Don’t Rush to Invest in Jordan (Re-post)

Andy Serwer writes today on the Fortune magazine website an article entitled “Can Jordan Build on its Relative Success?” Even the title is a give-away of modest expectations: “relative success”? The article lists some of Jordan’s undeniable achievements over the past seven or eight years: free trade agreements with the U.S. and the European Union that have caused exports to soar, some measure of macroeconomic stability, continued GDP growth even in the current economic crisis, improvements in education and health care, and reform and liberalization of several key areas of the economy. Having spent quite a lot of time working in Jordan, I agree with Mr. Serwer’s assessment of Jordan as the most secure and pleasant place to live in the neighborhood – in which he includes Egypt, Saudi Arabia, Iraq, Syria, Lebanon, and Israel – though Beirut’s nightlife and the topless sunbathers in Tel Aviv outshine any of Jordan’s more sedate attractions. But it is easy to overstate the case.

I have reservations about the World Bank’s “Doing Business” rankings and the methodology they use, but it’s worth noting that the 2009 “Doing Business” report ranked Jordan 101st out of 181 countries surveyed in overall ease of doing business, compared with 94th the previous year, just behind Zambia (100th) and ahead of Sri Lanka (102nd). Compared to its neighbors, Jordan beats out Egypt and Syria, but lags behind Lebanon, Kuwait, Israel, the United Arab Emirates, and Saudi Arabia. Some of the more problematic indicators for Jordan are: “starting a business,” “protecting investors,” and “enforcing contracts,” none of which augur well for the country’s prospects of attracting international investment. If you’re not too bothered by not being able to drink or wear shorts in public, Saudi Arabia (ranked 16th) is a far better place to do business.