Middle East | Turkey and Jordan’s quest to revive Middle East trade

Turkey and Jordan’s quest to revive Middle East trade

March 31, 2016 3:15 AM (UTC+8)

 

Trade, rather than the situation in Syria, was at the core of Turkish Prime Minister Ahmet Davutoğlu’s visit to Jordan earlier this week. Besides boosting bilateral trade, Turkey is eyeing the Jordanian Red Sea port of Aqaba as a transit route towards Gulf markets

ISTANBUL–Turkey and Jordan have two things in common: They are the only countries sharing a land border with both Syria and Iraq, and together with Lebanon they are the largest recipients of Syrian civil war refugees (Turkey hosting 2.7 million individuals and Jordan 636,000 as of the time of writing.)

Turkish Prime Minister Ahmet Davutoglu holds talks with King Abdullah II of Jordan
Turkish Prime Minister Ahmet Davutoglu (L) holds talks with King Abdullah II of Jordan in Amman

While the governments of these countries would probably prefer to be without rather than having these commonalities, Ankara and Amman are now discovering a third linkage, which is the fact that in the war-ravaged Middle East they do not have many alternatives left in terms of stable trading partners, except each other.

Back in 2010, Turkey and Jordan spearheaded efforts to create an economic integration project, which would also include Syria and Lebanon in the first phase, and Iraq in the second.

Prospects for this initiative were dimmed when Arab uprisings engulfed the region, and the outbreak of civil war in Syria and the emergence of a terrorist threat in the shape of the self-proclaimed Islamic State buried away whatever hope was left for economic integration for the foreseeable future.

What Turkey and Jordan are now trying to do is to strengthen their bilateral link, as prospects for multilateral trade integration in the Middle East are extremely bleak.

This is why trade, rather than the situation in Syria, was at the core of Turkish Prime Minister Ahmet Davutoğlu’s visit to Jordan earlier this week. When Davutoğlu met with King Abdullah II and his own counterpart Abdullah Ensour in Amman, terrorism was condemned by the two sides and a rhetorical consensus was declared on “supporting an end to hostilities in Syria”, while the real business of the day was about trade and investment between the two countries.

Since 2011, both countries witnessed a decline in their trading volumes with the rest of the Middle East. However, the bilateral trade between Turkey and Jordan has actually gone up, from $573.3 million in 2011 to $962.7 million in 2015.

The Turkey-Jordan free trade agreement that had entered into effect as of March 1, 2011 has surely played a role in this trend, and although the numbers are not huge, the increase over this four-year period has been crucial. It occurred despite spiraling instability in the region, which has, quoting Davutoğlu’s words in Amman, “erected a big wall between Turkey and Jordan”.

In the extremely fragile situation of the Middle East today, Turkey and Jordan increasingly depend on each other economically, and in addition to trade, the $300 million worth Turkish investment stock in Jordan as boasted by Davutoğlu is a significant component of the relationship.

However, as things stand it appears that there is a certain level of asymmetry in the relationship of economic interdependence too as Turkey depends, and will increasingly do so, on Jordan rather than the other way round.

It is not only about the fact that Jordan is a major market for Turkish exporters and Turkey has a surplus in its trade with this country (in 2015, Turkish exports to Jordan outpaced imports by 6.5 times), it is also and mainly about Turkey’s severely undermined access to the markets of the Gulf region. Turkey primarily needs Jordan as a transit route towards the Gulf markets, and the keyword here is: Aqaba.

Turkey’s trade with the Gulf is suffering from the lack of open routes through which containers can be transported. Syrian and Iraqi routes are closed. The Egyptian intermodal option combining the sea route with land transport is not working efficiently due to the political coolness between Ankara and Cairo. The Iranian route is not only long and costly, but also politically unstable. Israel’s Haifa port remains an alternative, but after being ferried there, container trucks still need to traverse Jordanian territory to reach the Gulf countries.

A second option, which topped Davutoğlu’s agenda in Jordan, is the use of the Jordanian Red Sea port of Aqaba. The plan is to ferry the container trucks from Turkey’s Mediterranean port of İskenderun to Aqaba, from where they can continue to destinations in the Gulf. This option is attractive for the Turks as it bypasses Israel and steers clear from the terrorist-infested areas of further north (which means significantly less danger for the truck and its driver, and much lower risk insurance premium for the exporter).

The idea of using the Aqaba port needs to be developed, but there is already some important work done. Turkish Airlines have launched direct flights to Aqaba (four times a week), becoming the only international carrier to do, and this is a significant advantage. The Turkish business community’s growing interest in this port and the accompanying special economic zone is another asset in this sense. A number of Turkish business associations conducted field trips to Jordan prior to Davutoğlu’s visit, and Aqaba was at the center of their work in each case.

In a field study report released by Turkey’s Foreign Economic Relations Board (DEİK), Aqaba is regarded as “Turkish investors’ stepping point into the Gulf countries and Africa”; possibilities for establishing a “Turkish zone” within Aqaba’s special economic zone are discussed (following the example of the Shenzhen-Aqaba Industrial Zone which will be financed by the Chinese); and a ferry route between İskenderun and Aqaba is proposed to “solve the problem of low levels of trade with region due to transportation issues.”

Turkey and Jordan can further increase their trade volumes, and if planned and developed well, the Aqaba route can provide an additional relief for Turkish exports. However, these won’t change the fact that the entire region between these two countries is devastated by civil war and terrorism. Despite all the economic progress that Turkey and Jordan have made, can make and will make, the Middle East will be far from “business as usual” in the years to come.

Dr. Altay Atlı is a lecturer in the Asian Studies program of Boğaziçi University in Istanbul, and a senior research fellow at Turkey’s International Strategic research Organization (USAK).

(Copyright 2016 Asia Times Holdings Limited, a duly registered Hong Kong company. All rights reserved. Please contact us about sales, syndication and republishing.)

Comments