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Unrest hits Amman market
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March 26, 1997: 8:55 p.m. ET
Political events in the Middle East hurt investor confidence in Jordan
From Correspondent Todd Benjamin
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LONDON (CNNfn) -- When Jordan's King Hussein dismissed the prime minister and replaced him with Abdul Salam al-Majali, who was prime minister for two years in the early 90s, it was a blow for the country.
Events like this, along with the stumbling Middle East peace process are destroying investor confidence.
The Amman stock market recently hit a two-and-a-half-month low. Jordan may have the fastest growing economy in the Middle East, but investors want political, not economic, success, along with inflation under control.
"Anything that affects the peace process does impact on Jordan," Crispin Hawes of the Economic Intelligence Unit said. "Jordan is structurally, economically, quite weak, and therefore it is much more susceptible to events in the countries around it, be it in Iraq, Saudi Arabia, or in Israel."
Some regional developments should benefit the country, such as Iraq's return to the crude oil market.
Last December, the United Nations finally implemented its oil for food deal with Iraq, Jordan's main trading partner. The change could boost Iraqi demand for Jordanian goods, especially medicines -- but any influence on the $6.5 billion economy is not certain.
"The major determinant is how much does it take from Jordan as opposed to other markets which historically weren't so close to it," Angus Blair, analyst at ING Barings, said. (92K WAV) or (92K AIFF)
Jordan's new prime minister already held the post from 1993 to 1995, and has stronger ties to Iraq than his predecessor.
Analysts say Abdul Salam al-Majali will also have to oversee domestic reform, including cuts in subsidies. But the lifting of wheat subsidies last August sparked riots.
King Hussein also expects him to speed up privatization, which has lagged behind other Arab nations, including Egypt.
Analysts say that's the best way to re-inflate the stock market and help Jordan weather the volatility of the peace process.
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