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Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Did the Arab Spring Benefit Economic Freedom in Jordan?


Political reform is economic reform. For businesses to invest and expand with confidence, they need a predictable, level playing-field, transparency and accountability, the rule of law and a strong, stable foundation of inclusive political life. His Majesty King Abdullah II, World Economic Forum, October 2011

Human development, as an approach, is concerned with what I take to be


the basic development idea: namely, advancing the richness of human life, rather than the richness of the economy in which human beings live, which is only a part of it. Amartya Sen

Prepared By: Yusuf Mansur

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Brief Review of the Arab Spring in the Arab World

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Tunisia
The events currently referred to as the Arab Spring were ignited when Mohammed Bouazizi self-immolated in dismay at the lack of economic freedom afforded him by the bureaucracy. Social networks such as Facebook and Twitter and satellite TV stations spread throughout the region the image of the man while burning; an image that ignited the fervor of Tunisians. Demonstrations against President Ben Ali erupted on December 18th, 2010 and lasted until he relinquished power on January 14th 2011.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Egypt
The first demonstrations took place January 24th, 2011 beginning first with labor strikes and acts of civil disobedience. Egyptians expressed grievances about their lack of freedoms, tampered election results, police brutality, governmental corruption, and the lack of economic equity. Under pressure from continued domestic unrest and international scrutiny, Mubarak resigned as President on February 11 2011 and Egypt was to be governed by a military council until a legitimate government could be established. The call for democratic reform came with the election of President Mohammad Mursi in July, 2012, amidst controversy.

Introduction Arab Spring Brief

Libya
On February 16th, 2011, Libyan protestors clashed with police in Benghazi after a human rights activist was arrested. Libya plunged into a civil war . Gaddafi used his own extensive stockpile of weapons against the Libyan population leading to death tolls in the thousands.

Jordanian Economy Jordan & Rankings Conclusions


By March 17th 2011, UN Security Council Resolution 1973 was passed creating a no-fly zone over Libya and 2 days later a coalition force of the French, United Kingdom, and United States began a bombing campaign against pro-Gaddafi forces. By late August 2011, with international support, the rebel forces stormed Tripoli forcing Gadaffi to flee; however, rebel forces found him soon after, and on October 20th 2011, killed Gadaffi; Libya now has a new government.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Syria
Protests began on January 26th, 2011 when a police officer assaulted a man in old Damascus. Massive resistance began March 6th 2011 when the Syrian security forces arrested 15 children for writing slogans against the Baathist regime. Thousands of protestors took to the streets all over Syria and soon the regime began to wrest control over the protestors, arresting thousands of protestors. By July 31st, 2011, Syrian army tanks were being deployed against the armed Syrian opposition known as the Free Syrian Army (FSA). Syria is in a civil war. It is believed that over 36,000 people have already been killed, many more are injured, and hundreds of thousands are displaced or have become refugeesJordan alone hosts close to 200,000 refugees. The situation continues to look grave for Syrians as new developments take place daily.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Yemen
Ali Abdullah Saleh also faced a large scale popular uprising. As unrest was increasing in the spring of 2011, the Gulf Cooperation Council drafted a plan for Saleh to cede power in exchange for immunity from any legal action. On June 3rd 2011 Saleh was badly injured in an assassination attempt and shipped to Saudi Arabia for immediate medical attention while his vice president Abd al-Rab Mansur al-Hadi continued Salehs response against demonstrating Yemenis. After returning to Yemen in September 2011, Saleh signed the GCC initiative, due to international and domestic pressure (in November) which would transfer power to his vicepresident. A presidential election was held on the February 21st, 2012, in which al-Hadi took 99.8% of the vote as the only running candidate. On February 27th 2012, Saleh officially transferred power to al-Hadi ending his 33 year reign over the country.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Bahrain
Bahrain was another country where the fervor of the Arab Spring made itself apparent among the populace. Protests began on February 14th, 2011 and were meant to achieve greater political freedom while creating awareness about human rights violations. Protests were not originally intended to threaten the monarch until February 17th 2011 when a police raid killed four protestors. The next day army forces opened fire on protestors and the demonstrators soon sought the end of the monarchy. Saudi-led Gulf Cooperation Council (GCC) forces were sent to Bahrain to quell the protestors as numbers were reaching 100,000 at the Pearl Roundabout. By March 15th 2011 King Hamad bin Isa Al Khalifa issued a three month state of emergency and turned to the military to reassert control over the country. The state of emergency was lifted in June 2011; however, both protests and human rights violations continued. Although major demonstrations have ceased, the government refuses entry to international human rights groups or news organizations.

