Knowledge Economy Transfer Channels: International, MENA, Jordan

EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan” March 10, 2012 - Reem N Bsaiso – Email: [email protected] of 115

Knowledge Transfer in MENA Countries Jordan Case Study

Table of Content

Page

Introduction Knowledge transfer and absorption in knowledge economy 4 Part I Identification of key drivers and enabling environments for

knowledge transfer and absorption, internationally 5

Policies Socio-economic regimes Education & human capital Innovation, S&T, R&D ICT infrastructure

Part II Situational Analysis of the Knowledge Transfer Channels in the Middle East and North Africa (MENA), Gaps and Recommendations

17

Socio-economic regimes Education & human capital Innovation, S&T, R&D ICT infrastructure Recommendations on MENA level Recommended guidelines on MENA level

Part III Deduction and Assimilation based on Findings & Enabling Factors for Knowledge Transfer in Jordan (A Case Study)

43

- Jordan Case Study Executive Summary Socio-economic regimes Education & human capital Innovation, S&T, R&D ICT Infrastructure Gaps Recommendations

Addendums: Acknowledgements Annexes 91 List of tables 2 List of figures 3


List of Tables (Back to Table of Content)

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Table 1 Inward FDI flows, in $M, current prices & exchange rates, 2000-2010 (sorted & rounded figures 2010)

Table 2 Outward FDI flows, $M, current prices & exchange rates, 2000-2010 (sorted & rounded 2010)

Table 3 Indicators of the KE index for Arab countries (KE Report)

Table 4 Availability of knowledge indicators for Arab countries included by the WB

Table 5 Total public education expenditure as % of GNP & % of total government spending (median), 2005

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Table 6 Main Economic Indicators – JD M

Table 7 Budgetary Central Government, 2010 (domestic revenue & public expenditure)

Table 8 Sectors contribution to GDP (%) (3rd Q 2011)

Table 9 GDP/ expenditure & value added $M current prices & exchange rates

Table 10 Foreign Trade Statistics (Thousand JD)

Table 11 Jobs Analysis

Table 12 Investment projects per sector

Table 13 Education distribution statistics

Table 14 Economic Activity (employment) – Jordan

Table 15 Employment within the Population of Jordan / 6,249,000 (100%)

Table 16 International flows of mobile students– tertiary education & ISCED 5 & 6 levels (2009)

Table 17 Internationally mobile students by host country & origin – tertiary education & ISCED 5 & 6 levels (2009)

Table 18 Mobile students by region of origin

Table 19 The distribution of students in tertiary and higher education

Table 20 List of tertiary and higher education institutes

Table 21 Students enrolment over mostly attended public and private universities

Table 22 Unemployed youth > 15 years of age, per gender and academic achievements in percentages

Table 23 ICT Exports to Arab countries


List of Figures (Back to Table of Content)

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Figure 1 Knowledge Economy Values

Figure 2 Index values for the pillars of KE for Arab Countries, G7 and the world

Figure 3 Latest KEI compared to 1995

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Figure 4 Summary of Central Government Budget, 2006 – 2010, JD M

Figure 5 Domestic and foreign investment in million JD

Figure 6 Foreign investment in million JD

Figure 8 Size of domestic investments in 2010

Figure 9 Size of foreign investments in 2010

Figure 10 Consequent job creation (2010)

Figure 11 Growth of total exports, 2000 - 2009

Figure 12 Growth of imports, M JD, 2000 - 2008

Figure 13 Job Analysis

Figure 14 FDI inflows and outflows in $M

Figure 15 National Agenda of Jordan Phases

Figure 16 Unemployment per age groups, 2000 – 2009

Figure 17 Jordanian students in higher education

Figure 18 Outbound Jordanian Students

Figure 19 Outbound Jordanian Students distribution per country

Figure 20 iPARK statistics

Figure 21 Researchers per million population in the Arab world, 2007

Figure 22 ICT sector contribution to GDP

Figure 23 ICT sector contribution to employment


Introduction Knowledge Transfer and Absorption in Knowledge Economy (Back) Today's global economy is one in transition to a "knowledge economy1" focused on the production and management of knowledge where knowledge is a product; using knowledge technologies where knowledge is a tool, to produce economic growth and job creation. Within interconnectivity and globalization settings, knowledge resources are as critical as economic resources and the application of knowledge is key for growth in the global economy; where organizations and people acquire, create, disseminate and use knowledge more effectively for greater economic and social development. The knowledge revolution incorporates education, life-long learning, S&T, innovation and increased investment in R&D – more than that in fixed capital2, supported by ICT. Making effective use of knowledge in any country requires developing appropriate policies, institutions, investments and coordination across these four functional pillars3 that help countries articulate strategies for their transition to a knowledge economy (WB Model): Socio-Economic Regime: an economic and institutional regime that provides incentives for the efficient

use of existing and new knowledge and the flourishing of entrepreneurship. Education: an educated and skilled population that can create, share and use knowledge well. Innovation: an efficient innovation system of firms, research centres, universities, think-tanks,

consultants and other organizations that can tap into the growing stock of global knowledge, assimilate and adapt it to local needs and create new technology.

ICT Infrastructure: that can facilitate effective communication, dissemination and processing of information.

Alongside the same vision, the EIB has been financing investment in development, education, research, innovation and ICT – i.e. pillars of knowledge economy, since 2000, for the establishment of a competitive, innovative and knowledge-based society, capable of sustainable growth, creation of more and better jobs and greater social cohesion, in addition to its keenness in supporting entrepreneurship and transfer of technologies that are essential for RDI and its progress4. In fact, both the EU and EIB, according to the European Growth Initiative, are launching 56 projects that invest in networks and knowledge across the EU generating strong cross-border impact and expected to yield positive results in terms of growth, jobs creation and protection of the environment. In light of the dominancy of knowledge in post-industrial turned knowledge economy society; residing in organizations, tools, tasks and networks; “knowledge transfer”5 has become essential in organizing, creating and disseminating tacit knowledge6 ensuring its availability for future users, becoming a public and advanced economies and policies context, from resource-based to knowledge-based production7. A main transfer enabler is “diffusion of innovation”8, denoting the “how, why and at what rate” new ideas and technologies are spreading through cultures. It is also defined as a process by which an innovation is communicated through “Knowledge Transfer Channels” over time in socio-economic systems. Foreign direct investment (FDI) and international trade, are two major channels for international technology transfer, through which cross-border technological knowledge travels. Factors promoting “knowledge diffusion“ are the identification and motivation of knowledge holders towards designing a sharing mechanism that facilitates transfer, executes a transfer plan, measures transfer and applies the transferred knowledge. This process is further guided by experience, experimentation, simulation, mentorship, work shadowing9, paired work and community of practice (CoP)10. On the other hand, knowledge transfer

1 http://en.wikipedia.org/wiki/Knowledge_economy 2 See Definitions 3 http://go.worldbank.org/94MMDLIVF0 4 http://www.eib.org/about/events/conference-in-economics-finance-2009.htm 5 http://en.wikipedia.org/wiki/Knowledge_transfer#cite_note-Argote_Ingram_2000-0 6 See Definitions 7 OECD (1999), Managing national innovation systems, OECD publications service, Paris 8 See Definitions 9 See Definitions

http://go.worldbank.org/94MMDLIVF0

http://www.eib.org/about/events/conference-in-economics-finance-2009.htm


between nations and within organizations raises concern where there is imbalance in power relationships or relative needs for knowledge resources e.g. developed and developing worlds (Harman & Brelade 2003)11. Impediments to knowledge transfer are attributed to accessibility, source, recipients, organizational context and implementation. Knowledge transfer maybe also hindered by distance, ICT limitation, lack of a shared social identify, language barriers, areas of expertise, internal conflicts, generational differences, lack of incentives, disability to visualize, beliefs, previous experiences or exposures, misconceptions, faulty information, resistant cultures (highly non-conductive to knowledge sharing), motivational issues, lack of trust and incapability. ICT-based innovation diffusion, education and R&D render knowledge, as a fixed and intangible capital. Knowledge transfer, can only occur in the presence of its enablers, namely: knowledge holders, transfer channels, knowledge recipients and diffusion that will lead to well being (van der Meer, EIB, CMI 2011)12. An individual, group, firm or nation’s ability to recognize the value of new information, assimilate it and apply it to commercial ends and in business, has been defined as the “absorptive capacity”, an enabler of innovation, based on developing cumulative absorptive capacity (Cohen and Levinthal 1990)13, investment in R&D and hiring of diverse teams serving diversity and creativity. Two concepts govern absorptive capacity: i) Receptivity14: a firm's overall ability to be aware of, identify and take effective advantage of technology; and ii) Innovative routines: adoption of practiced routines that define a set of competencies the firm is capable of doing confidently and the focus of the firm's innovation efforts (Nelson & Winder 1982)15. Enablers to evaluate absorptive capacity include (Zahra & George 2002) 16: i) Knowledge acquisition capability (number of years of experience of the R&D department, amount of R&D investment), ii) Assimilation capability (the number of cross-firm patent citations, the number of citations made in a firm’s publications to research developed in other firms), iii) Transformation capability (number of new product ideas, number of new research projects initiated) and iv) Exploitation capability (number of patents, number of new product announcements, length of product development cycle).

Part I Identification of Key Drivers and Enabling Environments for Knowledge Transfer and Absorption, Internationally (Back) A. Policies

Making effective use of knowledge in any country requires developing appropriate coordinated policies and institutions within the necessary supportive legislative framework (UNDP AHR 2003)17, to articulate transitional and long term strategies for knowledge economy, through socio-economic regimes, education and human capital, innovation, S&T, R&D and ICT Infrastructure, in a cross-cutting and integrated model that supports knowledge transfer and absorption capacity across sectors (finance, education, health, energy, ...), respective of enabling environments (policies, regulative and institutionalized systems, governance, reform...), that promote levels of development, advancement, economic growth and job creation. Demand-driven national policies promote economic and political contexts conducive to knowledge transfer and promotion of absorption capacity, heeding sector-related domestic enabling factors across channels and institutional characteristics.

10 See Definitions 11 Harman, C.; Brelade, S. (2003). Knowledge Management Review (Melcrum Publishing) 6 (1): 28–31. 12 KT and Absorption in MENA, Dr. Jacques van der Meer, EIB, CMI 2011 13 Cohen and Levinthal (1990), "Absorptive capacity 14 Seaton R.A.F. & Cordey-Hayes M., Technovation, 13: 45-53, 1993. 15 Nelson & Winter (1982), "The Schumpeterian Tradeoff Revisited", 16 Zahra and George (2002), "Absorptive Capacity: A Review, Re-conceptualization and Extension" 17 UNDP AHR 2003, AKR 2009


The dominant, dynamic and rapid social, economic and technological changes will shape life in the 21st century, dwelling on human capital as key enabler in new knowledge-intensive environments and increasingly competitive economies, creating a broad pallet of unprecedented opportunities, yet brings uncertainties and risks (Michalski)18. Accepting change and adaption are key, as we approach an integrated planet of socio-economic and technology systems, where knowledge has become the predominant input, output and structural feature of economy and society in the 21st century, in addition to inter-connected digital networks, acting as socio-economic and knowledge transfer enablers. Governments will not be able to meet highly diverse markets and societies and will focus on providing enabling conditions to empower citizens to determine their choices and life paths. This will empower diversity, creativity and complexity, which are the heart of the transition to knowledge-intensive socio-economies, yet digital divides will grow in terms of accessibilities, usage, easy access to the new wealth, attainment of good education and the ability to interpret effectively the use of information.

Michalski predicts either one of two reactions: embracing dynamic transformation, creativity and experimentation, within competitive international environment, or de-link from globalization and delay structural change and innovation with the aim of avoiding associated problems, turbulences and uncertainties; the latter of which is extremely harmful and costly choice, as an attempt to preserve the past at the expense of the future. Michalski advocates for change for long-term benefits, based on values-fed sustained innovation, supported by policy.

B. Socio-economic regimes (Back) A policy driven socio-economic regime, enables knowledge transfer and absorption, reliant on a coherent and supportive legislative system, sufficient allocation of funds and financial resources, adequate ICT infrastructure and sound economic and sectors-specific policies that support human capital, innovation and R&D. It harbours services and business sectors support, institutionalized organizational context, investment, consolidation of linkages between R&D institutions and industries, investing in building high human capital and local knowledge workers, across all policies-governed sectors, in order to achieve economic growth, through international skills gain, knowledge transfer, increased knowledge content and innovation.

Most effective knowledge transfer channels include: FDI, international trade, human capital mobility and scientific cooperation in education and research.

In the knowledge economy formula, developed economic policies are key knowledge transfer enablers, that support increased diversification of economies, creation of new enterprises and jobs, increased productivity, competitiveness and institutionalized capacities by increasing institutional knowledge transfer, knowledge content, innovation and therefore increased absorptive capacity of the economy, where FDI and international trade are two major channels through which technological knowledge developed in one country is transferred across borders into another (Saggi, Keller & Pantia)19.

FDI Indicators The FDI indicators facilitate achieving competitiveness among countries in support to investment policy reforms and open doors to broader investment climate improvements.

Indicator Indicator Details Enablers Target audience Doing Business-type indicators of investment policy

Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes

Foreign ownership restrictions

Investment promotion Pre-establishment procedures

Access to land Currency convertibility

Governments to target, stimulate, implement and communicate investment policy reforms Investors to help guide their

18 Ref. Prof. Dr. Wolfgang Michalski - The Role of Education in the Knowledge-Intensive Economy and Society of the 21st

Century 19 Saggi, 2002; Keller, 2004 and Kneller, Pantea and Upward, 2009


Trading across borders Enforcing contracts Closing a business

and repatriation Expropriation and int’l arbitration

investment location decisions and policy dialogue with governments Advisors / Consultants to focus their assistance to client countries on key policy-level constraints to increasing FDI competitiveness

Country benchmarks for the ease of establishment and operation of a foreign owned business in a country

• Employment restrictions on expatriates • IPR protection and enforcement • ADR mechanisms • Excluded investment climate variables: • Infrastructure • Human resources • Trade policy

Measures of formal statutory restrictions on FDI, and regulatory and administrative barriers in practice

Survey of laws/regulations (objective info) and administrative processes (subjective info)

Respondents are private sector, intermediaries (investment lawyers, consultants, accountants, ...)

Survey filled out by governments for validation / cross-checking purposes

Source20: Global Forum on International Investment, 2008

Economic policies aim to enhance the business environment by promoting ease of business creation and licensing, ownership, finance, local competition and openness to trade and investment, as well as product market flexibility, in a two-way producer-consumer knowledge transfer (Cowan, Soete and Tchervonnaya, 2001)21, while heeding different types of key determinant domestic institutions in terms of knowledge absorption capacity, namely private and public sectors, research institutions and education.

There are estimates that more than half of the GDP in major OECD countries22 is based on the production and distribution of knowledge (WB 1099).

The services sector23 has increased in importance in promoting growth, as an enabler for knowledge transfer, through various channels, in the context of the new economy, creating the need for companies to sustain themselves in highly competitive markets by improved accessibility and usage of new knowledge that is relevant to their activities. This section looks closely at this sector, at the international level, in terms of its enabling environment, channels, domestic determinant factors and challenges, serving as a guideline to assess countries knowledge transfer absorption, alongside this and other vital sectors. Moreover, knowledge transfer channels in manufacturing and services are very similar, yet the latter, i.e. the service sector, is gaining more importance than the manufacturing sector in terms of FDI and international trade (training and producer-consumer two-way knowledge transfer); average importance in terms of suppliers, licensing/franchising, intra-company strategic knowledge management, knowledge intensive business services, human capital mobility, Internet and links with academy; and less importance in terms of patents.

The impact of ICT is seen on the macroeconomic level (Kozma, UNESCO)24, every one of the world’s 25 largest economies has shifted from manufacturing to services provision, accounting to more than 50% of the GNP (Kamarkar and Apte, 2007; Apte, Kamarkar and Nath, 2008).

In the USA, manufacturing material goods and delivery of material services accounted for nearly 54% economic output (1967). Production of information products and provision of information services

20 FDI Indicators Project, OECD Global Forum on International Investment, 2008, Peter Kusek, [email protected] - FIAS The

multi-donor investment climate advisory service of the World Bank Group. http://www.oecd.org/dataoecd/2/32/40435871.pdf

21 Cowan, Soete and Tchervonnaya, 2001 22 The Organization for Economic Co-operation and Development (OECD), There are currently 34 members of the OECD http://en.wikipedia.org/wiki/Organisation_for_Economic_Co-operation_and_Development#Member_countries 23 http://www.merit.unu.edu/publications/rmpdf/2001/rm2001-021.pdf / Knowledge Transfer and the Services Sector in the

Context of the New Economy by Robin Cowan, Luc Soete & Oxana Tchervonnaya - 2001-2021 24 The Technological, Economic and Social Contexts for Educational ICT Policy, Robert B. Kozma . A UNESCO Publication

mailto:[email protected]

http://www.oecd.org/dataoecd/2/32/40435871.pdf

http://en.wikipedia.org/wiki/Organisation_for_Economic_Co-operation_and_Development#Member_countries

http://www.merit.unu.edu/publications/rmpdf/2001/rm2001-021.pdf%20/


accounted for 63% of output (1997), marking a growth from 36% to 56%. People now use eBay, Google and Yahoo, none of which existed 15 years ago, yet their combined market value exceeds $200 billion. The proliferation of information products and services or “information economy” is dominating wealth and job creation (Cogburn and Adeya, 1999). On the other hand, manufacturing increased in China, Thailand, Malaysia and Indonesia, creating jobs and pulling millions out of poverty (Sachs, 2005, 2008), but significant problems were created related to economic inequity, urbanization, pollution and environmental degradation. Macroeconomic and microeconomic studies (11 Papers, 6 Countries)25

showed changes in organizational structures and practices, towards organizationally flatter companies, decentralized decision-making, participatory disciplines and wide sharing of information. These changes have been enabled by the application of ICT for communication, information sharing and simulation of business processes The use of ICT is promoting new content of knowledge through new types of competencies calling for knowledge-intensive services consultancy and growing codification (e.g. delivery of traditional knowledge or advanced memory storage features), with improved inter- and intra-firm communication. Customer participation in service operations may control the specification of the service, or its diagnostics, or co-production (e.g. self-service retailing or banking, excluding high expertise requirements), or intervention (e.g. tracking courier shipment), where services are best categorized as private or public services, on- or off-line and producer or consumer-based. Simultaneity of production and consumption, more evident in services as opposed to goods industries, is related to or caused by the inability to store services. This is gradually changing today, as new technologies – like clouding, offer broad opportunities for new e-means of storage. Most service industries are now employing “innovation without formal research” (as opposed to the industrial sector), given the non-tangibility nature of services, hence less patentable, but closely linked to “changes in processes, organizational arrangements and markets”; in large service companies R&D is performed in “operations research, strategic planning or IT departments”.

"Not only does a country's total productivity factor depend on its own R&D capital stock, it also depends on the R&D capital stocks of its trade partners." (Coe and Helpman p.875).

The ICT and high-speed communication networks have revolutionized innovation. In Denmark, 70% of service industries innovative firms use mobile phones and email for innovation, while 40% use Internet homepages (Van Ark et al. 1999)26. The use of Internet to offer services to customers is considered as an innovation, with increasing trends towards e-services to include delivery of “functions” such as the maintenance of goods, within enhanced security schemes and networks to facilitate communication between different kinds of users with different kinds of data. Call centres are representing a substantial share of employment in the service sector. It can be concluded that a strong ICT infrastructure is an enabler for knowledge transfer in services, as relatively inexpensive way to transfer large amounts of information (and knowledge) at a very high speed and hence is conducive to formation of producer-user, producer-producer and consumer-consumer networks which are capable of generating considerable knowledge spill-overs to the service industry and the society at large. Selection of knowledge transfer channels is affected by cost, speed, accessibility, IP rights protection and past experience, so that a knowledge transfer channels platform, is reliant on: knowledge holders, recipients and institutional settings, where knowledge holders regulate the amount and quality of shared knowledge and recipients need to be ‘receptive’ to the flow and absorption of knowledge – often a limiting factor attributed to “resistance to change”. In transfer channels suppliers provide new equipment hence new knowledge for product enhancement. In Germany, 27% of the total innovation expenditure came from equipment service delivery. FDI as a knowledge transfer channel affects the inward and outward investments and brings new knowledge into a country, particularly to intangible services and consequent contribution to a country’s GDP, e.g. the FDI by/in the Netherlands, in the services sector had grown by 20 fold over

25 USA (Stiroh, 2003), UK (Borghans and ter Weel, 2001; Dickerson and Green, 2004; Crespi and Pianta, 2008), Canada (Gera

and Gu, 2004; Zoghi, Mohr and Meyer, 2007), France (Askenazy, Caroli and Marcus, 2001; Maurin and Thesmar, 2004), Finland (Leiponen, 2005), Japan (Nonaka and Takeuchi, 1995) and Switzerland (Arvanitis, 2005)

26 Van Ark et al. 1999, p.31


the last two decades accounting to the largest share of Dutch FDI stock (Van Hoesel & Narula 1999)27. However, for this channel to function properly it is necessary to have a favourable regime for service providers functioning abroad. The General Agreement on Trade in Services (GATS) ensure effective knowledge transfer in services through FDI via market access commitments, transparency and recognition of qualifications. Human capital mobility as a channel relies on human beings as “carriers” of tacit knowledge, particularly in organized two dimensional mobility across firms or institutes, while other channels depend on “employees’ profiles” where services are directly delivered. Liberal and transparent trade and investment regimes, are also major enablers of knowledge transfer. Intellectual property protection: an important specificity of services is that patents are less important instruments for IP protection in this sector, since much of the difficult-to-codify innovative capacity of service firms resides in human experience and expertise and shortness of innovation cycles for “lengthy patenting procedures”. Hence, most service industries employ other forms of IP protection like copyrights and trademarks. Consumers‘ knowledge involvement, on the other hand, is based on a learning dialogue between supplier and customer in highly interactive ways, while sources of consumer information is reflective of the consumers’ attention to the whole service delivery system where policy-backed enhancement of employee expertise in people-to-people communication is so important in relation to innovation and economic performance, therefore, emphasis on multi-disciplinary and lifelong learning must focus more on working in teams, communicating effectively, networking and adapting to change. This leads to education and networked knowledge economy, based on merging ICT and tools in education, instilling knowledge economy, entrepreneurial and job creation skills, within national, scalable and low cost schemes. The Internet is a constantly growing channel serving different users in services and manufacturing sectors, to receive and transmit knowledge. Other service sector channels of knowledge transfer include: licensing as in franchised services, industry-academia linkages, job related training, employing intra-company strategic knowledge management such as Intranet or MIS, producer-consumer two-way knowledge transfer, knowledge intensive business services by private enterprise reliant on professional knowledge to produce knowledge-based products and services such as computers, engineering, advertising, R&D, accounting and management consultancy, as well as knowledge generation and transferring through international conferences in both manufacturing and services sectors. Enablers across channels are comparable between manufacturing and service sectors, according to the specificity of services, nature of output, degree of customer participation in the production process, simultaneity of production and consumption, so that new economy services are impacting employment and development of knowledge and skills, e.g. financial, software or digitized entertainment and shopping services, by using new technologies, innovation and on-line provision, denoting a clear demand for e-commerce related services. It is essential to compare manufacturing and services sectors according to the nature of output, customer participation and simultaneity of production and consumption, in terms of knowledge transfer, transfer channels, knowledge holders and recipients; institutional settings and impact of ICT. The challenge of constantly changing scientific and technological realities, the level of knowledge required to manage modern industries is so high, that even competitors are choosing to collaborate, where output, innovation and knowledge creation are rapidly gaining more importance, as intangible services impact economic performance.

The impressive input of services into the economic development of many countries, including the Netherlands, has put it on an equal footing with manufacturing, so that more elaboration is placed on innovative policies, measurable by service-oriented innovation surveys (implemented by several OECD countries).

In general, recommendations to policy-makers on knowledge transfer in the services sectors (a case study of the Netherlands), include the need for IP protection for national and foreign business; regular

27 Van Hoesel and Narula 1999, p.16


innovation surveys; investing in a country’s ICT infrastructure, merging ICT in education, participation of national scientists in international networks directing diffusion of new knowledge to service businesses; training of future scientists; promote knowledge transfer in a two-way process; encourage foreign specialists through incentives; publishing information on legal procedures; maintaining liberal and transparent trade and investment regimes. Drivers of development (DFID, Dec. 2011)28 in low income countries depends on human capital pressures stemming from private sector growth, public sector policies and reforms which remain poorly understood, amidst a likely global recession and possible global financial meltdown with serious consequences on private sector growth, prompting fast research-backed policy-making to ensure support to private sector development. Market dynamics on the other hand determine entry of new firms and exit of weak ones, prompting needs for job creation in low income countries and support to open competitiveness. The World Bank (Doing Business, WB/IFC 2012)29 investigated enhancive regulations for business activities and inhibitors, across 183 economies, reliant on comparable quantitative indicators on business regulation and protection of IP affecting 11 areas of business life: i) start-up: starting a business, minimum capital requirement, procedures, time and cost; ii) expansion: registering property, procedures, time and cost; getting credit, credit information systems, movable collateral laws, protecting investors, disclosure and liability in related-party transactions, enforcing contracts, procedures, time and cost to resolve a commercial dispute; iii) operations: dealing with construction permits, procedures, time and cost, getting electricity, procedures, time and cost, paying taxes, payments, time and total tax rate, trading across borders, documents, time and cost; iv) insolvency: resolving insolvency, time, cost and recovery rate, so that clarity on IP rights and cost of resolving disputes is key to ensure predictability, certainty and protection that the sector needs, in addition to supporting credit and enforcing contracts. Regulative processes also depend on macroeconomic conditions, market size, workforce skills and security. A vibrant private sector with investments firms, job creation and improved productivity promotes growth-expanding opportunities for poor people. Governments are implementing reforms, including price liberalization and macroeconomic stabilization; yet focus more on daily economic activity. The “Doing Bossiness” guide has advantages and limitations. It is transparent, factual on laws and regulations, yet it has a limited scope in that if focuses on only 11 areas of regulation affecting local business and does not measure all aspects of business environments or all areas of regulation; it compares and benchmarks, yet it is based on standardized cases; it is inexpensive and replicable, yet focuses on the formal sector; it is actionable with data on obstacles, sources and points of change, yet, only reforms related to indicators can be tracked; it has multiple interactions with local respondents to clarify potential misinterpretation, yet assumes that business is informed on requirements; and finally, it nearly completed coverage of world’s economies, yet part of the data obtained refer to an economy’s largest business city only. On Gender, there is concern on low female participation in employment and self-owned business, inequity in job types, hours and wages, in addition to increasing numbers of economically inactive females, particularly in developing countries; as well as being able to assess the threshold, whereby the quantity of offered jobs in the market or the job-creation rate is enough to get female enterprises and employment growing. Women, business and the law merit support and the need to remove barriers to economic inclusion. A WB/IFS study finds 103 out of 141 economies studies impose gender-based legal differences (accessing institutions, using property, getting a job, providing incentives to work, building credit and going to court)30. The UNDP Human Report; links the Environment directly to the quality of life. Environmental achievements, linkages and performance are greater in developed countries, yet environmental trends over recent decades show deterioration on several fronts, with adverse repercussions for human

28 DFID Growth Research Newsletter - December 2011 29 Doing business in a more transparent world , WB and IFC 2012-01-09. Comparing regulation for domestic firms in 183

economies 30 http://wbl.worldbank.org/


development, especially for the millions of people who depend directly on natural resources for their livelihoods. The most disadvantaged people carry a double burden of deprivation: more vulnerable to the wider effects of environmental degradation, they must also cope with threats to their immediate environment posed by indoor air pollution, dirty water and unimproved sanitation.

Environmental degradation stunts people’s capabilities in many ways, going beyond incomes and livelihoods to include impacts on health, education and other dimensions of well-being.

A 10% increase in the number of people affected by an extreme weather event reduces a country’s HDI almost 2%, with larger effects on incomes and on medium HDI countries. Meeting unmet needs for family planning by 2050 would lower the world’s carbon emissions an estimated 17% below what they are today. There are many promising prospects for expanding energy provision without a heavy environmental toll. The report argues that a clean and safe environment is a right, not a privilege and should be embedded as environmental rights in national constitutions and legislations to be effective. This can be aided by empowering citizens to protect such rights and put a stress on the need to promote human development to address equity and care for environmental sustainability because of the fundamental injustice of one generation living at the expense of others, as it tackles innovative means for alternative and clean / renewable energy, clean water and sanitation, alongside reducing Carbon Dioxide (CO2) emissions and green house effect. C. Education and human capital (Back) The needs to allocate sufficient human capital in the implementation of foreign technologies (Keller 1996)31 is key in knowledge transfer, reliant on pro-knowledge absorption governing national policies, educational reform, (formal, informal education and vocational training) merging ICT in education, instilling knowledge economy and entrepreneurial skills through training for employment, job creation and innovation. Other knowledge transfer channels include labour markets, human capital mobility and labour migration including different kinds of diasporas caused by imbalanced inter-state economic and cultural territorial relationships based on domination and subordination, where the type of social coherence plays an important role, such as ties with ancestral lands and hence lack of full assimilation to the host country. The importance of building up human capital, was stressed by Keller (1996). To achieve higher growth, a country must actively support human capital formation, otherwise it will be locked in the role of an imitator. He pointed out that mere access to information is not sufficient for technological catch up. In particular, skill levels of domestic workers constrain a country’s ability to absorb and implement technologies invented abroad, emphasizing the key role of domestic skills in the assimilation of imported knowledge. Technology is only implementable among skilled labour force. Trade liberalization disseminates new technologies and goods to the domestic economy, but sustained growth gains are only forthcoming if in addition to the arrival of new technologies also skills are accumulated at a high rate. Education is considered as a key enabler to rapidly dominating social, economic and technological changes, to prepare human capital for global knowledge-intensive economies and societies. Education for employability in industrial societies, will no longer be a typical pattern of working life in new knowledge-based economy. In fact, in the enterprise sector, any given knowledge stock is becoming rapidly obsolete, as one takes on multiple occupations over working life. The growing internationalization of economic activities, ICT and innovation have major implications on educational content, with no mere focus on common core competencies, but rather on specific profession-oriented knowledge. Therefore, there is little value in educating people simply in the use of a particular technology or particular occupation-specific skills when any such technology or occupation is likely to become rapidly obsolete.

“The top 10 in-demand jobs in 2010 didn’t exist in 2004; We are currently preparing students for jobs that don’t yet exist, using technologies that haven’t been invented, in order to solve problems we don’t even know are problems yet”, Richard

31 Keller, 1996, p.200


Riley, former U.S. Secretary of Education

There is a need to prepare a human capital with new sets of knowledge economy and ICT skills, namely: critical, creative and analytical thinking, problem solving, employing scientific research methodologies, working collaboratively and distantly within groups, gaining advanced communications and outreach skills and competencies, in addition to entrepreneurship and job creation skills. Hence the creation of a self- and lifelong leaner, which is able to search for and identify available resources and tools, namely ICT; and harness those tools effectively and safely. Another important dimension in education, is good citizenship, democracy and human rights, in stand-alone models or ICT-based models given increasing role of social media networks, digital multi-media material, speed and ease of communications and networking, fostering dialogue, exchange of information (knowledge transfer channels) and tolerance. Despite rapid socio-economic transformations around the world, education is slow to change (Kozma, UNESCO 2010)32; and although people work collaboratively using a variety of digital tools and resources to devise new ideas and products, students in schools are still meeting in structured classrooms at specified times; (Law, et al., study, 2008), with ICT rarely being used. The shift from a paradigm that is based on mass production and consumption of standardized goods and the hierarchical structuring of business, governmental and social institutions to a paradigm based on the collaborative, customized creation, sharing and use of new knowledge by a large, diverse and distributed population is creating tremendous pressure for change on all components of the education system. It has profound implications for what is taught, how it is learned, how teachers teach, how students are tested and how schools are structured. And it has significant implications for changes in education policies, as well as the visions that organize structures, programs and practices in education systems. Changes in educational systems, in support of knowledge creation, creates capital accumulation and increased productivity through capital deepening (knowledge acquisition), high quality labour (knowledge deepening); and knowledge creation and innovation (knowledge creation33) (Kozma 2007)34. Educational transformations come from systematic changes, involving vision, policy, planning and alignment between policies and programs, creative financing and resources, where ICT is a lever for change and enabler, acting on curricula and assessment, teaching and learning, teachers’ training and pedagogy, technology applications and social infrastructure. Despite the significant investment that policy-makers have made in hardware, software and networking, to date, ICT have had a marginal impact on education. Outside of schools, ICT have had a significant social impact, too. Large numbers of people in developed countries use the internet regularly to conduct online purchases, access government services, make friends, use online chat and messaging, download music and movies, play games, exchange email, conduct banking transactions and search for information, as they develop into a knowledge society. These changes are reaching the most remote rural villages in the least developed countries. Yet education remains, by and large, unchanged. For many policy-makers, it will be a major accomplishment to introduce ICT innovations that can, over time, be scaled up, system-wide.

If research on ICT impact on the economy, business structures and on practices is any indication, the major impact of ICT on education is yet to come. But it will only be realized when ICT is accompanied by organizational changes and practices that align education systems with the emerging information technology paradigm.

Higher education witnessed new emerging dynamics in i) higher education demand: covering diversification of provision, changing lifelong learning needs, growing ICT usage and enhanced networking and social engagement with both the economic sector and community at large; ii) scientific research: particularly tensions between basic and applied research; and iii) fields of innovation: noting that innovation often occurs outside academic environments, as a result of inventive thinking and creative experimentation. The advancement of Knowledge Societies is compelling all countries, whatever their levels of developments

32 May 3, 2010 ICT Policies and Educational Transformation - A UNESCO Publication. Chapter 2 - A Framework for ICT

Polices to Transform Education - Robert B. Kozma, PhD. 33 See Definitions 34 Ref. ICT, Education Reform and Economic Development, Dr. Robert Kozma, Oct. 2007, Dead Sea, Jordan


are, to review and reorganize their capacities for accessing and benefiting from the high-level knowledge which shapes social change, or otherwise risk marginalization. Today, systems of knowledge production cover a vast range of entities inter alia universities, public laboratories, research centres, think-tanks run by policy and civil society groups, industry and the private sector and the military complex, with more inclinations for sustainable social development orientation. This involves placement of knowledge to include high-level scientific knowledge, at the service of development; converting knowledge, in all its forms, into value via applications and impact assessments; and sharing good practices, to ensure widespread benefits. The knowledge divide on the other hand, is being created among nations, as a concept that describes the gap in living conditions between those who can find, manage and process information or knowledge and those who are impaired in this respect and will become increasingly isolated and marginalized. Governance of higher education is, in the end, primarily about the governance and management of knowledge and knowledge workers; and the formation of coherent knowledge systems that organizes knowledge within a coherent and accessible framework addressing posed challenges where people converge around common understandings of the issues at hand and collaborate for purposes of sharing knowledge, developing new knowledge, or even applying knowledge to their own needs” (Choucri, 2007). Added value provided by well-organized knowledge systems is the re-use and re-configuration of existing knowledge. In developing and developed countries alike, the utility of higher education governance and management models will be judged in terms of how well they allow the higher education institutions to contribute to further the knowledge society and knowledge economy. Challenges of academic work (Teichler and Yagci) include physical mobility of students, graduates and scholars. Most experts agree that mobility has accelerated in recent years, as a consequence of increased opportunities, declining national controls and global economic and societal interconnectedness. Mobility in higher education and research tends to be discussed notably in four respects: i) the role physical mobility plays for knowledge transfer, ii) the contributions of mobility to quality of teaching, learning and research as well as the risks as far as quality is concerned, iii) the impact of mobility on the knowledge, values and subsequent life course of the mobile persons and iv) the ambivalent setting of costs and benefits of mobility for the mobile persons, the higher education and research institutions and the nations experiencing an influx or out-flux of persons.

UNESCO argues that student opportunities and problems linked to student mobility have changed in light of evolving ‘knowledge societies’, playing a role in knowledge transfer, contribution to quality of teaching, learning and research, impact on knowledge, values and subsequent life course of the mobile persons and setting of costs and benefits of mobility for the mobile persons, the higher education and research institutions and the nations experiencing an influx or out-flux of persons.

Education statistics collected by UNESCO show that the worldwide number of students studying abroad, i.e. in a country different from that of their citizenship, has increased substantially in absolute terms from less than 200,000 in the early 1950s to more than 2 million in most recent statistics. However the overall student population has increased at a regular pace and the rate of foreign students has remained more or less constant at about 2%. Available data suggests that incoming students from other countries comprise more than 10% of all students in various economically advanced countries and that of the students from some low- and middle income countries, more than half study abroad. International student mobility is linked to professional mobility and migration were many students in low- and middle-income countries opt for study abroad in general, or choose the field of study or host country, in the hope that study abroad will provide access to a career after graduation in an economically advanced country. However, temporary mobility within economically advanced countries, in terms of professional impact show that the study period abroad turned out to be helpful in the job search process, namely: formerly mobile students are more frequently professionally active abroad and those who are not employed abroad take over clearly more frequently visible international assignments such as communicating with foreigners, using foreign languages, travelling abroad for professional purposes, using knowledge on other countries, etc.” (Rivza and Teichler, 2007: 465). “Brain Drain” on the other hand is the most frequently employed term in this context to underscore the loss of investment and talent through outflow. “Brain Circulation”, in contrast, is often used to point out that countries facing an outflow of talent (also an outflow of scholars) often experience a “return” in terms of remittances. “More developing countries are


seeing the diasporas as a source of expertise, knowledge and networks rather than only a source of income” (Knight 2007). “While the Brain Drain continues to be a reality for many developing countries, returning experts or the circulation of expertise can offer positive aspects, but require innovative approaches to academic and professional credentials. Examples of this include Silicon Valley IT experts returning to India, mobilization of the diasporas from Africa and the Arab states and burgeoning cooperative arrangements such as joint professorships, dual research appointments and laboratories (known as ‘collaboratories’) and jointly awarded graduate degrees” (Kearney 2008). Altogether, there seems to be an inflationary use of the term “brain circulation” in order to play down the net losses many low- and middle-income countries suffer from, in light of the international mobility of highly-qualified labour and notably of researchers. Thus, it cannot come as a surprise that calls are often made for the receiving countries of mobility to compensate financially the enormous losses of the sending “drained” countries.

