on the jordanian economy - GLORIA Center

More documents

Recommendations

Info

The Triumph of the Old Middle Eastbecame king of Iraq. In Iraq, a 1958 militarycoup overthrew that regime and created arepublic. Still, relations eventually recovered.During the 1980-1988 Iran-Iraq war, Jordanand its people genuinely supported Iraq both asa fellow Arab state and as a protector againstIran's brand of radical Islamism, giving therelationship an increasingly important strategicdimension. When Jordan faced a deepeconomic crisis in 1989, its Gulf friends refusedto help, further increasing Baghdad's relativeimportance for Amman..The economic aspect of relations was quitecritical in all these years. During the war withIran, Jordan's economy--includingtransportation, trade, agriculture, and industry--all became essential for Iraq. In exchange, Iraqsupplied Jordan with cheap oil, grants, and lowinterestloans. Today, Iraq remains the majorsupplier of discounted oil and Iraqi continues tobe the largest market for Jordanian products.Delivering these goods in both directions hasbecome one of the main pillars of Jordan'stransportation sector.Jordan's economy faced many problemsbefore the Gulf War. There was a highunemployment rate of 20 percent. The foreigndebt, exceeding $11 billion, was triple theannual Gross Domestic Product (GDP). Andthe level of financial transfers from Jordaniansworking in the Gulf was declining.(3). As aresult, Jordan had to devalue its currency by 50percent in 1989. Another factor was Jordan’ssensitivity to trade levels and its dependence oninternational commerce. For instance, exportswere worth almost $1 billion in 1989, with afurther $181 million in goods being re-exportedthrough Jordan. Considering that Jordan’s GDPwas a mere $4.3 billion, this is a staggeringfigure. No less important to Jordanian livingstandards, the country imported $2.16 billionworth of goods in that same year.(4)Before the Gulf war, well over half ofJordan’s exports were sent to Gulf states. Iraqalone was the market for 23 percent of itsexports; Saudi Arabia was generally the marketfor at least 10 percent more. Iraq’s importancewas underlined by the fact that it was the sourceof between 10 and 17 percent of total Jordanianimports by the late 1980s.(5)Largely as a reaction to the problems ofdeficit and debt described above, theInternational Monetary Fund (IMF) pushedJordan to apply a tough economic reformprogram to increase production, decreaseimports, reduce government spending, and stopgovernment subsidies. These steps led tomassive riots in April 1989 starting in Ma'an,capital of Jordan's transport sector, and sweptthroughout the country, forcing King Husseinto change the government and keep subsidiesfor most basic products. By 1990, Jordan'seconomy had begun recovering from the 1989crisis but still needed serious domestic effort,international support, and time to reach betterlevels of performance.(6)THE IMPACT OF THE GULF WARImmediately after the Iraqi invasion ofKuwait, the UN Security Council passedResolution 661 which invoked economic tradesanctions against Iraq, a decision with whichJordan complied. UN sanctions deeply affectedJordan’s interests and economy since, as statedabove, Iraq was the largest Jordanian tradepartner for the previous ten years.Many Jordanian companies lost largeamounts because Iraqi companies were unableto repay their debts due to the sanctions.Moreover, key Jordanian economic sectors suchas transportation, agriculture, and industry,mainly serving Iraq, were severely affected bythe UN resolution. The Amman Chamber ofCommerce announced in November 1990 thatthe trade sanctions had already cost Jordan $2billion, and the loss was growing. According tothe same source, they expected it to reach $3.6billion in 1991.(7) In addition, before theresolution Iraq was supplying 80 percent ofJordanian oil at reduced prices.(8) Thesanctions forced Jordan to import oil from theinternational markets at the going rates.Iraq was highly dependent on Jordan as theroute for importing and exporting neededproducts. Each year, millions of tons of goodswere handled for Iraq in the Jordanian port ofMiddle East Review of International Affairs, Vol. 6, No. 2 (June 2002) 71
