A watered-down GCC membership for Jordan

05 December 2011

Full membership of the GCC is probably out of reach for Jordan, but Amman still has much to gain from forging closer ties with the economic bloc

Key fact

Saudi Arabia accounts for almost 20 per cent of Jordan’s imports and 11 per cent of all exports

Source: MEED

The announcement in May that the GCC wanted to invite both Morocco and Jordan into the economic bloc came as a surprise. While Jordan has been keen to join for many years, there had seemed little enthusiasm among the six member states to let it in, and distant Morocco seemed an even more unlikely candidate.

Nonetheless, the idea has been making steady, albeit slow, progress this year, if only because the Gulf states are keen to bolster the position of fellow monarchs in the face of the Arab uprisings. The first formal talks took place on 11 September, at a meeting of foreign ministers in Jeddah, but there is no clear timetable for how long they may last and few expect anything to happen quickly.

Economic differences

There are significant differences between the economies of the GCC, which rely on oil exports to generate the vast majority of earnings, and those of Jordan and Morocco, which have weaker, if more diversified economies.

It will be difficult to bring the two sides together as equals in the same trading bloc and what appears more likely is a system of closer ties that stops short of full membership.

Jordan-GCC trade, 2010
Saudi Arabia2,164,385451,037
Total trade with GCC2,745,486809,074
Total of all trade11,050,1264,216,949
Source: Department of Statistics

“The political decision has been taken and as the technical negotiations go through we will see progress, but that progress will not be uniform,” says one political analyst in Amman. “There are different tracks and each track will go at its own pace. On the economic track, we cannot unify our tariffs and taxes to the GCC because we [Jordan] rely on taxes, while the GCC economies rely on oil revenues. So that track will probably be a slower track. The security track will probably go faster.”

Jordan already has strong economic and political links with the Gulf states, in particular with Saudi Arabia, which is its most important source of imports and its fourth largest export market, after the US, Iraq and India.

In 2010, Saudi Arabia supplied JD2.16bn ($3.1bn) worth of imports, accounting for almost 20 per cent of Jordan’s imports and it bought JD451m worth of Jordanian goods in return, or 11 per cent of all exports. The UAE and Bahrain are also significant trade partners for Amman; the other three GCC states less so.

The prospects for even stronger economic ties have increased this year with the decision by the GCC countries to implement a five-year economic development programme for Jordan and Morocco.

At the same time, bilateral trade ties with Saudi Arabia have also been expanding. In July, Riyadh lifted a ban on the imports of Jordanian fruit and vegetables, which it had imposed 21 years earlier due to concerns about the safety of Jordanian crops. In October, the two countries signed a customs cooperation agreement to ease the movement of people and goods.

The opening up of the GCC economies to Jordanian exports is one of the most important potential benefits for Amman of the closer ties. But perhaps just as important is the potential of the Gulf economies as a source of jobs. These two factors could help to stabilise the Jordanian economy and ease the political pressures on its government.

“Jordan’s economic development is far below that of any GCC country, so for a comparatively poor country to be linked with a wealthy group of countries is economically positive,” says Elliot Hentov, a credit analyst at US ratings agency Standard & Poor’s. “The long term benefit is a closer relationship with the GCC economies. It could also mean more predictable fiscal transfers and it would allow for easier access to the GCC economies for Jordanian labour.”

Improved economic security may be the attraction for Jordan, but for the Gulf states it is security of a different kind that they are after.

“Jordan has functioned as a bit of a buffer state between various power centres and conflicts in the region, so it’s very much in the interests of Saudi Arabia that Jordan is stable and ideally a stable monarchy that buttresses the legitimacy of other monarchies,” says Hentov.

Military advantages

Military ties between Amman and the GCC are long-standing. Jordan has had a mutual defence pact with Saudi Arabia since the 1960s, which is still in force. It has also helped several Gulf monarchs repel domestic or foreign opponents, for example, coming to the aid of Kuwait in the early 1960s when it was threatened by the Iraqi regime of Brigadier Qassem. It also assisted Oman in the mid-1970s, when Sultan Qaboos was battling with the secessionist South Dhofar rebels.

For the GCC, the opportunity to have more formal links to Jordan’s armed forces, which are well regarded in the region, is a key attraction. “Jordan has the most professional army in the Middle East, other than Israel, and it will help to secure the club of kings,” says one Qatar-based security analyst.

Ultimately, the most likely scenario is a watered-down form of membership for Jordan and perhaps Morocco too, stopping short of full integration. Even if this is all it can achieve, the benefits for Amman mean that it is worth chasing.

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