country report€¦ · july 25, 1997 summary 3rd quarter 1997 outlook for 1997-98: the run-up to...

COUNTRY REPORT

Jordan

3rd quarter 1997

The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

The Economist Intelligence Unit

The Economist Intelligence Unit is a specialist publisher serving companies establishing and managingoperations across national borders. For over 50 years it has been a source of information on businessdevelopments, economic and political trends, government regulations and corporate practice worldwide.

The EIU delivers its information in four ways: through subscription products ranging from newslettersto annual reference works; through specific research reports, whether for general release or for particularclients; through electronic publishing; and by organising conferences and roundtables. The firm is amember of The Economist Group.

London New York Hong KongThe Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit15 Regent Street The Economist Building 25/F, Dah Sing Financial CentreLondon 111 West 57th Street 108 Gloucester RoadSW1Y 4LR New York Wanchai United Kingdom NY 10019, USA Hong KongTel: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288Fax: (44.171) 499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638e-mail: [email protected] e-mail: [email protected] e-mail: [email protected]

Website: http://www.eiu.com

Electronic deliveryEIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248London: Moya Veitch Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

This publication is available on the following electronic and other media:

Online databases CD-ROM Microfilm

FT Profile (UK) Knight-Ridder Information World Microfilms Publications (UK)Tel: (44.171) 825 8000 Inc (USA) Tel: (44.171) 266 2202

DIALOG (USA) SilverPlatter (USA)Tel: (1.415) 254 7000

LEXIS-NEXIS (USA)Tel: (1.800) 227 4908

M.A.I.D/Profound (UK)Tel: (44.171) 930 6900

Copyright© 1997 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited.

All information in this report is verified to the best of the author’s and the publisher’s ability. However,the EIU does not accept responsibility for any loss arising from reliance on it.

Symbols for tables“n/a” means not available; “–” means not applicable

Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK

ISSN 0269-722X

Contents

3 Summary

4 Political structure

5 Economic structure

6 Outlook for 1997-98

9 Review9 The political scene

15 Economic policy and the economy17 Energy and mining17 Transport and tourism19 Banking and finance20 Foreign trade and payments

23 Quarterly indicators and trade data

List of tables8 Forecast summary

23 Quarterly indicators of economic activity24 Foreign trade25 Direction of trade

List of figures8 Gross domestic product8 Jordan dinar real exchange rate

Jordan 1

EIU Country Report 3rd quarter 1997 © The Economist Intelligence Unit Limited 1997

July 25, 1997 Summary

3rd quarter 1997

Outlook for 1997-98: The run-up to the election could be an uncomfortableperiod for the regime, and the verdict in the Dakamsa trial will require carefulhandling. Regional struggles will focus on the MENA conference. Strong eco-nomic growth is predicted, but there is no prospect of a return of the “feel-good” factor. There are promising early signs on the current account.

The political scene: The king has confirmed the election timetable and thecurrent electoral law, a move which has provoked the Ikhwan to boycott thelegislative polls. The election has brought about a further consolidation ofpolitical groups. The government has tightened the press law. Zaid al-Rifai hasbeen appointed speaker of the Senate. Israel and Jordan have solved their waterdispute and General Shahak has paid his first visit to Jordan. The king hasagreed to allow Musa Abu Marzouq to stay in Jordan and has made a condi-tional overture to Syria. Jordanian-Kuwaiti relations appear to be on the mendand there are increasingly warm ties with the rest of the GCC, including SaudiArabia.

Economic policy and the economy: Spain blocked an EU-Jordan accord,after negotiations appeared to have been successfully concluded. The USA hasplaced Jordan on an intellectual property rights “watchlist”. The government isto establish a special fund for privatisation proceeds. Jordan is expected torecommence commercial borrowing.

Energy and mining: A joint-venture fertiliser factory has opened. A UScompany has farmed into the Anadarko oil concession.

Transport and tourism: Organisational and security problems have besetthe proposed Aqaba joint airport. Jordan and Kuwait have agreed to resumedirect flights. Tourism has experienced both growth and a shakedown.

Banking and finance: The CBJ has eliminated all vestiges of forex controls.The ceiling has been removed on non-Jordanian equity ownership. The CBJhas issued bi-monthly variable interest rate CDs. Jordanian companies areseeking to exploit international interest through GDRs and Eurobond issues.

Foreign trade and payments: Jordan has successfully completed its fourthrescheduling. The government is pursuing the removal of Lloyds trade moni-tors. The UN Sanctions Committee has approved contracts worth $68m withIraq. Concerns have increased that the Iraqi-Syrian rapprochement will ad-versely affect Jordanian exports.

Editor:All queries:

Crispin HawesTel: (44.171) 830 1007 Fax: (44.171) 830 1023

Jordan 3


Political structure

Official name Hashemite Kingdom of Jordan

Form of state Constitutional monarchy

National legislature Bicameral National Assembly; Senate of 40 members appointed by the king. Under theconstitution senators are selected from prominent political and public figures. Directlyelected Chamber of Deputies of 80 members

Electoral system Direct universal suffrage

National elections November 1993; next election due by November 1997

Head of state King Hussein Ibn Talal

National government Council of Ministers headed by the prime minister, appointed by the king; ministersappointed by the king on the advice of the prime minister. The Council of Ministers isresponsible to the Chamber of Deputies. A new government was sworn in onMarch 19, 1997

Main political organisations Political parties were legalised in 1992. Active parties include: Jordanian NationalAlliance; Popular Unity Party; Future Party; Unionist Arab Democratic Party; IslamicAction Front; pan-Arab nationalist, Baathist and Communist parties; and NationalConstitutional Party

Prime minister & defence minister Abdel-Salam al-MajaliDeputy prime minister & minister of administrative development Abdullah EnsourDeputy prime minister & minister for state development Jawad al-AnaniSpeaker of the Senate Zaid al-RifaiSpeaker of the National Assembly Saad Hayel Sorour

Key ministers Agriculture Muhjim KhreishaEducation & higher education Munther al-MasriEnergy & mineral resources Mohammed HouraniFinance Suleiman HafezForeign affairs Fayez al-TarawnehHealth Ashraf al-KurdiIndustry, trade & supply Hani al-MulqiInterior Nazir RashidJustice Riyad al-ShakaaLabour Salah al-KhasawnehMunicipal, rural affairs & environment Tawfiq KreishanPlanning Rima KhalafPublic works & housing Nasser al-LaouziReligious affairs Abdel-Salam al-AbbadiTourism & antiquities Aqel BaltajiTransport & communications Bassam al-SaketWater & irrigation Munzir Haddadin

Chief of the Royal Court Awn al-Khasawneh

Central Bank governor Ziyad Fariz

4 Jordan


Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995a 1996b

GDP at market prices JD m 3,493 3,802 4,201 4,655 5,147

Real GDP growth % 16.1 5.8 5.9 6.4 5.2

Consumer price inflation % 4.0 4.7 3.6 2.4 6.5

Population (East Bank only)b m 3.8 4.0 4.1 4.2 4.4

Exports fobc $ m 1,219 1,246 1,425 1,776 1,910

Imports fob $ m 2,999 3,145 3,004 3,297 3,756

Current account $ m –765d –628d –398 –221 –218

Reserves excl gold (year-end) $ m 750 1,632 1,693 1,972 1,956e

Total external debt (year-end) $ m 7,180 6,905 7,051 7,129 6,918

Debt-service ratio % 24.3 19.2 16.5 14.4 11.2

Exchange rate (av) JD:$ 0.680 0.693 0.699 0.699 0.709e

July 21, 1997 JD0.709:$1

Origins of gross domestic product 1996f % of total Components of gross domestic product 1996f % of total

