Jordan at the crossroads

King Abdallah II and Queen Rania of Jordan. Abdullah is seen as a moderniser

by BBC News Online's Myles Neligan

The kingdom of Jordan, poor in natural resources and hemmed in by more powerful neighbours, faces serious economic challenges.

For most of the 45 years since it gained full independence from Britain, political instability and high levels of debt have hindered the country's development.

Moreover, while Jordan has no oil supplies of its own, heavy dependence on aid payments and worker remittances from its oil-rich neighbours have paradoxically made it vulnerable to oil price shocks.

Having posted annual growth rates in excess of 10% during the oil boom of the 1970s and early 80s, Jordan was hit hard by the subsequent slump.

Debt crunch

The country found itself unable to service its $8bn external debt in 1989, prompting intervention by the International Monetary Fund.

Two years later, the 1990-91 Gulf War slashed export revenues and triggered an influx of refugees from neighbouring Iraq, forcing the government to suspend an IMF-inspired programme of budgetary austerity.

The end of the Gulf War brought a short-lived spurt of double-digit growth, but the economy struggled to expand by more than 2% a year during the late 1990s.

Now one of the Jordanian government's most pressing challenges is to find a way of delivering broad-based growth that will benefit the mass of the country's five million strong population.

Last year average gross domestic product per head of population stood at around $4,000, on a par with Syria and Egypt, but lagging far behind regional superpowers Israel and Saudi Arabia.

Meanwhile unemployment remains a persistent problem, running officially at 15%, although the true rate is probably far higher.

Many Jordanians continue to live in poverty.

Lessons well learnt

However, there are signs that the economic lessons of the last 20 years have been well learnt.

King Abdallah, who took over as head of state following the death of his father King Hussein in February 1999, has established himself as a moderniser, keen to open up and diversify the Jordanian economy.

He took Jordan into the World Trade Organisation (WTO) in April 2000, and five months later signed a free trade agreement with the US.

In order to become eligible for WTO membership, the Jordanian government swept aside many onerous regulations, including a raft of restrictions on foreign ownership of Jordan-based companies.

The government also started privatising state-run industries, selling a 40% stake in the Jordan Telecommunications Company to France Telecom last year.

The country's energy utilities, as well as its lucrative phosphate and potash industries, are next in line for privatisation.

We have been through a sharp decline, but we are already seeing signs of a recovery

Dr Taleb Rafai, Jordanian tourism minister

Tourism boom

Perceptively, the government also began pouring resources into tourism, hoping to emulate the success of the Egyptian tourist industry.

This policy has proved highly successful. The tourism industry has grown sharply since 1999, contributing a record 10% to the country's GDP last year.

Undeterred by the events of 11 September, the government plans to continue investing heavily in tourist infrastructure.

"This is happening against a very difficult background, but the tourism industry is resilient," Jordanian tourism minister Dr Taleb Rafai told BBC News Online. "We have been through a sharp decline in the last two months, but we are already seeing signs of a recovery."

Dr Rafai said that visitors from neighbouring countries, where the Jordanian tourist industry promotes itself aggressively, are helping to offset the absence of tourists from the west.

The government is currently planning to double the number of hotel rooms in Jordan to 32,000 by 2010.