With its strategic geographic location, major seaport, an international airport, and developed road network, in addition to being a special economic zone, Aqaba is a safe and secure base of operations located in a hub of shipping and trading activity in the Middle East. Sheldon Fink, CEO of PBI Aqaba (manager and operator of the Aqaba International Industrial Estate) talks to The Worldfolio.
Let’s start with Jordan and the US relations to see the big picture. This year is the 17th year of the relationship and its 20th anniversary of the first free trade agreement the US signed with an Arab country. What are the impressions that you have had regarding this agreement and what have been the advantages for Jordan?
The relationship that Jordan has with the US is a strategic, political relationship. The US supports Jordan and vice versa. Even though Jordan is much smaller, it has unique contributions to make politically and strategically in the region. This has been a very successful alliance. Regarding the economic and business side of the free trade agreement, Jordan made a policy to try to get into as many free trade agreements as possible. The US free trade agreement was one of the first, but afterwards there was a European Union free trade agreement and an Arab trade agreement. There was also a trade agreement with Turkey which has been recently cancelled. There’s been a whole series of free trade agreements, but the only free trade agreement that worked out best for Jordan was the agreement with the United States. All the other free trade agreements until recently, have just been vehicles for the other partner to take advantage of Jordan.
There was an old US supreme court decision saying that equal treatment of un-equals is unequal treatment that has been the case in most Jordan's FTA's, In most case there was a tremendous trade imbalance with no countervailing investment. There was the same with European free trade agreement, but recently, there was a series of amendments and the European Union recognized the justice of Jordan’s claim. There has been some improvement, but the US free trade agreement is the one that has always been balanced. Jordan and the US have approximately the same amount and if you take American investments into account, the balances are more or less equal. The huge U.S investment has granted Jordan an advantage, so from Jordan’s point of view, the US free trade agreement and the way they have administered the economic relations with Jordan, tremendously benefit Jordan. The Jordanians have contributed strategic and political support, so the US has also done well.
PBI Aqaba is a success story regarding investment attraction. What have been the main keys behind it?
Just to give you some perspective, in 2006. We had three buildings together of about 6,000 square meters. In 2018. We have over 400,000 M2 built up space, one building has 20,000 square meters. That’s three times more than the three originals. So, we’ve had tremendous growth, but it happened in three stages. You couldn’t get international companies to come in 2006. So, we had Jordanian investments first, then we attracted regional investors. When we had regional investors and the place looked more occupied, the international market came in. So, international investing is now three years old. Local investments started in 2005 and picked up internationally around 2016. As one would expect, there are a lot of Jordanian and regional investors.
Firstly, Jordan is a safe place. Despite the conditions in the Middle East, you don’t have to worry about your personal safety here. Secondly, Aqaba is the best place in Jordan. It offers a good quality of life and the tax regime is favorable. We have been offered to work in other places in Jordan, but our answer always been that we’d rather stay in Aqaba. Aqaba is a place where you can succeed. The third reason is a wager that the concept of industrial state developments worldwide would change from low cost. 10-15 years ago, the idea was that you could attract people by low cost and concessionary prices of land. Because of that, you would have fairly low quality of site amenities. However, we rejected this idea. We wanted to create high quality service that was more expensive. We foresaw people paying for it, and this has proven to be correct. Around this area, you will see planting, clean and wide streets, and other amenities. The prices that we get here are much higher as than price other people are getting and we attract more business than any other location here. On an investment dollar basis, we’re the most successful place in the Middle East. So, for a dollar investment compared to employment profitability and criteria, we have proven this is a good way to work.
From where are the investors in PBI Aqaba coming from?
FINK: We have Canadian, Indian, Chinese, and German investors. For regional investors, we have of Turkish, Iraqi, Syrian, and Libyan. So, that’s the profile. The past three years, we have been working with foreigners and they are already a substantial part of what we have. We’re looking forward to continuing with the Chinese investments here. We have an office in Shenzhen, which has been active for the past two and a half years. We also want to emphasize with India and Germany. We have some work starting in the US. The reason why we haven’t started in the US until now is that we’re small. One of Jordan’s big problems is that they try to attract to Fortune 500 companies, but they don’t come, because it’s a small place. So, we look for medium sized companies. We attract small companies, but they don’t have enough spare management capacity to move, but medium sized companies could do that. We tried in the beginning to bring in major players from different countries including the US. The difference is the US is a huge place and it difficult to know where to start. China was also difficult in this way, but we chose to start in Shenzhen. Where the other problem is there’s no knowledge in America about Jordan.
One of the main problems of Jordan, but specifically for Aqaba, is that some medium US industrial investors have no knowledge about the opportunities and advantages that the region offers. How are you addressing this challenge?
FINK: At the end of the day, we are a service company. The land here belongs to the government and it ends up in the hands of the investors; it’s not our land. We own a couple of lots to show people the buildings, but we don’t own the land here. We’re a service company; we bring customers here and we help them get land. We have a very satisfactory net income, but how much can we really do? We have 40 employees, but are have around ten management people here.
