The Impact of Sept.11^th Events on

The Political & Economic Conditions in Jordan

³      The September incident was drastic and has left tremendous material, psychological, political and economic impact, not only on the USA but allover the globe.

³      The subsequent political and economic repercussions are expected to be huge and global, taking into consideration the significance of the American economy, which account for ¼ of the global economy, and also the expectations concerning the US reactions to the incident.

³      The Big Picture:

§          The western world perceives the coming threat to originate from the Islamic civilization.

§          The Arab and Islamic peoples now believe that the repressive political regimes they are suffering from are supported by the west.

§          This mistrust concerns will dominate the relations between the two civilizations.

³      As for Jordan:

§          Politically, Jordan has a clear and moderate standing on terrorism, that is clearly understood by the US, and hence, Jordan has no political bills to pay.

§          The incident will not negatively reflect on Jordan-US close relations, evidenced by the recent ratification of the Free Trade Agreement signed between the two countries, rendering Jordan the fourth among the world countries to benefit from such a status.

§          The Jordan-US Free Trade Agreement signifies a message of support and appreciation for Jordan.

³      But, Jordan, like many other countries of the world, is waiting in anticipation of the subsequent reactions and developments.

³      However, Jordan is encountered by two major economic threats, arising from the action and the expected reaction to the incident:

§          Direct threat, arising from the negative effects of the recent world developments on tourism, investment inflow and some other sectors of the economy, which will be outlined shortly.

§          Indirect threat depending on countries to be hit by the US that may negatively reflect on Jordan’s trade & benefits.  If the US strike is going to include any surrounding country (mainly Iraq), there will be a strong public discontent in addition to the negative economic repercussions.

³      Direct Impact of the incident on Jordan’s economic sectors:

§          Tourism:

-       Income from tourism stood at US$ 830 million, entailing a value added of US$ 370 million and contributing 5.1% to the GDP.

-       Mostly impacted due to the severe decline of travel reservations to the area (an estimated 70 thousands reservations to Jordan were cancelled), which will reflect on hotels & resturants.

-       In alleviation of the impact, the government has started to provide support for the sector through reducing the VAT imposed on hotels from 13% to 3% and negotiating the possibility of hotels’ debt rescheduling.   

§          Transportation:

-       The aviation and touristic land transport industry will be negatively affected in response to the people’s hesitation to travel in light of the expected US reactions.

§          Investment Inflow:

-       Slowing down of investment inflow into the region due to recent developments and the expected US reaction.

-       The American & European investors will reconsider their investments within the area.

§          Financial Market (Stock Exchange):

-       Improvement since August that was halted by the incident.

-       Drop in trading volume (JD 3.5 million to JD 3 million) and a decline in the Stock Price Index as follows:

-       Investors’ losses were estimated at US$ 522 million two weeks after the incident.

§          Qualifying Industrial Zones (QIZ) Exports:

-       Thanks to QIZ, total exports to the US increased from JD 5.6 million in 1998 to JD 44.8 million in 2000.

-       QIZ exports to the US are expected to deteriorate due to the current market conditions in America.

-       The refusal of marine shippers to carry shipments from the Arab world and the subsequent cancellation of contracts are to reflect negatively on the performance of the QIZ.

§          Privatization Program:

-       The recent world developments are expected to slowdown the Jordanian privatization process.

§          US Dollar Exchange Rate:

-       The decline in the US Dollar against the EURO will negatively affect Jordan’s trade balance (1/3 of imports come from the EU).

-       The increase in the EURO against the Dollar from 89.6 on Sept.11^th to 92.1 on Oct.3^rd has risen Jordan’s imports bill by around US$ 42 million.

³      These factors are expected to influence Jordan’s economic performance for the next quarter, unless further events take place.

³      Conclusion:

§          Relations between the Arabs and the West will not go back to pre Sept.11^th, 2001 levels and status.

§          The coming three years will be years of uncertainty, where the Arab world, in his relations with the West, will be on the defensive side, while its people will face restive measures.

§          Despite the American president’s talk about a state for the Palestinians and the necessity of finding a political solution to deal with one of the cause roots of the emerging extremist and fundamentalist movements, Israel will attempt to capitalize on the recent incident to exercise more pressure on the Palestinians and impose its own solution on them.

§          This will create the ideal environment for the Islamic movements to gain more ground and public support within the Arab world.

§          The exclusion and isolation of the Arab world could force its states to form an economic coalition or league as a reaction to the restrictive measures exercized by the West.

§          The Arab money and capital funds abroad my start to flee back to the area to avoid restraining measures and control.

§          As for Jordan, maintaining regional political stability remains crucial for Jordan to reap the benefits of its reform agenda and domestic strategy to boost economic growth.