Oman

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Peaceful demonstrations erupted on January 17th, 2011 in several Omani cities. They eventually stopped in May 2011. Government responded by changing a third of the cabinet, hiring 50,000 young unemployed Omanis, forming a constitutional committee, and pledging to address unemployment and corruption.

Saudi Arabia
Although several calls for protests were made, Saudi Arabia avoided mass protests mainly due to several government decisions made in response to regional and internal demands for reform. Swift royal decrees costing an estimated USD 130 billion were issued on February 18th, 2011 including: Increase in pay in the public sector A grant equaling two months salary for all civil, military and state employees Monthly salary disbursement for the unemployed Two month salary bonus for all students in public education Establishment of a minimum wage for the public sector Increasing housing loans limit to US$ 130,000 500,000 new housing units across the country 60,000 new positions created at the Ministry Of Interior

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Kuwait
Although considered to be the most democratic out of the GCC countries, several protests in Kuwait called for an overthrow of the government and demanded the installation of a constitutional monarchy. The government responded by disbursing a grant of US4 3,400 to every citizen as well as a food subsidy for all the families in Kuwait for one year. Despite theses efforts, the cabinet was forced to resign in November, 2011 and a new elections were held that led to a majority win for the opposition.

Qatar Qatar is considered to have gained tremendously from the Arab Spring. Qatar became a
regional political power in the last 2 years increasing its influence across the region through the media and the countrys sovereign wealth . The Qatari Al-Jazeera news network was seen by many as the de facto network of the Arab Spring, taking the side of many revolutions occurring across the region.

United Arab Emirates


The sole reforms demand came in a polite letter signed by 133 national figures, asking the President of the Union to expand the authorities of the appointed National Federal Council, which has moderate consultative attributions. The UAE benefited from the onset of the Arab Spring as the Emirates were viewed as safe havens for corporations and businessmen operating in the region. The Emirate of Dubai financial position improved tremendously after it was heavily affected by the International Financial Crisis of 2009.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Jordan and the Arab Spring

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Timeline of Events

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions
Government Action Event

April 8th, 2012 Demonstrations by workers hit a new record during the first quarter of this year amounting to 302 protests, which was a 28.5% increase over those recorded during the same period in 2011. Around 180,000 Jordanian workers participated in these protests which called for pay raises, changes to labor-related regulations, and new job opportunities.

July 1st, 2012 In interview with Jordan TV, King Abdullah II highlighted the need for a democratic culture that cherishes pluralism based on diversity, dialogue and respect of others opinions. He reiterated that the reform process was very serious and irreversible, urging all political powers, including Islamists, to compete in the elections to render the effort a success. June 15th, 2012 Thousands of Jordanians rallied against rising fuel prices and delays in political reform. Sep 3rd, 2012 King freezes the cabinets decision to raise prices. 89 MPs demand the ouster of Tarawnehs government.

June 1st, 2012 Friday protests across various cities in Jordan were caused by the increase in 95-octane gas and electricity prices.

October 20h, 2012 In an interview with Jordan TVs Sixty Minutes program, Prime Minister Ensour states top priority is to protect the exchange rate of the local currency hinting at further price increases.

October

April 26th, 2012 Awn Khasawneh submitted his resignation to King Abdullah as he was heavily criticized for the slow pace of the governments work on reform legislations.

May 27th, 2012 The government unveils a limited electricity rate price increase as compared to the proposed 9% increase across all sectors that had th been debated for June 13 , 2012 The cabinet the past two announced an months. increase in the price of 90-octane gasoline April 29th, 2012 from JD 0.62 to JD Government implements a 0.70 per liter. 6% increase in public transit fares, which is a result of higher fuel prices and improvements in the quality of transit service.

