentro de los temas, pero se espera que el nivel de “injusticia” en este caso sea menor.

¹⁵ Estos temas fueron los que concentraron la mayor parte de las industrias seleccionadas en base al proceso descrito.

Jordan: The Elements of a Growth Strategy — Diagnosing Constraints and Identifying Export Opportunities for a Resilient Economy

Abstract

Executive Summary

1. Jordan’s Growth Trajectory

2. External Shocks: Impacts on Exports and Foreign Direct Investment (FDI)

2.1 Exports

2.2. FDI

3. Jordan’s Macroeconomic and Fiscal Outlook

4. An Export-Led Growth Strategy: Comparative Advantage Considerations

4.1 High-Cost Electricity

4.2 The Odd and Changing Character of Factor Endowment: Human Capital

4.3 Complementary High-Skill Immigration

5. Understanding Economic Complexity Inclusive of Services

5.1. Incorporating Goods and Services: Dun and Bradstreet Dataset

5.2. Identifying Sectors with High Potential

6. Integrando estos elementos en un marco para una estrategia de crecimiento

Figuras

Tablas

Referencias

Cómo citar en BibTeX

Abstract

Executive Summary

1. Jordan’s Growth Trajectory

2. External Shocks: Impacts on Exports and Foreign Direct Investment (FDI)

2.1 Exports

2.2. FDI

3. Jordan’s Macroeconomic and Fiscal Outlook

4. An Export-Led Growth Strategy: Comparative Advantage Considerations

4.1 High-Cost Electricity

4.2 The Odd and Changing Character of Factor Endowment: Human Capital

4.3 Complementary High-Skill Immigration

5. Understanding Economic Complexity Inclusive of Services

5.1. Incorporating Goods and Services: Dun and Bradstreet Dataset

5.2. Identifying Sectors with High Potential

6. Integrando estos elementos en un marco para una estrategia de crecimiento

Figuras

Tablas

Referencias

Cómo citar en BibTeX

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