OFFICIAL
DOCUMENTS
PRIME MINISTRY
Mr. David Malpass
President of the World Bank Group
The World Bank
Washington D.C., USA
Subject: Letter of Development Policy for the Second Equitable Growth and Job Creation
Programmatic Development Policy Financing
Dear Mr. Malpass,
1. Since taking office in June 2018, the Government of Jordan has expedited the economic revival process
with the aim to stimulate growth and create jobs. In November 2018, we launched our two-year Work
Plan for 2019-2020 'Road to Renaissance' that is citizen-centric responding to their needs and concerns.
The two-year Work Plan is guided by three main pillars; State of Law; State of Solidarity and State of
Productivity.
2. In close collaboration with the World Bank and our development partners, we strengthened and
deepened the Five-Year Growth Matrix that started in early 2018. In the matrix, we prioritized and
sequenced a set of important horizontal and vertical policy reforms critical to inclusive and sustainable
growth as well as job creation. Several critical reforms were already completed while others are under
implementation. In parallel, we are continuing with fiscal consolidation supported by our ongoing
program with the IMF, Extended Fund Facility (EFF), which comes to an end in early 2020.
3. Moving forward, we are committed to fiscal and macroeconomic stability by continuing a gradual and
sustainable deficit reduction strategy and controlling fiscal risks, including those posed by the energy
and other public utility sectors. We are also committed to continue policy reforms that will stimulate
demand growth, primarily through attracting foreign investment and promoting exports. To aid local
businesses, we commit ourselves to continued investment and doing business reforms that will yield
efficiency and lower costs to doing business. Most importantly, our aim is to continue reforms that will
improve the jobs outcomes of Jordan's increasingly better educated female and youthful labor force. We
also reinforce our commitment to low-carbon and climate resilient growth.
4. Moreover, for those that cannot yet fully benefit from the economic prosperity we aim to further
improve and expand our social protection system. We are also in the process of launching a new Social
Protection Strategy (2019-2025) focusing on three main pillars: better work; social assistance; and
welfare and social protection services.
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Implementation Arrangements
5. To build on what has been achieved to date and to keep the reform commitments the Government has
already strengthened the implementation arrangements in place to deliver and monitor progress made on
its reform agenda. This was done by prioritizing and focusing on reforms that have will have a
transformational impact on economic growth and job creation; maintaining tight management; and
explaining the purpose of proposed reforms to ensure their broad acceptance. On the latter, we are
strengthening outreach and communication of reforms and those that they are being rolled out and as the
next phase of reforms is being designed. In this context, we will also need to sustain our collaboration
with donors to pace adjustment reforms with the needed adjustment support.
6. The Second Equitable Growth and Job Creation DPF-2 supports the reform agenda initiated under DPF-
I and adds key strategic reforms (such as FDI liberalization, public procurement reform, and further
strengthening earlier PPP reforms). The DPF-2 aims to support: (i) reducing business costs and
improving market accessibility; (ii) creating more flexible and integrated labor markets and providing
better and more efficient social assistance; and (iii) improving fiscal sustainability and taking critical
actions in the energy sector.
7. Regarding the implementation of the reforms and policy measures tied to the second tranche conditions
of this loan, the Council of Ministers' decisions were already obtained committing the Government to
their implementation, technical assistance is on the ground, and consultations with stakeholders have
already started. The Council of Ministers decisions include:
* Energy: Cabinet adopted a bold Roadmap for Financial Sustainability of the Electricity Sector early
April 2019. The Roadmap aims to optimize the legacy debt burden of the National Electric Power
Company (NEPCO), strengthen operational performance, minimize working capital needs, as well as
address the increasing cost structure of electricity generation. It also includes quarterly performance
milestones in each of the policy reform area as well as other decision areas.
* Targeting of energy support benefits to help protect poor consumers: As part of the Roadmap, the
Government will improve and expand targeting of energy support benefits to help protect poor and
vulnerable consumers.
* Public Private Partnership: Introducing key amendments to the PPP Law, as well as to adopt a PIM-
PPP Framework Policy Paper currently being prepared with support of the World Bank that outlines
the rationale, policy changes and implementation arrangements of the revised law. The Government
has committed to a timely preparation and submission of a new PPP Law to Parliament as conditions
for the second tranche release. The Policy paper is complemented by a first year PIM-PPP
Implementation Plan that sets out the milestone actions required to operationalize the PIM-PPP
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Governance Framework and the amended PPP Law. The Implementation Plan includes the
preparation and approval of the regulations, key institution-building steps, establishment of a Project
Pipeline Development Fund, and activation of pipeline activities.
