Report

January 30, 2020

Jordan’s Socio-Economic Woes and Foreign Policy

Employment, Trade, and International Cooperation – Policy Briefs from the Region and Europe

Grievances have been growing over Jordan’s socio-economic and political problems, including high public debt, a significant current account deficit, and high unemployment. In June 2018, former Prime Minister Hani al-Mulki was forced to resign after mass protests swept the country in response to a new income tax law proposal. Jordan’s socio-economic challenges are further augmented by its challenging neighborhood. This includes the conflicts in neighboring Syria and Iraq, the threat posed by extremist actors in the region as well as the impact which the Gulf Cooperation Council’s crisis over the blockade of Qatar has had on Jordan.

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As a result of these developments, Jordan has been facing a significant influx of refugees on the one hand, and a more difficult environment to conduct trade and attract foreign direct investment (FDI) on the other. In addition, the US’ announcement of the so-called “Deal of the Century” for the Israel/Palestine conflict has heightened concerns in Amman that a two-state solution to the conflict may no longer be a viable option. This would have serious consequences for Jordan, which currently hosts more than two million registered Palestinian refugees. Given the strategic importance of Jordan, it is in the European Union’s own interest to support Jordan and ensure that the growing socio-economic challenges, as well as the various regional challenges, do not lead to a (further) destabilization of the country.

This edited volume brings together papers written by the participants of the workshop series “Promotion of Think Tank Work on Socio-Economic Reforms and Jordan’s Foreign Policy”, held in Berlin in April and in Amman in June 2019. The workshops were conducted as part of DGAP’s project on strengthening think tanks and similar institutions in the Middle East and North Africa (MENA) region and in Europe.

The authors analyze key challenges to Jordan’s socio-economic development and assess potentials for improved cooperation with the EU, while a smaller faction discusses the implications of regional developments. The volume offers recommendations for the Jordanian government as well as the EU and its member states.

Among the recommendations are the following: High energy costs are a key factor hindering Jordan’s economic growth and the competitiveness of its companies on the international market. The Jordanian government should, therefore, further support the development of renewable energy sources and prioritize decentralized, small-scale renewable energy systems to achieve energy security and reduce energy costs. In addition, targeted policies to improve employment are considered crucial to foster socio-economic development. These include more inclusive flexible work schemes, state-sponsored employment programs and greater stimulation of Jordan’s entrepreneurial potential through simplified business registration procedures, easier access to financing for micro, small and medium enterprises (MSMEs), and incentives for MSMEs to grow and formalize their businesses.

The EU should support Jordan’s economic development through different means, e.g. by suppor­ting vocational training programs and private sector employment as well as by enhancing the bankability of small and medium enterprises (SMEs) and start-ups. In addition, Brussels and Amman should encourage more Jordanian producers to make use of the EU-Jordan Free Trade Agreement as this would benefit the country’s economy. At the same time, the EU should set incentives and use development programs as leverage to achieve better cooperation by those political forces in Jordan which currently undermine socio-economic reform efforts. To do so more effectively, the EU should improve its understanding of political processes in Jordan by combining political economy analysis (PEA) with elite research. As Jordan’s socio-economic situation is also strained by the presence of a very large number of refugees, the EU and its member states should facilitate the resettlement of refugees by granting humanitarian visas.

The support of the EU and the international community is even more pressing in light of the US administration’s announcement that it will defund the United Nations Relief and Works Agency for Palestinian Refugees in the Near East (UNRWA). As UNRWA has been essential in alleviating the impact of hosting a vast number of Palestinian refugees in Jordan, Amman should work with the international community to secure funding for UNRWA to counter-balance the US’ funding cut. Since a two-state solution to the Israel/Palestine conflict appears increasingly unlikely, Jordan should develop a plan to respond to the circumstances. As part of this, it should increase cooperation with other Arab states, seek the blessing of the Arab League and the Islamic Conference Organization to recognize the Palestinian passport as a travel document for all refugees, and reduce bilateral relations with Israel.