Agriculture 5.5 Private consumption 65.9

Mining & quarrying 3.6 Government consumption 23.2

Manufacturing 16.2 Gross fixed capital formation 33.3

Electricity & water supply 2.3 Increase in stocks 1.6

Construction 8.0 Exports of goods & services 50.5

Trade, restaurants & hotels 11.3 Imports of goods & services –74.5

Transport & communications 13.9 GDP at market prices 100.0

Finance & other services 19.3

Government services 18.6

Community & personal services 3.2

Imputed bank service charge –1.9

GDP at factor cost 100.0

Principal exports fob 1996 $ m Principal imports cif 1996 $ m

Fertilisers 182.2 Machinery & transport equipment 1,114.0

Phosphates 179.0 Food & live animals 967.4

Potash 177.2 Manufactured goods 722.8

Medicaments 146.4 Chemicals 464.1

Total incl others 1,910.0 Total incl others 3,735.0

Main destinations of exports 1995 % of total Main origins of imports 1995 % of total

Saudi Arabia 12.5 Iraq 11.8

Iraq 9.2 USA 9.7

India 7.9 Germany 8.0

UAE 5.7 Italy 5.9

a Preliminary official data. b EIU estimates. c Including re-exports. d IMF estimate. e Actual. f Provisional.

Jordan 5


Outlook for 1997-98

The pre-election periodcould be uncomfortable

for the regime

King Hussein’s refusal to countenance an amendment to the election law andthe consequent decision of Al-Ikhwan al-Muslimoun (the MuslimBrotherhood) to boycott the legislative elections scheduled for the last quarterof the year has created a new set of political tensions (see The political scene).Most importantly, it has undermined the National Assembly elections as aserious political process. At best, the campaign is likely to be lacklustre: one inwhich personal ambition eclipses policy debate, and tribalism rather than ide-ology informs electoral preferences. Moreover, turnout will do well to edgeabove 50%. At worst, there could be growing and increasingly open protestsagainst the election law and the newly amended press law, especially as thehardline members of the Ikhwan appear to have won the upper hand withinthe organisation. Although serious violence is highly unlikely, the picture of asociety increasingly ill at ease with itself, especially when the economy and thepeace with Israel are considered, is difficult to escape.

From the regime’s perspective some level of Islamist participation in the elec-tion is vital; the moderates within the Islamic Action Front (IAF) may thus findsome unexpected encouragement to break away from the mainstream Ikhwan.If it does not, other leftist and nationalist parties may also boycott the poll.This would probably exacerbate the growing gulf between establishment insid-ers, who benefit from elections and a growing economy, and an increasingmajority of people who feel economically poorly served and politically disen-franchised. The latter group will increasingly look to Islamists, radicals andmaverick politicians for leadership. The biggest danger of the present situationis that the political system could cease to be inclusive and that, as parliamentbecomes less and less relevant, the prospects for intransigence and con-frontation will be multiplied.

King Hussein mustmanage the Dakamsa

verdict

For the past few weeks Jordan has been mesmerised by the trial of AhmedDakamsa, a Jordanian soldier accused of killing seven Israeli schoolgirls onMarch 13. The atmosphere surrounding the trial has become highly charged.On the one hand, Israel is demanding that the penalty reflect the crime; on theother, those who oppose normalisation of relations with Israel have rallied todefend him. The political establishment has sought to dilute public sympathyfor him by impugning his character, presumably in expectation of a guiltyverdict. Whichever way it goes, the outcome of the trial will require carefulmanagement. Mishandling it could cost Jordan and King Hussein dear in termsof their popularity with the Israeli public, while a guilty verdict followed by asentence of life imprisonment, or even the death sentence, could trigger openprotests.

Regional struggle focuseson MENA conference

Since the beginning of June regional diplomatic moves have focused on thefourth Middle East and North Africa (MENA) economic conference, which isscheduled to be held in Qatar in November. The Syrian government is workinghard to get the conference postponed, in order to penalise the Israeli govern-ment for its current approach to the peace process. The Jordanian governmentwould prefer the conference to proceed, as the further normalisation of wider

6 Jordan


Arab relations with Israel will make its own peace treaty seem less isolated.However, the Jordanian regime cannot be indifferent to the general Arab view,and the MENA conference happens to be the current issue on which the widerstruggle between Israel and Syria is being played out. If Syria is successful ingetting the conference postponed, as seems likely, attempts to isolate Israelfurther will follow, providing encouragement to the disparate alliance inJordan pledged to fight a rearguard action against normalisation. The struggleto consolidate Jordan’s peace with Israel is likely to be a long one.

Growth is strong— Well past mid-year, there is no doubt that Jordan will experience strong growthin 1997. Recently, there seems to have been a division between estimates fromofficial sources, which tend to be very upbeat, those from semi-official sources,which take a more sober view, and other estimates by external analysts whichtend to be even more conservative. The Senate Finance Committee, in itshalf-yearly report on June 30, confidently expected real GDP growth in 1997 tohit the 6.5% mark. Meanwhile, the Union Bank of Switzerland expects realgrowth of 5.8%, a figure which is certainly closer to the EIU’s estimate of 5.4%.

The procurement of humanitarian aid for Iraq under UN Security CouncilResolution (SCR) 986 has taken place much more slowly than originally ex-pected in Jordan, and it is still not clear how much of this extra demand will gothe way of Jordanian businessmen (see Foreign trade and payments). Likewise,regional economic integration has not proceeded at the rate expected locally.The business outlook is clearly good, as the rise in tourism and the performanceof mining and the increasingly active area of derivative-processing attest, butthe official figures put an unmerited gloss on Jordan’s prospects. Thus weexpect some acceleration in GDP growth in 1998, but only to 5.8%.

—but the “feelgood”factor is absent

Growth seems to be strong and sustainable, and certainly sufficient to absorbnew entrants to the job market, keeping unemployment rates steady at worst.Moreover, inflation has remained manageable, and the rate is expected to fallafter an exceptional jump in 1996 due to the withdrawal of subsidies: weexpect inflation to average 3.6% in 1997 and 3.4% in 1998. A number of otherfactors should also engender optimism: the increasing interest of internationalmarkets in Jordanian investments; growing investment from Arab and otherquarters; and the indulgence of the international financial institutions. How-ever, Jordan has yet to see the development of a real “feelgood” factor.

This is probably chiefly because the greatest source of confidence in Jordan ispolitical rather than economic, and the political outlook, both domestic andregional, is decidedly downbeat. A second factor is consumer uncertainty.People remain mindful of the events of 1988-91, when they experienced, suc-cessively, a currency crisis, a debt crisis, austerity programmes, a jump in un-employment, and a sudden and profound drop in real living standards. Thereis no reason why such conditions should return, but it will probably be sometime before Jordanians again have confidence in their macroeconomic manag-ers. A third factor is that although the government has not been slow topublicise growth levels, most Jordanians have yet to experience it in a tangibleform. Thus private consumption as a proportion of GDP has fallen from 71.3%in 1993 to 65.9% in 1996.

Jordan 7


There are hopeful signs onthe current account

Forecasts made at the start of the year that Jordan’s external economy might beentering a period of stability appear to have been confirmed by preliminarydata on economic performance in 1997. On the visible trade account, there areearly signs that the seemingly uncontrolled growth of imports has dissipated.First-quarter imports stood at JD671.1m ($959m), significantly down pro rataon the overall import bill for 1996 of JD3bn. These figures, however, ought tobe treated with considerable caution. The figures for January and February wereabnormally low compared with other months, suggesting short-term distor-tions. Domestic exports and re-exports were also down on the previous year’strend. Remittance figures for the first quarter were, as in the fourth quarter of1996, nudging the JD300m mark.