Barry RubinAqaba and this aspect of Jordan’s economy hadbeen growing rapidly before the sanctions tookeffect. Imports via the port went from 6.2million tons in 1989 to 3.2 million in 1990 to1.5 million in 1991. Exports also were hurt, ifless dramatically; from 10 million tons in 1989to 8.9 million in 1990 to 7.7 million in 1991.(9)The trade sanctions also caused thecancellation of many shipping visits, and as adirect result, the number of ships arriving atAqaba decreased from 2,583 in 1988 to 2,075in 1991. This, in turn, made it harder and longerfor Jordan to receive products it needed forlocal industry and agriculture, in addition todisrupting Jordanian exports. Allied warshipssearched thousands of vessels each year andturned back many shipments belonging toJordanian merchants who had business relationswith Iraq, even if they were targeted for localconsumption. Jordanian phosphate andpotassium exports were also disrupted sincethey depended on Aqaba’s port.(10)The Gulf War affected (in various ways)forty countries around the world.(11) Somecountries lost their exports to the Gulf area.Others lost the remittances of their expatriates.A few had to accommodate thousands of theircitizens who returned from the Gulf area. Mostcountries were affected as a result of theinterest rate increase on their old debts anddifficulty to get new credits. Many wereaffected by the increase in oil prices. Jordan,however, was severely affected by all of theseissues.Crown Prince Hassan announced that theeffects of Gulf War on Jordan could besummarized in three dimensions: the tradesanctions against Iraq, the refugees who fled theGulf area and passed through Jordan, and theJordanian expatriates who returned toJordan.(12) At the time of the crisis, estimateson what losses would occur due to the conflictvaried, but in Jordan, they were believed to bemassive. Mudhar Badran, Jordan’s PrimeMinister at the time, estimated Jordan’s totalloss at $8 billion, Badran added that whileJordan’s exports to other Arab countries were$485.7 million in 1989 and had increased by$42.8 million in the first half of 1990, they hadsince decreased gradually after August 2, 1990reaching zero at the end of 1990 and the first 3months of 1991.(13)The Jordanian daily al-Dustur reported thatJordan’s loss would reach $1.4 billion in thelast five months of 1990, and would reach $8.4billion in 1991, including both direct andindirect losses.(14) According to anotherJordanian daily, Sawt al-Sha’b, the UN hadestimated that Jordan lost $1.52 billion in 1990,and expected it to lose another $3.4 billion in1991 (15). Sawt al-Sha'b’s Sameh Hanandehreported in November 1991 that Jordan had lost$1.68 billion in 1990 and would lose $3.97billion in 1991.(16)Regardless of how much these figures(especially Badran’s) were an attempt to getmore foreign aid, the real impact was vast anddid cause Jordan’s leadership to worryenormously about the future of its economy.Jordan’s GNP declined by more than 8 percent,and Jordan's general economic growth droppedespecially in the first five months after thewar.(17) Jordanian reserves of foreigncurrencies and government revenues declinedleading to an estimated budget deficit of $308million in 1991, excluding interest payments.The crisis affected almost all productionsectors, led to an increase in the unemploymentrate to nearly 30 percent, and also resulted in anincrease of the poverty rate to 33 percent.Moreover, Jordan had to postpone theapplication of the IMF reform program. Writingin al-Dustur, Odeh Suleiman al-Swaisconcluded that, after the Iraqi and Kuwaitieconomies, Jordan’s economy suffered the mostdue to the Kuwait crisis.(18)Indeed, when compared to other countries,the serious effect on Jordan becomes evenclearer. During the eight months after the GulfWar, Jordan lost an estimated $4 billion whileTurkey, India and Yemen combined lost $5.5billion. Turkey estimated its losses to be $3billion, Yemen announced a loss of $830million, and India estimated its loss to about$1.6 billion. Even Egypt's actual loss didn'texceed $1 billion dollars. In addition, while72Middle East Review of International Affairs, Vol. 6, No. 2 (June 2002)
Page 1: THE 1991 GULF WAR AND JORDAN'S ECON
Page 5 and 6: Barry Rubinemployees working in man
Page 7: Gulf War," al-Dustur, Issue 8507, (

on the jordanian economy - GLORIA Center

Create successful ePaper yourself

Delete template?

Save as template?