Under Construction: The Global Financial Crisis And Jordan

Of all the things Jordanians tend to talk about, it is simply interesting to see the global financial crisis rank first in coffee-house conversations. Some are arguing that this is the “end of America”, while others are looking at it from a more personal perspective: how will something that is so global affect Jordanians? Will banks hold back on loans? Will the Dinar continue to sink to the pegged-anchor that is the American dollar? Will the crisis induce prolonged inflation? Will purchasing power take a plunge?

One of the very important questions that seems to come up is the future of the country’s development, much of which is based on its ability to attract money from the Gulf. In these dire financial times, the variables only seem to beg the question of whether this flow of investment will be hindered. In other words, will we see a trend of Gulf investments flowing out of Jordan and heading across the pond to the US and UK markets, to buy up cheaper real estate and stocks? The markets seem too unstable to tell right now and wealthy Gulf investors will either be very cautious or very adventurous when it comes to this window of opportunity, as some are labeling it. In other words, a crisis that is going to affect pretty much everyone in the world who is alive and breathing, is yet another opportunity for the rich to grow richer and the poor to grow poorer, and the people in between to fall between the ever-growing cracks.

More or less, the conversation in Jordan seems to be driven back to that debate of how sustainable this economy is with its growing reliance on Gulf-driven development projects. It’s funny how Jordanians tend to be very tangible when it comes to this debate; they want to see the end-game, the final result of such projects. It seems hundreds of them are announced but few of them unfold, or so the general perception holds and that is typically the argument for the opposition. All of these projects do take a lot of time and the fact that their source of funding comes from the Gulf does not mean they’ll be constructed at the same pace of Gulf-based construction.

Nevertheless, rumors are beginning to surface in many of these conversations that involve the selling of these “under construction” assets. Recently, I’ve heard at least half a dozen conversation regarding the selling of the Jordan Gates even before its completion, and at least another dozen regarding various other projects that range between the Abdali site to the array of suburban residential cities.

It’s funny how the economic debate has shifted from the controversial selling of government land, to whether Jordan is becoming a type of cash-and-carry laundromat for Gulf investors: an empty slate for them to invest a decent amount in building something grand, and then selling it off to the highest bidder.

I have to admit, I don’t have any of the answers and I doubt anyone at this time does. The waters are simply too murky to accurately tell what’s going on, so I’d be weary of anyone who does pretend to be in the know. But as usual, I’m more interested in the social debate itself. That being said, it’s usually in this murkiness that the things we don’t want to happen, happen. It’s only when the waters clear that we’re able to look back and see what actually happened in the chaos.

Hindsight is always 20/20


  • It is interesting to me that Jordan has put a great deal of emphasis on developing tourism, but at the same time the new restrictions on restaurants during Ramadan say fairly clearly to non-Muslim foreigners, don’t come here during Ramadan, which is a good length of time.

    Has there been discussion about this? All sorts of conferences and meetings that might be held in Jordan during Ramadan will be moved to other countries that don’t have restrictions like that. Are people talking about this? Have the new restrictions on restaurants been received well by people?

    I find this question to be quite closely related to the topic you mentioned about Gulf money and development.

  • If we approach this crisis scientifically, Jordan has the potential to emerge stronger from it. There is a threat to our economy, but it also gives us an opportunity to strengthen our regulations and learn from the mistakes of others before they happen in Jordan.

    I hope we can react fast enough to the volatile environment in this world and stay ahead of the curve.

  • I like the angle that #3 brings up: strengthening regulations and learning from the mistakes of others. a Three very simple lesson the world needs to learn:
    1- credit should only be given to those who can afford it and it should be priced appropriately.
    2- never assume that house prices can only go up.
    3- do not underestimate liquidty risk.

    I disagree with the view that Jordan will benefit from what’s going on. No one will. I also don’t quite agree with the view that the gulf is particularly weighing the options between jordan and UK/USA. They’re completely different markets with different return expectations.

    I do agree, however, that if the gulf sneezes, Jordan will catch a cold. A cold of the worst kind.

    On another note, I’m surprised that the one and only Nas is actually fuelling rumours under the ‘”interested in the social debate” title. There’s nothing wrong with that, but I just thought that was funny.

    Keep up the good work.

  • JD: thanks for the comment, however, i think when someone declares their interest in tackling something within the framework of a social debate, it no longer qualities as “fueling rumors” if you know what i mean 😉

  • In a global economy, why limit oneself to Gulf-driven enterprises?

    For example, @JD makes an excellent point about the perils of Jordan putting all its economic eggs into a single basket.

    Instead, why not aggressively branch out? One area that comes to mind is outsourcing in the technical arena – leveraging the mastery of English demonstrated Jordanians here and elsewhere.

