Few, if any, of the candidates contesting the 110 seats in Jordan’s Chamber of Deputies on 20 November have talked about the big issues affecting the country: rising oil prices, government subsidies for commodities, the lack of public transport and the state’s continued interference in large parts of the economy.

The two chambers that make up the National Assembly, the elected Chamber of Deputies and the unelected Assembly of Senators, have no direct power. The king appoints the prime minister directly. The prime minister appoints the members of the cabinet and they govern independently of parliament.

Parliamentary candidates can be forgiven for failing to talk about the issues that most affect their constituents. Without the power to draft new laws, parliamentarians have little reason to immerse themselves in policy details.

Nonetheless, Jordan is far from being an autocratic state. The government lavishes attention on the political issues that provoke the strongest reactions from ordinary Jordanians. The government started distributing food through the army during Ramadan in an attempt to stop prices rising even further. When then-finance minister Ziad Fariz tried to remove the last government subsidies on petrol back in August, his fellow ministers stopped him and he resigned in protest.

Governing the country has been made more difficult by the arrival of an estimated 170,000 Iraqi refugees since 2003. While large numbers of them have started businesses in Jordan, many more live in grinding poverty. Jordan also has the largest Palestinian population in the region. More Palestinians live in Jordan’s refugee camps and unofficial settlements than live in the West Bank itself.

In Jordan, the government knows that the wrong decisions could make it as politically unstable as some of its neighbours.

Table: Jordan at a glance

Government

Jordanians have had little practice of democracy. The kingdom’s first parliamentary elections only took place in 1989 and political parties were only legalised in time for the 1993 elections. Jordan’s Islamist parties boycotted the 1997 elections over what they saw as government interference in the contest.

This year’s municipal elections, the first in the country’s history, were also boycotted by the main Islamist party, the Islamic Action Front. The party, the political wing of Jordan’s branch of the Muslim Brotherhood, accused the government of sending security forces into the constituencies where its candidates were standing.

Government officials

• Monarch: King Abdullah II

• Prime Minister and Minister of Defence: Nader Dahabi

• Minister of Interior: Nayef Qadi

• Minister of Political Development: Musa Ma'aytah

• Minister of State for Legal Affairs: Salem Khazaleh

• Minister of State for Media Affairs and Communications: Nabil Sharif

• Minister of State for Parliamentary Affairs: Ghaleb Zu'bi

• Minister of Agriculture: Said Masri

• Minister of Foreign Affairs: Nasser Judeh

• Minister of Water and Irrigation: Raed Abu Saud

• Minister of Planning and International Cooperation: Suhair Ali

• Minister of Environment: Khalid Irani

• Minister of Labour: Ghazi Shbeikat

• Minister of Awqaf and Islamic Affairs: Abdul Fattah Salah

• Minister of Information and Communications Technology: Bassem Roussan

• Minister of Finance: Bassem Salem

• Minister of Health: Nayef Fayez

• Minister of Tourism and Antiquities: Maha Khatib

• Minister of Social Development: Hala Latouf

• Minister of Municipal Affairs: Shihadeh Abu Hudeib

• Minister of Public Sector Reform: Nancy Bakir

• Minister of Education: Tayseer Nueimi

• Minister of Industry and Trade: Amer Hadidi

• Minister of Higher Education and Scientific Research: Wali Ma'ani

• Minister of Culture: Sabri Rbeihat

• Minister of Transport: Sahel Majali

• Minister of Energy and Mineral Resources: Khaldoun Qteishat

• Minister of Public Works and Housing: Alaa Bataynah

• Minister of State for Prime Ministry Affairs: Thouqan Qudah

• Minister of Justice: Ayman Odeh

• Governor, Central Bank of Jordan: Umayya Toukan

Economy

Since independence from the UK in 1946, Jordanian policymakers have looked for ways of getting around the country’s lack of oil. Under King Hussein, who died in 1999, the answer was to buy cut-price oil from Saddam Hussein’s Iraq. The US army removed that option from Jordan’s government when it invaded Iraq in 2003.

King Abdullah II inherited a kingdom from his father that had grown used to cheap oil. Amman, the capital, has no public transport system to speak of despite being home to more than two million people. When the Americans turned off the supply of oil from Iraq, King Abdullah was presented with a massive economic problem.

Successive governments reacted by making cuts to the subsidy on petrol. Ordinary Jordanians have watched the price of their fuel climb six times since 2002. Many of them blame the government for increasing the price of petrol, even though ministers have no choice. Jordan’s finances have been ruined by the petrol subsidies. The Ministry of Finance is forecasting a budget deficit of JD 560.9m ($792.5m) for 2007. At the beginning of the year, the deficit was expected to be just JD 385 million ($544m).

