37115

A Quarterly Publication of the HASHEMITE KINGDOM Jordan Country Unit

OF JORDAN October 2001

Public Disclosure Authorized The World Group

Privatization: The Jordanian Success Story

Background industrial and service sector just starting and others which are companies, including various financial drawing to a close. These transactions Public Disclosure Authorized The has been institutions. Recently the Program has include: Royal Jordanian Airlines; assisting Jordanian privatization since started to consider activities in the Jordan Phosphate Mining Corporation; 1995 in collaboration with USAID and social sectors. postal services; Electricity Sector other development partners. At (distribution and generation); Petra present, the World Bank Group Outcomes Drilling Corporation; Assamara Water manages a substantial trust fund for Treatment Plant; Royal Jordanian Air USAID that supports the Jordan This Program ranks as one of, if not Academy; Ministry of Supply agri- Privatization Program (the Program). the most, successful programs in the business facilities; Customs The World Bank Group has been Middle East region. To date the Department warehouses; and the Water actively assisting the Jordanian following has been achieved: (i) a 33 Authority at Petra. They are scheduled Government through the Executive percent sale of the Jordan Cement for completion in the later part of this Privatization Commission (EPC) in Factories (JCF); (ii) the granting of year and next year. Public Disclosure Authorized crafting a privatization strategy, four bus concessions in the Greater designing an institutional framework Amman area [Public Transport Execution for implementing the Program, and Corporation (PTC)]; (iii) the granting supporting the implementation of the of a concession for the Ma’an Spa; (iv) The Jordanian Government’s Program. a 49 percent sale of the Jordan privatization strategy has a multi-track Telecommunications Corporation approach with appropriate modes for The Program primarily covers the (JTC); (v) a water management each situation: capital sales, e.g., IPO, Jordanian state-owned enterprises contract for the Greater Amman area divestiture etc.; sales to strategic which are concentrated mainly in the [Water Authority of Jordan (WAJ)]; Contents Page Infrastructure Sectors (Transport, (vi) the granting of a concession for Recent Economic Developments 6 Electricity, Water and Aqaba Railway (ARC); and (vii) the Bank Group Operations 9 Telecommunications) and investments divestiture of Government shares in World Bank Assistance Strategy 13 by the Jordanian Investment approximately 44 companies at Corporation (JIC), the state-owned approximately US$113 million. Total Poverty Alleviation in Jordan 14 Public Disclosure Authorized investment agency. The Government proceeds are in excess of US$900 Global Development has substantial share-holdings in a million. There is a large pipeline of Learning Network 17 number of small- and medium-sized current activities, some of which are New Bank Publications 18

Hashemite Kingdom of Jordan

The Jordan Investment Corporation (JIC)

For non-infrastructure enterprises the “holding company” or “state property fund” approach was used in Jordan in the form of the JIC. In this approach, Government-owned shares in enterprises were held in a corporate entity, which assumed the governance functions on behalf of the Government owner. With the Program, JIC actually evolved from being an investment arm of the Government, to adopting divestiture as its main objective. The key to successful divestiture required that several conditions be met. There needed to be full cooperation between the JIC and the EPC, as the latter provided important technical support and at all times played an oversight role. Management support was critical, but ultimately the commitment and support of the Ministry of Finance was what made the completion of the transactions possible. investors; concession agreements; leadership of the EPC and JIC (see level. This was an essential element management contracts; franchising; Box) paid off. The first breakthrough without which the privatization and other modes including BOT, BOO, came when some of the impeding program would not have moved in and BTO schemes. issues (such as foreign control and Jordan. This support also allowed valuation of assets) were innovatively some of the mo re difficult issues such As mentioned, an organizational addressed in designing the JCF as labor, valuation, and the “Crown structure was created to set policies, transaction and the deal was Jewels” issue, to be resolved more provide oversight and implement the completed in December 1998. The easily. Jordan Privatization Program. Key success of this transaction helped to elements of this organizational bolster institutional confidence and the A First Transaction is Crucial: A first structure included the Higher Ma’an Spa transaction was completed major transaction needed to be Committee for Privatization (HCP), the quickly thereafter. At about the same completed successfully in order to get EPC and the Privatization Steering time the PTC concessions were signed the Program going. In Jordan’s case, Committees. and the WAJ transaction soon this helped to allay many of the followed. One of the country’s largest apprehensions regarding privatization, In spite of the strategy and the transactions, JTC, also began to move provided institutional confidence to institutional arrangements having been and was soon in bidding and pursue other transactions, and put in place, progress in privatization negotiations. The sale of a 40 percent demonstrated the benefits of was initially slow and only began in strategic share for US$508 million privatization. earnest after August 1998. The main was completed in January 2000. issues slowing down the Program in Balance Transparency and Jordan included: the question of the The Lessons Effectiveness: However, in order to absorptive capacity of the Jordanian complete the first major transaction, it financial market; public preferences on A closer look at how Jo rdan managed was necessary to resolve one crucial strategic or foreign ownership; and to activate a stagnant privatization implementation issue that underlies public perceptions of the imp act of program and achieve so much in so most privatization programs - where to privatization on labor and consumer short a time holds important lessons strike the balance between prices. Before privatization could for governments as well as transparency and effectiveness: (i) in proceed, these issues needed to be privatization practitioners. setting up the institutional structure for addressed and consensus built. privatization; (ii) in setting up the Get Support at the Highest Level: decision making process; and, last but During this difficult period, EPC First and foremost, a major underlying not least, (iii) in the design and played a crucial role in moving the and significant contributing factor to structure of individual transactions. privatization agenda forward. The these successes was the emerging and persis tence and steadfastness of the unequivocal support at the highest

