I write this week from Amman, Jordan, where a high-level team of officials and experts met to explore new avenues for cooperation on trade and investment. The team’s work is part of a wider GCC-Jordan special strategic partnership announced over two years ago.

In December 2011, the GCC summit announced the decision to establish a special GCC-Jordan strategic partnership. The summit was held in Riyadh, Saudi Arabia — Jordan’s closest GCC neighbor. It was not surprising that some in the region were skeptical the newly established partnership would lead to much, considering the great challenges the region faced and a history of failed regional initiatives.

Some were hostile to the news, especially those who had designs on Jordan as extreme elements were hoping to encircle Jordan and destabilize it. Radical forces in Iran and their regional allies, as well as Al-Qaeda and its affiliates, had Jordan in their crosshairs as the next target after Iraq and Syria.

After the Riyadh announcement, the two sides took quick steps that proved the skeptics wrong. The GCC announced a generous aid program: A grant of $5 billion to be spent development projects and programs, on top of aid previously disbursed. The aim of that program was to bolster Jordan’s ability to fund its ambitious development plans, which had taken a hit due to regional instability and global slowdown. Tourism had sharply declined and foreign investors were discouraged by all the violence in the region.

Jordan faced a grim economic reality, complicated by the Syrian and Iraqi crises, which have spilled over in Jordan, not to mention the Palestine conflict, which has cast a long shadow over Jordan for generations. Jordan hosts about a million Syrian refugees, and rising. It also hosts a similar number of Iraqis fleeing the chaos in their country. In addition, Jordan has borne the brunt of the Palestine-Israel conflict economically. The United Nations Relief and Works Agency (UNRWA) puts the number of Palestinian refugees in Jordan at about two million, in addition to many unregistered with the agency.

The Greater Arab Free Trade Agreement (GAFTA), which came into effect in 2005, reduced tariff barriers between Jordan and its Arab neighbors, but it has failed to significantly generate new trade.

In addition to regional factors, the global economic crisis has affected the Jordanian economy. To find markets for its exports, Jordan had signed a Free Trade Agreement (FTA) with the United States in 2001 and an association agreement with the European Union in 1997, and gained an “advanced status” with the EU in 2010. But the global slowdown meant weaker demand for its exports, those deals notwithstanding.

As a result of daunting regional and global factors, unemployment was on the rise when the GCC and Jordan announced their new partnership, with economic and social dislocation in tandem. Unemployment was estimated officially at 13 percent in 2012, with youth unemployment at 30 percent. The government’s ability to cope was challenged by the recession and stagnant tax resources.

The aid package was meant to help Jordan cope with those challenges. In addition to aid, Jordan and the GCC accelerated efforts, punctuated by official meetings at all levels over the past two years, to map out the dimensions of the newly established strategic partnership. They put together a five-year “joint action plan,” anchored on three main pillars: Political coordination, economic integration, and enhanced people-to-people contacts.

Based on that plan, about a dozen specialized teams were set up to implement it along parallel tracks. They included economic, political, judicial and legal teams. They also included specialized teams in transportation, communication, agriculture, energy, natural resources and the environment.

To enhance people-to-people contacts, teams were set up to deal with education, scientific research, tourism, social and community development, culture, media, youth and sports.

Economically speaking, while aid is a short solution to help finance government’s development programs, trade and investment hold the strongest and most sustainable prospects. It is for this reason that GCC and Jordanian officials spent most of their time last week discussing investment and trade incentives.

It goes without saying that investors need a safe and profitable business environment. Jordan’s geographical position has always posed a challenge on both accounts. It is important to acknowledge their fears and deal with them head on.

Jordan and the six GCC member states are all members of the GAFTA, which came into effect in 2005. As such there is a fair degree of harmonization of customs tariffs and regulations. However, GAFTA sets only a minimum level of trade integration. It is therefore necessary to reassess its effects and seek ways to expand trade cooperation beyond its capabilities, especially in services.

In Amman last week, the GCC-Jordan economic team identified several ways to address investors’ and exporters’ concerns, including the following:

l Poll GCC and Jordanian investors to find out what impediments they face and organize meetings for investors and exporters with government officials to address them.

l Incentivize investors: Both sides have had considerable success with tax holidays and export credits, but wanted to explore other available avenues such as soft loans and investment and loan guarantees.

l Complete the set of agreements aimed at avoiding double taxation, so that GCC and Jordanian companies operating in each other’s jurisdictions do not have to pay taxes twice.

l Encourage more partnerships between GCC and Jordan businesses. The Amman meeting was attended by representatives from both business communities. It was agreed that they would organize investment and trade conferences to explore new partnerships.

l Pay special attention to small and medium enterprises (SMEs), where the potential is greatest for generating new jobs. SME Representatives from Jordan and the GCC were encouraged to engage and avail themselves of all available support systems.

Beside the economic team, which met last week, other teams have been at work to flesh out the burgeoning GCC-Jordan strategic partnership. As this multi-faceted work evolves, it can provide an example of regional integration that builds on long-standing historical ties and long-term mutual interests. But the difficulties are aplenty!

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