Jordan was a pioneer in opening up the infrastructure public-private
partnership (PPP) market to the private sector, indicating a shift from state
balance-sheet spending for the construction of infrastructure to longer-term
partnerships involving construction and operation, and introduced several
economic reforms to promote business growth and job creation through
strengthening the legal framework of lenders and borrowers.
اضافة اعلان
The World Bank estimates that the MENA region would
need $75–$100 billion in investment per year over the next 20 years to meet its
needs. As many as 242 PPP projects worth $223 billion are under development;
they entail building and expanding infrastructure in the health, mining,
transportation, energy, power, aviation, tourism, climate change, and ICT
sectors.
PPP programs are successful and sustainable when the
laws and regulations are backed by a credible pipeline of bankable projects and
enabler governments, through well-informed political decision makers about best
practices in PPP.
Jordan has attracted more than $9 billion in
investments from over 30 PPP transactions financed since 2004; the country
boasts world-class projects, such as the Queen Alia International Airport, the
Aqaba Container Terminal, and multiple water and renewable-energy projects.
Jordan’s PPP capital stock was estimated to surpass
22 percent of GDP. Nearly a third of the public sector investment portfolio had
been procured through PPPs by 2015, compared with just 6 percent on average in
emerging economies, according to the IMF.
Unfortunately, the volume of PPP finance fell to 0.6
percent of GDP in 2018, the lowest level since 2011.
High business costs affect the competitiveness of
the Jordanian private sector across the board. Electricity tariffs for
productive sectors are more than double the average tariffs in the region and
Europe, hindering more rapid growth of the economy.
Furthermore, transportation is expensive for the
quality that users receive. This premium is especially true for land transport
in the tourism sector, and trucking services between Aqaba and Amman.
Jordan recognizes that enhancing productivity and
competitiveness while generating private sector-led growth is critical to
achieving economic diversification. It has taken vast strides over the past
decades in creating an attractive business ecosystem and has successfully
established itself as a destination of choice for a range of industries. To
bolster these diversification efforts, Jordan upgraded its Public Private
Partnership Law (Law No. 17 of 2020).
High business costs affect the competitiveness of the Jordanian private sector across the board. Electricity tariffs for productive sectors are more than double the average tariffs in the region and Europe, hindering more rapid growth of the economy.
Furthermore, Jordan improved its ease of doing
business, ranking 75 out of 190 countries by the end of 2020, according to the
World Bank.
Robust market competition helps generate incentives
for firms to innovate, reduce costs, and become more efficient, driving
productivity.
PPP transactions have been mostly financed through
“international project finance” borrowing structures, with only 5 percent
sourced from the domestic financial system, while local investment in
infrastructure is still relatively small for both the Social Security
Investment Fund and banks.
According to Central Bank of Jordan (CBJ)
statistics, “public services and utilities” account for only 14.5 percent of
the total domestic loan book. This needs to be addressed by the government to
develop infrastructure-financing opportunities in local currency that can tap
domestic investors to fill the gaps in future projects in which financial
sustainability is more challenging to attain, like the Amman Water Desalination
and Conveyance Project.
The government needs to improve its investment
efficiency; whilst the creation of a dedicated PPP unit under the Ministry of
Investment is favorable to the private sector, other efforts are required to
ensure that high-quality investments are approved, fiscal commitments and
contingent liabilities are tracked, and the financial viability and governance
of sub-sovereign entities are strengthened and increase the capacity and
capability of this unit.
The government must align its PPP efforts with the
Sustainable Development Goals and Environmental, social, and corporate
governance programs and plan the PPP
scheme well, carry out feasibility studies, and conduct auctions openly and
transparently.
Private sector investors will be paying close attention
to the way the government strengthens its institutional capabilities to manage
the PPP process, and ensures strong financial, legal, and technical skills to
achieve fair and transparent bidding, evaluation, selection, and implementation
processes. Furthermore, the government should share the risks that it can
manage better than private investors.
Hamzeh S. Al-Alayani is a board member of a Jordanian public-sector
government investments management company and a regular commentator on regional
energy and industrial matters.
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