By Antonia Dimou
Jordan is an example of how the IMF can screw schizophrenic, socialist-lite economies that are productive members of the global economy. Jordan is a small country in the Middle East with a desert, oil and other natural resources but whose economy is based on three characteristics: dough from Jordanian labor in neighboring countries, especially in the Gulf states, which are an important source of national income equivalent to 15-20 percent of the GDP; Jordanian exports primarily destined for the region, which in turn supplies the bulk of Jordan's energy requirements; and charity.
| Excuse me, I'm confused. How is a country that could not survive without charity from the neighbors a strong, stable economy? |
Thus, oil inflation in the 1970s facilitated substantial transfers to Jordan that contributed to rapid growth. Conversely, falling oil prices and associated recessions in the oil-exporting countries of the region adversely affected Jordan in the second half of the 1980s.
The IMF and Jordan put the wood to the average Jordanian as part of an agreement between Jordan and the IMF. Nevertheless, a highly growing population and the unstable political situation in the region have been major impediments to immediately reaping the benefits of IMF-introduced economic reforms.
| Ahh. It's all the fault of the Juices. |
The first and second Gulf wars of 1991 and 2003 had severe disruptive effects on the Jordanian economy.
| Sorry: the Juices and America. |
Jordan's opposition to the 1991 Gulf War led to the termination of aid from regional countries and the expulsion of Jordanian workforce. The "returnees" boosted the population by about 10 percent. After the 1991 war, Iraq provided Jordan with almost all of its oil needs, part of it free and the rest at discounted prices. Since 2003, however, regional oil producing countries have provided charity to facilitate Jordan's recovery from the negative economic consequences of the second war on Iraq.
| More charity. I wonder why? Surely it's not because the Jordanian royal family used to own Mecca and the haj trade. That kind of sentimentality would be shocking in the Arab world, especially three generations after the fact. |
In this regional context and in view of its grave economic situation, Jordan agreed to a series of five-year reforms sponsored by the IMF. By 2000, Jordan was admitted to the World Trade Organization (WTO), and a year later it signed a Free Trade Agreement (FTA) with the United States. Jordan was also able to bring down its overall debt payment and restructure it at a manageable level.
| Check your clothing labels. Some of it will have been made in Jordan. |
According to Dominique Strauss-Khan, managing director of the IMF, "The Jordanian economy has proved resilient to the global economic downturn, thanks to sound economic management and prudent supervision of the kingdom's financial sector." At the conclusion of his recent visit to Jordan in April 2010, Strauss-Khan acknowledged that "looking beyond the immediate task of managing the impact of the global financial crisis, the Jordanian government's plans as outlined in its National Agenda head in the right direction towards the implementation of political, economic and social reforms designed to facilitate the further transformation of the kingdom into a highly-competitive, knowledge-based economy."
| What lovely verbiage, flowing nearly endlessly. |
As noted, towards the end of 2008, the world witnessed a financial crisis, but Jordan has dodged a bullet. The Central Bank of Jordan has ensured the stability of the banking system while inflation, which indicated that the economy would not face major problems. In fact, the setting of 12 percent as a percentage for capital adequacy has preserved the banks from any financial problems and led to a near impossibility of bankruptcy. The world standard for capital adequacy does not exceed 8 percent. Right after the world financial crisis, banks were requested to disclose all their toxic papers, which amounted to $40 million, an amount not considered a major loss taking into account the profits of over $1 billion for these banks in 2008.
In response to the recession, Jordan is executing several major infrastructure projects to be financed by public-private partnerships (PPPs) to stimulate the economy. One of these is a nuke,
| Another friend of Kim? Syria didn't do so well out of their friendship... |
the first such scheme to be built on a PPP basis. Since the start of 2010, Jordan's fortunes have turned a corner. Remittance levels have stabilized, and tourist arrivals have picked up. GDP growth is forecast to be 4.1 percent this year, rising to 4.5 percent in 2011.
Additional plans are in line, like grand tourism projects in Aqaba as well as two mega water projects. The first is the Disi water project, which will tap an aquifer near the Saudi border and pipe it to greater Amman where some 3 million out of the kingdom's 6 million population lives. The second is the "Red to Dead" project, which entails pumping water from the Red Sea to the rapidly falling Dead Sea, and along the way siphoning water for desalination and also for the cooling of nuclear projects. These are massive, multibillion-dollar projects that require bribes and charity.
| Israel's got plenty of money to spare, I hear... |
* Antonia Dimou is an associate at the Centre for Strategic Studies of the University of Jordan and head of the Middle East and Persian Gulf Unit at the Centre for Security and Defence Analyses based in Athens. |