How will the Jordanian Society Adjust to The New economic conditions

I think that the Jordanian Society can adjust to the new economic conditions, not by accepting a lower living standard, but by being smart. There are many things that can be done in the short and medium term that would help the Jordanian Society wither the storm:

*Cut down on the number of people invited to weddings by 50% and the amount of food ordered. This would save the Jordanian society more than 25million JDs.
*Have no party or a very small party for the engagement. This would probably save 5 million.
*Reduce the amount of Jewelry given to the bride at the wedding. This should save 3 million.
*Having smaller families with 2 children only. This should save the society more than 120 million JDs. These savings come in many forms, smaller cars that are cheaper and consume less fuel, smaller apartments that are cheaper, less overall expenses, less cloths to be purchased, etc.
*Replace mobile phones every third year instead of every year . This should save the Jordanian Society more than 10 million Jds.
* Allow women to openly date and use the home landline. This would probably save another 3millions.
*Use the mobile phone for the moderately important to the very important stuff only. This would save 50million JDs.
*Use Skype for international phone calls. Another 5 millions.
*Smoking 20% less. This should save 50million JDs in direct and indirect costs.
*Buy smaller engine cars(only 1.6 ltrs or less.) This would save 25million.
*Use compact florescent lights in every house. This would save 43millions.
*Using energy efficient computers and LCD screens. This saves around 10 millions.
*Using insulation and double glaze windows in new buildings. This would probably save 30 million JD.
*Depeg from the dollar. Expected savings of more than 150millions. This comes in many forms, including cheaper oil and gas, cheaper imports including wheat, corn, and rice.
*If every single household got a solar water heater. This would amount to savings of 30million.
*Have a proper public transportation system. Annual savings of 50million JDs.
*Going Digital. This should produce more than 100million JDs in savings. This can happen in several ways including more people working from home, people doing all their banking online and not going to the bank, no space required for digital items, etc.
*Give incentives for owning Hybrid cars in the form of tax breaks . Annual savings of 70million Jds.
*Have Jordanian drivers improve their driving style. This will result in the reduction in the number of accidents by 20% and improve millage by at least 10%. The total saving would be around 60million JDs.

This is almost 800 million JDs saved per year and I can probably come with 10 other ideas to bring out the total to 1 billion Jds.

Presto, all the economic problems solved with almost no cost and no compromised to the living standard, just a minor change in habits and customs.

I can only see one of these solutions having a problem in implementation and that is reducing the family size, no thanks to the perceived contradiction between contraception and religion. Hopefully the government will work hard to erase this misconception.

Jordanian Dinar

The government decided against the advice of many economists to stick to it's JD pegged to the US Dollar policy. That was a big mistake. The government should have switched to a basket of currencies rate when the Euro hit one JD.

The economists' proposal was to have the dollar make 20% of the basket. For the time being, the government can start with a basket of 80% dollar, 15% euro and 5% Yen. Then by shifting 10% from dollar to basket, every 6-9 months, in about 3-5 yrs we would have the ideal basket of 20% dollars and 80% other currencies.

This type of gradual shift would enable some sort of stability and would not cause a lot of losses to people who invested in dollars or Euros.

The time for action was a few months ago, but as they say better late than never. When the government acts, it will lose approx 1 billion dollars from it's reserves. But over the next 3-5 yrs the government will more than make it up from savings in purchases.

2008 Gov Budget

I had a chance to watch the minister of finance deliver his budget proposal on the floor of the parliament and was not happy at all.

The new budget aims to help the poor and needy and provide a more equitable distribution of income. Sounds great, however, the government plan is flawed as it hopes to achieve this by linking civil servant's salaries with inflation. IMHO, a sure recipe for double digit inflation rates.

Here is how things would probably play out:

1) Government increases civil servant's salaries and minimum wage in correlation with inflation numbers from the previous year.
2) Private sector increase wages based on the new minimum wage and then some more to attract some of the people who might consider government jobs.
3) Commercial sector increases prices due to both increased labor costs and also to take advantage of the increase in the average Jordanian's income(due to the wage increase.)
4) At the beginning of the following year the inflation numbers on which the new wages are computed are higher because all wages(prices) went up and the cycle starts again at number 1

The other thing that I fear from linking wages to inflation rates is that we might lose our competitiveness, and this is already happening to some degree; a number of factories are being moved from the industrial area in Irbid to Egypt because of the significantly lower wages(more than 65% less in some cases.) We might also end up losing some touristic business as the cost for visiting jordan is a bit on the insane side(especially hotels)

In the long run the government can only slow this by not going ahead with its plans. In the long run we need to have industries that have a significant amount of technical knowledge that would not be available in countries that depend on low wages to increase the competitiveness of their goods like Syria and Egypt.

