The Undeterred Entrepreneur: Stimulating Competition in Jordan | by Aseel A. Barghuthi

“put an end to the privileges of the few and establish and protect systems that safeguard opportunities for generations to come.”

Photo: Birds over Jerash, the ancient Roman city now in northern modern-day Jordan. Credit: Aseel A. Barghuthi
Photo: Birds over Jerash, the ancient Roman city now in modern-day northern Jordan. Credit: Aseel A. Barghuthi

Of the many freedoms that the Middle East may be accused of lacking, the freedom to compete receives the least attention. In an ideal sense, commercial competition takes place between two or more players vying for profit within a specified arena and guided by mutually accepted and applicable rules. There will be winners and there will be losers. Crucially, the vitality and dynamism of any particular commercial marketplace depends on each player having the equal opportunity to win, or to lose, based on known and knowable rules.

The entrepreneurial young have proved themselves to be important engines of economic growth in Jordan

Through innovation and creativity, firms may distinguish themselves, their product or their service in a marketplace to which everyone’s initial access is equal. Ideally, it is in such a manner that a widely accepted and evenly applied competition regime acts as an important cornerstone of sustainable development. By establishing level and transparent playing fields for competitors and consumers alike, fair and open rules of commercial competition promote entrepreneurship. In the practical reality of countries like Jordan, however, despite a burgeoning level of innovation, particularly among the youth, sustainable development is stifled by a restrictive competitive environment.

In the last decade, increased regional and international investment has meant Jordan’s GDP has almost doubled. Yet, regional turmoil has also significantly affected the country’s ability to attract foreign direct investment, and the burden on local capital has increased. The limited capacity of Jordan’s private sector has also meant an inability to absorb the high outflow of qualified graduates from the country’s universities.

Between, 2011 and 2015, unemployment among the country’s youth population maintained nearly unmitigated levels at around 30% of the population between 15 and 24. Despite this somewhat bleak picture, and notwithstanding a restrictive regulatory environment, entrepreneurship, especially among the youth, is on the rise; and local start-ups are taking off with much success. These entrepreneurs are to thank for generating most of the new jobs in the economy between that four-year period. The entrepreneurial young have proved themselves to be important engines of economic growth in Jordan.

Successful negotiation of international trade agreements such as those with the European Union has put pressure on many Middle Eastern countries to absorb competition frameworks without first establishing the necessary internal mechanisms and reforms needed to uphold these external structures

But for Jordan to capitalize on its growing local market potential, it is imperative that it builds an organic competitive economic regime fuelled by local innovation. At the heart of an environment in which competition is allowed to prosper is sound competition law. Competition law, however, is not a stand-alone tool but an important piece of a puzzle of policies and practices that pursue the broader social welfare. A functional competition regime also consists of a sound legal framework with cultural and political buy-in and awareness from the ground up. The importance of independent institutions that are empowered both on paper and in practice to enforce competition regulations in a transparent fashion cannot be over-estimated.

One of the problems that the wider competition framework in Jordan faces, which it shares in common with much of the Middle East, is a raft of competition law that has been inorganically imported into the society. Successful negotiation of international trade agreements such as those with the European Union has put pressure on many Middle Eastern countries to absorb competition frameworks without first establishing the necessary internal mechanisms and reforms needed to uphold these external structures.

Without political connections, or other kinds of  insider advantage, many may feel the process and effort of competing to be futile.

This goes some way to explaining why in Jordan, for example, a fully integrated competition regime has been slow to take root. Jordan signed its EU Mediterranean Partnership Agreement in 1997, yet it was not till 2002 that the country passed a provisional competition law, Temporary Competition Law No. 49.  The final law, Competition Law No. 33, followed in 2004.

Despite the fact that one of the most important features of an effective competition enforcement authority lies in its power to independently investigate and prosecute or sanction anticompetitive conduct, under Jordan’s 2004 competition law, the Competition Directorate is only empowered as an investigative authority to identify potential anticompetitive conduct. The Directorate does not have the power to prosecute or sanction any of the conduct which it identifies as anticompetitive. As such, its power over firms engaged in anticompetitive practice is limited, to say the least.

