US embassy cable - 04AMMAN1784

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 001784 
 
SIPDIS 
 
E.O. 12958: DECL: 03/09/2014 
TAGS: PGOV, KDEM, ECON, JO 
SUBJECT: IMPENDING PRICE AND TAX HIKES THREATEN PUBLIC 
STANDING OF PRIME MINISTER AND CABINET 
 
REF: A. AMMAN 01452 
 
     B. 03 AMMAN 07804 
 
Classified By: Charge d'Affaires David Hale for Reasons 1.5 (b), (d) 
 
 ------ 
SUMMARY 
------- 
 
1.  (C) The GOJ has publicly confirmed that it will raise the 
general sales tax rate and the prices of oil derivatives as 
early as April.  Despite the GOJ's efforts to prepare the 
country for these increases, Jordanian public opinion remains 
overwhelmingly opposed to price hikes. Prime Minister Fayez 
has not yet suffered a drop in his public approval rating, 
but expectations for his government have already declined 
since being installed last October.  The implementation of 
price and/or tax increases will cause Fayez and his Cabinet's 
public standing to take a beating.  But we see no signs of 
wavering in the government, which is committed to current 
fiscal reforms -- elements of which are conditions for 
disbursement of U.S. assistance.  End Summary. 
 
------------------------------------- 
ASKING THE PUBLIC TO TIGHTEN ITS BELT 
------------------------------------- 
 
2.  (U) Government spokesperson and minister Asma Khader told 
journalists March 1 that planned price hikes on some 
commodities could come into effect as early as April.  She 
repeated government assurances that the April increases would 
be the last for this year, but did not rule out further hikes 
in 2005.  Minister of Finance Mohammed Abu Hammour announced 
the same day that an increase in the general sales tax rate 
from 13 to 16 percent would be enacted in April.  On March 4, 
Khader stated that the government would publish at the end of 
the month a series of economic measures to raise the price of 
fuel and other oil derivatives, but that the Cabinet was 
awaiting a Finance Ministry study before deciding on specific 
increases.  Khader added that the measures would seek to ease 
the burden on lower-income Jordanians caused by the price 
hikes. 
 
3.  (C) After being caught off guard by the strength of 
initial opposition to its proposed price and tax increases, 
the GOJ has since attempted to engage MPs and public opinion 
makers in an attempt to soften public reaction to these belt 
tightening measures (see ref a).  Nevertheless, the Jordanian 
public remains strongly opposed to any increase in the price 
of subsidized commodities or taxes.  According to a public 
opinion poll released in February by the Center for Strategic 
Studies (CSS), 83.4% of 1,379 respondents agreed that the 
government's reasons for the planned hikes were unjustified. 
Nearly 91% of this group further agreed that proposed raises 
in civil servant salaries will not cover the higher cost of 
living resulting from increased prices. 
 
--------------------------------------------- 
FAYEZ UNDAMAGED BY PROPOSED HIKES ... FOR NOW 
--------------------------------------------- 
 
4.  (U) The same CSS poll attempted to gauge public opinion 
on the government's performance both among a "national 
sample" and a sample of 601 public opinion leaders including 
businessmen, political party and trade union leaders, 
academics and statesmen.  CSS had conducted a similar poll in 
early November 2003 to measure public expectations for Prime 
Minister Faisal al-Fayez and his Cabinet ministers after 
being sworn in on October 28 (see ref b).  Among the opinion 
leaders polled in February, 73% found that Fayez had been 
successful in his job as PM (compared with 68% who expected 
him to succeed in November 2003), although only 53% judged 
his Cabinet ministers as having performed successfully (down 
from a 60% expectation of success in November).  The national 
sample showed no significant change in its evaluation of the 
PM's successful performance (63% in February compared to 64% 
in November 2003).  Similarly, the percentage of respondents 
in the national sample who optimistically thought that 
Fayez's government would be "successful to a great extent" in 
shouldering its responsibilities remained between 16% and 
17%. 
 
5.  (U) With respect to the economy, expectations for success 
in economic development dropped from 48% to 38% among the 
national sample since the government's formation, with a 
similar drop from 50% to 42% among opinion leaders. 
Expectations for genuine political development took a similar 
tumble, falling from 55% to 45% among the national sample, 
and from 60% to 51% among opinion leaders.  Comparing the 
results of opinion polls over the course of the last nine 
years, CSS Director Fares Braizat noted that there was a 
persistent and growing lack of public confidence in the 
ability of successive governments to perform their duties. 
He warned that this decline could continue if current and 
future governments did not take measures that substantially 
stemmed poverty, unemployment and corruption. 
 
COMMENT 
------- 
 
6.  (C) The GOJ appears resolute in its plans to raise taxes 
and the prices of oil derivatives, but it is unlikely to 
raise prices of other subsidized commodities.  Public 
transportation fares may also be subject to an increase. 
Public opposition could well limit the scope of these 
increases and/or lead to spending measures (such as civil 
salary increases) to soften the blow of the hikes.  (However, 
we see no signs of wavering of the GOJ's commitment to the 
specific economic and fiscal reforms agreed as conditions for 
disbursement of U.S. assistance).  Regardless, Fayez's public 
standing, which has remained relatively solid over the past 
months, will almost certainly suffer when the price and tax 
increases are enacted.  The already declining public 
perception of his Cabinet ministers, some of whom have been 
vilified in Parliament for alleged corruption, may likewise 
take a blow.  As these officials are not elected and are not 
directly accountable to Parliament, however, low public 
popularity will not necessarily lead to changes in the 
Cabinet, unless it begins to affect King Abdullah's image and 
ability to implement his agenda for the country. 
 
Please visit Embassy Amman's classified web site at 
http://www.state.sgov.gov/p/nea/amman/ or through the 
Department of State's SIPRNET site. 
HALE