Jordan’s annual renewable resources of 61m3/pc/y are just 20% of the threshold for severe water scarcity. Withdrawal of water is currently one-third above renewable limits, and demand is expected to exceed supply by 30% over the next decade. Rapid population growth, the overwhelming refugee influx and urbanization trends have put more pressure on natural resources, specifically water sources. Additionally, climate change is exacerbating the challenge through increased rainfall variability and more frequent droughts. Water stress is exacerbated by weak water infrastructure, damaged irrigation systems and misallocation of water resources.

The agricultural sector uses 49% of the total water budget, while contributing 3.5% to GDP and employing 3% of the workforce and has yet to modernize. Low agricultural productivity contributes to rural poverty, and family farms are often dependent on women’s unpaid agricultural labour.  As Jordan imports 95% of its food, the Ukraine crisis has increased the disruption of supply chains and increased inflationary pressures making it highly vulnerable to food price fluctuations. In 2018, Jordan’s energy import reached 92% in the form of oil and gas, making it highly vulnerable to fluctuations in oil prices. Water supply relies on electrical energy as the electricity cost forms 50% of total water sector operating costs.  Thus, energy is closely tied to water resources and food production through the water-energy-food nexus.

Jordan has a crucial opportunity to ensure water and energy conservation through tariff reform. To increase food security and boost rural incomes, Jordan’s agricultural sector will need to shift towards greater use of recycled water and drought-resistant crops. Shifting to a green economy, particularly in the agriculture, tourism and energy sectors, can help revitalize the economy and create more dynamic, inclusive and sustainable growth. Boosting access to finance for green investment would help to harness the private sector to the green transformation agenda. Further, inclusive governance on the water-energy-food nexus will enable better implementation and enforcement of climate change policies and action plans. There are some real opportunities here for reforms and infrastructure development.

Public sector employment in Jordan accounts for 20% of GDP and 27% of recurrent expenditure. Jobs in the public sector enjoy a wage premium, permanent employment contracts and generous social protection. Meanwhile, half of all private-sector jobs are in micro-enterprises employing fewer than 10 workers and are often informal positions without social insurance or protection under the labour law. They are often filled by migrant workers and refugees, which depresses wages.

Secondary and higher education has had a traditional focus on producing public servants, rather than ensuring the skills required for business, science or technology. Vocational training and education are seen as low-status alternatives for those unable to succeed in academic education. Jordan can no longer continue to expand public-sector employment, and civil service numbers have been officially frozen for most of the past decade. Further, Jordan faces weaknesses in innovation.

To overcome this stagnating labour market, Jordan needs to rely on unskilled migrant workers to fill low skill jobs in order to free up more-skilled Jordanians for specific sectors and to focus on creating jobs that can harness the skills and creativity of young male and female Jordanians. The government has identified the knowledge economy as a sector with the growth potential to make Jordan a technology and innovation hub for the region, specifically to tackle challenges of storing solar energy and to protect resources.

A major effort will also be required to shift the expectations of young people and women and to equip them with the skills needed for a knowledge economy. This calls for partnerships between the government, the private sector and civil society organizations, with women and young people being well represented.

Unemployment in Jordan is stubbornly high, reaching 24.1% in 2021. The Jordanian economy is challenged to absorb more than one million young Jordanians into the job market over the next decade. Young people and women are largely excluded from the labour market and face high rates of unemployment, 47.9% for 20–24-year-olds and 33.1% for women.  Unemployment among women with university degrees is 75.8%.  Jordan’s rate of female labour force participation was 14% in 2020, compared to around 54% for men.

Unemployment shows little response to rates of investment due to rigidities in the labour market. Jordan needs to simplify processes for new formal enterprises to set up as it is currently ranked 75th in the Ease of Doing Business ranking. This has led to high rates of informality, and mismatches between the skills produced in the education system and the needs of employers. There are also notable barriers to the participation of young people, refugees, migrants and people with disabilities in the labour force.

In tandem with its efforts to diversify the economy, Jordan must equip its large, young, educated pool of workers for creating an investment environment, promoting entrepreneurs, start-up incubators and value chains. It needs to improve its ease of doing business to allow job creation in the formal private sector.

This will require removing bottlenecks, improving access to finance and value chain integration, simplifying legislation, enhancing services and infrastructure and promoting female Labour Force Participation. Also, Jordan should improve the labour market information systems and provide social protection to increase productivity and raise awareness among women on taxpayer rights and social protection. Finally, improvements to the quality and relevance of education and skills are crucial to remove the gap between demand and supply of a skilled workforce.

Jordan's institutional capacities could benefit from the development of more comprehensive implementation plans, including explicit actions, clearly defined institutional roles, and sufficient financial resources for a more effective execution of its policies and strategies. Mandates are often unclear and overlapping and cooperation across institutions is challenging. High turnover of leadership in government institutions creates incentives to launch new high-profile projects and initiatives, rather than sustain progress on long-term reforms. Many of the SDGs require partnerships with business and civil society, which remain in their infancy. There is a shortage of data in many of the key policy areas, and the data that is collected is often not informing policymaking. Given the tightening fiscal space, boosting the efficiency and effectiveness of government is an urgent priority to implement the Renaissance Plan, which includes decentralization, electoral reform and measures to improve government performance, as well as addressing the risks of corruption around public procurement that are aided by a lack of transparency and high levels of bureaucratic discretion.

If Jordan is to achieve its development objectives, there will need to be a refreshing and reenergizing of its governance and budgeting processes. This would be helped by executing just and inclusive tax enforcement and promoting a culture of openness in government and accountability for results. This is in addition to the need for available, comprehensive and regularly updated data to ensure full monitoring and evaluation on the effectiveness of implementing economic modernization vision.  The application of the Integrated National Financing Framework (INFF) is helping to address problems in development policy implementation, specifically in defining the financing strategy, monitoring system and a governance mechanism in Jordan.