HASHEMITE KINGDOM OF JORDAN The World Bank Group FIRST/SECOND QUARTER 2006 A Quarterly Publication of the Jordan Country Unit 37135 In this edition Page · World Bank Contacts 2 · Jordan Energy Efficiency and Renewable Energy Initiative 3 · Recent Economic Developments 8 · Amman: Using a City Development Strategy Framework to Improve City Services and Competitiveness 14 · World Bank's Four-Year Program for Jordan Presented in its Country Assistance Strategy 17 · Bank Group Operations 19 · News, Recent and Upcoming Activities 23 · Recent World Bank Publication 25 Hashemite Kingdom of Jordan Update World Bank Contacts Joseph Saba, Country Director World Bank Internet Address: Tel. (202) 473 2992 www.worldbank.org Fax (202) 477 1482 Email: Jsaba@worldbank.org To view and order World Bank Publications: http://publications.worldbank.org/ecommerce/ Osman Ahmed, Lead Country Officer Tel. (202) 473 7063 For more information on World Bank Fax (202) 477 1482 programs in Jordan: Email: Oahmed@worldbank.org www.worldbank.org/mena Sebnem Akkaya, Senior Country Economist To locate research papers, best practices, Beirut Country Office terms of reference, presentations, key Tel. (961 1) 987 800 policies, communities of practice, project Fax (961 1) 986 800 information and useful links from the World Email: Sakkaya@worldbank.org Bank and other sites: Email: askMNA@worldbank.org Sophie Warlop, Operations Analyst Tel. (202) 473 7255 Jordan Public Information Center Fax (202) 477 1482 Department of Public Libraries Email: Swarlop@worldbank.org Greater Amman Municipality Downtown, Next to the Roman Amphitheater Lorraine James, Program Assistant Tel: 962-6-4627718/9 Tel. (202) 473 5621 Fax (202) 477 1482 Email: Ljames@worldbank.org World Bank Address: 1818 H Street, NW Washington, DC 20433 Editorial Team: Reynold Duncan Stephen Karam Sebnem Akkaya Ahmed Attiga Chadi Bou Habib Sophie Warlop With special thanks to Mary Saba 2 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update JORDAN'S ENERGY EFFICIENCY AND RENEWABLE ENERGY INITIATIVE Introduction · for a country relying on energy import, reduces the country's import bill, and The Hashemite Kingdom of Jordan has little hence its external indebtedness; indigenous energy resources, with about 96 percent of energy supply imported. This raises the · helps maximize welfare per unit of energy issue of security and reliability. The supply of consumed for social services which benefit reliable energy at reasonable cost has been the poor, such as water, education and health, recognized by the Government as one of the and minimize fiscal expenditures associated crucial elements required to transform the with subsidy schemes to increase energy economy into an export-oriented economy with access to the poor, thus directly linking to the private sector playing a leading role. To poverty reduction; and achieve this, the Government is undertaking a number of initiatives, comprising both local · helps shift energy systems towards a low alternative energy sources and energy efficiency. carbon global economy, conserve the natural The former includes the development of the resources endowment for future generations, country's oil shale potential over the longer term, mitigate the global and local environmental conversion from liquid fuels to natural gas for impact of energy production and use and, both power generation and direct residential and therefore, minimize the need for and cost of industrial use and the development of its solar, adaptation. geothermal and wind energy potential. Scope Of Energy Efficiency And The Government requested World Bank support for the development of wind energy potential and Progress In Jordan the establishment of an energy efficiency fund. This article not only focuses on energy efficiency, To be effective, an energy efficiency program but also explains the advantages of combining needs to take a multi-sectoral approach to include energy efficiency and renewable energy under a all key supply and consuming sectors: oil, gas, common energy fund. This article also suggests transportation, industry, households, agriculture, how energy efficiency designs used in other etc. Table 1 illustrates the potential sector countries could be adapted for Jordan. coverage and interventions to improve energy efficiency. Direct Benefits Of Energy Jordan has made significant progress in improving Efficiency energy efficiency in electricity supply. With energy supply losses1 at about 15percent, the Increased energy efficiency: power supply system in Jordan is one of the most efficient in the Middle East Region. Jordan has · is the lowest-cost way to optimize the also converted most of the power plants that availability of energy supplies and reduce originally ran on Heavy Fuel Oil (HFO) to run on demand in order to lessen the vulnerability to natural gas, and plans for new thermal power disruptions in energy markets, and thus plants to be of the combined cycle design and improve energy security; using natural gas. · maximizes output or value added per unit of Jordan's overall energy intensity is below the energy consumed and is thus related to average for the Middle East, but is higher than economic growth and industrial and most of North African, OECD and Latin commercial competitiveness; American countries as illustrated in Figure 1. The 1Energy losses between the point of transmission and the point of consumption. First/Second Quarter 2006 3 Hashemite Kingdom of Jordan Update Government, therefore, now plans to facilitate Figure 1: Energy Intensity Comparison2 scale-up of energy efficiency by the consuming (TOE/US$1,000) sectors, especially in industry and commerce, 1.6 while developing alternative sources of supply, including renewable-based power generation; in 1.4 particular wind, solar, bio-energy and geothermal. 1.2 The Government also plans to substitute electrical 1 heating with solar and natural gas heating, thereby eliminating conversion loses. 0.8 0.6 Table 1: Potential Sectoral Interventions 0.4 Sector Measure Power · Refurbishment and/or 0.2 replacement of existing power 0 plants a ai · Increased gas-fired combined dan byLi tpy tiaw naIr qaIr Eg aisin aireg Ku ccooro acire tsaE DC As acir e OE Af cycle plant orJ Tu Al M mA ddli · Increased renewable-based nit M La generation · Reinforcement of transmission and distribution systems Barriers To Energy Efficiency · Tariff design; e.g. kVA- instead of kW-based max. demand The provision of more energy-efficient products, Transport · Tighter vehicle fuel-efficiency systems and services could reduce the pressure for and emissions standards and increased energy imports and for investments in enforcement energy supply infrastructure, and ease the burden · Improvement, coordination and of high-energy costs. However, despite the huge expansion of multi-mode mass potential for savings, there are several barriers to transport facilities scaling up private or public initiatives in Industry · Mandatory energy-efficiency developing countries. The most daunting barriers standards for new industrial include: equipment · Tax incentives and lower cost financing for investment in · Lack or inconsistency of knowledge by efficient technologies energy users of the benefits of energy · Energy auditing, target setting efficiency­demand-side intervention comple- and monitoring ments supply-side interventions. · Substituting electrical heating · Lack of expertise to develop energy efficiency with solar and natural gas projects. Residential · Tighter efficiency standards for · High initial implementation costs. and appliances and equipment · Lack of suitable financing mechanisms: banks Commercial · Mandatory energy labeling of lack experience and awareness in energy appliances · Tighter codes for residential and efficiency and renewable energy projects and commercial buildings need assistance on risk analysis and · Substituting electrical heating mitigation to achieve bankability. with solar and natural gas · Lack of consistent institutional frameworks. · Use of compact fluorescent lamps (CFLs) The next section discusses an institutional Health · Tighter efficiency standards for arrangement that could help eliminate these stoves barriers and scale up energy efficiency, using experiences in countries that have successful energy efficiency programs. 2Energy Balances of Non-OECD Countries 2002- 2003; IEA Statistics, 2005 Edition. 