SPECIAL ASSESSMENTS ON THE MIDDLE EAST SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A002100010059-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 19, 2016
• Document Release Date: July 14, 2005
• Sequence Number: 59
• Publication Date: June 20, 1967
• Content Type: MEMO

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ecret
MEMORANDUM
Special Assessments on the Middle East Situation
ECONOMIC IMPACT ON JORDAN OF THE LOSS OF JERUSALEM OR WEST JORDAN
Secret
L
20 June 1967
No. 0660/67
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
EXCIUt)E,I) EDOM AUTOMATIC
00. N(,IIA Of"', AND
DECI ASSIFICATION
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CENTRAL INTELLIGENCE AGENCY
20 June 1967
Economic Impact on Jordan of the Loss of
Jerusalem or West Jordan
Summary
The loss of only Jerusalem would reduce Jordan's
tourist earnings by-about $17 million a year without
significantly reducing import requirements. Balance
of payments difficulties or a forced reduction in im-
ports would be the result, unless foreign aid were in-
creased. The loss of West Jordan (including Jerusalem)
would take away from Jordan about one third of its
present gross domestic product. The loss of earnings
from tourism, remittances from abroad, and exports, how-
ever, would be about offset by the elimination of the
imports now going to West Jordan. Thus,East Jordan's
economy and its ability to import need not be affected,
if the UN continues to support refugees and foreign aid
does not decline. Should Jordan have to support large
numbers of refugees from its own resources without com-
pensating increases in outside aid, economic develop-
ment expenditures and personal consumption would have
to be curtailed.
The Economy of Jordan
1. Jordan, somewhat larger in area than Indiana,
is by and large an artificial political unit created
as a British mandate after World War I to link Brit-
ish-controlled Iraq and British-controlled Palestine.
It then included only the area now called East Jordan.*
In 1946, the mandate was terminated, and the Kingdom
of Transjordan was established. In 1950, West Jordan
*East Jordan and West Jordan refer respectively to
to the portions of Jordan east and west of the Jordan
River. West Jordan is defined to -include that part
of Jerusalem remaining in Arab hands after the 1948-49
fighting.
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formerly a part of the British Palestine mandate, was
added and Transjordan became the Hashemite Kingdom of
Jordan with its present boundaries.
2. In 1958, when US aid began, Jordan was given
little chance of developing a self-sustaining economy.
About 80 percent of its land was unproductive desert,
and phosphate and potash were the only known minerals,
present in sizable quantities. It had little industry,
few hotels, few paved roads, and an inadequate agricul-
tural production relying almost entirely on uncertain
rainfall. Food production fluctuated widely; the out-
put of wheat in years of good rainfall was (and is)
four times that of the driest years. In the light of
this prognosis, Jordan's economy has done surprisingly
well. After an initial period of confusion and lack
of organization, it has experienced annual rates of
growth averaging about 9 percent over the last eight
years. By 1967, there was some prospect that it could
eventually become self-sustaining.
3. In spite of its successes, the Jordanian economy
still has a long way to go. Gross domestic product in
1966 was about $420 million. About 23 percent was pro-
vided by agriculture, about 21 percent by domestic trade,
and only 11 percent by industry and mining. Agriculture
employed well over half of the labor force, including
part-time and seasonal employment. Although statistics
are not available, Jordan is believed to have a large
body of unemployed and underemployed workers. Its
largest industrial facilities, including a cement plant,
a petroleum refinery, phosphate mines, and about 60 per-
cent of its small electric power capacity, are situated
in :Ea'st Jordan.
4. Jordan remains heavily dependent on imports for
a number of essential commodities. All of its petroleum
supplies (which make up nearly all of the fuel consumed),
most of its cloth and clothing, and 60 percent of its
caloric intake--chiefly in the form of wheat--must be
imported. Imports normally exceed exports by four or
five to one.
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5. Jordan's ability to purchase these and other
essential commodities has depended in large part on
foreign exchange earnings from tourism, remittances
from Jordanian nationals living abroad, and loans and
other assistance from foreign countries and organiza-
tions. With these receipts, Jordan has been able to
maintain a satisfactory balance of payments position.
As of February 1967, it had gold and foreign exchange
reserves of $181 million, adequate to cover 11 months
of imports. In 1966, foreign exchange earnings from
tourism and remittances were $61 million, or about 29
percent of a total of $211 million in foreign exchange
receipts. Official foreign loans and grants received
by Jordan accounted for about $75 million (including
about $31 million from the US), exports for some $32
million, and other sources for the balance. The op-
portunity for development of export industries is
limited in the short run. Over the longer run, the
prospects for increasing exports of phosphate and cement
are good, but increased production will require sizable
additional investment.
