Opinion

Jordan Struggles to Reverse Decades of Poor Economic Management

In Jordan, where individuals often carry more political weight than institutions, the king’s personal intervention may be needed to solve the mess

Jordanian teachers clash with security forces during a protest in which they are demanding higher wages in the capital Amman on September 5, 2019.
AFP

Situated in a highly unstable neighborhood and suffering decades of bad policy, Jordan is struggling to find solutions for its ailing economy. Since 2009, the rate of economic growth has slowed down dramatically. This year it has hovered at around 2.2 percent, significantly lower than the government’s goal of 5 percent, and the prospects for the rest of 2019 are not promising at all. Per capita GDP, which is more relevant to people’s lives, hasn’t grown at all due to Jordan’s swelling population. The overhang of the tax law passed last year has taken its toll on Jordan’s stock market, reducing consumer confidence and purchasing power in the process.

Complicating matters are the high levels of debt and unemployment, which are still acting as a drag on the economy. There’s been a 24 percent drop in the value of real estate transactions and a 40 percent free-fall in new construction activity. Car imports are down 60 percent, mainly due to poor policy making that saw the government recently increase customs on electric vehicles. Rising public debt, together with sinking foreign investment, complete the bleak picture. Ordinary Jordanians have responded to the dismal state of affairs with hundreds of protests nationwide.

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For all the talk of Amman harnessing youth and escaping the middle-income trap, hundreds of thousands of Jordanians still cannot find a decent job. One of Jordan’s daily newspapers earlier this summer reported that almost a third of those surveyed expressed interest in leaving the country. With the rate of joblessness ranging from almost one in five for the general working population to as high as 38.5 percent for the youngest demographic (20-24), the search for better work opportunities continues to be the most significant driver for emigration.

Emigration also remains an option for Jordan’s Christian minority. While they enjoy a high degree of tolerance from the Hashemite monarchy, as well security and political power, they have always sought a second passport as an insurance policy against a sudden change. Yet a sagging economy has convinced scores more to want to leave, something the state should look at seriously and critically.

Sworn in during June 2018, with a mandate for a program of positive change, the government of Omar Razzaz, a competent ex-World Bank civil servant, has so far failed to produce any tangible results. Mind you, the problems he has to deal with are grave, real and long-standing.

At the same time, mounting fiscal pressures have meant that governments in Jordan are no longer able to attract competent technocrats from the private sector, where remuneration is significantly higher. This has resulted in a big gap in the state apparatus. On the one hand, there are the decision makers – senior public officers with the skills to exercise sophisticated economic judgment, manage multi-faceted projects and operate in complex political environments. On the other hand, there are the lower-ranking government officials, the majority of whom are incapable of comprehending the complex realities of globalization and its impact on public policy. Thus the capacity of senior government bureaucrats to implement decisions on issues such as trade, investment and planning has been limited.

Nowhere was bad policy more apparent than in the government’s recent handling of online personal imports by private citizens, which it wanted to tax heavily. Thirty years after customs reform began, the state continues to see its role as a cash cow. Indeed, the customs department, following cabinet directives, changed the law to require customers to register sensitive personal information on an online customs portal before their shipment can be proceeded.

Also, the 200-dinar ($282) monthly customs exemption was capped at 500 dinars ($705) per year. Faced with a massive public outcry over this new policy, the government last week decided to relax some of its new regulations by allowing freight-forwarding companies to do the “registration” process on behalf of their customers.

Why is Jordan – under the leadership of a progressive, reform-minded, tech-savvy monarch – still dealing with nonsense like this? Why is a nation that only recently put in place a ministry of digital economy and entrepreneurship behaving like it is the 1980s? Is Jordan fated to remain an aid-dependent state that stays above the line of abject poverty but never becomes fully developed because of its structural suffocating constraints?

All in all the data point to a catastrophic situation for Jordan that is not amenable to the ordinary, long-term economic measures the cabinet is taking. Instead, the current conditions have imposed new priorities that require urgent, short-term action, and crisis management.

Sadly, in a country where individuals often carry more political weight than institutions, only the king’s personal intervention can solve this mess. Ye, however you look at it, the reform process in Jordan, launched three decades ago by the late, great King Hussein and continued with even greater vigor by King Abdullah II since 1999, has had limited success in stimulating growth and triggering important political change. This is very disappointing indeed, as 30 years are long enough for a nation to transform itself, economically and otherwise (Israel and Singapore providing interesting examples in this regard).

Yet the reality on the ground is of failure by the Jordanian establishment to deliver on the grandiose promises of its reform-minded monarchy.

Marwan A. Kardoosh is a development economist with 20 years of experience working in the Middle East and North Africa.