ERDL would be complemented by a proposed parallel World Bank-supported Export Development Project. The Government's reform program has been effectively implemented despite the disruptions caused by the Gulf crisis of 1990-91. Notwithstanding this progress, major economic challenges still remain. Jordan needs to address a number of domestic policy constraints. The regulatory regime is tilted in favor of public enterprises.
Investment incentives are often discretionary and trade procedures burdensome.
The public sector is overextended and inefficient in a few respects. The financial system is segmented, not sufficiently flexible, and characterized by high costs and low volume of financial intermediation. Jordan will have to restrain aggregate demand and sustain economic growth over the medium term. On the first account, peace carries new growth opportunities for Jordan's banking sector, tourism and exports, and opens up the possibility of a major restructuring of trade patterns. It offers the prospect for regional cooperation in water, natural resource management and environmental protection, and it could lead to a broad-based investment recovery throughout the region.