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2nd quarter 1997

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

COUNTRY REPORT

Jordan

The Economist Intelligence Unit

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Contents

3 Summary

4 Political structure

5 Economic structure

6 Outlook for 1997-98

9 Review9 The political scene

15 Economic policy and the economy18 Energy and mining19 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 product 8 Jordan dinar real exchange rate

16 Gross domestic product by sector

Jordan 1

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997

April 18, 1997 Summary

2nd quarter 1997

Outlook for 1997-98: Campaigning will soon start for the general election.The new government represents continuity rather than change. The peaceprocess will continue to struggle while the current Israeli government remainsin power. GDP growth levels are set to improve in 1997-98. Export growth in1997 will see a current-account deficit of $360m.

The political scene: A new government has been appointed following thedismissal of Mr Kabariti. The letter of designation to the new team has empha-sised domestic affairs. Parliament has endorsed the controversial electoral law.Increasing divisions have emerged from within the country’s Islamists. Nineparties have united to form one new grouping. The king has sent an openlycritical letter to the Israeli prime minister. The crown prince has cancelled avisit to Israel. A Jordanian soldier killed seven Israeli schoolgirls in March. Aprisoner release has helped to improve relations with Kuwait.

Economic policy and the economy: Mr Majali has appointed an experi-enced economic team. The Central Bank governor has estimated 1996 growthat 5.2%, and anticipates high rates in the current year. The World Bank hasstepped up its loans to Jordan, while the IMF has also come up with newsupport. Legislative reform is moving more slowly.

Energy and mining: Jordan has signed an exploration accord with a UScompany. An Egyptian gas and infrastructure deal is proceeding while Jordanis renewing its efforts to build an oil refinery at Aqaba.

Banking and finance: The Central Bank has continued to pursue its strategyof increasing foreign exchange holdings and has rescued an ailing investmentbank.

Foreign trade and payments: Jordan is expected to seek new debt resched-uling. The IMF has estimated the rise in the trade deficit at 24%. Israeli-Jordanian trade figures have proved to be only modest in size. The energyminister has announced a rise in energy import costs, though an oil andproducts accord with Iraq has been rolled over. Jordanian firms have begun tosupply the Iraq market under the ’oil for food’ resolution. The USA is providingsoft loans for wheat imports.

Editors:All queries:

Crispin Hawes; Adrian SwinscoeTel: (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 on March19, 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 Ahmed al-LaouziSpeaker 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 and 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 3,811 4,191 4,621 5,178

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

Populationb m (East Bank only) 3.8 4.0 4.1 4.2 4.4

Exports fobc $ m 1,219 1,246 1,425 1,776 1,923

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

Current account $ m –765d –628d –398 –221 –359

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

Total external debt $ m (year-end) 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

April 18, 1997 JD0.709:$1

Origins of gross domestic product 1995f % of total Components of gross domestic product 1995f % of total

Agriculture 9.5 Private consumption 62.0

Mining & quarrying 3.3 Government consumption 23.1

Manufacturing 17.3 Gross fixed capital formation 32.8

Electricity & water supply 4.4 Increase in stocks 3.0

Construction 11.2 Exports of goods & services 51.2

Trade, restaurants & hotels 5.7 Imports of goods & services –72.1

Transport & communications 19.7 GDP at market prices 100.0

Finance & other services 28.2

Community & personal services 3.2

Imputed bank service charge –2.6

GDP at factor cost 100.0

Principal exports 1995 $ m Principal imports cif 1995 $ m

Potash 173.9 Machinery & transport equipment 908.0

Fertilisers 161.8 Manufactured goods 721.0

Phosphates 143.7 Crude oil 481.2

Food & live animals 142.4 Chemicals 454.5

Total incl others 1,437.1 Total incl others 3,705.3

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

Iraq 18.9 Iraq 12.2

India 11.4 USA 9.3

Saudi Arabia 7.0 Germany 8.4

UAE 4.3 Italy 5.3

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

Jordan 5


Outlook for 1997-98

Electioneering is set tostart

With legislative elections now less than six months away, and the cabinetreshuffle freeing many deputies from the constraints of government, the sceneis set for the onset of serious electioneering. As in the past two elections, most ofthe campaigning is likely to take place behind closed doors as candidates seekthe endorsement of tribal leaders and notables. Indeed, the failure of the ideo-logical opposition to obtain a change in the election law means that tribalismcan be expected to play a central role in the election of a majority of the deputies(see The political scene). Even so, the possibility exists that some populist issuesmay emerge during the campaign. The flowering of a tabloid press over the lasttwo years has helped this trend, with its taste for the sensationalising news.Issues which could blow up include: the treatment of the Jordanian soldier whokilled seven Israeli schoolgirls (see The political scene); corruption; the cost ofliving and the international community’s treatment of Iraq.

New governmentrepresents continuity

rather than change

The installation of a new government under the septuagenarian Abdel-Salamal-Majali looks set to usher in a period of consolidation rather than change. Incomparison with his predecessor’s administration, which was younger and hada commitment to rapid reform, this emphasis on stability and reliability willseem even more accentuated. The new government is, of course, bound to thecontinuing strategy of economic liberalisation and structural adjustment, as itwas when Mr Majali was last in power. However, as King Hussein’s letter ofdesignation made clear, the first task of the new cabinet is to oversee theelections, assuming, as is at present likely, that they take place.

Aside from that task, Mr Majali’s main role would seem to be to restore somesolidity to the process of government. This applies to the peace process asmuch as it does to domestic politics. A period of quiet continuity would bewelcome in Jordan. The twin tasks of fighting the election and providing someweight to internal politics do, however, raise the issue of the expected longev-ity of the government. At very least a major reshuffle looks probable at the endof the year, though the king has come out strongly against the recent practiceof incorporating large numbers of deputies into an expanded cabinet in orderto ensure a harmonious relationship with parliament. It is more likely that ayounger man will be brought in to lead the first government after the election,only then will the pace of reform seen over the past 12 months stand anychance of picking up anew.

The peace process willshow little progress

The failure of the Hebron deal in January this year to provide a respite from thetensions involved in the peace process provides evidence that the atmosphere inIsraeli-Palestinian relations is unlikely to improve while Binyamin Netanyahuremains Israeli prime minister. Relations between the two sides are likely toremain fraught with distrust and dislike only punctuated by periodic violence inthe West Bank while Likud remains in office. In Jordan, King Hussein faces theprospect of a long period in which he will have to finesse a close securityrelationship with Israel with cordial personal ties with Yasser Arafat. This he willseek to reconcile by maintaining the mediator’s role which he adopted in help-ing to clinch the Hebron agreement, and by cementing his relationship with

6 Jordan


Israeli society in the name of trying to push Mr Netanyahu towards compro-mise. He will have to hope that this strategy is not derailed by unforeseenevents, mainly through violence on either side, or by Palestinian anger mani-festing itself inside Jordan. The latter remains possible, the former probable.

