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A questionable grand economic project

Feb 26,2017 - Last updated at Feb 26,2017

Sixteen years after the establishment of the Aqaba Special Economic Zone (ASEZ), it is high time to examine the economics of this grand and costly project that promised much, but failed to deliver.

As a starting point, it is important to point out the fact that all the revenues collected by the zone, as listed in its annual budget, from all sources, belong to the central government Treasury, including the proceeds of the reduced income tax, sales tax, customs duties, licences, real estate tax, traffic tickets and, above all, the proceeds of the sale of government-owned land and all other forms of taxes and fees.

These revenues could have exceeded JD200 million had it not been for the special reductions and exceptions granted to the zone, but payable in all other parts of the Kingdom.

The so-called surplus the zone hopes to transfer to the Treasury in 2017 is only JD5 million, which is all the Treasury will reap from this grand project.

This amount represents the difference between total revenues and the JD5 million, which may go to the Treasury.

The zone spends 92 per cent of its gross revenue, a very high administration cost that reached JD56.2 million in 2017.

The Treasury is deriving from it an amount that is lower than what a small and poor village like Housha contributes.

Moreover, not even one new industry was established in Aqaba during the past 16 years. All that we got there are very expensive apartments to serve the rich during the weekends when they come from Amman to use them as second houses.

Few new hotels were established, but fewer than at the Dead Sea, which does not enjoy all those costly incentives and tax exemptions.

No need to spend much time on the obvious role of Aqaba zone in smuggling hundreds of millions of dinars worth of goods to Amman by people who benefit from avoiding high customs and sales taxes.

The idea of converting the city of Aqaba into a free zone is not new. It was debated 20 years ago and dismissed. It came up again in 2000 and was hurriedly implemented.

At the time when ASEZ was established, the politically motivated promoters of the project created high expectations that the return will be substantial.

Unfortunately, the actual performance did not prove them right. Actual results are way below ambitions.

If anything, the project turned out to be another government department whose cost is heavy and whose returns are meagre.

 

It is not too late to make up for this costly mistake, at least by daring to support the zone with a casino to attract tourists, just like Sharm El Sheikh in Egypt, the country of Al Azhar.

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