Counting Syria, Iraq and Israel among its neighbours, Jordan’s peaceful existence might seem like nothing short of a miracle. Surrounded by these conflict-ridden countries and consequently becoming a destination for a steady influx of refugees, Jordan certainly has its hands full. But for a small country lacking potentially lucrative natural resources, Jordan is bullish about FDI, promoting its new industries, geographic location and business-friendly policies to put itself on the investment map.   

Dry and resource-poor, Jordan imports nearly 97% of its energy from neighbouring OPEC countries, a situation that proved problematic when the Arab revolutions hit in 2011. “When we lost the gas supplies from Egypt that powered our entire power plants during the Arab Spring, you would have thought that Jordan was going to collapse,” says Imad Fakhoury, Jordan’s minister of planning and international co-operation. “We took that challenge as a government. We transformed that into a commitment to remove subsidies on oil products and to immediately open up the renewable energy sector because we needed to diversify energy.”

Advertisement

Tarek Al-Amad, CEO of renewable energy developer European Jordanian Renewable Energy Projects (EJREP), agrees. “Green energy is the name of the game,” he says. Jordan’s plentiful wind and solar potential has gone largely untapped until now, despite electricity demand in the country increasing at an average of 8% a year. The World Bank estimates that the Middle East and north Africa receives nearly 25% of the solar energy hitting the earth, and Jordan’s position at the heart of the Levant presents no end of opportunities if this energy is harnessed efficiently.

Cutting costs

Prime minister Abdullah Ensour’s government is implementing policies to facilitate investment in renewable energy, improving Jordan’s regulatory climate and introducing tax incentives for private companies. It has launched several joint projects and public-private partnerships (PPPs) with the EU, the European Bank of Reconstruction and Development, the International Finance Commission (IFC) and several private companies, both Jordanian and international, to build energy infrastructure as part of the Renewable Energy and Energy Efficiency Programme it began in 2012.

As part of the programme, Jordan announced in May the launch of nine EU-funded renewable energy and energy efficiency projects, which include waste-to-gas projects and using green energy to generate power in schools, hospitals and refugee communities. “The rising energy bill places growing pressure on the state budget, so boosting reliance on renewable energy is our priority at this stage,” minister of energy Ibrahim Saif told media at the launch.

The IFC recently partnered with Jordan to launch the Levant’s largest private sector-led solar initiative, a $207.5m debt package to build seven solar photovoltaic plants totalling 102 megawatts, projected to cut carbon emissions by up to 123,000 tonnes per year. The IFC has also brokered a $221m financing package for Jordan’s first privately owned wind farm. The wind and solar projects together are estimated to cut power generation costs by 25%. 

The recently introduced Jordan 2025 plan, a roadmap for the next 10 years of development, presents “an aggressive path of using PPPs to implement infrastructure projects, sustainable infrastructure and green energy opportunities”, says Mr Fakhoury. “We have a great track record: since 2005, more than $7bn has been or is being delivered for projects developing ports, aviation and transport infrastructure, four power plants, 12 solar plants, a wind farm and the Disi Water Conveyance Project. These successful PPPs have tested our legal environment many times, proving Jordan as a model for infrastructure PPPs in the region.” Of the country's potential over the next 20 years, Mr Fakhoury says: “We have more than $30bn of PPP opportunities just in Jordan itself.”

Keeping the peace

Jordan is the third largest recipient of refugees in the world, currently home to more than 3 million from Palestine, Syria and Iraq. It also plays a major role in regional peace making, moderating and inter-faith dialogue. The country markets itself as a hub of stability in a turbulent region, a gateway to the Gulf Co-operation Council countries and the Arab world market of 350 million people, and an access route to reconstruction opportunities from Turkey to Iraq. “While the downside is regional violence, the upside is the tremendous reconstruction and infrastructure opportunities,” says Mr Fakhoury.

When it comes to these opportunities, Denmark’s Vestas and India-based Suzlon Energy are two global energy companies solely dedicated to wind power that are establishing a growing presence in Jordan. Chinese renewable energy firm Hanergy also recently announced a grant of $310m to Jordan for setting up a green energy power transmission network. And numerous energy companies from Syria and Libya have relocated their operations to Jordan because of its stability, its business-friendly policies and the market access it provides, according to Sheldon Fink, CEO of special economic zone PBI Aqaba.

Investor-friendly

Free-trade agreements (FTAs) are another tool that Jordan is utilising in its attempts to attract foreign investors. “Jordan is second to none in terms of FTAs,” says Mr Fakhoury. “You’re looking at more than 1 billion consumers under FTAs around the world.” There are also 20 development zones and 42 free zones across the country.

The government recently endorsed a new generation of investor-friendly laws covering PPPs, taxes and energy efficiency policies. “Our socio-economic development plan for next 10 years is focused on inclusive growth, promoting investment, improving the ease of doing business, entrepreneurship, innovation, and focusing on nine economic sectors in which we have great competitive advantage: free trade access manufacturing, construction and professional services, ICT and BPO, agro-industries, tourism, healthcare and pharmaceuticals, education, financial services, and transport and logistics,” says Mr Fakhoury.  

The legislation has also unified investment-related institutions, placing all industrial free zones and global zones under the mandate of the Jordan Investment Commission. “That means we can tailor-make the government that you wish within these zones in terms of your needs and requirements,” says Mr Al-Amad of EJREP.

Challenges ahead

But along with the potential opportunities in Jordan, challenges abound. Accommodating new procedures into the energy sector will take time, according to Mr Al-Amad. “We have faced issues with the government trying to explain how renewable energy works, how it affects the grid. Talking to a utility or grid operator about renewable energy is an extremely tough process because they are configured on conventional grids,” he says.

Mr Fink adds: “I think the main problem is the resistance by the big electrical utilities companies to these changes. And in any process where you start creating a viable private sector, the state bureaucracy is very slow in carrying it out.”

Mr Al-Amad continues: “Regarding solar and renewable energy, I think the challenges today are mostly about competition, and about going to the government and changing laws and policies. But all the requirements are there for investors to come and invest.”

Mr Fakhoury admits: “We don’t have a perfect situation; we’ve gone down in business rankings, but we are dedicated to continuous improvement. The reform approach Jordan has historically adopted has been based on an inclusive, sustainable and evolutionary process; it creates growth from inside, empowers our citizens and creates a pipeline for opportunities. For the business community, all I ask of you is come and see it for yourself.”