GDP growth is set tobounce back in 1997—

GDP growth in 1996, now estimated at 5.2% by the Central Bank, was strongand, crucially, still resulted in a real increase in per head income. However, itwas a disappointment, especially when set alongside the overly optimistic pro-nouncements of officials. We retain some reservations over the latest prelimi-nary estimates issued by the Central Bank of Jordan (CBJ) and believe that theremay yet be a slight downward revision to the statistics, although any revision islikely to be minor. In any case, our prognosis for the next two years is forstronger growth than that achieved in 1996. There is likely to be a resurgence inGDP growth in 1997, principally on the back of the expansion of the Iraqimarket for Jordanian goods and the commissioning of new plants in the export-oriented mining and mineral processing sector. These factors may be even moresignificant in 1997, as Iraqi demand for Jordanian goods and goods re-exportedthrough Jordan expands under UN Security Council Resolution 986 (SCR 986)and new industrial facilities begin to build up to maximum capacity. On thedebit side, however, the uncertain future of the peace process will restrict oppor-tunities, while the slow pace of privatisation is unlikely to lead to rapid transfor-mations. On that basis the we foresee an improvement in real growth from 5.2%in 1996 to 5.6% in 1997 and perhaps even 5.8% in 1998.

—while inflation will fallback to 4.5%

After rising from 2.3% in 1995, inflation expanded rapidly in 1996, averaging6.5% over the whole year as the effects of subsidy removals were felt across theeconomy. In 1997 we expect inflation to fall back to 4.5% and in 1998 to 3.5%as the government continues to pursue conservative fiscal and monetary poli-cies. Data from the latter part of 1996 indicate that the inflation rate felldramatically from the highs of August when the crucial bread subsidies wereremoved. Over 1997-98, inflationary pressures will stem from the further re-moval of government subsidies, particularly those on water and higher educ-ation, and a higher rate of indirect taxation under the terms of the IMFprogramme.

External economyexpected to stabilise

The Central Bank estimates that exports grew by 9% over 1996, pushing totalmerchandise export revenues up to $1.9bn, with much of the growth stem-ming from exports of live animals and cement. However, import growth isbelieved to have been running at around 14% over 1996 to reach $3.8bn.Import growth was at least in part due to high wheat prices on the inter-national market and the investment in capital goods.

As a consequence of the ’oil for food’ resolution, and some growth in trade withthe Indian sub-continent, particularly in the area of mineral fertilisers, we ex-pect exports to grow by nearly 11.5% and 12.8% in 1997 and 1998 respectivelyto $2.14bn and $2.43bn. The stability of the external economy will also beassisted by a dampening down in import growth following the 21.5% and19.2% rises over the last two years. We predict a more modest increase of 6.5%and 7.1% in 1997 and 1998 to $4bn and $4.3bn. The conjunction of increasedgrowth in exports and a more subdued rise in imports should be a trade account

Jordan 7


which remains stable at around the $1.85bn mark. With invisibles expected tocontinue to hold their own, this should also translate into stability in thecurrent account, with Jordan expected to post a deficit of $360m and $358m in1997 and 1998 respectively.

Attention will turn backto foreign debt

The expiry of the current rescheduling agreement with the Paris Club in Maymeans that, after a couple of years of respite, attention will turn back to thesubject of debt. The Paris Club will meet at the end of April to consider thefuture with regard to a number of countries, including Jordan. Amman is verykeen to see a further rescheduling. The expectation is that the Paris Club willagree, although there may be complaints in subdued tones that the kingdomhas still not done enough in the area of restructuring, especially on privatis-ation. Overall, the size of the foreign debt is not expected to grow over the nexttwo years, with disbursements more or less compensated for by repayments oncommercial debt, debt-equity swaps and other devices. This means that totalforeign debt will remain at around $6.9bn. With the overall foreign debt re-maining stable, the debt/GDP ratio and debt service ratio should improve asthe economy continues to grow. We estimate that the former will fall from84.3% in 1997 to 79.3% in 1998. If workers’ remittances are included in thedebt service equation together with export earnings then this ratio is expectedto decline from 15.4% in 1996 to 14.9% in 1998.

Forecast summary($ m unless otherwise indicated)

1995a 1996b 1997c 1998c

Real GDP growth (%) 6.4 5.2 5.6 5.8

Consumer price inflation (year-end; %) 2.4 6.5 4.5 3.5

Merchandise exports fob 1,776 1,923 2,143 2,429

Merchandise imports cif 3,650 3,756 4,001 4,285

Current-account balance –221 –359 –360 –358

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

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

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 96(b) 97(c) 98(c)

Jordan dinar real exchange rate (d)1990=100

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8 Jordan


Review

The political scene

A new government hasbeen appointed—

On March 19 King Hussein swore in a new 23-member cabinet led by AbdelSalam al-Majali, an experienced and trusted figure, who is best known forhaving negotiated the October 1994 peace treaty with Israel. Mr Majali wasimmediately entrusted with a number of tasks, the main one of which is tooversee parliamentary elections, due to take place in November. He supervisedthe last National Assembly elections in November 1993. Mr Majali, aged 71,represents a safe pair of hands at a time when there is considerable unease inJordan over the government’s direction, the uncertain fate of the peace processand widespread economic hardship.

Assisting Mr Majali in presiding over the country will be two deputy primeministers, Abdullah Ensour and Jawad al-Anani, both of whom are experiencedpoliticians who have served in government before. It is expected that there willbe a division of labour between the two deputies, with Mr Anani, a Palestinianand a former labour and industry minister, overseeing the economy, andMr Ensour, an East Banker who has served as both a foreign and educationminister, having more responsibilities in the political domain.

Otherwise, the Majali cabinet is largely technocratic, a feature that char-acterised the new premier’s previous term in office between May 1993 andJanuary 1995. He has retained five ministers from the outgoing government:Rima Khalaf, the only woman, who retains planning; Munther al-Masri, whohas higher education added to his education portfolio; Abdul Salam al-Abbadi,who stays as Awqaf and Islamic Affairs minister; Nasser al-Laouzi, who movesfrom transport to public works and housing, and Abdullah Ensour, who hasbeen promoted to deputy prime minister from the education ministry. Many ofthe former ministers who also have parliamentary seats had wanted to leavethe cabinet in order to begin their campaigns for re-election. Even so, aroundhalf of the cabinet have previous experience of government. Some 13 ministershold doctorates or other higher degrees, primarily in economics, engineeringand public administration. Less than one-third of the cabinet consists ofPalestinians.

—following Mr Kabariti’sunexpected dismissal—

If the Majali cabinet is perceived as being safe, interest surrounds the circum-stances under which his predecessor, Abdul Karim al-Kabariti, was sacked.Mr Kabariti, whose appointment had seemed to presage a generational shift inthe kingdom’s governing elite, had been in power for only 13 months.Committed to a programme of rapid economic reform, it had been expectedthat Mr Kabariti would be retained as premier until the elections in November,especially as he had already let it be known that he would not stand again, andwould simply extensively reshuffle his cabinet. As little as a week before hisdismissal Mr Kabariti had seemed to enjoy the confidence of the king.

