HASHEMITE KINGDOM

FOURTH QUARTER 2001 OF JORDAN A Quarterly Publication of the Jordan Country Unit

Public Disclosure Authorized Update The World Bank Group

STRATEGIC ISSUES FOR FURTHER DEVELOPMENT OF THE EDUCATION SECTOR

g Introduction policy objectives of this program focused on upgrading teacher qualifications, upgrading Jordan is currently embarking upon an ambitious curricula and textbooks, and expansion and Public Disclosure Authorized program of social and economic reform with enhancement of school facilities. During the human resources development at its center. The intervening period, significant progress has been following notes outline the core strategic issues, made towards the achievement of these goals. which are being addressed at the respective levels While other policy objectives can be implied from of the education sys tem for their achievement. government directives, programming initiatives or other fora, an explicit policy framework for basic education addressing objectives such as access, g Basic Education equity, relevance, efficiency, financing, etc., is The Jordan “Accelerated Social and Economic currently not in place. The absence of this Development Plan” recognizes education as a framework presents challenges at all levels of the cornerstone of development and the principal system in terms of prioritizing inves tments, means of improving the welfare of its citizens. establishing program goals, and implementing effective monitoring and evaluation systems.

Public Disclosure Authorized With the guiding purpose of basic education to produce a literate and numerate population, and Formulation of a policy framework reflective of current priorities is seen to be an important also to lay the foundation for further education, strategic objective. It is understood that a high the primary and secondary educ ation systems need to undergo continuous adaptation to the level policy forum on basic education involving international participation is planned for the near changing characteristics of the wider society. Recognizing the shift from a resource-based future. The output from this forum is expected to economy to a knowledge-based economy, and the assist in the development of a policy framework attendant need to incorporate enhanced levels of for Jordan. student learning abilities, analytical skills, team based activity, and computer literacy at the early Governance and Leadership stages of the education system, the following The Ministry of Education and its General issues are seen to be of strategic importance. Directorates are respons ible for achievement of Clarity of Policy Framework Inside this Issue Public Disclosure Authorized The current basic education system in Jordan Recent Economic Developments 7 builds on the 1987 National Conference on Jordan – A Pione er in Water Sector Reform 11 Educational Development, leading to a set of recommendations that provided the basis for a Bank Group Operations 16 ten-year education reform program. The principal World Bank Publications 21

Hashemite Kingdom of Jordan Update the general objectives for education in the being broadly vocationally or iented. This is consi- Kingdom, including the design and dered to be unsustainable, inefficient and implementation of policies and plans. District inconsistent with the broader social and economic Directorates of Education in the governorates are development objectives of the country. It is responsible for the delivery of programs and recommended that the proposed education policy program quality. The education reform program forum place emphasis on this issue with a view to recognized the need to devolve increased levels of providing guidelines to undertake a fundamental responsibility to the local level and the individual reorie ntation of the secondary vocational stream. school level in order to meet the program objectives. No specific steps were identified Information, Communication Technologies however, to pursue such devolution. The Ministry (ICT) continues to maintain a high level of centralized authority with little autonomy being devolved to Jordan has well understood that a universal ability District Directorates or schools. This is seen to to fully utilize all dimensions of information and constrain growth, development and innovation. communication technologies will be central to the Following the articulation of the national achievement of its economic development education policy framework, it is recommended objectives. A similar recognition exists that the that detailed consideration be given to the development of these skills must begin at an early development of the most effective institutional age. In cons equence, a comprehensive strategic framework for implementation. Recognizing that framework for the incorporation of ICT into the high caliber schools are universally understood to basic education system has been formulated and be a direct function of the caliber of the school initial steps undertaken towards implementation. Principal, a similar level of consideration is This is clearly an important strategic initiative recommended in terms of program initiatives to which, together with other program reform issues, build educational leadership at all levels. calls for continued inves tment and support.

Program Structure and Content Professional Development

Two linked strategic issues are seen with respect While major investments have been made in to program structure and content. The first is that physical infrastructure for the development of basic education programming is strongly oriented basic education, the strategic thrust must now towar ds “teaching” as opposed to “learning”. This focus on building intellectual and institutional approach derives from the competitive and infrastructure. While teacher qualifications have academic nature of the Tawjihi examination been upgraded through the introduction of a which emphasizes the assimilation of information requirement to hold a baccalaureate degree as a and the development of abilities to respond to minimum prerequisite, the recommended shift questions of a standardized format. If an objective towards building a learning culture at the school for basic educ ation is seen to be preparation for level; the incorporation of ICT; program lifelong learning and integration of the individual adaptations; and the transfer of increased levels of into the productive sector of a knowledge autonomy to the local level will all call for major economy, then learning skills, analytical skills, investments in pr ofessional development. It is integrative abilities, and social adaptive abilities recommended that this issue be studied both are of significantly increased importance. Once quantitatively and qualitatively and an appropriate again, while issues of this nature were referenced strategy formulated. in the education reform program, they did not translate into the design of the education program System Efficiency itself. Within the context of the Jordanian objective to integrate more closely with the global As additional investments are proposed, economy, this becomes a core strategic issue. The maximizing system eff iciency becomes an second structural question relates to the objectives increasingly important core strategic issue. While and content of the secondary vocational stream. recognizing the need to provide equity of access The current program structure is seen to be to defined minimum levels of learning narrowly occupationally oriented as opposed to env ironment, additional investments should only

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occur after instituting multiple shift schooling, with respect to this issue and, without resolution, recruiting and deploying teachers more the work of the Council cannot be effective. The effectively, reducing the indirect costs of second issue relates to the structure, composition, education, and mobilizing community support functions, and relationship of the Secretariat to the have been fully explored. With a population Council. As presently constituted, responsibility growth rate paralleling projected economic to provide the Secretariat function has been growth rates, system efficiency of basic education assigned to the Vocational Training Corporation. continues to be a core strategic issue for Jordan. This is considered to be inappropriate on two grounds: first, the issue of conflict of interest g Technical And Vocational where one of the principal TVET providers is Education responsible for formulating policy options, and second, the skill sets currently resident within The mandate for providing publicly funded VTC do not encompass the range of issues, which the Council will be required to address. technical and vocational education in Jordan, is currently assigned to the Ministry of Educ ation, Continuing support to ensuring the efficient and the Vocational Training Corporation, and the effective functioning of the TVET Council is considered to be a strategic priority. Community Colleges managed by Al Balqa’ Applied University. Private technical and vocat ional education and training providers have Productive Sector Linkages traditio nally focused on the delivery of programs calling for low levels of capital investment and the As a labor surplus, labor exporting economy, utilization of part-time faculty. While the system there has traditionally been a low level of has historically been characterized by low levels incentive amongst Jordanian employers to invest of institutional co-ordination, duplication of in the development of their human resources, or to programming, and weak linkages to the labor establish strong working relationships with training providers. The changing nature of the market, recent developments arising from the establishment of the Economic Consultative economy, coupled with a recognized need to Council and the work of a national Technical and enhance the efficiency of the labor market is currently leading to improved le vels of Vocational Educ ation and Training (T VET) Task Force, has created the potential for increased cooperation between the productive sector and focus and improved efficiency. While recognizing education and training institutions. This these positive developments, the following core cooperation is further facilitated by the strategic issues are seen to require attention. introduction of the Organization of Labor Law that will establish occupational standards, and TVET Council certification of workers. While this trend is encouraging, it is unlikely to be sustained unless A law has been established to create a TVET supported by a clear strategy directed towards building an industry sector council model relevant Council with a mandate to undertake policy and program coordination for the whole system. The to Jordanian needs, and progressively transferring Council is chaired by the Prime Minister with both resources and responsibility for the definition of occupational skills and competencies to such equal representation of membership from the public and private sectors. Powers given to the councils. This is considered to be a strategic Council are potentially sweeping and will require priority in further development of the TVET significant levels of information gathering, data sector. analysis, and the exploration of policy options to guide their efficient and effective implementation. Labor Market Information Two strategic issues arise with respect to the TVET Council. First is the need to establish an All public and private TVET providers in Jordan, agreed set of policy objectives for the sector. The together with student constituency, are working in most fundamental of these is whether the system the dark in terms of either quantit ative or is to be social demand driven or employment qualitative knowledge of the labor market. demand driven. It is apparent that there are Collaboration between the National Center for presently divergent perspectives in the coun try Human Resources Development and the

