Overview of the Jordanian Economy … Reality and Anticipated Solutions

04-11-2020 05:16 PM

All Letters of Designations to the governments have focused on citizens; guaranteeing their food security, education and healthcare; combating poverty, eliminating unemployment, and job opportunities through real partnerships with the private sector, encouraging investments, and rigorous work on supporting entrepreneurial projects. Despite the efforts exerted to fulfill royal visions and directives, we have not achieved much. Unemployment rates have risen among men and women, forms and levels of poverty have become diverse, the efficiency and appropriateness of education outputs have regressed, and many burdens have been added to affect citizens. Perhaps this prompts us to think long and hard about the effectiveness of economic policies and decision-making mechanisms, and the government’s ability to adopt a holistic participatory approach with its intellectual and geographic dimensions. Unfortunately, the formation of advisory teams and councils is restricted to a specific group of people, centered in Amman, to discuss issues and design policies behind closed doors, thus making citizens mere recipients of such decisions, with little confidence in them simply because they are far from their source in most cases.

First, I would like to stress the need for a national program that elevates the Jordanian economy, grounded on enhancing entrepreneurial productive projects that enhance the added value of local industries, in accordance with development plans, and increases the competitiveness of national products and services. Difficulties have faced previous economic programs that decreased productivity and thus negatively impacted the Jordanian economy and inflated unemployment rates, especially after the impacts of COVID 19 which affected the trade balance and increased our dependence on the IMF and donor agencies.

I believe the country should revisit the economic model which has been adopted over the past decade, based on agreements with the IMF that commit Jordan to reducing the debt to GDP ratio from 96.1% to 77% in 2021 which has, In my opinion, been tried by previous governments strangely expecting different outputs and results through the same tools, approaches and inputs, which was proven impossible and has increased the total debt to 108% of the GDP. Economic growth is no longer growth, unemployment is rising, the refugee crisis continues to drain the Kingdom’s economy, resources and infrastructure, and regional horizons are filled with challenges and risks.

I believe the reason for this is the preoccupation of the governments with multiple issues alongside the economic concern. Despite the importance of those issues, this has diversified the efforts and wasted the resources, without citizens sensing a real positive impact on their daily life, especially in view of the weak realistic handling of economic issues, most notably the urgent ones, in view of the lack of a real participatory decision-making process, as mentioned earlier. Moreover, the absence of coordination and complementarity between the Chambers of Commerce and Industry and trade unions on one hand and the government on the other contributed to exasperating matters and resorting to short-term solutions in the absence of a clear strategy that is evidence-based and founded on accurate information.

Following are a number of proposed solutions to lead Jordan out of its economic crisis:

1. Despite abiding by IMF conditions, instructions and programs, represented by removing fuel subsidies, expanding the tax base, limiting tax exemptions for businesses and the government’s desperate attempts to contain spending and limit waste and losses in the water and energy sectors, we have arrived at where we are in terms of increasing public debt which will take a turn for the worse. The economy in general has become in grave danger. Although the financial sector is still generally in good standing, efforts must continue to enhance its security and stability, with the monetary policy focusing on supporting the system for linking the exchange rate and motivating economic growth by reducing interest. Therefore, proceeding with this approach will only make our economy more futile. The country and decision makers must reconsider all regulations and legislation and change the financial policy approach, which was applied over the past few years, and stimulate the economy by reducing taxes and the tax base and reduce expenses, while taking into account the popular saying “sell much and profit little”. This applies in our current situation to the tax system. I would say for a fact that reducing taxes is a fundamental strategy to encourage and motivate economic activity.
In my personal opinion, I believe that the best scenario to elevate our beloved Jordan in these crises times and amid the developments in the region is to adapt the policies and reforms to the economic and social challenges and to our reality. Transforming the Kingdom into a private economic zone and a regional hub for entrepreneurship and innovation and utilizing Jordan’s geopolitical location to provide logistical storage, transport, industry, agriculture and re-export services, especially in view of the developments in the region in terms of the diplomatic ties between Israel and the Arab countries, will improve the circumstances by achieving contained growth that covers more groups of the population.
In this case, the country must follow a completely different approach, by reducing the tax base, cancelling tariffs and combating all types of corruption and tax evasion, offering many other forms of support to energy, water and food security projects, enhancing equity, equality and good governance, undertaking reforms in multiple areas to improve competitiveness and employment opportunities, and rebuilding trust with and among society’s components, will expedite the pace of production, protect local production from external competition, increase the value of local products and provide cash solvency. It will also attract global projects and investments to benefit from these advantages. In this case, the government will certainly have to assume financial burdens for a few years, which requires the country to reschedule foreign debt and secure new loans and grants to implement the reform plan and enhance partnership with the private sector to cover, even if partially, the deficit costs through direct investments in entrepreneurial and productive projects. The economy will start to recover and the expected results will be a moment of victory over the internal and external lending policy.
There are many ways to execute this transformation, which cannot be done overnight, but rather requires the government to an action plan that adopts a gradual and phased approach, based on an in-depth analysis of the competitive advantages of each governorate in the Kingdom, and even each of its regions, and the needs to arrive at the ideal utilization and employment of these advantages along with the required motivational measures for foreign and local investments to transform the Kingdom into a private economic zone and find radical solutions for the problems of employment and unemployment, which will exceed 30% within the coming six months if we continue with the same policy that is applied today.

