Over the last thirty years, Jordan has been called an oil economy without oil, because it, like the oil rich Gulf countries, has seen its fortune made and unmade with the rise and fall in oil prices.
Is it still an oil economy without oil? The answer is important to Jordan and so are its implications especially now as oil prices, at a 10-year high and US inventory levels at a 24-year low, exhibit a here-to-stay kind of attitude.
Based on the unemployment rates of the past 32 years, the unemployment rate is projected to continue its fourteen-year-old climb in the near future. In the aftermath of the 1967 war, unemployment in Jordan hovered around 9.9 per cent. However, during 1973-1984 era, thanks to a regional economic boom induced by an OPEC price hike, the unemployment rate levelled at an all time low of 3.3 per cent. By 1986, the unemployment rate [official figures cited] had risen to 8 per cent with no one heeding the signals of a crisis, or doing much to stem the increase. In 1991, after a sudden jump to 10.3 per cent in 1989, the rate rose to its zenith of 18.8 per cent.
In comparison, the 15.6 per cent unemployment level of 1999 was lower, but still unacceptable in terms of lost human capital.
The rise in oil prices over the last two years, to an OPEC basket price of $28.68 in August, means the return of good times at the Gulf oil club. In the past, Gulf countries employed Jordanians and sent generous aid to our country. Both were short-term, second best solutions, which should have been coupled by economic reform at home.
Instead, the Jordanian economy became dependent upon employment in the Gulf hosting the creme de la creme of Jordan's labour force. The savings of Jordanians working there boosted real estate prices at home as there was nothing else to invest in, and besides these guys had no `wasta.' Jordan also lost, except in the summer, the consumption spending of its best wage earners who demanded sophisticated products and could afford them.
At the same time, the Gulf saw the bulk of the labour force savings go overseas because of over-protective xenophobic policies which meant that oil had to keep flowing every year to pay for the demands of development.
At home in Jordan, on the other hand, the public sector saw employment of civil servants as an easy approach to sustainable development. It began a policy of aggressive hiring which unfortunately lead to the hire of those who could not be employed in the Gulf, where competition was tough and the salaries were higher.
It thus started a trend of hiring the unemployable, which later exacerbated the symptoms of hidden unemployment and inefficiency in the public sector.
With the resulting adverse selection, and the creation of socio-economic disparities leading to a schism between the haves (Jordanians working in the Gulf) and the have-nots (Jordanians working in the public sector), inward investment spending by Jordanians travelled to friendlier havens and the gap between savings and investments remained a forbidding void.
The damage was widespread and policy-makers here and in the Gulf forgot that they needed long term solutions to solve the problems of investment and employment.
In the Gulf, investment opportunities have only recently become available to expatriates, and the demand for foreign labour has decreased overall as the domestic supply of quality labour continues to grow.
For Jordan, it is extremely important not to become an oil economy again, because it may prove to be as in the past, a hidden curse.
Will Jordan become an oil economy again? Most likely not because the political and economic landscapes have changed considerably since the seventies.
If it does, we may forget to do our homework and continue the economic reform. Jordan needs to continue to restructure the economy, expand government spending on projects that attract foreign investment (especially to non-traditional areas like telecommunications and the Special Economic Zone in Aqaba), and let go of organisations and regulations whose sole task is to tell the private sector what to do.
The trick is to tell the private sector what not to do and stay out of its way. Otherwise, the unemployment rate will continue to rise.
( Jordan Times )
By Yusuf Mansur
© 2000 Mena Report (www.menareport.com)