Investor Grievance Management Mechanism: The grievance management system would help ensure
that the Government responds to investor's complaints in a suitable and timely manner and in
accordance with the country's international investment agreements and domestic laws and
regulations. The Government will enable a set of policy, regulatory instruments (bylaws and/or
instructions) procedures and systems for an investor grievance management mechanism to operate
and empower the Jordan Investment Commission to identify, track, manage and solve grievances
arising between investors and public agencies within specified time periods.
Poliev Priorities
I. Fiscal Consolidation, Debt Management, Management of PPPs and Fiscal Risks
Fiscal Consolidation
8. The Government remains committed to a gradual and steady fiscal consolidation path. The fiscal
program for 2019 is envisaging an annual fiscal adjustment of 1.5 percent of GDP and reflects Jordan's
commitment to resume deficit reduction and a path toward stabilizing and reducing Jordan's public
debt. Despite the challenging social conditions, the Government passed the new Income Tax Law in
December 2018 with a view to broaden the tax base and support fiscal adjustment goals. Overall, Jordan
has shown its commitment to the goals of IMF-EFF Program and met all end-December 2018
performance criteria on fiscal areas. The Government intends to stay the course on the IMF-EFF
program and has obtained a seven-month extension from the current closing date of August 2019. The
Government also plans to start discussing soon a new follow-up program with the IMF.
9. Looking forward, we will not only strengthen implementation of government budget to meet our
projected revenue and expenditure targets but will also monitor it tightly to reduce the fiscal deficit and
arrears of key public agencies. We will also tightly manage fiscal risks. In particular, the energy sector
poses fiscal risks which we are committed to contain. The risks emanate from the higher interest costs
and the rising costs of the energy mix.
10. To this end, we recognize the critical need to restore NEPCO's operational balance and stabilize state-
owned water sector companies' overall deficit. Moreover, the Government is keen to halt the
accumulation of fuel, health, and water-sector arrears and to clear the legacy stock of energy arrears by
end-2021. Claims will be monitored while further accumulation of arrears will be prevented by
enforcing that Government Units will pay for their arrears from their own budgets, in line with the
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Budget Law. These measures will help to reduce the combined public sector deficit to 2.6 percent of
GDP in 2019 and turn it into a surplus by 2022.
I1. On the expenditure side, further rationalization efforts are planned while strengthening the targeting for
social assistance. In the medium term and building on measures undertaken in previous years,
expenditure control includes the rationalization of non-priority current spending and a containment of
the public sector size, including a limitation of the public-sector wage bill growth at around 1.5 percent.
Expenditure policy priorities will utilize freed up fiscal space to focus on social assistance. The
Government is planning to strengthen the social safety net in Jordan by doubling the coverage of the
National Aid Fund (NAF)'s cash transfer program starting in 2019. Additional reforms are designed to
enhance the cost-effectiveness of social safety net programs through the digitization of NAF payments
and the improved targeting of existing programs.
12. Public finances in the coming years will be supported by the 2018 income tax reforms. The new Income
Tax Law reduced the effective exemption thresholds of personal income taxes and introduced more
progressive tax rates. Corporate income tax collection will benefit from the introduction of surtax on
corporate profits for the non-manufacturing sector and the removal of arbitrage opportunities, by
unifying the statutory tax rate for the manufacturing and commercial sector. Moreover, the Law is
expanding the corporate tax base by taxing large agricultural companies and corporate income generated
on activities within free zones. Further the tax bill is implementing various additional revenue
initiatives, among others the introduction of an annual minimum corporate tax of JD500 for registered
partnerships and limited partnerships.
13. The Income Tax Law will be supported by tax administration measures, which will enforce compliance
and combat tax evasion. We are taking a series of measures to safeguard domestic tax revenue
mobilization in 2019, further to the decline in 2018, and the need for robust and timely implementation
of the revised income tax law. The Pay as You Earn (PAYE) compliance system for large taxpayers
will be strengthened, by enhanced reporting requirements and with access to third party information.
