Jordan - International University of Japan · 2007-07-23 · to present a common line on the proposal (initially explored privately by Saudi Arabia) to offer the Iraqi leadership

Country Profile 2004

JordanThis Country Profile is a reference work, analysing thecountry’s history, politics, infrastructure and economy. It isrevised and updated annually. The Economist IntelligenceUnit’s Country Reports analyse current trends and provide atwo-year forecast.

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Jordan 1

© The Economist Intelligence Unit Limited 2004 www.eiu.com Country Profile 2004

Contents

3 Regional overview3 Membership of organisations

4 Basic data

5 Politics5 Political background5 Recent political developments8 Constitution, institutions and administration11 Political forces13 International relations and defence

15 Resources and infrastructure15 Population16 Education17 Health17 Natural resources and the environment18 Transport, communications and the Internet21 Energy provision

22 The economy22 Economic structure24 Economic policy30 Economic performance33 Regional trends

34 Economic sectors34 Agriculture36 Mining and semi-processing37 Manufacturing38 Construction38 Financial services40 Other services

41 The external sector41 Trade in goods44 Invisibles and the current account45 Capital flows and foreign debt47 Foreign reserves and the exchange rate

48 Appendices48 Sources of information49 Reference tables49 Population49 Electricity production50 Government finances50 Government domestic revenue50 Government expenditure51 Money supply and interest rates51 Gross domestic product51 Gross domestic product by sector

2 Jordan


52 Gross domestic product by expenditure52 Retail and wholesale price indices52 Minerals production52 Industrial output53 Construction53 Stockmarket53 Arrivals by nationality54 Main commodities traded54 Main trading partners55 Balance of payments56 Gross official development assistance56 External debt57 Foreign reserves57 Average annual exchange rate

Jordan 3


Regional overview

Membership of organisations

The Arab Monetary Fund (AMF), based in Abu Dhabi, was established in 1977by 20 Arab states. It was hoped that this would presage greater integration ofArab economies, while AMF financing promoted the goal of greater inter-Arabtrade flows. Its success has been limited, but the AMF serves as a provider ofloans to members, especially for balance-of-payments support. Its originalarticles define other goals, such as promoting the use of the Arab accountingdinar (AAD) as a unit of account akin to the IMF’s special drawing rights, andworking towards the establishment of a single Arab currency. Another aim is topromote development of Arab financial markets. AMF officials have floated theidea of establishing a debt ratings agency. Iraq, Somalia and Sudan have beensuspended from the AMF for defaulting on debt repayments.

More commonly known as the Arab League, the organisation was formed in1945 to strengthen relations between Arab states and co-ordinate policies forthe good of the whole Arab nation. Its membership has stood at 22 sinceComoros was admitted in 1993. Palestine is treated as a full member of theorganisation. The League, which has observer status at the UN GeneralAssembly, is based in Cairo.

The Arab League has attempted to mediate in a number of regional conflicts,and was the overseer of the Arab boycott of Israel. It has been criticised as anineffective talking-shop; one of its handicaps is a system whereby unanimousdecisions of the Arab League Council are deemed binding on all members, butmajority decisions are binding only on those states that voted for them.

The Arab world has become increasingly divided in recent years, furthernegating the effectiveness of the League. The question of Israel remains thecentral source of dispute, with some Arab countries willing to form closerrelations with this state than others. However, with the unpopularity of USpolicy in the region and the weakening of deeply unpopular UN sanctionsagainst Iraq, the issue of Arab states’ relations with Iraq is now proving lessdivisive than in the 1990s. Saudi Arabia and Kuwait have in the past deploredthe overtures made by Syria, Jordan, Egypt and others towards Iraq. In contrast,a common stance opposing any military action against the Iraqi regime and insupport of the lifting of UN sanctions was agreed at the April 2002 Arab Leaguesummit in Beirut. However, the prospect, and then beginning, of the US-ledmilitary campaign against Iraq in 2003 provoked fissures in the efforts topresent a common stance of Arab unity. Three Arab League summits betweenFebruary and March 2003 veered from condemnation of states providing anyform of support for military action, to blander criticisms of the war itself. Effortsto present a common line on the proposal (initially explored privately by SaudiArabia) to offer the Iraqi leadership the option of exile as a means of preventingthe conflict proved unsuccessful. Most Arab leaders, weighing public oppositionto US policy towards Iraq and their own fear of political precedent, preferredthe relative safety of rhetorical condemnation of the conflict.

Arab Monetary Fund (AMF)

League of Arab States

4 Jordan


Basic data

89,206 sq km

5.3m (2002; official estimate)

Population by governorate, ('000; end-2002)

Amman 2,027Irbid 951Zarqa 838Balqa 350Mafraq 246Kerak 214Jerash 157Madaba 136Ajlun 118Aqaba 107Ma'an 104Tafiela 81

Hot and dry summers, cool and wet winters

Hottest month, August, 14-37°C; coldest month, January, 0-16°C; driest months,May-August, 0 mm average rainfall; wettest month, February, 75.5 mm averagerainfall

Arabic; English is also widely spoken

Metric system and local measures

Jordanian dinar (JD)=100 piastres=1,000 fils. The dinar is pegged to the US dollarat JD0.709:US$1

GMT plus two hours

January 1st (New Year’s Day); Eid al-Fitr; Eid al-Adha; Hijra New Year; May 1st(Labour Day); May 25th (Independence Day); June 9th (King Abdullah’saccession to the throne); June 10th (Great Arab Revolt); Prophet Mohammed’sbirthday; al-Isra’ wal Mi’raj; November 14th (birthday of King Hussein)

Land area

Climate

Language

Time

Population

Main towns

Measures

Currency

Public holidays

Weather in Amman (altitude777 metres)

Jordan 5


Politics

Political background

The Hashemite Kingdom of Jordan is an autocracy, tempered by constitutionalconventions. The king presides over foreign policy and sets the country’sstrategic direction. He is empowered to appoint and dismiss the prime minister,who in turn appoints the cabinet with the king’s close supervision. The cabinetis responsible for day-to-day government. It operates under the scrutiny of theChamber of Deputies (lower house of parliament), which is directly elected, butheavily influenced by government. Although political parties are legal anddiverse, party politics are in general less important than the status and tribal orfamily background of individual politicians. An extensive intelligence networkoperates under the king’s direct authority. Traditionally, the sharpest politicalcleavage has been between the majority Palestinian population, most of whomare refugees from the 1948 and 1967 conflicts with Israel, and the original “EastBank” Jordanians.

Recent political developments

The UK, the major power in the Middle East in the early 20th century, createdTransjordan in 1921, with Emir Abdullah, a Hashemite prince from Mecca in theHijaz (now in modern Saudi Arabia), as its head of state. The Hashemite familyclaims descent from the Muslim prophet, Mohammed, and was closelyinvolved in the Arab revolt against the Ottoman empire during the first worldwar. Abdullah established a close relationship between Jordan and the West,which continues today. Transjordan gained independence from the UK in 1946and was renamed the Hashemite Kingdom of Jordan.

The kingdom took part in the first Arab-Israeli war in 1948, during which itmanaged to gain control over the eastern portion of Palestine, now known asthe West Bank. With King Abdullah eager to expand his kingdom, the WestBank was formally incorporated into Jordan in 1950. The refugee outflow fromthe newly created state of Israel, together with the acquisition of the West Bank,created a large Palestinian population in Jordan. In 1951 King Abdullah wasassassinated in Jerusalem—the Old City and the rest of East Jerusalem was thenunder Jordanian control—by a Palestinian. He was succeeded by his son, Talal.However, Talal was on the throne for less than a year before he abdicated formental health reasons, in favour of his eldest son, Hussein.

The 1950s were a turbulent period in domestic and regional politics. Thetriumph of Arab nationalist forces in Egypt inspired similar movements acrossthe Arab world. At times the future of the Hashemite regime and even the stateitself seemed in doubt. King Hussein only managed to control the situation bysacrificing his early commitment to a liberal political regime.

During the Arab-Israeli war of 1967, Israel occupied the whole of the West Bank,including East Jerusalem. Jordan found itself faced with a second wave of

The formation of the state

Regional upheaval

6 Jordan


refugees, many of them uprooted for the second time in 20 years. The countrybecame the main staging ground for guerrilla attacks against Israel. Attempts bythe government to co-opt or control the Palestinian groups failed, and by thelate 1960s the Palestinian Liberation Organisation (PLO), headed by YasserArafat, was operating outside government control. Israel’s heavy andindiscriminate retaliation against the guerrilla groups—killing Jordanian andPalestinian civilians, PLO resistance fighters, as well as striking military andpublic installations alike—soon led to the alienation of these groups from thewider public. At the same time, more radical Palestinian groups wereembarrassing Jordan with high-profile hijackings and other attacks oninternational targets. An inevitable military showdown took place in September1970 (known as “Black September” by many Palestinians), with a bitter andsustained period of fighting leading to heavy casualties on both sides. At theend of that month a ceasefire was brokered by Arab governments and a treatyeventually signed in October. However, military clashes soon resumed. TheJordanian army’s superior weaponry and training eventually began to tell and,despite logistical support from Syria, the last of the Palestinian groups waspushed out of Jordan in mid-1971.

The conflict left a lasting legacy of division between the Jordanian andPalestinian populations of Jordan. It also forced the king to acknowledge aseparate Palestinian identity. At an Arab summit in 1974 he reluctantly acceptedan Arab League resolution recognising the PLO as the “sole legitimaterepresentative” of the Palestinians (although it was not until 1988 that he cut alladministrative and legal ties with the West Bank). This paved the way forMr Arafat to declare Palestinian independence in what was still the Israeli-occupied West Bank and Gaza Strip.

Most of the 1970s and 1980s were characterised by a high level of state-ledeconomic progress, but limited political development. Jordan benefited fromthe Middle East oil boom in the mid-1970s and the consequent Arab aid flowsand remittances from its workers in the Gulf. Through its Red Sea port ofAqaba, it also became a transit route for goods bound for neighbouring Iraq.During this period Jordanians enjoyed almost full employment, subsidisedprices, expanding health and educational provision and the prestige of largecapital investment projects. Political tensions remained contained. Parliamentwas suspended between 1974 and 1984, as King Hussein worked to centraliseHashemite rule more effectively; when reinstated, its activities were heavilycircumscribed.

Economic conditions became harsher in the mid-1980s, but Jordan was slow toadjust. The government resorted to costly international borrowing at com-mercial rates to finance (frequently opaque) public spending. In 1989, followingtwo currency crises and a debt-service default, Jordan turned to the IMF.However, the way in which the government handled the subsequent removalof subsidies on some basic goods sparked off riots, and King Hussein quicklyrealised that the end of the period of prosperity would require a political quidpro quo. He continued with the IMF reforms, but sacked the prime ministerand set in train a series of changes that led to an end to martial law, the

Political change

Jordan 7


restoration of parliament and the legalisation of political parties. The firstparliamentary election took place in late 1989.

During the 1990s there was some reversal of this political liberalisation, in largepart owing to the unpopularity of Jordan’s 1994 peace treaty with Israel.Although a third parliamentary election took place in 1997, changes to theelectoral law led many opposition parties to boycott it, and a parliamentdominated by tribal and pro-government figures was formed.

In July 1998 King Hussein left Jordan for cancer treatment in the US, leaving hisbrother, Prince Hassan ibn Talal al-Hashemi, as regent. In January 1999 KingHussein returned to Jordan and, in an announcement that shocked the countrywith its content and tone, stripped Hassan of the title of crown prince, whichhe had held for 35 years, and appointed his eldest son, Abdullah ibn Husseinal-Hashemi, in his place. King Hussein died on February 7th 1999 and Abdullahwas declared king. The new king named his 19-year-old half-brother, PrinceHamzeh ibn Hussein al-Hashemi, as crown prince. The British-educatedAbdullah has been quick to stamp his mark on the country. His main concernhas been to introduce fundamental economic and administrative reforms thatwill enable Jordan to integrate more rapidly into the global economy. His robustapproach has not always sat well with older Jordanians, but has won himsupport from the younger generation. That support was sorely tested with thestart of the US-led war on Iraq in March 2003. The king strove to persuade theUS not to resort to military action, but ultimately had little option other than tooffer discreet practical backing for the US war effort.

King Abdullah’s stance contrasts with the explicit opposition his father voicedto the US action against Iraq in 1991. King Hussein thereby managed to defusepopular anger, and was able subsequently to repair the damage in Jordan’srelations with the US and the Gulf Arab states. Many of King Abdullah’ssubjects were enraged by the US invasion and occupation of Iraq, althoughinitial outrage rapidly gave way to resentful resignation. By April 2004, popularanger was again largely focused on Israel's treatment of the Palestinians in theWest Bank and Gaza. This anger is severe, however, and the government hascome in for criticism for not cutting diplomatic ties with Israel. The king’s majorasset is the loyalty and effectiveness of his security services. The US is alsoproviding essential support in the form of military and civilian aid.

Important recent events

October 1994

Jordan and Israel sign a peace treaty.

August 1996

Riots break out in the southern town of Kerak over rises in bread prices. The primeminister, Abdul Karim Kabariti, is forced to resign.

November 1997

Opposition parties boycott the third national election, protesting over changes to theelectoral law and severe restrictions on public freedoms.

8 Jordan


February 1999

King Hussein dies and his son, Crown Prince Abdullah ibn Hussein al-Hashemi,becomes king.

June 2001

The government announces that parliamentary elections, scheduled for November,are to be postponed until the following year. The government justifies the decisionby saying that electoral procedures need more time to be finalised. However, intensepopular anger about the plight of West Bank Palestinians offers a more convincingargument for the postponement.

July 2001

A new electoral law is promulgated. However, the “one person, one vote” system,which prompted the Islamist opposition to boycott the 1997 election, is retained. Thissystem appears to favour candidates from sparsely populated Bedouin areas, whichare traditionally loyal to the Hashemite monarch, over densely populated urbanareas where the Islamists count most of their support.

August 2002

King Abdullah announces that the delayed parliamentary elections are to be post-poned again, this time until spring 2003. The king cites “regional tensions” for thedelay.

December 2002

Government officials repeatedly deny that they are offering logistical support to UStroops preparing for an invasion of neighbouring Iraq. However, a major influx ofUS military personnel (termed "advisors") into Jordan suggests otherwise.

March 2003

The US and UK launch their invasion of Iraq. There are popular protests in Jordan,but these are muted. The overall feeling is one of shock at the rapid collapse of theBaathist regime.

March 2004

Israel assassinates Sheikh Ahmed Yassin, the spiritual head of the PalestinianIslamist group, Hamas. Demonstrations against the killing, some of which turnviolent, break out in Jordan's Palestinian refugee camps.

Constitution, institutions and administration

Formally, Jordanian politics are governed by the 1952 constitution. This gives acentral role to the elected lower house of parliament, the Chamber of Deputies,from which a new prime minister must win a vote of confidence for apublished programme. The house also has the power to remove the primeminister. An appointed 40-member Senate forms the upper house of the bi-cameral National Assembly. Palestinians from the West Bank and refugees whomoved to the East Bank have been permitted to hold Jordanian citizenshipsince 1950, allowing them to vote and assume public office. The elected lowerhouse that sat between the 1997 election and the parliament’s suspension in

Parliament

Jordan 9


mid-2001 had 80 seats. A fresh election for an expanded 110-seat lower housewas held in April 2003.

Despite the constitution, the king is the country’s ultimate authority. During hislong reign, King Hussein supported his position through a combination ofpersonal charisma, powerful security services, and manipulation of traditionaland tribal relations. He was popular particularly among those from the EastBank, although the failure of the 1994 peace treaty with Israel to deliver anyperceived benefits to Jordan eroded his popularity somewhat. His power wasbolstered by a loyal and well-trained army and an efficient security andintelligence network. King Hussein often bypassed the constitution when hefound it inhibiting.

King Hussein’s death and the accession of King Abdullah in February 1999marked a major change in Jordan’s political environment. King Abdullah cameto the throne with a successful army career behind him, but little experience ofpower. He is clearly less politically polished than his father (his unease with theArabic language has been a handicap), but has shown a strong commitment toeconomic development. He has also sought to develop Jordan’s politicalinstitutions; for example, he is keen to see the formulation of secular politicalparties representing centre-left and centre-right, but has been frustrated by theapparent lack of public interest in his proposals.

