Forbes Middle East


Uncovering Hidden Potential

Hannah Stewart
Uncovering Hidden Potential
A greeing to meet on a warm afternoon in downtown Dubai, Sheldon Fink, chief executive of PBI Aqaba finds time for a rendezvous on his whistle-stop tour of the United Arab Emirates; next stop—Ras Al-Khaimah. With a three-day campaign underway to secure investments in Aqaba International Industrial Estate (AIIE)—his unique development located in the southern Jordanian coastal city—Fink predicts good things to come as his company turns its focus internationally. But the CEO suffers no delusions of grandeur, recalling with amusement the Jordanian authorities’ now out-dated slogan, “Aqaba is the new Dubai.” Though passionate about AIIE which today boasts 600,000 square meters of land marketed to date—Fink retains a degree of realism. “We’re not going to be the new Dubai, but we could be an annex of the Emirates.”

Managing to make money and maintain shareholder returns of approximately 18% every year since 2006, it seems that Fink’s assertion is not unfounded. Despite the shockwaves of regional economic and political crisis that hit Jordan’s shores, Fink’s company has prevailed, today boasting total invested capital of $160 million and assets of $8 million. How? For the American who has spent more of his life in the Middle East than his home country, the key to the success of his industrial estate is simple, “what we offer is very, very good service.” But Fink has another wildcard: prime location. With Iraq’s economy on the up and a thriving sea port at its disposal, AIIE has both access and connections to exploit to their advantage.

Situated in Jordan’s only port city which handles over 78% of the country’s exports and 65% of imports, and with access to Europe, Asia and Africa from its shores, AIIE occupies a strategic spot for local and international investors alike. Since the establishment of the Aqaba Special Economic Free Zone in 2001, new life has been breathed into the local economy. Spanning 27 kilometers along the Jordanian coastline encompassing the seaport, an international airport and the historic city itself, the free zone has boosted Aqaba’s status as a trade hub to rival that of neighboring Eilat. Now, AIIE is even rivaling some of its Gulf competitors. Counting amongst the benefits according to the Pennsylvania-born CEO, is the provision of fully-serviced land for sale as well as lease, and support in navigating the state bureaucracy. Not to mention the advantages of strong international trade agreements and a flat income tax of 5% offered by the free zone, which Fink claims are only slightly higher than those in Dubai’s Jebel Ali Free Zone.

It is this combination along with a number of other perks that appealed to Haytham Al-Rawi of Shanghai Group, an AIIE resident with a 43,000 square meter plot for goods storage. In explaining his transition from Dubai to Aqaba five years ago, Al-Rawi explains, “our markets are closer in Aqaba. We have markets in Jeddah, Damascus, Libya, Iraq and Jordan…and Aqaba is in the center of these countries.” Added to this, the businessman was attracted by competitive prices, “In Aqaba we found the prices for land cheaper than Dubai.” These advantages over its Gulf competitor, along with competitive tax rates, paint a positive picture for AIIE’s future, but closer to home, Fink’s industrial estate has another appeal; proximity to Iraq—an emerging market that is presenting increasingly attractive investment prospects.

As Jordan’s neighbor gets back on its feet after almost a decade of conflict, the Iraqis are once again opening for business, with strong economic potential as the country’s already large production of crude oil continues to grow. Economic expert Dr. Evan Scott Thomas, explains that data developed by the IMF and Iraqi authorities indicates that even under conservative assumptions, production which currently stands at approximately 3.15 million barrels per day is expected to almost double by 2017. “This creates a number of enviable opportunities for the people of Iraq…” he adds.

Senior economist Sibel Kulaksiz and economist Marc Schiffbauer from the World Bank also believe that Iraq presents strong investment opportunities, particularly in reconstruction, energy and retail, with Iraq’s Transport Minister appealing directly to international companies in February 2012. The two World Bank economists add that there are already five major Jordanian foreign direct investment (FDI) projects in Iraq in the manufacturing; sales, marketing and support and business services sectors. “Together, these projects account for an estimated $503 million,” they add.