There appear to have been two developments during the intervening timewhich turned King Hussein against his prime minister. The first disagreementcame over two issues relating to the peace process. Mr Kabariti was reported to

Jordan 9


have suggested that the Palestinians withdraw from talks with the Israeligovernment, advice which is said to have angered the king. Furthermore, fol-lowing the shooting by a Jordanian soldier of Israeli schoolchildren in theBaqoura area in March, Mr Kabariti was critical of the king’s decision to visitthe families of the schoolgirls killed in the incident.

The second point of contention seems to have been a personality clash betweenthe prime minister and Crown Prince Hassan which had erupted in the latterhalf of 1996. In particular, Mr Kabariti appears not to have informed PrinceHassan of the Baqoura shootings, even though he was at that time technicallyRegent since the king was outside the country. The fact that Mr Kabariti’s resign-ation letter repeatedly referred to the king personally, rather than the institutionof the monarchy or the Hashemite leadership was also taken as a snub towardsthe crown prince. The fact that the new government was established on the dayof Prince Hassan’s 50th birthday, with the mainstream Jordanian press full ofdeferential supplements, can be viewed as a riposte from the king.

—and subsequentlydenigrated

The bad blood existing between the king and Mr Kabariti was most visible in theexchange of letters between the two surrounding the formal resignation of theold cabinet. Both departed from the protocol of short missives, expressing grati-tude. Mr Kabariti’s letter appeared to be an exercise in self-justification. Theking’s reply was extraordinary in its explicit nature. He criticised Mr Kabariti forbeing overly concerned with his media image, and being unwilling to admit hisfaults and for a lack of compassion, especially towards those who have sufferedfrom ill health and deprivation. In a society where generosity and humility areregarded as great virtues, the latter criticism was especially damaging. Althoughthe king ultimately excused such failings, attributing them to the prime ministersuffering from exhaustion, the public nature of the outburst will make it hardfor him to re-appoint Mr Kabariti as premier. It was previously assumed that hewould remain a leading political figure in the kingdom for many years to come.Moreover, with a septuagenarian being appointed as Kabariti’s successor a ques-tion mark has been placed over the king’s commitment to a new generation ofpolitical leaders. Suspicions have existed before that King Hussein is not tem-peramentally well disposed to work with senior figures who are a generationyounger than himself.

Letter of designationemphasises domestic issues

Though King Hussein stated that the main job of the new government was tooversee the forthcoming elections, this was not the only instruction issued inthe letter of designation to Mr Majali. The king also placed great emphasis onother aspects of internal affairs. Much of the letter dwelt upon the need for thenew government to weed out favouritism and inefficiency from the system,and to reward hard work. He also railed against self-serving and corrupt publicservants, stating that the criteria for senior appointments should be “profi-ciency, loyalty and honesty”. More specifically, the king also pressed the newgovernment to address the issues of unemployment, which remains a worrythough the figures appear to have stabilised, what he described as “swellingpockets of poverty”, and the impact of what he referred to as “the economicrecession”. While one might quibble about whether an economy experiencing6% growth is in recession, the importance of being seen to be taking the issueseriously continues to be paramount. The king also mentioned the need to

10 Jordan


remedy “the chaos” in the educational system, and the failure to link educ-ation with society’s needs; perennial issues which are likely to lie beyond theability of the new government to act.

Curiously perhaps, in view of the king’s recent apparent alarm over the courseof Palestinian-Israeli negotiations, the construction of new settlements inJerusalem and the implications of these issues for Arab-Israeli relations, foreignaffairs received little attention in the letter. However, towards the end of theletter the king did restate his commitment to the peace process and the searchfor a comprehensive and lasting peace. King Hussein also reiterated his supportfor the Palestinians and the establishment of “their state on their national soil”.

Parliament endorsescontroversial electoral law

The National Assembly has re-affirmed its commitment to the current electorallaw, which was controversially adopted temporarily before the last legislativeelections in 1993. The debate proved to be one of the most heated seen in thecurrent parliament before a 51-21 vote endorsed the existing “one man onevote system”. The law has been controversial since it replaced the old multi-vote system, in which the number of votes an individual had at their disposalreflected the number of deputies being elected in the multi-member constitu-encies. The system was changed because it was felt that it gave a disproportion-ate weight to ideological and, in particular, Islamist groups. The one man onevote system has proved equally controversial because of the benefit which itgives to tribal candidates from rural areas who tend to be more apolitical. Thetamer nature of the current National Assembly, in comparison with its livelierpredecessor, underscores this point. As might be expected, Islamist deputiesemerged as the main critics of the existing electoral law during the debate, butmany outside the Assembly feel uncomfortable at the growth of executivepower over the past five years, and see a vocal parliament as an essential checkon the executive.

Behind this criticism, which is usually directed at the government, is a growingfeeling that the king too has greater latitude in decision-making than has beenthe case in the past. The increasingly suspect nature of his political judgement,seen across a range of subjects from his backing and then sacking of the primeminister through to his public support for the ending of bread subsidies and hisstrenuous efforts to promote normalisation with Israel, has led many to ques-tion his freedom of action.

Increasing divisionsemerge within Jordan’s

Islamists

Since the turn of the year an increasingly polarised debate has emerged withinthe ranks of the Muslim Brotherhood, the main component of the IslamicAction Front (IAF), which could yet produce a split. The debate, between twofactions labelled broadly hawks and doves, relates to general political strategy,in view of the political ineffectiveness of the Front since 1991, especially inparliament. The debate crystallised over the question of whether the IAFshould participate in what then was expected to be a major reshuffle in thecabinet led by Abdel-Karim al-Kabariti. A decisive vote of the Brotherhood’sShura Council at the end of January, in which the hawks won 17-9, with fourabsentees, ended the speculation about whether the Islamists might join agovernment in the near future. The argument for staying in opposition wasthat participation in government would imply recognition of the state of Israel.

Jordan 11


However, that vote has not removed a growing feeling on the part of moderatesthat the IAF’s refusal to join the government has been self-defeating and mayultimately be costing it support in the country. Led by an Assembly deputy,Abdullah Akayleh, who was briefly education minister in 1991 on the lastoccasion Islamists participated in government, the doves have tried to start amore public debate on the subject. Dr Akayleh’s views have been opposed bythe hardliners, led by Hammam al-Said and Munim Abu Zant.

Nine parties unite— An important big step was taken towards consolidating Jordan’s fragmentedparty system with the announcement on February 28 that nine political partieswould be uniting into one. The new party, the National Constitutional Party(NCP), is now the largest political grouping in the country, and, in view of itscentrist orientation, potentially the most influential. With three leftist partieshaving grouped together to form the Unionist Arab Democratic Party last year,the number of parties in the kingdom has now been reduced from 24 to 14. Themerging of parties represents a long-awaited rationalisation of Jordanian par-ties, one that has no doubt been prompted by the growing proximity of thisautumn’s general election.