Wadi Rum

I just came back from my first trip to Wadi Rum and the word amazing does not even come close to describe what I experienced.

Just like everything else in Jordan, this resource is only half heartedly tapped. Government efforts have no more than 15% to do with the moderate success of this place.

I am not suggesting that there is a need for large scale government interference to improve things. Any large scale government inference usually ends up with disastrous results. I formed this opinion after speaking at length with the "tourist guides" in Wadi Rum.

So what am I suggesting? In the very popular business book "The Tipping Point," the author talks about how the accumulation of small changes can make a huge difference. So following the same kind of thinking I would only suggest some very small changes most of which are "cosmetic" in nature . Or as one can learn from the movie "The Prestige," you might have an excellent magic trick, but you need to dress it up and sell it to the audience if you want to make it big and not just be stuck with small crowds.

So here is the list:

· Do some Search engine marketing. I did a search on Google and there was nothing under hiking in the first 30 results. And on top of it when you visit the following site, you get no information under Jordan:

http://www.traildatabase.org/

· Consult with the local people as to whether or not they want mobil transmission inside Rum. This is important if someone needs medical help. Currently there is very limited Mobil transmission.

· I asked the local tour guides: "What if someone broke their legs or was stung by a Scorpio?" His answer was that they take him to an "Arab medicine doctor" because there are no medical facilities inside rum.

· After some negotiations, look at the possibilities of training these tour guides in providing first aid and possibly having them carry first aid kits.

· Have some sort of medical helicopter stationed inside Rum to provide rapid medical aid if there is a need to move people to the closest city hospital.

· Provide some guidelines for tourists in terms of what to visit if they are not physically fit.

· Ask the local camp owners/tour guides about what they need to "improve" Rum for tourism and just do it. The impression I got was that no one really consults with them.

Of course, I am not your run of the mill nay sayer who just complains about the government and then does nothing. I just did some cosmetic changes to the Wadi Rum and the Wadi pages in the Wikipedia.

Actual Inflation Numbers

Approx 2 weeks after I wrote my Pizza Inflation blog, I learned that the actual inflation numbers for 2005 and 2006 are around 7%, so I was actually on the mark.

It also makes sense that the government decided to postpone the increase in fuel prices to the middle of next year. Otherwise, we would have ended up with something like 8-8.5%.

Female Employee Quota

The other day, I went to visit one of my annoying customers (90% of my customers are annoying to varying degrees). Any, what is somewhat peculiar about this customer is that this customer is in Naour which is very close to Marj Al Hamam, and to Amman in general. I would even consider this customer inside Amman. The peculiar part is that this customer has over one 100 employees and not a single one of them is a female. So when I was there annoyed at this fact, that was when it hit me; why doesn't the government have a law that specifies a quota for women workers just like they did for the lower house?

I can already see problems in the implementation, especially in areas where companies do not have their own buses and the public transportation service to this area is poor.

Well for starters, the government can start with a very small quota, something like 5-10% for companies with more than 50 employees. Additionally, the Government need not fully implement such a project. It can start with a pilot project in the Sahab industrial zone, or something of sort.

One of the other hurdles that could face such an endeavor is the that fact that we are in the 21st century, and still some families prohibit their daughters from engaging in any sort of work or even seeking employment.

This is a very sorry state of affairs. But the Government has to start somewhere. And that somewhere is with a quota system.

Pizza Inflation

Yesterday, I went to Pizza Hut for the Iftar Buffet. It was pretty full. The food was half and half, not so bad, and not so great. I remember a few Ramadans ago when the food was actually crappy and it was served somewhat cold. The thin crust pizza this time was actually good. They got us flat Pepsi the first time and replaced it when we told them it was flat.