The first sign of King Abdullah’s determination to assert his political views overthe conservative approach of the security establishment came in 2000, whenhe enacted a major cabinet reshuffle. Abdel Raouf al-Rawabdeh, regarded asclose to the security establishment, was replaced as prime minister by Ali Abual-Ragheb, a younger man who is known to share the king’s economic andpolitical views. He also forced through the retirement of the head of theGeneral Intelligence Department, Samih al-Battikhi. Mr Battikhi took a numberof steps—including a crackdown in 1999 on the Palestinian Islamist group,Hamas, in Jordan—that were at odds with the king’s efforts to promote a “cleanslate”. In December 1999, in a gesture of openness, the king appointed a newHigher Media Council to replace the Ministry of Information.

However, with the eruption of the second Palestinian intifada in the West Bankand Gaza in September 2000, and the election of the hardline Ariel Sharon asIsraeli prime minister early the following year, King Abdullah was forced toreassess his domestic political strategy. The Jordanian Palestinian communitywas furious with Mr Sharon's uncompromising approach to the West BankPalestinians and they regularly took to the streets of Amman in protest. Theywere also angry at the Jordanian government's unwillingness to severdiplomatic ties with Israel (although Jordan's ambassador has not returned tohis post since being recalled for "consultations" in 2001). King Abdullah'sresponse was equally robust: demonstrations were only allowed to proceedwith official authorisation, and unauthorised protests, which often occurredafter midday prayers on Fridays, were broken up by the police. A crackdown onthe press was initiated: any journalist or editor guilty of publishing articleslikely to harm the "image" of the country or the "fabric of society" were liable tobe fined or imprisoned. Parliamentary elections, which were due to proceed in

The monarchy

10 Jordan


November 2001, were suspended. A further postponement was announced in2002. In the absence of a sitting parliament, the opaque State Security Courtpassed a series of laws that tightened security and impinged on human rights.

With the build-up to the US invasion of Iraq in early 2003, it appeared that theelections would again be postponed. Jordanians were once more taking to thestreets to protest against the military build-up and the Jordanian government'sapparent collusion in the US's plans. This was a difficult but not overtlythreatening period for the Hashemite monarchy. In fact, the rapid collapse ofthe Baathist regime was bewildering to most Jordanians, who had assumedthat Saddam Hussein's government would match its words of defiance withdeeds. Although many felt resentment towards the occupation, they also feltdemoralised by what many characterised as a further military humiliation forthe Arab world. Popular protests quickly melted into shocked resignation.

Consequently, the king felt able finally to proceed with the parliamentaryelection in June 2003. The vote passed off smoothly and sprang few surprises.Voter turnout was moderate, with 59% (1.3m) of registered voters taking part.Tribal and independent candidates were the big winners, taking two-thirds ofthe seats, with identifiable party candidates taking just 25 seats, out of a totalof 110.

The Muslim Brotherhood’s political wing, the Islamic Action Front (IAF), whichboycotted the election in 1997, made a solid if not exceptional showing, taking17 seats of the 30 seats it contested, although it had been confident of winningall of them. Overall, the IAF won some 10% of all votes cast, making it the onlyreal opposition party in the new parliament. Other political parties fared badlywith pan-Arabist and Baathist candidates failing to take a seat, although the left-leaning Democratic Party won two seats.

Jordan’s system of government is characterised by the heavy concentration ofpower in the hands of the executive. Even relatively minor matters have to bereferred upwards to ministerial and even cabinet level. This gives great powersof patronage to ministers and allows for opacity and corruption. Although newprime ministers are mindful of the importance of ethnic, tribal and religiousidentities in the country, East Bank Jordanians tend to be disproportionatelywell represented at the higher levels of government and in the cabinet. Theroyal court has traditionally formed a near-parallel system of government, withthe king manipulating positions in both the court and cabinet to ensure that nopolitician is able to build an independent power base.

The October 2003 reshuffle

Ali Abu al-Ragheb resigned as prime minister in October 2003 amid charges ofcorruption and nepotism. Mr Ragheb formed his government in June 2000 with amandate to boost economic growth and attract foreign investment. He succeeded inthe former, but growth was largely limited to the export sector and made littlenoticeable dent in unemployment. In addition, many politicians questioned hisbusiness ties with influential Iraqi businessmen and officials in the government ofthe former Iraqi leader, Saddam Hussein. The new prime minister, Faisal al-Fayez, isa palace aide from the influential East Bank tribe, Bani Sakhr. In an open letter from

The cabinet

Jordan 11


King Abdullah, Mr Fayez was charged with speeding up the economic and politicalmodernisation of the kingdom. Reduced by one-third to 20 ministers, the cabinetincludes three women ministers and is dominated by Western-leaning reformists asopposed to the conservative politicians who held sway in previous governments.However, the shake-up did not transfer control of the pivotal security and intel-ligence functions, which have remained in the hands of old guard East Bankers.Indeed, the choice of Mr Fayez, the son of a former prime minister, Akef al-Fayez,confirms the importance of familial and clan loyalties.

The background of the new prime minister, Faisal al-Fayez, will suit the tribally-dominated parliament. Nevertheless, the planning and international co-operation minister, Bassam Awadallah—a US-educated Jordanian of Palestinianorigin and King Abdullah’s closest economic adviser—should have a bigger sayin shaping reforms. Palace officials insisted after the reshuffle that thegovernment’s free-market reforms will face fewer hurdles than under previousconservative administrations. However, this does not say much for the efficacyof the Economic Consultative Council, which was established by KingAbdullah in 1999 as a vehicle to develop and help implement socioeconomic,administrative and educational reforms. It was seen as a way of bringingyoung, private-sector representatives into the decision-making process and,informally, as a means of bypassing the generally sluggish bureaucracy.

Political forces

Although not a democracy, Jordan has a long tradition of political parties,including a number of radical Arab nationalist, leftist and Islamist groups. Inthe 1950s, the heyday of vigorous party politics, there was intensive activity bythe communists, the Muslim Brotherhood and Arab nationalist parties.However, despite intermittent national elections, real power remains with thepalace, leaving Jordan’s political parties with little effective influence.Compared with tribal and ethnic affiliation, parties play a negligible role incabinet appointments, and in all parties the individual ambitions of the leadershave been of significant importance in their development.

The Muslim Brotherhood, which dominates Jordan’s major Islamist politicalparty, the Islamic Action Front (IAF), is the only group with significant popularsupport. It is well organised and financed, and has a large grassroots followingbecause of its vocal opposition to corruption and to the normalisation ofrelations with Israel. However, the IAF’s influence was weakened by its poorperformance in cabinet after the 1989 election, when its efforts to imposeconservative social and cultural practices in Jordan were seen as trivial. TheMuslim Brotherhood also proved ineffective in brokering a deal between theregime and Hamas and in preventing the expulsion of Hamas leaders fromJordan in November 1999.

In 1993 the government amended the electoral law, introducing a new formulathat favoured tribal candidates over political ideologues. This prompted aboycott of the kingdom’s third general election in 1997 by most of the op-position parties and leading independents. A new electoral law was prom-ulgated in June 2001, but, although this introduced a number of reforms, the

Party and tribal affiliations

12 Jordan


unpopular voting formula was retained. The IAF elected a new, more moderateleadership in January 2002, with a view to taking part in the parliamentaryelection, which was supposed to be held later that year. The triumph of themoderates partly reflects the fact that the IAF has had to tread a cautious linesince the September 11th 2001 attacks on the US. Although the IAF was one ofthe first groups to speak out against the attacks, its informal links with theHamas movement—included on the US government’s list of “terrorist” groups—has led to fears that it could also fall foul of the US. The IAF itself puts itsmembership at 5,000, but independent estimates are as low as 3,000.

King Abdullah is keen to see a consolidation of Jordan’s political parties intothree main blocs representing the right, centre and left and for one of them tobe strong enough to handle executive power. Jordan currently has 30 registeredpolitical parties, but, with an estimated 9,000 members between them, mostare little more than status symbols for their leaders; only the IAF has anyserious claim to being a fully constituted, ideologically-based party.

Main political figures

King Abdullah ibn Hussein al-Hashemi

Unexpectedly appointed heir to the throne just prior to the death of his father, KingHussein, in February 1999, the former military officer has demonstrated anincreasingly confident political touch. He has managed to keep the simmeringintrigue of Jordan’s palace politics contained, while focusing public attention on theneed for economic reform. Young and energetic, with a clear idea of the country’sstrategic direction, King Abdullah has begun to ease out the political old guard andreplace them with individuals more in tune with his thinking. His Palestinian wife,Rania, is generally considered an asset, although she has begun to involve herself inissues, such as women’s rights, that have an overtly political dimension, upsettingsome members of the political establishment.

Zeid al-Rifai

A member of one of Jordan’s longest established political families, Zeid al-Rifai is theson of Samir al-Rifai, who served as prime minister six times between 1944 and 1963.He himself has served as prime minister four times, most recently in 1985-89.Currently speaker of the Senate, he was a close friend of King Hussein and retainsstrong links with the royal family. He maintains a degree of influence as one of thecountry’s most experienced political figures, and he could be called on to becomeprime minister again in the event of a national emergency.

Abdel-Hadi al-Majali

Leader of the Parliamentary Gathering Bloc (PGB), an amalgamation of nine smallerparties, Mr Majali was re-elected to Chamber of Deputies (the lower house ofparliament) in the 1997 general election. Although the current strength of the PGB inthe lower house is a matter of dispute, Mr Majali retains considerable personalpolitical power. He was elected to the influential post of speaker of the lower housein November 1998 and again in November 1999.

Hamzeh Mansour

Elected secretary-general of the Islamic Action Front (IAF), the political wing of theMuslim Brotherhood, in January 2002, Mr Mansour is a popular figure at grassroots

Jordan 13


level, and is experienced enough to build consensus among moderates and moreconservative strains in the IAF. Nevertheless, the appointment of Mr Mansour assecretary-general marked the triumph of the moderate wing of the party. Moderatesnow control all but one of the seats of the IAF’s 13-member executive committee.

Faisal al-Fayez

Mr Fayez was appointed prime minister in October 2003. He lacks a strong publicprofile and has little experience either in a government ministry or the private sector;his history in the Royal Court and family background appear to be his mainqualifications for the job (see "The October 2003 reshuffle" shaded box).

Women’s rights have emerged as a major issue in Jordan over the past decadeand have enjoyed high-profile support from both King Abdullah and QueenRania. Legal reforms in 2001 gave women the right to initiate divorce, raised thelegal age for marriage for both men and women to 18 years and cancelled anexemption to the penal code that allowed judges to commute sentences formen found guilty of “honour killings”. However, the extent to which thosechanges will translate into reality has yet to be seen, as the role of religion andtradition in this area remains very powerful. The formal political role ofwomen remains limited, although in February 2003 it was ruled that six seatswill be set aside for women in the next parliamentary election. Women arealso entering the workforce in greater numbers—they are heavily represented insectors such as teaching and healthcare and are making a growing mark inbanking, advertising and other services.

International relations and defence

As a small and weak state among more powerful neighbours, Jordan has had tomanoeuvre adroitly to maintain its independence. King Hussein proved partic-ularly skilful at this, but less so at maintaining good relations with neigh-bouring states. His ambitions to play a role as a regional mediator largely failed,and Jordan’s continued reliance on the US as its main backer has tended toundermine its claims to be following an independent regional or internationalforeign policy.

Since ascending to the throne, King Abdullah has devoted much attention toimproving relations with his Arab neighbours. The king had already developedclose ties with the younger members of the ruling families of the Gulf statesand, in the early months of his reign, made the strengthening of regional ties apriority. Unburdened by history, he has gone a long way towards repairingrelations with Saudi Arabia and the Gulf states, after the heavy blow of the1990-91 Gulf conflict when Jordan’s support for Iraq was out of step with theArab mainstream and left it diplomatically isolated.

In response to the 2003 war on Iraq, King Abdullah sought to achieve a difficultbalancing act between the official Arab consensus condemning US action andpressure from the US to provide logistical support. His youth is a potential assetin this respect. King Hussein was regarded with suspicion by other Arableaders: some of them even alleged that he had a hidden agenda of trying toreassert Hashemite claims to Iraq. King Abdullah has publicly reprimanded his

A pragmatic approach toregional ties

Women’s rights given higherprofile

The Iraq war posed freshchallenges

14 Jordan


uncle Hassan, the former crown prince, for associating himself with Iraqiopposition circles, thereby encouraging speculation that he might be acandidate to become a future ruler of Iraq, restoring the Hashemite dynastyoverthrown in the bloody 1958 coup. King Abdullah has been at pains topresent himself as an honest mediator, with no hidden agenda in Iraq. Hepublicly called on the US president, George W Bush, not to go to war againstIraq, but he also supported the approach of Egypt and Saudi Arabia, placingmuch of the responsibility for the crisis on Saddam Hussein.

The US has always been able to count on Jordanian practical support, evenwhen domestic political factors dictate that the government needs to present afacade that is critical of US policy. The US received some vital assistance fromJordan in the conduct of the 2003 war, including access to base facilities close tothe border with Iraq and overflight rights, although the government denies this.This assistance was crucial for the success of US special forces in taking overIraqi airbases in the west of the country and preventing possible Iraqi missileattacks on Israel. It is clear that Jordan had a vital interest in preventing Israelfrom becoming involved in the war. If that had happened, the domesticprotests in Jordan would have been that much more difficult to control. Jordanalso desperately needs US financial support. Mr Bush recognised this inawarding Jordan US$400m in military aid and US$700m in financial assistancein the supplementary budget approved by the US Congress in April 2003. TheJordanian package was the largest, in terms of direct grants, of all the aidcommitments the US has made to its regional allies and friends, with theexception of Israel.

The US has had good reason for concern about preserving its friendship withJordan. Lawrence Foley, an official with the US Agency for InternationalDevelopment, was shot dead outside his residence in Amman in October 2002in what was clearly a political assassination. What was less clear was theprecise motivation. His killers were suspected variously of being affiliated tothe militant Islamist network, al-Qaida, to Islamist Palestinian groups or to Iraq.Whatever the truth, the incident pointed to the breadth and depth of anti-American feeling among segments of the Jordanian population.

The Iraq war has also had an impact on Jordan’s periodically turbulentrelationship with Syria. King Abdullah has struck up a good personal rapportwith the Syrian president, Bashar al-Assad. Nevertheless, ever since the creationof the modern states of Jordan and Syria there have been repeated episodes ofmutual destabilisation campaigns. In the event of a determined USencouragement of regime change in Syria, Jordan would find itself once morein a very awkward position.

Traditionally, the principal concern of Jordanian regional policy has been Israel.Jordan signed a peace treaty with Israel in 1994, but the development ofrelations between the two states has been hampered by political developmentswithin Israel and by continuing tensions between Israel and the Palestinians.The election of the right-wing prime minister, Binyamin Netanyahu, in 1996strained bilateral ties. His replacement by the Labour Party leader, Ehud Barak,heralded an improvement, but Mr Barak’s failure to finalise a peace agreementwith the Palestinians increased tensions. Mr Barak’s replacement by the hard-

Jordan 15


line Ariel Sharon in February 2001 and the latter’s fierce handling of the newPalestinian intifada have exacerbated the situation. Mr Sharon consolidated hisgrip on power in the 2003 election. The US has promised to make a renewedpush for a lasting Palestinian settlement. However, the looming US presidentialelection in November 2004 suggests that there will be little movement on thisvexed issue. Moreover, even in the event of the so-called “road map” to peacebeing reinvigorated, the multiple challenges associated with securing progresstowards a final settlement could easily see the process unravel. For Jordan, thegreatest fear is that conditions for Palestinians in the West Bank become so badthat they will opt to leave the area for Jordan.

Jordan’s strategic military aim has always been to deter or delay any invasionfor long enough to mobilise other regional and international powers toneutralise the threat. Jordan has the military capability to make such a strategycredible, and its neighbours have on occasion proved willing to exert diplomaticor even military pressure to protect the state. Since Jordan’s peace treaty withIsrael, the US has been more sympathetic to Jordanian requests for modernmilitary equipment, and has re-equipped the Jordanian military with F-16 jetfighters, tanks and helicopters. Substantial further military aid is now in prospectas the US seeks to shore up its regional friends in the wake of the Iraq war.

Defence forces, 2003a

Total armed forces 100,500 Army 85,000 Navy 500 Air force 15,000Paramilitary 10,000

a Active.

Source: International Institute for Strategic Studies, The Military Balance, 2003/04.