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Department of Statistics is currently focusing on Capacity Development this issue. A national Occupational Classification System has been agreed, employment surveys are The profile of vocational instructors amongst all being undertaken with increased frequency, and a TVET providers shows levels of work experience Human Resources Development Information in the fields for which they are delivering training System is currently under construction. As this to be inconsistent with the requirements of a system begins to generate a clearer profile of the rap idly changing labor market. Investments have nature of the labor market in Jordan, imbalances been made in the development of pedagogical between training capacity, labor supply and labor skills amongst instructors, but virtually no demand will be thrown into sharp relief. This will investments have been made in the development call for the exercise of strategic choices in the of professional skills. The establishment of a new deployment of resources for investment in national Instructor Development Institute has been building human capital in the country. Support for proposed. While this will meet some instructor policy guidance in considering these choices is capacity develo pment needs, a more holistic considered to be an important strategic issue. strategy that addresses such issues as hiring policies, terms and conditions of employment, and Program Framework, Structure, and Content engagement with the productive sector will need to be formulated. As noted in the commentary on basic education, the MOE secondary vocational stream is Financing considered to be narrowly occupationally specific as opposed to providing a more broadly based Financing the TVET system has, until recently, exposure to different categories of vocation. An been considered to be a public cost. It is now examination of the program framework currently proposed to introduce a levy on productive sector delivered by VTC would show little change from profits that will be used to support the work of the that offered ten years ago. The VTC programs TVET Council and further development of the similarly focus almost exclusively on the TVET system. As noted above, the issue of performance of occupational tasks as opposed to progressive engagement of the productive sector building a broader range of employability skills in human capital development, and channeling required by the global marketplace. While some funding resources through the demand side, as significant changes have occurred in the opposed to the supply side, is seen to be a long- Community College program framework, the term strategic issue. program content continues to be largely information based as opposed to competency g Higher Education based with little input into program design or objectives from the productive sector. It is During the past two decades, the role of apparent from the foregoing that there are institutions of higher education in society has inevit able unsustainable inefficiencies in the fundamentally changed. Universities no longer TVET system. Responsibility for realignment of have an exclusive franchise as the primary programming now falls to the newly established producers of knowledge, disseminators of TVET Council. The question arises as to knowledge, or the credentialing of professional resources and capacity to undertake such a task. workers. Similarly, knowledge workers no longer Recognizing the national objective to introduce work in uni-disciplinary environments but in increased efficiency into the human capital trans-disciplinary environments. Cons equently, development system, the re-direction of internal universities are increasingly being judged by their resources from the delivery of non-productive relevance and contribution to national economic programming to the redefinition of relevant performance and quality of life. While there has program frameworks, structure and content is seen been rapid quantitative expansion in the higher to be a priority strategic issue. education sector in Jordan, there has not been an accompanying qualitative change. While also

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recognizing that the role of universities in society understood that the National Center for Human includes complex social, cultural and historical Resources Development has recently been dimensions, the success of Jordan’s intent to charged with examining th e relationship between integrate more closely with the global economy university programming and employment will be largely dependent upon the orientation of demand. Thus, a core strategic issue for the sector graduates from its higher education institutions. becomes the establishment of crit eria and The following are seen to be core strategic issues mechanisms to rationalize and accredit programs associated with the university sector. offered by public and private universities in the country. Governance, Policy Making and Institutional Culture Research

Previous studies of the higher ed ucation sector in The nature of research undertaken by universities Jordan have noted deficiencies at the governance, largely defines their relevance. Within the global policy, and management levels of un iversities in context of distributed knowledge production and the country. It is perceived that following the interdisciplinary application, the focus, structure, earlier abolition of the Ministry of Higher funding, and practice of applied research requires Education, many of these deficiencies remained a fundamentally different approach from more un-addressed or became aggravated. Issues traditional curiosity driven research. A review of previously identified include: centralization of proposals received under the Higher Education decision-making; absence of accountability; Development Fund provides a strong indicator absence of mechanisms to promote excellence; that universities in Jordan have yet to recognize duplication of programming; weak accreditation these differences, and build linkages with external mechanisms; etc. In terms of institutional culture, partners that lead to effective and relevant there remains a common perception of universities research. It will be important to build on this as teaching institutions as opposed to learning experience and, as a strategic issue, formulate institutions. This is strongly evidenced in the future interventions that provide resources on a static nature of the content of many programs. The more selective basis, to research activities, which recent re-establishment of the Ministry of Higher are visibly driven by national development Education and Scientific Research together with a priorities, and include a broad range of knowledge re-definition of the mandate of the Higher partners. Education Council is seen to comprise a recognition of the issues and a political will to Financing address them. Until the work of the Ministry and the Council are seen to bear fruit however, The need to ensure continuing focus on improving governance, management and ins titutional culture the efficiency of public expenditures on higher will remain as core strategic issues for the higher education remains a core strategic sisue. While education sector. some progress has been made in increasing private sector participation, improving cost Program Rationalization recovery and adopting a basic funding formula for resource allocation, wastage is still seen in It is apparent that the current level of production program duplication and weak control over capital of graduates from Jordanian universities far expenditures. exceeds the national employment demand. As an exporter of human capital, however, and an g National Center For Human economy that benefits significantly from Resources Development expatriate remittances, a rationale for meeting the social demand can be made. The issue remains, A key capability in providing coordination to however, of investing public resources in those national human capital formation strategies is the disciplines most relevant to the development establishment of an institution having a mandate needs of the country, and ensuring that the to undertake policy research and the capacity to academic programs offered are of an serve as an observatory to the labor market. In internationally competitive standard. It is order to fulfill these functions, there is perceived

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Hashemite Kingdom of Jordan Update to be a hierarchy of core factors that determine the mandate given to the TVET Council similarly effectiveness of the institution in fulfilling its role. includes research and policy advisory functions. These include: a political environment which is Thus, the potential for duplication or diffusion of committed to rational and progressive human effort arises, together with the potential erosion of resources development; a mandate to function at the NCHRD mandate. This occurs at a time when the policy level; independence from all education NCHRD’s capacity has been reduced through a and training providers; the availability of core leave of absence granted to the Vice President, the data sets; a staff of well trained analysts; well loss of a number of senior staff, and an developed ICT infrastructure; and the financial organizational focus on the implementation of resources to undertake the necessary scope of externally funded projects. A core strategic issue work. In Jordan, the foregoing functions are for continued development of the education sector assigned to the National Center for Human in Jordan is seen to be a reinforcing of the Resources Development (NCHRD). An NCHRD mandate; providing clarity of mandate examination of the mandate and structure of and function vis-à-vis sister agencies; and the NCHRD would suggest that it satisfies many of provision of sustaining resources to enable it to the foregoing criteria. The following strategic fulfill its role. issues, however, are seen to be important to its continuing effectiveness and sustainability. Investment Co-ordination

Mandate and Policy Research Capacity A significant proportion of development costs for the education sector are provided from a diversity The NCHRD mandate speaks specifically to of external sources. As such, the maintenance of a policy research and coordination. The strong coordination function becomes an organization has provided leadership in a number important strategic issue. As noted in the of key areas relating to education performance introduction to this section of the notes, an arms analysis and initiating improved understanding of length agency such as NCHRD is required to the labor market. The current national ensure complementarity of objectives, to provide development environment, however, is technical Secretariat services, and to undertake significantly more dynamic than in the past, and is program monitoring and evaluation. The present becoming increasingly dependent upon the approach is one that engages senior personnel on a formulation and analysis of policy options and an project-by-project basis to manage activities, ability to undertake rigorous program and project which militates against the development of a monitoring and evaluation. The re-eng ineering of sustaining core capability. Further investment in the Higher Educ ation Council includes proposals this dimension of the NCHRD mandate is seen to to establish an internal research capability. The be a core strategic issue.