June 24th, 2012 In an interview with Jordan TVs Sixty Minutes program, Prime Minister Tarawneh stated that the government will not tolerate any act that would offend the King

October 4th, 2012 King Abdullah dissolves the parliament

October 10th, 2012 Tarawneh cabinet resigns. Abdullah Ensour appointed as prime minister of Jordan

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

The Jordanian Economy

Real GDP

Introduction
Real GDP grew at an average annual rate of 6.65% between 2005 and 2011, reaching JD10.2 billion in 2011.

Arab Spring Brief


The smallest growth rate occurred during 2010 in which the increase in GDP amounted to only 2.31%. The second smallest growth rate was 2.59%, recorded during 2011.

Jordanian Economy Jordan & Rankings Conclusions


The GDP growth rates indicate, among other things the continued vulnerability of the economy to external shock and the inability of reforms in enhancing competitiveness. Real GDP Growth Rate (%), 2005-2011

The year 2010 and 2011 saw the lowest real GDP growth rates in the last 6 years; the growth however was higher with the onset of the Arab Spring than the previous year

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Central Gov Debt Increased by approximately JD 7.5 billion since 2005. Between 2005 and 2007, public debt rose slightly in absolute figures as government expanded spending. During 2007-2008, a 55.7% increase in the gross domestic debt of the central government, the figure constituted the greatest percentage increase throughout the time period. The debt increased by 23.15%, or approximately JD 1.3 billion, in 2009 to reach JD 7.086 billion; then further increased by 12.62%, JD 894 million, in 2010. The trend continued in 2011 as the debt rose by JD 2.016 billion (25.26%).
Gross Domestic Debt of the Central Government (JD millions) and Growth Rate (%), 2005-2011

The gross domestic debt has been growing before the Egyptian gas crisis and the Arab Spring. Total public debt now is JD15 billion

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Budget Deficit Excluding Grants During the 2005-2011 period, the Public Budget Deficit Without Grants more than doubled, increasing from JD978.1 millions to JD2602.9 million, or a total increase of JD 1624.8 Millions. Throughout the period, there has been a general increase in the Budget Deficit except during 2010, in which it decreased from JD1783.1 million to JD1446.9 million, or a decrease of JD372.2 million.
Budget Deficit without Grants (JD million) and Growth Rate (%), 2005-2011

The budget deficit has grown by 79.9% in 2011

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Foreign Grants During the years included in the 2005-2011 period, the value of foreign grants received by the government did not fall below JD 304.3 million. The average value of grants received annually for the same period was approximately JD545 million. The years with the highest values of received grants are 2008 and 2011, JD718.2 million and JD1215 million, respectively Foreign grants received in 2011 constitute 31.8% of the total value foreign grants during 2005-2011.
Foreign Grants, 2005-2011

Between 2010-2011, the value of foreign grants more than tripled, as the value leapt from JD401.7 million in 2010 to JD1215 million in 2011

FDI
Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions
The net inflows of foreign direct investment (FDI) for the period of 2005-2011 amounted to a total of JD 12,290 million. The annual average of inflows of FDI equated to JD 1755.77 million; though the average annual growth rate was -8.1%. By 2010 FDI inflows had plummeted to JD 1,172 million, only to fall further in 2011 to JD 1,043 million. It was during the 2009-2010 period that the lowest annual growth rate in FDI inflows was experienced, -31.59%, it was not to recover in 2011. Interestingly, 2012 saw an increase in FDI, according to the Jordan Investment Board. The increase may be due to the fact that Lebanon, Syria and Egypt, Jordans three primary competitors in the region for FDI inflows from the GCC countries have been subject to greater turmoil and instability.
FDI Inflows and Growth 2005-2011

In 2011, FDI reached their lowest level throughout the 2005-2011 period

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Jordans trade deficit was subject to fluctuations between 2005 and 2011, hovering between JD 3.556 and JD 5.895 billion. The greatest rate of increase in the trade deficit, 48.48% occurred in 2005, while the trade deficit reached its highest in value, JD 5.895 billion, in 2011. During the 2010-2011 period the trade deficit increased by over JD 1 billion, the only other period in which this increase was equaled or surpassed was during the 2004-2005 period. Jordan continues to import far more than it exports, posing a significant problem to the nations economic reserves.
Trade Balance, 2005-2011

