Can Jordan build on its relative success?

Dr. Maen Nsour, CEO of the Jordan Investment Board

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AMMAN, Jordan (Fortune) -- "We live in a bad neighborhood," one of King Abdullah's top advisors is telling me. "Sometimes, no matter how hard we try or how much progress we make, political events in this part of the world overwhelm them." Actually, it's even tougher than that for Jordan. They say oil and water don't go together, but sadly here they do. Jordan happens to be severely lacking in both: it currently imports 96% of its energy needs and is the fourth-poorest country in the world in terms of water resources.

Furthermore, Jordan has an unemployment rate of around 13% and, surprisingly perhaps, prices are high. And yet despite all that, folks here tell me they wouldn't want to live in any other country in the region, evidenced, they say, by the fact that every time something nasty does happen in the neighborhood (like a gulf war), refugees come pouring in. The reasons are peace, order, and political freedom. I know, I know: Jordan is a monarchy and the military, police, and security are ever-present, but relative to Egypt, Saudi Arabia, Iraq, Syria, Lebanon, and Israel (which is to say, "the hood"), Jordan looks pretty damn good. And that's not even counting some pretty amazing scenery and pleasing climatic zones.

Don't tell any of this, though, to Ayman Yousef Khalaileh, a University of Bristol-educated economist in the Jordanian Ministry of Finance. The ministry, which is on a dusty, hilly, jam-packed thoroughfare (you could say that about most streets in Amman), is cluttered and a bit hectic. Khalaileh looks a bit wiped out. "We are working this thing," he tells me. ("This thing" being the Jordanian economy.) "It can be tough." How tough? Well, inflation was 21% last year, now it's less than 0.5%. GDP growth was nearly 9% five years ago and is now 3.6%. Yes, Jordan has also been hit by the global slowdown. Try riding, never mind taming, those beasts!

The good news, I suppose, is that none of this is lost on experts like Khalaileh and others in the government, including Deerfield- and Sandhurst-educated King Abdullah II, who took the throne 10 years ago after the death of his father, King Hussein. King Abdullah is universally acknowledged as having steered the country along a fairly progressive economic-reform path especially in areas such as telecom, education, air transport, and special economic zones. No mean feat when you consider that moving too fast could upset conservative Muslims.

And the King's officials are happy to tick off some of the bright spots in the economy. "Exports to the U.S. are up from $200 million in 2001 to $1.5 billion now," says Dr. Maen Nsour, CEO of the Jordan Investment Board. Nsour also points out that Jordan has more trade agreements than any other Arab state and is known throughout the region for its human capital, education and health-care systems, and pharma industry. Even its natural-resource industries are growing. Which resources are those? Well, phosphate. Oh, and uranium.

That's right, uranium. Jordan actually has a bountiful supply, enough in fact to power a nuclear reactor, which is not surprisingly what it intends to build. The king announced the plant two years ago and officials say it will be completed in 2015. Guess who, the nuclear savvy French, are said to be happy to help. (In return, perhaps they get yellow cake?) "We could be exporting energy after that," says one source.

There are other super-ambitious plans too, like grand tourism projects in Aqaba. And then there are two mega water projects: one, called Disi, which will tap an aquifer near the Saudi border and pipe it to greater Amman, where some 3 million of the nation's 6 million citizens live. And then there is the "Red to Dead" project, which entails pumping water from the Red Sea to the rapidly falling Dead Sea, and along the way siphoning off some of that precious H₂O for desalination and also for the cooling of nuclear projects. These are massive, multibillion-dollar projects that will require mega amounts of foreign investment and aid, all the while watching those sticky budget and current-account deficits.

Probably the biggest economic push, though, isn't actually economic, it's political. Meaning: the Jordanian government knows that the No. 1 factor that would boost the economy is peace and stability, and it will work overtime to try to make that happen. "We need to convince the spoilers that there is simply no reason to play that game anymore," says the top government advisor.

Real peace in the region would provide massive dividends to all Middle Eastern countries, especially to Jordan, which government officials say is teed up not only for an economic recovery but also any sort of political breakthrough. For many companies and even nations, Jordan is already perceived to be the optimal economic gateway to the Middle East. Imagine what that might mean if the neighborhood began to turn around.