Dr. Adli Kandah
Economic Expert and Analyst
The debate surrounding Jordan’s export performance, particularly exports directed toward the U.S. market, raises an economic question that goes far beyond trade figures. Countries do not become stronger merely because they export more; they become stronger when they succeed in transforming trade and investment into domestic value creation, productive capabilities, technology transfer, skilled employment, and integrated national supply chains.
Not every dollar of exports generates the same developmental impact. The real economic contribution depends on the share of value added retained within the economy, the proportion of locally produced inputs, the degree of interconnection among sectors, and the ability of investment to create quality jobs and transfer knowledge.
Since 2005: The Question of Value Creation Was Already on the Table
Allow me to recall a personal experience dating back to 2005, when I participated in an economic seminar held at a hotel inside the Housing Bank complex, attended by a number of senior officials, most of whom are members of this respected group today.
During that seminar, I delivered an extensive intervention proposing the need to diversify investments in Jordan’s industrial and development zones that benefited from the special trade arrangements with the United States, rather than concentrating investment primarily in the garments and apparel sector.
The essence of my argument at the time was that the success of any export model should not be measured only by the size of exports, but by its ability to build a deeper economic foundation: local companies, supporting industries, technology transfer, national skills development, and production linkages extending across the wider economy.
The proposal received positive feedback from the Deputy Prime Minister who chaired the session, and His Excellency is also a member of this group. However, the desired transformation toward a more diversified investment base and a deeper industrial ecosystem has not materialized at the required pace and scale.
The Garment Sector: A Trade Success Story with an Unfinished Development Question
There is no doubt that Jordan’s garment sector represents an important export success story. The sector has benefited from Jordan’s special economic relationship with the United States, initially through the Qualified Industrial Zones (QIZ) arrangement and later through the broader framework of the Jordan–U.S. Free Trade Agreement, which became the main pillar governing bilateral trade relations.
Garment exports have become one of Jordan’s leading industrial exports, approaching around US$2 billion annually in recent years, while the sector has created tens of thousands of jobs.
However, economic analysis should not stop at the gross value of exports. It must ask a deeper question:
How much of this value is actually retained as domestic value added within the Jordanian economy?
An exported dollar does not necessarily remain entirely within the national economy. In industries that rely heavily on imported inputs, such as garments, a significant portion of the final product value represents value created outside Jordan before the product reaches its final manufacturing stage domestically.
Fabrics, yarns, accessories, and other production inputs are largely sourced from abroad, while the domestic contribution consists mainly of wages, operational services, utilities, logistics, and part of the profits and local expenditures.
Economic estimates suggest that domestic value added in export-oriented garment manufacturing may range approximately between 20% and 40% of export value, depending on the level of local integration achieved by each factory.
This means that exporting US$2 billion worth of garments does not necessarily translate into adding US$2 billion to the Jordanian economy. The real impact depends on how much Jordan produces itself in terms of inputs, services, knowledge, and skills associated with the production process.
This leads to the strategic question:
Do we want an economy that participates only in the final stage of global production chains, or one that captures a larger share of those chains?
From an Export Economy to a Production Economy
After more than two decades of trade openness, Jordan’s challenge is no longer simply attracting investment; it is improving the quality and developmental impact of that investment.
The required transition is from a model based primarily on low production costs to one driven by knowledge, technology, innovation, and higher value-added activities.
Successful international experiences, including South Korea, Singapore, and Ireland, provide a clear lesson: these countries did not build economic strength merely by exporting more. They built integrated production ecosystems.
They developed strong domestic companies, supporting industries, research and development capabilities, and human capital, then leveraged these strengths to compete globally. Exports became the outcome of a strong productive base, not a substitute for one.
Smart Import Substitution: A Strategic Industrial Opportunity for Jordan
In this context, Jordan should reconsider the concept of smart import substitution as part of its industrial policy framework.
This does not mean returning to traditional protectionist policies or isolating the economy from global competition. Rather, it means identifying sectors where Jordan has realistic opportunities to produce domestically a portion of the goods and intermediate inputs it currently imports.
Jordan imports approximately US$19–20 billion worth of goods annually, representing a significant strategic opportunity if investment is directed toward competitive sectors such as food industries, pharmaceuticals, chemicals, engineering components, and agricultural and industrial production inputs.
Producing part of these imports locally would not only reduce pressure on foreign currency resources, but would also create an entire economic ecosystem: factories, suppliers, logistics services, banking finance, training, and innovation.
Sectoral Interconnectedness: The Real Measure of Economic Strength
One of the most important characteristics of strong economies is the degree of sectoral interconnectedness.
A country does not become industrial simply because it has large factories. It becomes industrial because it has a broad network of small and medium enterprises, suppliers, and supporting industries connected to those factories.
One of the challenges in Jordan’s industrial model has been the emergence of what can be described as “isolated production islands”: successful export-oriented investments that rely heavily on imported inputs and therefore create limited linkages with the wider domestic economy.
The desired model is for large companies, whether domestic or international, to become engines of broader economic growth by relying increasingly on Jordanian suppliers for raw materials, components, engineering services, and technological solutions.
When a Jordanian SME produces a component that becomes part of a globally exported product, the economic value does not remain within a single factory; it spreads throughout the entire economy.
A Royal Vision for an Integrated Productive Economy
This approach is fully aligned with the vision repeatedly emphasized by His Majesty King Abdullah II, which focuses on maximizing domestic value added, empowering the private sector, attracting high-quality investments, linking large companies with SMEs, and transforming Jordan into a regional hub for production and services.
The objective is not merely to attract investors to Jordan, but to ensure that investors become integrated into the Jordanian economy: employing Jordanians, developing local suppliers, transferring knowledge, and generating a wider economic multiplier effect.
The Real Economic Question
After more than two decades of strengthening economic relations with the United States and expanding trade openness, the strategic question guiding Jordan’s trade and industrial policies should not only be:
How much did we export?
But rather:
How much domestic value did we create?
How many inputs have we started producing locally?
How many Jordanian companies have become part of global value chains?
How many high-quality jobs have we created for Jordanian citizens?
The economic strength of the 21st century is not measured only by trade volumes, but by a country’s ability to build an interconnected, productive, innovative economy capable of competing in global value chains.
Jordan’s challenge is not to become merely a platform for exporting products, but a platform for producing value, knowledge, and sustainable economic opportunity.
Beyond Exports: Can Jordan Turn Trade with the United States into Domestic Productive Power?