4 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update A Typical Energy Efficiency Remuneration would comprise a retainer fee, deal Program That Could Be Adapted origination (or closing) fee and a success fee. The For Jordan retainer fee is partly fixed and partly dependent on performance. The deal origination/closing fee is paid by borrowers in line with prevailing market Figure 2 shows a typical Energy Efficiency (EE) norms. The success fee is paid from revenues of institutional arrangement. This is followed by a the Fund at the end of the contract period. The discussion of the key elements of the design and performance-based retainer fee includes suggestions as to how this could be adapted for incentives for expanding the client base of the Jordan. Fund, while ensuring that defaults are minimized. The Fund Manager is responsible to the EE The Fund Manager consists of a team of Board, comprising representatives of key business, technical and financial experts in EE stakeholders in energy efficiency. The Fund project development, as well as technical support Manager and EE Board constitute the Energy staff. For Jordan, there may be a need for Efficiency Fund. outsourcing external support to establish the Fund and help develop local capacity that would later Investment Financing: The financing of energy take over responsibility for running the Fund. efficiency investments through Energy Service Figure 2: Energy Efficiency Fund Organization GEF Other Donors Grant Funds Grant Agreement Other Financing; World Bank MEMR e.g. EE Surcharge Subsidiary Grant Implementation Agreement Agreement Jordan Energy Efficiency Fund EE Board Servicing Bank Financing Performance Proposals Contract Fund Manager GEF Guarantee Clients Commercial Financing First/Second Quarter 2006 5 Hashemite Kingdom of Jordan Update Companies (ESCOs)3 or directly by energy users For Jordan, the EE Fund or other relevant is normally through equity and debt. The Fund institution would act as a credit guarantor. A would broadly coordinate three major funding guarantee account or similar arrangement would sources: first, funding from commercial sources be established with a commercial bank, the through a Credit Enhancement Facility (GEF Servicing Bank. Guarantee). This is considered a better option for Jordan than the provision of sub-loans by the EE Why A Common Energy Fund? Fund, due to the high liquidity of the banking sector. Second, the provision of an output-based The Government's objective to improve supply subsidy based on suitable outputs, such as reliability at reasonable cost, reduce the import efficiency improvements achieved. Third, a bill, and hence external indebtedness, calls for subsidy mechanism would also be required for both energy efficiency intensification, as well as renewable energy investments. The source of energy supply diversity. Alternative indigenous funding would be "other financing and GEF", resources include solar, wind, hydro, oil shale, channeled through the Fund. bio-energy and geothermal. Most of these require subsidies in their initial stages of development, Technical Assistance Financing: This component would normally cover the following and therefore, call for an appropriate subsidy- areas: (i) capacity building to activities in the transfer mechanism and relevant policy and initial project pipeline development, project regulatory frameworks. Several aspects of these, evaluation, marketing and dissemination of such as incentives for investments, capacity information; and (ii) set-up and running costs of building and business development, also apply to the Fund. The costs directly related to an energy energy efficiency. A common fund would thus efficiency activity, such as the design and avoid unnecessary proliferation and ensure a more implementation support could be cost-shared or efficient institutional arrangement. contingent grants. The source of funding would be "other financing and GEF", channeled through the Fund. Commercial Financing: As noted above, most commercial financiers are reluctant to finance energy efficiency projects due to their unfamiliarity with such projects and perceived weak client/project credit profiles. To mitigate this risk, credit enhancement instruments such as partial credit guarantees are used. A guarantee fee is charged based on the risk coverage level, with higher risk projects being charged higher fees. 3Companies that offer to reduce clients' utility costs, often with the cost savings being split between the company and the client through an Energy Performance Contract (EPC) or a shared-savings agreement. 6 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update RECENT ECONOMIC DEVELOPMENTS Real Sector Developments immigration, growing by 9.0 percent in 2005, compared to 12.3 percent in 2004. Jordan continued to achieve exceptional economic growth in 2005. Real GDP growth Figure 1. Real GDP Growth and the remained at over 7 percent for the second year in a Manufacturing Sector row. Furthermore, while the real growth rate of 2004 (7.7 percent) was partly explained by a 9% 24% rebound effect following the Iraq war-induced 8% 21% recession of 2003, the 2005 performance 7% 19% illustrates the dynamism of the Jordanian economy. Jordan's economy took advantage of 6% 16% ngi evolving positive external circumstances in the P 5% 13% region, and absorbed negative shocks--such as GD 4% 11% urtcaf those affecting the energy and tourism sectors. 3% 8% nua The high growth rate helped boost public M 2% 5% revenues, but the economy also showed signs of increasing vulnerabilities, with public 1% 3% expenditures rising by 15 percent, the Current 0% 0% Account Deficit reaching 17.7 percent of GDP, 30- 30- 30- 30- 40- 40- 40- 40- 50- 50- 50- 50- and the inflationary impact of rising fuel prices Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 becoming tangible. The Current Account Deficit GDP Manufactures was compensated by large remittances and public transfers from abroad and by a massive increase in capital inflows. On the fiscal side, higher revenues Source: Ministry of Planning and World Bank and reduction in oil subsidies helped control the staff calculations. budget deficit before grants, which remained high--around 10 percent of GDP. The services sector's supporting role in production is gaining renewed importance, On the supply side, the leading sector is while the manufacturing sector is reflecting the services, which benefited from higher external maturing performance of Qualified Industrial inflows--notably the finance and insurance Zones (QIZs). The contribution of manufacturing services grew by 13.4 percent against 6.4 percent value added to GDP growth, still strong at 27 a year earlier, and wholesale, retail trade grew by percent in 2005, declined from 34 percent in 2004. 9.6 percent against 5.4 percent in 2004. The This is mainly due to the application of the Multi- manufacturing, construction and transportation Fiber Agreements which reduced the comparative sectors continued to perform well, though at a advantages of Jordan's textile sector/exports; and more normalized pace than in 2004. The the maturing activity in the QIZs, operating at manufacturing sector grew by 11.3 percent nearly full capacity and with relatively few new compared to 16.3 percent in 2004, benefiting from comers. the recovery in exports to Iraq, and from the rise in demand for Jordan's products from the oil Despite strong growth performance, high exporting countries. Activity with Iraq continued unemployment persists. Unemployment to stimulate growth in the transport and increased from 13 percent in 2004 to 16 percent in communications sector, which grew by 7.7 2005. Jordan suffers from chronically high rates percent in 2005 compared to 12.1 percent in 2004. of unemployment, which contribute to the poverty The construction sector continued to benefit from problem, with families of the unemployed being transfers linked to oil prices and Iraqi 8 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update significantly more likely to be poor (22 percent short-term capital inflows, reaching 8 percent of versus 13 percent for the employed).1 GDP from 4 percent in 2004. Table 1. Sector Share in Real GDP Growth The large net capital inflows allowed Jordan to 2001 2002 2003 2004 2005 maintain the foreign currency reserves of the Total GDP 5.3% 5.7% 4.1% 7.7% 7.2% Central Bank at high levels. Reserves remained close to US$5.3 billion between end-2004 and Share of the sector value added growth in the GDP growth end-2005. However, expressed in months of Agriculture 1.0% 12.2% 9.9% 1.0% 2.6% imports of goods and services, reserves declined Mining 2.6% 6.1% -1.7% -1.4% -0.4% to 5.3 months in 2005 from 6.7 months in 2004. Manufacturing 22.4% 48.8% 11.3% 34.3% 27.1% Similarly, the coverage of the broad money supply Electricity and Water 2.6% 0.3% 2.1% 3.8% 2.2% by the foreign reserves dropped to 29.8 percent in Construction 10.4% 7.2% 0.1% 7.4% 6.0% 2005, compared to 35.3 percent in 2004. Trade and Tourism 4.9% 3.7% 10.6% 8.9% 11.7% Figure 2. Current Account Deficit and Net Transport and 28.2% 2.1% 26.8% 24.4% 17.0% Workers' Transfers Communication (Remittances and Compensations) Business Services-Net 10.1% 1.2% 14.2% 5.5% 10.3% Public and Private 12% 120% 12.2% 15.8% 16.2% 7.2% 10.3% Services 8% 105% Total Sector Share 94.5% 97.3% 89.5% 91.2% 86.9% 4% 90% Indirect Taxes Share 5.5% 2.7% 10.5% 8.8% 13.1% s erf Total GDP 100% 100% 100% 100% 100% 0% 75% Source: Ministry of Planning and World Bank staff ountccA -4% 60% ansrT's calculations. entr -8% 45% erk Cur or External Sector Developments W -12% 30% -16% 15% Jordan registered a large Current Account -20% 0% Deficit of 17.7 percent of GDP, compensated by 2000 2001 2002 2003 2004 2005 considerable net inflows of capital. This increase in the external deficit stems from a large Current Account (% of GDP) Remittances and Compensations (net) /Trade Deficit increase in the Trade Deficit of goods and services, reaching 41 percent of GDP Source: Central Bank of Jordan, Ministry of Planning and (approximately US$5.3 billion). The Trade Deficit World Bank staff calculations. grew by 53 percent in 2005 because of a 26 percent increase in imports, partially compensated Exports of goods increased at a lower pace in by a 10 percent increase in exports. Net Workers 2005, but Jordan seems to be diversifying its Remittances and Net Compensations of export offer. Exports of goods rose by 10 percent Employees remained high at 16.7 percent of GDP, in 2005 against 26 percent in 2004. The clothing but fell short of financing the growing Trade industries located in the QIZs remain major Deficit--covering only 41 percent of the Trade exporters of manufactured goods, is no longer the Deficit. The major financing for the Current leading export sector. Clothes exports increased Account Deficit came from the capital inflows, by 5 percent in 2005 against 48 percent in 2004 with Foreign Direct Investments and other capital and account for 24.5 percent of total exports in inflows increasing to record levels in 2005.2 The 2005. Exports of chemicals and manufactured capital account surplus soared to 11.0 percent of goods other than clothes rose by 18 percent and GDP in 2005 compared to a negative 1.5 percent now account for 31 percent of total exports. These in 2004, with Net Errors and Omissions, including exports have higher value added and are mainly directed to Arab countries and the European Union. Exports of food and beverage increased by 1World Bank (2004), Jordan Poverty Assessment. 