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French Version

Too early to predict war consequences on economy

The current US-led war on Iraq has failed in damping the enthusiasm of shareholders at the Amman Stock Exchange (ASE).

The price index at the market ended Sunday’s session at almost 170 points, the highest in two months. The market, meanwhile, circulated at JD 3.5 million in shares.

The potent stock performance, however, is failing to convince many economists who suggest, sooner or later, the economy is bound to face repercussions as the war continues. One week into the war on Iraq, businesses in the Kingdom are buoyant despite popular fears and concerns about the length of war.

The government reiterated it has plentiful reserves of foodstuffs, fuel and other oil products for the coming four or five months. Cabinet sources agree the war will affect the local economy one way or another, but maintain the government is taking every possible measure to overcome such repercussions.

Economist Ahmed Namri agrees it is too early to estimate the war effects on the economy. Cabinet officials estimated the Kingdom’s losses in view of the war on Iraq at around $2 billion.

Jordan has already asked the US and other European countries to support its economy financially, as the US is expected to grant the Kingdom $1.5 billion in aid shortly to sustain its economic growth.

Namri, however, maintains Jordan will feel the repercussions of the war in the long run. "Our trade with Iraq is no longer safe because of the daily American bombing—the flow of exports to Iraq is almost dead because of the war," he told The Star.

Iraqi oil supplies to Jordan were suspended because of the truck drivers’ reluctance to travel on the highway to Baghdad. Iraq’s 5.5 million tons of oil to Jordan are being supplied through a fleet of 700 trucks cruising from Baghdad and Amman.

Hence, said Namri, the suspension of oil supplies will affect the flow of business in the Kingdom in the long run. The Kingdom has oil reserves estimated at 1.5 million tons. Earlier this week, the government began using its reserves at 10,000 tons a day. Meanwhile, cargo shipments between Iraq and Jordan have also stopped. This is despite the flourishing business at the Aqaba seaport. Sources at the Special Economic Zone Authority there, note the flow of businesses at the port is going on.

Basel Hindawi, director of the Insurance Regulatory Commission, denied any hikes on insurance costs concerning maritime businesses. The war on Iraq is not affecting business schedules at the Aqaba seaport but hikes in the near future will likely have an effect on firms there.

Royal Jordanian, the Kingdom’s national carrier, retains its regional and international flights. The carrier, however, suspended flights to Baghdad. Samer Al Majali, RJ’s CEO, said the company has adjusted its flight schedules to serve its customers. However, he affirmed many flights have been canceled because of the lack of passengers.

Al Majali said the company lost about 40 percent of its passengers in March alone. "The carrier have drawn up a contingency plan to make sure all of its flights and aircrafts are safe during the length of the war," said Al Majali, who added RJ flights to the Gulf will continue despite the fact that some international airlines have suspended their operations to that area.

The war on Iraq is also having ramifications on gold prices. Earlier this week, Jordanians were shocked because the rapid decrease in gold prices at the shops. One gram of gold was selling, Sunday, at around JD 6.4-JD 6.6. It went down by half a dinar on the previous week.

Confidence was also seen in currency trading. The US dollar lost some of its potency in Amman’s markets while the euro continued to surge at more than 760 fils. Many exchangers in Amman said the slight decline in the dollar exchange rate was due to the fall in world markets.

The waves of optimism at the Amman stock market were seen as promising for many businessmen and investors. ASE sources saw the rise in the price index as ‘normal’ since many investors want to take advantage of the low share prices at the market to buy sizable amounts of stock.

Brokers, on the other hand, said the market received new investors and businessmen recently who want to have a slice of the market but they are speculating in the low-cost shares which are hoped to rise in the next few weeks.

The brokers said many of these shareholding companies want to see more activity on their stock so that they will rise in price.

"The rush by some of the well-off shareholders to buy low-cost shares at this time reveals their need to take advantage of the war on Iraq," said a broker, who preferred anonymity. "Many companies are suffering because of the lack of business, while well-off shareholders are finding what is going as an opportunity to set their foot in the stock market."

Many brokers and stockholders believe the Amman stock market will continue to grow, even at a leisurely pace, as long as there are businessmen and investors who still wish to buy.

They note His Majesty King Abdallah’s praise of the government’s precautionary efforts is sending hopeful signs among Jordanians, who were seen rushing to supermarkets and gas stations days before the war started. King Abdallah urged Jordanians this week to show perceptiveness and national unity in their reactions to the war.

Namri agrees the lifting ASE reflects much of hope among investors, but warned of excessive confidence. "It is possible the ASE shareholders may soon find themselves unstuck as their resources start going down if the war carries on longer."

Amman,03 31 2003
Ghassan Joha
The Star
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