Jordan today stands at the threshold of realizing the dynamic opportunities presented by economic openness and global integration. If we are successful in seizing the prospects currently open to our country, our experience will serve as evidence that countries can continue to leapfrog stages of development and bridge the wide economic and social divides that still exist between North and South. Jordan is a small country with a rich history and even richer potential. Our nation of five million people occupies a strategic position in the heart of the Middle East, a region often associated with conflict, instability; and unrestrained emotions, but also a region of unrealized and untapped possibilities. Within this environment, we have earned a reputation for being a voice of reason and a beacon of hope.
This is a tribute to the legacy of my late father, His Majesty King Hussein, who managed to build a society with understanding, dialogue, and respect for life at its core-- a society where education, equality; and a sense of purpose were not only attainable, but essential elements of being Jordanian. This focus on the development of a tolerant state, coupled with investment in human development, led to the successful evolution of a culture that originated from an essentially nomadic and traditional heritage to one capable of adapting to the 21st century without losing its rich and valuable cultural identity.
The Old Economy
Our aspirations have focused on benefiting from the opportunities of economic openness and global integration to become an active contributor to the global economy and society. The challenge in realizing this bold vision lies in effectively being able to adapt to a continuously changing set of global economic parameters. Jordan has positioned itself to thrive, not just survive, in this dynamically changing and frequently turbulent era of globalization.
Traditional economic models for developing nations, which focused on regional economic dependency and foreign aid, allowed Jordan to reach unprecedented growth levels in the early and mid-1980s, but they are no longer relevant in the new economy. This harsh reality became apparent during the severe economic crisis that gripped our country in the late 1 980s, and its fallout is still with us today. The rapid decline in oil prices and the eight-year Iraq-Iran war triggered the crisis that gripped the region. The dependence on these economies that had served Jordan well in the boom years had a devastating effect during the recession.
Prior to the crisis, the Jordanian economy relied heavily on the Gulf Cooperation Council (GCC) member nations, as well as the Iraqi market, to satisfy its production capacity. This arrangement negated the need to search for new markets and hindered industrial competitiveness and creativity in the process. At the time, capital investment in the Jordanian economy was driven by the public sector, fueled by foreign aid that inadvertently, yet significantly, marginalized the private sector's role in the development process. Our own labor force found readily available jobs in the GCC markets, removing any added burden on the local economy to create sufficient employment opportunities.
The downturn experienced by the regional economies adversely affected the demand for Jordanian products and labor, significantly reducing the inflow of GCC foreign aid to the country. A severe macroeconomic imbalance resulted and trickled down to citizens as inflation rates rose, unemployment hit a record high, foreign debt mounted, the fiscal deficit widened, and the trade deficit worsened, all in turn depleting our foreign reserves.
The drastic impact of the crisis prompted us to re-evaluate our economic approach. Our decision to seek an economic solution highlighted the benefits of adopting the liberal economic strategy that today drives most economies of the globalized world. We realized that Jordan would only be able to steer its way out of the economic crisis by establishing a free market. …