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Unusual business

Apr 13,2015 - Last updated at Apr 13,2015

The government in Jordan, in spite of a onetime aggressive privatisation programme, controls a large number of companies indirectly through the Social Security Investment Fund (SSIF).

Jordanian companies that have had their management appointed by the government have not traditionally fared well. Moreover, some of the privatised companies seem to be more at odds with this Cabinet than with previous one. This has cost Jordan hundreds of millions in terms of actual and potential returns, and the government also loses in terms of taxes, fees and goodwill.

The lack of meritocracy is apparent in government appointments to boards of directors of government controlled companies, or their chairmanship/management, which are based on an elitist, rentier-reward system, not on achievements, past performance and qualifications.

The profitability of these companies, which form a sizeable portion of the GDP and should have been flagships for economic development, is dismal, to say the least.

Bad management can make the most profitable of companies lose.

A famous example from outside Jordan of bad management is that of Nokia. Not so long ago, it dominated cellular phone sales worldwide.

In 2007, Nokia accounted for over 40 per cent of cellular phone sales worldwide. By 2014, Nokia had its phone business owned by Microsoft.

Stephen Elop, appointed as its CEO in 2010, took a series of wrong decisions, causing the company to lose $23 million every day he was at its helm. The board also made mistakes, ignoring the changing environment and failing to adapt to the competition from Apple and Samsung. 

Jordanian companies, which have been privatised through transparent and costly competitive tenders and with much fanfare as a sign of reform efforts to attract foreign direct investors, are now suing the government for alleged injustices.

The recent Orange-Jordan lawsuit is one example; others may be on the way.

The damage to Jordan’s reputation as an investment hub and as a place that attracts foreign direct investment due to its stability, modernity and a level playing field suffers. 

A reputation that was built over decades of dedicated hard work is being squandered.

Economic managers should be aware of the fact that investors move out in herd-like behaviour. Just as they bring each other into a country, investor can also discourage others from entering it.

No promotion can combat the negative image created by treating a foreign investor unjustly, especially big ones.

There is a rule in business: a satisfied customer brings you 10 customers, an unsatisfied one makes you lose a 100. It is a rule worth remembering.

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