Jordan's Future Challenges / Juan J.Stemmann

For years, King Abdallah has successfully steered Jordan's ship through the turbulent waters of a tempestuous regional context and a complex economic and social situation within the country. However, the country has not been immune to the wave of unrest sweeping the region following the revolts that toppled President Ben Ali in Tunisia and President Mubarak in Egypt, and the king will have to institute greater and more fundamental reforms in order to maintain the basic pact between the monarchy and the people and to prevent Jordanians from beginning to question the legitimacy of his rule.

Since his accession to the throne in 1999, King Abdallah has successfully steered Jordan’s ship through the turbulent waters of a tempestuous regional context and a complex economic and social situation within the country. The expansion of the economic reforms process agreed upon with the International Monetary Fund (IMF) has enabled Jordan to modernize its economic structure, post significant growth rates, and weather the storm of the international economic crisis. Nevertheless, the improvement of the macroeconomic situation has not prevented a series of protests denouncing rising commodity prices and rampant unemployment.

The road to greater political openness has been conditioned by a wide range of external factors. The second intifada, the U.S. military intervention in Iraq, and Hamas’ rise to power in Gaza have all influenced decisionmaking and provided arguments to those within the regime who feel that further democratization could jeopardize the country’s stability. However, Jordan has not been immune to the wave of unrest sweeping the region following the revolts that toppled President Ben Ali in Tunisia and President Mubarak in Egypt; the regime will likely need to start considering real reforms in order to curtail future opposition. The Israeli-Palestinian conflict remains a sword of Damocles for the regime in Jordan, where almost half of the population is of Palestinian origin and not all are well integrated. Any development in the conflict has immediate repercussions in Jordan. The Hamas coup in Gaza and the presence of militants close to Hamas within the Jordanian Islamist movement’s leadership has led the regime to change its attitude toward the Islamists, whom it accuses of radicalizing their anti-state discourse. Moreover, since 2002, Jordan has been targeted by al-Qaida in several terrorist attacks. Although the threat is still latent, effective action by the Jordanian security forces, the death of the al-Qa’ida leader in Iraq, Abu Mus’ab al-Zarqawi, and the steps taken to combat Salafi rhetoric have curtailed the capacity of Salafi networks to strike on Jordanian soil.


The early years of King Abdallah’s rule have been characterized by the development of policies focused on economic reform and Jordan’s integration in the global market. The major economic crisis in 1989 forced Jordan to sign an agreement for a structural adjustment program with the IMF in order to cut its debt and public deficit, control inflation, and set in motion a package of reforms aimed at modernizing the country’s economic structure. The removal of subsidies, the privatization process, and the trimming of the public sector have also affected the social support bases on which the regime relies, giving rise to new forces of power and influence.

Jordan’s economic problems were compounded as a result of the First Gulf War in 1991. King Hussein’s support for Iraq led to a rift with the Gulf nations, which until then had been Jordan’s biggest financial backers, and also to the return of 300,000 Jordanian workers (mostly Palestinians), a situation that triggered increased unemployment and higher inflation. Until the outbreak of the Second Gulf War in 2003, Iraq had financed virtually all of Jordan’s energy needs. The Jordanian economy was thus dealt a serious blow by the conflict in Iraq, which also affected vital sectors including transport and tourism as well as worker remittances. However, the mass return of workers also led to a significant increase (estimated at 1 billion USD) in investment in small and medium-sized businesses, which injected new life into Amman’s economy.[1]

At the time of King Abdallah’s accession to the throne in 1999, the economy was still in deep crisis, and Jordan had to contend with a particularly difficult regional context. Between 2000 and 2003, the country was affected by the outbreak of the second Palestinian intifada, the U.S. war on terrorism, and the military intervention in Iraq. Aware of the need to expand the economic reforms agreed upon with the IMF, the king appointed Ali Abu Raghib as prime minister in June 2000. Raghib led the reform process until 2003. He passed a series of laws to help open up the country’s economy to trade, to integrate Jordan into the World Trade Organization (WTO), and to create Qualified Industrial Zones to attract foreign investment and to set up joint ventures with Israel to access the U.S. market. The suspension of the elections scheduled for November 2001 facilitated matters for the government, which was able to implement its policy without the parliament.

Despite initial fears regarding its consequences for the Jordanian economy, the U.S. military intervention in Iraq brought some advantages for the country. Jordan recuperated the trust of the Gulf monarchies, which now finance the country’s energy needs[2] and are the main destination for Jordanian labor, goods, and services. Trade with Iraq was renewed and direct U.S. aid has grown considerably. Since 2003, Jordan has received an average of $750 million, nearly half of it military aid.[3] As of 2010, some 700,000 Iraqis were living in Jordan as a result of the war in Iraq. A large proportion of Iraq’s bourgeoisie have moved to Amman until the security situation in Iraq improves. Their presence has helped boost the real estate and retail sectors. The high numbers of Iraqi entrepreneurs in Amman and Iraq’s relative normalization have also provided new opportunities for Jordanian firms. The banking sector and the transport, aluminum, cement, and phosphate industries have all benefited from the stabilization of the situation in Iraq.[4]

Since 2006, Jordan has further facilitated investment in the country and has continued its privatization program. The investment promotion law passed in 2006 encouraged the arrival of new investors and helped the economy grow at an average of seven percent GDP between 2005 and 2008. Exports have also grown, with Saudi Arabia and the European Union being the main destinations. Moreover, the Jordanian authorities have used the revenue generated by assets sales during the privatizations to cut public debt. In 2008, the government ended petrol and gas subsidies in order to control the fiscal deficit.[5]

Jordan’s economy continued to post growth of 2.9 percent in 2009 despite the global recession. In order to tackle the crisis, the country has launched a series of infrastructure projects financed by public-private partnerships (PPPs). These include the construction of a nuclear power plant and two mega projects to supply the country with water. The Disi Water Project[6] is designed to pipe water to Amman, home to half the country’s population, from an aquifer close to the Saudi border, while the Red to Dead Project will pump water from the Red Sea to the Dead Sea.[7]

The economic forecast for 2010 was optimistic, with the economy expected to grow 4.1 percent, due to the resumption of worker remittances and the tourism industry. Yet the sudden rise in world commodity prices in December 2010 showed the failure of the economic model to convert the public sector-dominated economy into an investment-friendly haven for technology and services. Middle and lower income households have struggled due to the increasing cost of living and inflation, which reached more than 6 percent in 2010.


Notwithstanding the unquestionable successes achieved by the reform process, the country continues to face numerous economic and social challenges. The high fiscal deficit (almost 9 percent in 2010) and public debt (over 70 percent of GDP in 2010) threaten to slow growth. External aid remains vital and economic growth barely...



*Juan José Escobar Stemmann is a Spanish diplomat. He is a lecturer on Islamist movements at the Instituto Gutierrez Mellado for Defence Studies and the Spanish Diplomatic School in Madrid. His publications include “Muslims and Islamists in Spain” in Barry Rubin (ed.), Guide to Islamist Movements (M.E. Sharpe, 2009) and “The Crossroads of the Muslim Brothers in Jordan,” in Barry Rubin (ed.), The Muslim Brotherhood: The Organization and Policies of a Global Islamist Movement (Palgrave Macmillan, 2010).


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