GLOBALIZATION: TRADE AND INVESTMENT IN EGYPT, JORDAN AND SYRIA SINCE 1980.

INTRODUCTION

One of the questions that this essay intends to answer is what might globalized trade and investment have to do with development in these three countries? First of all, have these countries been developing? The GDP per capita of Egypt grew from $560 in 1980 to $750 in 1985 and 1986. Thereafter there was a drop in GDP per capita to $600 in 1987. It hovered between $600 and $700 for the next five years. There then was a steady increase, possibly part of the results of Egypt's economic reform and structural adjustment program and the benefits from Egypt's decision to join the Gulf war multinational coalition against Iraq, such as debt being cut almost in half, remittances increasing particularly in 1992, and increased aid from the EU, the U.S. and Japan. GDP per capita may have been close to $950 in 1997.

There were a few years, during the precipitous decline in the price of oil in the 1980s when the GDP per capita was falling. Then there was an upturn after the Gulf war. This upturn, in real per capita terms, has just barely made up for the losses of the late 1980s.

GNP per capita grew from $570 to $630 in 1980 through 1985. It then dropped below $600 for 1988-1991. After 1991, it increased to over $1000 by 1996. It may be as much as $1100 now.(1)

In real terms wages in Egypt, on average, were about the same in 1993 as they were in 1973. They have increased somewhat since 1993. This has been enough to increase past the years of losses in the late 1980s. However, it may not be enough yet to make up for the frustrations of the years of stagnating real wages. Since the economic reforms really started moving in 1994, some real positive changes have happened. Interestingly, the improvements in wages follow the developments of the ERSAP program.(2)

For Jordan GDP per capita increased from $450 in 1980 to about $730 in 1983. It then stagnated at about $800 for the years 1983 to 1993. It has increased slightly since then. Jordan's GNP per capita first increased from $1600 to $2200 from 1980 to 1985. Then it dropped to $1000 by 1992. This was a precipitous drop that started in 1986-87. That is it happened more because of the drop in oil prices that the effects of the Gulf war. After the Gulf war we see a slow rise in Jordan's GNP per capita. GNP per capita in 1997 was about $1600.

Even so, real wages in Jordan are now not much more than they were in 1973.(3) Unemployment is still high. Much of this is due to the still continuing effects of the forced repatriation of about 400,000 Jordanians during and after the Gulf war of 1991, and because of Jordan's historically high birth rate and labor force growth rate.

The peace dividend to Jordan from its 1994 peace treaty with Israel has been minimal. But it seems that even Jordan has bounced back from the shocks of the Gulf War. It has been reforming and improving its economy to a moderate extent with some successes. Even so, poverty had increased from 2% of the population in 1987 to 16% in 1992. It is likely that about 15% of Jordan's population remains at or below the poverty line.(4)

For Syria, GDP per capita was about $1200 in 1979. By 1983 it was $1800. But there was a steep drop-off from 1983 to the $890 figure for 1988-89. Thereafter, it has increased erratically to around $1200-1400 in recent years. Syria's GNP per capita grew from 1980 to 1983, from $1400 to $1800. Then it dropped massively to $820 by 1989. From 1989 to 1991, partly due to the Gulf war boomlet, GNP per capita increased to about $1200. It then dropped off again and leveled at about $1050 to $1100 until 1996.(5)

There has also been a real slide in the value of the Syrian lira since 1985. In conversion rate measures in 1985 there were 5 lira to the U.S. dollar. Recently the figure has been 42 to the dollar. There has been a significant slide in the value of the Syrian lira since the Gulf war. In longer run, the Syrian lira has been losing its value much faster than the Jordanian dinar and the Egyptian pound since 1980. The Jordanian dinar seems to have been the most stable currency, excepting the time period just after the Gulf war, when one looks at the historical average value of the currencies over the time period 1980 to 1996. In the last three years the most stable currency has been the Egyptian pound. The Syrian lira has been shedding its value relative to the dollar quite rapidly in recent years. The stability of a country's currency affects that country's economic stability and economic development in many ways. The more stable the currency the more likely real development in real terms can happen in the long run. In the short run a country can benefit from devaluations. However, for all three of these countries devaluations seem to have little to do with export growth and a lot more to do with internal inflation and increased debt payments in terms of the local currency.(6)

Real wages in Syria were in 1993 just about what they were in 1973. It does not seem likely that real wages have increased significantly since then. The precipitous drop in the lira along with the relative stagnation of the Syrian economy, combined with the high population growth rate, add up to not much change in the real wages of the average Syrian since 1993.

Furthermore, Syria has had tough times in the last three years. As the oil prices dropped, the post-war aid diminished, the economic reform program slowed down, and government showed its unwillingness to follow through with real economic and political reform, Syria faced some significant economic difficulties.(7)

However, according to the Human Development Report of 1998, Syria is doing the best of the three with a human development index (HDI in 1995) of .75. Jordan is second with .73 and Egypt was way behind with .62. Jordan's score had remained the same for the previous 15 years. Egypt is the most improved of the three. Its HDI has increased from .5 to .62.(8)

For all three countries there have been improvements in health and education. However, where education was concerned, this has been more in quantity than quality. Health improvements are undeniable in both quantity and quality measures. The average life span of the average person in these three countries has increased by 2 years in the last 15 years. The under five mortality rates have halved in all three countries in the last 15 years. Well over 90% of the populations of the three have access to health care. Jordan had always been in the 90% category since 1980. These are increases in 10-15% of the population having access to health care in Egypt and Syria.(9)

Food production per capita has stayed steady for Jordan and Egypt, but has fallen rapidly for Syria. Food aid has dropped significantly for Egypt, yet has doubled for Syria and nearly quintupled for Jordan.(10)

Telephone lines have increased in all three. So has access to safe water. Water systems have improved. Roads have increased in miles of paved roads. Rail lines have improved and increased in miles of track, but to a lesser extent than for roads. Syria has increased its length of track but uses it much less than in the past. There have been many infrastructure projects in all three of these countries, mostly paid for by foreign aid. In all three countries there have been very few private sector infrastructure projects. Yet, worldwide infrastructure has been increasingly developed by the private sector.(11)

The manufacturing bases in all three are stronger in 1996 than they were in 1980. Agri-based industries are stronger and more competitive in 1996 than they were in 1980, especially in Egypt. The manufacturing and tourism sectors may have had the best improvements, with construction and trade services running close behind. Again, Egypt seems often to be the most successful at these changes. The petroleum and natural gas industries have also had improvements in Syria and Egypt over the time period. Yet, even as the price of oil has declined in real terms these industries have improved in their structures and performances relative to their earlier years, especially in Egypt. Syria has shown some moderate improvements, especially in the late 1980s and early 1990s, but there has been some back-stepping lately. Foreign oil companies have been leaving Syria.(12)

Export diversification has been pretty much a failure in all three. Egypt and Syria have depended mostly on petroleum and labor exports. Jordan has depended on phosphates, fertilizers and labor. Yet, since 1980 manufacturing exports have been taking the place of phosphates and fertilizers, slowly, but surely. As the price of phosphates declined, manufacturing exports took part of the phosphates' percentage of Jordan's exports. Food exports from Jordan have also increased in their relative importance to the rest of all the exports of Jordan. The real growth in the relative importance of food exports has been the time from the start of the Gulf war and the sanctions against Iraq. Most recently, however, such trade with Iraq has seen some decline.

Exports of manufactures have also been an increasing percentage of all of the exports of Egypt from 1985 to 1995. As fuel exports and many other categories of exports declined in importance, manufactures took their place. Metal exports, particularly exports of aluminum, have increased in importance since 1980. Food exports have also increased in importance since 1985, obviously with the initiation of serious reforms in Egyptian agriculture and the agricultural trade of Egypt. Nonfood primary products, such as cotton, have been in relative decline, but have not shown the rapid decline like that of petroleum.

