October 1989, Page 39

Trade and Finance

By John T. Haldane

Jordan's New Economic Plan

Jordanian Finance Minister Basil Jardaneh recently gave international bankers in London an outline of his government's new medium-term economic program. Cuts in the rate of inflation and in the budget and current account deficits were among the main features of the new plan designed to return Jordan's economy to an even keel. Jardaneh said Amman would seek to reschedule about $700 million in debt repayments due the end of this year and in 1990. He was confident an estimated balance of payments gap this year of approximately $900 million could be reduced through debt rescheduling, external grants and new concessionary loans.

The minister concluded his London talk with the remark that his program had the blessings of the International Monetary Fund (IMF). This was confirmed by Shakour Shaalan, director of the IMF's Middle East Department, who said that "Jordan's reform program is courageous and comprehensive. We have little doubt of their understanding of what needs to be done and that they will carry it out in a sustainable way." The IMF has approved a letter of intent regarding Jordan's reform plan for presentation to the fund's executive board. Approval will authorize the disbursement of IMF facilities worth about $125 million, allowing Amman to apply to the Paris Club for rescheduling of government-guaranteed debt.

Jordan will face a five-year austerity program imposed by the IMF as a precondition to loans needed for debt rescheduling. To ease the burden, Amman is looking for an influx of financial aid from the Gulf states, including $40 million in emergency aid and an additional $40 million worth of crude oil from Kuwait.

Gulf Pollution Agreement

The Kuwait-based Regional Organization for the Protection of the Marine Environment (ROPME) recently signed an agreement providing for regional cooperation in clearing the Persian Gulf of sunken ships, aircraft and other dangerous debris left by the Iran-Iraq war. Iran and Iraq also have agreed to cooperate with the ROPME members (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) in controlling pollution from offshore gas and oil exploration. Two protocols include provisions for environmental assessments of new offshore drilling operations and the preparation of emergency contingency plans in case of spills. Limits were set on oil and sewage discharge and the dumping of plastic materials and rubbish.

The ROPME administers the Kuwait Action Plan, under the mandate of the United Nations Regional Seas Program, which is designed to increase member cooperation in such areas as environmental management, training and public education about pollution dangers.

A UN spokesman pointed out that "even before hostilities broke out in the Gulf, pollution levels in the area were very high for a marine environment its size, due to oil spillages from drilling, shipping and handling operations. The Gulf neighbors have now declared their intention to improve their common environment beyond prewar levels."

Kuwait and USSR Sign Oil Agreement

Kuwait and the Soviet Union have signed an agreement providing for Soviet technical studies on future development of Kuwait's Bahrah oil. Exploratory drilling is expected to begin by the end of this year. The agreement also includes the study of possible participation of the Kuwait Foreign Petroleum Exploration Company in the development of several oil fields in the Soviet Union. This latest agreement falls within the framework of economic protocols concluded between the two countries in 1986 and an oil cooperation pact signed earlier this year.

In January, the Soviet Union's Technoexport Company won a $59 million turnkey contract for the third stage of the Kuwait Oil Company's desalination and dehydration project. This contract was the first time a Soviet contractor had been awarded a major project in the Kuwait oil sector.

Sudan Faces Economic Chaos

The new military junta in the Sudan, Africa's largest country and one of the world's poorest, must immediately cope with a failing economy. Inflation is estimated at over 90 percent, and budget deficits have reached unprecedented levels. The infrastructure is crumbling, ports and railways are operating at less than 20 percent capacity, and roads are left to deteriorate.

The government's deficit for the financial year beginning July 1 is estimated to be $2.9 billion. Foreign assistance is expected to cover only about $1.2 billion of the shortfall, leaving a financing gap of $1.7 billion.

Not surprisingly, Sudan has fallen heavily into arrears with repayments on debt servicing. In 1986, the government actually was declared ineligible for new credits by the IMF. Some officials of the World Bank view the Sudanese economy as one of the most mismanaged in all of sub-Saharan Africa.

In addition to the financing of a costly six-year civil war, a famine in southern Sudan last year caused an estimated 250,000 deaths from starvation and hunger-related diseases.

Successful Trade Mission to Middle East

Robert F. Ruan II, the director of the recently established Engineering and Construction Services Trade Mission to Iraq, Kuwait and Turkey, reports that his six-company group had a very rewarding visit to the Middle East.

The Baghdad leg of the trip was the focal point of the trip since Iraq now is a major market for foreign companies in engineering and construction. The Iraqi government is pushing a number of development programs in which construction firms will be playing an important role.

The mission met with Iraq's Minister of Housing and Construction Taher Mohammed Marzouq. He welcomed the return of US companies, following their absence during the Iran-Iraq war. He warned, however, that American firms would face stiff competition for new contracts since project financing is a key factor in government decisions. After the meeting, Mr. Marzouq arranged for the team members to visit the six local construction companies supervised by his ministry.

Business Booming for US Contractors

The Engineering News-Record reports that the Middle East/North Africa was the second most lucrative market, after Europe, for the top 500 US design firms and the top 400 US petrochemical contracting companies in 1988.

Total design billings for the 21 Arab countries were $570 million, accounting for approximately 24 percent of total new foreign contracts. US Petrochemical contractors last year enjoyed billings worth $5.6 billion in the area, a 12 percent increase over 1987. A rise in worldwide demand for petrochemical products created the new opportunities for American companies. Cordell W. Hull, Bechtel's executive vice president, stated: "The Middle East is an attractive market for petrochemical, power and infrastructure projects." The busiest locations were Saudi Arabia with 14 US firms; Egypt (14); the United Arab Emirates (12) and Kuwait (8).

John. T. Haldane is a Middle East specialist who has served as a foreign service officer in Baghdad, Cairo and Beirut, and as an international economist in the departments of Commerce and Treasury.