The Political Economy of Market Reform in Jordan

By Borthwick, Bruce | The Middle East Journal, Winter 2000 | Go to article overview

The Political Economy of Market Reform in Jordan


Borthwick, Bruce, The Middle East Journal


The Political Economy of Market Reform in Jordan, by Timothy J. Piro. Lanham, MD: Rowman & Littlefield, 1998. xvii + 131 pages. Bibl. to p. 123. Index to p. 131. $54 cloth; $19.95 paper.

In this slim monograph, Timothy J. Piro has concisely and clearly described the role of stateowned enterprises (SOEs) in the Jordanian economy and the difficulties of privatizing them, even when they are money losers and a drain on the state. In a country where the private economic sector is very small and the state is weak, state and SOEs are linked together as are Siamese twins: cutting them apart results in the death of both.

In the 1970s and 1980s, using money from the oil-rich Arab states, the Jordanian government ascribed to the state a privileged position, allowed labor remittances from those working in the Gulf to be used for consumptive purposes, and rewarded the groups which supported its policies. Afraid of being toppled by riots, demonstrations, and violent action, the government did not demand much from the people in the form of taxes. It did not encourage the growth of private industry, preferring, instead, to rely on remittances by expatriates, customs duties on imports, and economic assistance from foreign countries. It tied important parts of the private and public sectors into a "close, and ultimately parasitic, relationship" (p. 70), which enfeebled the private sector. The end result was a rentier economy, which differed only slightly from those of the oil-rich states of the Arabian Peninsula.

Piro examines the "Big Five" Jordanian enterprises: the Jordan Cement Factory Company, the Jordan Phosphate Mines Company, the Jordan Petroleum and Refinery Company, the Arab Potash Company, and the Jordan Fertilizer Industries Company. All but one of these were established in the 1950s to promote economic development, national sovereignty, and international prestige. The state provided the capital, appointed the directors, and influenced the selection of managers. Thus, the enterprises did not have much autonomy, were not profit-oriented, and (along with other institutions) served as pillars of the patrimonial political system, in which the king divvied out awards to families, tribes, business interests, and political factions in order to keep them off balance and somewhat happy with the regime.

But today the call from international organizations, such as the World Bank and the International Monetary Fund (IMF), is for "market reform," which, for the Jordanian government is not easy to implement. Because of the Gulf War (1990-91), economic assistance to Jordan from oil-rich Arab states and remittances from workers in the Gulf have ceased. …

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