By Suleiman al-Khalidi
REUTERS
AMMAN: Jordan's King Abdullah faces growing challenges ranging from protests fuelled by economic hardship and demands for reform to resistance within his tribal power base over political liberalisation that could weaken its influence.
 
Jordan's defining faultline between its "East Bank" and Palestinian citizens also poses a long-term threat.
 
Having seen the uprisings sweeping the Arab world, Abdullah has tried to implement long-promised political reform, despite opposition from a security apparatus and bloated bureaucracy whose salaries eat up most of the $9 billion budget.
 
The most far-reaching has been a package of constitutional amendments proposed last August to empower parliament and pave the way for the prime minister to emerge from a parliamentary majority instead of being picked by the king.
 
To head off civil unrest, authorities expanded subsidies to the tune of $1.4 billion and channelled tens of millions of dollars to develop provincial areas and offer more handouts to East Bank citizens used to preferential treatment in state jobs.
 
The moves took some of the steam out of protests which broke out across the resource-poor kingdom since January, but did not stop disgruntled indigenous East Bankers from jockeying for a bigger share of state perks.
 
The state's support of East Bankers, who hold political power, in budget allocations and subsidies has also brought to the surface underlying tensions between them and the country's majority population of Palestinian origin.
 
Analysts say that by sacking a much-criticised prime minister in October, the king defused political tensions that had grown after pro-reform rallies were met with violence by members of conservative tribes.
 
But a reform-minded premier Awn Khasawneh, a judge who worked at the Hague-based International Court of Justice, faces an uphill task of reversing a legacy of perceived official corruption and mismanagement.
 
East Bank Jordanian tribes, who form the bedrock of support for Abdullah's Hashemite monarchy, felt threatened by falling state benefits brought about by the global financial crisis and economic reforms of previous governments, as well as any prospect for political empowerment of Palestinian Jordanians.
 
Palestinians dominate business but are sharply under-represented in politics. Electoral laws ensure that urban centres where most of them live return far fewer parliamentarians per voter than rural tribal areas.
 
Protests have broken out in East Bank tribal strongholds as well as around Amman, where Palestinians -- and Islamists, who form the most popular political force -- are concentrated.
 
Although all demonstrators have been chanting for reform, East Bank protests are motivated largely by concerns over state jobs and benefits that go to pro-state tribal leaders, while demonstrations in Amman are fuelled by a sense of injustice in Jordan's electoral laws.
 
Even before the wave of protests inspired by the uprisings in Tunisia and Egypt, Jordan witnessed an escalation of violence in provincial regions that are strongholds of East Bank tribes, fuelled partly by competition for the dwindling number of jobs provided by the state and perceptions the capital Amman was being favoured by a bigger share of investments and wealth.
 
Jordan hosts the largest number of Palestinian refugees and when the kingdom made peace with Israel in 1994 it got no guarantee of right of return for its Palestinian citizens.
 
Analysts say the issue would come to the fore if the breakdown in Middle East peace talks raises the prospect of a permanent settlement of Jordanians of Palestinian origin.
 
To head off the unrest that has swept the Arab world, the government introduced extra social spending packages and subsidies since January ranging from salary rises for civil servants to a freeze in gasoline price rises and lower taxes on basic commodities.
 
The extra spending has pushed up the projected 2011 budget deficit to a forecast 6.2 percent of GDP. Officials hope that Gulf aid, especially from Saudi Arabia, will partially offset lower revenues and sluggish business.
 
But economic sanctions on neighbouring Syria, which is a major business partner, have angered importers who say it will raise costs and deal another blow to a stagnant economy.
 
Expansion of spending on civil service salaries and pensions, which form 80 percent of the budget, has pushed debt beyond a legally permissible 60 percent of GDP, analysts say.
 
Khasawneh's government aims to hike electricity prices and reduce subsidies on energy to bring fiscal consolidation.
 
But rising pressures from the country's powerful state bureaucracy and expected civil salary rises will test the ability of the government to reduce spending. This has sent negative signals to the vibrant private sector, which the treasury relies on to generate jobs and taxes.
 
It could jeopardise a modest growth target of around 3 percent in 2012, from a lower forecast 2.3 percent this year as the economy struggles to recover.