Such results bode well for the services account, although a lack of precision inthe collection of statistics on remittances means that a wider margin of errorthan the 5% that usually applies has to be operated. A clearer idea of trends for1997 will emerge by the third quarter. In the meantime, the early indicators arenot incompatible with our forecasts of a current-account deficit of $283m in1997 and $262m in 1998.

Forecast summary($ m unless otherwise indicated)

1995a 1996b 1997c 1998c

Real GDP growth (%) 6.4 5.2 5.4 5.8

Consumer price inflation (year-end; %) 2.4 6.5 3.6 3.4

Merchandise exports fob 1,776 1,910 2,118 2,356

Merchandise imports cif 3,650 3,735 3,985 4269

Current-account balance –221 –218 –283 –262

Exchange rate (year-end; JD:$) 0.699 0.709d 0.709 0.709

a Preliminary actual. b EIU estimates. c EIU forecasts. d Actual.

0

1

2

3

4

5

6

7

1994 95(a) 96(b) 97(c) 98(c)

Jordan

Middle East & North Africa

Gross domestic product % change, year on year

(a) Preliminary actual. (b) EIU estimates.(c) EIU forecasts. (d) Nominal exchange rates adjusted for changesin relative consumer prices.Sources: EIU; IMF, International Financial Statistics; World EconomicOutlook.

80

90

100

110

1990 91 92 93 94 95(a) 96(b) 97(c) 98(c)

Jordan dinar real exchange rate (d)1990=100

JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$JD:$

JD:¥

JD:$

JD:¥JD:¥

JD:DMJD:DMJD:DM

JD:$

JD:¥

JD:$

JD:¥JD:¥

JD:DMJD:DMJD:DM

JD:$

JD:¥

JD:$

JD:¥

JD:$

JD:¥

JD:$

JD:¥

JD:$

JD:¥

JD:$

JD:¥

JD:$

JD:¥

JD:$

JD:¥

JD:$

JD:¥

JD:$

JD:¥

JD:DM

8 Jordan


Review

The political scene

King Hussein confirms theelection timetable and

current electoral law

As expected, King Hussein has confirmed that parliamentary elections will beheld on time, most probably in November. The king has the constitutionalpower to postpone elections for 12 months on two successive occasions, but,barring serious domestic or regional developments, Jordan’s third election ineight years will take place before the end of 1997.

The king also confirmed that, with the exception of some minor administrativerevisions, the poll will be conducted under substantially the same electorallegislation as in 1993. This has proved rather more controversial. Many ofJordan’s political parties, led by the Islamic Action Front (IAF), have beencampaigning for extensive revisions to the so-called one man, one vote system,which is widely believed to favour candidates from a tribal background. Incontrast, the 1989 system, under which individuals cast multiple votes inmultimember constituencies, was thought to favour ideological parties. Manyactivists had hoped for the development of a compromise system, but the kingeffectively closed that door with his statement. Along with reform of the elec-toral law hopes have faded of any other reforms, such as lowering the votingage from 19 to 18, expanding the number of seats in the National Assembly, orredrawing electoral boundaries in order to reflect demographic distributionmore accurately.

The Ikhwan decides toboycott the elections—

After much agonising and a vigorous internal debate, Al-Ikhwan al-Muslimoun(the Muslim Brotherhood) announced on July 8 that it would boycott theparliamentary elections. Commenting on the announcement, one of themovement’s senior figures said that the decision had been taken to demon-strate the group’s conviction that “the political game in Jordan is no longeruseful”. The decision was taken at the urging of MPs on the right wing of theIkhwan, such as Hammam al-Said, Ahmed Kofahi and Abdul-Munim Abu Zant;the arguments of the more pragmatic members of the movement, such asAbdullah Akaileh and Ishaq Farhan, were swept aside.

—thus giving up apotentially strong position

Mr Farhan had argued that, with growing misgivings about the peace processand increasing unhappiness about the state of the economy, the Islamistscould hardly fail to increase their parliamentary representation, even under thecurrent electoral system. Some commentators believe that Islamist candidatescould win up to 30 seats in November. Since they have such a strong electoralposition, the decision to boycott the poll is in effect a vote of no confidence inparliament by the Ikhwan. This view was echoed by a member of the group,who said that the National Assembly was “absent from all important politicaldecisions, law-making, budgeting or appointment in important posts of state”.

The Ikhwan’s decision immediately heightened speculation over the positionof the Islamic Action Front (IAF), which is dominated by the Ikhwan and won17 of the National Assembly’s 80 seats at the last national poll. The IAF is nowfaced with the choice of endorsing the Ikhwan’s decision or breaking away to

Jordan 9


contest the elections independently. Although the latter course cannot beruled out, the size, organisation and financial resources of the Ikhwan wouldmake it difficult for the IAF to continue on its own, especially with the elec-tions so close.

The looming electionprompts partyconsolidation

The prospect of an imminent general election has continued to concentratethe minds of Jordan’s disparate political groupings, acting as a force for con-solidation. The latest political bloc to emerge as a result of this process is aprogressive alliance that will field candidates on a common list in the forth-coming election. The alliance appears to be stronger on well-known partici-pants than it is on well-developed structures and organisations.

The three best-known names are:

• a former prime minister, Ahmed Obeidat, a critic of normalisation withIsrael and well-respected for being unconnected with corruption;

• Taher al-Masri, the kingdom’s most prominent insider Palestinian, also aformer premier, foreign minister and House speaker; and

• Suleiman Arar, a long-time parliamentary speaker from the East Bank, whoalso carries considerable political weight and is the leader of the Al-Mustaqbalparty.

Also included in the group is a former communist, Isa Madinat, and hisJordanian Unionist Democratic Party.

However effectively the electoral necessities of November’s poll may have beenin uniting these disparate elements, there is every chance of them separatingagain after the election. The formation of the alliance brings to four the num-ber of broad-based political groupings, the first three of which are:

• the IAF, representing the Islamist movement, which was formed before thelast election;

• the National Constitutional Party, formed in late 1996, which expects tocapture 20 seats; and

• the Jordanian Nationalist Democratic Front, a collection of leftist and nat-ionalist parties and hence less mainstream.

The government tightenspress regulation

The 1993 Press and Publications Law was formally amended on May 17 tohowls of protest from journalists, publishers and members of the country’sprofessional associations. The law was tightened to enable the governmentbetter to supervise the weekly tabloid press, where major growth has takenplace over the past three years, and which officials accuse of often being sensa-tionalist and irresponsible, and of having a scant regard for the truth.

Opposition activists fear that the regulations will allow abuse and representanother step back from attempts to introduce democracy in Jordan, whichmany believe to have been faltering for four or five years. The following threeareas of amendment have attracted particular criticism.

• Article 40, which details which areas are off-limits, has been expanded. It isnow prohibited for Jordanian papers to do anything which “threatens national

10 Jordan


unity”, endangers the currency, or disparages the royal family, the securityservices or friendly states.

• A new obligation for daily and weekly newspapers to increase their capital-isation from JD50,000 to JD600,000 and JD15,000 to JD300,000 respectivelywithin three months. With daily newspapers already capitalised above thisfigure, the provision appears to be directed specifically against the weeklies.

• The ceiling on fines for contravening the law has been increased fromJD6,000 to JD25,000. The courts also have the right to suspend publication, arevocation of which can only be obtained from the Ministry of Information.

Zaid al-Rifai is appointedSpeaker of the Senate

In June King Hussein named his childhood friend and one of Jordan’s mostexperienced politicians, Zaid al-Rifai, as Speaker of the Senate. The appoint-ment establishes Mr Rifai as the country’s senior elder statesman and marks hiscontinuing importance as an adviser to the king. It also gives him a prestigiousplatform from which to continue his behind-the-scenes activities in Jordanianpolitics. This will almost certainly be to the benefit of his son, Samir, who hashimself just been promoted to head the crown prince’s office, and that of hisnephew, Nasser Judeh, who is married to one of the crown prince’s daughtersand is the head of Jordan Television. The appointment may also help thecrown prince himself, after his bruising encounters with the former primeminister, Abdul Karim al-Kabariti.