Resources and infrastructure

Population

Differing estimates of the Jordanian population appear to have been reconciledwith each other, following earlier discrepancies. The Ministry of Finance putthe total at 5.3m in 2002, a figure supported by the Department of Statistics. Thefinance ministry also has a preliminary estimate of 5.48m for 2003. The mostrecent census, carried out in 1994, gave a figure of 4.14m. The UN now seems tobe in line with these figures and puts 2001 total population at 5.2m, havingpreviously estimated the 1999 population as 6.5m. Official figures do not breakdown the population between East Bank and West Bank. The population isdescribed as almost entirely Arab, with only small communities of Circassians,Chechens and Armenians, and is overwhelmingly Sunni Muslim. The Christianpopulation, which accounts for around 4% of the total, has diminished, owingto emigration and a lower birth rate.

There is a continuing division between East Bankers (those who lived on theEast Bank of the Jordan river before 1948) and Palestinians (who have arrived as

Fast-growing population

Military philosophy aimed atdelaying invasion

16 Jordan


refugees and immigrants since 1948, and are estimated to make up anythingfrom 60% to 70% of the population). However, although there are tensionsbetween the two communities, high levels of intermarriage and businesspartnerships, as well as the passage of time, have blurred many distinctions,making it difficult to generalise about the identity and loyalty of the Palestinianpopulation. Fertility rates are declining, but the annual natural growth rate isstill high, at 2.9%, compared with 1.5% in Egypt, 1.3% in Lebanon and 1.2% inTunisia. According to government figures, foreigners make up 7.6% of thepopulation, with the largest number from Egypt, Iraq and Syria. In 2002 menaccounted for 75% of the labour force and were most heavily concentrated intrade, followed by public administration and defence. Over half of workingwomen were employed in either education or health.

Distribution of the labour force by economic activity, 2002(% of total)

Female Male OverallAgriculture 2.6 4.1 3.9

Mining & quarrying 0.3 1.2 1.1Manufacturing 9.8 13.1 12.6Electricity, gas & water 0.3 1.7 1.5

Construction 0.9 7.2 6.3Trade 6.9 20.0 18.1

Hotels & restaurants 0.5 2.6 2.3Transport, storage & communications 3.3 11.4 10.2Financial intermediation 3.0 1.6 1.8

Real estate 5.0 3.7 3.9Public administration & defence 5.6 17.7 16.0

Education 41.4 6.9 12.0Health & social work 14.1 3.1 4.7

Other community, social & personal service 4.7 5.3 5.2Private households with employed persons 0.8 0.1 0.2Extra-territorial organisations 0.7 0.2 0.3

Source: Department of Statistics, Statistical Yearbook.

Education

Jordan places a high priority on universal education; the government investsabout US$100m annually in new school facilities and in upgrading of thecurriculum and teacher training standards. Despite this, there is still a heavyemphasis on rote learning, classrooms are often overcrowded and corporalpunishment is common. The public sector provides schooling for all children,but most middle-class families prefer private schools, which generally offerbetter language teaching and a broader curriculum. Some 37% of childrenattend private schools.

School enrolment stands at 94% for primary level and 76% for secondary.Overall adult literacy rates are high for the region, at 90.3% in 2001, comparedwith 72% in Tunisia and 56% in Egypt. A decision to allow technical schoolgraduates to go on to higher education is encouraging more families to considerthis option. Since the 1970s Jordan has maintained a successful policy of

Universal provision

High literacy rates

Jordan 17


educating its citizens with the aim of enabling them to obtain professional jobsin the oil-rich states of the Gulf.

Educational institutions, 2001/02Primary & secondary educationSchools 5,137Classrooms 51,644Teachers 71,723Students 1,463,484

Tertiary educationState universities 8Private universities 13Total students enrolled in universities 143,511Technical & community colleges 41Total students enrolled in colleges 29,177


Health

By regional standards, Jordan has a well-developed healthcare system, someelements of which are world class. However, it still suffers from inefficiencies inboth the financing and delivery of certain services. The Ministry of Healthoperates a nationwide system of 1,245 primary healthcare centres and 27 hos-pitals, which provide some 37% of all beds. The Jordanian armed forces’ RoyalMedical Services provides a further 11 hospitals and 24% of total beds, and theJordan University Hospital supplies 3% of all beds, with 56 private-sectorhospitals contributing the remaining 36% of beds. Amman has good medicalfacilities and some world-class doctors (although nursing standards are lessimpressive), but it is difficult to persuade physicians to live and work outside ofthe capital. The poor and patchy quality of government health servicesencourages many people to opt for private care even if they are entitled to usegovernment facilities, although this is often very expensive.

As part of the Plan for Socio-Economic Transformation (PSET), the governmentis in the process of expanding and improving healthcare provision to Jordan’spoor. This includes expanding health insurance to 100% of the population,from the current 75%, upgrading primary healthcare facilities, and improvinghospital administration to speed up admissions and reduce duplication ofservices and other waste. Much of this was supposed to be completed in 2002,but funding problems associated with the PSET meant that implementationhas been pushed into 2003-04 or beyond. The government is also keen tobuild on Jordan’s reputation for quality service to attract more patients fromthe Arab world.

Natural resources and the environment

About 75% of Jordan’s 89,206 sq km is sparsely populated desert or semi-desert.The upland areas of the centre and north have the highest annual rainfall andproduce cereal crops and summer vegetables. The Jordan Valley, which extends

A strong regional reputation

18 Jordan


down the western flank of the country, is the most fertile area and providesmost of Jordan’s fruit and vegetable production.

Jordan has limited oil and gas resources. Annual output of natural gas fromthree wells in the Risha district near the Iraqi border is just 5.5bn cu ft, althoughnew studies suggest that reserves could total as much as 1trn cu ft. The Hamzaoilfield near Azraq Shishan yields an average of 600 barrels/day andexploration is under way in other areas of the country. Steps are now beingtaken to exploit Jordan’s extensive oil-shale reserves, currently estimated at40bn tonnes. The country’s major exploitable mineral resources are phosphateand potash.

Scarce water

Jordan suffers from a very serious problem of water shortage and mismanagementof water resources. With annual average rainfall of just 200-600 mm in the uplandsand 20-70 mm in the desert, lack of water—and the government’s response to theproblem—has held back Jordan’s development. Annual consumption is now 882m cumetres, including 225m cu metres pumped from rapidly dwindling groundwatersources. Heavy investment in industry and tourism, coupled with rapid populationgrowth, will see demand for water rise rapidly in the coming years. The governmentis hoping that the construction of the planned US$625m Disi-Amman waterconveyor will solve the problems of domestic water supply over the next decade.The Disi scheme to bring an extra 100m cu metres of water annually to Ammanfrom southern Jordan has suffered from a long history of delays and changes. It wasactually listed as a priority project at the Middle East and North Africa summit inAmman in 1995, with both government finance and a build-operate-transferapproach considered as options. In February 2004, following a series of withdrawalsand re-tenders, the government set a "target" of mid-2004 for the signing of theproject, although it was still not clear which firms were being considered. Thegovernment can take some comfort from the fact that good rainfall in the 2003/04winter season (November-February) will at least ensure adequate water supplies inthe short term.The signing of a US$89m contract with Turkey’s Ozaltin at the start of 2003 for theconstruction of the Wihdeh dam on the Yarmouk River in the north also means thatwithin three years an extra 80m cu metres of water will become available as astrategic reservoir. However, most industry observers agree that it is vital for newsources to be tapped before too long. It is also important to promote the moreefficient allocation of water resources.

Transport, communications and the Internet

The development of Jordan’s transport network over the past 50 years has beendictated largely by the Middle East’s geopolitical structure. Until 1948 Jordanrelied on the port of Haifa. However, it was forced to develop its own facilitiesat Aqaba when Haifa fell to the Israelis. Aqaba received a further boost in the1980s when it emerged as the major supply centre for Iraq during its war withIran. At this time the road to Baghdad was developed as a superhighway.Jordan’s peace treaty with Israel has raised hopes that the country will becomea link between the Mediterranean and the Arab hinterland. Whatever the direc-

A regional network

Jordan 19


tion of trade, Jordan’s 6,200-km road system is likely to be the main beneficiary.The rail network, with just 620 km of track, is used primarily for transportingphosphates to Aqaba, although there are plans to upgrade and expand thenetwork to serve new fertiliser projects. In early 2003 the governmentannounced that it would take responsibility for the construction of a rail link toconnect the Shidiyeh mines of the Jordan Phosphate Mines Company (JPMC)to the Aqaba Railways Corporation's rail link to Aqaba. The 22.5-km link is nowunder construction and is forecast to save the JPMC US$2.8m in trucking costs.

The war in Iraq dealt a severe blow to Jordan’s transport sector as trade withIraq all but dried up. However, the post-war recovery was swift, if erratic. ByDecember 2003 trade had reached US$53m, well above the pre-war total.

In the short term, however, there are still problems to be overcome. ManyJordanian truck drivers have refused to make the trip to Iraq; the main highwayto Baghdad has developed a bad reputation for hijacking and robberies. Iraqidrivers have stepped in to take their place and are now handling an estimated90% of the work. Congestion at Aqaba Port is also hampering trade. In January2004 the king, Abdullah ibn Hussein al-Hashemi, gave the port authoritiesthree months to sort out the problems with the container terminal, whichappear to be management-related. The government has been forced to extendthe period allowed for imports to come in through other regional ports untilthe end of April 2004. Surcharges of US$450 on 20-ft containers and US$950 on40-ft containers imposed by international shipping companies for freightheading to and from Aqaba have made importing through regional portscheaper. In response to King Abdullah's ultimatum, the Aqaba SpecialEconomic Zone Authority invited offers for the private management of thecontainer port. The successful bidder will be responsible for improvingefficiency at the port and for computerising its work. The government willretain ownership of all facilities.

The government has identified communications and information technology(IT) as a major potential growth area for the economy, as well as a primarycomponent of infrastructure. Jordan’s abundant supply of skilled workersmakes it a promising centre for regional IT development and a good base forcompanies trying to tap the US and European outsourcing markets. Thegovernment has already committed itself to developing an IT park to supportthe sector, although no visible progress had been made by April 2004.

Telecommunications was one of the first sectors to feel the impact of thegovernment’s privatisation programme. A 1995 telecoms law opened all non-fixed-line services to the private sector. These developed rapidly to include twocellular services with subscriber numbers of around 1m, two pay-phonenetworks, a paging service and ten data information services, offering eitherInternet access or private communication networks. A further telecoms law, inplace since March 2002, gives the new Ministry of InformationCommunications Technology responsibility for the development of IT,telecoms, post and broadcasting policy, while decreasing the ministry’s role inregulation of the sector.

Telecommunications

20 Jordan


In December 1999 the government sold a 40% stake in the JordanTelecommunications Company (JTC), Jordan’s fixed-line service provider, to ajoint venture of France Télécom and the local Arab Bank, for US$508m. JTC’sfirst major move following the sale was the introduction of the country’ssecond cellular service. Competition between the two cellular networks has ledto a sharp reduction in costs, with subscriber numbers soaring from around60,000 at end-1999 to about 1.35m at the end of 2003. The market leader isFastlink, which had secured 990,000 subscribers by end-2003, when Kuwait’sMTC-Vodafone acquired a 92% stake from Egypt’s Orascom Telecom forUS$424m. JTC’s cellular arm, Mobilcom, has been pushing hard for marketshare since its launch in 2001. By end-June 2003 it had 321,000 subscribers.

The Telecommunications Regulatory Commission (TRC) heralded the firstmoves in a shake-up of the mobile-phone sector when it issued its guidelinesfor a third mobile licence in October 2003. Fastlink and MobileCom, who untilthe end of 2003 had a duopoly, are not surprisingly in favour of the status quo;MobileCom’s chief executive, Michael Ghossain, went so far as to say that hiscompany would not invest further or might even leave the market if the entryof a third player led to a serious decline in profitability. Mr Ghossain suggestedthat another company would be unable to offer anything new to the market asthe two existing firms are already providing the most advanced technology anda high level of service, while low service prices made it unlikely a new entrantcould be sufficiently profitable.

The TRC, however, defended the case for further liberalisation, saying itintended to offer the new player two bandwidths in either the 1800-mhz or1900-mhz bands, which are currently used by the Jordanian military, and willplace no limits on the technology it can use. With this in mind, the existingcompanies will be offered more spectrum in the 900-mhz band, which bothcurrently use, and in the 1800-mhz band, and will also be freed of currentrestrictions on their use of technology under their existing licences. Currentoperators, or any shareholders with more than 10% of an existing serviceprovider, are not eligible to apply for the new licence, which will be for 15 yearsand renewable. As part of the process of granting a third licence, Fastlink andMobileCom will also be required to allow the new operator to have roamingcapacity on their networks for a period of two years to ensure that customersof the new company have full access from the time the service is rolled out.The licensing plan was approved by the cabinet in November and the TRChopes to award the new licence by April 2004.

As of end-2003 Jordan had an estimated 53,000 Internet subscribers (roughly1% of the population), with each subscription serving an average of six people.Costs are comparatively high: combined server and phone charges per monthare the third highest in the Middle East, while Jordan’s income per head is oneof the lowest in the region. Nevertheless, an abundance of Internet cafes andthe establishment of government-sponsored Internet centres offering free useare helping to extend access to a wider number of people.

A local and a French Internet service provider—Global One and Wanadoorespectively—announced a strategic partnership in October 2003. Under thedeal, Global One subscribers will keep their existing e-mail addresses but will

Jordan 21


be encouraged to change over to a “wanadoo.jo” address. France Télécom has a40% stake in Global One, which was established in 1996 and is estimated tohave 40% of the local market, and also has a 73% stake in Wanadoo, making thenew alliance a logical step. The partnership was expected to lead to reductionsin Internet access prices in Jordan.

Jordan has five daily and 14 weekly newspapers. The principal daily ones areAl Dustour, Al Ra’i (both Arabic) and the Jordan Times (English). The mainweeklies are Assabeel, Al Hadath, Shihan (all Arabic) and The Star (English). Ingeneral, the weeklies tend to be more outspoken than the dailies. However,amendments to the penal code in late 2001 have prompted greater censorshipby all newspapers. The new penal code includes fresh measures against thepress—allowing for closure of publications, heavy fines and prison terms of upto three years for journalists—for a range of reasonably specific infringements,including inciting strikes and illegal public assemblies, and prison terms foranyone found to have produced offensive verbal, written or electronic mes-sages relating to the king, queen or crown prince. Fines and prison terms arealso to be handed down for far vaguer misdemeanours, including thepublication of articles sowing seeds of “hatred and malice”, instigating acts of“religious and racial fanaticism” and even those that are “harmful to nationalunity”. The most ambiguous and alarming offence is perhaps that of“disrupting society’s basic norms by promoting deviation from what is right”.

Sustained domestic and international criticism of this amendment led tosomething of a reversal in late 2003. The Higher Media Council and the JordanPress Association are co-operating on the drafting of a new media law toreplace the existing legislation. The comment by the prime minister, Faisal al-Fayez, that the government wants “a media and press that can express thecountry’s accomplishments and its aspirations for the future” suggested that hisvision of reform and freedom of the press might still differ from that of themedia themselves.

Energy provision

Jordan has traditionally relied on imported oil for its energy generation, but hasincreasingly been exploring the potential of local gas and shale oil reserves andimported natural gas. The result has been a profusion of projects using differentenergy sources, including shale oil, solar, wind and biomass energy, but withlittle overall planning.

Electrical energy production in 2002 was 7.9bn kwh, with some 94% of thisproduced by the state-owned National Electric Power Company (Nepco), andthe balance by private companies. The two main generators of electric powerin Jordan are the Hussein thermal power station in Zarqa (with three 33-mwand four 66-mw steam-generating turbines, and one 14-mw and one 18-mw gasturbines) and the Aqaba thermal power station, with five 130-mw steam-generating units. Industry is the largest energy consumer in Jordan, accountingfor 34% of total consumption, followed by domestic consumers, with 31%. Some98.5% of the Jordanian population has access to electricity supplies.

Media

22 Jordan


With electricity demand growing by 10% annually, the government is keen toattract private-sector investment to the sector. The government is aiming toinvite bids for shares in three electricity companies by the first half of 2004. Ithopes to sell 60% of the state-owned Central Electricity Generating Company(CEGC), together with 100% of the government-controlled Central ElectricDistribution Company and its 55.4% share in the publicly-listed Irbid DistrictElectricity Company.

