Posted by: randomconsistentideas | June 21, 2007

Industrial Jordan in the Age of Globalization

Globalization is a fact – it is just like winter or autumn… it simply happens. In preparation for the Winter, people go and buy coats and heavy clothes, and make sure the heat-equipment and fuel are suitable. And just like that, we have to prepare for Globalization.

By we, I mean the country Jordan. How can one prepare for Globalization? well, very simple.

Globalization simply means that communication and transportation happen very quickly in today’s world. When an event takes place in Indonesia (remember the Tsunami waves), most parts of the world would know about it within few minutes. When the Asian stock market crashed in the 1990s, the New York stock responded. When 9/11 happened, even European companies got affected.

This also means when a company in China manufactures laptops $200 cheaper, then the laptops will sell probably for ~$200 cheaper in the US (assuming free market and that manufacturing cost is still dominant in sale price). Not just that, laptops will get cheaper just because of such news – way before the first cheap laptop makes it to the US!

What does this mean to Jordan?

Many people think that Jordan and its people have a lot of potential, but they are weak economically. And, I think, all Jordanians wish if Jordan has a stronger economy.

To have a stronger economy in the age of Globalization, one should think more in terms of Globalization.

Many idealists talk about “local industry” i.e., consume only locally-made products. this simply does NOT work! (it is good as a personal motto, giving business to people you like, but not as an economic plan).

Why? because with the current very cheap transportation prices (a.k.a Globalization), it is cheaper to buy clothes from China than to make them in Jordan.

The idealists would say: “We don’t want the clothes-makers in Jordan to lose. Thus, we will ban Chinese clothes and force everybody in Jordan to buy Jordanian clothes.”

With this move, you are causing all of Jordanians to lose (pay extra money that they could have spent elsewhere) for the clothes-makers to make money. As if you are taking extra sales tax from people who buy clothes, and giving it to the Jordanian clothes factory. Is this something you really want to do?

With Globalization, countries are not “local economies” anymore, but they are more like a Dukkan – a shop, in a big mall of other shops. Each country/shop sell things that other shop-owners need. Thus, to succeed, you have to make more Goods that are desirable and profitable to sell to others – locally and globally. And you want to make sure that what you sell to others is more than what you are buying from them.

To enhance Jordan’s economy, we must start exporting companies in Jordan. We need companies that can sell goods and services to people outside Jordan, thus, bring more money to the local economy. Each one of us must be thinking of business ideas that can work globally, and bring returns and create jobs in Jordan.

Back to the clothes example. The better way to support Clothes Manufacturers in Jordan (if we decide that it is a feasible business to enter globally) is for the government to give them direct incentives and tax-cuts that would help them compete globally. We want their products to be so competitive, that people in Jordan and elsewhere would choose to buy them – without any “imposed laws”.

Why did I talk about Globalization all of a sudden… well, I actually just wanted to introduce a very nice piece of news I got. But since this post has gotten long enough, I will put the piece of news in a separate post. (check in few minuts)

RandomConsistentIdeas


Responses

  1. thanks for a very good read. I am a globalist and a firm believer in globalization.

    to put it into technical terms, what Jordan needs is to work on their Comparative Advantages. we have many of them in Jordan that it is possible to successfully compete in the global market. be it Geographic location, natural resources, educated labor force, you name it. once these advantages are well developed and taken care of, they will serve Jordanian industries in ways other far more industrialized nation cannot afford.

    a country’s comparative advantage principle simply means that a country can produce product A better, more efficient, and at a less cost than producing product B. since product B is being produced by another country competitively, it only makes sense to concentrate our resource at producing product A. this way we become even more competitive even if we end up importing product B.

    for clothes manufacturing in Jordan, we can become competitive without government help. because if the government does, it means unfair competition in favor of inefficient industries. what Jordanian businesses need to do is to embrace advanced technology in order to cut costs.

    when the Gap places an order for jeans at a textile factory, advanced machinery and trained workers will get a large job done at a lower cost than the labor intensive Chinese manufacturer.
    I can write non-stop about globalization. let just leave it at that.

  2. Thanks Globalorama – agree. good explanation.

    When I mentioned Government Help, I mainly meant help in the initial stage of starting the business. Continuous government “subsidization” will definitely lead to inefficient industry practices.

  3. thats true. I agree that governments should help initially, but gradually let them decide their own destiny.

  4. I would like to add that without strategic assets such as water and energy resources we will be erased of the map soon..Inflation in the first 3 months of this year was 8.2% and it is expected to go higher by the end of the year..Water is life, and energy is the blood..And our government talk about solving those issues is like THRAT 3L BALA6 o 3la mabda2 7o6 bel 7’orj..

  5. Global,
    Regarding the textile “industry” I consider it dead, egypt signed a QIZ agreement with the US, some factories already moved there and some are on the way, we cant compete in this simply because labor is cheaper in egypt or china, raw materials comes from cotton producing countries, with some of it also coming from petro-prdoucts, so basically we can’t compete in this specific area, but we can focus our asses on solving the real problems of water and energy, we have the jordan valley which with water can become GODs heaven on earth, we have the educated work force in the agricultural field, pharmacuticals is another field, we have cooper, sa7’er zeti, uranium, dead sea, gold, phosphate, potesh, etc..But again there is no political will…

  6. There are still people advocating free market faux theory in the world ?
    Here are some thoughts….
    Do you think that quality is more important than price ?
    Do you think that you can compete with the wage enslavement ?
    Do you think china is not technically developed ?
    Do you think a country is able to maintain its sovereignty if it is not self sufficient in the basic industry ?
    How about forgoing our economy and adopting the dollar for our currency, oh wait we already did that.
    A service based economy will not be able to shoulder a whole country, give me just one successful example of this please.
    really i don’t mind buying cheaper non essential products, but when it comes to commodities we should be self sufficient and not destroy our economies to succumb to the IMF and WTO cabal.
    now there are more but i want to move on to the next post and carry on the rest there

  7. Bambam,
    thanks for the comment. good questions to ponder on. You seem to advocate ridding ourselves of freemarket and globalization. I don’t believe this is possible, but I think you have a very good point at the end. what about strategic goods? should we simply go to the cheaper seller and abandon making them?

    Certainly not. But, that would be a political and security decision, not an economic one. We wouldn’t choose to grow our own wheat to enhance our economy. But we may choose to do so in order not to rely on foreign powers for our livelihood. (just hink of Maan’s bread events)


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