Trade with Jordan

Overview:

Jordan is a open economy but with a wide network of bilateral, regional and multilateral trade agreements, including with two global centers: North America (the United States and Canada) and the European Union (EU). Further, Jordan acceded to the World Trade Organization (WTO) in the year 2000.

As a result, Jordan’s total foreign trade (merchandise total exports plus imports) reached 69% of GDP (2021 figure). According to UNCTAD, Jordan enjoys a respectable score of 0.81 for export performance index in Q4 2021, compared to 0.42 for Morocco, 0.47 for Tunisia and 0.73 for UAE. Export performance index is a composite indicator which includes export growth of goods and services; performance vs. peers (export performance of direct competitors); as well as export diversification and competitiveness in major and dynamic markets. A greater score implies higher export performance. With improved global competitiveness and export readiness, Jordan's diverse trade network would enable Jordanian companies better market access to key world markets.

According to latest global trade information, Jordan worldwide is ranked 99 in total exports and 85 in imports (ITC; out of 220 countries), but Jordanian economy is positioned at a rank of 63 most complex economy according to the Economic Complexity Index (ECI). ECI measures the relative knowledge intensity of an economy for 133 countries. Notably more complex (knowledge-based) industries in Jordan are medicine and other chemical industries (e.g. phenols and refined fertilizers), in addition to certain niches in machinery (e.g. air conditioners& watches) and transport industries (e.g. parts of aircrafts).

At the Kingdom's policy stance, the Economic Modernization Vision 2022 focuses on enlarging fast growing export industries &products and aims at expanding exports of future services in the regional and global markets.

Jordan’s Trade Snapshot& Trends:

Jordan exported commodities and services worth US$ 13.9 billion in 2021, as confirmed by Jordan’s preliminary trade figures. Domestic merchandise exports have grown by an annual average of 7% during 2017-2021 while services exports grew at 8 %. Merchandise imports totaled US$ 19.3 billion in 2021, leaving Jordan with a trade deficit of US$ 9.9 billion. Services Balance reached US$ 386 million in 2021.   Focusing on Year-on-Year change in trade in goods, the year 2021 showed a reinvigoration in Jordan’s merchandise exports compared to the pandemic year 2020, as shown in the Table below:

During the first third of 2022, Jordan's total exports surged by 48% to reach JD 2.7 billion. Top sectoral drivers of such a record growth were the chemical industry (fertilizers and inorganic chemicals), clothing industry and the mining industry (crude potash and phosphates). Increasing world concerns over food security and rising world demand and prices for fertilizers have fueled such a record rise in Jordan’s key merchandise exports.

Domestic Exports of Top 5 Sectors during the First Third of 2022      (US$ million)

Source: WITS (World Integrated Trade Solution).

At a more disaggregate level (HS4), the Atlas of Economic Complexity confirms that 145 HS4 subsectors in Jordan enjoy a revealed comparative advantage RCA (>= one) in 2019, of which 31 subsectors with a RCA exceeding 10. These globally promising subsectors are classified in: the Agriculture sector (56 subsector), Chemicals (32), Textiles (25), Metals (13), Machinery (6), Minerals (5), Stone (5), Vehicles (2), and Electronics (1 subsector).

Jordan export's competitiveness is particularly high in phosphates, inorganic chemicals most notably phosphoric acid, and fertilizers, as shown in the Table below. These products witnessed a trade surplus in 2021 and a high average growth during the last five years. Other sub-sectors with a strong revealed comparative advantage include garments, medicaments, and live sheep.

Jordan: Export Competitiveness in Top 6 Sub-sectors (HS4) *

High-Technology Exports in Jordan: Size, Structure and Dynamics

High-technology industries, goods and services make special contribution to Jordan’s long-term productivity growth and export performance. Knowledge is a prime engine in creating and sustaining global competitive advantage and high-wage employment opportunities, especially with increasing world prices and production costs.

Examples of high-technology industries in Jordan are pharmaceuticals, information technology, and aircraft parts. This analysis utilizes a fine (4-digit ISIC) industries approach to gauge the contribution and dynamics of high-technology (knowledge-based) industries in Jordan using UNIDO database.

In 2019, Jordan’s high-technology exports in the manufacturing sector (ISIC3 15-37) recorded a high level of US$ 1.2 billion, reflecting a growth of 10% above their 2018 level. As for industrial composition, these high-technology exports are distributed among ten ISIC industries, as shown in the table and chart below:

Source: JE calculations based on UNIDO Industrial Demand-Supply Balance Database (IDSB) at 4-digit ISIC3 

The long-term average annual growth for high-technology manufacturing exports was clearly above average; 7% during the period 2010-2019 against 3% for total merchandise exports. This notable upward trend of exports generated by high-technology manufacturing industries during 2010-2019 reflects their promising growth performance, as shown in the chart below:

Source: JE calculations based on UNIDO Industrial Demand-Supply Balance Database (IDSB) at 4-digit ISIC3  

As for regional comparison using the same above methodology, the share of high-technology manufacturing exports (in % of manufactured exports) in Jordan was astonishingly high at 16.6% in 2019, in comparison with 12.4% for Tunisia and 1.6% for Kuwait for the same year.

