Jordan’s Economy and the Regional Crisis

 

Jordan is well equipped to cope with the security fallout of the chaos surrounding it. The bigger threat to its stability may be domestic.

 

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By Abdel Bari Atwan

It is difficult to find optimists these days in the Jordanian capital, Amman.

On a recent visit, I met with a broad spectrum of informed Jordanians including political figures, former and serving officials, and technocrats, academics and fellow journalists. Whether at private gatherings, conferences, round-table discussions or informal political salons, their conversations were pervaded by a deep sense of concern and apprehension: not only, as could be expected, over the regional turmoil that surrounds Jordan, but also the critical condition of the country’s economy.

The two crises are, of course, closely connected.

Most obviously, the arrival of over one million Syrian refugees has placed enormous economic strains on Jordan: whether in terms of services, employment, housing, infrastructure or resources. Along with the previous (and to some extent on-going) influxes of displaced Iraqis and Palestinian refugees, it has fuelled a rapid and hard-to-manage growth in the population of a country with few natural resources and a chronic water shortage.

Being a haven of stability in a crisis-ridden neighbourhood has its economic benefits too, as Jordan has long been aware. Turmoil in Iraq and Syria attracted much private capital and many wealthy individuals from both countries to Jordan, in addition to substantial amounts of international relief aid. Jordan’s security and military role in the region has also resulted in record levels of US economic and military aid – estimated at $1.3 billion this year – plus hundreds of millions more from the US, UK and others for border security, logistical support, anti-terrorism and similar programmes. But much of this goes into the already bloated military and security sectors, and does little to mitigate the negative economic impact of the region’s wars and tensions on the people of a country that was already struggling to make ends meet.

At $35 billion, Jordan’s public debt now amounts to 93% of GDP and costs some two billion to service annually. The government, facing a projected budget deficit of $1.1 billion, cannot afford this. Some economists expect it may be forced to default on interest payments within the next three years.

But it is the social impact of the economic malaise that causes the most concern. Unemployment has been inexorably rising — notably among the young, including graduates – along with poverty levels and inflation. Income disparities have grown visibly, with wealth increasingly concentrated in the hands of a small proportion of the population and a super-rich elite. A recent survey by The Economistfound that Amman was the most expensive Arab capital in terms of living costs, yet earnings in the country are among the lowest. And there have been several indications recently of seething public frustration at the status quo.

So long as it remains politically impossible to give the economy the kind of structural overhaul it really needs, the government knows it needs to take urgent measures to deal with the situation.

Efforts have long been made to bolster the economy by attracting more foreign investors and tourists. But both have been frightened away by the turmoil in the region: levels of foreign direct investment have fallen in recent years and the tourism industry has been hammered. In addition, the economic slowdown in the Gulf states has reduced remittances from the hundreds of thousands of skilled Jordanians working there, which accounted for some 10% of GDP.

Until recently, the authorities were counting on the promise of financial support from the Gulf countries, especially Saudi Arabia, to help Jordan out of its economic straits. After the 2011 Arab uprisings, the Gulf states offered Jordan a five-year aid package worth $5 billion, starting with $1.5 in budget support from Saudi Arabia. But since then the flow of Gulf aid has dried up, or to be more precise, been frozen.

Despite the formation in April of a Saudi-Jordanian Coordination Council to develop large-scale joint projects in Jordan, none of the promised billions of Saudi investment dollars have materialized. Nor is there any sign of the five-year Gulf aid pledge, which expires this month, being renewed.

 

Jordanian King Abdallah’s special envoy to Saudi Arabia, former royal court chief Basem Awadallah, was sent to Riyadh some weeks ago to request renewal of the aid package and explain Jordan’s pressing need for serious financial support. Despite his reputed close relationship with the Saudi Arabia’s all-powerful deputy crown prince, Mohammed Bin-Salman, Awadallah apparently returned empty-handed.

 

It is widely believed in Amman that the Saudis are using the aid cut-off to put pressure on Jordan to play a more active role in efforts to topple the regime in Syria – perhaps by supporting the opening of a new rebel front in the south targeting Damascus to compensate for the loss of Aleppo.

 

Many Jordanians see this as outrageous. They argue that the country has already done too much to accommodate the Saudis – by joining their ill-considered campaign in Yemen, for example, and closing its embassy in Iran in solidarity with them – in the hope of preserving their good-will and ensuring financial support.

 

A former Jordanian prime minister complained to me that instead of ‘begging’ for aid or loans from the Saudis, Jordan should remind them of the valuable political and security services it provides them for free – including protecting their border, keeping refugees and terrorists out of their territory, and supplying invaluable intelligence.

But the former premier conceded that it is too late for that now: Saudi Arabia itself is on the verge of bankruptcy, waging wars in Yemen and Syria, unable to pay contractors, imposing taxes and austerity on its own citizens and borrowing vast sums abroad.  Bankrolling Jordan, he concluded, is no longer one of its priorities.

The quashing of hopes for a financial life-line from the Gulf leaves the Jordanian government poised to impose a variety of familiar IMF-prescribed measures for raising revenue and reducing spending: increasing tariffs, taxes and charges on a range of goods and utilities such as power and water, and cutting services and subsidies, including on essentials like fuel and bread. A list of 95 such measures has been drawn up for implementation. They will invariably hurt the poorest people the most.

This seems bound to cause a public and political backlash. There is already a widespread sense of grievance in the country that has surfaced repeatedly in recent months. Last summer, a month-long sit-in to protest against unemployment in the town of Dhiban culminated in violent clashes with the security forces, the most serious such incident in years. In September, a rash of demonstrations by schoolteachers and parents was triggered by the government’s altering of textbooks in a manner seen as pandering to the Western ‘anti-extremism’ agenda. The following month, there was a surge of angry public protests over the government’s secretly-negotiated deal to buy $10 billion worth of gas from Israel over 15 years.

 

The last two manifestations of public protest were not directly related to the economic situation, but they reflect a mood of mounting anger that is liable to explode when provoked, and is fuelled above all by a sense of economic marginalization. This also is doubtless a factor in attracting marginalized youth to extremist ideology and the underground movements it has spawned, of which Jordan has more than its fair share.

With its professional military and pervasive internal security forces, Jordan is better equipped than most countries to cope with the security fallout of the chaos, conflict and political and sectarian polarization afflicting the region. It may yet find that this is not its biggest problem: the greater threat to its stability may ultimately stem from its ailing economy.

 

This article was published in Turkish in http://www.derinekonomi.com.