A special initiative championed by King Abdullah transformed Aqaba into a special economic zone in 2001. Since then life has no longer been the same for Aqaba whose fortunes are changing as it gears itself to become Jordan’s leading investment destination. Aqaba Special Economic Zone Authority (ASEZA) was created in 2001 with the sole mission of positioning Aqaba as a leading regional business and leisure hub. ASEZA is an autonomous regulatory body which has been empowered with legislative and economic freedom to promote and attract investments to the zone. In less than five years since it came to existence, ASEZA did not fall short of its mission as all economic and social indicators demonstrate a dramatic progress.
Economic Indicators
The rise in ASEZA’s revenues confirms that it is heading in the right direction…
During the period 2001-2004, ASEZA’s revenues increased by a CAGR of 30% to stand at JD18.6mn at the end of 2004. As of May 2005, total revenues amounted to JD10.5mn, marking a 22% surge in revenues compared to the same period in 2004. Tax revenue represented around 63% of total revenue generated by ASEZA while the balance was derived from fees and customs. According to a revenue sharing agreement, the revenues from the Aqaba Special Economic Zone are split on a 50:50 basis between ASEZA and the government of Jordan.
Total trade levels quadrupled since ASEZA was created…
During the period 2001-2004, total trade grew at a CAGR of 59% to reach a total of USD576mn at the end of 2004. During the same period, imports grew at a CAGR of 47% to reach USD443mn in 2004 which represents 77% of total trade. On the other hand, export growth was exponential, albeit from a low base, at a CAGR of 305% to reach USD133mn in 2004. As evident from the trend, exports growth clearly outpaced imports growth, increasing its share of total trade from a mere 2% in 2001 to 23% in 2004. Hence we believe that this ratio is set to continue rising in the future as Aqaba positions itself as a regional export hub.
The boom in construction activity reveals strong investor interest….
Investors’ interest in Aqaba is mounting as can be seen from the surge in construction licenses awarded by ASEZA. During the period 2000-2004, total construction licenses awarded grew at a CAGR of 37% to 2,803 licenses at the end of 2004. Between January-May 2005, 478 construction licenses were awarded compared to 422 licenses awarded for the same period last year. This construction boom is also apparent in the total amount of licensed land which grew by a CAGR of 49% during 2000-2004 amounting to 912,323 sq. m. at the end of 2004. Between January-May 2005, the amount of licensed land was 202,899 sq.m. compared to 141,003 sq.m awarded for the corresponding period last year.
ASEZ generates new jobs for the Jordanian economy …
With official unemployment figures for Jordan hovering around 12.5%, job creation is vital to stimulate economic growth. After just four years in operations ASEZ’s contribution to the Jordanian economy is gradually being felt with job creation in the zone heading upwards. During the period 2001-2004, total numbers of labor surged by a CAGR of 50% to reach 23,335 at the end of 2004. It is worth noting that Jordanian labor constitutes 61% of total labor in ASEZ. The Jordanian labor force in ASEZ grew at a CAGR of 110% to reach 14,200 in 2004. This superior rate of growth proves the economic viability of ASEZ and confirms its ability to become Jordan’s economic powerhouse. Needless to mention that ASEZA’s role in generating employment opportunities for Jordanians improves the social welfare for the Jordanian citizen.
Sector Focus: Tourism
Growth in Aqaba tourism outpaces the national average…
With its crystal blue water and pristine sandy beaches, Aqaba is slowly but surely emerging as an important international tourist destination. Not only that Aqaba is securing its share of international and local tourism but it is also proving to be the catalyst for growth in the Jordanian tourist industry. Whereas the overall tourist arrivals to Jordan grew at a CAGR of 2.1% during the period 2000-2004, tourist arrivals to Aqaba grew at a handsome CAGR of 11%. It is worth noting that Aqaba achieved this superior growth rate in a period full of regional turbulence, thus confirming its brighter prospects when things cool down in the region. Owing to this superb growth, Aqaba’s share of total tourist arrivals to Jordan increased from 5.2% in 2000 to 7.1% in 2004 to reach 357,200 tourists. Of the total tourist arrivals in Aqaba, Jordanians represent the lion’s share with more than 60% followed by Europeans and Arabs with a share of 16.6% and 12.2% respectively in 2004. Among the positive indicators confirming the health of Aqaba’s tourism is the improvement in hotel occupancy rates from 50% in 2003 to 60% in 2004, again outperforming the national average which stood at around 46% in 2004.
