A common observation and complaint
in Jordan is that policymakers are hardly ever held accountable for their
performance while in office. One way to evaluate policy leaders’ successes and failures
is to examine the impact of their policies or terms in office on the value of
stocks in the Amman stock market — more than half of which is comprised of the
savings of Jordanians. A quick review of what happened to market capitalization
of the domestic companies listed in the Amman Stock Market from 2007 to 2020 is
illuminating.
اضافة اعلان
One reason that market
capitalization is a reasonable indicator of performance is that the stock price
encompasses several variables in addition to the performance of the firm, such
as relative optimism, positive or negative expectations, the level of trust in
the institutions of the country, harmonization between fiscal and monetary
policies, and the impact of external shocks on the supply and demand sides of
the economy.
The losses in numbers
In 2007, the market
capitalization stood at around JD29 billion. After many government executives
decided that Jordan should become a victim and partake in the global credit
crisis (and hence began to use this as an excuse for their many policy
failures), the market capitalization value dropped to JD19.3 billion in 2011. Note
that this was before the onset of the Arab Spring, during which Jordan was
among the least-affected countries in the Arab world. The loss to stock-market investors
at the time was close to JD10 billion, or 34 percent of the value of their
investments.
The market capitalization value dropped to JD19.3 billion in 2011… the loss to stock-market investors at the time was close to JD10 billion, or 34 percent of the value of their investments.
However, the losses did not stop
there. From 2012 until 2016, the drop in capitalization totaled JD1.7 billion.
Then, from 2016 to 2018, the loss in capitalization slowed down to JD1.3
billion, only to rise again in 2019 by JD1.2 billion, and in 2020 by JD2
billion.
Questioning the cause
What should irk everyone is that
the total loss of savings of people who invested in the capital of companies in
the stock market reached JD16 billion, which is 56 percent of their initial
investment. But did anyone raise a red flag here or there? No — many of the so
called “experts”, which is a common designation in Jordan, blamed it on
speculation, not knowing or basically ignoring that speculation is a huge
factor in any stock market, especially among non-institutional buyers.
What should irk everyone is that the total loss of savings of people who invested in the capital of companies in the stock market reached JD16 billion, which is 56 percent of their initial investment
So, were executives held
accountable? Not at all! Was such a decline in capital due to monetary or
fiscal policies? I believe both, but I am not aware of any research into this. Were
the reasons behind the losses domestic or external? Most external factors
actually led to gains, as in the case of the influx of rich émigrés and
industrialists who increased supply and demand in the country. If domestic
reasons were to blame, then, which ministerial cabinet caused the most damage,
and was it rewarded or punished? The numbers spell out the answer — there is no
need to highlight the obvious. All were rewarded, and none were chastised.
Beyond blame throwing,
mudslinging, and name calling, what is the solution? Recall that the present
state of denigrated market capitalization and perished savings is but a result
of many flows. Is it about time that policy makers pay attention to the plight
of the millions who lost billions? I think it is.
Yusuf Mansur is CEO of the Envision Consulting Group and former minister of state for economic affairs.
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