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Atlas of Jordan

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Myriam Ababsa

Chapter seven - Jordan’s Rentier Economy

Jordan and Globalization

Myriam Ababsa et Françoise De Bel-Air

Texte intégral

Foreign trade and Jordan’s economic and financial partners

1Jordan’s current account shows a structural deficit since the country imports its raw materials, food products and everyday consumer goods. In 2011 the trade deficit amounted to US$ 6 billion, that was not offset by surplus transfers (US $ 3.3 billion), tourism revenues (US$ 2 billion) and services (US$ 705 million) (IMF 2011) (fig. VII.3).

Figure VII.3 — Trade Balance Evolution 1989-2009.

Figure VII.3 — Trade Balance Evolution 1989-2009.

2Jordan imports 96% of its energy in the form of crude oil, oil products and gas, amounting to JD 2.1 billion in 2010. The second largest sector of imports is transport equipment and spare parts (over one billion JD), followed by steel, textiles and pharmaceuticals. Exports doubled following the implementation of trade agreements, particularly with the United States in 1995 (fig. VII.4). They increased by 190% between 1996 and 2008. Exports consist essentially of clothing manufactured in the QIZs, followed by potash, medical and pharmaceutical products, vegetables, fertilizers and phosphates (fig. VII.5).

Figure VII.4 — Major Imports in 2010 (JD Million).

Figure VII.4 — Major Imports in 2010 (JD Million).

Figure VII.5 — Major Domestic Exports in 2010 (JD Million).

Figure VII.5 — Major Domestic Exports in 2010 (JD Million).

3One third of imports come from Arab countries (mainly oil), but for manufactured goods, Europe is Jordan’s largest trading partner with 19.8% of imports (9.7% come from Germany). China provides only 10.9% of imported goods (fig. VII.6). 50% of exports are sent to Arab countries, especially Iraq (18.5%), but most products are re-exported, with Jordan serving as a transit country. The U.S.A. receives 15.6% of exports and Europe only 3.7% (fig. VII.7 and VII.8).

Figure VII.6 — Geographic Distribution of Imports, 2010.

Figure VII.6 — Geographic Distribution of Imports, 2010.

Figure VII.7 — Geographic Distribution of Domestic Exports, 2010.

Figure VII.7 — Geographic Distribution of Domestic Exports, 2010.

Figure VII.8 — Jordan’s Trade by Country, 2010.

Figure VII.8 — Jordan’s Trade by Country, 2010.

4In the end of the 1990’s, Jordan undertook a process of market liberalization and signed several free trade agreements: Qualifying Industrial Zones in 1996, GAFTA (Great Arab Free Trade Agreement) in 1997, free trade agreements with the United States in 2000 and the Euromediterranean partnership in 2002.

The trade deficit offset by donations and Foreign Direct Investment

5Jordan’s public finances are in deficit: revenues and donations totalled $ 6.56 billion in 2010, while expenditures amounted to $ 8.02 billion; leaving a shortfall of $ 1.46 billion (30.42% of GDP) (Central Bank of Jordan 2011). Bilateral and multilateral grants recorded in the balance of payments reached JD 854 million in 2010, compared to an average JD 686 million from 2006 to 2010. Arab aid counted for one third (JD 283 million), but was zero in 2007 (an average of JD 365 million during the period 2006-2010). U.S. aid (JD 280 million) represented another third (on average JD 239 million). Aid from the European Union was 11.5% of the total with JD 97.7 million.

6Foreign direct investment was only JD 1.2 billion in 2010, one-third down on the 2006-2010 average. Most of these foreign investments were for the tourism industry for which the country’s stability is essential. They represented only 6.4% of GDP in 2010, compared to a record 22.7% in 2007 (fig. VII.9 and VII.10).

Figure VII.9 — Foreign Direct Investment in Jordan, Israel and the Arab World as % of GDP, 2000-2009.

Figure VII.9 — Foreign Direct Investment in Jordan, Israel and the Arab World as % of GDP, 2000-2009.