In 2011, Trade Deficit was at its biggest level throughout the 2005-2011 period

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Foreign Reserves
Foreign reserves are currently at below US$7 billion; their lowest point since 2007. The fall in the reserves was due to: The decrease in remittances of Jordanians working abroad (primarily in the Gulf) by 4.5% in the first nine months of 2011 relative to the same period of last year. Current remittances stand at JD 1.6 billion. In 2010, remittances reached JD 2.21 billion compared with JD 2.4 billion in 2009; Income from tourism dropped in the first nine months of the year by 17.7% to reach JD 1.5 billion compared to JD 1.9 billion in the same period last year; A drop in the inflow of FDI, which reached its lowest level in six years, to JD 561 million during the first half of the year compared to JD 656 million, a drop of 14.4%
2001 Reserves (JD bn) Coverage of Imports of (months) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1.83 5.5

2.48 7.2

3.36 9.1

3.42 5.2

3.36 4.7

4.33 5.1

4.87 4.7

5.49 6.1

7.7 7.8

8.68 7.3

7.45 6.1

The current size of reserves JD4.8 bn is not cause for alarm. The IMF had requested at the outset of its economic reform and restructuring programs that Jordan maintains reserves that are sufficient to cover 1.5 months of imports.

Introduction

Arab Spring Brief

Jordanian Economy Jordan & Rankings Conclusions

The Consumer Price Index (CPI) increased by 38.84 from 94.125to 129.967 between 2005-2011. The greatest increase occurred during 2007-2008. The second greatest increase occurred during the 2009-2010 period, this is followed by the increase experienced during the 2010-2011 period. The only period in which the consumer price index decreased was during 2008-2009. The decrease was due to a dramatic drop in oil prices that year.
Consumer Price Index, 2005-2011

In 2011, the CPI reached its biggest level throughout the 2005-2011 period

Introduction Arab Spring Brief

Remittances
260,000 Jordanian expatriate workforce (10- 12% of the GDP). Jordan experienced an overall increase in remittance receipts between 2005 and 2011. Total value of remittances equalled JD 13836.1 million. From 2008 forward, remittance receipts fluctuated with decreases in 2009 and 2011. Note that most recent figures regarding remittances show a rise in remittances by 1.9%.

Jordanian Economy Jordan & Rankings Conclusions


Remittance Receipts (JD Million), 2005-2011

The greatest decrease in remittance receipts occurred in 2011, amounting to a decrease of JD 95.2 million, or 4.2%.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Poverty
The most recent studies on poverty in Jordan (2008), indicate that the poverty rate in Jordan reached 13.3%, and the absolute poverty line in Jordan (both food and non-food poverty) was an annual income for an average family consisting of 5.7 members JD 3,876, or a monthly income of JD 323. The Abject Poverty Line for an average family was JD 138.7 per month. There was a notable increase in Poverty Pockets, an area in which at least 25% residents live under the poverty line. The number of poverty pockets increased from 22 in 2006 to 32 in 2008. Between 2006-2008, 18 areas maintained the classification of being poverty pockets, while 4 were removed, and 14 new areas became classified as poverty pockets.

Introduction Arab Spring Brief

Unemployment Unemployment in Jordan may be described as chronic, hovering between a high of 15.3% and a low of 12.3% over the last decade. Jordan has severe case of Structural Unemployment, a disparity between the skills of workers seeking employment and the demand in the labor market, which is the main cause of Jordans persistently high unemployment rate.
Unemployment Rate in Jordan (%), 2000-2012 Q2

Jordanian Economy Jordan & Rankings Conclusions

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Youth Unemployment Suffer the highest unemployment rates In 2008-2011, unemployment of the youth group aged 15-19 years hovered between a low of 29.1% in Q3 2009 and a high of 37.9% in Q3 2010 and 2011. Unemployment rates of the youth group aged 20-24 years hovered between a high in Q3 2010 of 30% with the lowest rate of 23.2% occurring in Q2 2009.
Quarterly Youth Unemployment Rate, Q1 2008 Q3 2011

The rates are considered extremely high by international standards and higher than the regional unemployment average for youth of 25%.

