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It is expecting thousands of workers home from the Gulf, but whether that's a positive remains to be seen.
Certainly, construction, tourism and other industries are feeling the sting of the meltdown, but many economists here see it as more of an opportunity than a threat.
As recession overtakes the Gulf countries, nations like Jordan are well situated to use the situation to restructure their economies and win back laborers who have long been lured by higher wages in the Gulf and overseas. Experts, however, warn that without fast action and government assistance, the chance may pass Jordan by.
“The effect of the overall global recession on Jordan should be positive, not negative,” says Yusuf Mansur, CEO of EnConsult, an economic consulting firm in Amman.
More than 20 percent of Jordan’s gross domestic product comes from remittances sent home by citizens outside the country. The Arabian Gulf alone is home to nearly 10 percent of Jordan’s population.
Though an influx of jobless workers may seem menacing, Mansur said, those returning are likely to bring considerable savings they accrued in the Gulf. When Jordanian workers returned from Kuwait after the first Gulf War, for example, the economy grew by more than 16 percent.
But that boom period was short-lived, as the returnees spent their money and then struggled to find work.
“In the immediate future these countries are going to be in a fire-fighting mode, with much of the labor returning,” says Krishna Kumar, a senior economist who specializes in economic growth and development at the RAND Corporation.
However, Kumar says that instead of seeing this as a burden, countries like Jordan could potentially use it as an opportunity to restructure the economic landscape.
“This kind of a crisis gives political cover for a lot of reform-minded policy makers in these labor exporting countries to say, ‘We’ve benefited from exporting labor, that was one step in the development. Now here is a perfect opportunity for us to move to the higher end of development and start making goods ourselves,’” he says.
To date, though, Jordan has yet to take any major actions to facilitate such opportunities. Despite a healthy foreign reserve that grew by 12.7 percent in 2008, Jordanian officials have largely adhered to prudent financial policies and maintained high interest rates — in December the weighted average interest rate on loans and advances was 9.48 percent, according to the Central Bank of Jordan.
The behavior of migrant workers in a downturn is hard to predict. As layoffs begin throughout the Gulf, some estimates have up to 25 percent of the Gulf workforce returning to their homes by the end of 2009. But many may also migrate to Gulf countries less affected by the downturn, or if there is a quick recovery they may return to the Gulf after only a short time in their home countries.
“It’s not easy to say precisely what’s going to happen,” says Ahmed Oran, head of the economics department at the University of Jordan. “The magnitude of the international crisis is not known yet and it has not ended.”
Despite its limited effect on Jordan thus far, the crisis is starting to send ripples through select segments of the economy here.
Last year, Tony El-Khal established a real estate development branch of his UAE-based firm in Jordan. He had planned to begin building twin towers in Amman, but put the project on hold until his company could assess the economic situation going forward. While El-Khal didn’t lay anyone off, he cancelled plans to hire new employees for the project.
He is, however, optimistic that, if not this year, the situation will begin to improve shortly thereafter. “We were hoping that the first half would be bad, and the second half would be the correction, but it seems no, the second half of this year will be not so good as well,” he says.
While businessmen like El-Khal remain optimistic, those on the receiving end of hiring freezes face a much bleaker predicament.
Wajdi El-Asir runs a small electrical engineering firm that contracts out to large construction projects. Just a year ago he had trouble keeping up with the amount of work available. Now, he’s had to lay off two of his 15 employees and is struggling to find even a small project to keep others on the payroll.
“No one is starting new projects right now, because they don’t know what will happen,” he says.
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