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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007 AMMAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Economic and Political Environment King Abdullah II upon ascending to the throne following his father's death in 1999, has provided re-energized economic leadership. King Abdullah, II bin Al-Hussein has proven to be a steadfast proponent of an invigorated program of economic reforms that includes privatization, structural and procedural changes that attract foreign investment and enable foreign debt restructuring and reduction. He also believes that efforts should be continued to build a modern Jordan that provides its men and women with opportunities for a decent life and ensures that the gains of development are distributed equally among the people. King Abdullah belongs to a new generation of Western-educated Arab leaders. The king's political agenda has been focused on economic revival, greater political openness, social justice and equality, in order to clearly place Jordan actively on the regional and international map. While keeping the warm ties with the West nurtured by his father, he has succeeded in improving ties with Syria and the Palestinians and cementing links with Saudi Arabia and Kuwait. Economic Performance The real GDP growth by end of 2006 was 6.0% compared to 7.2% for 2005. The decline was due to the decrease in the extraction industries and non-profit services producers sectors. By November of 2006, exports reached US$ 4.65 billion. Jordan conducts its monetary policy with a fixed peg to the US dollar and believes that its trade performance indicates that policy still provides for good international competitiveness of its exports. In the past few years, it has also resulted in virtual stability in the price level with inflation as measured by both the GDP deflator and the CPI. Meanwhile, CPI inflation at the end of the year 2006 was 6.3%, compared with 3.5% in 2005. As for the fiscal policy performance, re-estimated figures indicate an increase of 22.2% in domestic revenues by the end of 2006 as compared to the year 2005, and a rise of 10.2% in public expenditures, putting the fiscal deficit at 4.5% of the GDP. Jordan's main export commodities are phosphates, fertilizers, potash, agricultural products and textiles. Its main imports include crude oil, machinery, transport equipment, food, live animals and manufactured goods. By end of November 2006, exports (exports and re-exports) grew by 19.7%, and imports increased by 9.2%. Foreign direct investment (FDI) has been increased steadily in recent years, by the end of 2006, it reached US$ 2.9 billion compared to US$ 1.1 billion for the year 2005. Jordan's gross international reserves have been rising steadily over the past several years, and at the end of 2006, these reserves stood at more than US$ 6.1 billion, equivalent to the value of seven months' merchandise imports. Privatization has moved along quite well. The centerpiece of the program was the sale of a large minority ownership in Jordan Telecom to France Telecom. Recently, the government sold another part of its stake in Jordan Telecom to some institutional investors and to the public and offered new 10% of the company’s shares through an IPO. Also the government sold 37% of its stake in the Jordan Phosphate Mines and sold 80% of the Royal Jordanian Investment. Many projects are in the pipeline such as Jordan Post Company, Jordan Mills Company, and Jordan Agricultural Marketing and Processing Company. Furthermore, many privatization actions are taking place in the field of aviation, power, transportation, and mining.* * Information provided by the Amman Stock Exchange Key Information Contacts Jordan Securities Commission www.jsc.gov.jo Securities Depository Center www.sdc.com.jo Jordan Investment Board www.jordaninvestment.com Arab Monetary Fund www.amf.org.ae Ministry of Finance www.mof.gov.jo Central Bank of Jordan (CBJ) www.cbj.gov.jo National Information Center www.nic.gov.jo 2006-CONTRIBUTION OF MAJOR SECTORS IN THE GDP (%) Manufacturing Transport & Communications Financials & Banking Trade, Restaurant & Hotel Net Taxes Constructions Government Services Others 15.7 18.6 16.3 GROWTH OF INVESTMENT AND GDP (%) 50 40 30 GDI GDP 9.0 9.6 20 10 0 13.0 5.0 12.8 -10 -20 97 98 99 00 01 02 03 04 05 06 PAGE 30
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007 AMMAN STOCK EXCHANGE JORDAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture 3.0 6.4 Industry 25.0 25.0 Services 72.0 68.6 JORDAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES 1998 1999 2000 2001 2002 2003 2004 2005 2006 Money Supply M1 (dinars-billions) 1,613.9 1,777.1 2,026.7 2,119.7 2,316.2 2,919.8 3,192.9 4,061.3 4,566.5 Money Supply M2 (dinars-billions) 6,026.3 6,747.6 7,434.7 7,866.1 8,419.1 9,465.7 10,571.4 1,236.4 14,109.7 Growth Rate M1 -1.7% 10.1% 14.0% 4.6% 9.3% 26.1% 9.4% 27.2% 12.4% Growth Rate M2 8.1% 12.0% 10.2% 5.8% 7.0% 12.4% 11.7% 17.0% 14.1% Interest Rates deposit rates 8.3% 7.9% 6.6% 5.2% 4.0% 2.8% 2.5% 3.5% 5.1% lending rate 12.9% 12.7% 11.4% 10.5% 9.9% 8.9% 7.6% 8.1% 8.6% Foreign Exchange Reserves (US$ millions) 1,750 2,629 2,763 2,578 3,495 4,739.5 4,824.1 4,743.9 6,102.5 Exchange Rate Period Average (dinars/US$) 0.709 0.709 0.709 0.709 0.709 0.709 0.709 0.709 0.709 Annual % Growth 0 0 0 0 0 0 0 0 0 GROWTH OF EXPORTS AND IMPORTS (%) INFLATION (%) Exports Imports GDP deflator CPI 50 40 30 20 10 0 -10 0 97 98 99 00 01 02 03 04 05 06 -1 97 98 99 00 01 02 03 04 05 06 7 6 5 4 3 2 1 EXPORT AND IMPORT LEVELS (US$ millions) CURRENT ACCOUNT BALANCE TO GDP (%) Exports Imports 12,000 10,000 8,000 6,000 4,000 2,000 0 97 98 99 00 01 02 03 04 05 06 15 10 5 0 -5 -10 -15 -20 97 98 99 00 01 02 03 04 05 06 *All data before 2004: The Economic Intelligence Unit Ltd. All data after 2004: CBJ website and IMF expectations PAGE 31
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