GLOBALIZATION: TRADE AND INVESTMENT IN EGYPT, JORDAN AND SYRIA SINCE 1980.

• Author: Sullivan, Paul
• Position: Statistical Data Included

INTRODUCTION

One of the questions that this essay intends to answer is what might globalized trade and investment have to do with development in these three countries? First of all, have these countries been developing? The GDP per capita of Egypt grew from $560 in 1980 to $750 in 1985 and 1986. Thereafter there was a drop in GDP per capita to $600 in 1987. It hovered between $600 and $700 for the next five years. There then was a steady increase, possibly part of the results of Egypt's economic reform and structural adjustment program and the benefits from Egypt's decision to join the Gulf war multinational coalition against Iraq, such as debt being cut almost in half, remittances increasing particularly in 1992, and increased aid from the EU, the U.S. and Japan. GDP per capita may have been close to $950 in 1997.

There were a few years, during the precipitous decline in the price of oil in the 1980s when the GDP per capita was falling. Then there was an upturn after the Gulf war. This upturn, in real per capita terms, has just barely made up for the losses of the late 1980s.

GNP per capita grew from $570 to $630 in 1980 through 1985. It then dropped below $600 for 1988-1991. After 1991, it increased to over $1000 by 1996. It may be as much as $1100 now.(1)

In real terms wages in Egypt, on average, were about the same in 1993 as they were in 1973. They have increased somewhat since 1993. This has been enough to increase past the years of losses in the late 1980s. However, it may not be enough yet to make up for the frustrations of the years of stagnating real wages. Since the economic reforms really started moving in 1994, some real positive changes have happened. Interestingly, the improvements in wages follow the developments of the ERSAP program.(2)

For Jordan GDP per capita increased from $450 in 1980 to about $730 in 1983. It then stagnated at about $800 for the years 1983 to 1993. It has increased slightly since then. Jordan's GNP per capita first increased from $1600 to $2200 from 1980 to 1985. Then it dropped to $1000 by 1992. This was a precipitous drop that started in 1986-87. That is it happened more because of the drop in oil prices that the effects of the Gulf war. After the Gulf war we see a slow rise in Jordan's GNP per capita. GNP per capita in 1997 was about $1600.

Even so, real wages in Jordan are now not much more than they were in 1973.(3) Unemployment is still high. Much of this is due to the still continuing effects of the forced repatriation of about 400,000 Jordanians during and after the Gulf war of 1991, and because of Jordan's historically high birth rate and labor force growth rate.

The peace dividend to Jordan from its 1994 peace treaty with Israel has been minimal. But it seems that even Jordan has bounced back from the shocks of the Gulf War. It has been reforming and improving its economy to a moderate extent with some successes. Even so, poverty had increased from 2% of the population in 1987 to 16% in 1992. It is likely that about 15% of Jordan's population remains at or below the poverty line.(4)

For Syria, GDP per capita was about $1200 in 1979. By 1983 it was $1800. But there was a steep drop-off from 1983 to the $890 figure for 1988-89. Thereafter, it has increased erratically to around $1200-1400 in recent years. Syria's GNP per capita grew from 1980 to 1983, from $1400 to $1800. Then it dropped massively to $820 by 1989. From 1989 to 1991, partly due to the Gulf war boomlet, GNP per capita increased to about $1200. It then dropped off again and leveled at about $1050 to $1100 until 1996.(5)

There has also been a real slide in the value of the Syrian lira since 1985. In conversion rate measures in 1985 there were 5 lira to the U.S. dollar. Recently the figure has been 42 to the dollar. There has been a significant slide in the value of the Syrian lira since the Gulf war. In longer run, the Syrian lira has been losing its value much faster than the Jordanian dinar and the Egyptian pound since 1980. The Jordanian dinar seems to have been the most stable currency, excepting the time period just after the Gulf war, when one looks at the historical average value of the currencies over the time period 1980 to 1996. In the last three years the most stable currency has been the Egyptian pound. The Syrian lira has been shedding its value relative to the dollar quite rapidly in recent years. The stability of a country's currency affects that country's economic stability and economic development in many ways. The more stable the currency the more likely real development in real terms can happen in the long run. In the short run a country can benefit from devaluations. However, for all three of these countries devaluations seem to have little to do with export growth and a lot more to do with internal inflation and increased debt payments in terms of the local currency.(6)

Real wages in Syria were in 1993 just about what they were in 1973. It does not seem likely that real wages have increased significantly since then. The precipitous drop in the lira along with the relative stagnation of the Syrian economy, combined with the high population growth rate, add up to not much change in the real wages of the average Syrian since 1993.

