Introduction
Currently, the world has numerous and well established Global Financial Centres (GFC). Most of these Financial Centres do not only yearn to be dominant, but also to be recognized as key regional and international GFC. Literature on international finance shows that in the last few decades, there has been the emergence of several Financial Centres in different areas across the globe.
These GFCs have shown different levels of financial and operational success. Amongst the top ranked global financial centres are Toronto, Geneva, Chicago, Tokyo, Seoul, Zurich, Singapore, Hong Kong, New York City, and London. The list is in ascending order. A worldwide city or home to stock exchange, businesses, and banking defines a financial centre. Therefore, international financial centre is not a specific word for describing important participation in the financial trade market (Central Bank of Jordan, 2012).
The modern telecommunication provision and great worldwide financial organization has generated uninterrupted and permanent global financial market. The outlay of transportation and complexity in communication has been decreasing constantly over the recent years.
This has fostered the development of a solitary money market in the globe. The Jordanian government gave its support to the proposal of changing the biggest and best-known city of Jordan to a GFC. This was in addition to the existing IFC. A working organization make-up was fashioned with the aim of changing Jordan to a regional finance centre. Later it emerged as one of the most significant among the well-established IFC (Ferguson, 2008). The innovations were intended to warrant the future status and potentiality of Jordan as an IFC.
There is no agreement reached on the common meaning of a Financial Centre. The place where clients and providers of financial services convene to carry out big business can best define it. In fact, this description summarises both the international and domestic financial centres definitions.
It can also be an accumulation of the foreign finance, overhaul ventures, and commercial operation centres. The objective of a FC is the provision of high-level monetary and specialized services more willingly than retail banking services. These services serve the universal, local, and nationwide nonfinancial and financial organization headquarters. Conversely, a place where financial institutions and banks are highly concentrated is a financial centre (Central Bank of Jordan, 2012).
The objectives and reasons for establishing the Jordan Financial Centre (JNFC)
The JNFC was established to boost the economic atmosphere for investment in Jordan Empire. This was a dignified dream of King Abdullah (II). The king yearned for a strengthened development of financial centres in the region. The King established JNFC out of the JSC (Jordan Securities Commission) honour.
This Centre is a representation of the nation’s economic force and signifies the major market enlargement in Jordan. With conformity to the international customs and principles, this centre has united economic, societal, and cultural facets in the capital market. It has maintained sound settings for investments through its general purpose.
Furthermore, JNFC has implemented information guidelines and promoted growth concerning marketplace safety through overseas speculation. This multifaceted financial project has a number of bank subdivisions, agencies and representatives, Investor Halls, Security Deposit Centres, Amman Stocks Exchange, and Finance Study Centres (Jordan Securities Commission, 2012).
Jordan has established innovative financial hubs for recognition to improve capital markets venture operations both locally and abroad. The centre has computerized packed trading structure in bank office, house brokerage, and exchange. This latest centre is adjacent to current Amman Stocks Exchange. It has augmented investment environment in the state’s capital market as a local centre. Moreover, in agreement to the paramount global practices, it has established protected and eye-catching environment.
Hence, JNFC is recognized and has more than one hundred programmed corporations. This brings its capital in the market to nearly $32.40 billion. The state does not put restriction on foreign ownership. Thus, non-residents in Jordan possess above 46.0% of the listed corporations. The financial sector in Jordan is well organized (Association of Banks in Jordan, 2010).
The JNFC provides easy and efficient business operations in international finance for profitability. It has a recognized workforce talent and experienced administration to cover up co-dependent services like official and accounting, finance, and businesses.
This makes available multi-disciplined teams to facilitate great overseas connections in the shortest period possible. Further, this centre has a profound liquidity and superiority in the capital market. Hence, it competes and regulates taxes globally with flow in offshore production and foreign investment (Sheikh-Miller, 2007).
Jordan’s worth to financial services significantly multiplies through labour force that promptly responds through groundbreaking techniques. Moreover, it has the best information technology and telecommunication worldwide with multilingual and intellectual workforce. This makes the location for the financial services to be well organized (Association of Banks in Jordan, 2010). JNFC provides customers with fascinating and hospitable surroundings for business transaction.
JNFC deals in diverse and major currencies in the world, and not just the legal state tendering. Therefore, financial transactions links is indirect to the domestic banking system. JNFC is thus an offshore financial centre since it not only deals in domestic money, but also in offshore currencies to allow foreign investment.
JNFC renders foreign transactions on tax-free basis and enjoys exchange controls imposed on domestic financial transactions. The recognition of this irregularity by the government is the major reason why there is extraordinary growth in Eurodollars market and Eurocurrency in foreign investment. Jordan has executed the provision of financial services to both natives and non-residents.