Outlook: The right formula is there for a brighter future…
Looking at the extent of what has already been achieved during the past four years which we consider to be tough by any standard, we believe that the future looks even more promising for the tourism industry in Aqaba. The sector managed to defy all laws of gravity when it grew at a 4-year CAGR of 11% compared to a world-average of 2.6% during a tough period characterized by dramatic events. As per ASEZA’s projections, total hotel rooms and total bed night demand are expected to increase by 121% and 127% respectively by 2010. To achieve its targets, ASEZA plans to intensify its marketing activities by increasing its marketing expenses to position Aqaba as a premier international holiday destination. The recent Israeli pullout of Gaza and hopefully the restoration of order in Iraq will in our view contribute to achieving regional stability which will undoubtedly benefit the tourism sector in Aqaba.
Sector Focus: Transportation
Aqaba port is gearing up for increased demand…
Being Jordan’s only sea access, the port of Aqaba has been stretched to cope with the increasing demand following the Iraq war in 2003. During the period 2000-2004, container handling at the port of Aqaba grew at a CAGR of 13.6%. The year 2004 saw an 18.5% surge in container volumes in Aqaba Container Terminal (ACT) to 359,000 TEUs. This growth comes as the port is widely considered by international companies to be the main gateway to doing business in Iraq and the Levant. In addition to that, the United Nations has chosen the port of Aqaba to be its supply port to Iraq. On a regional perspective, the port, though the smallest in terms of volumes of containers handled, is strongly emerging as an important player among other neighboring Arab ports. With a growth of 18.5% in containers handled in 2004, ACT ranked third after Saudi Arabian and UAE ports which achieved a growth of 31% and 25% respectively.
ASEZA took a bold move by privatizing ACT in 2004…
As part of its master plan to develop Aqaba, ASEZA has taken a bold step in March 2004, when it signed a 2-year contract with APM Moller, a part of the worldwide Maersk Sealand Shipping Containers Group. The decision by ASEZA came as the port was suffering from exhorbitantly high waiting times reaching 129 hours per ship which drove away business from Aqaba to nearby ports such as Jebel Ali and Haifa. It was not long before the success of the new management was being felt as measured by the reduction in achorage waiting times from the high of 129hrs in February 04 to less than four hours currently. This operational improvement was translated into fianancial return as the port’s revenues jumped by 24% in 2004 to reach USD116mn. The success of the ACT privatization will encourage ASEZA to take the same step for the cargo terminal at Aqaba International Airport.
Aqaba port will emerge as a regional transportation hub…
In addition to its strategic location as Jordan’s only sea port, Aqaba’s chances of assuming a more key role in regional trade has dramatically increased after its privatization in 2004. With improved operational efficiency the port is ready to carve itself a niche as a key container port for Asian trade bound for Iraq and the Levant region. In just one year after being privatized the port achieved an increase of 24% and 18% in revenues and container volumes respectively. In addition to being the gateway for trade to Iraq and the Levant, we believe that the long-term prospects of the port are promising given the potential increase in demand from re-construction of Iraq and expected boom in economic activity in Gaza following the recent Israeli pull-out. Leading companies such as PWC-Logistics, the leading end-to-end supply chain solutions provider in the Middle-East believes in the future of Aqaba. The company has set up shop in Aqaba in the warehousing and light industrial area over an area of 100,000 sq.m. The JD14mn project stretches will offer shipping, distribution, transportation and storage services.
