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Jordan GDP by Sector
Jordan - Unavailable
Figure 7. Gross Domestic Product (GDP) by Sector of Origin, 1978
and 1987
Source: Based on information from Jordan, Central Bank of Jordan,
Monthly Statistical Bulletin, Amman, April 1979, Table 40;
and Jordan, Department of Statistics, Statistical Yearbook,
1987, 383.
The large contribution of the service sector to GDP, versus the
small contribution of the industrial and agricultural sectors, has
long been a source of concern to economic planners. In the late
1980s, Jordan's aggregate private and public service sector
continued to contribute about 60 to 65 percent of total GDP. This
figure was exceeded only in some of the world's most industrially
advanced market economies. Figures nearly as high were reached by
several of the world's poorest economies, however, where
unproductive surplus labor was absorbed into the service sector.
Some segments of the service sector, such as banking and
engineering, relied on advanced and sophisticated skills.
Nonetheless, the sector's overall contribution to GDP remained
roughly constant in the 1970s and 1980s, even though its share of
total employment increased significantly. The relative lack of
growth called into question the overall efficiency and productivity
of the service sector.
In 1987 the government, which employed more than 40 percent of
the labor force and more than 67 percent of service sector
employees, contributed about 18 percent to GDP. Retail and
wholesale trade--which included well-developed hotel and restaurant
subsectors--was the second largest contributor to GDP. This sector
generated 17 percent of GDP in 1987, a share that had declined
about 2 percent over the preceding decade. Finance, banking, real
estate transactions, insurance, and business services made up 8
percent of GDP. Transportation and communications contributed about
11 percent of GDP
(see Jordan -
fig. 7). Manufacturing, mining, agriculture,
and construction--the sectors that produced consumer or capital
goods or inputs--together accounted for only about 32 percent or
less of GDP. The steady growth of manufacturing, which climbed from
about 4 percent of GDP in 1970 to almost 15 percent in 1987, was
regarded as a promising sign. Agriculture--including animal
husbandry, forestry, and fishing--constituted almost 40 percent of
GDP in the 1950s and about 15 percent of GDP in the early 1970s. By
1987, however, its share had declined to 7 percent, which caused
the government considerable concern. Construction's contribution
doubled between 1970 and 1975, reaching about 8 percent of GDP as
spending on both public works and private housing increased, and
then stabilized. By 1987 construction had declined to 6 percent.
Utilities such as electricity and water supply accounted for 3
percent of GDP, and mining contributed 4 percent in 1987.
Jordan's demand structure in terms of GDP consumption was
distorted. In 1986 the government consumed more than 26 percent of
GDP, a figure that was the fourth highest in the noncommunist
world. Private consumption was about 87 percent of GDP, also among
the highest in the world. Consumption exceeded GDP by 13 percent,
the highest margin in the world except for the Yemen Arab Republic
(North Yemen). Jordan's exports of goods and nonfactor services
(i.e., freight, insurance, and travel) amounted to 49 percent of
GDP, and its negative resource gap--the excess of imports over
exports as a proportion of GDP--was minus 44 percent, by far the
highest in the world. Inflows of capital from external sources
financed all gross domestic investment (31 percent of GDP) and part
of domestic consumption.
Insofar as consumption exceeded GDP and the difference was made
up partially by aid and remittances, Jordan did not fully earn the
growth it experienced in the 1970s and early 1980s. Jordan's GDP,
which rose from about US$2 billion to US$4 billion during the
period, was only between 75 percent and 90 percent of its GNP. At
the same time, annual inflows of unrequited--or, as the Jordanian
government sometimes called them, "unrequested" transfer payments--
were in some years more than US$1 billion. These unearned
transfers, in the form of foreign aid and expatriate worker
remittances, permitted Jordan to register only a relatively small
current account deficit. In several years, Jordan actually
registered current account surpluses despite outspending its GDP by
the highest margin in the world. In 1980, for example, Jordan had
a current account surplus of almost US$375 million. As foreign aid
declined and remittance income tapered off, Jordan suffered a
current account deficit of US$390 million in 1983. By 1987 the
current account deficit had shrunk considerably, because a reduced
trade deficit more than compensated for declining aid and
remittance inflows (see
table 5, Appendix).