For Syria, since 1980 textiles showed some improvement - at least until 1991. Since 1985 food exports have also become a more important part of Syria's trade. Non-food primary exports, like cotton, have shown a relative decline in importance. Petroleum exports boomed in the late 1970s to the late 1980s. Then their was a brief drop-off around the time of the Gulf war. Unlike Egypt, oil increased in importance after that. Oil is now about 60-65% of all of Syria's exports. It could be that Syria's non-oil industry could not respond to the changer in the global marketplace as Egypt's non-oil industry did. Egypt responded slowly compared to the former "tigers", but certainly much faster than Syria. Jordan seems to have the quickest response time to changing circumstance in the international market place. Its size might have something to do with that. However, it has also been the most private sector oriented of the three. It also has the least number, and weight, of regulations on its industry and its investors. The same might be said about Syria's ability to increase its food exports relative to the ability of Egypt and Jordan to do the same. Jordan is the "most free" economy, Egypt comes second, and Syria is the "least free" economy.

All three have been remittance, and, hence, oil price sensitive countries. Egypt and Syria also rely on oil for their internal oil revenues and as a source of foreign exchange. There have been significant changes over the time period since 1980 in the structure of the trade of these countries. However, these changes have not been enough to sufficiently diversify their exports. Also, they could have used these structural changes in trade to help develop industry and employment domestically, but government policies and internal and external political, financial and economic events got in the way often. This was most particularly the case in Syria.

Egypt, Syria and Jordan still rely on volatile sources of income such as oil, remittances, tourism, transport, phosphates, and trade in primary commodities. Many other have countries developed away from their reliance on primary commodity trade and toward technology-intensive, human capital (skill)-intensive trade, and (for labor surplus economies) labor-intensive manufactures exports. These three, especially Egypt and Syria in the 1980s, continued to rely on labor saving industries and volatile primary products trade, oil in particular. Jordan has been moving in the direction of human capital-intensive and technology-intensive trade most recently. They have been surprisingly successful in medicines and chemical products. Sometimes these developments in Jordan are tied to some outside investments in the form of foreign direct investment. But more often than not such successes are mostly due to domestic investments. Egypt has also shown some surprising success in chemicals and pharmaceuticals. The recent purchase of Amoun pharmaceuticals by Glaxo-Wellcome may bode well for the development of these very important industries.

All three of these economies have fragile economic connections internationally, because of the structures of their domestic economies, their human and natural resource bases, and their relative non-diversification of their international trade. Once these frailties have been shored up these countries will be more likely to reap the benefits from the globalization whirlwind.

Of the three, Jordan's economy has been the most private-sector oriented. Jordan was also the first of the three to leap into economic reform and structural adjustment with some zeal. This occurred in part due to the fall in phosphate prices in the early 1980s and its untenable debt and unemployment situations in the late 1980s and early 1990s. Egypt got its ERSAP program running with some zeal only within the last couple of years, after a switch in prime ministers and cabinet officials in early 1994. Syria is still unwilling it seems, even with Law 10 and other so-called liberalization measures to privatize, restructure and let the economy free itself from the heavy hand of the government that has controlled it for the last three plus decades.(13)

There have been many improvements in these countries, but hardly the improvements one would have expected if the policy environments of these three countries were more developmentally oriented. To be fair, however, these countries have also been subject to the whipsaw political cycles of the Middle East during the 1980s and 1990s. They have had to face embargoes, peace negotiations, fundamentalism, the fallout from the Iranian revolution, the Iran-Iraq war, Israel's invasion of Lebanon, Syria's virtual takeover of Lebanon, the phony peace process between the Israelis and the devastated Palestinians, and the collapse of the facades of Arab unity and the so-called Arab nation with the Gulf War of 1991. The financial and economic shocks of the Gulf War were, in the short to medium run, also significant. The Gulf War, however, had very different effects on each of these countries.(14) The stunning decline in the real price of oil since the very brief oil boomlet of 1973-1983 has been by far the largest shock to these economies. Some of the results of the collapse of the oil price are political as well as economic.

Debts and the economic polio of the public sector, inter alia, drove Egypt to the peace table in 1978. These economic problems continued through the 1980s. As the oil price dropped the debt of Egypt and the structural weaknesses of its economy drove it to economic reform and structural adjustment. It had no other reasonable choice.

Debts, the Gulf war, consistent over-reliance on volatile sources of income, and so on, drove Jordan to the peace table in the 1990s. Economic stagnancy and debt that grew to twice its GNP drove Jordan to a structural adjustment reality check even before Egypt faced its inevitable economic reality check.

The fall of the USSR drove Syria toward at least thinking about liberalization. Liberalization in Syria has been a rough road. Oil companies and other foreign investors have been leaving Syria for the last four years due to foreign exchange rules that have since changed, corruption, a moribund and obsolete banking system, and the sometimes frustrating negotiation practices of certain persons in the government. Syria has been the least willing to change. It has been the most closed polity and economy. It may also be the most backward politically and economically, the HDI aside.

The Gulf war aid booty to Syria and its relatively tiny oil reserves have allowed it to postpone the really tough decisions for a while. The decisions include whether to finally talk peace with Israel, whether to cut back on its massive expenditures on the military, and whether it will finally liberalize its politics and economics. A country that postpones such decisions almost always makes them more expensive. Syria has already paid a very high price for its economic and political defiance. It is now a $16 billion dollar economy on a slow slide to, possibly, less than marginality.

Even so, we have also seen another form of development in these three countries: the relative decline of the military. Defense expenditures as a percentage of GDP have dropped significantly in all three since 1980. The greatest drop has been in Jordan, from 16% of GDP in 1980 to 4% of GDP in 1995. Even Syria has seen significant drops, from 16% in 1980 to 5% in 1995. Egypt saw a drop from 7% of GDP in 1980, to 4% in 1995.(15) Syria and Jordan have gone from being two of the most military dominated economies toward some form of relative normality, or at least "averageness".

A large proportion of the military expenditures of these three countries went to importing weapons. Egypt remained over the last few years among the top ten weapons importers in the Third World.(16) Syria, Jordan and Egypt have been some of the best markets for weapons exporters for many years -- even though their economies are fairly small in world terms. The GNPs of these three countries combined would not add up to the Gross State product of Kentucky in the U.S..(17)

GLOBALIZATION AS A NEW PHENOMENON

Is it not clear when we consider the many strong international effects on Egypt, Jordan and Syria, that in many ways they are part of the globalization trend even when they sometimes seem unwillingly so. Furthermore, globalization has hardly been a new phenomenon for these three states, which were part of the Ottoman Empire. The Ottoman Empire's bankruptcy can be easily traced to globalized supranational capital. Syria and Jordan were mandate territories after World War I. Egypt was effectively nm by the British and British investors for years. Many of the 19th and 20th centuries foreign economic policies of the French and British were governed and controlled by the lobbying of the great industrialists in these countries. Egypt's original mechanized textile industry was in part based on British transnational capital and technology. The Suez Canal is a globalization phenomenon, which was finished in 1869. The making of Israel out of the Yishuv was from a globalized migration of people, ideas, and capital. Mohammed Ali would fit right in with Bill Gates, George Soros, and Richard Branson at the globalization meetings in Davos. His monopolies were a form of 19th century globalization. Jerusalem, Cairo, Damascus, and Alexandria have been global villages for centuries.

Globalization is hardly a new thing for these three countries. For the sake of this essay the term globalization will be defined as those technological, economic and political changes that have occurred since the new definition of globalization was arbitrarily fixed sometime in the last few years. The time period of our focus is 1980-1997. The variables to be focused on are aid, trade and investment.

