Friday, Dec 15, 2017
Industry & Trade | Middle East | Jordan

Aqaba Special Economic Zone Authority

Aqaba: Strategic location with access to market of 1bn consumers


3 years ago

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For global investors interested in accessing the regional market, Aqaba offers unparalleled advantages as a springboard thanks to free trade access to more than 1 billion consumers. Investment in the Aqaba region has already reached $20 billion, far greater than the Aqaba Special Economic Zone Authority’s initial goal of $6 billion by 2020

Ever since the first traders in the Gulf of Aqaba exchanged goods in the time of the Ancient Egyptians, the eponymous city was destined to become an important regional hub. Taba and Eilat were connected with Aqaba as early as the third millennium BC and the port city in modern-day Jordan flourished. Its importance to the country’s development potential was recognized in 1965 when Jordan and Saudi Arabia negotiated a land swap deal that extended the former’s coastal territory in the south of the country by 11 miles. Today, that prescient exchange forms the basis of the Aqaba Special Economic Zone (ASEZ) encompassing both business and leisure on the doorstep of Aqaba, the gateway to one of the region’s most popular tourist destinations located within easy reach of the World Heritage site of Petra.

New developments and mega-projects are mushrooming in the Aqaba area. The real estate and construction sectors have enjoyed 6.3% and 13.1% growth respectively over the past five years, with investment forecast to exceed $20 billion overall. A similar amount is expected to be generated by ambitious large development projects in leisure, tourism and the domestic housing industry.

“People used to say that Lebanon is the Switzerland of the Orient and I can tell you for a fact that it is not Lebanon, it is Jordan,” says Mahmoud Zuaiter, CEO of Jordan Projects for Tourism Development (JPTD), which is the owner, developer and operator of the Tala Bay project in Aqaba. Operational for more than five years, Tala Bay is a fully integrated seaside village that includes real estate, contemporary hotels, a state-of-the-art marina that serves as an international port, and the entire supporting infrastructure for the burgeoning community.

Thus far, only 10% of Tala Bay’s 2.7-million square meters has been developed, including 1,200 rooms and commercial enterprises, but Mr. Zuaiter says design and planning work on a further 2,500 rooms across up to 10 hotels is well underway. Tala Bay already plays host to premier international hotel chains including Radisson Blu and Moevenpick. Mr. Zuaiter attributes the expansion of Jordan’s tourism industry to a boom in the European market among tourists wishing to experience the Middle East’s rich culture.

“It is only four hours away,” he says. “Aqaba provides the ideal setting that will potentially lead to growth in the tourism market in Jordan. Instead of having a 14 or 15% contribution [to GDP] from the tourism market, I should think that this will go up to 20% in the coming years. Aqaba is a very important place for Jordan. It is the exit to the sea. It is nicely within proximity to other free countries and we have two other nations that are just a short distance away. All this makes it the ideal location for Jordanian economic growth.”

The JPTD’s influence on Aqaba is the natural progression of a multi-sector development that was designed to embrace a wide variety of sectors covering real estate, tourism, industries and services. ASEZ came into being in 2001 and covers 375 square kilometers along Jordan’s Gulf of Aqaba coastline, encompassing high-tech firms, hotels, entertainment, and some of the best diving in the world. It also boasts logistics and distribution facilities, residential complexes and office space. ASEZ’s geographical location at the apex of the Gulf makes it a perfect entry point for access to the entire Middle East and North Africa and, standing at the confluence of the Levant region, also a major export and logistics center.

“The vision was very clear: we needed a hub for the eastern part of the Red Sea and at the same time a gateway for tourism and cultural activities,” says Dr. Hani Mulki, Chief Commissioner of the Aqaba Special Economic Zone Authority (ASEZA). “However, in order for us to do this with the restrictions of a 26 kilometer shoreline there had to be a great deal of prior thinking as to how we allocated different activities to different sites and areas.

“Jordan had always been an open economy, but also a heavily regulated one. Over the past 15 years we have accomplished openness in terms of trade and industry, which is the backbone for promoting investment. We were among the first countries to sign on the Arab Free Trade Greater Area, and we were the first among the Arab countries to go into a partnership with the European Union. We were also the first, and I think the only one, that has free trade with the U.S. Early in the game we joined the WTO.

“So we have achieved a movement away from a bureaucratic open-market system to a dynamic open-market system. We have built a model where we have nurtured private-public partnership, as seen in the case of the Aqaba Container Terminal (ACT), full public-sector companies and government-related companies, or government-managed companies like the Aqaba Development Cooperation (ADC).”

