A bad neighbour is a great misfortune, Hesiod observed in 800BC. For Jordan, that seems especially true today. The small, secular Hashemite kingdom borders powerful Saudi Arabia, restive Israel and the troubled Palestinian territories. These difficult neighbours pale in comparison, however, to the problems posed by the country’s long borders with Syria and Iraq.
Security is one dimension. Jordan dealt with this by shutting its crossings, first with Iraq in 2014 when the so-called Islamic State seized large swathes of the country, then with war-torn Syria.
This response has aggravated Jordan’s second perennial problem: a stuttering economy. “Syria and Iraq are considered to be old natural markets for Jordan. The closure of the Syrian border has been hurtful in a way,” says Muhannad Shehadeh, Jordan’s minister of state for investment.
The Karameh crossing with Iraq reopened in August 2017 and is expected to improve this outlook somewhat. However, the toll is visible: Syria and Iraq used to absorb 20% of Jordan’s exports, but these plummeted by 68% between 2014 and 2016.
“Jordan is a resilient market… with all the hits we have been taking, we have maintained growth, we have maintained security,” says Mr Shehadeh.
Jordan’s survival since it was given emirate status in 1921 is testament to that resilience. But recent regional turmoil has hit economic growth, dropping from an average of 6.8% for the first decade of the millennium to about 2% since.
The IMF granted the country a sizeable loan package beginning in 2016 to help it cope. This came with strings attached, however, in the form of long-delayed structural reforms that patronage from the US and the Saudis had helped to push off. Tax cuts and slashes to subsidies were announced in January 2018. Protests in cities across the country followed.
A beacon of peace
Attracting foreign investors is a key component to the government’s efforts to kickstart the economy. Its pitch is that Jordan is an oasis of relative calm in a turbulent neighbourhood with friends on many sides. “Our population is 10 million [so] it is definitely a small market. However, when you look at the affiliations of Jordan you would see it is a 1 billion-person market,” says Mr Shehadeh, pointing to the country’s free-trade agreement with the US and simplified rules of origin with the EU as assets.
So far, six factories in the country have been qualified under the fast-track EU rules, with more expected. “People are using Jordan as a platform to reach out to the world,” adds Mr Shehadeh.
The country is also positioning itself to take advantage of the massive reconstruction efforts that will take place in Iraq and Syria once their respective conflicts end. A free zone has been set up in Mafraq, 15 kilometres from the Syrian border and 200 kilometres from Iraq, complete with a logistics hub and an airbase.
Sizeable tax breaks are available to businesses that set up there. “Geographically for us it is important to pay attention to the rebuilding process. What is being done [is] to create the proper tool to take advantage of that,” says Mr Shehadeh.
As with many countries in the Middle East, the government still plays a substantial role in the economy through its part or full ownership of companies. Some privatisation has taken place, however: in the decade to 2008, the government sold off 14 state-owned companies netting it $2.3bn.
Mr Shehadeh anticipates more will come. “We have seen an exit throughout the past years,” he says. “Would I see a continuous exit in companies and [government] focus only on regulation? I think we should do that.”
Weeks after this interview, former Jordanian prime minister Hani Al-Mulki resigned on June 4 following several days of protests against IMF-proposed tax hikes. King Abdullah has named Omar Al-Razzaz, previously education minister in Mr Mulki’s government, to form a new government, placing cabinet members’ positions in some uncertainty.