Mr Rifai held lengthy tenures as premier in the 1970s and 1980s, before beingforced from office in disgrace after the April 1989 riots. He was also closelyassociated with the unannounced sale of part of the kingdom’s gold reservesimmediately prior to the debt crisis in January 1989. It was assumed that theresulting damage to his reputation would make his reappointment as premierpolitically risky. King Hussein has apparently calculated that the position ofspeaker of the Senate is a more viable way of reintroducing Mr Rifai to publiclife.

Israel and Jordan appearto have solved water

disagreement

With the conclusion of an understanding on water resources, Israel and Jordanappear to have solved another of the problems that have cast a shadow overbilateral relations. The agreement was reached during a meeting in Aqaba be-tween King Hussein and Israel’s prime minister, Binyamin Netanyahu, on May15. As a result, Israel has begun supplying Jordan with 30m cu metres of waterper year, a figure which is scheduled to rise to 50m cu metres after the first threeyears. The water will be pumped from the Sea of Galilee into the King AbdullahCanal, with approximately 20m cu metres being transferred in the summermonths, during which Jordan has recently been experiencing worrying short-ages, and the balance in the winter. This is in addition to the 50m cu metresIsrael already supplies to Jordan from the Sea of Galilee. An additional 100m cumetres will be transferred to Jordan from Israel via the River Yarmouk, once aseries of dams has been built (as yet, the date for this work has not been set).

The 1994 peace treaty obliged Israel to make the 200m cu metre transfer eachyear, beginning 12 months after the conclusion of the peace. Failure to fulfilthis commitment and subsequent Israeli inflexibility resulted in thecancellation of a scheduled meeting between Crown Prince Hassan and

Jordan 11


Mr Netanyahu on May 6. The water dispute, together with the problems con-nected to so-called back-to-back trade, had caused considerable exasperationon the Jordanian side, and had fuelled resentment against Israel. The apparentresolution of the water issue, following the belated trade accord, should help toease such tensions, although it is unlikely to eradicate a widely held view inJordan that Israeli cooperation is only granted late and grudgingly on any issuerelating to mutual ties.

General Shahak pays hisfirst visit to Jordan

The Israeli chief-of-staff, Amnon Shahak, arrived in Jordan on July 8 for atwo-day visit, the first time that Israel’s highest ranking military officer hasvisited any Arab country in an official capacity. The visit came at a time whenIsrael and Jordan have been extending their security cooperation. Units fromboth sides’ military forces participated in a joint exercise in June at Baqoura(where seven Israeli schoolgirls were killed by a Jordanian soldier in March).The two countries have agreed to hold war games in the Mediterranean at anundisclosed future date. Last year the Israeli defence minister, YitzhakMordechai, also visited Jordan.

General Shahak was accompanied by a senior intelligence official, indicatingthe deepening relationship between Israel and Jordan in the area of intelli-gence. Details of the general’s visit were kept secret, but it is known that heattended a military training exercise held by Jordanian army units and visitedthe King Faisal Air Force Base in Azraq. Jordanian officials have strenuouslydenied any connection between General Shahak’s visit and growing militarycooperation between Israel and Turkey, which is still extremely controversialin the Arab world.

Jordan accepts Hamasfigure

Jordan has agreed to take Musa Abu Marzouq, the former head of the politicalwing of the radical Palestinian Islamist group, the Islamic ResistanceMovement (Hamas), who was deported from the USA in May. The deportationbrought to an end a protracted saga, in which the US government found itselfin an increasingly difficult position. Mr Abu Marzouq has spent the past twoyears in prison in the USA having been detained on his arrival in New York inJuly 1995.

The US government had intended to expel Mr Abu Marzouq, but took him intocustody when it became clear that Israel would seek his extradition. Mr AbuMarzouq fought the application, but dropped his objection earlier this year,calling Israel’s bluff; Israel then withdrew its extradition application. KingHussein had been saying for months that Jordan would be willing to takeMr Abu Marzouq, even though he had been expelled from Jordan immediatelyprior to his visit to the USA, apparently at the urging of the Clinton adminis-tration. Mr Abu Marzouq was duly deported after agreeing to plead “nocontest” to US charges linking him to terrorism. On his arrival in Amman heinsisted that he had not confessed to the charges and that he remained apolitical, rather than a military, leader of Hamas. The Jordanian prime min-ister, Abdel Salam al-Majali, stated after Mr Abu Marzoup’s arrival that hewould be able to resume his political activities in the kingdom, and that therewould be no restrictions on him as long as he respected the country’s laws.

12 Jordan


King Hussein makes aconditional gesture

towards Syria

King Hussein has signalled that he would welcome improved relations withSyria but that any gestures to that end must be reciprocated. The first sign of adesire to improve bilateral relations, which have ranged from indifferent tocool for many years, was Mr Rifai’s appointment as speaker of the Senate;Mr Rifai has long been regarded as having good relations with the Syrianregime. This was followed by a declaration that Mohammed Assayyed, thehead of the Syrian branch of the Ikhwan’s information bureau in Amman, waspersona non grata, and had a week to leave the country. Rumours have sincecirculated that other members of the organisation would be asked to leave. Theking followed these gestures with a speech delivered in the northern city ofIrbid, during which he praised the Syrian president, Hafez al-Assad, and his“correctionist” political movement.

Nevertheless, the king also made it clear that he required a quid pro quo in theform of an end to Syrian help and encouragement for a cluster of Jordanianopposition groupings, including some of the smaller political parties and pro-fessional associations. Indications that Jordan might boycott the Middle Eastand North Africa (MENA) economic conference, scheduled to take place inQatar in November, if the general Arab view was in favour of a boycott, mayalso owe something to this new approach to Syria. However, the response fromthe Syrian regime to King Hussein’s moves is at present unclear.

A thaw in relations withKuwait begins in earnest —

Following six years of bitterness, it seems that a real thaw in Jordanian-Kuwaitirelations is finally under way. The breakthrough came in June when theKuwaiti foreign minister and brother of the emir, Sheikh Sabah al-Ahmedal-Sabah, announced that Kuwait was ready to normalise relations with thethree Arab states that had “supported” Iraq during the Gulf crisis, Jordan,Sudan and Yemen. These sentiments were followed at the beginning of July bya message from the Kuwaiti information minister, Sheikh Saud Nasser al-Sabah,that Kuwait was interested in speeding up normalisation with Jordan.

As a first move, the two countries are to recommence direct scheduled flights(see Transport and tourism), but bilateral relations will not easily return to thestatus quo before 1990. A report that the Jordanian foreign minister, Fayezal-Tarawneh, would visit Kuwait in mid-July was denied, while Shaikh Saudalso laid great emphasis on the need for the Jordanian press to change itshighly critical stance towards Kuwait. Nevertheless, the change of tack doesappear to be substantive.

—as relations areconsolidated with the rest

of the Gulf states—

The move to rebuild ties with Jordan seems to reflect a growing appreciation inKuwait that it is not sufficiently powerful to sustain such antipathies, especiallysince the other Arab Gulf states have restored full relations with Jordan.King Hussein’s warmest relations continue to be with Sultan Qaboos of Oman,whom he visited in early May. The longstanding close relations between thetwo men will be reinforced by the planned marriage of Prince Ghazi binMohammed, King Hussein’s nephew and adviser on cultural affairs, to thedaughter of the Sultan’s telecommunications adviser, Omar Zawawi.