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RECENT ECONOMIC DEVELOPMENTS

g Resilient Growth adverse neighborhood effects, could partly be due to the result of ongoing structural reform efforts Real GDP growth (at market prices) reached 3.9 (tax, tariff, trade and fiscal reforms and percent in 2000, after languishing at or below 3 privatization) and partly be due to a response to percent in the preceding four years. Importantly, monetary policy stimulus. The global events the Jordanian economy showed some resilience to following the September 11 terrorist strikes have regional shocks as GDP growth rates recovered to the potential to adversely affect the prospects 4.1 percent average for the first three quarters of through diminished exports, tourism and private 2001, after dipping below 4 percent for the two capital flows. quarters following the start of the Intifada. The Intifada in Palestine, now running for more than a g Inflation Picking Up, But year, affected Jordan directly through reduced Still Moderate arrivals of non-Arab tourists, reduced export of construction material, vegetables and fruits to Inflation in Jordan is moderate averaging only 2.8 Palestine and Israel. However, a surge in exports percent in the last five years, helped partly by the from Qualifying Industrial Zones (QIZs)1 to unchanged exchange rate between the Dinar and United States markets, pick-up in construction the US dollar since 1996. The US dollar’s strong activity, and revival of industrial production and appreciation against the European currencies - an broad-based service sectors have helped Jordan area from which a third of Jordanian imports are pick up growth momentum. All indicators - sourced - and Jordan’s import tariff cuts have exports, im ports, industrial production, private helped in keeping imported input costs low. sector credit - up to the third quarter of 2001 point Inflation, as measured by the Amman Consumer to increasing strength of the economy. The Price Index, which was declining through the year welcome upsurge in the economy, despite recent and only averaged 0.7 percent (annual rate) in

Figure 1. GDP Growth Rate Figure 2. Inflation (in percent, annual rate, and year on year) (in percent, year on year) 4.0 4.5% 4.4% 3.0 4.3% 4.2% 2.0 4.1% 4.0% 1.0 3.9% 0.0 3.8% 3.7% -1.0 3.6% 3.5% -2.0

-3.0

Source: Department of Statistics, Jordan. 1999.07 1999.10 2000.01 2000.04 2000.07 2000.10 2001.01 2001.04 2001.07 2001.10 Note: GDP is measured in constant 1994 market prices. Source: Central Bank of Jordan (CBJ) Monthly Statistics Bulletin, International Financial Statistics

(IFS) and LDB. 1 Exports from QIZs are allowed to enter the United States duty-free and quota-free, as long as they meet specific local content requirements from Israel, Jordan, and West Bank and Gaza. 7 Fourth Quarter 2001

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2000, began to climb during the start of 2001. For g Service Exports Moderate: the year to date, January to October 2001, Remittances Slow, Tourism In Second inflation averaged 1.4 percent. The broadening of Year Of Decline the 13 percent General Sales Tax (phase two) base to trading sectors implemented from January Worker remittances and tourism receipts are two 2001, and upward revisions to petroleum prices important sources of service exports for Jordan. In announced in July-August 2001, are behind the 2000, worker remittances were larger than moderate increase in inflation, as shown in Figure merchandise exports by 30 percent and tourism 2 (above). receipts 3 amounted to nearly half of the exports. Growth momentum in the Gulf economies fueled g Merchandise Exports Surge by strong oil prices has probably helped to After Five Years Of Stagnation increase worker remittances inflows in 2000 by 11 percent. Growth momentum in worker remittance After remaining flat at around US$1.8 billion for inflows have been moderating through 2001 to five years, exports2 jumped by 19 percent in the record a growth of 7.5 percent rate for the first nine months of 2001. This healthy double- cumulative flow for the first three quarters, a pace digit growth was taking root in the third quarter of more in line with the rises recorded in years of 2000, but was interrupted by the outbreak of the stable oil prices. Intifada in the Occupied Territories. However, export growth proved to be resilient, led by the The decline in tourism revenues by 9 percent in clothing sector, and resumed, or, even picked up 2000 was attributed to the regional uncertainty. momentum, through 2001. Analysis for the first This declining trend persisted through 2001 nine months of 2001 reveals that the stellar except for a small up tick of 1 percent in the performance in the apparel and clothing sector second quarter. This up tick is attributed to an helped overcome the drag of mineral and increase in the arrival of Arab tourists. However, a chemical exports. Contributions from the top five decline of 2.4 percent is observed in travel export sectors are shown in Table 1. Much of this receipts for the first three quarters compared to surge (about 60 percent) in clothing exports is led 2000. Given the events of September 11, the year by exports from QIZs, which have shown a near 2001 is expected to turn out to be the second doubling of exports for the past two years. The successive bad year for tourism, which has rest of the strength in exports has come from prompted the Government to lower GST from 13 vegetables and manufactured goods such as to 3 percent for the hotels, and the Jordan Hotels 4 plastics, paper and cement. Association to seek rescheduling of its debt to local commercial banks.

Table 1: Analysis of Export Surge in the g Imports Climb Persistently First Nine Months of 2001 Weight Growth Contribution Helped partly by the strong Dinar and continuing (percent) (percent) (percent) import tariff reductions as a part of the trade Total 100.0 18.5 100.0 reforms, imports continued to climb in the first Clothes 5.9 192.0 61.1 nine months of 2001 to 9.4 percent annual rate in Vegetables 5.5 27.5 8.2 current US dollar terms. This rise comes after a strong surge noted in 2000, when imports Plastic & Article 1.9 54.6 5.6 Thereof increased by 24 percent ending a declining trend of the previous four years. More than half of this Paper & Cardboard 3.8 25.2 5.2 increase came from the import of manufactured Cement 1.5 62.6 5.0 goods and telecommunication equipment as a Source: Staff estimates based on Central Bank of result of higher industrial output and investment Jordan Monthly Statistical Bulletins. Weights are demand. Given that merchandise exports cov ered derived from data for 2000. only a quarter of merchandise imports and that the

3 Travel receipts are treated as tourism receipts. 2 Does not include re-exports. 4 The size of debt is reported to be JD180 million.

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rise in imports outpaced the pick-up in exports, g Easy Monetary Policy Is Having the trade balance continued to be large at around a An Impact third of GDP.

The Central Bank has been relaxing the monetary g Narrowing Current Account po licy to stimulate growth since mid-1999, and in Surplus the more recent period the decline in United States interest rates have created more room for action in In 2000, current account surplus (including this regard. In mid-May 2001, the Central Bank grants) sharply narrowed to a small surplus of 0.7 re-discount rate was lowered to 5.5 percent, taking percent of GDP declining from the peak of 5 the cumulative reduction in the preceding year percent reached in 1999. This was the net result of amounting to 150 basis points. In response, the import surge and weakness in tourism receipts commercial banks have been lowering their witnessed in the year 2000. As expected, the lending rates, though by not as much. The prime current account balance is turning into a deficit for lending rates of commercial banks are in the range the first time in five years in 2001. Though of 8-9 percent with the banks free to set the rate exports surged strongly and the brisk pace of depending upon the borrower’s credit risk. imports slackened somewhat in the first nine Growth in credit to the private sector is showing a months of 2001, moderate growth in service strong, persistent pick-up since mid-2000 to reach exports are expected to lead to a small surplus, or, a nearly 12 percent growth in October 2001, near balance, on the cumulative current account compared to a year earlier. This is a clear sign of for the first three quarters. Gross foreign reserves pick-up in private sector activity compared to the (excluding gold) of the Central Bank which sluggish 6 percent annual average credit growth reached a high of US$3.5 billion in September witnessed in the previous five years, 1996-00. The 2000 helped by UN compensation payments and bulk of the new credit went towards “buying privatization proceeds, have been depleting at a shares and other” - a residual category - (40 moderate rate to US$3.0 billion at the end of percent) and trading sector (28 percent). October 2001, still some eight months of merchandise import equivalent 5.

Figure 3. Current Account Balance Ratio Figure 4. Growth in Private Sector Credit (percent, year on year) (in percent of GDP, yearly)

6 5.0 16.0 4 14.0 12.0 2 0.4 0.3 0.7 10.0 0 8.0 6.0 -2 4.0 -4 -3.2 2.0 -3.8 0.0 -6 -6.3 -8 1996M1 1996M7 1997M1 1997M7 1998M1 1998M7 1999M1 1999M7 2000M1 2000M7 2001M1 2001M7 1994 1995 1996 1997 1998 1999 2000

Source: Central Bank of Jordan. Source: Central Bank of Jordan.