October 2001 2 Hashemite Kingdom of Jordan

· Institutional Structure: The main solid foundation with support from privatization process better and with question here was where to locate the most of the major constituencies in the progressively less external help. responsibility and authority for country. privatization. Locating the Ensure Commitment in Sector privatization responsibility at each · Transaction Design and Institutions: This institutional Sector Ministry would have increased Structure: Here too effectiveness approach of sharing responsibility for effectiveness (provided there was the needed to be balanced with the sake of transparency required the will to privatize at the Sector Ministry) transparency. In trying to ensure that support and commitment of the Sector for individual transactions, but the process was transparent, the to ensure effectiveness. This included reduced it on an overall basis as program sometimes encountered not just Sector Ministries, but also the benefits of experience would not delays and waste. The selection of Civil Service and Enterprise easily be shared. Transferring the financial advisors and other Management. In every case, wherever responsibility for a PE privatization consultants might not always have and whenever there was not support or entirely to the EPC could also increase been optimal, and often process interest at the Sector level, effectiveness, but would meet stiff undermined speed, for example when privatization inevitably stalled, and resistance and could reduce ready buyers had to be put on hold conversely, when the Sector had transparency. In Jordan, the until transactions could be advertised. commitment, the privatization process responsibility was shared between the However, the initial investment in moved forward rapidly. EPC and the Sector Ministries, with transparency paid off in allowing the the EPC providing technical resources later stages of transactions to be Let Privatization Expedite the and support to the process (thus, completed smoothly. Regulatory Framework: Regulatory bringing the benefit of accumulated issues needed to be resolved for experience, for example, in bidding Leadership of the Privatization Unit privatization to be effective. The issue and negotiations), as well as, is Key: The leadership of the EPC has of a regulatory strategy in the context performing an oversight function. been a key catalyst contributing to the of privatization was a difficult one. This provided just the right balance of success of the Program. The ability of Trying to achieve a perfect regulatory effectiveness and transparency needed the EPC to access and influence top environment before starting to for the Jordanian circumstance. decision-makers was crucial in garne- privatize, had the risk of Sector ring support at the top. Sometimes the specialists protracting this process to · Decision Making Process: A EPC was the flag bearer for avoid privatization. On the other hand, salient feature of Jordan’s privatization, especially when progress not having an adequate regulatory privatization approach was that it for one reason or another slowed. At framework in place before strove to achieve its objectives other times, it helped ensure privatization might not provide through consensus, and thus, with a transparency – especially when sector adequate protection of consumer (and high priority on transparency.1 The organizations were moving ahead investor) interest. Jordan chose to consensus approach had both a cost rapidly with privatization on their proceed in parallel with privatization and a benefit. The cost was that own. However, the EPC never and setting up of the required progress often appeared to be slow attempted to dominate the process or regulatory framework. This strategy with large committees and several be unilateral in its actions, but relied forced the Sectors to keep up with the approval levels. However, the benefit on consensus to mobilize support and privatization pace in putting the was that, when progress occurred, it resources. These leadership skills have regulatory framework together. was more sustainable and on a more helped the EPC, which started as a protected department within the Office Find Solutions for the Employee 1 Transparency generally includes two of the Prime Minister, to grow and Issue: Finally, Jordan had to solve aspects: (1) ensuring competition in build within itself the needed technical major labor redundancy issues or bidding and pricing to get the best competencies to better support the privatization would not have been deal for the country, and (2) the achievable. The approach taken in avoidance of side deals.

October 2001 3 Hashemite Kingdom of Jordan

Jordan was interesting and needs to be Cumulative losses in the Transport and additional estimated US$3.5 million in explored for other countries. The Water Sectors alone were by end-1998 tax revenues. Finally, privatization Jordanian Government tailored its more than 20 percent of GDP. The proceeds have strengthened the solutions to the labor issue on a case- Program is now: helping to clean up international reserves position (at one by-case basis, but with some common financial balance sheets of the PEs and point fragile) of the . underlying threads. First, the making Government assets liquid; Reserves are now at an all time high of Government set up general rules mobilizing foreign and domestic US$2.6 billion, or eight months of preserving the rights of employees in private investment – both directly in imports. This has contributed to a all privatized enterprises and the privatized companies, as well as significant reduction in interest rates, institutions. Second, in some cases, related spin-offs; creating new jobs; which may stimulate growth. transition packages -- including and benefiting consumers in terms of generous compensation (with share better services. Investments directly related to ownership in some cases), training, privatization, both current and and placement assistance helped the Privatization proceeds so far have prospects for the next four years, are workers with the transition. But, in reached more than US$900 million or very promising. It is estimated that most cases, particularly in the more 12 percent of GDP. Of course, making there has been approximately US$500 difficult rural areas where alternative assets liquid does not in itself change million of these investments. Most of employment opportunities are limited the net worth of the Government, and the investments relate to the Tourism or where skill levels of workers are as such, should not affect public and Telecommunication Sectors. In the limited, Jordan decided to privatize expenditure decisions directly. Telecommunication Sector, it is first and solve the redundancy According to the new Privatization anticipated there will be close to problem later. For example, in the case Law, privatization proceeds are US$400 million of new investment. of ARC and PTC, none of the invested in a separate fund to be used employees were to be laid off, but to repay loans owed by the privatized The ARC Project will result in overall were absorbed at other Government firms to the Government, and finance investments of US$120 million in organizations. The redundancy economic and social development railway tracks for the new Shidiya problem would be resolved after the projects. Phosphate Mine and for the Port of privatization transaction was Aqaba. Even more significant, the completed. The implicit logic seemed Privatization is yielding additional ARC Management Contract and to be that if the labor issue prevented direct fiscal benefits for the investment for the new tracks is privatization, the Government would Government. In the case of ARC, the expected to pave the way for a need to continue to employ these Government was immediately relieved separate US$600 million Fertilizer people anyway, so why not privatize. of some US$6.9 million in losses for Production and Export Project led by That way, at least the expected which it had to provide fiscal support. Norsk Hydro. The private operators of privatization-led investment and These losses, in the unlikely event that the four bus route franchises have growth could occur in the Sector and they continued under private collectively invested about US$12 help to alleviate the employment management, were now the million in new buses. In the Power burden down the road. responsibility of the private operator. Sector, the IPP is expected to invest a Similarly, in the case of PTC, the total of US$300 million. The Benefits Government will no longer have to make up the US$2.1 million of annual The WAJ transaction enabled Jordan to The Government of Jordan was in a losses. In addition, the US$0.8 million obtain a US$55 million World Bank situation in which many of its public in annual franchise fees from the new investment loan. Furthermore, a new enterprises had losses and future operators will now flow directly to the water treatment plant costing US$150 development of the economy was Government’s budget. Net profit of million will be funded (50 percent by hampered by lack of funds for JCF has increased by 50 percent in the the private sector on a BOT basis and necessary infrastructure development. first year alone, contributing an the rest through donor grants). Also in

October 2001 4 Hashemite Kingdom of Jordan

the Water Sector, the 320km conveyor telephone line has been reduced from inequitable access and cost-sharing. of fossil water from Disi to Amman, at years to weeks, and phone rates, Many households were forced to buy a cost of US$700 million would be though still high according to water from truck suppliers at much financed on a BOT basis. international standards, have been higher prices. Water is now flowing reduced significantly. The PTC again on a more regular basis. Street These privatization-related transaction has yielded immediate flooding from water mains, once a investments, totaling more than results. With private investment, buses common sight in Amman, is now US$2.1 billion, averaging seven are more frequent and ridership has rarely seen. percent of GDP per year during the increased dramatically from 60,000 to next four years, become important 100,000, while the fares have remained Conclusion factors for the revival of the Jordanian the same (see Box). On a more economy. qualitative level, the buses are new, Privatization of major infrastructure clean inside, and less polluting. This PEs is complicated, requires broad- Jobs are being created due to the new based consensus, and takes time to do Private Sector investments and Amman Bus Transport transparently. Transactions cannot be opportunities. Although it is still early micro -managed from outside, nor can 200 to assess the impact of the Program on strict deadlines be set in advance. The employment, preliminary evidence 150 IDF Grant and Technical Assistance indicates that already more than 6,000 Pre provided by the Bank and donors has jobs have been created on a net basis 100 Privatization been instrumental in getting the relative to a labor force of about one Post 50 Privatization Program started and underway. But million. As indicated above, the honors go to the Government and according to the strategy, no one has 0 No. of Ridership people of Jordan for steadfastly lost their jobs involuntarily, but the Buses '000 dealing with the overwhelmingly Program may have generated pockets complex issues one-by-one and of hidden unemployment. The has been a boon to the average working making the Program a grand success. employees of the old enterprises have person whose commute has been The EPC is a major anchor and either been retained in the new significantly reduced, in some cases driving force behind this success. privatized organizations or transferred from two hours each way every day to Now funded through the Government or absorbed in other agencies, either under half an hour, and has enabled budget, the sustainability of the four- into vacant positions or merely in them to seek employment opportunities year old program is further secured by pending outplacement opportunities. in locations which were previously the exp ertise and enthusiasm Nevertheless, the experience clearly difficult to reach except by car or taxi. harnessed in the EPC. shows that opening up sectors such as Telecommunication to Private Sector City water is a very scarce commodity competition can produce new jobs in Jordan delivered once or twice a quickly. week. Leakage and illegal connections left 55 percent of water usage Consumer benefits are being reaped unaccounted for. Broken meters and from the Program. The wait for a “private arrangements” resulted in