Important steps have also been taken to consolidate relations with Qatar,Bahrain and the UAE. The Qatari government continues to make the runningin this respect and, during a visit by Mr Majali to Doha in May, a labour

Jordan 13


agreement was signed between the two governments to expedite Jordanianworkers leaving for and finding employment in Qatar. In spite of the bitterantipathy between Bahrain and Qatar, Jordan is finding it possible to improveits relations with both. Closer cooperation between Bahrain and Jordan in thefield of internal security is being forged, with a growing exchange of visits byrelevant personnel.

—including Saudi Arabia Undoubtedly the most important representative of a Gulf Cooperation Council(GCC) state to visit Jordan in recent months was the foreign minister of SaudiArabia, Prince Saud al-Faisal, who paid a two-day visit in June. The trip wentwell and achieved its main objective in marking an improvement in ties,although the dynastic tensions between the Hashemites and the Saud clanremain closer to the surface now than they were before 1990.

Talks cover specificissues—

The agenda for talks focused on detailed issues. The Jordanian side asked theSaudi government to facilitate the passage of Jordanian goods, especially per-ishable agricultural produce bound for the Gulf states and the Saudi market. Inspite of there being no official policy to interfere with such trade, Jordanianmerchants are still subject to obstacles. The Jordanians also raised the issue ofexpatriate labour and the possibility of increasing the number of Jordanianworkers in Saudi Arabia. To deal with the first question the two governmentsare to establish a joint committee, while both parties committed themselves tomore frequent high-level visits to improve the general climate of relations.Rumours in Amman that Jordan was also using the visit to seek Saudi agree-ment for the supply of crude oil could not be confirmed, but the governmentis concerned that the Iraqi government could cut off the supply of concession-ally priced oil and products at any time.

—and the peace process It was the peace process that dominated the political discussion, at least in thepublic utterances of Prince Saud. In addition to lashing out at Israel for itsintransigence, Prince Saud hinted heavily that Saudi Arabia might boycott thefourth MENA conference. In leaning in this direction, the Saudi governmentseems to be influenced by Syria, which is leading the campaign for a boycott inorder to penalise Israel for its present government’s approach to the peaceprocess. Although King Hussein would prefer the MENA summit to go ahead,both to support his new friends in Qatar and as a way of making Jordan’s peacetreaty with Israel less controversial, he is mindful of the larger regional actors,notably Egypt and Saudi Arabia. It was therefore no coincidence that by thebeginning of July Mr Majali was saying that Jordan’s attendance would dependon the position of other Arab states.

Relations with the USAcontinue to improve

With joint exercises, increasing levels of aid and a batch of jet fighters soon toarrive in Jordan, relations with the USA continue to develop at a rate whichmight have seemed unlikely in view of the damage done to the relationshipduring the 1990-91 Gulf crisis. The chairman of the Jordanian joint chiefs-of-staff, Hafez Kaabneh, announced that the first batch of F-16 fighters wouldarrive in December. The F-16s are the most prominent part of a $300m militaryaid package, which includes helicopters, tanks, trucks, small naval vessels andsmall arms. Field Marshall Kaabneh was speaking just after the completion of a

14 Jordan


three-week war game, involving 500 Jordanian troops and 2,000 US marines, abalance suggesting that the exercise was more for the benefit of American thanJordanian personnel. The manoeuvres coincided with a visit to Aqaba by threeUS military ships, and were the third set of joint exercises held between the twostates since 1994.

Economic policy and the economy

Spain blocks EU-Jordanaccord—

The long-awaited partnership agreement between Jordan and the EU has beenblocked at the final hurdle by Spain, which objected to the flexibility shownover imports of Jordanian tomato paste. The accord was knocked off course inlate June, having been initialled in April, during the Euro-Med conference inMalta. The agreement specified that Jordan could export 3,900 tons of tomatopaste to the EU duty free, a figure which the Spanish government initiallyappeared to have accepted. However, Spain later raised objections to a clauseadded at the last moment in Malta which permitted both sides to revise thedetail of the agreement.

With the remainder of the agreement proving non-controversial, and theeagerness of both sides to seal a new relationship, the chances of the tomato-paste problems proving an insurmountable barrier to the conclusion of anagreement are low.

—after negotiations aresuccessfully concluded—

The EU-Jordan agreement initialled in April followed six rounds of negoti-ations, making Jordan the fifth partner with which the EU has concluded anagreement in principle. If finally approved by member states, the agreementwill come into force on January 1, 1999. The agreement links Jordan to anattempt to forge a Mediterranean free-trade area by 2010. Under the terms ofthe agreement, Jordan has agreed immediately to lift customs duties on a largerange of goods, including a list of 492 capital goods. A second list of goods,including pharmaceuticals, chemicals and fertilisers, will be subject to an an-nual 20% reduction in duty, thereby introducing a five-year transitional periodduring which Jordanian companies are intended to adapt to greater compet-ition. A smaller list of non-exempt goods, ranging from cigarettes and alcoholto tomato paste and furniture, will not be exempt from duties in the foresee-able future.

The EU has also shown flexibility, within clear parameters, over the issue ofintellectual property rights (IPR). Jordan has been given seven years (five yearsin the case of pharmaceuticals and chemicals) in which to review, rewrite andenforce internationally acceptable standards in this area.

—although the benefitsfor Jordanian exports are

doubtful

While the elimination of trade barriers and the protection of ownership rightswill benefit European exporters, the benefits for Jordan are less clear, apart fromthe political dimension of a closer relationship with the EU. Jordan’s exports toEU countries totalled around JD80m ($114m) in 1995. Although greater accessto EU markets would edge that figure upwards, there can be no guarantee thatthe kingdom will benefit significantly, apart from in a few particular markets,such as new potatoes, processed fruit and vegetables, and tomato paste, whichare allocated higher quotas. Most of the new benefits are expected to come in

Jordan 15


the form of either targeted aid or exhortations to European companies to investin the kingdom.

The USA places Jordan onan intellectual property

rights “watchlist”

As the EU and Jordan were concluding a future strategy on IPR, the US govern-ment was signalling its concerns on the issue. The USA has added Jordan to a“watchlist” of 36 countries where real concerns about intellectual propertyexist. The list was published as part of the US trade representative’s annualreview of IPR practices, as required under federal law. The report says that the1992 Jordanian copyright law is “cumbersome and falls short of internationalstandards in most respects”. It further notes that the law is undermined inpractice because of the lack of effective enforcement mechanisms, and con-cludes that in practice “piracy” is rampant. The report does acknowledge thatJordan has plans to revise its copyright law as part of its overall economicliberalisation strategy, but complains that insufficient progress has been made.

There appear to be even more problems with the patent law, of which legis-lation dating back to 1953 forms the core component, and where the reportclaims that trademark protection is “unavailable”. Problems here are partic-ularly apposite for the pharmaceuticals industry, and the issue was one of ahandful of areas that held up the conclusion of the EU-Jordanian agreement.

The government is toestablish a special fund

for privatisation proceeds

The government has intimated that it will establish a special fund in which tolodge the proceeds of future privatisations. It is intended to function as areserve for “future generations”. The interest derived from the fund will be usedto finance a range of activities, including capital projects to aid low-incomefamilies, and cross-subsidies for other areas of activity where the state retainsan equity stake. The decision to use privatisation proceeds in this way is likelyto disappoint international financial institutions, which reportedly pushed thegovernment to use privatisation income to pay off Jordan’s external debt.

With the kingdom’s 12-year-old privatisation initiative moving painfullyslowly, the issue is still somewhat academic, as the capital generated fromprivatisation remains nominal. It is also difficult to have much confidence inthe sanctity of such a “generations fund”, as it has already been labelled. Asimilar fund in Kuwait was undermined by the need to fund the response tothe 1990 Iraqi invasion. Lack of transparency in financial management con-tributed to Jordan’s high level of indebtedness and allowed the secret sale ofgold reserves in the late 1980s. A law is expected to be drafted soon to establishthe fund.

