The New Economy Kingdom?

Jordan is pulling apart its bureaucracy, rebuilding its legislation and overhauling its entire communications infrastructure in a bid to become a New Economy powerhouse. Can the country pull it off?

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By  David Ingham Published  March 8, 2001

The vision|~||~||~|Dr Fawaz Zu’bi, Jordan’s charismatic Minister of Post & Communication, has a dream. Looking one year ahead, he foresees Jordan as a country where the free market is taking hold, the barriers that hold businesses back are being broken down and high-tech startups are springing up all over the country, creating jobs and long term prosperity.

Zu’bi foresees affordable high-speed communications as the norm, an independent telecomms regulator will be in place ensuring a fair deal for operators and customers, and Jordan’s ministries will be well on the way to putting their services online. Careful to safeguard the future, the country’s educational institutions will be increasing the quantity and improving the quality of the country’s technology and business graduates.

“We, as the government of Jordan, are committed to this path and urge all of our partners to take advantage of the opportunities we are working hard to create,” says Zu’bi. “Let us look back… and say it was not a dream.”

The minister set out his ambitious vision at Convergence 2001, a conference held in Amman in early February to showcase Jordan Telecom’s success to date in overhauling its telecommunications infrastructure. But the event went well beyond that, to look at all aspects of Jordan’s bid to develop into a fertile breeding ground for New Economy and high-tech companies.

In the plan works out, Jordan could be transformed from a middling regional economy to a thriving ‘New Economy’ where opportunities both to find jobs and start your own company are more plentiful. In the new world envisioned by Jordan’s King Abdullah II and his government, the country’s brightest young people will no longer have to leave their homes and move West or to the Gulf to achieve a higher standard of living.

Jordan’s wealthy will also feel more compulsion to invest their money in their own country rather than stashing it in North American stock markets. There will be a more transparent legal system and more efficient government that will remove many of the hassles that now bedevil businessmen.

Tangible targets have already been set. Between 2000 and 2004, the authorities aim to attract a total of $150 million of direct foreign investment in the technology sector. With $59.75 million invested in 2000, that seemingly modest figure looks easy to reach.

There are two other key, and more challenging, numbers though. By 2004, exports of technology products and services should be worth $550 million annually and 30,000 jobs should have been created in and around the technology sector. Figures weren’t available to indicate how far those targets are towards being reached.

||**||Jordan Telecom leads the way|~||~||~|No-one is pretending that realising the vision is going to be easy, but all those involved in Jordan’s bid to transform its economy are bullish about the progress already made. One of the first steps has been to overhaul the communications infrastructure, a process that began last year when France Telecom and partner Arab Bank took a 40% stake in Jordan Telecom (see related story ‘JT and FT: so far, so good.’)

With $508 million in cash and an injection of new management blood, both local and French, Jordan Telecom has begun the process of revamping the telecommunications system. The number of customers waiting for a land line has reportedly been cut by one third, Jordan Telecom has launched a mobile phone operation to challenge incumbent FastLink and high speed Internet access is being rolled out across the country.

The Jordanian government’s approach to the whole issue of telecomms deregulation is certainly a refreshing contrast to the arguments heard in the Gulf about greedy foreigners taking the money and running. The Jordanian government knows that inferior telecomms holds back high-tech businesses. Improve the telecomms infrastructure and, the thinking goes, the boost to business in general more than covers any loss of revenue or control.

Third party observers with an interest say Jordan Telecom is doing a good job. Ramzi AbdelJaber, the CEO and co-founder of, a financial services Web site and technology provider based in Amman, says service has improved considerably. “I think it’s much, much better than it used to be,” he says. “They promised price reductions in May and December and they did deliver. They are delivering in terms of products and price reductions. They are introducing a lot of services, things like toll free phone numbers,” he adds.

His one question mark is over the amount of money that’s being spent on marketing, some of which he says could have been redirected towards customer service systems. He says that he and other customers have had errors on bills that could have been avoided through better use of technology. Jordan Telecom says it’s aware of the problem and is going to invest $6.8 million in customer care systems this year.

||**||The law and e-government|~||~||~|Overall then, steady improvements in telecomms, but Jordan’s authorities know that a successful economy is like an ecosystem, where every component feeds off the others. That’s why every aspect of how the country does things is now being looked at.