October 2001 5 Hashemite Kingdom of Jordan

Recent Economic Developments

Resilient Growth tariff, trade and fiscal reforms, and privatization) and partly be due to a response to stimulus. Real GDP growth (at market prices) reached 3.9 percent The global events following the September 11 terrorist in 2000, after languishing at or below three percent in the strikes have the potential to adversely affect the preceding four years. Importantly, the Jordanian prospects for the rest of the current year and beyond economy showed some resilience to regional shocks as through diminished exports, tourism and private capital GDP growth rates recovered to a four percent average for flows. the first two quarters of 2001, after dipping to 3.5 percent in the last quarter of 2000. The Intifada in West Bank Inflation Picking Up But Still and Gaza, now running for a year, affected Jordan Moderate directly through reduced arrivals of non-Arab tourists, reduced export of construction material, vegetables and Inflation in Jordan is moderate averaging only 2.8 fruits to West Bank and Gaza and Israel. However, a percent in the last five years, helped partly by the surge in exports from Qualifying Industrial Zones unchanged exchange rate between the Dinar and the US 1 (QIZs) to United States markets, pick-up in construction Dollar since 1996. The US Dollar’s strong appreciation activity, and revival of industrial production and broad- against the European currencies - an area from which a based service sectors, have helped Jordan pick up growth third of Jordanian imports are sourced - and Jordan’s momentum. All indicators - exports, imports, industrial import tariff cuts have helped in keeping imported input production, private sector credit - up to the second costs low. Inflation, as measured by Amman Consumer quarter of 2001 point to increasing strength of the Price Index, which was declining through the year and economy. The welcome upsurge in the economy, despite only averaged 0.7 percent (annual rate) in 2000, began to recent adverse neighborhood effects, could partly be due climb during the start of 2001. The broadening of the 13 to the result of ongoing structural reform efforts (tax, percent General Sales Tax (phase two) base to trading sectors implemented from January 2001, and upward Figure 1. GDP Growth Rate revisions to petroleum prices announced in July-August (in percent, annual rate, year on year) 2001, are behind the moderate increase in inflation, as shown in Figure 2. Petroleum product price increases 4.4% 4.2% announced in July and August have not been fully 4.0% reflected in the indices available up to July which 3.8% 3.6% registered an increase of 2.8 percent compared to the 3.4% previous year. 3.2% 3.0% Figure 2. Inflation (in percent, year on year)

4.0 2000Q1 2000Q2 2000Q3 2000Q4 2001Q1 2001Q2 3.0 2.0 1.0 0.0 Source: Department of Statistics, Jordan. -1.0 -2.0 Note: GDP is measured in constant 1995 market prices. -3.0

1 1999M7 1999M9 2000M1 2000M3 2000M5 2000M7 2000M9 2001M1 2001M3 2001M5 2001M7 Exports from QIZs are allowed to enter the United 1999M11 2000M11

States duty-free and quota-free, as long as they meet Source: Central Bank of Jordan (CBJ) Monthly Statistics specific local content requirements from Israel, Jordan Bulletin, International Financial Statistics (IFS) and LDB. and West Bank and Gaza.

October 2001 6 Hashemite Kingdom of Jordan

Merchandise Exports Surge After somewhat of a rebound in the second quarter of 2001 with increased tourism receipts growing at six percent Five Years Of Stagnation (year-on-year). The main reason for this rebound appears

to be the increased arrivals from Arab countries with After remaining flat at around US$1.8 billion for five different perceptions of regional risk. years, exports2 jumped by 16 percent in the first half of

2001. Stellar performance in apparel, clothing and pharmaceutical products helped overcome the drag of Imports Climb Persistently mineral exports as shown in Table 1. Much of this surge in clothing exports is led by exports from QIZs. Helped partly by the strong Dinar and continuing import tariff reductions as a part of the trade reforms, imports Table 1: Analysis of Export Surge in the First Half of continued to climb in the first half of 2001 to nearly 19 2001 percent annual rate in current US Dollar terms. This persistent surge comes after a strong pick-up noted in Weight Growth Contribution 2000, when imports increased by 24 percent, ending a Commodity (%) (%) (%) declining trend of the previous four years. More than half of this increase in the first half of 2001 came from the Total 100.0 15.7 100.0 import of manufactured goods and telecommu nication Clothes 7.0 172.3 0.3 equipment as a result of higher industrial output and Medical and Pharmacy investment demand. Given that merchandise exports 10.3 15.0 10.7 Products covered only a quarter of merchandise imports and that Vegetables 5.5 29.5 9.9 the rise in imports outpaced the pick-up in exports, the trade balance continued to be large, at around a third of Cement 1.5 78.9 6.3 GDP. Potash 12.8 7.5 6.0 Source: Staff estimates based on Central Bank of Jordan Narrowing Current Account Surplus Monthly Statistical Bulletin. Weights are derived from data for 2000. In 2000, current account surplus (including grants) sharply narrowed to a small surplus of 0.7 percent of Service Exports Moderate GDP declining from the peak of five percent reached in 1999. This was the net result of import surge and

weakness in tourism receipts witnessed in the year 2000. Worker remittances and tourism receipts are two As expected, current account balance is turning into a important sources of service exports for Jordan. In 2000, deficit for the first time in five years in 2001. Though worker remittances were larger than merchandise exports exports surged strongly and the brisk pace of imports by 30 percent and tourism receipts3 amounted to nearly slackened somewhat in the first half of 2001, moderate half of the exports. Growth momentum in Gulf growth in service exports led to a small deficit on the economies fueled by strong oil prices has probably current account of US$60 million – about 0.7 percent of helped to increase worker remittance inflows in 2000 by GDP. Foreign reserves (excluding gold) of the Central 11 percent. The results for the first half of 2001 show a Bank which reached a high of US$3.5 billion in persistent trend with worker remittances continuing to September 2000 helped by UN compensation payments flow at the same rate. The decline in tourism revenues by and privatization proceeds, have been depleting at a nine percent in 2000 was attributed to the regional moderate rate to US$3.1 billion at the end of July 2001, uncertainty. This declining trend persisted into the first still some eight months of merchandise import quarter of the current year. However, there has been equivalent4.

2 Does not include re-exports. 3 Travel receipts are treated as tourism receipts. 4 Using merchandise imports for the year 2000.

October 2001 7 Hashemite Kingdom of Jordan

Figure 3. Current Account Balance Ratio Figure 4. Growth in Private Sector Credit (percent, year on year) Current Account Balance Ratio (yearly) (In percent of GDP) 6 5.0 16.0 14.0 4 12.0 10.0 2 0.7 0.4 0.3 8.0 0 6.0 -2 4.0 2.0 -4 -3.2 -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.

