Prosperity or facade: Unveiling Jordan's economic realities

Economy

Published: 2024-02-22 22:25

Last Updated: 2024-04-14 03:44


Prosperity or facade: Unveiling Jordan's economic realities
Prosperity or facade: Unveiling Jordan's economic realities

Recent data from the Companies Control Department (CCD) indicates a notable surge in company registrations in Jordan, with an 11 percent increase compared to the same period last year and a remarkable 20 percent surge compared to pre-COVID levels in January 2019.

The CCD aimed to reach a staggering 6000 new company registrations by the end of 2024. Amidst this apparent economic growth. However, underlying trends are emerging.

During the same period, over 300 companies filed for insolvency/administration, marking a concerning 70 percent increase from January 2023.

In “@JordanFinance” newsletter “Collapsed Companies Department: Muddying the Economic Vision” a deeper look is taken into the CCD's data that revealed an even darker aspect: in 2023, over 80,000 companies had their operations suspended, potentially leading to compulsory liquidation in 2024. This alarming figure represents approximately 42 percent of all registered companies in the Kingdom.

This economic turmoil coincides with Jordan's efforts to address regulatory shortcomings highlighted by the Financial Action Task Force (FATF). Placed on the "gray list" from October 2021 to October 2023 due to deficiencies in its anti-money laundering and countering financing of terrorism framework, Jordan committed to implementing an action plan by 2023.

As part of this initiative, Jordan was in the process of implementing a new amendment mandating all companies registered with the CCD to submit the 'Beneficial Ownership' declaration. This measure aimed to enhance transparency and compliance with international regulatory standards, addressing concerns raised by the FATF.

The concept of beneficial ownership, crucial in financial governance and regulatory compliance, aims to unveil the true individuals who control or benefit from a company.

However, identifying true beneficial owners amidst legal entities poses significant challenges, with distinguishing between nominators and genuine beneficiaries proving to be a complex endeavor.

Despite efforts to enforce compliance, delayed disclosures by the CCD left shareholders unaware of the declaration until February 2023, with a short deadline set for November 2023.

The aftermath of regulatory measures has been significant, with more than 85,000 out of approximately 197,800 registered companies in Jordan failing to submit their 'Beneficial Ownership' declaration.

Following a warning issued in December 2023, these companies faced suspension of operations and risked liquidation within 12 months if no corrective action was taken.

The impact of these measures has been widespread, affecting various sectors and even leading to the suspension of investments by prominent firms.

As Jordan grapples with economic fluctuations and regulatory challenges, the need for comprehensive reforms to address both economic instability and regulatory deficiencies becomes increasingly urgent.

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