Furthermore, Syria has had tough times in the last three years. As the oil prices dropped, the post-war aid diminished, the economic reform program slowed down, and government showed its unwillingness to follow through with real economic and political reform, Syria faced some significant economic difficulties.(7)

However, according to the Human Development Report of 1998, Syria is doing the best of the three with a human development index (HDI in 1995) of .75. Jordan is second with .73 and Egypt was way behind with .62. Jordan's score had remained the same for the previous 15 years. Egypt is the most improved of the three. Its HDI has increased from .5 to .62.(8)

For all three countries there have been improvements in health and education. However, where education was concerned, this has been more in quantity than quality. Health improvements are undeniable in both quantity and quality measures. The average life span of the average person in these three countries has increased by 2 years in the last 15 years. The under five mortality rates have halved in all three countries in the last 15 years. Well over 90% of the populations of the three have access to health care. Jordan had always been in the 90% category since 1980. These are increases in 10-15% of the population having access to health care in Egypt and Syria.(9)

Food production per capita has stayed steady for Jordan and Egypt, but has fallen rapidly for Syria. Food aid has dropped significantly for Egypt, yet has doubled for Syria and nearly quintupled for Jordan.(10)

Telephone lines have increased in all three. So has access to safe water. Water systems have improved. Roads have increased in miles of paved roads. Rail lines have improved and increased in miles of track, but to a lesser extent than for roads. Syria has increased its length of track but uses it much less than in the past. There have been many infrastructure projects in all three of these countries, mostly paid for by foreign aid. In all three countries there have been very few private sector infrastructure projects. Yet, worldwide infrastructure has been increasingly developed by the private sector.(11)

The manufacturing bases in all three are stronger in 1996 than they were in 1980. Agri-based industries are stronger and more competitive in 1996 than they were in 1980, especially in Egypt. The manufacturing and tourism sectors may have had the best improvements, with construction and trade services running close behind. Again, Egypt seems often to be the most successful at these changes. The petroleum and natural gas industries have also had improvements in Syria and Egypt over the time period. Yet, even as the price of oil has declined in real terms these industries have improved in their structures and performances relative to their earlier years, especially in Egypt. Syria has shown some moderate improvements, especially in the late 1980s and early 1990s, but there has been some back-stepping lately. Foreign oil companies have been leaving Syria.(12)

Export diversification has been pretty much a failure in all three. Egypt and Syria have depended mostly on petroleum and labor exports. Jordan has depended on phosphates, fertilizers and labor. Yet, since 1980 manufacturing exports have been taking the place of phosphates and fertilizers, slowly, but surely. As the price of phosphates declined, manufacturing exports took part of the phosphates' percentage of Jordan's exports. Food exports from Jordan have also increased in their relative importance to the rest of all the exports of Jordan. The real growth in the relative importance of food exports has been the time from the start of the Gulf war and the sanctions against Iraq. Most recently, however, such trade with Iraq has seen some decline.

Exports of manufactures have also been an increasing percentage of all of the exports of Egypt from 1985 to 1995. As fuel exports and many other categories of exports declined in importance, manufactures took their place. Metal exports, particularly exports of aluminum, have increased in importance since 1980. Food exports have also increased in importance since 1985, obviously with the initiation of serious reforms in Egyptian agriculture and the agricultural trade of Egypt. Nonfood primary products, such as cotton, have been in relative decline, but have not shown the rapid decline like that of petroleum.

For Syria, since 1980 textiles showed some improvement - at least until 1991. Since 1985 food exports have also become a more important part of Syria's trade. Non-food primary exports, like cotton, have shown a relative decline in importance. Petroleum exports boomed in the late 1970s to the late 1980s. Then their was a...