A document released by the government talks of, “removing impediments” and “creating an environment that allows IT companies to grow and prosper.” It’s all summed up in a document called REACH 2.0 that was released last year by Intaj, Jordan’s IT association.

Reform of the law is a crucial element of the plan, according to Karim Kawar, chairman of Intaj, and a successful businessman. He identifies three areas that need to be worked on.

The first is to implement laws that actually exist already, particularly the law protecting intellectual property. “We asked for its enforcement and it is being enforced,” says Kawar. “That protects the rights of local companies that are developing software, plus it legitimises the environment in which we work. You cannot attract investors into a market that does not respect intellectual property.”

Software giant Microsoft is taking notice. It’s committed itself to opening an office and to engaging with the government of Jordan, a country it had previously criticised and shunned over its levels of software piracy.

“We want to be there, we want to be ready to meet the needs of our customers and to support the activities of our resellers and partners,” says Fred Kamperman, regional director of Microsoft’s enterprise customer unit. “And that means growing our resources on the ground fast. We’ll obviously move to react to customer and partner demand in Jordan, but we’re planning for growth, without a doubt.”

The second area of the law identified by Kawar is the need to amend existing legislation that holds back businesses. An example is a law that says that a company must be profitable for three consecutive years before it can go public.

“That limits companies being able to access the capital market,” says Kawar. Intaj has worked with the government to relax the regulations, allowing companies easier access to capital and giving investors more incentive to risk their money.

The third type of legislation that Intaj and Jordan’s government are looking at is new laws, to cover areas like electronic commerce and e-signatures. Kawar says that the objective is not to, “reinvent the wheel” but to use precedents for guidance. UNCITRAL, an arm of the United Nations, has issued suggestions to member states on how to draft ‘e-legislation.’ Kawar speaks of taking the UNCITRAL framework and adapting it to suit Jordan’s own market conditions.

Clarifying the law is one thing, working with it is another. No-one is denying that Jordan is currently a bureaucracy, where a procedure as vital as registering a company can require stamps from several different departments.

In an effort to remove this impediment, Jordan has declared its intention to become an e-government. Mahmoud Khasawneh, chief information officer for the Ministry of Post & Communication, explains that the approach is to fix what needs fixing most urgently, and to take it from there.

He says eight ‘fast tracks’ have been identified and work is underway now on moving those particular processes online. The fast tracks include company registration, tax returns and motor vehicle procedures.

Khasawneh knows all too well that e-government is as much about changing mindsets as it is about putting in place technology. “We’re tackling the business process re-engineering side as seriously as we are the technology,” he says. “We’re not going to fix them [processes]. If necessary, we’re going to replace them with new processes.” Khasawneh says King Abdullah has set a deadline of eighteen months to deliver the fast tracks.

||**||Capital|~||~||~|Even if you have the communications, a flatter bureaucracy and all the necessary legislation in place, you still need two more things: venture capital and brains. Brains is one thing that the government can do something about and more on that later. Venture capital is a little bit more tricky.

Even Minister Zu’bi admits that the attitude of Jordan’s own financial institutions towards high-risk startups is “in transition.” “The banking sector in Jordan is very conservative,” admits Karim Kawar, although he tries to be optimistic. “I think you will see a change as awareness grows,” he says.

On the plus side, there are believed to be at least three venture capital firms in Jordan now. One called Jordan Technology Group has provided seed finance to some New Economy startups, and Karim Kawar says that Intaj will be trying to play a role as matchmaker between startups and financiers. “Intaj helps by… making sure they are speaking the same language and are seeing eye to eye,” he explains.

Nevertheless, there at least two cases where the local financial sector missed out on opportunities to buy pre-IPO equity in promising companies. landed its first major cash injection, of $1 million, from Saudi investor Alwaleed bin Talal. Its most recent funding has also come from outside Jordan, from a US-based Arab venture capital company called Ibtikar and industry giants like Compaq., a company developing an online financial service and specialised software for banks, also went outside. It took venture capital from Ibtikar and efinanceworks, a US venture capitalist.