33 percent in 2005 compared to 20 percent in 2 FDI inflows alone amounted to US$1.7 billion (13 2004, bringing their share in exports to 10.6 percent of GDP in 2005), roughly four times the level recorded in the past five years. percent, up from 8.8 percent in 2004. First/Second Quarter 2006 9 Hashemite Kingdom of Jordan Update percent increase). But non-oil imports also Exports to the European Union increased by 24 significantly increased, accounting for 34 percent percent, as Jordan continues to benefit from the of the increase in imports. This is largely appreciation of the Euro against the US Dollar, a explained by a sharp increase in the prices of currency to which the Jordanian Dinar is pegged. machinery and equipment imports (43 percent), The propensity to import from Arab countries also while volumes remained relatively stable. Overall, increased due to the rise in oil prices, with exports these developments underline both the high to this destination rising by 15 percent (21 percent dependence of Jordan's economy on imported excluding Iraq)3. Exports to the United States intermediary goods and the developing re-export increased by 8 percent against 56 percent a year activity with Iraq. earlier, due to slowdown in clothes exports. Nevertheless, the share of clothes in total exports Fiscal Developments to this destination remains high at 86 percent, against 88 percent in 2004. Government's domestic revenues increased significantly for the second consecutive year. Figure 3. Domestic Exports by Destination Domestic revenues reached 28 percent of GDP in 2005 compared to 26 percent in 2004. The most dynamic components of revenues were income tax Arab Other and land registration fees, which increased by 30 Countries 24% percent and 84 percent, respectively. The latter 42% reflects both the price and activity dynamics of the real estate sector in 2005 and the former reflects the economic dynamic in 2004. All in all, domestic revenues rose by 20 percent in 2005. EU 3% The increase in oil prices exerted important pressures on public expenditures. Expenditures reached 38 percent of GDP against 37 percent a year earlier--reflecting the combination of an 18.5 percent increase during the First Half of USA 2005, and of an 11.6 percent increase in the 31% Second Half of 2005. The Government has taken Source: Central Bank of Jordan and World Bank staff two sets of measures in the Second Half of 2005 calculations. in order to contain the rise in oil subsidies. First, in response to the sharp increase in subsidies in Imports of goods increased by 28 percent, July and August, the Government contained and mainly due to higher prices of imported restricted other types of expenditures, especially commodities. The price dynamic accounts for 18 capital expenditures, which decreased by 29 percentage points of the increase in imports, while percent in the Second Half of 2005, compared to the remaining 10 percentage points are due to a the same period in 2004. Second, the first round volume increase4. Over 36.6 percent of the of cut in oil subsidies became effective in increase in imports is linked to the increase of oil September, and despite the continuous rise in oil prices (a 47 percent increase) and volume (a 7.4 prices, subsidies for the last four months of the year increased only by 49 percent, compared to 3 Data for the past ten years suggest an oil price the same period of 2004--in contrast, subsidies elasticity of 0.55 for Jordanian exports to the Arab through September increased by 139 percent over countries, Iraq excluded. Calculations show an oil price the same period in 2004. All in all, oil subsidies in elasticity of 0.24 for the share of these exports to the 2005 rose by 104 percent and represented 61 total exports, excluding exports to Iraq and clothes percent of the total increase in expenditures. The exports. defense and security expenditures represent 10 4 This suggests a reversal in the 2004 pattern, when percent of the total increase in expenditures. imports increased by 43 percent, with volume increase representing 23 percentage points of the total increase, and the price increase the remaining 20 percentage Despite significant fiscal consolidation efforts points. in response to the sharp increase in the cost of 10 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update oil subsidies and diminishing external grants, debt in total debt increased, currently representing the budget deficit (before grant), remained 32.8 percent of the total debt against 28 percent a high in 2005. The sharp rise in expenditures year earlier. combined with signifcantly lower grants kept the total and primary deficits before grants at levels Prices, Money and Banking close to those of 2004. The budget deficit stood at 10.1 percent of GDP in 2005, slightly lower than The Consumer Price Index (CPI) inflation the 2004 ratio of 11 percent. The primary defict, accelerated in the Fourth Quarter of 2005 has shown a more tangible improvement at 7.8 following the cuts on oil subsidies. Oil subsidies percent of GDP against 9 percent in 2004. Grants were helping to absorb the effects of the increase declined from 9.9 percent in 2004 to 5.5 percent in oil prices on consumer prices as revealed by a of GDP. monthly pattern of price increases. The CPI increased by only 2.5 percent over the first eight Table 2. Central Government Budget months. For the last four months of 2005, and with the transmittal of the effect of the cut on oil 2004 2005 subsidies to consumer prices, CPI inflation Domestic Revenues 2139 2562 reached 5.6 percent. On annual average terms, Tax Revenues 1429 1766 however, the CPI increased by 3.5 percent, Income and Profits 218 284 comparable to a 3.4 percent increase in 2004. Sales Tax 827 1023 Customs 267 305 The GDP deflator rose by 4.2 percent in 2005, Other 117 154 reflecting the price dynamic of several sectors. Non-Tax Revenues 650 756 The deflator of the mining and quarrying sector Repayment 60 40 increased by 15.6 percent, the restaurant and Total Expenditures 3034 3479 hotel sector by 5.3 percent, the manufacturing Current Expenditures 2259 2848 sector by 4.5 percent and the finance and Excluding Debt Service 2098 2641 insurance services sector by 5.5 percent. Higher o/w Defense and Security 653 699 demand for goods and services, partially o/w Oil Subsidies 260 531 reflecting Iraqi immigration, the inflows of oil Debt Service 161 207 money and the rise in import prices have all External 98 113 contributed to inflate prices in Jordan, both in Internal 64 94 tradable and non-tradable sectors. Capital Expenditures 776 631 Surplus / Deficit -895 -917 The broad money supply (M2) increased by 17 as percentage of GDP -11.0% -10.1% percent in 2005, mostly reflecting the dynamics Primary Balance -734 -710 of deposits in the banking sector. Time deposits as percentage of GDP -9.0% -7.8% in Jordanian Dinars increased by 15.3 percent and Balance Including Grants time deposits in foreign currencies increased by Surplus / Deficit -226 -417 10.9 percent. Demand deposits in Jordanian as percentage of GDP -2.8% -4.6% Dinars remained the most dynamic aggregates of Primary Balance -65 -210 the money supply with a 35 percent increase, as percentage of GDP -0.8% -2.3% while demand deposits in foreign currencies Grants 811 500 decreased by 2.3 percent. Money supply ratio to Source: Ministry of Finance and World Bank staff GDP increased to 136 percent from 129 percent a calculations. year earlier. The total debt stock of the public sector Deposits at the commercial banks continued to decreased by an equivalent of US$131 million rise along with the inflow of capital triggered in 2005. The ratio of the total debt to GDP by the soaring cost of oil, despite the low dropped from 91 percent in 2004 to 83 percent, interest rate spread compared to international and the ratio of the foreign debt decreased from markets. Resident deposits increased by 5 percent 65.5 percent to 55.5 percent. The foreign debt is since June 2005 and by 16.9 percent since end- now below the 60 percent ceiling established by the Government. In contrast, the share of domestic First/Second Quarter 2006 11 Hashemite Kingdom of Jordan Update 2004. The dollarization5 of resident deposits 2004. The Authorities also raised the nominal decreased to 26.9 percent in December 2005, interest rates by 335 bpt on the Three Months compared to 29.5 percent at end-2004. The Certificate of Deposits (CDs) and by 375 bpt on gradual decrease in the dollarization rate reflects the Six Months CDs, hence, managing to absorb the rise in the real interest rates on Jordanian part of the market liquidity. Consequently, the re- Dinar time deposits by 200 basis points (bpt) financing cost for the banks rose by 369 bpt in between December 2004 and December 2005. real terms, while the real interest rate on Three Nevertheless, the spread between the nominal Months CDs increased by 425 bpt, and on Six interest rate on the Jordanian Dinar-denominated Months CDs by 464 bpt. However, the upward Time Deposits and the