|Jordan’s economic fortunes hang in the balance over war on Irak
|Businessmen and investors at the Amman Stock Exchange (ASE) were elated this week about news of a possible merger between two major pharmaceutical producers in Jordan: Dar Al Dawa’ and the Arab Pharmaceutical Manufacturing Co.
Rumors about the merger pushed the market’s price index to 173 points on Monday. Yet, they failed to dampen fears among ASE investors, who fear consequences of a possible US war on Iraq.
Apprehensive economists warn Jordan’s economy won’t survive any war on Iraq, resonating the current chaos the US war rhetoric is causing in the global economy.
Taking the ASE an example, economists said last year’s good achievements by shareholding companies in Jordan are being left by the sidelines because of the warlike conditions in the region.
Many of the ASE’s investors preferred to take a backseat and watch the stock market rather than actively take part in the daily trading sessions. This was the situation through out 2002 downsizing foreign investments in the stock market by almost 25 percent.
The stock market succeeded in reaching its highest peak in July, when the price index hit the 190-point level. Since then, trading sessions at the market declined in both of the daily trading volume and as reflected in the price index.
Jalil Tarif, the ASE’s CEO, agrees that politics is affecting the flow of investments in the stock market. He went further by suggesting the ASE would be among the big losers if war breaks out in the region.
A developing economy like Jordan’s, is an aid-dependent one and a mainly service-oriented economy. Iraq makes about one-fifth of the Kingdom’s international trade, and it provides Jordan with about 6 million tons of oil products annually.
That’s why economists urge the government to work fast to alleviate the negative economic and financial effects that may emerge from a war on Iraq. They warn the Kingdom is expected to face extensive war repercussions, both from Iraq and the Occupied Territories.
Palestinian officials often warned Israel is likely to exploit a war on Iraq by expelling the Palestinian people out of their homes to Jordan. With this, Jordanian economists believe the coming stage will be critical for the Kingdom.
Observers believe the slowdown at the stock market is an indicator of what is going on in the economy. They agree further political instabilities in the region would mean a long-term reversal in Jordan’s strive to achieve sustainable social and economic growth.
Minister of Economy Samer Al Tawil made it clear last week when he spoke of the gravity of the situation. A war on Iraq would be catastrophic for Jordan he said. The minister was quoted by the AFP as saying, “The impact of such a war on the Jordanian economy will depend on its duration and magnitude, and on how long a halt in oil imports will last.”
According to him, a long-term halt in Iraqi oil supplies means the government will bear an additional $700 million in its budget for this year.
“I believe the government can manage for some weeks and even months,” Al Tawil told The Star. “There is a bountiful reserve of oil in the Kingdom that was kept for such situations.”
Ali Abul Ragheb’s government is certainly aware of the financial and economic burdens that would certainly happen if a war on Iraq ensues and the likely expulsion of Palestinians happens. Al Tawil said the government has already defined its steps and procedures for war repercussions on Jordan. He, however, refused to give details.
“We realize well of the expectations in the event of war, all the consequences are possible. As soon as war is launched, the government will implement its contingency plan that complies with the situation in Iraq,” Al Tawil explained.
The minister’s remarks answered the calls by local economists who urged the government to set up a certain national strategy to make the economic sectors and the people ready for war when it takes place. They said time is running fast, blaming the government for its lack of producing a clear policy in its dealing with Iraqi affairs.
“No one can forecast when the Americans will launch their war on Iraq,” said economist Ibrahim Seif. “But the government can easily carry out a contingency plan to lessen the war’s repercussions on the economy before it breaks out.”
Seif told The Star the government must empower a special team of ministers and experts to conduct studies on the possible ways to guide the economy during wartime.
Oil is on the top of the agenda for Jordanians. The Kingdom receives its oil supplies through thousands of tankers crossing the borders with Iraq. Seif predicted the flow of these oil tankers won’t stop, even if the US starts bombing Iraq from the air.
He takes the 1991 Gulf War as an example, when Iraq maintained its oil supplies to the Kingdom at the time the US-led coalition attacked Iraq from the south.
“It is true war conditions are much different this time,” said Seif. “But everybody knows Jordan has nothing to do with the war on Iraq.”
A long-term halt in oil supplies also means doom for many industries. With tourism already stalled, many experts predict Jordan’s trade with Iraq would be hindered, forcing the local economy to lose more than $700 million in mutual trade.
Economists predict inflation will rise this year, in view of the economic implications of the war on Iraq. The inflation rate is estimated for 2002 at 3.7 percent.
Asked if post-war Iraq will maintain its good trade relations with Jordan, Seif said Jordan and Iraq uphold historic strong relations that make each party dependent on the other.
“Jordan will have to take advantage in different ways,” he pointed out. “Soon after the war ends, the Iraqis will be in need of economic, financial and construction support to rebuild their country. Jordan has all these potentials to employ its expertise in that regard.”
Al Tawil, meanwhile, stressed war repercussions on Jordan can’t be fixed overnight. “A war on Iraq will definitely affect all of its neighboring countries. Our problem is only with oil. The shorter the war will be, the better,” he said.