The Jordanian Economy - Back to the Roots

Multiple perils are facing the Jordanian economy; poverty at 14.4% of the population in 2010, unemployment at 14%, public debt at $35 billion and an annual governmental budget deficit that contributes to the debt problem annually. These challenges have been deterrents to achieving economic development and prosperity to Jordanians. But why has not the Jordanian economy been able to overcome these challenges, despite the multiple correctional programs directed by the International Monetary Fund and the many USAID-ran projects over the past years? Billions of dollars have been spent on fighting poverty, workforce development, capacity building, and tourism sector development, fostering entrepreneurship and gender equality. Yet, poverty and unemployment are on the rise. Public debt has reached an unprecedented level, and the budget deficit is not easing. Governmental capital spending is very low; and if it were not for the GCC grant, many infrastructure projects would have not seen the light. 

On the other hand, there have been many success stories worth capitalizing on. Great progress has been achieved on the energy dossier, especially in renewable energy investments. The ICT sector has reached a plateau and is looking to move to the next level. Other service sectors have shown promising results, such as; the medical services sector, the business services sector and the architectural and engineering sector. However, these sectors are still highly fragmented (many small operators) and highly exposed to regional economic turmoil. The local market is not big enough to cater for all the firms in this sector; therefore many firms export their services to the Gulf, Iraq and Libya. However, the recent political, security and economic disturbances in these target markets have left many of these firms in adversity. 

The Jordanian economy needs a jolt, and this jolt does not come cheap. A targeted investment is needed to develop new sectors that are either export-oriented or focused on import-substitution. Which sectors require governmental attention and investment? And which are most likely to succeed and employ the Jordanian workforce? In order to identify the opportunities within the economy let us look at the structure of the Jordanian economy using the three-sector theory. The three-sector theory is an economic theory, which divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services (tertiary). It was developed by Alan Fisher, Colin Clark and Jean Fourastié. According to the theory, the main focus of an economy activity shifts from the primary, through the secondary and finally to the tertiary sector. 

Nations in their first stages of economic development, employ most of their workforce in the primary economy. As economies industrialize, more are employed in the secondary economy; in factories and construction. Finally, as automation dominates the primary and secondary sectors and educational systems improve; most of the workforce moves to the tertiary sector, working in services, information-based jobs, government, and knowledge-based jobs. 

Jordan’s services (tertiary) sector contributes to 69.2% of GDP and employs 77.9% of the workforce; the manufacturing (secondary) sector contributes to 24.8% of the GDP and employs 18.7% of the workforce; while, the primary sectors contributes to 6.0% of the GDP and employs 3.4% of the total workforce. 

The Jordanian primary sector consists mainly of the following activities; mining and quarrying, agriculture, and fisheries. Mining and quarrying employs an estimate of 10,178 workers while agriculture employs an estimate of 31,139 workers. 

Though the past decade, Jordan has focused its efforts to build a knowledge-based economy; focusing on developing service and knowledge based sectors; and has achieved notable results in the ICT sector, business services sector, A&E sector, pharmaceutical and life sciences sector, and the medical services sector. Yet, these results have not been disseminated countrywide, and the most of the workforce have -or was already- settled in the capital city Amman. Job creation and poverty alleviation have been and remains major objectives for every government. Job creation should be distributed among the twelve governorates of the kingdom. Many young job seekers in these governorates have not given the chance to develop competencies suited for the knowledge-based economy; not all Jordanians are architects, engineers, game developers, pharmacists, …etc. Therefore, it is imperative to develop economic opportunities closer to the competency mix of rural Jordan. 

The answer is to go back to the roots; invest in the primary economy (agriculture, fisheries, and mining). Mining is a capital-intensive industry that is already taken its share of attention and we are looking to see the outcome of the investments made in shale oil, uranium, and, maybe, copper mining. That leaves us with two opportunities for economic development; agriculture and fish production. Well, Jordan is among the world's most water-deficit countries, only 11.7% of its land is arable, and currently agriculture consumes 60% of its fresh water supplies. Opponents to the concept of agriculture development in Jordan have made their point that we can have better use of fresh water, rather than using it in an economic activity that contributes only 2.7% to the gross domestic product. The counter argument is to develop a farming business that does not require soil or water. The answer is Aquaponics; what started out as a backyard or hobby farming system, has now gained commercial momentum. Aquaponics is an intensive fish farming business that uses the nutrient-rich water from growing fish in a re-circulating system to provide a source of natural fertilizer for the growth of plants, organically. As the plants feed on the nutrients, the water is purified and recirculates to the fish tank. An aquaponic system: 

A typical aquaponic production unit will occupy 500 square meters of land and will cost around JD 20,000 to build. An aquaponic farm can be built on any type of land. This is a suitable solution for establishing a farming business in the Jordanian desert. However, this farming business requires the collaboration of multiple stakeholders in order to make it succeed. The government of Jordan can lease land to farmers and entrepreneurs who are willing to invest in the business, the National Centre for Agricultural Research and Extension can help farmers determine the most suitable produce and fish species they can farm, the Agricultural Credit Corporation can extend credit to farmers who want to establish their aquaponic units, the Hashemite Fund for Development of Jordan Badia can help promote the business in the arid areas of Jordan, the universities can collaborate with other universities who have research programs on aquaponics, such as the University of Virgin Islands, and international donor organizations can help in competency building efforts and training on the matter. 

The idea of directing attention to the primary economy (agriculture) might seem counter-intuitive to economists calling for industrialization and moving the economy towards a knowledge-based economy. Although, investment in high-tech industry, design-based industry, business services and financial services are still very important to the economic development in Jordan, agriculture should play its part in that growth. It is very important to remember how agriculture has played a major role in the industrialization of Europe, and how rice production in Japan has fed the growth of other sectors of the economy.