5 Using merchandise imports for the year 2000. 9 Fourth Quarter 2001

Hashemite Kingdom of Jordan Update g Medium-Term Outlook For for 2002, which has been delayed, is presented. Fiscal Policy Improves The key components of the acceleration program include a strong training and human resource

Fiscal management continued to be focused on development, rural development, pension reform, judicial and administr ative reforms supported with securing medium -term gains. The introduction of the Value Added Tax rate at 13 percent, the changes to some 50 laws. enactment of the new Public Debt Law that empowered the Cabinet to set a ceiling for Total An important achievement of the year 2000 in Gross Public Debt at 80 percent of GDP (as public debt management was the 11 percent point against the estimated ratio of 114 percent in 2000) reduction in government’s external debt as a ratio were strong indicators that fiscal prudence would of GDP to 85.3 percent. Active buying back of remain the overriding aim of fiscal policy. To Brady Bonds debt-swaps contributed to this reduce vulnerability to oil price changes, decline, in addition to some currency revaluation effects. authorities announced increases (petrol - 15 percent; diesel - 3.8 percent; and kerosene - 21 percent) in administered prices of petroleum g Unemployment Edges Up products in July-August 2001. The overall fiscal Slightly deficit (excluding foreign grants which average about 4 percent of GDP) as a ratio of GDP, Based on Quarterly Labor Force Surveys carried estimated at 8.9 percent was higher than the out by the Department of Statistics, previous year’s 7 percent because of shortfalls, unemployment rose by one percentage point to mainly in non-tax revenue. In the first nine 14.6 percent for the average of the first three months of 2001, again, non-tax revenues declined rounds of 2001 (February, May and August) by 4.9 percent, even as growth in tax revenues compared to the same rounds of the previous year. outpaced total expenditures (5.4 versus 4, in However, unemployment rate for f emales over the percent). As a net result, as estimated by the same comparison periods registered a marginal authorities, overall fiscal deficit excluding grants (0.7 percentage point) decline to 20.6 percent. for the first nine months of 2001 amounted to Given the signs that GDP growth is gathering JD306 million compared to JD265 million for the momentum, the increase in unemployment rate is previous year. a pointer to the continuing concern about the quality of growth. Driven by the need to make ordinary Jordanians enjoy the fruits of development efforts on a more immediate basis, His Majesty King Abdullah Figure 5. Unemployment Rate announced a special stimulus package labeled (for total population aged 15 and up) Accelerated Program for Socio-Economic Transformation Plan in November 2001. This 16.0% acceleration plan is a five year program of 15.5% 15.0% add itional spending over 2002-2006, with the first 14.5% year’s spending amounting to JD275 million 14.0% (nearly 5 percent of GDP). The challenge facing 13.5% the Government is to fund this extra spending 13.0% 12.5% without incurring further debt and accommodating 12.0% for future current expenditures for the new 11.5% investments, drawing on new privat ization

proceeds and grant sources. The final contours of 2000R1 2000R2 2000R3 2000R4 2001R1 2001R2 2001R3 the program will become clear when the budget

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JORDAN – A PIONEER IN WATER SECTOR REFORM

g Background g Strategic Challenges

As a result of its limited renewable and non- Aside from water scarcity, Jordan faces additional renewable water sources, Jordan is one of the challenges in institutional aspects relating to water most water -stressed countries in the world. Water resource management, and the huge financial scarcity is exacerbated by the country’s requirements of the Capital Investment Program topography and pattern of population distribution. for Water, and the operation and maintenance While nearly 80 percent of Jordan’s population (O&M) of the water and wastewater network. lives in urban areas in the central and northern Donor agencies have an ongoing dialogue with highlands, most of Jordan’s surface water sources Jordanian officials regarding appropriate water are captured from lower elevations of the Jordan sector reforms to improve the efficiency of the and Yarmouk Rivers. The Disi Fossil Aquifer, water and wastewater network. Faced with these which will supply water for the greater Amman challenges, the Government of Jordan has area in the future, lies close to the border of Saudi implemented several groundbreaking policy Arabia. Thus these features make it essential to reforms, with the assistance of donor agencies, pump water for municipal and industrial (M&I) and has a future agenda to carry out further uses to higher elevations, and/or over long reforms, which will make Jordan a pioneer in the distances (320 kms from Disi to Amman). Middle East Region (MNA) in managing its scarce water resources. The main sources of water in Jordan are surface water, groundwater aquifers, and treated g Water Scarcity wastewater. Surface water in the Jordan Valley is mainly used for irrigation, but also supplies the Main Challenges. The main challenges that face capital through the Deir Allah Pumping Station. Jordan in the water sector are: the future water Groundwater aqu ifers in the highlands (which are balance and water quality; irrigation and urban mainly used for irrigation) are overdrawn, and a water use efficiency; groundwater overdraft; and market has developed for the sale of water to wastewater treatment and use. Projections of the Amman and other cities via tanker trucks. water balance for Jordan show continuing water Additional sources of water supply will come deficits through 2020, which require careful from the following sources: the Disi Aquifer for management of this scarce resource. Jordan has Amman; Al-Wehdah Dam (under construction); less than 200 cubic meters (cu.m) of renewable the Wadi Mujib Dam and Conveyor; the Peace freshwater availability per capita per year. This Treaty with Israel; the exchange of freshwater compares with the Middle East Region’s average from the Yarmouk River, wadis, and springs for of 1250 cu.m per year of freshwater per capita. treated wastewater of adequate quality for use in Despite the rapid growth of the M&I sector, agriculture, between the highland cities and agriculture (which generates about 3 percent of agriculture in the Jordan Valley; water saving by GDP and 5 percent of employment) accounts for rehabilitation of, and reduction of physical losses 70 percent of water consumption. Current water in the water supply systems of large urban use in Jordan exceeds renewable supply, and the centers; and brackish and sea water desalination deficit is met by overdrawing of highland aquifers in some areas. There are recent moves to revive and the non-renewable Disi Aquifer [over 300 the Red [Sea] -Dead [Sea] Project involving large- million cu.m (MCM) in 1998], leading to a falling scale water transfers to the Dead Sea to retard the water table and deterioration of water quality. The latter’s decline. Hydropower generation and increase in projected water requirements is mostly additional water desalination will be a part of the due to growth in the M&I sector, which will more revenue earning streams in the Project. than double due to a rapid rate of population

11 Fourth Quarter 2001

Hashemite Kingdom of Jordan Update growth, a rising standard of living, and a rising challenges. The Ministry of Water and Irrigation share of industrial activity in the economy. Water (MOWI) is currently preparing a Master Plan for requirements for agriculture will increase slightly, water and wastewater resources, with the primarily as a result of the planned increase in assistance of the German and Japanese aid cropping intensity in the Jordan Valley, while agencies Gesellshaft für Technische irrigated areas will remain nearly the same. Zusammenarbeit (GTZ) and Japan International Cooperation Agency (JICA). The Master Plan Although irrigation conveyance and distribution emphasizes the rapid growth of the M&I sector in efficiency in the pressurized network in the the investment program, whose share in actual Jordan Valley is high, there is a considerable total water supply is projected to increase from 30 range to improve on-farm irrigation efficiency. percent in 1998 to 52 percent in 2020. The Moreover, efficiency of the urban water system Government has awarded a four-year for M&I uses is low, and un-accounted-for-water performance-based Management Contract to a (UFW) in the greater Amman network exceeds 50 private company in 1998 for the operation of the percent due to an aging network and inefficiency water and sanitation system in the greater Amman in metering. area financed by a World Bank loan.

Groundwater aquifers in the highlands are In irrigation, a pilot project has been initiated in overdrawn and abstraction needs to be reduced to the Jordan Valley to hand over O&M irrigation ensure the long-term sustainability of aquifers and functions to water users. Efficiency of the protect against salinization. In addition, the main pressurized irrigation conveyance and distribution fossil aquifer in Disi is used to irrigate cereal system in the Jordan Valley will rise as more of crops and fruit trees, and also to supply municipal the system is converted from open-channel to a water for Aqaba. pressurized system. In addition, on-farm irrigation efficiency will improve as more farmers convert to Finally, treated wastewater is re-used for modern irrigation practices. Government policy irrigation, and the main wastewater treatment also calls for a significant reduction in water plant in Al-Samra near Amman is operating at abstraction in the highlands, mainly in 200 percent of design capacity, leading to agriculture: 90 percent of wells are already inadequate treatment and high salinity. metered; the Government is considering Furthermore, there is need for an overall strategy volumetric charges for all water abstractions; for wastewater treatment and use, including a groundwater monitoring has been transferred from regulatory mechanism for pricing and allocation. the Water Authority of Jordan (WAJ) to MOWI; Treated wastewater needs to be closely monitored and a project has been completed with the US to ensure its safety for use in agriculture and other Agency for International Development (USAID) uses. to implement a Groundwater Management Program through stakeholder participation in the Water Supply and Requirements in Jordan, Zarqa Basin. Wastewater available for reuse will 1998-2020 increase nearly 3.5 times by 2020 as the Disi (MCM/Year) Conveyor Project goes online; a five-year Year M&I Agr. Total Total Deficit Investment Program for Wastewater Treatment in Req. Req. Req. Supply the major cities has been prepared, and the main 1998 342 863 1205 898 -307 wastewater treatment plant in Al-Samra will be 2005 463 858 1321 1042 -279 expanded and modernized by the private sector through a Build-Operate-Transfer (BOT) Project. 2010 533 904 1435 1250 -186 Water quality standards have been re-assessed, 2015 639 897 1536 1283 -254 and MOWI and the Ministry of Health (MOH) 2020 757 890 1647 1287 -360 have a joint monitoring mechanism. Laboratories Source: World Bank Report, Water Sector Review have also been upgraded and an early warning Update, February 2001. system for impurities is in place. Water quality in the Jordan Valley has to be closely monitored for Status of Reforms. The Government of Jordan possible downstream contamination from poor has taken important measures to address these rural sanitation. Ongoing pilot projects and