However, the long-awaited Khirbet al-Samra independent power project (IPP)has been shelved. Rather, the CEGC has been given responsibility for theconstruction of the new Samra power station. Although it had a notable failurewith the first IPP, the government is committed to trying again. No details of thesize or location of the second IPP have been released but the Ministry of Energyand Natural Resources has retained a US-Australian consultancy, K&M, asadvisers on a new build-operate-own project and hopes to see it in operationby 2008 or 2009.

In July 2003 King Abdullah and the Egyptian president, Hosni Mubarak,inaugurated the gas pipeline linking Jordan and Egypt. The 270-km pipeline isthe first phase of a planned regional system that should include Syria andLebanon by 2005 and Cyprus and Turkey by 2006. Jordan is due to receive1bn cu metres of gas a year and according to the energy and natural resourcesminister, Azmi Khreisat, could save Jordan some US$50m annually. In January2004 the Jordanian-registered Al Fajr Company was licensed to construct a 393-km pipeline to bring gas from Aqaba to northern Jordan. Al Fajr will carry outthe US$270m project on a build-own-operate-transfer basis. Al Fajr's mainshareholders are an Egyptian consortium that includes the Egypt Gas HoldingCompany, Petroject and Emppi. The pipeline is due to be competed by 2005and should be extended to the Syrian port of Banias and to the Lebaneserefinery at Zahrani by 2006.

The economy

Economic structure

Main economic indicators, 2003Real GDP growth (at 1994 prices; %) 3.1a

Consumer price inflation (av; %) 2.3

Current account (US$ m) 951a

Total external debt (US$ bn) 7.6a

Exchange rate (av; JD:US$) 0.709

a Economist Intelligence Unit estimate.

Sources: IMF, International Financial Statistics; Central Bank of Jordan, Monthly Statistical Bulletin; World Bank, Global Development

Finance; Economist Intelligence Unit.

Under pressure from the IMF and the World Bank, Jordan has made efforts toreduce the state’s economic influence and boost the private sector. Progress hasbeen patchy since the process started in the late 1980s, but the king, Abdullahibn Hussein al-Hashemi, is now showing a strong commitment to a fund-amental reorientation of the economy. He aims to move towards a public-

Gradually retreating state

Jordan 23


private partnership that will involve joint policymaking but will moveresponsibility for most investment to the private sector. Nevertheless,government services remain one of the largest single contributors to GDP,accounting for 19.6% in 2002 (current prices, factor cost), exceeded marginallyonly by finance, real estate and business services, at 20.8%. Significant stepshave been taken to open utilities and transport to private investment andmanagement.

Gross domestic product by sector, 2002a

(JD m; current prices)

Agriculture, forestry & fishing 137Mining & quarrying 190

Manufacturing 914Electricity & water supply 148

Construction 244Wholesale & retail trade, restaurants & hotels 630Transport & communications 949

Financing & business & real estate services 1,191Community, social & personal services 264

Government services 1,120Producers of private non-profit services to households 60

Domestic services of households 13Imputed bank service charges -134GDP at factor cost 5,724Net indirect taxes 929GDP at market prices 6,653Net factor income from abroad 78Total GNP at market prices 6,731

a Data may not sum, owing to rounding.

Source: CBJ, Monthly Statistical Bulletin.

As a whole, services dominate the economy, with finance and real estate,transport and communications, and government services the major contributors.Services' contribution has remained fairly constant over the past five years, atabout 71.5% (current prices, factor cost), while industry has also remained static,accounting for around 26% (agriculture supplied only 2.4% of GDP in 2004).

Until recently, manufacturing was held back by Jordan’s small, low-incomedomestic market and its weakness in establishing reliable export markets.Following rapid growth in 1992-94, the share of the economy accounted for bymanufacturing had slipped back to 12.8% by 1996. However, building on thesuccess of the qualifying industrial zones (QIZs, goods from which enjoy duty-free access to the US), manufacturing—particularly of textiles—recovered to 16%of GDP in 2002. Nevertheless, one might have expected a more rapid increasein the sector's contribution given the exceptionally strong export performancein 2001-02 as QIZ exports to the US accelerated. The Economist IntelligenceUnit estimates that manufacturing’s share of GDP remained at 16% in 2003.

The construction sector expanded considerably in 1992 and 1993, largely owingto investment in housing and small businesses by some of the 300,000Jordanians who left Kuwait after the 1991 Gulf war. However, the sector’s shareof the economy slipped to 4.3% in 2002, from a peak of 8.9% in 1993.

24 Jordan


Agriculture’s share in GDP declined from around 8.5% in 1994 to just 2.4% in2002. Capital-intensive fruit and vegetable production in the Jordan Valley hasbenefited from a recovery in demand from the Gulf states and someimprovement in demand from western Europe, but rain-dependent uplandcereal production remains volatile.

Comparative economic indicators, 2003a

(US$ bn unless otherwise indicated)

Jordan Lebanon Egypt IsraelGDP 10.0 16.5 70.1 108.7GDP per head (US$) 1,831 4,910 980 16,240

Current-account balance 1.0 -2.9 0.4 -0.2Exports of goods (fob) 3.0 1.5 8.8 29.8

Imports of goods (fob) 5.0 6.6 14.6 32.3

a Economist Intelligence Unit estimates.

Source: Economist Intelligence Unit.

Economic policy

Jordan’s economic policy over the past decade has been largely dictated by theneed to re-establish fiscal and monetary stability in the wake of the 1988-89debt crisis. Heavy external borrowing began to have a detrimental effect onJordan’s economy from 1988. The dinar, which had been pegged to the IMF’sspecial drawing rights at an inflated value, suffered two major devaluations. ByJanuary 1989 total debt stood at some US$7.2bn (196% of GDP). The militarycomponent of this had been concealed, and the government was unable tomeet its commitments. As a result, it was obliged to turn to the IMF to negotiatea comprehensive debt-rescheduling arrangement and submit to an IMFstabilisation programme. The World Bank weighed in with a structuraladjustment programme (SAP).

Under the programme, state-sector salaries were frozen, new recruitment wascurtailed, import duties were slashed and subsidies for basic commodities werecut, leading to a rapid rise in prices. A 30% increase in fuel prices in 1989prompted riots in the southern city of Ma’an, one of Jordan’s main transporthubs. Other structural measures, however, were adopted with surprisingly littleprotest, although the political opposition was vehemently opposed to the IMF’sintervention, and remains so to this day. The opposition focused in particularon the detrimental impact on the poor of the restructuring programme, and thepotential loss of sovereignty associated with the opening of the economy towidespread foreign participation.

Jordan’s stabilisation and adjustment plans were thrown off course by Iraq’sinvasion of Kuwait in 1990. Initially, the country had to cope with a massiveinflux of Jordanian returnees from Kuwait, and then the arrival of around300,000 nationals expelled from Kuwait in 1991. A second SAP (SAP II) enabledJordan to reschedule debt payments and have some of its bilateral debtforgiven. As with the first programme, SAP II, which ran until February 1999,met with some resistance, particularly over the introduction of a sales tax and afurther reduction of subsidies. When the sales tax was finally introduced in

Economic collapse and IMFintervention

Gulf conflict and SAP II

Jordan 25


1994, the main rate was reduced from 10% in the original proposals to 7%.Once the controversy died down, it was increased to 10% late in 1995 and thento 13% in 1999. Since then, the tax has been extended to cover a range ofservices and, from 2002, was extended from businesses with an annualturnover of JD250,000 (US$352,600) to those with a turnover of JD150,000. Theviolent protests that greeted the lifting of subsidies on bread in August 1996served as a warning to the multilateral agencies that Jordanians can reactstrongly if reforms prove too harsh. The government has therefore usuallybeen allowed considerable leeway over the introduction of new structuraladjustment measures.

Jordan has also been able to play on its role as a force for stability in the region,and on its support for the Middle East peace process, to win substantial budgetsupport from Western donors. As a result, the government has been able to setup aid funds for low-income groups and maintain spending on health andeducation—notably the Plan for Socio-Economic Transformation. The admin-istration also delayed as long as possible the introduction of realistic publicutility charges, leaving these until the World Bank threatened to withhold badlyneeded SAP loans.

In the early 1990s the negative side effects of the adjustment process werepartly ameliorated by an economic boom that lasted until 1995. Over thisperiod real GDP growth rates averaged 9% a year, with little in the way ofstrong inflationary pressure. Targets set by the IMF for inflation, export growth,monetary and fiscal policy and the current account were generally met, at leastuntil 1998, when exports started to decline and the budget deficit (excludingforeign grants) reached 10% of GDP. The government began to work to containthe deficit, managing to bring it down to 6.9% of GDP in 2001.

Government finances(JD m)

2002 2003 % changeRevenue 1,754.1 1,698.6 -3.2 Tax 1,000.3 1,083.2 8.3 Corporations 120.9 128.3 6.1 Individuals 36.4 38.6 6.0 General sales tax 510.7 596.3 16.8 Non-tax 680.5 571.5 -16.0 Miscellaneous 280.8 169.3 -39.7Expenditure 2,296.7 2,542.6 10.7 Current 1,857.9 2,057.2 10.7 Wages, salaries & allowances 401.6 418.5 4.2 Interest payments 251.4 270.3 7.5 Defence & security 551.3 629.3 14.1 Capital 438.8 485.4 10.6 Net lending 0.0 0.0 0.0

Overall balance -542.6 -844.0 55.5Foreign grants 266.7 682.6 155.9Overall balance incl grants -275.9 -161.4 -41.5

Source: Ministry of Finance, Government Finance Bulletin.

Economic boom and bust

26 Jordan


According to official figures, the budget deficit reached JD844m (US$1.19bn) in2003, equivalent to 12% of our estimate for GDP, the highest proportion since1985. If foreign grants are included, the deficit was a far more manageableJD161m, or 2.4% of GDP, underlining the importance of foreign, particularly US,financial support.

The data reveal that far from curbing excessive expenditure (as it had promisedto), the government increased current spending by a considerable 10.7% in 2003,compared with the 2002 outturn. With consumer price inflation of only 2.3%,the real increase in current expenditure was around 8.4%. The main reason forthis large rise was the continued presence of high oil prices during 2003 and,more importantly for Jordan, the loss of heavily subsidised oil from Iraqfollowing the collapse of Saddam Hussein's regime. This impacted on both thegovernment's current expenditure costs and its ability to manipulate localprices of oil products.

Although the government was clearly helpless in the face of an unforgiving oilmarket, and the downfall of a generous neighbour, there were other areas ofspending that could at least have been reined in. The 4.2% increase in spendingon public-sector wages and salaries, while slightly lower than the 2002 rise,was still significant, especially as the government had publicly pledged to bringthis under control. Moreover, the increase in this item does not appear toinclude the wages of security and defence personnel. These and other currentspending devoted to security rose by a substantial 14.1%, making this the largestelement of expenditure by some margin.

Overall revenue showed a disappointing 3.2% decline on 2002. The governmentmight point to the 8.3% increase in tax receipts to argue that management of thetax regime is improving. This might be so; however, the main reason for theimproved tax performance was the increase in the rate of the general sales taxon some products earlier in 2003. The decline in overall revenue was mainlyowing to a steep downturn in non-tax income, which fell to JD571.5m fromJD680.5m in 2002. This in turn was caused by a near 40% collapse in"miscellaneous" revenue, which is largely composed of the profits generated byIraq's oil subsidy (the government used to make a healthy profit on thedifference between the cost of this oil and what it sold it for on the localmarket). With the collapse of the Baathist regime and the disappearance of theoil subsidy, there was no scope for such profit making.

The downfall of the Baathist regime did not leave the government as exposedas it might have feared. Jordan's strategic utility to the US ultimately rescued itfrom a perilous financial position in 2003. The fiscal outturn shows that foreigngrants increased by 156%, more than offsetting the collapse in domestic revenue.The government and the IMF seem content to treat grants as an "above the line"revenue item; consequently, on their terms at least, a deficit of JD844m wasreduced to JD161m, 42% lower than in 2002.

Yet there are serious problems with this approach to fiscal accounting. First,counting grants as current revenue rather than as a financing item means thatthe government's financing options are clearly reduced. It must now rely onfurther borrowing—or whatever it can raise through privatisation—to balance its

Jordan 27


books. This borrowing will in turn create servicing pressures in the future.Second, heavy reliance on US financial largesse creates political and fiscalvulnerability. It forces the government to support US policies in the region (nomatter how domestically unpopular these might be) and leaves it exposed to achange of strategy in Washington. This is already clear: the US has announcedthat, at US$456m, financial aid to Jordan in 2004 is to be around one-thirdlower than in 2003.

Although successive Jordanian governments have paid lip service to privat-isation since 1985, it was only in the late 1990s that major divestments began.This reluctance to act stems from a number of considerations, ranging from adesire to retain control over “strategic” parts of the economy, such astelecommunications, to protecting vested interests and maintaining patronagenetworks, as well as a fear of job losses and the social and political con-sequences of these. Early steps included legislative change, which openedmajor utilities to private investment, and some divestiture by the governmentof its holdings in listed companies.

The pace of change began to quicken in 1998 with the finalisation of the sale ofa 33% stake in Jordan Cement Factories Company and the opening ofnegotiations on the privatisation of Aqaba Railways Corporation (ARC). Thegovernment also signed agreements with international consultants for the long-awaited financial and legal restructuring of the national carrier, Royal Jordanian(RJ). Further progress was made in 1999 with the finalisation of the leasingagreement for ARC with a US-led consortium; the sale of a 40% stake in JordanTelecommunications Company (JTC); and the offer of a 49% stake in RJ alongwith the 100% sale of three of its subsidiaries.

However, the pace has since slackened. Attempts to sell the 49% stake in RJfoundered, owing mainly to its lack of profitability but also because of thedownturn in the global airline industry in the wake of the September 11th 2001attacks on the US. Although no major new privatisations took place during2001, progress was made on a number of private-sector-led infrastructureprojects and the government developed its plans to reduce its holdings inJordan’s two largest industrial companies, Jordan Phosphate Mines Companyand Arab Potash Company (APC). In 2002 the only real progress was the saleof a further stake in JTC on the Amman Stock Exchange in October 2002.Nevertheless, in mid-2003 the government sold half of its 52% stake in the APCto a Canadian company, the Potash Corporation of Saskatchewan, for US$172m.The other half of the government’s 52% stake was sold on the Amman StockExchange in October 2003.

Trade unions have been outspoken in their opposition to privatisation and toeconomic liberalisation in general. In October 2003 the General Federation ofJordanian Labour Unions (GFJLU) placed advertisements in local paperscomplaining of the adverse impact of some foreign investment, privatisationand strategic partnerships on the local economy. It highlighted QIZ investorswho have abandoned projects without settling debts owed to workers, butsaved particular criticism for the Anglo-Dutch consumer giant, Unilever, for itsdecision to withdraw a production licence for its products from the Industrial

Privatisation

Trade unions are on theoffensive, however

28 Jordan


Commercial Agricultural Company after over 40 years. The GFJLU called onJordan to reconsider not just its relationship with Unilever but also itsAssociation Accord with the EU.

In addition, workers at the state-owned Agricultural Marketing and ProcessingCompany managed to postpone plans to privatise the company, which runs atomato processing plant in the Jordan Valley. After a lengthy sit-in by the 226workers at the company, the government postponed privatisation plans“indefinitely” and promised the workers that any future proposals wouldinclude a clear statement about their fate.

Privatisation highlights

Amman water and wastewater management: Management of the GreaterAmman Water and Wastewater Networks has been managed successfully by aFrench company, Suez Lyonnaise des Eaux, since it was awarded the contract in 1998.A major wastewater project moved ahead in December 2003 with the signing of theagreement to upgrade and expand the Khirbet Es Samra wastewater treatment plant.The US$169m project was agreed with a consortium led by a French company, SuezEnvironment, which will carry out the work under a 25-year build-operate-transferagreement. Once the expansion is completed, the Khirbet Es Samra plant will handleup to 268,000 cu metres of wastewater daily, about 80% of Jordan's total, and willserve 2.5m people in Amman and Zarqa.

Jordan Cement Factories Company (JCFC): A 33% stake in the company was soldto Lafarge Cement Group of France in October 1998, generating JD72m (US$102m) forthe government. The balance of the government’s share was sold to the PalestinianAuthority early in 2002.