three months Libor became pressures on the banks' real re-financing interest negative in 2005--at 0 bpt in December 2004, the rates have not been mirrored in the same spread reached a negative 100 bpt in December proportions on the lending interest rates to the 2005. Despite the low level of interest rates private sector. Large resources in the banking compared to the international market rates, sector for lending prevented interest rates from substantial financial inflows have continued increasing substantially, while lending to the throughout 2005. This is, in part, explained by the private sector expanded significantly. Among the large amount of liquidity available through factors explaining this outcome are the large expatriate workers/residents, who benefited from external inflows/increase in bank resources, and the sharp increase in oil prices, but usually have the optimism of private investors about the little access to the international markets and are country's outlook despite external shocks and the naturally inclined to transfer their funds to the regional environment. domestic banking sector. Box.1 Price Effect of Reduction in Oil Subsidies Lending to the private sector continued to increase, in line with the strong GDP growth The CPI of fuel and electricity increased by only 3.7 and the rise in banks' resources. Claims on the percent over the first eight months, but jumped by 19.4 private sector (resident) increased by 30 percent percent in the last four months. This price increase in 2005, compared to a 17 percent increase in contributed directly by 0.8 percentage points to the 2004. In value, this corresponds to an increase of difference in the total CPI between the two periods. JD1.8 billion, or 19.6 percent of GDP. The share The indirect effect of reduction in oil subsidies can also of these claims in the commercial banks' assets be roughly assessed through the evolution of the CPI, rose to 36 percent in December 2005 from 33 excluding the fuel and electricity items: the CPI percent in December 2004. The breakdown of excluding fuel and electricity increased by 3.2 percent lending by sector shows that lending to the during 2005, but by only 2.3 percent in the first eight agriculture, industry, construction, and trade months and by 4.8 percent in the last four months, sectors increased by 10.6 percent. Lending to the compared to the same period last year. This increase tourism sector remained stable reflecting the contributed by 2.3 percentage points to the difference difficulties encountered by this sector due to between the two periods, providing a proxy indirect building regional tension. Consumers and Stock effect of the partial removal of the oil subsidies on Market investors remained the most dynamic consumer prices. borrowers, with a 58 percent increase in the lending to these two categories during 2005. Claims on the public sector jumped by 18.5 Large external inflows, however, seem to be percent and deposits with the Central Bank limiting the effectiveness of the restrictive increased by 10.9 percent. interest rate policy. The availability of large resources in the banking sector is keeping the The Authorities followed a restrictive deposit rates at relatively low levels. Large monetary policy with a substantial impact on resources are also undermining the effects of an interest rates. The discount rate of the Central interest rate policy that is relevant only in an Bank is now 275 bpt higher than that of year-end environment with a moderate increase in resources and where banks depend on the Central Bank for their refinancing, which increase their 5Figures for end-2004 changed due to the adoption of a sensitivity to the re-discount rates. In the case of new definition of dollarization, which excludes Jordan, the availability of large resources in the currency in circulation. 12 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update banking sector is removing liquidity constraint on from a substantial and safe remuneration on a part banks, thus sheltering them from the effects of the of their assets, while competing with each other rise in the re-financing rates of the Central Bank. on the private lending market, which keeps the Also, the increase in the CD's rate is having a lending interest rates at a relatively low level. perverse effect with over-liquid banks benefiting Table 3. Real Interest Rate and GDP Inflation Dec-03 Dec-04 04/03 (bpt) Dec-05 05/04 (bpt) Central Bank Re-Discount Rate 0.38% -1.44% -182 2.25% 369 Certificates of Deposit - three months -0.01% -2.29% -228 1.96% 425 Certificates of Deposit - six months 0.04% -1.96% -200 2.68% 464 Treasury Bills - six months -0.06% -1.81% -175 2.30% 410 Treasury Bonds 2.42% 1.70% -72 4.48% 278 Average Interest Rates on Deposits Demand -1.58% -4.66% -308 -3.54% 112 Saving -1.21% -4.30% -309 -3.19% 110 Time 0.62% -2.62% -325 -0.61% 201 Average Interest Rates on Lending Overdrafts 7.17% 3.37% -380 4.90% 153 Loans and Advances 6.67% 2.21% -446 3.79% 157 Discounted Bills and Bonds 7.96% 3.51% -445 3.61% 10 Prime Rate Served to Best Clients 4.30% 0.70% -360 2.73% 203 GDP Deflator (period average) 2.11% 5.26% 4.16% Source: Central Bank of Jordan, Ministry of Planning and World Bank staff calculations. First/Second Quarter 2006 13 Hashemite Kingdom of Jordan Update AMMAN: USING A CITY DEVELOPMENT STRATEGY FRAMEWORK TO IMPROVE CITY SERVICES AND COMPETITIVENESS In 2004, the World Bank received a US$200,000 Development Plan for the period 2002-2005 with grant from the Cities Alliance to support the specific objectives and programs targeting a wide Greater Amman Municipality (GAM) in range of sectors, among which are institutional implementing its City Development Strategy development, including improvement of the (CDS). The specific focus of GAM's CDS is on system of local revenue collection and strengthening municipal management and management, and urban planning. After three governance, while upgrading its urban planning years of implementation, Amman's Development capacities, including adoption of a city-wide Plan revealed an urgent need to refine and further upgrading strategy for squatter settlements and detail two programs within the existing strategy, refugee camps. City officials see GAM's future namely the municipal management and success and competitiveness hinging on the city's governance program and the urban planning effectiveness, inclusiveness and responsiveness in and development program. planning and delivering services to all city residents, including the urban poor. What Is A City Development Strategy? Background A City Development Strategy (CDS) is a vehicle for building a Vision for a city or economic region, a As the Capital of the Hashemite Kingdom of Strategy for its implementation and an Jordan, Amman is home to more than two million Implementation Plan for its realization. A CDS is people, representing just under 40 percent of the built around the following elements: total population. Its rapid expansion in population · Assessment: A good CDS starts with a sound and area over the past decade, however, has understanding of the city's existing situation and placed extraordinary new pressures on the city to potential. Stakeholders would review and plan and deliver municipal services, particularly determine the comparative and competitive following the first Gulf War when there was an advantages of the city; values and preferences of immediate influx of some 300,000 refugees. In a its residents; relationship to global and domestic region marred by instability and conflict, Amman economies and physical and locational has become for many a safe haven and refuge, characteristics, among other factors. which, at the same time makes city planning and · Vision: Asks the question "Where do we want to management a particularly vexing challenge. be in 10 years time?" Should include broad participation to build a "shared vision" of the city, while being realistic and achievable. · Strategy: Focuses on results and accountability; should be realistic but challenging; clearly identifies institutional responsibilities, resource requirements and incentives for performance. · Implementation Plan: Assigns responsibilities, establishes a monitoring and assessment system; sets clear milestones and a realistic timeframe. Why Develop A CDS for Amman? Traditionally, the World Bank has focused on single sector urban infrastructure projects addressing urban water, wastewater, roads and other infrastructure needs in isolation from the broader urban context. Increasingly, however, the Bank has moved away from these "single sector" approaches and adopted a more integrated Development of the city of Amman follows a approach that is more responsive to city needs. guiding framework which was prepared as a 14 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update Partnering With Cities Alliance Development Institute (AUDI), Amman has made And The Arab Urban Development serious strides in thinking through and reshaping Institute its city vision and strategy to guide it over the coming years. Several reasons account for this shift in approach, among which are: (i) The Economic Role of Focusing On Municipal Cities. Cities play a major role in the national Management economy representing, in most cases, well over 50 percent of the contribution to GDP based on an Under the Municipal Management and Gover- existing manufacturing base and expanding nance theme of the CDS, GAM officials have service sectors--infrastructure services needed to recruited a Municipal Management Specialist, attract investment are thus key; (ii) Long-term with CA funding to carry out a broad stocktaking Investment