Does this matter as long as Jordan’s startups get the capital they need? It does if you think Jordan’s financial institutions should be grabbing the opportunity to buy equity in companies that may have IPO potential. More importantly though, entrepreneurs that don’t have access to foreign venture capital firms might never have the chance to get their ideas off the ground.

||**||Brains|~||~||~|Raising finance for companies isn’t something that the government can ultimately do itself, but education certainly is one area where it can have an impact. Jordan believes it’s already doing a good job of producing technology graduates – Intaj puts the number at around 2500 per year. Its research has identified two other areas where it feels work needs to be done.

The country’s challenge on a wider level is to have basic computer literacy taught across the board at all school levels, along with the English language. Jordan’s Ministry of Education has finalised a national syllabus for secondary IT education, and has included IT courses as a compulsory subject for the ‘Tawjihi’ passing-out examination.

Jordan Telecom is playing its part by committing itself to the provision of high speed Internet access in schools. “We are talking to the educational sector right now, working out how we can best ensure early and effective implementation of 512 Kbit and 1 Mbit services to schools and universities to support their requirements,” says Jean-Louis Vareille, chief technology officer, Jordan Telecom.

IT is already reported to be the country’s third most popular course decision, so producing the quantity of technology graduates is not the country’s problem. Authorities say the challenge now is to evolve the skillsets that those graduates have. This is where the government wants to work with vendors such as Microsoft, Oracle and Cisco to develop programmes that provide skills in areas of shortage identified by Intaj.

Beyond the purely technical, the country also needs to imbibe these graduates with what Karim Kawar calls soft skills. “It’s communication, teamwork, quality assurance – the sort of skills that are not necessarily provided through the traditional schooling system,” says Kawar.

||**||The Irish role model|~||~||~|If the government of Jordan gets its plans right, what sort of company could we expect to see emerging in Jordan? Might the country end up as the information age’s equivalent of the industrial sweatshop, a focal point for low cost outsourcing of software development? Karim Kawar says that such a model could not work in Jordan, nor does the government want it to. Kawar says he sees Ireland as Jordan’s role model.

Like Jordan now, Ireland was once relatively under developed and had a problem with the emigration of its brightest young people. After deregulating and opening up its economy in the 1980s, however, Ireland grew in the 1990s to become an economic powerhouse.

Overseas investment in the tech sector has been a major driver for Ireland’s growth, but the country has also seen a flowering of smaller, indigenous technology startups. “Ireland has been a great success story, where the average size of company is about 32 employees,” says Kawar.

The good news is that companies like this already exist in Jordan. Take Integrated Business Solutions (IBS), and its latest venture,, located in the Jebel Amman area of Jordan’s capital.
Whilst IBS is well known in Jordan, is due to formally launch soon and will be very much focused on the Gulf market. The eight employee company currently does its development work in Jordan and intends to keep it that way. Two of the Middle East’s most popular online properties, and Maktoob, are also Jordanian and have the bulk of their resources in the country. Now, the challenge is to encourage more of these types of companies.

The Ireland example may well be a good one for Jordan to try to emulate, but there are some notable differences. Ireland is close to the European market, which has made it a haven for overseas investment.

However, Jordan’s geographical location close to the turbulence in Palestine will always sow seeds of doubt in investors minds. Although that may make it more difficult for the country, it’s determined not to lie down and give up. “What happens in the region will always affect us,” says Minister Zu’bi. “Does that make us negative? No.”

Ireland was also the beneficiary of generous cash handouts from the European Union. Jordan doesn’t have the same type of benefactor waiting in the wings. That’s why partnerships between the public and private sector like that between France Telecom and Jordan Telecom are so important. In any case, Minister Zu’bi also believes that money will find its way to the right projects. “Money finds a way to cover the programmes that you have,” he says.

Clearly there are big challenges to be overcome, but those challenges have always existed and haven’t stopped companies like IBS, Menafn, Arabia and Maktoob. Now, Jordan needs more companies like them. If what’s been said and done so far is anything to go by, the country’s authorities are serious about doing all they can to encourage them.||**||

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