The total amount of foreign aid that Jordan received was
difficult to pinpoint. Jordan never received all the aid it was
promised, and some aid was in the form of loans at concessionary
interest rates or in the form of commodities and services. Although
the amount of aid varied from year to year, it was always
substantial. In 1980, for example, foreign aid constituted 46
percent of government revenue before borrowing; in 1985, it
constituted 30 percent of preborrowing revenue.
Financial aid was received mostly from the Arab Organization of
Petroleum Exporting Countries (AOPEC). At the Baghdad Conference in
November 1978, seven countries promised to donate US$1.25 billion
annually to Jordan for ten years as a "war chest" to fund its
ongoing confrontation with Israel. Libya and Algeria reneged on
their commitments from the outset, and Iraq stopped paying after
the Iran-Iraq War started in 1980. In 1984 Qatar and the United
Arab Emirates stopped paying except on an ad hoc basis, and in 1985
Kuwait suspended its payments. Only Saudi Arabia consistently met
its payment obligations, which amounted to US$360 million per year
disbursed in six equal bimonthly installments. Total Arab aid to
Jordan stood at about US$750 million in 1980, with aid from non-
Arab countries boosting total aid to about US$1.3 billion. Arab aid
fell to about US$670 million in 1983 and to about US$320 million in
1984. In 1988, according to Jordanian government figures, financial
aid totaled about US$474 million and development aid and soft loans
(bearing no interest or interest below the cost of the capital
loaned) totaled about US$260 million, yielding a total of US$734
million in outside assistance. This figure included a United States
aid package that authorized US$28 million of military training,
US$20 million in budget support, and up to US$80 million in
commodity credits. The figure also included United Nations Relief
and Works Agency (UNRWA) for Palestine Refugees in the Near East
aid of about US$10 million, World Bank soft loans in excess of
US$100 million, and Arab aid of at least US$350 million. The
European Economic Community authorized US$112.5 million in aid to
Jordan to be paid in installments between 1987 and 1991. Worker
remittances, the other main source of external income, could not be
estimated precisely in 1988, but exceeded US$1 billion
(see Jordan - Remittance Income
, this ch.).
Foreign direct investment and reexports, particularly of goods
destined for Iraq, also contributed to GDP growth. The government
of Jordan was one of only a few Arab governments that chose to
stake its future on an economic system that, if not laissez-faire,
was by regional standards free, open, and market oriented. In the
1980s, however, Jordan began to compete for foreign investment with
Egypt, which was pursuing its own open-door policy. On the one
hand, Jordan's open-door policy posed risks insofar as the country
had to compete and cooperate with Arab governments that had
protectionist and subsidized state-controlled economies. On the
other hand, the policy was particularly effective because it was so
rare in the Middle East. Furthermore, with the devastation of
Beirut after the start of Lebanon's Civil War in 1975, Jordan was
at least partially successful in replacing that city as a prime
regional commercial center. In this role of merchant middleman,
Jordan became an entrepôt and conduit for trade and investment
between the West and the rest of the Arab world. It encouraged
transit trade through duty-free zones. Its open-door policy acted
as a magnet for inflows of foreign direct investment. It provided
tax concessions to both domestic and foreign businesses. Until 1988
it maintained a sound and freely convertible currency backed by
substantial gold reserves. A sound currency, combined with relative
political stability, made Jordan a safe haven for Arab bank
deposits. Jordan also established a strong professional service
sector, including well-developed banking and insurance industries
that catered to international business. Total net foreign direct
and portfolio investment in Jordan could not be estimated, however,
because foreign investment was offset by capital flight abroad.
Estimates of Jordanian capital invested abroad ranged from US$4
billion to $US40 billion. Net direct investment in Jordan was
estimated at US$23 million in 1985.
Data as of December 1989
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