It has been a tough couple of years for Jordan. Rising energy costs in 2008 and the impact of global recession in 2009 hit the economy hard.

In 2009, exports fell 19.4 per cent, foreign direct investment (FDI) dropped 37 per cent and remittances fell 5.2 per cent. Real gross domestic product (GDP) slowed to 3 per cent, from an average of about 8 per cent a year between 2004-08, according to figures from Beirut-based Bank Audi.

The country has been without a legislature since November 2009, when King Abdullah II dissolved parliament two years before its term ended, and the following month, a new prime minister had to be appointed after the resignation of Nader al-Dahabi.

Economic reform in Jordan

Under the circumstances, the country is responding rather well to the challenges.

In the past few months, King Abdullah and his administration, led by Al-Dahabi’s replacement Samir al-Rifai, have introduced
a programme of economic, political and civil reform that, while by no means a panacea for Jordan’s troubles, offers hope that they can at least be alleviated.

There is a lot to put right. In 2009, the government adopted a fiscally expansive budget that aimed to stimulate to the economy during the downturn, but also increased the debt burden on an already highly leveraged government. Jordan’s fiscal deficit widened to an estimated 8.5 per cent of GDP in 2009, according to the International Monetary Fund (IMF), and it also has substantial current account and balance of trade deficits. By the end of 2009, the country’s total liabilities amounted to 56 per cent of GDP, just below an agreed debt ceiling of 60 per cent.

Political reforms suggested by King Abdullah or the government are not transferred to action

Hani Hourani, director-general of Al-Urdun al-Jadid

The government has pledged to make debt reduction a top priority – largely through reduced spending. It is reforming the tax and social security system, reducing subsidies and making efforts to improve the business environment. The appointment of Mohammad Abu Hammour as finance minister in December 2009 has been well-received by economists, who see him as a no-nonsense figure, well-qualified to tackle the country’s economic problems.

Hammour is already enjoying some success. According to figures released by the Finance Ministry on 5 August, the fiscal deficit over the first six months of the year was 70 per cent lower than for the equivalent period in 2009. The government aims to reduce it further to 3 per cent of GDP by the end of 2013. Economists in the region say that this is an ambitious target, and perhaps 4-5 per cent might be more realistic, but nevertheless they are pleased that the country is moving in the right direction.

In the current global economic climate, the international financial community is paying close attention to what governments are doing to deleverage their finances, but austerity cannot always be taken for granted.

In nearby Lebanon, which is also highly indebted, economists are frustrated that the government’s proposed 2010 budget envisages a sizeable increase in spending. “I’m encouraged,” says a senior diplomatic source in Amman. “It’s the first time I’ve seen such painful decisions taken on government expenditure, and there’s more to come.”

Jordan: A regional player in the Israeli-Palestine peace talks

The fragility of Jordan’s economy is likely to mean that the challenge of balancing the books remains the government’s number one priority for the foreseeable future. But King Abdullah is also keen to promote a programme of political and civil rights reform, and to see Jordan continue to play a role in region politics.

Despite being one of the smallest countries in the region, Jordan is eager to maintain a high profile. King Abdullah and Egypt’s president Hosni Mubarak are the only two Middle East leaders directly involved in the talks between Israel prime minister Benjamin Netanyahu and Palestinian president Mahmoud Abbas that began in Washington on 1 September.

King Abdullah has been outspoken in his support of the process. Middle East peace is a “strategic interest” for Jordan – the majority of whose population is Palestinian in origin – and the world “will pay the price” if the talks fail, he said in remarks published by the royal court on 5 September.

Amman was also the final stop on a recent tour of the Middle East by Saudi Arabia’s King Abdullah bin Abdulaziz. During the Saudi monarch’s two-day visit at the end of July, the leaders not only discussed increased bilateral ties but also spoke out in support of stability in Lebanon, where domestic and international troubles are threatening to disturb the delicate political balance.

Within Jordan’s borders, the government’s failure to make substantive progress with political and human rights reform over the years despite the king’s repeated declarations of intent has brought criticism from local and international non-governmental organisations (NGOs). Government and diplomatic sources in Amman speak of a renewed determination on the part of the king and his government in recent months, but how much of an impact their latest reforms will have remains to be seen.

