Unchecked corruption puts Jordan, and Middle East, at risk

Unchecked corruption puts Jordan, and Middle East, at risk
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Jordan is the most educated Islamic Middle Eastern country, boasting a 98 percent literacy rate in Arabic and English, and with more researchers per million than the European Union. It ranks No. 1 among countries in the Arab world for education.

At first glance, the comparable Gini coefficient to Western democracies gives the false impression that all is economically well-balanced in the kingdom and, therefore, that corruption has not hindered economic growth. Yet reality is rather different, with a high coefficient in the wealthy area of Amman pulled down by poorer areas of the country.

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Compared to its nearby polar twin Israel, both born of the Sykes-Picot Agreement, Jordan’s per-capita gross domestic product (GDP), smoothed for exchange rate fluctuations, at $8,337 (USD) is far lower than Israel’s at $33,132 — and there definitively has not been a similar embrace of technology.

Jordan’s history in accepting a massive influx of Arab refugees is astounding, compared to its neighbors. The transition to a constitutional monarchy on similar lines to the United Kingdom also is avant garde for the Middle East, and this experimental model is of significant interest to nearby kingdoms.

Jordan signed the United Nations Convention against corruption in 2003 and, over the years, there have been a variety of amendments to Jordan’s corruption laws. The Integrity and Anti-Corruption Commission (JACC) was established by King Abdullah II to give some teeth to the legislation.

Jordan’s failure to entirely bite the bullet to resolve three ongoing corruption cases — one involving Walid Kurdi, a former chairman of the Jordan Phosphates Mining Company, another involving Taameer Jordan Holdings, and one alleging illegal manufacturing of tobacco and cigarette smuggling — does not send the necessary message that it is time for the system of “wasta” (middlemen) to come to an end.

These cases, which date as far back as 2010, involved allegations of abuse of power, bribery, money laundering, tax evasion and theft. The Jordanian Constitution has but one king and royal family to anchor the state and provide necessary stability in a turbulent region and, like the United Kingdom, there should be no gilded entourage since Jordan receives overseas financial support.

The resolution of the three corruption cases would resolve the 3 percent budget deficit for an entire year, since receipts should exceed $1 billion (USD), while sending the requisite message to the young, unemployed and middle-class protesters, who took to the streets last year, that they shall not be burdened by the crimes of the privileged. The full implementation of the rule of law also would act as a firm indication to Western investors that Jordanian legislation is being adhered to, which would encourage more foreign direct investment.

Jordan is still reeling from the 2015 exogenous shock brought on by the civil war in Syria and the massive influx of refugees and Syrian businesses to the country. Trade with Syria and Iraq has collapsed, and exports now pass almost exclusively via the Jordanian port city of Aqaba.

Debt-to-GDP ratio hit 95 percent last year; unemployment stands at 18 percent, yet only 3 percent of Jordanians pay income tax. The most wealthy avoid taxes via no capital gains and dividend taxes. Proposals last year to widen the income tax to 10 percent of the population were thwarted by mass protests — which is questionable, given that they were then replaced by regressive consumption taxes that hit the lower echelons of the population far harder than the wealthy minority.

Public outrage over this inflationary shock, together with 50 percent of the population now being non-Jordanian in origin and high unemployment, are a cocktail that is best contained by further political, legal and constitutional reform to engender higher levels of economic growth that support the mass of the population.

It is in the interests of Israel and the West to support stability in this Middle Eastern bastion of constitutional freedom; a radicalized Jordan would not be beneficial to regional stability. Further economic measures should be taken in the form of free-trade agreements, infrastructure investments and the facilitation of new trade routes to reverse the impact of regional turbulence that soon may be further complicated by splintering in the Gulf Cooperation Council.

Jordan sits as the state most likely to facilitate the further resolution of the Palestinian question in the years to come, which would increase global stability and prosperity.

James Arnold is a British financier and geopolitical strategist. He has been in asset management and finance for a quarter-century.

Christopher Nixon Cox is a member of the board of directors of the Richard Nixon Foundation and a non-resident fellow in Princeton’s Liechtenstein Institute on Self-Determination.