—but a number of issuesremain unresolved—

The announcement was the culmination of two months of intensive negoti-ations, and much has yet to be decided, especially regarding the selection of theparty’s leadership. All that has been agreed hitherto is that the old leaders haveresigned, and that a general assembly of the party will elect a new leadership butno firm date has been set for the assembly. The election of the new leadership,together with choosing a unified list for the forthcoming general elections, willbe major tests for the new group. Even if the NCP holds together through thenational elections, the risk of splits immediately following the poll is high.

—although someconsensus is reached on

foreign policy

One area where there has been relative consensus has been over the foreignaffairs component of the party’s new programme. Agreement has been forgedon the basis of a series of somewhat vague commitments in favour of a numberof issues:

• an independent Palestinian state with Jerusalem as its capital;

• Israel’s full withdrawal from south Lebanon and the Golan Heights; and

• the removal of UN sanctions against Libya, Iraq and Sudan.

The new party has yet to address the thornier issues of domestic policy. Partiesinvolved in the new union include: the East Bank nationalists, Pledge, led byAbdul Hadi al-Majali, the brother of the new premier; the Jordan NationalAlliance, which is strongly backed by Bedouins; and parties led by well knownpolitical figures such as Anis Muasher and Abdel-Raouf al-Rawabdeh.

King Hussein’s letter toMr Netanyahu is openly

critical—

Less than six weeks after the near-euphoric relief with which he had greeted thebreakthrough over Hebron, King Hussein was again expressing open frustrationwith Binyamin Netanyahu, the Israeli premier, over his conduct of the peaceprocess. The king addressed an open letter to the Israeli leader in which hesuggested that Mr Netanyahu’s decision to allow a Jewish settlement to be builtat Jabal Abu Ghnaim (known in Hebrew as Har Homa), on the outskirts of

12 Jordan


Jerusalem might destabilise future talks. It is widely held that the new settle-ment would complete the encirclement of Arab East Jerusalem with Jewishsettlements, thereby effectively prejudicing the final status negotiations on thefuture status of the city. In the letter King Hussein warned that the decision“was bound to create facts on the ground whose negative effects will adverselyinfluence the positive feelings that have been prevailing lately”. Although theking was restrained on paper, he was much more candid informally. Officialshave that he was once again angered by what he saw as Mr Netanyahu’s“arrogance” and “irresponsibility”, and even that the Israeli leader’s behaviourwas “narcissistic”. In spite of such sentiments, however, there is little chance ofKing Hussein making a radical departure in his relations with Israel.

The king’s letter came two days after a visit to Amman by Mr Netanyahu onFebruary 23, when the Israeli premier presumably informed the king of hisplans to build the settlement. The nature of the letter was somewhat of asurprise, as reports of the visit gave no inkling as to the likelihood of such anoutburst. The two leaders spent several hours in talks together, leaving theimpression that they had gone well, at least in the sphere of bilateral relations,especially with regard to economic cooperation and joint projects.

—while the crown princecancels a visit to Israel

The king’s letter indicated a willingness to revert to the tactics used during thefinal quarter of 1996, when he resorted to public pressure via the Israeli press totry to influence the Israeli government. The public nature of King Hussein’sdiplomacy was underlined when Crown Prince Hassan cancelled a visit toIsrael immediately afterwards. He had been expected at a Tel Aviv ceremony inmemory of the assassinated former prime minister of Israel, Yitzhak Rabin. Thecrown prince let it be known that he would only be willing to travel to Israelagain “if such a visit will serve the cause of peace”.

A Jordanian soldier killsseven Israeli schoolgirls

In the end, the period of poor Israeli-Jordanian relations proved short-lived asKing Hussein was forced to put his antagonism towards the Israeli adminis-tration aside following the massacre of Israeli schoolgirls by a Jordanian soldier.The killings took place on March 13 at Baqoura in northern Jordan during afield trip by the school party. The soldier, acting alone, killed seven of the girlsand wounded six before being overpowered. The king seized the momentfurther to bolster his standing in the eyes of the Israeli population by visitingthe families of the bereaved with Mr Netanyahu. Observers contrasted KingHussein’s dignity and grief with the awkwardness of the Israeli premier. Theking’s prompt action also won plaudits in the USA, though at home there weremutterings that he had rarely responded in such a way to the killing of Arabs.The occasion also provided an opportunity for the king to side-step the AbuGhnaim controversy and allowed him to return to a role of mediator betweenthe Israeli and Palestinian sides.

The Jordanian authorities will need to be extremely sensitive in dealing withthe soldier, Ahmed Dakamsa. On the one hand, Israeli expectations are thatthe sentence be as severe as possible, on the other, initial Jordanian statementsthat the soldier was “deranged” and “insane” suggest that he might not besubject to formal military justice. Meanwhile he is fast becoming the focus ofthose who oppose normalisation with the state of Israel, with Jordanian law-

Jordan 13


yers almost falling over each other to represent him in court. A series of com-mittees have also been established to provide support to Mr Dakamsa and hisfamily. Furthermore, the killings have raised the issue of the status of Jordanianland formally returned by Israel under the 1994 peace treaty, of which Baqourais a part. Israel acknowledged Jordanian sovereignty over such territory in1994, but immediately leased back the land which is now farmed by Israelis.The Jordanian opposition has condemned what they regard as the continuedoccupation of Arab land.

Treatment of prisoners inKuwait threatens already

poor relations—

The controversy over the treatment of Jordanian prisoners in Kuwaiti jailswhich has been brewing for some time has been partially defused by the releaseof ten of the detainees. The controversy emerged in late January, when theJordanian press reported that Jordanian prisoners in Kuwait were being sub-jected to systematic beatings. Press opinion pages called on the Jordaniangovernment to take action and the administration was widely criticised for itsinaction over the issue.

Official statements on both sides began to exacerbate the already considerabletension existing between Jordan and Kuwait, threatening to obliterate theprogress which had been made in ameliorating ties between the two countries.In order to prevent the issue escalating too far a joint Omani-Qatari investig-ative committee was formed to look into the allegations and the UK and USambassadors in Amman worked to stabilise the situation. A number of Gulfstates and leading Western countries all have an interest in preventing rel-ations between Jordan and Kuwait from again deteriorating further.

—but a limited releasecalms the situation

Ultimately a compromise was reached by the Kuwaiti government whichserved to calm the situation. The Kuwaiti head of state, the emir, Sheikh Jaberal-Ahmad al-Sabah, included ten Jordanians in a list of 405 prisoners pardonedat the Eid al-Fitr celebrations at the end of Ramadan. The Jordanian govern-ment was quick to praise the gesture as a positive move. Around 20 Jordanians,imprisoned in the aftermath of the Iraqi occupation of the Emirate, remain injail in Kuwait.