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Jordan In International Rankings

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The Global Competitiveness Report (GCR) evaluates and reports the business operating environment and competitiveness in 142 countries, as of 2012.
Rank Major Indicators 2009-2010 133 Countries Basic Requirement Institutions Infrastructure Macroeconomic Environment Health and Basic Education Efficiency Enhancers Higher Education and Training Market Efficiency Labor Market Efficiency Financial Market Development Technological Readiness Market Size Innovation & Sophistication Factors Business Environment Development Innovation 46 25 42 105 57 66 42 43 106 52 61 82 51 49 59 2010-2011 139 Countries 57 41 61 103 65 73 57 46 112 54 62 84 65 66 68 2011-2012 142 Countries 61 45 59 97 72 78 59 54 107 65 59 88 70 68 77 -4 -4 +2 +6 -7 -5 -2 -8 +5 -11 +3 -4 -5 -2 -9 Performance Difference

Jordan has experienced a drop of 6 places over the last year

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Regionally the GCR indicates that Jordan, Egypt, Algeria and Libya have each recorded significant drops in their rankings between 2009 and 2011. Qatar, Saudi Arabia, Oman, and Kuwait on the other hand have all risen in rank due to most of these nations being oil producing states. Interestingly, when looking at the 2010 report compared to the 2011 report, countries like Egypt, Algeria, Libya, and Jordan, all countries confronting the Arab Spring, saw a drop in their ranking. Tunisia experienced a decrease in its 2009 to 2010 rank, however dropped in ranking between 2010 and 2011.
Global Competitiveness Rankings of Jordan and Regional Countries 2009-2012

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Ease of Doing Business: Jordan suffered a major drop in ranking in the Report, which examines various aspects of the business environment and its resulting affects on the performance of a firm. In, Overall Ease of Doing Business, Jordan suffered a steady decline in ranking, from 73rd place in 2005 to 111th in 2011. Comparing the 2005 report to the 2011 report, Jordan has seen no change in the ease of starting a business and has seen slight improvements in registering property and trading across borders. All other indicators however have showed a decline in ranking. The largest drop has been seen in the ability to enforce contracts.
Doing Business Report, 2005-2011 Major Indicators
Ease of Doing Business Starting a Business Dealing with Construction Permits Employing Workers Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business Participating Countries

2005 2006
73 127 68 30 110 76 114 16 85 72 79 135 74 133 71 45 106 80 105 19 51 128 84 155

2007 2008
78 133 70 30 110 83 118 18 78 75 84 175 80 133 71 45 109 84 107 19 59 128 87 178

2009
101 119 116 48 105 125 114 22 77 129 96 181

2010
100 125 92 51 106 127 119 26 71 124 96 183

2011
111 127 92 N/A 106 128 120 29 77 129 98 183

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

In the Doing Business Report of 2011, Jordan is ranked 9th overall in a region of 14 countries. However, if you are to exclude all of the oil producing countries, Jordan is considered advanced in the region.
Doing Business Report, 2011

Countries
Jordan Oman Qatar UAE Bahrain Saudi Arabia Kuwait Egypt Yemen Syria Lebanon Iran Algeria Iraq

Doing Business Ranks, 2011


111 57 50 40 28 11 74 94 105 144 113 129 136 166

Introduction Arab Spring Brief Jordanian Economy

Economic Freedom of the World Report: Jordans summary ranking has improved in 2010 from a severe drop in 2009 to reach 24. Jordans size of government and regulation rankings have both continuously improved since 2000. Jordans legal system and property rights and sound money ranking saw the worst decline of all indicators.