Jordan is expected torecommence commercial

borrowing

All the signs suggest that Jordan is about to raise its first sovereign loan atcommercial rates since the emergence of the debt crisis in early 1989. CentralBank of Jordan (CBJ) officials have confirmed that the kingdom is interested inraising a $70m loan from the Eurobond market, a transaction which is ex-pected to be completed by the end of the year. Curiously, there has beenrelatively little debate about the wisdom of such a move, the assumptionpresumably being that the loan is a positive development for reasons of eco-nomic virility, in that it demonstrates renewed credibility with the inter-national markets.

16 Jordan


An exception to the quiescence with which the move has been received is aleading economics commentator, Fahd al-Fanek. Dr Fanek has argued that, ifthe purpose of the loan is to reduce the old debt which is now routinely carriedforward in the CBJ’s balance sheet, this would be a positive move, as it wouldhelp to counteract a weakness in the CBJ’s financial position. However, he hasopposed the use of the loan for public expenditure, either in the form ofconsumption or capital formation, which would be inflationary and wouldweaken the government’s commitment to a tight fiscal regime. Since there hasbeen no clarification of the purpose of the loan, the likelihood is that it isintended for the latter purpose.

Energy and mining

A joint-venture fertiliserfactory begins production

An $85m fertiliser plant, the first of a clutch of joint ventures close to commis-sioning, has started production near the southern port of Aqaba. The earlysigns are that test production has gone well and that the venture will be asuccess.

The Nippon-Jordan Fertiliser Company is a joint venture, involving on theJordanian side the Jordan Phosphates Mines Company (JPMC) and the ArabPotash Company (APC), each of which holds 20% equity, and a consortium ofJapanese companies, which holds a controlling share. The plant will produce300,000 tons of ammonium phosphates and compound fertiliser per year,earning Jordan an expected $60m in foreign currency. The Japanese side hasbuilt a vessel to transport the plant’s output to Japan, where it has a guaranteedmarket. The inauguration of the scheme is testimony to the emergence ofJapanese-Jordanian relations over the past ten years.

A US company joins theAnadarko concession

Union Texas Petroleum Holdings has teamed up with Anadarko in operatingthe latter’s energy-prospecting concession in north-east Jordan. Under theagreement, Union Texas has taken up a 50% interest in the production-sharingconcession covering the Safawi block. According to the companies concerned,Jordan’s Natural Resources Authority has approved the match. Two strati-graphic test wells are due to be sunk this year to begin the process of evaluatingthe block’s hydrocarbons potential.

Transport and tourism

Organisational problemsbeset the proposed joint

airport—

The idea that the Red Sea coast of both Israel and Jordan should be served byone airport, a symbol of their peacetime cooperation, has run into a series oforganisational and security problems. By the beginning of July, the projectappeared to have come to a standstill, beset by a range of problems: what typesof aircraft should be allowed to use the runways, what fees should be charged,the capacity of the airport, the location of the terminals and the nature of thecompany that would run the facility. The two sides have also disagreed oversecurity arrangements, with Israel wanting to take over such procedures, andJordan rejecting the idea out of hand. The original idea was to expand theairport at Aqaba, in Jordan, as a service centre for the south, rather than haveEilat and Aqaba airports in competition with one another on either side of the

Jordan 17


border. A mark of the seriousness of the impasse was the decision by theJordanian side to put on hold a planned trial flight to the airport.

—but talks continue In spite of the difficulties, negotiations are continuing at ministerial and tech-nical levels to try to arrive at mutually agreeable arrangements. The Israeli sidehas proposed that the airport should be operated by an international companywith recognisable competence. The Amman administration has not ruled thisout as a way forward, provided that such a company works “within the sover-eignty of Jordan”. Future good relations between the two countries would ap-pear to depend on a successful outcome to the talks. However, it seems unlikelythat the joint airport will be fully operational for some considerable time.

Jordan and Kuwait agreeto resume direct flights

In a further move suggesting a tangible improvement in relations, Jordan andKuwait have agreed to resume direct flights, which were suspended seven yearsago following the Iraqi invasion of Kuwait (see The political scene). Flightsremained suspended after the liberation of the emirate as bilateral ties stayedcold, with the Kuwaiti government suspecting its Jordanian counterpart oftacitly supporting Iraq. As a result of an agreement in mid-June, regular flightsresumed in July. A full re-evaluation of flight schedules is expected to take placein September or October. The agreement to resume flights was taken after adelegation of senior officials from Kuwait Airways visited the kingdom, follow-ing a high-level decision to improve bilateral relations in general. The resump-tion of flights and the accompanying exchanges of technical delegations whichare expected to take place will help to prepare the Kuwaiti public for a resump-tion of diplomatic relations.

Growth leads to bullishprojections—

The fortunes of the tourism sector as a whole continue to improve, with esti-mates that the industry generated more than $700m of foreign exchange in1996. Bullish expectations, based on these results, have led to further substan-tial investment. Between 3,000 and 4,000 new beds are expected to becomeavailable over the next three years. The southern shore of the Red Sea is pre-dicted to be a key centre of development, with some 15-20 large tourist sites tobe established.

—but problems areemerging

However, the overall improvement cannot disguise problems within the sectorand concern at the low income levels accruing from some visitors, notablyshort-stay tourists from Israel. In spite of the strong overall performance of thesector, there is reported to have been a wave of closures which has seen thenumber of travel agencies shrink from around 400 to 267. This shakedown hastaken place as a result of a Ministry of Tourism stipulation adopted in June lastyear that agents make adequate provisions for their operations. Consequently,ticketing agencies were required to provide an annual bank guarantee ofJD25,000, while larger organisations engaged in tour operations were obligedto furnish a guarantee of JD50,000.

Meanwhile, the frustrations of the Jordanian tourism sector with low-spendingIsraeli day-trippers to Petra continues. Jordanians are ambivalent about Israelitourists at the best of times, but the low-spending propensity of many Israelitourists has meant that an opportunity to create a constituency that would havehad a vested interest in advocating a greater interaction with Israel has been lost.

18 Jordan


The frustration of Jordanian travel agents has manifested itself most recently ina demand for a sliding scale of exit and entry charges that would provide anincentive for longer stays. The organisation representing Jordanian travel agentshas demanded the introduction of a punitive $100 charge for one-day visitors,falling to $60 for those spending three or more days in the country.

Banking and finance

The Central Bankeliminates forex controls

The Central Bank of Jordan (CBJ) has formally ended all controls on the flow offoreign exchange in and out of Jordan. In fulfilment of a long-cherished objec-tive, the CBJ governor, Ziyad Fariz, announced on June 29 the full liberalisationof the foreign exchange regime in Jordan. The move permits Jordanian resi-dents to hold unlimited deposits in foreign currencies and to withdraw andtransfer unlimited funds, free from controls. Although the changes are unlikelyto make a great difference, they are important in that they underline a commit-ment to a strategy of dinar convertibility and forex liberalisation. The governorstated at the time of the change that he hoped it would have a positive impacton foreign exchange inflows.

Ceiling removed onnon-Jordanian equity

ownership

As part of its continuing attempts to encourage foreign direct and portfolioinvestment, the kingdom has removed the ceiling on equity ownership bynon-Jordanians in certain sectors. It is now possible for non-Jordanian invest-ors to hold a stake in excess of the 50% ceiling which had previously beenimposed on companies quoted on the Amman Financial Market operating intransportation, insurance, banking, telecommunications and agriculture.Private securities experts in Jordan hope that the deregulation will attract morethan $400m in additional portfolio investment. However, the previous ceilingcontinues to apply to firms in the construction, retail trading and metallurgysectors. It is widely assumed that commercial banks, and cement, pharma-ceuticals and hotel management companies will prove the most attractive toforeign investors.

