On the face of it, Jordan must be a tough sell to international investors: there is the ubiquitous threat of instability and violence lurking from neighboring Syria and Iraq while the kingdom’s small economy, which is reliant on foreign aid, is strained by high unemployment and budget deficits.
Nonetheless, some foreign private equity groups are willing to take the risk.
Buyout giant Carlyle Group last year bought a sizeable minority stake in Nabil Foods, a Jordanian frozen food producer. And earlier this month, the private equity arm of emerging markets-focussed bank Standard Chartered invested $35 million in Al Jazeera Agricultural Company, a Jordanian poultry and chicken feed producer.
It was the StanChart private equity unit’s fifth deal in the Middle East and North Africa region where it has invested a total of $385 million since 2010.
“You have to have the right stomach and right mindset for these markets,” said Taimoor Labib, regional head of Middle East and North Africa and head of global private equity portfolio management at StanChart’s private equity business.
The fact that Jordan is one of the Middle East’s smallest economies has spurred its domestic companies to expand in the region, Mr. Labib said.
“It can’t be good enough to stay in Jordan while for example in Saudi Arabia you could just be a local guy,” he noted. “Jordan is on the smaller side but you definitely have some businesses that really built something up.”
The International Monetary Fund in June said Jordan’s economy was set to grow at 3.5% in 2014 from 2.9% the year before.
The IMF also called on authorities to further reform its institutions and to bring more women into the labor market.
But as has been the case in previous years, the crises in Jordan’s neighboring countries remain the prime concern which the IMF shares with potential investors.
“We like Jordan a lot. But would we have made that call three years ago? You partly couldn’t have and I would have said let’s wait and see how things play out,” said Mr. Labib, adding the geopolitical dimension of a deal has more than ever become an essential part of the bank’s pitching process these days.
“Our business here is never certain…but we’re here to mitigate risk,” he said. “We’re comfortable with Jordan.” Asked if the bank was looking at more deals in the kingdom, the answer was “Yes.”
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(via WSJ Blogs)