The Jordanian government inspects the possibility of interference from inhabitants and the intercontinental centre (Sheikh-Miller, 2007). Nevertheless, this has propelled JNFC to balance its conflicting objectives. This has made JNFC to be recognized as a regulator of residents’ probable exploitation and an advocate of IFC.
The pros to Jordan Financial Centre emerging as regional or GFC
Jordan is perceived as one of the biggest Arabic countries and is a gateway market in the region. In fact, most financial activities and manufacturing services occur around and some in Jordan city. To add on that, the City of Jordan has emerged to be amongst the globally enormous metropolis and it is currently described as the business and economic capital.
A majority of Jordan population stays in the city where the Financial Centre was constructed. They generate nearly 27% of the total economic output, about half of the total country’s exports, and 40% of the tax revenues (Presley, 2012). Within these types of potentials around its Financial Centre, the government of Jordan is able to turn the Jordan Financial Centre into a global or regional financial one.
The aim of being a global or regional financial centre is spearheaded by various prospective advantages the FC has around it. For instance, Jordan has vast human capital as well as other resources such as the dynamic and youthful educated labour force. These groups are able to execute most monetary transmission activities. Secondly, Jordan has a stable and favourable macroeconomic environment that can facilitate the activities and business or financial activities of the JFC.
Third, the country is politically determined and is seen as a regional power, hence, it stands a better chance of enhancing most financial business operations that are undertaken by the Financial Centre. Fourth, the quality of financial services offered, rapid Jordan economic growth, and its geographical location gives JFC an upper to become a global or regional Financial Centre (Bank Audi sal, 2008).
Therefore, the advantages that Jordan Financial Centre has, which can help it become a global or regional financial centre can be summarized in terms of strengths and opportunities. The strengths and opportunities include:
- In the emerging cities outlook and global cities index, the 2012 report indicated that Jordan would be amongst the most important city vectors in the coming years. Jordan is acknowledged as a pivot amid west and east. It has enough expertise and rich in regal culture that can govern financial interactions (Bank Audi sal, 2008).
- The country has up to date airports, which connect Jordan to major cities, business, and financial centres around the world.
- Jordan has a complimentary time zone. The country’s geographical position puts its close to various upcoming markets in the Black Sea Region, Central Asia, Eastern Europe, North Africa, Gulf, and the Middle East. These are amongst the advantages that Jordan has that will steer its financial centre into a global one (Sheikh-Miller, 2007).
- Jordan’s commitment to the European Union accession namely; changes in the structures of economic governance, changes in the framework of macroeconomic policy, and single marketplace integration is an added advantage to Jordan Financial Centre operations (Presley, 2012).
- Jordan is amongst the largest global economies, and the government has the strong will of establishing Jordan Financial Centre.
- There is profitable and sturdy banking Sector in Jordan. Therefore, the strong and adequate capital of Jordan banks is beyond the authorized 8% limit.
- Jordan has better commercial banking when compared to other rivalry International Financial Centres in the area.
- There are skilled and high quality workforces in the banking field. These labour forces can easily be accessed at relatively lower costs. This is because approximately 21% of Jordan’s increasingly educated and youthful workforce resides in the city where the Financial Centre is constructed (Central Bank of Jordan, 2012). Thus, numerical labour shortages are unheard of in the market for labour.
- When compared to other G20 nations, Jordan has cheaper rates. This implies that, professionals who offer financial services are able to benefit from identical or even high living standards from other International Financial Centres that charge low costs.
- Jordan does not restrict foreigners from acquiring real estates
The cons to Jordan Financial Centre emerging as regional or GFC
- Jordan occasionally experiences current account deficits and low savings rates. This makes the country to be financed or funded through interim capital inflows
- Jordan has very few lawyers in the financial service industry to offer legal advice on financial matters.
- There is a great traffic congestion problem in Jordan. For instance, Jordan transportation is typically through private automobiles, taxis, minibuses, or buses.
- The taxation system is quite complicated. Various documents must go along with tax statements either annually, quarterly, or monthly.
- Jordan has comparatively weak derivatives, private sector bonds market, and stock market capitalization. This gives the country a weaker national brand image.
- While Jordan has a pool of skilled workforces, the labour force lacks proficiency in speaking English.
The success and future outlook of Jordan Financial Centre
The JNFC has achieved its objectives under several aspects. It has succeeded in erecting new finance centre, lured investors through stocks exchange, opened up novel banks, and actively competed with other GFC. This has helped the centre to plan for its future growth.
New finance centre in Jordan
The erection of the JNFC cost approximately seventy million US dollars. It offers offices for bank, brokerage, and is the current quarters for Amman Stocks Exchange. It has fully enlarged to a fledged local finance centre that makes safe distant investment in the empire. The current site of the JNFC is in Arjan region near Amman Stocks Exchange.