Fragile ties are improvinggradually

The affair shows the extent of the fragility of relations between the two states,but also provides an indication of a growing readiness to see ties improve. TheJordanian government is probably keener to take steps to achieve this aim thanits Kuwaiti counterpart since popular feeling in Kuwait still runs very high overthe stance taken by Arab leaders following Iraq’s invasion of Kuwait in 1990. InMarch the Kuwaiti crown prince, Sheikh Saad Abdullah al-Salem al-Sabah,angrily rejected the contention of the Palestinian leader, Yasser Arafat, that hehad not supported the Iraqi invasion but had sought merely to avoid furtherconflict. In the case of Jordan, more progress has been made and the Kuwaitigovernment has taken note of King Hussein’s hostile attitude towards the Iraqiregime since 1995.

There is little popular support in either country for the establishment of closerelations. While many Kuwaitis feel a keen sense of betrayal because of Jordan’sstance during the 1990-91 Gulf crisis, the expulsion of Jordanians andPalestinians from the emirate in 1991 has ensured that Jordanian popular

14 Jordan


sentiment does not favour the Sabah regime. Nonetheless, the two govern-ments are expected to maintain the tentative momentum towards the re-establishment of diplomatic relations, although this is initially likely to involveonly low-level representation.

Economic policy and the economy

Mr Majali appointsexperienced economic

team

As might be expected of a senior figure who has served as premier before, therewere few unfamiliar faces in the economic team appointed by Mr Majali. Thesenior figure in the cabinet with responsibility for economic affairs is undoubt-edly Jawad al-Anani, who has been appointed one of the two deputy premiers.He enjoys both the trust of Mr Majali, whom he served during his lastadministration as minister of information, and the king, since he held key rolesduring the peace negotiations with Israel in 1993-94. The fact that the financeportfolio has been given to the former ministry under-secretary, SuleimanHafez, a technocrat without a track record in politics, suggests that Mr Anani’sinfluence over policy will be even greater.

Technocrats have been appointed elsewhere, with the former under-secretary,Mohammed Hourani, becoming energy and mineral resources minister, andRima Khalaf (who also served with Mr Majali three years ago) retaining plan-ning. The experienced nature of the new cabinet is reinforced by two furtherappointments: the return of Bassam al-Saket as transport and communicationsminister and the arrival of Munzir Haddadin at the water and irrigation min-istry, after running the Jordan Valley Authority for several years. Mr Haddadinwas previously an economic advisor to the crown prince, agriculture ministerand has run Jordan’s main cement company.

In a cabinet which tends to lack new blood, two younger appointments on theeconomic side are significant: the retention of Mr Laouzi, who has been movedfrom transport to the public works and housing portfolio and more importantly,the promotion of Hani Mulqi to the Ministry of Industry and Trade. Mr Mulqi,whose background is in academia and at the Royal Scientific Society, recentlycame to prominence when the king gave him a leading role in the peace process.The son of a former prime minister, he could yet emerge as one of the youngergeneration of politicians among whom the premiership rotates in years to come.

Legislative reform movesmore slowly—

While Jordan is continuing the overhaul of laws applying to the economy, it ismoving ahead slowly and fitfully. The removal of the reform-mindedAbdel-Karim al-Kabariti in March has placed a further question mark againstthe rate of future reforms. In January, the National Assembly approved 18 ofthe 292 articles contained within the draft companies law. The bill, which isone of three or four key pieces of new legislation currently under conside-ration, seeks to minimise red tape, promote decentralisation and generallyimprove upon existing legislation.

—with criticism holdingup the competition law—

In other areas, however, progress is considerably slower. A draft law on compet-ition and monopolies, which was forwarded by the cabinet to parliament inmid-December, has been held up, because of wide ranging and systematiccriticism from the private sector. Critics of the bill have attacked different

Jordan 15


aspects of the proposed law, from its very conception, to the imprecise lan-guage contained in the draft and the institutional reforms that it contains.Some have suggested that the bill owes more to an international template forlegislation, driven by such bodies as the WTO, of which Jordan is presentlynegotiating membership, than to the specific conditions prevailing in thecountry. It is price manipulation, a spasmodic problem in the country, thatshould be the subject of legislation, some have argued, rather than the presenceof cartels, which a small economy like Jordan’s tends not to produce.

—and targeting anenforcement authority

Further objections have surrounded the controversial idea of creating a nine-member authority to enforce the new law, and the creation of a special court tohear cases. Members of the private sector fear that the former, seven of whosemembers would be from the public sector, would have an inbuilt philosophicalbias against enterprise. The creation of special courts is automatically regardedwith some suspicion, it having been routine for martial law courts to reviewcommercial cases as recently as the late 1980s.

The Central Bankgovernor puts 1996

growth at 5.2%—

It has now been officially confirmed that the Jordanian economy experienceda dip in growth last year, with real GDP rising by 5.2%. Speaking at the end ofFebruary, the governor of the Central Bank, Ziyad Fariz, gave the preliminaryestimate for 1996, which fell significantly short of the growth target of 6%.Mr Fariz attributed the disappointing figures to a higher than expected foodimport bill, though other factors, such as the difficult experiences of the peaceprocess leading to lower than expected tourism receipts and depressed tradewith Israel and the Palestinian entity, have also been advanced as reasons.

—but predicts fasterexpansion in 1997

In spite of the reverse experienced in 1996, Mr Fariz has remained upbeat aboutthe prospects for growth this year. The governor has predicted that Jordan willmeet its target of 6.5% growth and may even exceed it, and he justified hisoptimism on three grounds:

• increased exports and re-exports on the back of the expanding Palestinianmarket and the UN’s oil for food deal with Iraq;

• a wave of export-oriented, joint venture mining and processing investmentswhich are to come on stream in 1997-98; and

0.0

0.5

1.0

1.5

2.0

2.5

1992 93 94 95(b)

Industries

Government services

Services to households

Gross domestic product by sectorJD bn at constant (1985) prices (a)

(a) Excluding imputed bank service charges. (b) Official estimates.Source: Central Bank of Jordan.

16 Jordan


• rising levels of foreign investment as the government moves ahead with thelong-delayed privatisation drive as part of the IMF-directed reforms.

While there may be an element of truth about all three, the significance of thefirst would seem to be exaggerated, the second to be somewhat premature andthe third to owe something to a degree of wishful thinking. While we tooexpect a faster level of growth in 1997, our forecast falls well short of thosebeing predicted by the governor (see Outlook for 1997-98).

The World Bank is to stepup loans for Jordan—

The World Bank’s senior official for the Middle East has stated that the Bankintends to lend $1bn to Jordan over the next five years. The allocation of sucha figure represents an increase in funding for Jordan, which, since 1992 hasbeen receiving average annual assistance of $100m. In 1996 World Bank creditsto Jordan topped the $160m mark. The decision to increase assistance to Jordanhas been made, according to Kamal Darwish, the Bank’s vice-president for theMiddle East and North Africa, on the basis of the country’s strong macro-economic track record. Mr Darwish mentioned low inflation, good, sustainableannual growth rates and shrinking budget deficits as the determining factors.