Impacts of Brain Drain: the financial cost of $4 billion is spent annually on the salaries of approximately 100,000 western expatriates who help make up for the loss of professionals in sub-Saharan Africa. Policymakers worry about subsidizing the education of students who ultimately go elsewhere. The cost of training, for example, a non-specialized doctor in a developing country is about $60,000 and for a paramedical specialist about $12,000.

D. Innovation, S&T and R&D (Back) Innovation as one of the key enablers of knowledge transfer and absorption and can manifest itself in different forms and levels across sectors and borders, through the promotion of S&T, openness of academic research, scientific cooperation in education and research, patents, domestic R&D, institutions linkages with industrial, service and business sectors, as well as the promotion of academia and industries linkages for effective diffusion of innovation. Demand and acceptance of innovation is enabled and enhanced by socio-economic policies that mobilize and promote governments’ roles, markets, social factors and active educational and research cooperation networks with enhancive international communities to knowledge absorptive that is vital to the economy (Gallouj 2000)35.

Entrepreneurship and innovation for economic development (UN University)36 are two of the most pervasive concepts of our times, yet there are still gaps in our understanding of the interactions between entrepreneurship and innovation, particularly in developing countries.

A key message is that entrepreneurial innovation, whether through small firms, large national firms, or multinational firms, is often vibrant in developing countries, but does not always realize its full potential. This is due to institutional constraints, the absence of the appropriate mix of different types of small, large, domestic and foreign firms and insufficiently developed firm capabilities. There is a need to assess the impact of entrepreneurship and innovation on growth and development, determinants and impacts of innovative performance of entrepreneurs in developing countries and the role institutional environments play in shaping the extent and impact of innovative activities, as well as policies and institutions that support or hinder innovation. The Europe 2020 Strategy (EIB)37 suggests that knowledge and innovation for sustainable growth can be achieved through resource efficiency, greener and competitive economy; high employment economy, research, climate action and energy; education; and combating poverty. It all starts with education which supports employability, greater capacity for R&D, innovation across all sectors of the economy that is combined with increased resource efficiency, improved competitiveness and job creation. Investing in cleaner technologies helps our environment, contributes to fighting climate change and creates new business and employment opportunities. ICT infrastructure and digital networks strengthen and

35 Gallouj, 2000 36 http://www.wider.unu.edu/publications/books-and-journals/2011/en_GB/Entrepreneurship-Innovation/ 37 www.eib.org/report

http://www.eib.org/report


accelerate this dissemination. Competition and innovation-driven growth (WB)38 can be promoted by increasing competitiveness in the manufacturing sector. World Bank studies show that innovative firms exhibit higher employment growth, depending in strength on the level of skills and qualifications, with younger firms portraying higher innovation rates, where enabling pro-competitive enabling environments support access to information, finance, export opportunities, essential services that facilitate entry and expansion of young firms. The Global Innovation Index39, explores the transformative power of innovation and identifies its enablers that are important for socio-economic growth, despite data limitation and different interactive factors per country. A global assessment on “Science and Technology” in terms of budget, human resources, status of science and research goals and despite formal similarities among countries, found out that: i) emerging countries use science as a tool for innovation, supported by state and incentives, seeking international cooperation and participation; ii) research is seen as luxury, distant from needs and out of reach; funding is accepted without working on projects themselves, as some countries suffer from wars or poverty. Yet some countries are rich with oil and do not need research for economic reasons; to those, research is a decoration, as some tribal or monopolizing regimes have divergent values. The little science that remains will need international support to ensure viability and sustainability. Authorities should take interest, private sector participation inclusive academia should play an active role; and iii) intermediary countries have not clearly identified the actual function of research, with fluctuating state support. Institutions are strong, where researchers are firmly rooted, yet strategy building is difficult. Components of S&T are reliant on human resources in terms of numbers, critical mass, profession standards, work conditions and brain drain. The challenge has become to keep capacities from disappearing, by building on good treasures (dedicated scientists) and availing enabling environments for their research (labs, networks…). International support and appropriate mechanisms can boost research (UNESCO)40. RDI systems are reliant on these critical activities: i) provision of R&D investment to create new knowledge, primarily in engineering, medicine and natural sciences, ii) capacity-building to create a highly skilled work force to be used in R&D, iii) establishment of new product markets, iv) quality assurance mechanisms, v) encouraging creative organizations which promote entrepreneurship and enhance the infrastructure to boost innovation, vi) networking through markets and mechanisms with interactive learning amongst the institutions involved, vii) creating enabling institutions which facilitate innovation - such as IPR and tax laws, R&D investment, sound environmental and safety regulations; viii) incubation activities to foster innovative projects; ix) financing of innovative processes to facilitate the commercialization of knowledge; and x) consultancy services for technology transfer - including the legal and commercial aspects of innovative activities (Edqvist, 2006). In such a climate, innovation can be generated from the synergies amongst opportunities, capacities, resources and incentives. Countries with robust innovation systems have privileged research in a variety of contexts including universities and the private sector. This has led to new challenges for research management and universities to expand their research links with industry, commerce, government and the community at large. Universities are key players who fuel through “Research” the reservoir of future researchers and highly qualified, inquisitive and creative human capital for production sectors, given the advantage of harbouring the greatest number of researchers, adding value through liaisons with other international bodies. Nationally universities can participate in dealing with impending problems. Challenges facing research has been attributed to: financial, professional and institutional reasons. Universities have to compete for funding, based on value and assessment from basic to applied research. Research centres face more serious dilemmas, as mostly are ‘mission oriented’, set up to provide new technologies to governments, or entrusted with public services requiring accuracy and reliability (e.g. producing vaccines). Issues to address are the roles of centres, whether technical, service provision, social programs or other sophisticated services for international firms. Research needs setting up or strengthening of adequate building blocks,

38 http://go.worldbank.org/5HRC2LA230 39 Global Innovation Index 2011 Accelerating Growth and Development Soumitra Dutta, INSEAD Editor 40 Mapping research systems in developing countries, UNESCO

http://go.worldbank.org/5HRC2LA230


namely laboratories, supported by criteria-based assessments, for both research outputs. Cooperation is vital for co-authorships, which are indicative of multi-national cooperation, less occurring in Africa, Asia and the ME and mostly taking place in Europe, USA and Japan, by scientists from the metropolis of science. Yet, many emergent countries have national articles (India, China, Asian). The UNESCO Forum on Higher Education (2009)41 focused on the role and status of “National Research Systems” in relation to the challenges posed knowledge economy and policy dialogue on key underpinning research systems: (i) policy trends; (ii) infrastructure; (iii) human capacity; and (iv) investment, as well as charting the course in light of new and changing knowledge society dynamics within the areas of higher education, research and innovation, namely: (i) demand; (ii) diversification of provision; (iii) changing lifelong learning needs; and (iv) growing ICT usage, enhanced networking and social engagement, both with the economic sector and with the community at large. Increased partnerships among governments, economic sectors and research universities help link knowledge to development goals, needed a flexible and pragmatic research approaches, within academia. Overall, the situation of research universities in low-income countries remains bleak needing rapid and effective solutions. Other challenges facing research include equity; quality; relevance; ownership; international networking, research and innovation systems that support creation of new knowledge through R&D, human capital, new product markets, quality assurance, creative organizations, entrepreneurship, infrastructure, networking and interactive learning, innovation-based environment, support to IP rights, tax laws and other safety regulations; in addition to incubation activities to foster innovative projects; financing of innovative processes to facilitate the commercialization of knowledge; and consultancy service for technology transfer (including legal and commercial aspects of innovative activities (Edqvist, 2006).

One success story is the significant rise in the number of Singapore’s Research Scientists and Engineers (RSEs), from 4329 in 1990 to 11,596 in 2004 (Mouton, 2007).

E. ICT infrastructure (Back) A dynamic ICT Infrastructure ranging from radio to the internet is required to facilitate effective communication, dissemination and processing of information, hence a key knowledge transfer enabler and communications channel and network. The impact of ICT is reliant on the human capital and the availability and level of the ICT infrastructure, in addition to the governments governing policies and interventions, on the national level, while being reliant on skills set and degree of innovation, on the business level (UN Conference on Trade)42, yet measuring this impact is difficult due to the diverse and changing nature of ICT, complexity of impacts and illustrating a cause-and-effect relationship between the different variables. However, positive impact was found on economies, businesses, poor communities and individuals, directly and indirectly across economic, social and environmental realms. ICT is also used in management information systems (MIS) and decision support systems (DSS). Challenges facing such systems, are updating, particularly from very old technologies, as well as maintenance, skilled human resources and finance. The global telecommunications services (Pyramid Perspective 2012)43 market is expected to grow at a more modest 4% in 2012 (after expanding at7% in 2011), as a result of the rising volatility and uncertainty facing the global economy, at a total service revenue of US$1.7 trillion, or 2.4% of global GDP (2012). Mobile broadband, enabled by the proliferation of high-speed mobile computing devices including smart phones and tablets, will be one of the largest growth areas in 2012, enabling further penetration in emerging markets. Regulators and policy makers around the world are pushing for broadband adoption, putting incentives to increase investment in broadband infrastructure, key for development as governments make unprecedented financial commitments to the sector and mobilizing private capital along the way. Since the late 1990s wireless technologies and liberalization of telecommunications markets lead to tremendous access to ICT.

41 Ref. Higher Education, Research and Innovation – changing dynamics, Higher Education, Research and Innovation: Changing

Dynamics Report on the UNESCO Forum on Higher Education, Research and Knowledge 2001-2009 42 Measuring the Impacts of ICT for Development. UN Conference on Trade & Development 43 Pyramid Perspective 2012 Top Trends in the Global Communications Industry


Part II Situational Analysis of the Knowledge Transfer Channels in the Middle East and North Africa (MENA), Gaps and Recommendations (Back) Developing countries are facing challenges in attaining knowledge-empowered systems, failing to tap the vast and growing stock of knowledge because of their limited awareness, poor economic incentive regimes and weak institutions, thus increasing the “Knowledge Divide” between them and countries that are generating most of this knowledge, amidst increasing international competition emitting out of a combined trade policy liberalization and knowledge revolution, challenging the natural resources and low labour costs advantages most developing countries had relied, or still relying on. A widening knowledge gap with industrialized countries, is attributed to lack of innovative capabilities, R&D, scientific articles, patents and inequality in internet accessibility.

Developing countries need to build on their strengths and carefully plan appropriate investments in human capital, effective institutions, relevant technologies, innovative and competitive enterprises in order to capitalize on the knowledge revolution and improve their competitiveness and welfare.

A. Socio-economic regimes (Back)

Arab countries, of about 355 million inhabitants, stretch by more than 6300 km from Baghdad to Nouakchott, of lower middle income classified economies, with Egypt having the largest market and population size of 23% of the Arab world (about 80,8 million)44. In fact 6 Arab countries account for more than 70% of population. In terms of GDP Saudi Arabia alone accounts for more than 26% of total Arab GDP and only 6 countries account for nearly 70% of total Arab GDP (2007). The Arab region is very heterogeneous in terms of economic and social development. Its market size and business environment climates vary, as does the income per capita of 80,000 US$ in high income GCC countries to just 385 US$ in low income countries such as Mauritania, Sudan and Yemen. Knowledge economy oriented policies in the MENA are taking the low-road approach to economic development, as the UNIDO report (2002/2003) points out, when confronted with intense global competitive pressures, developing countries may be tempted to take the low road and foster development by devaluating exchange rates, disregarding labour or environmental regulations and reducing wages, only to enrich the few and perpetuate social inequities – a trait seen during Arab Spring. A high-road approach to economic development, in when less-developed countries use competitive advantages, create a stable macroeconomic structure, liberalize trade, develop human capital and infrastructure and attract transnational corporations, foreign direct investment and imported technology. Knowledge, education and infrastructure play particularly important roles in the high-road approach, as witnessed in 13 countries (Commission on Growth & Global Development)45, crafted policies to create economic growth of 7% GDP over 25 years, in countries that were poor 35 years ago (such as Singapore and Thailand) had invested in schooling its citizens and deepening its human capital. The development of human capital was one of the principal means by which government policy was used to support economic development in these high growth countries. Conversely, the study found that no country had sustained rapid growth without also keeping up impressive rates of public investment in infrastructure and education. But for those policy-makers who choose the high road, development policy and programs can build the infrastructure, human capital and knowledge needed to fuel economic productivity, while promoting social equity and broad-based

44 2010 (Wikipedia) 45 Commission on Growth and Global Development (2008)


Using World Bank Governance Index and indicators, the quality of Arab institutional framework was assessed; showing that Arab countries in general suffer from a weak regulatory framework and widespread corruption. The Corruption Perception Index, published by Transparency International, assessed the magnitude of corruption in 180 countries based on 13 independent indicators in the public and political sectors. Arab countries showed a level of ‘Perception of Corruption’ of less than 5 on a scale of 1 – 10 . This implies a direct correlation between the spread of corruption and the decline of government performance. Jordan scored a little above 5. Corruption and regulatory framework assessments showed that only 7 Arab countries had positive scores (2007). Countries that had relatively better governance status are Bahrain, Jordan, Kuwait, Oman, Qatar, Tunisia and the UAE. It is clear that the quality of the institutional framework is a big handicap for FDI inflows to the Arab region. Political stability is low, rendering a risk-prone region that inhibits foreign investors despite the investment opportunities of the region. Only 6 Arab countries had positive values on political stability of the index out of 17 Arab countries. The rule of law situation is better with 8 countries having positive scores, Long term impact of a stable macroeconomic policy is essential as FDI responds to macroeconomic fundamentals rather sluggishly (Kamaly, 2006), therefore, macroeconomic stability is important to translate the impact of FDI on economic growth (Jallab et al, 2008). FDI exerts a positive impact on growth, but more so through employment and value added and less through spill-over effects of technological transfers (Nicet-Chenaf, 2007). FDI inflows to the MENA region are not related investments to human capital and technology (Onyeiuw 2008), yet the difficulty of measuring human capital and technology in the region due to serious data limitations makes it difficult to conclude that these factors are not relevant to FDI. The region is not FDI attractive despite good macroeconomic frameworks and progress in liberalization. Trade and exchange liberalization, infrastructure availability and sound economic and political conditions help increase FDI (Sekkat and Varoudakis 2004). Arab countries aiming to attract European FDI should learn from East European experiences in terms of regulations and use of investment diplomacy as a tool to attract more FDI (Zukrowska et al, 2006). Multinationals allocate FDI to regions where return is highest – this is heavily impacted by the quality of infrastructures; most countries aim for more FDI by investing in infrastructure projects, since the quality backbone services are affecting FDI inflows to MENA countries (Sekkat, 2002).

The status of infrastructure is linked to the level of economic development. Most Arab non-Gulf countries need to upgrade their infrastructures in order to improve their business environments.

Arab Countries Share in Global FDI Inflows and Cross-border Mergers and Acquisitions (1997-2006) was $62,406 M, which is 16.% of the developing countries share and 4.8% of the $1,305,852 M global share. The impact of quality institutions on FDI flows is evident . Bad institutions and governance deter FDI and increase the risk of hesitation among investors. Using World Bank Governance Indicators (Marani 2007)46 developed by Kraay et al (2005) found that institutions play a significant role in investment attractiveness of countries. Alessandrini (2000) concentrated on the role of legislation and regulation that directly manage FDI inflows. Sarisoy et al (2007) argued that FDI depends on the political regime. He found that autocracies are likely to receive relatively more vertical47 FDI, whereas democracies are more likely to receive more horizontal FDI.

Attracting higher levels of FDI is premised upon a sufficient level of education and skills. Without policies and systems in place to ensure increasing levels of skills formation, investors choose other destinations or bring low levels of technology which is not upgraded over time and fails to increase demand for higher skilled labour (Lall 2000).

46 Marani (2006) 47 See Definitions


According to the Arab Human Capital Challenge Report (UNDP/MBRF 2009)48, record high levels of liquidity in the Gulf have encouraged public spending, re-investment and FDI outflow to many Arab countries such as Egypt, Jordan and Tunisia. This FDI outflow has gone into numerous sectors that have since prospered, such as tourism, real estate, construction and financial services. These sectors became main vehicles for growth and generated employment for people in the region at all levels, creating heightened need for skilled and qualified labour. Intra-Arab FDI is found to be very unpredictable and unevenly distributed between countries, yet encouraged by regulating environments, discouraged by infrastructure quality and can benefit from improved business environment, control of corruption, risks and deepening cooperation. FDI flows are determined by market size, purchasing power, quality of the business and investment environment. Trade flows are strongly related to investment flows, however economic freedom is not a strong impediment to attracting FDI as most government have special regulations with regards to FDI. It is important to highlight economic, geographical and regulatory factors involved in the intra-regional investment decision to address the gaps and strengthen the drivers of intra-regional FDI (Laabas & Abdmoulah)49. Inter-Arab investment flows, are shown using an augmented gravity model based on both Standard Gravity Variables (distance, income and population, congruity and other dummies) of both sending and receiving countries, as well as on a set of variables specific to cross-border investment flows using panel data of Arab countries.

Table 1 Inward FDI flows, in $M, current prices & exchange rates, 2000-2010 (sorted & rounded figures 2010)

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

S. Arabia 183 504 453 778 1,942 12,097 17,140 22,821 38,151 32,100 28,105

Egypt 1,235 510 647 237 2,157 5,376 10,043 11,578 9,495 6,712 6,386

Qatar 252 296 624 625 1,199 2,500 3,500 4,700 3,779 8,125 5,534

Lebanon 964 1,451 1,336 2,860 2,484 3,321 3,132 3,376 4,333 4,804 4,955

UAE -506 1,184 95 4,256 10,004 10,900 12,806 14,187 13,724 4,003 3,948

Jordan 913 274 238 547 937 1,984 3,544 2,622 2,829 2,430 1,704

Tunisia 779 487 821 584 639 783 3,308 1,616 2,758 1,688 1,513

Morocco 422 2,808 481 2,314 895 1,654 2,449 2,805 2,487 1,952 1,304

Palestinian 62 19 9 18 49 47 19 28 52 265 115

Kuwait 16 -176 4 -67 24 234 121 112 -6 1,114 81

Yemen 6 136 102 6 144 -302 1,121 917 1,555 129 -329

Table 2

Outward FDI flows, $M, current prices & exchange rates, 2000-2010 (sorted & rounded 2010)

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

S. Arabia 1,550 46 2,020 473 79 -350 -39 -135 3,498 2,177 3,907

Kuwait -303 -242 -77 -4,960 2,581 5,142 8,211 9,784 9,091 8,636 2,069

UAE 424 214 441 991 2,208 3,750 10,892 14,568 15,820 2,723 2,015

Qatar 18 17 -21 88 438 352 127 5,160 6,029 11,584 1,863

Egypt 51 12 28 21 159 92 148 665 1,920 571 1,176

Morocco 59 97 28 12 31 75 445 622 485 470 576

Lebanon 108 1 0 611 827 715 875 848 987 1,126 574

Tunisia 2 6 6 5 4 13 33 20 42 77 74

Yemen -9 1 39 61 21 65 56 54 66 66 70

Jordan 9 32 14 -4 18 163 -138 48 13 72 28

Palestinian 213 377 360 49 -46 13 125 -8 -8 -15 -11

UNCTAD, UNCTADstat (back to list of tables)

48 Arb knowledge report 2009, Towards Productive Intercommunication for Knowledge, Mohammed bin Rashid Al Maktoum

Foundation (MBRF) and the United Nations Development Programme/ Regional Bureau for Arab States (UNDP/RBAS 49 Belkacem Laabas, Walid Abdmoulah API/WPS 0905


From 2000 to 2008 trade as a percentage of regional GDP (Schwalje, LSE/UK)50 increased at a compound annual growth rate of 2.87%, with imports and exports increasing from 72% of regional gross domestic product (GDP) in 2000 to 90% in 2008. Trade in knowledge-based services as a percentage of regional Gross Domestic Product (GDP) also increased from 2000 to 2009 at a compound annual growth rate of 2.76% which was roughly the same as the OECD countries. Exports of knowledge-based services during this period increased at a compound annual growth rate of 12.40% which was less than S. Asia at 24% and E. Asia and the Pacific at 13.41% but comparable to OECD countries at 11.23%. However, export sophistication is declining. Royalty and license fees decreased at a compound annual growth rate of -2.3% from 2000 to 2009.

Only 1% of the Arab World’s manufactured exports are classified as high-technology, R&D intensive exports and the region’s portion of high technology exports as a percentage of manufactured exports actually declined at a compound annual growth rate of -4.83% from 2000 to 2009 (Bank 2010).

The "Investment Climate in the Arab Countries 2007 Report51" shows a stable investment climate despite regression in composite indicators, inclusive surged inflation in 12 Arab countries. There was an unprecedented growth of US$ 62.4 B in 2006 (UNCTAD 2007) accounting for 4.8% of the global FDI inflows, as an outcome of the tangible increase in FDI inflows to 14 Arab countries (Egypt, KSA, Jordan, Sudan, Lebanon, Oman, Qatar, Syria, Algeria, Bahrain, Tunisia, Djibouti, Libya and Somalia), on one hand and decreased FDI inflows to 7 Arab countries (UAE, Morocco, Mauritania, Iraq, Palestine, Kuwait and Yemen), on the other. Arab foreign trade in 2007, grew by around 15.1% (WTO 2007 Estimates), so that total Arab foreign trade, excluding Iraq & Somalia, amounted to US$ 1234.9 B, of which exports accounted for 60.6%, i.e. US$ 749 B and imports for 39.4%, i.e. US$ 486 B. There was a tangible progress in Arab stock markets, following reform and corrective programs adopted by most Arab stock markets (2005 - 2006). Amended legislations, enhanced market watch and control and appropriate policies were further boosted towards more appropriate doing-business environment. Investment legislations and reform enhanced the doing-business environment through improvement of investment laws, tax incentives & exemptions, bilateral, international & regional agreements, new free areas & industrial zones, new airports & seaports and activation of the private sector's role within the comprehensive economic process. New economy components were further boosted through the possession of latest IT & Telecommunications applications, improvement of digital infrastructure, transparent economic statistics & databases as well as programs for poverty elimination, employment, woman empowerment and enhancement of civil societies. The periodic international sovereign rating by the Financial Times, based on the sovereign rating of the international credit rating agencies, showed that Egypt, Morocco and Jordan had a ‘speculation grade’, medium risk and probability of payment risks, while the Composite Country Risk Index was low for Jordan and Tunisia and moderate for Egypt. The Euro-money Country Risk was moderate for Tunisia and Egypt and high for Jordan. The Institutional Investor for Country Rating was moderate for Tunisia and high for Jordan and Egypt. The DUN & Bradstreet Country Risk Indicator was low for Tunisia, moderate for Jordan and Egypt. The COFACE The Global Competitiveness Index (2007)showed improvement in Tunisia’s rank and dropped down ranks for Jordan and Egypt. Doing Business 2008 ranks were 80 for Jordan (dropped) and 88 for Tunisia (dropped), while Egypt showed improvement. Gulf countries were leaders on related indicators, followed by medium income countries (Jordan, Lebanon, Tunisia, Egypt, morocco), reflecting a negative correlation between each country's level of income and its digital divide. Arab telecommunications & ICT markets were subject to reforms by independent regulative bodies to create favourable investment climates and promote market opportunities. Political players, public, private and civic sectors, the diasporas and the international community are all “Actors of Reform”. Political actors decide the feasibility and implementation of reforms, so that they are influenced by the change demand and the nature of the regimes. The bureaucracy in the region, highly sized, is one of the major reforms blockers. Public servants have often rent-seeking behaviour for their

50 Wes Schwalje, LSE, UK 51 Investment Climate in the Arab Countries 2007 - The Arab Investment & Export Credit Guarantee Corporation


own and their mentors’ benefits. This explains the large observed differences between regulations and their enforcement. The private sector is one of the main beneficiaries of the reforms but often in collusion with political powers. The civil society is one of the main actors of change, with exceptions resisting change, like education trade unions to protect the teachers’ interests. The media are an instrument for dissemination of knowledge especially the social media. The Diaspora’s role is enhancive to knowledge economy and should be drivers of change, while the international community is supportive in terms of nationally channelled financial assistance and opening up trade access to their markets, while introducing more open policies towards immigration and support to outflows going to the Arab countries. This support should be used as an incentive to change.

Reform should lead to structural trade and investment policies, downsizing of public sector, financial sector, competition and innovation, governance, government effectiveness, accountability, control of corruption and stability.

Education, gender disparities and youth exclusion should be set also as top priorities. The feasibility of reforms depends on local conditions. The most difficult part is related to the societal dimension, these groups could be considered: (i) in-transition groups that need to build governance reforms and conducive environments for KE, (ii) constitutional reformers (e.g. Morocco and Jordan that set up inclusive processes to build reforms for democratic transition). The sequencing of reforms is essential for success and must be adapted to the specific situation of each country, based on progressive approach with short term wins anchored in a shared long term vision for change. This approach will be then strategic with adequate participatory, transparent planning, budgeting, monitoring and evaluation frameworks. Arab countries seem to have missed on rapid diffusion of ICT (Samia Satti)52, advanced knowledge systems, recent trends of globalization and impact on economic systems and global prosperity are lagging behind in terms of knowledge, skills, technological capabilities, spending, diffusion of ICT, competitiveness and average growth rate. Their poor performance minimizes their integration and share in new and global economic systems, portraying poor technology achievement index, poor absorptive capacity and capacity to create knowledge. Gulf countries are leading the Arab States in terms of GDP per capita, human development indicators, spending and diffusion of ICT, but fail to present a convincing and coherent performance in the new economy. Arab countries show that most of R&D, FTE researchers and S&T activities are mostly allocated within both public and university sectors. There is also a gap in terms of ICT diffusion, in particular, the Internet users, telephone mainlines and cellular subscribers, with higher numbers of users in the Gulf.

The Arab region failed to reach economic convergence with developed countries (average per capita GDP hovers around 8% of that of N. America and has even decreased relative to the EU and E. Asian countries), with lower labour market participation rates, especially for women and high unemployment, in particular for the youth who suffer the highest regional level of unemployment (24.4%) in the world.

This stunning figure explains, along with the quest for freedom, good governance and social justice, the frustration that led to what is now called the “Arab Spring”, calling for the need to adjust the economic model for rapid, sustained and inclusive growth, with high levels of job creation.

This can be achieved by strengthening productivity and the competitiveness of regional economies, shifting towards a knowledge-based economic model that opens up opportunities to FDI and trade (two channels for technology inflows), develop education and training to step up readiness to knowledge rendering skilled and productive workforce, fosters innovation and makes a full use of the ICT for the development.

The success of the KE model depends on credibility and government commitment towards ensuring efficient transformation of resources into outcomes by building sound institutions, especially budgetary ones, managing public servants on merit-basis and applying the rule of law that is essential to ensure

52 Ref. The incidence and transfer of knowledge in the Arab countries Dr. Samia Satti Osman Mohamed Nour


confidence in national institutions, especially by building a credible and predictable judicial system. Indicators of knowledge economy include measures of GDP growth, poverty, tariff and non-tariff barriers, regulatory quality, rule of law, royalty & license fees payments & receipts, S&T journal articles, granted patents, adult literacy rate, secondary & tertiary enrolment, telephone & computers & internet penetration. The Arab world, falls short on most of these indicators, as shown in Figure 1.

Figure 1 Knowledge Economy Values

Source: KE Report, WB database, Knowledge Assessment Methodology KAM) (back to list of figures)

According to the WGI, the region is still underperforming many others (36%). Fight against corruption that undermines the credibility of policies and institutions and the confidence of investors and citizens alike in their governments is too low in this central dimension (34%); and enhanced security that is the basis for building any development, especially a knowledge-based one, that needs a lot of inflows from the technological frontier, is also low. Economic and institutional regimes should foster trade and investment flows for the transfer of technology and stimulate efficiency, for a knowledge-led growth model. The region remains relatively closed with highest overall Trade Restrictiveness Index with less than 1% of world exports (excluding oil), lack of facilitation (28 days for customs procedures against 12 days in OECD), mediocre transport infrastructures and logistics performances (the latter’s index is one point below the OECD average). Knowledge transfer from expatriates to national staff, as per the Arab Human Capital Challenge Report, is shown by Arab CEOs to be 74%. However, this rate was lower in UAE and Qatar than the remainder of Gulf countries and much larger at 88% - 85% respectively in the Levant and North Africa. Knowledge transfer was more significant in key drivers of economic growth: financial services, media, entertainment, transport, logistics and storage (80’s%), followed by retail and consumer goods, energy and travel and tourism (70s%), mining and utilities, engineering and construction and real estate (60s%).


In order to increase the incidence and transfer of knowledge in the Arab countries, policies and recommendations have to be set to narrow knowledge gaps, information problems and improve institutional settings of IPRs and patents (Samia Satti)53.

Arab countries need to improve the performance of educational and training systems, local and regional knowledge and S&T institutions, attract both financial and human investment to build local technological capabilities, particularly, basic and high technology infrastructure, ICT infrastructure, skill levels and competitiveness and to learn from the experiences of other nations to create a wider range of technological capabilities. Policies must narrow knowledge gaps by making efficient public investments in lifelong education opportunities, maintaining openness to the world and dismantling barriers to competition in the telecommunication sector. Recognizing that knowledge is at the core of all development efforts, governments and bilateral donors, multilateral institutions, non-governmental organizations and the private sectors must work together.

Table 3 Indicators of the KE index for Arab countries (KE Report)

Economic Incentive & Institutional Regime Innovation System

Country Tariff &

Non-Tariff Barriers

Regulatory Quality

Rule Of Law

Royalty, License Fees,

Payments, Receipts

Patent Applications

Granted By US Patent & TM

Office

Scientific & Technical Journal Articles

Unit $/Person Per Million

People

Egypt 66 -0.4 0 4.3 0.1 22.8

Jordan 74.8 0.4 0.5 - 0.3 50.8

Tunisia 71.8 0.2 0.4 2.2 0.1 56.9

Indicators of the KE index for Arab countries (KE Report)

Education & Human Resources ICT

Country Adult

Literacy Rate

Secondary Enrolment

Tertiary Enrolment

Telephones Computers Internet Users

Unit % Over 15 % % Per 1000 People

Per 1000 People Per 1000 People

Egypt 71.4 86.2 34.8 325 38 68

Jordan 91.1 87.4 39.9 419 57 119

Tunisia 74.3 83.3 30.1 692 57 95

KE index for Arab countries compared to other countries (KE Report)

Country Economic Incentives

& Institutional Regime

Innovation System

Education & Human Resources

ICT KE

Index Difference Between Highest

& Lowest Pillar

KEI Value Among 135 Countries Of The World

Egypt 3.6 4.5 4.4 3.5 4.0 1.0

Jordan 5.8 5.7 5.5 4.6 5.4 1.2

Ranking Among 135 Countries

Egypt 91 71 80 93 83 22

Jordan 55 55 57 73 62 18 Source: Knowledge Economy Report

(back to list of tables)

53 Ref. The incidence and transfer of knowledge in the Arab countries Dr. Samia Satti Osman Mohamed Nour


Figure 2 Index values for the pillars of KE for Arab Countries, G7 and the world

(Source: WB database KAM) (back to list of figures)

Figure 3

Latest KEI compared to 1995

(Source: WB database KAM) (back to list of figures)


Table 4 Availability of knowledge indicators for Arab countries included by the WB

Availability Of Index Indicators For Latest Period In 19 Arab Countries

Number of Arab Countries Lacking Data For The Index

In 17 Arab Countries

Kind of Indicator No. of

Indicators No. of Countries

(Country/Indicator) Availability (%) Latest Period 1995

Overall Economic Performance

9 16.1 85 - -

Economic Incentive & Institutional Regime Index

19 16.9 89 1 8

Innovation System Index

24 11.4 60 11 9

Education & Human Resources Index

19 14.1 74 4* 0

ICT Index 12 14.8 78 0 0 All KE Indicators 83 14.3 75 11 13 (*) The four countries that lack data for the index of the education and human resources pillar for the latest period but did not lack such data in 195 are Djibouti, Mauritania, Sudan & Syria.

Source: World Bank (back to list of tables)

B. Education and Human Capital (Back) The Challenge facing Arab Human Capital (Schwalje, LSE, UK)54 is mainly the growing need for the convergence of human capital development policies, driven by a shared vision of a knowledge-led future and knowledge-based economic development in a post-awakening Arab world, as economic Arab world policies are impaired to varying degrees due to lack of transparency and accountability (Henry and Springborg 2011). Development across the region faces largely similar human capital development challenges, in support to knowledge-based economic development, as Becker (1994) drew strong links between human capital and economic growth:

“Since human capital is embodied knowledge and skills and economic development depends on advances in technological and scientific knowledge, development presumably depends on the accumulation of human capital.”

Underpinned by high fertility rates and increased life expectancy, the population of the Arab World nearly tripled to 359 million growing at an average annual rate of over 2% from 1970 to 2010 (Mirkin 2010), having the largest youth population in the world, with approximately 30% of the total population currently under the age of 15 and 30% aged 15-29, hence 60% are under the age of 30.

Millions of young people will enter the work force over the next 10 years needing jobs either at home or through labour mobility, as the region suffers from the highest youth unemployment in the world at 25 %, with even higher female and youth unemployment exceeding 30 % (IFC, IDB)55.

The economic loss of youth unemployment exceeds US$ 40 – 50 billion, approximately 2-3 % of the region’s economy. “Young people are the drivers of economic development. Foregoing this potential is an economic waste and can undermine social stability.” Juan Samovia, Director General of the ILO. This unemployment is attributed to missing enablers, such as regulatory environments in terms of quality, funding, education providers, training of employers, transparency and matchmaking. The posed risks

54 Wes Schwalje, LSE, UK 55 Education for employment: realizing Arab youth potential IFC and the Islamic Development Bank www.e4earabyouth.com

http://www.e4earabyouth.com/


associated with unemployment are high, causing suffering and discontent. Creating the required number of jobs is crucial, but not easy.

Just to maintain current average unemployment rates will require the region to create 35-40 million extra jobs.

To reduce unemployment rates to the global average (currently 6.2 %, across all age brackets) would, in addition to this, require it to create 10-15 million jobs.

If we were to assume the region intends to reduce unemployment rates to around 6 % and at the same time approach world average work force participation rates, this would require it to create yet another 40-45 million jobs.

If the Arab World wishes to achieve the global unemployment rate (at the global average work force participation level), this will demand that it create more than 85 million jobs over the next ten years.

Tackling unemployment will require addressing labour demand (enough jobs, adequate skills, self-employment potential) and labour supply (adequate education system providing the right quality and quantity of skilled graduates), supported by strong economic development - to create well educated workforce critical for driving economic development, governed by information transparency between labour demand and supply, using mechanisms that facilitate market clearing between them. Occupations with higher education requirements have depressed wage growth in Egypt and Jordan. The annual real wage growth for Jordan (2002 – 2006) was -3.6% for high skill occupations and 1.9% for medium and lower skill occupations.

Such challenges facing the Arab human capital include: * low levels of workforce productivity, * preference for public sector employment; * increasing female labour market participation; * poor match between workforce skills; * education and training system misalignment with the needs of knowledge-based economies; *barriers to entrepreneurship.

Arab human capital investments meant to support knowledge-based development over the last decade have been marginally successful.

There is an evident mismatch between human capital investments and private sector needs, since such a success is reliant on the production of human capital in the quantity and quality required by the market via the formal education and training systems; efficient utilization of human capital in terms of the expectations of employers; and maintenance of human capital (Development 2010). World Bank data shows that 24% of firms in the Arab world report that they face a skills gap which is deterrent to further knowledge-based development. Arab private sector employers report a large disconnect between the skills required for the growth and operation of their businesses and the skills of their employees, casting further doubt on whether the other larger macroeconomic objectives, namely job creation, economic integration and economic diversification, have been achieved through human capital investments that have accompanied knowledge-based economic development policies in the Arab world over the last decade. The burden of making up for inadequate pre-employment skills formation shifts attention from the formal education system as provider of knowledge and skills towards the role of firm training in eliminating skills gaps. Based on sparse statistics from the Arab region, the number of employers providing formal training to permanent employees is comparatively low: Egypt (12%), Jordan (24%). Structural transformation of Arab economies to a specialization in knowledge-based industries requires alliances between existing firms and Arab governments.

Governments must increasingly view the national skills formation systems as an ecosystem that includes education and training providers, firms, government entities and individuals to address supply and demand.

The most needed skills youth identified, as most important for securing a job were: English/French, Arabic, ICT literacy, communications and job-related skills. The most exciting and fulfilling professions identified by youth were: engineer/doctor/surgeon at almost 50%, followed by starter jobs in finance, teaching, IT, medical, social, business, real estate and some vocational jobs. In Jordan, expectations of earnings for start-up jobs varied among youth groups as follows: i) currently studying youth: 25% except


< 400$, 75% between 400-550$; ii) currently employed youth: 82% between 400-550$, the rest > 550%. In Egypt and Morocco expectations were less by about 75% to 50% respectively. Employers on the other hand thought that 22% university graduates they hired in the last year, had hard skills and 25% had soft skills, while 10% of vocational graduates had hard skills and 16% had soft skills. Skills in Egypt and Morocco were higher. The university graduates were distributed by field of study as follows in the Arab world: 37% education and humanities, 31% social sciences 18% scientific, technical and engineering, 8% other and 6% medicine, versus Asian countries: 31% were in the scientific streams, while in Latin American countries, 39% were in social sciences and much less in education and humanities (in the latter two). Employers provided training to their employees, in Jordan, as follows: 47% for new hires and 38% for existing employees, versus 71% and 43% for Egypt and 63% and 55% for Morocco respectively. Employers provided training to new hires, in Jordan, in hard skills 79% and 32% soft skills, versus 94% and 45% in Egypt and 87% and 42% in Morocco. Vocational education and training (VET) accounts for approximately 20 % of post-secondary students in the formal education system. While approximately 80% of post-secondary students in the formal education system are in universities. There is a need for stronger coordination between academia and market in terms of curricula, practice, work placements and distant learning, with closer linkages with business to create readiness, entrepreneurship and job creation skills. It is clear that the current system is not producing the quantity or quality of graduates needed. Educational shortcomings pose serious economic and social risks requiring multiple stakeholders toward employment and private sector investment (higher education, vocational training & work readiness) and businesses incentives; there is a need for employment opportunities, self-employment and the right skills. Investments in post-secondary education produce lower private and social returns than in countries in other regions. Indirect societal costs (such as joblessness, school dropouts, migration) can multiply these costs to 7% and17 % of GDP in Jordan and Egypt respectively. From the perspective of economic returns, the average annual private return per year of schooling in the Arab World is 7.8 %, half that for countries in Latin America (15 %). This indicates that students have less of an incentive to continue in further education because their employer sees less value in it and do not reward it as much in terms of increased wages.