Planning. Effective investment exercise aimed at assessing weaknesses, gaps, planning depends on identification of broad overlapping mandates and functions within the resource needs over a multiyear timeframe, municipality, with the aim of streamlining GAM's addressing a range of infrastructure service organizational structure, while realigning newly requirements requiring O&M budgeting that reorganized functional departments with defined needs to be addressed in an integrated and service delivery targets and standards. A commu- consolidated manner; (iii) The CDS Tool. In nications strategy for the city and measures to many ways, the CDS provides a tested approach enhance performance of GAM's "Citizen Services for integrated planning purposes and a set of tools Center" are also under preparation. that help guide cities in preparing their development strategies and investment plans. As such, cities have become more effective development partners and are less dependent on central government-designed investment programs; and (iv) Impact and Results. CDSs help establish a strategic framework for investments, reforms, and capacity building measures designed around a results orientation responsive to city residents and businesses. One particular area of weakness is GAM's existing array of Information and Communications Technology and management information systems (MIS). GAM has more than 15 legacy systems with different platforms and database engines, each working as a separate island with significant breakdowns in communications. In parallel with CA assistance, the World Bank has provided support in assessing There are over 96 countries globally that have system weaknesses and in mobilizing a GAM undertaken a CDS in one form or another with the team to map out business processes as a first step support of the Cities Alliance (CA), and Amman toward a major overhaul of GAM's MIS, was the second to do so in the Middle East. In the including a proposal for implementing a case of Amman, the CDS proved to be just the completely integrated enterprise system. approach and set of tools that city officials were looking for. With financial support from the CA Improving Urban Planning in the amount of US$200,000, technical support from World Bank consultants, and an effective The second component of the grant focuses on partnership established with the Arab Urban urban planning improvements. In addition to First/Second Quarter 2006 15 Hashemite Kingdom of Jordan Update advising on the approach to update its master- greater autonomy and authority is being granted to plan, the CA-funded Urban Planner is providing the Kingdom's newly defined regions as a means GAM with guidance regarding how it will of empowering communities to pursue local implement a participatory planning process, development, the World Bank and AUDI are paying particular attention to urgent urban working together in partnership with the Ministry upgrading needs. Strengthening land use planning, of Planning's Local Development Department, zoning and building regulations are intended to Ministry of Municipal Affairs and selected cities increase efficiency by reducing low density areas in setting up a Programmatic CDS Facility. This and minimizing urban sprawl, thus enabling the approach will not only support the Government's city to better accommodate and service the recent broader objective of decreasing regional influx of new city residents. disparities in access to services and economic opportunities, but would also help secondary Following the launch of the CDS process in 2004, cities to elaborate their strategies and a series of CDS workshops have taken place, implementation plans as a means of improving including one in February 2006 when the final their ability to plan and deliver municipal recommendations of the consultants were services. As with any other CDS initiative, this presented to over 400 participants for discussion. process would be driven by the cities themselves and participation of city residents through The workshop succeeded in promoting vibrant workshops and other consultative means will discussion and debate about city planning remain the hallmark of the approach. The activities, citizen participation and soliciting proposed facility would also underpin and provide feedback and ideas from city residents as to how a vital city to a central government link within the GAM can improve its services and responsiveness framework of the proposed Regional and Local to resident needs. Among the adopted Development Project (RLDP) which is being recommendations was the need to establish a prepared by the Government of Jordan with performance-based management system at GAM support from the World Bank and AFD. to improve performance (which is already recognized as a regional model for citizen Amman's Vision of the City's Future: Effective engagement through its city feedback and Urban Planning Seen As a Vital Ingredient complaint monitoring and resolution system). The workshop also confirmed the need to update urban City planners and residents alike agree that Amman's future competitiveness will depend greatly on how it planning guidelines and regulations and initiate a plans its future development. Using a participatory process of updating Amman's master plan. All of CDS process helped to elaborate a framework for these initiatives are geared toward increasing citizen participation and contributed in identifying participation and citizen engagement in shaping some key objectives and characteristics of the city in the city in which they live and work. the coming years: Improved public transport and integrated regional transport. Reduced and better managed traffic. Better housing opportunities for low income communities. Upgraded informal settlements integrated within the urban fabric. Clear, regulated and favorable environment for private sector investments. Conserved agricultural land. Preserved quantity and quality of water resources. Improved control over urban sprawl. Stronger identity and preservation of the city's The success of Amman's CDS process thus far cultural heritage. has prompted other cities in Jordan to seek World Increased green areas. Bank and Cities Alliance assistance in developing Increased public safety. their own city development strategies. In support of the Government's regional initiative in which 16 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update WORLD BANK'S FOUR-YEAR PROGRAM FOR JORDAN PRESENTED IN ITS COUNTRY ASSISTANCE STRATEGY On May 4th, 2006, the World Bank's Board of In juxtaposition to the gains, over the past two Executive Directors discussed the Country years, Jordan has experienced a double external Assistance Strategy (CAS) for Jordan--a four shock: (i) diminishing external grants; and (ii) year program to help Jordan meet its key doubling of the price of oil. These shocks are development challenges of reducing poverty and experienced by the population through increasing creating jobs while maintaining fiscal stability and energy prices and austerity measures dictated by development sustainability. sharp fiscal constraints which threaten public services and the robust economic growth rate This CAS differs from the previous CAS in that needed to maintain and improve public welfare. the Jordan context for reform has matured, a greater sense of urgency prevails (given the Despite the improved economic performance, regional volatility) and recent analytical (largely high unemployment, particularly among the in poverty, expenditure management and the young, and deep pockets of poverty persist. investment climate) and project work (largely Jordan's population growth is among the highest education) have enabled the World Bank Group to in the region and nearly 70 percent of the better focus on results and organize the agility population is under the age of 30. Looking needed to be responsive. forward, about 60,000 new jobs and continued strong growth of 7 percent plus would be needed Jordan's economy performed well over the past each year to avoid higher levels of unemployment five years with a growth rate of 5-7 percent, and poverty. Distribution of the gains is despite regional uncertainties and a poor resource geographically uneven. Poverty reduction and job base. This growth has been broad-based, creation remain Jordan's most important supported by exports and manufacturing challenges. expansion. Jordan has also performed well in terms of human development--education, health Sustaining gains, advancing reforms and and closing the gender gap in access to basic cushioning hardships for the vulnerable, while services. In governance, Jordan has outpaced most managing external shocks are the developmental countries in the region, though further challenges confronting the Jordanian economy in improvements are needed. the coming years. This requires carefully calibrated adjustments to the fiscal situation and Comprehensive structural reforms over the last maintenance of the pace of structural reform for decade have underpinned the good economic growth, including a radical upgrading of the performance. These reforms have helped improve quality of education, modernizing the public the environment for private investment, sector and modernizing institutions to support liberalized the trade regime, supported a robust private sector development. These efforts need to privatization program and initiated establishment be particularly focused on expanding the of modern regulatory and institutional framework opportunities and access of the poor and in some key areas, such as energy and water. In unemployed to share more fully in Jordan's the 