How to Really Aid Our Development

Rather than asking for more aid to keep a lid on the government’s self-inflicted budget deficit, we should be encouraging foreign governments to invest in economically viable infrastructure projects.

Jordan has always been a well-deserved recipient of foreign aid. Having to absorb almost every humanitarian and political catastrophe to befall the region in modern times has entitled Jordan to become an endowment house for all those countries unable or unwilling to directly take on the burden themselves, most recently in form of the Syrian refugee crisis.

It’s clear Jordan has been successful in spending some of this foreign assistance, which now totals well over a billion dollars annually, on building a good national infrastructure. Water and electricity reaches virtually every home, and roads link up every corner of the country.

Nevertheless, we still have to ask if the international community, especially the United Sates and members of the GCC, should really have to hand over more aid to cover our JD450 million fiscal deficit for 2017, especially if that shortfall is the result of economic distortions or even the mismanagement of public funds?

From a purely rational economic point of view, the answer is simply no. No one, except our own government, should have to justify the JD2 billion spent each year on funding 62 quasi-public agencies, most of which we don’t really need. The transport ministry alone has four. Wouldn’t it be wiser to have one unified entity overseeing our transport network? How much money would this save?

On the other hand, it would be a totally different story if we asked the question whether we need more foreign sovereign direct investments. What is more preferable, to receive JD450 million to cover a distorted, non-rational fiscal deficit, or to call for even half that amount to be invested in a series of well-studied national infrastructure projects?

What if our investment authority and the planning ministry worked together to produce a list of highly promising, financially and socially visible projects and offer them up to foreign countries and sovereign funds, instead of asking for more money to cover the fiscal deficit? This would open up opportunities to receive funds that would enhance growth, create jobs, reward investors, boost foreign reserves, and above all bring more tax revenues to the government.

I really think we don’t need more foreign aid as much as we need to transfer that into investments. The actual cost of subsidies in Jordan doesn’t exceed JD180 million, and that has been covered with the fact that after lifting subsidies on oil derivatives, which used to cost almost JD400 million, the government started to collect a special tax on oil derivatives that exceeds JD500 million.

So the need today is for a more agile government and a different paradigm for asking for foreign cash. We need to ask our neighbors in the region to come and invest in our country in economically viable projects rather than asking them to cover our mismanagement of resources. If we only ask them to allocate the proceedings of one day of oil exports to be invested in Jordan for the coming five years, this will mean that we will receive almost $1 billion annually in investments over the same period. It’s a sound and simple formula. But it will only work if we’re able to present a raft of attractive projects that will simultaneously help our economic development and provide a decent investment return.