Jordan is turning a new page after years of setbacks, its prime minister said Thursday during an international conference dedicated to investment in the Middle Eastern country.
“We’ve had one shock after the other, whether in terms of oil, refugees, closure of borders,” Jordanian Prime Minister Omar Razzaz told CNBC’s Hadley Gamble in London. “But we’re now moving toward a very different trajectory which is all about growth, about opportunities.”
The event, attended by international business leaders and entitled “Jordan: Growth and Opportunity, the London Initiative 2019,” stems from a partnership launched by Prime Minister Theresa May in 2017 aimed at supporting economic and social reform and growth in Jordan.
May on Thursday called on investors to support the Kingdom of Jordan during the London conference meant to boost economic and social progress in the Middle Eastern country and longtime British ally.
Once boasting economic growth averaging 6.5 percent annually, Jordan’s fortunes took a sharp downward turn from 2008 onward as the global financial crisis, then the Arab Spring fallout, and border closures with vital trade partners Syria and Iraq crippled economic activity. Unemployment is at a 25-year high of 18 percent, and growth sits at a mere 2 percent.
As part of its commitment to Jordan, which May stressed as vital to ensuring stability in an unstable region, the prime minister announced that the U.K. will underwrite a $250 million World Bank loan to Jordan to help it manage its mounting national debt. The confidence demonstrated by the U.K. move is hoped to encourage further international investment.
The event’s attendees also included U.S. Treasury Secretary Steven Mnuchin, EU Foreign Affairs Representative Federica Mogherini, and a number of foreign ministers and CEOs.
‘Partners through good and bad’
May on Thursday introduced a number of U.K.-led initiatives aimed at helping the country deliver reforms to create jobs, boost productivity and help it access low interest loans. “Unlocking that potential, to enable Jordan to prosper and remain a beacon of stability, matters to all of us,” she said.
“There is a historic relationship between the U.K. and Jordan that goes back 100 years, and we’ve been partners through good times and bad times,” Razzaz told CNBC, pointing out the political and economic challenges posed by Brexit uncertainty. “So this is the U.K. being there for us, and we are very confident that this is something we can build on.”
The prime minister stressed the fiscal measures Amman has taken to stabilize the country’s macroeconomics, including austerity and private sector reforms that have weighed on the Jordanian public. He also touted promising sectors that have already seen substantial foreign investment including back-office services, IT, renewable energy and tourism, exemplified by double-digit tourism growth and expansion by companies like Microsoft and Expedia.
“We very much appreciate what the U.K. is going through in terms of Brexit negotiations,” he said. “We appreciate that this is happening in spite of all that.”
The U.K. has also planned a £14 million ($18.6 million) contribution to a new World Bank-led trust fund for Jordan, which follows £110 million in aid funding committed by the country’s Department for International Development (DFID) last spring for the 2018/19 fiscal year.
Struggling growth and and painful IMF reforms
The country has had to embark on a series of painful International Monetary Fund (IMF) mandated reforms in order to approach stabilizing its finances — reforms that saw subsidies drop and living costs skyrocket for ordinary Jordanians. Anger stemming from those changes led to mass protests in June of last year that forced the firing of Razzaz’s predecessor. Razzaz is now Jordan’s eighth prime minister in 10 years.
Following the June protests, Gulf neighbors Saudi Arabia, Abu Dhabi and Kuwait pledged a $2.5 billion injection into Jordan’s central bank in an effort to help stabilize the country.
The kingdom has a 94 percent debt-to-GDP (gross domestic product) ratio and poverty stands at 20 percent. The IMF’s $723 million three-year line of credit to the country aims to cut debt-to-GDP to 77 percent by 2021 through reforms that will “bolster economic growth” and achieve “gradual fiscal consolidation,” according to the international lender.
Living in volatile neighborhood
Jordan has been working to attract foreign investment and shift away from a public sector-dependent model in order to create more sustainable job growth for its population of nearly 10 million. But despite having a number of promising sectors — including IT, back office services and renewable energy, as well as a cheap and educated labor force — its proximity to the conflicts in Syria, Iraq and the Palestinian territories have kept many investors away, the prime minister has admitted.
Long seen as an island of stability in a highly volatile neighborhood, Jordan has been hit hard economically by an influx of 1.4 million Syrian refugees since that country’s civil war began in 2011, according to data from the UN High Commissioner for Refugees (UNHCR). It also is home to some 2 million Palestinian refugees, many of whom have integrated into society, though several hundred thousand remain in refugee camps. Government estimates put the cost of absorbing Syria’s refugees into Jordan at $10 billion.
Many years of border closures with Iraq and Syria, vital markets for Jordan’s exports, have taken a serious economic toll as well. Iraq and Jordan have agreed to open several new border crossings this year, and a border crossing with Syria that once saw billions of dollars in annual trade was reopened in October.