Jordan's Economic Outlook

Here is a link to an excellent full report my friend authored on the risk profile for investment in Jordan.

This is the executive summary:
[CLICK ON THE IMAGE TO OPEN A READABLE VERSION OF THE EXEC SUMMARY].


I definitely recommend reading the full report, by his firm PIRC, if you have any interest in economic development especially in the Middle East.

The Other Oil Crisis

We've all heard about the oil crisis: the price of oil is high, we may be running out, the car exhaust causes health problems, and, oh yeah, it's contributing to global warming (or weirding.) And we're all familiar with the innovation the crisis is spurring in automobiles: electric cars, hybrid cars, fuel cell cars, and solar cars to name a few. But those innovations fail to address deeper concerns with an automobile centric society:

1. DEATH AND INJURY. The US Department of Transportation announced that in 2007 there were 41,059 deaths and 2,490,000 people injured in vehicle accidents, and those were the lowest figures in fourteen years. (As Robert Reich points out, the only reason the numbers are down is because the economy is slow and so people are driving less.) If a foreign country attacked and injured 1% of those numbers we'd be at war and spending billions of dollars, so why not address this issue. Also, as the developing world aspires to the US standard of living, we should consider that already over 1.2 million people die worldwide in vehicle accidents.
   
2. LOST TIME. In the US it is estimated the average driver spends 38 hours stuck in traffic per year. (In Los Angeles 98 hours, Houston 56 hours). This is not just frustrating, it is time away from families and time lost from productive working. Unlike time on a train, you can't work (safely) while driving. The cost of congestion is estimated to be over $78.2 billion annually.
   
3. SOCIAL INTERACTION. Cars are bubbles. The only way drivers communicate with others on the highway is with horns, lights, and often the middle finger. How many people have met their husbands or wives while commuting in separate cars on the highway? Sharing a public space, like a train compartment, would result in increased public discourse and a greater feeling of community, which we could use when addressing some of our other problems.
   
4. RESOURCE USE. The roadways are publicly funded for construction and repair. From 1998 to 2003 US highway spending alone cost approximately $80 billion per year. And building more roads only adds to the cost, and uses up more land.
   

Cars are of course an attractive method of travel. But often we think they are so attractive simply because they are the only reliable option. The time is for our leaders to make a serious commitment to building a public transportation system worthy of a first rate nation. Yes, there will always be times when an automobile is simply the best way to go, like on moving day, or to transport people to the hospital. For the rest of the time, we need reliable, clean, safe, fast public transportation.

Iraq Exports Need to Grow

As the Memri Economic Blog reported, Iraq’s central bureau of statistics announced that total Iraqi exports of oil and goods rose by $11.9 billion from 2006 to 2007. ($41.26 billion in 2007 compared with $29.36 billion in 2006). However, $10.92 billion of that increase (92%) was due to crude oil. Since then oil exports have further increased, not just in value but in quantity, thanks in part to the improved security situation.

But, as I pointed out in my previous entry, the oil sector doesn't and won't employ many people (less than 1% of the population at best), so gains in oil production do not translate to increased employment. In a 2006 estimate the CIA estimated unemployment of 18-30%, while the Brooking Institution estimated 25-40% last year. In some villages it is much higher, and it has become clear that without employment there cannot be stability.

US administered microgrants are a small start, nurturing small service-sector businesses and restaurants, as are the small US sponsored "Industrial Zone" for vehicle maintenance, but neither can be expected to generate exports. Instead those service jobs will depend on the health of the oil industry and will suffer the swings of the market, more so when the US departs. At some point in the future we can expect the world to shift away from hydrocarbons, at which point Iraq better have an alternative money maker. The only other serious sector at this time is government, either employment by the Government of Iraq or payments from the US to stand guard (i.e. Sons of Iraq).

This article reports that one large company, Diyala Food Company, shut down, releasing thousands of employees. This is particularly sad when you consider that the US buys hundreds of millions of dollars of food for its military in Iraq, none of it from Iraq. The US should find a way to leverage its forces' huge logistical demands in Iraq, for everything from construction supplies and housing trailers to food. That would create companies that would be able to continue functioning after the US withdrawal.

The US and the Government of Iraq should consider the South Korean example. Before the Korean War the north was actually wealthier than the south due to greater natural resources. Since then, South Korea has experienced one of the fastest economic growth rates in history, largely due to heavy government sponsorship of large companies in key industries for export. There are many differences between Iraq and South Korea, large oil reserves in Iraq being one of them, but also similarities that may be instructive and which I will attempt to further explore on this blog in the future.