America was a heavy weight to tackle. Now we are focusing on products we think we can attract. We’re looking to find those companies and analyze whoever might be interested in going overseas, target. So, we’ve started in the States and have someone there now. If you want numbers now, we’re around 700 million dollars in investments and around 5,000 jobs right now. In 2015, I said that we’d probably get to 2,500 jobs at this time. So, we doubled our projection.
This is also about you, your vision, and your contribution.
Yes, but we are succeed because we are a group. It’s also to recognize that people want good service. We’re not a real estate or engineering company. The real estate and engineering are just services we provide. The customer needs to be helped before, during, and after they come here. That’s the contribution made, because now that’s normal and accepted here, but before it was thought to be crazy. Everyone said you will waste your money and it’s not going to happen, but it has added a lot of value.
Do people still prefer your services, even if they are more expensive?
Absolutely, in the first few years, I was thought to be a crazy, but once we started to show real results. The unconventional way of dealing with things became acceptable. So, yes, I have things in my personality that are useful, but if the society was closed off and didn’t let that happen, it wouldn’t have been successful.
I want to give credit to the US embassy and the USAID. Who have given tremendous support.
So, now that you’ve exceeded the goals that you had, what are your new goals?
Even though were not a real estate company, we need real estate. It’s part of the merchandise. The location that were sitting on here will be finished within two years. There won’t be any more work. That’s a minimum of 1,700,000 sq. meters, or 17 million sq. feet. We’re going to fill all of that up. So, if we want to continue, we need more land inventory. We started working on this about a year ago. When we first had the three buildings in the desert, the city of Aqaba was about seven kilometers from here, but it has expanded since then, and industrial land can’t be expensive. Planning for industry and logistics requires a huge occupancy for land, and the land is not cheap anymore. The Government of Jordan makes money mainly from land. They don’t make a lot of money on taxes. So, the land is very reasonably priced, but once the government can sell for office buildings and expensive housing, we can not to use more of this land for industrial. To get more land here means to pay a higher price, and paying a higher price means getting out of the range where we think we can do industry.
We signed for another 1,800,000 sq. meters of land, but not here, it’s in Querah, which is 25 kilometers outside of Aqaba city on the main highway to Amman. It’s half an hour away.
Why have you chosen Querah?
FINK: We chose it, because all the necessary infrastructure and utilities are there. The highway, gas pipelines, water and electrical high tension lines are there. It’s on a corridor of utilities which runs from Aqaba to Amman. This is the first thing to look at, because if you’re far away from that, then your expenses go up. The government also wanted to encourage that area. About 30,000 people are living and it has a high unemployment rate. We negotiated for this last year and in January of this year we signed for Querah. It’s about 10% bigger than what we have here. The government has started to put in the connecting utilities. They built an entrance road and water pipeline, so the infrastructure is being dealt with right now. We started some preliminary sales activity there and the prices for land will be considerably lower than the prices here. So, we will actually decrease our prices starting out. We signed a contract on that and then we took an option? another piece of 950,000 sq. meters in the south by the new port area. We have that option, and will decide by the end of this year whether we will also take that.
Basically, we had 1,700,000 sq. meter potential, and now we have almost three million sq. meter potential. The goal is to continue for another 10-15 years. So, now we’ve created a legal basis for continuation on the land and utilities infrastructure side. We have started marketing. The market in Querah will be a bit different, but we already have one customer who signed, and we have a few more interested customers. We have a huge pipeline project. I differentiate between customers. Some customers are going to sign, and some are waiting until more streets get in and the place looks more normal. Pipeline means you are negotiating with people that have been here a few times and seem very interested, but it’s not yet a done deal. However, the pipeline projects are huge, because we’re talking about 700 million dollars. Before we finish it, it will be up to one billion. The 5,000 workers will increase to 8,000 workers. The projects in the pipeline there are about 1.4 billion. That’s why investors have come here and done feasibility studies. Even if a third of it happens, it will be around 400 million, So, I'm quite optimistic now. What holds us back is energy at high costs, but we are on the way to solve. That’s something that was challenging a few years ago, so we had to find companies that were not energy price sensitive. The other thing is the failure of the banking system in Jordan to support entrepreneurial activity.
Mr. Fink, you have spent almost half of your life in the Middle East, some of them as CEO of PBI Aqaba. What legacy would like to leave to Aqaba and the company you are managing?
I want to achieve a level that gives value to all the stakeholders, not just the shareholders. Yes, the shareholders must have value. They won’t stay here unless they are making money, but beyond that, you must give value to the community, the government, and the workers. Everybody is a stakeholder, and that’s the legacy of our company. We create value for everyone. That is what I would like to see continue.
What is your final message to our readers?
Normally in business, especially financing, you sell the story. You don’t want the people to see the real thing. That’s what marketing is, but here, what you see is better than what is being represented. So, my message is to come to Jordan and you will see that it is much better than what you expected.