* Opposition to liberal economic policies post-Arab Spring
* MPs, unions, tribes attack privatisation
* New economic reforms put on hold
* Some foreign investment projects suspended
* Government may need fresh mandate to revive reforms
By Suleiman Al-Khalidi
AMMAN, April 11 (Reuters) - At a meeting in the royal palace last month, Jordan’s King Abdullah did not disguise his exasperation with his officials as he listened to a chorus of complaints from foreign investors.
Among the frustrated investors was Abu Dhabi property developer Al Maabar, whose plan to build a resort in the granite mountains around the Red Sea port city of Aqaba has come under attack from conservative politicians and tribal leaders.
Critics allege the $500 million acquisition of land for the project involved corruption and represented a plunder of national wealth at cut-rate prices.
Angry executives of the company, part-owned by Abu Dhabi’s ruling family, went as far as telling the monarch at a private meeting in February that they were prepared to give up the project, according to industry executives familiar with the affair.
“The Marsa Zayed project is to set up an economic and touristic landmark in Aqaba, and the rumours about corruption in the agreement are affecting the company. The agreement with Jordan is clear and transparent,” managing director Yousef Al Nowais told reporters in February.
The tense atmosphere in the royal palace was a far cry from the optimism among businessmen which prevailed just a few years ago. At the start of the last decade, Jordan began introducing a string of liberal economic policies which made the country a showcase of International Monetary Fund-guided reforms.
Foreign investors were courted in order to create jobs and obtain hard currency. Substantial stakes in state enterprises were sold to investors including Brunei’s sovereign wealth fund, France Telecom, cement maker Lafarge and Canada’s Potash Corp of Saskatchewan.
But last year’s “Arab Spring” uprisings elsewhere in the Middle East emboldened opponents of the reforms, and their opposition has developed into a broad backlash against economic policies designed to aid the private sector.
Members of parliament, union activists and tribal leaders have made demands ranging from the renegotiation of privatisation deals, in order to recover billions of dollars in royalties that were allegedly lost, to the repurchase of majority stakes in some companies by the state.
The backlash has been particularly strong among Jordan’s East Bank tribes, whose members enjoyed preferential access to jobs at state-owned firms before the privatisations, and cannot count on this benefit with the companies under new management. Some state bureaucrats have also opposed the reforms because they remove a major source of the bureaucracy’s influence.
“Our goal is to regain control of our national wealth. Phosphates are Jordan’s petroleum, and privatisation to a certain party has given it a complete monopoly,” said Ahmad Shaqran, an MP from Jordan’s impoverished south.
He headed a parliamentary committee that recommended the abrogation of the sale of 37 percent of Jordan Phosphate Mines to Brunei in 2006, and demanded that ministers involved in the sale be referred to the prosecutor-general on corruption charges.
Jordan’s economic reformers can point to successes of their policies. Gross domestic product expanded by over 7 percent annually in the five years through 2008, before the global financial crisis hit; that was roughly 3 percentage points faster than growth rates in the previous five years.
Former officials say the privatisation programme brought over 1.7 billion dinars ($2.4 billion) to state coffers, easing the country’s external debt problem while putting some of the privatised firms on a sounder financial footing.
But the government is finding it hard to make such arguments. Jordanian administrations have traditionally shown little appetite for confronting the country’s tribes, which form the backbone of public support for the government and provide much of the manpower for the powerful security services.
Prime Minister Awn Khasawneh, who was appointed to the post by King Abdullah last October in response to public protests against corruption and pressure for democratic reforms, has echoed some of the criticism of the privatisation programme.
“We will review deals with the possibility of buying back some of the assets,” Khasawneh told angry deputies at one of several parliamentary sessions on privatisation since late last year.
The government, facing daily picketing by workers at state enterprises and demands for pay hikes, has already put the brakes on further privatisation deals that it thinks could inflame the opposition.
Industry executives say a decade-old plan to sell off state-owned Jordan Post, which had drawn bidding interest in the region, has now been scrapped. The government has also retreated from asking foreign firms to build and operate a new port.
Jordan’s privatisation agency, which spearheaded some of the country’s largest sales, is nearly defunct, employees say. Its website, which previously described plans to lease a range of state assets to investors including utilities and grain silos, now says there are “no new tenders at the present time”.
Some economic liberalisation is still proceeding, including deregulation of imports of petroleum products after the monopoly of the country’s sole refiner was abolished. But an official list of six firms pre-qualified to handle the business has been reduced to three.
Authorities have frozen plans to launch billions of dollars of public-private partnerships, which would involve private firms in building infrastructure and providing public services.
Popular protests have extended even to companies which have no direct link to the privatisation programme. Local residents have staged sit-ins in front of a plant operated by Saudi Arabia’s Arabian Cement Co in Jordan’s southern town of Qatraneh, demanding jobs as a social right.
Some members of parliament have called for higher taxes on the telecommunications sector, dominated by foreign players such as France Telecom, Kuwait’s Zain and Bahrain Telecommunications. It is unclear whether the proposal will be adopted, but it has helped to chill business sentiment.
In some ways, Jordan remains attractive to private investors. Its population of about 6 million is young and fast-growing. It is an important base for doing business in Iraq, where post-war reconstruction is gathering pace.
Nevertheless, the populist backlash against private business has clearly begun to hurt investment. For example, Cairo-based developer and resort operator Amer Group Holding, which had intended to establish resorts in Jordan’s Dead Sea area, has put those plans on hold, according to investment officials.
The failure of the government to defend one of the country’s most prominent tycoons, Sabih Masri, who has interests in tourism, banking and agriculture, has prompted him to halt new projects in the southern region of Wadi Rum. After some of his land holdings there appreciated in value, authorities sought to renegotiate the leases, citing protests by community elders, said executives working with Masri.
“None of the large privatisation deals concluded in the last decade have any legal certainty now because of parliament’s ability to demand the invalidation of these deals, and this is creating a lot of caution among new investors,” said Lana Alamat, a lawyer with International Business Legal Associates, an Amman-based firm.
“This shadow of doubt is worsened by the cabinet’s unwillingness to approve new transactions or give incentives to new investors, which is affecting prospective deals in the making.”
A more aggressive government stance on defending the private sector may depend on the results of the next parliamentary elections, expected this year or next. As part of democratic reforms, Jordan’s cabinet drafted a new electoral law this week which it says will improve political representation.
The danger, however, is that the elections could give conservative tribes even more influence in the assembly, which could increase the mood of economic nationalism.