Easy Monetary Policy Is Having An Medium-Term Outlook For Fiscal Impact Policy Improves

The Central Bank has been relaxing the monetary policy Fiscal management continued to be focused on securing to stimulate growth since mid-1999, and in the more medium-term gains. The introduction of the Value recent period the decline in United States interest rates Added Tax Rate at 13 percent, the enactment of the new have created more room for action in this regard. In mid- Public Debt Law that empowered the Cabinet to set a May 2001, the Central Bank re -discount rate was ceiling for Total Gross Public Debt at 80 percent of GDP lowered to 5.5 percent taking the cumulative reduction in (as against the estimated ratio of 114 percent in 2000) the preceding one year amounting to 150 basis points. In were strong indicators that fiscal prudence would remain response, the commercial have been lowering their the overriding aim of fiscal policy. To reduce lending rates, though by not as much. The prime lending vulnerability to oil price changes, authorities announced rates of commercial banks are in the range of eight-nine increases (petrol - 15 percent; diesel - 3.8 percent; and percent with the banks free to set the rate depending kerosene - 21 percent) in administered prices of upon the borrower’s credit risk. Growth in credit to the petroleum products in July-August 2001. The overall private sector is showing a strong, persistent pick-up fiscal deficit (excluding foreign grants which average since mid-2000 to reach a nearly 11 percent growth in about four percent of GDP) as a ratio of GDP, estimated July 2001, compared to a year earlier. This is a clear sign at 7.4 percent, by the authorities remained at the same of pick-up in private sector activity compared to the level as in the previous year because of short-falls, sluggish six percent annual average credit growth mainly in non-tax revenue. In the first half of 2001, witnessed in the previous five years, 1996-00. The bulk again, non-tax revenues declined by 7.1 percent, even as of the new credit went towards buying shares (60 growth in tax revenues outpaced total expenditures (6.2 percent) and the trading sector (30 percent) which helped versus 4.3, in percent). As a net result, as estimated by stimulate a weak stock market as evidenced by the the authorities, overall fiscal deficit, excluding grants, for dramatic six-fold rise in trading volumes and the nine the first half of 2001 amounted to JD 233 million percent gain in the Amman Stock Exchange Index by compared to JD 202 million for the previous year. July 2001 from the lows reached in September 2000.

October 2001 8 Hashemite Kingdom of Jordan

An important achievement of the year 2000 in public females that has declined to 15.6 percent from the debt management was the 11 percent point reduction in average of 21 percent in 2000. the Government’s external debt as a ratio of GDP to 85.3 percent. Active buying back of Brady Bonds and debt- Figure 5. Unemployment Rate swaps contributed to this decline, in addition to some (For total population aged 15 and up) currency revaluation effects. 16 15.5 Unemployment Edges Up Slightly 15 14.5 14 Based on Quarterly Labor Force Surveys carried out by 13.5 13 the Department of Statistics, Jordanian unemployment 12.5 rose slightly (1.3 and 0.4 percent points respectively) for 12 11.5 the first two rounds of 2001 (February and May) compared to the same rounds of the previous year. At

13.7 percent for Round 2 of 2001 (May), it is nearly the 2000R1 2000R2 2000R3 2000R4 2001R1 2000R2 same as the average for the year 2000. However, this masks the sharp reduction in the unemployment rate for

Bank Group Operations

IBRD Projects In The l Samra First Private Power together with restructuring of key Pipeline Project (US$50 million Guarantee). institutions, and preparation of an The Project is designed to: (i) action plan for reuse of treated l Agriculture Exports Project support the Government’s initiative wastewater. for private power generation and its (US$30 million). The objectives of the efforts in tapping new sources of l Public Sector Reform Loans Agriculture Exports Project are: (i) to private capital for the Power Sector; (PSRLs). The foundation for Bank support private investments for the (ii) add new power-generating support to Jordan’s Program of Public production and marketing of non- capacity, in line with the least-cost Administration Reform is a series of traditional high-value crops with an development plan for the Power three one-tranche Public Sector effective demand in the international Sector, and at competitive prices, Reform Loans. The Loans will support markets; (ii) to introduce and while improving its efficiency; and an agreed medium-term program of disseminate new technologies for the (iii) strengthen the Ministry of step-by-step Public Sector reforms, production and post-harvest handling Energy’s capacity to prepare future with a focus on budget reform, better of these crops; and (iii) to initiate the private projects and put into effect key delivery of public services, and process of establishing Jordan as a policies for sustainable development increased transparency and reliable supplier of export crops to of the Energy Sector. accountability. The Loans will build highly-demanding markets in on the positive experience of the European and Gulf countries, leading l Jordan Rift Valley Improvement series of single-tranche Economic to improvements in levels of farm Project (US$30 million). The Project Reform and Development Loans, income and in the overall agricultural would support improved water which supported a program of trade balance. management in the Jordan Rift Valley, structural reforms aimed at

October 2001 9 Hashemite Kingdom of Jordan

strengthening the environment for In addition, measures are sought in a coherent manner to ensure its private sector. The PSRLs will support which aim at economizing the use of economic, social and environmental a strong, coherent program of reforms public resources. sustainability. To this end, the in line with the policy framework for Government, with Bank assistance, single-tranche and programmatic l Housing Finance and Urban has formulated a medium- to long- adjustment lending. The first PSRL Sector Reform Project (HFUSRP). term Tourism Development Program. for US$120 million was approved in (US$20 million.) The Project supports The Second Tourism Development June 2001. the Government's strategy to improve Project finances Phase I investments the efficiency of the Housing and of the Program. The Project's IBRD Ongoing Projects Housing Finance Sectors, promote development objectives are to: (a) Private Sector development in land create the conditions for an increase in The current portfolio in Jordan and housing production, and reduce sustainable and environmentally sound consists of 10 projects for a total the role of the Government in both tourism in Petra, Wadi Rum, Jerash commitment amount of US$411.7 Sectors. The Project would establish a and Karak; and (b) realize tourism- million, of which US$254.2 has been Secondary Mortgage Facility to related employment and income- disbursed to-date. improve the efficiency of medium- to generation potential at Project sites. longer-term financial flows for l Health Management Project mortgage lending mobilization; l Community Infrastructure (HMP). (US$20 million.) The facilitate and foster competition in Development Project (CIDP). (US$30 Project was designed to enhance the market-based mortgage lending; and million.) The Community health status of the population lengthen the term structure of Infrastructure Development Project through: (1) qualitative improvements mortgage lending. represents the first (pilot) phase of a in the Ministry of Health’s primary longer-term program of small-scale and hospital services; and (2) reform l Second Tourism Development infrastructure improvements to poor of the Ministry’s organization, its Project (TDP-II). (US$32 million.) communities in Jordan. This pilot management, finances and planning Tourism is Jordan's second largest phase tests the opportunities for capacity. The Project finances generator of foreign exchange after developing: (a) income -generating technical assistance, fellowships, remittances. It results in foreign activities in economically deprived training, teaching equipment, health exchange revenues of over US$750 areas; (b) approaches to promote local facility construction and renovation, million equivalent, or approximately participation in the identification of computer hardware and software, and 10 percent of GNP. The actual tourism priority infrastructure needs; (c) medical and office equipment. potential of Jordan is even greater. criteria for eligible appropriate Capturing this potential, however, investments; and (d) detailed l Second Human Resources requires Jordan to develop the Sector relocation plans in squatter settlements Development Sector Investment Project (HRDSIP-II). (US$60 Commitments and Disbursements Approval Loan Amount million.) The central Project objective Project Name Year Amount Disbursed is to improve educational quality. The US$ Million focus is on measures to enhance the Health Management 1993 20.0 17.8 teaching/learning environment Human Resources Dev. Sector Inv. II 1995 60.0 48.7 including: teaching competencies; Housing Finance & Urban Sector Reform 1996 20.0 19.1 Tourism Development II 1997 32.0 10.2 curricula and textbooks; Community Infrastructure Development 1997 30.0 12.9 administration and management; and Training & Employment Support 1998 5.0 1.5 creating a strong institutional Amman Water & Sanitation Management 1999 55.0 16.6 framework, particularly in relation to Health Sector Reform 1999 35.0 9.3 vocational and technical education, Higher Education Development 2000 34.7 1.5 examinations and national assessment. Public Sector Reform Loan I 2001 120.0 120.0 TOTAL 411.7 257.6