Figure VII.10 — Foreign Direct Investment in Jordan as % of GDP and amounts, 2005-2010.

Figure VII.10 — Foreign Direct Investment in Jordan as % of GDP and amounts, 2005-2010.

7Inter-Arab investments soared in 2005, the year of the assassination of the Lebanese Prime Minister and the oil price boom. However, Jordan is a limited market compared to Saudi Arabia and booming Algeria (fig. VII.11 and VII.12).

Figure VII.11 — Main Recipient of Inter Arab investments in 2010.

Figure VII.11 — Main Recipient of Inter Arab investments in 2010.

Figure VII.12 — Inter Arab investments in Jordan (1995-2010).

Figure VII.12 — Inter Arab investments in Jordan (1995-2010).

8In terms of market capitalization, Jordan is only the tenth Arab country, half the size of Lebanon and a tenth that of the UAE. The Arab Bank, however, was the eighth Arab bank in 2010 with $ 32 billion. In 2011, Jordan made its banks increase their capital over one year, from a minimum of JD 40 million to JD 100 million, while foreign banks must have a minimum capital of JD 50 million (compared to JD 20 million previously) (Bank Audi’s Research Department 2011) (fig. VII.13).

Figure VII.13 — Arab Countries Market Capitalization in 2010.

Figure VII.13 — Arab Countries Market Capitalization in 2010.

9To reduce sovereign debt, in November 2010 the Jordanian government issued five-year euro-bonds amounting to U.S. $ 750 million, or 11.5% of the total debt of JD 4.6 billion. The Kingdom’s total debt cannot exceed 60% of GDP and its internal and external debts must not exceed 40% of GDP each. Total net public debt was 58.7% of GDP at the end of 2010, up 4.5 points in a year (Klein 2011).

International aid: geopolitical revenue

10Since the first Arab-Israeli war of 1948, Jordan has received considerable humanitarian and development aid to allow the government to provide basic services to its population that had doubled in a few weeks with the arrival of Palestinian refugees. This direct development aid amounted to $ 122 per capita, ranking Jordan just after Lebanon, but before Iraq in 2009 (fig. VII.14).

Figure VII.14 — ODA received per capita in 2009 (current US $).

Figure VII.14 — ODA received per capita in 2009 (current US $).

Remittances | Françoise de Bel Air

11The integration of Palestinians in the Kingdom of Jordan also generated another source of economic prosperity: remittances from emigrants, employed as mostly of Palestinian origin, managers, particularly in the prosperous oil economies of the Arabian Peninsula from the late 1950s. According to Jordanian government departments, between 1961 and 1983 the number of Jordanians working abroad increased fivefold, rising from 64,000 to 312,000, of which over 85% worked in the Gulf. In addition, half a million family members accompanied these workers. Remittances reflect these demographic changes: from $ 16 million in 1970 (2.7% of GNP), the sums transferred to Jordan by emigrants rose to over US$ 1 billion between 1981 and 1986 (approximately 25% of GNP). The flow of economic migrants and their remittances dropped slightly from the mid-1980s, in response to the crisis faced by the countries of the Arabian Peninsula, and then fell more sharply after the 1991 Gulf War, when some 300,000 workers were expelled from Kuwait and Saudi Arabia (fig. VII.15). Remittances recovered in the mid-1990s (through other forms of expatriation), but did not return to pre-war levels (260,000 Jordanians were working abroad in 2001). However, remittances bounced back in the early 2000s reaching almost U.S. $ 2 billion. According to a 2008 estimate by the Department of Statistics, around 260,000 Jordanians work abroad (600,000 with their families). The majority of expatriates reside in oil producing countries in the Gulf: mostly in Saudi Arabia (260,000 people), but also in the UAE (250,000), Kuwait (42,000) and Qatar (27,000) (estimates of the number of Jordanians in the Gulf in early 2009, Jordanian press). The Gulf region is therefore home to about a tenth of the kingdom’s population; workers and their families.

Figure VII.15 — Jordanian Expatriates’ Remittances in amounts and % of GDP (1961-2011).