According to the World Bank, “Regardless of how the impact of investment in education in the MENA region is evaluated, the story is similar: the higher level of investment in education during the last four decades was not associated with higher economic growth or with appreciable gains in (Total Factor Productivity) growth compared to East Asia and Latin America.”

Getting the Arab Youth into Employment56, is one main challenge looked at by Tom Speechley, CEO of Abraj. Throughout 2011, youth from across the Arab world have occupied streets, squares and other public places to protest a lack of inclusion, a lack of dignity and a lack of social justice. The most cited cause uniting the protesters is a desire for inclusion in the process of governance, primarily as a means to address these concerns. Unemployment is the biggest security threat facing the Arab world today. In some Arab countries, the proportion of those under the age of 26 and out of work is as high as 25%, one of the highest youth unemployment rates in the world. The economic loss arising from youth unemployment exceeds $40–50 billion annually across the Arab world. The real issue facing the region is that the future looks much bleaker. The UNDP assessment of 2009 points out that 51 million new jobs must be created by the end of 2020 merely to stand still on unemployment, at face value, we see that the Arab countries must, in effect, increase the number of employment positions in the region by around 50% over the next 10 years to 2020. Looked at another way, from the same UNDP report, economies need to grow at an annual rate of 7.6%, to generate the requisite employment opportunities. This is, just for unemployment not to get worse, yet these economies are growing at much lower rates. For countries without large fiscal surpluses, that is both a massive challenge and an even more massive liability if they fall short. For countries with significant fiscal surpluses there will be no real escape in the final analysis. The cost will inevitably need to be passed on and the cost will be huge. The entire Arab world faces being engulfed by the impact of rapidly rising unemployment. Investment is required in

56 Getting the Arab Youth into Employment by Tom Speechley, January 14, 2012 http://www.wamda.com/2012/01/getting-

the-arab-youth-into-employment

http://www.wamda.com/tomspeechley

http://www.wamda.com/2012/01/getting-the-arab-youth-into-employment



infrastructure, in education and private sector enterprise. It is estimated from studies in the U.S. that every billion dollars of investment in infrastructure can create 18,000 direct and downstream jobs. Investments in ports, airports, financial centres and industrial zones are good examples. Yet faced with the magnitude and urgency of the task, infrastructure investing is but a relatively small part of the solution, just like employment by the state is not going to provide a solution. Put simply, there aren’t any more jobs to give out and what more jobs can be manufactured will not be sustainable in the long term. Employment on a mass scale needs to be delivered by sustainable private sector economic growth and for that we need to invest heavily in the private sector and educate our youth to be able to fill the private sector jobs that are then generated. Investing in the private sector involves: focus on SMEs. According to EU research, an investment in an SME is twice as likely to create employment opportunities as an equivalent investment in a large corporate. Similarly, research from the US shows that between 1980 and 2005, the U.S. economy created 40 million net new jobs, from businesses that were less than 5 years old. SMEs are also more likely to create employment in newer more innovative sectors, thus providing economic diversification and knowledge economy jobs. To date, the amount of investment in SMEs that is happening in the Arab world is a tiny fraction of what is required. Banks are not lending. According to recent research, SME lending accounted for a mere 8% of all lending in the MENA region and a mere 2% in the GCC. This is despite the fact that SMEs account for more than 90% of all enterprises and employ perhaps 70-80% of the workforce. But blame cannot simply be cast at the banks. The vast majority of SMEs are simply not bankable. The education system is not yet producing the right kinds of graduates in all the right places. So, whilst access to education in the Arab World has been successfully broadened, we find that many graduates do not have the right skill sets for the jobs that are out there. Internal borders should be designed to attract capital, people, trade and ideas from within the Arab World whereas in practice there are significant frictions and barriers. Expenditure-wise, the region has invested a lot compared to its GDP but the lack of incentives to performance (for example for teachers, schools managers) and of accountability are two of the main reasons behind this poor situation. The share of the education sector in total government expenditure is a more direct measure of budget priority . Data for 2005 is available for 87 countries. Arab States, with data available, tend to devote a significantly higher proportion of total expenditure to education than do governments in other regions57.

Table 5 Total public education expenditure as % of GNP & % of total government spending (median), 2005

N. America

& W. Europe

Iberoamerica & Caribbean

Sub-Saharan Africa

Arab States

Central Asia

E. Asia &

Pacific

S. & W.

Asia

C. & E. Europe

Total public education expenditures as % GNP

5.7 5.0 5.0 4.5 3.2 4.7 3.6 4.9

Total public education expenditure as % of total government spending

12.7 13.4 17.5 25.7 18.0 15.0 14.6 12.8

Source: Summary: EFA Global Monitoring Report 2008, http://unesdoc.unesco.org/image/0015/001548/154820e.pdf , p. 31 (back to list of tables)

The Arab Knowledge Report 2009, Towards Productive Intercommunication for Knowledge (UNDP/MBRF)58, stressed on the crucial role played by the educational system, in terms of young people’s “employability” levels and economic gain, so that failure to render human capital is a liability for the economy. In the Arab world, more than 60 million people, two thirds of them women, are illiterate and some nine million school-age children are out of school. A review of science, learning and policy

57 Development, Education and Finance. Analysis of debt swap for social investment as an extra-budgetary education financing

instrument. By Senator Diego Filmus – Esteban Serrani. 58 Mohammed bin Rashid Al Maktoum Foundation (MBRF) and the United Nations Development Programme/ Regional

Bureau for Arab States (UNDP/RBAS)

http://unesdoc.unesco.org/image/0015/001548/154820e.pdf


emphasized the importance of institutional reform of knowledge institutions and the need for restructuring higher education and science policies in the MENA countries, where human capital mobility (through the migration of Arab postgraduate students to Europe and USA) is seen as an enhancer for transfer of knowledge with global influences on higher education, noting, on the other hand, the serious consequences of brain drain in the MENA countries due to lack of incentives and favourable environments to encourage the return of the migrants Arab postgraduate students in Europe and USA (Minerva 2011)59.

The Mobile students from the Arab States as a percentage of the tertiary students enrolled (outbound mobility ratio), was 2% in 1999 and 3% in 2004 (UNESCO 2009)60.

The Arab human capital challenge report61 attributed expected increase in cost of skilled labour, to the inability of educational sectors to keep up with the pace of development and demand for skills. There is a shortage of educational institutions to supply sufficient human capital to meet market demand. MENA CEOs see availability of adequate skills at 54% and only sufficiency in amounts at 48%. Again, the education sector is questioned in terms of adequate skills and sufficient quantities output, for economy growth. Responses were on those two indicators respectively: 54% and 48% (MENA), 72% and 73% (Levant), 82% and 86% (Jordan). Hiring systems need revamping “ ”We hire traditionally, based on technical skills, because graduates are not well rounded and then we train them.” Samer Majali, President & CEO, RJ. Expanding trade, technological change and changing forms of work organization have increased global demand for skilled labour. In examining global skills gaps and how skills gaps impact firm performance in the Arab world, Wes Schwalje noted the unmet quantitative demand for highly skilled workers in which firms face qualitative internal skills deficiencies that limit performance. Employers feel that their existing workforce has inadequate skill types and levels to meet their business objectives; and new entrants to the labour market were trained and qualified for occupations but still lack variety of the skills required; However, the increased pressures on the demand for a skilled national workforce have revealed the scarcity of this supply. This gap is widened since most of the population is under the age of 30 while weaknesses have been identified in the region’s education systems ability to supply relevant skills and provide available training. From an industry point of view, most sectors were concerned with the education system’s ability to provide sufficient numbers of qualified people and the education system’s ability to provide the economy with adequate skills.

“The current system does not prepare the students academically for stringent college studying which affects their ability to enter the work force. We prefer to hire those with degrees from the USA, rather than local degrees” Professor Anmar Kaylani, Dean, Faculty of Educational Sciences, University of Jordan. “Methods focus on formalistic training, consider the numbers of students without taking into account the quality of the teachers,” Hisham Ghasib, President, Princess Sumya University of Science and Technology. “Rules and low quality of education are major problems” Economist Yusuf Mansur. “Our PSUST graduates are very successful in the market place. One reason is because we require our students to do a two-month training internship and a graduation project that gives them real world experience.” Duried Jerab

C. Innovation, S&T and R&D (Back) The knowledge divide between richer and poorer states, is prompting MENA countries to develop their own competitive research, since knowledge-importing countries with limited resources need high-priced technology from knowledge exporting countries with IP rights, monopoly and pricing of technology. To

59 The “National, Regional and Global Perspectives of Higher Education and Science Policies in the Arab Region” Minerva: A

Review of Science, Learning and Policy, Springer, December 2011 Minerva, Springer, Germany, December, Vol. 49, No. 4, December 2011, pp. 387-423

60 Ref. Higher Education, Research and Innovation: Changing Dynamics Report on the UNESCO Forum on Higher Education, Research and Knowledge 2001-2009

61 Mohammed Bin Rashid Al Maktoum Foundation


build and maintain research-based knowledge systems, there is a need to understand socio-political, economic and cultural dimensions of research, formulate advice, document research systems and empower universities’ roles as strong knowledge-based systems. The need of MENA for higher education and research should no longer be questioned, in face of common challenges of balancing investments across educational levels, to raise access, classify levels of academia and utilize research findings to stimulate innovation. Private sectors roles should be enhanced in widening of learning opportunities; challenging traditional education systems by introducing more competition and innovative programs and delivery methods; increase competitiveness; diversification of budgeting and promote partnerships. There is a need for RDI systems to create new knowledge through R&D, human capital, new product markets, quality assurance, creative organizations, entrepreneurship, infrastructure, networking and interactive learning, innovation-based environment, support to IP rights, tax laws and other safety regulations; in addition to incubation activities to foster innovative projects; financing of innovative processes to facilitate the commercialization of knowledge; and consultancy services for technology transfer, including legal and commercial aspects of innovative activities (Edqvist, 2006). Furthermore, indicators for research productivity, such as patents, are weak in addition to weak health-related research. The overall situation of research at universities remains bleak needing rapid and effective solutions. The average government expenditure on research in the Arab States is around 1.5% compared to 2.5 % at OECD or 18% in Japan (Ramirez 2008, El Kaffass 2007). The poorest nations require research capacity, or access to research findings, to progress; this requires national commitment and must remain a major objective for international cooperation. Major challenges facing research include equity, quality, relevance, ownership and international networking. Innovation policies in the Mediterranean countries can be gathered under the following main streams (Arvanitis, Estime Project)62: i) catching-up of industry “Mise à niveau”, as the backbone of “innovation” policies; ii) technical linkages with research, technical and innovation centres, experimentation platforms and the like; ii) orienting individuals researchers toward more applied projects (incentives in universities, promotion and evaluation); iv) creating specific institutions devoted to innovation or technological innovation; v) clustering of industry and support to such clustering; vi) specific funding and promotion of R&D, venture capital, etc... and vii) publicity, diffusion and spreading awareness among the public on innovation and technology. These are usually addressed to younger people and children. There exist also schemes like the “science weeks” in Jordan and other types of similar programs. Most countries have focused on creating Technology Transfer Units in universities and higher education institutions. These units have great difficulty in doing their job. Apart from institutional difficulties in the administrative management of technology transfers, enterprises (mainly SMEs ) are less likely to address a university or a technical centre. As a paradox, Tunisia, although its consistent innovation policy has rather little emphasis on the university technology transfer units, has 8 technical oriented centres that are aimed at reaching SMEs. In Jordan the centres that depend on the Higher Council have a function of disseminating the more applied work. The institutional reports of every country shed more light on these measures63. According to Arvanitis (Estime Project Evaluation), there is a need for strategic evaluation, as key in science policies, on individual, project and strategy national levels, to respond to research needs for socio-economies. Three countries have done an exercise in national priority setting, e.g. Jordan (Strategy plan 2006-2010), yet it remains necessary to enhance tools and their use in policy-making. The positive experiences of Morocco, Jordan and Tunisia are interesting in this regard, in line to attention given to support research policy. Jordan immediately assessed the need to re-focus the science policy process, to enhance the role of HCST and to re-orient the policy making process. A large part of the recommendations of an expert report especially devoted to this question concluded: “The Mission believes that the evaluation function and its necessary linkage to future planning is an area in which the HCST needs to pay more attention in the future.” The IDRC

62 Rigas Arvanitis, coordinator the Estime project (evaluation of scientific and technological capabilities in Mediterranean

countries) 63 Rigas Arvanitis, ESTIME


review we just mentioned found also that programme evaluation was an exception in Jordan. This is quite worrying since Jordan has probably a quite well organized research system. Processing of innovation surveys needs to address the number of innovations, their degree of novelty, patents, licenses, R&D and engineering activities, technical links with technology centres, other companies or agencies devoted to the development of new products and processes. Indicators may include percentages of sales for R&D; percentages of persons working in R&D units, links with universities, etc…leading to technical centres or other institutions for product and process development. Such surveys can detect, passive enterprises, low and high innovations or performers. In the case of Morocco, SMEs are becoming more sensible to R&D (Khelfaoui 2006). According to Wes Schwalje (2011) many of the features necessary for an innovation system typical of knowledge-based economies in high and medium income countries is lacking such as: research funds and linkages (corporate funds, seed VC, angels, professional societies, entrepreneurs, governmental departments, S&T bodies, science foundations, research institutions representing supply (corporate R&D, universities, national labs), commercialized funds, linkages and development and product prototypes (inclusive IP developers, technology transfer agencies, SMEs…); funds to bring research to consumers and linkages; and finally research consumers repressing demand (research consumers, academics and researchers, business community, governments, the public and the press). This model is existent in the Arab countries but weak in terms of SMEs-related commercialization funds, linkages and development, product prototype and corporations in terms of funds to bring research to consumers and linkages. As for IP developers, technology transfer agencies, technology transfer funds and large VC, PE (under commercialization funds and commercialized linkages) they are missing. In order to bridge this lack of infrastructure, several Arab countries have launched industry clustering initiatives. Examples include Qatar Science & Technology Park and Jordan’s iPARK. The UNESCO Science Report (2010) identified renewed interest on the part of many Arab countries in reinvigorating S&T and higher education, with the launch of a number of top-down initiatives to support education and research. A handful of countries have also approved plans to allocate more resources to research and development (R&D), among them Egypt, Tunisia and Qatar. Egypt, Jordan and Tunisia, are part of the middle income group making up 70% of the population in the Arab world. They have relatively mature higher education infrastructure, yet innovation is not a part of S&T. Universities and research centres were founded by governments from the 1960s onwards, e.g. Jordan’s University of Jordan (1962); and its main industrial research centre, the Royal Scientific Society (1970), have only adopted a National Science and Technology Policy in 1995. Today, many Arab countries lack national policies or strategies for S&T. On the Global Competitiveness Index 2009/2010, UAE is the highest at (27) out of 133 economies, Tunisia (38) and Jordan (59), [WEF, 2009]. Jordan launched El-Hassan Science Park as part of a major science project in Amman. Heads of States met at the Arab Summit (March 2010) and adopted a resolution mandating the LAS to develop a S&T strategy for the entire Arab region, in co-ordination with specialized Arab and international bodies to address the important issues of facilitating the mobility of scientists within the region, enhancing collaborative research with expatriate Arab scientists, launching the Arab S&T observatory to monitor the S&T scene in Arab states and highlighting any shortcomings in implementation. Challenges include: absence of S&T governance mechanisms at the state level; low gross domestic expenditure on R&D (GERD); lack of co-operation between scientific organizations and productive sectors; low technology component, leading to few manufactured exports and a limited number of high-tech exports; poor capacity to innovate according to society’s needs; lack of databases providing information on S&T; plus challenges facing organizations involved in science. To address them, political support for S&T at the highest level is required, coupled with affirmative government action, an upgrade of existing STI infrastructure and an increase in GERD. The R&D governance, is based mainly within higher education systems, since research has shown that the bulk of S&T research in the Arab world is carried out within the higher education system. Organizing science at the institutional level is crucial for the effectiveness of R&D. In Arab countries, the indifference shown by decision-makers to S&T is a major contributor to the current vegetative


state of S&T. Government bodies responsible for R&D policies and co-ordination are as follows: In Egypt: the Ministry of State for Scientific Research; In Jordan: the Ministry of Higher Education and the Scientific Research Higher Council for Science and Technology; In Tunisia: the Ministry of Higher Education, Research and Technology. Trends in R&D expenditures, show that the GERD as a percentage of GDP has been consistently low in the majority of Arab countries for over 4 decades and much lower than the world average, between 0.1 - 1.0% of GDP, versus 2.5% of GDP spend by advanced countries on R&D. Countries such as Egypt, Qatar and Tunisia have set themselves ambitious targets for GERD. UAE and Jordan will avail more funds in future for scientific activities. As for numbers of researchers, Arab countries have not produced a critical mass of fulltime equivalent (FTE) researchers in the majority of disciplines. Moreover, links between universities and research centres remain weak. This leads to little or no coordination at the national level between research communities. Also, even when fresh graduates are ready to become engaged in research, there is often no capacity within the R&D system to absorb them, or even any willingness on the part of senior researchers to mentor young minds. To make matters worse, unemployment within the R&D community is high, especially among women researchers, who constitute around 35% of the total researchers’ community in Arab countries, according to estimates by the UNESCO Institute for Statistics (UIS). Only a handful of Arab researchers have been internationally recognized. The only Nobel laureate in a scientific discipline to come from the Arab world is Egyptian-born Ahmed Zewail, who received the distinction for chemistry in 1999 while working at the California Institute. The number of researchers per million population in the Arab world put Jordan at the top of the list at 1,952, followed by Tunisia at 1,588. Egypt has 617 and Saudi has 42, marking lowest number. Areas of needed R&D, as per Arab countries unanimous designated S&T priorities were: i) water and energy (posing a grave challenge) and S&T in agricultural policies; ii) ICT; and iii) nanotechnology and biotechnology. The R&D landscape in the Arab region is changing, yet more emphasis needs to be put on R&D output, as patents and publications, development of ICTs and their primary manifestation, high-tech exports, higher education output in terms of forming the S&T labour force. There is a need to take a comparative look at Arab universities, increase investment trends in higher education. Causes of low academic standards in higher education are attributed to a number of features in the Arab region that are contributed to academic standards, namely unresponsiveness to globalization and the ascendance of private education, new knowledge and knowledge delivery modes, it remains essentially supply-driven rather than demand-driven. Arab universities are under pressure to fulfil many complementary yet conflicting roles: i) knowledge transmission (teaching); ii) knowledge generation (research); and iii) knowledge preservation and diffusion. University governance in the majority of Arab countries remains unsteady, unable to assume one or more of these roles successfully. As knowledge transmitters, universities in Arab countries must aim to form highly productive work-ready professionals, not bureaucrats, with the appropriate skills to address economic needs and opportunities, as well as those of the economy’s component industries and sectors. It can be concluded that Arab countries have been aware of the importance of STI for socio-economic development for at least four decades. However, little has changed in terms of the impact of science and the scientific enterprise on achieving socioeconomic development, or generating new knowledge. The challenges facing Arab countries in S&T is enormous. However, they can be overcome with vision, commitment and hard work.

The huge strides made by countries that two or three decades ago were at the same level of development as Arab states, including Brazil, China, India, Ireland, Mexico and the Republic of Korea, show that it is possible.

Gaps include non-clarity of research goals, despite known problems. Even in instances where funding has been no object, the private sector has been unable to produce a critical mass of knowledge workers to utilize these resources to meet national objectives. Yet shortages of funds have impeded progress in these areas. High-tech exports from Arab countries are negligible. The acquisition and application of technology is a function of an enabling environment, yet this environment is almost non-existent in many


parts of the Arab world. For instance, although expenditure on defence in Arab countries is among the highest in the world, there is no home-grown defence industry. There is very little linkage between universities and industry when it comes to research output and thus little wealth generation via the commercialization of R&D. In the majority of Arab states, intellectual property regimes are very weak, providing little protection for the output of scientists. A patent culture being almost non-existent, researchers often come up against a blank wall when attempting to commercialize or otherwise develop their research output. A number of Arab countries have a sizeable S&T potential. This potential is often dispersed and championed by individuals rather than institutions. S&T output has been growing unsteadily over the past three decades. Today, exploiting this output still relies on a handful of dedicated knowledge workers based at a few universities and research centres in the Arab world. Some countries have begun to streamline R&D into basic research, applied research and technological development. They have also started assimilating market parlance, not only when it comes to producing papers and patents but also prototypes and products. Long-term security and prosperity for all countries in the region can only be achieved by assuring the triple helix of food, water and energy security, combined with sustainable and equitable socio-economic development in tolerant societies where accountability and rule of law prevail. S&T can achieve some of these goals, if not all. D. ICT infrastructure (Back)

ICT offers the promise of fundamentally changing the lives of much of the world’s population. In its various forms, ICT affects many of the processes of business and government, how individuals live, work and interact and the quality of the natural and built environments. The development of internationally comparable ICT statistics is essential for governments to be able to adequately design, implement, monitor and evaluate ICT policies (UNCTAD)64. The World Summit on the Information Society (WSIS), the Geneva Plan of Action and the Tunis Commitment expressed strong belief in the development potential for ICT and commitment to raise awareness of the benefits that ICT can bring to humanity and the manner in which they can transform people’s activities, interaction and lives and thus increase confidence in the future. This included 10 target areas to be achieved by 2015, of which 6 were to improve connectivity, (between villages, educational institutions, libraries, hospitals, government organizations) through ICT access (radio, television, internet or other forms of technologies) by the world’s population. Impact of ICT access is expected especially on poor and rural communications, use on educational outcomes and the importance of school curricula in preparing students for the information society, networks on health institutions and health outcomes; various impacts arising from the availability of e-government services; and improving access to information and knowledge by suitable access to electronic content. The Geneva Plan of Action suggested the promotion of ICT applications that can support sustainable development. The strategic importance of the IT industry is widely acknowledged in developed as well as in developing and emerging countries. Many governments have recognised the key role of this exceptionally dynamic sector that enables income generation and employment promotion, has a substantial export potential and significantly contributes to improving productivity, efficiency and innovation in the public and private sectors (BMZ/GIZ)65. Focusing on the importance and impact of ICT in policy making, depends on determining factors such as the human capital, the level and availability of ICT infrastructures and government intervention, on country levels, as well as the needed levels of skills and innovation to determine degree, direction and impact of ICT access and use, on the business level. Impact areas of ICT relate to the broader economy, society and environment, affected by ICT supply and ICT demand and, at a country level, are likely to be governed by i) existing ICT infrastructure, which enables an ICT critical mass that can amplify impacts; ii) country level of education, skills and income; iii) government ICT policy and regulation and the level of e-government. Impact of ICT on socio-economic

64 Measuring The Impacts of ICT for Development (UNCTAD – UN Conference on Trade and Development) 65 Federal Ministry for Economic Cooperation and Development (BMZ). IT Sector Promotion in Developing and Emerging

Countries Manual Developed by GIZ


regimes include areas such as: economic performance, citizen participation, individuals and communities, privacy and security, health, education, employment, innovation and research, poverty alleviation. Economic impacts arising from the ICT sector and from ICT diffusion throughout the economy are positive on macroeconomic levels in terms of increased productivity and growth that can arise from the following sources (OECD 2004, 2008a): i) increase in the size and productivity of the ICT sector and associated effects such as growth in industries that provide inputs to ICT production; ii) ICT investment across the economy, which contributes to capital deepening and leads to a rise in labour productivity; and iii) multifactor productivity growth across the economy, which arises from the role of ICT in helping firms innovate and improve their overall efficiency. Impacts of ICT on employment, is seen in creating employment and self-employment opportunities. Impacts can be direct, through growth of the ICT sector and ICT-using industries and indirect through multiplier effects. In economies increasingly dependent on ICT, individuals will benefit by having requisite ICT skills, thereby enhancing their opportunities for employment. Arguably, ICT can also lead to loss of employment as tasks are automated. In respect of the ICT sector in low-income countries, telecommunication services might offer the greatest opportunities for employment creation (UNCTAD, 2010). Only a small number of developing countries have a well-developed ICT sector. For those that do, ICT manufacturing can be significant in employment terms, sometimes involving the poor. In China, for example, the ICT sector provides employment to about 26 million internal migrant workers, with evidence that a large portion of their earnings is remitted to poor rural and remote areas. Mobile phones penetration is increasing dramatically in developing countries (see ITU, 2010b). Impacts of ICT on education is reflected by considerable policy interest in the benefits that ICT can bring to education. ICT may deliver significant educational benefits by providing tools for the teaching and learning processes and by providing the skills needed in a society that is increasingly reliant on ICT. Conversely, students who enter such a world without those skills may be unable to fully participate and suffer from a digital-divide effect. The digital divide is likely to be a greater problem for developing countries, where access to ICT is generally lower than for OECD countries. Other possible benefits of ICT in education are improved attitudes to learning, development of teachers’ technology skills and increased access of the community to adult education and literacy (OECD, 2010b; Kozma, 2005). Impacts of ICT on health bring major benefits; according to ITU (2010a), e-health ICT applications include electronic health records, telemedicine, m-health (the use of mobile devices such as mobile phones for health purposes), decision-support systems, e-learning and e-journals. In Jordan, mobiles and HMIS were used in association with immunization awareness and follow up on remote areas. In OECD (2007), the use of ICT was also cited as enabling complex and networked medical equipment. The study points out that the Internet can be a useful source of information about health from an individual’s point of view. There is no doubt that ICT can also have negative effects on health, for instance, occupational overuse injuries associated with computer use. Recycling of e-waste is a particular problem for some developing countries, with adverse health impacts. Impacts of ICT on communities, citizens’ participation and individuals is seen in facilitating democratic processes and increased participation by citizens. Such impacts may occur as a result of greater communication and information dissemination offered by ICT, through the use of social networking sites, e-mail and mobile phones. They are also frequently enabled by electronic information and services offered by government (e-government), usually via the Internet or mobile phones. Of particular interest is how e-governments can improve democratic processes and encourage citizen participation in decision-making. Impacts of ICT on the environment is a relatively new topic. In OECD (2009b), positive and negative links between ICT and the environment are discussed. The scope of environment is limited to aspects where ICT is likely to be a strong positive or negative factor, that is, climate change, energy use and waste. The proposed conceptual model recognizes the following impacts of ICT on the environment: i) positive impacts, such as its potential to improve the efficiency of a range of energy-using processes and equipment and facilitation of dematerialization and ICT’s role in climate change monitoring and modelling, dissemination of information and administration of carbon-pollution-reduction schemes; ii) negative impacts from energy needs and greenhouse gas emissions arising from ICT use, the manufacturing and transport of ICT products and pollution from disposal of e-waste. Social media and political change in MENA countries are further guiding directives of this impact and learning source, in light of extraordinary recent social and political events in several MENA countries


unfolded, attributed in part by many to ICT and to the increasing popularity of social networking sites. As reporting of the events continued, some commentators doubted that significant political change would come about, whilst others were referring to ‘Twitter revolutions’ suggesting that new technology is evidently making group action much easier to take (Shirky, 2009). However, the actual evidence base on the relationship between ICTs, social networking and these specific political movements is far from complete but in general there is a clear impact of ICT on society in terms of the processes by which information is produced, disseminated and used, or information generation and ‘authentication’, on one hand and information dissemination or ‘editorship’; on the other, where information is used to impact social communications with different relative values. The question of participation and ‘access’ is critical, but it needs to be allied with an understanding of the ‘skills and capabilities’ of the various interested parties involved. ICT in education (Kozma, UNESCP)66 can have a greater impact when policies and programs are crafted in the broader context of socio-economic goals as coordinated change to support educational transformation. Globally, there is a shift from a mass production-based socio-economic regime, to one that is based on knowledge creation that is significantly affecting the development of human capital. While the growth of ICT has been exponential, it has not been evenly distributed around the world. There are significant differences in the penetration of computers in high-income (67 computers per 100 people - 2007) and MENA countries (6 per 100). Differences are even greater for Internet access, where Internet penetration is still rather modest even in high income countries (26 per 100) and very low in the MENA (2 per 100). Rapidly ICT development is creating fast-changing information and KE, bringing new opportunities and challenges for citizens, government and business. Innovative technologies and new applications for existing ICTs are changing conventional modes of operation and ICTs have become fundamental to economic and social infrastructure. They also drive and enable structural change and innovation throughout the economy, including the business sector, in social interactions and in the delivery of healthcare, education and government services. Furthermore, with continuous and rapid technological advances, such ICT-enabled changes can take place faster than ever before. New technologies help to empower citizens in traditional and emerging democratic processes; recent events in the MENA region provide a good example. They can also transform economic life, enabling consumers and firms to improve and customize products and services. An important policy challenge is to identify and harness the benefits while mitigating the risks created by the new information society. Today it is difficult to think of any aspect of public-sector, private-sector or civil society life that is not affected in some way by ICT. Policies need to facilitate the diffusion and use of ICT, notably by putting in place the conditions that help to make ICT infrastructure and services available and aid the development of the skills required to maximize the impact of the changes that ICTs enable. With an increasing share of economic and social activity taking place over the Internet, new or adapted legislation is also needed to protect consumers, enhance cross-border scientific collaboration, foster creativity and innovation, protect intellectual property rights and privacy and prevent accidental damage to and malicious attacks on the Internet and other ICT infrastructures. Internet access is a precondition and main ICT tool, allowing communication with wide access to knowledge and information. Equally important, is that users can access meaningful content, including local content, in accessible languages, form and sustain meaningful (local and remote) social contacts. ICT is an important factor in socioeconomic development, as seen through the indicators of ICT diffusion and indicators of economic and social development which include: estimated Internet users, fixed broadband subscriptions, fixed Internet subscriptions, fixed telephone lines, mobile broadband subscriptions and mobile cellular subscriptions, drawn from the International Telecommunication Union’s (ITU’s) database. Challenges facing private and public sectors investment in networks and knowledge towards accelerating high speed broadband communications to generate and use knowledge covering are: i) weak

66 The Technological, Economic and Social Contexts for Educational ICT Policy, Robert B. Kozma . A UNESCO Publication


regulatory or administrative financial instruments incentives, ii) insufficient political commitment to encourage public or private actors to move ahead with investment, since financing roll outs of broadband networks is reliant on private investors, in addition to investing in knowledge through research, development and innovation; iii) difficulties SMEs face to access needed capital and skilled workforce, iv) lack of a community patents and expenditures on research and innovation within public and private investments (EU Initiative for Growth in NWs)67. It is recommended to have policy and funding frameworks to support regulatory and administrative environments for private sector involvement, reinforcement of capacity to innovate and means of financing investment in networks and knowledge in support for structural reforms, on national and regional levels. According to the 2011 WBG Little Data Book on ICT, since the late 1990s wireless technologies and liberalization of telecommunications markets lead to tremendous access to ICT. MENA 2009 statistics show 67.4% mobiles subscribers, 2% fixed broadband subscribers and 5.7% PC owners, with no available data on ICT goods & services import or export68. Secure Internet servers stood at 2.4 per million. Comparing with high-income countries, there are 123.2% mobiles subscribers, 26.9% fixed broadband subscribers and 56.0% PC owners. Trading in ICT goods of high-income countries stood at 6.6% for goods export, 8.6% goods import and 9.8% services export out of their respective totals. There were 544.6 per million secure internet servers. Cybercrime, is one adverse knowledge transfer feature. Raising of awareness on cybercrime in MENA, and information security is of the essence given huge investments in ICT infrastructures. “Unfortunately the importance of securing this infrastructure is by far “Business first, security later”, according to El-Guindy (Nets Safe. ME69). There is a need to change and improve legislative and technical capability to deal with this new type of transitional crime. Such crimes have political, economical and social implications, varying in gravity on the content of the hacked or leaked information. Cyber Trafficking and human trafficking is the second largest criminal industry in the world. While the Philippines has adopted measures intended to eliminate this despicable trade, it has failed to keep up with challenges brought about by technological advancements that frustrate efforts towards this end. The Internet, for one, has provided broader opportunities for the business, creating a new means by which persons may be exploited. Through this medium, traffickers are able to cast a wider net and expand their clientele by making transactions more convenient and accessible to target consumers (Polaris Project)70. Money laundering is one of the ongoing problems facing the international economy, and from the evidence studied it can be seen that while the fundamentals of this crime remains largely the same, technology has offered, and will continue to offer a more sophisticated and indirect means to convert ill-gotten proceeds into legal tender and assets. The largely unchecked growth of the Internet presents what has been described as the "Armageddon scenario of banking on the Internet, is that criminals could have money transferred without any audit trail". There is a total absence of regulation of the Internet and it has been recognized that authorities need to ensure that legislation keeps abreast of technology in order to understand and pick up on any new techniques that professional money launderers may come up with71. Electronic transfers are fast, they can be done from anywhere, and they require no contact with other humans, so is downloading and transferring of digital or e-cash or using smart cards, void of traditional financial institutions (Morris, FINCEN States)72. Financial institutions are at the forefront of the battle against the money launderers73.

67 A European Initiative For Growth - Investing In Networks And Knowledge For Growth And Jobs 68 2011 The Little Data Book On Information And Communication Technology –WBG 69 http://netsafe.me/category/cybercrime/ 70 http://lawandict.blogspot.com/2010/09/cyber-trafficking.html 71 http://www.laundryman.u-net.com/page14_conclusions.html 72 http://www.cs.utah.edu/~kmay/look/digital/Laundry.htm 73 http://www.laundryman.u-net.com/page8_efonfin.html

http://www.laundryman.u-net.com/page8_efonfin.html


E. Recommendations: Enhancive knowledge transfer on the MENA level (Back)

Arab countries live in a density disparity zone, where knowledge density is higher on the outside than on the inside and pretty much like “osmosis” there is a need for knowledge influx to create equilibrium and bi-directional exchange, namely through direct economic action (FDI, foreign trade, ease of staring business, globalization, open trade, standardization and competitiveness), as an immediate action for short-term impact; with mid-term goals of political, economic and social reforms, in support for knowledge transfer through adequate ICT infrastructure and innovative platform nurturing innovation, S&T and R&D. Long-term knowledge economy policies, are needed to build the one in-common and crucial national human capitol, to gain ICT-based, knowledge economy and entrepreneurship sets of skills, for knowledge creation and production.

“Michalski predicts either one of two reactions: embracing dynamic transformation, creativity and experimentation, within competitive international environment, or de-link from globalization and delay structural change and innovation with the aim of avoiding associated problems, turbulences and uncertainties, the latter of which is extremely harmful and costly choice, as an attempt to preserve the past at the expense of the future. Michalski advocates for change for long-term benefits”.

The Arab Spring has stimulated a demand for reforms deeming a suitable time to act on national, regional and international levels towards a comprehensive knowledge economy approach. Nationally, countries are different, so a single set of recommendations is hard to agree on and is not recommended. However, the starting point is the participatory setting of a strategy of knowledge-based development built on a shared long-term vision - therefore the strategy of all. This should be translated in plans and budgets geared towards results which have frameworks for monitoring and evaluation of the results with specific, relevant and measurable indicators for which the reference situations exist and final and intermediate targets are defined. The societal dimension should receive high priority in strengthening transparency, accountability, freedom of the media and civil society participation, reform and orientation of the public sector to performance, rule of law, combating corruption, participation of women and youth, primacy of knowledge in society and opening to foreign languages and ideas. The economic environment requires sound macroeconomic policies, elimination of barriers to FDI entry such as licenses and sector restrictions, simplification of procedures in particular for SMEs, structural reforms relating to international trade, taxation, financial sector, competition and the downsizing of the public sector in the productive sectors and the labour market. Educational reform must focus on quality and external effectiveness. The former will benefit from the societal dimension in terms of performance incentives, accountability and commitment of society, especially local authorities, teachers' unions and parent-teacher organizations, but also of specific reforms to improve the educational offer. External effectiveness should put the employability at the heart of education policies - and their evaluation - moving towards more vocational training and more involvement of the private sector. Innovation requires, in addition to a conducive business environment, the overhaul of the R&D system, the creation of poles of competitiveness, the support to entrepreneurship of youths and diasporas, the development of linkages between SMEs and large companies, especially multinationals and the promotion of venture capital. The development of ICT may be provided by more competition, effective and independent regulations for the expansion of infrastructure, technological convergence and competitiveness, a policy of universal access to cover “non-market areas”, e-public services to stimulate demand, legal and institutional frameworks to promote the use of mobile technologies, electronic commerce and business process outsourcing. The reforms to be adapted, their impact analysis, the measures to remove obstacles and their sequencing should be debated at the national level to ensure success. An inter-ministerial committee led by the head of the Government must drive this process to ensure the consistency, effectiveness and efficiency of interventions. At the regional level, the strategy may cover the dimensions of regional economic integration and with the rest of world, especially the neighbouring regions and Europe, the coordination of education and training to have a workforce whose skills are certified and to ensure intra-regional labour mobility, the development of a regional program for innovation and an integrated digital space as well as the consolidation of the institutions to be able to achieve objectives selected for the other dimensions. Naturally, this strategy should be developed following the above principles and adopted by the leaders of the region. There could be an Observatory that could be placed within the renovated


institution of the League of Arab States. At the international level, the G-8 Deauville Partnership (EU or other governments or agencies) is an opportunity to promote dialogue on reforms in the region (it now includes Egypt, Jordan, Morocco and Tunisia) and to set up right incentives for their implementation in terms of (i) scaled-up international assistance, (ii) preferential trade access by expanding agriculture and reducing Non-Tariff Measures and (iii) co-development by facilitating the mobility of the labour force and the flow of financial and knowledge transfers from migrants to their countries of origin. Recommended guidelines, based on global and MENA findings along the KE model (Back)

A. Policies

Knowledge Economy Policies : Mobilize national policies, legislation and strategies towards economic growth and job creation, by

using a knowledge economy model (WB), across socio-economic regimes, education and human capital, innovation and research and ICT infrastructure.

Develop appropriate coordinated policies and institutions within necessary supportive socio-economic and legislative framework to articulate transitional and long term strategies for knowledge economy, sufficient allocation of funds and financial resources, education, human capital, innovation, S&T, R&D and adequate ICT Infrastructure, in a an integrated model that supports knowledge transfer and absorption capacity across sound economic incentive regimes and sectors-specific policies (finance, education, health, energy, ...), respective of enabling environments (regulative, institutionalized systems, governance, reform...), that promote levels of advancement, development, economic growth and job creation.