October 2001 10 Hashemite Kingdom of Jordan

to enable upgrading basic and (ii) lay the groundwork for the Government; and (d) support the infrastructure in subsequent phases of sustainable involvement of the Private rationalization of the community the CIDP. The CIDP is one Sector in the overall management of college sub-sector through the new Al- component of the Government of these services. These objectives Balqa' Applied University. Jordan's Social Productivity Program complement the Government of (SPP), which is a comprehensive Jordan's strategy for water supply and l First Public Sector Reform Loan strategy to address the problems of wastewater services. (PSRL-I). (US$120 million.) This poverty and unemployment through programmatic Loan is the first in a productivity improvements. l Health Sector Reform Project planned series of three Public Sector (HSRP). (US$35 million.) The Project Reform Loans (PSRLs). The program l Training and Employment is based on the findings of the Health supports Jordan by providing fast- Support Project (TESP). (US$5 Sector Study, prepared jointly by the disbursing external financing to meet million.) This pilot Project is intended World Bank and the Government of anticipated gaps originating from its to introduce an efficient and effective Jordan (April 1997). The Project is fiscal needs, while supporting linkage between public expenditures expected to increase the efficiency, fundamental structural changes in its for short-term training, and business quality, and long-term financial core public sector. The Loan aims to community skill requirements. It is sustainability of health services in strengthen public institutional capacity another component of the Government Jordan. Indicators to measure the and the quality of public services. of Jordan’s SPP. The TESP has achievement of these objectives Key objectives are to strengthen created a Fund (the Training Fund) include: increased hospital occupancy private investment, diversify the that issues monetary awards to rates; adoption of treatment protocols; economy, achieve closer integration enterprises which provide or purchase and a reduction in spending on with the global economy, strengthen training and related services (e.g., pharmaceuticals as a share of total the country’s human capital base, and intermediation, needs analyses) expenditures. ensure better access to services for necessary for the recruitment of the citizens, particularly the poor. unemployed to fill genuine vacancies. l Higher Education Development The objective of the pilot TESP is to Project (HEDP). (US$34.7 million.) IFC Ongoing Projects test the demand for, and the The objective of the Project is to effectiveness and efficiency of, initiate improvements in the quality, l Al-Hikma Pharmaceuticals employer-based training supported by relevance and efficiency of Jordan's Limited (Jordan). The Project is a Training Fund, i.e., whether training higher education, and to support designed to help Al-Hikma can be more cost-effective and Jordan’s program to reform Sector Pharmaceuticals upgrade and expand efficient when it is demand-driven. governance. The Project will: (a) its existing pharmaceutical and Public Training Funds are establish system-wide modern chemical plants, and build a new competitively awarded between public information technology, management plant. and private providers, and information systems, and library employment services are also offered infrastructure for higher education; (b) l Zara Investment Holding by private offices whose operations support a Higher Education Company. The investment Project have been until recently illegal. Development Fund providing grants to consists of the construction and public universities for innovative and operation of an international standard l Amman Water and Sanitation economically relevant sub-projects 312-room hotel and complex Management Project (AWSMP). and for improving teaching and comprising 44 apartments, partially (US$55 million.) The objectives of the learning; (c) initiate reforms of higher serviced by the hotel; well-equipped Project are to: (i) improve the education governance, including the exhibition/conference facilities; an efficiency, management, operation and introduction of formula -based auditorium; a health club, managed by delivery of water and wastewater allocation of higher education Hyatt International; and a Wellness services for the Amman Service Area; recurrent funding from the Center and 231-room hotel complex on

October 2001 11 Hashemite Kingdom of Jordan

the Dead Sea, combining medical and imperative, as are sufficiently low Hotel will also replace 15 of its recreational facilities, to be managed noise levels, adequate lighting, and elevators, its boilers, the kitchen, safety by Mövenpick. Economic benefits sanitary facilities. IFC will require that and telecoms equipment. The accruing to Jordan include foreign El-Zay's new facilities comply with management agreement between exchange generation and the creation World Bank guidelines in this regard. InterContinental Hotels Corporation of about 600 direct jobs. IFC's main and JHTC has recently been extended role in this Project is to provide long- l Arab International Hotels to 2007. term funding on terms and maturities Company (AIHC). The Project not available in Jordan, and help the consists of the renovation and l Jordan Investment Trust Zara Company mobilize local loans. expansion of the Amman Marriott, a (Jordinvest). The Project involves the leading hotel located in the Shmeisani establishment of the first investment l Business Tourism Company. The area of Amman. The work comprises: bank in Jordan. Jordinvest is expected Project consists of building and (i) the complete refurbishment of all to carry out a broad range of operating a resort of international the hotel’s 294 rooms; and (ii) the investment banking activities, standards, which will include: (i) a addition of conference and banqueting including: providing long-term private 230-key hotel; and (ii) a health/medical facilities, a health club, retail space, equity; investing in quoted spa and beauty care facility. The Dead movie theaters and an underground investments; underwriting and private Sea, due to its unique therapeutic parking facility. The proposed placement of debt and characteristics and climate, has expansion and modernization of the equity issues; corporate finance established itself as a world-class Marriott will boost the hotel to a 5-star activities, especially restructurings, center for the treatment of various skin international level, allowing it to match privatization, and mergers and and muscular-joint ailments, such as the quality level provided by its acquisitions. Jordinvest would play a psoriasis and rheumatism. The competitors. critical developmental role in proposed complex will be managed by addressing the financial needs of the Marriott International and will target l Jordan Hotels and Tourism Private Sector in Jordan and in both health and leisure tourists. Company (JHTC). The Project developing its capital markets. comprises an extensive refurbishment Through its affiliation with its sponsor, l El-Zay (Textile). El-Zay of most of the InterContinental Hotel's Gulfinvest, the Company would also specializes in the manufacture of high existing 366 rooms and the addition of attract foreign, as well as Middle quality men's suits. The Project 125 new rooms and facilities. The Eastern, investors to the region. consists of: (i) an expansion program to diversify El-Zay's product line by List of Projects in the Portfolio manufacturing men's outerwear; and Project Name Approval Loan Amount (ii) a financial restructuring designed Year Amount Disbursed to strengthen El-Zay's balance sheet US$ Million by replacing most of its short- and Al-Hikma Pharmaceuticals Limited (Jordan) 1987/90/ 0.34 0.34 93/95 medium-term debt with long-term Zara Investment Holding Company 1996 17.3 17.3 debt. IFC's investment is to help the Business Tourism Company 1997 4.6 4.6 company complete the Project's El-Zay (Textile) 1997 3.6 3.6 financial plan and improve its Arab International Hotels Company 1998 3.6 3.6 financial structure by providing Jordan Hotels and Tourism Company 1998 9.3 9.3 funding on terms and maturities not Jordan Investment Trust 1998 1.4 1.4 Modern Agricultural Investment Company 1999 1 0.8 otherwise available in Jordan. Also, Middle East Investment Bank Recapitalization 2000 2.2 2.2 garment manufacturing operations Boscan Jordan-I 2001 8.0 8.0 typically employ numerous people in Jordan Gateway 2001 10 0 a relatively confined factory. Boscan Jordan-II 2001 1 0 Adequate fire prevention at the site is Total 62.34 51.14

