Jordan seeks to rekindle trade with Iraq

A free trade agreement between Jordan and Iraq that comes into force this month is meant to breathe new life into an economic relationship which has suffered badly since the US invasion of Iraq in 2003.

A cautious Jordanian attitude, however, prompted mostly by past security concerns, is still seen as putting a break on growth in trade relations.

“There is a lot of hesitation from our local companies here to set up shop there [in Iraq], obviously because of security reasons,” says Amer al-Hadidi, Jordan’s minister of trade and industry. But this is mainly a reflection of the past, he says.

The minister says he plans to take a large business delegation to Iraq for a trade fair in the first quarter of this year. It would mark the first time that Jordanian businesses have held such an event in Baghdad, years behind many other countries, as a result of Jordan’s ambivalent relationship with Iraq.

During the years of sanctions on Iraq, prior to 2003, Jordan profited from a preferential oil deal and its wider economy benefited from myriad ways in which the sanctions were evaded. Any comparison between current trade figures, which stand at $750m or 18 per cent of Jordanian exports, and the pre-2003 period are difficult, says Mr Hadidi and there is no suggestion that a similar oil trade deal will be reintroduced. “That was a different time and a different country,” he says.

During the sanctions era, Jordanians were torn between sympathy for the Iraqi population and their government’s close co-operation with the US and other western countries.

This persisted after the invasion, which is why the relationship between the two countries since 2003 has not always been a happy one. The first big bomb attack by insurgents in Baghdad after the invasion, in August 2003, was at the Jordanian embassy, killing 17 people.

In subsequent years ties were haunted by the spectre of master-terrorist Abu Musab al-Zarqawi, identified as the head of al-Qaeda in Iraq, who hailed from the town of Zarqa in Jordan. Jordanian intelligence eventually helped US troops track and kill him in 2006 but not before he was implicated in a triple suicide attack against five-star hotels in Amman in 2005, in which 60 people died.

At the same time, hundreds of thousands of Iraqis sought refuge in Jordan, changing the face of Amman and straining resources as well as providing a boost for the economy. Estimates of the number of refugees vary widely, up to more than 500,000 although only about 65,000 are registered with the UNHCR, the United Nations refugee agency.

The government imposed stricter entry requirements to try to stem the flow and, from 2007, as a security measure. This has made it harder for Jordan to profit from the business opportunities that Iraq offers, say veteran Iraqi businessmen in Jordan. In general, they are critical of the way that Jordan has handled this trade potential.

“We do not know why but there are still some obstacles to doing business with Iraq,” says Majid Allawi al-Saedi, chairman of the Iraqi Business Council in Amman. Foremost among these, he cites restrictions on the banking sector, particularly the problem of Jordan’s central bank not recognising letters of credit from Iraq, not even from the well-regarded Trade Bank of Iraq.

Second, says Mr Saedi, visa requirements for visiting Iraqi businessmen or for people who need training in Jordan are too onerous, compared with some other countries in the region. Mr Saedi says the Iraqi business community in Jordan is crucial in stimulating trade between the two nations, but recently 20 members of the council have moved to Beirut because of Lebanon’s more flexible attitude towards Iraqi banking and visas.

Mr Hadidi, the finance minister, acknowledges some problems with the banking sector, which he says is not always very transparent in Iraq. “Nowadays during a financial crisis you cannot accuse a central bank of being conservative. I think there is more room for flexibility but I would not go all out because that’s dangerous,” he says.

Ibrahim Seif, an economist at the Amman Centre for Strategic Studies, sees only limited potential for growth in trade with Iraq. “It is mostly traditional products – not high quality or high added value. So while it is sustainable, it is limited,” Mr Seif says.

He expects exports to reach about $1bn but not much more for the foreseeable future – short of the trade minister’s prediction of a doubling over the coming years to $1.5bn.

Mr Hadidi acknowledges that Jordan has less to offer than other countries such as Turkey, which has made significant inroads in Iraq. But he sees strong potential for exports, if only Jordanian businesses were more active in Iraq.