THE CONTRIBUTIONS IN SUMMARY

Chapter I: Socio-Economic Challenges and Reforms in Jordan

Political Economy

The Blind Spot of International Donors – How the Jordanian Political Elite Undermines Socio-Economic Reform”: Tomisha Bino draws attention to the highly personalized, informal and nontransparent nature of Jordan’s political system and the undermining effect which political corruption has on the country’s socio-economic reform efforts. She argues that by combining political economy analysis (PEA) with elite research, international donors could identify more targeted incentives and leverages to improve the cooperation of currently obstructive political institutions in Jordan when designing and implementing development programs.

Energy

Energy Policy in Jordan – Achieving Security and Economic Development through Domestic Renewable Energy”: Nadim Abillama acknowledges that Jordan has taken steps to support the development of renewable energy sources in its quest to achieve energy security. He argues, however, that the country needs to address ongoing challenges at the institutional, economic and financial level if it wants to achieve its goal of a twenty-percent share of renewable energy by 2025. For this reason, he calls for public and private sector investments in research and development, as well as government guarantees that demand will be sustained in the long-run. In addition, domestic companies should upgrade their production lines.

Improving Competitiveness and Trade Balance through Decentralized Renewable Energy – The Case of Jordan”: Jessica Obeid focuses on Jordan’s energy policies and the negative impact which high energy costs have on economic growth and trade. Assessing the Jordanian government’s response to the issue, she argues that decentralized small-scale renewable energy systems should be promoted to immediately decrease energy costs. To this end, investment should be geared toward decentralized solutions, and the different energy systems should be integrated into a modernized grid.

Employment

From Survival Strategy to Innovation – Creating an Enabling Business Environment for Micro, Small and Medium Enterprises in Jordan”: Sophie Schmid assesses current barriers to the creation and growth of MSMEs in Jordan. She argues that improving the current conditions could not only set incentives to formalize businesses but also be a catalyst for economic growth and innovation in Jordan. Therefore, business registration processes and fee structures should be simplified, the tax system should be adjusted, and targeted micro-lending regulations should be adopted that can facilitate access to financing.

The ‘Employer of Last Resort’ – A Route to Women’s Empowerment in Rural Jordan”: Salam Abukhadrah addresses the low rates of female participation in the Jordanian labor market. She advocates the introduction of a state-sponsored “Employer of Last Resort” (ELR) program, which aims to ensure employment for involuntarily unemployed women, especially in rural areas.

Promoting Flexible Work Regulation in Jordan to Achieve Comprehensive Youth Economic Empowerment”: Bara’ah Bathaina critically assesses the Flexible Labor Regulation, which was introduced in Jordan in 2017. She argues that while the government has taken an important step to foster employment, especially among youths, by introducing flexible work schemes, adjustments need to be made in order to maximize the full potential of the regulation. This includes broadening the scope of workers and companies that are eligible, increasing efforts to promote the flexible work model, and conducting studies on its implementation and effectiveness.

Youth Inclusion

Revisiting Pillar 4 – A Young and Equal City of the Amman Resilience Strategy through the Lens of Parti­cipatory and Inclusive Approaches”: Rana Aytug analyses the plan put forward by the Greater Municipality of Amman (GAM) to foster urban resilience. Focusing on the fourth pillar of the strategy, she argues that GAM should reduce barriers to youth involvement, support the establishment of a youth council, and use public spaces across Amman for formal and informal initiatives to effectively implement a truly bottom-up, participatory and inclusive approach.

Youth Services Sustainability in Zaatari Refugee Camp”: Bothaina Qamar emphasizes the importance of providing youth services for refugees. She warns that recent budget cuts and the subsequent closure of many youth programs in Zaatari Camp could have a negative impact at the communal as well as national level. Building on the best practices of the previous nine years, she advocates strengthening national grassroots initiatives for youth services in the camp, adopting funding streams and partnership models which pool funding and capacities and engage the private sector, and promoting Jordanian and Syrian youth leadership capacities through the formation of cooperatives between Syrian refugees and Jordanians.

