This Balancing Act May Get Trickier

Economic backlash from the war could shatter Jordan's calm

In a fawn-colored building on the out-skirts of Amman, some 400 Jordanian women stitch together Bugle Boy and Faded Glory pants for the American market. The factory is part of the U.S. effort to keep Jordan afloat economically and in the pro-American camp in the Middle East. But that doesn't mean the workers support the U.S., which has just overthrown the government of neighboring Iraq. Says Sherin, a recent university graduate from nearby Zarqa who earns the minimum wage of about $119 a month: "America is no good, but even if we have objections, it doesn't matter."

Sherin's factory is located in Al-Tajamout Industrial City, one of seven so-called qualified industrial zones (QIZs), which can export to the U.S. duty- and quota-free. As of the end of last year, investors -- mostly from Asia, the U.S., and Israel -- had plunked down $500 million and created 18,200 Jordanian jobs in the QIZs. Al-Tajamout recruits women in southern Jordan and houses them in dormitories. "There is such poverty in these areas; we need these jobs," says Janset Kasht, Al-Tajamout's business development manager.

Jordan now has them, thanks to the political skills of King Abdullah, who like his father, King Hussein, has positioned his tiny but strategically important country to attract the support of powerful backers. The crisis over Iraq has been trying for Abdullah because Jordanians sympathize with their neighbors. The king's solution: Oppose the war publicly and let people vent their anger against it in almost daily protests, yet still allow a low-profile U.S. military presence. "The king managed the situation well," says Fahd Al-Fanek, editor of Jordan Economic Monitor, a newsletter.

But Abdullah's test may get tougher. If the U.S. has trouble managing postwar Iraq, events there could produce turbulence that might batter Jordan. And with Palestinians making up the majority of its population, Jordan is vulnerable to backwash from the Israeli-Palestinian struggle. Perhaps the greatest danger for the king is that his pro-U.S. policies are out of step with his people's anti-U.S. views. "The gap between the [people's] feelings and the government's policies is so wide there could be problems in the future," says Taher Masri, a former Jordanian Prime Minister.

There are signs the king is worried. Despite allowing antiwar protests, he has reduced political freedom in the kingdom. He suspended Parliament two years ago and has largely muzzled the once-informative Jordanian press. New parliamentary elections are scheduled for June 17, but the legislative body they produce is expected to stick to parochial bread-and-butter issues. "Officials are complaining about a lack of interest," says Masri. "People believe the MPs will be irrelevant." Some Jordanians say the king, an ex-special forces chief, relies too much on the security services -- instead of encouraging a Jordanian brand of democracy to underpin his rule.

Sharp economic deterioration could shatter the calm. Jordan already suffers from 20% unemployment, and one-third of Jordanians live below the poverty line. Moreover, the economic fallout from Iraq may be just beginning. Dealings with Iraq accounted for almost 20% of Jordan's gross domestic product, Al-Fanek estimates. Jordan received 90,000 barrels a day of Iraqi oil through a combination of grants and barter deals, and shipped some 20% of its exports to Iraq, largely food and machinery. Now, all this activity has halted, and Jordan is likely to suffer if trade doesn't resume.

Aware of the risks posed to its ally, the U.S. is trying to shore Jordan up by pumping in an additional $1.1 billion in economic and military assistance. The country is also benefitting from the hefty 70% rise in exports to the U.S., to $400 million last year. Saudi Arabia and Kuwait, meanwhile, are plugging the oil gap with 75,000 barrels a day for three months.

But Jordan can't count on handouts forever. "The key to the future here is relations with Iraq," says a prominent banker. While the cushy deals may be over, Jordanian entrepreneurs figure they will do well selling Iraq low-tech exports and services such as information technology. Jordanians scorn the U.S. effort to remake Iraq. But they have a big stake in its success.

Corrections and Clarifications Jordan's gross- domestic-product growth is incorrect in the graphic, "The Economy at a Glance." It is 4.85%, not -4.85%

By Stanley Reed in Amman

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