October 2001 12 Hashemite Kingdom of Jordan

l Modern Agricultural Investment l Boscan Jordan-I. The Project is to infrastructure development of a 50 ha Company (MAICO). The overall expand the operations of Boscan Jordan area on the Jordanian side, and (ii) objective of the Company's operations Group, a Jordanian manufacturer of construction of 94,000 m² of is to act as a market and technology soft-side luggage products selling buildings, offices and factories for beacon to help diversify and upgrade primarily to the United States market. rent, on the Jordanian side, which are the range and combination of crops and Boscan Jordan's existing facilities proposed to be partially financed by irrigation methods, which would consist of 20 production lines. The IFC develop a modern Export Sector, Project will add 40 additional thereby maximizing the economic production lines. The Company's l Boscan Jordan-II. The Project is return on irrigation water and products are manufactured and sold to develop an integrated Industry and ultimately rationalize its overall under brand names by major United Information Technology Park consumption. States retail chains. Boscan Jordan’s Development (IITPD). The industrial speciality is carry-on luggage, one of park has been granted the status of a l Middle East Investment Bank the fastest growing sectors of the Qualifying Industrial Zone (QIZ), to (MEIB) Recapitalization. The Project luggage market. The Project is expected provide companies located there with involves both MEIB’s (the smallest to have a significant development the competitive advantage of quota- commercial bank in Jordan) impact in employment creation in Irbid, free and duty-free access to the United recapitalization to meet the Central Jordan. States market. In addition to the QIZ, Bank of Jordan's minimu m capital the proposed park has been given a requirements, and its restructuring, l Jordan Gateway Project. The "Free Zone" status by the Jordanian managed by Société Générale Libano- Project is to develop, construct and Government, which provides a 12- Européene de Banque. IFC investment operate an industrial estate covering year tax holiday and other incentives is part of this larger recapitalization about 65 ha (of which about 50 ha for tenant companies. and restructuring program for MEIB. It would be in Jordan) at the Jordan- complements the Technical Assistance Israel border. The Project will be program in Jordan, provided by both developed in three phases. Phase I of IFC and the World Bank. the Project will involve: (i) land and

World Bank Assistance Strategy

On December 16, 1999, the World Group, the EU, and several bilateral balance of over five months of Bank's Board of Executive Directors donors. The economy's initial response coverage of imports). The current discussed the Bank Group's Country to the Jordanian Government's Reform account during this period remained Assistance Strategy (CAS) for the Program was strong. Economic essentially balanced. The economic Hashemite Kingdom of Jordan fundamentals in the first half of this situation began to deteriorate in 1996 covering the period 2000-2002. decade were quite satisfactory: a high with growth falling below the average growth rate of 7.6 percent per population growth rate resulting in Country Context annum (until 1996 when it began to approximately a two percent decline in deteriorate); a reduction in the fiscal per capita income per annum during Since the early 1990s, Jordan has deficit; low inflation; and sound the 1996-98 period. The decline undertaken considerable stabilization monetary management, which helped occurred largely because the country and adjustment efforts. These have in the build-up of foreign exchange faced several unfavorable factors that been supported by the Fund, the Bank reserves to a healthy level (current were outside its control, including:

October 2001 13 Hashemite Kingdom of Jordan

lack of progress in the peace process; Bank Strategy And million for Private Sector declining oil prices, thus reducing the Priorities For Bank infrastructure investments. The Bank market for Jordanian exports in Group exp ects to lend to projects in neighboring countries; and spillover Assistance higher education, agriculture exports, from the general slowdown in the vocational education, tourism, social Asian economies. Based on detailed discussions with the protection, water, and Public Sector Government and other stakeholders in reforms. IFC proposes to provide The Government is focused on the the country, the Bank's assistance for selective support for viable investment challenge of restoring the country to a 2000-2002 will focus on: transactions where comparative higher growth path. Actions are being advantages are present. There will also taken in privatization (e.g., Aqaba · Reviving, maintaining, and be substantial nonlending services. Railway, Jordan Telecommunications accelerating economic growth, MIGA Guarantees will be available as Company); several key economic laws emphasizing higher levels of appropriate. have been passed; tariffs have been private investment, export further reduced; and increased efforts development, and tourism; Partnerships · Promoting human development, are being made towards fulfilling including social protection; and requirements of accession to the The CAS is a unified strategy of the · Improving water resources World Trade Organization. Moreover, World Bank Group, IBRD, IFC, and management and the environment. Public Sector reforms have become an MIGA - all will collaborate to integral part of the Government's implement the strategy. Many donors IBRD loans to Jordan are expected to development plan for the next three to are active in Jordan, and the Bank average US$100-150 million per year five years. This would make the coordinates its assistance closely with between 2000-2002, assuming overall Public Sector more efficient and theirs. To improve macroeconomic satisfactory macroeconomic promote private investment in the management, the Bank works closely management, structural reforms and country. with the IMF. portfolio performance. In addition, IBRD Guarantees could total US$200

Poverty Alleviation in Jordan

Poverty declined in Jordan between The following is an abstract of Poverty Alleviation in 1992 and 1997: Jordan – Lessons for the Future written by Radwan

Shaban, Dina Abu-Ghaida, and Abdel-Salam Al-Naimat, · The percentage of Jordan’s population below the June 2001 (ISBN 0-8213-4958-9). poverty line was lower in 1997 than it was in 1992. This

decline is not dependent on the choice of poverty line. The purpose of this report is to draw lessons for improving the policy design of poverty alleviation · More specifically, the fraction of the population schemes in Jordan. The conclusions herein are based on living below the poverty line of JD 313.5 per capita per analyses of trends in consumption poverty1 in Jordan and year2 (using per capita consumption expenditure) assessment of the impact of government programs declined from 14.4 percent in 1992 to 11.7 percent in (including food subsidies and cash transfers) on poverty 1997. Other measures of poverty also declined during the alleviation in the 1990s. same period, as shown below.