The trade and aid environments of Egypt, Jordan and Syria have been globalized for many years - even in the face of high tariff and non-tariff barriers at the borders of these countries. The globalization of trade also occurred even in the face of often anti-export and anti-import laws and regulations, especially in Syria until today, and Egypt until 1991 and the EREIA.(18) Egypt's membership in the WTO, Jordan's observer status and application for full membership, and some signs of opening up of internal and external markets for Syria are indications that such globalization may be expected to increase. The recent ministerial decrees on limiting imports of cars in Egypt may indicate a stepping back, but compared to all that has been going on there moving the country toward globalization and openness, such ministerial decrees are mosquito bites on the back of the globalization giant.

Until most recently, particularly for Syria, the investment environments of these countries have been minimally global and relatively closed off in comparison to countries like Thailand, Indonesia and Turkey. But with the new banking and investment laws of Egypt and Jordan we may see Egypt, and possibly Jordan, globalized in banking and investment even more than the former East Asian Tigers before their recent temporary fall.(19)

GLOBALIZED TRADE

Clearly all three of these countries have had significant global and regional trade in merchandise and labor for many years. All three have been exporting to, and importing from, a large variety of countries for the time period 1973-1997.(20)

Syria has been exporting labor throughout the world for a century. More recently, remittances income to Syria topped out at close to $1 billion in 1980. It had been dropping until just after the Gulf war to around $300 million. In 1993 they may have been 600 million. In 1996 they went up to $900 million. In 1997 they may have been as high as $1 billion. That is a pretty significant trade in labor for a country that had an economy of about $16-20 billion in 1997.(21)

Egypt exports its labor mostly to the Gulf, Syria has remittances coming in from all over the world, including North and South America. For Egypt, remittances have been a large proportion of its GNP since the late 1970s. They accounted for about $2.1 billion in 1980, $4 billion in 1984, and over $6 billion in 1992. There was a sharp drop after 1992 to about $3-4 billion in 1993-1994. The 1992 upsurge may have been due to the remittance workers sending back more remittances than usual and some of their bank and other savings because of their perception of Egypt as a safer place to keep their money than the Gulf. This was likely a "one-shot".

More recently remittances have averaged about $3-4 billion. Egypt's remittances seemed to have defied the fall in the oil price in the 1980s.(22) That may have been due more to economic diplomacy by the Gulf states than the necessary increasing demand for Egyptian labor by the GCC and other Arab oil producers. These increases against the trend in oil prices and oil revenues may have been a signal from the Arab oil states that they were going to support Egypt even in the face of the Arab embargo of Egypt and Egypt's signing of the Camp David Accords and the peace treaty with Israel. They may not have been that much against the treaty in the first place, possibly. The increased remittances may have been a subtle way to replace the aid that would have come from the Arab oil states had the peace treaty with Israel not been signed. However, the Arab oil states could not say this openly and publicly. They could say it by hiring more Egyptians even though publicly they disagreed with Egyptian foreign policy. This is the opposite of what they did to the Palestinians, Yemenis, Sudanese, and Jordanians after the Gulf war because of their countries' foreign policies with regard to Iraq.(23)

Like Egypt and Syria, Jordan's remittance trade really started to take off after the 1973 oil shock. There was another sharp upturn after the 1979 oil shock. Jordanian remittances boomed from $21 million in 1972 to close to $1 billion in 1981-82. By 1991 they were $450 million. However, there was already a significant and steady decline in remittances to Jordan before the Gulf war happened.(24) The decline before and during the Gulf war was mostly due to the expulsion of Jordanians, especially Palestinians, almost entirely from Kuwait, and many from Saudi Arabia. Many also left before and during the Iraqi invasion of Kuwait, and during the time period between the end of that war and the multinational coalition invasion of Iraq. These drops in remittances, however, were mitigated by the remittance deposits into Jordan brought back by some of the "lucky" returnees. By 1993 remittances were back up to $1 billion. By 1996 they were $6 billion. These recent increases may be due to the return of some of the expelled Jordanians to the Gulf, although not many to Kuwait, and to the settlements of legal cases brought by Jordanians for lost assets because of the war and the expulsions.(25)

What are other indications of global trade connections for the three countries, connections that could help them develop globalization strategies and successes in the future?

Total trade (imports and exports of goods and services) was 100% of GDP for Jordan in 1973. By 1980 it was 225% of GDP. Jordan saw a huge drop in trade/GDP from 1980-1986. By 1986 the ratio was back down to 100%. But it has bounced back. Over the last couple of years it has been at about 140-150% of GDP.(26)

For Egypt, total trade had been between 50 and 80% of GDP form 1975 to 1997. There was a secular decline from 1980 to 1987 from about 80% to 50%. Since then it has bounced back to around 60-70% of GDP.(27)

Even for a so-called isolated state like Syria, total trade has been hovering at around 50% of GDP from 1975 to date. For Syria it has been on a fairly even keel, unlike the trade/GDP ratios for Egypt and Jordan.(28)

Putting these figures in per capita terms one can get a better feel for the situation. Trade per capita for Jordan has been over GDP per capita for just about every years since 1975. In 1981-83 trade per capita was around $3000 and GDP was around $1000. Trade per capita has dropped to about $2000 since then. Overall, after a steep decline to 1987, GDP per capita has risen slightly since 1983.(29)

This, of course, was generated by global oil prices that generated regional remittances. These remittances then helped generated huge domestic imports during the time of the oil booms in the late 1970s and early 1980s.

For Egypt we see a still fairly trade sensitive economy with GDP per capita trailing just under the total trade per capita. The closest points for these two data series were in 1980-1982 when they were almost equal. From that time period an increasing gap occurred, that is only recently being closed - unfortunately because of the huge increase in imports into Egypt over the last few years since the Gulf war.

Syria seems to be the least trade sensitive of the three. The gap between GDP per capita and trade per capita had been widening from 1973 to 1985-86. However, this gap was in the opposite direction to the gap that was being produced in Jordan. For Syria GDP per capita was increasing much faster than trade per capita. After 1985-86 the gap was closing in Syria.(30)

Interim conclusion: Jordan is by far the most trade sensitive. Egypt comes in a far second. Syria is a distant third. The charts for GNP per capita and total trade per capita show similar results (please see charts a, b and c). Also in these charts one can see the trade sensitivity of these three countries. One can also see how internationally connected these countries have been.

Looking at the products these countries export may give us an idea of where to look to find where globalization may help their economic developments in the future:

Syria's largest export markets in 1996 were the EU, Italy in particular, Spain, Croatia, Cyprus, Turkey, Jordan, Lebanon, Saudi Arabia, and, oddly, Costa Rica. Syria's largest import markets have been Italy, Japan, the People's Republic of China, Korea, the Czech Republic, Romania, Turkey, Ukraine, Egypt, Jordan, Saudi Arabia, Argentina, and Brazil. Now that seems like a global enough list for a small country like Syria.(31)

Syria's top export items are, by most important country of destination, the following:(32)

Product group for export           Top destination markets

Oil                                Italy, Germany and France
Cotton                             Italy and Spain
Petroleum Products                 Italy and Cyprus
Vegetables                         Saudi Arabia, Kuwait, and Italy
Fruits and Nuts                    Saudi Arabia, Kuwait and Egypt
Apparel                            Germany, France and the U.K.
Live Animals                       Saudi Arabia, Kuwait and Italy
Wheat                              Tunisia, Germany and Belgium
Leather                            Italy, China and Turkey
Women's clothing                   U.K., Saudi Arabia, and Kuwait
Fertilizers                        France, Romania, and Yugoslavia

[Oil accounted for about 65% of Syria's exports merchandise exports in that year, and 20% of its GDP.] Many of these exports are not usually thought of as some of the driving forces of development. The linkages with the rest of the economy are limited in the industries associated with the production of these products, especially the oil industry.(33)

Syria has not done well in connecting its exports to the basic needs of real development. For all of Syria's exports in 1996 primary products accounted for 93%, labor intensive products 4%, technology intensive products a measly 1%, human capital intensive products just 1%, and natural resource intensive products only 1%. Primary product based development often has led to immizerizing growth in developing as well as developed countries.(34)

