GCC membership may boost growth potential for Jordan

The Gulf Cooperation Council’s (GCC) warm reception of Jordan’s membership application to join the wealthy six-member bloc could have a positive impact on the Kingdom’s economy. The GCC’s welcoming of both Jordan and Morocco, which is also being considered for membership, is widely seen as a response to expanding unrest across the region and a way to bring together like-minded governments. For Jordan, joining an alliance of oil-rich Gulf states could mean economic growth potential. Membership would allow financial support from the GCC to flow to the Kingdom, which relies heavily on tourism, foreign investment and worker remittances for its revenue. Though Jordan has managed to stave off the unrest some of its neighbours have seen, the country is saddled with a nearly $2 billion deficit and growing foreign debt and unemployment. The International Monetary Fund (IMF) recently predicted that Jordan’s economic growth this year would be 3.3 per cent, down from its October 2010 estimate of 4.2 per cent. The GCC makes a habit of helping its members, most recently when it pledged a total of $20 billion to Bahrain and Oman to alleviate the economic troubles that were a cause of unrest in those countries. Being a member of the GCC could see Jordan also benefit from such financial support. “Jordan is in desperate need of the GCC’s umbrella to ease its economic hardships, while the GCC wants Jordan’s security and military expertise at a time of regional instability,” Jordanian political analyst Labib Kamhawi told international media recently. “If anything happens in any GCC country, like the unrest that engulfed Bahrain, Jordan cannot intervene militarily if it’s not a GCC member.” In addition, tourism could also see a boost: Figures from the Ministry of Tourism’s 2010 statistical newsletter showed that visitors from the six GCC states was up 11.5 per cent between 2009 and 2010, to some 1.65 million visitors. If Jordan were to become a member of the GCC, eased visa restrictions and greater travel freedoms could increase that number over the coming years. Freer movement of labour would also be a benefit, as foreign worker remittances make up about 20 per cent of the gross domestic product (GDP), with many Jordanians working in neighbouring states. The economic benefits of more tourists and remittances might be offset by capital outflows from Jordan, as local businessmen will likely take advantage of low cost production centres in GCC countries, such as Saudi Arabia. Taking steps to maximise its competitiveness and provide fiscal incentives before it removes the barriers in line with membership requirements will help avoid this situation. It is still unclear if Jordan would be accepted as a full member or one with partial membership rights, such as Yemen and Iraq. Jordan’s foreign minister, Nasser Judeh, said in early May that he was in contact with his counterparts in the GCC to discuss the Kingdom’s membership requirements, though he declined to specify what they might be. This is not the first time Jordan has applied for GCC membership. The Kingdom first did so in the mid-1980s after it had run up a multibillion-dollar foreign debt financing its army, but was rejected from the bloc with no explanation. Since then, the Kingdom’s interests have run parallel to those of the GCC: It is allied with the US, determined to uphold the monarchy system, opposed to Iran’s growing Shia influence in the region, and concerned about the wave of protests in the region. It is possible, as some analysts have opined, that the move to bring in Jordan and Morocco could signal an intention to group together countries run by a monarchy or semi-monarchies as a way to show that they can stand in peaceful contrast to republican governmental systems. Waleed Al Khatib, head of the public opinion polling unit at Jordan University’s Centre for Strategic Studies, told local media, “Political systems in the GCC countries are either monarchies or semi-monarchies.” The GCC’s acceptance of Jordan’s membership request could help send a message that “Arab countries that have monarchical political systems are more stable than the republican countries, and this is clear on the ground,” Khatib said. For their part, Jordanians appear to be enthusiastic about the news of the country’s joining the GCC. In addition, newspapers across the Gulf seemed to take the news of the GCC’s welcoming of Jordan positively, according to a May report in The Jordan Times, which quoted a number of papers saying they foresaw increasing economic prospects and a strengthening of regional ties. For many, Jordan’s membership could signal not only increased economic stability but also the added security and regional standing that would come from allying with a set of established wealthy nations. “Since the collapse of Iraq [in 2003], Jordan has been very much left out in the cold,” Nawaf Tell, the director of the Jordanian Centre for Strategic Studies and a former diplomat, told The Financial Times. “This move means that Jordan would become part of a collective - economically, politically and strategically.” Oxford Business Group (OBG) is a highly acclaimed global publishing, research and consultancy firm, which published economic and political intelligence on the markets of Asia, Eastern Europe, the Middle East, and North and South Africa.