While there are established methods for identifying manufacturing industries according to technology intensity, capturing knowledge-based tradable service activities has proved more challenging. Limited data availability and international comparability are the main reasons. However, typical, broadly defined, sub-sectors included in the definition of knowledge-based service sectors were: education, health, telecommunications, finance and insurance, and business services, where business services include scientific research, computer, legal, accounting, architectural and marketing. Jordan enjoys a strong comparative advantage in high-technology tourism exports, namely: medical tourism and high-quality education tourism, as well as ICT exports.

This conclusion is in line with a key study of Harvard Center for International Development (Hausmann et al., 2019) which identified six export services as the most strategic, given the capabilities exhibited by the Jordanian economy as well as global trends in demand: (1) Business, IT and Professional Services, (2) Education Services, (3) Healthcare Services, (4) Creative Industries, (5) Tourism, and finally (6) Transportation and Logistics.

Untapped Export Potential and Export Diversification

Taking a forward-looking and future perspective on Jordan’s merchandise exports with a view to spot untapped export potential and diversify exports, this investigation is mainly based on ITC Export Potential Map for the case of Jordan. The analysis is based on trade flows over a five-year period, using weighted averages to moderate the impact of outliers, projected into the future based on GDP and population forecast six years ahead of the latest year used in the analysis.

The total untapped export potential for the exporters of Jordan stands at US$4.2 B. The products with greatest export potential from Jordan to the World are: (1) Potassium chloride for use as fertilizer; (2) Phosphoric acid; Polyphosphoric acids, and (3) Live sheep. Potassium chloride for use as fertilizer shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth US$ 522 M.

The markets with greatest potential for World’s exports of 310420 Potassium Chloride for use as fertilizer are: India, China, and Malaysia. India shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth US$ 149M.

The globally capable competitors with Jordan to export 310420 Potassium Chloride for use as fertilizer to the World are: Canada, Russian Federation and Belarus. Canada shows the largest absolute difference between potential and actual exports in value terms.

The products with greatest export potential from Jordan to Europe are Jerseys & similar of man-made fibers, knit/crochet, Potassium chloride for use as fertilizer, and Phosphoric acid; polyphosphoric acids. Jerseys & similar of man-made fibers, knit/crochet shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth US$ 46 M.

The products with greatest export potential from Jordan to United Kingdom are: Jerseys & similar of man-made fibers, knit/crochet, Men's shirts of man-made fibers, knit/crochet, and Men's trousers & shorts of synthetic fibers, knit/crochet. Jerseys & similar of man-made fibers, knit/crochet shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth US$ 6.2 M.

The markets with greatest potential for Jordan’s exports of All products are: United States, India, Saudi Arabia, and China. United States shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth US$ 630 M.

Jordan’s best options for export diversification in the World are Lentils, dried & shelled, Sesamum seeds and Avocados, fresh or dried. Jordan finds Lentils, dried & shelled easiest to reach. Other footwear, rubber/plastic soles & uppers is the product that faces the strongest demand potential in the World.

Utilizing the methodology of Economic Complexity to explore which products are feasible for Jordan's future exports, and to identify the country’s new opportunities for product diversification based on what it currently exports, an in-depth Jordanian Study (Jordan Strategy Forum, 2017) found that Textiles, Chemical Products, Mineral Products, Metals, and Animal Products are the sectors which have the highest number of products that are both sophisticated and closest to the current productive knowledge in Jordan.

In general, Jordan's export potential may be invigorated by three factors: (1) choosing the right market orientation towards high-growth dynamic markets (such as Chile, Brunei, Niger and China); (2) specializing in the right products, i.e. products with increasing and above-average growth in world demand (such as high-value fertilizers, pharmaceuticals as well as soap and washing preparations); and (3) upgrading in export global competitiveness in terms of cost, quality and innovation.

For more information and updated details on RCA for commodity-producing sub-sectors (HS4 & SITC3) and products (HS6) in Jordan, please visit:

1- UNCTAD RCA RADAR PLOTS: https://unctadstat.unctad.org/en/RcaRadar.html 

2- World Bank WITS (World Integrated Trade Solution); Advanced Query: Trade Outcomes Indicators (needs simple registration)

3- Atlas of Economic Complexity (What did Jordan Export in 20**), choose: Product Space, under Complexity Visualizations