Economic Freedom of the World Report 2000-2010

Jordan & Rankings


2000 2005 2009 2010

Conclusions
Summary Rating (Rank) Area 1. Size of Government Area 2. Legal System and Property Rights Area 3. Sound Money Area 4. Freedom to Trade Internationally Area 5. Regulation

Rating (Rank) Rating (Rank) Rating (Rank) Rating (Rank)


7.40 (34) 6.08 (68) 7.22 (38) 9.67 (7) 7.22 (62) 6.83 (44) 7.61 (27) 6.85 (54) 6.86 (42) 9.21 (37) 7.76 (40) 7.37 (26) 7.14 (50) 4.90 (104) 6.76 (41) 9.27 (36) 7.66 (44) 6.94 (54) 7.61 (24) 7.56 (29) 6.53 (49) 9.19 (44) 7.61 (44) 7.21 (37)

Introduction Arab Spring Brief Jordanian Economy

Regionally Jordan ranked in the top 33% scoring 7th out of 21 countries. In regards to corruption rankings, Jordan ranked 50th globally and 5th out of 21 countries in the region. In regards to overall freedom of the press, Jordan ranked 140th out of 196 countries and 5th out of 21 countries in the region. Finally, the index of most unstable countries Jordan received a score of 48.7 out of 100 (being the most unstable). Because many countries in the region are not scored Jordan is ranked 7th out of 14.
Population, GDP per capita at PPP, Democracy, Corruption, Freedom of the Press
Country Algeria Bahrain Djibouti Egypt Iraq Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Palestine Qatar KSA Somalia Sudan Syria Tunisia UAE Yemen Population (Million) 35.9 1.2 0.9 84.6 31.4 6.4 3.5 4.3 6.5 3.4 32.4 3.3 4.1 1.7 27.1 10.1 43.2 22.5 10.4 6.7 24.3 Population under 25 47.5% 43.9% 57.2% 52.3% 60.6% 54.3% 37.7% 42.7% 47.4% 59.3% 47.7% 51.5% 64.4% 33.8% 50.8% 63.5% 59% 55.3% 42.1% 31% 65.4% GDP per capita, 1000 at PPP 8.2 24 2.3 5.9 4 5.2 40.6 13.4 18.7 1.9 4.7 23.3 2.9 66.9 22.9 0.6 2.3 4.7 8.6 27.2 2.9 Democracy 125 122 126 138 111 117 114 86 158 115 116 143 93 137 160 NA 151 152 144 148 146 Corruption 105 48 91 98 175 50 54 127 146 143 85 41 NA 19 50 178 172 127 59 28 146 Freedom of Index of 100 = the Press most unstable 141 49.7 153 36.5 159 NA 130 65.7 144 65.7 140 48.7 115 21.7 115 30.7 192 71 118 57.4 146 46.8 153 58.4 181 NA 146 20.7 178 52.5 181 NA 165 NA 178 67.3 186 49.4 153 24.3 173 86.6

Jordan & Rankings Conclusions

Economist Intelligence Unit Democracy Index; Transparency Internationals Corruption Perceptions Index; Freedom Houses Freedom of the Press; The Economist

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Development Challenges
1. Size: Jordans development in hindered by both its geographical and population size. The total land area of Jordan is only 89,300 km, and has a population of just over 6 million. This small population makes Jordan a relatively small market for local producers to operate in. Location: Jordans geographical location has proved a hindrance to its development. There is only access to one port, Aqaba, and is situated in the center of an unstable region. There are currently a number of wars or recurring conflicts in a number of countries sharing borders with Jordan, Iraq, the West Bank, and Syria. These conflicts have led to difficulties in exporting or importing to and from these countries. Resources: Jordan is not well suited for agriculture as it has an arid climate and only 7.8% of the total land area is arable, mostly concentrated in the Jordan Valley. Though the Government is looking into extracting shale oil and the harnessing of nuclear power, these sources of energy are far from completion. Jordan imports 97% of energy needs and 86% of all food. This reliance on imports for fuel and food has rendered Jordan susceptible to rising energy costs and commodity price fluctuations. This was especially harmful during the Global Financial Crisis as the US dollar plummeted, and the JD with it, forcing the purchasing power of the JD to fall and prices to rise considerably.

2.

3.

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4.