Egypt's largest import markets have been recently the U.S., the EU, the People's Republic of China, Japan, Malaysia, Singapore, Poland, Romania, Turkey, Saudi Arabia and Brazil. Egypt's largest export markets have been Italy, the U.S., the U.K., other large EU economies, Singapore, Romania, Turkey, Saudi Arabia, Japan and Australia. Just about all of the continents are in this list.(35)

Egypt's recent top articles of exports:(36)

Product group for export             Top destination markets

Oil                                  Israel, Italy, Romania
Petroleum products                   Italy, U.S., Romania
Yams                                 Italy, U.S., Belgium
Vegetables                           U.K., Germany, Saudi Arabia
Apparel                              U.S., Germany, U.K.
Men's clothing                       U.S., Italy, Romania
Aluminum                             Belgium, Germany, Italy
Women's clothing                     U.S., Italy, Romania
Cotton                               Japan, Korea, Italy
Fruits and Nuts                      Saudi Arabia, Kuwait, U.K.
Woven cotton                         Italy, U.K., Romania
Floor coverings                      U.S., Germany, Japan

Egypt also exports iron bars to Saudi Arabia, the U.S. and Japan. Again, many of these export items are not exactly related to the driving forces of modern development. But Egypt is doing a lot better than Syria in this category. Of all of Egypt's exports in 1996, 67% were primary products, 4% were natural resource intensive, 21% labor intensive (good for a labor surplus economy), 4% technology intensive, and 4% human capital intensive products.(37) If exports are to lead development Egypt does not seem to be focusing on the most dynamic and competitive industries in the long run.

Jordan's largest export markets in 1996 were India, Saudi Arabia, and Iraq. Jordan's largest import sources were the EU, the PRC, Turkey, Ukraine, Saudi Arabia, Iraq, Japan, Australia, and Brazil. Notice that Egypt, Jordan and Syria share in some of the non-Arab markets for exports and share in sources of imports. When one looks at the export markets these three countries have outside and inside of the region, and the overlaps in the products that they export, one can also see some room for competition as well as cooperation.(38)

Product group for export       Top destination markets

Fertilizers, processed         Malaysia, Philippines, Korea
Crude fertilizers              Netherlands, India, Japan
Live animals                   Saudi Arabia, Kuwait, Netherlands
Medicines                      Saudi Arabia, Tunisia, Iraq
Hides and Skins                Turkey, Italy, Spain
Lime, cement                   Saudi Arabia, Malaysia, Kuwait
Mechanical engines             U.K., Netherlands
Petroleum products             India, Saudi Arabia
Men's clothing                 U.S., Italy, U.K.
Vegetables                     Kuwait, Germany, U.K.
Aircraft                       U.K., Germany
Waste metal                    Korea, Hong Kong, Japan

Fertilizers accounted for about 45% of all of Jordan's exports. In the 1980s they accounted for far more. Do these export items connect up with the rest of the Jordanian economy with linkages for development? Of all of Jordan's exports in 1996 45% were primary products, 3% natural resource intensive, 6% labor intensive, 40% technology intensive, and 5% human capital intensive.(39)

Jordan seems to be doing a lot better job than both Egypt and Syria on the technology intensive score and the human capital intensive score, but worse than Egypt in the labor intensive score. In terms of development connections to exports Jordan comes out on top. Because of this they may have the brightest future in development via globalized trade than the other two.

GLOBALIZED INVESTMENT

What about globalized investment trends in these three countries? Fast food, communications, tourism, baby food, other food processing industries, pharmaceutical, and business services seem to be the most likely candidates. The International Finance Corporation has been involved in tourism in Jordan and Egypt. It has also been involved in: natural gas projects in Jordan general investment in Jordan, the establishment of a risk management facility with the National Bank of Egypt, the aluminum industry of Jordan, Jordan's telecom sector, the establishment of an inter-Arab rating company with the Arab Monetary Fund, a tissue essay plant in Jordan, equity investments in Egypt, and the banking sector of Egypt.

Large transnational oil companies have been involved in all three countries, but most of all in Egypt. Egypt has the largest potential oil reserves known and certainly has a more pro-business environment than Syria. Some of the companies involved in Egypt include Apache, Amoco, Arco, ENI-Agip, Exxon, BP, and Mobil. Syria has attracted such companies as Tullow, Conoco, Elf and Total. An Arab-Israeli crude oil refinery in Egypt called Midor is still in the works it seems, with Spain's Repsol as the manager.(40)

Egypt may have as much as $12 billion in assets to sell from its stock of public sector companies.(41) This is another reason for foreign investors to take a closer look at Egypt. The Syrian Government may have billions of public sector assets to sell, but they seem to have little interest in doing so. The Egyptian Government seems focused on its privatization drive.

Petrobel of Egypt is a subsidiary of ENI of Italy. Seagull Energy of the U.S. is very much involved in joint ventures with the EGPC. BP Chemical is involved in the production and management of a polyethylene plant. The Sumed pipeline is owned by the Arab Petroleum Pipeline Company (APP) which is a multinational joint venture: 50% Egypt, 15% Saudi Arabia, 15% Kuwait, 15% U.A.E., and 5% Qatar. The International Egyptian Oil Company (IEOC) is a subsidiary of ENI of Italy. IEOC is the leading producer of natural gas in Egypt. A nuclear research reactor was "finished" near Alexandria by an Argentine firm in late 1997.(42)

Egypt is looking into methods of getting more FDI into the country in electricity generation and distribution though BOOT (build-own-operate-transfer) project offerings. Natural gas company investments can be found in all three of the countries.(43) One of the biggest natural gas investment agreements, which unfortunately seems to have fallen apart, was to happen in Jordan. This was to be the construction of a massive LNG (liquefied natural gas) plant by Enron corporation of Houston, Texas mostly. This liquefied natural gas was to be regassified and transported to Jordan, Israel and other markets. The gas to be regassified was to be Qatari liquefied gas, that is LNG shipped by LNG tankers from Qatar to Jordan. The port of Aqaba was also going to be considerably changed by this investment.(44) Now Israel has transferred this idea to a regassification plant to be built offshore near Ashkelon.(45)

Now the biggest natural gas investment in Jordan is for the pipeline network that will bring gas from Egypt (but not just originating only in Egypt) to Jordan, the Palestinian Territories, and then up to Syria, Turkey and so forth. There are also plans to establish a natural gas loop almost encircling the Mediterranean. There are huge potentials for private sector investment here. Certainly the governments of the southern Mediterranean region cannot afford the entire cost of construction, maintenance, repairs, upgrades, and whatever else will be needed to make this mega-project work. The World Bank and other development agencies may pay another part of the bill, but certainly in this political and economic, and ideological environment, the private sector could find real opportunities in these power projects.

Jordan may have as much as 30 billion barrels of oil equivalent locked up in shale rock. In February, 1998 Shell Oil Corporation signed an agreement with Jordan to develop these shale oil reserves. U.S. companies Westinghouse and Oil Shale Energy, Inc. are involved in the construction of an oil shale electrical plant near Lejjun.(46)

The recent decision by Kuwait and Saudi Arabia to sell oil once again to Jordan at concessionary prices, as well as the relatively very low price of oil recently anyway, will make this project and many other energy projects less profitable for the time being, but they will likely still be built. They will also help Jordan develop energy independence to some extent.