In addition to macroeconomic achievement, the strength of the Bank’s supportmight be the desire to provide support for Jordan during a difficult politicalperiod. Details of the $1bn allocation are expected later in the year, when Jordanannounces its latest five-year development plan. All that Mr Darwish has beenprepared to say on the matter is that loans will be made available both forsupporting sectoral reforms and helping Jordan to address some of its socioeco-nomic problems. It may be assumed that the energy and water sectors will be atthe forefront of the former. Poverty alleviation and unemployment reductionwill form the core objectives of the latter. Since a relationship was established inthe early 1960s the World Bank has lent some $1.4bn to the kingdom.

—while IMF also bolstersits support

The announcement by the World Bank followed an earlier decision by the IMFto bolster its financial support for Jordan. The IMF board decided in earlyFebruary to extend its credit to Jordan by SDR37.24 ($51.8m), also in recogni-tion of Amman’s economic performance. The additional credit is being sup-plied from the Extended Fund Facility (EFF), and will be provided for theaugmentation of resources. More specifically, the funds will be used to increaseJordan’s foreign currency reserves and to boost its balance of payments. Thenew allocation brings to $337m the funds allocated for Jordan for the period1996-98 under the EFF. The Fund’s decision followed a visit to the Kingdom ofJordan by its managing director, Michel Camdessus, and an upbeat reportsubmitted after a mission in October last year.

Energy and mining

Jordan signs anexploration agreement

with a US company

Foreign oil interest in Jordan continues to be sporadic, as the signing of anotherprospecting and production-sharing agreement indicates. The accord with aTexas based firm, Medaillon-Huber, was announced in early March. Under theterms of the eight year agreement, Medaillon-Huber will explore a 4,800-sq kmblock in the Sirhan region. In addition to geophysical and geological studies, thefirm has agreed to undertake the work-over of two existing wells and to drill a

Jordan 17


minimum of nine exploration wells. In doing so, Medaillon-Huber has commit-ted itself to a minimum of $23m worth of expenditure. The accord also includesa commitment towards the transfer of technology and the training of local staff.

Egyptian gasinfrastructure deal is

set to proceed—

The ministry of energy and mineral resources has concluded a build-own-operate (BOO) preliminary agreement for a gas supply system, which will appar-ently bring Egyptian gas to Jordan. The move represents a joint decision on thepart of the two governments to press ahead with an arrangement which wasoriginally to have included Israel. The tripartite element of the scheme seems tohave been put on hold, a casualty of the deterioration in Egyptian-Israeli rel-ations, itself a by-product of the peace process problems of the last 12 months.The decision to go ahead has also been taken in the wake of the collapse of aproject under which the Enron Corporation would have built a regasificationplant at Aqaba, using Qatari LNG, for the Israeli and Jordanian markets. Thesurviving gas plan would involve the construction of a 300 km pipeline acrossthe Sinai Peninsula to Aqaba, where it would be hooked up to the Jordaniannational grid. The increasing demands for power, notably by the Jordanianfertiliser industry, has provided the impetus for the revamping of the project.

—with Amoco andTractebel to benefit—

The beneficiaries of the letter of intent, which was signed on February 26, arethe Amoco Corporation of the USA, which had earlier brought in Belgium’sTractebel as a partner. It is being assumed that the gas will come from Egypt’sonshore/offshore Nile Delta field, in which Amoco has a share of production.Amoco and Tractebel will be responsible for the establishment and operationof the new gas infrastructure, which will include the construction of a gaspipeline. Other duties will include the purchase, marketing and distribution ofthe natural gas in what is being touted as an entirely private-sector initiative.Under the terms of the accord the consortium have 18 months to complete allnecessary studies before a final and binding gas sales and purchase agreementis concluded.

Planners are looking for Jordan’s electricity capacity to rise from its currentlevel of 1,100 mw to 1,500 mw in 2000 in order to meet expected demand.There is also a possibility that the eventual gas deal will include the enhance-ment and exploitation of Jordan’s sole gas field at Risha, which currentlyproduces 30m cu ft/day.

—while the Aqabarefinery plans are to go

ahead

The government also looks determined to push ahead with efforts to find acontractor for the planned new oil refinery for Aqaba, in spite of the doublereverse experienced last year. The fate of the $2.5bn project appeared to bedoomed when two out of the three short-listed outfits pulled out after failingto secure the necessary financing under the terms specified by the Jordanians.The energy and mineral resources ministry has invited new bids for the con-struction of the plant with the specifications largely unaltered. However, theterms of the deal, in which the Jordanian government is refusing to provideany commitments to the purchase of products from the refinery or to share theinvestment risk, is likely to deter foreign participation. The investment incen-tive package has been regarded as meagre, covering the provision of land andtax breaks only.

18 Jordan


Banking and finance

Push continues to raiseforeign currency reserves

The Central Bank has maintained the concerted push, which it set in motionin 1996, to build up foreign currency reserves. By the end of February, accord-ing to CBJ sources, Jordan had forex cash reserves equivalent to around $820m.The bank remains committed to meeting its target of $1bn by the end of 1997,on its way to satisfying an IMF demand that reserves be sufficient to cover fourmonths worth of imports, currently around $1.2bn. The CBJ aims to increasereserves to over $1.3bn by the end of 1998.

The reserves policy is a central feature of CBJ strategy, which is committed tothe objectives of full convertibility and exchange rate stability and whichwants to purge the system of all aspects of dollarisation. Over the past 15months the new team running the bank has pursued these aims with a single-minded commitment. Doubts remain, however, about how successful they areever likely to be. The trauma of the devaluations of 1988 has made Jordanianswary of being long in dinars, even with the punitive interest rate differentialwhich penalises dollar accounts. Of the $8.45bn deposit base of the 20 privatebanks in Jordan, an estimated $2.36bn is held in foreign currency. Moreover,even with forex reserves in excess of $1bn, the Central Bank would havetrouble defending the dinar against concerted market pressures.

The Central Bankintervenes to rescue AIB—

For the fourth time in its history, the Central Bank has intervened to save oneof Jordan’s private financial institutions. Whereas earlier rescue plans haveinvolved fully fledged commercial banks, on this occasion the smaller AmmanInvestment Bank (AIB) was the target of the rescue. The decision to step infollows the failure of the AIB’s board and shareholders to expand the bank’scapital either through their own resources or through attracting external in-volvement in line with CBJ capital adequacy regulations. Consequently, theCBJ has appointed a special committee under its vice-president, AhmedAbdel-Fattah to resolve the situation. The committee, which includes repre-sentatives of both the finance and industry ministries, will begin by assessingthe assets and liabilities of the bank, before deciding on recommendations forthe future of the institution. The Arab Bank appears to be the favourite toacquire the AIB, having previously held talks with the old board about thebank’s future. The Arab Bank are understood to want to take over the AIB inorder to turn it into their Islamic banking wing.