Chapter II: International Cooperation

The EU and its Member States

Avoiding the Nightmare of Jordan’s Destabilization – A Holistic Approach for EU Institutions and Member States to Support a Key Ally in the Middle East”: Emphasizing the importance of Jordan as a key ally of the EU and its member states in the Middle East, Eugenio Dacrema outlines three courses of action the EU can take to help the country avoid (further) destabilization. In the short term, European leaders should support the Jordanian government in its opposition to the so-called “Deal of the Century” proposed by the Trump administration to address the Israel-Pales­tine conflict. They should include Jordan in their own initiatives and develop common policies on the issue. In the medium to long term, the EU should further Jordan’s economic development by enhancing its support for vocational training programs and private sector employment and by increasing its efforts to improve the bankability of small and medium enterprises (SMEs) as well as start-ups.

Realizing the Opportunity of the Recently Improved EU-Jordan Association Agreement – How More Jordanian and Non-Jordanian Producers Can Take Part”: Mohammed Al-Husari argues that the EU-Jordan Free Trade Agreement, which was signed in 2016 and adjusted in 2017 and 2018, offers great potential for Jordan’s economic development, yet more Jordanian producers should be effectively encouraged to export to the EU. Required for this are policies that draw in foreign direct investment (FDI) from ­ex­porters to the EU from other countries who are currently not exempt from tariffs; improve the energy costs of Jordanian producers; and improve research and development cooperation between science labs and research institutions in Jordan. In addition, possible exporters to the EU should be supported with preferential credit and financing opportunities.

The International Community’s Responsibility to Protect in Action – The Double-Speed Dynamics of Granting Humanitarian Visas for Exiled Populations in Jordan”: In light of the social, economic, and political challenges which Jordan is facing as a host country to a very large number of refugees, Hela Manadile calls on European countries to offer humanitarian visas for refugees in Jordan. She argues that this would allow European countries to assess the legitimacy of asylum requests before people arrive in Europe. It would also reduce the number of people who seek to reach the continent via illegal routes, curtail human smuggling and trafficking, and, as a result, decrease the number of refugees who lose their lives in the Mediterranean.

Israel/Palestine

Jordan’s Options in the Wake of the Failure of the Two-State Solution”: In light of Israeli domestic political developments as well as the Trump administration’s approach to the Israel-Palestine conflict, Hassan Barari urges the Jordanian leadership to acknowledge that a two-state solution may no longer be a viable option. As a result, Jordan should reduce its bilateral relations with Israel and strengthen its alliance with other Arab countries. This course of action should include seeking the support of the Arab League as well as the international community to secure continuing funding for UNRWA. In addition, the government should communicate clearly that it would not play an active role in the West Bank and insist on the right of Palestinians to return.

Palestinian Voices and Agency in the Time of the ‘Deal of the Century’ – Building Stronger Narratives and Networks”: Tamara Taher critically asserts that Palestinian voices are frequently sidelined in international and regional political discussions on the resolution of the Israel-Palestine conflict. In response, she advocates greater transnational cooperation between actors and civil society organizations (CSOs) which promote Palestinian narratives, e.g. on collective memory and human rights. This cooperation could, for instance, focus on cultural and educational pro­jects to increase their visibility.


About the workshop

The following papers were written by participants of the workshop “Promotion of Think Tank Work on Socio-Economic Reforms and Jordan’s Foreign Policy” organized by the German Council on Foreign Relations’ Middle East and North Africa Program in the spring and summer of 2019 in cooperation with the West Asia-North Africa (WANA) Institute and the Konrad-Adenauer-Stiftung in Amman. The workshop is part of the program’s project on the promotion of think tank work in the Middle East and North Africa, which aims to strengthen the scientific and technical capacities of civil society actors in the region and the EU who are engaged in research and policy analysis and advice. It is realized with the support of the German Federal Foreign Office and the Institute for Foreign Cultural Relations (ifa e.V.).

The content of the papers does not reflect the opinion of the DGAP. Responsibility for the information and views expressed herein lies entirely with the authors. The editorial closing date was June 30, 2019.

Authors:

Nadim Abillama, Salam Abukhadrah, Mohammed Al Husari, Rana Aytug, Hassan Barari, Bara’ah Bathaina, Tomisha Bino, Eugenio Dacrema, Hela Manadile, Jessica Obeid, Bothaina Qamar, Sophie Schmid, and Tamara Taher

Edited by Dina Fakoussa and Laura Lale Kabis-Kechrid

Bibliographic data

DGAP Report No. 5, January 2020 (first published in July 2019), pp. 76.

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