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Jordan: Building resilience through laying a foundation for inclusive growth and job creation

September 19, 2013

Reforms have progressed well in the areas of education, health and privatization/liberalization. In addition, with support from the World Bank Group, the Government of Jordan has been working towards reform of subsidies and the social protection system. Bank support has also focused on GoJ efforts to improve the conditions for greater public private partnerships in infrastructure, along with tax reforms, including the improvement of tax administration and management. The Bank organized projects to address the cross border impact of the Syrian crisis, such as legal support to displaced persons.
PROJECT MAP

Challenge

Jordan has experienced its own version of the “Arab Spring.” Since February 2011, low-scale but persistent demonstrations have challenged the government to initiate political reform and address economic governance. The different governments since have responded by embarking on a process of gradual reform. The Parliament has approved constitutional changes to strengthen the independence and integrity of judiciary bodies thereby improving public accountability. On the structural reform side, the government is pursuing reforms in the area of transparency and accountability, public finance management (in particular budget and debt management and public sector spending efficiency) and private sector development. Sustained progress in the implementation of structural reforms and a supportive regional and external environment are critical for sustaining good economic performance in the period ahead.

Sound economic policies and additional reforms will be necessary to reduce the vulnerability of the country to external shocks. Challenges include vulnerability to fluctuations in the international oil market, due to the country’s high energy import dependency and disruption of gas supplies from Egypt; high unemployment and dependency on remittances from Gulf economies; and increasing pressure on natural resources, especially water. The greatest challenge (and also the largest opportunity) remains the necessity to create adequate conditions for increased private investment and improved competitiveness. This will help  deliver the high and sustainable growth needed to create employment and to reduce poverty. Staying the course with the implementation of the fiscal consolidation program may prove challenging but is key to maintaining a strong economic performance.

The Syrian crisis is strongly affecting Jordan as it has resulted in large numbers of displaced people. Jordan has received a disproportionate share of refugees, especially in relation to its population. The influx of the Syrian refugees has had not only a humanitarian dimension but also developmental consequences. The displacement is putting a strain on local hosting communities that already face challenges in terms of service delivery and poverty levels. The turmoil in Syria is also affecting the Jordanian economy by exerting further pressure on already stressed public finances..

Solution

The Bank’s approach in Jordan is to build resilience through laying a foundation for inclusive growth and job creation. This strategy is being supported through three interlinked Country Partnership Strategy (CPS) pillars, namely: (i) strengthen fiscal management and increase accountability to support public financial management; (ii) strengthen the foundation for sustainable growth with a focus on competitiveness; and (iii) enhance inclusiveness through social protection and local development.

Among others, the Bank is supporting the government in building resilience and sustainable growth through the preparation of a series of  Development Policy Loans (DPLs)  focusing on: (i) improved transparency and accountability, (ii) improved budget and Debt Management, (iii) enhanced efficiency of government spending and services and (iv) to promote private sector-driven growth. The first in the series of DPLs  was delivered in January 2012.

Results

Bank-supported projects have contributed to Jordan’s development objectives by financing investments, strengthening capacity, providing advisory services and analytical work. Selected outcomes include:

