The Middle East / June 2000
By Larry Luxner
AMMAN -- The Hashemite Kingdom of Jordan -- ruled by a net-surfing, 38-year-old monarch who was educated in Massachusetts -- wants to position itself as the Arab world's leading source of online computer programming.
At the recent World Economic Forum in Davos, Switzerland, King Abdullah II made it his business to meet not only with President Clinton and Israeli Prime Minister Ehud Barak, but also with Microsoft's Bill Gates and CEOs of other top high-tech firms.
The new royal mission: to make IT Jordan's No. 3 foreign-currency after phosphate mining and tourism. King Abdullah's ambitious plan would create 30,000 new jobs in the IT sector, boost software exports to $550 million and generate $150 million worth of foreign investment.
Unlike neighboring Israel, where cellular and Internet penetration is among the world's highest, Jordan -- a desert kingdom of 4.5 million inhabitants -- is a relative newcomer to the online world. Yet its highly skilled workforce, low labor costs and widespread use of English could be enough to lure companies like Microsoft, Cisco and Intel to outsource their programming here. Furthermore, Jordan's 1994 peace treaty with Israel provides a measure of political stability not seen elsewhere in the Arab world.
"The king doesn't expect Internet penetration in Jordan to reach 50%," says Abdulla Shahin, a telecom analyst at the Atlas Investment Group in Amman. "His project is more about using our human skills, providing the infrastructure for companies to come here and set up. It's not necessarily for Jordan to be the end user, but rather a working station for U.S. companies."
"We have several big advantages," Shahin continues. "One thing we're blessed with is the workforce. We graduate more programmers every year than Ireland, and labor costs are very minimal compared to Israel. They're closer to levels in China and India. Also, there are a lot of bright software developers. The idea is to have a client service center in the U.S. and development centers in Jordan. This would give those companies a huge cost advantage over other companies."
The success of King Abdullah's IT plan depends, of course, on a reliable telecom infrastructure. While Jordan undoubtedly has a long way to go, the government in early February took a big step towards that goal by selling off its state telephone monopoly, Jordan Telecommunications Co. (JTC).
Under the deal -- the largest privatization in Jordanian history -- France Telecom and its minority partner, Arab Bank Ltd. of Amman, will buy a 40% chunk of JTC for $508 million, which was the minimum price set by the government. The state retains a 60% stake in JTC.
The France Telecom-Arab Bank consortium narrowly defeated a second group -- GTE Corp. and Al-Ain Investment Group of the United Arab Emirates -- which had also bid the minimum $508 million. Officials say that because the dollar bids were identical, they decided to award JTC to France Telecom on purely technical grounds. A third group, SBC and Saudi-based Arab Investment Co., bid substantially less, only $275 million
France Telecom Chairman Michel Bon said the acquisition would boost his company's regional presence -- it already has operations in Egypt and Lebanon. He also said France Telecom would invest over $400 million between now and 2003 on modernizing and revamping Jordan's inadequate telecom infrastructure.
At the moment, JTC has 510,000 fixed lines and a teledensity of just under 11 per 100. In 1996, the company was valued by U.S. consulting firm Arthur Andersen at $1.26 billion, yet analysts say JTC has become a burden on the government's treasury because of the continual need to upgrade and expand the network.
In 1999, capital expenditures were estimated at JD340 million ($480 million), with JD54 million ($76.2 million) budgeted for the GSM cellular project and another JD10 million ($14 million) on expanding Internet access. JTC, whose monopoly over fixed lines ends in 2003, reported 1999 earnings of JD216 million ($305 million), up from JD189 million ($267 million) the previous year.
"With privatization, there'll be a lot less bureaucracy," says Marwan Faraj, general manager of National Electronic Systems, a leading computer software firm in Amman. "France Telecom is an excellent company to have a partnership with. In two years, we'll have a definite improvement in the telecom infrastructure."
France Telecom also plans to introduce by September a new GSM service -- tentatively dubbed Petracell -- to compete with Motorola-controlled Fastlink, which for the past five years has been Jordan's sole cellular service provider.
"Privatization will put Jordan Telecom at accepted international standards of quality, expediency and variety of services," said Shabib Ammari, the new chairman of JTC, who took over on Jan. 23.
But the big story could ultimately be Internet access and Jordan's potential for meeting the programming needs of multinational companies.
Currently, there are around 20,000 subscribers logged on with six ISPs -- the largest of them being Global One and National Equipment Technical Services (Nets). But the real number of users is estimated at 100,000. In the last two years, some 300 Internet cafes have cropped up around the kingdom -- from the busy streets of Amman to the ancient ruins of Petra. An unbelievable 20 Internet cafes are crowded along a single street in Irbid, Jordan's second-largest city.
"JTC will develop whatever services are necessary to any software developers who hopefully will be investing in Jordan," Ammari told The Middle East. "In our judgment, this privatization is an important prerequisite in the development of Jordan's IT industry."