Jordan: How to Turn Public Sector Gluttony to Private Sector Growth

Written by Zachary Colman, Guest Contributor | 11 August 2012

The austerity measures recently approved by Jordan’s parliament will put pressure on the Hashemite Kingdom’s ill-equipped private sector to provide jobs. Those decisions will not launch Jordan full swing into the Arab Spring theater—at least not immediately—but they might rattle what has been a fairly mild protest atmosphere.

Cuts to the government’s operational spending and a hiring freeze are just two items on a menu of measures to shed $423 million from expenses—not to mention corruption charges hanging over the throne, cabinet, and parliament—that are putting Jordan’s long-term health at stake.

Battling the bulging public sector is the right move in the general sense, but it must also be done in the right way. It remains to be seen whether the government has the fortitude to combat endemic corruption in the public sector. If it does so, that could open the door for the underemployed youth, theoretically leading to a much-needed cultural shift in the Jordanian bureaucracy.

For the most part, Arab Spring watchers have paid little attention to the fact that Jordan is now breaking in its fourth prime minister in a little more than a year. Such machinations are par for the course in Jordan. The parliament even passed a law in May to encourage political party formation, which some have said will consolidate fractious political groups that could better challenge King Abdullah II’s supporters.

But in light of the soon to be enacted cuts, if the government does not have the wherewithal to tackle corruption, the halt to public sector hiring will strangle the Jordanian economy, largely because of its poor private sector workforce development efforts. A World Bank report released in July said that since adopting a national plan to improve workforce training and preparedness in an increasingly globalized Jordanian economy, “the past two years have not seen effective coordinated implementation” of outlined initiatives.

The austerity measures might actually have the effect of locking in current employees. That would keep young people who will depend on private sector growth away from the government positions charged with driving economic and private sector policies. That scenario could be devastating in the long term for a country with a population at a median age of 22.

Notably, chief among the reasons for the lackluster private workforce development cited in the World Bank report was a lack of direction and coordination from government. That surely has not improved as the government hemorrhages personnel, struggles to keep a prime minister seated, and hobbles through corruption.

The private sector in Jordan has not been engaged in workforce training because, historically, Jordan generated most of its revenues from high tariffs. An economic downturn in 1988, however, stoked trade liberalization. A broad subsidy system grew in tandem with that effort.

Buoyed by at least five International Monetary Fund programs between 1992 and 2002 as it weaned itself off of protectionist economic policies, Jordan followed the standard IMF prescription of lowering trade barriers, cutting public benefits, and privatization. Jordan joined the World Trade Organization (WTO), the EU partnership agreement, the Arab Free Trade Area, and a free trade pact with the United States. That all meant Jordan needed a better trained workforce to compete with its new, freer economic borders, which has led to rapidly increasing exports and GDP.

But much of Jordan’s initial economic growth occurred from increasing exports, which is easy when you change from a drastically protectionist trade policy and have low wages—Jordan’s GDP per capita is $5,900, ranking 140th in the world, according to the CIA World Factbook. The key now for Jordan is value creation. More than 77 percent of its workforce is in the service industry, in which jobs are low paying and do little to generate societal benefit.

Geopolitically, Jordan has always played a minimal role, with the exception of the peace treaty it signed with Israel in 1994. The nation has not strayed far from its reputation regarding the Arab Spring, possibly because similar protests there would force the nation to answer to its own dirty secret of how it has treated Palestinians—which comprise nearly half of Jordan’s population—as second-class citizens for decades. The idea of creating an avenue for more Islamist parties to exert influence in Jordanian politics might open debate on a topic many Jordanians fear.

But if Jordan balks at embracing protests and demonstrations at the scale of other Arab nations for that reason, it must still find a way to push back against corruption and decisions being made that threaten its future economic viability. Getting young people involved in the public sector will help, not least because it will invite fresh thinking into a bureaucracy that must quickly build a private sector.

This article was originally published in the July/August edition of the Diplomatic Courier.