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JORDAN Roads Sector Assessment June 2019

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JORDAN Roads Sector Assessment June 2019 JORDAN Roads Sector Assessment June 2019 Disclaimer © 2019 The World Bank | 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Report No: AUS0001171. Some rights reserved. This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution: World Bank. 2019. Jordan: Fiscal Commitments and Contingent Liability Management for PPPs. World Bank, Washington, DC. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [email protected]. 2 • Jordan: Roads Sector Assessment Table of Contents Acknowledgements ii Abbreviations & Acronyms iii EXECUTIVE SUMMARY 1 CHAPTER 1: INTRODUCTION 11 Country and Macro-Economic Context 11 Developing a National Growth Strategy 14 The Roads Sector within Jordan’s Macro-Economic Situation 15 CHAPTER 2: THE ROADS SECTOR IN JORDAN 17 Developing the Roads Sector in Jordan 18 Identifying and Costing Priority Roads Sector Investments 20 Revenue Generation Options to Fund the Roads Sector in Jordan 26 Traffic Projections and Revenue Generation Potential from Road User Charging in Jordan 33 Financing Road Upgrades, Maintenance, and Operations in Jordan: Preliminary Structuring Considerations 37 Summary of Findings 46 CHAPTER 3: IMPLEMENTING A COMMUNICATIONS STRATEGY FOR THE ROADS PPP PROGRAM 47 CHAPTER 4: CROSS-CUTTING ISSUES 53 PPP and Project Finance Experience and Trends in Jordan 53 Legal and Institutional Context for PPPs in Jordan 58 Capacity and Processes to Support Government Participation in the Roads PPP Program 60 CHAPTER 5: RECOMMENDED ACTION PLAN AND NEXT STEPS FOR THE ROADS PPP PROGRAM 65 Acknowledgements The Jordan Roads Sector Assessment Program report was prepared by a team co-led by Aijaz Ahmad (Task Team Leader, Senior Public Private Partnership Specialist, GTIFP) and Ibrahim Dajani (Task Team Leader, Program Leader for Sustainable Development and Infrastructure, MNC02) under the supervision of Sebnem Erol Madan (Practice Manager, IPGFS), Olivier Le Ber (Practice Manager, GTR05) and Fatouma Toure Ibrahima Wane (Practice Manager, IPGPA). Members of the core team included Peter Mousley (Program Leader, MNC02), Mira Morad (Transport Specialist, GTR05), Hakim Al-Aghbari (Senior Highway Engineer, GTR05), Andrew Jones (Consultant, GTIFP), Ashraf Al-Saeed, (Communication Specialist, MNAEC), and Jeffrey Ghannam (Consultant, GTIAK). The team would like to acknowledge the support of Saroj Jha (Country Director, MNC02) and Tania Meyer (Resident Representative to Jordan, MNCJO). The team is indebted to the following individuals for their contribution and inputs: Emmanuel Cuvillier (Senior Public Sector Specialist, GGOMN), Fiona Stewart (Lead Financial Sector Specialist, GFCLT), Haocong Ren (Senior Financial Sector Economist, GFCMW), Amer Al-Ghorbany (Environmental Specialist, SMNEN), and Deborah Berger (Senior Social Development Specialist, SMNSO). Finally, the team would like to thank the peer reviewers of this report: Arnaud Dornel (Lead Financial Sector Specialist, GFCMW), Christopher Millward (Sector Manager, MIGOP), Satheesh Sundararajan (Senior Infrastructure Finance Specialist, IPGFS), Robert Pilkington (Infrastructure Specialist, GTIGF), and Alexandre Leigh (Investment Officer, CTAPM). ii • Jordan: Roads Sector Assessment Abbreviations & Acronyms ADCP II Amman Development Corridor Project II MDB multilateral development bank BOO build-own-operate MEMR Ministry of Energy and Mineral Resources BOT build-operate-transfer MFD Maximizing Finance for Development CAGR compound annual growth rate MIGA Multilateral Investment Guarantee Agency CAPEX capital expenditure MoF Ministry of Finance CBJ Central Bank of Jordan MoPIC Ministry of Planning and International Cooperation CMT crisis management team MoT Ministry of Transport DBFOM design, build, finance, operate, and maintain MPWH Ministry of Public Works and Housing DBOM design, build, operate, and maintain MSMI Ministry of State for Media and Information EBRD European Bank for Reconstruction and Development NPV net present value EIB European Investment Bank NRIP National Registry of Investment Projects EPC Executive Privatization Commission ODA official development assistance ESIA environmental and social impact OECD Organisation for Economic Co-operation assessment and Development FCCL financial