New Cabinet Pushing Capitalist Measures to Boost Economy : Jordan Feels Fallout of Oil Slump

AMMAN, Jordan â€”  The end of the Arab oil boom has halted Jordan’s piggy-back ride to prosperity. The little Middle Eastern kingdom is hoping for a new lift from private enterprise.

The new Cabinet that took office April 4 has vowed to arouse capitalist spirits by rewriting tax and investment laws, reducing price controls, untangling red tape and cooperating with private business.

Prime Minister Zaid Rifai has raised the possibility that the government might sell off some of its extensive business holdings, such as hotels or trucks.

Jordan has little oil of its own. But Arab oil states provided aid and jobs that fueled a decade-long boom in the Indiana-sized kingdom, which is north of Saudi Arabia and east of Israel.

Per-capita income rose to $2,037 in 1983 from $436 in 1973. Sprawls of stone villas rose on the hills of Amman, the capital, and hordes of Mercedes-Benz sedans clogged its streets.

Men whose grandfathers had roamed the desert as nomads made fortunes selling once-worthless land--using the money to send their sons to foreign universities and to build mansions of their own.

The growth absorbed Jordan’s rapidly expanding labor force and helped heal bitter social divisions caused by a 1970 war against the Palestine Liberation Organization.

Most of the country’s 2.5 million people are Palestinian refugees or their offspring.

21% Annual Investment Growth

Domestic investment grew at a rate of 21% a year from 1970 to 1982. The mining, manufacturing, construction and banking sectors more than doubled in size between 1975 and 1983, even correcting for inflation.

“We were lucky in a sense, and we jumped at the opportunity,� said former Industry and Trade Minister Jawad Anani. “We never expected that bonanza to last forever.�

It ended by 1983. Slumping world oil prices eroded the generosity of Arab donors and halted the proliferation of jobs in the Persian Gulf, where almost 40% of Jordanian workers are employed.

Preliminary official figures show that the economy grew by only a few percentage points in 1983 and 1984 and that per-capita income fell slightly.

Businessmen say that Jordanians abroad began to invest their money elsewhere or to hoard it. The stock market slumped. Big new office buildings stood almost empty for lack of renters.

Rifai has indicated that his government will try to lure home some of the earnings of expatriate Jordanians as well as investment by foreigners and Arabs.

The new government’s first major economic action was to repeal a requirement that all foreign banks become 51% Jordanian-owned by 1987.

The government’s pro-business promises and the banking action helped propel the small local stock market on its biggest rally since June, 1982.

“The psychology is high now, and that’s what’s needed to activate the market and the economy,� said Hashem Sabbagh, general director of the Amman Financial Market.

Jordan, created by Britain in 1921 and given independence in 1946, has never been self-sufficient. It has always imported far more than it exported and has depended on subsidies--first from the British, then the United States and then the Arabs.

Jordan’s problems were aggravated by hundreds of thousands of Palestinian refugees who flooded in after the Arab-Israeli wars of 1948 and 1967. The 1967 war also cost Jordan the West Bank region, which had accounted for 40% of its economy.

The oil boom of the mid-1970s transformed Jordan’s swollen population into its major export commodity and made aid from oil states a major source of revenue.

By early 1985, about a third of the country’s people lived outside its borders. The Labor Ministry estimated that 325,000 to 350,000 Jordanians held jobs abroad, 80% of them in the Persian Gulf region. They were accompanied by about 450,000 family members.

So many Jordanians went abroad, many to high-paying professional and managerial jobs, that the kingdom has imported about 150,000 low-wage workers from Egypt and other countries.

The money that Jordanians sent home in 1983--the last year of complete figures--exceeded the combined output of Jordan’s agriculture, mining, manufacturing and utility industries.

Even at the official count of 402 million dinars ($1.1 billion), remittances were 20% of the gross national product in 1983.

Virtually all economists say actual remittances were half again as high as the official estimate, perhaps even double, because vast amounts flow home uncounted through money changers rather than banks.

Government officials said remittances in 1984 were probably about the same as those in 1983.

Arab Aid Peaked in ’79

Anani said that as much as 40% of the remittances wind up in the hands of Palestinian-Jordanian citizens on the Israeli-occupied West Bank--aiding Israel’s economy more than Jordan’s.

Arab aid to Jordan peaked at $620 million in 1979, covering 40% of Jordan’s government budget. It fell to $305 million in 1984, covering 17%.

At the same time, Jordan has built up a foreign debt of more than $2.5 billion.

Jordanian officials say they are not worried by the debt, because most of it was loaned at very low rates and on long terms.

With the end of growth in Persian Gulf jobs, Jordan will look to new domestic projects to help absorb a labor force growing by about 4.4% a year, said Saleh Hassani, undersecretary of labor.

“In many cases, we will be substituting Jordanians for non-Jordanians,� he said.

The result, economists say, is that many Jordanians will have to settle for jobs they now shun, such as farm work that pays the equivalent of about $7.50 to $15 a day.