The CBJ issues bi-monthlyvariable interest CDs

Under World Bank guidance and in an effort to increase the sophistication ofmonetary instruments, the CBJ has started issuing variable interest rate certifi-cates of deposit (CDs). The paper was introduced at the beginning of June. Inthe first auction under the variable rate system, the CBJ offered JD70m worthof CDs, and the offering was oversubscribed by 11%. CD yields are currently9.25% for three-month paper and 9.5% for six-month paper, a 4% differentialwith dollar rates, as the CBJ continues to treat the defence of the dinar as its toppriority. The CBJ hopes that the new CDs will add to the effectiveness of thecontrol of money supply in the kingdom, in addition to stimulating a secon-dary market in CD and other instruments. CDs were first offered by the CBJ in1993 on a weekly basis, and the new fortnightly system was brought in in Aprilthis year.

Jordanian companies seekto exploit international

interest through GDRs—

A leading Jordanian company is poised to undertake a ground-breaking equityforay which could also help to pave the way for a more imaginative approachto raising capital as well as raising Jordan’s profile. The Arab Potash Company(APC) is close to concluding Jordan’s first global depository receipt (GDR).

Jordan 19


Eight global investment banks have been invited to take part in a prequalific-ation process, which is expected to be completed by the end of July. The GDRwill offer 3.62 million shares left unsubscribed from a public float in 1994,which was designed to raise the company’s capital to JD83.3m (just over$115m), together with a proportion of Jordanian government shares in APC.The shares are expected to sell at JD7-8 each. The GDR issue, if successful, willhelp to raise global funds ownership in APC from 0.9% to 4% of the firm’scapital. The Jordanian state owns approximately 57% of APC, most of thebalance being held by other Arab state and institutional investors.

Although modest in size, the GDR is being talked up, both as the tip of afinancing iceberg and, more generally, as a means to increase internationalinterest in Jordanian companies. The APC is already speaking of a $50m GDRlisting to be traded in international markets by the end of the year. A handfulof other companies are following the fortunes of APC’s GDR very closely. Otherfirms reported to be interested in availing themselves of such an instrumentinclude the Jordan Cement Factories Company, the Housing Bank and theJordan National Bank.

—and Eurobond issues The Jordan Phosphates Mines Company (JPMC), the APC’s similarly vigoroussister company in the mining sector, is about to raise $100m in the form of acorporate Eurobond, the second such use of this type of instrument by aJordan-based company. In September 1995 Jordan Telecoms raised $50mthrough a corporate Eurobond which was underwritten by the World Bank andlead-managed by Banque Paribas. JPMC is expected to come to the market inlate July or August, following a roadshow in Europe, North America and theGulf. HSBC Markets announced on June 17 that it had been given the mandateto lead-manage the deal. The bonds are expected to be priced at 150 basispoints over Libor. The capital will be used to expand the firm’s phosphate-mining operation at Shidiyah in the south of the country.

Foreign trade and payments

Jordan is successful in itsfourth debt rescheduling

The Paris Club has agreed to reschedule $450m of debt, comprising principaland interest falling due between June 1, 1997, and September 7, 1999. This isthe fourth such rescheduling exercise agreed between Jordan and its countrycreditors. The agreement represents a compromise between Jordan, which hadbeen pushing for up to $600m to be taken into consideration, and the ParisClub members, which calculated the financing gap for that period at $339m.Of the amount to be rescheduled, $400m comprises debt owed to Paris Clubmembers and $50m debt owed to non-members. The rescheduling will take theform of conventional bilateral arrangements over 20 years with a five-yeargrace period, and government-guaranteed export credits over 22 years with aten-year grace period.

The Paris Club has also encouraged its members to help Jordan through debtswaps. Since 1991 the Paris Club’s approach to debt swaps with Jordan hasbeen flexible, relaxing previous ceilings of 10% of outstanding debt or SDR20mto 20% and SDR30m respectively. Debt swaps are to be considered by each clubmember as part of the individual bilateral agreements between now and March

20 Jordan


1998. Jordan’s total foreign debt is estimated by the CBJ at $6.4bn, of which upto $4bn is owed to bilateral creditors, $1.3bn is commercial debt collaterisedsince 1994 in the form of Brady bonds, and the balance is multilateral debt.Previous reschedulings took place in 1989, 1992 and 1994. The current exercisewill be the last rescheduling under the structural adjustment programme,which is due to expire in February 1999.

The government pursuesremoval of Lloyds scrutiny

The Jordanian prime minister, Abdel Salam al-Majali, has called for an end tothe activities of Lloyds Register, the UK-based company which scrutinises Iraqi-bound imports entering the port of Aqaba. Lloyds Register set up operations inJordan as part of an agreement between Jordan and the UN, to ensure that theinternational sanctions regime against Iraq was properly enforced. Prior to that,goods bound for Aqaba were subject to interdiction by the US Navy. Mr Majaliraised the issue because of what he described as unacceptable practices whichmeant that Jordanian-bound imports were also being searched by LloydsRegister personnel. He called for the Iraqi imports scrutiny activities to beshifted from Aqaba to Iraqi territory. The Jordanian foreign minister, Fayezal-Tarawneh, subsequently said that the government was working to stop theinspections, and a formal request for their curtailment has been submitted tothe UN. Representatives of Lloyds Register have stated that there has never beenany intention to inspect goods for the Jordanian market. Lloyds maintains thatits presence in Aqaba stems from its agreement with the UN, and that it willcontinue to fulfil its instructions until they are superseded from New York.

The UN approves $68m ofexports to Iraq

By the end of June the UN Sanctions Committee had approved Jordanianexport contracts to the value of $68.3m, under the provisions of the newso-called oil for food arrangements under UN Security Council Resolution(SCR) 986. The approved contracts represent only apart of the $120m of con-tract requests originally submitted to the UN in New York. The disappointinglevel of approvals in the course of the first six months of the operation of theSCR 986 points to the slow and bureaucratic pace at which the SanctionsCommittee has proceeded with the consideration of contract submissions. Thegoods that have been approved for export to Iraq include detergents ($26m),vegetable oil ($23.6m), medicine ($17m), and salt ($0.8m).

Concerns rise at effect ofIraqi-Syrian trade

rapprochement on Jordan

The Iraqi deputy prime minister, Tariq Aziz, has sought to reassure Jordanianbusinessmen that the resumption of trade ties between Iraq and Syria will nothave a detrimental effect on Jordan. He pointed out that Iraq began to make useof Aqaba port in 1974, when Syrian and Lebanese ports were available to Iraq.Aqaba’s quality services and low charges can also be held up as objective reasonswhy the Jordanian port will not be supplanted, and in any case SCR 986 singlesout Aqaba and the Iraqi port of Umm Qasr as the entry points for Iraq-boundcargo. Even so, it appears that the Iraqi regime does regard Aqaba as a back-upfor Umm Qasr. In the six months to June only two vessels, both laden withwheat, docked at Aqaba with a cargo for Iraq under the conditions of SCR 986,both of which used Aqaba because they were too large for Umm Qasr.

Jordan 21


It is for Jordanian businessmen and merchants that the fears of being sup-planted by Syria are greatest. There is a big overlap in the goods that the twocountries can offer Iraq, notably in such areas as vegetable oil, foodstuffs, andtextiles. Jordanian businessmen are particularly concerned that the Syrian statemight become involved in making sure that the volume of trade increasesthrough, for example, lowering port fees to cut costs. The Iraqi governmentmight also begin to use trade for political ends, either to build stronger bilateralrelations with Damascus or, alternatively, to punish Jordan for King Hussein’sflirtation with the Iraqi opposition in 1996.