Jordan Telecommunications Company (JTC): A consortium of France Télécomand the local Arab Bank paid US$508m for a 40% strategic stake in JTC in December1999. In October 2002 37.5m shares, or 15% of the company, were floated on theAmman Stock Exchange (ASE). Around 70% of the shares were taken up.

National Petroleum Company (NPC): The NPC’s drilling activities have beenseparated into a new entity, the Petra Drilling Company, which is slated for eventualprivatisation.

Royal Jordanian (RJ): Government plans to sell up to 49% in the national carrier arecurrently on hold, owing to adverse conditions in the global airline business. Threeof RJ’s subsidiaries, Jordan Airports Duty-Free Shops Company, Jordan Flight CateringCompany and Jordan Airline Training and Simulation, have all been sold.

Arab Potash Company (APC): In 2003 the government sold half of its 52% stake inthe APC to a Canadian company, the Potash Corporation of Saskatchewan (PCS), forUS$172m. The new shareholders moved quickly to make their mark on the company,replacing the APC director-general and two of his senior managers with PCS staff.The other half of the government’s 52% stake was sold on the ASE in the same year.

Successive governments have also attempted to alter the legislative regime topromote private-sector investment. Changes have been made to customs,

Jordan 29


taxation, company law and the financial market, but bureaucratic resistance hasoften weakened their impact. However, the strengthening of intellectualproperty legislation in the country has encouraged new confidence amonginvestors in the information technology (IT) and pharmaceuticals industries.King Abdullah’s apparent awareness of the critical need to attract new localand foreign investment, and his determination to push through administrativereform, have raised hopes that the entire economic reform process will be takenmore seriously. The October 2003 cabinet reshuffle is regarded as an attempt tospeed up this process.

Major policy events of recent years

November 1995

The Central Bank of Jordan fixes the exchange rate at JD0.709:US$1, in a bid to enduncertainty following the devaluation of the currency.

December 1995

A new World Bank structural adjustment programme for 1996-99 emphasisesprivatisation.

March 1997

A maximum limit of 49% on the size of direct investment and stock purchases byforeign investors is lifted.

December 1999

The government sells a 40% stake in the Jordan Telecom to a consortium led byFrance Télécom.

January 2000

Jordan joins the World Trade Organisation.

January 2001

The Red Sea port of Aqaba becomes a special economic zone.

November 2001

The government presents a new Plan for Socio-Economic Transformation, designedto improve public services (particularly health and education delivery) and alleviatepoverty.

December 2001

Jordan’s free-trade agreement with the US comes into force; this involves gradualdismantling of tariffs and other barriers to trade over a ten-year period.

July 2002

The Paris Club approves a fresh round of debt restructuring following strong pressureon members by the US.

March 2003

The US agrees to provide around US$1bn of military and civilian aid to compensateJordan for the effects of the war in Iraq. Japan also provides aid to finance oilimports, and Italy writes off US$70m in debts.

30 Jordan


November 2003

The new finance minister, Mohammed Abu Hamour, promises that the governmentwill take "tough austerity measures" to bring the fiscal deficit back to manageableproportions.

For many years, potential foreign investors remained extremely wary ofJordan’s geopolitical position. Its proximity to Iraq, the Palestinian Territoriesand Israel was seen as a major liability. In the wake of the toppling of the Iraqiregime, however, attitudes are beginning to change, albeit slowly. Although theshort-term security outlook in Iraq remains volatile, there is a belief amongmany that this will gradually be resolved once a sovereign Iraqi government isin place and that Jordan is ideally placed to benefit from the pick-up in foreigninvestment in Iraq. Despite ongoing managerial problems, the port of Aqaba isstill the most obvious gateway to Iraq for goods shipped from Europe and theUS. In addition, many investors with an eye on Iraq see Jordan as an idealplace to base themselves, at least until the security situation improves.

However, the prospects for an end to violence in the Palestinian Territoriesappear bleaker. The Israeli government, headed by the prime minister, ArielSharon, shows no real interest in pursuing the US-sponsored "road map", and ispushing ahead with its "security barrier" in the West Bank. Even in the contextof a possible Israeli withdrawal from the Gaza Strip and the dismantling ofsome West Bank settlements, few believe that this will provide a "solution" toIsraeli-Palestinian violence and many Palestinians (and others) suspect that theeconomic and social hardships imposed by the security barrier might forcePalestinians to seek a better life in Jordan—something that the Jordaniangovernment is desperate to avoid.

Beyond these political issues, over which Jordan has little influence, someforeign investors say that more could be done at the “micro” level, particularlyin terms of improving transparency in the decision-making process. During ameeting with British companies at the end of 2001, King Abdullah was told thatafter an initially enthusiastic response from Jordanian officials their investmentbids had become bogged down in red tape, with few officials willing to make adecision. In response, the king told the investors that if they experienced anyfurther problems of this type they should contact him directly. Most firms saidthat they were reassured by the king’s attitude, but reiterated that geopoliticaldevelopments would continue to govern their attitude towards investing inJordan, in the short term at least. Given this, it is not surprising that foreigndirect investment has remained low over the past two years, averaging onlyaround US$80m a year in 2001-02, compared with US$330m in 1997-98.

Economic performance

The economic crisis of the late 1980s threatened the Jordanian economy withan extended period of turmoil and recession. In 1989 the economy contractedby a massive 13.5% in real terms according to IMF figures, but then picked up togrow by 1% in 1990 and a further 1.8% in 1991, even as the Gulf crisis turnedinto war. Once the fighting was over, economic growth accelerated, climbing to

Boom in the early 1990s

Investing in Jordan

Jordan 31


almost 19% in 1992 and averaging 5.3% over the next three years. The mainreason for the high growth in 1992-95 was the arrival of around300,000 Jordanians expelled from Kuwait. The majority were able to liquidatetheir assets and repatriate them to Jordan, where they were swiftly channelledinto property, construction and new businesses.

Gross domestic producta

(1994 prices)

Annual average2003 a 1999-2003

% change 3.3 4.0

a Official preliminary estimate.

Source: Ministry of Finance, Government Finance Bulletin.

The injection of capital transformed the construction sector. Between 1986 and1990 cumulative output in the sector grew by just 16% in real terms, but thisaccelerated to 10.5% in 1991, 55.4% in 1992 and 25.6% in 1993. Although theconstruction boom eased in 1994, it still helped to push economic growth to 5%(at factor cost). The arrival of the Kuwait returnees also raised demand forservices, particularly finance and retail, with output rising by 35% in 1992-94. Inaddition, the 50% devaluation of the dinar between 1988 and 1991 made Jordana more competitive site for export-oriented production aimed at regionalmarkets, while the recession greatly reduced domestic business costs. However,by 1996 the returnee-led boom had largely run its course and hopesengendered by the peace agreements of 1993 and 1994 had dissipated.Sentiment quickly turned negative and investment was adversely affected.

Jordan’s economy remains extremely vulnerable to external shocks. This washighlighted in a number of ways during the 1990s. The imposition of sanctionson Iraq in 1990 severely constricted bilateral trade; previously, Iraq had beenJordan’s main trade partner. Jordan’s perceived support for Iraq during the Gulfconflict also compromised diplomatic relations with Saudi Arabia and the Gulfstates, dampening demand for Jordanian products and labour. Even asdiplomatic ties began to recover, Gulf demand was further undermined by thecollapse in oil prices in the late 1990s.

Rapid growth in the early 1990s was not accompanied by a large increase inwage levels, in either the public or the private sectors, helping to keep inflationlow. Civil service salaries were frozen in the late 1980s. Their real value fellsteadily throughout the 1990s until the 1996 budget, when they were raised byan average of 6%. A 10% increase was allowed in 1998. From the late 1980s realwage levels in the private sector actually fell. Although there is anecdotal evi-dence to suggest that they have risen in some sectors over recent years, highunemployment and the presence of growing numbers of foreign workers havehelped to keep wage demands in check. With the boom in the early 1990sdriven predominantly by new private investment, few of the price strainsusually associated with such high levels of growth were experienced. Tightmonetary policy has also kept a lid on inflation.

Low inflation

32 Jordan


InflationAnnual average

2003 1999-2003% 2.3 1.4

Source: Central Bank of Jordan, Monthly Statistical Bulletin.

Jordan’s economy slowed substantially in the second half of the 1990s. From6.2% in 1995, real GDP growth declined to 2.1% in 1996, 3.1% in 1997, 2.9% in 1998and 3.1% in 1999, according to revised official figures.

Faced with slow growth, an expanding budget deficit and unmanageable debt-repayment obligations, Jordan was obliged to turn to the IMF and World Bankonce again. Political considerations and US support ensure that the countrycontinues to receive a largely sympathetic response from the internationalcommunity. In late 1998 it received a loan commitment of around US$265m for1999 from the World Bank. Of this, some US$150m was used for structuraladjustment support, while three important sectors—water, education andhealth—were allotted a total of US$138m. In April 1999 Jordan finalised a newIMF agreement that brought it loans of SDR161.98m to support economicadjustment and structural reform in 1999-2001. In June 1999 the Paris Club ofinternational creditors rescheduled US$800m in debt-service payments. Theagreement covered payment due between March 1999 and April 2002.

The IMF said in May 2002 that Jordan had made exemplary progress inadhering to the three-year extended fund facility programme. In July the Fundsigned a new two-year US$113m stand-by credit programme that led to furtherdebt relief through the Paris Club.

By 2000 the economy began to show signs of recovery. Certain dynamicsectors, such as IT and the QIZs, were showing strong growth, and recovery intraditional export markets—for example, Iraq and the Gulf—was gainingmomentum. However, the economy’s continuing vulnerability to geopoliticswas again highlighted in the final months of the year, following the onset of thesecond Palestinian intifada (uprising) in September, which affected both tourismand investor confidence (although real growth still accelerated to 4% for theyear as a whole). The global economic slowdown and poor perceptions of theMiddle East following the September 11th 2001 attacks on the US had a furtherharmful impact on tourism and foreign investment. Nevertheless, an excep-tionally strong export performance—responding to strong US demand—helpedthe economy record 4.6% real growth in 2001, according to official figures. Realexports continued to show strong growth in 2002 and, according to thegovernment, real GDP growth reached 4.9%. However, this figure should betreated with some caution since, despite the strong export performance, theeconomy remained weighed down by flat domestic demand as a result of highunemployment and growing political concerns. Moreover, Jordan’s GDP hasbeen badly overestimated in the past, and some official figures have had to berevised downwards.

Economic performance in 2003 was badly affected by the Iraq war. A full-yearbreakdown was not available by April 2004, but it was clear that growth didnot reach much above 3% in real terms. The Iraq war meant the temporary

Back to the IMF

Signs of recovery

Jordan 33


"disappearance" of one of Jordan's most important trade partners, while theimportant tourism sector was also badly affected. Nevertheless, it is also clearthat the economy rebounded quite quickly following the end of officialhostilities in Iraq and real growth of over 5% is well within reach for 2004.

Regional trends

Geographically, the Jordanian economy has always been dominated by Ammanand its environs. Government activity, commerce, services and much of man-ufacturing are located in the capital and its immediate hinterland, including thetown of Zarqa, about 20 km to the north-east. Elsewhere, economic activity iseither modest or specifically oriented. The town of Ma’an, for example, about140 km to the south of Amman, is a major transport centre. The city of Mafraqin the north-east of the country is trying to develop as a manufacturing andcommercial farming centre. Concern about the sociopolitical consequences ofcentralisation has led successive governments to encourage investors andbusinessmen to look beyond Amman. Generous incentives have been offeredand the establishment of industrial estates in most regional centres shouldencourage the process.

Aqaba special economic zone

Aqaba has always been an exception to the general focus on Amman, with a busyport co-existing with industry and tourism. The pace of development in the southenjoyed a significant boost with the creation of the Aqaba special economiczone (SEZ), which came into operation on January 1st 2001. All of Aqaba’s admin-istrative bodies have been brought under a unified authority, whose job it is to createone of the most attractive investment environments in the region. Investors in theSEZ enjoy duty-free privileges, low taxes, 100% ownership, ease of land purchase orleasing, and streamlined procedures. The government hopes to see US$6bn ininvestment and the creation of 70,000 jobs in the SEZ over the next 20 years.In January 2003 the Aqaba qualifying industrial zone was officially launched as partof the Aqaba International Industrial Estate, within the framework of the SEZ. Itmarked the US$22m first phase of the new estate and covers 57 ha of a planned275-ha project owned by the Jordan Industrial Estates Corporation. The US Agencyfor International Development financed the first phase. Although the inaugurationwas overshadowed by the growing tensions over Iraq, Jordanian officials said thatseveral investors had signed up to set up businesses in the zone, and interest frombusinesses based in Dubai was particularly strong. Development of a number ofphosphate and potash-related downstream plants, with an accompanying upgradingof railway and port facilities, is already under way in southern Jordan. Thegovernment is looking to the SEZ to add light industry and logistical services to theseestablished industries, as well as other location-based services such as professionalservices in information technology and aircraft engine overhaul. Medical andretirement services may also be developed. The government estimates that 50% ofnew activity in the zone will come from tourism, 30% from services, 13% from heavyindustry and the remaining 7% from light industry.Congestion at Aqaba Port continued to be a major problem, however. The king,Abdullah ibn Hussein al-Hashemi, visited the terminal in mid-January and gave the

Amman dominates theeconomy

34 Jordan


port authorities three months to sort out the problems with the container terminal.The government has been forced to extend the period allowed for imports to comein through other regional ports. Surcharges of US$450 on 20-ft containers andUS$950 on 40-ft containers imposed by international shipping companies for freightheading to and from Aqaba have made importing through regional ports cheaper.The Aqaba Special Economic Zone Authority has invited offers for the privatemanagement of the container port, but it will take time for the successful bidderto have any impact. The chosen firm will be responsible for improving efficiencyat the port and computerising its work. The government will retain ownership ofall facilities.

Economic sectors

Agriculture

Consecutive years of drought from 1998-2001 have highlighted the vulnerabilityof much of Jordan’s agriculture, although good rains in 2002/03 an 2003/04have lifted the immediate danger and replenished dry aquifers. The sector isdivided into two areas, the rain-fed uplands, which produce mainly cereals, andthe capital-intensive, high-yield irrigated farms in the Jordan Valley, whichproduce fruit and vegetables. Although the uplands have been the focus ofnumerous donor-supported projects for many years, the impact on yields hasbeen small. The uplands area is heavily dependent on seasonal rainfall; droughtyears reduce yields sharply and leave small growers reliant on food aid. Wheatis the main crop, with barley and some lentils and chickpeas also grown.Produce is consumed domestically, but does not come anywhere near satisfyinggrowing demand. Although demand for wheat has soared to about 650,000tonnes annually, average annual production has ranged from 30,000-70,000tonnes, and during the severe drought of 1999/2000 was a mere 9,000 tonnes.

In production terms, the Jordan Valley presents quite a different picture.Exploitation of the land began only recently, with few farms dating backbeyond the 1960s. Although the government originally distributed land tocreate modest family-run farms, influential families were later able to mani-pulate the system to gain larger areas, which they have developed forcommercial farming through irrigation provided by the state and by employinglow-paid, usually Egyptian, migrant workers. The staple produce of the JordanValley is tomatoes, cucumbers, citrus fruit and bananas. Melons, aubergines,cauliflowers, cabbages and grapes are also widely grown.

Olive oil industry in trouble

Jordanians have been growing olives for thousands of years and olive oil is thepreferred cooking oil for most Jordanians. However, the domestic market is smalland export markets have not been easy to find. In early 2004, the Ministry ofAgriculture, Water and Irrigation was looking at the possibility of halting newplanting of olive trees for ten years following growers’ difficulties in finding newmarkets. Jordan has experienced a boom in planting over the past ten years,although production continues to vary widely in line with seasonal rainfall. Latestavailable ministry statistics show production for the 2000/01 season at 59,700

Jordan 35


tonnes compared with 134,300 tonnes in 1999/2000, 38,300 tonnes in 1998/99 and137,500 tonnes in 1997/98. The 2001/02 season produced a much better crop andprices were depressed as farmers struggled to find adequate markets. In January2003 producers formed the Jordan Oil Company in a bid to find markets abroad, butit has had little success so far.

Winter produce is shipped to the Gulf, where it sells at a premium. Somegrowers have attempted to break into the European market, but poor packagingand quality control, high transport costs and limited marketing skills haveundermined their efforts in this highly competitive market. Specialist institutionssuch as the Agricultural Credit Corporation and the Jordan Co-operativeOrganisation have been established to extend loans to small farmers in both theuplands and the Jordan Valley, with mixed results. Both institutions have a poorrepayment rate and have constantly been forced to reschedule loans.