—after years of difficulties The AIB has experienced difficulties more or less since its inception in 1982,when it was created as an amalgam of industrial and financial institutions. Thebank inherited more than JD11m in debt from the merger. The AIB’s latestbudget estimates total losses at JD34m in excess of its capital. Most of thebank’s small depositors are believed to have withdrawn their savings from theinstitution since the seriousness of its situation was revealed. Large companiesand institutions are understood to account for the JD76.8m in existing depos-its. The CBJ’s intervention is the latest example of its more rigorous approachto bank supervision. The CBJ has previously intervened in the cases of PetraBank, the Jordan Gulf Bank and the Bank al-Mashreq.

Jordan 19


Foreign trade and payments

The IMF estimates a 24%increase in trade deficit

Although final actual official trade figures have yet to be published, the IMF haspredicted a 25% increase in the trade deficit for 1996 compared with theprevious year. The Fund expects the deficit to grow to near the $2.4bn mark, anincrease of 23.5% on 1995. The projection is based on a 16% increase inimports to stand at $4.3bn, and a smaller 8% growth in exports to $1.9bn inearnings. If anything the estimates are rather on the optimistic side. The rise inthe import figure may well be closer to 20%, while the unexpectedly sluggishexport performance may make an increase closer to 3% more likely. IMF esti-mates for 1996 are especially interesting when set alongside staff projectionsmade near the end of 1995. The IMF, which has consistently underestimatedthe kingdom’s import pressures, undershot on its import projection by $267mfor 1996. However, with net services income rising by nearly 30%, based onincreases in both remittances and travel, the Fund expects the trade deficit tobe contained and actually foresees a fall in the current-account deficit from$257m in 1995 to $217m in 1996.

Israeli-Jordanian traderemains modest

Trade figures for 1996 from Israeli sources indicate that the value of bilateraltrade last year was just over $18m, a big disappointment in view of expect-ations generated by the 1994 peace treaty. In spite of this, Israeli diplomaticsources, speaking in mid-February, were optimistic about the immediate pros-pects for trade, predicting that bilateral trade could climb as high as $100m in1997. This optimism is founded on changes in transport procedures betweenthe two countries agreed in late 1996. This involved the Israeli governmentrescinding its insistence on a back-to-back system whereby Israeli lorries had tobe used for the transportation of Jordanian goods to Israel and the PalestinianAuthority areas. With the deterioration in the peace process in March suchoptimism would appear to be exaggerated. Bilateral trade will do well to top$50m in the current year, the minimum level of bilateral trade expected bythese Israeli diplomatic sources.

According to recently released figures Israel exported goods worth $12.25m toJordan in 1996, importing $5.75m in return. These figures included a verysmall element representing transit trade, presumably mostly Jordanian prod-ucts going to markets in Europe via Israeli ports. Israeli exports consisted ofplants and saplings, mechanical equipment, agricultural products and raw ma-terials. In turn, Jordan exported foodstuffs, chemicals and raw materials in theother direction.

A rise in energy importcosts is announced—

A combination of rising oil prices and the kingdom’s growing consumption ofenergy has resulted in total fuel imports topping the $486m mark in 1996,according to the then energy and mineral resources minister, Hashem Dabbas,speaking in mid-February. The 1996 fuel bill was estimated to be the equivalentof 31% of the value of exports and 13% of imports, and to comprise 7.5% ofJordan’s GDP. Total fuel imports, covering both crude oil and refined products,were even then much lower than they could have been, owing to the conces-sionary rates under which Iraq, Jordan’s main supplier, calculates its prices. Therise in 1996 came about as a result of some 6% annual growth in energy

20 Jordan


consumption, and an increased evaluation of prices by Baghdad to take intoaccount the strengthening of prices over the past two years.

—although the energyimport accord remains

unaffected

In spite of the bigger fuel bill, Jordan and Iraq renewed their supply agreementin January this year. Under the terms of the 1997 accord Iraq will supply Jordanwith 69,000 b/d of oil and 19,000 b/d of fuel products, mainly LPG, gas oil andfuel oil. The agreement made no mention of price, which will presumably staythe same as in 1996. Even though oil prices have significantly weakened thisyear compared with last a downward revision in price is unlikely. First, Jordanhas already benefited disproportionately from the conservative pricing struc-ture used in the 1990s, when actual prices have been consistently higher.Second, Jordan has nowhere else to go for its fuel imports other than the openmarket, where prices would be considerably higher.

The USA provides softloans for wheat imports

Jordan and the USA have signed a $21m agreement for the provision of softloans to enable the kingdom to purchase around 100,000 tons of US wheat.The loan is being extended by the US Department of Agriculture under theprovisions of its PL (Public Law) 480 programme. The loan will make Jordanthe second largest recipient of funds under the scheme in the world for thesecond year running. The concessionary rate of 3% will be charged for the firstfive years, and the rate will increase to 4% thereafter. Repayments will beginafter a five-year grace period.

Jordanian firms start tosupply Iraq under SCR 986

By the end of March, 11 Jordanian companies had received formal approvalfrom the UN to supply Iraq with $41m of goods, under the terms of UNSecurity Council Resolution 986 (SCR 986), the “oil for food” deal. The firstsuch shipment is believed to have taken place in early April. The contractawards and approvals come as some relief to the Jordanians but the existingcontract awards still represent a poor indicator as to what extent Iraq will turnto Jordan as both a direct supplier and a conduit for trade. The awards that havebeen made hitherto have been for the export of vegetable oil and detergents,areas of local production (together with pharmaceuticals) where there hadbeen little doubt that they would be the beneficiaries of Iraqi procurement.Elsewhere, the situation is much more uncertain. There are currently a further32 Jordanian firms that are awaiting UN permission to export goods worth anestimated $79m to Iraq under SCR 986.

A new debt reschedulingagreement is in prospect

With the current Paris Club rescheduling agreement due to expire in May thisyear, it is widely expected that the Jordanian government will seek a furtheraccord. The Paris Club ought to be well disposed towards Amman, as creditorgovernments are eager to help Jordan and the perception of the country’smacroeconomic management and the implementation of structural adjust-ment is positive. Even so, a new agreement, although likely, cannot be takenfor granted. From June onwards the debt that will begin to fall due will be thatwhich has already been rescheduled from 1989, and which it has been assumedwould not be subject to further rescheduling. There can, however, be no doubtthat Jordan needs a new rollover. The perception of a growing burden would bepolitically unpopular in Jordan where economic confidence is fragile and theexperience of austerity has engendered considerable bitterness.