Create tolerant polices that are accepting to change and adaption to a new integrated planet of socio-economic and technology systems. Recognize that knowledge has become the predominant input output and structural feature of economy and society in the 21st century, in addition to interconnected digital networks, (ICT Infrastructure) acting as a socio-economic and knowledge transfer enabler.

Promote political relations to facilitate equitable knowledge transfer; adapt political and economic contexts conducive to knowledge transfer to support institutionalized sector-related domestic enablers across channels.

Macroeconomics: Accommodate regulative processes to macroeconomic conditions, market size, workforce skills and

security. Apply governmental reforms, to include price liberalization, macroeconomic stabilization programs, yet focus on daily economic activity.

Promote flat organization (macroeconomic and microeconomic levels), decentralized decision-making, participatory disciplines and wide sharing of information, where ICT is an enabler for communications, information sharing and simulation of business processes (ICT infrastructure)

Knowledge Economy Systems: Build knowledge-empowered systems, tap into the growing international stock of knowledge

(decrease knowledge gap); promote creation, production, management and incentivized efficient application and use of existing and new knowledge. Support the process of transfer (transfer plan, experience, experimentation, simulation, mentorship, work shadowing, paired work and community of practice...) and knowledge diffusion by channelling knowledge as needed, spreading new ideas and technologies across cultures within effective implementation of knowledge.

Some Impediments to knowledge transfer: * Disability to visualize (policy), orient policies in support of knowledge economy models or revamp socio-economic regimes * De-linking from globalization resulting in delay in structural changes and innovation; a costly choice in an attempt to preserve the past at the expense of the future. * Lack of organizational context, incentives, faulty information, source of knowledge (foreign or local), knowledge mismanagement, motivational issues, lack of trust, distance or transport (country infrastructure), as well as inability to properly use / implement new knowledge, innovatively. * Accessibility, ICT limitation (ICT Infrastructure), recipients, areas of expertise, previous experiences or exposures and incapability (human capital). * Lack of a shared social identify, language barriers, internal conflicts,


generational differences, beliefs, misconceptions, resistant cultures (highly non-conductive to knowledge sharing), (social regime)

Foreign Trade: Promote foreign direct investment (FDI) and international trade, as two major channels for

international technology transfer, (for the recipient), and source of income for innovation (for the supplier – e.g. Netherlands, Germany), for cross-border technological knowledge transfer. Activate the General Agreement on Trade in Services (GATS) to promote FDI and international trade, based on market access commitments, transparency and recognition of qualifications, within trade policy liberalization and investment regimes that further promote international competitiveness.

Recognize that FDI contributes to new knowledge for the intangible services and contributes to the GDP (e.g. FDI by/in the Netherlands, in the services sector had grown by 20 fold over the last two decades accounting to the largest share of Dutch FDI stock74).

Business Environment: Enhance business regulations based on quantitative indicators to promote business activities and IP

protection, particularly for start-ups (ease of business creation and licensing, minimum capital requirement, procedures, time, cost), expansion (registering property, procedures, time, cost, getting credit, credit information systems, movable collateral laws, protecting investors, disclosure and liability in related-party transactions, enforcing contracts, procedures, time and cost to resolve a commercial dispute); operations (dealing with construction permits, procedures, time, cost, getting electricity, procedures, time, cost, paying taxes, payments, time, total tax rate, trading across borders, documents, time, cost); insolvency (resolving insolvency, time, cost, recovery rate, clarity on IP rights, cost of resolving disputes, supporting credit and enforcing contracts). Increase publishing information on legal procedures.

Regulate market dynamics to facilitate entry of new firms and limit exit of weaker ones, job creation and open competitiveness.

Manufacturing & Service Sectors: Support the service, manufacturing and business sectors, institutionalizing of organizations,

investment, consolidation of linkages between R&D institutions and industries, investing in building high human capital and local knowledge workers, through international skills gain, knowledge transfer, increased knowledge content and innovation.

Recognize and work on the similarities and differences between the service and manufacturing sectors, in terms of knowledge transfer, channels, holders and recipients, institutional settings and impact of ICT. The service sector is gaining more importance (across all knowledge economy pillars) in terms of FDI and international trade (training and producer-consumer two-way knowledge transfer); average importance in terms of suppliers, licensing/franchising, intra-company strategic knowledge management, knowledge intensive business services, human capital mobility, Internet and links with academy; and less importance in terms of patents.

Create innovative policies; recognize growth of service sectors and measurable service-oriented innovation surveys to put services on equal footing with manufacturing (e.g. Netherlands), also noting that creating jobs through manufacturing has to conform with economic equity, rural-urban balance, clean energies and environmental protection.

Encourage industries and intangible services to merge even among competitors in light fast advancing science and technology, on output, innovation and knowledge creation and better economic performance.

Apply R&D in large service companies, in “operations research, strategic planning or IT departments”.

Service Sectors: Recognize the new importance of / and support the service sector (intangible goods, services/ -

services) in promoting growth, as an enabler for knowledge transfer, through various channels, in the context of the new economy. Empower the service sector that will create the need for companies to sustain themselves in highly competitive markets by improved accessibility (ICT infrastructure) and usage of new knowledge (human capital development) that is relevant to their

74 Van Hoesel and Narula 1999, p.16


activities. Promote innovative e-services in business environments based on ICT and high speed communications (use of mobiles phones, email) and online service provision (internet home pages) within enhanced security schemes and networks to facilitate communication between different kinds of users with different kinds of data. Look at shared best practice.

Aim to raise the participation of the service sector, particularly knowledge-based or intangible services, in the GDP, up to 50% or more, looking at success stories from OECD countries and WB studies based on production and distribution of knowledge, (25 largest economies has shifted from manufacturing to services provision, accounting to more than 50% of the GNP, in the US production of information products and provision of information services accounted for 63% of output 1997. The combined market value of eBay, Google and Yahoo, exceeds $200 billion). Promote the enabling environment for the service sector, inclusive sector channels of knowledge transfer and domestic determinant factors. This includes: licensing as in franchised services, industry-academia linkages, job related training, employing intra-company strategic knowledge management such as Intranet or MIS, producer-consumer two-way knowledge transfer, knowledge intensive business services by private enterprise reliant on professional knowledge, to produce knowledge-based products and services such as computer, engineering, advertising, R&D, accounting and management consultancy, as well as knowledge generating and transferring international conferences in both manufacturing and services sectors.

Promote enablers across channels, to increase new economy services impact on employment and development of knowledge and skills, (e.g. financial, software or digitized entertainment and shopping services), using new technologies, innovation towards e-commerce.

Focus on call centres for employment in the service sector. Work on “employees’ profiles” as a channel where services are directly delivered.

Involve customer participation in determining services, diagnostics, or co-production e.g. self-service retailing or banking or intervention (e.g. tracking courier shipment).

Cater for simultaneous production and consumption (enabled by new technologies like clouding). Classify services as private or public services, on- or off-line and producer or consumer-based. Create policies that promote knowledge transfer through the protection of IP for national and

foreign business, since services are more reliant on IPs as opposed to ‘Patent’ in the manufacturing industry based on codified innovative capacity of service firms or other forms of IP protection like copyrights and trademarks. Avail new type of knowledge intensive-competencies consultancy for using ICT in service sector (growing codification, memory storage features…).

Research, Development and Innovation (RDI): Increase the absorptive capacity and innovation in business by investing in R&D, hiring diverse

teams to serve diversity and creativity. Raise firm awareness and effective use of technology and application of skill-based practices.

Promote acquisition (based on R&D experience), assimilation (patents, citations, research publications...), transformation (new products ideas and research projects) and exploitation capabilities (announced products, development cycle); and cater for diverse markets and societies.

Private Sector: Expand opportunities for poor people by promoting a vibrant private sector with investment firms,

job creation and improved productivity. Social Systems: Promote social balance to promote social cohesion and full assimilation to the host country

Environment: Combat environmental deterioration adverse repercussions for human development, especially

protection of natural resources for livelihoods from pollution, dirty water and unimproved sanitation that impact health; expand energy provision without a heavy environmental toll and promote human behaviour to care for environmental sustainability. Find innovative means for alternative and clean / renewable energy, clean water and sanitation.

ICT Infrastructure: Recognize that the ICT infrastructure is an enabler for knowledge transfer in services, relatively

inexpensive way to transfer large amounts of information (and knowledge) at a very high speed, prompting user-producer-consumer networking generating knowledge spill-overs to service industry


and society at large, the internet being a constantly growing channel serving different users in services and manufacturing sectors, to receive and transmit knowledge.

B. Human Capital

Knowledge Transfer: Recognize that human capital is the key enabler in new knowledge-intensive

environments and increasingly competitive economies. Knowledge Economy Skills: Train human capital, through education and training, on ICT-based,

knowledge economy, entrepreneurship and job creation skills and sufficient human capital on foreign technologies to promote knowledge transfer. Support human capital formation and catching up to new technologies to unlock potential, especially among domestic workers in increase absorptive abilities assimilate imported knowledge and implement technologies invented abroad.

Diversity: Empower diversity, creativity and complexity (the heart of transition to knowledge intensive socio-economies).

Market & Opportunities: React to human capital pressures by promoting drivers of development and researched-based policies to promote private sector growth, public sector policies and reform, particularly challenging amidst global recession. Recognize that human capital mobility is one of the main transfer channels. Promote effective two dimensional Human capital mobility where human beings as “carriers” of knowledge, across firms or institutes. Provide enabling conditions to empower citizens to determine their choices and life paths. Promote easy access to the new wealth and attainment of good education and ability to interpret effectively the use of information

Gender: Remove barriers of inclusion and promote female participation in employment and self-owned business, equity in job types, hours and wages; increase economically active females; make sure to assess market threshold whereby offered quantity of jobs or job-creation rates support influx of female enterprises and employment. Support women in business in terms of law and legal awareness to eliminate gender-based legal differences (accessing institutions, using property, getting a job, providing incentives to work, building credit and going to court).

C. Education

Knowledge Systems: Create a versatile and evolving education in light of new technologies and tools to

educate new generations for new jobs, technologies and skills that will evolve, by creating self- and life-long learners and instilling ICT-based knowledge economy, entrepreneurial and job creation skills, within nationally owned, scalable and low cost schemes. Transform traditional education from mass production to that tuned for knowledge creation, to support: larger numbers acquiring advanced skills, personalization of processes, diversity of outcomes, disciplinary knowledge and skills, where students act as intentional learners and knowledge creators, projects are collaborative, technology as central, there is decentralization of education and schools are structured horizontally. Promote high exchange and creation of academic and knowledge content. Create networked knowledge economies through educational cross-border networks, impacted by ICT.

Knowledge Transfer: Mobilize education as enabler for rapid socio-economic and technological changes, to prepare human capital for global knowledge economy. The human capital is key for all components of knowledge economy empowered countries, on which setting of polices depend, education, innovation and building of ICT infrastructure, working as the key factor in knowledge transfer and absorption, as main channel. Long term national planning for knowledge economies, is based on spreading knowledge economy skills among countries populations.

Higher Education: Design policies that meet emerging higher education demands and diversification, in response to changing lifelong learning needs; growing ICT usage and enhanced networking and social engagement with economy and community (see RDI). Regulate mobility of academics to serve knowledge transfer in higher education, quality and research, while conducting research on the impact of mobility on the knowledge, values and subsequent life course of the mobile persons, as well as costs and benefits of mobility for the mobile persons, the higher education and research institutions and the nations experiencing an influx or out-flux of persons. Limit brain drain by creating incentives and favourable conditions


D. Innovation, S&T, R&D

Policy Level: Create innovation supportive policies, by loosening institutional constraints within firms, promoting innovation outside academic environments based on inventive thinking and creative experimentation; link to research strategies, academia, motivating participation of private sector actors. Place supportive policies that harnesses knowledge and innovation for sustainable growth through resource efficiency, greener and competitive economy; high employment economy, research, climate action and energy; education; and combating poverty. Increase competition and innovation-driven growth by increasing competitiveness in the manufacturing sector.

Innovation Systems: Exploit synergies amongst opportunities, capacities, resources and incentives, to create robust innovation systems to research in a variety of contexts including universities and the private sector. Create innovative system of firms, research centres, universities, think-tanks, consultants and other organizations that can tap into the growing stock of global knowledge, assimilate and adapt it to local needs and create new technology. Create awareness as to the interactions between entrepreneurship and innovation, for economic development. Assess the impact of entrepreneurship and innovation on growth and development.

Innovation through Education: Create innovation through educational systems that support employability, greater capacity for R&D, facilitated by ICT infrastructure and digital networks. Promote scientific cooperation in education and research.

Knowledge Transfer: Promote innovation as key enabler of knowledge transfer and absorption through socio-economic policies that mobilizes government roles, markets, social factors, active educational and research cooperation networks with the international community. Recognize the different types of key determinant domestic institutions in terms of knowledge absorption capacity, namely private and public sectors, research institutions and education. Promote absorptive capacity in business firms through RDI: by promoting: Knowledge acquisition capability (number of years of experience of the R&D department, amount of R&D investment), Assimilation capability (the number of cross-firm patent citations, the number of citations made in a firm’s publications to research developed in other firms), Transformation capability (number of new product ideas, number of new research projects initiated) and Exploitation capability (number of patents, number of new product announcements, length of product development cycle).

Academia: Promote governance of higher education to manage knowledge and knowledge workers within coherent knowledge systems and accessible framework to contribute to further the knowledge society and knowledge economy. Promote research at universities, to create highly qualified future researchers and human capital. Promote openness of academic research, patents, domestic R&D institutions linkages with industrial, service and business sectors, for effective diffusion of innovation. Promote applied research.

RDI: Increase investment in R&D more than in fixed capital and promote IP rights. Establish a national research and innovation system, to meet knowledge economy and society challenges. Promote critical activities, by transferring technologies that are essential for RDI and its progress, investing in R&D (new knowledge, engineering, medicine, natural sciences), capacity-building (highly skilled group and labour force for R&D), establishment of new product markets, quality assurance mechanisms, encouraging creative organizations (promote entrepreneurship, enhance infrastructure to boost innovation), networking through markets and mechanisms, creating enabling institutions which facilitate innovation (IP rights, tax laws, R&D investment, sound environmental, safety regulations), incubation of activities (innovative projects), financing of innovative processes (commercialization of knowledge), consultancy services for technology transfer legally and commercially

Science: Support through incentives the use of science as a tool for innovation, aided by international cooperation and participation. Seek international support and appropriate mechanisms to boost research. Stock on dedicated scientists, availing enabling environments for research (labs, networks…). Restore trust in S&T by balancing academic research and mission-oriented research. Promote scientific articles, patents (or trademarks/IP) by increasing innovative capabilities and R&D. Encourage participation of national scientists in international networks directing diffusion of new knowledge to service businesses; training of future scientists.


E. ICT Infrastructure

Support socio-economic regimes, research, development and innovation, S&T, education and creation of knowledge economy skilled human capital, to support economic growth and job creation.

Support effective use, production and management of knowledge, by promoting knowledge transfer, absorption / diffusion and retention through knowledge transfer channels, such as FDI, foreign trade, service sector, knowledge-economy skilled human capital, innovation and education.

Invest in a country’s ICT infrastructure and relevant technologies to create a dynamic ICT structure that facilitates effective communication channels and networking, dissemination and processing of information, for knowledge transfer and formation of knowledge content and product.

Decrease digital divide through increased and ease of accessibility and promotion of effective usage. Promote usage of ICT in MIS and DSS Expand telecommunications markets

Part III Deduction and Assimilation based on Findings & Enabling Factors for Knowledge Transfer in Jordan (A Case Study) (Back)

Executive Summary Introduction Jordan is a country that has both beauty and potential, it is a picturestique land of diverse terrain and climate, rich history and heritage, unexploited tourism and natural resources (mining), has friendly and literate people who are eager to learn and succeed and good foundations for growth and development. Yet, competitive results are wanting on account of dispersions of efforts and potential, of which, lack of knowledge retention, is one, let alone support to knowledge transfer, its channels and enabling environments. Systems need to work together, through a knowledge economy model, towards economic growth and job creation, building on strengths and carefully planning appropriate investments in human capital, effective institutions, relevant technologies, innovative and competitive enterprises in order to capitalize on the knowledge revolution and improve its competitiveness and welfare. Identified knowledge transfer channels: FDI, foreign trade, and openness to trade, networking and cooperating with the international community are main knowledge economy channels (KTC) whose success rely on the investment climate, availability, sustainability and efficiency of the infrastructure - specially ICT, sound plans and systematic institutions that are needed for promoting knowledge absorption capacities. FDI is an important knowledge transfer channel, particularly to intangible services, and consequent importance of the services & industrial sectors in contributing to a country's GDP. (e.g. FDI by / in the Netherlands, in was 50.60/44.80 industry, 0.70/0.72 construction and 48.60/54.50 services75). FDI as a knowledge transfer channel can be 100% foreign owned, or based on multi-partners joint venture, which affects the flow of knowledge, inward and outward investments bringing new knowledge into a country. Of particular importance are SMEs, start-ups and ease of doing business, as well as such enabling procedures. Domestic private and public institutions, inclusive research and educational ones, are key domestic enablers for knowledge absorption, in varying degrees according to their institutional characteristics, so is the use of ICT in private and public services. ICT and high-speed communication networks are enablers of innovation. Domestic RDI, particularly innovative capabilities, can enable or hinder (in case of their absence) international knowledge. A strong ICT infrastructure creates a favourable environment for knowledge transfer in services, as inexpensive transfer of information and knowledge at high speed, conducive to interactive networks and knowledge spillovers to the service industry and society at large. Openness of

75 Stibora and de Vaal 1999 P. 160


academic research, university-industry links are conductive channels, in addition to scientific cooperation in education and research, and commercialization of S&T. Scientific articles, patents and equality in internet accessibility are some of the measurable indicators of knowledge, and its transfer. Jordan’s socio-economic regimes play an important role in promoting absorptive capacities of knowledge, as poverty and youth unemployment adversely affect knowledge transfer. Complexity of administrative procedures, fiscal procedures, and corruption are further inhibitors to KT. Although international institutions promote absorption capacity, yet non-receptive audience or resistance to change are bottlenecks, therefore, human capital readiness – is one of the major enablers for knowledge transfer, where enablers / bottlenecks in KT and absorption are attributed to incidence of tacit and codified knowledge (educational attainment, literacy) and effectiveness (employment and participation rates, productivity growth, industry value added, high tech exports, publications and patents). KTCs are reliant and produced through educational and academic systems (including research institutions), tacit knowledge through and among national educational institutions, (foreign) direct investment, international trade and networks, NGO's and provision of technical assistance, etc. Free Trade Zones and or Business Parks are good conductors for KT, in addition to labour, product market flexibility and immigration (e.g. diasporas) as economic growth and KT factors. The human capital empowerment, although a long-term objective, is a main KT channel and platform which relies on knowledge holders, recipients and institutional settings, where knowledge holders regulate the amount and quality of shared knowledge and recipients need to be ‘receptive’ for flow and absorption of knowledge – often a limiting factor attributed to “resistance to change”. The characteristics of knowledge holders and knowledge recipients are very important for the process of knowledge transfer. Human capital mobility’s value as a knowledge transfer channel is based on the fact that human beings are “carriers” of tacit knowledge, particularly in organized bi-dimensional mobility across firms or institutes. International conferences are also important in knowledge-generation and knowledge-transfer infrastructures in both manufacturing and services, aided by human exchange of knowledge. Summary of Jordan Case Study HM King Abdullah II was responsive to Jordan’s share of the Arab Spring by dismissing the cabinet twice to pursue and speed up democratic reform. He announced constitutional amendments to strengthen the role of the judiciary and rule of law. Jordanian policy-makers aspire reaching a knowledge-based economy using the demographic opportunity of young population. This transformation would require policies that encourage business creation, boost its comparative advantages and emphases quality education. Jordan achieved economic growth of 3.1%, has high unemployment (13%) budget deficit (5.5% GDP), and increased inflation (5%). Most of GoJ income comes from taxes (75%) and most of its expenses go to public sector salaries, pensions and compensations. Its GDP comes mainly from manufacturing (17.8%) followed by net taxes on products. Economic reform is slow, despite paving good grounds for investment climate. GoJ is taking active steps, lead by HM to enhance Jordan’s financial state. The energy crises topped the list of challenges. Earlier on, the PM affirmed that the economic hardship affected the poor and middle class sectors of the community. GoJ was advised by WB not to cut back on capital expenditures, needed for economic growth. Jordan’s private sector is demanding transparency on the large budgetary deficit and a reform road map. The parliament on the other hand, refused to endorse the budget, calling it “beyond repair”, as Jordan gets grants of $1 B to partly close its $2 B deficit, having exceeded its legally allowed debts level beyond 60% GNP. The general debt is predicted to rise above 66% of the GDP, namely attributed to imbalance due to Jordan’s energy bills following interruptions in the Egyptian natural gas pipes. Critics fear further taxations, as they criticize Jordan’s trade imbalance and its real economic growth that is less than its population increase. Some refer to it as the “jobless growth”. Meanwhile, Jordan’s ranking on international indices was lagging behind standards. Despite favourable rise in some indicators, the overall evaluation is always pulled down by other retreating values. Tax laws were main obstacles facing business men. The weakest sub-indicators included low quality and output of education, customs procedures, public debt, government budget deficit, weak funding through local financial markets, lack of modern technologies in production areas, linking wages to productivity, enabling environments to innovation and R&D, weak relations among scientific research and the


industrial sector, non-effectiveness of IPR legislative protection, usage of modern marketing technologies by companies, efficiency of management in delegating authorities in corporations, development of clusters, high schools dropouts, declining enrolment rates in secondary education, weak public and private sector institutions in general and the inability to link international markets to local ones at low costs. Jordan was especially behind in the economic environment and labour market efficiency with a significant drop in infrastructure, business environment development and institutions. Most of the weak performances are attributed to weak socio-economic regimes, lack of political will and finance, followed by absent accountability systems, rule of law and assessment and evaluation schemes. All knowledge transfer channels and absorption are impaired within inhibitive environments, for example, week educational output affects levels of creativity and innovation, which is also challenged by lack of IPR and nurturing environments that support innovation and commercialization and lead to economic gain and job creation. Both MoIT and JIB see a need to unify all investments packages pertaining to different zones into just one to create less confusion to the investor, and a true one-window-stop, adding that changes in policies, taxations and exemptions/subsidies affect the stability of the sector, so do frequent cabinet changes and lengthy cycles of changing policies. The new draft Investment Law is being ratified by the parliament, yet, there is lack in enablers to e-services given their intangible and fast innovation characteristics as opposed to manufacturing. Jordan registered good progress on BPO and call centres that is being replicated, alongside many other sector success stories (manufacturing, pharmaceutical, ICT,...). Ease of doing or owning business has not become easier. Jordan’s relatively worse performance was associated with enforcing contracts, dealing with construction permits - in spite of significant improvements - registration of property, obtaining permits, obtaining credit, fiscal complexity, law enforcement and protection of investors, yet, there are ample investment opportunities in Jordan, estimated at 260 million ($7.6B) waiting to be tapped into – not to mention unexploited mining and tourism sectors. There has been job creation at an average of 330 jobs / project, namely by the real estate projects, followed by the financial and business services. Jordanian FDI stock levelled as 89.9 % of GDP marking a positive indicator of Jordan’s economical receptiveness to FDI, Furthermore the 89.9 figure is much higher than global and regional averages (JBI). Transport is also undergoing great expansions of airports and sea port, as well as road and railroad enhancements. The sector contributes 12% to GDP, employing 10% of workforce. Energy put Jordan in a jam as it imports 80% of its needs from the Egyptian natural gas. Damages due to the former’s interruptions soared to $1.5 B, causing a rise in electricity tariffs by 9-17% for those consuming above 600 KW/hr, much to the dismay of the industrialists, who protested this rise, and cautioned of possible closures. At some point, heavy fuel and diesel as alternatives to produce electricity, cost the Kingdom $ 4 M/day. Meanwhile, there are increased demands on GoJ to opt for clean and renewable energy, tapping into Jordan’s abundant solar and wind energies. Nuclear alternatives options have their supporters and opposition. Privatization on the other hand, is not meeting its initially set goals, according to some critics. Jordan’s high unemployment falls among the age group 16-64, mostly women, that are actively seeking but not finding employment, this leave 2 million persons, of same age group that are economically inactive. The cost of unemployment has been calculated and proven high, not to mention the low income per capita, given a dependency ratio of 1:5. Unemployed youth are pressurizing the government for jobs and solutions. There is lack of vocational training orientation to markets and females and lack of awareness against stereotyped jobs. Guest workers are estimated at 300,000. The national employment plan is being drafted to look into job creation. Most of Jordan’s schools are public and therefore the impact of MoE on the next Jordanian generation is high. Public and UNRWA schools have 77% of all Jordanian students, 74% of teachers, and 61% of schools. Jordan has its own share of mobility of students and scholars that do not return needing to bridge the gap so that while mobility is an ideal knowledge transfer channel, Jordan needs to create favourable conditions for those wishing to come back and work in Jordan – hence creating a media for innovation and application. Similarly, Jordan received about 30,000 inbound students, from all over the world. Innovation efficiency for Jordan was low, in terms of institutions, human capital & research, infrastructure, market sophistication, business sophistication, scientific output and creative output.


Commercialization and scaling up of successful stories is needed. The RSS iPARK business incubator and the ICT for Development (ICTD) Cluster are such success stories, the latter having just deployed an online system for PWD – there are 300,000 disabled people in Jordan. In the absence of a comprehensive innovation policy, that nurtures innovation across sectors and communities and its protection, inhibitors will continue to act. The evaluation of S&T in Jordan shows low ranking on the Scientific Research Indicator. Functions of research are not recognized, limiting gains. Impediments to research include poor career advantages that are linked to research achievements. Key weaknesses in Higher education include lack of soft skills among university graduates and bridging the gap with the labour market. Enrolling students are not presented with market studies marking in-demand jobs. MoICT on the other hands, has led the ICT sector into stories of success, yet still faces challenges of lack of universal accessibilities and high tariffs. The sector still needs regulation. IT usage remains low. SMEs especially small family businesses do not use IT to strengthen their competitiveness. High telecom costs and PC prices, compared to the average income level, lead to low penetration of PC’s and Internet usage in the country. Uncertainty over the expected removal of sales tax on computers has contributed to a significant drop in sales in the local market since the beginning of this year. Buyers are reluctant to buy, pending a possible reduction in price. Sales in computers' markets dropped by 50%. Low public spending on R&D slows down potential expansion of the ICT sector. There are also poor linkages between ICT and academia. The local market is considerably small and fragmented. Key Threats include domestic consumers who are not global trend setters and are adversely affecting innovation. New graduates lack soft skills (e.g. writing skills), as per the industrial sector. In Jordan’s Competitiveness Report 2007 one of the constraints to growth of the sector was lack of access to venture capital and other non-traditional forms of financing. Although privatized, the telecommunication market still faces monopoly – this time by Jordan Telecom, (JIB Country Sheet). ICT’s contribution to the GDP has been 14.10% and its share of employability was 1.23%, showing remarkable growth across the decade. Jordan Case Study Report (Back) Knowledge transfer and innovation have been little studied in Jordan, often researched at universities as part of desertification presentations or registered success stories of instilling entrepreneurial skills and emerging start-ups, and although there has been documentations on the significant relationships between knowledge transfer and innovation within manufacturing and business sectors, such as the pharmaceutical and telecommunications; and within academia, training and research entities, there is no mass of ‘innovative human capital’ nor has Jordan reached the knowledge deepening and knowledge production stages reflective of developed economies and reflecting on GDP. Without undermining Jordan’s enormous achievements on different fronts, the case study dwells on Jordan’s areas of improvements based on Jordan-specific resources, literature and interviews in terms of knowledge transfer determinants, enablers, inhibitors heeding identified KT channels across socio-economic regimes; education, human capital and labour markets; innovation, R&D and S&T and ICT infrastructure, and the different levels of achievements across international indices.

A. Socio-economic regimes (Back) The Constitutional Monarchy is comprised of the executive body: King (chief of state), prime minister (head of government), council of ministers (cabinet); the legislative body: bicameral parliament (appointed upper house known as the senate, elected lower house); and the judicial body composed of civil, religious and special courts. Jordan has 12 administrative subdivisions or governorates. Responding to popular demands set against the context of the Arab Spring, King Abdullah Bin Hussein II dismissed the cabinet to pursue democratic reforms (February 2011) and announced amendments to strengthen the role of the judiciary and rule of law (August 2011) rendering the October 1, 2011 Constitution. The cabinet was dismissed again, in response to popular frustration over the pace of reform, Awn Khasawneh was named as Prime Minister (October 2011), who had been serving on the International Court of Justice. Jordan is classified by the World Bank as an "Upper Middle Income Country." Jordan’s population of 6.51 million (2011) has an urban population of 78%, adult literacy rate of 92.1%76 and primary, secondary and

76 Jordan’s Department of Statistics


tertiary enrolment of 77%. The Nominal77 GDP is $21.92 B and per capita GDP of $4,700 (DoS 2009). The 1.8 million workforce with 313,000 registered guest workers work in the service sector (34%), manufacturing (20%), public sector (19%), education (12%), health & social services (11%) and agriculture 3% (CBJ). Almost 13% of the economically active78 Jordanian population residing in Jordan was unemployed in 2008 (DoS, Jordan), although unofficial estimates cite a 30% unemployment rate. Education, literacy rates and measures of social well-being are relatively high compared to other countries with similar incomes. Jordan's population growth rate is currently 2.3% (declined). The Central Bank of Jordan (CBJ) has the main role of advising the government on the formulation and implementation of fiscal and economic policies, manage monetary problems and participating in containing local economic problems as well as regulating quantity, quality and cost of credit to meet the requirements of economic development and monetary stability. According to CBJ, Jordan in 2010 showed some signs of economic recovery, economic growth (3.1%), unemployment (13% up .5%), budget deficit (5.5% GDP, down by 3%), external trade (up 10.5%) and increased inflation (5%) due to rise in international markets basic commodities prices. CBJ reserves surged by 12.5% exceeding $12 B. Outstanding balance of credit facilities extended by banks increased by 8.5% (mainly to private sector). DoS statistics reveal a 3.5% growth in GDP, driven by recovery in services and exports. Per capital GDP grew by 8% versus estimated 2.2% population growths. The Consumer Price Index (CPI) rose up, driven by rise in oil and food. The budget deficit / surplus (excluding grants was recorded as JD -1,840.2 M (Nov. 2011). The Trade Balance Deficit, was recorded as JD – 4238.1 M. The following table shows trends across last 5 years:

Table 6 Main Economic Indicators – JD M

Public Finance (Exc. Central Gov. Deposits) 2011 J-N

2010 2009 2008 2007

Domestic Revenues 3,895.1 4,261.1 4,187.8 4,375.4 3,628.1

Foreign Grants 1101.3 401.7 333.4 718.3 343.4

Current Expenditures ( Commitment basis ) 5,019.8 4,746.6 4,586.0 4,473.4 3,743.9

Capital Expenditures 715.5 961.4 1,444.5 958.5 842.6

Deficit / Surplus (Including Grants) -738.9 -1,045.2 -1,509.3 -338.2 -615.0

Deficit / Surplus (Excluding Grants)) -1,840.2 -1,446.9 -1,842.7 -1,056.5 -958.4

Internal and External Public Debt 2011 2010 2009 2008 2007

Gross Domestic Debt of Central Government Nov

( Budgetary and Own - Budget Agencies) 9,561 7,980 7,086 5,754 3,695

Trade Balance (Deficit -) -4238.1 -4823.8 -4448.8 -5084.4 -4574.2

Exports F.O.B. 4243.9 4990.1 4526.3 5633.0 4063.6

Imports F.O.B. 8482.0 9813.9 8975.1 10717.4 8637.8

Source: CBJ (back to list of tables)

The Jordanian trade balance is witnessing a continuous deficit due to the limited natural resources and lower contribution of industrial and agricultural sector In addition to the increase in international oil and food prices. Despite the decrease in trade balance deficit in 2009 by 14.8% to reach an amount of JD 5465 million compared to JD 6414 million in 2008,the trade balance is still below aspirations (MoPIC). Following is a summary graph of the Central Government Budget, and tables reflecting the revenues and expenditures, and sectors contributions to GDP in 2010.

77 Re US DoS Bureau of Near Eastern Affairs, December 30, 2011 78 Defined as age group 16 – 64 seeking employment


Figure 4 Summary of Central Government Budget, 2006 – 2010, JD M

Source: CBJ (back to list of figures)

Table 7

Budgetary Central Government, 2010 (domestic revenue & public expenditure)

Domestic revenue Public expenditures

General sales tax 46.5% Military expenditures 29.8%

Taxes on income & profits 14.7% Capital expenditures 16.9%

Revenues from selling goods & services 14% Compensation of employees 15.6%

Taxes on international trade & transactions 6.7%, Pensions & compensation 13%

Other tax revenues 2.1% Other expenditures 12.5%

Other revenues 15.5% Interest payments 7%

And subsidies 5.25% Annual Report 2010 - Www.Cbj.Gov.Jo


Table 8

Sectors contribution to GDP (%) (3rd Q 2011)

Sectors Q3 Q3 Sectors Q3 Q3

2010 2011 2010 2011

Manufacturing 17.5 17.8 Community, social and personal services 4.3 4.3

Net taxes on product 17.5 16.9 Agriculture, hunting, forestry, and fishing 3.2 3.3

Transport, storage & comm. 13.4 13.5 Electricity and water 2.3 2.3

Producers of government services 10.3 10.4 Restaurant and hotels 1.4 1.3

Real estate 9.9 9.9 Mining and quarrying 1.3 1.4

Wholesale and retail trade 9.4 9.4 Domestic services of households 0.6 0.6

Finance and insurance services 8.6 8.7 Producers of private non-profit services to households

0.4 0.4

Construction 5 5 Imputed bank service charge -5.1 -5.1 Source: MOPIC


http://www.cbj.gov.jo/


Table 9 GDP/ expenditure & value added $M current prices & exchange rates

Jordan 2008 2009

GDP 22,698 25,092

Total value added 21,469 23,568

Final consumption expenditure 22,801 23,527

Household consumption expenditure (including NPISH) 17,933 18,482

Imports of goods and services 19,229 16,459

Services 14,401 15,832

Exports of goods and services 12,416 10,928

Other activities 9,557 10,503

Industry 6,541 7,088

Gross capital formation 6,710 6,923

Gross fixed capital formation 6,263 6,462

Mining, manufacturing, utilities 5,558 5,862

General government final consumption expenditure 4,868 5,045

Manufacturing 4,012 4,416

Transport, storage and communications 2,604 3,051

Wholesale, retail trade, restaurants and hotels 2,239 2,278

Construction 983 1,227

Agriculture, hunting, forestry, fishing 526 648

Changes in inventories 447 461 Source: UNCTAD (back to list of tables)

Under King Abdullah, Jordan has undertaken economic reform. The government passed legislation targeting corruption and began tax reform, as it worked to liberalize trade, joined WHO (2000); signed an Association Agreement with the EU (2001) and the first bilateral FTA between the U.S. as an Arab country. In 2009, Jordan's economy continued to grow slightly but was hurt by lower-than-expected revenues and slower growth due to the global financial crisis. Today, Jordan is going through economic and budgetary challenges brought about by the rise in oil prices and disruption of flow of Egyptian natural gas which affected country resources.

The Prime Minister affirmed that the economic hardship affected the poor and middle class sectors of the community (Al-Rai Newspaper).

This hardship, according to the PM, is prompting efforts to attract foreign investment, given readiness of Jordan’s investment conditions and political stability. The government is trying its best to increase state income and control expenditures, as Jordan looks into international experiences in economic reform to learn from. The PM was confident that political reform will improve the accountability and transparency indicators that will push forth economic reform in the right direction, enhancing the investment climate. Anti-corruption efforts, lead by the government upon directives of HM, confirms governmental will to combat this ailment in the society. Currently, the PM had taken active steps to combine the political and economic files (having had started with the political one).

The World Bank pointed out the importance of not cutting back on capital expenditures, needed for economic growth

Simultaneously, the President of Jordan’s Chamber of Industry Hatem Hilwani requested a “road map” for economic reform, in this televised speech addressing the Cabinet. “We need to assess the facts of our economy, as we face large budgetary deficit, which has reached $2B (before receiving international aid of $1B). Local income covers but 85% of total current expenditures. Foreign investments, on the other hand retreated by 34% compared to last year, stressing the need for immediate governmental remedial action and a sustainable investment climate” (Arabian Press).


Note: The FDI dropped from 706,941,417 in 2009 to 224,109,100 JD in 2010. This means that the FDI dropped 68.3%. The year 2010 also witnessed an overall drop in investments of 8.8%, however, domestic investments alone, rose by 28.9%. The following graphs show respective domestic and foreign trends since 2004, in JD M (JIB). Please refer to Figure 7 for the size of domestic and foreign investments benefiting from the Investment Promotion Law, and Table 10 for the foreign trade statistics.

Figure 5 Domestic and foreign investment in million JD

Figure 6 Foreign investment in million JD

Source: JIB (back to list of figures)

The GoJ requested postponing voting on the Public Budet Law for the 2012 fiscal year, after 4 days discussions. Endorsment was attained on 23 Feb. 2012. The budget had been critisized for its deficit and the need to ease economic burdens, unemployment and poverity, calling for reducing public expenditures, fighting corruption, merging institutions and attracting FDI and DDI. Deputies added that Eastern Amman has no sanitary system. Deputy Qammoh called for alternative solar, wind and shale oil energy and recyling and increasing the support for health, education and tourism. Al-Faour dwelled on farmers’ hardships and road safety. Al-Shayyab described some privatization deals as “non-feasible” to the government and country (Al-Dustour)79.According to economic analyst A.M. Zubi (Al-Arab Al-Yaum 2/5/2012), the budget is facing challenges of debts exceeding JD 1 B, prompting re-funding of JD 4 B due debts by issuing governmental bonds of no less than JD 5 B in 2012. Borrowing such amounts from banks would pose risks of rising interests and service of debt and less keenness from banks towards general debt tools. The government has been overspending at the rate of JD 250 M between 2007–2011. Zubi adds “had the government committed to designated expenditures between 2007 and 2011, it would have lowered its debts by JD 1 B, hence preserving debts levels within the legally allowed 60% of the GNP”. A very recent decision in the right direction involved adoption of a GFMIS system by all Ministries, through a USAID grant. The Government Financial Management Information System (GFMIS) will enhance usage of ICT as tool of financial development and reform, based on a digitized system that avails accurate and comprehensive data, coming at a good time to support decision making that guarantees transparency in governmental financial services. The project will be executed at MoF and will depend on knowledge transfer to disseminate application know-how to the rest of the ministries and governmental departments and financial centres (totalling 38). Long term expected benefits of the project include enhanced economic opportunities, business environment through reliance on credible information on general funds, reduction of deficit, funding of general investment80 (Al-Rai).