Figure VII.15 — Jordanian Expatriates’ Remittances in amounts and % of GDP (1961-2011).

12Remittances from expatriate workers are growing steadily: they continued to rise in 2007 and 2008, and reached US$ 2.6 billion in 2006, according to data from the Central Bank of Jordan, for Gross Domestic Product (GDP) or 16% of GDP. Thus, although mass emigration causes a “brain drain” that is detrimental to the country’s future in the long term, in the short term it generates income that is essential for the kingdom’s economy. In addition, it plays a role for social and political stability by ensuring access to capital for young professional Jordanians and their families, which is increasingly difficult in the kingdom since the economic deregulation process started. A drop in oil prices could therefore have social and political consequences in Jordan as well as an impact on the economy.

13In 2010, Jordan was ranked 16th worldwide amongst countries receiving remittances from nationals abroad. However, in proportion to its population size it was second worldwide after Lebanon and ahead of Morocco and Egypt (fig. VII.16). Thus, a substantial proportion of its GDP comes from remittances from Jordanian expatriates. Figure VII.17 compares Jordan’s GDP per capita to those of other Arab countries. This figure depends on hydrocarbon resources and the total population, the record was achieved by Qatar with 73,000 dollars per capita, followed by the Gulf countries, which each have fewer than five million inhabitants.

Figure VII.16 — Jordan among the 20 first developing countries receiving remittances.

Figure VII.16 — Jordan among the 20 first developing countries receiving remittances.

Figure VII.17 — Arab countries GDP per capita according to population size 2011.

Figure VII.17 — Arab countries GDP per capita according to population size 2011.

Table des illustrations

Titre Figure VII.3 — Trade Balance Evolution 1989-2009.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-1.jpg
Fichier image/jpeg, 44k
Titre Figure VII.4 — Major Imports in 2010 (JD Million).
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-2.jpg
Fichier image/jpeg, 52k
Titre Figure VII.5 — Major Domestic Exports in 2010 (JD Million).
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-3.jpg
Fichier image/jpeg, 36k
Titre Figure VII.6 — Geographic Distribution of Imports, 2010.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-4.jpg
Fichier image/jpeg, 48k
Titre Figure VII.7 — Geographic Distribution of Domestic Exports, 2010.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-5.jpg
Fichier image/jpeg, 48k
Titre Figure VII.8 — Jordan’s Trade by Country, 2010.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-6.jpg
Fichier image/jpeg, 148k
Titre Figure VII.9 — Foreign Direct Investment in Jordan, Israel and the Arab World as % of GDP, 2000-2009.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-7.jpg
Fichier image/jpeg, 48k
Titre Figure VII.10 — Foreign Direct Investment in Jordan as % of GDP and amounts, 2005-2010.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-8.jpg
Fichier image/jpeg, 56k
Titre Figure VII.11 — Main Recipient of Inter Arab investments in 2010.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-9.jpg
Fichier image/jpeg, 36k
Titre Figure VII.12 — Inter Arab investments in Jordan (1995-2010).
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-10.jpg
Fichier image/jpeg, 32k
Titre Figure VII.13 — Arab Countries Market Capitalization in 2010.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-11.jpg
Fichier image/jpeg, 44k
Titre Figure VII.14 — ODA received per capita in 2009 (current US $).
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-12.jpg
Fichier image/jpeg, 36k
Titre Figure VII.15 — Jordanian Expatriates’ Remittances in amounts and % of GDP (1961-2011).
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-13.jpg
Fichier image/jpeg, 64k
Titre Figure VII.16 — Jordan among the 20 first developing countries receiving remittances.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-14.jpg
Fichier image/jpeg, 28k
Titre Figure VII.17 — Arab countries GDP per capita according to population size 2011.
URL http://books.openedition.org/ifpo/docannexe/image/5026/img-15.jpg
Fichier image/jpeg, 69k

© Presses de l’Ifpo, 2013

Conditions d’utilisation : http://www.openedition.org/6540