  • Second Education Reform for the Knowledge Economy Project: Achievements so far include (among others): (i) the successful implementation of the Jordanian model of school-based programs in half of the schools in Jordan; (ii) the finalization of a framework for Early Childhood Development (ECD) and Special Education; (iii) the successful expansion and piloting of quality kindergartens (KGs) all over the country (gross enrolment rate in KG increased from 52.3 % in 2009/2010 to 57.7% in 2011/2012); (vi) the completion of 70 percent of standard guidelines and programs aligned with vocational and technical education; and (vii) the construction of 16 new schools and the rehabilitation of 21 schools to provide access to safe and adequate school facilities to basic and secondary students. In addition, enrolment rates in primary and secondary education have increased (from 96.9% to 97.8% and from 60.4% to 75.8% respectively), exceeding their target values.
  • Amman Development Corridor Project : The World Bank, together with the Arab Fund for Social and Economic Development Fund and the European Investment Bank have financed the 40-kilometer 4-lane Corridor highway in Eastern Amman, one-half of it opened to traffic in February 2012 with the expected handover of the completed second half    by the end of 2013.
    The Corridor highway is expected to contribute significantly to further development of Jordan’s industrial and service sectors and employment, as a result of the lands opened up and served with lower-cost transport. Substantial private commercial and industrial development has already started, particularly near to Jordan’s principal airport.  
  • Regional and Local Development Project: Co-financed with Agence Française de Développement- AFD).The project aims at promoting regionally balanced development in Jordan through more rigorous and equitable central-local financial transfers, improved municipal and financial management, and enhanced investment planning capacity. Key outcomes under the project include: improved municipal planning, management of investments, investment prioritization, strengthened procurement capacity and increased fiscal responsibility. A number of local development projects have also been implemented throughout the country, bearing a direct impact on the local economy and on life conditions.
  • Cultural Heritage, Tourism, and Urban Development Project: The project has supported large infrastructure and beautification works in the cities of Ajloun, Jerash, Karak, Madaba, and Salt, contributing to the renown and attraction of the cultural sites and historic city cores for the population and for visitors and allowing the cities to play an increasing role in the country’s economy. Street networks and public spaces have been rehabilitated in the city centers, property values have increased, and hospitality and tourism activities are developing as a result.
  • Mitigate the socio-economic impact of Syrian displacement in Jordan: The Jordan-related grant of $900,000 from the SPF, implemented by Save the Children became effective on September 1, 2012, allowing the organization to align their work with the school year. The project consists of community education services, community health services, and the promotion of improved livelihoods. While the grant is still under implementation, substantial achievements were made as of the end of December 2012. The implementing Non-Governmental Organization (NGO) Save the Children (SC) has established, renovated, furbished and equipped eight community based Parent Child Centers in Northern Jordan. The centers have benefitted 2,163 people, including 1,786 Syrian refugees and 1,543 children (1,318 Syrian and 225 Jordanian) - which is already exceeding the final target indicator for the project. 500 winter kits have been distributed to children at the centers. 614 mothers have been trained and mentored in child protection, early childhood education and parenting skills. SC has built the capacity of 54 staff and volunteers at six community based organizations to handle the training and mentoring. Two outreach campaigns raising awareness of the importance of early childhood development have been undertaken, reaching 579 people. Non-formal education and youth-led community initiatives have started, initially reaching 49 youth. Two more Parent Child Centers will open in 2013  and another outreach campaign will be organized. 750 home packages will be delivered to mothers having taken the training to assist in conducting age-appropriate activities for children at home.
  • Justice Sector Reform - The Enhancing Community-Driven Legal Aid Services for the Poor ( and Extending Legal Aid Services to Displaced Iraqis and Palestinians: Funded by the Japan Social Development Fund (JSDF) and the SPF respectively, the programs were launched with the implementing partner, the Justice Center for Legal Aid.  Legal aid centers have been established in Amman, Irbid, Zarqa and Aqaba.  Plans are underway to extend services to Mafraq, Jerash, Ajloun, Karak and Ma'an.  Public awareness sessions took place in Amman, Zarqa, Rusaifah and Madaba covering the following topics:  sexual harassment, personal status issues, labor law, rights of children, landlord-tenant law, social security benefits, inheritance and the elections law. More than 700 poor persons have benefited from legal counseling sessions and representation by lawyers in court proceedings, mostly related to personal status cases. Beneficiaries are poor persons, primarily women (68% of beneficiaries), and the vast majority of beneficiaries (1008 of the 1419 consultations and 719 of the 1014 legal representations) are related to personal status issues (access to alimony child support and dowries, and divorce cases).  The statistics are demonstrating the common intersection of the justice sector and poverty - poor women needing assistance in accessing what might be their only considerable economic assets (alimony, child support and dowries). 
  • Fiscal Adjustment (Technical assistance): The fiscal adjustment analysis conducted by the Bank provided quantification to many of the implemented or planned reforms by the government: e.g. the fiscal savings from removing fuel subsidies; the impact of various scenarios of electricity tariff increases. These scenarios informed the policy dialogue and were extensively discussed between various institutions in Jordan, including the Central Bank and the Electricity Regulator. It highlighted the large amount of tax arrears and unpaid taxes, and the government has recently issued directives to tax administration and judges to accelerate the recovery of JD1 billions of tax arrears. The work was instrumental for the International Monetary Fund Stand-By Arrangement, especially regarding revenues and the power sector. Hence, the approach on the need for strengthening tax administration and reversing the declining trend in revenues is largely inspired from the findings of the Bank’s work.
  • The Jordan Competitiveness and Innovation Partnership (JCIP):  A Bank initiative developed jointly with the Government of Jordan focused on promoting the competitiveness and innovation of the Jordanian economy and its industry sectors in order to strengthen private sector growth to create jobs. JCIP was developed as an implementation oriented initiative. At the national level, the main focus is on the strategic framework for investment and innovation strategy. More than 100 public and private sector representatives as well as donors and academia discussed the findings and reform recommendations and agreed on a package of Bank technical assistance in a JCIP public-private workshop organized in Amman on July 3, 2012. Furthermore, the reform recommendations also reflected the findings of the mini-investment climate assessment report "Small Enterprises in Jordan: Challenges for Growth, Employment, Exports and Innovation". The new study provided data and analysis on the factors influencing the performance of small and medium-size firms across both the manufacturing and services sectors in Amman and Zarqa.

International Finance Corporation (IFC): Through an integrated investment and advisory program, IFC has assisted in the development of the financial sector by increasing access to finance to underserved groups.  The IFC program has also contributed significantly to investment and private sector development in Jordan. The Queen Alia International Airport (QAIA) is one such landmark, transformational project in the region which has recently been awarded "GOLD" for being one of the top 40 Public Private Partnerships (PPPs) in Emerging Markets. QAIA is not only the Middle East's first full airport concession, but the first to use Sharia-compliant finance. The new airport is expected to create 23,000 jobs and will allow Jordan's importance as a tourist and economic center to grow. IFC was the lead advisor to the GoJ in structuring and implementing the project leading to the award of a 25-year concession to the Aéroports de Paris Consortium with a bid of 54.58% of gross revenue to the GoJ, the highest revenue-sharing percentage achieved in the world for similar projects.

