Stable but stagnant: Transforming Jordan’s economy

Stable but stagnant: Transforming Jordan’s economy

After attempts by Prince Hamzah bin al-Hussein and other government officials to destabilize the country, King Abdullah of Jordan is eager to bolster his already strong ties with the US. While foreign policy may be high on the agenda, Jordanian policymakers should pay more attention to the pressing economic issues weighing on the country.  

As King Abdullah strengthened US-Jordanian relations during his visit with President Joe Biden, the Hashemite Kingdom finds itself at a crossroads. With conflict dragging on in Syria, Lebanon experiencing the worst economic crisis in its history, and simmering Israeli-Palestinian tensions, the Levant appears in dire straits. Jordan has sought to position itself as a linchpin of regional stability, making it a key ally of the United States. Yet despite its relative stability and strong foreign alliances, the country faces numerous domestic economic problems, including weak growth, rising poverty, and high levels of debt, all of which predate but were exacerbated by the pandemic. To transform itself beyond a strategic Western ally, Jordan can capitalise on its resiliency to achieve sustainable economic growth inclusive of all citizens.

US–Jordan relations have been built upon the Hashemite Kingdom’s counterterrorism efforts and support for US military operations in the region as a major non-NATO ally. US aid to the kingdom has quadrupled over the past 15 years, surpassing $1.6 billion in 2021 to exceed US aid to Egypt, which has a population ten times larger. 

Jordan’s geopolitical position has endured recent regional shakeups. King Abdullah had feared former US President Donald Trump’s Middle East Peace Plan would transfer Hashemite custodianship of Jerusalem’s Muslim and Christian holy sites to Saudi Arabia. Now, the tables may have turned with a new administration in Washington. Following the sedition plot to replace the King with his half-brother, President Biden was quick to affirm US support and repair ties with King Abdullah. While the affair took center stage, foreign policy may be distracting the government from domestic economic woes affecting ordinary Jordanians.

A Struggling Economy

While U.S. and Jordanian counterterrorism efforts and military cooperation have helped prevent the spread of regional terrorism and illicit actors, Jordanians still face a pressing economic situation. Jordan’s GDP per capita has steadily declined since 2009 and the absence of structural economic reforms have constrained the country’s potential. Jordan’s bloated public sector is rife with corruption and excludes Jordan’s Palestinian majority. Jordan will face mounting struggles as sky-high unemployment mixes with a rapidly growing population.  

Jordan has some of the highest levels of public debt in the Middle East at over 100% of GDP, as a result of its inefficient public sector and dependence on costly foreign energy imports. The resource-poor kingdom is the second most water scarce country in the world, and local agricultural production is alarmingly low with total annual production sufficient for only one week of domestic consumption. 

While Jordan had been making significant headway building its tourism sector, the halt to global travel caused by the pandemic will undoubtedly set back progress. Jordan is the Middle Eastern country most dependent upon tourism, which accounts for nearly 20% of GDP. While a rapid return of foreign visitors to Petra and Wadi Rum would surely be beneficial, Jordan will likely be affected by regional instability in the future and should seek to capitalise on its politically stable environment beyond the tourism sector. 

One sector where the country has supposedly flourished is textiles. Jordan’s success there stems from the U.S. Congress’s 1996 establishment of Qualifying Industrial Zones (QIZs), which permit the duty-free entry of exports to the US provided they contain a certain level of Israeli input. While the zones account for one of Jordan’s largest and fastest growing exports, the sector has attracted controversy for the reported abuse of workforces, which is comprised by nearly 70% of female foreign workers from South Asia.

Politics first

The influx of 1.3 million Syrian refugees has strained Jordan’s economy. While the refugee crisis remains a convenient scapegoat, it likely exacerbated pre-existing problems rather than caused them. When asked what is the most important problem facing the country, only 1% of Jordanians named Syrian refugees.

While Jordan’s economy has struggled, the government has also taken some steps in the right direction. Jordan hopes the “New Levant” alliance will facilitate economic cooperation with Iraq and Egypt and include a new oil pipeline extending to the port of Aqaba. Likewise, rapprochement with Israel has brought the Kingdom tangible benefits, including Israel’s sale of 50 million cubic meters of water, and an agreement to increase Jordanian exports to Palestine. But for the public, these deals have not yet translated into new jobs or improved living conditions. Jordan has devoted 65% of its 2021 state budget towards financing public payrolls and pensions and 17% to debt servicing, leaving little room for social and economic investment. 

The most recent 2018 US-Jordan MOU amounting to $6.375 billion over 5 years could become a crutch for the monarchy and leaving domestic issues unresolved will continue to raise public discontent. Jordan should consider reining in public debt to address necessary investment in education, health, and infrastructure and focus on private-sector growth employing Jordan’s young, well-educated and eager population. Should stability be of foremost importance for both countries, Jordan should look into utilizing this pandemic induced impasse to restructure and improve the economy. This would be beneficial not only to Washington’s budget but the average Jordanian as well. 


About Author