Unpacking (and Re-Packing) the Refugees Compact Experiment: Lessons From Jordan Two Years On

Erica Harper

WANA Institute, Royal Scientific Society in Amman, Jordan, February 2018



The London Compact Agreements encapsulated host country commitments to integrate refugees into their labor markets, conditional upon significant increases in donor funding, concessional loans and market access. The refugee compacts represented a paradigm shift by (a) recognizing that low- and middle-income countries host the vast majority of refugees and carry a disproportion share of the fiscal burden; (b) revealing the willingness of European states to pay a high price to stem the flow of asylum-seekers; and (c) the huge concessions made by Compact partners despite competing political imperatives. However after two years, there has been slow progress on both work permits and pledges in Jordan due to several challenges: (i) appeal of legalized working status for refugees was significantly overstated; (ii) sectors where Syrians were expected to be most easily integrated required employees to undergo significant in-house training and businesses were unwilling to make this investment in refugees; (iii) even if all male and female Syrians who were able/willing to work could find employment, Jordan would still only be able to reach around 80 per cent of its 200,000 work permit goal. Donors were unwilling to make good on pledges until formalization had taken place, and catalytic investments were needed to incentivize employers to regularize informal employment or hire Syrians. The author suggests that Jordan might seek to renegotiate the terms of the Compact Agreement by demonstrating that they are bearing most of the costs of forced displacement. Investment should reorient from manufacturing towards sectors where Jordan might develop a comparative market advantage (e.g. water-savvy agriculture, renewable energy and ICT). Jordan would need to address institutional impediments (opaque regulatory framework, difficulty accessing credit and high energy costs).The author argues that labor force integration makes sense for refugees, humanitarian actors and their donors, as well as countries of future repatriation, however how host states fare depends on their economy. Where an economy is stagnant or contracting, refugees compete with existing labor; if the influx is large relative to the size of the economy, wages and employment will most likely be negatively affected. This impact will be felt by both refugees and nationals, and may persist for many years. In such situations, assistance will be needed in the form of economic stimulus.

To realize the potential of refugee compacts, the author recommends: (1) early investment of humanitarian funds in livelihoods programming; (2) leveraging wealth in global capital markets, by introducing mechanisms to diffuse risk and overcome the bureaucratic hurdles that dissuade investors from deploying their capital, identifying motivated investors, and building new public–private investment institutions that can provide finance to frontier markets through mechanisms other than debt financing; and (3) transferring risk to the insurance sector.

The author concludes that “…against the challenges of protraction, the [status quo] humanitarian model being applied is astonishingly inefficient. Dependent on long-term humanitarian assistance, refugees forsake dignity, opportunity and self-determination. For host states, systemic development deficits are exacerbated, while new economic and social cohesion challenges are introduced. Donors support the basic assistance needs of unprecedentedly large population groups, and then face backlash when they withdraw. And when countries recover from conflict, they are returned a depreciated human capital pool, often stripped of its best and brightest”. She argues that the humanitarian community should embrace burden-outsourcing, because it is an improvement on the status quo, and far better than the alternative outcome.