October 2001 14 Hashemite Kingdom of Jordan

Summary Table 1 · Inequality in per capita consumption expenditure, as measured by the Gini Index4, declined from 0.40 to 1987 1992 1997 0.36 during this period. This underlying level of Poverty Line 148 261 313.5 inequality is essentially moderate by regional and (current annual JD per capita) international standards. Poverty Measures Headcount Index 3.0 14.4 11.7 Government programs contributed to (% of population) 3 Poverty Gap Index (%) 0.3 3.6 2.5 poverty alleviation: Absolute Magnitudes Number of Poor People (‘000) 87.4 554.3 538.2 · In 1992, government programs consisted Total Poverty Gap 1.3 35.9 36.6 predominantly of food subsidies, which benefited (current JD, millions) the non-poor more than the poor.

Source: Based on Table 4 in main report (1987 data are from · In 1997, government cash transfers constituted the the World Bank [1994] Poverty Assessment). Welfare measure bulk of government programs, and these benefited is per capita consumption expenditure. the poor more than the non-poor.

· In addition, the data indicate that the poorest tenth of · The decline in incidence and depth of poverty the Jordanian population benefited from National between 1992 and 1997 is observed for any poverty line Aid Fund assistance more in 1997 than in 1992. The below JD 491 per capita per year. For example, using a Development and Employment Fund and the Zakat poverty line of JD 365 per capita per year, the fraction of Fund also target the poor. the population that was poor declined from 20.8 percent in 1992 to 18.2 percent in 1997. Poverty continues to be a major policy challenge for Jordan: · Despite the reduction in poverty between 1992 and

1997, there is widespread belief that poverty actually · The absolute number of poor people only dropped increased in Jordan during the mid-1990s. This belief is from 554,000 in 1992 to 538,000 in 1997 (see partly in reaction to declining overall per capita incomes Summary Table 1). since 1996 in the context of expectations of rapid economic improvements following the 1994 Jordanian- · Declining per capita income leads to greater poverty, Israeli peace treaty. In addition, poverty in Jordan in for a given level of inequality. Thus, the decline in 1997 remained far higher than it was in 1987. per capita GDP in Jordan since 1996 is expected to

lead to increasing poverty. Poverty declined because inequality declined: · The poor and near-poor remain vulnerable as a result of the shallowness of poverty in Jordan (many · In 1997 prices, per capita expenditure levels went people concentrated close to the poverty line) and down from JD 821 in 1992 to JD 762 in 1997. the adverse effects of potential shocks. A 10 percent However, the poorer 40 percent of the population uniform reduction in expenditure is estimated to had higher per capita expenditure levels in 1997 than increase the number of the poor by 35 percent. in 1992, while the richer 60 percent were worse off. · This clear reduction in inequality outweighed the effect of the decline in per capita expenditure levels and led to a lower poverty rate in 1997 than in 1992.

October 2001 15 Hashemite Kingdom of Jordan

Policy Conclusions One mechanism for reducing the vulnerability of the poor and near-poor to negative shocks is through 1. Sustainable reduction of poverty requires community-based public works programs that offer resumption and sustainability of growth. jobs at low wages. These mechanisms provide Government transfers had a role in bringing poverty insurance to low-income households, encourage down, but budgetary constraints limit their risk-taking, and lead to higher incomes in the long expansion and, in a recessionary economy, also their run. sustainability. After several years of negative growth in per capita incomes, Jordan needs to resume 3. The capacity of the National Aid Fund (NAF) needs growth to reduce poverty as well as improve overall to be significantly enhanced. Increased reliance on standards of living. Poverty projections for different targeted cash assistance has had a measurable growth scenarios are shown in the following figure. impact on poverty alleviation. Yet, more could be Structural adjustment reforms that enhance and achieved with the available resources if accelerate growth are therefore critical for poverty implementation inefficiencies are overcome. NAF reduction in the future. requires capacity and institutional strengthening in such areas as its organizational structure, mission, and business operations.

4. Continued priority needs to be placed on human development policies, particularly those affecting the poor. This investment is important to permit the poor to benefit from growth and increased job opportunities. Although overall indicators of literacy and health are good in Jordan, the profile of the poor clearly indicates that the educational attainments of the household directly impact the incidence of poverty. It is important to continue investing in the health and education of the poor so they will be able to benefit from higher growth and increased job opportunities.

1 Consumption poverty relates the notion of poverty to Note: All growth rates are real per capita GDP. Current insufficient means to meet the cost of a basket of basic needs. 2 The poverty line of JD 313.5 per capita per year, in 1997 growth projections are -2.7, -2.1, -0.3, 0.4, and 1.4 percent prices, is an update of the line used in the World Bank’s 1994 for 1998, 1999, 2000, 2001, and 2002, respectively. Poverty Assessment, which is an update of the official poverty line originally derived by the Ministry of Social Development 2. There is a need for policy response to the for the year 1987. 3 The 1992 Income and Expenditure Survey indicated 21.3 vulnerability of the poor and near-poor to economic percent of households as poor using a household-based poverty shocks. The current government welfare program line. This report uses individual-based poverty lines. aims at the permanently poor. It si therefore not 4 The Gini Index measures inequality in per capita income or equipped to respond flexibly and quickly enough to expenditure. It ranges between 0.0 for perfect equality and 1.0 for perfect inequality. relieve any hardship resulting from a negative shock.

October 2001 16 Hashemite Kingdom of Jordan

Global Development Learning Network

“As we look at the challenges of poverty, it is clear that money alone is not what is needed. We need colleagues who can learn and share experiences with each other. Distance learning is the tool that will enable this and benefit us all.” James D. Wolfensohn, President, The World Bank.

In the global economy of the network of learning centers. GDLN of change, using two-way multimedia information age, knowledge and provides learning opportunities for video-conferencing sessions with print information have become more vital to stakeholders in the development packages, CD-ROMs, interactive Web sustainable development than bricks community and provides cost- communications, and face-to-face and mortar. Policymakers, Private effective capacity-building programs tutorials; (b) fostering global Sector leaders, community workers in countries that now – for the first dialogues providing unique and other “agents of change” in the time in history – are able to make a opportunities for participants to developing world know that their sustained effort to close the address pressing issues that call for a success depends on bridging the gap knowledge gap with the rest of the common international agenda or between the information-poor and the world. require the formulation of local policy information-rich. That is why the response. The participants at the World Bank and its partners have As part of the Higher Education GDLN Center will be government launched the Global Development Project (previously described), and co- officials, universities, business and Learning Network (GDLN), a financed by a Japanese Trust Fund, a trade associations who will take part Partnership of organizations that is Global Development Learning in distance learning activities with leading the way in using 21st Century Network Center is being established at developmental emphasis. learning technologies to share the University of Jordan. GDLN will development knowledge. provide quality programming drawn The Center was opened on July 5, from public and private sources, 2001 by His Majesty King Abdallah. GDLN is an interactive, multichannel including the World Bank Institute’s His Majesty attended the first GDLN network with a mandate to serve the GDLN Center which promotes Session, which included a multi-party developing world. This flexible development-related learning in all its session with the Tanzanian, Ukrainian learning system uses two-way aspects. Learning programs include: GDLN Centers, the World Bank Paris videoconferencing, Internet and other (a) seminars, workshops, and courses Office, and the Bank’s Washington advanced communications techno- targeted to the needs of policy-makers, Headquarters Office. logies to link together a global development practitioners, and agents