In May 2003 farmers were granted permission by the Jordan Valley Authorityto plant summer crops after a two-year ban. Traditional summer crops such aspeppers, aubergines and courgettes require substantial supplies of water. In thedrought years of 2000 and 2001 the government leased land from JordanValley farmers and left it fallow.

Production of main crops, 2003(‘000 tonnes)

Tomatoes 360Cucumbers 120

Olives 85Citrus fruit 128

Wheat 35Grapes 36Bananas 42

Barley 46

Source: UN Food and Agriculture Organisation (FAO).

Jordan meets only around 30% of domestic demand for red meat from localsources, owing to a shortage of pastoral land, the high cost of imported feed-stuffs and the attraction of high prices for meat exported to Saudi Arabia. Littlesuccess has been achieved in building up either sheep or cattle numbers, andhigh costs have made local production more expensive than imported freshand frozen meat, although Jordanian consumers often have been willing to paya premium for local meat. The lifting of subsidies on water and fodder as partof the government’s structural adjustment programme has also driven an esti-mated 30% of breeders, mainly those with less than 50 head of sheep, out ofbusiness over the past 2-3 years. Meanwhile, the dairy industry has expandedand now provides for all local needs except for powdered milk. The majorsuccess in livestock has been poultry and egg production, in which the countryis now self-sufficient, although insufficient slaughterhouse and refrigerationfacilities can lead to some interruptions in supply.

Meat and livestock

36 Jordan


Livestock production, 2003('000 tonnes)

Meat 123 Poultry 114Milk 251

Eggs 34

Source: UN FAO.

Mining and semi-processing

Jordan’s largest industry is the mining and processing of phosphates andpotash. Phosphate mining, which is controlled by a joint-stock monopoly, theJordan Phosphate Mines Company (JPMC), is now concentrated in the south-east of the country at Shidiyeh, near the Saudi Arabian border, where reservesof at least 700m tonnes have been confirmed. With production in 2003 ataround 6.7m tonnes, Jordan is the world’s third largest supplier of raw phos-phates. JPMC has also achieved some success in developing downstreamactivities. It now has two joint ventures for the production of fertilisers withJapanese and Indian interests. In December 2000 plans for further diversif-ication received a serious blow when Norway’s Norsk Hydro pulled out of aUS$500m-600m fertiliser venture, which would have been Jordan’s largest everindustrial project.

The decision has left JPMC with no new downstream projects in prospect. Thecompany continues to face difficulties with the transport of phosphate toAqaba, both for export and for use in its fertiliser complex. JPMC is nowworking with the Aqaba Railways Corporation (ARC) on the construction of a22.5-km railway connection between the Shidiyeh mine and the ARC’s mainrailway line to Aqaba. JPMC said in late 2003 that the US$28m extension willsave the company an estimated US$2.8m annually in trucking costs.

After a faltering start in the 1980s, the Arab Potash Company (APC), anothermajority government-owned firm, has grown steadily, boosting its basic potashproduction and expanding its downstream activities. Both as APC and througha holding company, the Jordan Dead Sea Industries Company, the firm isdeveloping a number of fertiliser and chemicals projects. It produced 2m tonnesin 2003. Production prospects for 2004 have been boosted by the inaugurationof the Kemira Arab Potash Company, an APC subsidiary, in October 2003. Theplant has a production capacity of 150,000 tonnes of potassium nitrate and75,000 tonnes of dicalcium phosphate animal feed and is a 50-50 joint venturebetween APC and a Finnish company, Kemira GrowHow.

The government's majority holding in JPMC has had an adverse effect on itsmanagement and profitability. JPMC posted large losses in 1999 and 2000,although it has managed modest profits more recently (an estimated US$14m in2003). Its poor results were in part owing to market factors, but were largely aresult of government demands for high mining fees and other taxes, as well asserious overstaffing. The government intends to reduce its holdings in JPMCand had pinned its hopes on Canada’s Potash Corporation of Saskatchewan

Phosphates are a magnet forforeign investment

Jordan 37


(PCS). However, the Canadian firm grew cool about the idea and switched itsattention to APC, in which it bought a 26% stake in 2003.

Manufacturing

Although the sector has grown in recent years, historically, Jordan has notpossessed a substantial industrial base, for a variety of reasons. Its domesticmarket is limited by low purchasing power, and neither the domestic invest-ment climate nor the regional political situation have been conducive to long-term risk. Private investors have mainly engaged in light industrial activity, suchas food-processing, textiles, consumer goods and construction materials. Muchof the private industry that has taken root did so on the back of surgingdemand from Iraq in the late 1970s. When Iraq was placed under an embargoafter its 1990 invasion of Kuwait, Jordanian businesses came under strongfinancial pressure. This eased slightly after the UN agreed to a number of “oil-for-food” deals with Baghdad. Local industry has also suffered from com-petition from cheap imports, following the progressive reduction of importduties as part of government restructuring efforts. Heavy industries such asphosphates and cement continue to provide the backbone of the man-ufacturing economy.

Pharmaceuticals are one of the success stories of Jordanian industry, earning anestimated US$184m in export revenue in 2003. The major heavy industries,such as cement, oil refining and fertilisers, were originally the product ofgovernment initiatives, although private investors were strongly encouraged toparticipate in their establishment. To boost industrial development, the govern-ment has offered incentives for local industry, including the establishment ofindustrial estates and free-trade zones. It has also offered tax breaks toindustries willing to locate outside the Amman-Zarqa corridor, where mostindustry is currently situated. The major industrial zone at Sahab outsideAmman has been generally successful and Irbid and Kerak also have estates.

Output of main manufactures, 2003('000 tonnes unless otherwise indicated)

Petroleum products 3,695

Cement 3,514Clinker 3,170

Fertilisers 634Potash 1,961Phosphate 6,762

Chemical acids 1,499Industrial production indexa (1994=100) 137

a Includes minerals and electricity.


Jordanian industry has enjoyed some fruits from the 1994 peace treaty withIsrael, but progress has been hampered by the reluctance of much of the localbusiness community to deal with Israeli partners. However, US-promotedqualifying industrial zones (QIZs) have now emerged as a significant motor forJordan’s light industrial production and exports. Companies eligible for QIZstatus are required to have a minimum of 35% value-added within the zone, of

New emphasis on the QIZs

38 Jordan


which 8% must be Israeli input. This allows their products duty-free and quota-free access to the US market. Exports from the QIZ's reached JD414m (US$584m)in 2003, up from JD270m in 2002. The Hassan industrial estate at Irbid innorthern Jordan, strategically located close to the Israeli border and with easyaccess to the port of Haifa, was the first to be nominated as a QIZ. Other zonesinclude the Tajamouat industrial estate in Amman, the Ad Dulayl industrialpark in Zarqa and the Kerak industrial zone. All QIZs have attracted stronginvestor interest, particularly from East Asian manufacturers facing quotarestrictions in the US.

As well as helping to cement economic relations between Israel and Jordan, itwas hoped that the QIZs would generate a large number of jobs for Jordanians.However, as there is no minimum percentage of local labour required for theQIZs, much has been sourced from East Asia. According to the Ministry ofIndustry, Trade and Investment, 44% of the 28,639 workers employed in theQIZs at the end of 2003 were non-locals.

Construction

Rapid population growth and the oil boom of the 1970s have made con-struction a profitable sector for much of the past 25 years. Over this periodJordan’s major towns have grown rapidly, with Amman in particular acquiringsprawling suburbs. Owing both to their large size and the funding policies ofdonor agencies, foreign companies have continued to take the lion’s share ofmajor projects in the sector. Local companies have largely been able to shareonly in smaller-scale construction, including residential, schools, water andminor roads, or have worked as subcontractors on larger projects. Jordan hasalmost 1,000 registered contracting companies, but most are small and family-owned, and even during the boom years have not been able to expand beyondthe control of their founders. All companies use Jordanian architects andengineers, but Egyptians and Syrians make up the bulk of labourers onconstruction sites, large or small.

After almost 15 years of growth up to the mid-1980s, activity in the constructionsector became much more volatile. Activity first tailed off in the mid- to late1980s, just before the economic collapse of 1988-89. Construction led the wayout of the slump in the early 1990s, when many Jordanians returning fromKuwait invested heavily in residential, business and light industrial develop-ment. In the mid-1990s the sector declined once more, however, and did notstart to pick up again until 2001, when activity expanded by about 15%, largelyowing to an increase in house building. The growth of industrial estates andurban regeneration (for example in Zarqa) has brought new opportunities.

Financial services

Jordan has a moderately well-developed financial services sector. It is currentlyserved by nine local commercial banks, two Islamic banks, five investmentbanks and five foreign banks. Lebanon's Banque Audi will be joining otherforeign banks in opening up in Jordan in 2004, bringing to three the number of

Volatile performance

Commercial banks

Jordan 39


new banks in the market for the year so far. National Bank of Kuwait andLebanon's Banque du Liban et d'Outre Mer also have licences. The arrival ofthree strong regional banks has been widely welcomed. They are expected tobring in new services, sophisticated technology and generally help to push upstandards within the sector.

Despite the increasing importance of foreign banks, Arab Bank, with about 60%of all assets, dominates the sector. This dominance was increased in early 2003when it took over the operations of the troubled Jordan Gulf Bank. Arab Bankis followed by the Housing Bank, which has raised its capital to JD100m(US$141m) and has been making strenuous efforts to become a real competitorto the Arab Bank. The Central Bank of Jordan (CBJ) has offered incentives toencourage smaller institutions to merge, but has not been particularly successfulin this, as Jordanian banks have a strong tradition of family ownership andowners are reluctant to cede control to larger institutions. Over the years,activity has been constrained by the conservatism of the banks, which havetended to prefer the short-term risks of trade finance and property developmentto longer-term industrial ventures. When economic growth started to fall in1996, banks concentrated on expanding their retail services. The moresophisticated banks have moved into electronic services.

Nevertheless, commercial banks have been slow to reduce lending rates, whichhas restricted lending to the private sector. Although commercial banks haveseen their cost of capital massively reduced (the CBJ reduced its base rate from4.5% in January 2003 to 2.5% in December), lending rates have not been loweredat anything like the same rate. The weighted average on loans and advances fellonly marginally during the course of 2003 to 8.92% from 9.42%, whereas theaverage rate on overdrafts actually increased. With such a comfortable (andexpanding) profit margin it is little wonder that lending to the private sectorexpanded by only 3.5% during the year. Lending to the private sector is alsobeginning to be squeezed out by the far safer option of buying governmentdebt. Commercial bank lending to the central government increased by 7.5%during the year as the government's financial position deteriorated.

There are five long-established specialised credit institutions dealing with ag-ricultural credit, housing, rural and urban development and industry. Thesehave been joined by the Jordan Loan Guarantee Corporation, which providesguarantees to cover bank loans in support of small and medium-sized localindustries, and the Jordan Secondary Mortgage Refinance Company, which wasestablished in 1996 to refinance medium- and long-term housing loansextended by the banks. Jordan also has 76 authorised money-changers, whoplay an important role in private transfers from expatriate Jordanian workersand foreign workers in Jordan.

The banking system is regulated by the Central Bank. Its supervision hasgenerally been adequate, with attention focused on bank lending policies andprovisioning. However, banking scandals have occurred, and a large bank, PetraBank, collapsed in the 1980s as a result of fraud. A new banking law passed in2000 strengthened supervision and clarified procedures for the licensing ofnew banks. An associated law cleared the way for the establishment of a

Specialised institutions

40 Jordan


depositors’ insurance company. Flaws in the supervision were exposed when amajor banking fraud came to light in January 2002. A local businessman fledthe country, leaving as much as US$100m in outstanding bank loans, afterbeing accused of falsifying contracts with government departments to gaincredit. The case was quickly handed to the State Security Court for invest-igation. In the wake of the scandal, the Central Bank ordered the three banksinvolved—Jordan Gulf Bank, Jordan Investment and Finance Bank, and JordanNational Bank—to raise their capital.

In early 2004, the CBJ launched a three-pronged programme to upgradegovernance and supervision. The new approach has three main elements:bank-related aggregates such as deposits/credits and capital adequacy; client-related elements such as credit assessment and concentration of lending; and athird element to cover money laundering.

The Amman Stock Exchange (ASE) boomed in 2003, reaching record levels ofactivity for the year and confounding expectations that the Iraq war wouldkeep many investors out. Trading volume was up by 95.5% to JD1.9bn(US$2.7bn), the share price index rose by 53.8% to 261.5 points (after hitting apeak of 262.6 points on December 23rd), and market capitalisation was up by54.71% to JD7.7bn. Foreign investment in the market stood at 38.8% at the endof the year, up from 37.4% in 2002, and net foreign investment for the year wasJD81.8m compared with just JD900,000 (US$1.27m) in 2002. The biggestindividual increase in foreign ownership came from the PCS purchase of a26% stake in the Arab Potash Company and the acquisition of a 5% stake inArab Bank by the Saudi Arabian-registered but Lebanese-owned company,Saudi Oger.

Other services

The potential of tourism has only recently begun to be exploited in Jordan. Thecountry is rich in antiquities, ranging from the Stone Age, Greek, Nabataeanand Roman periods, to the Islamic and Crusader conquests. It also has astunning geography, covering the Red Sea to the desert, the lush Jordan Valleyand the Mediterranean-like uplands. However, the tourism industry hastraditionally been too fragmented and parochial to develop fully, and regionalpolitical instability has been a serious hindrance to growth. The 1994 peacetreaty with Israel was expected to transform the industry. Initially, peace didhave a positive impact, with large numbers of Israeli tourists visiting thecountry (Petra was the most popular destination). However, plans for jointdevelopment projects with the Israeli sector have come to little, because ofdifficulties associated with the peace process.

Tourism from Saudi Arabia and the Arab countries of the Gulf suffered after the1991 Gulf war, but there has since been rapid growth in this area. Improvedrelations with its neighbours have encouraged the return of Arab visitors toJordan, who by 1999 accounted for over 50% of total tourist arrivals in thecountry. Arab tourists are generally good spenders and have the advantage ofpreferring the otherwise slow summer months. European and US touristnumbers have improved over the years and in 1999 showed healthy growth,

Tourism

Stockmarket booms

Jordan 41


which continued up to September 2000. Jordan then had a sharp reminder ofhow vulnerable the industry can be to regional political influences, as tourists,many of them booked for Holy Land tours that also included the PalestinianTerritories and Israel, cancelled their bookings in reaction to the upsurge ofviolence in the West Bank and Gaza.

The industry received a second blow with the global slump in tourism thatfollowed the September 11th 2001 attacks on the US, and earnings in that yearamounted to only US$700m. There was a modest rebound in 2002 to aroundUS$785m. Despite the Iraq war, receipts actually increased to US$814m in 2003.The sector was supported by an upturn in visitors from Saudi Arabia and Iraq,with the latter showing a sharp increase in the wake of the war. Surprisinglyperhaps, arrivals from the US increased markedly, although this is probablyexplained by the influx of military and military-related personnel prior to andduring the war, and an increase in business visitors eager to gain access to theIraqi market from the middle of the year onwards.

The external sector

Trade in goods

With its narrow industrial base and dearth of raw materials, Jordan hashistorically suffered from chronic deficits on trade in goods. The situation hasbeen exacerbated by persistently large food import bills, which have continuedto grow with the expansion of the population, and by volatile oil import bills.Since the late 1980s successive governments have sought to contain importsand stimulate exports. The strategy has met with some success, partly becauseof the devaluation of the dinar between 1988 and 1991, which made Jordanianexports more attractive and raised the cost of imports. After the 1991 Gulf warexport earnings grew by an average of 11% per year over 1991-95, with certainindustries, notably pharmaceuticals, detergents and textiles, benefiting fromstronger regional demand. Phosphates, fertiliser and potash exports allexpanded steadily until 1996, but potash and fertiliser exports then fell in 1997,owing to a combination of technical factors and the decline in the Asianeconomies. They recovered in 1998, and the long-term prospects for mineralsexports are good.

Total export earnings levelled off in 1996, and it was not until 2001 thatearnings resumed significant growth, reaching US$2.3bn, from US$1.9bn in2000—a remarkable 21% increase. The surge was fuelled by a sharp rise indemand from the US, particularly for clothing, despite the overall downturn inthe economy there. There were more modest contributions from the Indian,Saudi Arabian and Iraqi markets. Export earnings showed almost equallyimpressive growth in 2002, reaching US$2.74bn, a 20% increase, with clothing—and the US market—leading the way. More moderate but still healthy expansionof 8% was registered in 2003. Again, clothing was the main engine of growth.