India's Southern Petrochemicals Industry has a joint venture in Jordan for a $170 million phosphoric acid plant, which came on line in August, 1997. The Arab Potash Company and a Japanese consortium led by Mitsubushi are building a fertilizer plant and an ammonia phosphate plant near Aqaba. Norsk Hydro is developing plans for a $400 million fertilizer project in Aqaba and Shidideh.(47)

The Indo-Jordan Chemicals Company is a joint venture among Jordan Phosphate Mines Company, Southern Petrochemicals Industry Corporation, and the Arab Investment Company of Riyadh, Saudi Arabia.(48) The Jordan-Japan NPK plant is joint venture among Jordan Phosphate Mines Company, the National Federation of Agriculture Association (ZEN-NOH), Mitsubishi Chemical, Asahi Industries, and Mitsubishi Industries.(49) The Jordan Phosphate Mines Company and Fauiji Fertilizer of Pakistan signed an agreement in 1994 to develop a DAP and UREA plant. JPMC supplies to phosphoric acid for the plant that is built in Pakistan for 13 years.(50)

Israel and Jordan have been developing a qualified industrial zone (QIZ). The companies which choose to join this joint venture will get exemptions from U.S. taxes and tariffs if they can prove a certain percentage of joint Israeli-Jordanian production. They will also get other incentives from both Jordan and Israel.(51)

In 1995, Malaysia's Petronas and Trans-Global of Houston, Texas started exploring for gas and oil in northern Jordan. Jordan plans to privatize its oil sector.(52) It is doubtful Egypt and Syria will consider such a move anytime in the foreseeable future. Jordan is in the process of privatizing its electrical power and transport sectors. There will certainly be opportunities there for FDI or even FPI (foreign portfolio investment).

On the other end of the liberalization spectrum, after 3 years of debate, Syria has allowed Belgium's Tractabel and Lebanon's Sarabaki Group to build the first private power plant in the country, but it will only be a 600 megawatt plant.(53) Even in the somewhat stifling environment of Syria many Syrian investors in the textiles, pharmaceuticals, food processing, and other light industries have backing from Gulf investors.(54) Only 5 of the 14 oil companies that were in Syria in 1991 remained in 1998. These companies were Elf, Marathon, Demenix, Tullow, and Shell. The unsatisfactory business arrangements given by the Syrian Petroleum Corporation, as well as poor exploration results, corruption and problems with exchange regulations drove most of the oil companies out.(55) A somewhat surprising set of events occurred when Mitsubishi Heavy Industries was allowed to start construction on a 600 MW power plant near Al-Zara (with a soft loan to Syria form the Japanese Government) and a 1065 MW power plant near Aleppo (with a Saudi Development Fund loan to Syria).(56)

Syria's crude oil exploration and production is dominated by Al Furat Petroleum Corporation, which is a joint venture among Syria's state owned Syrian Petroleum Corporation, Royal Dutch/Shell, Pecten of the U.S., and Demenix of Germany. The marketing of crude oil in Syria is mostly done by Sytrol, which is a joint venture among Syrian public sector firms and Agip, Bayoil, Chevron, Conoco, Marc Rich, Oemu, Shell, Total, and Veba. There is a $300 million service contract up for auction to develop associated gas in Syria. Conoco of the U.S. may have a good chance at winning it.(57) Considering that oil is 55-60% of all of the export earnings of Syria energy investments are vital. Natural gas may become much more important to Syria in the future. This is not only in the use of Syria's own gas reserves, but in the transmission of other country's gas across Syria territory. FDI will likely be needed for that to occur in the best fashion.

In Egypt, Hoechst Orient and the Arab African bank have floated bonds on the international markets to finance their future developments. About 50% of Egypt's most recent FDI inflows have been in manufacturing, another 30% have been in banking. This is a big change from earlier times when almost all of the FDI was in oil with the rest going to tourism development.(58) A good part of the new banking investment is due to recent changes in the business environment in Egypt, as well as recent banking law changes that further opened up the potential for foreign ownership of Egyptian banks. This is a long way from Nasserism and Arab Socialism.

Most of Egypt's FDI stock is to be found in petroleum and natural gas joint ventures with the Egyptian General Petroleum Corporation (EGPC).(59)

The Egyptian government has been floating bonds of around $250 million in the last year or so. Part of the funds from these bond floats may go to the development of the New Nile Valley, or the Toshkha Project in Upper Egypt.(60) This is a major step away from Nasser's way of partly financing the Aswan High Dam by nationalizing the Suez Canal. Could one imagine Nasser floating Aswan High Dam bonds on Wall Street?

The Egyptian British Bank is now in a joint venture with the Hong Kong and Shanghai Banking Corporation (HSBC). Egypt has a baby food plant set up by Nestle and telephone exchanges set up by AT&T and Seimens. These are hardly new examples of globalization. They were set up in the 1980s. The infrastructure projects were mostly financed by globalized aid. Now, if these projects were to be done, they might be financed in large part by the private sector.

The Egyptian data do not distinguish between Egyptian and other Arab investors. This certainly leads to an underestimate of foreign investment stocks and flows. The non-Egyptian Arabs, especially Gulf Arabs and Libyans, have been very much involved in investments in Egypt. Their investments can be found in banking, construction, tourism, land reclamation (the New Nile Valley Project or Toshka), oil, and petrochemicals, for examples. Some of the finest hotels in Egypt are owned by Libyan and GCC investors. Arab investors are a big part of the Egyptian privatization process.

An Arab investor should be reconsidered as much a part of globalization as any investor from Japan or Germany getting involved in Egypt. The non-Egyptian Arab investors are foreign investors, all of the pan-Arab Nasserism hold over in the statistical offices notwithstanding. Real globalization for Egypt will include regional integration in investment and trade, as well as more extensive global integration in investment and trade. The regional integration and the global integration seem to be happening in these three countries at the same time, albeit at different rates and directions for each country, with mixed results.

For example, Arab investment in Egypt did slow down, but did not stop, during the Arab "embargo" of Egypt.(61) As the Arabs mostly kept away form investing in Egypt, western firms like Amoco, Marriot, Sheraton, Elf, Agip, Le Meridien, and Movenpick moved in. Arab investment started up again with gusto after the Gulf war. Many of Egypt's best businesses have Gulf Arab investors, partners, or backers. More and more western investors are showing interest in Egypt, but many investors still have a sense of caution for the country. Given its political and military past, as well as its weak legal system, they have good reasons to be cautious.

Law Number 8 of 1997, put into force in May, 1997, was supposed to really open the floodgates of foreign investment with new and improved tax exemptions, free zone incentives, and so forth. This law is far more business friendly than its predecessor, Law 230. This law is meant to start the foundation of new businesses in Egypt. Venture capital markets may have reached the pyramids.(62)

Recent improved taxation agreements also exist between Egypt and the U.S. and Egypt and the U.K. This may add positively to the investment environment in Egypt for companies from the U.S. and the U.K. The new Egyptian banking laws may also help in foreign banking investment, which may bring in new banking technologies, as well as new and better auditing and accounting procedures to Egyptian banks. They are certainly in need of such improvements.(63)

However, the weak legal system, systematic official and private corruption, the low skills of much of the labor and management in Egypt, poor work ethics compared to East Asian competitors, somewhat opaque customs procedures, events such as what happened in Luxor in November, 1997, the faltering of the peace process, and increased tensions due to what is happening in Iraq, and increased threats to many western countries' citizens, do not help the investment climate of Egypt. This remains the case even with all of the improvements to the legal and economic environment of the country.

