Unleashing the Power of Jordan’s Small and Medium Enterprise
Doing business in Jordan just became easier due to a series of new economic reforms. In 2019, Jordan jumped an unprecedented 29 positions from the previous year in the World Bank Group’s (WBG) recently released Doing Business 2020 rankings.
“The fact that Jordan is this year among the world’s top-10 reformers is a milestone,” said Dalia Wahba in an October 24 WBG press release. Wahba continued, “The reforms are highly conducive to a more effective business environment as they help cut red tape. Through these efforts, officials are stimulating private-sector-lead growth, improving competitiveness and efficiency, and making Jordan a more attractive destination for investors.”
The key economic reforms included improving the legal rights of borrowers and lenders, implementing an electronic filing and payment system for labor taxes and other mandatory contributions, and reducing the number of yearly payments from 23 to 9. Jordan’s private credit bureau also improved access to credit information by providing credit scores to banks, financial institutions, and borrowers.
What makes Jordan’s success in the WBG Doing Business 2020 report even more impressive is that all the above has taken place during a crisis. Over the past 8 years, the country has received more than 1.4 million refugees from Syria, straining the country’s resources and infrastructure. Today in Jordan, one person in every 14 is a refugee, with few making plans to return to Syria anytime soon. Regional instability over the last decade has disrupted trade routes, according to the World Bank, and the country has watched its GDP fall and its debt rise. Unemployment is high.
But there is one sector in Jordan expressing optimism for its economic future — small and medium business enterprises, or SMEs. These businesses make up 97 percent of Jordan’s private sector economy and employ around 60 percent of the country’s labor force. According to a recent report by Building Markets, a US-led nonprofit dedicated to strengthening SMEs in crisis-affected countries, Jordanian-owned SMEs are creating on average 15 jobs per year, and the SMEs started by Jordan’s large refugee population are creating 18 new jobs a year. These businesses are creating new jobs at a higher percentage than Jordan’s large enterprises.
Given these results, the government of Jordan, the private sector, and international donors agree that a focus on strengthening Jordan’s SME sector, including the refugee population, will keep the country on its current path to economic recovery, growth, and sustainable prosperity.
Turning Crisis into Opportunity
Jordan’s progressive response to its refugee crisis, with support from the international community, has the potential to create new economic opportunities for the region. Jordan committed to a new approach toward dealing with a large displaced population in the 2016 Jordan Compact: In return for providing education and legal employment for Syrian refugees, a UK-led compact, with support from the World Bank, gave Jordan billions of dollars in grants, loans, and favorable trade agreements with the European Union.
“The 2016 Jordan Compact was game-changing to how host countries and the international community respond to protracted refugee situations. Jordan has effectively become the model for refugee compacts, providing important lessons learned on which to build subsequent iterations in other protracted displacement contexts.” - Center for Global Development, March 2019
Jordan’s refugees arrived with more than just a need for food, shelter, and safety — they brought with them skills and talents that are now contributing to the Jordanian economy. By providing work permits and legal means to register small and medium enterprises, refugee-owned SMEs are reducing Jordan’s high unemployment and creating new investment opportunities.
Challenges — and Solutions — to Jordan’s SME Sector
The owners of Jordan’s small and medium enterprises are optimistic about their future. According to the 2019 Building Market survey and report, more than 60 percent of SMEs in the country forecast their profits to increase in the six next months, and 58 percent expect to hire more employees. Overall, 59 percent expect to hire an average of 14 people in the next six months. The major challenge to their future growth and success, according to the primary economic reports (including the World Bank, the Center for Global Development, the Organisation for Economic Co-operation and Development, and Building Markets), all cite the Jordanian government’s laws and policies as the leading obstacles.
International organizations and donors all recommend that Jordan implements the following next steps:
- Clarify the legal and bureaucratic regulations around entrepreneurship.
- Allow refugees to access more sectors of the Jordanian economy.
- Implement policy consistency across Jordan’s national and municipal sectors.
- Consider policies and regulations that specifically enable the growth of both Jordanian-owned and refugee-owned SMEs.
- Increase access to finance.
- Improve SME access to markets.
- Offer business training that is demand-driven and aligned with SME growth constraints.
While Jordan continues to strengthen its business environment, as noted by WBG Doing Business 2020, continued reforms in Jordan that strengthen its SME sector development, including the refugee population, will keep Jordan on the path to economic recovery, growth, and sustainable prosperity.
“Ensuring that these entrepreneurs can thrive will create much-needed jobs and ensure Jordan remains on a path of inclusive and sustainable economic growth,” reports Building Markets.