Anyway, we paid 7Jds including tax. And this was only for the soup, pizza, pasta, and drink. This is a sharp 17% increase from last year(or the year before.) I am not sure if this it is due to inflation which would be scary or if they did it to pay for the new decorations. If it was because of the former, then I think this year's inflation numbers will not be less than 7%. And since this would look pretty bad, I expect the government to hide the numbers until the end of the next year or the middle of the year after. I also expect this inflation cycle to go on for at least another couple of years and that is being optimistic, which I am not.

Customs

I am a typical trader who imports stuff from abroad. My problems are the same problems that other importers face.
Sometimes my shipments would arrive from Germany, or from wherever on a Wednesday night. The customs have half Thursday off and leave at 12:00pm. They are also closed on Friday and Saturday, so if Sunday is not a holiday and there are no other holidays, the clearance company would get me my stuff by Tuesday, or Wednesday, which means that it takes almost a week to clear stuff out of the customs, it also means that the employees in the customs are only working 32 hrs per week which is really very little.

Considering how many people in trade and industry import stuff, I think that the number of work hrs at the airport customs should be increased to 40 hrs/week spread over 6 days, so that people in urgent need of their stuff would get it on time. I do not think that any person who imports stuff would mind paying a few JDs extra to cover the increase in work hours.

The Total Cost of Stupidity

I have been visiting Jordanian industrial companies for the last 4 yrs now, trying to sell them high quality stuff that has very little running and maintenance costs over their life time. I did have an acceptable amount of success.

One of the of most frustrating things about trying to sell high quality/high cost stuff is the alien nature of the concept of total cost of owner ship to the owners and purchasing departments of most Jordanian business. So much so, I no longer bother to mention it. I might as well talk to donkeys or preach to monkeys or sing to the deaf.

By my own conservative calculations, businesses in Jordan could save millions of JDs if they started looking at the total cost of ownership.

Jordan Economy, part 2

Visiting customers in the industry, and going to restaurants, hotels, and cafes, I am exposed to both the industrial sector and tourisms, so I can claim that I know what I am talking about. The main problem in Jordan is than people do not want to work; a ministry of labor report two weeks ago confirms this. The number of unemployed is around 250000, and the number of foreign labor is also 250000. This is a real joke. In theory, Jordan can have 0% unemployment. Maybe in practice, it can go down to slightly less than 10% (around 15% actual)which would be really good for an Arab country.

I have really no solution for this problem; I really do not know how to make the Jordanian people want to work, or accept menial jobs instead of no jobs. Maybe having mandatory military service would help, not the previously used 2 yrs version, which I bet sucked big time, and cost the government too much, but a 90 days version. Suggesting this is a bit hypocritical on my part, because I would not even do military service for money.

Jordan Economy

I decided to share some of my thoughts on the Jordanian economy. I have been thinking for the last two years, or maybe even more, that despite the good growth rate in the economy (almost twice the population growth rate,) that Jordanian economy is not out of the woods yet and it will not be for a while. What most people are not noticing is that Jordan seems to be putting the few eggs that it has in one basket. Actually when I say Jordan here, most people think it is the government, when in actuality it is not. Jordan suffers among other things from form what I would call "Mobile shop syndrome" Or "Shawerma place Syndrome" One person opens up a mobile shop and 10 seconds later everyone else opens a Mobil shop next to him.

Now the hottest bandwagon that everyone seems to be jumping on is real estate. That is all nice, but I really do not see what value real estate adds in the long run.

Now regarding the Jordanian industry where I have most of my day to day observations, this is truely where all the eggs are in one basket. And the government is not the one to blame here. For some odd reason, just like mobile shops, everyone wants to open a factory to sell stuff to Iraq, from plastic products to pharmaceuticals. But as usual people have very short attention spans and even shorter memories. I do remember how after the first gulf war, most factories exporting to Iraq almost went bankrupt. This is a fact most people forget. I understand that it is easier to export to Iraq, as other bordering markets are virtually closed( Israel, Syria, KSA) for various reasons. But from what I have seen, Iraq is a viable market maybe for a maximum of 3-4 years. So in the mean time, the industry needs to start thinking differently, it needs to be less traditional, and think about a way to sell outside the Arab region, to sell a large set of products, not only textiles, pharmaceuticals, but other things too.