Jordan also has made some progress in opening up FDI in banking and in other fields. Syria is way behind the other two.(64)

Egypt has 28 domestic commercial banks, 21 foreign commercial banks, and 33 investment banks. Jordan has 15 domestic commercial banks, 5 foreign commercial banks and 12 investment banks. Syria has 1 domestic commercial bank, no foreign commercial banks, and 4 investment banks.(65) The banking system in Syria is so poorly run that many of the diplomats in Damascus, and their embassies, use banks in Lebanon. Jordan has the highest bank density per person of the three, followed by Egypt, and way down the list, with a lower bank density than the Sudan, is Syria.(66)

We can get another view of the globalizing investment picture by looking at the total FDI figures over time in theses three countries. From 1983 to 1988 average FDI inflows into Egypt were about $959 million per year. The peak years were 1984 and 1985 with about $1.2 billion. The years 1988-89 saw about the same amounts. After 1989, there was a steep drop off, possibly because of the political uncertainties due to the Gulf war. For the 1990-1993 period FDI hovered in the $200 to $450 million range. In 1994 there was a tremendous leap to $1.4 billion. According to the IMF, FDI then dropped to $600 million for 1995 and 1996.67 According to the Economist Intelligence Unit it increased in 1995 and 1996 to about $1.5 billion each year.(68) In 1997, FDI may have been even higher, according to the EIU. Portfolio flows into Egypt have been erratic. There was just $5 million in 1981, $20 million in 1985, and back down to $2 million in 1989. In 1990 there were just $15 million and $6 million in 1992. These are tiny amounts compared to overall international portfolio flows in the trillions of dollars, mostly to Asia, and particularly in the late 1980s and early 1990s.

A measure of Egypt's ability to absorb FDI and FPI may be partially found in the capitalization of its stock markets. This was greatly aided by the Capital Markets Law of 1992 and Law 8 of 1997. Until the Capital Markets Law of 1992 the total capitalization of the Egyptian stock market was just $3 billion. By 1994 it was $4 billion. By 1996 it was $14 billion. In 1997 it was a relatively staggering $20 billion. Egypt's stock markets have had some positively inspiring improvements since 1992. The first real upturn in the market was in 1991. This corresponds to the start of Egypt's ERSAP program and Egypt's beneficial international financial situation due to the Gulf war. However, only about 2% of Egypt's equity holdings on the stock market are held by foreigners recently. Most of this increase in the value of the stock market is due to Egyptian investing. The building up of this stock market is, however, a very good sign for potential increases in foreign investment in Egypt.

Turnover of stocks has also seen huge changes in recent years. Until 1994 turnover was only about $500 million per year. In 1994 it leapt to $700 million. By 1996 turnover in stock was about $2.5 billion. There is hope for globalization here. Especially when one considers that over 60% of investment in Egypt is now private sector investment. But, then again, FDI is only .9% of GDP. Egypt has a long way to go. It has also come a very long way in the last 15 years.(69)

Jordan's FDI inward flows, according to the IMF, have been in decline since 1981. They were $140 million in 1981. Most of these investments were from the GCC countries. By 1984 they were just $80 million. In 1990, FDI was $40 million. There have been years since the Gulf war when FDI was net negative. Part of the explanation for this in the pre-war years is that most of this FDI inflow has been from the Gulf Arab states. As their revenues declined, so also did their investments in Jordan. As Jordan showed its lukewarm support for Saddam Hussein in the invasion of Kuwait and as it tried to stave off the Gulf war of 1991, Gulf Arab investment dried up. Since the Gulf war most of the FDI into Jordan has been from Israel (since the 1994 signing of the peace treaty) the West, the EU and the U.S., and very interestingly, from eastern countries such as India, Japan and Pakistan. Still it is paltry compared to what it could be. From 1991 to 1993 net FDI was on average -$5 million. From 1984 to 1988 it was just $37 million per year. For 1994 to 1997 FDI inflows averaged about $51 million per year. This is still very low, but at least an improvement over the previous years.

Jordan has very good potential for foreign investment. It may also be in a much better position to benefit from globalizing investment than either Egypt or Syria. Jordan's stock market may be the most modern and efficient in the Middle East. That certainly gives hope for investment inflows.

In 1983 the capitalization of the Jordanian stock market was about $1 billion. By 1990 it was $2 billion. By 1993 it had blossomed to $5 billion. Some of this money is likely a result of the inflow of funds from some of the Jordanians who returned from the Gulf because of the war and the expulsions. The Amman Financial Market (AFM) may be capitalized at around $6 billion recently.

There have also been significant improvements in the investment laws of Jordan since 1991. Law 16 of 1995, the "Investment Promotion Law", has brought in some foreign investment. Unfortunately, such investments have usually been under $100 million in the major industries in Jordan. There have been some very large investments by the Japanese and Indians recently, however.(70)

As in Egypt, as government investment went down as a percentage of the GDP, the private sector and the stock market seems to have taken up the slack, even during some of the most difficult times, like during and after the Gulf war of 1991. Private investment is now 77% of all investment in Jordan. This is one of the highest in the Middle East. But FDI is only .2% of GDP.(71)

A rather odd result is that the stock market capitalization of Jordan had its greatest growth period during 1990 to 1993. This is when Jordan was having some of its toughest economic crises in decades. It was also before the peace treaty with Israel. Since the peace treaty was signed the capitalization of the stock market of Jordan has been relatively stagnant. The turnover of stocks also boomed in 1990 to 1993, from $400 million to $1.4 billion. Turnover has dropped off to under $200 million since then.

The pre-peace boom may have had a lot to do with changes in investment and tax laws. It may also have had something to do with the restrictive measures the IMF imposed on Jordan while it developed its ERSAP program. It may also have had something to do with the privatizations that were occurring at that time. But it also had a lot to do with the 400,000+ Jordanians who were mostly forced to rerum and start a new life, and new businesses in Jordan after 1990.

Another important fact about the Amman Financial Market (AFM) as reported by the Jordanian Embassy in Washington, D.C.(72) is that about 33% of the AFM's market value is owned by non-Jordanians. The Government of Jordan owns 26%. The Jordanian Embassy also reports that the private sector is 100% of construction, 94% of manufacturing, 95% of services like banking, business, and other finance.

The Investment Promotion Corporation of Jordan(73), established as part of Law 16, "Investment Promotion Law", of 1995, gives the following data for investments in different sectors of Jordan for 1997. For industrial projects 159.6 million JD was from domestic sources. 64.3 Million JD was from foreign sources. For Hotels 74 million JD were from domestic sources. 54 million JD were from foreign sources. For agricultural investments 12.2 million JD were from domestic sources. 4.9 million JD were from foreign sources. The exchange permits for that time period may also show who is doing what amount of investing. Persons or companies from the "Arab Common Market" countries were given 11.4 million JD in exchange permits. Other Arab persons or companies were given 5.3 million JD. EEC persons or companies were given 12.1 million JD. Persons or companies from the U.S. were, surprisingly, the highest at 32.9 million JD. Others had only 4.2 million JD total.

Syria seems to be a very different story. The annual average FDI inflows for Syria from 1983-1888 were about $38 million.(74) This is a tiny number, like that for Jordan, compared to Egypt - and certainly compared to Singapore, Thailand, Taiwan and South Korea during the same time period. These numbers are also tiny compared to the Gulf Arab and other investments that could have gone to Syria if it had a more amenable foreign policy and if it had a more pro-business policy domestically. It may also have helped if Syria's banking system was not so corrupt, obsolete, and inefficient. Syria's support of Iran in the Iran-Iraq war did not make many friends for Syria in the Gulf Arab states. The EIU reported, quoting UNIDO figures, that as much as $8 billion in foreign investment might pour into Syria over the next few years if the government would allow the banks to go private, and the government regulations on these banks were liberalized.(75)

The best year for FDI for Syria seems to have been 1994, with $200 million flowing in. 1995 and 1996 saw $100 million or less. Much of these investments were in the oil industry. The drop off after this may be due to most of these oil companies leaving Syria.

The data on FDI for Syria seem much more difficult to find than the data on Jordan and Egypt. Syria can sometimes be an opaque country anyway. Syria also has no stock market. Its financial markets are far behind those of Jordan and Egypt. It also has about half of the known oil reserves, and much less capacity for tourism than Egypt. Syria has many wonderful tourist areas, but not as many high quality hotels or not as much tourism infrastructure that Egypt has - or even as Jordan has per capita. Tourism investment in Syria seems to be mostly from domestic sources. There have been some considerable improvements lately. Now Syrian investors are focusing on building for the needs of wealthy Syrians, Gulf Arabs, and tourists from the West. Tourism from France and Germany has increased considerably recently. Still, most tourists to Syria come from Lebanon and Jordan. The highest number used to be from Iran. But Iran has been having some economic difficulties lately. The Alawis, the ruling group in Syria, are an offshoot of Shia Islam . Iranians are also not hassled as much in Syria as they are in other countries in the region.