Taxpayer registration will be improved by linking the issuance of a business license to the issuance of a
taxpayer identification number. The tax compliance among self-employed persons will be underpinned,
by matching in an online system the Government records of licensed professionals and businesses
against the tax authorities' registrations. Penalties for delays in compliance and tax evasion were
strengthened across tax sources.
Debt Management
14. The Government endorsed an updated Debt Management Strategy for 2019-2023 for public and
publicly guaranteed debt, both domestic and external, in preparation for DPF-2. The Strategy includes
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quantitative targets for interest rate risk, refinancing risk, and foreign exchange risk. A risk assessment
framework for government guarantees has been developed and implemented. While fiscal policies will
be the main driver of debt reduction, the Debt Management Strategy sets the goals to manage and
contain the debt: (i) increase external share of debt to a maximum of 51.8 percent of GDP; (ii) extend
the average maturity of domestic debt by issuing debt instrument with long term maturity (3, 5, 7, 10
and 15 years) taking market conditions into consideration; (iii) decrease the share of debt maturing
within one year; (iv) issue Islamic Sukuk to diversify the financing sources and expand the investor base
in government debt securities; and (v) develop new policies for issuing guarantees.
15. To implement this Strategy, following the renewed momentum gained by the London Initiative 2019,
we worked with our development partners, including the IMF and the World Bank, to increase the
degree of concessionality-and grant shares-of future financing and to stretch the maturity. This
approach will help us better manage the repayment of US$3.25 billion in Eurobonds due in the years
2019, 2020, and 2022.
16. As part of the talks with our development partners, we are paying attention to the energy sector debt,
which reached US$7.46 billion or about 18 percent of GDP in 2018. About US$3 billion of this debt is
serviced by NEPCO with guarantees from the Central Government and the rest is serviced by the
Central Government.
17. We made concentrated outreach to the donor community in preparation and following the London
Conference seeking support for implementation of a comprehensive Debt Optimization Plan for
managing NEPCO legacy debt. The plan is in line with the Roadmap on Financial Sustainability of the
Electricity Sector approved in April 2019. We plan to leverage commercial as well as developmental
funds to replace expensive commercial debt with long-term blended finance to ensure a smooth debt
service profile, in exchange for critical reform efforts that will assure the financial sustainability of the
energy sector.
Public Investment Management
18. Given Jordan's limited fiscal space, we are committed to continue ensuring that our public investment
spending is well assessed and efficient to promote growth, while minimizing future risks to the budget.
Measures to strengthen public financial management will improve the management of fiscal risks and
the monitoring of the Government's underlying fiscal position. We adopted in June 2016 a decision
establishing a central Public Investment Management (PIM) Unit at the Ministry of Planning and
International Cooperation (MOPIC) along with an action plan. As part of DPL-1, we adopted a
Governance Framework for PIM/PPP decision making, recognizing that but PIM and PPP use scarce
public resources to deliver public goods. As next steps and in close cooperation with the World Bank,
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IFC, USAID and IMF, we are: (i) establishing a Central PIM Unit at MOPIC; (ii) staffing it with
selected PIM-PPP-trained government officials; and (iii) plan to begin managing all investments
according to standards set by the new PIM/PPP framework by end 2019. We also plan to develop a
National Register of Investment Projects (NRIP) for PIP and PPP projects and make it fully operational
for all new projects to be selected through appropriate methodologies and selection criteria for the 2021
Budget Law. This Governance Framework is similarly complemented by the PIM-PPP implementation
plan referenced previously.
Public Private Partnerships
19. Following assistance from the IMF Fiscal Affairs Department (May 2017), an IMF conducted Public
Investment Management Assessment (PIMA, February 2018) and continuous World Bank technical
assistance on PIM and PPPs, the Government is taking accelerated legislative action which we view as a
critical step to ensuring large and small contracts that involve the public sector are contracted
transparently and based on objective criteria, with no exceptions. The Council of Ministers recently
approved submitting a revised PPP Law to Parliament, with key provisions including: (i) a PPP
decision-making process embedded in public investment; (ii) a PPP Unit linked to the Prime Minister;
(iii) eliminating exemptions under law (previously provided to projects in the water and energy sectors);
(iv) functional fiscal commitments and contingent liabilities control; and (v) creation of a Project
Pipeline Development Fund.
20. Furthermore, the Council of Ministers adopted a decision in January 2019 authorizing the Ministry of
Information and Communications Technology to enter into agreements with private sector to lease
excess capacity of the national broadband network, based on a PPP model. Moving forward, we are
taking necessary steps to further strengthen the PPP infrastructure and culture as well as eliminating any
bottlenecks to increase investment in public infrastructure.
