GCC throws economic lifeline to Jordan, Morocco

The Media Line Staff

Amman, Jordan David Rosenberg – The surprise invitations extended to Jordan and Morocco to join the Gulf Cooperation Council (GCC) hold out the promise of economic gains to its two candidate members and security benefits for the group’s current members. But an expanded GCC also risks undermining reform and exacerbating tensions in the Middle East, analysts warned.

Relatively poor and facing high unemployment and yawning budget deficits, Jordan and Morocco could benefit from concessional prices for oil and gas, better access for their citizens to work in the Gulf and financial assistance. An expanded GCC would enhance the role of Saudi Arabia, by far the biggest GCC state, as it takes a more assertive political stance.

“Jordan needs the Gulf and the Gulf needs the Jordanians,” Walid Alkhatib, who works at the University of Jordan’s Center for Strategic Studies, told The Media Line. “We need them because we are in a critical economic situation. …The only way we can sustain our economy is through the Gulf.”

The Arab Spring has so far posed no immediate threat to the region’s monarchies, but Saudi Arabia fears the turmoil has emboldened Iran in its long-standing bid to achieve dominance in the Gulf and has forced the region’s monarchies to boost subsidies, create jobs and makes some gestures towards democracy.

Like the six Gulf states that currently comprise the GCC, the two prospective members are both pro-Western, Sunni Muslim monarchies and are feeling the pressure of the Arab Spring to undertake reforms. But the similarities end there. Jordan, some 750 miles from the Gulf, has a per capita gross domestic product of $5,300 while Morocco’s, some 3,100 miles distant, is $4,900. By comparison, Saudi Arabia GDP per capita was $24,200 in 2010.

Enriched by climbing oil prices, the Gulf monarchies have been able to respond with generous aid programs for their already wealthy populations – Saudi Arabia alone has committed to spending $125 billion – but in Jordan and Morocco, kings have had to increase deficit spending to cover the cost of handouts and include political reforms to sweeten the pot. Meantime, their economies are suffering under the weight of slow growth and higher global prices for food and energy.

In Morocco, the Institute for International Finance (IIF) estimates the government’s budget deficit will widen to 5.3 percent of GDP this year as economic growth slows. King Mohammed VI has promised constitutional changes by June and Morocco promised to inject $2 billion in subsidies to soften price hikes for staple goods.

In Jordan, economic growth will slump to 2.8 percent as its budget deficit swells to 6.77 percent of GDP. Jordan’s woes have been compounded by repeated interruptions in the pipeline delivering Egyptian natural gas, which has forced it to ration electricity and increase its import bill.

Faced with unrest in two of its member states, the GCC in March agreed to provide Oman and Bahrain $10 billion each over a decade to help meet protesters’ demands for higher living standards. Morocco and Jordan may be looking for similar assistance. But they would also benefit from discounted energy prices from GCC members and, in Jordan’s case, easier access for its citizens to work in the Gulf, who can now only stay in GCC countries if they have an employer sponsoring them.

“If they give us oil and gas cheaper prices than the market price then that would help our economy,” Alkhatib of the Center for Strategic Studies said. The IIF predicts that Jordan’s current account deficits will more than double to 9 percent of GDP this year.

For the GCC countries, Jordan and Morocco add to the clout of Saudi Arabia, which has been taking a more assertive role in the Middle East amid concerns that the U.S. is unprepared or unwilling to act as a regional power and Egypt has become preoccupied with domestic instability. Saudi troops were called into fellow GCC member Bahrain in March to put down unrest that threatened the local monarch and the GCC has played the leading role in mediating between Yemen’s leader and rebels.

But analysts warned of a downside to the agreement as well.

Subsidies and more jobs in the Gulf might alleviate pressure on Jordan and Morocco’s government to undertake reforms. Indeed, Marc Lynch, writing in on-line journal Foreign Policy on Wednesday, said reversing the reform drive might be a condition for GCC membership as Gulf monarchs try to solidify the region’s royal institutions.

“The real point here would seem to be a promise of GCC, or more specifically Saudi, assistance to those non-Gulf monarchies in order to prevent them from going too far in meeting popular demands for reform. Such a Sunni King’s Club would be a counter-revolutionary institution,” he wrote.

Lynch warned that the GCC alliance threatens to exacerbate tensions not only with Iran but with Egypt, which is being excluded from a growing pro-Western alliance just as it is still casting about for a new foreign policy stance in the post-Mubarak era.

Economically, too, the expanded GCC has drawbacks as well, both for the veteran GCC members as well as the prospective new ones, analysts said.

An influx of Jordanians and Moroccans could flood the GCC labor markets at the expense of locals at a time when the governments of the region are trying to encourage domestic employment. Jordanians tend to fill the kind of skilled jobs, as engineers, business executives, teachers and nurses, that GCC governments want their nationals to take.

“I don’t see a lot of economic benefits for the GCC especially as Jordan and Morocco have plenty of cheap labor, which will freely move around. What will happen to Saudization and Omanization and Bahrainization?” asked John Sfakianakis, chief economist at Banque Saudi Fransi, in an interview with Arab News on Thursday.

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