Is Amman expensive?
Jordan Times July3, 2007
The aptly named Economist Intelligence Unit (EIU) of the Economist magazine named Amman the most expensive city in the Arab world in its Worldwide Cost of Living Survey of 2007.
Media protestations from Jordanian analysts have denied the result of the survey and its ranking.
Before jumping to the defence of this dear, dear city of mine, I will first explain the meaning of this ranking and another ranking, “The Cost of Living Report”, by Mercer, which also ranks Amman consistently among the most expensive cities in the Arab world.
Both the EIU and Mercer conduct these surveys for companies and international organisations, to use in providing compensation for their executives during travel or stay in cities outside their place of permanent domicile and work.
The EIU looks at 177 products in 130 cities that are classified into 10 subcategories (shopping basket, alcoholic beverages, household supplies, personal care, tobacco, utilities, clothing, domestic help, recreation and entertainment and transportation) to calculate its indices.
The Mercer report covers almost the same subcategories and countries; however, the EIU report covers more Arab cities.
The indices do not include the cost of housing rent, international schools and business trip costs.
Both reports have consistently placed Amman among the most expensive in the Arab world. In 2007, and for the second year in a row, the EIU survey results gave Amman the not-so-sought-after title of the most expensive city for travellers in the Arab world, followed, in close second place, by Dubai; Mercer ranked Amman third, after Dubai and Algiers.
Cities like Kuwait, Jeddah, Riyadh and Khobar, where alcohol is banned and tobacco is lightly taxed in comparison with Jordan, were considered low-cost cities by the EIU.
Furthermore, falling interest rates, the low exchange rate of the US dollar, and price controls led to an overall increase in the rank of most Arab cities (meaning they were ranked as being cheaper), except for Amman.
Jordan also witnessed tremendous price hikes in recent years.
This resulted from the following: interest rates were increased 17 times over the last two years; the price of energy rose with the world price and the “government subsidy” was removed; price controls on goods and services were removed with the onset of World Bank and IMF reforms; and being a net importer (the trade deficit makes up 53 per cent of the GDP) from countries that use currencies other than the dollar — which the Jordanian dinar has been pegged to since 1995 — imports became more expensive.
The recent estimate of the Department of Statistics that inflation in the first quarter of 2007 was 8.2 per cent and a recalculation after adjusting the consumer basket will show an even higher inflation rate.
Both rankings mean nothing to the average Jordanian consumer whose per capita income is $2,540 in 2007, and where less than 10 per cent of households make more than JD800 per month.
This Jordanian consumer, more than 90 per cent of the population, will not wine and dine at places where the bill for a meal would be higher than a month’s salary, or drink a cup of coffee priced the same as in Kuwait and the Gulf at one of the international franchise coffee shops which equals the salary for a day.
No, low- and middle-income Jordanians go to the cheaper places, where the short-stay trippers will most likely not go.
As for those who want to encourage tourism and business tourism, maybe policy makers need to review the high cost of energy that hotels pay (three time the rate paid by industry, even though tourism has been classified as industry), and the 16 per cent sales tax added to the 10 per cent compulsory service charge, the high tax customs duties on imports, and the many other taxes that make Amman expensive for travellers.
The upshot is that Amman is truly expensive and becoming more so, and most likely the most expensive city in the Arab world for travellers and foreigners.
And, yes, if you are one of the blessed 5 per cent of Jordanians who can afford to eat and drink out, remember, you are an elite bunch.