21. In terms of next steps, the Government commits to a timely preparation and submission of the PPP Law
to Parliament as conditions for the second tranche release. To this end, we took a Cabinet Decision on
April 18, 2019, committing to the following: (i) preparation of a PPP Policy Framework to be finalized
by end-June; (ii) preparation of amendments to the PPP Law no. 31 of 2014 to be submitted to
Parliament in September; (iii) implementation of a robust Government PPP communications strategy to
ensure full understanding and ownership across stakeholders of the importance of the legislative
amendments.
II. Electricity Reform and Climate Change
22. Despite a critical dependence on imported fuels for power generation, Jordan provides reliable and
good-quality electricity supply to all its citizens. After achieving a zero-operational loss during 2016,
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NEPCO witnessed a small loss of JDO.7 million in 2017. Despite adopting a monthly Tariff Adjustment
Mechanism since end of 2017 and securing additional revenue of JD237 million through monthly tariff
adjustments, NEPCO witnessed an operational loss of about JD77 million in 2018 (about 0.3 per cent of
GDP) according to the Company's audited financial statement. This fall in sector financial performance
raised a red flag that the Government takes urgent actions to avoid slipping into deeper losses. We are
committed to maintain the financial viability of NEPCO by ensuring that operational balances are zero
or positive in 2019 and in subsequent years.
23. The losses in 2018 were cause by wide fluctuations in LNG import costs (benchmark Brent oil price
rose from US$55 per barrel to US$85 per barrel) and a fall in grid-electricity demand (high cross-
subsidy burden and low solar photo-voltaic prices encourage large consumers to self-generate).
Furthermore, the sector is projected to have a surplus generation capacity going forward with significant
take-or-pay contractual obligations. We anticipate an increasing interest cost from rolling-over of legacy
debt burden of US$7.46 billion accumulated from disruption of Egyptian gas supply between 2011 and
2015. Meanwhile, a large quantum of electricity bill-receivables from Government agencies (over JD
200 million added during 2018) also contribute to the sector's financial difficulties.
24. With the objective of addressing these challenges and putting the sector back on the road to financial
sustainability and maintaining zero or positive operating balances in 2019 and beyond, the Government
together with the World Bank team developed and adopted a Roadmap for Financial sustainability in the
Electricity sector.
25. The Roadmap comprises of the following key measures, which we are committed to implement as
planned:
We initiated important steps to reduce sector costs and to ensure adequate tariff revenues. Jordan
started receiving piped gas from Egypt since January 2019, which is not only cheaper than the LNG,
but also has a much lower indexation to the Brent oil prices. Along with some other cost reduction
measures at NEPCO, and increased revenues from higher bulk tariffs charged by NEPCO to the
distribution companies. The Government took the decision to eliminate cross-subsidies to
households with three-phase connections or those with more than one meter. We are committed to
ensure that there is no operational loss in the sector at the end of 2019 and will undertake quarterly
review of the sector financial performance and implement timely measures to mitigate any revenue-
gap, including adjustment of consumer tariffs if needed.
* We imposed a moratorium on new generation contracts outside of the latest electricity master plan.
Moreover, with an aim to address the excess generation capacity and high-cost take-or-pay
contracts, we hired legal and financial advisors to help us optimize the risk and cost allocations
under our portfolio of Power Purchase Agreements (PPAs) and related agreements. We are keen on
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reviewing these agreements and to take action to ensure that the prices paid by NEPCO are
consistent with international experience and least cost electricity generation principles.
* We are also exploring options to export electricity to neighboring countries. We will continue to
diversify our fuel sources towards cheaper, less volatile and domestic sources. Additionally, we
committed to expanding domestic renewable energy capacity with suitable measures to address
variability in generation.
* We will further adopt fair economic chargers applicable to self-generation consumers to reflect
costs of capacity support, network support, network losses, and electricity banking, among others.
* The Ministry of Energy and Mineral Resources and the Ministry of Social Development will
develop and implement a medium-term framework for improved targeting of tariff subsidies, as well
as energy-saving schemes to reduce the need for cross-subsidies, and on-bill payment assistance to
cap the amount of subsidy support. We anticipate that these measures will progressively decrease
the cross-subsidy burden, allowing us to reduce the prevailing high tariffs for productive sectors.