79 Addustour official newspaper. Local and governorates section. Nasim

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- 10.00 20.00 30.00

2004

2005

2006

2007

2008

2009

2010

Total D & F Inv. JD M Total Inv. JD M

2,004

2,006

2,008

2,010

0 500 1,000 1,500

Foreign Inv. JD M F. Inv.

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Jordan needs to adopt a 3-year fiscal reform program to limit inflicted deformities on national economy and sustain higher and more comprehensive growth (WB Report–Feb. 8, 2012). The 4th Review Report predicted a growth rate of the GDP of 2.75%, due to increased social pressures and increasing instability in the area. The total deficit will retract to reach 5.25% of the GDP in 2012, due to political turmoil in the region, rise in basic commodities import prices and sovereign fiscal costs, that will adversely affect the Jordanian economy; the deficit in current accounts will reach 7.5% as a percentage of the GDP attributed to levelling in the Kingdom’s importation of energy and increase in mining exports that are prospering, while predicting an inflation average of 5.5% in 2012. The general debt will continue to rise up to 66% of the GDP, at the end of this current year due to failure in controlling the financial situation within the 2012 general budget, accelerated pro-inflation pressures, increased external imbalance and increased cost of local borrowing. Looking at 2010 economic indicators, increased unemployment is noted by 13%, with further expected increase due to expected weak economic growth. The current deficit has reached 9.5% of the GDP in 2011, foreign reserves dropped by 14% to $ 10.7 B, accompanied by low direct FDI and deteriorating current balance. In light of basic commodities prices increase (namely oil), Jordan is in for lower economic growth and increased external financial deficit - more than the expected; indeed, Jordan has witnessed a 13% retreat in trade exchange volume in 2011. The challenges that FDI face in Jordan can be attributed to macroeconomic policies, diversification of economies, trending towards intangible goods and services, in addition to the prevailing and previous economic crisis that had swept across the world. However, the investment policy reform, remains a main and direct enabler in creating the appropriate investment climate that will dwell on Jordan’s stability and security, amid a region that is witnessing turmoil and Arab Spring. Doing business indicators are hampering FDI in Jordan, namely, the difficulties and related costs to: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Impediments to FDI and its transfer and knowledge absorption channels include: foreign ownership restrictions, pre-establishment procedures, access to land, obtaining funds and credit as well as insolvency. These can be further impeded by: employment restrictions on expatriates, IPR protection and enforcement, Alternate Dispute Resolution (ADR) mechanisms, investment climate variables, infrastructure (inclusive ICT infrastructure) and human resources. Main enablers include legislation, administrative processes (Governance), private sector, consultants and key stakeholders (government - to target, stimulate, implement and communicate investment policy reforms, investors - to help guide their investment location decisions and policy dialogue with governments, and advisors – particularly on key policy-level constraints to increasing FDI competitiveness. On part of the GoJ, it will attempt to curb the fiscal deficit to mitigate risks associated with serving debts and to preserve financial sustainability. In doing so, it will focus on increasing local income through tax deductions and transfer of properties fees, while raising taxes on luxury items, in addition to controlling public expenditures by freezing public hiring, reducing ministries’ operational budgets and applying reform methodologies, in addition to subsidizing some petroleum derivatives81. Economist Dr. Yusuf Mansur (Al-Arab Al-Yawm Official Newspaper), noted increased imports and exports, registering at 14.6% and 17.6% respectively (2011) and noted that imports values were almost twice as much, consumer prices (measure of inflation) rose by 4.4% and unemployment went up from 12.5% to 13%, so that 55% of high school graduates or higher were unemployed. In light of the trade deficit, the real economic growth was 2.3% which is less than the population increase rate of 2.4%, denoting retreat in real income, as Jordan’s competitiveness Index on Business Performance went down. The Global Competitiveness Report 2010-2011, ranked Jordan as 65th out of 139 countries. Tax laws and rates, in addition to access to funding where the most important obstacles facing businessmen, according to private sector opinion. Nonetheless, the business environment does have political and government stability. This retreat in Jordan’s position is attributed to its modest performance on basic requirements, efficiency enhancers, innovation & sophistication pillars and subsequent sub-pillars. The Index shows that the weakest sub-indicators are reflective of the weakest performance in areas of

81 Al-Rai - http://www.alrai.com/article/22471.html


business performance due to governmental procedures, low quality and output of education, specially basic education, customs procedures, burden of the public debt, deficit in government budget, weak funding through local financial markets, lack of modern technologies in production areas, linking wages to productivity, enabling environment to innovation and R&D, weak relation among scientific research and the industrial sector, effectiveness of legislation protecting IPR, using modern marketing technologies by companies, efficiency of management in delegating authorities in corporations, development of clusters, high schools dropouts and declining enrolment rates in secondary education, weak public and private sector institutions in general and the ability to link international markets to local ones at low costs. Jordan was specially behind in economic environment and labour market efficiency (above 100). In comparison to 2009, there was a significant drop in infrastructure, business environment development and institutions. Please refer to Annex 4 Jordan’s full ranking along the Global Competitiveness Index 2009-2011.

Taxes

Paying taxes covers 101 days, needing 26 tax payments. Profit tax is 14.3%, labour tax and contributions is 12.4%, other taxes are 4.4% and the total tax rate is 31.1% of profit.

Source: Ease of Doing Business – Jordan (WB-IFC). Education Performance impediments

Increasing pressure on the educational infrastructure.

Low enrolment in nursery schools because of limited number of facilities, high costs and lack of awareness regarding the importance of early learning.

Insufficient male specialization in some disciplines such as mathematics, science and English.

High turn-over rate of qualified employees from the Ministry of Education..

Matching general education outcomes with higher education as well as with the labour market

needs.

Low enrolment in vocational secondary education.

Unpredictable population growth resulting in increased pressure on the education sector. Source: MoPIC

Consequently, Jordan’s Ministry of Planning & International Cooperation (MoPIC) formed a follow-up committee, as per PM directives in coordination with other concerned ministries, to follow up on international indicators and come out with recommendations, plans and timeframes to increase Jordan’s competitiveness. Several workshops will be conducted for both private and public sectors to discuss these recommendations for a road map. The Jordan National Competitiveness Team (JNCT) was established at the Ministry of Planning and International Cooperation (MoPIC) in 1997. Since then has been involved in assessing, evaluating and improving the competitiveness of various industries and economic clusters in Jordan. The Jordan National Competitiveness Observatory (JNCO) was established to build Jordan’s competitive advantage. The JNCT works to create a competitive mindset by spreading awareness; develop of a mechanism for change; and the transfer of data into knowledge. It has been studying economic clusters, monitoring Jordan's competitiveness and supporting public sector decision making process. A joint World Bank-IFC mission visited the Hashemite Kingdom of Jordan between March 7 to March 18, 2011, to conduct industry sector scoping in preparation of a competitiveness program for Jordan using the Competitiveness Partnership Initiative (CPI) approach. The objective of the exploratory mission was to identify focus sectors with the potential to bring about a sustainable change to improve global and regional competitiveness of the Jordanian economy, and its ability to create and sustain higher value jobs. The Competitiveness Partnership Initiative (CPI) approach will focus on sectors that can achieve sustainable change to improve global and regional competitiveness of the Jordanian economy and its ability to create and sustain higher value jobs, such as: back office operations; consulting; engineering/architecture; food manufacturing; health care; ICT; pharmaceuticals; tourism and medical tourism; trade logistics; and water and energy. The mission recommended further in-depth analysis of 3


sectors: tourism (with a high potential perceived for the medical segment), IT-enabled services and energy efficiency/renewable energy (clean tech/green tech). The WEF Financial Development Report 2010, was analyzed by MoPIC to aid decision-making, identify main factors affecting the financial system development in Jordan and setting priorities along 7 WEF Indicators: institutional environment, business environment, financial stability, banking financial services, non-banking financial services, financial markets and financial access. Accordingly, Jordan’s performance went back 4 points on the Index from 29 (2010) to 25 (2011). Jordan achieved progress on many fronts, indicators and sub-indicators, however, hereunder are listings of the factors that declined and affected overall ranking:

Institutional Environment

Legal and regulative issues, governmental and central regulation in adopting economic policies, transparency, liberation of the financial sector, execution of contracts, supervision of law agencies, judicial independency.

Business Environment

Taxation (affected by lack of collection from informal payments), tax competitiveness, labour force decline due to decreasing quality of education and training, science and math, employees training and infrastructure, due to decline in public infrastructure quality and decline in the number of telephone lines (internet users increased, creating balance in ranking).

Financial Stability There was a decline on the banking system stability index due to the banking crisis. Banking Financial Services

Efficiency, profitability, general banking cost, operational cost percentages to the bank assets and drop in transparency (giving out financial information).

Non-banking financial services

Retreat in the insurance sector index which had joined the non-banking financial services, as well as stocks, shares and merging of companies.

Financial Markets Turnover in stock markets showed weakness. Financial access Witnessed steep decline (14 spots) based on trade access and retail indices,

attributed to Jordan’s regress in ease of access to credit and financing in local stock markets, as well as decline in foreign investments as a percentage of the GDP (8 spots), resting at 13, based on regression in private finance in financial services.

Please refer to Annex 5 Jordan’s ranking / WEF Financial Development Index Indicators (2009-2010) vs. MENA countries.

The WEF Global Trade Enabling Report 2010, ranked Jordan as 39th of 125 countries. Jordan’s low rating was attributed to its overall performance on the main economic indicators. Please refer to Annex 6 for Jordan’s performance on the WEF Global Trade Enabling Report (2009-2010). The 2012 Country Scorebook MCC USA Indicators to Millennium Challenge, is a scorebook that is based on third-parties measure of indicators. It presents information on country performance and demonstrated commitment in terms of: ruling justly, investing in people and encouraging economic freedom. Jordan’s scorebook showed the following:

Ruling justly Political rights, civil liberties, voice and accountability

Fell short of performance

Control of corruption Government effectiveness and rule of law

Above performance standards at 90%, 94% and 87% relative to LMIC group peers

Voice and accountability

Political rights and civil liberties

Although below the bar went down

Economic freedom Business start-up and fiscal policy

Below performance standards at a mere 11% of income group

Investing in people Primary education expenditures & natural resource management

Fell below performance standards

Regulatory quality Land rights and access, trade policy and inflation

Above performance standards of group at 90%, 80%, 67% and 82% respectively

Fiscal policy Deteriorated


Inflation Dropped radically in 2009 to slightly average of group from 825 to about 5%.

Business start-up Despite below the bar showed no change Natural resource management

Below standards went down

Education & health Girls’ primary education completion health expenditures and immunization rates

Above performance standards at 74% 83% and 67% respectively relative to income group

Education expenditure & primary education expenditures

No change

Please refer to annexes 7a and 7b for Jordan’s country scorebook and reading the scores reference guide

Justice

The Judiciary Sector (Formal and Islamic jurisprudence) has deficiencies in numbers of specialized judges, increasing number of cases and weak infrastructure of courts. Overlap between courts, public prosecution and public civil attorney department.

The legislation Sector faces deficiencies in numbers of qualified personnel and absence of training. Lack of coordination with institutions leading to unclear legislative text that meets the needs of all concerned parties

Source: MoPIC Education

Jordan faces challenges in education as 43% of its youth are under 15 years of age, requiring quality education relevant to job matching and creation.

Currently there is a mismatch between skills taught in schools and workplace needs, uneven teacher to student ratio, outdated teaching methodologies, and limited use of technology.

Although Jordan has one of the highest female literacy rates in the region (82 percent), females are often directed into generalist streams.

This situation deprives girls from taking part in learning that will serve them in the workforce.

It also creates significant gaps in future employment and income as compared with their male peers. Further, although parents value education, economic hardship sometimes forces them to remove their daughters from the educational system at an early age – in many cases to care for younger siblings.

This practice negatively impacts female participation rates and ensures a life of economic and social challenges for affected women.

Jordan’s educational system provides only limited access to early childhood education (ECE), and the current system of pre-service and in-service training, necessary for improving and standardizing teaching methods and sector-specific expertise, does not fully meet the challenges of preparing students for the modern work place.

Source: USAID – Jordan Natural Resources

Jordan has limited natural resources

Scarcity of water. Absence of a comprehensive management plan for natural water resources and systems.

Increasing aggression on natural reserves and forests.

Environmental degradation. Weak institutional awareness of environmental safeguards and lack of coordination among the various concerned sectors. Failure to link environmental degradation to the national economy,

Shortage of technical environmental staff in institutions related to natural resources and the environment.


Unexploited mining sector (such as Shale oil, raw minerals, raw nuclear material, solar and wind energies)

Source: MoPIC More info on Jordan’s Mining Sector: The mining sector in Jordan is limited to non-metallic mineral (industrial rocks), especially phosphate, potassium, cement, building materials and calcium carbonate. The mining sector consists of two parts, namely extracting mining industries including phosphate, potassium, bromine, magnesium, salt, calcium carbonate, volcanic tuff, treated Zeolite, treated silica, travertine, quarry and mine products and Dead Sea clay and salts. The second part is mineral manufacturing industries including chemical fertilizers, chemical acids, Aluminum Fluoride, Calcium Oxide and lime paste, lime bricks, cement, white cement, rock wool, ceramics, and cosmetics manufactured of Dead Sea clay. The main products of the Jordanian mining sector are cement, phosphate, potassium and chemical fertilizers. The mining sector's share of GDP in 2008 was about 15.2%. The extracting industries revenues were approximately 56.5% of the total mining sector's revenues, while manufacturing industries accounted for about 43.5% of such revenues. To raise the mining sector's share in the national economy, the Government of Jordan has adopted the policy of maximizing the added value and efficiency rising through the privatization of the major institutions in this sector starting with the Cement Factory.

According to the Doing Business Report (IFC), Jordan moved back 11 spots from 100 (2010) to 111 (2011) out of 183 countries. In terms of Ease of Doing Business, Jordan ranked 129 out of 183 countries (2011) as opposed to 127 (2010). Starting a business has not become easier; it preserved the same rank of 2010 which stood at 127. Jordan’s relatively worse performance was associated with enforcing contracts, at 129th in 2011. In Dealing with construction permits category and in spite of significant improvements over the past few years, Jordan still ranked in the bottom half. Please refer to Annex 8 for Jordan’s ranking along the “Doing Business Index”. On Diversification of the Economy 2011 Index, USA ranked 1st, among 59 countries, at 8.31 points. Jordan came in the 46th rank at 4.24 points82.

Doing Business:

Starting a business needs 8 procedures over 13 days at a cost of 50% of income / capital, and min. capital of 20% of income per capital.

Dealing with construction permits needs 19 procedures over 87 days at a cost of 697% of income per capita.

Registering property needs 7 procedures over 21 days at a cost of 7.5% of the property value.

Getting credit is governed a low strength in legal rights (4/10), low depth of credit information (2/6), low public registry coverage at 1% of adults and no private bureau coverage.

Protecting investors has an average extent of disclosure, low extent of director liability 4/10, low ease of shareholder suits 4/10 and low strength of investor protection 4.3/10.

Trading across borders needs 7 documents to export, and 17 days, at a cost of 730 $/container; 7 documents to import, and 19 days, at a cost of 1290 $/container.

Enforcing contracts needs 38 procedures over 689 days, at a cost of 31.2% of the claim (this depends on the efficiency of the judicial system in resolving a commercial dispute)

Closing a business takes 4.3 years, at a recovery rate of 27.3 cents on the dollar and 9% cost of estate. Source: Ease of Doing Business – Jordan (WB-IFC).

Columnist and economist Yusuf Mansur83 stressed the need for “Local Economic Indices” to cater for better country-specifics and accuracy. His remarks were made during a lecture organized by the Friedrich Naumann Foundation entitled " Jordanian economy in recent rankings, a comparison", during which he

82 IMD - World Competitiveness Criterion of the Month - January 2012 83Jordan Times, 16 December 2010, added by UrdunMubdi3 at 3:12pm on December 16, 2010-

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examined the findings of four major economic indices on the Kingdom's economy, highlighting certain inaccuracies. Mansur examined Jordan's rankings in the Global Competitiveness, Ease of Doing Business, and Economic Freedom by Heritage and the Economic Freedom of the World by Fraser Indices. Heritage Foundation's Index of Economic Freedom in 2009 put the overall tax revenue as 21.1% GDP, Mansur noted that his study found that it was 16.2%, never exceeding 19% in the previous four years. Pointing to the Index's reference to the set prices in telecommunications, Mansur said: "Telecom prices are not all set by government, only the fixed lines. Competition sets the prices". He said numbers in such indices do not always reflect the actual economic situation, citing the example of a decrease in tariffs when in reality, a tariff may go down 15%, with a value added tax of 20% replacing it. "The value added tax is internal and not referenced outside like the tariffs. So to the world we look great, when in reality the taxes are still there," Mansur said. He warned of ineffective reforms that make the economy look better on the outside but the same inside. He called for networking between neighbouring countries to compare local indices and stressed that the data should be available for everyone to engage them in a dialogue. "The Jordanian individual's share of the national debt is JD1,623” and added that "our policy keeps changing with the different governments. This results in an institutional memory loss". Jordan Times, 16 December 2010. The Ministry of Industry and Trade (MoIT) is responsible to create a sound environment for investments in various industries and other professional businesses, register and protect patents, trademarks, industrial designs & models to ensure an appropriate environment for investments in industries and other commercial activities; organize internal and external trade through the Import and Export Law and other regulations; adopt national industrial policies and work with the National Council for Industrial Development (NCID) on implementation and effectiveness; promote partnerships and QIZs; quality and market control; execute international agreements and apply the Competition Law. The Foreign Trade Policy deals with international multilateral and bilateral economic and trade agreements. MoIT issues sector-specific and trade liberation impact studies. The Jordan Investment Board (JIB), a governmental institution, promotes Jordan as a destination for FDI and works to sustain investments to achieve economic prosperity. It is committed to work with the private sector. The GoJ has been adamant on its reform initiatives geared towards facilitating investment, inclusive ease in construction permits by extending one-stop shop services in Greater Amman to medium-size commercial construction projects. Contract enforcement was improved by setting up special commercial courts equipped with computer-aided case management systems. Taxpaying for businesses was eased with the introduction of an online filing and payment system and a simplification of form filing. Business start-up was eased by offering a single reception service for company registration at the company registrar. Trade was made more efficient by implementing a risk-based inspection regime of post-destination clearance for preapproved traders; and a 30% reduction on containers share subject to physical inspections. Implementation of new software allowing online submissions of customs declarations has reduced customs clearance time by 2 days for exporters and 3 days for importers84. Jordan incentives and exemption taxation on investments are affected through the Jordan Investment Board, Jordan Industrial Estates Corporation, Free Zones, Aqaba Special Economic Zone Authority and the Development Zones Commission. Jordanians do not enjoy same exemptions, however, in 2010, a new income tax law has been issued by which nearly 85% of employees wages in the public and private sectors were exempted from income tax for those whose wages don't exceed 12,000 JD's/ year / person and 24,000 JD's for the main provider (for example: head of family) regardless of the number of family numbers. The tax percentage is 7% on any amount exceeding the first 12,000 and 14% on anything above that. As for the income corporate tax, the following taxes applies: ● 30% on banks and financial companies. ● 24% on communication companies, mediation and financial exchange. ● 14% on rest types of companies including industrial and commercial. ● Treaties for the prevention of double taxation apply for 10 Arab countries and 17 foreign ones.

84 http://www.doingbusiness.org/Reformers/MENA2009.aspx, Doing Business Report, World Bank, 2010

http://www.doingbusiness.org/Reformers/MENA2009.aspx


The size of domestic and foreign investments, based on six main sectors benefiting from the Investment Promotion Law was reliant on: industry, hotels, agriculture, hospitals, transport, exhibition centres, entertainment cities, and distribution of water, gas & oil. In 1996, the foreign and domestic investments were JD 75 thousand and JD 272 M respectively. With the exception of the years (2002 to 2005), there was a steady increase peaking in 2007 at JD 1 B and JD 1.2 B respectively. By 2010, foreign investments dropped to a mere JD 224 M and domestic investments rose to JD 1.4 B. The following graphs shows the trending in both investments, since 1996, knowing that the first Investment Promotion Law No. 16 had been issued in 1995, followed by the Temporary Investment Promotion Law No. 68 issued in 2003 and the current new draft No. 68 presented to Parliament for ratifications, in 2011.

Figure 7 Size of domestic and foreign investments benefiting from the Investment Promotion Law

Source: JIB


Table 10

Foreign Trade Statistics (Thousand JD)

Year Domestic Exports Imports Re-Exports

2005 252,802 662,771 41,620

2006 294,786 731,153 74,008

2007 276,556 946,672 97,789

2008 359,514 809,865 86,059

2009 341,278 915,837 79,972

Source: Central Bank Jordan 2009 (back to list of tables)

1,996

1,997

1,998

1,999

2,000

2,001

2,002

2,003

2,004

2,005

2,006

2,007

2,008

2,009

2,010

Foreign 75,7 123, 154, 184, 438, 409, 131, 83,7 95,6 276, 845, 1,04 560, 706, 224,

Domestic 271, 255, 326, 364, 354, 472, 169, 177, 322, 473, 987, 1,17 1,37 1,11 1,43

0

500

1,000

1,500

2,000

2,500

Mill

ion

s o

f JD

s


Figure 8 Size of domestic investments in 2010

Figure 9

Size of foreign investments in 2010

Figure 10

Consequent job creation (2010)

Source: JIB

(back to list of figures)

2010

Hotels

Industry

Ent

Transport

Hospitals

Agriculture

2010

Industry

Hotels

Entertainment Cities

Agriculture

Industry

Hotels

Agriculture

Hospitals

Transport

Entertainment Cities


The JIB Jordan Country Fact Sheet has Jordan’s Key Economic and Macro Economic Indicators, please refer to Annex 9. Jordan has signed the following Free Trade Agreements: Greater Arab Free Trade Area (GAFTA), Jordan-EU Association Agreement, Jordan–US FTA, Jordan-EFTA Free Trade, Agadir Agreement and Jordan-Singapore Free Trade Agreement. The JIB Jordan Country Factsheet describes each agreement. According to MoICT and JIB (interviews), having multiple regulations and laws governing investment, attracts a lot of complaints, since investors prefer to deal with one law through one entity that promotes “all of Jordan”. There are various zones offering various options depending on types of businesses and sector clusters. According to the private sector, some of the faced challenges include changing of policies, for example partial exception of land registration fees, then pulling back. This is affecting business and investment. In his opinion, Jamal Fariz, CEO of Tamkeen Leasing / Investbank changes in policies should be in favour of the investor and more focused on innovation, environmental issues and raising awareness. Recent regulative initiatives for the business environment, such as the New Unified Tax Law (2009) and the Development Zones Law (2008) that offer incentives or take away others, call for a need for a new investment law to re-define and clarify the incentive package and the need to reinstate JIB as the Investment Program Association (IPA) for the country as a whole, promoting additional sectors to benefit from incentives as certain sectors rose to prominence over the past decade and need to be included especially in the knowledge economy, in addition to the need to have an empowered One-Stop-Shop service that will bypass old bureaucracies in order to set up businesses in record time once all required documents are provided. The JIB has just presented the Parliament with a draft of the New Investment Law 2011, justifying the need for it, to further empower competitiveness, attract investments through increased incentives and availed exemptions to investors, while simplifying licensing, through the investment window. Specifically, the new law is focused on e-services. On March 6, 2009 JIB received a letter from OECD on Jordan’s request for adherence to the Declaration on Investment and Multinational Enterprises. The OECD Council agreed to invite Jordan, subject to full review of its investment policies by the Investment Committee to be an adherent country of the Declaration. This would secure Jordan’s status of participant in the Committee’s working party and the Committee’s enlarged sessions (Elias Farraj, Deputy CEO JIB). Jordan Trade Relationships, for the top 10 partners, showed S. Arabia in the lead (15.5%), USA (9.6%), china (8.3%), Iraq and India (5.1%) each, Egypt (5%), Germany (4.7%), Japan (3.4%), S. Korea (3%), UAE and Italy (2.8%) each, of total trade volume. Imports (JD 6.4M) of above 10 countries were higher than exports (JD 2.5M). Foreign trade statistics show that the domestic exports steadily increased reaching JD 341M, and exports reaching JD 916M in 2009 (as per shown aforementioned trade deficit). Re-exports were about JD 80M. Globally, trade data showed that Jordan’s imports from the world amounted were about $14,000 M, Jordan exports to the world were about $6,500 M (2009)85. Please refer to Annex 10 – Jordan Trade Relationships.

85 Source: International Trade Center, http://www.trademap.org/


Figure 11 Growth of total exports, 2000 - 2009

Total exports value decreased by 19.6% in 2009 amounting JD 4526.3 million compared with JD 5633.0 million in 2008. This drop was the result of the continued consequences of the global economic and financial crisis, which noticeable led to the decline in exports value covering clothes and accessories, pharmaceuticals, crude potassium, fertilizers, vegetables and crude phosphate.

Figure 12

Growth of imports, M JD, 2000 - 2008 (back to list of figures)

On the other hand, the value of imports in 2009 fell by 16.2% to JD 10107 million against JD 12061 million in 2008. The ratio of imports to GDP in current market prices was 56.7% in 2009.

Source: JIB

Although Jordan’s GDP is relatively small compared to other Arab nations, Jordan has a large number of investment opportunities estimated at 260 opportunities at $7.6 B (USD), distributed among many sectors and industries86, particularly agriculture, energy, water, environment; mining, chemicals, plastics, fertilizers, textiles, ICT, business and logistics services; real estate and tourism87. Job analysis for Jordan (2003–2010) showed 330 jobs per average project88. Total created jobs are shown in the graph hereunder.

Table 11 Jobs Analysis

Figure 13 Job Analysis

Year # of created jobs (*) % Growth

2003 2,236

2004 1,134 -49.3%

2005 6,275 453.4%

2006 17,578 180.1%

2007 4,578 -74.0%

2008 19,916 335.0%

2009 7,456 -62.6%

2010 842 n/a

Total 60,015

Average 7,502

* The average project size was 330 jobs per project. * Jobs data based on both actual and estimated values

Source: FDI Intelligence from Financial Times Ltd


86 Source: Investment Climate in Arab Nations Report, 2010. 87 Source: Investment Climate in Arab Nations Report, 2010, The Arab Investment & Export Credit Guarantee Corporation 88 FDI Intelligence from Financial Times Ltd


Industrial analysis showed that real estate accounted for the highest number of projects, with a total of 24, representing 13% of the investment projects, followed by financial and business services89. Table 12 shows the industrial analysis and number of projects per sector.

Table 12 Investment projects per sector

Sector 2003 2004 2005 2006 2007 2008 2009 2010 Total Av. Annual Growth

Real Estate 4 11 2 6 1 24 n/a

Financial Services 2 2 1 3 2 9 19 n/a

Business Services 1 1 3 6 4 3 18 n/a

Hotels & Tourism 3 1 2 4 1 2 3 16 n/a

Communications 1 2 1 4 3 1 12 n/a

Food & Tobacco 2 1 1 3 2 2 11 n/a

Software & IT services 1 1 3 1 1 3 10 n/a

Consumer Products 2 2 2 2 8 n/a

Consumer Electronics 2 2 2 1 7 n/a

Textiles 1 1 1 2 1 6 n/a

Other Sectors 6 4 9 6 9 6 9 4 53 20.8%

Overall Total 16 11 24 32 20 34 26 21 184 21.5% Source: FDI Intelligence from Financial Times Ltd

(back to list of tables) Foreign Direct Investment (FDI) markets reports and regional FDI reports and analysis showed that Jordan has developed BPO operations with call centres as part of the 7 business service projects (2009). Jordanian FDI stock levels as 89.9 % of GDP is a positive indicator of Jordan’s economical receptiveness to FDI, Furthermore the 89.9 figure is much higher than global and regional averages. FDI inflows and outflows in $ Million, are shown in the Figure 14.

Figure 14 FDI inflows and outflows in $M

UNCTAD database, 2010


89 FDI Intelligence from Financial Times Ltd)

0

500

1000

1500

2000

2500

3000

3500

4000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Inflow

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Jordan FDI


In Jordan, e-services enablers are still lacking. Namely i) channels of average importance (suppliers, licensing/franchising, intra-company strategic knowledge management, knowledge intensive, business services, human capital mobility and Internet); ii) channels of average importance for manufacturing, and of more importance for services (FDI and training); iii) channels of average importance for services, and of more importance for manufacturing (links with academy); iv) channel of less importance for manufacturing and of more importance for services (producer-consumer two-way knowledge transfer); and v) channel of less importance for services and of more importance for manufacturing (patents). In Jordan, e-services have just been included under “industries” in the recent investment law draft, and no enabling and governing legal framework was set to support e-services, for lack of knowhow. Intellectual property protection is another important specificity of services, so that patents are a less important instrument for intellectual property protection in e-services than in manufacturing due to lengthy patenting procedures and the fact that the former is harder to codify in terms of human experience, and happens in shorter innovation cycles. Hence, most service industries employ other forms of IP protection like copyrights, trademarks. Consumers in this sector pay attention to the whole service delivery system where policy-backed enhancement of employee expertise in people-to-people communication is so important in relation to innovation and economic performances, therefore, emphasis on multi-disciplinary, and lifelong learning must focus more on working in teams, communicating effectively, networking and adapting to change. However, the impressive input of services into the economic development of many countries, including the Netherlands, has put it on an equal footing with manufacturing, so that more elaboration is placed on innovative policies, measurable by service-oriented innovation surveys (e.g. in several OECD countries). The importance of KT for the industrial and service sectors, is due to constant changes in scientific and technological realities. The level of knowledge required to manage modern industries is so high, even competitors choose to collaborate and the output, i.e. innovation and knowledge creation are changing rapidly and gaining more importance, as well as the intangibility of services and their impact on economic performance. The Real Estate Sector, shows that Jordan attracts Gulf, Palestinian, Iraqi and Lebanese expatriates and investments in real estate. The construction sector accounted for 4.4 % of the GDP in the last decade. Peaking in building permits at 27,000 of which residential permits was the bulk at 88 % totalling JD 5.6 B. The value of investments in the real estate sector topped JD18.0 B over the course of 5 years. Investments in Jordan’s real estate sector are expected to exceed JD 50 B by the end of the year 2012. Non-Jordanian investments constituted around 2.4 % of total real estate investment. The Landlord and Tenants Law No. 11 has been going through amendments, with controversies between the right of a tenant to occupy a property indefinitely at the same rent even after the end of the lease term and landlords’ right to reclaim property or raise the rent. This is calling for more investments and growing need for low-middle income housing. The real estate boom in Jordan has inadvertently spilled over onto the tourism sector in Jordan. The kingdom has been receiving more tourists over the course of the last several years, where the number of arrivals in the kingdom increased90. Real Estate accounted for the 24 projects, representing 13% of the investment projects (JIB 2010). The real estate’s contribution to the GDP, was 9.9% in the third quarter of 2011 (MoPIC), coming fifth after manufacturing, nets taxes on products, transport & storage. Transportation, as part of the investment enabling environment covers 5 airports, 507 km railways (ranked 143) and 7,891 km roadways (ranked 143). This includes Queen Alia International Airport (QAIA) “expansion” to be completed in 2012 to increase airports’ capacity to 9 M travellers annually, with further plans to expand to 12 M; and Aqaba Port “expansion / relocation” expected to cost $5 B, to be completed by 2013. MoPIC – Jordan’s National Competitiveness Team, issued Jordan’s Third Competitiveness Report for the transportation sector (2010–2011). The Report supports transportation clusters in terms of development supporting business and investment climates in Jordan, sub-divided into: external commuter cluster, covering all external travel across Jordan’s borders; freight cluster, focusing on transportation and movement of goods, including foreign trade; and internal commuter cluster, concentrating on internal transportation issues. The transport sector amounts for 12% of GDP and had provided JD 588.6 M (2nd Q, 2011). It employs 10% of the workforce.

90 Global Investment House- Jordan - http://www.jordanecb.org/library/634448683491060000.pdf

http://www.jordanecb.org/library/634448683491060000.pdf


On energy issues, Jordan imports 80% of its needs from Egyptian Natural Gas to generate electricity at the rate of 6.8 M3/day of the imported gas (Haidar Al-Qamaz, Al-Rai). Repeated news of explosions were reported along the pipeline leading to Jordan. On the 31st of January, 2012, an increase in electricity tariffs was announced (Al-Akhbar, Al-Iktisad Al-Yawm). The sustained damages due to the disruption in Egyptian natural gas flow amounted to $1.5 B (till end 2011). The Electricity Regulatory Agency issued a declaration that normal subscribers consuming 600 KW/hr and below, will not be included in this raise, i.e. 92% of citizens. Those consuming above 600 KW/hr will have increased tariffs ranging between 9%-17%. The Regulatory Agency is expecting JD 1.7 B ($2.4 B) in additional losses in 2012 should the gas not flow. The Kingdom opted for heavy fuel and diesel as alternatives to produce electricity, hence added expenditures by $ 4 M/day. Normally, Jordan receives 250 M3, as per the 2001 MoU. “All indications denote an exceptional year ahead on all aspects, our concern is the economy”. M. Saket, Member of Board of Amman’s Chamber of Industry attributed his concern, in Al-Rai article, to the events witnessed by neighbouring traditional markets, surge in energy prices, adding the last rise in the prices of electricity. Saket saw a need for MoIT to implement the trade early warning system project, as promised, to observe imports and identify harmful trade practices to national industries that are closing down. According to M. Aref, a respondent to the article, the decision to raise electricity tariff for industries is a hasty decision, since industries are already suffering. Last July, 2011, the daily tariffs were raised by 28% and night tariffs by 39%, in addition to a payment of JD 3.79 by factories, on each extra KW of maximum load (ceiling). Therefore raising the tariffs again by 16% will make it impossible to go on, in light of imports from neighbouring countries that do not have such high manufacturing costs (Al-Rai91). In further response, the industry sector requested electricity exceptions and allocation of alternative energy (Al-Rai92). The industrialists warned against over-burdening their sector with additional financial cost that will limit their competitively, threaten their productivity capacities and may lead to closing down and release of workers, reminding that industry contributes to 25% of the GDP, employing 180,000 workers (20%). National industries are already facing challenges of competitiveness, in front of other subsidized Arab industries. There is a need to find alternative energy to Egyptian gas that has been disrupted several times, such as solar and wind energies, proven successful around the world. The VP of Amman’s Chamber of Commerce, Engineer Mosa Al-Saket stressed on the need to exclude the industrial sector from this rise, in light of its importance to the local economy, in light that the tourism sector has been excluded from this increased. The option of alternative energy is viable since the treasury has spent about JD 2 B (2011), inclusive importation of natural gas from Qatar and storing it on a specialized vessel at a cost of 250 M as its being converted and pumped directly into generation stations and factories. He cited Algiers that has harnessed solar energy.

Energy Jordan lacks conventional energy sources and currently imports 96% of its needs for the energy mix basically made up of crude oil, oil products and natural gas. Local sources provide not more than 4% of such needs and renewable energy contributes only to a small proportion of this mix. The current cost of imported energy forms about 12% of GDP. The natural gas is now used to generate 80% of the generated electricity. The total primary energy used in Jordan in 2009 was about 7,66 million tons of oil equivalents. Oil products constituted about 57% while natural gas constitutes about 40%. One refinery operates at present in Jordan with a capacity of 14 thousand tons/day and there are 416 fuel distribution stations, 839 gas distribution agencies and 146 gas cylinders warehouses all over the governorates to meet citizens' needs. Electricity The volume of combined generation capacity in Jordan at the end of 2009 was about 2749 mega watt, including 1098 mega watt steam generation, 597 mega watt gas generation and 980 mega watt compound cycle generation. The additional generative capacity needed up to 2020 is estimated to be 3300 mega watts. The number of electricity transformers in the Kingdom (400/132 kV) 42 stations. The length of

91 http://www.alrai.com/article/21254.html 92 http://www.alrai.com/article/22393.html - Ala’ Al-Qaraleh




high tension networks is about 4120 km, which is in line with the development of the Jordanian electricity system. Per capita of energy consumption in 2009 was 1300 Kilograms of oil equivalent, while per capita of electricity consumption is 2000 kilo watt/ hour. These are relatively high rates compared with those in other developing countries. Source MoPIC

The privatization strategy in Jordan aims at enhancing projects efficiencies, productivity and competitiveness by activating market forces, removing irregularities of economies, motivating local savings, attracting more private, local, Arab and foreign investments by opening markets and abolishing state monopoly. Yet, most of these goals were not met through privatization, perhaps for the telecommunications sector only, in light of inequitable growth and deterioration in service quality (Yusuf Mansur93). The updated Master Strategy of Energy (2007-2020) was based on HM the King’s directives, as he charged HRH Prince Hamza Ibn Al Hussein with the presidency of a Royal Commission to review and update the National Master Strategy of Energy, sanctioned by the Cabinet on 7/12/2004 with the aim to confront the challenges that impede implementation of several projects and to contribute to the level of availability and openness of energy market before investors and achieving energy supply security. The Royal Commission formed 3 subcommittees covering oil, electricity, natural gas; renewable & alternative energy, energy conservation and local energy in addition to necessary legislations and prudent governance. The strategy estimated the volume of required investments, using 2007 rates in the energy sector for 2008–2020 in accordance with the different programs and projects for the sector, at about $13,300 M – $17,300 M. It also looked into all energy sources alternatives that are available, including nuclear energy. The volume of investments required for different projects in the energy sector for 2008–2010 ranges between $14 – $18 B.

