Crossing Jordan

In 2004, Jordan borrowed US$38 million to develop its logistics capabilities. Two years later, is the country any closer to becoming a leading Middle East distribution centre?

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By  Robeel Haq Published  September 18, 2006

|~|lead_jordan2.jpg|~||~|Despite its relatively small size, Jordan’s status on the world map has grown considerably over the past two years. The country is increasingly seen as a vital link between the Levant, the GCC and Iraq, reinforcing its position as an important commercial and logistics centre in the Middle East. Indeed, the Jordanian government is actively developing the country’s involvement in the lucrative Middle East logistics industry – a strategy which gained momentum following a US$38 million investment loan, approved by World Bank in 2004. The government used the money to develop the country’s logistics infrastructure, by removing transport bottlenecks and providing access to affordable land for urban development purposes. Jordan reinforced the development by signing a free trade agreement with the United States and maintaining other international trade agreements with the EU and neighbouring countries. As a result, Jordan has attracted a growing list of international, regional and local players from the logistics industry, including the likes of TNT, Aramex, DHL, Gulf Agency Company (GAC) and PWC Logistics. “Rapid economic growth, trade and commerce agreements with several industrial countries, together with the success of industrial zones, are among the reasons Jordan has become an attractive proposition for the logistics industry, particularly in the Levant region,” says Iyad Kamal, vice president of logistics and ground services at Aramex. Although Jordan suffers from certain logistical hurdles, such as the rising price of land and the resistance of companies to outsource their supply chains, the country has still successfully marketed itself as a multi-modal distribution centre with airports, seaports and efficient road access to neighbouring countries, including Iraq, Saudi Arabia and Syria. Three major airports are located in Jordan: Queen Alia International Aiport, Amman Marka International Airport (AMIA) and King Hussein International Airport. Each of these facilities, managed and controlled by the Civil Aviation Authority, have experienced considerable growth this decade. In particular, Queen Alia International Airport has proved a major success, handling over 90% of the country’s total traffic. Earlier this year, the Ministry of Transport launched a $423 million airport expansion project to meet the increasing movement of air traffic. The expansion is expected to last three years and the new building should be operational in 2010. “Jordan’s government has adopted long-term policies and practices focusing on the economic growth of the country,” says Kamal. “The development of the Queen Ali Airport has certainly enhanced the development of the logistics industry in the country.” To coincide with the airport’s expansion project, DHL Jordan is also developing an ambitious $4 million regional hub at Queen Alia Airport, which will measure 4000m². The facility will provide a link between the Middle East, Europe and North Africa, facilitating trade and enhancing DHL’s express service through a state-of-the-art facility with onsite customs clearance. “We want Queen Alia Airport to become a cargo hub in the region and the massive expansion project, together with DHL’s forthcoming regional hub, are contributing factors to this vision,” says Captain Suleiman Obeidat, director general of the Jordan Civil Aviation Authority. The government is actively encouraging projects such as DHL’s regional hub in Jordan, providing high levels of support to logistics companies wishing to commence similar projects. “The government has fully embraced DHL’s development in Queen Alia International Airport, which has helped to ensure the facility is operational by early 2007,” says Rhys Williams, country manager at DHL Express Jordan. “By offering such support, and ensuring additional flexibilities for transportation into and out of Jordan, the government is helping to shape Jordan’s future in the logistics industry.” The road network in Jordan allows companies to transit consignments to neighbouring Arab countries. During the 1980s, land transportation represented a major portion of freight traffic, although the industry suffered a downturn following the Gulf War. However, Jordan’s ability to provide logistical support in the rebuilding of Iraq has helped boost trade once again. The big five Iraq contractors - KBR, DynCorp, Bectel, Flour and Parsons - not only use Jordan as a gateway to Iraq, but have also opened their offices in Amman. Today, over 300 FTL’s move across the border between Jordan and Iraq, delivering anything from FMCG goods to construction supplies in the rebuilding of Iraq’s infrastructure. To aid the increasing volumes, Jordan’s government has invested in development programmes to improve the road network, which