Startups and Bitcoins in Jordan

Jordan has long and rich history. Ancient city Petra, ruins of which today serve to general public as the major tourist destination and to Hollywood as the prime filming spot, had been founded in 4BC and later became the capital of legendary Nabataean Kingdom. The engineering genius of this Bedouin civilization is most significantly manifested in the Al-Khazneh complex, which walls are still standing in almost unperturbed order and which elaborated network of artificial rivers and lakes still able to protect its liquid gold from the wrath of the Arabian desert.

After almost four hundred years of the Ottoman rule, which was interrupted in 1916 by the Arab Revolt, bitter and bloody inter-tribal warfare followed. Lloyd George's and Clemenceau's governments, fast and greedy as usual, saw in this local war their chance to establish military hegemonies in this region and soon Jordan, which at that time was called Transjordan, stood divided between two "protectorates". In September 1922 British imperial control was reinforced by the League of Nations' issued "Mandate for Palestine".

In 1946, after obtaining its independence, Jordan was declared an absolute monarchy. Still, today, Abdullah II exercises an almost unchallenged control over all branches of governments. After September 2016 elections there are 100 independent deputies and 9 political parties in the Jordanian House of Representatives - 130-members Majlis Al-Nuwaab. Fifty percents of those 9 parties have only one parliamentary. The largest partisan delegation in Majlis is that of the far-right Islamic Action Front, which holds to 10 seats. This odd distribution of seats in the Jordanian main representative body facilitates an additional extension of king's power into the regulatory sphere.

There are three pillars, on which comparative prosperity of Jordanian economy has been traditionally set. Those are: banks, tourists and oil. Jordan is ranked as one of the most desirable destinations for foreign investors in the Middle East. Amman's cosmopolitan culture and its relative safety attract tourists as well as skilled professionals from other Arab states. However, country's agriculture sector rests in a shadow of those three industries, with many products imported from neighboring countries, as local fields are periodically scorched by dry desert winds.

In 2008, because of its heavy reliance on international banking and commodities' markets, Jordanian economy was especially hard hit by the world financial crisis and following collapse of oil prices. As a result, GDP growth rate plummeted from 10% in 2007 to under 1% in 2016. At the same time unemployment rate had risen from around 11% in 2012 to almost 15% in 2016.

In 1999 Abdullah II revealed to the world his ambitious plan to convert Jordan into MENA's main technological hub. Today, after almost 20 years, which have passed since this revelation, Jordan leads in the region by the number of new startups. Additionally, despite the fact that Jordanian economy is much smaller than that of most of Arabian states, many international tech giants have chosen the capital city Amman to open their regional headquarters. Meanwhile, as the competitive pressure from its neighbors continues to mount, Jordan is hard pressed to defend its "Arabs' Silicon Valley" title.

Added to that are high legal and administrative barriers, which, coupled with government controlled entities' dominance on Jordanian internal market, have significantly elevated costs of running business for fledgling tech companies. Additionally, some young Jordanians, which are today faced with rising unemployment and increased political uncertainties, have chosen to leave their country, searching for better job opportunities in Western Europe and America.

In February 2014 the Central Bank of Jordan sent a circular to local banks, financial companies, payment processors and currency exchangers prohibiting them from dealing with crypto-currencies. Additionally, CBJ published a note, which contains the following statement, aimed at the general public: "... virtual currencies are not legal tender and there is no obligation on any central bank in the world or any government to exchange its value for real money ...". However, despite those proclamations, buying or selling crypto as well as organizing ICOs have remained technically legal in Jordan and country's population as well as SME are allowed to trade on the crypto-market by using alternative channels.

Business Notes for Startups Founders:

political climate: relatively friendly;
economic climate: relatively friendly;
regions to focus: MENA;
industries to focus: e-services for middle-income urban class, e-commerce, FinTech;
major limitations: relatively small GDP ($90 billion), slowing economic progress (GDP growth rate stands at 2%), very high administrative and legal barriers for SME, increasing competition, rising costs, political uncertainties (inflow of Syrian refugees), high level of government control over economy, very high unemployment rate among youth, brain-drainage;
stimulus: middle-income 10 million population (per-capita $5000), government investments into the development of local startup ecosystem, availability of VC and seed financing (mainly in Amman), well developed infrastructure (fixed Internet penetration rate stands at 50%), good educational system;
opportunities: to build a large e-businesses orientated on MENA markets;
Cryptocurrencies and ICOs (outlook): legal (moderately negative).
The author: Svyatoslav (Svyat) Sedov
Angel investor and founder of The First International Incubator for Silicon Valley Companies (FirstInternational.In) in the Bay Area, CA, USA.

Twitter: https://twitter.com/SvjatoslavSedof