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Hashemite Kingdom of Jordan Update

studies, supported by USAID, GTZ, French aid, In the medium-term (to end 2005), experience and Canadian International Development Agency gained from the Zarqa Basin Project on strategies (CIDA), examine the options for use of treated involving water users needs to be expanded into a wastewater in the Jordan Valley, growing salinity- national program for groundwater management. tolerant crops, and on-farm water management. In Any additional water should be made available for addition, by requiring permits, progress has been M&I use (except where this is not physically made in controlling industrial effluent discharges feasible), in which case it should be used to raise into sewers. cropping intensity in existing areas, rather than increasing irrigated areas. Future Agenda. The overriding objective of water resource management is to ensure the long- g Water Resource Management: term sustainability of water supply (in terms of The Institutional Challenge quantity and quality) for domestic water supply, industry, and agriculture. This requires continued Main Challenges. Institutional efficiency lies at emphasis in the investment program on M&I the heart of water resource management. projects, ensuring that water for irrigation is not Improving the performance of water services is a constrained below its present level, while at the strategic necessity, and strengthening the same time capping the irrigated area at around its regulatory mechanism is critical. The main present level. challenges that govern water resource management institutions are: restructuring the In the short-term (to end 2002), the Jordanian main agencies in the sector, WAJ and JVA; the Government will consider the following role of MOWI; and the lack of an adequate measures: (1) the pilot project to improve regulatory framework for private sector irrigation efficiency in the Jordan Valley will be participation in water resource management. consolidated into an integrated program under the proposed Jordan Rift Valley Improvement The three agencies responsible for water and Project; (2) continued efforts at metering wastewater resource management (MOWI, water groundwater abstraction in the highlands, resource strategy, planning, and development; ensuring operatio nal performance of the meters, WAJ, urban water supply; and JVA, irrigation), enforcement of licensed quantities, volumetric until recently had overlapping responsibilities for tariffs, and stakeholder participation, need to be water resource planning and management. As a the focus in the future; (3) for both irrigated result, decision-making was fragmented and short- agriculture and M&I uses, demand management term in its outlook. WAJ and JVA independently through raising water charges by WAJ and the proposed projects for the Capital Investment Jordan Valley Authority (JVA) are on the agenda; Program for Water, without any consideration for (4) reducing UFW is the quickest and most cost- overall water availability or cost. The private effective instrument for augmenting water supply sector had no role in urban water resource in the greater Amman area, and the Government management, and farmers played no role in will consider expansion of Management management of irrigation systems. Contracts for water and sanitation networks to other cities; (5) a strategy and guidelines, along WAJ and JVA still lack full autonomy, and are with an action plan for treated wastewater re-use overstaffed (except at the technical/managerial in agriculture and urban areas need to be level), leading to low efficiency, and accumulation formulated, based on ongoing pilot projects and of financial deficits. JVA’s mandate extends studies; (6) regulations need to be expanded to beyond water resource management in the Jordan cover industrial waste not discharged into sewers, Valley, and covers land management and tourism regulations for the proper use of water tankers and infrastructure which taxes the human and financial household storage need to be strengthened, and a capacity of JVA. rural sanitation program in the Jordan Valley is needed; and (7) awareness campaigns on water Status of Reforms. Water resource planning is conservation and quality issues will have to be concentrated in MOWI, with the participation of strengthened. WAJ, JVA, and stakeholders. MOWI is probably

13 Fourth Quarter 2001

Hashemite Kingdom of Jordan Update the only agency in the region that has projects such as the Disi Conveyor, a northern consolidated water management functions of conveyor, and wastewater treatment in Aqaba and water use in various sectors (M&I and the Jordan Valley; (iii) expanding the pilot project irrigation). A National Security Council for in the Jordan Valley for water user groups to other Water has been established, with the Prime irrigation areas and exploring the potential for Minister as Chairman, and Minister of MOWI as private sector participation in water and irrigation Deputy Chairman, as well as five committees services in the Jordan Valley; and (iv) developing (Policy, Quality, Irrigation, Dams, and a regulatory framework for private sector Wastewater). In general, coordination of water participation in water supply and sanitation. In management and stakeholder participation in addition, JVA needs to focus on strategic aspects MOWI decision-making has increased. of water management in the Jordan Valley and divest retail irrigation services below pumping Other measures need to be considered by the stations to water user groups or private Jordanian Government, but no action has yet been entrepreneurs, and hand over regional taken on them. These include: the restructuring of development functions to other public institutions. WAJ and JVA and increasing their accountability JVA needs to modernize its accounting systems to by introducing and monitoring performance improve efficiency and transparency of indicators; strengthening management by operations. Finally, JVA needs to review staff contracting senior technical staff; and the possible numbers and qualifications to identify the scope downsizing of WAJ and JVA. for restructuring and reduction, training, and/or redeployment of redundant staff. Experience in other countries shows that the best approach to improve efficiency in the water and In the medium-term, water management agencies wastewater sector is through the adoption of a need to implement a Management Enhancement commercial approach, increasing competition in Program ; authorities need to select an appropriate the provision of services, and greater involvement regulatory framework ; and reassess the future role of stakeholders. The Government of Jordan has and restructuring of WAJ to take into account the already taken several steps to enhance the role of increasing role of the private sector; and expand the private sector in water resource management. water markets for the voluntary transfer of water These include: awarding a private contract for the among users (from agriculture to urban uses). operation of the water and sanitation system in the greater Amman area; awarding a BOT Contract g The Financial Challenge for the Al-Samra Wastewater Treatment Plant; and initiating a pilot project to hand over O&M Main Challenges. The main financial challenges functions of irrigation in the Jordan Valley to in the water and sanitation sector relate to water user groups. As the role of private firms in priorities of the investment program; financing of developing and operating water sector the investment program by donors, the infrastructure increases, the need for an enabling Government, and the private sector; and the regulatory framework becomes more important to financial viability of WAJ and JVA and cost ensure compliance with quality standards, recovery for urban and irrigation water. improving competition and consumer protection, provision of incentives to attract private Assigning priorities in the investment program is a investment, and establishing an efficient contentious issue and implies sectoral water mechanism for water pricing. allocation. The investment program for the 2000- 2005 period totals JD1.6 billion (US$2.3 billion), Future Agenda. In the short term, initial reforms or about 4.2 percent of GDP, and is front-loaded in private sector participation need to be (planned investment would exceed 5 percent of broadened to other cities and deepened through GDP in 2002-2003). The investment program is the following actions: (i) further private sector ambitious in terms of its size, donor financing and participation in water and wastewater budgetary constraints. management in the greater Amman area and other cities; (ii) expanding/introducing the BOT and Irrigation and municipal water are subsidized in Build-Own-Operate (BOO) Contract approach for Jordan. This not only jeopardizes the financial

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Hashemite Kingdom of Jordan Update

viability of WAJ and JVA, but also provides little 15 fils/m3 in 1995. These charges represent incentive for water conservation. WAJ incurred progress, but are still way below cost, contribute annual deficits in excess of JD35 million (US$50 to fiscal deficits, and do not provide adequate million); consequently, it depends on Government incentives for water conservation. transfers which average JD40 million per year, not only for debt service, but also to cover Future Agenda. The structure and level of tariffs operating losses. Both the level and structure of should be the main focus of MOWI. Tariffs nee d the tariff, which are low and untargeted, need to to cover the O&M costs of both WAJ and JVA, be revised. JVA also depends on budgetary and the mechanism for revising tariffs should transfers to cover O&M costs, in addition to allow for more frequent but smaller increases. investment needs (the O&M cost, excluding Further consideration should be given to the depreciation, is 18 fils/m3, while JVA charges current WAJ’s tariff and fee structures that 15fils/m3, and collects 12 fils/m3, or 66 percent encourage water conservation and increase of cost). Accurate accounts are not available to revenues. Moreover, metering, billing, and determine actual revenues and expenditures of collections need to be improved to raise efficiency JVA. and revenue. JVA needs to phase in a new tariff to recover at least its O&M costs. Furthermore, JVA Status of Reforms. The Capital Investment needs to modernize its accounting system for Program for Water has in large part been efficiency and transparency. Annual reviews and prioritized to emphasize M&I needs to reflect updates of the investment program need to be their contribution to the economy, but require carried out to reflect current realities on an large investment and operating costs. ongoing basis. Private investment needs to be encouraged by expanding the BOT and BOO Donor financing has been secured for 42 percent Contract approach. of the investment program, and an additional 31 percent has been tentatively identified from In summary, Jordan has carried out significant donors. The Government will fund about 11 reforms in the water and wastewater sector, and is percent, and the private sector is expected to among the pioneers in the field of water resource finance 14 percent (2 percent not funded). It is management in the Middle East. Reforms carried expected that the private sector will fund projects out so far are impressive. These reforms, however, similar to the first BOT project in Jordan, the Al- need to be consolidated and deepened, and Samra Wastewater Treatment Plant. increasingly involve private investors and stakeholders in water resource management in WAJ has increased water tariffs by an average of order to improve water use efficiency as an 12.5 percent in 1997, and the sewerage tariffs for essential ingredient in meeting the main long-term Amman and Zarqa have increased by 12 percent challenge, namely, making the most efficient use in 1999. JVA has raised O&M charges from 6 to of its scarce water resources.