Policymakers have started developing the non-oil economy only relatively late in the day. Jordan has plenty of phosphate for its mining sector, but other parts of the economy have been slow to develop. The Ministry of Information and Communications Technology (MoICT) is pursuing its own drive to create an IT outsourcing industry. In September, it brokered a cut in the tax on corporate profits generated from call centre work.

Table: Economic indicators

($ million, unless stated)

Sectors

Banking and Finance

It does have one of the Middle East’s largest banks in Arab Bank. As well as being dominant in the Jordanian market, Arab Bank is active elsewhere in the Middle East. The company has been given permission to operate an investment bank in Saudi Arabia. The Saudi subsidiary will also carry out private equity and asset management businesses when it opens in early 2008.

Companies and Markets

The Amman Stock Exchange is smaller than the exchanges in neighbouring financial centres. Both the Cairo and Alexandria Stock Exchange in Egypt and the Tadawul in Saudi Arabia are much larger by market capitalisation.

Manufacturing

Manufacturing has benefited from the creation of qualifying industrial zones (QIZs) since 2000. The US agreed to allow tariff-free imports of Jordanian goods manufactured in a handful of QIZs provided that Israeli companies contributed to the creation of the products. The policy was quickly successful. Jordan’s exports to the US totalled just $6.9m in 1997. In 2002, exports had grown to $661m a year. The governments of both countries drew up a free trade agreement in 2002. A similar agreement with the European Union soon followed.

The QIZs, however, face stiff competition from China in the textiles market. Even without tariff-free access to the US, China can still supply textiles in greater quantities and at cheaper prices than is possible for Jordanian producers.

Telecoms and IT

Jordan needs to develop expertise in more value-added sectors of the economy. The decision to cut tax on corporate profits from 25 per cent to 6.25 per cent for businesses that operate call centres is the main plank in MoICT’s strategy of increasing the IT industry’s contribution to gross domestic product from eight per cent today to at least 15 per cent by 2011. Other types of IT outsourcing, such as first-line IT support, may win a similar tax cut from the authorities in 2008.

The government is considering creating a new special economic zone in the north of the country near Irbid and the border with Syria. The new development, which may be announced before the end of 2007, will provide IT companies with as yet unspecified tax cuts and access to a purpose-built technical infrastructure. Many IT companies base their operations in the smarter suburbs of Amman because they are the only places in the country that are guaranteed to have access to a good fixed-line telecoms network. If the government can create a place outside the capital with a reliable infrastructure, many IT businesses would relocate even if they only wanted to do so to reduce their office costs.

Jordan feels that its large number of English-language speakers give it an advantage over China and maybe even India as a location for call centres. It already has companies that adapt common back-office IT systems to the rules and regulations in different Arab countries. Menaitech, for example, has developed a human resources application that it claims is more customised for Arab countries than the standard software packages provided by Western IT companies. The challenge for the kingdom’s policymakers is to find the right policy tools that will encourage high added-value IT outsourcing activities such as business process outsourcing (BPO). To date, there is little or no BPO activity in Jordan.

The kingdom is still far from signing direct offshoring deals with big multinational companies. Jordan has attracted outsourcing companies, but it has yet to do deals with individual banks or retailers who are looking for a location to host some of their IT systems offshore. Direct outsourcing deals represent a potentially larger source of revenue for Jordan than the deals with outsourcing suppliers. Jordan’s telecoms regulator has made the market the most open in the Middle East.

The Telecommunications Regulatory Commission (TRC) has granted four mobile phone licences to Zain, the Kuwaiti giant, Orange from France, Xpress and Umniah, which is owned by Batelco, a Bahraini operator. Every other country in the region has three or fewer licences.

In September 2007, the TRC continued to liberalise its telecoms sector faster than the regulators in other Middle Eastern countries. It published a consultation paper that said virtual network operators (VNOs) would be able to do deals with existing licence holders. VNOs would be permitted to offer mobile phone subscriptions to the public without obtaining their own licences to build networks.

Existing licence holders would be expected to give the VNOs access to their networks in return for a share of the revenues. Mobile phone retailers and companies such as Oger Telecom, the telecoms business of the Saudi Oger construction company, were considered the most likely to look for deals with existing licence holders.

Retail

Jordan is one of the preferred markets for international retailers looking for a way into the Middle East. The country’s first branch of Carrefour, France’s largest supermarket chain, opened in the capital next to Mecca Mall at the beginning of 2007. Other retailers are likely to follow Carrefour into Jordan.