In addition to the above, the World Bank Group’s high quality analytical and advisory work has made important contributions to the government’s development agenda, especially in economic diversification and competitiveness, subsidy reform, poverty assessments, and investment climate reforms.

Bank Group Contribution

The World Bank’s active portfolio in Jordan comprises investments in the Urban Development, Education, Social Protection, Energy, Environment, Public Sector Governance and Finance/Private Sectors. The Urban Development Sector accounts for the highest share of the portfolio at 60 percent, followed by the Education Sector at 35 percent. As of February 28, 2013, Jordan’s active portfolio was valued at US$255.5 million, of which 85 percent is financed by the Bank (seven projects, including one guarantee project, for a total of US$217.5 million) and 18 percent is financed by Bank-administered trust funds (16 projects). The trust fund portfolio mainly supports government accountability, capacity building, environmental sustainability, and local development/inclusion. Jordan is also supported through a comprehensive technical assistance program focused on poverty analysis and strategy formulation, subsidy reform, employment strategy formulation, competitiveness, and innovation.

IFC’s investment program in Jordan has ramped up in recent years, with the portfolio growing from $50 million in FY05 to around $650 million as of end-March 2013. IFC’s total exposure is close to US$1 billion if the US310 million of mobilized investment is included, the highest ever IFC investment program in Jordan and the third highest in the MENA region (after Egypt and Pakistan). The majority of this scale up has been supporting infrastructure (power and transportation) and manufacturing (pharmaceuticals and chemicals) sectors. IFC has also helped its clients generate close 67,000 MSME loans, create 16,000 direct jobs, and reach 5.5 million airport passengers resulting in high development impact.  IFC’s advisory services program in Jordan is expanding and includes projects in PPPs, corporate governance, doing business, regulatory simplification, financial infrastructure and access to finance. Jordan is also a key country where IFC’s regional Education for Employment (E4E) initiative is being implemented, and IFC is grateful for the support of Her Majesty Queen Rania, Honorary Chairperson of the initiative, in this effort.  IFC has been instrumental in putting the PPP agenda on the forefront of government policy programs in the region

Partners

The World Bank Group has maintained close partnerships with other donors, especially the United States Agency for International Development, the European Commission, the International Monetary Fund and other bilateral donors.

Jordan has good relations with its development partners. The Ministry of Planning and International Cooperation takes the lead in the dialogue with its development partners, but there is room for more coordination among donors. Given the strong presence of a number of other development partners in Jordan, the Bank’s support is often complemented by the work of others to ensure complementarity and coordination through technical and financial support. A list of partners in the respective sectors includes:

Education Sector

Canadian International Development Agency (CIDA); Arab Fund for Economic and Social Development (AFESD); United Kingdom Department for International Development (DFID); European Investment Bank (EIB), European Commission; Japan International Cooperation Agency (JICA); Kreditanstalt fur Wiederaufbau (KFW); Islamic Development Bank (IDB)

Public Financial Management Reform

United States Agency for International Development (USAID); JICA; International Monetary Fund

Business Environment and Micro- Small/Medium Enterprise Development

Agence Française de Développement (AFD); USAID; EIB; DFID; European Union; IDB

Water Sector

USAID; KFW; AFD; JICA; EIB; the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)

Local Development Sector

European Union; AFD

Transport Sector

EIB; AFESD

Moving Forward

The World Bank Group will continue to support Jordan in its efforts to promote stronger growth, build resilience and create jobs through a three-pronged strategy: (i) strengthen fiscal management and increase accountability to support public financial management; (ii) strengthen the foundation for sustainable growth with a focus on competitiveness; and (iii) enhance inclusiveness through social protection and local development. The strategy supports the government’s central objectives of focusing on fiscal consolidation, growth, job creation, private sector development, and governance, as expressed in the government’s Executive Development Plan. 

Within the framework of the Board approved CPS for Jordan, IFC’s key strategic priorities include: (i) supporting PPPs (solar and wind power, water, ports); (ii) financing strategic infrastructure projects; (iii) developing the financial sector, especially improving access to finance, through supporting Microfinance and Small to Medium Enterprises, and strengthening financial infrastructure (secured lending, credit information, and microfinance); and (iv) mobilizing financial resources for project finance.  Providing long-term debt financing and taking selective equity stakes has also been an area of increased focus as well as mobilizing intraregional South-South investments.

Beneficiaries

Justice Center for Legal Aid video showing actual beneficiaries and highlighting the most common types of cases handled:

  • husbands failing to provide living expenses to wives (required under the Personal Status Code)
  • access to alimony and child support after divorce
  • domestic violence
  • employment abuse (non-payment of salaries and benefits) –
  • financial fraud (using the names of poor persons to fraudulently obtain loans without their knowledge, usually done by forging documents).