* We adopted measures that will allow us, by the third quarter of 2019, to address the stock of
electricity bill receivables from public agencies, as well as to ensure timely payment by all agencies
going forward. These measures will include a one-time settlement of the stock of bill receivables by
the Ministry of Finance against the advances provided to NEPCO earlier.
* We are in process of developing and adopting an Electricity Bill Recovery Mechanism, which
would include a number of measures, including but not limited to: (i) ensure adequate budgetary
allocation to public agencies for payment of electricity bills; and (ii) mechanism to ensure bill
recovery in case of non-payment by due date. The design of the bill recovery mechanism will also
capture schemes for public agencies to adopt energy efficiency and conservation measures.
* We reached out to the donor community in course of the London Conference in end February 2019
requesting their support for implementation of a comprehensive Debt Optimization Plan for
managing NEPCO legacy debt. The Plan will be closely linked to the Financial Sustainability
Roadmap of the Electricity Sector and will leverage commercial as well as developmental funds to
replace expensive commercial debt with long-term blended finance to ensure a smooth debt service
profile and reduce the interest burden.
* We remain committed to institutional and governance reforms in the sector. In 2018, we started
implementing governance reforms at NEPCO with assistance from EBRD. We will strengthen the
regulatory set-up according to global best practices on transparency, accountability and stakeholder
participation in the processes.
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26. Moreover, and as part of our transformation towards a low-carbon economy, the Government passed a
new Climate Change Bylaw. This is important progress toward achieving Jordan's nationally
determined contribution under the Paris Agreement of the United Nations Framework Convention on
Climate Change, which proposes to reduce Jordan's greenhouse gas emissions by 14 percent by 2030.
Over 80 percent of Jordan's greenhouse gas emissions come from the energy sector, including transport.
Reducing the carbon intensity of the electricity sector requires increasing the share of natural gas and
renewable energy, while reducing in the electricity generation mix. Reducing that of the transport sector
involves a faster transition to electric vehicles. Jordan has one of the most advanced regulatory and
policy frameworks for renewable energy investment in the MENA region. This policy framework has
shown impressive results with the share of RE-based electricity generation rising from none in 2012 to
more than 10 percent in 2018.
27. Initial assessment indicates that total carbon emissions from the electricity sector in Jordan has
decreased by 31 percent by a quarter since 2014 (a carbon intensity decline of 35 percent) without
adversely impacting NEPCO finances and despite the country absorbing a large influx of refugees. The
new Climate Change Bylaw establishes the institutional framework for continuing this low carbon,
while mainstreaming climate change across all sectors, enabling development of new mechanisms to
facilitate climate action and attracting climate and green finance from public and private sources. This is
important progress toward achieving Jordan's nationally determined contribution under the Paris
Agreement of the United Nations Framework Convention on Climate Change, which proposes to reduce
Jordan's greenhouse gas emissions by 14 percent by 2030.
28. This national commitment to climate action translates to sectoral actions across the transport, energy,
industry, waste management, water and agriculture, and food security sectors, with the energy sector
underpinning the bulk of emissions across other sectors.
III. Encouraging Private Investment and Entrepreneurship
Foreign Direct Ivestment
29. The Government of Jordan amended the Investment Regulation for Non-Jordanian Investors
(Regulation No. 77-2016) removing equity restrictions on FDI in 22 additional activities (mainly in
services) to unlock growth, create jobs, and support export diversification. The Government also
adopted a gradual approach to liberalization, recognizing that it may disadvantage specific groups, and
to allow for enough time to strengthen the competent authorities to ensure a level playing field and a fair
and full implementation of the amended regulation.
30. Moving forward, the Government plans to institutionalize a strengthened investor grievance
management mechanism that enables the Jordan Investment Commission (JIC) to identify, track,
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manage, and solve grievances arising between investors and public agencies within specified time
periods. This would require adopting a policy, designing the investor grievance management
implementation arrangements and adopting appropriate regulatory instruments (regulations/bylaws
and/or instructions) to strengthen three critical elements of the investor grievance management
mechanism, namely: (i) empowerment of JIC as the lead agency to establish and exercise an investor
grievance management mechanism (including scope, escalation stages, etc.); (ii) details on the
applicable procedural rules (requirements, eligibility, timelines, tracking device, portal, details on
escalation, etc.); and (iii) scope, functions and obligations of JIC as the lead agency vis-a-vis other
authorities and other review mechanisms, to institutionalize the filtering, referral, and problem-solving
approach of grievance cases.