22 Jordan


Quarterly indicators and trade data

Quarterly indicators of economic activity

1995 1996 1997

1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr

Prices Monthly av

Consumer prices: 1990=100 121.4 121.6 122.2 127.2 132.1 129.6 130.6 132.2 132.2 n/a

change year on year % 2.4 1.3 2.3 3.2 8.8 6.6 6.9 3.9 0.1 n/a

Money End-Qtr

M1, seasonally adj: JD m 1,752.8 1,785.9 1,773.5 1,745.6 1,678.9 1,614.8 1,552.8 1,539.0 1,569.6 n/a

change year on year % –0.2 2.8 1.3 –0.2 –4.2 –9.6 –12.4 –11.8 –6.5 n/a

Foreign trade Qtrly totals

Exports fob JD m 247.8 284.2 345.8 363.3 271.6 315.4 354.1 347.0 280.3 n/a

Imports cif “ 586.7 649.9 657.4 696.4 681.9 877.6 780.3 799.3 671.1 n/a

Exchange holdings End-Qtr

Central Bank:

golda $ m 224 230 228 229 238 233 230 226 212 208b

foreign exchange “ 1,708 1,751 1,965 1,972 1,720 1,775 1,808 1,759 1,404 1,390b

Commercial banks:

assets ” 2,395 2,502 2,496 2,655 2,497 2,547 2,556 2,845 3,115 n/a

Exchange rate

Market rate JD:$ 0.691 0.695 0.711 0.709 0.709 0.709 0.709 0.709 0.709 0.709b

Note. Annual figures of most of the series shown above will be found in the Country Profile.a End-quarter holdings at quarter’s average of London daily price less 25%. b End-April.

Sources: IMF, International Financial Statistics; Central Bank of Jordan, Monthly Statistical Bulletin.

Jordan 23


Foreign trade(JD ’000)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Mar Jan-Mar1992 1993 1994 1995 1996 1996 1997

Imports cifFoodstuffs 416,023 435,146 409,673 419,232 685,917 101,117 105,331 of which: live animals 26,061 27,937 30,928 29,846 26,822 10,083 5,263 meat 50,037 58,293 43,200 29,428 37,878 10,030 12,843 dairy products 34,615 41,367 30,750 39,124 59,584 11,023 8,244 wheat 54,167 76,117 52,259 40,992 112,047 287 13,300 rice 20,938 20,492 15,962 21,721 31,143 355 1,012 fruit & vegetables 41,501 26,123 28,290 43,194 80,176 14,311 12,991 sugar 28,819 33,084 56,279 29,684 59,899 21,665 6,086Mineral fuels 303,425 314,785 300,657 336,360 372,501 91,215 108,367 of which: crude petroleum 228,845 236,804 232,323 249,310 259,582 65,599 90,146Animal & vegetable oils 37,628 42,653 82,501 94,697 73,647 25,937 17,222Chemicals 245,544 248,566 279,917 317,697 329,053 76,020 76,994Paper & manufactures 49,291 55,478 46,508 73,116 66,574 20,191 13,128Textile yarn, cloth & mnfrs 94,408 94,995 87,674 89,294 92,204 25,674 19,817Iron & steel 133,580 157,995 130,770 147,026 158,659 38,585 23,892Machinery incl electric 273,727 375,495 361,376 362,574 456,514 110,768 116,027Transport equipment 270,054 285,367 238,958 272,136 333,341 75,106 80,135Clothing & footwear 42,107 42,092 35,625 44,279 41,653 10,741 8,893Scientific instruments etc 39,759 38,275 41,436 36,298 44,585 14,992 9,381Total incl others 2,214,002 2,453,625 2,362,583 2,590,250 3,043,556 681,828 671,067

Domestic exports fobFoodstuffs 92,033 140,033 91,200 99,509 160,112 30,062 35,086 of which: live animals 15,257 18,444 12,613 15,327 63,108 7,824 12,730 dairy products 14,830 38,072 2,903 2,743 2,911 677 1,844 vegetables 39,563 47,720 43,820 53,821 65,256 16,219 15,193 fruit & nuts 10,453 21,419 21,443 14,393 16,792 2,500 2,885Natural phosphates 122,464 97,884 100,390 105,493 126,922 27,242 31,722Potash 86,220 86,023 92,573 121,616 125,628 24,811 22,539Animal & vegetable oils 1,856 1,717 62,698 147,009 64,381 4,374 18,978Chemicals 196,932 195,462 262,361 302,119 331,124 74,547 67,965 of which: medicaments 54,991 70,478 91,297 87,344 103,807 24,034 23,755 fertilisers 72,456 55,623 89,205 113,100 129,153 28,433 21,611Manufactured goods 66,990 81,367 85,921 96,672 118,780 25,913 24,810 of which: paper & manufactures 6,100 12,810 12,109 14,170 21,600 4,567 6,628 textile yarn, cloth & mnfrs 15,286 19,311 20,897 22,896 25,248 5,948 6,236 cement 22,214 17,362 27,334 29,576 41,453 9,505 6,667Machinery & transport eqpt 11,838 23,904 39,443 45,891 24,485 5,639 8,259Miscellaneous manufactured articles 41,009 52,282 40,469 48,259 51,147 12,677 11,537 of which: clothing 9,422 13,178 12,914 17,024 24,453 5,861 5,648 plastic products 9,515 15,409 11,455 7,325 5,344 1,156 1,477Total incl others 633,755 691,282 793,919 1,004,534 1,039,801 212,779 226,561Source: Central Bank of Jordan, Monthly Statistical Bulletin.

24 Jordan


Direction of trade(JD m)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Mar Jan-Mar1992 1993 1994 1995 1996 1996 1997

Imports cifIraq 295.44 307.01 298.35 316.27 358.46 86.23 106.01Germany 186.75 202.79 184.35 218.35 242.23 63.97 60.62USA 246.15 311.49 232.55 240.51 294.90 36.81 42.43Japan 132.19 123.62 93.61 91.44 126.92 34.38 39.87 UK 108.41 127.92 120.78 124.53 133.10 32.08 38.54Italy 110.93 134.91 139.15 138.74 178.36 42.89 36.77France 78.09 98.54 111.09 119.11 149.24 47.52 29.07Saudi Arabia 39.32 48.64 71.52 91.41 91.51 19.60 22.86South Korea 46.72 61.31 58.23 76.82 94.33 24.50 20.60Turkey 97.41 58.45 62.85 88.99 107.96 26.32 19.70Syria 21.37 32.64 48.25 54.96 99.50 15.34 16.80

Domestic exports fobSaudi Arabia 70.08 80.13 72.26 70.35 129.65 23.85 32.14Iraq 48.82 77.51 105.26 190.83 96.16 13.49 24.65India 96.37 65.89 88.06 114.11 81.70 14.13 16.41Lebanon 9.73 17.53 17.89 24.17 24.17 10.03 10.89UAE 25.92 30.45 39.01 43.63 59.39 9.50 7.80Australia 2.56 5.56 12.48 7.70 12.20 0.99 5.84Egypt 4.09 4.57 5.81 8.82 14.04 2.87 5.76Kuwait 0.19 0.00 1.38 0.90 20.10 0.10 5.49Italy 4.14 6.32 10.00 18.20 20.49 6.67 5.40Syria 12.93 19.11 26.71 39.37 40.99 10.80 4.41Indonesia 28.97 37.60 27.96 27.34 31.42 7.70 4.00Source: Central Bank of Jordan, Monthly Statistical Bulletin.

Jordan 25


country report€¦ · july 25, 1997 summary 3rd quarter 1997 outlook for 1997-98: the run-up to...

Documents