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Hashemite Kingdom of Jordan Update

BANK GROUP OPERATIONS

IBRD Projects In The Pipeline education for disadvantaged children and expansion of school construction to meet • Public Sector Reform Loans (PSRLs). The population growth; and (b) quality of education foundation for Bank support to Jordan’s Program through the use of technology and professional of Public Administration Reform is a series of development. three one-tranche Public Sector Reform Loans. The Loans support an agreed medium -term • Samra First Private Power Project (US$50 program of step-by-step Public Sector reforms, million Guarantee). The Project is designed to: (i) with a focus on budget reform, better delivery of support the Government’s initiative for private public services, and increased transparency and power generation and its efforts to tap new accountability. The first PSRL (US$120 million) sources of private capital for the Power Sector; (ii) was approved in June 2001 and is fully disbursed. add new power-generating capacity at competitive The second PSRL (US$120 million) is scheduled prices, while improving its efficiency; and (iii) for Board presentation in June 2002. The strengthen the Ministry of Energy’s capacity to objectives of the PSRL II are to: (a) achieve prepare future private projects and put into effect judicial reform; (b) enhance capacity for key policies for sustainable development of the conducting governmental transactions over the Energy Sector. Internet; (c) simplify procedures and positions in the Government; (d) implement restructuring of the Government; (e) redefine the boundaries IBRD Ongoing Projects separating the public and private sectors; (f) reform budgeting; and (g) modify civil service The current portfolio in Jordan consists of seven institutions. projects for a total commitment amount of US$251.7 million, of which US$107.8 million has • Horticultural Exports Promotion Learning been disbursed to date. and Innovation Loan (US$5 million). The Project would initiate the process of establishing Jordan • Second Human Resources Development as a reliable supplier of non-traditional, high- Sector Investment Project (HRDSIP-II). (US$60 value export crops for which it has competitive million.) The central Project objective is to advantage to niche markets in the European Union improve educational quality. The focus is on and the Gulf countries. The Project would: (i) measures to enhance the teaching/learning support the establishment of an Export Promotion env ironment including: teaching competencies; Center to provide marketing information to curricula and textbooks; administration and producers/exporters; establish the link between management; and creating a strong institutional the domestic supply and overseas demand; and framework, particularly in relation to vocational assist in the logistics of the exporting process; and and technical education, examinations and (ii) support the Ministry of Agriculture to upgrade national assessment. In addition, measures are key support services and systems in support of sought which aim at economizing the use of production of high quality, market-oriented public resources. varieties of fresh fruits and vegetables. • Second Tourism Development Project (TDP- • Th ird Human Resource Development Sector II). (US$32 million.) Tourism is Jordan's second Investment Loan (US$120 million). The Loan largest generator of foreign exchange after aims to improve: (a) access to, and equity in, remittances. It results in foreign exchange education through supporting pre-school revenues of over US$750 million equivalent, or

Fourth Quarter 2001 16

Hashemite Kingdom of Jordan Update

approximately 10 percent of GNP. The actual purchase training and related services (e.g., tourism potential of Jordan is even greater. interm ediation, needs analyses) necessary for the Capturing this potential, however, requires Jordan recruitment of the unemployed to fill genuine to develop the Sector in a coherent manner to vacancies. The objective of the pilot TESP is to ensure its economic, social and environmental test the demand for, and the effectiveness and sustainability. To this end, the Gover nment, with efficiency of, employer -based training supported Bank assistance, has formulated a medium- to by a Training Fund, i.e., whether training can be long-term Tourism Development Program. The more cost-effective and efficient when it is Second Tourism Development Project finances demand-driven. Public Training Funds are Phase I investments of the Program. The Project's competitively awarded between public and private development objectives are to: (a) create the providers, and employment services are also conditions for an increase in sustainable and offered by private offices whose operations have environmentally sound tourism in Petra, Wadi been until recently illegal. Rum, Jerash and Karak; and (b) realize tourism- related employment and income-generation • Amman Water and Sanitation Management potential at Project sites. Project (AWSMP). (US$55 million.) The objectives of the Project are to: (i) improve the • Community Infrastructure Development efficiency, management, operation and delivery of Project (CIDP). (US$30 million.) The water and wastew ater services for the Amman Community Infrastructure Development Project Service Area; and (ii) lay the groundwork for the represents the first (pilot) phase of a longer-term sustainable involvement of the Private Sector in program of small-scale infrastructure the overall management of these services. These improvements to poor communities in Jordan. objectives complement the Government of This pilot phase tests the opportunities for Jordan's strategy for water supply and wastewater developing: (a) income-generating activities in services. economically deprived areas; (b) approaches to promote local participation in the identification of • Health Sector Reform Project (HSRP). priority infrastructure needs; (c) criteria for (US$35 million.) The Project is based on the eligible appropriate investm ents; and (d) detailed findings of the Health Sector Study, prepared relocation plans in squatter settlements to enable jointly by the World Bank and the Government of upgrading basic infrastructure in subsequent Jordan (April 1997). The Project is expected to phases of the CIDP. The CIDP is one component inc rease the efficiency, quality, and long-term of the Government of Jordan's Social Productivity financial sustainability of health services in Program (SPP), which is a comprehensive Jordan. Indicators to measure the achievement of strategy to address the problems of poverty and these objectives include: increased hospital unemployment through productivity occupancy rates; adoption of treatment protocols; improvements. Commitments and Disbursements • Training and Approval Loan Undisbursed Employment Support Project Project Name Year Amount Amount (TESP). (US$5 million.) This US$ Million pilot Project is intended to Second Human Resources 1995 60.0 11.3 introduce an efficient and Development Sector Investment effective linkage between Second Tourism Development 1997 32.0 19.7 public ex penditures for short- Community Infrastructure 1997 30.0 15.5 term training, and business Development community skill requirements. Training and Employment Support 1998 5.0 3.4 It is another component of the Amman Water and Sanitation 1999 55.0 36.9 Government of Jordan’s SPP. Management The TESP has created a Fund Health Sector Reform 1999 35.0 23.9 (the Training Fund) that Higher Education Development 2000 34.7 33.2 issues monetary awards to TOTAL 251.7 143.9 enterprises which provide or

