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Doing business in Jordan — unsatisfactory progress

Nov 12,2017 - Last updated at Nov 12,2017

According to the latest World Bank’s Ease of Doing Business Report, Jordan’s business environment gained 15 ranks globally over the last year, from 118th to 103rd, out of 190 countries.

Prominent public opinion leaders commended this noticeable progress and praised the considerable underlying efforts by the government to upgrade the business environment in the Kingdom.

Yet, the details in the World Bank report are at odds with these positive statements.

Based on the report’s findings, the Jordanian government has only undertaken one single reform to improve the business climate over the last couple of years, a lacklustre pace of progress given the stretched economic situation and the prolonged poor international ratings of the investment environment in the country.

The central bank’s achievement of establishing a credit bureau in 2016 was the only reform recognised by the World Bank, and the exclusive entity responsible for the 15 places Jordan gained in the latest global ranking of doing business.

Conversely, all other government efforts to improve the business environment over the past 24 months fall short of contributing positively to the country’s business structure.

According to the surveys conducted by the 2018 doing business report, some formalities and procedures at General Amman Municipality and Land Directorate still take investors up to two weeks.

The report also shows that Jordan’s ranking on insolvency regulations and protecting minority investors remained persistently low, with no tangible improvement over the past several years.

Jordan is ranked 146th out of 190 countries on both insolvency regulations and protecting minority investors because the government and the parliament failed until now to upgrade the legal frameworks of bankruptcy and corporate governance standards in publicly listed companies.

The Ministry of Planning and International Cooperation spearheads national efforts to improve business environment and promote competitiveness in the country.

However, the ministry cannot be blamed for the underperformance and the slow pace of progress given that it has no line of authority over government entities and national stakeholders in charge of legislating and executing reforms.

In fact, the lack of transparent and precise key performance indicators (KPIs) on the Cabinet and parliament, and the weak structure of accountability are the main drawbacks to blame in this regards.

In countries with tight budgets and high public debt burdens like Jordan, the government has no affordable instrument to stimulate economic growth other than supply-side reforms that aim at surmounting bottlenecks in business activities.

Given the exceptional magnitude of business environment reforms in Jordan, it is recommended to set a yearly quantitative target for the government to gain a specific number of places in the World Bank’s ease of doing business ranking.

In order to enforce accountability, a proposed KPI can even determine whether this Cabinet stays on.

Jordan has no more room to postpone economic reforms, especially those at minimal fiscal costs and no direct financial implications on citizens.

The writer, an economist and columnist, contributed this article to The Jordan Times.

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