Jordan 21


Quarterly indicators and trade data

Quarterly indicators of economic activity

1994 1995 1996 1997

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

Prices Monthly av

Consumer prices: 1990=100 125.0 123.1 123.3 123.9 129.0 133.9 131.4 132.4 134.0 n/a

change year on year % 4.6 2.5 1.3 2.3 3.2 8.8 6.6 6.9 3.9 n/a

Money End-Qtr

M1, seasonally adj: JD m 1,769.9 1,754.6 1,784.1 1,768.3 1,766.9 1,680.6 1,611.6 1,548.3 1,557.8 n/a

change year on year % 1.2 –0.2 2.9 1.3 –0.2 –4.2 –9.7 –12.4 –11.8 n/a

Foreign trade Qtrly totals

Exports fob JD m 286.3 247.8 284.2 345.8 363.3 271.6 315.4 354.1 213.7a n/a

Imports cif “ 635.7 586.7 649.9 657.4 696.4 681.9 877.6 780.3 511.6a n/a

Exchange holdings End-Qtr

Central Bank:

goldb $ m 229 224 230 228 229 238 233 230 226 213c

foreign exchange “ 1,692 1,708 1,751 1,965 1,972 1,720 1,775 1,808 1,759 1,525c

Commercial banks:

assets ” 2,399 2,395 2,502 2,496 2,655 2,497 2,547 2,556 2,845d n/a

Exchange rate

Market rate JD:$ 0.701 0.691 0.695 0.711 0.709 0.709 0.709 0.709 0.709 0.709e

Note. Annual figures of most of the series shown above will be found in the Country Profile.a Total for October-November. b End-quarter holdings at quarter’s average of London daily price less 25%. c End-January. d End-November.e End-February.

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

22 Jordan


Foreign trade(JD ’000)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Nov Jan-Nov1991 1992 1993 1994 1995 1995 1996

Imports cifFoodstuffs 417,668 416,023 435,146 409,673 419,232 388,998 677,101 of which: live animals 37,483 26,061 27,937 30,928 29,846 27,682 25,446 meat 55,617 50,037 58,293 43,200 29,428 25,476 35,282 dairy products 34,376 34,615 41,367 30,750 39,124 36,409 45,343 wheat 61,773 54,167 76,117 52,259 40,992 40,992 145,070 rice 26,940 20,938 20,492 15,962 21,721 21,664 37,081 fruit & vegetables 33,407 41,501 26,123 28,290 43,194 39,482 71,434 sugar 45,926 28,819 33,084 56,279 29,684 26,400 70,637Mineral fuels 247,454 303,425 314,785 300,657 336,360 304,131 341,039 of which: crude petroleum 193,663 228,845 236,804 232,323 249,310 225,741 236,093Animal & vegetable oils 23,676 37,628 42,653 82,501 94,697 86,691 64,901Chemicals 218,764 245,544 248,566 279,917 317,697 292,009 303,344Paper & manufactures 43,205 49,291 55,478 46,508 73,116 68,920 63,145Textile yarn, cloth & mnfrs 76,953 94,408 94,995 87,674 89,294 82,064 85,783Iron & steel 84,520 133,580 157,995 130,770 147,026 135,745 145,671Machinery incl electric 149,177 273,727 375,495 361,376 362,574 340,786 420,245Transport equipment 149,908 270,054 285,367 238,958 272,136 250,835 310,014Clothing & footwear 25,238 42,107 42,092 35,625 44,279 40,423 37,952Scientific instruments etc 20,945 39,759 38,275 41,436 36,298 33,429 41,692Total incl others 1,710,463 2,214,002 2,453,625 2,362,583 2,590,250 2,388,737 2,851,422

Domestic exports fobFoodstuffs 86,041 92,033 140,033 91,200 99,509 88,141 144,075 of which: live animals 8,608 15,257 18,444 12,613 15,327 13,069 56,182 dairy products 6,830 14,830 38,072 2,903 2,743 2,620 2,660 vegetables 43,531 39,563 47,720 43,820 53,821 48,809 60,676 fruit & nuts 10,929 10,453 21,419 21,443 14,393 11,692 14,085Natural phosphates 123,092 122,464 97,884 100,390 105,493 94,396 114,651Potash 96,764 86,220 86,023 92,573 121,616 107,869 106,498Animal & vegetable oils 2,312 1,856 1,717 62,698 147,009 140,836 59,888Chemicals 177,045 196,932 195,462 262,361 302,119 266,924 297,157 of which: fertilisers 86,471 72,456 55,623 89,205 113,100 110,309 119,723Manufactured goods 63,411 66,990 81,367 85,921 96,672 85,247 107,195 of which: paper & manufactures 8,098 6,100 12,810 12,109 14,170 12,115 18,712 textile yarn, cloth & mnfrs 11,852 15,286 19,311 20,897 22,896 20,739 22,465 cement 26,103 22,214 17,362 27,334 29,576 26,501 38,168Machinery & transport eqpt 7,442 11,838 23,904 39,443 45,891 42,417 22,685Miscellaneous manufactured articles 26,627 41,009 52,282 40,469 48,259 42,794 46,723 of which: clothing 8,577 9,422 13,178 12,914 17,024 14,787 22,299 plastic products 5,796 9,515 15,409 11,455 7,325 6,941 4,872Total incl others 598,627 633,755 691,282 793,919 1,004,534 902,531 934,051Source: Central Bank of Jordan, Monthly Statistical Bulletin.

Jordan 23


Direction of trade(JD m)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Nov Jan-Nov1991 1992 1993 1994 1995 1995 1996

Imports cifIraq 170.87 295.44 307.01 298.35 316.27 288.24 328.70USA 178.16 246.15 311.49 232.55 240.51 229.96 311.30Germany 133.18 186.75 202.79 184.35 218.35 203.46 222.62Italy 73.63 110.93 134.91 139.15 138.74 125.97 165.65France 73.60 78.09 98.54 111.09 119.11 113.56 134.56UK 77.57 108.41 127.92 120.78 124.53 115.22 128.67Japan 61.12 132.19 123.62 93.61 91.44 84.68 117.76Turkey 57.14 97.41 58.45 62.85 88.99 84.29 99.56South Korea 24.77 46.72 61.31 58.23 76.82 70.41 86.44Syria 39.01 21.37 32.64 48.25 54.96 48.30 86.25Saudi Arabia 27.67 39.32 48.64 71.52 91.41 82.96 83.57

Domestic exports fobSaudi Arabia 11.02 70.08 80.13 72.26 70.35 58.42 113.46Iraq 55.82 48.82 77.51 105.26 190.83 171.79 85.11India 109.65 96.37 65.89 88.06 114.11 109.17 73.17UAE 26.07 25.92 30.45 39.01 43.63 39.13 55.10Syria 9.11 12.93 19.11 26.71 39.37 35.22 38.25Indonesia 24.21 28.97 37.60 27.96 27.34 22.11 29.55Lebanon 10.04 9.73 17.53 17.89 24.17 21.20 21.33Italy 3.51 4.14 6.32 10.00 18.20 17.47 18.89Kuwait 0.10 0.19 0.00 1.38 0.90 0.90 17.87Pakistan 4.59 5.91 4.04 16.71 10.93 9.79 17.67Turkey 13.07 15.27 12.59 10.30 19.57 17.56 17.19Source: Central Bank of Jordan, Monthly Statistical Bulletin.

24 Jordan


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