Population Growth: Jordans high rate of population growth has two main sources: the influx of refugees, from Iraq and now Syria, and high birthrates. High birthrates has led to 69% of the total population to be aged 30 or less. With such a large portion of the population being aged 30 or younger, a great amount of strain has been put on the education system and has placed pressure on the Kingdom to create more jobs. Urbanization: As of 2008, Amman, Zarqa, and Irbid contained 71.4% of the total population of Jordan. This has put significant pressure on employment and housing, as well as over-burdening urban area and the systems contained within them such as the educational system, health system, and water and sanitary systems. Income Distribution: The Gini coefficient is usually used as a measure of the inequality of the distribution of income. A coefficient value of zero shows perfect equality where everyone in the population measured has an equal share of income and a value of one conveys maximum inequality, one person has all the income. Nations watch for the slightest change in the Gini, which usually indicate large or significant changes in equality. In 2002-2003, after the Government altered the income tax law and raised the sales tax rate twice and expanded its coverage, the Gini Coefficient became 38.8; in other words, income inequality increased. In 2007, income inequality rose again to 39.7. Note that the worlds best economy in terms of income equality is Sweden at 23.

5.

6.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

7.

Geographical Disparity in Income: According to DOS, there is great disparity in average income among the governorates in Jordan. As of 2008, there was a 68% difference between the highest figures, Amman with an average annual income per person of JD 1,682, and the lowest figure, Tafieleh with an average annual income per person of JD 1,078. The rates of average income per person explain the urbanization Jordan is experiencing, as Jordan, Irbid, and Zarqa are the heaviest populated governorates as well as having the highest average annual income per person. Corruption: In recent years, Jordan has taken significant strides in fighting corruption. In 2010, Jordan ranked 50th out 180 countries on Transparency Internationals Corruption Index; an improvement from 53rd in 2007. The improvement is attributed to the formation of the Anti-Corruption Committee in 2009. Dependence on Foreign Grants and Aid: Since the 1950s, Jordan has supported its budget and development programs through foreign aid. Most of the aid received by Jordan originated from Western countries as well as oil rich GCC members. Between 2003-2011, Jordan received approximately JD 5.6 billion in foreign aid. In 2011, Jordan received JD 1.215 billion in foreign grants, constituting approximately 6% of the GDP that year. Though foreign aid is high, the ineffective use of Aid Funds has limited effect they have had on the country. This is mainly due to a lack of coordination and not properly sharing the lessons learnt among other institutions.

8.

9.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

9.

Taxes: Regressive taxes, such as a 16% sales tax, have greatly affected Jordans poor. The sales tax affects the most those who spend the largest portion of their income, this means that the tax is felt by those with lower salaries the most.

10. Low Food Security: Only 30% of the arable land in Jordan is cultivated, meaning that food security is low, making Jordan especially vulnerable to fluctuations in commodity prices. 11. Water Limitations: Jordan's water balance in 2010 was -692 MCM/year; the annual supply of 550 MCM does not meet the annual demand of 1,242 MCM. The demand gap is set to increase to -1,368 MCM by 2040. Jordan has 10 primary reservoirs holding 110 million cubic meters of water (roughly one third full), but the country requires a minimum of 140 million cubic meters during the summer months. Jordan obtains most of its water from rainfall during the winter months. Rapid increases in population and industrial development have placed unprecedented demands on water resources.

Introduction Arab Spring Brief Jordanian Economy Jordan & Rankings Conclusions

Conclusions Though the Jordanian economy was in poor shape prior to the Arab Spring, much due to the effects of Global Financial Crisis and pro-cyclical policies, the negative effects of the Arab Spring on the economy are somewhat apparent. Yet they arose not from instability but more from an ad hoc approach to dealing with the spillover effects. Consequently, many of the problems contributing to an already ailing economy were shown to have been exacerbated but not caused by the Arab Spring. The effects of the Arab Spring on economic freedom in Jordan were relatively unsubstantial; as shown by the economic figures and international reports and rankings. The Kingdom maintained its emphasis on removing subsidies and decreased government spending. However, the decrease in spending affected more capital expenditures than current expenditures, which had grown to crowd-out spending on improving the economic infrastructure. Increases in foreign grants after the Arab Spring will most likely ease the burden (budget deficit and public debt) of government in the short run. However, political reforms are warranted for dealing with structural deficits and its manifestations, high unemployment and poverty rates. Without decreasing the government workforce and bureaucracy, the economic malaise should persist into the medium and long run.