31. In terms of additional course adjustments, JIC will continue to strengthen governance and sharpen focus
upon its investment promotion and investor-servicing mandate. As part of an inter-agency effort, the
Government will continue to work on revising the incentives framework to achieve cost-effectiveness,
improve transparency and administration, and better targeting to increase positive public spillovers and
impact.
Exports
32. We intend to continue taking measures to improve competitiveness and bolster export diversification
and growth. The Government's plan is aimed at intensifying export promotion and services to support
Jordanian exporters; improving access to the EU, US, African and new and unconventional markets;
improving National Quality Infrastructure; increasing export finance; and reducing the high cost of
trade.
33. To this end, the Government established a national export promotion agency 'Enterprise Jordan'
following a partnership model between the public and private sectors, which will set in place an
institutional framework to assist Jordanian businesses develop and promote their products in global
markets. This is an essential step towards creating a sustainable framework for export promotion, which
goes in line with the Government actions in facilitating export growth. Next steps include developing a
strategy, action plans, and procedures and a sustainability model to ensure the effectiveness of this
agency.
34. The relaxation of Rules of Origin (ROO) for exports to the EU in July 2016 provides a significant
opportunity to diversify our markets and broaden our product mix. We took several active steps to
accelerate the potential benefits of this opening and agreed in December 2018 to loosen the
requirements for businesses to benefit from this arrangement. The ROO Decision, which was extended
to 2030, is no longer restricted to pre-specified industrial and development zones and the minimum
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proportion of Syrian workers involved in production will now remain flat at 15 percent. Moreover, if the
number of active work permits issued to Syrian refugees reaches 60 thousand, the minimum
employment requirement will be lifted entirely.
35. Domestically, several workshops were conducted to raise awareness among Jordanian firms of the
benefits and requirements of the revised initiative, while also simplifying application procedures,
continuing with waiving fees associated with work-permit applications, and supporting Jordanian firms
on marketing and certification for entry into the EU market. The Government also conducted trade
missions to (and began free trade negotiations with) fast-growing East African countries, and to the U.S.
(with which Jordan has a free trade agreement) to diversify the mix of products currently dominated by
garments.
36. More broadly, for Jordan to expand its footprint in global markets, it must have the capacity to meet the
standards that those markets require, which will in turn require an appropriate "National Quality
Infrastructure" (NQI). In this regard, we will adopt a National Quality Policy and associated action plan
in 2019 to eliminate internal conflicts of interest, increase the transparency and predictability of the
process for adopting mandatory requirements, and provide a full range of NQI services to Jordanian
customers-including conformity assessment, metrology, and surveillance.
37. On export finance, as part of DPF-I, the Government created an Export Guarantee Fund (managed by
Jordan Loan Guarantee Corporation-JLGC) and provided capital in the form of a JD100 million loan
from the Central Bank of Jordan to help support exporters. On the latter initiative, the Government
adopted a strategic plan that will allow JLGC to increase its underwriting capacity on foreign buyers.
38. On trade facilitation, the Government approved new Customs Law and Bylaws permitting the
implementation of a Customs Silver List (preferred merchant scheme); establishing single window
procedures; addressing export controls and customs procedures (including integration and simplification
of inspection work in export and import control institutions); and automating a number of key services.
Licensing and Inspections
39. A key Government priority is to further streamline the business environment through facilitating and
integrating procedures and improving the investors' journey. For this purpose, the Council of Ministers
submitted to the Parliament for its consideration a bill abolishing the Crafts and Industries Law (1953),
as a first step towards eliminating duplicative licensing requirements.
40. In the medium-term, the Government will streamline municipal licenses by enacting the amended
Vocational Licensing Law for Greater Amman Municipality (GAM) and develop secondary legislation
for it. We will also amend the Vocational Licensing Law for Municipalities to follow the revised model
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which is characterized by a streamlined vocational license that uses risk-based approaches and extended
license validity, abolished health license, allowing virtual and home-based businesses and new types of
businesses that could emerge, more transparent and predictable licensing regime by introducing
governance principles, in addition to the inclusion of professional offices by merging the Law of
Professional Offices Fees to streamline licensing and ensure a uniform vocational licensing regime for
all businesses.
