WASHINGTON, January 24, 2012 – The World Bank Group (WBG) is supporting reforms in the Hashemite Kingdom of Jordan designed to improve governance and fiscal management. A new country strategy focuses on building a foundation for sustainable growth and job creation while $250 million pledged today helps the country manage the global economic downturn and the short-term shocks caused by political events in the region.
The World Bank Board of Executive Directors today discussed the FY12 to FY15 Country Partnership Strategy (CPS) for Jordan and approved a $250 million Development Policy Loan (DPL), designed to strengthen transparency and accountability, budget and debt management, efficiency of public spending and services, and private sector development.
Among some of the notable reforms already undertaken to prepare for this financial support are cabinet approval of a draft law on anti-corruption an enhanced public-private partnership law, efficiency measures for government health spending and a new investment law establishing greater transparency for transactions and faster acquisition of licenses.
“Jordan’s government is embarking on a series of political reforms coupled with the essential growth enhancing reforms needed to urgently boost employment,” said Inger Andersen, Vice President for the Middle East and North Africa (MNA) Region of the World Bank. “In Jordan and across much of the region, authorities have awakened to the need for political reforms and their deep linkage to economic well being and progress and that you can’t have one without the other. We are committed to supporting this process.”
Jordan’s small and open economy has been buffeted during 2011 by the global shocks of increasing food and fuel prices and by a sharp fall off in tourism, remittances and foreign direct investment (-16%, -3% and -32% respectively) due to the changes sweeping across the region. Furthermore, social expenditures in response to these shocks, including large untargeted subsidies, have increased fiscal deficits and Jordan’s vulnerability to further shocks.
“Jordan’s vision is to build itself as a strong knowledge-based economy and it is well positioned in the region to do this,” said Hedi Larbi, the World Bank’s Country Director for Jordan. “Jordan has the advantage of a well-educated population and potential for globally competitive sectors. With a healthy business climate, good governance, and improved management of social protection expenditures, the country can return to a path of growth. Our strategy and support are designed to support Jordan in these efforts.”
The Bank Group’s four-year strategy for Jordan is built around three main themes. The first focuses on strengthening governance through improved fiscal management and increased accountability, also supported by the DPL. The Bank will offer guidance on ways to improve public financial management and on increasing the efficiency of public expenditures as well as strengthening mechanisms for both internal and external accountability.
The second theme is designed to boost sustainable growth with a focus on competitiveness. This encompasses the creation of a more open and efficient business environment and a focus on education quality with a view to making sure Jordanian graduates have the skills sought by the market. Women’s participation in the labor force in Jordan is low and the Bank will support efforts to increase their access to jobs.
The third pillar of the strategy looks at reaching more vulnerable citizens, notably in rural areas where the average country poverty rate of 13% can see sharp increases. Better targeting of social assistance and subsidies is critical to help these more vulnerable communities. The Bank is proposing community-based approaches which have worked well elsewhere in the world to help reach those left out, most often women and younger people.
The International Finance Corporation has significantly ramped up its program in Jordan over recent years, and expects to keep this momentum in supporting Jordan's private sector during the new CPS period.
"Despite the current uncertainties in the region, IFC continues to see strong potential for private sector financing and Advisory support in Jordan," said Mouayed Makhlouf, Regional Director for Middle East and North Africa of the IFC. "In the short-term, IFC will continue its support to Jordan's private sector with a view to restoring investor confidence, while working in parallel with all stakeholders and the Bank to address the country's more medium-term challenges of infrastructure development, financial sector strengthening, and education reforms."
In light of the government’s increased focus on transparency, public participation, and government accountability, the WBG will also seek opportunities to support these efforts across the CPS portfolio and to foster broader consultation with the private sector and civil society organizations.
The strategy was designed in consultation with Jordan’s official representatives and with other stakeholders including civil society and the private sector. Discussion and engagement with civil society will be an ongoing and much broader process as the Bank strategy is implemented in various initiatives and projects.
For the period of the CPS, Bank lending is envisaged at between $500 and $650 million. IFC portfolio currently stands at $653 million, and annual investments of around $100 million are expected over the CPS period