93 Posted by Yusuf Mansur on January 29, 2012 at 7:17 (Blog-Urdun-Mubdi93)

http://urdunmubdi3.ning.com/profile/YusufMansur


Jordan’s National Agenda (2005) remains a pillar as Jordan had planned its three development phases to create employment opportunities by promoting export-oriented, labour intensive industries, education, infrastructure and legislation regulating political life (First Phase), gradually upgrading and strengthening the industrial base (Second Phase) and preparing the ground for the development of high value-added sectors in the knowledge economy (Third Phase), with these eight themes: 1) Political Development and Inclusion, 2) Justice and Legislation, 3) Investment Development, 4) Financial Services and Fiscal Reform, 5) Employment Support and Vocational Training, 6) Social Welfare, 7) Education, Higher Education, Scientific Research and Innovation, and 8) Infrastructure Upgrade.

Figure 15 National Agenda of Jordan Phases

Source: National Agenda of Jordan


B. Education and the Human Capital (Back)

Jordan shares the awes of the Arab world, where it comes to finding and creating jobs for its youth and women, matching skills with demand, and entrepreneurship with job creation within an ICT-based enabling environment to rear an intelligent, ethical and knowledgeable human capitol, capable of creating, transferring and assimilating information and knowledge, in a knowledge economy era as a contributor to economic growth, quality of life and prosperity. The Arab World’s biggest challenges remain to be its largest youth populations, where 60% are under 30 years of age, high unemployment at 25%94 and millions of young people entering the workforce over the next decade, not to mention the fast-pace of globalization, technology advancement, knowledge-base and e-commodities racing by. Unemployment comes with a serious economic and social cost, and at a cost of discontent and suffering, plus added pressures on governments for change. Education is one of the four major economy mobilizing components of the WB KE model, defined as “educated and skilled population that can create, share and use knowledge well”. As aforementioned, the major impact of ICT on education is yet to come, meaning education is one of the largest and slowest moving sectors towards structural changes, yet, amidst their walls, they carry the hope of the future. Technology in “their” small hands can solve future world problems, we created. The Ministry of Education Statistics (2010-2011) show about 1.7M student (13% increase from 2001) distributed at about 1.15M in public schools, 400,0000 in private schools, 14,000 in other governmental schools, and 118,000 in UNRWA schools. These cover 2 KGs levels (ages 4-5 years), 10 basic grades (ages 6-15) and 2 secondary academic/vocational grades (ages 6–17). The overall distribution of students, teachers, class sessions and schools, is shown in the table hereunder. However, 2011 witnessed a large

94 Figures from e4e Arab Youth – IFC & IDB, Education For Employment: Realizing Arab Youth Potential IFC And The

Islamic Development Bank www.e4earabyouth.com



influx of private schools students into the already burdened public schools due to inflation, estimated at 10,000 students (Al-Liwa News95) other news media estimated at least 14,000 students. As for tertiary education (post secondary & university) enrolment in public and private institutions according to ISCED levels were 266,881 in total, distributed as 234,559 (5A), 30,061 (5B) and 2,261 (6). The GoJ allocated 10% of its general budget to education, at JD 590,748,446 out of a JD 5,708,024,127, i.e. 10.35%. According to MoL 2009 figures, public and private universities graduated 48,377 students, at an increase of 20% from the previous year, with 46% males. College graduates dropped down 6%, with 41% males. Vocational school graduates dropped 60% compared to previous years, with 71% males. Academic schools graduates increased by 9%, with 41% males in 2008/2009.

Table 13

Education distribution statistics

2010-2011 MoE Private Unrwa Other government

Students 1,143,008 382,867 117,957 14,090

Teachers 71,183 25,627 4,493 1,332

Class sections 42,689 18,072 3,384 522

Schools 3,433 2,368 173 33

Source: MoE Statistics Book 2010-2011 (back to list of tables)

The population of Jordan(about 6.25 M) is about 51% males, almost 60% are under the age of 24 and 76% under the age of 35 (DoS, 2011). Total employees by economic activity for both public and private sectors are 421,096 (76% males, 95% Jordanians ) are working as follows - excluding armed forces, public security and civic defence.

Table 14 Economic Activity (employment) – Jordan

Education 27% Manufacturing 18%

Public administration & defence 16% Health, social & personal services 8%

Transport, storage & communications 7% Wholesale, retail, trade, vehicle repair, household ... 5%

Financial intermediation 4% Electricity, gas, water supply 3%

Construction 3% Hotels & restaurants 3%

Real estate, business 3% Mining & quarrying 2%

Other community, social and personal service activities 2%

GoJ DoS – 1998 (back to list of tables)

The Human Development Index (HDI)96 measures life expectancy, adult literacy and gross enrolment in education and purchasing power parity, public private partnerships and income. Jordan rank 96th out of 182 countries on the Index, and 62nd on education, 107 on DGP/capita and 91% on literacy (UNDP 2009). Unemployment in Jordan is one of the highest in the region, at 13% calculated on the basis of the age group 16-64 years, seeking work. Therefore, this does not include an estimated 2 million persons of the same age group who are not seeking a job, under qualified and simply gave up, half of which are women, classified under “housekeepers” in the DoS census. Statistics show that the working age-group in Jordan, above 15 years of age, is 62.7%, divided into 40% economically active persons and 60% economically inactive persons (students, housekeepers, disabled - have no income, etc ). The economically active are divided into those who are actually working at 87% and those who are out of a job (13 %), as follows.

95 Al-Liwa online media, Mohammad Sapti http://al-liwa.com/News.aspx?id=93239&sid=3 96UNDP, Human Development Report 2009

http://al-liwa.com/News.aspx?id=93239&sid=3


Table 15 Employment within the Population of Jordan / 6,249,000 (100%)

Work Age Group 15-64 / 3,714,790 (67.2%) Not Working Age >15, <64 (32.8%)

Economically Active (40.1%) Economically Inactive

(59.9%)

1,489,631 2,225,159

Actually Working (87%)

Out Of Jobs (13%)

1,295,979 193,652

GoJ DoS (back to list of tables)

Accordingly, there are 1.221 M working Jordanians (2009), up by 4% (2008). New hires were mostly females (8.5%) compared to males (3.3%). But in general, females occupy fewer jobs; their shares are 34% at international agencies, 13% at the private sector and 20% at the public sector. Skills of working segment are mostly vocational, less than secondary, secondary schooling or illiterate, the rest are graduates of collages, bachelors or post graduates. There are 303,325 guest workers (2009), a 10% increase from (2008), mostly males (84%), mostly unqualified or illiterate (90%) – hence low on the knowledge transfer value. Labour in qualified zones regressed from 43,072 (2008) to 33,082 (2009) from both the Jordanian and guest workers sides (Jordanians from 10,529 to 8,138 and guest workers dropped from 32,543 to 24,944). Companies count went down from 107 (2006) to 78 (April 2010). Consequently, exports dropped down by 19%. New jobs amounted to 36,099 (2009), marking a drop of 13% (2008), 75% of which went to males. Females overall share of created jobs was 8,941 (25%). The accumulative job applications at the Civil Service Bureau reached 203,476 applications (2007-2009), 75% came from females. Only 10,666 were hired (50% males). Job seekers registered at MoPIC centres were 27,961 (2008), 16% up from previous year, 68% males, with decreasing hiring percentages of 49%, 36% and 31% (2007-2009) respectively. Unemployment rates dropped down from 14.8% (2005) to 12.9% (2009), marking unemployment that is higher among females (24%) and age-group 15-24 (57%), with no changing pattern across the years. Unemployment among age-group 40+ increased remarkably (2009) attributed to early retirements due to recent Social Security Law amendments. Figure 16 shows unemployment per age groups (2000-2009).

Figure 16

Unemployment per age groups,

2000 – 2009


Most of the unemployed were high school graduates (46%), followed by Bachelors (31%), while unemployed illiterates dropped down to 1% of the total unemployed. Gender disparity is apparent as most of the unemployed males are below high school levels at 63% versus 54% of unemployed females with bachelor’s degrees or above. It was found out that 53% had been unemployed for almost half a year


and 35% had been unemployed for almost one year (2009). The Vocational Training Corporation continues to open its doors for vocational training, receiving 10,456 trainees (2009), of which 68% were males and 7,460 graduated (MoL 2009)97. The GoJ reformed social security procedures and laws to allow more people to join and rendered it obligatory for companies, regardless of the number of workers in order to sustain the Social Security Corporation (SSC) which in turn benefits the insured and future generations. The reformed laws had positive impact as subscribers increased by 6% (2009), registered companies sustained growth by 18%, and early retirement accounted to 1% increase versus 4% in 2008. Dr. Omar Razzaz, Ex-Director General of the Social Security Corporation of Jordan, joined an interactive debate on unemployment and the National Employment Strategy draft, with a group of youth, in terms of facts & figures, diagnosis of problems and proposed solutions. The debate was posted online98. Issues were proposed, starting with the notion that not all economic growth guarantees work opportunities, there is jobless-growth in certain sectors (US growth did not create employment opportunities as per the 90’s theories). This holds true for Jordan, as it consistently sustained positive economic growth (av. 7%), yet unemployment remains high, just like investment alone will not create jobs, since it depends on the type of investments, direction of benefits and governing policies. However, the “Employment” percentages are not indicative of healthy work markets. Razzaz commented on GoJ DoS 13% unemployment figure that is based on the (15-64) age group, actively and seriously searching but cannot find work. In reality, the work age group is 3.7 M, out of which 1.5 M (and increasing) are economically active, meaning there are 2.5 M economically inactive persons, including non-skilled youth and females (classified as housekeepers) who were not able to find work and simply gave up (and are therefore no longer seeking). This raises the “dependency problem”, meaning that every working citizen is providing for 4–5 persons, on top of providing for him/herself. This includes providing for people of similar age. Therefore, a salary of $ 1000 - $ 1300 is still relatively a poor yielding. “Our worry is not the 13% unemployment rate or its increase to 13.5% , our concern is the 2.5 M economically inactive persons, and how to attract them into becoming active” Razzaz added. Going back to the Employment within the Population of Jordan Table, it is clear that 32.8% of the working age group (16-64) are not working, hence low working force, add to that the 13% of the age group that are looking for work. On gender issues, a raised concern was on high expenditures on higher education, in return for non-employment, specially for females, who although with highest qualifications, are not finding employment. It seems females favour the public sector (particularly in education and health), in term of less working hours and better benefits – as opposed to the private sector. To encourage hiring females in the private sector and in a new law by SSC, maternity is subsidized by the employer by deducting equally from both male and female employees. There was also the problem of productivity per person, as large numbers of employees may not yield heightened productivity. The contribution to the GNP may not be indicative to the number of workers, when machinery, tools and innovation are added, it would increase productivity per person. In this case, productivity was increased without increasing employment. Another issue is when people cash on their early retirement but do not actually leave the work market, by picking up other work. Early retirement is a controversial issue, while it has its advantages in creating job opportunities to others, yet, in the absence of properly maintained knowledge transfer channels and absorption, it can adversely affect working institutions that have a foreman-workers setup. This is especially damaging in industrial work structures where 45–50 years olds “foremen” who have the knowledge and decide to retire early (to get another job and double pay), leaving the structure to collapse, as attempt of replacement fail, against lower salaries given to the next in line – hence a break in the knowledge transfer chain. New job opportunities often go to guest workers, specially at free zones, as Jordanians abstain from picking up those jobs due to low wages. Normally, construction, housing and weaving sectors need unskilled labour. It has also been said, that the real number of guest workers, is not as appears in official records; it is also unclear how can the real numbers of guest workers be counted, since household surveys

97 Mol – An Analytical Study of Lab our Market Status in Jordan, 28/6/2010 98 Urdun Mubdi Posted by Nadine Toukan, Jan. 13, 2012, 7:16 pm

http://urdunmubdi3.ning.com/forum/topics/2651659:Topic:50612 (Arabic)

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may only record 7-8% (mostly domestic help). It does seem however, that Jordan has fallen into a vicious circle, exporting highly skilled, qualified and academic workers and importing high numbers of unskilled labour, adversely affecting inward knowledge transfer. However, relying on such lows skills in large numbers when starting new projects, for lower wages, removes added values from the formula and lowers productivity, hence overall economic growth. The session concluded by acknowledging the magnitude of faced challenges that call for multi-faceted strategies, on short, medium and long terms plus many measures. On mobility of students, the international outbound Jordan mobility of students (Global Education Digest) was 10,102 males and females in 2009, at an outbound mobility ratio of 4%, so that 2,203 students left to Ukraine, 2,188 to the USA, 1,329 to UK, 558 to Saudi Arabia and 541 left to Germany. This means that about 21% of outbound Jordanian students go to each of Ukraine and the US. In return, the inbound Arab or foreign students were 26,637 (most of which from Arab countries, and 33% are females), with a net flow of mobile students (inbound and outbound) for both males and females of 16.5% and a net flow ratio of 6.5%.

Table 16 International flows of mobile students– tertiary education & ISCED 5 & 6 levels (2009)

Source: UIS-UNESCO Global Digest



Table 17 Internationally mobile students by host country & origin – tertiary education & ISCED 5 & 6 levels (2009)

Source: UIS-UNESCO Global Digest


Tertiary education, on the ISCED 5 & 6 levels, for internationally mobile students by host country and region of origin (2009) as per the UIS-UNESCO Global Digest show that Jordan receives ‘inbound’ students from abroad, amounting to 26,637 males and females (10.5%). It also receives 21,015 inbound students from the Arab world and 3,222 students from N. America & Western Europe, as follows.

Host country

or territory

Students from abroad studying in a given country (inbound mobile students)

Table 18 Mobile students by region of origin

MF

Inbound mobility rate (%)

Arab States

C.&E. Europe

C. Asia E. Asia

& Pacific

LA & Caribbean

N. America

& W. Europe

S. & W. Asia

Sub Saharan Africa

Egypt 35,031 1.4

Jordan 26,637 10.5 21,015 215 11 931 449 3,222 207 253

Morocco 7,921 1.9 2,645 21 10 80 17 79 21 4,150

Arab States

187,008 2.4 45,427 668 445 1,985

530 4,257 3,749 6,709 123,238

From Arab states to other regions

15,441 1,047 16,532 381 149,350 91 216 53

World 3,369,242 2.0 232,463 374,801 120,983 945,637 195,951 522,531 321,549 234,886

Source: UNESCO-UIS-Global Education Digest 2011: Table 11 Tertiary Education / ISCED 5 and 6 / internationally mobile students by host country and region of origin / 2009, pp. 190-191, 198-199


Following are the Ministry of higher education and scientific research. Statistics on Jordanian students studying at higher education institutes outside Jordan, 2009 – 2010. The statistics were based on information from Cultural Attaches at Jordanian Embassies abroad. The study covers 21 countries, hosting 19,451 students. It has been estimated that 8000 students are studying in countries that did not send in their data hence, an estimate of 27451 Jordanian students studying abroad (2010). The following graph shows that 90.1% of students study in Jordan and 9.1% are outbound.


Figure 17 Jordanian students in higher education

Source: Ministry of Higher Education & Scientific Research


Figure 18 Outbound Jordanian Students



Number

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Outside Jordan, 27,451

Total, 302,162

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Figure 19 Outbound Jordanian Students distribution per country



The Inbound Arab & Foreign students enrolled to Jordanian Universities for the year 2009/ 2010 were 29379 out of which 32% were females. Students enrolled mostly in bachelor degree programs (88%), followed by Masters Degrees (10%) and Ph.D. (2%). C. Innovation (Back)

According to the Global Innovation Index 2011, Jordan ranks 41 with a 38.4/100 score, based on its innovation output (35.5%), innovation input (41.3%) and innovation efficiency (0.9%) covering institutions, human capital & research, infrastructure, market sophistication, business sophistication, scientific output and creative output. Please refer to Annex 12 for The Global Innovation Index 2011 Jordan ranking.

“The world of science and higher education is marked by a complex struggle, pull-and-push effect, between continuant and change. It is all about new challenges, opportunities and new modes of ‘learning to learn’. The idea of reforms, innovations, transformations and evolution (rather than revolution) tells us that higher education and science are in ferment in creating and constructing knowledge”

HRH Prince El Hassan bin Talal

The Higher Council for Science and Technology (HCST), established in 1987, is a public independent institution that is chaired by HRH Prince El Hassan Bin Talal, who has been instrumental to the progress of S&T in Jordan, from the onset. The HCST acts as a national umbrella for all S&T activities in Jordan, and aims to spread awareness and support scientific and research activities within national priorities. It has established R&D centres to support innovation and entrepreneurship to commercialize scientific and technological ideas into products and businesses. Responsibilities include policy level ratification of the general policy of S&T to define specifying conditions and requirements for the accreditation of scientific centres of excellence and assisting in their development. Affiliated centres to the Council include: the National Centre for Diabetes, Endocrine and Inherited Diseases, National Centre for Human Resources Development, National Centre for R&D responsible for biotechnology, energy, nanotechnology, water, food and other research. The Royal Scientific Society (RSS) was founded by HRH Prince Hassan, on the belief that science and technical application are crucial to developing our human resources. Jordan’s growing population and its sparse supply of natural resources are creating challenges that only scientific know-how can solve. The HCST and RSS work in partnership with several other public, private and civic

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20000

25000


sector institutes. It works on knowledge, testing, quality and outreach sectors. The RSS is committed to security and stability through science, focusing on water and renewable energy technology, since it has been estimated that by 2025, three hundred million people in the Arab world will be living under what the UN defines as conditions of “absolute water scarcity”. RSS works with the following partners: Princess Sumaya University for Technology (PSUT), a not-for-profit University that is specialized in ICT; the HCST and El Hassan Business Park (EHBP), one of the main innovation leading institutions in Jordan. The EHBP consists of Queen Rania Centre for Entrepreneurship (QRCE), the iPARK business incubator and the Intellectual Property Commercialization Office (IPCO). With these components, EHBP can provide comprehensive services and consultations to innovators, inventors and entrepreneurs. The QRCE is a non-profit organization established in 2004 to help develop technology entrepreneurship in Jordan. El Hassan Business Park (EHSC) of El Hassan Science City is one of the main innovation leading institutions in Jordan. EHBP consists of : Queen Rania Centre for Entrepreneurship, iPARK business incubator and the Intellectual Property Commercialization Office. With these components, EHBP can provide comprehensive services and consultations to innovators, inventors and entrepreneurs. iPARK Technology Incubator aims at providing the needed catalyst to fuel the entrepreneurial process that is pivotal to Jordan's economic development. Through proper strategic business advice, operational technical support, the provision of an ideal logistical environment and networking, iPARK will contribute to increasing the odds of success of its member companies and thus contribute to the growth and development of Jordan's ICT start-up community. CEO Omar Hamarneh, (interview) explained the process whereby active youth are approached and supported into success stories, 3000 young men and women who has graduated and tried the work market, are met each year and at the end around 200 successful entrepreneurs emerge, this has been going on since 2004 (around 1800 – 2000 entrepreneurs). The iPARK is offering incubation, development, knowledge transfer and training at the Queen Rania Entrepreneurship Centre. Scalability of the project is of the essence to achieve national levels through higher education or other institutions, but that would require an enabling environment and needs national adoption. The iPARK has been able to provide specialized value-added services to incubated companies, incubated and supported 35 companies, graduated 20 companies, export oriented companies with major regional and international client base, high-value added products and services contributing to Jordan’s intellectual capital. Companies supported by iPARK created over 750 high-value added jobs. Please refer to Annex 13 for graphs representations of these achievements. Hamarneh spoke highly of the hospitality industry in Aqaba and knowledge transfer from Amman in this sector. iPARK provides specialized value-added services to incubated companies in the form of assistance in developing business plans, student internship/employment, networking, grants, promotion, HR management, raising capital from VCs, IP and laboratory facilities. In 2020, there were more than 35 incubated companies and 20 gradated ones. More than 750 jobs were created, most of which are full time, as opposed to part-time. The export oriented companies succeeded in reaching international clients (86%) and local clients (14%). The high-value added products and services contributing to Jordan’ intellectual capital were 26 shares of copyrights, 10 shares of patents and 4 shares of other. Following are the demonstrated graphs:


Figure 20 iPARK statistics

iPARK Business Incubator website


The ICT for Development (ICTD) Cluster has also registered success stories, over the past few years, namely, a life-saving development of an Online Centralized Workflow system for the provided services by the Higher Council Affairs for Person with Disabilities (HCAPD) which was created to manage the workflow of getting benefits from the services provided by HCAPD. The PWD enters his/her National ID Number and selects a service (e.g. wheelchair, or hearing aid). The system will perform a diagnosis by arranging for medical checkups and appointments up until the person is granted his/her request. The system ties up remote areas and villages, with de-centralized assistance to use and benefit from the system. A database is kept to ensure safety of patient in terms of medical reports and non-duplication of services. This represents a success story, where knowledge has been transferred to all centres to use the system, and absorbed by means of training, application and documentation. It was also a realization of R&D into a nationally commercialized system, that will save the Council on money (avoid duplication of services), effort and time. PWD on the other hand become enabled through those aids to become economically active, as the council sets another employability plan for PWD. There are 300,000 PWD in Jordan, however estimates are expected at 15% of the population. (RSS, http://www.hcd.jo) The Social Health and Information Technology for the benefit of rural Communities in Jordan (SOHITCOM) initiative is addressing maternity challenges in rural areas, where connectivity is maintained

http://www.hcd.jo/


through mobiles with mothers to remind them and follow up on immunization for their newborns and children, in connection with the National SMS Gateway of the Government. The concept was adopted after extensive research. (RSS, http://www.sohitcom.org.jo) The World Bank Team for Jordan99has been visiting Jordan (2010-2011) to run an audit of the country’s innovation policy and institutions, at the request of the MoPIC, to later assist the HCST in its strategizing efforts. This requires systematic rethinking and revamping of the country’s diffuse, fragmented and highly incomplete innovation policy and institutions set-up, to become a world-class enabling environment for innovation in its various contemporary forms, in the next few years. Messrs. Mukhallad Omari and Aktham Al Zubi, MoPIC (interview), based on the WB mission, affirmed that the country was well positioned to achieve such a jump and that there was a critical mass of innovation champions from government, business and civil society ready and eager to contribute to such a future-defining experience for Jordan. The initiative would focus on the aware “innovation champions” on one part and on persons who are not. The divide between innovative-aware and those with limited perceptions on the matter, is prevalent throughout both private and public sector. The evaluation of Science and Technology capabilities in Jordan shows that Jordan has numerous bridging institutions yet it ranks low on the scientific research indicator. Brain drain takes a heavy toll. Function of research is not recognized, limiting gains. Research is a subordinate function, needing to be taken seriously, with clearer linkages to society and more efficiency. Scientific and technological production relies on a small number of performers, professional values and linking the career of academics to some research achievements are diminishing, there is a need for institution building and new incentives. Foreign agencies can contribute to this upgrading by supporting specific labs for longer periods of time to enter intensive networking and large programs. Finally, accurate data is needed for follow up and to pave the way for a regional observatory to standardize and validate data, analyze and launch specific studies and benchmarking best practice. One main weakness of research units, is their lack of participation in far reaching programs. Faculty members in Jordan are well remunerated; and careers are regulated by research achievements, as tertiary education remains substantial and preeminent. Impediments to research include poor career advantages that are linked to research achievements; research achievements are poorly assessed; multiple occupations are sought for status, with no real ‘devoted scientific communities’. Struggling with bureaucratic authorities or academic establishment is time consuming. Brain drain of scholars or never-returning students in Jordan show 4000 established scientists and engineers in the USA, employed in R&D and Research. This is attributed to mainly poor incentives, frustration and potential in the system. However modest growth shows 15,891 researchers registering 1927 researchers / 1 M of population, producing 1371 papers (62nd rank) at an average of 8.6 per 100,000 and 13.67 scientific publications per 100,000 (2003). Few patents come out of universities. Jordan ranks well in terms of availability of scientists, engineers, local research and training services, quality of scientific institutions and university industry collaboration. The total number of researchers in Jordan, was 1,952 researchers per million population, in 2007, taking the lead among Arab countries as per following graph.

99 Ref. A Candid Review of Jordan’s innovation Policy. WB / Korea Rapid Innovation Action Learning (RIAL) Team for Jordan:

J.F. Rischard, J. White, S. Chung, J.S. Kim. April 2010 (revised December 2010),

http://www.sohitcom.org.jo/


Figure 21 Researchers per million population in the Arab world, 2007

Source: UNESCO Science Report 2010, Dr. Adnan Badran & Moneef Zou’bi (back to list of figures)

The total scientific publications were 101.4 in 2002 and increased to 157.1 publications per million population in Jordan, in 2008. This puts Jordan in the third place, following Kuwait and Tunisia at 222.5 and 196.2 respectively (2008). Jordanians published 459 scientific articles in 2000 and 928 articles in 2008, taking the sixth place in the Arab World. Egypt led by 3963 articles in 2008. As for scientific co-publishing, Jordan came in 7th with 153 co-publications in 2000 and 420 in 2008. The number of patents granted by USPTO to Jordan amounted to 1 and zero in 2003 and 2008 respectively. Jordan’s shares in high-tech exports in total manufactured exports, measured as percentages of total Arab world shares, were 4.0 and 1.1 in 2002 and 2007 respectively. The Ministry of Higher Education and Scientific Research prepared the strategic document called: the National Strategy for Higher Education and Scientific Research Sector for the Years 2007-2012. It should guide the development and priorities of the sector. There are many international programs executed in Jordan. The sector in Jordan has still potential to grow and expand, benefiting from the fact that more foreign students come to study in Jordan. There are certain plans to enhance universities’ autonomy and develop governance and institutional performance. The JIB Country Sheet, sheds light on Jordan’s higher education in terms of distribution of institutes and students, in Tables 15-17.


Table 19 The distribution of students in tertiary and higher education

2008-2008

Public Universities

Private Universities

Total Comm. Colleges

Abroad

175,000 61,000 237,000 28,000 28,000

Average 17,500 /Univ.

4,067 /Univ.

Undergraduate Graduate

219,000 17,000 The JIB Country Sheet (back to list of tables)

Table 20 List of tertiary and higher education institutes

10 Public Universities

17 Private Universities

2 Regional Universities Arab Academy For Banking & Financial Sciences & the Arab Open University

2 Private Universities Under Construction

50 Community Colleges (28 Public: 4 Belonging To MoH, 7 To MoD and 22 Private Ones. The JIB Country Sheet (back to list of tables)

Table 21

Students enrolment over mostly attended public and private universities

Public Universities Private Universities

UJ 37,971 Al-Zaytoonah 8,021

Yarmouk 31,058 Applied Science 7,956

JUST 21,491 Al-Isra 6,896

Mu’tah 15,949

The Ratios of Students vs. Faculty Members are 35 and 25 The JIB Country Sheet (back to list of tables)

Key Weaknesses: there is a need to improve soft skills among university graduates and bridge the gap with the labour market. Students do not rely on analyzed market trends or demand when selecting their topic of study. There is a growing unemployment among graduates (34.3%) that is distributed as 21.1% among males and 64.3% among females, as shown hereunder:

Table 22 Unemployed youth > 15 years of age, per gender and academic achievements in percentages

Academic achievement Total Males Females

Total % 100 100 100

Illiterate 0.8 1.1

Less than secondary 46.1 62.9 8.1

Secondary 7.6 8.7 5.1

Diploma 11.2 6.3 22.4

Bachelors’ Degree and higher 34.3 21.1 64.3

Source: GoJ DoS – 2010 (back to list of tables)

The government subsidies fluctuate considerably and are unpredictable, so universities find it difficult to adopt long-term financing plans to support its activities. Jordan spends 0.34–0.4% of its GDP on research and development, compared to 2-4% spent by highly industrialized countries. In the developed world, 2/3rd of the funding comes from the private sector, which invests in R&D for the development of their products and services. In Jordan, almost 70% of funding comes from the government. Results


from the 2007 Trends in International Mathematics and Science Study, found that university graduates in Jordan wait for a long time to transition into the job market because the learning they receive at universities, can best be described as “old pedagogy”. They memorize textbooks and class notes of professors. Key Threats: In the light of the global financial crisis and budget expenditure cuts, finding more resources for public universities could become difficult. Finding adequate public funding that covers all applicants for loans and grants by the Student Support Fund, may again become very difficult, thus, undermining the idea of financial assistance. There may not be enough high quality faculty members to accommodate the growing demand for tertiary education in Jordan. According to new plans revealed in the National Strategy, there will be a limit imposed on the number of students allowed to enter public universities. The process will be guided by general and special accreditation criteria. Such a move may limit the number of people willing to study. D. ICT Infrastructure (Back)

The Ministry of Information and Communications (MoICT) MoICT is commissioned with setting the policies for the ICT sector, impacting the information of stakeholders in all sectors. The Telecommunications Regulatory Commission (TRC) operates under the Telecom and Postal Law to regulate and ensure the provision of high quality ICT services to users at just, reasonable and affordable prices and optimizing sector performance”. MoICT holds regular meetings with the industry. The government policy and interventions are favourable and improving (JIB Country Sheet), yet the IT is a deregulated sector. Amendments to the Telecom Law should give a stimulus to further develop this sector. There is a highly competitive mobile phones market in Jordan. Key Weaknesses & Threats: IT usage is still low. SMEs especially small family businesses do not use IT to strengthen their competitiveness. High telecom costs and PC prices, compared to the average income level, lead to low penetration of PC’s and Internet usage in the country. Uncertainty over the expected removal of sales tax on computers has contributed to a significant drop in sales in the local market since the beginning of this year. Buyers are reluctant to buy, pending a possible reduction in price. Sales in the computer market dropped by 50%. Low public spending on R&D slows down potential expansion of the ICT sector. There are also poor linkages between ICT and academia. The local market is considerably small and fragmented. Key Threats: Domestic consumers are not global trend setters, adversely affecting innovation. New graduates lack soft skills (e.g. writing skills), as per the industrial sector. In Jordan’s Competitiveness Report 2007 one of the constraints to growth of the sector was lack of access to venture capital and other non-traditional forms of financing. The ISP industry in Jordan is considered to be moving to a more competitive market, although from the 9-12 ISP providers Wanadoo and Batelco (now Uminiah) still account for > 80% of the market. This number of providers is relatively small in comparative terms. The telecoms infrastructure is fast approaching global standards is still monopolized by Jordan Telecom, this is likely to change as policy recommendations and objectives of the Telecom Regulatory Commission (TRC) will spur additional competition. The immediate opportunity is for additional investment in ISP’s to provide value added services at competitive rates. At least 1 individual and 22 class license applications have been approved as of Feb 2006, this suggests a healthy and continued interest in the Jordan Market and the prospect for investment (JIB Country Sheet). WEF Global Information Technology Report (2009–2010) ranked Jordan at 44 / 133 countries on the Networked Readiness Index and 4th among its group of LMIC. The GoJ is trying to merge ICT with economic, social and cultural aspects of life, which was reflected in increased usage of internet, mobiles and online e-government tools and e-commerce. Jordan ranked 35/133 in accessibility to modern technologies (Annex 15). Jordan is managing the demand in the telecommunications sector by opening the sector to market competition and local and foreign investment. Combined with the strong regulatory environment and modern legislation, the government is enhancing competition and the provision of services to stimulate and meet growing demand100. Please refer to Annex 16 for Telecom Sector Employment, Investment and Users.

100 Telecommunications Regulatory Commission, http://www.trc.gov.jo/

http://www.trc.gov.jo/


INTAJ, an NGO founded in 2000, is very active and has a key role in mobilizing and engaging the IT sector. Regular discussions are held on sector related issues, particularly for e-businesses and BDO, covering such issues as: business registration in light of unavailability of related business activities & improper definition of related industries & its business requirements, taxation issues and exemptions regulations, licenses, hosting, trade missions, marketing, and sales tax on IT equipment which affects prices and cost structure. INTAJ has 200 companies as members (Right Graph 101). The contribution of sectors in the GDP and direct employment is seen as follows (Left Graph 102)

Figure 22 ICT sector contribution to GDP

Figure 23 ICT sector contribution to employment

INTAJ (back to list of figures)

The ICT sector exports to more than 45 countries , examples:

Table 23 ICT Exports to Arab countries

Item/Country $ %GDP Country $ %GDP

Major Export Markets

Saudi Arabia $70m 34% Iraq $28m 13%

UAE $27m 13% USA $13m 7%

Oman $10m 5%

Regional Opportunities

Saudi Arabia $4b 50% Kuwait $700 M

UAE $1b Qatar $400 M INTAJ


The ICT sector has generated 84,000 jobs and contributes to 14.1 % of GDP103, and has opportunities in e-learning, e-health, telecommunications, process outsourcing, online and mobile content and gaming, among others. The focus for the next 10 years includes: fully integrated ICT in other sectors products and services, strong public private partnerships locally, regionally and internationally and further infrastructure attraction for the telecommunications, to create a platform for converged data, voice, media and content; broadband and virtual e-learning for all Jordanians; through a strong, independent, competent regulator, strong products and services export capacity to regional and international locations; attractive business and investment destination (example Yahoo/Maktoob); innovative and entrepreneurial global and regional products and services; and major capacity in PPP projects (example e-Government). Sector Competitiveness & Development Engine revolves around empowering and building up investment, exports, labour & education, IP & innovation pillars.

101 Graph source Telecom: Arab Advisors Group and int@j Industry Classification and Statistics 2009 102 Source: i) Manufacturing, Construction, and Agriculture GDP and Employment: Department of Statistics ii) ICT: int@j

Industry Classification and Statistics 2009 iii) Tourism: Ministry of Tourism 103 MoICT – ICT Economic Impact

mailto:int@j


E. Gaps and inhibitors of knowledge transfer, its channels and absorption, in Jordan Case Study

(Back) a. Socio-Economic Regime

Politics

● Jordan had its mild share of the Arab Spring, as unemployment and poverty create more pressures on the government to perform. There is pressure from people for faster reforms.

Economy ● The economy climate in Jordan portrays lower growth rate than population growth, high

unemployment, increased inflation, high fiscal deficit, lack of controlled public spending and overspending by $250 M in recent years, borrowing has reached limits, and debts exceeded 60% GDP, with registered imbalance in trade as imports far exceed exports. Jordan’s energy bill is on the rise. electricity tariffs raise will cause at least 15% rise in some costs for consumer. GoJ is considered at some point cutting back on capital expenditures, needed for economic growth. The economic hardship affected the poor and middle class sectors of the community as the critics fear further taxations and “jobless growth”. The private sector is demanding transparency and the parliament has refused to endorse the “beyond repair” 2012 budget. Jordan’s main revenues come from taxes and spent mainly on public sector. The GoJ tax evasion by doing direct ‘unregistered’ business.

● The per capita GDP is 391.6 with a high dependency rate of almost 1:5. ● The Prime Minister affirmed that the economic hardship affected the poor and middle class sectors

of the community (Al-Rai Newspaper). ● Systems are not working together, through a knowledge economy model, towards economic growth

and job creation, building on strengths and carefully planning appropriate investments in human capital, effective institutions, relevant technologies, innovative and competitive enterprises in order to capitalize on the knowledge revolution and improve its competitiveness and welfare.

● There is popular frustration over the pace of reform. ● Competitive results are wanting on account of dispersions of efforts and potential, of which, lack of

knowledge retention, is one, let alone support to knowledge transfer, its channels and enabling environments.

Investment climate & Trade ● There are several investments packages pertaining to different zones that confuse the investor.

According to the private sector, some of the faced challenges include changing of policies, for example partial exception of land registration fees, then pulling back. This is affecting business and investment. Ratification of last investment laws took years. Lack of supportive legislations and laws to non-tangible goods and services / e-services. Ease of doing or owning business has not become easier. Jordan’s relatively worse performance was associated with enforcing contracts, dealing with construction permits registration of property, obtaining permits, obtaining credit, fiscal complexity, law enforcement and protection of investors. Unexploited investment opportunities estimated at 260 million ($7.6B) waiting to be tapped into –mining and tourism sectors being unexploited. Privatization is not meeting its initially set goals, according to some critics.

● Foreign investments, retreated by 34% compared to last year, stressing the need for immediate governmental remedial action and a sustainable investment climate” (Arabian Press).

● Imports values were almost twice as much as exports, consumer prices (measure of inflation) rose by 4.4% and unemployment went up from 12.5% to 13%, so that 55% of high school graduates or higher were unemployed. In light of the trade deficit, the real economic growth was 2.3% which is less than the population increase rate of 2.4%, denoting retreat in real income, as Jordan’s competitiveness Index on Business Performance went down.(Mansur)

Energy ● Jordan imports 80% of its needs from the Egyptian natural gas, recently sustaining some damages

causing deprecations in high-cost fast remedies and raise in electricity pricing, affecting industries and large institutions (consuming above 600 KW/hr). Lack in clean and renewable energy, tapping into Jordan’s abundant solar and wind energies. Nuclear alternatives options are facing some opposition from the people.


● The Electricity Regulatory Agency is expecting JD 1.7 B ($2.4 B) in additional losses in 2012 should the Egyptian natural gas not flow. Electricity prices went up for > 600 KW/hr consumers – industrialists protested, warned of possible closedowns. Malls warned of 15% increase of all goods prices.

Jordan Competitiveness Gaps on several international indices: ● Competitiveness of Jordan’s ranking on international indices lagged behind standards, as overall

evaluations get always pulled down by other retreating values. Main ‘fallen’ indications cover tax laws as main obstacles facing business men, low quality and output of education, customs procedures, public debt, government budget deficit, weak funding through local financial markets, lack of modern technologies in production areas, linking wages to productivity, enabling environments to innovation and R&D, weak relations among scientific research and the industrial sector, non-effectiveness of IPR legislative protection, usage of modern marketing technologies by companies, efficiency of management in delegating authorities in corporations, development of clusters, high schools dropouts, declining enrolment rates in secondary education, weak public and private sector institutions in general and the inability to link international markets to local ones at low costs. Jordan was specially behind in the economic environment and labour market efficiency with a significant drop in infrastructure, business environment development and institutions. Most of the weak performances are attributed to weak socio-economic regimes, lack of political will and finance, followed by absent accountability systems, rule of law and assessment and evaluation schemes.

● Global Competitiveness Index 2010 shows tax laws and rates, in addition to access to funding where the most important obstacles facing businessmen, according to private sector opinion modest. Jordan has modest performance on basic requirements, efficiency enhancers, innovation & sophistication pillars and subsequent sub-pillars. The Index shows that the weakest sub-indicators are reflective of the weakest performance in areas of business performance due to governmental procedures, low quality and output of education, specially basic education, customs procedures, burden of the public debt, deficit in government budget, weak funding through local financial markets, lack of modern technologies in production areas, linking wages to productivity, enabling environment to innovation and R&D, weak relation among scientific research and the industrial sector, effectiveness of legislation protecting IPR, using modern marketing technologies by companies, efficiency of management in delegating authorities in corporations, development of clusters, high schools dropouts and declining enrolment rates in secondary education, weak public and private sector institutions in general and the ability to link international markets to local ones at low costs. Jordan was specially behind in economic environment and labour market efficiency (above 100). In comparison to 2009, there was a significant drop in infrastructure, business environment development and institutions.

