In the World Economic Forum’s recently published Global Competitiveness Report 2014-2015, Jordan managed to improve its position, moving up from 68 to 64 out of 144 economies. Margareta Drzeniek, director and lead economist, Global Competitiveness and Benchmarking Network, tells Venture what’s helping the Kingdom climb upwards and what more needs to be done for it to realize its full potential as a competitive economy.
By Dina al-Wakeel
In your most recent report, Jordan has risen back to the same rank it held two years ago. How did the Kingdom climb up despite the geopolitical conflict and economic hardships?
The improvement mainly reflects a lower budget deficit and some progress made in education, where enrollment rates related to primary and tertiary education levels were updated. At the same time, the country also registers improvements to its financial market development, where the assessment of access to finance, as well as overall stability, of the sector has improved. These improvements have outbalanced the deterioration in the security situation, which has negatively affected the country’s competitiveness.
What does Jordan need to do to climb up even further?
Boosting economic growth over the longer term will require Jordan’s policymakers to address a number of challenges. According to the Global Competitiveness Index (GCI), there is significant room for improvement in boosting labor market efficiency, and the full potential of ICTs for improving productivity has not yet been fully exploited. Jordan could also benefit from more openness to international trade and investment, which would trigger further efficiency gains in its domestic economy and facilitate the transfer of knowledge and technology. Tariff barriers remain high in international comparison and regulatory barriers to FDI remain in place. And although bank financing appears to be more easily available than in the past and than in many other countries, efforts to further stabilize its banking sector should be continued.
Have you noticed any significant improvements in the Kingdom’s attempts to tackle problematic factors for doing business, like improving the investment climate?
Indeed, many aspects of the investment climate are captured in the GCI. The Kingdom improves in a number of relevant aspects, for example on indicators related to the efficiency of the judiciary (up by 7 from 38 to 31 on the efficiency of the judiciary in settling disputes), or labor market regulations which became more flexible in terms of hiring employees (up by 12 to 60). At the same time, we see some factors that are key for international investment deteriorate or stagnate; the administrative barriers to start a business (number of days to start a business remained constant at 12) or the protection of property rights (down by 6 to 34).
In regards to the rest of the region, which country takes the lead and which fares worst?
The best performing economy in the region is the United Arab Emirates at 12 position globally. The UAE has undertaken many efforts to strengthen its competitiveness over the past years and has also benefited from the availability of resources to do so. Today it is a very open economy, fairly diversified, with excellent infrastructure and an improving institutional framework.
The poorest performer in last year’s report was Yemen at 142, a country which faces competitiveness challenges across the board. In the meantime, the country has been affected by conflict, which will make it difficult to improve its competitiveness in the near future.
In regards to the GCC economies and in light of the drop in oil prices over the past year, have you witnessed any shift in their macroeconomic policies and less reliance on oil revenues?
It is still too early to observe the effect of falling oil prices on the competitiveness of countries as measured by the GCI, due to the lag in the data. However, I expect that a number of macroeconomic indicators will deteriorate in oil and gas exporting countries.
The diversification of the economy is a long-term process that needs to take into account many factors such as the business environment, education, innovation policy, but also technological readiness. GCC economies that rely on oil and gas revenues for their budgets will have less means to invest in the diversification should energy prices remain low. It is nevertheless crucial for these countries to undertake the necessary structural transformations to ensure future prosperity.
Does unemployment remain the biggest hurdle facing the region’s economies?
There is no doubt that unemployment and in particular youth unemployment is the biggest challenge in virtually all countries of the region. Creating jobs will require a stronger and more productive private sector in all the economies as the reliance on the public sector for job creation is not sustainable. This, in turn, will necessitate higher levels of competitiveness and a better business environment. Competitiveness is therefore central to the region’s economic policy agenda.