What matters more

A few days ago, I was invited to a brainstorming session by a research centre in Amman.

One of the issues discussed on the sidelines was the new Jordan Investment Fund Law that Parliament is expected to address in its upcoming extraordinary session before the end of this month.

One of the views expressed was that this new law amounts to a kind of nationalisation of certain sectors in the Kingdom.

I respectfully disagree with this opinion.

When an international (and I do not say “foreign”) investor looks at the feasibility of a major investment in a frontier market like Jordan, the exercise entails a projected income statement over at least 10 years.

Frequent changes of laws and regulations, whether they have to do with taxes or other aspects, and the perceived arbitrariness of applying rules and regulations will drive international investors away from a country.

If a country is perceived as having this legal and regulatory “risk”, then the feasibility study will include an additional “risk premium” in its calculations, which will reduce the projected rate of return on the investment, making it not feasible.

The new Investment Fund Law is a “surgical” intervention intended to carve out an economic safety zone for international investors in Jordan, so that the legal and regulatory risk premiums are kept to a minimum, helping to make a case for investing in this country, increasing GDP and generating employment opportunities at a time when unemployment is fast becoming a national security issue.

In this day and age, it is far less important who owns a project in a frontier or emerging market, provided that proper corporate governance standards are being practised.

What matters more is the added value created. The more added value is created in country the higher the rate of economic growth and employment.

Majd Shafiq,
Former commissioner - Jordan Securities Commission,
Amman