NS4053 Winter Term 2015 Jordanian Economy

1. NS4053 Winter Term 2015Jordanian Economy

2. Jordan Background I • The Jordanian economy has been stable in recent years • In part, the country’s stability has been linked to the economy’s good performance • Jordan experienced a period of robust growth during 2000-09 (averaging about 6.5% per annum) • The economy is among the most open in the Middle East • Tourism receipts, remittances, FDI flows and external grants play an important role • Still there are problems • While the authorities have implemented structural reforms to develop the private sector, unemployment remains persistently high (13.7% over 2000-2012) • Unemployment is concentrated among the youth – ages 15-24 • This group accounts for about half the unemployed and their rate of unemployment reached 29 percent in 2012

3. Jordan Background II • As elsewhere in the region discontent about the economy has contributed to protests in Jordan since the start of Arab Spring uprising • In 2011, King Abdullah responded by offering handouts and promising political reform • Since then several changes in prime minister but political reforms have made little progress. • The economy does have a number of vulnerabilities which create considerable uncertainty and tension. • Remittances 600,000 Jordanian working abroad bring in about 3.3 billion dollars a year (13% of GDP). -- Dependent largely on external conditions • Aid Jordan depends heavily on budget support from Saudi Arabia and the Gulf. Starting in a billion dollars a year for five years. U.S. aid about $660 million annually

4. Jordan Background III • Other Vulnerabilities • Energy Jordan imports almost all of its oil and gas needs. Gas imports from Egypt have been disrupted by attacks on the Siani pipeline • Forces Jordan to import more oil, country had to raise electricity prices • Syria Although Jordan has not imposed sanctions on Syria conflict causing problems by increasing cost of goods normally transited through Syria from Turkey • Country has been flooded with Syrian refugees • Discontent about economy and limited degree of democracy has caused protests from time to time along with demands for reform

5. Jordan Background IV • Discontent amplified by anger about widening inequlity and perception privitaziations have enriched a few at expense of the many • Increasing doubt aboutgovernment’s sincerity over reform as it holds back from addressing core issues: • Corruption. Although the country compares favorably with most regional countries, public discontent has increased • Unemployment. Official data putit at 12.9% but the true level may be twice as high. • Public discontent about unemployment grown especially in rural areas where levels are higher and public sector salaries have stagnated relative to rising prices. • Dominance and success of Jordanian Palestinians in some parts of private sectors resented by some other Jordanians

6. Jordan Background V • Assessment • Public discontent about the economy may feed into discontent about politics • The government will try to keep public attention on political reforms but it may also promise new increases in public sector salaries or spending if protests escalate. • However these are only sustainable with Gulf aid • May not suffice to head off protests in the absence of credible reforms. • Main problems • Country lacks the domestic revenue to sustain its institutions and has become entirely economically dependent on foreign aid. • Without any method of self sustaining growth, Jordan often forced to make unpopular decisions (subsidy reform) imposed by creditors (IMF). • Bouts of protests and uprisings show how vulnerable the state has become

8. Jordan Reforms I • Curtis Ryan, “Jordan, Oasis or Mirage? Jordan’s Unlikely Stability in a Changing Middle East,” World Politics Review, January 15, 2015 Arab Spring and Internal Reform Struggles • Throughout Arab Spring years Jordan maintained a moderate and seemingly stable position • Kingdom did not see revolution, civil war, insurgency or a regime change • Still not completely free of turmoil • In 2011 and 2012 – protesters marched in Jordan also – sometimes reaching the thousands

9. Jordan Reforms II • Wide spectrum of protest groups • Youth activists • Islamists – based heavily in Jordan’s very large Muslim Brotherhood movement • Leftist and nationalist parties • Trade unions, and • Professional associations • Nearly all cases protestors called for reforms, not revolution • Some wanted regime to lead reform process • Others wanted regime to remain, but to take less of a role in politics devolving more power to elected bodies Allowing for greater democratization

