Tuesday, May 3, 2011

Jordan: Four Challenges

By Yusuf Mansur
This commentary was published in The Jordan Times on 03/05/20 

Jordan today stands at a crossroad, with four economic challenges - unemployment, poverty, inflation and corruption - that need to be addressed with ingenuous swiftness. Failure to do so or a laggard, relaxed, attitude will not only destroy opportunities that may arise from the temporal doom of other economies in the region but also bring unwarranted consequences domestically. 

Here are the four challenges that need to be tackled:

- The inflation rate in Jordan in 2010 was 5 per cent, up from -.7 per cent in 2009 and down from 13.9 per cent in 2008. According to the Food and Agriculture Organisation, basic food prices will likely rise by 50 per cent this year, prompted in part by rising fuel prices and the falling US dollar. 

Jordan, an importer of 86 per cent of its caloric intake and 96 per cent of its energy needs, will see a strong inflationary pressure this year. The poor spend over 40 per cent of income on food and fuel; hence, their spending power will be severely curtailed.  

Furthermore, inflation being imported, it is a wild card that can be triggered by regional unrest, and since it is due to factors outside domestic control, it cannot be dealt with through monetary policy instruments, including the exchange rate.
- Unemployment, which reached a zenith of 19.6 per cent in 2003, two years after Jordan received 300,000 repatriated Jordanians from the Gulf, with their savings of $1.6 billion, is on the rise again. True, unemployment has fallen over the years to 12.7 per cent in 2008; the trend since then has been upwards. 

In 2009, unemployment reached 12.9 per cent, and 13.1 per cent in 2010. The first quarter of 2011 showed an increase over the first quarter of 2010; hence one can surmise that unemployment this year is trending up, which is not a happy sign. Furthermore, given that the unemployment among the youth, which make up 65 per cent of the population, is 25.6 per cent, the majority of the nation’s young will most likely be unhappy. (By the way, the University of Michigan created an index that has become known as the Misery Index, which is the sum of inflation and unemployment rates. A rise in both inflation and unemployment will cause misery among a large group of people.)
- Poverty has not fallen over the years, but has increased in 2008 to 13.3 per cent from 13 per cent in 2006, according to the 2008 Household Expenditure and Income Survey of the Department of Statistics. This occurred despite huge outlay by the government in 2008. Moreover, since that outlay was non-recurring (does not happen every year), poverty will most likely be around 20 per cent. In other words, one of five people will be below the poverty line.
- The fourth challenge, the catalyst for negative behavioural exuberance and consequent mayhem, is corruption. The common perception is that corruption has been on the rise since the last IMF reform programme ended in 2004. Jordan, which was until then known for low levels of corruption, became subject to rumours of large-scale corruption, which, if proven founded, could not only derail a costly reform process but also become the means and venue for unrest, since most likely people will blame corruption for usurping the fruits of the boom years (2004-2008), that were also lost with the bust (2009-until now). 

Corruption has also paralysed a large segment of government. Few officials would dare nowadays make a decision that requires thinking outside the box. After years of acting almost without a care about the public, the very same officials have seemingly chosen a policy of appeasement and hesitation, which is just as bad as corruption, if not more. The paralysis we witness nowadays in decision making, as one committee is formed after another, shows that the approach is not right for solving urgent and pressing economic maladies. 

Enter the large young population of Jordan, which is heavily affected by the four challenges, into the equation, and the commonsensical outcome is that what is required is a sense of urgency in policy making and implementation. 

Politicians should heed the words of Adam Smith who, three centuries ago, said: “No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable.”

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