Foreign direct investment (FDI) in Jordan

FDI in Figures

Historically, the Jordanian economy has benefited from massive investment by the Gulf countries, which continued to skyrocket until 2006. However, since then FDI has declined due to the international economic crisis, followed by geopolitical instability. The situation was compounded by the health and economic crisis triggered by the COVID-19 pandemic, as well as by the Israel-Hamas conflict and geopolitical tensions in the area. According to UNCTAD's World Investment Report 2024, FDI inflows stood at USD 843 million in 2023, down by 32.6% y-o-y but in line with the pre-pandemic level. At the end of the same period, the total stock of FDI reached USD 39.53 billion. According to a report by the Central Bank of Jordan, in the first three quarters of 2024, Jordan received USD 1.3 billion in FDI, or 3.3% of GDP. While this is down from USD 1.6 billion in the same period of 2023, it still exceeds FDI inflows for 2021 and 2022. Arab countries contributed 49.1% of the total FDI, with GCC nations accounting for 31.7%. The European Union represented 11.5%, led by the Netherlands (4.9%) and France (3.5%). Non-Arab Asian countries contributed 7.2%, with China (2.5%) and India (2.1%) being the largest investors. Other regions made up 32.2%. The financial and insurance sector attracted the largest share of FDI at 15.7%, followed by manufacturing (7.7%), information and communication (7.5%), mining and quarrying (7.3%), and transportation (7.0%). Wholesale and retail trade accounted for 6.1%. Real estate and land investments by non-Jordanian individuals made up 14.9% of total FDI inflows.

The country's attractiveness lies mainly in the quality of its infrastructure, its solid and dynamic banking system, as well as its level of economic openness, which has allowed the establishment of free trade zones and public-private partnerships. The Government introduced a new initiative to encourage investment, including offering investors a single-window application facility through the Jordanian Investment Commission. In October 2022, Jordan enacted the Investment Environment Law No. 21 of 2022, which took effect in January 2023, replacing the Investment Law No. 30 of 2014. The purpose of this law is to foster an environment conducive to investment and to encourage greater investment inflows. It reiterated that non-Jordanian investors would receive equal treatment as Jordanian investors and broadened the range of sectors eligible for incentives, subject to specific criteria being met. Among other incentives, the law allows companies to employ foreign workers more freely, permitting the hiring of non-Jordanians for administrative and technical roles requiring specialized skills, up to 25% of the total workforce, extendable to 40% if qualified Jordanian labour is lacking. Moreover, Jordan recently launched the Investment Promotion Strategy for 2023–2026, delegating all international promotion activities to specialized marketing agencies. These agencies are responsible for identifying potential investors and executing targeted campaigns in selected countries. Despite enhancements in business indicators aimed at easing investment and operations, conducting business in Jordan can be more challenging compared to other regional locations. Investors particularly highlight tax regime instability and incentive package concerns, along with issues in the public-private interface, including inconsistent government interpretation of policies and regulations. The Investment Environment Bylaw No. 7 of 2023 expanded ownership percentage in some economic activities, while maintaining some restrictions. Jordan ranks 73rd among the 133 economies on the Global Innovation Index 2024 and 91st out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Jordan

Strong Points

The main advantages of Jordan are:

• Its political stability built around King Abdullah, who remains very popular and has the support of the army
• Its geographical location and very good international relations (with the EU, the IMF, the Gulf monarchies and the United States), which allow it to have the financial, political and logistic support of the international community
• A growth rate above the region's standards, favoured by a significant production of phosphate and potash and by a well-developed tourism sector
• Control of public expenditure
• Low cost and well-educated labour in the Arab world
• Favourable business environment
• Modern and well-connected infrastructure
• Special economic zones across the country (either Development Zones or Free Zones)

Weak Points

Jordan's main weaknesses in attracting FDI are:

• Political tensions in the region with the proximity of Iraq, Syria and Israel. On the domestic front, the massive influx of Iraqi refugees, added to the large presence of Palestinian refugees, is a risk factor for social cohesion.
• A very large structural trade deficit linked to its lack of natural resources and food products leading to a high dependence on external aid
• Very high unemployment rate (19.1% in 2019 - Jordan's Department of Statistics, latest data available) that fuels social tensions

Government Measures to Motivate or Restrict FDI

Jordan, under King Abdallah's leadership, has developed a progressive economic liberalisation policy that favours foreign investment. The special economic areas, such as the Qualified Industrial Zone (QIZ) and the Free Zone of Agaba offer very advantageous tax regimes for companies. Also, the government has simplified the registration procedures for foreign companies by creating the Jordan Investment Commission. Finally, the Jordanian State has launched a campaign of privatisation which has benefited public and private partnerships in several sectors. Among the main measures set up by the government are:

• Income tax exemption during 10 years, variable depending on the place and sector of activity
• Tax exemption on income generated from the export of goods and services
• Repatriation of  capital, profits and salaries without charges

The Jordan Economic Growth Plan 2018-2022, will put Jordan on a path of sustainable growth and double Jordan's economic growth, at a minimum, according to a report released by the Economic Policy Council. 
Furthermore, based on Jordan's "Vision 2025", the economic growth plan is expected to gradually rise from 6.5% in 2021 to 7.5% in 2025. This measure seeks to boost Jordan's economic growth. It is effectively supported by the Jordanian government, which has been cutting bureaucracy and paperwork, improving its economic legislative environment and harmonizing its economic operations.