For Syria only .6% of the GDP is FDI, according to the World Bank, World Development Indicators. One might expect that the actual FDI is larger because of the silent partners some Syrian businessmen have. Many of these partners come from the Gulf. They are also sometimes wealthy Syrians who now live outside of Syria. The textiles, pharmaceutical, food processing, and other light industries have benefited from such outside backing.(76) The opening of trade with Iraq in June 1997(77) may also give some incentive for increased foreign investment. Some businessmen may be looking at Syria as a conduit for developing present, and possibly more important, future trading relations with Iraq.

For international equity issues Egypt has been the only real player of the three. Outside of Kuwait it is the largest floater of international equity issues in the Middle East and North Africa. Before 1996 there were almost no international flotations from Egypt. There is still zero in Jordan and Syria. In 1996 there were $233 million in international equity issues from Egypt. That was over 50% of the international equity issues in the entire MENA region.(78) The first and second quarters of 1997 saw over $200 million more international equity floats.(79) These were using GDRs and ADRs.

When it comes to catching at least part of the wave of globalizing investments Egypt seems to be the real winner and potentially the biggest winner of foreign FDI, FPI, and international equity floats of the three. Jordan, however, should not be counted out. It still has chances of being the most agile economic "tiger" of the Arab world. Comparatively, Egypt is in a much stronger position for many reasons. Egypt's FDI stock are now over $4 billion. Egypt's pension funds bring in about $700 million annually and have a net worth of about $10 billion. There are real opportunities to develop global investing in Egypt.(80)

There are various free zones being set up in all three of these countries. Foreign investors may find more business-friendly, and more profitable, environments in these areas than in other parts of the three countries.(81)

CONCLUSIONS AND LESSONS LEARNED

Knowing the amounts, directions and types of trade of this group of countries gives us a part of the globalization to development puzzle. Knowing the amounts, sources and type of FDI, FPI, international floats and other types of international investments into these countries gives us yet more keys to the puzzle. Knowing the typologies of how trade and investment affect development is another part of the puzzle. Knowing the connections of trade and development to the government policies of these countries is yet another part of the same puzzle. Knowing the connections and linkages between trade and investments and development of the key sectors of the economies of Egypt, Syria and Jordan is one of the last pieces of the puzzle. What will help to finish off the puzzle of development from these perspectives is an understanding of the synergistic and holistic natures of development. One cannot just throw money at a country's problems and expect development to happen. Integrative and holistic approaches are needed.

Domestic policies must correspond with international ones - or at least not contradict them. A pro-development and pro-economic freedom environment helped along by the government is best - with the usual legal and regulatory constraints that are often needed to take care of market failures, public goods, and so forth. Then trade and investment can have their greatest impact on development.

Egypt seems to be doing the best job in this regard. Jordan comes in second. Syria is a miserable third. From the result we have seen in this essay we can conclude that for these three countries development requires some form of globalization. The question is not whether to globalize or not, but when. These countries need to improve their trade environments and their trade-development connections. They could benefit from considerably increased investments in those industries that are most connected with development, employment, and increasing the standard of living, health, in other words overall development, human development, of their countries. These three countries could have used their development funds a bit better in the past. The question of the future is whether they will use those future funds more effectively toward development.

However, more research and analyses are required. Typologies for development that fit these countries must be individually constructed. That is specific and detailed typologies of trade and investment beyond what we have established here. Then typologies of each government's domestic and international economic policies will be constructed. These may be the overall typologies of the three economies in such areas like: the relative importance of certain economic sectors and how these have changed over the last 18 years or so; whether the country is labor exporting, oil based or not, the structure of the banking system, and more. A decision-theoretic framework could then be developed to look into first the effects of trade, aid and investment on development in the past and what variables affected these links. Then some attempts at forecasting the important contributory variable in the future may be attempted. Only by piecing these typologies together can we get a sense of the economic development, and hence, economic security situations of these three countries in the past and in the near future.

What sort of things could be looked into? For example, what has hampered globalization's reach in Egypt, Jordan and Syria? One could look at the following explanations as they might be manifested in the trade, aid and investment connections: the slow development of the peace process; the Gulf wars since 1980; corruption; poorly designed and poorly implemented economic policies; weak legal systems; Islamic militancy; inter-Arab politics; other regional and international politics; the vital domestic politics and economics of each of the three countries; and international economic developments like the collapse of phosphate and oil prices.

The World Bank(82) reached some conclusions from a survey they made of Egyptian business persons about why FDI might be slow in moving into Egypt. The reasons include the following: unclear information about liberalization causing uncertainty among investors; complex and restrictive labor laws, weak protection of intellectual property rights, consumer rights (or rights in general one might add to the list); inadequate antitrust and trade legislation; complex and prohibitive regulations on corporate approval and licensing, both at the national and local levels; inefficient and inadequate public institutions responsible for policy administration and enforcement; time-consuming and expensive litigation procedures that harken back to the days of a socialist planned economy. Add to this a weak legal system that is manipulated, if not controlled, by the powerful and corrupt; inadequate credit mechanisms for small and medium sized businesses, a limited securities market and virtually non-existent derivatives market; a lack of adequately educated workers and managers; and cumbersome and time consuming tax administration procedures.

Law 8 of 1997 may have helped to solve at least a few of these problems. There has been some progress during the years since the government was changed and Ganzouri became Prime Minister. But there has not been enough change. Moody's rates Egypt as BB-. This is better than Turkey, Hungary, India, and Mexico and about the same as Greece and Oman. Thomson Bankwatch puts Egypt in the BB category, just below investment grade. This is about the same level as the Philippines and India. What are Thomson's reasons? The pound is overvalued. Egypt relies too much on historically volatile sources of income like oil, tourism and remittances. Egypt's bureaucracy and massive public sector are often not as productive as they should be, and are often a net drain on the economy. Militancy and high unemployment also add to investment risk.

Jordan has had its difficult times for many reasons: the drop in the real price of oil, the drop in the real price of phosphates, the Gulf war, increased debt, the difficulties of finding peace, and the rather mediocre return to the peace treaty with Israel so far, inter alia. Even so, it seems that Jordan has been heading toward greater export diversification. It has also been heading toward more development oriented exports. The Amman Financial Market has been developing well. It may be the most efficient in the Middle East. A large proportion of the market value of the AFM is owned by non-Jordanians. Israel, India, Pakistan, the EU and the U.S. have had more of their citizens and corporations investing in Jordan in recent years. The Arabs have shut Jordan off almost completely until most recently. Aid to Jordan has come from many locales and has been global indeed. Aid, trade, and investment have been a part of the globalization of Jordan, particularly in recent years. Given the economic and political stress Jordan is under presently one might expect that it will open up even more so to globalization. Jordan can benefit greatly from this opening up - with the appropriate safeguards in place.

Syria has been the laggard of the three. Investments have been very slow to move into Syria for quite obvious reasons: corruption, a moribund financial system, the tight grip the government has on the economy, confusing exchange restrictions, the no-war-no-peace situation with Israel, its weak and sometimes corrupt legal system, and on and on and on. Syria seems to be caught in the 1960s of Nasser. The trade of Syria is the least diversified. Syria, however, has really no choice but to move from petroleum to other goods and commodities. Given the oil reserves known today, they have very few years left. The dinosauric nature of the economic policy of the Syrian government may slow down the ability of Syrian businesses to respond to these economic changes. Yet, even the Syrian government has shown some signs of liberalizing its economy, if not its politics. Such liberalization will have to pick up pace if Syria wants to reap the benefits of globalization - and if Syria wants to stay away from being made a less than marginal economic player.

