In Jordan, there are 102
municipalities and the
Greater Amman Municipality (GAM). Municipalities are
provided revenue-generating authorities through municipal taxes, licensing, and
user fees for municipal services. They are also responsible for a range of
local infrastructure and services, including urban planning, environment,
roads, culture, public safety, and waste management, to name some.
اضافة اعلان
Many cities in Jordan have
faced financial challenges since the implementation of decentralization in
2015, resulting in indebtedness due to limited resources and reliance on
government aid (municipal debt stood at about $500 million).
To address this issue,
increasing revenues through updated property valuations and better compliance
could attract private investments and facilitate infrastructure development
through
public-private partnerships (PPPs). Despite a nationally determined tax
rate of 15 percent, insufficient tax collection has left municipalities owing
citizens approximately $600 million. This is why exploring innovative
investment opportunities is crucial for mayors, executive directors, and community members to improve the financial situation of municipalities.
Public-private partnerships in JordanPPPs are part of a
fundamental, global shift in the role of the municipality from being the direct
provider of public services to becoming the planner, facilitator, contract
manager, and regulator that ensures local services are available, reliable,
meet essential quality standards, and are affordable for users and the local
economy.
In recent decades, Jordan has
seen rapid population growth from regional conflict and millions of refugees.
At the same time, the government has been facing fiscal constraints that have
hampered efforts to maintain or expand existing infrastructure. Therefore, the
government enacted the PPP law and regulations, established a PPP unit, and
incorporated infrastructure development (including PPPs) into the Economic
Modernization Vision 2033.
Increasing revenues through updated property valuations and better compliance could attract private investments and facilitate infrastructure development through public-private partnerships
Both Jordan and GAM have
developed the PPPs model and raised about $10 billion in private capital
through PPPs in the
electricity, transport, and water sectors since the 1990s.
By 2015, 30 percent of the public sector's investment portfolio was procured
through PPP, compared to 6 percent in emerging economies. However, challenges were
witnessed in screening projects and preparing feasibility studies to expand the
PPP models.
Benefits of PPPsEffective PPPs can provide
municipalities with high-quality and cost-efficient infrastructure, which is
especially critical in the context of rapid urbanization and limited public
funds. To determine which sectors should prioritize PPPs and which types of PPP
agreements are most suitable, careful planning and management are necessary. The
municipality must ensure that it has adequate funding or can mobilize
sufficient financing to fulfill its obligations under the project, especially
given competing fiscal priorities.
For example, GAM and other
municipalities can prioritize the regeneration of derelict land and other big, empty plots. Subsequently, they can invite private sector proposals to develop
these spaces and pursue PPPs or land value capture mechanisms that align with
clear social and environmental benefits.
Effective PPPs can provide municipalities with high-quality and cost-efficient infrastructure, which is especially critical in the context of rapid urbanization and limited public funds.
This PPPs mechanism can
mobilize additional finance towards sustainable development through blended
finance of both public and private financing for projects that contribute to
low carbon, climate resilient interventions and achieving sustainable
development outcomes.
Serving citizensAccording to the National
Council for Public-Private Partnerships, PPPs are a contractual arrangement
whereby municipalities' and private companies' resources, risks, and rewards
are combined to provide greater efficiency, better access to capital, and
improved compliance with a range of government regulations.
By mobilizing private
expertise, and human and financial resources, PPPs can accelerate the
construction of
infrastructure, improve the efficiency of public services, and
foster innovative solutions that offer a better response to user needs than
would often poorly functioning public service provision.
Fine-tuning the modelWithin this broad paradigm,
from the municipality's perspective, transferring risk to the private partner
is a significant benefit of a PPP. At the same time, the private partner will
need to be compensated for the risk borne. Thus, the more risk transferred to
the private partner, the higher the cost of capital, and it even results in
project failure at times.
By mobilizing private expertise, and human and financial resources, PPPs can accelerate the construction of infrastructure, improve the efficiency of public services, and foster innovative solutions that offer a better response to user needs
Therefore, the PPPs model
needs advisers to assist with project preparatory work; the municipality's
creditworthiness, financial capacity, and overall credibility as a contractual
partner; and the applicable legal and regulatory framework, including as it
relates to the municipality's legal authority to enter into a binding PPP
agreement.
The better and more complete
the feasibility study, the more sustainable the project will be. Any temptation
to cut corners to save money on this analysis, or when time is scarce and
expectations are unrealistic must be avoided. Therefore, advisers should
prepare feasibility studies with the cooperation of the government's PPPs unit.
The feasibility study report informs the decision-making body in the
municipality about the feasibility and desirability of undertaking the project
as a PPP.
The best approach to identify
pilot municipalities towards climate neutrality is acting with bespoke
solutions in six areas covering energy,
waste management, land use, electricity
for buildings, industrial processes, mobility, and transport. This pathway
could be implemented with the public Cities and Villages Development Bank to
meet quality-of-life goals, diverse and improved public spaces, more reliable
public transportation, and increased stakeholder participation, including women
and youth.
Read more Opinion and Analysis
Jordan News
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