17 Fourth Quarter 2001

Hashemite Kingdom of Jordan Update and a reduction in spending on pharmaceuticals as The Company launched commercial operations in a share of total expenditures. September 2000 and has already built out a network that achieves coverage for 98 percent of • Higher Education Development Project the population. As of July 2001, the Company (HEDP). (US$34.7 million.) The objective of the had obtained over 80,000 subscribers. Project is to initiate improvements in the quality, MobileCom's arrival introduced competition to relevance and efficiency of Jordan's higher the Jordanian mobile telephone market and has education, and to support Jordan’s program to contributed to unprecedented subscriber growth reform Sector governance. The Project will: (a) rates in Jordan. MobileCom expects to have establish system-wide modern information approximately 700,000 subscribers by 2010. techno logy, management information systems, and library infrastructure for higher education; (b) • MEREN Silica Sand. The proposed US$15.5 support a Higher Education Development Fund million greenfield Project is to establish the providing grants to public universities for MEREN Silica Sand Plant which will innovative and economically relevant sub-projects manufacture high quality silica sand to be mainly and for improving teaching and lear ning; (c) exported to European glass manufacturers. With initiate reforms of higher education governance, an installed annual capacity of 350,000 tons, including the introduction of formula -based MEREN is designed to manufacture about 10 allocation of higher education recurrent funding different quality products, including dried and from the Government; and (d) support the milled silica for glass, ceramics, oil and gas rationalization of the community college sub- fracturing, and other industries. MEREN will use sector through the new Al-Balqa' Applied state of the art technology provided by its University. technical partner, CARPCO U.S., a division of a global metal group, Outokumpu, one of the largest suppliers of this type of equipment in the world. IFC Projects in the Pipeline IFC has been requested to provide a loan of up to US$5 million to MEREN. • Industry and Information Technology Park Development Company. (IITPD). The proposed IFC Ongoing Projects Project is to develop an integrated Industry and Information Technology Park (IITPD). The • Al-Hikma Pharmaceuticals Limited. The industrial park has been granted the status of a Project is designed to help Al-Hikma "Qualifying Industrial Zone" (QIZ), which Pharmaceuticals upgrade and expand its existing provides companies located there with the pharmaceutical and chemical plants, and build a competitive advantage of quota-free and duty-free new plant. access to the U.S. market. In addition to the QIZ, the proposed park has been given a "Free Zone" • Zara Investment Holding Company. The status by the Jordanian Government, which investment Project consists of the construction provides a 12-year tax holiday and other and operation of an international standard 312- incentives for tenant companies. room hotel and complex comprising 44 apartments, partially serviced by the hotel; well- • MobileCom. The Project consists of the equipped exhibition/ conference facilities; an construction and oper ation of a nationwide auditorium; a health club, managed by Hyatt cellular telecommunications network using GSM- International; and a Wellness Center and 231- 900 technology by Petra Jordanian Mobile room hotel complex on the Dead Sea, combining Telecommunication Company Ltd. MobileCom is medical and recreational facilities, to be managed a wholly owned subsidiary of Jorda n by Mövenpick. Economic benefits accruing to Telecommunications Company (JTC), Jordan's Jordan include foreign exchange generation and national telecom operator. MobileCom owns a 15- the creation of about 600 direct jobs. IFC's main year cellular license which was initially awarded role in this Project is to provide long-term funding to JTC as part of its privatization in 1999 and then on terms and maturities not available in Jordan, transferred to MobileCom in 2000. and help the Zara Company mobilize local loans.

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Hashemite Kingdom of Jordan Update

IFC is currently considering a rescheduling of its match the quality level provided by its loan to Zara. competitors.

• Business Tourism Company. The Project • Jordan Hotels and Tourism Company consists of building and operating a resort of (JHTC). The Project comprises an extensive international standards, which will include: (i) a refurbis hment of most of the InterContinental 230-key hotel; and (ii) a health/medical spa and Hotel's existing 366 rooms and the addition of beauty care facility. The Dead Sea, due to its 125 new rooms and facilities. The Hotel will also unique therapeutic characteristics and climate, has replace 15 of its elevators, its boilers, the kitchen, established itself as a world-class center for the safety and telecoms equipment. The management treatment of various skin and muscular-joint agreement between InterContinental Hotels ailments, such as psoria sis and rheumatism. The Corporation and JHTC has recently been extended proposed complex will be managed by Marriott to 2007. IFC is considering a rescheduling of its International and will target both health and loan to JHTC. leisure tourists. • Jordan Investment Trust (Jordinvest). The • El-Zay (Textile). El-Zay specializes in the Project involves the establishment of the first manufacture of high quality men's suits. The investment bank in Jordan. Jordinvest is expected Project consists of: (i) an expansion program to to carry out a broad range of investment banking diversify El-Zay's product line by manufacturing activities, including: providing long-term private men's outerwear; and (ii) a financial restructuring equity; investing in quoted investments; designed to strengthen El-Zay's ba lance sheet by underwriting and private placement of debt and replacing most of its short- and medium-term debt equity issues; corporate finance activities, with long-term debt. IFC's investment is to help especially restructurings, privatiz ation, and the company complete the Project's financial plan mergers and acquisitions. Jordinvest would play a and improve its financial structure by providing critical developmental role in addressing the funding on terms and maturities not otherwise financial needs of the Private Sector in Jordan and available in Jordan. Also, garment manufacturing in developing its capital markets. Through its operations typically employ numerous people in a affiliation with its sponsor, Gulfinvest, the relatively confined factory. Adequate fire Company would also attract foreign, as well as prevention at the site is imperative, as are Middle Eastern, investors to the region. sufficiently low noise levels, adequate lighting, and sanitary facilities. IFC will require that El- Zay's new facilities comply with World Bank guidelines in this regard. Updated List of Projects in Portfolio (US$ million) • Arab International Hotels Project Name Total Disbursed Disbursed Company (AIHC). The Project Committed Loan Equity consists of the renovation and Al-Hikma Pharmaceuticals 2.36 0 2.36 expansion of the Amman Zara Investment Holding Company 16.73 13.76 2.96 Marriott, a leading hotel located Business Tourism Company 3.56 3.56 0 in the Shmeisani area of Amman. El-Zay (Textile) 3.21 3.21 0 Indo-Jordan Chemical Company 18 18 0 The work comprises: (i) the Arab International Hotels Company 3.6 0 3.6 complete refurbishment of all the Jordan Hotels and Tourism Company 8.57 8.57 0 hotel’s 294 rooms; and (ii) the Jordan Investment Trust 1.41 0 1.41 addition of conference and Modern Agricultural Investment banqueting facilities, a health Company 1.0 0 0.75 club, retail space, movie theaters Middle East Investment Bank and an underground parking Recapitalization 4.35 2.15 0 facility. The proposed expansion Boscan Jordan-I 8.0 8.0 0 and modernization of the Marriott Al Tajamouat Industrial City 8.0 2.0 0 will boost the hotel to a 5-star Jordan Gateway 10.0 2.0 0 international level, allowing it to Total 88.8 61.25 11.09

19 Fourth Quarter 2001

Hashemite Kingdom of Jordan Update

• Modern Agricultural Investment Company • Jordan Gateway Project. The Project is to (MAICO). The overall objective of the develop, construct and operate an industrial estate Company's operations is to act as a market and covering about 65 ha (of which about 50 ha would technology beacon to help diversify and upgrade be in Jordan) at the Jordan-Israel border. The the range and combination of crops and irrigation Project will be developed in three phases. Phase I methods, which would develop a modern Export of the Project will involve: (i) land an d Sector, thereby maximizing the economic return infrastructure development of a 50 ha area on the on irrigation water and ultimately rationalize its Jordanian side; and (ii) construction of 94,000 m² overall consumption. of buildings, offices and factories for rent, on the Jordanian side, which are proposed to be partially • Middle East Investment Bank (MEIB) financed by IFC. Recapitalization. The Project involves both MEIB’s (the smallest commercia l bank in Jordan) • Al Tajamouat Industrial City (SIC). The recapitalization to meet the Central Bank of proposed venture will expand the existing Jordan's minimum capital requirements, and its integrated industrial estate, ATIC. The expansion restructuring, managed by Société Générale commenced in late 2000 to keep up with the high Libano-Européenne de Banque. IFC investment is demand for Qualifying Industrial Zone (QIZ) part of this larger recapitalization and space in Jordan. The project entails: (i) purchase restructuring program for MEIB. It complements of addition al land; (ii) construction of the Technical Assistance program in Jordan, supplementary infrastructure (electrical and water provided by both IFC and the World Bank. treatment facilities, transportation, communication and cargo-handling facilities); (iii) completion of • Boscan Jordan -I. The Project is to expand seven, and expansion of three factory buildings the operations of Boscan Jordan Group, a that will add 60,255 m2 of industrial space to the Jordanian manufacturer of soft-side luggage existing occupied 88,000 m2; and (iv) construction products selling primarily to the United States of a canteen and dormit ories for up to 2,250 market. Boscan Jordan's existing facilities consist workers. of 20 production lines. The Project will add 40 add itional production lines. The Company's • Indo Jordan Chemical Company. The products are manufactured and sold under brand Company owns and operates a 244,000 mt/year names by major United States retail chains. (as of 100 percent P205) phosphoric acid plant Boscan Jordan’s specialty is carry-on luggage, and ancillary facilities adjacent to a phosphate one of the fastest growing sectors of the luggage rock mine in the south of Jordan, as well as market. The Project is expected to have a storage facilities at the Red Sea Port of Aqaba. significant development impact in employment P205 is used to produce DAP, a widely used creation in Irbid, Jordan. fertilizer.