● Jordan’s performance went back 4 points on the WEF Financial Development Index (2011). Jordan declined on those fronts: Institutional Environment: Legal and regulative issues, governmental and central regulation in adopting economic policies, transparency, liberation of the financial sector, execution of contracts, supervision of law agencies, judicial independency. Business Environment: Taxation (affected by lack of collection from informal payments), tax competitiveness, labour force decline due to decreasing quality of education and training, science and math, employees training and infrastructure, due to decline in public infrastructure quality and decline in the number of telephone lines (internet users increased, creating balance in ranking). Financial Stability: There was a decline on the banking system stability index due to the banking crisis. Banking Financial Services: Efficiency, profitability, general banking cost, operational cost percentages to the bank assets and drop in transparency (giving out financial information). Non-banking financial services: Retreat in the insurance sector index which had joined the non-banking financial services, as well as stocks, shares and merging of companies. Financial Markets: Turnover in stock markets showed weakness. Financial access: Witnessed steep decline (14 spots) based on trade access and retail indices, attributed to Jordan’s regress in ease of access to credit and financing in local stock markets, as well as decline in foreign investments as a percentage of the GDP (8 spots), resting at 13, based on regression in private finance in financial services.

● The WEF Global Trade Enabling Report 2010, ranked Jordan as 39th of 125 countries. Jordan’s low rating was attributed to its overall performance on the main economic indicators. Please refer to Annex 6 for Jordan’s performance on the WEF Global Trade Enabling Report (2009-2010). USA


Indicators to Millennium Challenge, is a scorebook that is based on third-parties measure of indicators. It presents information on country performance and demonstrated commitment in terms of: ruling justly, investing in people and encouraging economic freedom.

● The 2012 Country Scorebook – MCC, showed these shortcomings in Jordan’s performance in Ruling justly, Voice and accountability, Economic freedom (below standards), Investing in people, Fiscal policy (deteriorated), Business start-up (no change), Natural resource management, Education expenditure & primary education expenditures (no change).

● According to the Doing Business Report (IFC), Jordan moved back on ease of doing business, with worst performance in dealing with construction permits.

b. Education

● Education is experiencing low quality and output - specially basic education, declining enrolment rates

in secondary education. Education expenditure & primary education expenditures showed no change. Ministry of education hosts most of Jordan’s students (77%).

● Some of Jordan’s mobile students or researchers do not return for lack of favourable conditions for those wishing to come back and work in Jordan

Employment ● Jordan’s population suffers high unemployment of 13% (working age group), 2 million persons are

economically inactive (same working age group). The cost of unemployment has been calculated and proven high, not to mention the low income per capita, given a dependency ratio of 1:5. Unemployed youth are pressurizing the government for jobs and solutions. There is lack of vocational training orientation to markets and females and lack of awareness against stereotyped jobs. Guest workers are estimated at 300,000, as locals abstain from low-way (culturally unattractive) jobs, however, the real number of estimated guest workers is suspected to be higher.

● The labour force decline was attributed to decreasing quality of education and training, science and math, employees training and infrastructure, due to decline in public infrastructure quality and decline in the number of telephone lines (internet users increased, creating balance in ranking).

● Only 15% of female work group work. There are more than 2 million economically inactive of same work-age that are not seeking work, half of which are females. This raises high dependency of almost 1 to 4 or 5. This means that one person works and provides for 4 – 5 other persons, other than him/herself, and sometimes of same age. People, specially females prefer public sector for medical insurances and benefits. Nurseries hours do not coincide with working hours. The wages for females are not adjusted for “the reservation wage”, i.e. money spend on house-help or nursery.

● There has been early retirement 45-50 to cash pension and work elsewhere, adversity affecting knowledge transfer channels.

● There was also the problem of productivity per person, as large numbers of employees may not yield heightened productivity.

● New job opportunities often go to guest workers, specially at free zones, as Jordanians abstain from picking up those jobs due to low wages.

● Normally, construction, housing and weaving sectors need unskilled labour. Jordan is exporting highly skilled labour and importing low to none-skilled workers.

c. Innovation, S&T, R&D

● Innovation efficiency for Jordan was low, in terms of institutions, human capital & research,

infrastructure, market sophistication, business sophistication, scientific output and creative output. Commercialization and scaling up of successful stories is needed.

● Absence of a comprehensive innovation policy. ● Global Innovation Index 2011 showed less than average ranking for innovation output, input

and efficiency covering institutions, human capital & research, infrastructure, market sophistication, business sophistication, scientific output and creative output. Jordan ranks low on the scientific research indicator. Brain drain takes a heavy toll. Function of research is not recognized, limiting gains. Research is a subordinate function, needing to be taken seriously, with clearer linkages to society and more efficiency. Scientific and technological production relies on a


small number of performers, professional values and linking the career of academics to some research achievements are diminishing, there is a need for institution building and new incentives. One main weakness of research units, is their lack of participation in far reaching programs. Impediments to research include poor career advantages that are linked to research achievements; research achievements are poorly assessed; multiple occupations are sought for status, with no real ‘devoted scientific communities’. Struggling with bureaucratic authorities or academic establishment is time consuming. Brain drain of scholars or never-returning students in Jordan show established scientists and engineers in USA, employed in R&D and Research. This is attributed to mainly poor incentives, frustration and potential in the system.

● Academic and research centre researches are not being commercialized or scaled up within protective and enabling environments. The evaluation of S&T in Jordan shows low ranking on the Scientific Research Indicator. Functions of research are not recognized, limiting gains. Impediments to research include poor career advantages that are linked to research achievements. Key weaknesses in Higher education include lack of soft skills among university graduates and bridging the gap with the labour market. Enrolling students are not presented with market studies marking in-demand jobs.

Key Weaknesses in Higher Education ● There is a need to improve soft skills among university graduates and bridge the gap with the

labour market. Students do not rely on analyzed market trends or demand when selecting their topic of study. There is growing unemployment among graduates (21%). The government subsidies fluctuate considerably and are unpredictable, so universities find it difficult to adopt long-term financing plans to support its activities. Jordan spends 0.34–0.4% of its GDP on research and development, compared to 2-4% spent by highly industrialized countries. In the developed world, 2/3rd of the funding comes from the private sector, which invests in R&D for the development of their products and services. In Jordan, almost 70% of funding comes from the government. Results from the 2007 Trends in International Mathematics and Science Study, found that university graduates in Jordan wait for a long time to transition into the job market because the learning they receive at universities, can best be described as “old pedagogy”. They memorize textbooks and class notes of professors. Key Threats: In the light of the global financial crisis and budget expenditure cuts, finding more resources for public universities could become difficult. Finding adequate public funding that covers all applicants for loans and grants by the Student Support Fund, may again become very difficult, thus, undermining the idea of financial assistance. There may not be enough high quality faculty members to accommodate the growing demand for tertiary education in Jordan. According to new plans revealed in the National Strategy, there will be a limit imposed on the number of students allowed to enter public universities. The process will be guided by general and special accreditation criteria. Such a move may limit the number of people willing to study.

d. ICT Infrastructure

● Low public spending on R&D slows down potential expansion of the ICT sector. There are also poor linkages between ICT and academia. The local market is considerably small and fragmented. Key Threats include domestic consumers who are not global trend setters and are adversely affecting innovation. New graduates lack soft skills (e.g. writing skills), as per the industrial sector. In Jordan’s Competitiveness Report 2007 one of the constraints to growth of the sector was lack of access to venture capital and other non-traditional forms of financing. Although privatized, the telecommunication market still faces monopoly – this time by Jordan Telecom, (JIB Country Sheet).

● MoICT faces challenges of lack of universal accessibilities and high tariffs. The sector still needs regulation. IT usage remains low. SMEs especially small family businesses do not use IT to strengthen their competitiveness. High telecom costs and PC prices, compared to the average income level, lead to low penetration of PC’s and Internet usage in the country. Uncertainty over the expected removal of sales tax on computers has contributed to a significant drop in sales in the local market since the beginning of this year. Buyers are reluctant to buy, pending a possible reduction in price. Sales in computer markets dropped by 50%.


● Key Weaknesses & Threats: IT usage is still low. SMEs especially small family businesses do not use IT to strengthen their competitiveness. High telecom costs and PC prices, compared to the average income level, lead to low penetration of PC’s and Internet usage in the country. Uncertainty over the expected removal of sales tax on computers has contributed to a significant drop in sales in the local market since the beginning of this year. Buyers are reluctant to buy, pending a possible reduction in price. Sales in the computer market dropped by 50%. Low public spending on R&D slows down potential expansion of the ICT sector. There are also poor linkages between ICT and academia. The local market is considerably small and fragmented. Key Threats: Domestic consumers are not global trend setters, adversely affecting innovation. New graduates lack soft skills (e.g. writing skills), as per the industrial sector. In Jordan’s Competitiveness Report 2007 one of the constraints to growth of the sector was lack of access to venture capital and other non-traditional forms of financing. Although privatized, the telecommunication market still faces monopoly – this time by Jordan Telecom, (JIB Country Sheet).

F. Recommendations (Back) The final recommendations were based on Jordan Case Study findings, international and local literature and interviews, relayed within a KE model perspective and reliant on the aforementioned identified knowledge transfer channels. Jordan has rendered itself in a very challenging position, with high deficits, debts reaching their limits, high unemployment and increased pressures on the government to perform and deliver. Jordan needs to raise its income more than what it can save from cutting back on public expenditures to sustain growth and job creation. It needs to achieve fast gains, build on its strengths and tracks that harbour and nourish knowledge transfer and retention. FDI and foreign trade would indeed flourish subject to revamping the investment climate reliant on a unified investment package for Jordan, one destination and law ratifications that need not take five years, with more focus on the intangible goods and services, with all that entails from an enabling environment in terms of laws, stability in governing polices and exemptions, as well as e-commerce supporting mechanisms to empower SMEs, drag them into the force field and cash onto the myriads of untapped opportunities and unexploited sectors like mining and tourism. This is without forgetting to add the utmost importance of “starting, owning or ease of doing business” that has not yet well performed on international indices. Not only will this lead to prosperity but it will save Jordan from taking alternative, perhaps desperate measures to counter its deficit. Simultaneously, a long-term measure has to be reconciled, focusing on education and the emerging youthful generation by instilling ICT-based knowledge economy and entrepreneurship skills, fostering creativity, towards innovation and job creation. The socio-economic regime, in the meantime has to be reformed, so that all of Jordan follows the same vision – in practice – and work on a unified and integrated agenda that the country follows regardless of changes in office - under an umbrella of transparency, accountability and rule of law. Innovation, S&T and R&D should also have their share of nurturing attention, across all sectors, and not just in confinement, void of feasible commercialization. It is important to realize that through the perspectives and perceptions of a knowledge economy model, it is no longer viable to excel in one sector, nor score in one sub-indicator, since what would make a difference is to have horizontal integration and communications among all sectors, that share platforms and enabling environments. More awareness is needed on the ‘value of knowledge’ as a commodity and service that can contribute by 50% to a country’s GDP, the added value in sharing and transferring knowledge, and working in groups and teams, hence achieving prosperity to all and higher standards of living. Based on the aforementioned knowledge transfer inhibitors throughout the report, and in order to boost knowledge transfer, its channels and absorption towards economic growth and job creation, the following proposed recommendation come in responsiveness to gaps and shortcomings seen from angles of knowledge economy main pillars: a. Socio-Economic Regime

The economic and institutional regime is what provides incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship, boosting economic growth and job creation, a matter of urgency to Jordan.


Reformed Policies Take serious and active steps towards economic reform, reliant on transparency, accountability, rule

of law and fighting corruption to realize growth, job creation, enhanced business and sustainable investment climates.

Orient policies towards a horizontal knowledge Economy model crossing socio-economic regimes, education (human capital), innovation (S&T, R&D) and ICT infrastructure to connect platforms and unify goals amidst executive, legislative and judicial support towards economic growth and knowledge production.

Focus on short term enhancement of the investment climate, with particular to promote FDI and DDI, with focus on SMEs and ease of starting business.

Promote capital and intangible goods and services through knowledge enablers. Look at developed countries models where knowledge production nears 50% of the GDP, and countries that created jobs such as Turkey that created 3.5 M jobs through an innovative service provision model.

Recognize that changes in cabinets are affecting the flow of procedures and interrupting some others – hence the need for a unified road-map or national agenda that will not be affected by changes in office.

Create and preserve a “national memory”, where knowledge retention and flow is streamed lined to support country policies, national agendas and road maps, on steady, measured, monitored and updated bases to reach national targets, regardless of changes in office.

Work under one comprehensive vision, which translates to all levels, towards a knowledge-based economy. Work on the strengths, identify and harness available resources and opportunities towards building growth through aligned sector-strategies.

Create monitoring and evaluation methods for public sector performance, on cross sector, policy implementation levels and spending.

Customize strategies that take into consideration empowerment of middle class and mitigating poverty, which are the most effected segments of the economic crisis, inflation and unemployment.

Transparency in publishing amounts, conditions of loans and given aid per donor. Continue to work on Jordan’s competitiveness by rising up the bars in international indices, raise

Jordan’s credibility, and regain trust of its people. Nurturing a vibrant S&T sector is seen as the most effective way to ensure the long-term social and

economic development of the Kingdom, together with investing in knowledge and innovation that materialize in commercialized and national applications, towards capital and intangible goods and services.

Strengthen public and private sector institutions and improve institutional accessibility to new knowledge, so institutions can sustain themselves in highly competitive markets, and access and use new knowledge, through knowledge transfer.

Develop business environment through central governmental regulations, economic policies and transparency. Improve execution of contracts and work on the legal and regulative issues, and supervise law agencies.

Political stability Promotion of peace and political stability in the area, as Jordan continues to play the peacemaker’s

role in the region and absorbs many shock-backs of events around it, burdening its unready over-loaded systems and infrastructure.

Increase people’s participation and engagement in political reform. Economy Diversify Economy, link international markets to local ones, create and encourage new public-

private partnerships, and encourage economic freedom. Work on streamlining privatization for optimal impact and achieving goals. The privatization

strategy in Jordan aims at enhancing competitiveness by activating market forces, yet, most of these goals were not met through privatization.

Financial systems Reform fiscal policy and adopt a proactive system that aligns expenditures to economic growth, job

and knowledge creation, by focusing on the value of expenditure, investment return, value, anti-corruption controls and continuous monitoring schemes.


Abide to budget, cut down on debt, reduce deficit, control public expenditures and increase state income by adopting local income-generating initiatives that support employability. Orient public sector for maximum efficiency and productivity, (adjustments of wages to productivity) since public sector salaries comprise high expenditures. Expand on government management information systems (MIS).

Raise foreign investments as a percentage of the GDP by supporting private finance in financial services.

Strengthen financial systems and stability through institutionalizing financial banking services in and non-banking financial services.

International lenders and donor should review Jordan’s national economy in order not to over look grave unemployment levels, given the societal costs of joblessness, suggesting analysis of employment issues and policies impacting employment, instead of leaving that area largely to other international agencies such as ILO. Unemployment, corruption, poverty and repression is a major MENA challenge calling for reforms in the employment sector.

Legislation and law Base legislative and legal frameworks on transparency, accountability and rule of law. Enhance judicial performance, enforcement and protection of rights. Recognize that legal systems are not intended to protect the corrupt elite & legalize the

expropriation of private benefits, hence law and law enforcement is of the essence for a healthy business and other environments.

Engage the public by announcing regulatory requirements, provide advance notice and seek public comments on all draft laws, regulations and instructions of general application. Allow adequate grace periods for compliance before new regulations come into effect, and ensure spread of awareness.

Create a national registry of all laws, regulations, and instructions of general application readily available to the public by carrying out this task of compilation and granting access.

Speed up passing of new legislations and amendments specially those directly affecting economic gain.

Focus on the law and gender issues. There are laws that are in favour of males and against women’s rights.

Investment & Trade The New Investment Law draft supports FDI and DDI, yet more focus is needed to enhance the

investment climate, based on identified gaps in international and local indices, to exploit full potential of the massive investment opportunities available in front of FDI and foreign trade.

Unify investment packages that cause some confusion among investors due to multi-zone packages. There is a need to unity a real one-stop-shop at JIB and one unified investment law that works on attracting investors through exemptions and incentives, with guarantees against sudden changes of policies in terms, taxes, tariffs, fees and rates.

Work on enablers (e.g. laws and legislations) pertaining to intangible goods and services, namely e-services, which have specific peculiarities that are different from the manicuring sector, in order to boost knowledge creation, as well as economic growth and job creation (recommended case study of the Netherlands). Call centres is a good example for creating employment and value-added services

Stipulate new laws and enablers for FDI and e-commerce through digital economy platforms, aided by reputable networks and gateways that will guarantee Jordan’s small and medium sized businesses, and open trade opportunities, alternatively to join already existing global platform, free to users, such as GCEL or the like. There are trade barriers attributed namely to lack of digital economy platform, assurance for liabilities and credibility and credit insurance on one side.

There is a need to increase ICT imports (same trade barriers as attracting FDI, foreign trade and investments, with more focus on financial credibility).

Promote industries or projects that do not require a lot of water and energy that Jordan lacks. For examples, some farmers plant and irrigate type of plants that consume far more water than rendered feasible on a national level, as over-pumping underground water renders increased salinity and depletion of water that cannot be replenished. The Ministry of Water and Irrigation is studying some heat and drought tolerant species that have high economic return.

Water scarcity: Jordan has one of the lowest levels of water resource availability, per capita, in the


world. Water scarcity will become an even greater problem over the next two decades as the population doubles and climate change potentially makes precipitation more uncertain and variable, particularly in this region. Management of water resources is therefore a key issue facing national government authorities. Increasing overall water extraction to meet demand carries a high cost; Jordan is now accessing non-renewable water resources from fossilized deep-water aquifers. Water quantity and quality also have major health and environmental impacts. Assessing those impacts against alternative water management and efficiency strategies, and in the light of policy costs and economic development issues, can optimize the use of a scarce resource.

Give more attention to SMEs, empower female operated micro-projects to impact local economies

and support innovation. Cater for increased IT usage, which remains low, especially among SMEs and small family

businesses that do not use IT to strengthen their competitiveness. Enhance business environment in light of the difficulties in starting new business, high taxes and

insecurity due to unstable investment environment in light of changing policies and slowness in amending others.

Energy and water Focus on the energy sector in terms of alternate, clean/green and renewable energy such as solar

and wind, which is at ideal levels and annual durations, particularly in light of economic crisis, rise of prices, Egyptian natural gas interruption and dear prices from other sources, let alone the cost of the damage to the environment and health.

Review water policies to adopt a more participatory approach recognize women as primary users of water. Availing water potable water remains a challenge for one of the world’s most water-scarce nations.

Support RDI at the Ministry of Water and Irrigation (MoWI), needed to combat climate change, decreasing rainfall, increased depletion of groundwater, increased salinity of water and soil, contamination of water due to chemical fertilizers and the need for water-saving crops, irrigation methods and techniques. Support the MoWI linkages with academia and water-user associations / farmers.

Aim for regional partnership to finance for regional mega-projects in energy, water, wastewater and solid waste.

Other sectors Tourism & Mining: Work on the unexploited tourism and mining sectors, empower supported by

developed transport, logistics, infrastructure and ICT infrastructure. Media: reform the media, to become more aware on the real drivers in the country and to raise

appropriate awareness and advocacy. Health: Encourage health awareness and debates. Aim for full access to health programs by all

sectors (public and private sectors). Support research and awareness on chronic diseases or other spread diseases that has a high toll on expenditures.

Agriculture: Modernize agriculture methodologies and dealing with marketing strategies to avoid spoiling / or throwing of produce and its wastage.

b. Education and human capital

Employment Aim for demand-driven policies rather than supply-driven ones since readiness of markets into

receptive modes and enabling environments will not be of value if there are no jobs in the market. Encourage projects with high employability, high productivity per person, and those that require less

water and energy resources, and are environmentally friendly. Create real job opportunities, where revenue goes directly to youth / to the country and prevent

them from becoming inactive. Adoption of medical insurance schemes for the private sector. Reform some capital health

expenditures into streamlined health insurance systems for both public and private sectors (value for money to larger segments). Promote and apply social security employment insurance, while spreading awareness on such social reforms.


Fight 13% unemployment among economically active age group and motivate the more than 2 million economically inactive of same age group.

Raise employability among females amounting to 15% of work-age group. This can only be done by increasing market absorption to new males and females jobs, by raising awareness to abolish taboos against certain professions that the cultural does not accept, either due to low wages, or low-end of the career path or unfit for females/males (e.g. male nurses), and by instilling knowledge economy and entrepreneurship skills to promote the creation of new jobs.

Change the reservation wage value, and accommodate nurseries timing. Focus on vocational training for women & spread awareness on business laws among women to facilitate owning businesses.

The need for a professional hiring or selection services, one can go through, to mitigate risks when supporting emerging entrepreneurs or hiring.

Train and harness human capitol as key element in the reform and knowledge transfer channels and key enabler, manager, user and producer of knowledge through long-term strategies.

Instil ICT-based 21st century knowledge economy / entrepreneurial, job creation skills through ICT-based education, pedagogy, and curricula towards knowledge creation, by creating self- and lifelong learners, who are able to think creatively critically and analytically, solve problem, employ scientific research methodologies, have advanced communications skills and are able to work collaboratively (and distantly) within groups, creating connected and networked knowledge economies on national, regional and global levels. Focus on languages, specially the skill of writing, which was found wanting among high school and university graduates, on communications skills (for e-services) and entrepreneurship for job creation and self employment.

Raise specific awareness on the concept of sharing information and the value of group work. Cultural habits affect peoples’ behaviour. In Jordan, like some other countries, the “I” comes before the “We”. This was detected by foreign experts who visited Jordan on missions of standardization. People regard knowledge as a source of income and like to keep it from others, not understanding the value in multi-directional learning and sharing in the “c-learning” model – i.e. connected learning. This situation may also be enhanced through active application of IRP.

Raise quality of basic education and improve girls’ primary education completion. Fight high schools dropouts and declining enrolment rates in secondary education. Recognize illiteracy among younger ages that ‘seep’ through the system.

Increase education expenditures & primary education expenditures. Support private schools, since inflation caused mobility of more than 10,000 students from private

to public schools, burdening the already burdened public system, with expected increase. Already the private teaching has more qualitative traits.

Look into the public and private schools disparities in terms of quality and quantity. Create partnerships and learn from the private sector, particularly where it comes to MIS, where private schools have excelled in finding creative solutions for common problems.

Promote further infrastructure investments attraction in telecommunications, networks, portals, platforms, etc...to avail virtual e-learning to all Jordanians (hence lifelong learning).

Combine will to act and commitment by MoE, with availed budget to implement the last WB policy which follows steps for capital deepening (knowledge acquisition), high quality labour (knowledge deepening); and knowledge creation and innovation (knowledge creation), using ICT as a lever and enabler for change, acting on curricula and assessment, teaching and learning, teachers’ training and pedagogy, technology applications and social infrastructure” (Kozma104).

In higher education, there is a need to instil soft skills among university graduates and bridge the gap with the labour market. Additionally, instilling entrepreneurship and job creation skills, will increase employment chances, as self-learning skills can create new technologies, knowledge and jobs

Avail to the students analyzed market trends to give them a fair status, while creating awareness on shying from most sought for jobs out of tradition (Medicinal Doctor and Engineer) while promoting other jobs.

Find better stability in government subsidies towards universities to allow the latter to plan appropriately, based on stable predictions. Since universities are finding it difficult to adopt long-term financing plans to support its activities.

104 Ref. ICT, Education Reform and Economic Development, Dr. Robert Kozma | October 2007 | Dead Sea, Jordan


Track brain drain phenomena, follow up on the achievements of Jordanians aboard, and create / maintain a knowledge transfer bridge between them and their countries, while working on favourable and encouraging conditions for their return and active interaction.

Focus on persons with disabilities through the Higher Council for the Affairs of Persons with Disabilities (HCD), since although the announce rates are 1.6% of the population, it is believed that 15% of the population have some type of disability – at least 300,000 if not more – that to be seen in the 2014 GoJ – DoS census. Needless to say that tapping into this resource can turn PWD into economically active and aware citizens of their rights and duties. Jordan needs to work on its spatial environment to be more friendly to PWD, and can be a pioneering country in this regard, in the region, in addition to other rights and services supportive policies.

Spread awareness on vocational training and vocational jobs, to negate stereotyping against certain jobs abstained from, out of traditional norms.

Innovation Empower an efficient innovation system of firms, research centres, universities, think-tanks,

consultants and other organizations that can tap into the growing stock of global knowledge, assimilate and adapt it to local needs and create new technology.

Increase public spending on R&D. Increase linkages between with academia. Focus on commercialization on larger scales when feasible.

Participation of national scientists in international networks directing diffusion of new knowledge to service businesses; training of future scientists and encourage foreign specialists through incentives since knowledge transfer is a two-way process.

Motivate companies spending on R&D towards high tech exports. This will increase competitiveness, knowledge transfer and intangible goods and services with high innovation, hence increased investment return, income and employment generation.

ICT infrastructure Further develop the ICT infrastructure, and regulate it. Reduce high telecom costs and PC prices to

raise accessibility and increased internet usage in the country. Create stable ICT enabling environment, particularly tax exemption on PCs /LTs and avoid fluctuating sales tax to prevent interference in purchase powers, due to uncertainty in prices.

Merge ICT with economic, social and cultural aspects of life, reflected in increased usage of internet, mobiles and online e-government tools and e-commerce.

Regulate and enhance ICT Infrastructure that can facilitate effective communication, dissemination and processing of information .Target the ICT infrastructure functions towards developing a knowledge economy, and facilitating knowledge transfer, towards motivated innovation and competitiveness – throughout sectors.

Participate in bridging the gap in lacking national and shared data on all systems levels and across systems, to save time, effort, money and decreases risks and errors, within a larger knowledge management and retention systems.

Support accessibility to information and sharing – inclusive spread of awareness in order to avail adequate levels of market studies on continuous basis, and economy-driven research, in addition to other vital information to citizen and investor.


Acknowledgements (Back)

Entity Contact

Civic Club Socio-economic community club (Al-Faiha) in Shmeisani on economy and energy issues

Consultant Omar Razaz, National Employment. Ex-DG Social Security, (online debate in Arabic)

Free Zones Nabil Romman, President, Board Member, Jordan Free Zones Investment Commission

INTAJ Abed Shamlawi, CEO

JIB Elias S. Farraj, Deputy CEO, Jordan Investment Board

JIB Ahmad Al-Zubi

MoE Dr. Sameh Ghwanmeh, Ministry of Education Consultant

MoE Firyal Aqel, ED, DCU

MoIT Yousef Al-Shamali, Director, Foreign Trade Policy & Relations, MoIT

MoL Nadera Bakheet – (acting Sec. Gen.) Director of TVET council secretariat

MoP Ahmad El Zubi, Director, Research And Studies Department, Jordan Investment Boar

MoP Mukhallad Omari, Director, Policies And Studies Department

Banking Jamal Fariz, CEO/Gm, Tamkeen (Investbank)

Economist Dr. Yousef Mansour

P. Sector Samer Asfour ED PricewaterhouseCoopers, ME Public Sector Institute, Ex CEO JIB

QRC Queen Rania Centre for ICT, Dr. Mohammed Daoud Al-Majali , MD

RSS Wisam Rabadi, ED iPark

RSS Dr. Nabeel Ibrahim Al-Fayoumi, VP , Royal Scientific Society

RSS Daher Daher, Acting Executive Director of ICTD, Royal Scientific Society

RSS Islam Mamdouh Ahmad, System Analyst

RSS - iPark Omar Hamarneh, CEO iPark


Annexes 1 – 13

Annex 1 Definitions

Annex 2 Acronyms

Annex 3 References

Annex 4 Global Competitiveness Index

Annex 5 Financial Development Index

Annex 6 WEF Global Trade Enabling Report

Annex 7

7 a MCC Score Card

7 b MCC Score Card Instructions

Annex 8 Doing Business

Annex 9 JIB Fact Sheet

Annex 10 Jordan Trade Relationships

Annex 11 Industry Analysis

Annex 12 Global Innovation Index

Annex 13 iPark Achievements

(Back to Table of Content)


Annex 1 Definitions - (Back)

Community of Practice (CoP)

The process of sharing information and experiences within a group. CoPs can exist online, such as within discussion boards and newsgroups, or in real life, such as on a factory floor.

Diffusion of Innovation

Diffusion of innovation is how, why, and at what rate new ideas and technology are spreading through cultures. It is a process by which innovation is communicated through certain channels over time in a social system. (Everett M. Rogers, 2004)

Innovation One Definition: Innovation is the creation of enhanced products, processes, technologies or ideas that are accepted by markets, governments, and society. It caters for actual use of new ideas or methodologies, based on fundamental knowledge and change in attitude105 across sectors, rather than its mere creation (pure invention), ultimately, materializing into the comfort of everyday life, (transport, infrastructure, safety ...) on the social aspect, and into a catalyst to growth, in business and economies.

Tacit Knowledge The knowledge that is difficult to transfer by means of writing or verbalizing, such as the ability to speak a language, use algebra, or design and use complex equipment, as opposed to formal or explicit knowledge. It is not easily shared as it involves learning and skill, and includes habits and culture, often described as: “know-how” as opposed to “know-what” (facts), “know-why” (science), or “know-who” (networking).

Work Shadowing The process of following and watching another worker, for training or research purposes.

Phases of Knowledge Creation

Basic education approach: Providing the skills needed for improved health and welfare and to participate in the formal economy.

Knowledge acquisition approach: Increasing the knowledge level of the workforce and citizenry and their ability to use technology.

Knowledge deepening approach: Increasing the ability of the workforce and citizenry to use knowledge to participate in society and add value to economic output by applying school knowledge to solve complex, real-world problems.

Knowledge creation approach: Increasing the capability of the citizenry and workforce to continually learn, to create cultural artefacts, to innovate and produce new knowledge, and to benefit from this new knowledge. (Kozma, UNESCO)

Vertical & Horizontal FDI

Vertical FDI takes place when the multinational fragments the production process internationally, locating each stage of production in the country where it can be done at the least cost. Horizontal FDI occurs when the multinational undertakes the same production activities in multiple countries. http://www.nber.org/papers/w8631

105 Tarde, G. (1903). The laws of imitation (E. Clews Parsons, Trans.). New York: H. Holt & Co.

http://www.nber.org/papers/w8631


Annex 2 Acronyms – (Back)

< Less Than

Change

ASEZA Aqaba Special Economic Zone Authority

B Billion

BPO Business Process Outsourcing

CBJ Central Bank Of Jordan

CEO Chief Executive Officer

CO2 Carbon Dioxide

COP Community Of Practice

CPI Consumer Price Index

DOS US Department Of State

DOS Department Of Statistics

E East

EHBP El Hassan Business Park

EIB European Investment Bank

EU European Union

FDI Foreign Direct Investment

FT Foreign Trade

FTA Free Trade Agreement

FTE Fulltime Equivalent

GCC Gulf Cooperative Council

GDE Gross Domestic Expenditure

GDP Gross Domestic Product

GERD Gross Domestic Expenditure On R&D

GFMIS Government Financial Management Information System

GOJ Government Of Jordan

GPTS General Purpose Technologies

HCST Higher Council For Science And Technology

HDI Human Development Index

HM His Majesty

HMIC Higher Middle Income Countries

HRH His Royal Highness

ICT Information And Communications Technology

IFC International Monitory Fund

ILO International Labour Organization

IP Intellectual Property

IPCO Intellectual Property Commercialization Office

IPR Intellectual Property Rights

IT Information Technology

JIB Jordan Investment Board

KA Knowledge Absorption

KAM Knowledge Assessment Methodology

KE Knowledge Economy

KEI Key Economic Indicators

KPI Key Performance Indicators

KTC Knowledge Transfer Channels

LAS League Of Arab States

LA Latin America

M Million

MBRF Mohammed Bin Rashid Al Maktoum Foundation


ME Middle East

MENA Middle East And North Africa

MOH Ministry Of Health

MOPIC Ministry Of Planning And International Cooperation

N North

NPISH Non Profit Institutions Serving Households

OECD Organization For Economic Cooperation And Development

PE Private Equity

PE/VC Private Equity And Venture Capital

PM Prime Minister

PPP Private Public Partnership

PWD People with Disabilities

QAIA Queen Alia International Airport

QRCE Queen Rania Centre For Entrepreneurship

R&D Research And Development

RDI Research, Development And Innovation

S South

S&T Science And Technology

SSC Social Security Corporation

TRC Telecommunications Regulatory Commission

UAE United Arab Emirates

UJ University Of Jordan

UN United Nations

UNDP United Nations Development Office

VC Venture Capital

W West

WANA West Asia And North Africa

WB World Bank

WBI World Bank Institute

WHO World Health Organization

WSIS World Summit On The Information Society


Annex 3 References – (Back)

2010 (Wikipedia) 2011 The Little Data Book On Information And Communication Technology –WBG A Candid Review of Jordan’s innovation Policy. WB / Korea Rapid Innovation Action Learning

(RIAL) Team for Jordan: J.F. Richard, J. White, S. Chung, J.S. Kim. April 2010 (revised December 2010),

A European Initiative For Growth - Investing In Networks And Knowledge For Growth And Jobs

Al-Liwa online media, Mohammad Sapti http://al-liwa.com/News.aspx?id=93239&sid=3 Al-Rai - http://www.alrai.com/article/22471.html Arab knowledge report 2009, Towards Productive Intercommunication for Knowledge,

Mohammed bin Rashid Al Maktoum Foundation (MBRF) and the United Nations Development Programme/ Regional Bureau for Arab States (UNDP/RBAS

Belkacem Laabas, Walid Abdmoulah API/WPS 0905 Cohen and Levinthal (1990), "Absorptive capacity Commission on Growth and Global Development (2008) Cowan, Luc Soete & Oxana Tchervonnaya - 2001-2021 Cowan, Soete and Tchervonnaya, 2001 Defined as age group 16 – 64 seeking employment Development, Education and Finance. Analysis of debt swap for social investment as an extra-

budgetary education financing instrument. By Senator Diego Filmus – Esteban Serrani. DFID Growth Research Newsletter - December 2011 Doing business in a more transparent world , WB and IFC 2012-01-09. Comparing regulation for

domestic firms in 183 economies Education for employment: realizing Arab youth potential IFC and the Islamic Development

Bank www.e4earabyouth.com FDI Indicators Project, OECD Global Forum on International Investment, 2008, Peter Kusek,

[email protected] - FIAS The multi-donor investment climate advisory service of the World Bank Group. http://www.oecd.org/dataoecd/2/32/40435871.pdf

FDI Intelligence from Financial Times Ltd FDI Intelligence from Financial Times Ltd) Federal Ministry for Economic Cooperation and Development (BMZ). IT Sector Promotion in

Developing and Emerging Countries Manual Developed by GIZ Figures from e4e Arab Youth – IFC & IDB, Education For Employment: Realizing Arab Youth

Potential IFC And The Islamic Development Bank www.e4earabyouth.com Gallouj, 2000 Getting the Arab Youth into Employment by Tom Speechley, January 14, 2012

http://www.wamda.com/2012/01/getting-the-arab-youth-into-employment Global Innovation Index 2011 Accelerating Growth and Development Soumitra Dutta,

INSEAD Editor Global Investment House- Jordan -

http://www.jordanecb.org/library/634448683491060000.pdf Graph source Telecom: Arab Advisors Group and int@j Industry Classification and Statistics

2009 Harman, C.; Brelade, S. (2003). Knowledge Management Review (Melcrum Publishing) 6 (1): 28–

31. Higher Education, Research and Innovation – changing dynamics, Higher Education, Research

and Innovation: Changing Dynamics Report on the UNESCO Forum on Higher Education, Research and Knowledge 2001-2009

Higher Education, Research and Innovation: Changing Dynamics Report on the UNESCO Forum on Higher Education, Research and Knowledge 2001-2009

http://en.wikipedia.org/wiki/Knowledge_economy http://en.wikipedia.org/wiki/Knowledge_transfer#cite_note-Argote_Ingram_2000-0

http://al-liwa.com/News.aspx?id=93239&sid=3


mailto:[email protected]

http://www.oecd.org/dataoecd/2/32/40435871.pdf


http://www.wamda.com/tomspeechley


http://www.jordanecb.org/library/634448683491060000.pdf

mailto:int@j



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Dead Sea, Jordan ICT, Education Reform and Economic Development, Dr. Robert Kozma, Oct. 2007, Dead Sea,

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Guarantee Corporation Jordan Times, 16 December 2010, added by UrdunMubdi3 at 3:12pm on December 16, 2010-

http://urdunmubdi3.ning.com/xn/detail/2651659:Topic:22557 Jordan’s Department of Statistics Keller, 1996, p.200 KT and Absorption in MENA, Dr. Jacques van der Meer, EIB, CMI 2011 Manufacturing, Construction, and Agriculture GDP and Employment: Department of Statistics.