10. Jordan Reforms III • In general, protestors demands touched on three main themes: • The reversal of the long-dormant political liberalization process • The restoration of the fuller economic and social safety net that had eroded in era of privatization and other neoliberal economic reforms, and • A serious effort to wipe out corruption in public life • By 2013 demonstrations were tapering off • Most activists disillusioned with the violent turns taken by the Arab Spring elsewhere – especially Syria • Syria divided the opposition • Islamists backed rebel movements while • Secular leftist and nationalists often backing Assad

11. Jordan Reforms IV • Four years after start Arab Spring, regime and opponents have different images of what has been accomplished • Regime argues: • Jordan has demonstrated flexibility in adapting to volatile circumstances • Reforms – mainly political: • changes in constitution, • electoral laws, • political party laws • media laws and • an Anti-Corruption Commission • Opposition contends that these are mostly cosmetic and that nothing has really changed • Regime argues that need to move slowly due to serious security challenges – Opposition just an excuse

12. Jordan Economic Challenges I Refugees and Economic Challenges • Jordan’s small size and weak, even dependent economy make it vulnerable to regional crisis • Currently major refugee problem • Not clear how many Syrian refugees there are • Most not in camps but instead Amman • Jordan estimates 1.4 million Syrians in a country of 7 million people • Jordan’s problem – international pledges of assistance rarely matching actual funds

13. Jordan Economic Challenges III • Economic Reforms • Country still aid dependent, energy dependent and even water dependent – very vulnerable to regional tensions • Began economic liberalization under King Hussein in 1989 • Involved series of neoliberal economic reforms • Opened the eonomy to greater trade and investment • Austerity programs to deal with bloated public sector • Privitization if previously state owned companies in industries from communications to transportation to construction • Under King Abdullah, neoliberal economic agenda stedily accelerated • Been a major part of the regime’s economic development strategy

14. Jordan Economic Challenges IV • Jordan’s economic adjustment program has at times involved severe austerity measure's as part of IMF restricting program • In turn these have triggered political unrest • Riots over the loss of subsidies for basic food items in 1980 and 1996 and more recently November 2013 • Today despite regional turmoil and the refugee crisis, IMF has rated Jordan’s economy as stable • Kingdom turned out to be poster country for the IMF, World Bank and WTO • Jordanian reforms supported by business community but many critics • Reforms have caused some rearrangements in the normal structures of opposition to the regime.

15. Jordan Economic Challenges V • For decades tendency of state institutions and the public sector to be dominated by East Bank Jordanians • The private sector dominated by Jordanians of Palestinian origin • As privatization has proceeded, pubic sector shrank and private sector expanded • Many pro-regime communities now feel left out of Jordan’s development plans • Tribal East Jordanians have historically been the regime’s core supporters • Now with economic, social and political change this is not always the case

16. Jordan Economic Challenges VI • In the 2011 uprisings youth based movements emerged thought the kingdom, but mainly in East Jordanian communities • Many protestors felt Jordan’s neoliberal reforms had gone to far, undermining the social safety net and harming their own prospects for jobs and livelihoods • Some wanted to roll back privatization efforts and re-establish direct state support for their communities • Others have emphasized poetical reform and democratization rather than economic change • Palestinians have also participated, but not in great numbers

17. Jordan Economic Challenges VII • Still Jordanian politics is not simply a contest between rich Palestinian business elites and poor disenfranchised tribal Jordanians • Sometimes dividing lines in Jordanian politics between ethnic identities, sometimes between tribes, sometimes between ideologies • Most important line is economic: between rich and poor • Regional politics and economic crisis have often mobilized or divided protest movements in Jordan • Syria – various opposition groups divided • Israel united the groups • Problem – Jordanian government wanted to import some of its gas from Israel – major opposition has hurt energy security

18. Jordan Assessment • Assessment • Jordan still very vulnerable to developments outside border – bad neighbored • Situation could change rapidly • Vital for both the government and opposition to move forward in achieving meaningful political and economic reform and energy security • Great need to include Jordanians of all walks of life in that process.