ipr    Info-Prod Research (Middle East) Ltd.
Home      Country Guide      Reports      Services      Business Development-    Clients      About IPR         Publications      Contact Us

	Jordan		Info-Prod Country Guide
CHARACTERISTICS   INDICATORS   THE ECONOMY   INVESTMENT ISSUES   PROJECTS   PROSPECTS

Principal Commercial and Political Characteristics General Jordan's economy is, and has always been, dependent on the input of external capital, including foreign assistance and remittances from Jordanians working abroad. During the 1970s and early 1980s, Jordan received a considerable amount of foreign currency remittances from its thousands of expatriates working in the Gulf states. The bulk of the money was spent on building infrastructure and on defense needs. Jordan faced serious economic problems in the late 1980s when promised assistance from the Arab states failed to materialize. The Kingdom was supposed to have received US$ 1.2 billion in Arab financial aid between 1980 and 1990, but the actual receipts were much lower, as some of the Arab states failed to honor their pledges. At the same time, the Jordanian government borrowed heavily against the anticipated assistance and spent the money on developing infrastructure and on meeting defense needs. In 1988, it became clear that the pledges would not be fulfilled, and this has placed Jordan in a difficult situation. The Gulf War crisis beginning in August 1990 resulted in Jordan being deprived of its main export markets, which included, among others, Kuwait, which was under siege, as well as Iraq, which was placed under international sanctions. The trickle of Arab aid dried up completely and more than 320,000 expatriates returned to Jordan from the Gulf nations, heralding an end to the much-needed expatriate remittances that had previously been a major source of foreign exchange. The resulting situation imposed severe limitations on the Jordanian economy. It severely constrained the Kingdom's ability to develop its infrastructure, led to a jump in the unemployment rates and in the poverty level and dealt a difficult blow to industries that depended on the Iraqi, Kuwaiti and other export markets in the Gulf. Jordan's economy started to recover in 1992 and 1993 due to an influx of investment for construction starts and industrial ventures, largely from returnees from the Gulf. While Jordan still suffers from a significant debt burden, it has met or surpassed most structural adjustment targets set by the International Monetary Fund (IMF), and its currency, the Jordanian Dinar, has been stable since 1989. In addition, the rate of absolute poverty in Jordan has decreased steadily in recent years, falling from 21.3 percent in 1992, to 18.3 percent in 1993 and to 14.7 percent in 1994. Commercial Outlook Jordan, more than any other nation perhaps, is reaping economic rewards as a result of the regional peace process. The Kingdom saw more investment in the first half of 1996 than in all of 1995. Nonetheless, 1996 appears to have been a disappointing year for Jordan overall. The economy grew by just 5.2 percent in 1996, down from 6.9 percent in 1995. The downturn is attributed in large part to stalls in the peace process and to the resulting skepticism regarding the region's future. While Jordan's main hard currency earners (the potash and phosphates industries) grew by 10 percent in 1996, retail and wholesale trade, transport and communications grew by just 6 percent. Heeding IMF requests to reduce the US$ 211 million deficit in the US$ 2.5 billion annual budget and to demonstrate its commitment to continued economic reform, Jordan's parliament lifted its subsidy on bread in August of 1996, increasing the price by 117 percent from US$ 0.12 to US$ 0.35 cents per kilogram. In 1995, Jordan paid US$ 136 million in imported food subsidies, of which bread was the main component. Political Outlook In response to the price hike on bread, many Jordanians, particularly in the poorer southern end of the nation and the capital of Amman, rioted for two days. Parliament's move was in line with Jordan's increased interest in attracting both foreign aid and investment, both of which were less available before the signing of the peace accords. In 1989, as a result of an IMF recommended reduction in the subsidy of some commodities, including bread, rioting also occurred in south Jordan. King Hussein held talks in December 1996 with Iraqi Foreign Minister Mohammed al-Sahaf. The meeting represented the warming of relations between Iraq and Jordan, which were strained since 1995. Central to the discussion were Jordan's potential economic benefits from increased Iraqi imports from and via Jordan and Jordan's potential as a mediator between Iraq and the US. In 1996, King Hussein also made a concerted effort to improve relations with the GCC countries. In particular, he strove to obtain access for the free movement of Jordanian goods, services and workers through the region. While he was largely successful in this quest, Kuwait maintains its refusal to improve relations with the Hashemite Kingdom. Efforts to orient Jordan's economy with Israel and away from Iraq are subject to progress with the peace process as well as Iraq's ongoing problems with the UN-backed sanctions. Presently, the finalized Hebron deal allows Jordan to rekindle its relationship with Israel. Jordan's outlook for the future is positive. The peace treaty between Jordan and Israel, coupled with Jordan's skilled, low-cost labor force establishes the Kingdom as a stable and attractive regional sales/marketing and service center. The government is committed to improving the nation's infrastructure in order to support new investment and continued economic growth. Jordan is in the process of liberalizing its investment and customs laws in an effort to attract foreign investment. Foreign investors are now allowed to invest in Amman's stock market and in its financial markets. Contents Menu Next Chapter

Home      Country Guide      Reports      Services      Business Development-    Clients      About IPR         Publications ;   Contact Us