The area measures about seven hundred and forty thousand square feet and holds the regions training facility (Jordan Securities Commission, 2012). The Commission of Jordan Securities laid down this facility, and its cost depicts what Jordan will reap in the end. This centre follows the global FC practices and develops the modern computerized systems for trade and communications.
Appeal to investors by Amman Stocks Exchange
The financial centre operates as a crowd-puller to advance investment from foreign investors. This is rational because Amman Stocks Exchange interests are over and done.
The stock market in the empire is not restricting foreign investments. Inhabitants from Arabic region can own and invest in Jordan. Nevertheless, JNFC has attracted a number of investors’ since the economic stability and resource protection is high in Jordan. Thus, investors from areas like Iraq and Lebanon whose states are politically disarrayed and affected invest in JNFC (Ferguson, 2008).
There was a drastic drop in the proceeds of Amman Stock Exchange along with other bourses in the Middle East. Despite this, not less than forty-five percent of listed shares are in the alien investors’ ownership. In recent years, the Stock Exchange fell off by thirty three percent resulting into 21% plunge in market capitalization. Today its capitalization has tripled and ranges at $31.10 billion. This gain is coming from the large number of well-informed investors who come from the Gulf (Central Bank of Jordan, 2012).
Jordan’s new fangled banks
Jordan has encouraged overseas investment in the sector of finance. This move has attracted new Arab firms that are listed on the nation’s capital market. Hence, the establishment of JNFC has boosted the Kuwait Finance House in Bahrain to open up a bank in Jordan at a cost of $50.00 million.
The Jordan-Kuwait Finance House is an auxiliary entirely possessed by Bahrain. It has networks covering in Malaysia, Turkey, Bahrain, and Kuwait. Moreover, the bank centre of attention is on activities like acquirement, investment advice giving, and investment banking (Association of Banks in Jordan, 2010).
Besides, extra express distant investment into the empire gets critical support from the bank. The Jordan-Kuwait Finance House came into partnership with Jordan Industrial Development Bank at the same time with Dubai Islamic Bank, Dubai International Capital, and the Jordan Dubai Capital.
This resulted into increased capital of more than $100.00. Thus, they got their hands into the main stake at the Jordan Industrial Development Bank and in JNFC (Jordan Securities Commission, 2012). The Foreign Service suppliers and banks are seeing logical prospective in the financial sectors in Jordan. Therefore, other foreign companies are focusing to ascertain and open up in the kingdom. This will boost the operations of the JNFC.
Market competition in Jordan
This financial centre is not the only organization in the Middle East. In fact, Jordan foreign investment has fostered establishments of many ambitious finance centres in the Gulf region. This has generated supplementary diversification in trade and industry. Actually, Bahrain Financial Harbour, Qatar Financial Centre, and Dubai International Finance Centre offers competition. They proffer low duty, tax-free services, and bid one hundred percent in alien rights. They all target special divisions in the market (Sheikh-Miller, 2007).
With Qatar’s richness in natural resources, Bahrain and Dubai dominate service-based economy. Thus, they all correspondently compete to be most excellent financial centres in the Peninsula of Arabia. Contrary, it is advantageous for Jordan to be the most logical finance centre in the Levant region.
This is because of its geographic location that detaches it from the Gulf. Without doubt, it is probable that investors would be ploughing more investment funds into Jordan. These are the financial overhaul providers, and investors from the Gulf region tend to diversify their investment collections (Sheikh-Miller, 2007).
Conclusion
In the Arabic region, there are various International Global Financial Centres including the Bahrain Financial Harbour, and the Qatar Financial Centre, and the Dubai IFC. However, despite being well established, Jordan Financial Centre imposes serious market competition to these GFC.
The country has stable and rapid economic growth, offers quality financial services, is geographically well positioned, enjoys political determination, as well as regional power (Jordan Securities Commission, 2012). Besides, Jordan’s macroeconomic environment is favourable and the country has vast dynamic, low priced, and young workforce that can offer expertise financial services.
Despite these strengths, the long-term operation of Jordan Financial Centre still faces various setbacks. These include complicated tax system, inadequate infrastructure, weak legal framework, and unstable financial environment. All these factors can hinder the success of Jordan in becoming a universal financial centre.
References
Association of Banks in Jordan (2010). Development of the Jordanian banking sector (2000 – 2010). Web.
Bank Audi sal (2008). Jordan economic report: challenging twin deficits in a wait and see mode economy. Web.
Central Bank of Jordan (2012). Jordan is banking sector: monthly chart book. Web.
Ferguson, R. (2008). International financial stability: Geneva reports on the world economy 9. London, UK: Centre for Economic Policy Research.
Jordan Securities Commission (2012). National financial centre. Web.
Presley, J. (2012). Directory of Islamic financial institutions (RLE: banking & finance). New York, NY: Routledge.
Sheikh-Miller, J. (2007). Jordan to build new financial centre. Web.