How to save industry
Jordanian manufacturing industry deserves to be commended.
According to the Department of Statistics, the industry was obliged to reduce its output in 2015 by 1.2 per cent, and to reduce prices by an average of 13.3 per cent. The drop in sales proceeds is 14.5 per cent, yet the industry survived.
Industrialists hold meetings with government officials to discuss the future of the manufacturing industry and the challenges it faces. Such meetings are usually covered by a detailed piece in the economic sections of our newspapers and nothing else.
The industry claims to be the most important sector of the economy, measured by its contribution to the gross domestic product, which stands at around 20 per cent.
Industry is also the second greatest source of jobs after the government. It employs some 20 per cent of the country’s labour force.
The detailed list of national exports indicates that industry is responsible for 83 per cent of all national exports.
If all these facts are true, and they are, then the difficulties of this distressed sector deserve to be considered to allow it to survive, continue operating and increase contribution to the economic and social well-being of the county.
To encourage industry through the easy way of reducing income tax on their profits is not effective, as there are no profits to benefit from tax reduction.
Tax exemption is the easiest way for the government to deal with a problem, but it is the least productive from a national point of view.
Industry needs a push in the field of exports. It needs a reasonable customs protection in its local market to be able to grow and determine prices on economic considerations.
As far as exports are concerned, the government should put pressure on all trade partners to import Jordanian products equal in value to Jordan’s imports from those partners, or at least half that much.
After all, trade between countries should be balanced and go in both directions.
The high rate of local origin imposed by the European Union on Jordanian exports should be rejected out of hand because a minimum rate of 60 to 65 per cent of local origin amounts to prohibiting Jordanian products from entering the European markets.
Official statistics show that European exports to Jordan in 2015 were 25 times European imports from Jordan.
In this respect, we only have a promise to enter into negotiations during the second half of this year to revise this very high ratio as part of supporting the Jordanian economy to help accommodate the influx of Syrian refugees, as agreed in the recent donors’ conference in London.
It is not known to what extent the EU will agree to make a meaningful reduction in the rules of origin.
Jordan is expecting the EU to treat Jordanian exports on the same terms and conditions granted by the US, where only 35 per cent rate of local origin is needed to qualify Jordanian exports to enter the American market.
The Jordanian manufacturing industry is still in infancy. It needs a measure of customs protection and administrative restrictions against imports to enable it to survive and enjoy priority in meeting the needs of the local market.
In that case, the rules of the World Trade Organisation (WTO) can be discarded. This organisation imposed on Jordan many restrictions and conditions, but did not give it one advantage.
WTO membership is not needed. It is dispensable.