For all three countries, as the aid budgets of the DAC countries, especially the GCC, decline in real terms as many expect, they will have to turn to the private sector for many of their development needs and development funds. Syria may also benefit from a stock market, much as Egypt and Jordan have. It may also benefit from opening up its economy more at all levels. Clearly, Syrian socialism has had its benefits for the Syrian people, but its time is past.

It is time for Egypt, Jordan and Syria to rethink their economic policies and economic ideologies. Egypt and Jordan have been relatively dexterous on this. Jordan has been the most ambitious. Egypt has been cautious, but becoming less so. Syria has been dragging its feet at almost all levels, politics, economics, law, etc. It has been paying the price. Yes, these are poor countries with some problems of income inequality. Pure capitalism could, therefor, never work in them. A more liberal and ambitious economic framework based on humane capitalism may be the way to proceed in order to gain the benefits from globalization, and yet keep the peace in these countries in the long run. The old ways are past. The shocks of the oil price declines, the wars, the end of the USSR, the economic diplomacy of the GCC, the massive buildups of debt, unemployment creep, and periodic foreign exchange shortages, and so forth have shown the weaknesses of these old ways of doing things. Globalization is like an economic freight train. If one is prepared to jump on board, then one can go far - if you pay the price for the ticket. Otherwise the freight train will pass you by and your competitor nations will be far ahead of you. Egypt, Jordan and Syria have the choice to jump on board or sit on the sidelines. Possibly, these countries could learn from the lessons of the years since Camp David to see the costs and benefits of change (and not changing), and the costs and benefits of globalization (or not catching the globalization freight train). This essay is simply a starting point of thinking about the issues. There is certainly more that needs to be said.

NOTES

1. The World Bank (E) various years and UN, ESCWA, various years

2. The World Bank 1995(1); The World Bank (E); The World Bank 1995(2); Economic Research Forum 1998

3. The World Bank (E), various years; The World Bank1995(2); UN, ESCWA 1997; Economist Intelligence Unit (B), various years.

4. UN, UNDP, various years; The World Bank 1995(1)

5. The World Bank (E), various years; Economist Intelligence Unit (C),various years, UN, ESCWA, various years; The World Bank (B), various years

6. The World Bank (E), various years; UN, ESCWA, various years; IMF (D), various years

7. The World Bank (E), various years; Economist Intelligence Unit (c), various years; The World Bank 1995(2); UN, ESCWA, various years; U.S. Department of State 1998(3); NTDB 1998(3)

8. UN, UNDP, various years

9. UN, UNDP, various years; UN, ESCWA, various years; The World Bank 1995(1); Economic Research Forum 1998

10. The World Bank (B and C), various years

11. The World Bank (B and C), various years; UN, UNDP, various years; David Canning, 1996; Economist Intelligence Unit (A, B, and C) various years

12. Economist Intelligence Unit (A, B, and C), various years; UN, ESCWA, various years; US Department of Energy, Energy Information Agency 1998 (1, 2, and 3); U.S. Department of State 1998(1, 2 and 3); The World Bank(E)

13. Economist Intelligence Unit (A, B and C), various years; UN, ESCWA, various years; NTDB 1998(1, 2, and 3); U.S. Department of State 1998(1, 2 and 3); U.S. Department of Energy, Energy Information Agency, 1998 (1, 2, and 3)

14. Paul Sullivan 1991 (2)

15. U.S. Arms Control and Disarmament Agency, various years; SIPRI, various years

16. U.S. Arms Control and Disarmament Agency, various years; SIPRI, various years

17. U.S. Department of Commerce, 1997

18. Kheir El Din 1992 and Handoussa 1997

19. UN, UNCTAD, various years

20. See IMF (B), various years

21. IMF (A), various years; Van den Boogaerde 1989; Economist Intelligence Unit (C); UN, ECSWA, various years

22. IMF (A), various years; Van den Boorgaerde 1989

23. See Paul Sullivan 1999(1)

24. IMF(A), various years

25. IMF (A), various years; Economist Intelligence Unit(B), various years; UN, ESCWA, various years

26. The World Bank (E), various years 27. The World Bank (E), various years 28. The World Bank (E), various years 29. The World Bank (E), various years

30. UN, ESCWA, various years; The World Bank (E), various years; The World Bank (B), various years; Economist Intelligence Unit (C), various years

31. www.intracen.org/itc

32. www.intracen.org/itc

33. Economist Intelligence Unit, C, various years

34. www.intracen.org/itc

35. www.intracen.org/itc

36. www.intracen.org/itc

37. www.intracen.org/itc

38. www.intracen.org/itc

39. www.intracen.org/itc

40. U.S. Department of Energy, Energy Information Agency, 1998 (1, 2 and 3)

41. U.S. Department of Energy, Energy Information Agency, 1998(1)

42. U.S. Department of Energy, Energy Information Agency, 1998(1)

43. U.S. Department of Energy, Energy Information Agency, 1998(1)

44. U.S. Department of Energy, Energy Information Agency, 1998(2)

45. U.S. Department of Energy, Energy Information Agency, 1998(4)

46. U.S. Department of Energy, Energy Information Agency, 1998(2)

47. U.S. Department of Energy, Energy Information Agency, 1998(2)

48. www.jpmc-jordan.com/indo.html

49. www.jpmc-jordan.com/japan.html

50. www.jpmc-jordan.com/pakistan.html

51. U.S. Department of Energy, Energy Information Agency, 1998(2) and Economist Intelligence Unit, 1998 (B)

52. U.S. Department of Energy, Energy Information Agency, 1998(2)

53. U.S. Department of Energy, Energy Information Agency, 1998(3)

54. Economist Intelligence Unit, C, various years

55. U.S. Department of Energy, Energy Information Agency, 1998(3); Economist Intelligence Unit, 1998(C)

56. U.S. Department of Energy, Energy Information Agency, 1998(3)

57. U.S. Department of Energy, Energy Information Agency, 1998(3)

58. Economic Research Forum, 1998

59. Economic Research Forum, 1998

60. Economic Research Forum, 1998

61. Lavy 1984; Sullivan 1998(2), El-Baradei 1991

62. www.awo.net/business/invest/egy1/asp

63. Ernst and Young at www.mbendi.co.za/ernsty/cyegyip.htm, Economist Intelligence Unit (A), various years; U.S. Department of State 1998(1); Economic Research Forum, 1998

64. NTDB 1998(2); Economist Intelligence Unit (B), various years; U.S. Department of State, 1998(2); www.tradecompass.com; UN, ESCWA, various years

65. Economic Research Forum 1998

66. Economic Research Forum 1998; UN, ESCWA, various years; Economist Intelligence Unit (C), various years

67. IMF(A),various years

68. Economist Intelligence Unit (A) 1998

69. IMF (A), various years; UN,UNCTAD, 1998; The World Bank (B)

70. Investment Promotion Agency, Jordan, 1998; NTDB 1998(2); U.S. Department of State 1998(2)

71. The World Bank (B), various years

72. www.jordanembassyus.org/investm.htm

73. www.arab-business.net/ipc.statisti.html

74. UN, UNCTAD, 1998

75. Economist Intelligence Unit, 1998(3)

76. Economist Intelligence Unit, 1998(3)

77. Economist Intelligence Unit, 1998(3)

78. Economic Research Forum, 1998

79. Economic Research Forum, 1998

80. UN, UNCTAD, 1998; Economic Research Forum, 1998; Economist Intelligence Unit (A, B, and C) various years

81. Economist Intelligence Unit (A, B and C), various years; UN, ESCWA, various years; Economic Research Forum, 1998

82. The World Bank, 1994

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Paul Sullivan is a professor in the Department of Economics, the American University in Cairo.