Jordan's challenge of facing energy shortage

The country has managed to weather the global economic crisis, and now needs to face one of its most important challenges: energy shortage. Professor Zu'bi Al-Zu'bi, Dean of the Faculty of Business of the University of Jordan, sheds light on how his country is determined to keep on developing its economy
 
 
In a turbulent Middle East, the Hashemite Kingdom of Jordan has always been a beacon of stability. The country has managed to weather the global economic crisis, and now needs to face one of its most important challenges: energy shortage. In this interview with ABO, Professor Zu'bi Al-Zu'bi, Dean of the Faculty of Business of the University of Jordan, sheds light on how his country is determined to keep on developing its economy.
 
What are the most pressing needs of the Jordanian economy right now?

Like much of the world, Jordan has felt the effects of recent global events. Regional instability led to a decrease in tourism (one of the most important economic sectors), as well as less foreign direct investment. In an effort to minimize the effects of these events, subsidies and wages were increased, which led to a greatly increased budget deficit (currently 9 percent of gross domestic product – GDP). At the same time, unemployment continues to be very high, particularly among youth and among refugees.

nstability in the region has also had more direct economic
effects – as Jordan accepts refugees from neighboring conflict-struck countries, it must also bear much of the cost of feeding and housing these refugees. For example, Syrian refugees cost an estimated $2.1 billion in 2013.

Energy remains a pressing need for the economy. Since 2011, Jordan had experienced rapidly-rising energy prices, particularly due to damage to the Sinai pipeline, which has disrupted importation of natural gas from Egypt.
 
Furthermore, the national electricity firm, NEPCO, suffered significant losses, leading to a large financing gap. Despite these challenges, Jordan's economy has weathered the global storm quite well – the first quarter of 2013 still saw 2.6 percent growth.
 
The European Parliament has just decided to offer Jordan 180 million euro in financial assistance for the next two years. How important is the economic partnership with Europe for Jordan?

This partnership is essential for Jordan's economy. The European Union is Jordan's largest trading partner, and it has provided Jordan with 330 million euro of grants over the past three years. This latest offering is intended to help Jordan to fund its balance of payments, to promote economic development and reform, and to support Syrian refugees. There is no doubt that without this money, Jordan's ability to deal with the challenges it faces would look dim.
 

Jordan is becoming known as the Arab Silicon Valley. What opportunities does the high-tech sector offer in terms of Jordan’s economic growth?

One thing that Jordanians can be proud of is our entrepreneurship. Jordan produces more technology start-ups than any other Middle Eastern country, with the most famous and successful being Maktoob, which was acquired by Yahoo for $80 million in 2009. Technological entrepreneurship is something that is being fostered by the government – the Queen Rania Centre for Entrepreneurship is one such initiative, and Jordan has a very low barrier to entry to the market. At the same time, though, the maintenance of old laws means that it can be prohibitively expensive to run a company. The high-tech sector in Jordan is relatively new, so there isn't really any information yet on how it will affect the Jordanian economy.
 
What has been the impact of the Arab uprisings on Jordan’s oil supplies?

Jordan relies on Egypt for energy, receiving 80 percent of its energy needs from the country. Before the fall of Mubarak, Jordan received oil via the Sinai pipeline at a low price. Since the beginning of the Arab Spring, however, decreased security in Sinai resulted in regular disruptions and increased oil prices. Imports from Egypt fell from 250 to 40 million cubic feet a day, and Jordan has had to find other sources of oil, at much higher prices. This year, energy accounted for 30 percent of all imports, at a cost of $18 billion – it is estimated that problems in Sinai cost Jordan $2 billion alone each year.
 
Jordan is thought to have the fourth-largest shale oil reserves in the world.
 
 Can you tell us about the plans to build the first oil shale-fired power plant in the Middle East?

Jordan is thought to be sitting on 30 billion barrels of oil in the form of shale oil. The Utah-based company Enefit has signed agreements with the government both for exploration and production rights over segments of Jordan’s shale and to build an oil shale production plant and an oil shale-fired power plant. The factory is currently moving ahead, with the final steps before construction including negotiations with potential contractors and a discussion with the Jordanian government on electricity tariffs. Enefit claims that shale oil could not only provide for Jordan’s own electricity needs but also lower its trade deficit. Enefit won't have a monopoly on Jordan's shale oil. More recently, China and Jordan signed a memorandum of understanding to build an oil shale-fired power plant at a cost of $2.5 billion. At the same time, the Jordanian company Karak International Oil is doing research in Al Lajjun, with the hope of beginning oil production in 2016 or 2017.
 
 
 
Biography Zu'bi Al Zu'bi
 
Zu'bi Al Zu'bi is the Dean of the Business School at the University of Jordan. He has lectured in the United Kingdom, U.S.A and Jordan. In addition, he worked as an advisor for several international, regional, governmental, and private organizations. He is a frequent correspondent for the Jordanian media and has organized and moderated many debating sessions for senior officials and decision makers regarding economic and political issues. He has been elected to the Fellowship of the Higher Education Academy in the UK.