Recognising the need to maximise the economic value of the country’s 27-kilometre (km) coastline, Jordan’s leadership, under the auspices of King Abdullah, has come up with an ambitious 20-year plan. It focuses on the Red Sea port town of Aqaba, where in 2001, the newly created Aqaba Special Economic Zone Authority (ASEZA) designated a 375km2 zone for special development. The introduction of investor-friendly regulation and incentives aimed at unleashing Aqaba’s economic potential started a transformation that is now reaching full momentum.
ASEZA’s investment strategy started more than five years ago, says Imad Fakhoury, chairman and chief executive of ASEZA’s development arm, Aqaba Development Company (ADC). “We started with our own backyard, targeting the great liquidity of Gulf investors, which are our prime investors,” he says.
The region cannot develop effectively with capital investment alone, however; international investors offering Western expertise must also form part of the development equation, according to Mr Fakhoury. Dutch company APM Terminals, part of the Moller-Maersk Group that operates more than 33 ports worldwide, is a model partnership that ASEZA wants to replicate with other international firms. “Initially, we signed a management contract with APM to manage our container terminal, followed by a joint venture agreement to develop and operate the container terminal under a 25-year contract,” says Mr Fakhoury.
Port relocation plan
The master plan includes relocating the town’s main port from the urban core in the north to the south of Aqaba, closer to the Saudi Arabian border. ADC has not yet appointed a developer for the $500m new port project although it has put the contract out to international tender. Once the new port opens, the existing port site, a prime waterfront location, will be developed into a business and leisure complex.
The government-backed development corporation is also seeking operators for the new port’s general cargo terminal. “The Western world has excellent expertise in this area and we are still looking for operators for the general cargo terminal, the passenger terminal and the oil jetty,” says Mr Fakhoury.
Natural resources from the Dead Sea, including phosphate and potash, will be processed and exported via the new port. Dead Sea mineral raw materials support existing downstream industries such as fertilizer production, many of which are joint ventures with foreign firms including Japan’s Nippon and the Jordan Indian Company, which both produce for export. “We need foreign companies for technology transfer because we want to keep processing our rich raw materials in our country and export the final product ourselves,” says Mr Fakhoury.
As well as boosting local industry, the improved capacity of the new port will be vital to the development of the region for importing liquid bulk, grains and other uncontainerised products. “Aqaba is a regional port for Asian and Australian goods into Iraq, Syria, Saudi Arabia, even Israel at times, because we are the gateway to the Levant region and we need those imports to sustain and improve growth,” says Mr Fakhoury.
However, tourism, not light industry, offers the most opportunities for growth in the region and so the ADC’s priority over the next three to four years will be to attract tourism and real estate investment. There are many opportunities for international investors, particularly in the hotel sector, says Mr Fakhoury.
“We want to attract companies with tourism sector expertise with the aim of knowledge and technology transfer around the hotel industry,” he says. Most of the hotel chains in Aqaba are from the western Europe, the US and Canada, although emerging Middle Eastern brand Jumeirah also has a presence in the area.
One of the pioneer investors in the area is local Jordanian firm Saraya Holdings in a project that broke ground in January 2006. Situated at the western tip of Aqaba, Saraya Aqaba comprises a man-made lagoon that will add about 1.5km of beachfront to the Gulf of Aqaba. When the $1bn project is completed at the end of 2009, it will cover an area of about 617,000 square metres and combine residential, retail, leisure and business facilities in the form of an ancient-style city.
Saraya Aqaba general manager Shadi Ramzi Majali says that the main selling point for the development is security. “Apart from the longstanding political stability of the country, the economic, financial and regulatory security is what attracted us as investors to the area,” he says.
Geographically, Aqaba is surrounded by four countries and is the only sea gateway into Jordan. It is also at the tip of the tourist golden triangle, which comprises the beach resort of Aqaba, the ancient city of Petra, and Wadi Rum, a sandstone and granite valley renowned for its desert beauty. A dry jet stream coming in from the Jordan valley almost all the time means that there is no humidity and the seas are calm, which makes Aqaba a perfect tourist destination and provides a good quality of life.
“People think Aqaba is just a plan for an industrial zone but it’s not; it’s a live city designed to benefit the local population as well as investors,” says Mr Majali.
What makes ASEZA unique is its governance and regulatory environment, according to Mr Majali. “ASEZA is the government but it is financially and administratively independent so it can give quicker and better decisions without going back to the capital for decision-making, enabling a better service to investors, the public and the local community in the way of infrastructure, municipality services and other local issues,” he says.
ASEZA has about 350 business lines but in terms of decision making it is a one-stop-shop for land approvals, services, licensing and regulation. The zone has no customs duty and has a 5% corporation tax across the board.
Although the master plan comprises 20% industry, 30% services and 50% tourism, Mr Majali’s belief, as well as that of his shareholders, is that each dollar spent in the tourism sector has an additional impact on the region. “The raw materials for tourism in Jordan are much more available than within the industrial sector because we do not have much water or oil, but in terms of tourism we have natural beauty and heritage sites that predate Christ,” he says.
As tourism develops, 1000 rooms will be added each year to the current 2000 to reach about 5000 in three to four years’ time, says Mr Majali. “Once we have that capacity, we can comfortably talk to international operators that could start airlift tourist operations,” he says. He is convinced that Aqaba will become an international destination in the next three years as an industrial sea gateway to the rest of the region and an established tourism centre for years to come.
86,000Area: 375 sq kmBorders: Saudi Arabia, Egypt, IsraelTime zone: GMT + two hours in winter and three hours in summer