The power to prosecute or sanction anticompetitive conduct is reserved for the Minister of Industry and Trade who is also given wide discretion to grant exemptions under the current law. In its current capacity, therefore, the Competition Directorate serves a merely informational role. Even in its heavily circumscribed standing, however, the Directorate’s effectiveness is further hampered by the fact that the institution is inextricably enmeshed with, and dependent on, the central government by virtue of both its budget and mandated decision-making process.

Jordan’s Competition Directorate being independent only on paper means that the power to grant or deny access to the national market, or to permit or disallow certain economic behaviours has been centralised. The possibilities for nepotism, corruption, and the unsavoury exchange of unearned favours is boundless. The less obvious result is that entrepreneurs and potential participants to the market are deterred from taking part and innovating due to the wide spread perception that the market is an unfair playing field in which the odds are heavily, and institutionally, stacked against them. Without political connections, or other kinds of  insider advantage, many may feel the process and effort of competing to be futile.

In Jordan, there is currently no coherent system in place for consumer protection. Among consumers themselves, there exists very little awareness of the availability of such protection.

By putting off market actors, the structural and non-transparent organization of Jordan’s nascent competition regime stands in the way of unlocking the country’s local economic potential. The institution of a truly independent competition authority tasked with the even-handed enforcement of Jordan’s competition laws and rules across all firms, has become imperative not just for the country’s competitive environment but for a larger socio-economic development.

The ability of poor competition regimes to negatively affect economic development does not lie only on the former’s effect of discouraging firms and would-be entrepreneurs. Skewed competitive environments, such as that which is operated in Jordan, also adversely affect the consumer; and this is not only very bad for business, it is very bad for growth. The existence of valid competition law is one thing, but without consumers asserting their market rights and the market in turn fulfilling their demands, a healthy and well-integrated competition system cannot exist.

In Jordan, there is currently no coherent system in place for consumer protection. Among consumers themselves, there exists very little awareness of the availability of such protection. For the purposes of fair trade, fair competition, and the exchange of accurate information in the market space, the importance of consumer welfare cannot be over-appreciated. In 2001, the Jordanian National Society for Consumer Protection prepared and submitted a draft consumer protection law to the Ministry of Industry and Trade. The draft legislation was shelved. In 2013, the parliament allegedly received a draft consumer protection law endorsed by the Jordanian Cabinet of Ministers. As of writing this, there has yet to be any movement on the draft law.

The possibilities for nepotism, corruption, and the unsavoury exchange of unearned favours is boundless

Despite the restrictive competition environment in Jordan, a 2015 World Bank report found that in recent years, most job creation and growth has taken place as a result of start-ups and young firms. However, the same report also found that out of every 10,000 working age individuals, only 7 new limited liability firms are created annually. This is in stark contrast to the average of 26 new firms in other developing countries. Cumbersome local licensing rules and other barriers to market entry have evidently dampened the zeal of potential local entrepreneurs.

70% of Jordan’s population is under the age of 30; encouraging creativity and innovation, and increasing market access can only help pave the way for future generations of entrepreneurs and problem-solvers. Jordan has made many adjustments to its economic policies in an effort to adapt to trade liberalization demands. But in order to properly position itself to move towards an inclusive economic marketplace that safeguards consumer rights, establishes a level playing field, and encourages creativity, far more effort must be focused on building an internal competitive process that is allowed to develop organically from Jordan’s own local market needs.

An economy fuelled by competitive rivalry, innovativeness, and market access is especially necessary for Jordan at this time. While political turmoil throughout the Middle East has involved varied issues that differ in scope from one country to the next, the overall message from the region has been the same: put an end to the privileges of the few and establish and protect systems that safeguard opportunities for generations to come.

The inconsistent and preferential application of Jordan’s competition laws, as well as the lack of consumer awareness of existing rules is one system that is not presently doing the country any favours. By limiting the number of players incentivized to compete, it is a system that prohibits the emergence of a competition-orientated economy. This is a problem for future generations of bright, hard-working, and creative young Jordanians.

Aseel A. Barghuthi is a Jordanian national. She is an international lawyer specialising in international commercial law with experience in international commercial arbitration. Aseel obtained her J.D. from the George Washington University Law School. She holds an M.Sc. from University College London and a B.A. from Duke University.

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