Part of the efforts of the Jordanian authorities to internationalize Aqaba was a 2003 agreement between ASEZA and the ADC to seek partners to increase the capacity and operational efficiency of the port. There was only one company to approach: APM Terminals, which has operations on five continents and is, in terms of geographical reach, the world’s largest port and terminal operating company.

“When we started out in 2004 we got a management contract with the government to prove ourselves, and we finally got a 25-year concession from 2006,” says Jeppe Jensen, CEO of ACT, the company born out of the signing of a joint development agreement between the state-owned ADC and the private multinational APM Terminals to run the operation as APM Terminals Jordan, which is also responsible for the optimization of the existing infrastructure and future expansion at Aqaba in accordance with ASEZA’s blueprint. 

“At that time, Aqaba – certainly in terms of its containerization capacity – was basically a small port and what you saw was weeks of congestion outside the terminal, with vessels waiting to berth,” says Mr. Jensen. “Today you have fixed berthing windows and it is much more efficient. Back then we were handling around 200,000 to 300,000 TEUs, and we have more than tripled that today. If you look at Jordan, the only entry point is through Aqaba, so everything you buy in the supermarkets and everything that needs to be built goes via the port. Because of this, ACT is a major player when it comes to containerization.”

Although Jordan’s geographical location oils the machinery of trade, the region’s volatility can also have a knock-on effect. Trade at the port dropped by around 100,000 TEUs – about 25 to 30% of ACT’s output – in 2014 due to the volume of business Jordan has drummed up in neighboring Syria and Iraq, Mr. Jensen estimates. He notes, however, that domestic demand has offset the decrease and forecasts for 2015 stand at 800,000 TEUs being unloaded at Aqaba.

Sheldon Fink, CEO of PBI Aqaba, says that misconceptions about the realities on the ground in Jordan have largely been eroded and that there has never been a better time to explore business opportunities in the country. “I have been working in the Middle East for 40 years and in my experience Jordan is one of, if not the, most stable and safest places to work in the region. As far as we are concerned if you want to work in the Middle East this is the place to do it.”

PBI Aqaba is the management company for the Aqaba International Industrial Estate (AIIE), a state-of-the-art facility for environmentally friendly industries, logistics, storage, and services. Registered in the U.K., PBI Aqaba is a cooperative of U.S., U.K. and Turkish interests, with the backing of Parsons Brinkerhoff International, and operates under a concession contract with affiliated local companies.

Companies that set up in the AIIE, which is located in the ASEZ, enjoy a series of investment incentives put in place by the Jordanian government, such as a flat 5% income tax on profits and duty-free imports. They also benefit from having King Hussein International Airport on the doorstep.

Unlike many similar projects worldwide, there is no restriction on foreign ownership within the AIIE. Over the past eight years since its inception, AIIE has attracted more than $200 million in investment and created 1,000 jobs. As Mr. Fink notes, “If we get up to $400 million we will have 2,500 jobs.” PBI Aqaba’s goal is to reach $600 million of investment and an occupied area of 1 million square meters.

“Aqaba has a good port and is a good transportation hub for overland travel to Iraq,” says Mr. Fink. “The tax regime is excellent and Jordan has free trade agreements with many countries, considerably more than any country in the region and that is a big incentive we advertise. We market Jordan as a place for selling in the region and for achieving enough industrial added value to be able to market our products as made in Jordan – rather than in China – and to get the trade agreement benefits that will bring. There is a lot of money being pumped into the ports because everybody figured out Jordan could be a hub, but nobody initially realized the potential of turning it into a regional port instead of a port for Jordan. Now that has become apparent, a lot of money is being spent on that.”  

Jordan is also investing heavily in its transport infrastructure. In order to attract major international investment, the government is working to develop its infrastructure across the kingdom, including that which will serve major real-estate projects, particularly its transport sector, including the rail system, Amman’s Queen Alia Airport, and the port of Aqaba. On the World Economic Forum’s 2014-15 Global Competitiveness Report, Jordan’s overall transport network scored 4.8 points out of a maximum seven, placing the kingdom 48th out of 144 countries included. 

Challenges remain of course; while the well-developed road network formed the backbone of the transport sector’s 12% contribution to annual GDP in 2013, the need to drum up almost $3 billion in investment to extend the country’s 1,000km of track into an interstate rail network linking Aqaba with Jordan’s neighbors remains a government priority. Plans to ramp up a ferry service under the Arab Bridge Maritime joint venture established between Jordan and Egypt in 1985 are already on the table, which aim to increase the transfer volume of people and goods between the two nations. The concession to operate the Aqaba-Nuweiba ferry line was granted to AB Maritime, which plans to expand its current fleet of seven vessels to meet the growing demand for maritime trade between the regional partners.



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