Economy

Jordan is a small country with limited natural resources. The country is currently exploring ways to expand its limited water supply and use its existing water resources more efficiently, including through regional cooperation. Jordan also depends on external sources for the majority of its energy requirements.

During the 1990s, its crude petroleum needs were met through imports from Iraq and neighbouring countries. Since early 2003, oil has been provided by some Gulf Cooperation Council member countries. In addition, the Arab Gas Pipeline from Egypt to the southern port city of Aqaba was completed in 2003. The government plans to extend this pipeline north to the Amman area and beyond.

Since 2000, exports of light manufactured products, principally textiles and garments manufactured in the Qualifying Industrial Zones (QIZ) that enter the United States tariff and quota free, have been driving economic growth. Jordan exported US$6.9 million in goods to the US in 1997, when two-way trade was US$395 million; it exported US$661 million in 2002 with two-way trade at US$1.05 billion. Similar growth in exports to the United States under the bilateral US-Jordan Free Trade Agreement that went into effect in December 2001, to the European Union under the bilateral Association Agreement, and to countries in the region, holds considerable promise for diversifying Jordan's economy away from its traditional reliance on exports of phosphates and potash, overseas remittances, and foreign aid. The government has emphasised the information technology (IT) and tourism sectors as other promising growth sectors. The low tax and low regulation Aqaba Special Economic Zone (ASEZ) is considered a model of a government-provided framework for private sector-led economic growth.

Jordan is classified by the World Bank as a 'lower middle income country.' The per-capita GDP (PPP) was approximately US$5,700 in 2006, and 20% of the economically active population, on average, was unemployed in 2006.

While pursuing economic reform and increased trade, Jordan's economy will continue to be vulnerable to external shocks and regional unrest. Without calm in the region, economic growth seems destined to stay below potential. On the positive side, however, there is huge potential in the solar energy falling on Jordan's deserts, not only for the generation of pollution-free electricity but also for such spin-offs as desalination of sea water.

Macro-Economic Trend

Jordan's distance from other markets makes its exports less competitive outside the region, and political disputes among its traditional trading partners-Iraq, Saudi Arabia, and the Gulf states-frequently restrict regional trade and development. King Abdullah II has encouraged his government to liberalise the economy, improve economic ties in the region, and seek opportunities in the global information economy.

Since 1987, Jordan has struggled with a substantial debt burden and rising unemployment. In 1989, efforts to increase revenues by raising prices of certain commodities and utilities triggered riots in the south. The mood of political discontent that swept the country in the wake of the riots helped set the stage for Jordan's moves toward democratization.

Jordan also suffered adverse economic consequences from the 1990-91 Gulf War. While tourist trade plummeted, the Gulf States' decision to limit economic ties with Jordan deprived it of worker remittances, traditional export markets, a secure supply of oil, and substantial foreign aid revenues. UN sanctions against Iraq-Jordan's largest pre-war trading partner-caused further hardships, including higher shipping costs due to inspections of cargo shipments entering the Gulf of Aqaba. Finally, absorbing up to 300,000 returnees from the Gulf countries exacerbated unemployment and strained the government's ability to provide essential services.

Trade

Since 1995, economic growth has been low. Real GDP has grown at only about 1.5% annually, while the official unemployment has hovered at 15-30%. The budget deficit and public debt have remained high, yet during this period inflation has remained low, and exports of manufactured goods have risen at an annual rate of 9%. Monetary stability has been reinforced, even when tensions were renewed in the region during 1998, and during the illness and ultimate death of King Hussein in 1999.

Expectations of increased trade and tourism as a consequence of Jordan's peace treaty with Israel have been disappointing. Security-related restrictions to trade with the West Bank and the Gaza Strip have led to a substantial decline in Jordan's exports there. Following his ascension, King Abdullah improved relations with Arabic states of the Persian Gulf and Syria, but this brought few real economic benefits. Most recently the Jordanians have focused on WTO membership and a Free Trade Agreement with the US as means to encourage export-led growth.

The Free Trade Agreement (FTA) with the United States that went into effect in December 2001 will phase out duties on nearly all goods and services by 2010. The agreement also provides for more open markets in communications, construction, finance, health, transportation, and services, as well as strict application of international standards for the protection of intellectual property. In 1996, Jordan and the United States signed a civil aviation agreement that provides for 'open skies' between the two countries, and a US-Jordan treaty for the protection and encouragement of bilateral investment entered into force in 2003. Jordan has been a member of the World Trade Organisation since 2000.

Textile and clothing exports from Jordan to the United States shot up 2,000% from 2000 to 2005, following introduction of the FTA. According to the National Labor Committee, a US-based NGO, Jordan has experienced sharp increases in sweatshop conditions in its export-oriented manufacturing sector.

Tourism

Tourism is a very important sector of the Jordanian economy. In addition to the country's political stability, the geography offered makes Jordan an attractive tourist destination. Jordan's major tourist activities include visiting numerous ancient places and unspoilt natural locations to observing the cultural and religious sites and traditions.

Influence of the Middle East Conflict

The ongoing Arab-Israeli conflict, the Gulf War, and other conflicts in the Middle East have made huge impacts on the economy of Jordan. The fact that Jordan has peace with the surrounding countries, combined with its stability, has made it a preference for many Palestinians, Lebanese and people from the Persian Gulf immigrants and refugees. Though this may have resulted in a more active economy, it has also damaged it by substantially decreasing the amount of resources each person is entitled to. Jordan has a law that states that any Palestinian may immigrate and obtain Jordanian citizenship, but must remit their Palestinian claim. It should also be noted that Palestinians are not allowed to purchase land unless they give up their Palestinian citizenship.