Jordan’s economy could benefit from Palestine confederation

As John Kerry arrives, time to consider controversial proposal

With US Secretary of State John Kerry back in the Middle East this week, new ideas are being touted to revive the Arab-Israeli peace process – with a confederation between Jordan and an independent Palestine among those getting traffic. While it is deeply controversial and unpopular with much of the political classes in both Jordan and Palestine, the economic benefits of such an agreement for Jordanians could be significant.

The idea itself isn’t new at all: under various guises, confederal schemes have been under discussion for decades. The new proposal, however, is slightly different. Each state would remain politically independent – having its own administration, including government, parliament, police, and judicial structure, as well as a separate educational system etc. Only in specific issues regarding the outside world would the operate as one: areas as currency, tariffs, customs, and of course as defense and foreign policy.

It must be said that no institutional link between Jordan and Palestine is possible before the latter becomes independent. But that state could become part of a confederation with Jordan while still maintaining its independence. This is not transferring Palestinians from Israeli rule back to the Jordanian domination of 49-67 – which was not a confederation, but simply domination by Amman – but the creation of a free Palestine within an economic agreement.

What’s in it for Jordan?

From an economic point of view, confederation could be a way out for an increasingly non-viable Jordan. Reduced to scrounging handouts from benefactors in the West or the Gulf in order to pay the salaries of bureaucrats and security personnel, Jordan’s economy is chronically weak, corruption is rife, and poverty and unemployment stubbornly high.

A common market within a confederal system could facilitate sustainable economic growth for Jordan. To begin with, an independent Palestine will attract a massive influx of capital from the Palestinian diaspora and others, part of which would flow into Jordan. Along with this money, Palestinian capitalists could help pull Jordan out of its statist morass, with the stultifying Jordanian system eroded by a free market.

Of course, the Jordanians have no monopoly on statism and corruption: quite a few of the Palestinians in power in the West Bank and Gaza are flamboyantly crooked. Nevertheless, in a free Palestine with market forces prevailing, a tide of investment could dilute the strength of corrupt elites and eventually change the culture of the whole system. Palestine has little to teach Jordan about good governance, but perhaps more about cultural and market freedoms.

Another advantage for Jordan would be access to the Mediterranean at Gaza via the territory of a geographically unified Palestine (This in turn would be made possible after appropriate land swaps, with bridges and tunnels linking respective Palestinian and Israeli territory.)

Economies of scale would also kick in to the benefit of both sides; confederation could make it easier and cheaper to set up and run large joint enterprises, in both public and private sectors. In particular, infrastructure could be shared in areas such as transport, energy, water etc.

Thus would “little” Palestine save a bigger Jordan from itself, ending an absurd situation in which so many Jordanians work for or otherwise kowtow to the Amman government. Of course, any country needs cops, administrators, and soldiers, but to base a whole system on them is a joke that is no longer funny.

This won’t happen overnight: as mentioned, Palestinian independence has to come first, and that is still a tall order – though far easier to contemplate now than it was back in the late 20th century. The other major hurdle will be isolationists on both banks of the River Jordan those who think tribally and view confederation with suspicion – misinterpreting it as an attempt at domination by the other side.

Secretary Kerry please note: the growth of Jordan and Palestine into sustainable economies is the only way to assure both of them their security and that is better done in tandem than separately. So bringing the Palestinians and Jordanians together in an equitable relationship may in fact be as important as drawing the Arabs closer to Israel, yet another challenge for US diplomacy.


Riad al Khouri, a Jordanian economist who lives and works in the region, is principal of DEA Inc, Washington DC

Riad Al-Khouri is Middle East director of GeoEconomica GmbH