1990s, Jordan ranked as one of the best growth, while strengthening safety nets and social reformers, not only in the region, but also protection measures. compared to other middle-income countries. This process of structural reforms has been To meet these challenges, Jordan has recently accompanied by a painful, but effective, fiscal developed a National Agenda--a strategic plan consolidation that has steadily reduced that covers the main development areas, and government debt from above 200 percent of GDP establishes objectives and broad strategies in an in the early 1990s, to around 82.2 percent at year- integrated way. Its main objective is to increase end 2005. The past three CASs have focused on the welfare for Jordanians and to reduce poverty these reforms. and create jobs through sustained and broadly- First/Second Quarter 2006 17 Hashemite Kingdom of Jordan Update shared growth, while achieving fiscal Development Policy Lending (DPL) will be sustainability and external balance. considered flexibly in any of the four clusters, or could be designed across the four clusters, and be This Country Assistance Strategy, in support of strongly linked to the implementation of the the National Agenda objectives, aims at tangible National Agenda to underscore the ownership of progress in poverty reduction and job creation, the policy program supported by Bank policy while assisting the country in its transition lending. Investment lending will focus on through the medium-term economic shocks. implementing institutional reforms, leveraging other donors' resources and linkages to analytical The Bank program's under the CAS is organized and technical assistance activities. Partial risk into four cross-sectoral clusters: guarantees will be considered on request, provided the overall framework for Public Private Strengthening the investment environment for Partnership is satisfactorily enhanced. a skill-intensive and knowledge-based economy; IFC's strategy will seek new investment Supporting local development through opportunities in the private sector to increase its increased access to services and economic portfolio, provide strategic and technical opportunities; assistance for private sector development, and Reforming social protection and expanding carry on advisory services for private participation inclusion; and in infrastructure and privatization. Restructuring public expenditures and supporting public sector reform. IFC and IBRD work closely on privatization, Public-Private Partnerships and enhancing the The first two clusters tackle issues related to enabling environment for the private sector. private investment and job creation, respectively Going forward, the collaboration will include: (i) at the macro level and at the local level. The third the design of IBRD's Private Sector Development cluster deals with programs to support those who (PSD) diagnostic assessments in order to identify cannot by themselves achieve sufficient welfare and implement IFC's technical assistance through market mechanisms. The last cluster is activities; (ii) joint identification of Private focused on supporting improvements in the Participation in infrastructure opportunities, and government budget and the administration as the (iii) identification of opportunities for providing main tools of public policy. Important cross- sub-national financing through the Municipal cutting issues, such as gender and the Fund. The new IFC field office in Amman has environment, will be mainstreamed into the advanced collaborative efforts. The PSD clusters. Various sectoral concerns, such as water consultations for this CAS were jointly prepared and energy, will be integrated in these and led by the two institutions. programmatic clusters through a thematic approach. While many large donors are present in Jordan, the World Bank Group's comparative advantage The CAS is designed to provide flexibility for is in providing integrated support for complex interventions. It is not expected that all activities institutional reforms, coupled with its ability to contemplated in the program will be undertaken. provide critical financial support if needed. As in Rather, the Bank will respond to Jordan's main many middle-income countries, the Bank's challenges flexibly through the strategic thrust of advantages can only be realized through matching the clusters. Thus, the CAS mix among policy the Bank's counterpart's sophistication and lending, investment lending and analytical challenges with a more focused program, higher services reflects the emerging needs with respect quality services, more flexibility and a better to short-term financial challenges and longer-term understanding of its mission in the country. institutional developments, with a lending ceiling of up to US$540 million over four years. The total The full report is available on-line at : CAS envelope for IBRD lending is US$440 www.worldbank.org/jo million in the base case. 18 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update BANK GROUP OPERATIONS As discussed above, to support Jordan's recently IBRD Ongoing Projects developed National Agenda, the Bank's lending program over the next four years will revolve The current portfolio in Jordan consists of six around the following four cross-sectoral clusters: projects for a total commitment amount of US$268 million, of which US$123 million has · strengthening the investment environment for a been disbursed to-date. skill-intensive and knowledge-based economy; · supporting local development through increased Amman Water and Sanitation Management access to services and economic opportunities; Project (AWSMP). (US$55 million.) The Project · reforming social protection and expanding aims at: (i) improving the efficiency, inclusion; and management, operation and delivery of water and · restructuring public expenditures and supporting wastewater services for the Amman Service Area; public sector reform. and (ii) laying the groundwork for the sustainable involvement of the private sector in the overall IBRD Projects In The Pipeline management of these services. Regional and Local Development Project Higher Education Development Project (US$35 million). The objectives of the Project are (HEDP). (US$34.7 million.) The objective of the to: (i) strengthen the intergovernmental finance Project is to initiate improvements in the quality, system; (ii) upgrade financial management, relevance and efficiency of Jordan's higher technical and administrative capacities at the local education, and to support Jordan's program to level; and (iii) increase the coverage and quality reform sector governance. of municipal service provision, with particular emphasis on under-served areas. Horticultural Exports Promotion Learning and Innovation Loan (US$5 million). The Loan Cultural Heritage, Tourism and Urban will initiate the process of establishing Jordan as a Development (US$35 million). The objective of reliable supplier of non-traditional, high-value the Project is to develop regionally balanced export crops to niche markets in the European cultural tourism through regeneration of historic Union and Gulf countries. urban neighborhoods and creation of cohesive and culturally rich urban attraction poles. Education Reform for the Knowledge Economy (US$120 million). The Project supports systemic educational reform in Jordan that extends from Early Childhood Education through Loan Undisbursed Approval Amount Amount Closing Active Portfolio Date US$ M US$ M Primary Sector Date Amman Water and Sanitation Management Mar-99 55.0 2.2 Water Supply/Sanitation Jan-07 Higher Education Development Feb-00 34.7 9.0 Education Jun-07 Horticultural Exports Promotion Agriculture Markets and Learning and Innovation Jun-02 5.0 2.8 Trade Dec-06 Education Reform for Knowledge Economy May-03 120.0 80.4 Education Dec-08 Amman Development Corridor Jun-04 38.0 35.9 Transport Jun-09 Public Sector Capacity Building Mar-05 15.0 14.4 Public Sector Mar-09 Total 267.7 144.7 First/Second Quarter 2006 19 Hashemite Kingdom of Jordan Update Secondary Education. The Project will contribute Government's efforts to integrate climate change to the development of human capital with the concerns in its economic development strategy by skills and competencies required by the removing the barriers to promoting the Knowledge Economy. development of Jordan's renewable energy resources (wind, solar and geothermal), and in Amman Development Corridor (US$30 enhancing the efficiency of energy use in line with million). The Project aims at: (i) assisting Jordan's the policy to meet the energy needs of Jordan in growth strategy by providing needed an economic and environmentally sustainable infrastructure to support Amman's role as a manner; and (ii) support a feasibility study for the regional center for trade and services; and future development of a commercial size wind (ii) helping ensure that Jordan's road assets are energy project with private sector involvement. managed in a cost-effective and sustainable manner. Conservation of Medicinal/Herbal Plants Project (US$5 million). The Project supports the Public Sector Capacity Building Project conservation, management and sustainable (US$15 million). The objective of the Project is to utilization of medicinal and herbal plants in support the ongoing implementation of the Jordan through ensuring effective in-situ Government's public sector reform strategy by protection of threatened habitats and ecosystems ensuring that the required institutional and ex-situ sustainable use. The main components infrastructure is in place and functioning. It also are: (i) institutional strengthening; (ii) pilot