Pundits urge mid-, long-term planning to address ailing economy

AMMAN – Economists on Tuesday put forward several suggestions the government can adopt in order to increase its revenues and avoid raising tax rates or hiking prices on Jordanians to address budget woes.

In separate interviews with The Jordan Times, experts said that as the government's approach over the past three years focused on short-term measures to raise domestic revenues and address financial challenges, and achieve monetary stability, it is time for decision makers to draw up medium- to long-term strategies to boost the economy and generate high income for the Treasury. 

Economist Jawad Anani, former Royal Court chief and former minister, said attracting foreign and local investors through revisiting taxes on investments in key sectors and through a stable legislative environment for businesses is the solution to generate higher revenues, create jobs and stimulate economic growth. 

"The investment environment is still not attractive for investors. This should be addressed immediately," Anani said. 

As the government is facing financing strains, it should prepare a list of large strategic projects that can be implemented by the private sector or foreign investors, he said, adding that only large development schemes can absorb unemployment among Jordanians and reduce demand for jobs in the public sector. 

The economist believes that raising tax rates will no longer be helpful for the government to increase revenues, citing the Laffer tax curve to explain the fiscal policies in Jordan over the past years.  

The Laffer curve shows that increases in tax rates will increase the government’s tax revenue; at some point, however, when the rates become high enough, further increases in tax rates will decrease revenue. 

This occurs because higher taxes become strong disincentives against earning or declaring taxable income.

Zayyan Zawaneh, former adviser at the International Monetary Fund and Finance Ministry, said the government has failed to utlise Jordan’s stability and its “good” relations with regional and international countries to promote the Kingdom as a hub for investments. 

In order to curb expansion in taxation policies, Zawaneh said the government should reduce its spending, particularly operational expenditure, which, he said, is covered by loans on many occasions. 

Cutting government spending can be achieved by reducing the size of the public sector by merging and cancelling a number of independent public agencies, estimated at 60 entities. 

Another move Zawaneh suggested to help stimulate the country’s economy is to work out a mechanism to address tax evasion.

Although there is no accurate figure about the size of tax evasion, official and non-official reports suggest that it is estimated to be around JD800 million, he added.

“The government should come up with a certain mechanism to collect what it can of these funds,” he said. 

President of the Economic and Social Council (ESC) Munther Shara made a number of suggestions as growth drivers. 

Enacting the decentralisation law without delay coupled with a comprehensive developmental programme would enhance redistribution of national income among regions, increase production and productivity in development zones, create new projects and jobs, and, subsequently, generate extra budgetary revenues, he said. 

Adopting a smart national ID for citizens would channel subsidies only to households that deserve government support, which means it could save the Treasury hundreds of millions of dinars paid every year, he added.

Administrative flaccidity, red tape and corruption must be checked, the ESC chief said, describing lack of enthusiasm among public employees as disastrous to government efforts to enhance productivity and better service provision to the public.

Shara also cited stability and consistency of investment legislation as a prerequisite for encouraging and attracting not only foreign investors to invest in Jordan, but to lure back Jordanian investors as well. 

He stressed that it is high time for policy makers to start thinking of new methods of financing transportation mega-projects such as highways and railroads through public-private partnerships. 

Head of the Lower House’s Financial Committee MP Yousef Qorneh said the government has taken short-term measures to reduce budget deficits and achieve monetary stability in the past three years. But now, he said it should provide growth and development-oriented budgets for the upcoming three years. 

The government should focus on large development schemes as a generator of higher revenues and jobs, the lawmaker said, adding that development projects should mainly target governorates to bridge the gap with Amman. 

Qorneh urged the government to speed up the establishment of the national investment fund –– proposed by His Majesty King Abdullah in his Speech from the Throne that was delivered at the opening of the 17th Parliament’s third ordinary session on November 15. Such a fund, the deputy said, will boost economic development in the Kingdom. 

He said the government should look at similar experiences in this field such as in Singapore and India and to draft its legislation in a way to render the Kingdom more attractive to investors. 

Economist Ziad Dabbas said the government should initiate constant communications with Jordanian expatriates to integrate them in the development process by attracting them to invest in the Kingdom. 

The Central Bank of Jordan, Dabbas said, should work on launching bonds targeting expatriates to finance lucrative and strategic projects.