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French Version

Strengthening Ties

Given a string of outstanding political disputes, last week’s announcement of closer economic ties with Saudi Arabia has been warmly welcomed in Jordan. The Jordanian-Saudi Higher Joint Committee spent two days in Amman discussing bilateral trade and ways of enhancing commercial ties.

The highlight was the announcement of a $500 million fund in the form of a joint holding company aimed at developing services, industry and tourism in both countries.

Relations between both kingdoms have been considerably strengthened since the 2003 US invasion of Iraq, when Jordan began to import the vast majority of its oil from Saudi Arabia. Until then, Jordan predominantly relied on Iraq for its supply.

Whilst oil is the primary factor in bilateral trade, there are many other areas where trade is currently underway, and both parties have stated this week their desire for this trade to grow. The president of the Jordanian Chamber of Commerce, Haidar Murad, cited exports from Saudi Arabia into Jordan of some $2.46 billion, with imports from Jordan accounting for $232 million. Private sector Saudi investment is already apparent in Jordan, but both parties are looking for further mutually beneficial openings.

Jordan has endeavored to make itself as attractive as possible to regional investors, conscious that the appetite for placing money further afield has diminished. The Hashemite kingdom has already benefited significantly from the excess liquidity in the Gulf. Unsurprisingly then, the delegations’ principal aim was the broad development of private sector enterprise. The result was the inauguration of the holding company announced last Wednesday. The social need for wealth creation has never been stronger in Jordan and the government has realized that the days of state subsidies are over.

Indeed, a day earlier, King Abdullah met with Saudi Arabia’s industry and trade minister, Hashem Yamani, and made it apparent that it was his hope that the establishment of the holding company would lead directly to job creation. It was heartening then when Yamani told the press that his country was particularly “impressed with Jordan’s experiment in restructuring its economy” and went on to say later that the Jordanian investment environment “has become a model for the region”. Yamani said that the Saudis were particularly keen to learn from Jordan’s successes in industrial estate development. His country has its own set of social and employment issues and a specific need for both industrial diversification and regeneration. Saudi Arabia could also benefit from developing trade with Jordan, as the kingdom has advantageous trade agreements with places such as Singapore.

In a separate but significant move, Yamani and his Jordanian counterpart, Sharif Zu’bi, signed an agreement ending Saudi Arabia’s 14-year old ban on Jordanian agricultural produce imports. The 1992 ban came into affect because of Saudi concerns over the use of treated wastewater for irrigation in Jordan. The document identifies four governorates from where produce can now be exported to the Saudi market—all are relatively far from areas where wastewater is used. The agreement paves the way for further discussions to allow Jordan to export livestock and poultry to Saudi, providing adequate proof that the animals are disease-free is provided. This is welcome news for Jordan’s farming community.

In the spirit of the entire two days, both parties identified the need for dialogue and the development of joint-programs to mutually beneficial ends. Saudi-Jordanian relations have come a very long way since their low point in 1991, when King Hussein chose to defy regional consensus and attempted to find a peaceful solution to the crisis over Kuwait that precipitated the Gulf war of that year. The subsequent withdrawal of aid from Saudi Arabia, the US and others crippled the Jordanian economy. Gradually, relations have thawed and the two countries, as demonstrated this week, have a vested interest in the other’s future prosperity.

Whilst Jordan’s needs are perhaps more acutely apparent, Saudi Arabia is beginning to realize that it does not have quite the influence on the global stage it once did and that Jordan could become a stronger ally. King Abdallah has come under considerable domestic pressure for seeking closer ties with the US and his broader effort to spend time abroad selling Jordan. This is in part a political drive, but also a way of promoting Jordan and its opportunities. The King has driven the domestic reform program, frequently changing ministers to find the best people to carry these out. Now that these changes are beginning to bear fruit, it is time to court investment.

For Saudi Arabia, the advantages of closer ties with Jordan are in the form of tangible economic benefits and the subtler political message they send. The ever-present Iraq factor could also be at play. Both kingdoms are Sunni and keen to see a fair deal for the Sunni population in their war-ravished neighbor. The inevitable dominance of the Shia in elections in Iraq will present both states with issues that may be best addressed together. Ultimately, heightened interest in Jordan from Saudi Arabia can only be good for the former kingdom’s economy, which whilst substantially reformed has a long way to go. Most analysts believe that future success relies on the development of small- and medium-sized enterprises (SMEs) and entrepreneurial skills—with foreign direct investment (FDI) and international trade seen as the keys to this. To this end, the Jordanians successfully lobbied the Saudis to support their desire for a free-trade agreement with the whole Gulf Cooperation Council (GCC), as opposed to the individual bilateral arrangements that currently exist.

The commitment to Jordan shown by Yamani and his delegation not only shows a more open and pragmatic approach from the more conservative Saudis, but that Jordan is increasingly seen as a politically and economically sound partner.

Amman,16May2006
Redaction
The Star


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