But benefits are not limited to Iraq. Kulaksiz and Schiffbauer explain that investment is flowing both ways with an Iraqi FDI project in the Jordanian communication sector worth approximately $48 million. Furthermore, exports from Jordan to Iraq have increased substantially in the last 15 years, accounting for an average of 15% of total Jordanian exports between 2008 and 2010 explain the two economists, with Iraq the main destination for Jordanian exports followed by the U.S., India, and the Gulf. In fact, Iraq’s rising income from oil production is likely to increase imports further. According to Scott Thomas, the IMF estimates that between 2008 and 2011 Iraqi GDP devoted to imports rose from 47% to 62%. “These import shares are likely to remain stable or even continue growing as the economy itself takes off,” he remarks. The signing of a bilateral free trade agreement between Iraq and Jordan in 2010 has also served as a catalyst for trade explains Kay Marwan Depolacky from the Jordan Industrial Estate Corporation. “The volume of trade between Jordan and Iraq reached 1.3 billion U.S. dollars in 2010,” he adds.

Taking advantage of these opportunities, Fink explains, “Aqaba port is a logistics play on Iraq…and industry in Aqaba is also production play on Iraq.” Making the 1,200 kilometer trip, which accounting for the border crossing takes a little over two days, one thousand semi trailers travel from Aqaba to Iraq daily, with PBI Aqaba itself running six to seven thousand semi-trailers per year. While the route from Kuwait is theoretically shorter, the challenge of passing through Baghdad, gives Aqaba an edge. But once again Fink keeps his expectations in check as he considers the extent to which Jordan can supply Iraq, “Jordan can be 10% or 20% and that’s great prosperity for Aqaba...there is no goal of Aqaba becoming 50%.”

Nevertheless, the significance of AIIE and Jordan’s industrial estates more broadly should not be underestimated. According to Dr. Maher Marouq, director general at the Amman Chamber of Industry, the industrial sector contributes almost 25% of the country’s national GDP today, with indirect contributions increasing this percentage to between 40 and 45%. The sector also accounted for 93% of the country’s total exports in 2011 amounting to around $6.5 billion. “The industrial estates in general actually reflect the level of enhancement and development in the industrial sector…in Aqaba the industrial estates are promising,” he adds.

Fink recognized this promise seven years ago. Starting out with an empty plot of desert and an initial $1 million (part of $5 million from PBI partners spread over five years), the courageous entrepreneur embarked upon the challenge back in 2006 to plan, develop and run the Aqaba International Industrial Estate, aided financially by a further $15 million channeled through a USAID grant. Work on the estate located in a 175-hectare site in the Aqaba Special Economic Zone began after PBI Aqaba beat off competition to win a 30-year concession from the Jordan Industrial Estates Corporation back in 2002 as part of a government initiative to increase private sector participation.

Several years on, the company has clients from all corners of the MENA region, and for the past year, has been seeking international companies keen to increase their presence in the Middle East, with clients from Brazil, Canada, Germany and Russia already taking their first step onto Jordanian soil. Now with 38 companies in operation and under construction, and more than 900 employees, efforts are paying off. But quitting whilst he’s ahead, PBI Aqaba’s dedicated leader is in now considering a two year exit strategy. With a firm belief that the Jordanians can run the “bread and butter projects” as well as he, Fink explains frankly, “our value added is to bring in international companies that will create savings in management, and we’ve reached a certain plateau with that.”

However, this does not signify that Fink is heading out of the game. Besides Aqaba, the CEO is working with the company’s Turkish partner to set up a geothermal energy project and is exploring possibilities for agricultural projects in Kurdistan, as well as assisting a number of American software companies to break into Middle Eastern markets. “You know, there are always interesting things to do,” he remarks.

As Sheldon Fink continues to drum up international investments, the when, where and how remain unclear, and whether or not the industrial zones of Jordan could one day make the country an annex of the Emirates remains to be seen. But one thing is for sure; even once Aqaba International Industrial estate is safe in Jordanian hands, with the emerging economy of Iraq next door, and the solid foundations laid by the committed CEO, Aqaba is destined for good things. As for the man himself, when the time is right, Fink’s Middle Eastern odyssey will no doubt continue, “I’ve been in Jordan for eight years but I’ve been in the Middle East for 40 years and that’s just what I know how to do.”
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