has already proved beneficial to logistics companies. “The government is actively ensuring that the business environment remains fertile,” says Aramex’s Kamal. “Enhancing and developing the road and transport infrastructure throughout Jordan has been a key achievement.” Jordan also has a relatively large seaport, located in Aqaba. The port is operated by the Ports Corporation and includes three cargo handling areas: the main port, the industrial port and the container port. The main port handles general cargo, liquid and dry bulk, such as phosphate and grains. The industrial port is used for bulk exports of chemical fertilisers and import of livestock and oil. The container port, although smaller in size, is actually considered the most financially lucrative, due to high container traffic. Various development projects at Aqaba Port are already in the pipeline, including the introduction of information technology for port operations, rehabilitation of the container terminal, training of personnel and upgrading of the port handling equipment. “The Jordanian government is completely aware of the opportunities that currently exist in terms of logistics, including opportunities at Port Aqaba,” says Jeremy Skyrme, customer service and marketing director, TNT Express. “In particular, the potential of offering daily sailings to Port Said in Egypt could dramatically impact the country’s logistics activities. It could also link into Turkey, where some of the big logistics companies have major operations.” The port of Aqaba is also the pivotal centre of the Aqaba Special Economic Zone (ASEZ), possibly Jordan’s strongest asset in the race to become a logistics superhub. ASEZ has become a centre point for the transportation of products on their way to destinations throughout the Middle East. It is located in the south of Jordan, offering a multi-modal transportation network, including the Aqaba seaport and King Hussein International Airport, which operates under the “open skies” policy and facilitates freight transportation to Amman and various international destinations. The airport can accommodate all types of commercial aircrafts, thereby offering business opportunities in logistics, aviation services, transhipment and aerospace industries. The Hijaz Railway also links Aqaba to other cities and areas, with future extensions planned to further increase Aqaba’s accessibility. Aqaba Special Economic Zone Authority (ASEZA) is responsible for managing the project and creating a healthy investment environment to stimulate trade. It is also tasked with simplifying procedures, promoting the private sector’s role, and creating jobs for Jordanians. “ASEZ offers an efficient, cost competitive environment for logistics and distribution services companies to serve a growing regional trading location,” says Jamal Dabbas, director of investment, ASEZA. “We provide a competitive business environment, which has played a significant role in developing ASEZ’s position as a key logistics hub.” ASEZ, which covers an area of approximately 375km² and extends to the land borders of Israel and Saudi Arabia, in addition to the territorial waters of Egypt, offers a variety of attractive business incentives to investors. These include exemption from custom duties and sales tax on all imports to ASEZ (except for cars). Investors are also exempt from the social services tax, annual land and building taxes, and sales tax on the final consumption of all goods and services, except for a 7% services and retail tax. A 5% flat tax on net business income, except for banking, insurance and land transport services, is subject to prevailing Jordanian income tax. “ASEZ stands as an embodiment of the Jordanian government’s assertive commitment to turn the country into a competitive investment hub,” says Dabbas. “This is being done through a combination of progressive policies, allowing us to streamline the investment environment and encourage private sector participation in all aspects on the zone’s development. “A perfect example would be the unprecedented independency the ASEZA leadership enjoys in regards to managing and developing the zone. This financial and administrative independency has allowed ASEZA to be a true one-stop shop,” he adds. The value of products entering ASEZ over the past five years has increased considerably, rising from $40 million in 2001 to $421 million in 2005. It’s therefore unsurprisingly that the logistical opportunities in ASEZ could prove particularly lucrative for distribution companies. “Jordan is quickly beginning to complement the other logistics centres in the region to meet the growing demand for products and services,” says Aramex’s Kamal. “The success of ASEZ has also created new global investment opportunities in a world-class business environment. Industries ranging from tourism to recreational services, from professional services to multi-modal logistics, from value-added industries to light manufacturing, all have found ASEZ to be a thriving hub in the Levant.” ||**||

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