MENA REGION II: JORDAN’S BUSINESS-FRIENDLY APPROACH PAYS OFF

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Last week we provided you with the first instalment in our series on the MENA region, with the aim of helping you determine if the region is worthy of your focus.

Amman - JordanAlthough there is only a population of 6million it can represent a stable capitalist friendly environment and platform for companies interested in the region.

The following article by: Fawzi Jumean of Amwal AlKhaleej is highly enlightening.

Yahoo’s recent acquisition of Maktoob, the leading Arabic online portal for the Middle East and North Africa region, for more than $150m, has left some people puzzled. Why is the largest regional internet company based in Jordan, a country that accounts for only roughly 1 per cent of the MENA region’s gross domestic product and 2 per cent of its population?

With 6m people and a 2008 GDP of $20bn, Jordan has less than half the population of Cairo and its economic output equals half the 2008 revenue of the Saudi Basic Industries Corporation. Had the Maktoob story been unique in its Jordanian origins, it would have been easy to brush aside as an anomaly.

Yet it is also the case that Aramex, the largest Arab courier and logistics company, was founded in Jordan. So was Hikma, the region’s largest generic pharmaceutical company; and Fine, the leading hygienic papers company. Of the region’s top five banks by assets, all are based in Saudi Arabia except the third largest: Arab Bank, which is Jordanian. So how is a country as small as Jordan able to account for such a disproportionate share of corporate stars in the region? There are three main reasons for Jordan’s fertile corporate environment.

First, the country has a decidedly capitalistic culture. The business community is open to various forms of investments and foreign investors have been welcomed. The companies mentioned have financed their growth through almost every form of capital, including family wealth, angel investors, private equity, public equity, pension funds and bank loans.

The government has also adopted business friendly measures. Setting up a company takes a few hours, as does shutting one down. In some areas, the government is distinguished by its absence or its flexibility: capital movements are free and visa policies are liberal.

No one deludes themselves that Jordan’s domestic market is not large enough to sustain regional business leaders and that a focus on exports and regional, often global, expansion is crucial. Hikma makes drugs in the US, Aramex delivers goods in China and the Arab Bank offers its services in Switzerland.

Nor is there shame in choosing any listing venue, foreign or local. Hikma is listed on the London Stock Exchange, Aramex trades on the Dubai Financial Market, while the Arab Bank, with a $10bn market capitalisation, is listed locally on the Amman Stock Exchange.

Second, Jordan has one of the region’s best pools of skilled labour and one of the lowest wage rates for a given level of qualification. Relatively cheap, skilled labour is a competitive edge for an aspiring business hub, especially so when the country has modest natural resources to support business activity.

Finally, the tone of the country is set from the top and the government’s outlook over the last decade has been remarkably pro-business. King Abdullah II has frequently met with companies and investors from around the world to market the country and its companies, often taking local business leaders with him and advocating projects to foreign investors.

Shortly after Yahoo’s acquisition of Maktoob, the king awarded the company’s founders national medals of the first order. When a head of state recognizes company leaders for a significant transaction, because of the benefit the deal does the country, the gesture is an adrenaline shot in the business community’s arm.

Many countries in the region, most with larger domestic markets and financial resources, are competing for entrepreneurs and creating environments conducive to the creation of regional champions. To keep competing, Jordan must continue distinguishing itself where it can: excellence in human resources and liberal-mindedness in government policies.

A commitment to a greater level of excellence in higher education, and a government commitment to continue leaving business activities unfettered, will be the surest way of encouraging the next regional leader to emerge from Amman.

Article written by: Fawzi Jumean from Amwal AlKhaleej