2. Support and utilize the active sectors in Jordan and introduce some quick improvements to develop them as quick sources of income. In my opinion, although this is not a conclusive solution for the crisis, it will contribute to finding short term solutions that provide the economy with some stability. For example, the tourism sector, which is suffering from COVID-19, is presented with a golden opportunity to develop services and reduce accommodation costs to attract both internal and external tourism.

3. Food security: This term refers to what the country can secure in terms of a sufficient safe supply of food items, with a guarantee of continued provision and access by all groups in society. Food security obstacles lie in the lack of harmony between the agricultural and industrial sectors and the focus on developing the already narrow industrial sector, at the expense of the agricultural sector, both plants and animals. The rationale and science call on the agricultural revolution to precede the industrial one, because it will automatically prompt the development of industries to attain self-sufficiency from the agricultural industries, contribute to supporting the GDP with additional figures and motivate the industrial sector to export production excesses to the international markets.
The limited and scarce water resources and their misuse, failure to utilize agricultural lands, both rain-fed and irrigated, desertification, urban encroachment, lack of guidance and investment in the agricultural sector, lack of graduation and arrangement of agricultural products and their storage, high cost of financing, internal migration from rural to urban areas, extreme shortage in agricultural machines and the absence of various types of technology in all phases of agriculture and production, lack of concentration on modern agriculture, lack of investment on agricultural research, reliance on imported food, limited training and qualification of agricultural workers, weak marketing, failure to activate the role of agricultural associations and cooperatives and their support to work as umbrellas for farmers and small plot owners, bureaucracy in competent departments, lack of methodology in managing food security files and self-sufficiency, and weak agricultural guidance and counseling are all obstacles that must be prioritized in this green revolution.
Thus, it is time to implement a new model focused on the denominator not the numerator so that the GDP is improved by all sectors, including services, to arrive at new levels of self-sufficiency, thus creating job opportunities in all sectors. This in turn will limit unemployment and poverty rates so that we can feel the effects of sustainable and comprehensive development in various social, industrial, agricultural, service and environmental areas in all regions of our beloved Kingdom.

4. Jordan enjoys climate advantages that place it in the lead in the production of all forms of clean energy if we have the will and determination. This necessitates greater focus on renewable energy projects, developing energy infrastructure networks and overcoming the obstacles hindering productivity projects, which in turn will contribute to reducing production and living costs and decreasing the oil bill.
5. Jordan has always prided itself on its human capacities as the main capital in view of, not limited resources, but rather weak investments in the available resources. Perhaps this also requires additional efforts in the area of creating education and learning policies to enhance linking the outputs of education at the national and regional levels with market needs in terms of crafts, trades, tourism, agriculture, renewable energy and others. A positive step in this area was the establishment of the Prince Hussein Bin Abdallah Technical University, which is a pioneering and important experiment that opens new horizons for the youth. We hope this will contribute to changing their viewpoint on the traditional labor market and directing them towards more innovation and creativity, so that we may rebuild our human capital.

6. Women constitute approximately 50% of the population. The percentage of women’s education in Jordan is also among the highest in our region. On the other hand, the rate of Jordanian women’s participation in the labor market is among the lowest, not just globally, but also regionally. This also applies to women’s contribution to the entrepreneurial sector. This requires intensifying the efforts aimed at enhancing the economic participation of women in the various agricultural, industrial, service and entrepreneurial sectors and creating plans and policies in partnership with the private sector that contribute to attracting women to these sectors, enhancing their productivity and their engagement in the economic renaissance and sustainable development. Perhaps the COVID-19 response and recovery policies and decision adopted by the government, provide clear evidence to the poor attention paid to Jordanian women and their pivotal role in supporting national efforts at various levels.

7. Finally, media plays a vital role in guiding public opinion, building or destroying confidence between the different components of society. The aforementioned reform steps must be accompanied by a media plan that highlights achievements spreads positivity in society and reduces negative attitudes.
Thus, we find that Jordan has capacities that have the potential to achieve a lot if invested correctly. Moreover, the natural resources that we are blessed with are components in various mining industries such as potassium, phosphate, silica, shale oil and other minerals.

If we have a true will to produce, remove the cloak of suffering and leave this dark tunnel, we must an implementable strategic plan, overcome difficulties, focus on equipping capacities at all levels and employ all capacities to change the path towards the goal we seek. I believe this day will come soon.

Dr. Abdel Salam Amin Nabulsi
Ph.D. in Industrial Engineering
President of the American University of Culture and Education in Lebanon
Founder of a group of companies working on food security

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