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In advance of expectations

Jordan has survived the traumas of the US-led military action in the region more effectively than seemed likely, mainly because state finances have been tightened up, the stock exchange modernized and privatization advanced. However western foreign investors still remain nervous.

JORDAN'S LOCAL INVESTORS are in a positive mood. Share prices on the Amman Stock Exchange (ASE) are up more than 7% so far this year, a rise that began even before the end of the US-led invasion of Iraq. Gulf financiers are also increasingly positive about prospects but western investors remain cautious.

There are some grounds for the optimism. The reconstruction of Iraq will provide opportunities for Jordanian companies and the transit of goods through Aqaba port is also expected to rise sharply. In the longer term, Iraq, which has the human and natural resources to become one of the wealthiest and most dynamic states in the region, will become a more attractive export market.

However, the end of Saddam Hussein's regime also poses major challenges for Jordan. Iraq, boycotted by most of the world, was an important market for its neighbours, taking 20% of Jordan's exports. Iraq's new trade links may be based more on economic than political interests.

Another problem for Jordan is the impact on its budget of the cutting off of heavily subsidized Iraqi oil. Kuwait, Saudi Arabia and the UAE have agreed to provide free oil for three months but the Amman government will be need a longer-term arrangement if it is avoid making painful cuts.

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