ICT: int@j Industry Classification and Statistics 2009. Tourism: Ministry of Tourism Mapping research systems in developing countries, UNESCO Marani (2006) May 3, 2010 ICT Policies and Educational Transformation - A UNESCO Publication. Chapter 2

- A Framework for ICT Polices to Transform Education - Robert B. Kozma, PhD. MD - World Competitiveness Criterion of the Month - January 2012 Measuring The Impacts of ICT for Development (UNCTAD – UN Conference on Trade and

Development) Measuring the Impacts of ICT for Development. UN Conference on Trade & Development Mohammed Bin Rashid Al Maktoum Foundation Mohammed bin Rashid Al Maktoum Foundation (MBRF) and the United Nations Development

Programme/ Regional Bureau for Arab States (UNDP/RBAS) MoICT – ICT Economic Impact Mol – An Analytical Study of Lab our Market Status in Jordan, 28/6/2010 Nelson & Winter (1982), "The Schumpeterian Tradeoff Revisited", OECD (1999), Managing national innovation systems, OECD publications service, Paris Posted by Yusuf Mansur on January 29, 2012 at 7:17 (Blog-Urdun-Mubdi)



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http://www.laundryman.u-net.com/page8_efonfin.html

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http://urdunmubdi3.ning.com/profile/YusufMansur


Prof. Dr. Wolfgang Michalski - The Role of Education in the Knowledge-Intensive Economy and Society of the 21st Century

Pyramid Perspective 2012 Top Trends in the Global Communications Industry Rigas Arvanitis, ESTIME Rigas Arvanitis, coordinator the Estime project (evaluation of scientific and technological

capabilities in Mediterranean countries) Saggi, 2002; Keller, 2004 and Kneller, Pantea and Upward, 2009 Seaton R.A.F. & Cordey-Hayes M., Technovation, 13: 45-53, 1993. Stibora and de Vaal 1999 P. 160 Telecommunications Regulatory Commission, http://www.trc.gov.jo/ The “National, Regional and Global Perspectives of Higher Education and Science Policies in

the Arab Region” Minerva: A Review of Science, Learning and Policy, Springer, December 2011 Minerva, Springer, Germany, December, Vol. 49, No. 4, December 2011, pp. 387-423

The incidence and transfer of knowledge in the Arab countries Dr. Samia Satti Osman Mohamed Nour

The incidence and transfer of knowledge in the Arab countries Dr. Samia Satti Osman Mohamed Nour

The Organization for Economic Co-operation and Development (OECD), There are currently 34 members of the OECD

The Technological, Economic and Social Contexts for Educational ICT Policy, Robert B. Kozma . A UNESCO Publication

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http://urdunmubdi3.ning.com/forum/topics/2651659:Topic:50612 (Arabic) US DoS Bureau of Near Eastern Affairs, December 30, 2011 USA (Stiroh, 2003), UK (Borghans and ter Weel, 2001; Dickerson and Green, 2004; Crespi and

Pianta, 2008), Canada (Gera and Gu, 2004; Zoghi, Mohr and Meyer, 2007), France (Askenazy, Caroli and Marcus, 2001; Maurin and Thesmar, 2004), Finland (Leiponen, 2005), Japan (Nonaka and Takeuchi, 1995) and Switzerland (Arvanitis, 2005)

Van Ark et al. 1999, p.31 Van Hoesel and Narula 1999, p.16 Van Hoesel and Narula 1999, p.16 Wes Schwalje, LSE, UK Wes Schwalje, LSE, UK www.eib.org/report Zahra and George (2002), "Absorptive Capacity: A Review, Re-conceptualization and

Extension"

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http://urdunmubdi3.ning.com/forum/topics/2651659:Topic:50612

http://www.eib.org/report


Annex 4 Global Competitiveness Index 2009-2011 – (Back)

The Global Competitiveness Index 2009/2010 and 2010/2011 – Jordan (Lower Rank = Better Performance( Difference in Performance Rank in 2010 Rank in 2009 Year

139 133 Main Pillars / Participating countries

11 57 46 Basic Requirement

16 41 25

Institutions

19 61 42 Infrastructure

2 103 105 Economic environment

8 65 57 Health and basic education

7 73 66 Efficiency Enhancers 15 57 42

Higher education and training

3 46 43 Market efficiency

6 112 106 Labour market efficiency

2 54 52 Financial markets development

1 62 61 Technological readiness

2 84 82 Market size

14 65 51 Innovation & Sophistication Factors 17 66 49 Business environment development

9 68 59 Innovation


Annex 5 Financial Development Index Indicators (2009 – 2010) / Jordan – (Back)

Change 2010 2009 Year

57 55 Main Components and Respective Indicators Participating countries

-2 25 23 Institutional Environment

-2 22 20 1.1 Financial sector Liberalization

- 1 1 1.1.1 Capital Account Liberalization

- 21 21 1.1.2 Commitments to WTO agreement on trade in services

+5 36 41 1.2 Corporate governance

-2 54 52 1.2.1 Extent of incentive-based compensation

-6 39 33 1.2.2 Efficacy of corporate boards

-9 50 41 1.2.3 Reliance on professional management

-6 43 37 1.2.4 Willingness to delegate

-6 25 19 1.2.5 Strength of auditing and reporting standards

-3 26 23 1.2.6 Ethical behaviour of firms

-10 19 9 1.2.7 Protection of minority shareholders’ interests

-5 30 25 1.3 Legal and regulatory issues

-12 19 7 1.3.1 Burden of government regulation

-7 45 38 1.3.2 Centralization of economic policymaking

-1 19 18 1.3.3 Regulation of securities exchanges

-3 21 18 1.3.4 Property rights

-2 24 22 1.3.5 Intellectual property protection

-1 24 23 1.3.6 Diversion of public funds

-6 23 17 1.3.7 Public trust of politicians

- 26 26 1.3.8 Corruption perceptions index

-1 40 39 1.3.9 Strength of legal rights index

n/a 46 - 1.3.10 Central Bank Transparency

-2 40 38 1.4 Contract enforcement

-14 44 30 1.4.1 Effectiveness of law-making bodies

-6 27 21 1.4.2 Judicial independence

-4 26 22 1.4.3 Irregular payments in judicial decisions

-3 48 45 1.4.4 Time to enforce a contract

+2 39 41 1.4.5 Number of procedures to enforce a contract

-2 49 47 1.4.6 Strength of investor protection

-2 44 42 1.4.7 Cost of enforcing contracts

-6 43 37 Business environment

-5 40 35 2.1 Human capital

-12 45 33 2.1.1 Quality of management schools

-9 31 22 2.1.2 Quality of math and science education

-14 52 38 2.1.3 Extent of staff training

-1 33 32 2.1.4 Local availability of specialized research

- 48 48 2.1.5 Brain drain and ease of hiring foreign labour

-1 35 34 2.1.6 Tertiary enrolment

-10 33 23 2.2 Taxes

-14 36 22 2.2.1 Irregular payments in tax collection

-7 28 21 2.2.2 Distortive effect on competition of taxes and subsidies

- 33 33 2.2.3 Marginal tax variation

- 9 9 2.2.4 Time to pay taxes

-3 43 40 2.3 Infrastructure

-3 24 21 2.3.1 Quality of overall infrastructure

-2 19 17 2.3.2 Quality of telephone infrastructure

+3 41 44 2.3.3 Internet users

-1 46 45 2.3.4 Broadband Internet subscribers

-5 52 47 2.3.5 Telephone lines


-3 43 40 2.3.6 Mobile telephone subscribers

- 48 48 2.4 Cost of doing business

-3 55 52 2.4.1 Cost of starting a business

-1 51 50 2.4.2 Cost of registering property

- 20 20 2.4.3 Cost of closing a business

- 21 21 2.4.4 Time to start a business

-2 22 20 2.4.5 Time to register property

-2 50 48 2.4.6 Time to close a business

+9 41 50 Financial stability

+12 39 51 3.1 Currency stability

+1 24 25 3.1.1 External vulnerability indicator

-2 57 55 3.1.2 Current account balance to GDP

n/a 33 n/a 3.1.3 Dollarization vulnerability indicator

-1 30 29 3.1.4 External debt to GDP developing economies

-3 19 16 3.2 Banking system stability

+4 16 20 3.2.1 Frequency of banking crises

+9 10 19 3.2.2 Financial strengths indicator

-3 11 8 3.2.3 Aggregate measure of real estate bubbles

n/a 1 n/a 3.2.4 Tier 1 capital ratio

n/a 52 n/a 3.2.5 Output loss during banking crises

+4 46 50 3.3 Risk of sovereign debt crisis

-2 41 39 3.3.1 Local currency sovereign rating

-4 48 44 3.3.2 Foreign currency sovereign rating

41+ 9 50 3.3.3 Aggregate macro-prudential indicator

+3 41 44 3.3.4 Manageability of public debt

-11 26 15 Banking financial services

-1 10 9 4.1 Size index

-2 16 14 4.1.1 Deposit money bank assets to GDP

-4 13 9 4.1.2 Central bank assets to GDP

-2 10 8 4.1.3 Financial system deposits to GDP

+1 8 9 4.1.4 M2 to GDP

+1 20 21 4.1.4 Private credit to GDP

-2 11 9 4.1.5 Bank deposits to GDP

n/a 26 n/a 4.1.6 Money market instruments to GDP

-10 21 11 4.2 Efficiency index

-19 31 12 4.2.1 Aggregate profitability indicator

-5 22 17 4.2.2 Bank overhead costs

- 1 1 4.2.3 Public ownership of banks

-4 25 21 4.2.4 Bank operating costs to assets

+5 33 38 4.2.5 Non-performing bank loans to total loans

-2 54 52 4.3 Financial information disclosure

-3 49 46 4.3.1 Private credit bureau coverage

-1 21 20 4.3.2 Public credit registry coverage

-6 29 23 Non Banking financial services

-9 25 16 5.1 IPO activity

-3 49 46 5.1.1 IPO market share

-4 11 7 5.1.2 IPO proceeds amount

-12 46 34 5.1.3 Share of world IPOs

-4 35 31 5.2 Mergers and Acquisitions activities

-4 54 50 5.2.1 M&A market share

-7 25 18 5.2.2 M&A transaction value to GDP

-3 53 50 5.2.3 Share of total number of M&A deals

n/a 47 n/a 5.3 Insurance

n/a 49 n/a Life Insurance density

n/a 27 n/a Non- Life Insurance density


WEF Financial Development Index Indicators (2009-2010): Ranking of Jordan in comparison to MENA countries

= Change. 2009 (55 countries) and 2010 (47 countries)

Ranking of Jordan in comparison to MENA countries

= Change. 2009 (55 countries) and 2010 (47 countries)

Overall Rank Institutional Environment

Business Environment

Financial Stability

Year 2009 2010

2009 2010

2009 2010

2009 2010

Countries 55 47

55 47

55 47

55 47

Jordan 25 29 -4 23 25 -2 37 43 -6 50 41 9

Emirates 20 21 -1 21 23 -2 19 21 -2 17 6 11

S. Arabia 24 26 -2 25 29 -4 24 22 2 6 1 5

Bahrain 27 23 4 20 21 -1 18 14 4 40 23 17

Israel 28 27 1 24 19 5 27 33 -6 27 32 -5

n/a 42 n/a Real growth of direct insurance premiums

n/a 54 n/a Life Insurance Coverage

n/a 48 n/a Non- Life Insurance Coverage

- -5 17 12 Relative value-added of insurance to GDP

+1 14 15 5.4 Securitization

+1 5 6 5.4.1 Securitization to GDP

+2 52 54 5.4.2 Share of total number of securitization deals

-6 19 13 Financial markets

n/a n/a n/a 6.1 Foreign exchange markets

n/a n/a n/a 6.1.1 Spot foreign exchange turnover

n/a n/a n/a 6.1.2 Outright forward foreign exchange turnover

n/a n/a n/a 6.1.3 Foreign exchange swap turnover

n/a n/a n/a 6.2 Derivatives markets

n/a n/a n/a 6.2.1 Forward rate Interest rate derivatives turnover

n/a n/a n/a 6.2.2 Interest rate derivatives turnover Swaps

n/a n/a n/a 6.2.3 Interest rate derivatives turnover Options

n/a n/a n/a 6.2.4 Foreign exchange derivatives turnover Currency swaps

n/a n/a n/a 6.2.5 Foreign exchange derivatives turnover Options

-7 21 14 6.3 Equity market development

-3 43 40 6.3.1 Stock market turnover ratio

- 4 4 6.3.2 Stock market capitalization to GDP

- 20 20 6.3.3 Stock market value traded to GDP

-1 10 9 6.3.4 Number of listed companies per 10,000 people

n/a n/a n/a 6.4 Bond market development

n/a 54 n/a 6.4.1 Private international bonds to GDP

n/a 44 n/a 6.4.2 Public international bonds to GDP

-14 34 20 Financial access

-11 20 9 7.1 Commercial access

-2 35 33 7.1.1 Financial market sophistication

-3 35 32 7.1.2 Venture capital availability

-19 30 11 7.1.3 Ease of access to credit

-19 23 4 7.1.4 Financing through local equity market

-4 34 30 7.1.5 Ease of access to loans

-8 13 5 7.1.6 Foreign direct investment to GDP

-11 31 20 7.2 Retail access

-3 24 21 7.2.1 Market penetration of bank accounts

+1 24 25 7.2.2 Commercial bank branches

n/a 40 n/a 7.2.3 Total number of ATMs

-1 8 7 7.2.5 MFI borrowers’ penetration rate


Kuwait 30 28 2 36 37 -1 29 32 -3 8 18 -10

Egypt 36 38 2 38 38 - 46 48 -2 45 35 10

Morocco - 41 - - 49 - - 41 - - 16 -

Banking & Financial

Services Non-Banking Financial

Services Financial Market Financial Access

Country 2009 2010

2009 2010

2009 2010

2009 2010

Jordan 15 26 -11 23 29 -6 13 19 -6 20 34 -14

Emirates 21 20 1 26 28 -2 21 28 -7 7 15 -8

S. Arabia 31 34 -3 34 54 -20 31 35 -4 10 4 6

Bahrain 32 14 18 33 38 -5 39 42 -3 5 9 -4

Israel 26 21 5 37 31 6 32 22 10 24 17 7

Kuwait 28 30 -2 54 52 2 18 9 9 39 41 -2

Egypt 40 42 -2 31 33 -2 34 38 -4 11 21 -10

Morocco - 32

- 42 - - 45 - - 45 -

Source: Jordan Mop / WEF Financial Development Index 2010


Annex 6 – Jordan’s performance on the WEF Global Trade Enabling Report (2009-2010)

(Back)

Jordan’s performance on the WEF Global Trade Enabling Report (2009-2010)

Lower Rank = Better Performance(

2010 2009 Year

125 121 Participating countries

Main Pillars & Economic Indicators 10 51 61 Market Access 10 51 61 Domestic and foreign market access 9 45 36 Border Administration 16 50 34 Efficiency of customs administration 7 61 54 Efficiency of import-export

procedures 2 36 34 Transparency of border

administration & Transport 52 52 ثابت

Communications Infrastructure

9 50 59 Availability & quality of transport infrastructure

14 53 39 Availability & quality of transport services

Availability and use of ICTs 65 65 ثابت1 21 22 Business Environment Regulatory framework 30 30 ثابت1 13 14 Physical security


Population 5,951,000

Annex 7 A - (Back) Jordan FY11 GNI/Cap: $3,740 LMIC

Ruling Justly

Sources: Freedom House Freedom House World Bank/Brookings WGI World Bank/Brookings WGI World Bank/Brookings WGI World Bank/Brookings WGI

Investing In People

WHO/UNICEF WHO UNESCO/National Sources

Economic Freedom

UNESCO CIESIN/YCELP

World Bank/Brookings WGI IFAD/IFC IFC Heritage Foundation IMF WEO IMF WEO

How to Read this Scorecard: Each MCC Candidate Country receives an annual scorecard assessing its performance in 3 policy categories: Ruling Justly, Investing in People, and Economic Freedom. Under the name of each indicator is the country’s score and percentile ranking in its income peer group (0% is worst; 50% is the median; 100% is

best). Under each country’s percentile ranking is the peer group median. Country performance is evaluated relative to the peer group median. Scores above the median,

represented with green, meet the performance standard. Scores at or below the median, represented with red, do not meet the performance standard. The black line that

runs along the horizontal axis represents the peer group median. Each of the Worldwide Governance Indicators (World Bank/Brookings Institution) is accompanied by a

margin of error, which is represented by the vertical blue bar.

For more information regarding the Millennium Challenge Account Selection Process and these indicators, please consult MCC’s website: www.mcc.gov

10/18/2010

Regulatory Quality

Land Rights and

Access

Business Start-Up

Trade Policy

Inflation

Fiscal Policy

Data 0.77 (90%) 0.838 (80%) 0.961 (45%) 78.8 (67%) -0.7 (82%) -5.6 (11%)

Median 0.00 Median 0.706 Median 0.964 Median 73.9 Max. 15 Median -1.2

2 . 0

1. 0

0 . 0

- 1. 0

- 2 . 0

' 0 5 ' 0 7 ' 0 9

1.0

0 .8

0 .6

0 .4

0 .2

0 .0

' 0 6 ' 0 8 ' 10

1.0

0 .8

0 .6

0 .4

0 .2

0 .0

' 0 6 ' 0 8 ' 10

10 0

80

60

40

20

' 0 6 ' 0 8 ' 10

0

10

20

30

' 0 5 ' 0 7 ' 0 9

10

5

0

-5

- 10

' 0 5 ' 0 7 ' 0 9

Immunization Rates

Health Expenditures

Primary Education

Expenditures

Girls' Primary

Education Completion

Natural Resource

Management

Data 96.5 (67%) 5.28 (83%) 1.80 (38%) 100.3 (74%) 80.90 (40%)

Median 93.5 Median 2.72 Median 1.95 Median 94.3 Median 82.50

10 0

8 0

6 0

4 0

2 0

' 0 5 ' 0 7 ' 0 9

15

12

9

6

3

0

' 0 5 ' 0 7 ' 0 9

10

8

6

4

2

0

' 0 6 ' 0 8 ' 10

13 0

10 0

70

4 0

10

' 0 6 ' 0 8 ' 10

10 0

75

50

2 5

0

' 0 6 ' 0 8 ' 10

Political Rights

Civil Liberties

Control of

Corruption

0.65 (90%)

Government

Effectiveness

Rule of Law

Voice and

Accountability

Data 10 (19%) 24 (26%) 0.65 (94%) 0.71 (87%) -0.60 (26%)

Median 21 Median 32.5 Median 0.00 Median 0.00 Median 0.00 Median 0.00

40

30

20

10

0

' 0 5 ' 0 7 ' 0 9

60

40

20

0

' 0 5 ' 0 7 ' 0 9

2 . 0

1. 0

0 . 0

- 1. 0

- 2 . 0

' 0 5 ' 0 7 ' 0 9

2 . 0

1. 0

0 . 0

- 1. 0

- 2 . 0

' 0 5 ' 0 7 ' 0 9

2 . 0

1. 0

0 . 0

- 1. 0

- 2 . 0

' 0 5 ' 0 7 ' 0 9

2 . 0

1. 0

0 . 0

- 1. 0

- 2 . 0

' 0 5 ' 0 7 ' 0 9

http://www.mcc.gov/


Reading the Scores—A Reference Guide Annex 7 B – (Back)

Every year each MCC candidate country receives a scorecard assessing performance in three

policy categories: Ruling Justly, Investing in People, and Encouraging Economic Freedom.

Indicator Name

Green bar: meets

performance standard

Red bar: does not meet

performance standard

Country’s score

Country’s percentile ranking

in its respective income group

(0 percent is the worst;

50 percent is the median:

100 percent is the best)

Median or threshold

score for country’s

income group

(country score

must be greater than

this score to pass)

2.0

Margin of error

(when known)

Current year’s median

score in the respective

country’s income group

Country’s score

Performance range

Year

World Bank/Brookings WGI

Data source 2011-017-0494-02

For more information regarding the MCA Selection Process and these indicators, please visit MCC’s website at www.mcc.gov/selection

7 2012 Country Scorebook

Rule of Law

0.15 (61%)

Median 0.00

1.0

0.0

’04 ’05 ’06 ’07 ’08

-1.0

-2.0

http://www.mcc.gov/selection


Annex 8 - Jordan’s Doing Business Profile – IFC – (Back)

Jordan’s Doing Business Profile – IFC

Doing Business 2005 2006 2007 2008 2009 2010 2011

Ease of Doing Business 73 74 78 80 101 100 111

Starting a Business 127 133 133 133 119 125 127

Dealing with Construction Permits 68 71 70 71 116 92 92

Employing Workers 30 45 30 45 48 51 --

Registering Property 110 106 110 109 105 106 106

Getting Credit 76 80 83 84 125 127 128

Protecting Investors 114 105 118 107 114 119 120

Paying Taxes 16 19 18 19 22 26 29

Trading Across Borders 85 51 78 59 77 71 77

Enforcing Contracts 72 128 75 128 129 124 129

Closing a Business 79 84 84 87 96 96 98

Participating Countries 135 155 175 178 181 183 183

Economy Jordan

Year 2011

Ease of Doing Business Rank 95

Starting a Business - Rank 98

Starting a Business - Procedures (number) 7

Starting a Business - Time (days) 12

Starting a Business - Cost (% of income per capita) 16.3

Starting a Business - Paid-in Min. Capital (% of income per capita) 17.9

Dealing with Construction Permits - Rank 94

Dealing with Construction Permits - Procedures (number) 17

Dealing with Construction Permits - Time (days) 70

Dealing with Construction Permits - Cost (% of income per capita) 630.5

Getting Electricity - Rank 35

Getting Electricity - Procedures (number) 5

Getting Electricity - Time (days) 43

Getting Electricity - Cost (% of income per capita) 323.8

Registering Property - Rank 103

Registering Property - Procedures (number) 7

Registering Property - Time (days) 21

Registering Property - Cost (% of property value) 7.5

Getting Credit - Rank 130

Getting Credit - Strength of legal rights index (0-10) 4

Getting Credit - Depth of credit information index (0-6) 2

Getting Credit - Public registry coverage (% of adults) 1.5

Getting Credit - Private bureau coverage (% of adults) 0

Protecting Investors - Rank 120

Protecting Investors - Extent of disclosure index (0-10) 5

Protecting Investors - Extent of director liability index (0-10) 4


Protecting Investors - Ease of shareholder suits index (0-10) 4

Protecting Investors - Strength of investor protection index (0-10) 4.3

Paying Taxes - Rank 19

Paying Taxes - Payments (number per year) 26

Paying Taxes - Time (hours per year) 101

Paying Taxes - Profit tax (%) ..

Paying Taxes - Labour tax and contributions (%) ..

Paying Taxes - Other taxes (%) ..

Paying Taxes - Total tax rate (% profit) 31.2

Trading Across Borders - Rank 74

Trading Across Borders - Documents to export (number) 6

Trading Across Borders - Time to export (days) 14

Trading Across Borders - Cost to export (US$ per container) 825

Trading Across Borders - Documents to import (number) 7

Trading Across Borders - Time to import (days) 18

Trading Across Borders - Cost to import (US$ per container) 1,335

Enforcing Contracts - Rank 130

Enforcing Contracts - Time (days) 689

Enforcing Contracts - Cost (% of claim) 31.2

Enforcing Contracts - Procedures (number) 38

Resolving Insolvency - Rank 104

Resolving Insolvency - Time (years) 4.3

Resolving Insolvency - Cost (% of estate) 9

Resolving Insolvency - Recovery rate (cents on the dollar) 26.9

Source: http://www.doingbusiness.org/CustomQuery/ (Back)

http://www.doingbusiness.org/CustomQuery/


Annex 9 – Jordan Country Fact Sheet (JIB) – (Back)

i. Jordan Economic Indicators

ii. Jordan Macro Economic Indicators

i. Jordan Economic Indicators

(Back)


2010 2009 2008 2007 2006

Money and banking April

Currency with the public 2,746.30 2,679.50 2,664.80 2,172.40 2,027.40

Deposits of residents 14,700.60 14,444.60 12,314.00 9,809.10 8,760.00

Deposits of residents in Foreign currencies 3,027.80 2,889.20 3,325.40 3,625.30 3,322.30

Money supply (m2) 20,474.70 20,013.30 18,304.20 15,606.80 14,109.70

Foreign assets (net) 9,202.00 8,881.40 7,101.50 7,866.80 7,408.30

Domestic assets (net) of which: 11,272.70 11,131.90 11,207.70 77,401.00 6,701.40

Claims on public sector (net) 4,775.40 5,100.80 4,773.10 2,725.60 1,988.40

Claims on private sector (resistant) 12,854.90 12,693.40 12,533.50 11,003.30 9,546.40

Public finance March

Domestic revenue 1,197.70 4,192.80 4,375.40 3,628.10 3,164.40

Foreign Grants 68.2 333.4 718.3 343.4 304.6

Current expenditures (commitment basis) 1,103.80 4,536.30 4,473.40 3,743.90 3,118.10

Capital expenditures 143.9 1,439.70 958.5 842.6 794.1



2010 2009 2008 2007 2006

Deficit/surplus (including grants 18.2 -1,449.80 -338.2 -615 -443.2

Deficit / surplus (excluding grants) -50 -1,783.20 -1,056.50 -958.4 -747.8

In % of GDP

Deficit / Surplus (including Grants) -8.9 -2.2 -5.1 -4.3

Domestic Revenues 25.8 29.1 30.1. 30.5

Internal and external public debt (million JDs)

March

Gross Domestic Debt of central government

(budgetary and own- budget (agencies) 7,012 7,086 5,754 3,695 2,961

In percent of GDP 43.6 38.2 30.6 28.5

In percent of domestic revenues 7.6 5.9 4.8 4.3

External public outstanding 3,864.90 3,869.00 3,640.20 5,253.30 5,186.50

In percent of GDP 23.8 24.2 43.6 50

External Public debt of service (commitment base)

32.4 388.9 1,954.50 618.8 593.6

In percent of exports of goods and non factor

Services 5 22.2 7.3 7.7

External Factor

Current account -899.8 -1,546.00 -2,038..0 -1,223.80

Trade balance (deficit-) -4,353.70 -5,084.40 -4,574.20 -3,584.70

Exports FOB 4,519.60 5,633.00 4,063.60 3,689.90

Imports FOB 8,873.30 10,771.40 8,637.80 7,274.60

Capital and financial account (net) o/w: 306.7 1,439.50 1,662.80 1,369.90

Direct foreign investment in Jordan 1,691.00 2,005.70 1,859.10 2,512.70

April

Gross official Reserves 7,868.50 7,713.30 5,490.50 4,871.40 4,326.10

Coverage of prospective imports of goods and non-factor services (in months)

8 8.1 6.2 4.7 5.1

% GDP

Current account -5.5 -10.3 -16.9 -11.8

Trade Balance (Deficit-) -26.8 -33.8 -37.9 -34.5

Services balance (net) 3.3 1.74 0.2 -0.4

Production and prices

Nominal GDP at market prices (JD Million) 16,266.20 15,056.00 12,056.80 10,378.60

Population (in millions) 5.98 5.85 5.723 5.6

Per capita GDP at current

%Change

Nominal GDP at market prices 8 24.9 16.2 16.3

Real GDP at market prices 2.85 7.8 8.8 8.1

GDP deflator at market prices (1994=100) 5.1 15.9 6.7 7.6

April

Percentage change in consumer price index (2006=100

0.4 -0.7 13.9 4.7 6.25

(1) : including public entities



2010 2009 2008 2007 2006

Bonds

Source: Central bank of Jordan (taken from Jordan Country Fact Sheet (JIB)

(Back)


Annex 10 – Jordan Trade Relationships – (Back) Jordan Country Fact Sheet - JIB

i. Trade Relationships Ten Partners (Millions JD – Excludes Re-Exports)

ii. Foreign Trade Statistics (Thousand JD) iii. Bilateral trade between Jordan and Middle East 2009 (Includes Re-Exports) - Thousand

USD iv. Global Trade Data (US Dollar Millions)

i. Trade Relationships Ten Partners (Millions JD – Excludes Re-Exports)

Country 2008 2009 %of total

trade Imports (2009) Exports (2009) Re-Exports

Saudi Arabia 2,887.60 2,106.50 15.5 1,728.96 377.504 34.129

USA 1,287.30 1,305.80 9.6 693.753 614.014 7.311

China 1,330.40 1,129.10 8.3 1,093.93 35.135 2.269

Iraq 625.6 697.4 5.1 89.837 607.523 296.715

India 1,273.30 696.2 5.1 210.555 485.636 0.779

Egypt 615.9 672.6 5 609.898 62.672 19.085

Germany 727.9 632.2 4.7 628.838 3.387 1.69

Japan 460.7 462.7 3.4 372.848 89.881 0.256

South Korea 431 401.7 3 390.712 11.037 0.207

UAE 374.6 381.8 2.8 235.459 146.325 32.252

Italy 418.8 374.7 2.8 337.59 37.102 1.711

Source: Central Bank Jordan 2009 (Back)

ii. Foreign Trade Statistics (Thousand JD)

Year Domestic Exports Imports Re-Exports 2005 252,802 662,771 41,620

2006 294,786 731,153 74,008 2007 276,556 946,672 97,789 2008 359,514 809,865 86,059 2009 341,278 915,837 79,972

Source: Central Bank Jordan 2009 (Back)

iii. Bilateral trade between Jordan and ME 2009 (Includes Re-Exports) - $ 1000

Country Jordan's imports from Jordan's Exports to

Algeria 1,262 100,112

Bahrain 75,480 39,321

Egypt 859,011 115,073

Iran 6,801 10,065

Iraq 126,531 1,273,361

Israel 130,884 117,195

Kuwait 66,993 76,687

Lebanon 111,955 213,466


Libya 1,347 44,286

Morocco 34,138 10,615

Oman 19,281 40,274

Palestine 32,015 49,895

Qatar 9,524 69,650

Saudi Arabia 2,435,149 579,514

Sudan 12,597 82,049

Syria 306,509 232,888

Tunisia 19,125 35,444

Turkey 412,956 39,243

UAE 331,632 251,485

Yemen 14,366 46,240

Total 5,007,556 3,426,863

Source : International Trade Centre, http://www.trademap.org/ (Back)

iv. Global Trade Data (US Dollar Millions)

Global Trade Data (US Dollar Millions)

Jordan's imports from world 2009 14,075

Jordan's exports to world 2009 6,365

Middle East's imports from world 2008 811,885

Middle East's exports to world 2008 1,130,705

Middle East's exports to Middle East 2008 102,095

Middle East's imports from Middle East 2008 102,145

Source : International Trade Centre, http://www.trademap.org/ (Back)

http://www.trademap.org/

http://www.trademap.org/


Annex 11 – Industry Analysis: Number of Projects by Sector – (Back)

Industry Analysis: Number of projects by sector

Sector 2003 2004 2005 2006 2007 2008 2009 2010 Total

Real Estate 4 11 2 6 1 24

Financial Services 2 2 1 3 2 9 19

Business Services 1 1 3 6 4 3 18

Hotels & Tourism 3 1 2 4 1 2 3 16

Communications 1 2 1 4 3 1 12

Food & Tobacco 2 1 1 3 2 2 11

Software & IT services 1 1 3 1 1 3 10

Consumer Products 2 2 2 2 8

Consumer Electronics 2 2 2 1 7

Textiles 1 1 1 2 1 6

Other Sectors 6 4 9 6 9 6 9 4 53

Overall Total 16 11 24 32 20 34 26 21 184 Source: FDI Intelligence from Financial Times Ltd


Key indicators

Population (millions)

GDP per capita, PPP (current international $)

GDP (US$ billions)

4 4.1

4.1.1

4.1.2

4.1.3

4.1.4

4.2

4.2.1

4.2.2

4.2.3

4.2.4

4.3

4.3.1

4.3.2

4.3.3

4.3.4

4.3.5

Market sophistication Credit

44.7 29.5

44 94 6.5

5,597.0

25.1

Strength of legal rights for credit* ............................... 40.0..............83

Depth of credit information*........................................... 33.3..............95

Domestic credit to private sector, % GDP ............... 33.9..............30

Microfinance gross loans, % GDP ....................................6.1..............40

Score 0–100 Rank Investment 47.4 21 Global Innovation Index ............................... 38.4 ...... 41

Innovation Output Sub-Index ................................................................. 35.5............. 33

Innovation Input Sub-Index.................................................................... 41.3............. 56

Innovation Efficiency Index....................................................................... 0.9............. 16

Global Innovation Index 2010 ...................................................................................... 58

Global Innovation Index 2009 ...................................................................................... 55

Strength of investor protection* ................................... 43.0..............93

Market capitalization, % GDP........................................... 56.6.................6

Total value of stocks traded, % GDP............................ 33.3..............19

Venture capital deals/tr GDP PPP$............................... 66.1..............27

Trade & competition 57.1 38 Applied tariff rate weighted mean, %........................ 72.1..............82

Market access trade restrictiveness*, % .................... 68.5..............54

Imports of goods & services, % GDP .......................... 43.0..............19

Exports of goods & services, % GDP ........................... 38.1..............46

Intensity local competition† ............................................. 69.4..............43 1 1.1

1.1.1

1.1.2

1.1.3

1.2

1.2.1

1.2.2

1.2.3

1.3

1.3.1

1.3.2

1.3.3

Institutions Political environment

65.8 53.5

62 66

Political stability*...................................................................... 36.3..............73

Government effectiveness* .............................................. 63.3..............53

Press freedom*.......................................................................... 60.9..............85

5 5.1

5.1.1

5.1.2

5.1.3

5.1.4

5.2

5.2.1

5.2.2

5.2.3

5.2.4

5.2.5

5.3

5.3.1

5.3.2

5.3.3

5.3.4

Business sophistication Knowledge workers

32.3 24.0

77 105

Knowledge-intensive employment, % ........................n/a............n/a

Firms offering formal training, % firms ...................... 24.0..............73

R&D performed by business, %........................................n/a............n/a

R&D financed by business, % ............................................n/a............n/a

Regulatory environment 66.6 53 Regulatory quality* ................................................................ 61.4..............57

Rule of law* ................................................................................. 62.3..............49

Rigidity of employment*.................................................... 76.0..............56 Innovation linkages 38.4 38

Business environment 77.3 73 University/industry collaboration†................................ 35.6..............90

State of cluster development† ........................................ 41.2..............64

R&D financed by abroad, % ................................................n/a............n/a

JV/strategic alliance deals/tr GDP PPP$ .................... 38.6..............19

PCT patent filings with foreign inventor, %..............n/a............n/a

Time to start a business, days.......................................... 88.5..............48

Cost to start a business, % income/cap.................... 65.2........... 104

Total tax rate, % profits......................................................... 78.1..............35

2 2.1

2.1.1

2.1.2

2.1.3

2.1.4

2.1.5

2.2

2.2.1

2.2.2

2.2.3

2.2.4

2.2.5

2.2.6

2.3

2.3.1

2.3.2

2.3.3

Human capital & research Education

41.4 63.2

50 43

Knowledge absorption 34.4 61 Royalty & license fees payments, % GDP ...................n/a............n/a

High-tech imports less re-imports, % ........................ 13.8..............85

Computer & comm. service imports, %.................... 12.5........... 111

FDI net inflows, % GDP........................................................ 76.8.................9

Education expenditure, % GNI........................................ 63.4..............22

Public expenditure/pupil, % GDP/cap.........................n/a............n/a

School life expectancy, years ........................................... 53.7..............63

PISA scales in reading, math, & science .................. 30.7..............49

Pupil-teacher ratio, secondary ........................................ 88.7..............41 6 6.1

6.1.1

6.1.2

6.1.3

6.1.4

6.2

6.2.1

6.2.2

6.2.3

6.3

6.3.1

6.3.2

6.3.3

6.3.4

Scientific outputs Knowledge creation

22.1 22.4

77 36 Tertiary education 39.6 35

Tertiary enrolment, % gross .............................................. 41.1..............52

Graduates in science, % ...................................................... 59.5.................9

Graduates in engineering, %............................................ 32.9..............49

Tertiary inbound mobility, %............................................ 42.1..............14

Tertiary outbound mobility, % ........................................ 27.3..............54

Gross tertiary outbound enrolment, % ..................... 19.8..............45

Domestic resident patent ap/bn GDP PPP$ .......... 10.9..............53

PCT resident patent ap/bn GDP PPP$ .........................n/a............n/a

Domestic res utility model ap/bn GDP PPP$ ..........n/a............n/a

Scientific & technical articles/bn GDP PPP$........... 33.9..............33

Knowledge impact 21.1 98 Growth rate of GDP PPP$/worker, % .......................... 42.5..............53

New businesses/1,000 pop. 15–64 yrs..........................5.7..............65

Computer software spending, % GDP..........................9.1..............56

Research & development (R&D) 21.3 71 Researchers’ headcount/million pop. ......................... 22.9..............27

Gross expenditure on R&D, % GDP.................................6.4..............61

Quality research institutions† ........................................... 34.7..............91 Knowledge diffusion 22.9 81 Royalty & license fees receipts, % GDP........................n/a............n/a

High-tech exports less re-exports, %.............................5.5..............58

Computer & comm service exports, % ..................... 15.1........... 101

FDI net outflows, % GDP .................................................... 48.1..............66

3 3.1

3.1.1

3.1.2

3.1.3

3.1.4

3.2

3.2.1

3.2.2

3.2.3

3.2.4

3.3

3.3.1

3.3.2

3.3.3

Infrastructure Info & comm. technologies (ICT)

22.6 29.4

96 56

ICT access*................................................................................... 37.4..............67

ICT use* ............................................................................................9.9..............71

Government’s Online Service*........................................ 53.3..............22

E-Participation* ......................................................................... 28.6..............41

7 7.1

7.1.1

7.1.2

7.1.3

7.1.4

7.2

7.2.1

7.2.2

7.2.3

7.2.4

7.2.5

Creative outputs Creative intangibles

48.9 70.1

10 4

Domestic res trademark ap/bn GDP PPP$........... 100.0.................1

Madrid resident trademark ap/bn GDP PPP$ .........n/a............n/a

ICT & business models† ....................................................... 57.1..............67

ICT & organizational models† .......................................... 53.1..............56

Energy 11.1 105 Electricity output, kWh/cap .............................................. 12.1..............69

Electricity consumption, kWh/capita ............................8.5..............69

GDP/unit of energy use, PPP$/kg oil eq................... 21.9..............77

Share of renewable in energy use, % ..........................1.1..............97 Creative goods & services 27.7 47 Recreation & culture consumption, % .........................n/a............n/a

National feature films/mn pop. ........................................n/a............n/a

Daily newspapers/1,000 literate pop............................n/a............n/a

Creative goods exports, %................................................. 27.7..............32

Creative services exports, % ...............................................n/a............n/a

General infrastructure 27.4 113

Quality of trade & transport infrastructure* ........... 42.3..............53

Gross capital formation, % GDP ........................................9.1........... 112

Ecological footprint & biocapacity, ha/cap............. 30.7..............86

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Annex 12 - Jordan – (Back)


Annex 13 – iPark Achievements – (Back)

Providing Specialized Value-Added Services to Incubated Companies

Incubating and supporting 35 companies and graduating 20

companies

Companies supported by iPark created over 750 high-value added jobs

Export Oriented Companies with Major regional and International

Client Base

High-Value Added Products and Services contributing to Jordan’s Intellectual Capital

Knowledge Economy Transfer Channels: International, MENA, Jordan

Documents

Transcript of Knowledge Economy Transfer Channels: International, MENA, Jordan