Fourth Quarter 2001 20

Hashemite Kingdom of Jordan Update

Summary of Bank Lending in Jordan Jordan joined the World Bank in 1952, and received its first IDA credit in 1961. Over the 35% past 40 years, a total of 67 credits and loans 30% have been granted to Jordan for a total amount 25% of US$1,940.7 million. Jordan is also a member 20% of IFC, ICSID, and MIGA . 15%

10% IDA: US$86.1 million (15 Credits) 5% IBRD: US$1,854.6 million (52 Loans) 0% Of which: Investments: US$1,194.3 million Health Energy Finance

Telecom Adjustments: US$630 million (6 Projects) Mining Urban Education Agriculture Multisector Water Industry and Development Transportation

Supply/Sanitation Disbursements: US$1,783.1 million

Repaid: US$771.0 million Obligation: US$952.6 million

World Bank Publications

Recent Reports on Credit and Development (FATEN) was Jo rdan complicated and difficult. But these experiences brought to light many of the issues inherent to Partnership for Education in Jordan such program restructuring-issues similar to those (Newsletter, Report 22995). With vision and an typ ically found in a corporate context. These innovative spirit, Jordan launched a program of include: marketing considerations; and the legal, education reform in 1985, and continues to work financial, and programmatic futures of the toward the goal it embodies: to establish an instit utions, especially as they relate to their educational system that will enable its graduates prospects for growth and sustainability. to match the highest international standards of educational achievement. A long-time partner Strategic Action Programme for the Red Sea with Jordan in advancing education, the World and Gulf of Aden (Report 22004). The Red Sea Bank has actively supported this enterprise. In a and Gulf of Aden contain some of the world's study of the results achieved thus far, the most important coastal and marine environments Operations Evaluation Department (OED) found and resources. In view of their environmental that the program has produced significant uniqueness, the threats they are facing, and the accomplishments, establishing a record deserving need for action, the preparation of the Strategic attention from other countries that aspire to Action Programme (SAP) for the Red Sea and the achieve similar goals. But OED also noted Gulf of Aden was initiated in October 1995. The impediments that will slow future progress if left SAP process, coordinated by the Regional unresolved. Organization for the Conservation of the Environment of the Red Sea and Gulf of Aden Spinning Off for Sustainable Microfinance: (PERSGA), has been undertaken with support Save the Children Federation into JWDS, Al- from the countries of the region, the Global Majmoua, and FATEN (Working Paper Environmental Facilit y (GEF), selected 23075). The only known spin -offs in the Middle international development institutions, and donor East and North Africa's microfinance industry are organizations. The SAP supports and facilitates Save the Children's microcredit programs in the primary goal of PERSGA, which is the Jordan, Leb anon, and the West Bank and Gaza. conservation of the environment of the Red Sea Spinning off the Jordanian Women's Development and Gulf of Aden. The goals of the SAP are to Society (JWDS), Al-Majmoua, and Palestine for develop a regional framework for protecting the

21 Fourth Quarter 2001

Hashemite Kingdom of Jordan Update env ironment and the sustainable deve lopment of aggregates, and key debt ratios, as well as, coastal and marine resources. average terms of new commitments, currency composit ion of long-term debt, debt restructuring, and scheduled debt service projections. Other Bank Institutional subscribers - libraries, corporations, Publications and academic institutions: please contact [email protected] for de tails about Globalization, Growth and Poverty: Building institutional subscriptions. For further information an Inclusive World Economy (ISBN: 0-19- send an email to [email protected]. 521608-3). Globalization, Growth, and Poverty focuses on globalization in terms of growing The World Bank Annual Report 2001 economic integration resulting from the increased (Free -- download from: flow of goods and services, people, capital, and http://www.worldbank.org/annualreport/). In information. The Report is primarily concerned Fiscal Year 2001, the World Bank intensified its with the effect that this growing integration has on efforts to help countries fight poverty. Major economic growth and poverty reduction. priorities included:

· Helping the poorest countries prepare poverty Global Economic Prospects 2002: Making reduction strategies , advancing their eligibility for Trade Work for the World's Poor (ISBN: 0- significant debt relief; 8213-4996-1). This year’s Global Economic · Heightened collaboration with global Prospects argues for reshaping the global partners around the international development architecture of world trade to promote goals; development and poverty reduction. The report · New efforts in the fight against HIV/AIDS focuses on four policy areas: in particular; 1. Using the WTO ministerial to launch a · Creation of a new Strategic Framework, “development round” of trade negotiations that laying out the guiding principles for Bank would reduce global trade barriers; assistance at the country and global levels for the 2. Engaging in global collective action to promote next three years. trade outsid e the negotiating framework of the WTO; Investing in Private Education in Developing 3. Adopting pro-trade development policies of Countries (Working Paper 23444). The high-income countries unilaterally; and International Finance Corporation is entering the 4. Enacting new trade reform in developing education sector because of the exceptional countries. development benefits that education can create and the innovative, constructive roles that private World Development Report 2002: Building ownership can play in the sector. IFC's entry Institutions for Markets (ISBN: 0-19-521606- provides significantly new instruments with which 7). The Report undertakes the complex issue of to enhance the Bank Group's capacity to promote the basic institutions needed for markets to growth and reduce poverty by investing in human function properly. This year's World Development capital through education. This paper discusses Report goes beyond a simple examination of the IFC's entry strategy, investment criteria, role institutional structure and explores the functions in education investment, and partnership with the of institutions . Recognizing that one size does not World Bank. fit all, the Report asks “what do all institutions which support markets do?” Cultural Heritage and Development - A Framework for Action (ISBN 0-8213-4938-4). Global Development Finance 2002 Database The Middle East and North Africa countries are Online. You can now subscribe to GDF Online home to an extraordinary cultural heritage, secular and get access to statistical data for the 136 and religious, of critical importance not only for countries that report public and publicly - each country but for the entire world. This guaranteed debt to the World Bank Debtor strategy research and framework for action study Reporting System. The database covers external explores the key challenges confronted by MENA debt stocks and flows, major economic countries in integrating patrimony management Fourth Quarter 2001 22

Hashemite Kingdom of Jordan Update

within their mainstream develo pment policies and with the shifting public sector. The public sector programs, in deriving higher benefits from the is a part of the state undergoing significant economic and educational potential of the cultural restructuring very quickly in many parts of the heritage, and in safeguarding the patrimony world. Political representatives need to explore against accelerated deterioration and loss. This this reform process and the factors spurring it. volume also describes and analyzes the experience This Guide has three basic goals: (1) to sketch the of the World Bank’s MENA Region in supporting different elements of the public sector, and to patrimony preservation and maps out its strategy identify key factors that have been driving and options for future activities in this domain. reforms ahead in various parts of this public service environment; (2) to consider carefully Urban Water and Sanitation in the Middle what a "better" public sector means, and to review East and North Africa – The Way Forward. different reform ideas as they relate to the The Middle East and North Africa region – home meaning of "better"; and (3) to analyze how to 4 percent of the worlds population – possesses political representatives can best interface with the only 1.4 percent of global water resources. Three- public sector and its reform process to achieve quarters of the land mass is arid, making the improved governance and more effective services region the driest in the world. It is defined largely for people. by drought and desert, and suffers from the scarcity of fresh water, uneven availability, a growing gap between supply and demand, deteriorating water quality, and dom inance of To order by phone or fax: agricultural water use. Jordan, Yemen, and the Phone: 1-800-645-7247 or West Bank and Gaza are among the countries 703-661-1580; least well endowed with water resources in the Fax 703-661-1501 region.

Public Service Reform and Parliaments To order on-line: (Working Paper 21340). This Guide aims to http://publications.worldbank.org/ecommerce/ assist political representatives in their dealings E-mail: [email protected]

23 Fourth Quarter 2001

Hashemite Kingdom of Jordan Update

World Bank Contacts

Joseph Saba, Country Director Sereen Juma, Communications Associate Tel. (202) 473 2992 Tel. (202) 473 7199 Fax (202) 477 1482 Fax (202) 522 0003 Email: [email protected] Email: [email protected]

Osman Ahmed, Lead Operations Officer World Bank Internet Address: Tel. (202) 473 7063 www.worldbank.org Fax (202) 477 1482 Email: [email protected] To view and order World Bank Publications: http://publications.worldbank.org/ecommerce/ Thirumalai G. Srinivasan, Senior Economist Tel. (202) 473 1288 For more information on World Bank Fax (202) 477 0432 programs in Jordan: Email: [email protected] www.worldbank.org/mna/jordan

Sophie Warlop, Operations Analyst World Bank Address: Tel. (202) 473 7255 1818 H Street, NW Fax. (202) 477 1482 Washington DC 20433 Email: [email protected]

Dilys Quinn, Program Assistant Tel. (202) 473 6092 Fax (202) 477 1482 Email: [email protected]

Editorial Team:

Joe Fuleihan Suheil J.S. Jme’An Roger Pearson Dilys Quinn Bassam Ramadan Manuel Schiffler Thirumalai G. Srinivasan Ashok Subramanian Sophie Warlop With special thanks to Mary Saba

Fourth Quarter 2001 24