October 2001 17 Hashemite Kingdom of Jordan

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

15% IDA: US$86.1 million (15 credits) 10% IBRD: US$1,854.6 million (52 loans) 5% Of which: 0% Investments: US$1,194.3 million Adjustments: US$630 million (6 projects) Hlth

Energy Finance Telecom Transport

Education Disbursements: US$1,783.1 million Agriculture Urban Dvt. Multisector Water S&S

Industry/Mining Repaid: US$771.0 million Obligation: US$952.6 million

New Bank Publications

RECENT REPORTS ON JORDAN Jordan Water Sector Review and irrigation services. Urban water Update (Report 21946-JO). The and irrigation tariffs have not Poverty Alleviation in Jordan – Ministry of Water and Irrigation, increased since 1997. Urgent action is Lessons for the Future. (ISBN0- Hashemite Kingdom of Jordan, invited needed on tariffs to ensure full 8213-4958-9). The incidence of the Bank to assist in updating the recovery of operating costs and poverty in Jordan declined between Water Sector Review of 1997 as an periodic adjustments for inflation. 1992 and 1997. This decline is related input into the formulation of a five- Self-financing of water supply and to the change in Jordanian year action plan for the Water Sector. irrigation services must be a high Government policies from generalized Jordan faces three critical challenges: priority. In terms of the institutional food subsidies, (benefiting the rich 1) the resource challenge; 2) the challenge, reforming the Water more than the poor), to targeted cash financing challenge; and 3) the Authority of Jordan and Jordan Valley assistance for the poor. Yet poverty institutional challenge. In terms of the Authority to focus on essential reduction remains a major policy resource challenge, the challenge of strategic and bulk water management challenge for the country since the water deficits is compounded by the tasks while divesting retail water improvement was driven by reduced need to ensure water quality and services to user or Private Sector inequality and not by positive environmental protection. A entities is a high priority. (2001) economic growth. The sustainability systematic action plan for reuse of of Jordan’s social safety net is limited treated wastewater needs to be Nonfarm Income, Inequality, and by the growth of the budget and the formulated in view of the projected Poverty in Rural Egypt and Jordan economy. The report therefore increase in the quantity of treated (WPS2572). Nonfarm income has a examines Jordan’s recent experience wastewater available for use in the greater impact on poverty and in poverty alleviation schemes to draw Jordan Valley. In terms of the inequality in Egypt than in Jordan. In lessons for future policy design financial challenge, Jordan will have rural Egypt the poor receive almost 60 improvements. to redouble its efforts at generating percent of their income from nonfarm significant additional operating sources, while in rural Jordan they income from drinking water supply receive less than 20 percent. The

October 2001 18 Hashemite Kingdom of Jordan

reason for this difference is land: in Reforming Public Institutions and labor practices, environmental rural Egypt, agricultural land is very Strengthening Governance: A protection, and intellectual property productive, but access is quite limited, World Bank Strategy (ISBN 0- rights. and so the poor are “pushed” into 8213-4875-2). Poorly functioning · The influence of technological nonfarm work; while in rural Jordan, Public Sector institutions and weak innovations and what electronic land is not very productive, and access governance are major impediments to commerce means for trade and is not highly prized. In both countries growth and equitable development in production in developing the best way to reduce poverty and many developing countries. The topic economies. inequality might be to focus on is important because of its centrality nonfarm unskilled labor. to development. Voices of the Poor . The Voices of the Poor Project was undertaken as a This strategy paper reviews the World multi-country research initiative to OTHER BANK PUBLICATIONS Bank's recent work on governance, understand poverty from the eyes of Public Sector institutional reform, and the poor. The research findings are World Development Report capacity building, particularly in core being published in three books over 2000/2001: Attacking Poverty (ISBN public institutions. The agenda for the the course of this year. 0-19-521129-4). At the start of a new next three years is to continue to century, poverty remains a global foster changes through the · Can Anyone Hear Us? (ISBN 0- problem of huge proportions. Of the advancement of analytic tools, new 19-521601-6) gathers the voices of world's six billion people, 2.8 billion approaches to the design of lending over 40,000 poor women and men live on less than US$2 a day and 1.2 operations, expanded emphasis on in 50 countries from the World billion on less than US$1 a day. The partnership with clients and other Bank's participatory poverty report argues nevertheless that major donors, and progressive shifts in assessments. reductions in all these dimensions of staffing, incentives, and evaluation · Crying Out for Change (ISBN 0- poverty are indeed possible - that the techniques. 19-521602-4) pulls together new interaction of markets, state field work conducted in 1999 in 23 institutions, and civil societies can Global Economic Prospects and the countries. harness the forces of economic Developing Countries 2001 (ISBN 0- · From Many Lands (ISBN 0-19- integration and technological change 8213-4675-X). Global Economic 521603-2) offers regional patterns to serve the interests of poor people Prospects and the Developing and country case-studies. and increase their share of society's Countries 2001 discusses three issues prosperity. that are central to the challenges GDLN Newsletter. facing developing countries as they http://www.worldbank.org/gdln/news. World Development Indicators participate in the global trading htm (WDI) 2000 (ISBN 0-8213-4553-2). system: Enlarged to include more than 80 · Many developing countries, To order by phone or fax: tables and 600 indicators for the most particularly some of the poorest Phone: 1-800-645-7247 recent observations, with a ones, have had little success sharing or 703-661-1580; comparison for earlier decades, the in the expansion of global trade, WDI has become an invaluable source Fax 703-661-1501 because of both protectionist to those in the Private Sector who To order on-line: analyze business opportunities in policies and inappropriate http://publications.worldbank.org/ developing countries and emerging macroeconomic and trade policies. ecommerce/ markets. · In trade negotiations, the global E-mail: [email protected] economy faces the critical governance issue of adequate standards for health and safety,

October 2001 19 Hashemite Kingdom of Jordan

World Bank Contacts

Joseph Saba, Country Director Ghassan El-Rifai, Principal Adviser, Regional Tel. (202) 473 2992 Strategy, Sectoral Policy, and External Affairs Fax (202) 477 1482 Tel. (202) 473 6162 Email: [email protected] Fax (202) 522 0006 Email: [email protected] Osman Ahmed, Lead Operations Officer Tel. (202) 473 7063 Sereen Juma, Communications Associate Fax (202) 477 1482 Tel. (202) 473 7199 Email: [email protected] Fax (202) 522 0003 Email: [email protected] Thirumalai G. Srinivasan, Senior Economist Tel. (202) 473 1288 World Bank Internet Address: www.worldbank.org Fax (202) 477 0432 Email: [email protected] To view and order World Bank Publications: http://publications.worldbank.org/ecommerce/ Sophie Warlop, Operations Analyst Tel. (202) 473 7255 For more information on World Bank programs in Fax. (202 477 1482 Jordan: www.worldbank.org/mna/jordan Email: [email protected] World Bank Address: Dilys Quinn, Program Assistant 1818 H Street, NW Tel. (202) 473 6092 Washington DC 20433 Fax (202) 477 1482 Email: [email protected]

Editorial Team:

Dilys Quinn Radwan Shaban John Speakman Thirumalai G. Srinivasan Sophie Warlop With special thanks to Mary Saba

October 2001 20