|Jordan's economy linked to Iraq - War rhetoric causes unsettling situation
|The rising talk of war by the US on Iraq is threatening the Jordanian economy. Despite Baghdad's decision to allow UN weapon inspectors to return to Iraq, Jordanian economists warn that the warlike situation is not going away.
Economists argue Bush will still likely wage war on Iraq despite the findings of the UN inspectors. They foresee an unsettling future for the region if a war on Iraq erupts.
Some economists suggest Jordanian Prime Minister Ali Abul Ragheb forms an "emergency cabinet" to handle the impending economic situation in the Kingdom if war does break out. "We need a government that is able to deal with the economic, political and social effects that will be created by a US war on Iraq," Dr Mohammed Saqr, professor of economics at the University of Jordan, told The Star. Saqr considers Iraqi approval of inspectors as a "temporary defusing of the war on Iraq." He urges the government to work fast and take advantage of the current political stillness to uphold economic stability. "The cabinet must have the wisdom to know how to treat the economy under warlike circumstances."
Abul Ragheb restated last week Jordan's economy is doing well. He, however, didn't hide fears of the consequences that may take place after an imminent US strike on Iraq. "Iraq is our main trading partner and any future military strike against it will bring havoc to the Kingdom's economy. That's for sure," Abul Ragheb said. "We are not looking at this from a profit and loss account perspective but according to the long-term effects for the region and Jordan in particular."
Saqr's remarks were echoed by recent Egyptian news reports indicating that many of the Arab economies, including Jordan, still face mounting economic problems due to the 11 September attacks on the US last year.
The reports said Arab investments in foreign markets lost billions of dollars over the past 12 months; this immense loss of money forced many Arab governments to severely cut down on outside expenditures.
Dr Munir Hamarneh, professor of economics at the University of Jordan, says Abul Ragheb must take these realities into consideration. "The threats to the Jordanian economy have already began when the US administration declared war on Iraq," Hamarneh explained. He welcomed the Iraqi move to allow the UN inspectors to Baghdad, but says these alone does not ensure economic and political stability in the region. "What really matters now is how long this negative situation will remain?"
Iraq is Jordan's sole oil supplier with over 5.5 million tons of crude oil and oil products. The current political crisis comes at an especially bad time with the two countries working together to establish an oil pipeline from Iraq to Jordan. Oil would be transferred to Jordan through the proposed pipeline, rather than the current method which involves thousands of tankers and trucks delivering the oil to Jordan.
The new oil pipeline will be halted if the US wages war on Iraq. Both Saqr and Hamarneh agree that the Iraqi regime well realizes this fact. "I believe the Iraqis are wise enough so as not to allow the region to go further down the political slippery-slope," said Saqr. Iraq's oil supplies to Jordan are part of the UN Oil-for-Food program, effective since 1997.
Trade ties between Iraq and Jordan have also become stronger than before. Besides the $450 million trade protocol between the two countries, Jordan's exports to Iraq make up one-third of the overall Jordanian exports worldwide. "A war on Iraq means a death certificate for the Jordanian economy," one economist said. "Many of the local industries and economic sectors in the Kingdom will be shut off. The US wants from Jordan to use up its aid to support the local economy and makes it a dependent one," said the economist, who preferred anonymity.
The threat of war has dampened the Amman Stock Exchange (ASE) for weeks now as investors worry about its impact on economic development.
The ASE's gross trading volume over the first seven months of 2002 leaped to over JD 730 million, while the value of its shareholding companies increased more than 30 percent this year to over JD 4.3 billion. This, however, forced many investors and shareholders to cede and wait for the developments on the grounds. ASE sources expect Iraq's decision to allow UN inspectors to Baghdad will help the market regain its upward trend.
Bassam Saket, president of the Jordan Securities Commission, said the ASE can bolster its growth only by bringing Jordanian capital in the US back home. "We have to take advantage of the repercussions of 11 September attacks," Dr Saket stressed. "There are many Jordanian resources that need to be brought into Jordan's economy and employed in profitable investments."
The threat of war and economic instability, however, discourages these resources from returning to Jordan.
Saqr and Hamarneh disputed suggestions a war on Iraq may affect the purchasing power of the Jordanian dinar. They noted the dinar today is stronger than before, but urged the government to take care of its resources and keep Jordanian investments in the country.
"Jordan's economy depends on foreign aid. The government must then rationalize its public expenditure, provide the basic commodities for its citizens and prevent any further misfortunes that may happen to the economy," said Hamarneh.
He, however, sees hope in Iraq's yield to the US and UN demands and considers it a first step to ensuring economic stability. "I call on Iraq to recognize the political and economic dimensions of its political course and prevent the region from any further economic adversity."