commitments and contingent OFID Organization of the Petroleum Exporting liabilities Countries Fund for International Development FSAP financial sector assessment plan O&M operations and maintenance FY fiscal year OPEX operational expenditure GBD General Budget Department PDD Public Debt Department GCC Gulf Cooperation Council PIM public investment management GDP gross domestic product pp percentage point GoJ Government of Jordan PPA power purchase agreement HEIS Household Expenditure and Income Survey PPIAF Public-Private Infrastructure Advisory Facility IFC International Finance Corporation PPP public-private partnership IMFEFF International Monetary Fund Extended Fund Facility SSIF Social Security Investment Fund IPP independent power producer TCFC Technical Committee for Financial Commitments JD Jordanian dinar WBG World Bank Group JEGP Jordan Economic Growth Plan Acknowledgements • iii iv • Jordan: Roads Sector Assessment Executive Summary THE GOVERNMENT’S OBJECTIVES AND PRIORITIES: PRIVATE SECTOR DEVELOPMENT AND THE ROADS SECTOR The Government of Jordan (GoJ)’s new development model shifts the focus toward the private sector as the engine of growth and job creation. An ambitious economic reform program, laid out in the Jordan 2025: A national vision and strategy report, is intended to revive growth and spur job creation. It includes provisions for significant investments to be made to expand and improve infrastructure. This will create a foundation for competitiveness, provide access to markets and basic services, and help the movement of goods and services along supply chains. The increased productivity and output will also have an important multiplier effect on the economy, leading to reductions in poverty, unemployment, regional imbalances, illiteracy and poor health, all of which inhibit national development. An improved approach to infrastructure would focus on project selection, asset management and financing.Expanding and improving Jordan’s infrastructure stock is a key priority of the Jordan 2025 report. The development of an effective mechanism for the selection and prioritization of infrastructure investments was included in the integrated Public Investment Management (PIM)–Public Private Partnerships (PPP) Governance Framework, which was approved by Cabinet Decision No. 7968 on May 21, 2018. Meanwhile the World Bank’s 2015 Systematic Country Diagnostic for Jordan also included a recommendation to “increase integration of public investment with broader policy objectives,” given limited fiscal space, to ensure that infrastructure investment provides optimal value for money. Meeting Jordan’s infrastructure needs will require the implementation of the PIM-PPP Governance Framework to support efficient use of public financing and the mobilization of private sector financing to supplement public budgets. With regards to asset management, in 2019 the World Bank released a report entitled Beyond the Gap: How Countries Can Afford the Infrastructure They Need while Protecting the Planet. It noted that investing in infrastructure is not enough; maintenance matters. Lessons from Beyond the Gap point to a shift away from spending more, toward spending better on the right infrastructure objectives, particularly adequate operations and maintenance. Structured maintenance, which should be incorporated into PIM-PPP decision-making, can generate substantial savings by reducing the total life-cycle cost of transport infrastructure by more than 50 percent. Executive Summary • 1 Mobilizing private finance via PPPs to meet the country’s infrastructure investment needs will help maximize available finance for development.Jordan has a large pipeline of planned infrastructure investments. In 2017 (latest available data), the Organisation for Economic Co- operation and Development (OECD) reported that Jordan received US$2.9 billion in official development assistance (ODA), representing 7.2 percent of Jordan’s gross domestic product (GDP) of US$40.1 billion. To supplement ODA and public resources, PPPs are one of the tools available to the GoJ to support the realization of its planned infrastructure investments, within the context of a fiscally sustainable investment program. Based on the GoJ’s interest, as expressed in the 2017 Spring Meetings, and aligned with its Jordan 2025 report, the country was
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