    There are other similar areas that don’t require huge investments that can achieve a sustainable positive cash-flow in a short period of time.

  • This is not the end of America.

    America is finally realizing the concept of “invisible money”. Among many other Americans, I have been spending money that really isn’t in my checking account. I have a high credit limit – I can buy a big screen TV and fly to Paris a couple fo times this week.

    Do I make that much money? No. Can I SPEND that much? Yes.

    It makes no sense, i know. But this country rewards spenders with more spending power, and now, we’re finally becoming conscious of that.

    Some one with poor payment history, now, can’t get many credit cards or high mortgage limits. Banks don’t lend as easily.

    People are realizing that if they can’t pay cash for the big screen, they shouldn’t buy it on credit, using their “invisisble money”.

    The concept of buying something and paying it back over years and years of installments is getting unpopular very quickly. People are renting more than borrowing to own, they’re buying used cars for cash instead of luxury new cars on credit.

    This was a wake-up call. A rough one, but hardly the end of anything American besides the bad spending habit.

    Gas is back down to $2.XX after almost reaching $5, and the stock market is finally seeing some green positive tickers instead of the constantly red negative drops. The bailout helped a lot.

    A lot of people criticize governments bailing banks out. But how funny is it that the EU waited on us to implement this, then did the EXACT SAME thing?

    I guess we’re not doing anything wrong afterall.

    We’re okay.

  • al salam alykom

    dear i will tell u something u dont know about jordan and jordanian people
    first you had to know that jordan with his simplist land (no wate and no oil ) proved himself in the world and becam as he the heart of the medle east as the the heart of the body .

    then jordanian people have thinking before he invest in any kind of invistment he want and so in addition of his religin bleves that intrest is prohebeted and not preferable thing he putted his mony in islamic banks and no intrest by the way . so the economy dosent affected from financial perspective.

    on the other wise the financial market in jordan is closed market that means that do not have very much financial deals with world financial market like forex for example,

    so finally i advice you to visit jordan you are wellcome to know jordan at real uless you are dirty jowesh …
    on the next time please have some sense when you are talking about jordan and be carefull.

  • muntaser:

    first, i didn’t understand about 95% of what you wrote. if you’re more comfortable in arabic, please write in arabic.

    second, i don’t know if you were addressing me or others, but please respect everyone’s right to an opinion.


  • Thank you for addressing this very important issue. It is amazing how many Jordanians, including bloggers, are giving more time and thought ot such an important issue that the managers of the economy whose job it is to give the issue not some thought but alot of not only thinking but effort. Unfortunately, we don’t have think tanks to come up with well reserached scenarios and proper diagnosis not only of the possible impacts but also of strategic action.

    Here is my two cents:
    1. Imports become cheaper with a world depression;
    2. Our exports are a third of imports and not most will be affected: the pharmaceutical industry will benefit since we produce and export cheaper medicines; toursim will fall slightly but not much because the JD is still inexpensive in terms of exchnage rate–hasn’rt risen back to its pre 2003 value and most of our tourists are Arabs; QIZ exports have little to no effect on GDP (95% of investment is foriegn, 75% of wage bill goes to expats, there is no borrowing from local banks, and factories use subsidized resources); phosphate and potash may be affected only if oil prices remain low; and the same goes for our agriculture exports which we really shouldn’t export–uses scarce water, employs few jordanians, and prices of vegetables are high locally.
    3. Tourism, because Jordan is small, has little developmental effort on jordan. Small countries benefit little from tourism because most earnings are leaked as imports.
    4.Remittances: even if some return, expectations are that the Gulf will recover by 2011 latest and if the oil prices rise back the recovery will be quicker. Dubai with 250,000 Jordanians will most likely be the most affected (has no oil reserves, highest external debt to GDP ratio, uses derivatives and is hevaily exposed to global banking trends. some may return but if they bring back their savings their return will boost the economy for one-two years. So this is not totally bad, and the economy will be bouyed until they return.

    So the economy can wither this crisis and we can even gain as a consumer in the global economy. But we are not doing anything to alleviate the distress that is fomenting in people’s psyche:

    The Central bank, unlike all the banks of the world remains to lower interest rates or remove its some of its restrictions even though our foreign reserves are at an all time high.

    The government is moving slowly and not speaking to us enough to create positive expectations. It is not alrmed by the fall in the GDP growth rate this year and last.

    The high interest rate and the mishandling of the Bourse companies crisis has created great distress in the financial market and has driven prices of stocks down. The deterioration of Jordanian wealth is significant.

    General uncertainty ahs brough real estate prices down in a manner that is unwitnessed in the history of Jordan.

    What we have is what economists call: policy ineffectiveness; worse still it should be called: government ineffectiveness.

Your Two Piasters: