V 26585 Public Disclosure Authorized - The World...

V

26585HASHEMITE KINGDOM

OF JORDAN

UPDATEThe WorOd Brank Group

PRIVATIZATION:The Jordanian Success Story

Background industrial and service sector just starting and others which arecompanies, including various financial drawing to a close. These transactions

The World Bank Group 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 Ol Outcomes Drilling Corporation; Assamara Watermanages 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.

crafting a privatization strategy, four bus concessions in the Greaterdesigning an institutional framework Amman area [Public Transport El Executionfor implementing the Program, and Corporation (PTC)]; (iii) the grantingsupporting the implementation of the of a concession for the Ma'an Spa; (iv) The Jordanian Government'sProgram. 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 areawhich are concentrated mainly in the [Water Authority of Jordan (WAJ)];

Infrastructure Sectors (Transport, (vi) the granting of a concession for Recent Economic Developments 6

Electricity, Water and Tele- Aqaba Railway (ARC); and (vii) thecommunications) and investments by divestiture of Government shares in B pthe Jordanian Investment Corporation approximately 44 companies at Wy 13

(JIC), the state-owned investment approximately US$113 million. Total Poverty Alleviation in Jordan 14

agency. The Government has proceeds are in excess of US$900 Global Developmentsubstantial share-holdings in a number million. There is a large pipeline of Learning Network 17

of small- and medium-sized industrial current activities, some of which are World Bank Publications 18

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.___!_______________ 2=':] lS MngdOM 0 t JW H . . .

For non-infrastructure enterprises the "holding company" successful divestiture required that several conditions be

or "state property fund" approach was used in Jordan in met. There needed to be full cooperation between the JIC

the form of the fIC. In this approach, Government-owned and the EPC, as the latter provided important technical

shares in enterprises were held in a corporate entity, which support and at all times played an oversight role.

assumed the governance functions on behalf of the Management support was critical, but ultimately the

Government owner. With the Program, JIC actually commitment and support of the Ministry of Finance was

evolved from being an investment arm of the Govermment, what made the completion of the transactions possible.

to adopting divestiture as its main objective. The key to

divestiture etc.; sales to strategic persistence and steadfastness of the unequivocal support at the highest

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 more difficult issues such

As mentioned, an organizational addressed in designing the JCF as labor, valuation, and the "Crownstructure was created to set polici'es, 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 toelements of this organizational bolster institutional confidence and the A First Transaction is Crucial: A firststructure included the Higher Ma'an Spa transaction was completed major transaction needed to beCommittee 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,transactions, JTC, also began to move provided institutional confidence to

.n spite of the strategy and the and was soon in bidding and pursue other transactions, andinstitutional arrangements having been negotiations. The sale of a 40 percent demonstrated the benefits ofput in place, progress in privatization...was initially slowgan on begvianion strategic share for US$508 million privatization.was initially slow and only began in wscmltdimaur 00was completed in January 2000.earnest after August 1998. The mainissues slowing down the Program in Balance Transparency andJordan included: the question of the * Effectiveness: However, in order toTherl\_ Lessons of complete the first major transaction, itabsorptive capacity of the Jordanian

was necessary to resolve one crucialfinancial market; public preferences on A closer look at how Jordan managed im nementato issue t nerliesstrategic or foreign ownership; and to activate a stagnant privatization implementation issue that underlies

, . , . ~~most privatization programns - where topublic perceptions of the impact of program and achieve so much in soprivatization on labor and consumer short a time holds important lessons strike the balance betweenprices. Before privatization could for governments as well as transparency and effectiveness: (i) in

. . ~~~~setting up the institutional structure forproceed, these issues needed to be privatization practitioners. prvtizatinstit)tin sttup the

adrse n onessbit privatization; (ii) in setting up theaddressed and consensus built. decision making process; and, last but

Get Support at the Highest Level: not least, (iii) in the design andDuring this difficult period, EPC First and foremost, a major underlying structure of individual transactions.

played a crucial role in moving the and significant contributing factor toprivatization agenda forward. The these successes was the emerging and

Hashemite Kingdom of Jordan Update

* Institutional Structure: The main was more sustainable and on a more privatization process better and withquestion here was where to locate the solid foundation with support from progressively less external help.responsibility and authority for most of the major constituencies in theprivatization. Locating the country. Ensure Commitment in Sectorprivatization responsibility at each Institutions: This institutionalSector Ministry would have increased .Transaction Design and approach of sharing responsibility foreffectiveness (provided there was the Structu re: Here too effectiveness the sake of transparency required thewill to privatize at the Sector Ministry) needed to be balanced with support and commitment of the Sectorfor individual transactions, but t I tri t that to ensure effectiveness. This includedreduced it on an overall basis as the process was transparent the not just Sector Ministries, but also thebenefits of experience would not Civil Service and Enterpriseeasily be shared. Transferring the program sometimes encountered Management. In every case, whereverresponsibility for a PE privatization delays and waste. The selection of and whenever there was not support orentirely to the EPC could also increase financial advisors and other interest at the Sector level,effectivenessl but would meet ine consultants might not always have privatization inevitably stalled, andresistance and could reduc been optimal, and often process conversely, when the Sector hadtrensitarnc. and couldan re e undermined speed, for example whentransparency. In Jordan, the ready buyers had to be put on hold comtet th piaztinPrcsresponsibility was shared between the until trsac co be avtised moved forward rapidly.

until transactions could be advertised.EPC and the Sector Ministries, with However, the initial investment inthe EPC providing technical resources transparency paid off in allowing the Let Privatization Expedite the

and~ ~ ~ ~ ~ ~ ~rnsaec suppor off th process (thes Regulatory Framework: Regulatoryand support to the process (thus, later stages of transactions to be issues needed to be resolved for

experience, for example, in bidding completed smoothly. privatization to be effective. The issue

and negotiations), as well as, of a regulatory strategy in the contextperforming an oversight function. Unit Of privatization was a difficult one.This provided just the right balance of is Key: The leadership of the EPC has Trying to achieve a perfect regulatory

effectiveness and transparency needed been a key catalyst contributing to the environment before starting tofor the Jordanian circumstance, success of the Program. The ability of privatize, had the risk of Sector

the EPC to access and influence top specialists protracting this process toDecision Making Process: A decision-makers was crucial in garne- avoid privatization. On the other hand,

salient feature of Jordan's ring support at the top. Sometimes the not having an adequate regulatoryprivatization approach was that it EPC was the flag bearer for framework in place beforestrove to achieve its objectives privatization, especially when progress privatization might not providethrough consensus, and thus, with a for one reason or another slowed. At adequate protection of consumer (andhigh priority on transparency.' The other times, it helped ensure investor) interest. Jordan chose to

transparency - especially when sector proceed in parallel with privatizationaondsabenefit. Tpproachehadb cost worganizations were moving ahead and setting up of the requiredprogressnoften appeared too e wasl t rapidly with privatization on their regulatory framework. This strategywithoarges ommittappeares and sevl own. However, the EPC never forced the Sectors to keep up with thewith large committees and several approval levels. However, the benefit attempted to dominate the process or privatization pace in putting thewasttprogallevels.Howeveress oued b it be unilateral in its actions, but relied regulatory framework together.

on consensus to mobilize support andresources. These leadership skills have Find Solutions for the Employee

Transparency generally includes two helped the EPC, which started as a Issue: Finally, Jordan had to solveaspects: (a) ensuring coupetition in protected department within the Office major labor redundancy issues orbidding and pricing to get the best of the Prime Minister, to grow and privatization would not have beendeal for the country, and (2) the build within itself the needed technical achievable. The approach taken inavoidance of side deals. competencies to better support the Jordan was interesting and needs to be

_._._._ _ Hashemite Kingdom of Jordan Update

explored for other countries. The Cumulative losses in the Transport and first year alone, contributing an

Jordanian Government tailored its Water Sectors alone were by end-1998 additional estimated US$3.5 million in

solutions to the labor issue on a case- more than 20 percent of GDP. The tax revenues. Finally, privatization

by-case basis, but with some common Program is now: helping to clean up proceeds have strengthened the

underlying threads. First, the financial balance sheets of the PEs and international reserves position (at one

Government set up general rules making Government assets liquid; point fragilc) of the Central Bank.

preserving the rights of employees in mobilizing foreign and domestic Reserves are now at an all time high of

all privatized enterprises and private investment - both directly in US$2.6 billion, or eight months of

institutions. Second, in some cases, the privatized companies, as well as imports. This has contributed to a

transition packages -- including related spin-offs; creating new jobs; significant reduction in interest rates,

generous compensation (with share and benefiting consumers in terms of which may stimulate growth.

ownership in some cases), training, better services.and placemcnt assistance helped the Investments directly related to

workers with the transition. But, in Privatization proceeds so far have privatization, both current and

most cases, particularly in the more reached more than US$900 million or prospects for the next four years, are

difficult rural areas where alternative 12 percent of GDP. Of course, making very promising. It is estimated that

employment opportunities are limited assets liquid does not in itself change there has been approximately US$500

or where skill levels of workers are the net worth of the Government, and million of these investments. Most of

limited, Jordan decided to privatize as such, should not affect public the investments relate to the Tourism

first and solve the redundancy expenditure decisions directly. and Telecommunication Sectors. In the

problem later. For example, in the case According to the new Privatization Telecommunication Sector, it is

of ARC and PTC, none of the Law, privatization proceeds are anticipated there will be close to

employees were to be laid off, but invested in a separate fund to be used US$400 million of new investment.

were absorbed at other Government to repay loans owed by the privatized

organizations. The redundancy firms to the Government, and finance The ARC Project will result in overall

problem would be resolved after the economic and social development investments of US$120 million in

privatization transaction was projects. railway tracks for the new Shidiya

completed. The implicit logic seemed Phosphate Mine and for the Port of

to be that if the labor issue prevented Privatization is yielding additional Aqaba. Even more significant, the

privatization, the Government would direct fiscal benefits for the ARC Management Contract and

need to continue to employ these Government. In the case of ARC, the investment for the new tracks is

people anyway, so why not privatize. Government was immediately relieved expected to pave the way for a

That way, at least the expected of some US$6.9 million in losses for separate US$600 million Fertilizer

privatization-led investment and which it had to provide fiscal support. Production and Export Project led by

growth could occur in the Sector and These losses, in the unlikely event that Norsk Hydro. The private operators of

help to alleviate the employment they continued under private the four bus route franchises have

burden down the road. management, were now the collectively invested about US$12responsibility of the private operator. million in new buses. In the Power

* The Benefits Similarly, in the case of PTC, the Sector, the IPP is expected to invest aGovernment will no longer have to total of US$300 million.

The Government of Jordan was in a make up the US$2.1 million of annual

situation in which many of its public losses. In addition, the US$0.8 million The WAJ transaction enabled Jordan to

enterprises had losses and future in annual franchise fees from the new obtain a US$55 million World Bank

development of the economy was operators will now flow directly to the investment loan. Furthermore, a new

hampered by lack of funds for Government's budget. Net profit of water treatment plant costing US$150

necessary infrastructure development. JCF has increased by 50 percent in the million will bc funded (50 percent by


the private sector on a BOT basis and telephone line has been reduced from water from truck suppliers at muchthe rest through donor grants). Also in years to weeks, and phone rates, higher prices. Water is now flowingthe Water Sector, the 320km conveyor though still high according to again on a more regular basis. Streetof fossil water from Disi to Amman, at international standards, have been flooding from water mains, once aa cost of US$700 million would be reduced significantly. The PTC common sight in Amman, is nowfinanced on a BOT basis. transaction has yielded immediate rarely seen.

results. With private investment, busesThese privatization-related are more frequent and ridership hasinvestments, totaling more than increased dramatically from 60,000 to * ConclusionUS$2.1 billion, averaging seven 100,000, while the fares have remainedpercent of GDP per year during the the same (see Box). On a more

next four years, become important qualitative level, the buses are new, PEs is of reirestroadrfactors for the revival of the Jordanian clcan inside, and less polluting. This ba is complicated, requires broad-economy. based consensus, and takes time to do

0 Beforc Privatization *AfterPrivatization transparently. Transactions cannot beJobs are being created due to the new 200 micro-managed from outside, nor can

strict deadlines be set in advance. ThePnvate Sector investments and _S D rn n ecnclAssacopportunities. Although it is still early 10 *IDF Grant and Technical Assistance

100 provided by the Bank and donors hasto assess the impact of the Program onemployment, preliminary evidence 50 -_ i* r _i _ been instrumental in getting theindicates that already more than 6,000 0- Program started and underway. Butjobs have been created on a net basis No. of Buses Ridership the honors go to the Government andrelative to a labor force of about one (thousands) people of Jordan for steadfastly

million. As indicated above, Amman Bus Transport dealing with the overwhelminglyaccording to the strategy, no one has complex issues one-by-one andlost their jobs involuntarily, but the has been a boon to the average working making the Program a grand success.Program may have generated pockets person whose commute has been The EPC is a major anchor andof hidden unemployment. The significantly reduced, in some cases driving force behind this success.employees of the old enterprises have from two hours each way every day toeither been retained in the new under half an hour, and has enabled Now funded through the Governmentprivatized organizations or transferred them to seek employment opportunities budget, the sustainability of the four-

or absorbed in other agencies, either in locations which were previously year old program is further secured byinto vacant positions or merely in difficult to reach except by car or taxi. the expertise and enthusiasmpending outplacement opportunities. haressed in the EPC.Nevertheless, the experience clearly City water is a very scarce commodityshows that opening up sectors such as in Jordan delivered once or twice aTelecommunication to Private Sector week. Leakage and illegal connectionscompetition can produce new jobs left 55 percent of water usagequickly. unaccounted for. Broken meters and

"private arrangements" resulted inConsumer benefits are being reaped inequitable access and cost-sharing.from the Program. The wait for a Many households were forced to buy

_


I RECENT ECONOMIC DEVELOPMENTS I* Resilient Growth tariff, trade and fiscal reforms, and privatization) and

partly be due to a response to monetary policy stimulus.Real GDP growth (at market prices) reached 3.9 percent The global events following the September 11 terroristin 2000, after languishing at or below three percent in the strikes have the potential to adversely affect the prospectspreceding four years. Importantly, the Jordanian for the rest of the current year and beyond througheconomy showed some resilience to regional shocks as diminished exports, tourism and private capital flows.GDP growth rates recovered to a four percent average forthe first two quarters of 2001, after dipping to 3.5 percent * Inflation Picking Up But Stillin the last quarter of 2000. The Intifada in West Bankand Gaza, now running for a year, affected Jordan Moderatedirectly through reduced arrivals of non-Arab tourists, Inflation in Jordan is moderate averaging only 2.8 percentreduced export of construction material, vegetables and in the last five years, helped partly by the unchangedfruits to West Bank and Gaza and Israel. However, a exchange rate between the Dinar and the US Dollar sincesurge in exports from Qualifying Industrial Zones 1996. The US Dollar's strong appreciation against the(QIZs)' to United States markets, pick-up in construction European currencies - an area from which a third ofactivity, and revival of industrial production and broad- Jordanan Imports are sourced - and Jordan's import tarffbased service sectors, have helped Jordan pick up growth cuts have helped in keeping Imported iput costs low.momentum. All indicators - exports, imports, industrial Inflation, as measured by Amman Consumer Price Indexlproduction, private sector credit - up to the second which was declining through the year and only averagedquarter of 2001 point to increasing strength of the 07pce (a nnu rate) i20 began ocli durig

econmy. he wlcom upsrgein te ecnomy desite 0.7 percent (annual rate) in 2000, began to climb duringeconomy. The welcome upsurge in the economy, despite the start of 2001. The broadening of the 13 percentrecent adverse neighborhood effects, could partly be due General Sales Tax (phase two) base to trading sectorsto the result of ongoing structural reform efforts (tax i ente d from January 2001 ban up ardriong stor

x Implemented from January 2001, and upward revisions to

Figure 1. GDP Growth Rate petroleum prices announced in July-August 2001, are(in percent, annual rate, year on year) behind the moderate increase in inflation, as shown in

Figure 2. Petroleum product price increases announced in4.4% July and August have not been fully reflected in the

indices available up to July which registered an increase of4.2% _ 2.8 percent compared to the previous year.

4.0% - - _ _ Figure 2. Inflation (in percent, year on year)3.8% -- 3.0%-- 1 1 1 11

3.6% - - ~~~~~~~~~~~~~~~2.5%2.0% - - - - . - - -

34% 1.5% _ - - -1-1.0% - --

3.29,vo ~ ~~~~~0.5% - .. . - .- - - -3.0% ~ ~ ~ ~~-0.0%- ------

9' 9' 9' 9' 9'~E - 0. 5% - - - - -t - -0 0 0 0 - -~~~~~~~~~~~~~~~~~~~~~~-10/

o c o o o -~~~~~~~~~~~~~~~~~~~~~~~~~1~91.0%-

Source: Department of Statistics, Jordan. -2.0%Note: GDP is measured in constant 1995 market prices. o e - 0 0 O 0 0 - 0 0 0 0

ONO N0 0 0 0D 0 0-- -

Exports from QIZs are allowed to enter the United - - -States duty-free and quota-free, as long as they meetspecific local content requirements from Israel, Jordan Source: Central Bank of Jordan (CBJ) Monthly Statisticsand West Bank and Gaza. Bulletin, International Financial Statistics (IFS) and LDB.

o4ashawmMs I M nsd'm 1 f OIrdan Update

o Merchandise Exports Surge quarter of the current year. However, there has beenAfter Five Years Of somewhat of a rebound in the second quarter of 2001

with increased tourism receipts growing at six percentStagnation (year-on-year). The main reason for this rebound appears

to be the increased arrivals from Arab countries withAfter 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 of2001. Stellar performance in apparel, clothing and Imports Climb Persistentlypharmaceutical products helped overcome the drag ofmineral exports as shown in Table 1. Much of this surge Helped partly by the strong Dinar and continuing importin clothing exports is led by exports from QIZs. 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. Thispersistent surge comes after a strong pick-up noted in2000, when imports increased by 24 percent, ending a

'W'Y MD declining trend of the previous four years. More than halfof this increase in the first half of 2001 came from the

Total 100.0 15.7 100.0 import of manufactured goods and telecommunication

Clothes 7.0 172.3 0.3 equipment as a result of higher industrial output and

Medical and Pharmacy investment demand. Given that merchandise exportsProducts 10.3 15.0 10.7 covered only a quarter of merchandise imports and that

the rise in imports outpaced the pick-up in exports, theVegetables 5.5 29.5 9.9 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 AccountMonthly Statistical Bulletin. Weights are derived from data for Surplus2000.

In 2000, current account surplus (including grants)

Service Exports Moderate sharply narrowed to a small surplus of 0.7 percent ofGDP declining from the peak of five percent reached in

Worker remittances and tourism receipts are two 1999. This was the net result of import surge andimportant sources of service exports for Jordan. In 2000, weakness in tourism receipts witnessed in the year 2000.worker remittances were larger than merchandise exports As expected, current account balance is turning into aby 30 percent and tourism receipts3 amounted to nearly deficit for the first time in five years in 2001. Thoughhalf of the exports. Growth momentum in Gulf exports surged strongly and the brisk pace of importseconomies fueled by strong oil prices has probably slackened somewhat in the first half of 2001, moderatehelped to increase worker remittance inflows in 2000 by growth in service exports led to a small deficit on the11 percent. The results for the first half of 2001 show a current account of US$60 million - about 0.7 percent ofpersistent trend with worker remittances continuing to GDP. Foreign reserves (excluding gold) of the Centralflow at the same rate. The decline in tourism revenues by Bank which reached a high of US$3.5 billion innine percent in 2000 was attributed to the regional September 2000 helped by UN compensation paymentsuncertainty. This declining trend persisted into the first and privatization proceeds, have been depleting at a

2 Does not include re-exports.3 Travel receipts are treated as tourism receipts.

m _ _ _ _ _ _ _ _a__ _ __Il


moderate rate to US$3.1 billion at the end of July 2001, dramatic six-fold rise in trading volumes and the nine

still some eight months of merchandise import percent gain in the Amman Stock Exchange Index by

equivalent4. July 2001 from the lows reached in September 2000.

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

6.0%5.0% 16.0%

4.0% _ -0% -81. 14.0% - - _ I -2.0% 12.0% -.......-- r-- - - -]--

0.0% -6 10.0% _ l -fl , --..8.0% -- _o

-2.0% 1 9 1 9 9 6 .9.- 1.0 % ; - t _ I a___l

-4.0% -- -3.8% -3.2% -4.0% - - I1 --609.300%--- -

-8.0%~~~~~~~~~~~~~~~~00

1994 1995 1996 1997 1998 1999 20000 0 0

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

* Easy Monetary Policy Is * Medium-Term Outlook forHaving an Impact Fiscal 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 banks 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

the first half of 2001 amounted to JD 233 million

4 Using merchandise imports for the year 2000. compared to JD 202 million for the previous year.

1911we a~~~

An important achievement of the year 2000 in public masks the sharp reduction in the unemployment rate fordebt management was the I 1 percent point reduction in females that has declined to 15.6 percent from thethe Government's external debt as a ratio of GDP to 85.3 average of 21 percent in 2000.percent. Active buying back of Brady Bonds and debt-swaps contributed to this decline, in addition to some Figure 5. Unemployment Ratecurrency revaluation effects. (For total population aged 15 and up)

16.0%

a Unemployment Edges Up 15.5%Slightly 15.0%

Based on Quarterly Labor Force Surveys carried out by 14.0%- -the Department of Statistics, Jordanian unemployment 13.5%- _rose slightly (1.3 and 0.4 percent points respectively) for 13.0%the first two rounds of 2001 (February and May) 12.5% compared to the same rounds of the previous year. At .013.7 percent for Round 2 of 2001 (May), it is nearly the 12.0% -

same as the average for the year 2000. However, this c 0 0 - l,~~ ~~ O O 0 . 0 0

[; XBANK GROUP OPERATIONS

* IBRD Projects in S Samra First Private Power together with restructuring of keyProject (US$50 million Guarantee). institutions, and preparation of an

The Pipeline The Project is designed to: (i) action plan for reuse of treatedsupport the Government's initiative wastewater.

* Agriculture Exports Project for private power generation and its(US$30 million). The objectives of the efforts in tapping new sources of 0 Public Sector Reform LoansAgriculture Exports Project are: (i) to private capital for the Power Sector; (PSRLs). The foundation for Banksupport private investments for the (ii) add new power-generating support to Jordan's Program of Publicproduction and marketing of non- capacity, in line with the least-cost Administration Reform is a series oftraditional high-value crops with an development plan for the Power three one-tranche Public Sectoreffective demand in the international Sector, and at competitive prices, Reform Loans. The Loans will supportmarkets; (ii) to introduce and while improving its efficiency; and an agreed medium-term program ofdisseminate 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, betterof these crops; and (iii) to initiate the private projects and put into effect key delivery of public services, andprocess of establishing Jordan as a policies for sustainable development increased transparency andreliable supplier of export crops to of the Energy Sector. accountability. The Loans will buildhighly-demanding markets in on the positive experience of theEuropean and Gulf countries, leading * Jordan Rift Valley Improvement series of single-tranche Economicto 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 oftrade balance. management in the Jordan Rift Valley, structural reforms aimed at

[E____ qvwi 2


strengthening the environment for vocational and technical education, potential of Jordan is even greater.private sector. The PSRLs will support examinations and national assessment. Capturing this potential, however,a strong, coherent program of reforms In addition, measures are sought requires Jordan to develop the Sectorin line with the policy framework for which aim at economizing the use of in a coherent manner to ensure itssingle-tranche and programmatic public resources. economic, social and environmentaladjustment lending. The first PSRL sustainability. To this end, thefor US$120 million was approved in Govemment, with Bank assistance,June 2001. * Housing Finance and Urban has formulated a medium- to long-

Sector Reform Project (HF USRP). term Tourism Development Program.(US$20 million.) The Project supports The Second Tourism Development

* IBRD Ongoing the Government's strategy to improve Project finances Phase I investmentsthe efficiency of the Housing and Poetfnne hs netet

Projects he Finance Sectors, and of the Program. The Project'sP JoectP Housing Finance Sectors, promote development objectives are to: (a)The current portfolio in Jordan Private Sector development in land create the conditions for an increase inconsists of 10 projects for a total and housing production, and reduce sustainable and environmentally soundcommitment amount of US$411.7 the role of the Government in both tourism in Petra, Wadi Rum, Jerashmillion, of which US$254.2 has been Sectors. The Project would establish a and Karak; and (b) realize tourism-disbursed to-date. Secondary Mortgage Facility to related employment and income-

improve the efficiency of medium- to generation potential at Project sites* Health Management Project longer-term financial flows for

(HMP). (US$20 million.) The mortgage lending mobilization; * Community InfrastructureProject was designed to enhance the facilitate and foster competition in Development Project (CIDP). (US$30health status of the population market-based mortgage lending; and lion.)The Comunitythrough: (1) qualitative improvements lengthen the term structure of Infrastructure Development Projectin the Ministry of Health's primary mortgage lending. represents the first (pilot) phase of a

and hospital services; and (2) reform longer-term program of small-scaleof the Ministry's organization, its * Second Tourism Development infrastructure improvements to poormanagement, finances and planning Project (TDP-II). (US$32 million.) communities in Jordan. This pilotcapacity. The Project finances Tourism is Jordan's second largest phase tests the opportunities fortechnical assistance, fellowships, generator of foreign exchange after developing: (a) income-generatingtraining, teaching equipment, health remittances. It results in foreign activities in economically deprivedfacility construction and renovation, exchange revenues of over US$750 areas; (b) approaches to promote localcomputer hardware and software, and million equivalent, or approximately participation in the identification ofmedical and office equipment. 10 percent of GNP. The actual tourism priority infrastructure needs; (e)

* Second Human Resources nDevelopment Sector Investment Approval Loan AmountProject (H{RDSIP-11I). (US$60 Project Name Year Amount Disbursed

US$ Millionmillion.) The central Project objective Health Management 1993 20.0 17.8is to improve educational quality. The Human Resources Dev. Sector Inv. II 1995 60.0 48.7focus is on measures to enhance the Housing Finance & Urban Sector Reform 1996 20.0 19.1teaching/learning environment Tourism Development It 1997 32.0 10.2

Community Infrastructure Development 1997 30.0 12.9ncluding: teaching competencies; Training & Employent Support 1998 5.0 1.5

curricula and textbooks; Amman Water & Sanitation Management 1999 55.0 16.6administration and management; and Health Sector Reform 1999 35.0 9.3creating a strong institutional Higher Education Development 2000 34.7 1.5framework, particularly in relation to Public Sector Reforr Loan 1 2001 120.0 120.0

TOTAL 411.7 257.6

a l, . ,, 6 S . E l


criteria for eligible appropriate efficiency, management, operation and introduction of formula-basedinvestments; and (d) detailed delivery of water and wastewater allocation of higher educationrelocation plans in squatter settlements services for the Amman Service Area; recurrent funding from theto enable upgrading basic and (ii) lay the groundwork for the Government; and (d) support theinfrastructure in subsequent phases of sustainable involvement of the Private rationalization of the communitythe CIDP. The CIDP is one Sector in the overall management of college sub-sector through the new Al-component of the Govermnent 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 @ First Public Sector Reform Loanstrategy to address the problems of wastewater services. (PSRL-I). (US$120 million.) Thispoverty and unemployment through programmatic Loan is the first in aproductivity improvements. * Health Sector Reform Project planned series of three Public Sector

(HSRP). (US$35 million.) The Project Reform Loans (PSRLs). The program* 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 meetmillion.) This pilot Project is intended World Bank and the Government of anticipated gaps originating from itsto introduce an efficient and effective Jordan (April 1997). The Project is fiscal needs, while supportinglinkage between public expenditurcs expected to increase the efficiency, fundamental structural changes in itsfor short-term training, and business quality, and long-term financial core public sector. The Loan aims tocommunity skill requirements. It is sustainability of health services in strengthen public institutional capacityanother 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 strengthencreated a Fund (the Training Fund) include: increased hospital occupancy private investment, diversify thethat issues monetary awards to rates; adoption of treatment protocols; economy, achieve closer integrationenterprises which provide or purchase and a reduction in spending on with the global economy, strengthentraining and related services (e.g., pharmaceuticals as a share of total the country's human capital base, andintermediation, needs analyses) expenditures. ensure better access to services fornecessary for the recruitment of the citizens, particularly the poor.unemployed to fill genuine vacancies. * Higher Education DevelopmentThe objective of the pilot TESP is to Project (HEDP). (US$34.7 million.)test the demand for, and the The objective of the Project is to * IFC Ongoingeffectiveness and efficiency of, initiate improvements in the quality, Projectsemployer-based training supported by relevance and efficiency of Jordan'sa Training Fund, i.e., whether training higher education, and to supportcan be more cost-effective and Jordan's program to reform Sector * Al-Hikma Pharmaceuticalsefficient when it is demand-driven, governance. The Project will: (a) Limited (Jordan). The Project isPublic Training Funds are establish system-wide modern designed to help Al-Hikmacompetitively awarded between public information technology, management Pharmaceuticals upgrade and expandand privatc providers, and information systems, and library its existing pharmaceutical andemployment services are also offered infrastructure for higher education; (b) chemical plants, and build a newby private offices whose operations support a Higher Education plant.have been until recently illegal. Development Fund providing grants to

public universities for innovative and * Zara Investment Holding* Amman Water and Sanitation economically relevant sub-projects Company. The investment ProjectManagement Project (A WSMP). and for improving teaching and consists of the construction and(US$55 million.) The objectives of the learning; (c) initiate reforms of higher operation of an international standardProject are to: (i) improve the education governance, including the 312-room hotel and complex

_

comprising 44 apartments, partially terms and maturities not otherwise Companzy (JHTC). The Project

serviced by the hotel; well-equipped available in Jordan. Also, garment comprises an extensive refurbishment

exhibition/conference facilities; an manufacturing operations typically of most of the InterContinental Hotel's

auditorium; a health club, managed by employ numerous people in a existing 366 rooms and the addition of

Hyatt International; and a Wellness relatively confined factory. Adequate 125 new rooms and facilities. The

Center and 231-room hotel complex on fire prevention at the site is imperative, Hotel will also replace 15 of its

the Dead Sea, combining medical and as are sufficiently low noise levels, elevators, its boilers, the kitchen, safety

recreational facilities, to be managed adequate lighting, and sanitary and telecoms equipment. The

by M6venpick. Economic benefits facilities. IFC will require that EI-Zay's management agreement between

accruing to Jordan include foreign new facilities comply with World Bank InterContinental Hotels Corporation

exchange generation and the creation guidelines in this regard. and JHTC has recently been extended

of about 600 direct jobs. IFC's main to 2007.

role in this Project is to provide long- * Arab International Hotels

termn funding on terms and maturities Companj' (AIHC). The Project 0 Jordan Investment Trust

not available in Jordan, and help the consists of the renovation and (Jordinvest). The Project involves the

Zara Company mobilize local loans. expansion of the Amman Marriott, a establishment of the first investmentleading hotel located in the Shmeisani bank in Jordan. Jordinvest is expected

* Business Tourism Coinpany. The area of Amman. The work comprises: to carry out a broad range of

Project consists of building and (i) the complete refurbishment of all investment banking activities,

operating a resort of international the hotel's 294 rooms; and (ii) the including: providing long-term private

standards, which will include: (i) a addition of conference and banqueting equity; investing in quoted

230-key hotel; and (ii) a health/medical facilities, a health club, retail space, investments; underwriting and private

spa and beauty care facility. The Dead movie theaters and an underground placement of debt and

Sea, due to its unique therapeutic parking facility. The proposed equity issues; corporate finance

characteristics and climate, has expansion and modernization of the activities, especially restructurings,

established itself as a world-class Marriott will boost the hotel to a 5-star privatization, and mergers and

center for the treatment of various skin international level, allowing it to match acquisitions. Jordinvest would play a

and muscular-joint ailments, such as the quality level provided by its critical developmental role in

psoriasis and rheumatism. The competitors. addressing the financial needs of the

proposed complex will be managed by Private Sector in Jordan and in

Marriott International and will target * Jordan Hotels and Tourism developing its capital markets.both health and leisure tourists. * - -*

* El-Zay (Textile). El-Zay Project Name Approval Loan Amount

specializes in the manufacture of high Year Amount DisbursedUSS Million?

quality men's suits. The Project Al-Hikma Pharmaceuticals Limited (Jordan) 1987/90/ 0.34 0.34consists of: (i) an expansion program 93/95to diversify El-Zay's product line by Zara Investment Holding Company 1996 17.3 17.3

manufacturing men's outerwear; and Business Tourism Company 1997 4.6 4.6..i) a financial restructuring.designed El-Zay (Textile) 1997 3.6 3.6

(ni) a financial restructuring designed Arab International Hotels Company 1998 3.6 3.6

to strengthen El-Zay's balance sheet by Jordan Hotels and Tourism Company 1998 9.3 9.3

replacing most of its short- and Jordan Investment Trust 1998 1.4 1.4

medium-term debt with long-term Modern Agricultural Investment Company 1999 1 0.8

debt. IFC's investment is to help the Middle East Investment Bank Recapitalization 2000 2.2 2.2company complete the Project'Is Boscan Jordan-I 2001 8.0 8.0

company complete the ProJecl s Jordan Gateway 2001 10 0

financial plan and improve its financial Boscan Jordan-lI 2001 1 0

structure by providing funding on Total 62.34 51.14


Through its affiliation with its sponsor, and restnicturing program for MEIB. It Israel border. The Project will beGulfinvest, the Company would also complements the Technical Assistance developed in thrcc phascs. Phase I ofattract foreign, as well as Middle program in Jordan, provided by both the Project will involve: (i) land andEastern, investors to the region. IFC and the World Bank. infrastructure development of a 50 ha

area on the Jordanian side, and (ii)* Modern Agricultural Investment * Boscan Jordan-l. The Project is to construction of 94,000 m2 ofCompaniy (MAICO). The overall expand the operations of Boscan Jordan buildings, offices and factories forobjective of the Company's operations Group, a Jordanian manufacturer of soft- rent, on the Jordanian side, which areis to act as a market and technology side luggage products selling primarily proposed to be partially financed by

beacon to help diversify and upgrade to the United States market. Boscan IFCthe range and combination of crops and Jordan's existing facilities consist of 20irrigation methods, which would production lines. The Project will add 40 * Boscan Jordan-Il. The Project isdevelop a modemn Export Sector, additional production lines. The to develop an integrated Industry andthereby maximizing the economic Company's products are manufactured Information Technology Parkreturn on irrigation water and and sold under brand names by major Development (IITPD). The industrialultimately rationalize its overall United States retail chains. Boscan park has been granted the status of aconsumption. Jordan's speciality is carry-on luggage, Qualifying Industrial Zone (QIZ), to

one of the fastest growing sectors of the provide companies located there with

* Middle East Investment Bank luggage market. The Project is expected the competitive advantage of quota-(MEIB) Recapitalization. The Project to have a significant development impact free and duty-free access to the Unitedinvolves both MEIB's (the smallest in employment creation in Irbid, Jordan. States market. In addition to the QIZ,

commercial bank in Jordan) the proposed park has been given arecapitalization to meet the Central "Free Zone" status by the JordanianBank of Jordan's minimum capital * Jordan Gateway Project. The Government, which provides a 12-requirements, and its restructuring, Project is to develop, construct and year tax holiday and other incentivesmanaged by Societe Generale Libano- operate an industrial estate covering for tenant companies.Europeene de Banque. IFC investment about 65 ha (of which about 50 hais part of this larger recapitalization would be in Jordan) at the Jordan-

WORLLDIB--AA'NIK-'--iANCE STRATEGY

On December 16, 1999, the World been supported by the FLnd, the Bank in the build-up of foreign exchangeBank's Board of Executive Directors Group, the EU, and several bilateral reserves to a healthy level (current

discussed the Bank Group's Country donors. The economy's initial responsc balance of over five months ofAssistance Strategy (CAS) for the to the Jordanian Government's Reforn coverage of imports). The currentHashemite Kingdom of Jordan Program was strong. Economic account during this period remained

covering the period 2000-2002. fundamentals in the first half of this essentially balanced. The economicdecade were quite satisfactory: a high situation began to deteriorate in 1996

* Country Context average growth rate of 7.6 percent per with growth falling below theannum (until 1996 when it began to population growvth rate resulting in

Since the early 1990s, Jordan has deteriorate); a reduction in the fiscal approximately a two percent decline inundertaken considerable stabilization deficit; low inflation; and sound per capita income per annum duringand adjustment efforts. These have monetary management, which helped the 1996-98 period. The decline

Haslsemite Kingdom of Jordan Update

occurred largely because the country * Bank Strategy and IBRD Guarantees could total US$200faced several unfavorable factors that million for Private Sector infrastructure

were outside its control, including: Priorities for Bank investments. The Bank Group expects tolack of progress in the peace process; Assistance lend to projects in higher education,declining oil prices, thus reducing the agriculture exports, vocational

market for Jordanian exports in education, tourism, social protection,

neighboring countries; and spillover Based on detailed discussions with the water, and Public Sector reforms. IFC

from the general slowdown in the Government and other stakeholders in proposes to provide selective support for

Asian economies. the country, the Bank's assistance for viable investment transactions where

The Government is focused on the 2000-2002 will focus on: comparative advantages are present.

challenge of restoring the country to a . Reviving, maintaining, and There will also be substantial

higher growth path. Actions are being accelerating economic growth, nonlending services. MIGA Guarantees

taken in privatization (e.g., Aqaba cmphasizing higher levels of will be available as appropriate.Railway, Jordan Telecommunications private investment, export

Company); several key economic laws development, and tourism; c Partnershipshave been passed; tariffs have been * Promoting human development,

further reduced; and increased efforts including social protection; and The CAS is a unified strategy of the

are being made towards fulfilling * Improving water resources World Bank Group, IBRD, IFG, andrequirements of accession to the management and the environment. MIGA - all will collaborate to

World Trade Organization. Moreover, IBRD loans to Jordan are expected to implement the strategy. Many donorsPublic Sector reforms have become anGobicecthveromeants average US$100-150 million per year are active in Jordan, and the Bankintegral part of the Govemment' s between 2000-2002, assuming overall coordinates its assistance closely withdevelopment plan for the next three tofiveloymear This would maknextthee the satisfactory macroeconomic theirs. To improve macroeconomicPie Sectors.Thiswould more ienth a management, structural reforms and management, the Bank works closely

PromcSeteopriva investmfient ind t portfolio perfor-mance. In addition, with the IMF.promote private investment in the

country.

POVERTY ALLEVIATION IN JORDAN

The following is an abstract of Poverty Alleviation in P Poverty Declined in JordanJordan - Lessons for the Future written by Radwan between 1992 and 1997Shaban, Dina Abu-Ghaida, and Abdel-Salam Al-Naimat,June 2001 (ISBN 0-8213-4958-9).

* The percentage of Jordan's population below the

The purpose of this report is to draw lessons for poverty line was lower in 1997 than it was in 1992. Thisimproving the policy design of poverty alleviation decline is not dependent on the choice of poverty line.

schemes in Jordan. The conclusions herein are based onanalyses of trends in consumption poverty' in Jordan and More specifically, the fraction of the population

assessment of the impact of government programs living below the poverty line of JD 313.5 per capita per

(including food subsidies and cash transfers) on poverty year" (using per capita consumption expenditure)allevating thed su i d declined from 14.4 percent in 1992 to 11.7 percent inalleviation in the 1990s.

1997. Other measures of poverty also declined during thesame period, as shown below.

6S. -.. .. ........ ... ._Sa


Summary Table 1 * Inequality in per capita consumption expenditure, asmeasured by the Gini Index4 , declined from 0.40 to 0.36during this period. This underlying level of inequality is

Poverty Line 148 261 313.5 essentially moderate by regional and international(current annual JD per capita) standards.

Poverty MeasuresHeadcount Index 3.0 14.4 11.7 Programs(% of population) 3 3.0e14.4nGovernmentPoverty Gap Index (%) 0.3 3.6 2.5 Contributed to Poverty

Absolute Magnitudes AlleviationNumber of Poor People ('000) 87.4 554.3 538.2Total Poverty Gap 1.3 35.9 36.6 * In 1992, govermment programs consisted(current JD, millions) predominantly of food subsidies, which benefited the

non-poor more than the poor.Sozurce: Based on Table 4 in mnain report (1987 data are fromthe WVorld Bank [1994] Poverty' Assessment). Welfare measure b n9 government cams tandser constitued theis per capita consumption expenditure, obulk of government programs and these benefited the

poor more than the non-poor.

* The decline in incidence and depth of poverty * In addition, the data indicate that the poorest tenth ofbetween 1992 and 1997 is observed for any poverty line the Jordanian population benefited from National Aidbelow JD 491 per capita per year. For example, using a Fund assistance more in 1997 than in 1992. Thepoverty line of JD 365 per capita per year, the fraction of Development and Employment Fund and the Zakat Fundthe population that was poor declined from 20.8 percent also target the poor.in 1992 to 18.2 percent in 1997.

* Despite the reduction in poverty between 1992 and * Poverty Continues As1997, there is widespread belief that poverty actually Major Policy Challenge forincreased in Jordan during the mid-1990s. This belief is Jordanpartly in reaction to declining overall per capita incomessince 1996 in the context of expectations of rapid * The absolute number of poor people only droppedeconomic improvements following the 1994 Jordanian- from 554,000 in 1992 to 538,000 in 1997 (sec SummaryIsraeli peace treaty. In addition, poverty in Jordan in Table 1).1997 remained far higher than it was in 1987.

* Declining per capita income leads to greater poverty,for a given level of inequality. Thus, the decline in per

* Poverty Declined because capita GDP in Jordan since 1996 is expected to lead toinequality Declined increasing poverty.

* The poor and near-poor remain vulnerable as a result* In 1997 prices, per capita expenditure levels went of the shallowness of poverty in Jordan (many peopledown from JD 821 in 1992 to JD 762 in 1997. However, concentrated close to the poverty line) and the adversethe poorer 40 percent of the population had higher per effects of potential shocks. A 10 percent uniformcapita expenditure levels in 1997 than in 1992, while the reduction in expenditure is estimated to increase thericher 60 percent were worse off, number of the poor by 35 percent.

* This clear reduction in inequality outweighed theeffect of the decline in per capita expenditure levels andled to a lower poverty rate in 1997 than in 1992.

X ___


* Policy Conclusions One mechanism for reducing the vulnerability of thepoor and near-poor to negative shocks is through

I Sustainable reduction of poverty requires community-based public works programs that offer

resumption and sustainability of growth. jobs at low wages. These mechanisms providc

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 growthin 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 figurc. impact on poverty alleviation. Yet, more could be

Structural adjustment reforms that enhance and achicved 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 insuch areas as its organizational structure, mission,

800 - and business operations.

700 - .. _ 4. Continued priority needs to be placed on human

600- _ development policies, particularly those affecting

500- the poor. This investment is important to permit the

400- . | poor to benefit from growth and increased job.00 Current Growth Projection opportunities. Although overall indicators of literacy

300 - and health are good in Jordan, the profile of the poor

200 - +Hyothetical 1% Additional Growth- clearly indicates that the educational attainments of+-Hypothetical 2 % Additional Growth the household directly impact the incidence of

100 ._. .- _ poverty. It is important to continue investing in the

o - . health and education of the poor so they will be able

1997 1998 1999 2000 2001 2002 to benefit from higher growth and increased job

opportunities.

Impact of Growth on the Number ' Consumption povertv r elates the notion of pover(v toof Poor People (thousands) inzsuifficient ineans to meet the cost of a basket of basic needs.

2 The povertv line of JD 313.5 per capita per year, in 1997Note: All growth rates are real per capita GDP. Current prices, is an update oJ the line used in the World Bank's 1994

growth projections are -2. 7, -2.1, -0.3, 0.4, and 1.4 percent Poverty Assessmnent, ihich is an update of the official poverty

for 1998, 1999, 2000, 2001. and 2002, respectively. line originally derived by the Ministry of Social Developmentfor the year 1987.

2. There is a need for policy response to the 3 The 1992 Income and Expenditure Suivey indicated 21.3percent of households as poor using a household-based povertv

vulnerability of the poor and near-poor to economic line. This report uses individual-based poverty lines.shocks. The current government welfare program 4 The Gini Index measures inequality in per capita income oraims at the permanently poor. It is therefore not expenditure. It ranges between 0. Ofor perfect equality and 1.0

equipped to respond flexibly and quickly enough to for perfect inequalih;.

relieve any hardship resulting from a negative shock.

MIR Ilion* lm


Global Development Learning Network

"As we look at the challenges of poverty, it is clear that money alone is not what is needed. We needcolleagues who can learn and share experiences with each other. Distance learning is the tool thatwill 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 multimediainformation age, knowledge and provides learning opportunities for video-conferencing sessions with printinformation have become more vital to stakeholders in the development packages, CD-ROMs, interactive Websustainable development than bricks community and provides cost- communications, and face-to-faceand mortar. Policymakers, Private effective capacity-building programs tutorials; (b) fostering globalSector leaders, community workers in countries that now - for the first dialogues providing uniqueand other "agents of change" in the time in history - are able to make a opportunities for participants todeveloping world know that their sustained effort to close the address pressing issues that call for asuccess depends on bridging the gap knowledge gap with the rest of the common international agenda orbetween the information-poor and the world. require the formulation of local policyinformation-rich. That is why the response. The participants at theWorld Bank and its partners have As part of the Higher Education GDLN Center will be governmentlaunched the Global Development Project (previously described), and co- officials, universities, business andLearning Network (GDLN), a financed by a Japanese Trust Fund, a trade associations who will take partPartnership of organizations that is Global Development Learning in distance learning activities withleading the way in using 21 St Century Network Center is being established at developmental emphasis.learning technologies to share the University of Jordan. GDLN willdevelopment 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 GDLNnetwork with a mandate to serve the GDLN Center which promotes Session, which included a multi-partydeveloping world. This flexible development-related learning in all its session with the Tanzanian, Ukrainianlearning system uses two-way aspects. Learning programs include: GDLN Centers, the World Bank Parisvideoconferencing, Internet and other (a) seminars, workshops, and courses Office, and the Bank's Washingtonadvanced communications techno- targeted to the needs of policy-makers, Headquarters Office.logies to link together a global development practitioners, and agents

U


. 0 . m m * 06.I

35% ___________________________________________ Jordan joined the World Bank in 1952, and received its

30% ______________________________________ first IDA credit in 1961. Over the past 40 years, a totalof 67 credits and loans have been granted to Jordan for

25% a total amount of US$1,940.7 million. Jordan is also a

20% - member of IFC, ICSID, and MIGA.

15% IDA: US$86.1 million (15 credits)

10% IBRD: US$1,854.6 million (52 loans)5% _ _ Of which:

I * _ i * * Investments: US$1,194.3 million0% l , .n O b . >: v >| ': ] _Adjustments: US$630million(6projects)

C:0 21~~~~

D t o C. Disbursements: US$1,783.1 million.(i~~~~ G) 0 c ,1- a< >

_ ' X a Repaid: US$771.0 millionH Obligation: US$952.6 million

World Bank Publications

lessons for future policy designRecent Reports on improvements. the Jordan Valley. In terms of theJordan financial challenge, Jordan will have

Jordan Water Sector Review to redouble its efforts at generatingPoverty Alleviation in Jordan - Update (Report 21946-JO). The significant additional operatingLessons for the Future (ISBNO- Ministry of Water and Irrigation, income from drinking water supply8213-4958-9). The incidence of Hashemite Kingdom of Jordan, invited and irrigation services. Urban waterpoverty in Jordan declined between the Bank to assist in updating the and irrigation tariffs have not1992 and 1997. This decline is related Water Sector Review of 1997 as an increased since 1997. Urgent action is

to the change in Jordanian input into the formulation of a five- needed on tariffs to ensure fullGovernment policies from generalized year action plan for the Water Sector. recovery of operating costs andfood subsidies, (benefiting the rich Jordan faces three critical challenges: periodic adjustments for inflation.