sites seeks to support an important set of cross-cutting conservation; (iii) public awareness and reforms in areas ranging from policy coordination education; and (iv) income generation activities. to improved financial and human resource practices. Ozone Depleting Substances (ODS) Phaseout II (US$5 million). The overall objective Ongoing Grants is to assist Jordan in phasing out the use of ODS within its territory through, inter alia: (i) the o Institutional Development Fund Grant to introduction of appropriate policy measures; (ii) Support the Development of a Monitoring and the institutional strengthening of responsible Evaluation System (US$395,000). The Grant is governmental entities; and (iii) the expected to contribute to the design and implementation of specific cost-effective priority implementation of a sound monitoring and investments to reduce consumption of Ozone evaluation framework for the Government to: Depleting Substances in the manufacturing and (i) adequately monitor input requirements of large servicing sectors. scale reform projects; and (ii) follow implementation of large-scale, multi-sectoral Promotion of a Wind Power Market reform projects through various activities. (US$350,000 Global Environment Facility). The objective of the Project is to remove barriers to o Integrated Ecosystems/Rift Valley Grant wind farm development, including lack of a legal (US$350,000). The objective of the Grant is to and regulatory framework, lack of institutional assist in the preparation of the Integrated capacity and inadequate information on wind Ecosystem Management in the Jordan Rift Valley resources, with the reforms clearing the way for a Project, whose main objective is to secure the private entity to build a 60MW wind farm. ecological integrity of the Jordan Rift Valley as a globally important ecological corridor and Privatization Technical Assistance migratory flyway, through a combination of site (US$9.5 million). The objectives of the Grant protection and management, nature-based socio- are to strengthen the investment climate and job economic development and land use planning. creation, leading to new investments and improve effectiveness and efficiency of the delivery of o Sustainable Development of Renewable public services, and creation of fiscal space. Energy Resources and Promotion of Energy Efficiency Grant (US$1 million). The objectives Further information on ongoing and pipeline of the Grant are to: (i) contribute to the projects can be found at: http://www4.worldbank.org/sprojects/ 20 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update IFC's Activities in Jordan effective implementation. With this wider range of products that IFC can offer, a coherent country IFC has historically experienced solid demand for strategy has been formulated to utilize new financing from successful private sector opportunities. companies in Jordan. In recent years, however, there has been a decline in the portfolio due to IFC's total committed portfolio in Jordan stands at competition (cheaper alternative financing) and US$59 million in 11 companies. In FY05, IFC excess liquidity in the market--which has resulted committed US$25 million, and in FY06, the in prepayments and cancellations. In 2005, IFC expected commitment is US$18 million. Portfolio established a new field office in Amman to performance has been generally good. Extensive accelerate its investments and technical assistance efforts have been devoted, however, to improve business development activities, enhance the the status of three projects in the manufacturing relationship with the private sector and the and agribusiness sectors. Recovery and government and improve coordination and restructuring options are being considered. collaboration with IBRD and the donor community. The collaboration with IBRD has been significantly increased. It has involved working IFC's strategy in Jordan places a high priority on closely on areas such as privatization, Public- seeking new investment opportunities in the Private Partnerships, and enhancing the enabling following areas: (i) promoting export-oriented and environment for the private sector. Going forward, foreign exchange generating investments, the collaboration will include: (i) participation in particularly in manufacturing and services; (ii) the design of IBRD's PSD and financial sector encouraging private participation in infrastructure; diagnostic assessments leading to the (iii) attracting foreign private investment, identification and implementation of IFC's TA particularly to the Aqaba Special Economic Zone activities; (ii) joint identification of Private (ASEZA); (iv) developing the financial sector Participation in Infrastructure opportunities; and through promoting housing finance, microfinance (iii) exploration of the possibility for providing and trade finance; and (v) contributing to sub-national financing through the Municipal improving the private provision of health and Fund. The new IFC field presence has facilitated education, and support for the tourism and ICT better coordination with IBRD on a systematic sectors. In addition, as a result of the and continuous basis. The PSD consultations for establishment of IFC's regional Technical this CAS were jointly prepared and led by the two Assistance (TA) Facility--the Private Enterprise institutions Partnership (PEP-MENA)--TA activities in Jordan have significantly increased, covering a wide range of areas that contribute to private sector development. These activities are being Further information on IFC ongoing and pipeline strategically selected and positioned to fill gaps, projects can be found at: complement what other organizations and donors http://www.ifc.org/projects are doing, respond to client demands, and ensure First/Second Quarter 2006 21 Hashemite Kingdom of Jordan Update Bank Lending To Jordan ­ Fact Sheet Sectoral Distribution by Value Jordan joined the World Bank in 1952, and received its first IDA credit in 1961. Over the Urban past 42 years, a total of 86 credits, loans, and Development Agriculture 5% grants have been granted to Jordan for a total 7% amount of US$2,228 million. Jordan is also a Other Public Sector Governance member of IFC, ICSID, and MIGA. 11% 18% IDA US$86 million (15 Credits) IBRD: US$2,142 million (66 Loans) Transportation Of Which: 7% Investments: US$1,358 million Finance Development 2% Policy Loans: US$870 million (8 Projects) Water Supply Disbursements: US$2,079 million & Santn 10% Repaid: US$1,107 million Obligation: US$953 million Education 22% Electric Pwr & Engy Hlth, Nutn & 13% Popultn 4% Net Flows and Net Transfers Disbursements Projects Approved by Fiscal Year 180 120 160 Fiscal # Of US$ 100 Year Projects M. 80 140 1994 2 100.0 60 1995 3 146.6 120 40 1996 2 120.0 n ionill 20 illio 100 1997 2 140.0 m m 1998 3 67.0 $ 0 $SU 80 1999 3 210.0 US -20 60 2000 1 34.7 -40 2001 1 120.0 -60 40 2002 1 5.0 -80 20 2003 2 240.0 -100 2004 1 38.0 2000 2001 2002 2003 2004 2005 2006 0 2005 1 15.0 Fiscal Year 2001 2002 2003 2004 2005 2006 Total 22 1236.3 Net Flows Net Transfers Fiscal Year 22 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update NEWS, RECENT AND UPCOMING ACTIVITIES The World Bank's Webcasting Service B-SPAN is the web casting in the world where the Internet is accessible. By service of the World Bank Group, bringing World Bank events to the computer presenting seminars, workshops screen, B-SPAN is an invaluable tool for the and conferences on a variety of World Bank's missions of promoting transparency sustainable development and and sharing knowledge. poverty reduction issues via streaming video. All B-SPAN events appear in their original format--videos are not edited for content. B- The World Bank and its partners play host to SPAN also provides indexing for quick access to numerous seminars, workshops and conferences specific speakers, display an accompanying where the world's leading development experts summary to assist in watching the video, archive and practitioners discuss the latest developments videos on the B-SPAN Web site, and inform in a range of sectors, including agriculture, World Bank officials of new releases which might sustainable development, finance, poverty be of interest to them. reduction, health, education, governance, environment, energy, infrastructure, rural and B-SPAN recently introduced "the Best of B- urban development, and more. Through B-SPAN, SPAN pod cast series" to provide an introduction the discussions, debates, and key points of these to the complicated problems of development, with events can be preserved and made available to a each episode focusing on a new topic. worldwide audience. B-SPAN web casts are free to view. World Bank staff, academics, students, researchers, journalists, For further information, please visit: NGO representatives, and members of the public- www.worldbank.org/bspan at-large can virtually attend events from anywhere . 