The import bill remains disproportionately high, about 75% higher than exportearnings. Despite efforts to restrain demand, imports have tended to grow wellin excess of government targets. In 1996 the trade deficit reached levels not seen

Persistent trade deficits

42 Jordan


since the early 1980s, although it declined over the following three years as aresult of a fall in import spending. In the early 1990s the surge in imports waslinked more to growth in domestic investments than to consumer demand,with purchases of capital goods and, to a lesser extent, spare parts and rawmaterials growing rapidly. In 1994-96, however, consumer imports began to rise,jumping by a massive 21% between 1995 and 1996, before tailing off in 1997-99.Overall import spending surged in 2000, to US$4.6bn (cif) from US$3.7bn in1999. A further increase to US$4.9bn was registered in 2001 and to just belowUS$5bn in 2002. The 2000 rise was attributable both to higher UN compen-sation payments to Jordan arising from Iraq’s 1990 invasion of Kuwait, whichboosted consumer demand, and to a sharp rise in the cost of Iraqi oil; the 2001increase was largely a result of a sharp rise in the prices of manufactured goodsand a further increase in Iraqi oil prices (Iraq’s annual oil trade agreements withJordan were based on the prevailing oil price of the past 12 months.)

External trade, 2003(US$ m)

Merchandise exports (fob) 2,999 Domestic exports (fob) 2,312 Clothes 674 Potash 204 Pharmaceuticals 185 Manufactured goods 173 Vegetables 140 Phosphates 128 Fertilisers 103 Re-exports 687

Merchandise imports (cif) 5,579 Machinery & transport equipment 1,297 Manufactured goods 1,104 Food & live animals 790 Crude oil 672Trade balance -2,580


Oil import costs rose by a further 18% in 2003 as the agreement with Iraqcollapsed and global prices remained high. Manufactured goods, particularlyyarn for clothing exports, also showed strong growth and this helped push theoverall import bill up to US$5.6bn.

The pattern of Jordan’s exports has been affected mainly by political factors.Since 2001 the US has become a major market for Jordanian goods, jostlingwith Iraq for the number one spot. Domestic exports (that is, excluding re-exports, for which there is no geographical breakdown) to the US more thantrebled in 2001 to reach US$231m, displacing India. In 2002 they surged again toreach US$413m. A further increase saw exports to the US reach US$660m in2003. The main reason for the rise has been the substantial investment directedinto the qualifying industrial zone (QIZ) projects. Jordan also stands to gainlonger-term benefits from its free-trade agreement (FTA) with the US, whichwill see all tariffs eliminated over a ten-year period.

Direction of trade

Jordan 43


The Iraqi market was worth around half of the US market in 2003, losingalmost 30% owing to the war. However, there are two caveats here. First, muchof the re-export trade is likely to involve Iraq, and second, much Jordanian-Iraqitrade probably goes unrecorded (this was certainly the case during the era ofsanctions). The Iraqi market is likely to become more competitive with theremoval of sanctions, following the collapse of the Baathist regime, but Jordan’sgeographical proximity suggests it will continue to benefit—its “gateway” statusfor European and US imports also promises significant services earnings. Exportrevenue from the Iraqi market accelerated rapidly in the wake of the Iraq war,reaching US$52m in December 2003 from only US$12m in May. India, alongwith China and Indonesia, continues to be a major buyer of Jordanianphosphates, potash and fertilisers. However, exports to India have slipped inrecent years as it has developed its own phosphates. The Saudi market remainsimportant, with pharmaceuticals performing particularly well in recent years.

The main suppliers of Jordan’s imports are now Kuwait (for oil), EU countries(primarily Germany, France and the UK) and the US. These countries meetJordan’s needs for capital goods. Japan, South Korea, Turkey and China areimportant sources of consumer goods. Purchases from countries in Asia andAustralasia have grown in recent years, following the devaluation of theircurrencies in late 1997. Meanwhile, Saudi Arabia has emerged as a supplier ofprocessed foods and consumer goods.

Jordan’s Association Accord with the EU came into force on January 1st 1999,paving the way for a full FTA in the following 12 years. Under the agreement,Jordan has committed itself to a progressive reduction in all customs fees,duties and taxes on EU products, although industrial goods will not be affecteduntil the end of the transitional period. The agreement eases the way forJordanian goods into the EU market, although both local and Europeancompanies have been slow to take advantage of this opportunity. Jordan wasaccepted as a member of the World Trade Organisation (WTO) in December1999 (joining in January 2000), and signed an FTA with the European Free-Trade Association in 2001.

Jordan has a number of bilateral trade agreements with other Arab states andhas enthusiastically embraced moves towards the development of an Arab free-trade area. It has signed an agreement with Saudi Arabia for the progressiveestablishment of a free-trade zone by 2005, as well as an FTA with Kuwait in2001. It is working on similar arrangements with Syria and Egypt. The countryalso has bilateral agreements with Iraq, Lebanon, Morocco, Yemen and thePalestinian Authority (PA), although the latter is subject to agreement withIsrael on a list of products that Jordan may export to the PA areas. Jordan hasalso been building ties with Iran—a deal in 1997 resulted in an Iraniancommitment to buy Jordanian potash. Implementation of these agreementsdepends on political as much as economic factors.

Jordan-US free-trade agreement (FTA)

An FTA between the US and Jordan came into effect on December 17th 2001. Jordanjoined Canada, Mexico and Israel as only the fourth country to benefit from such anagreement. The FTA underscores the political importance that the US attaches to

44 Jordan


Jordan—as a pro-Western state in a volatile region—and also represents a substantialvote of confidence in the reforms that Jordan has made to its trade and investmentclimate over the past ten years. Trade between the two countries has risen sharply inrecent years, reaching over US$1bn in 2003 from US$372m in 1998 (when Jordanianexports contributed only US$8m). The increase in trade has been fuelled by theexpansion of Jordan’s qualifying industrial zones (QIZs), goods from which areallowed duty-free access to the US, provided that 8% of the value-added is producedin Israel. The FTA will eventually render the QIZs obsolete, although not for a numberof years yet, as clothing and textiles—the main output of the QIZs—generally have thehighest tariffs and tend to be dealt with last in bilateral negotiations of this type.

Invisibles and the current account

Although Jordan’s external account suffers from a large trade deficit, a structuralsurplus on the invisibles and current transfers balances has generally helped tokeep the current account in surplus, at least in recent years. After brieflyregistering a surplus in 1989, the current account moved heavily into deficit,particularly in 1992 and 1993, when it recorded deficits equivalent to 15.7% and11.2% of GDP respectively. The deficit gradually shrank, turning into a smallsurplus of US$29m in 1997 and US$14m in 1998. A substantial surplus ofUS$405m was recorded in 1999 as import spending was squeezed, although in2000 the surplus fell back to US$59m (0.7% of GDP, according to official figures).The current account recorded a deficit of US$4.1m in 2001, before reboundingstrongly to reach US$468m in 2002, equivalent to almost 5% of GDP. Asubstantial increase in US aid during 2003 (to protect the country from theimpact of the Iraq war) saw current transfers surge. This helped push thecurrent-account surplus up to an estimated US$1.1bn, equivalent to 11% of theEconomist Intelligence Unit's estimate of GDP.

Despite the importance of US aid in 2003, the dominant element in the currentaccount, apart from the trade deficit, has always been workers’ remittances,which in 2003 reached a record US$2.3bn. Demand for Jordanian labour inSaudi Arabia and other Arab countries in the Gulf is influenced to some degreeby the level of oil income in these states, but, with most Jordanian labour inthe Gulf being professional (school teachers and accountants, for example, whotend to have contracts), the correlation between oil income and remittances isnot always direct. Politics has an equal, if not greater, importance indetermining demand. Jordan paid a heavy price for its support of Iraq in theearly 1990s, with many of its workers expelled from Kuwait in the aftermath ofthe 1990-91 Gulf conflict. This saw remittance inflows fall to a mere US$450min 1991, from almost US$900m in 1988. Remittances gradually recovered duringthe course of the 1990s, as Jordan strove to rebuild its diplomatic ties withKuwait and other Gulf states. The more measured stance taken by the king,Abdullah ibn Hussein al-Hashemi, with regard to the 2003 war on Iraq meantthat the status of Jordanian workers in the Gulf was not seriously affected.

In addition to remittances, official transfers have historically supported thecurrent account, although again they have been subject to the vagaries ofpolitical developments. Jordan benefited from massive transfers from oil-richGulf countries from 1979, ostensibly to bolster the country as a “frontline” state

Workers’ remittances

Jordan 45


against Israel. However, these transfers tailed off in the mid-1980s as the Gulffaced a downturn in oil prices. Although contributions picked up briefly afterthe riots in Jordan in 1989, they were cut off completely when King Husseinopposed the use of force against Iraq in 1990-91. Jordan faced alarmingfinancing gaps in 1991 and 1992, which were only bridged by assistance fromJapan and the EU. The peace treaty with Israel in 1994 has more or lessguaranteed a minimum flow of assistance from Japan, the US and a range ofmultilateral and bilateral donors, including the EU. In 1994 net inwardgovernment transfers stood at almost US$324m. They grew to aroundUS$400m in 1997, declined to US$358m in 1998 and rose slightly to US$390m in1999. Transfers remained steady in 2000-02, but surged to an estimatedUS$1.3bn in 2003 in line with the pick-up in US aid.

Tourism is another significant positive contributor to the current account, but isalso highly vulnerable to political factors. "Travel receipts", as the Central Bankof Jordan (CBJ) calls them, increased steadily from US$563m in 1993 to US$795min 1999, before falling to US$723m in 2000 as the impact of the secondPalestinian intifada (uprising) was felt on tourist arrivals from the US and theEU. Although receipts dipped to US$700m in 2001, this was not as bad asoriginally feared (given the impact of the September 11th attacks on the US) anda strong marketing effort among potential Gulf visitors saw receipts recover toUS$786m in 2002 and, despite the US invasion of Iraq, to US$815m in 2003.Receipts from air freight likewise rose during the 1990s, matching the rise inearnings from the export of goods. The income deficit has narrowed in recentyears, even recording surpluses in 2000-02 as Jordan has continued to build upits foreign assets. Jordan is also likely to have recorded a surplus in 2003.

Current account, 2002(US$ m)

Goods: exports fob 2,770Goods: imports fob -4,450

Trade balance -1,680Services balance -223

Income balance 111Current transfers balance 2,260

Current-account balance 468

Source: IMF, International Financial Statistics.

Capital flows and foreign debt

In the mid- to late 1980s the Jordanian government regularly resorted to theEurodollar capital market to raise funds to cover its budget deficits, as othersources of revenue, namely transfers from the Arab oil-producing states, tailedoff. However, the country’s debt situation then began to deteriorate rapidly,mainly because of a lack of transparency in the use of funds. Large public-sector companies, such as the national airline, Royal Jordanian, started toborrow to cover their own debts, but this did not appear as part of thegovernment’s financing gap. The military, too, began to develop substantialexternal debt, independent of government spending. It was Jordan’s inability toservice this debt that brought on the crisis of 1989.

46 Jordan


After the IMF stepped in, negotiations were opened with both the Paris andLondon Clubs to reschedule Jordan’s debt. At its peak in 1991, Jordan owedsome US$1.26bn in debt service, equivalent to 41% of exports, according to theWorld Bank. The government was able to reduce its London Club debt withsome judicious buybacks, which took advantage of heavily discounted rates onits debt. In December 1992 an agreement was reached with the London Club,based on the so-called Brady Plan formula (whereby some developingcountries’ debt was converted into bonds). In 1994 Jordan convinced the ParisClub to replace a year-by-year understanding with a three-year accord. Jordanagreed both to a new Extended Fund Facility (EFF) and a Compensatory andContingency Financing Facility (CCFF) with the IMF in April 1999. This wasfollowed in June 1999 by a Paris Club agreement to reschedule US$800m indebt-service payments due between March 1999 and April 2002. The IMFapproved a new stand-by credit agreement in mid-2002, leading to anotherround of Paris Club debt relief, affecting some US$1.2bn worth of paymentsfalling due between 2002-2007. The deal was apparently brokered by the US;afterwards a clearly exasperated Paris Club said that the agreement would be“Jordan’s last”. The government's rapidly deteriorating fiscal position and theUS's leverage over the Paris Club and IMF suggests that this might not be true.

The 1994 peace agreement with Israel also brought about some concessionsover Jordan’s debt, including US$950m of debt forgiveness by the US, withsmaller gestures of forgiveness and debt conversion (to development projects)by other Western countries, notably Germany. Jordan’s total foreign debt at end-2001 had declined to US$7.5bn, according to the World Bank, equivalent to 84%of GDP. Japan is Jordan’s largest creditor, followed by France, the UK andthe IMF.

Perceptions of regional instability have hampered attempts by Jordan to attractsubstantial foreign investment. Despite steady and significant improvements tothe local investment climate, the country’s proximity to Israel and the WestBank has tended to deter potential Western investors. Consequently, stronggrowth in foreign direct investment (FDI) in 2000 tailed off quickly with theonset of the second Palestinian intifada in that year. The situation wascompounded by the September 11th attacks on the US in 2001, when FDIcrashed to US$100m from almost US$800m in 2000. According to IMF figures,FDI dwindled even further to just over US$50m in 2002; however, this mightnot capture the full extent of foreign investment in the QIZs, which continuedto thrive and have proved largely immune to regional political woes. Thegovernment is also confident that it will be able to attract substantial newforeign investment to the Aqaba free-trade zone and to tourism developmentsin the medium term. Jordan also has high hopes that the FTA with the US willstimulate US investor interest. Foreign portfolio investment was negligibleduring the 1990s, but began to gather pace in 2000 in line with regulatorychanges and a strong performance from Jordan’s banking sector, whichdominates the bourse. Inward portfolio investment reached around US$400min 2002, although net foreign portfolio flows were negative. Full-year figureswere not available in April 2004, but, if the level of stockmarket activity is anyguide, net portfolio inflows would appear to have increased sharply in 2003.

Debt forgiveness

Potential for foreigninvestment

Jordan 47


Foreign reserves and the exchange rate

Foreign reserves and the exchange rate have been sensitive issues since thedevaluation of 1988, when foreign-exchange reserves plunged to just US$110m.Since then the CBJ has unequivocally committed itself to defending the dinar’speg to the US dollar—in place since late 1995—through a regime of high interestrates (though these have gradually come down) and occasional intervention inthe local market. Suggestions from the IMF that the peg to the US dollar mightbe broken in order to allow a more flexible monetary policy have beenstrongly resisted by the CBJ.

In July 1997 the Central Bank moved to ease the country’s punitive base rate forthe first time in almost eight years. However, the announcement by the formerking, Hussein ibn Talal al-Hashemi, in July 1998 that he was suffering fromcancer led to a new bout of capital flight, highlighting a continued lack ofconfidence in the dinar. This forced the CBJ to raise interest rates once more. AsJordan adjusted to the death of King Hussein in February 1999, and asinflationary pressures eased, the Central Bank was able to return to itsprogramme of reducing interest rates. By end-2001 the CBJ had pushed itsrediscount rate down to 5%, from 6.5% a year earlier. In 2002 inflationarypressures remained weak, which, along with a substantial build-up ininternational reserves, prompted the CBJ to reduce rates further to 4.4%.Although inflationary pressures increased in 2003, they remained slight, andthe CBJ reduced its discount rate to an all-time low of 2.5%.

Since 1998 the government has made a concerted effort to rebuild internationalreserves. According to the IMF, gross official reserves (excluding gold) stood atUS$5.2bn at end-2003, equivalent to 9.4 months of import cover according toour estimates. The speed with which reserves have been rebuilt, and withwhich the Central Bank was able to resume its policy of rate reductions afterthe death of King Hussein—and then maintain this, despite the politicaluncertainties of the past few years—shows a greater sense of domesticconfidence in economic policy in general.

