Countries of the World/COUNTRYS.BIN/dp/0204/02048.txt

Text File | 1991-06-25 | 30KB | 485 lines

$Unique_ID{COW02048}
$Pretitle{234}
$Title{Jordan
Chapter 3A.   The Economy}
$Subtitle{}
$Author{Darrel R. Eglin}
$Affiliation{HQ, Department of the Army}
$Subject{percent
government
budget
economy
economic
foreign
jordan
1970s
domestic
increased}
$Date{1979}
$Log{Nabataean Painted Pot*0204801.scf
}
Country:     Jordan
Book:        Jordan, A Country Study
Author:      Darrel R. Eglin
Affiliation: HQ, Department of the Army
Date:        1979

Chapter 3A.   The Economy

[See Nabataean Painted Pot: First century B.C.]

     Jordan is a country critically short of agricultural land and other
natural resources-even water-but they may have been sufficient to support the
small number of inhabitants at independence in 1946. The population, however,
more than doubled between 1946 and 1950 as a result of a massive influx of
Palestinian (see Glossary) refugees, far exceeding the capabilities of the
primitive economy to meet the needs of the much greater population and to
maintain a large modern military force. Since 1948 extensive external
assistance has been essential to finance the government and the requirements
of the people.

     Part of the foreign aid has been channeled to increase the capabilities
of the economy. By the late 1970s substantial growth had occurred but in
spasms because the economy was disrupted by wars and other disturbances.
Considering the magnitude of the task and the many disruptions, economic
development has made remarkable progress. But the people remained poor; gross
domestic product (GDP) per capita was only about US$700 in 1978, and
dependence on outside assistance has grown larger in spite of the government's
efforts to achieve economic independence. Self-support remained a national
goal, but it may be unobtainable without peace in the Middle East and
settlement of Palestinian issues.

Growth and Structure of the Economy

     By the late 1940s the economy of Transjordan had barely changed from
centuries past. The bulk of the population was engaged in farming or in a
nomadic existence raising livestock. Both activities followed traditional
practices and, in an arid region with erratic rainfall, yielded little more
than bare subsistence. Industry hardly existed apart from handicrafts and a
few processing facilities largely lacking mechanical power. Modern transport
was at an early stage and mainly oriented toward the area that became Israel.
Transjordan was much less developed than Palestine to the west of the Jordan
River.

     The Arab-Israeli War of 1948 had a drastic impact on the economy. A large
agricultural area-the West Bank (see Glossary)-and a major portion of
Jerusalem became important and integral parts of the Jordanian economy and
remained so until 1967. The formation of Israel cut Jordan off from the
Mediterranean ports and the commercial centers formerly used. Most important
of all, the influx of Palestinian refugees swelled the population from fewer
than 500,000 in the mid-1940s to approximately 1.3 million by 1950.

     After the 1948 war some of the Palestinians went into refugee camps
while others settled in Amman and other urban areas; many subsequently
established businesses, particularly in commerce (see The Palestinians, ch.
2). The huge increase in population necessitated large imports of food and
other supplies and rapid expansion of transportation to move the goods.
Government services expanded to meet the changed conditions. Very quickly
the economy switched from one where agriculture was the primary activity to
one in which services dominated, a characteristic that would long remain. In
1978 the services sector contributed 63 percent of GDP compared with 37
percent from agriculture, industry, and construction combined (see fig. 8).

     In the 1950s economists were pessimistic about Jordan's economic future.
With few resources and almost no arable land not already under cultivation,
the problem of creating jobs and incomes for the greatly increased population
seemed overwhelming. Despite the handicaps economic growth between the 1950s
and the June 1967 War (also known as the six-day war) was remarkably high
because of the effective use of foreign financial assistance. Between 1954
and 1967 gross national product (GNP) increased by an average of more than 11
percent a year in current prices. Prices remained stable during the period,
and economists have estimated the real growth of GNP to have been on the order
of 8 to 9 percent a year, one of the highest in the world.

     All sectors of the economy participated in the economic expansion, paced
by industry, construction, trade and banking, and personal services. New
modern industries, such as oil refining, cement, and processing phosphate
rock, were established, and there was considerable growth of smaller
manufacturing concerns. Irrigation helped agricultural output to increase at
about 7 percent a year. The country's only port, Al Aqabah, was developed, and
the road and railroad systems were expanded to link the economic areas of the
country. Tourism grew through the construction of hotels and improvements of
services. Commercial and financial centers quickly developed to accommodate
the country's needs. Government activity increased, and construction boomed
owing to the enlarged demand for housing and the numerous investment projects.

     The six-day war started a series of setbacks that continued over the next
few years. In the war Israel occupied the West Bank and the Jordanian section
of Jerusalem. The country lost over one-third of its best agricultural land
and its primary tourist attraction. Some economists estimated the loss as high
as one-third to two-fifths of GDP. The Suez Canal was closed until June 1975,
causing a rerouting of most imports and exports via ports in Syria and
Lebanon. The limited capacity and the higher costs of the land routes
adversely affected the flow of trade.

     Between 1968 and 1971 Israeli retaliatory attacks against Palestinian
guerrilla organizations and subsequently Jordan's own civil war created
additional disruptions. Many farmers were driven out of the Jordan Valley,
halting cultivation in the country's most productive area. The insecurity of
the area diminished the flow of tourists, already at a low level with the loss
of Jerusalem. Because of Jordan's attacks on the guerrillas, Syria closed its
borders to Jordan for about eighteen months in 1971 and 1972, and various
Arab countries halted their financial aid to Jordan (see The Guerrilla Crisis,
ch. 1). In addition about 300,000 new Palestinian refugees entered Jordan in
the wake of the 1967 war.

     The series of setbacks depressed economic activity, but because official
data continued into the 1970s to include estimates for the West Bank, the full
extent of the setbacks was unclear. Subsequently a new series of national
accounts was published for the East Bank only that also incorporated some
changes in methodology. Economists, familiar with the country and the data,
concluded that even by 1975 GNP per capita in real terms had not yet
regained the level of 1966.

     It is perhaps useful to interject the cautionary note that Jordan, like
most developing countries, had to build the collecting and processing agencies
for statistics from almost a zero base. Economic data improved over the years,
but gaps and deficiencies remained in the late 1970s. Foreign economists, for
example, found it difficult to explain from available statistics why Jordan
was so much more successful than other developing countries in converting
foreign aid into an exceptionally high rate of economic growth. Some part of
the data apparently was deficient, which is not surprising considering that as
of October 1979 such a fundamental economic measurement as the size and
distribution of the population was last enumerated in 1961. (A census was
scheduled for November 1979.) Jordanian statistics should be regarded as
orders of magnitudes and reflections of trends rather than assigned the
precision usually found in economi