2006 Annual Meetings-Information for Civil Society Organizations In 2006, the Annual Meetings and related events Representatives from established CSOs that focus will be held in Singapore from September 13th- on development issues and other issues relevant to 20th. the work of the World Bank and the IMF, and have a track record in these areas, are encouraged All Civil Society Organizations (CSO) to apply for accreditation. representatives who wish to participate in the 2006 Annual Meetings will need to obtain formal Accredited CSOs are responsible for obtaining a accreditation. The accreditation system is fully visa, if necessary, to enter Singapore. web-based. As in previous years, the Civil Society Teams at For more information, please contact: the Bank and IMF will organize a Civil Society civilsociety@worldbank.org Forum (the agenda will be available in July 2006) for accredited CSOs during the 2006 Annual or consult: Meetings. www.worldbank.org/civilsociety First/Second Quarter 2006 23 Hashemite Kingdom of Jordan Update Online Media Briefing Center The Online Media Briefing Center (OMBC) is a their interests and the media outlets where their password-protected site for working journalists work appears. The site offers advance access to only. Most information in the OMBC is released World Bank information and opportunities to to the public soon after it is provided to the media. submit questions through online press Non-journalists who would like to be informed conferences. when new World Bank information is released are invited to subscribe to one or more of the World Bank's free e-mail newsletters. 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It is supported by the society, government officials, and, in general, the WBI's Multimedia Center and the Bank's broad public interested in poverty reduction. Information Solutions Group (ISG). All of the Poverty and Growth Blog authors are The blog aims to share knowledge and improve members of the World Bank Institute's Poverty common understanding of the challenges of and Growth Program (PGP). Occasionally, guest reducing poverty and accelerating growth. The bloggers from outside the PGP are invited to Bank is looking forward to an open, on-going comment on specific topics of their expertise. In dialogue with anyone interested in Poverty and all cases their posts are their own, and do not Growth issues. To facilitate this process, the blog necessarily reflect the views and opinions of the tries to bring together all aspects of poverty, and World Bank Group, its Board of Directors, or the growth: knowledge, news, resources, tools, ideas governments they represent. and commentary on issues relating to the design, implementation, monitoring, and evaluation of poverty reduction policies and strategies. For more information, please visit: http://pgpblog.worldbank.org/ 24 First/Second Quarter 2006 Hashemite Kingdom of Jordan Update RECENT WORLD BANK PUBLICATIONS MENA Publications school enrollment. Since then, as a result of decades of conflict, sanctions, and Morocco--Fostering Productive Diversifica- underinvestment, living conditions have declined. tion to Higher Growth and Employment: Country Economic Memorandum (Report No. Recent Publications on Jordan: 32948). This Country Economic Memorandum (CEM) for Morocco focuses on the outlook for Jordan--Country Assistance Strategy growth and employment and seeks to provide a (Report No. 35665-JO). clear understanding of the main constraints to Jordan--Supporting Stable Development in growth, the potential policy adjustments that are a Challenging Region--A Joint World Bank- needed to remove them, and the degree of Islamic Development Bank Evaluation activism these policies require from the (ISBN: 0-8213-5782-4 SKU: 15782). Government in order to change course. Through Strategic Options for Energy Sector separate, but integrated sections, the Report Development (Report No. 32281). addresses five main questions: What can be Jordan--Poverty Assessment (Report No. learned from past growth performance, and what 33802). remains unexplained? What are the main Seawater and Brackish Water Desalination binding--actual and potential--constraints to in the Middle East, North Africa and Central growth? How can Morocco improve its business Asia--A Review of Key Issues and environment while addressing productive Experience in Six Countries (Report No. diversification? What are the key elements of a 33515). trade strategy that would eliminate the anti-export bias and contribute to exports diversification, Project Appraisal Documents for ongoing enhanced competitiveness, and growth? What key projects, Implementation Completion Reports for elements of an employment strategy would closed projects, and Project Information complement a growth strategy? Proposals for a new growth strategy include a set of measures that Documents for projects under preparation are also would further encourage productive available on-line. diversification and enhanced competitiveness. Also Available: Rebuilding Iraq: Economic Reform and Transition (Report No. 35141). Iraqi Gender and Development in the Middle East reconstruction is stalled by the lack of security. and North Africa: Women in the Public Oil production and exports have yet to reach pre- Sphere (ISBN: 0-8213-5676-3 SKU: 15676). war levels, and non-oil sectors remain sluggish. Unlocking the Employment Potential in the High unemployment, poverty, and weak social Middle East and North Africa: Toward a protection systems dominate public concerns and New Social Contract (ISBN: 0-8213-5678-X threaten the fragile democracy. Violence and SKU: 15678). crime, which have increased substantially since Better Governance for Development in the late 2003, hamper reconstruction and undermine Middle East and North Africa (ISBN: 0- governance efforts. Increased violence also limits 8213-5635-6 SKU: 15635). people's access to much-needed public services Trade, Investment, and Development in the and thus stifles progress in human development, Middle East and North Africa: Engaging particularly for the growing number of the poor with the World (ISBN: 0-8213-5574-0 SKU: and the vulnerable. Thirty years ago, Iraq led the 15574). Middle East and North Africa region in social development indicators, such as maternal and child mortality, nutrition, literacy, and secondary First/Second Quarter 2006 25 Hashemite Kingdom of Jordan Update Bank Publications some countries, and that the benefits of this progress are reaching poor families. World Development Indicators 2006 (ISBN: 0- 8213-6470-7 SKU: 16470). This statistical New Industries from New Places: The reference allows consulting over 800 indicators Emergence of the Hardware and Software for some 150 economies and 14 country groups in Industries in China and India (ISBN: 0-8213- more than 80 tables. It provides a current 6478-2 SKU: 16478). This book compares the overview of the most recent data available, as well growth performance of private enterprise in the IT as important regional data and income group manufacturing and IT services sectors in China analysis in six thematic chapters: World View, and India, and evaluates explanations for the People, Environment, Economy, States and growth performance of each sector in each Markets, and Global Links. The CD-ROM country. It compares the economic context and the editions contain 43 years of time series data, business environment for private enterprise in covering 1960 to 2004, and offers mapping, China and India, and considers how far charting, and data export formats. differences in economic policies or the business environment explain the observed differences in Global Development Finance 2006: The growth performance. It also draws conclusion for Development Potential of Surging Capital future economic policies and business strategies. Flows (ISBN: 0-8213-5990-8 SKU: 15990). International private capital flows to developing Little Book of External Debt 2006 (ISBN: 0- countries reached a record net level of US$491 8213-6605-X SKU: 16605). This first edition of billion in 2005. This surge in private capital flows The Little Book on External Debt provides a quick offers national and international policy-makers a reference for users interested in external debt major opportunity to bolster development efforts stocks and flows, major economic aggregates, key if they can successfully meet three challenges. debt ratios, and the currency composition of long- The first is to ensure that more countries enhance term debt for all countries reporting through the their access to developmentally beneficial Debtor Reporting system. international capital through improvements in their macroeconomic performance, investment climate, and use of aid. The second is to avoid World Bank documents can be accessed at the sudden capital flow reversals by redressing global World Bank Public Information Center located imbalances. And the third is to ensure that at: development finance is managed judiciously to Jordan Public Information Center meet the development goals of recipient countries Department of Public Libraries while promoting greater engagement with global Greater Amman Municipality financial markets. These are the themes and Downtown, Next to the Roman Amphitheater concerns of this year's edition of Global Phone: 962-6-4627718/9 Development Finance. To order by phone or fax: Global Monitoring Report 2006: Strengthening Phone: 1-800-645-7247 or 703-661-1580; Mutual Accountability--Aid, Trade, and Fax 703-661-1501 Governance (ISBN: 0-8213-6477-4 SKU:16477). To order on-line: This third edition of the Global Monitoring http://publications.worldbank.org/ecommerce/ Report examines the commitments and actions of E-mail: books@worldbank.org donors, international financial institutions, and Research and working papers are also developing countries to implement the available in electronic format free-of-charge at: Millennium Declaration, signed by 189 countries http://econ.worldbank.org/ in 2000. Many countries are off track to meet the To access the World Bank e-Library, an online, Millennium Development Goals, particularly in fully cross-searchable portal of over 3,000 Africa and South Asia, but new evidence is World Bank documents, please visit: emerging that higher-quality aid and a better www.worldbank.org/elibrary policy environment are accelerating progress in 26 First/Second Quarter 2006