Jordan’s parliamentary reform

The king’s decision to dissolve parliament in November 2009 was largely well-received. The legislature had been the target of allegations of corruption and was seen as self-serving rather than dedicated to the public interest. Although hardly revolutionary, a new electoral law announced in June has taken steps towards parliamentary reform, including enlarging the size of the legislature from 110 to 120 seats and increasing the quota of female members from six to 12. Among the new seats are four for the towns of Amman, Zarqa and Irbid, a concession to those who claimed the previous system was unfairly prejudiced against urban areas, where the Islamic Action Front (IAF), the country’s largest opposition party, is traditionally strongest.

The changes have not been enough to convince the IAF of the fairness of the system. On 30 July, it declared it will not contest the next parliamentary elections, scheduled for November. “The government has no serious will for political reform,” said a party spokesperson.

The IAF, a branch of the Muslim Brotherhood, would have been the only party with any prospect of winning a fair proportion of the seats, but it is not as strong as it used to be. During the 1990s, it held almost half the seats in parliament, however, the lack of a coherent programme has since led to an erosion of its support. In elections in 2003, the IAF won less than 20 per cent of the seats, and, having boycotted the latest elections in 2007, the party has been riven with divisions over how closely it should be associated with Hamas in Gaza.

The preferred candidate of those who favour close ties with the movement was elected president of the IAF’s ruling council at the end of May, but by the slender margin of 10 votes, from 111 cast. “The IAF doesn’t want to reveal how weak they are by standing in the elections,” says the diplomatic source. “They probably wouldn’t get more than 20 per cent of the vote.”

Compared with the closed political systems in most of the Middle East, Jordan is often held up as a democratic paragon. But while most Jordanians believe elections to be relatively free and fair, the poorly-developed state of party politics in the country means that it has never really lived up to its billing.

Research carried out in 2007 by Jordan University’s Centre for Strategic Studies found that 80 per cent of respondents believed that none of the political parties were qualified to form a government. Less than 10 per cent believed the parties represented their political, economic and social aspirations. The result has been voter apathy: the turnout at the 2007 elections was just 58 per cent. “The whole political atmosphere is not working,” says Hani Hourani, director-general of Al-Urdun al-Jadid, a political research centre in Amman.

“Political parties are weak and opposition parties have no encouragement to participate in elections. Even political reforms suggested by the king or the government are not transferred to action. People are exhausted by it all.”

A new political parties law was introduced in early 2008 in an attempt to reduce the influence of family and tribal loyalties in parliamentary elections. The new rules resulted in the number of political parties falling from 36 to 12, but sources in the kingdom are pessimistic about the impact it will have on parliament’s composition.

Jordan’s political system: Courting controversy

Other elements of the government’s programme of social and political reform have met with a mixed response. Moves to professionalise a relationship between government and the media that in the past has been based on the exchange of favours to ensure favourable reporting have been welcomed. But the extension of defamation laws to prevent outlandish fabrications in the media have provoked considerable opposition. New rules on the conduct of members of parliament (MPs) were introduced earlier this year, reducing MPs’ perks and highlighting their responsibilities, but there is still uncertainty as to what effect the legislation will have in practice.

Amendments to the country’s laws on gathering and assembly have also proved controversial. The government claims that they help to expand the role of civil society, while NGOs claim that there is still too much state interference in their activities.

Funding is tightly restricted, political involvement is strictly forbidden, the establishment of new NGOs has to be approved by the government and their activities are closely monitored.

Human Rights Watch, an international NGO, says that although the new rules lighten regulation in some areas they are still “a legal veneer” on the government’s “efforts to stifle society”.

But despite all the imperfections of Jordan’s political system, says Hourani, most people are content that their leaders have at least provided them with stability, something that many of the country’s neighbours are unable to claim. “When they compare their experience to people in the West Bank, or Iraq, or Lebanon, people in Jordan believe it’s better to stay calm than to take to the streets.”