The Role of Special Economic Zones in Reducing the Jordanian Trade Deficit

Abstract

In the early 1960s, Jordan initiated a strategic plan to establish special economic zones (SEZs) with the aim of stimulating economic growth and addressing structural imbalances reflected in various economic indicators. This study seeks to evaluate the extent to which these zones, in their diverse forms, have contributed to reducing the trade deficit between 1975 and 2023, thereby offering an empirical reflection of Jordan’s economic landscape. To achieve this objective, the study employs the Autoregressive Distributed Lag (ARDL) model, along with integration tests of the relevant variables, to assess the dynamic impact of SEZs on the trade balance. Given the heterogeneous timeline of zone operations and the lack of comprehensive quantitative data, a dummy variable approach was adopted to capture the effect of SEZs. The findings reveal that Jordan’s SEZs have not been effective in alleviating the trade balance deficit. This outcome is consistent with the observed economic reality, wherein the deficit continued to widen despite the expansion of SEZs during the study period. Accordingly, the study recommends that policymakers reassess the incentive structures granted to investors, evaluate the efficiency of benefit allocation mechanisms, and reorient incentives toward high-performing investments based on measurable outcomes.