more than the poor), to targeted cash 1) the resource challenge; 2) the Self-financing of water supply andassistance for the poor. Yet poverty financing challenge; and 3) the irrigation services must be a high

reduction remains a major policy institutional challenge. In terms of the priority. In terms of the institutional

challenge for the country since the resource challenge, the challenge of challenge, reforming the Waterimprovement was driven by reduced water deficits is compounded by the Authority of Jordan and Jordan Valley

inequality and not by positive need to ensure water quality and Authority to focus on essential

economic growth. The sustainability environmental protection. A strategic and bulk water management

of Jordan's social safety net is limited systematic action plan for reuse of tasks while divesting retail water

by the growth of the budget and the treated wastewater needs to be services to user or Private Sector

economy. The report therefore formulated in view of the projected entities is a high priority. (2001)examines Jordan's recent experience increase in the quantity of treatedin poverty alleviation schemes to draw wastewater available for use in


Nonfarm Income, Inequality, and recent observations, with a policies and inappropriatePoverty in Rural Egypt and Jordan comparison for earlier decades, the macroeconomic and trade policies.(WPS2572). Nonfarm income has a WDI has become an invaluable source * In trade negotiations, the globalgreater impact on poverty and to those in the Private Sector who economy faces the criticalinequality in Egypt than in Jordan. In analyze business opportunities in governance issue of adequaterural Egypt the poor receive almost 60 developing countries and emerging standards for health and safety,percent of their income from nonfarm markets, labor practices, environmentalsources, while in rural Jordan they Reforming Public Institutions and protection, and intellectual propertyreceive less than 20 percent. The Strengthening Governance: A rights.reason for this difference is land: in World Bank Strategy (ISBN 0 * The influence of technologicalrural Egypt, agricultural land is very 8213-4875-2) Poorly functioning innovations and what electronicproductive, but access is quite limited, . . . commerce means for trade and' ' ~~~~~Public Sector institutions and weak

d so the poor are "pushed" into governance are major impediments to production in developingnonfarm work; while in rural Jordan, . economies.' ' ~~~~~growth and equitable development inland is not very productive, and accessIS not highly prized. In both countries im i optant because of its centrality Voices of the Poor The Voices ofthe best way to reduce poverty and t deI nt the Poor Project was undertaken as ainequality might be to focus on multi-country research initiative tononfarm unskilled labor. This strategy paper reviews the World understand poverty from the eyes of

Bank's recent work on governance, the poor. The research findings areOther Bank Public Sector institutional reform, and being published in three books over

Other Bank capacity building, particularly in core the course of this year.Pubblications public institutions. The agenda for the

next three years is to continue to * Can Anyone Hear Us? (ISBN 0-World Development Report foster changes through the 19-521601-6) gathers the voices of2000/2001: Attacking Poverty (ISBN advancement of analytic tools, new over 40,000 poor women and men0-19-521129-4). At the start ofa new approaches to the design of lending in 50 countries from the Worldcentury, poverty remains a global operations, expanded emphasis on Bank's participatory povertyproblem of huge proportions. Of the partnership with clients and other assessments.world's six billion people, 2.8 billion donors and progressive shifts in * Crying Out for Change (ISBN 0-live on less than US$2 a day and 1T2 staffing, incentives, and evaluation 19-521602-4) pulls together newbillion on less than US$I a day. The techniques. field work conducted in 1999 in 23report argues nevertheless that major countries.reductions in all these dimensions of Global Economic Prospects and the * From Many Lands (ISBN 0-19-poverty are indeed possible - that the Developing Countries 2001 (ISBN 0- 521603-2) offers regional patternsinteraction of markets, state 8213-4675-X). Global Economic and country case-studies.institutions, and civil societies can Prospects and the Developingharness the forces of economic Countries 2001 discusses three issuesintegration and technological change that are central to the challenges To order by phone or fax:to serve the interests of poor people facing developing countries as they Phone: 1-800-645-7247and increase their share of society's participate in the global trading or 703-661-1580;prosperity. system: Fax 703-661-1501

* Many developing countries,World Development Indicators particularly some of the poorest To order on-line:(WDI) 2000 (ISBN 0-8213-4553-2). ones, have had little success sharing http.//publications.worldbank.org/Enlarged to include more than 80 in the expansion of global trade, ecommerceltables and 600 indicators for the most because of both protectionist E-mail: books(aworldbank.org

_

Joseph Saba, Country Director Ghassan El-Rifai, Principal Adviser, RegionalTel. (202) 473 2992 Strategy, Sectoral Policy, and External AffairsFax (202) 477 1482 Tel. (202) 473 6162E-mail: saba(a)worldbank.ori Fax (202) 522 0006

E-mail: elrifaiAi)worldbank.orgOsman Ahmed, Lead Operations OfficerTel. (202) 473 7063 Christina Lin Hasley, Communications AssociateFax (202) 477 1482 Tel. (202) 458 9659E-mail: ahmed(@worldbank.org Fax (202) 522 0006

E-mail: hasley(q.worldbank.orgThirumalai G. Srinivasan, Senior EconomistTel. (202) 473 1288 World Bank Internet Address: www.worldbank.orgFax (202) 477 0432E-mail: srinivasan(q),worldbank.or= To view and order World Bank Publications:

http://publications.worldbank.org/ecommerce/Sophie Warlop, Operations AnalystTel. (202) 473 7255 For more information on World Bank programs inFax. (202 477 1482 Jordan: www.worldbank.org/mna/jordanE-mail: warlop(aworldbank.org

World Bank Address:Dilys Quinn, Program Assistant 1818 H Street, NWTel. (202) 473 6092 Washington DC 20433Fax (202) 477 1482E-mail: quinn(@Dworldbank.org

Editorial Team:

Dilys QuinnRadwan ShabanJohn Speakman

Thirumalai G. SrinivasanSophie Warlop

With special thanks to Mary Saba

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CORRIGENDUM

World Bank Contacts

Joseph Saba, Countiy Director Sereen Juma, Communications AssociateTel. (202) 473 2992 Tel. (202) 473 7199Fax (202) 477 1482 Fax (202) 522 0003Email: Jsaba@ worldbank.orp. Email: Si uma @worldbank.org

Osman Ahmed, Lead Operations Officer World Bank Internet Address:Tel. (202) 473 7063 www.worldbank.orgFax (202) 477 1482Email: [email protected] To view and order World Bank Publications:

http://publications.worldbank.org/ecommerce/Thirumalai G. Srinivasan, Senior EconomistTel. (202) 473 1288 For more information on World BankFax (202) 477 0432 programs in Jordan:Email: [email protected] www.worldbank.org/mna/iordan

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

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

Editorial Team:

Dilys QuinnRadwan ShabanJohn Speakman

Thirumalai G. SrinivasanSophie Warlop

With special thanks to Mary Saba

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