48 Jordan


Appendices

Sources of information

Central Bank of Jordan (CBJ), Monthly Statistical Bulletin. This is the main sourceof regularly updated official statistics on a range of economic areas. Entriescover money and banking, public finance, external trade and balance ofpayments, production and prices. The material is drawn from a number ofgovernment sources. The publication was at the centre of controversy in early1998, when it was revealed that figures for GDP growth in 1996 and 1997 (takenfrom the Department of Statistics) had been seriously overestimated. Govern-ment explanations for the incorrect figures did not entirely dispel the idea ofdeliberate misrepresentation, which undermined more generally the credibilityof official figures. However, there has since been a tightening of methodology.

Department of Statistics, Statistical Yearbook. A valuable reference work giving arange of useful figures on the Jordanian economy and social trends. Sectionsinclude manpower, demography and climate. Its major drawback is its slowappearance. As this report went to print the latest available yearbook wasfor 2002.

Jordan Economic Monitor (JEM, monthly newsletter). An essential source ofstatistics on the economy, with some commentary. Particularly good forindicators of economic growth and trade patterns.

Jordan Times (daily). A good, although patchy, source of news stories ondifferent aspects of the Jordanian economy.

Ministry of Finance, Government Finance Bulletin. A monthly statistical pub-lication, which gives comprehensive monthly data on government finances, aswell as on internal and external public debt. In addition, it provides a shortcommentary on the main indicators. In the past, statistics varied with thosepublished by the CBJ, but this problem now appears to have been resolved.

Central Bank of Jordan: www.cbj.gov.jo

Dept of Statistics: www.dos.gov.jo

Jordan Times: www.jordantimes.com

Ministry of Finance: www.mof.gov.jo

Energy Data Associates, Bishops Walk House, 19-23 High Street, Pinner,Middlesex HA5 5PJ

IMF, International Financial Statistics (IFS; monthly and annual), Washington

International Institute for Strategic Studies (IISS), The Military Balance (annual),London

OECD, External Debt Statistics (annual), Paris

International sources

National statistical sources

Websites

Jordan 49


OECD Development Assistance Committee, Geographical Distribution ofFinancial Flows to Aid Recipients (annual), Paris

World Bank, Global Development Finance (annual), Washington

Laurie A Brand, Jordan’s Inter-Arab Relations, Columbia University Press, NewYork, NY, 1994

Rolland Dallas, King Hussein: a Life on the Edge, Profile Books, London, 1998

John Hanssen-Bauer, Jon Pederson and Age A Tiltnes (eds), Jordanian Society:Living Conditions in the Hashemite Kingdom of Jordan, Fafo Institute of AppliedSocial Sciences, Oslo, 1998

James Lunt, Hussein of Jordan, Macmillan, London, 1989

Kamal Salibi, The Modern History of Jordan, IB Tauris, London, 1993

Rodney Wilson (ed), Politics and the Economy in Jordan, Routledge, London, 1991

Reference tables

These reference tables provide the most up-to-date statistics available at the time ofpublication.

Population(m unless otherwise indicated)

1998 1999 2000 2001 2002Population (m) 4.76 4.9 5.04 5.18 5.33 Male 2.49 2.56 2.64 2.71 2.78 Female 2.27 2.34 2.4 2.47 2.54

Population growth (%) 3.4 2.9 2.9 2.9 2.8


Electricity production1999 2000 2001 2002 2003

m kwh 6,900 7,208 7,366 7,865 7,721

Source: Central Bank of Jordan (CBJ), Monthly Statistical Bulletin.

Select bibliography

50 Jordan


Government finances(JD m unless otherwise indicated)

1999 2000 2001 2002 2003Revenue 1,784 1,801 1,885 2,021 2,381 Domestic 1,585 1,561 1,638 1,754 1,699 Foreign grants 198 240 247 267 683Expenditure 2,007 2,005 2,076 2,297 2,542 Current 1,643 1,718 1,787 1,858 2,057 Capital 299 288 326 439 485 Net lending 65 -2 -37 0 0

Balance incl grants -224 -204 -191 -276 -161 % of GDP -3.9 -3.4 -3.0 -4.0 -2.4Balance excl grantsa -422 -444 -438 -543 -844 % of GDP -7.3 -7.4 -6.9 -8.1 -12.0

a Includes rescheduled interest.

Sources: CBJ, Monthly Statistical Bulletin; Ministry of Finance, Government Finance Bulletin; Economist Intelligence Unit (EIU).

Government domestic revenue(JD m)

1999 2000 2001 2002 2003Tax revenue 884 962 996 1,000 1,083 Sales tax 373 465 503 511 596 Customs duties 274 261 224 214 202 Income & profits tax 153 161 195 196 195Non-tax revenue 701 599 642 681 572 Fees 172 200 215 225 249 Licences 25 37 33 32 32 Interest & profits 197 141 136 137 121 Miscellaneous 300 215 253 281 169Total domestic revenue 1,585 1,561 1,718 1,754 1,699

Sources: CBJ, Monthly Statistical Bulletin; Ministry of Finance, Government Finance Bulletin; EIU.

Government expenditure(JD m)

1999 2000 2001 2002 2003Current expenditure 1,643 1,718 1,787 1,858 2,057 Defence & security 512 531 537 551 629 Wages & salaries 343 366 380 402 419 Food subsidies 15 0 0 0 0 Transfers 377 408 453 519 581 Interest payments 278 293 275 251 270 On domestic debt 47 49 56 59 61 On external debt 231 245 219 192 209Capital expenditure 299 288 326 439 485

Net lending 65 -2 -37 0 0Total expenditure 2,007 2,005 2,076 2,297 2,542

Sources: CBJ, Monthly Statistical Bulletin; Ministry of Finance, Government Finance Bulletin.

Jordan 51


Money supply and interest rates(JD m unless otherwise indicated; end-period)

1999 2000 2001 2002 2003Money supply (M1) 1,777 2,026 2,120 2,316 2,920 Currency in circulation 1,107 1,240 1,202 1,253 1,444 Demand deposits 671 787 917 1,063 1,476Money supply (M2) 6,748 7,435 7,866 8,419 9,466

Discount rate (%) 8.0 6.5 5.0 4.5 2.5


Gross domestic product1999 2000 2001 2002 2003

Total (JD m)At current market prices 5,767 5,992 6,310 6,653 6,991At constant (1994) prices 5,181 5,391 5,666 5,960 6,173Real change (%) 3.1 4.0 4.2 5.2 3.6Per head (JD)At current prices 1,177 1,189 1,226 1,257 1,285At constant (1994) prices 1,065 1,076 1,090 1,113 1,117Real change (%) 0.2 1.0 1.3 2.1 0.4

Sources: Ministry of Finance, Government Finance Bulletin; EIU.

Gross domestic product by sectora

(JD m; current prices)

1998 1999 2000 2001 2002Agriculture, forestry & fishing 145 116 121 124 137

Mining & quarrying 170 164 172 176 190Manufacturing 742 750 798 837 914Electricity & water supply 121 129 134 141 148

Construction 215 207 203 231 244Wholesale & retail trade, restaurants & hotels 532 543 589 619 630

Transport & communications 717 762 820 879 949Financing & business & real estate services 979 991 1,071 1,135 1,191Community, social & personal services 200 224 235 251 264

Government services 943 996 1,042 1,077 1,120Producers of private non-profit services to households 56 57 60 58 60

Domestic services of households 7 8 10 11 13Imputed bank service charges -108 -94 -111 -123 -134

GDP at factor cost 4,720 4,854 5,144 5,417 5,724Net indirect taxes 890 913 845 894 929GDP at market prices 5,610 5,767 5,989 6,311 6,653Net factor income from abroad -6 -9 96 133 78Total GNP at market prices 5,604 5,759 6,085 6,443 6,731

a Data may not sum, owing to rounding.


52 Jordan


Gross domestic product by expenditure(JD m; current prices)

1997 1998 1999 2000 2001Private consumption 3,647 4,110 3,961 4,843 5,130Government consumption 1,313 1,367 1,387 1,422 1,458

Gross fixed capital formation 1,325 1,190 1,354 1,263 1,238Change in stocks -3 36 98 64 79

Exports of goods & services 2,533 2,516 2,505 2,507 2,677Imports of goods & services -3,677 -3,609 -3,538 -4,110 -4,273

GDP at market prices 5,138 5,610 5,767 5,989 6,310


Retail and wholesale price indices(1997=100)

1999 2000 2001 2002 2003Food & beverages 103.1 102.4 102.7 102.9 104.8

Housing 102.6 104 105.9 108.3 110.9Clothing & footwear 109.3 110 111.3 110.6 106.2Other goods & services 104.7 107.6 112.7 118.5 124.4

All items 103.7 104.4 106.3 108.2 110.7 % change 0.6 0.7 1.8 1.8 2.3

Amman wholesale price index (1998=100) 97.6 94.1 92.7 91.2 93.9 % change -2.4 -3.6 -1.5 -1.6 2.9


Minerals production(‘000 tonnes)

1999 2000 2001 2002 2003Phosphates 6,014 5,506 5,878 7,107 6,762Potash 1,800 1,936 1,963 1,956 1,961


Industrial output('000 tonnes unless otherwise indicated)

1999 2000 2001 2002 2003Fertilisers 510 620 671 695 634Cement 2,700 2,640 3,173 3,558 3,515

Industrial production indexa (1994=100) 115 120 132 146 137

a Includes minerals and electricity.


Jordan 53


Construction(‘000 sq metres)

1999 2000 2001 2002 2003Residential 3,896.9 4,132.5 5,130.1 5,901.0 6,462.0Other 576.1 780.0 942.0 1,405.0 1,647.0

Total 4,473.0 4,912.5 6,071.9 7,307.0 8,109.0


Stockmarket1999 2000 2001 2002 2003

ASE general weighted index 167.4 133.1 172.7 170.0 262.0 % change -1.4 -20.5 29.6 -1.6 54.1Market capitalisation (JD m) 4,138 3,510 4,476 5,029 7,700

Source: Amman Stock Exchange.

Arrivals by nationality('000)

1999 2000 2001 2002 2003Syrians 940 898 1,127 1,364 1,353Saudi Arabians 609 471 603 687 681

Iraqis 358 330 417 392 371Other Arab nationalities (excl Jordanians) 391 329 388 487 416Europeans 412 451 384 319 334

Egyptians 270 215 325 355 410Turks 78 59 71 104 107

US 100 99 59 58 73Total incl others 4,767 4,618 5,235 5,543 5,308

Source: Public Security Directorate.

54 Jordan


Main commodities tradeda

(US$ m)

1999 2000 2001 2002 2003Domestic exportsb (fob) 1,480 1,522 1,904 2,166 4,309 Potash 178 194 195 193 384 Pharmaceuticals 143 156 183 201 400 Phosphates 162 128 127 136 271 Clothes 49 107 287 483 961 Fertilisers 110 84 86 90 179 Vegetables 94 83 116 145 288 Animal & vegetable oil & fats 69 63 60 94 187 Paper & cardboard 45 55 71 47 93 Cement 23 23 36 40 80 Live animals 34 22 6 11 22

Imports (cif) 3,711 4,590 4,865 4,974 5,580 Transport equipment & spare parts 516 658 514 544 529 Electrical & non-electrical machinery 506 654 808 687 n/a Crude oil 311 526 543 582 673 Textiles & fabrics 113 180 304 379 470 Medical & pharmaceutical products 146 145 158 174 209 Iron & steel 139 143 214 173 183 Plastics 98 116 133 121 151 Paper & cardboard 74 95 117 107 116 Fruits, vegetables & nuts 82 90 92 95 103

a Based on average annual exchange rates. b Excludes re-exports.


Main trading partners(% of total)

1998 1999 2000 2001 2002Exports to:US 0.4 0.7 3.3 10.1 18.8Iraq 8.3 6.2 7.4 9.9 19.9India 9.2 13.9 12.8 9.0 10.5Saudi Arabia 8.1 7.7 6.8 5.8 6.7Israel 1.9 4.3 4.1 3.7 4.5Imports from:Iraq 8.7 11.2 14.9 14.1 15.5Germany 9.8 9.7 11.6 9.2 9.2US 9.5 9.9 9.9 8.2 7.2China 2.7 3.2 3.9 4.8 6.6France 3.9 3.9 3.8 3.8 4.2


Jordan 55


Balance of payments(US$ m)

1998 1999 2000 2001 2002Goods: exports fob 1,802 1,832 1,899 2,294 2,770Goods: imports fob -3,404 -3,292 -4,074 -4,301 -4,450

Trade balance -1,602 -1,460 -2,174 -2,007 -1,680Services: credit 1,825 1,702 1,637 1,482 1,513

Services: debit -1,784 -1,698 -1,723 -1,725 -1,735Income: credita 307 301 670 447 484

Income: debita -445 -456 -535 -439 -373Net current transfers 1,712 2,016 2,184 2,238 2,260Current-account balance 14 405 59 -4 468Direct investment abroad 0 -5 -5 -8 -25Direct investment in Jordan 310 159 787 100 56

Other investment assets -80 -42 146 27 52Other investment liabilities -407 609 600 580 644Financial account balance -177 725 1,388 528 675Capital account balance 81 90 65 22 69Net errors & omissions -454 29 316 80 -49

Overall balance -536 1,249 1,827 625 1,163Financing (– indicates inflow)Flow of reserves 536 -1,249 -1,827 -625 -1,163Reserve assets -83 -1,289 -1,815 -613 -1,175Use of IMF credit & loans 22 40 -11 -12 13

Note. Some totals do not sum in source.

a Interest, profit and dividends.

Source: IMF, International Financial Statistics (IFS).

56 Jordan


Gross official development assistancea

(US$ m)

1998 1999 2000 2001 2002Bilateral 403 338 384 219 465 US 143 170 191 149 346 Japan 47 62 67 -7 -32 Germany 60 56 52 69 61 Italy 31 -8 17 -2 6 UK -26 7 15 3 12 France 110 23 9 7 -41Multilateral 207 172 190 227 203 EC 111 8.2 115 42 79 UNRWA 76 83 79 80 n/a IFC 39 -23 2 -10 5 Arab agencies n/a 0 1 1 2 IBRD -27 95 -15 106 111

Total 611 511 573 446 670Grants 338 394 506 459 542

a Disbursements. Official development assistance is defined as grants (excluding technical co-operation grants) and loans with at least a 25% grant element, provided by OECD and OPEC membercountries and multilateral agencies, and administered with the aim of promoting development andwelfare in the recipient country. IMF loans, other than Trust Fund facilities, are excluded, as is aidfrom the former Eastern bloc.

Source: OECD Development Assistance Committee, Geographical Distribution of Financial Flows to Aid Recipients.

External debt(US$ m unless otherwise indicated; year-end)

1997 1998 1999 2000 2001Total external debt 7,346 7,618 8,106 7,366 7,480 Long-term debta 6,176 6,555 6,737 6,199 6,599 Short-term debt 743 593 871 706 447 IMF credit 427 469 498 462 433

Public disbursed medium- &long-term debt 6,176 6,555 6,737 6,199 6,600

Official creditors 4,649 5,202 5,505 5,210 5,760 Multilateral 1,434 1,640 1,805 1,716 1,820 Bilateral 3,215 3,562 3,700 3,493 3,940 Private creditors 1,527 1,353 1,232 990 840Private non-guaranteed debt 0 0 0 0 0Debt service Total paid 864 873 552 741 669 Principal 504 422 298 427 400 Interest 360 451 255 314 269 Debt-service ratio, paid (%)b 15.8 15.9 9.8 12.2 10.4

a Maturity over one year. b Debt service as a percentage of exports of goods and services.

Source: World Bank, Global Development Finance.

Jordan 57


Foreign reserves(US$ m unless otherwise indicated; end-period)

1999 2000 2001 2002 2003Foreign exchange 2,629.8 3,331.6 3,061.0 3,975.0 5193.1SDRs 0.3 0.6 1.2 0.9 1.1

Reserve position in the IMF 0.0 0.1 0.1 0.1 0.1Total reserves excl gold 2,629.1 3,331.3 3,062.2 3,975.9 5,194.3Gold (national valuation) 120.0 99.1 112.2 141.2 171.3Total reserves incl gold 2,749.1 3,430.4 3,174.4 4,117.1 5,365.6Memorandum itemGold (m fine troy oz) 0.486 0.410 0.405 0.410 0.411

Source: IMF, IFS.

Average annual exchange rate1999 2000 2001 2002 2003

JD:US$ 0.709 0.709 0.709 0.709 0.709

Source: IMF, IFS.

Editors: James Reeve (editor); Neil Partrick (consulting editor)Editorial closing date: April 1st 2004

All queries: Tel: (44.20) 7830 1007 E-mail: [email protected]

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