The Economy of West Jordan
6. Although regional statistics on most economic
aspects are lacking, probably 35 percent of the gross domestic
product of Jordan, or some $150 million, is generated in
West Jordan.* This income comes largely from a limited
agriculture, many small plants and handicraft shops,
domestic trade, and domestic services associated mainly
with tourism. Before the current Arab-Israeli crisis,
about 47 percent of the population lived .in West Jordan,
which was not able to support them. Out of a total of
about 850,000 people, 487,000 were receiving some UNRWA
relief, including perhaps 350,000 getting full rations.
UNRWA is the only regular source of foreign aid for the
West Bank since virtually all of the foreign loans and
grants for projects received by Jordan were spent in
East Jordan.
*This percentage was derived by examining available
statistics on such indicators as telephones, gasoline
consumption, and municipal revenues.
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7. In 1966, West Jordan accounted for about 30
percent of Jordan's cultivated land and a third of its
agricultural output by value. Its principal agricul-
tural products are olives, grapes, citrus fruits,
vegetables, and a small amount of wheat. The best
arable land is adjacent to the Israeli border; much
of the land is unusable for crops and provides but
poor pasture for sheep and goats. Industry is made up
of very small establishments, using, with few excep-
tions, primitive hand techniques. Although some 65
percent of Jordan's industrial establishments are in
West Jordan, they employ only about 45 percent of
Jordan's industrial labor force. The principal prod-
ucts are olive oil, soap, flour, and a host of handi-
crafts produced for tourists and local use. Tourists
are attracted by the great religious shrines at Jeru-
salem, Jericho, and Bethlehem, and some 600,000 are
estimated to have visited West Jordan in 1966.
Economic Impact of the Loss of Jerusalem
8. The loss of Jerusalem would cost Jordan about
$17 million per year in tourist earnings, representing
about half of its total tourist earnings and some 8
percent of its foreign exchange receipts. In the
short term, this loss could only be made up by in-
creased foreign assistance. Since the crisis began,
Jordan has been granted loans totalling $24.8 million
by Saudi Arabia, Kuwait, the UAR, and Libya.
9. Other economic. losses to Jordan would be
minor. Some of the remittances from abroad probably
go to people residing in Jerusalem, but the amount in-
volved is very small. No agricultural output and
very little industrial output would be lost.
Economic Impact of the Loss of West Jordan
10. The loss of West Jordan (including Jerusalem)
would deprive Jordan of about. one third of its present
gross domestic product. Approximately $50 million in
foreign exchange earnings from tourism, remittances,
and exports would be lost, but this loss would be
about offset by the elimination of imports now going
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to West Jordan. Thus, the economy of East Jordan
need not be affected, if it continues to receive for-
eign aid as before and if UNRWA continues to support
Jordan's refugees, including the newly arrived.
11. The loss of West .Jordan would probably cut
tourist earnings by at least 75 percent, or about $25
million per year. Without West Jordan, Jordan's
tourist attractions would be essentially limited to
the ruins at Jerash and.Petra. Remittances from Jor-
danians living abroad, most of them Palestinians,
would probably be reduced by about 70 percent, or
some $20 million a year. This assumes that the 100,000
Palestinians who fled to East Jordan during the crisis
will remain there. West Jordan's export earnings,
largely from olive oil,.fruits, and vegetables, prob-
ably amount to no more than $5 million a year. West
Jordan's imports are estimated to be on the order of
$50 million annually, or about one fourth of total
Jordanian imports in 1966. .
12. There is only a small degree of interdependence
between the economies of East and West Jordan. The only
items that East Jordan now appears to import from West
Jordan in significant quantities are soap and olive oil.
The only significant exports from East Jordan to West
Jordan are cement and refined petroleum products, but
the excess capacity produced by the cessation of these
exports would probably be temporary.
13. Should Jordan be forced to support the 100,000
new refugees from West Jordan., while UNRWA supported
the rest, the cost would be from $2.5 to $3.5 million
a year, not including housing. This would represent
3 to 4 percent of East Jordan's foreign exchange
earnings, excluding foreign aid. In the event that
UNRWA ceased supporting the refugees already in East
Jordan, the total cost would be between $8 million and
$9 million a year, or some 10. percent of foreign ex-
change earnings. Expenditures of this magnitude
would force a substantial cut in economic develop-
ment programs, and a diversion of foreign aid funds
from development projects to balance of payments sup-
port.
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14. Should a mass exodus. of the population of
West Jordan take place, say of 90 percent, Jordan
would acquire an additional new refugee population
of about 760,000, instead of the present 100,000.
Caring for this number would require an outlay of some
$20 to $25 million a year. If, under these circum-
stances, UNRWA stopped supporting the 220,000 already
there, the total annual costs would be about $25 to $35mil-
lion a year. Clearly, a mass exodus of the size
postulated is beyond Jordan's ability to handle with-
out massive additional foreign assistance.
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