41. The Government will further streamline sectoral licenses. We started implementing the Licensing
Reform Policy Paper (adopted by Council of Ministers in January 2019) and assigned a qualified and
empowered core team with clear mandate and responsibilities. We also started to carry out capacity
building and awareness raising activities on the Licensing Reform Policy Paper to ministries and
agencies that issue licenses, as part of the consultations with the sectoral regulators on the findings of
the Licensing Assessment report, on which we will reach decisions on final recommendations.
42. As part of this effort, the Government plans to revise the Cities and Villages Law to streamline zoning
and construction permitting regimes, and to revise the environmental licensing regime as well as to
undertake the required amendments to the Environmental Law and Environmental Licensing Bylaw.
43. The Government is also expediting inspections reform. The bylaws for the new Inspections Law were
enacted October 2018. The Inspection Law, which was endorsed by Parliament in September 2017,
streamlines the inspection mandates and processes of several inspectorates in Jordan, and will improve
the business environment by reducing the burden on the private sector resulting from overlapping
inspection mandates and unplanned inspection visits, and by reducing uncertainty by introducing risk-
based targeting while raising business awareness on compliance requirements. The Law also
emphasizes the role of the Higher Committee for Inspection Reform as the national umbrella for
business inspections.
44. Subsequently, rationalizing and streamlining Jordan's inspections and licensing regimes will reduce the
time and cost burden on businesses resulting from unnecessary inspections and improve the
transparency and predictability of the licenses and inspections that are necessary. We started designing a
fully integrated service delivery approach that integrates registration with licensing and inspection.
45. In the coming months, the Government will streamline and launch an online portal for business
registration. Building on the approved policy for licensing reform, the Government will abolish
unnecessary or excessive licensing, streamline remaining licenses that are necessary and extend license
durations, and will put in place a moratorium on issuing new types of licenses that are not aligned with
the principles of the Policy Paper. The Government of Jordan plans to implement the abolishment of the
Crafts and Industries Law over the next six months. In this context, the Government will request adding
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it to the agenda of the extraordinary session of Parliament this summer. The Government will also take
necessary steps to map all secondary regulations that are affected by abolishing this Law in order to
come up with a more realistic timeline for abolishing or re-issuing these regulations.
Credit Infrastructure (Insolvency and Secured Transactions)
46. Modern Insolvency and Secured Transaction laws are the cornerstones of an enabling financial system.
Jordan has made great progress on enacting and implementing both laws. Following the approval of the
Insolvency Law in May 2018, we enacted the associated bylaws in January 2019. As next steps, the
Government plans for efficient implementation of the reform through:
*  Legal drafting: Draft the instructions foreseen in the regulation.
*  Insolvency Practitioners (IPs) training and oversight: (ii) form the insolvency practitioners
committee foreseen in the law and the regulation, (ii) develop training material for IPs & code of
Ethic, (iii) Hold the first training round for IPs, (v) certify first generation of IPs under the new
regime.
*  Capacity Building and Awareness Raising: (i) Build capacity of judges in collaboration with the
Judiciary Institute, and (ii) Raise awareness with lawyers, bankers, accountants and business
community.
*  Set-up the Insolvency E-Registiy: (i) fundraise for a customized IT solution, and (ii) appoint a
registrar and train ministry officials.
47. Moreover, Parliament approved the new Secured Transactions Law (Law of Movable Asset Rights No.
20 of 2018) in April 2018, and the Council of Ministers approved the related Bylaw in October of the
same year. Based on which, an online Collateral Registry was launched in March 2019. The Collateral
Registry System was established under the Ministry of Industry, Trade and Supply as a fully functional,
electronic registry in accordance with provisions of the new law. It is pertinent to note that the
Collateral Registry had been launched as a pilot for registration of interests held by leasing companies,
which by the provisions of the law, their registered interests will be categorized as prior notices.
48. By end of April 2019, 20 accounts had been setup and 325 transactions were registered. However, as
this type of reform changes existing commercial practice and procedures, results are expected to become
substantial within twelve months from the launch of the Registry. In the coming year, we plan to
continue stakeholder engagement and capacity building that will focus on providing technical support to
the Ministry of industry, Trade and Supply; and training on the scope of the legal framework to relevant
stakeholder groups, associations and beneficiaries.
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Public Procurement
49. The Government recognizes that a well-functioning public procurement system can improve governance
and service delivery, and advance sustainable development, through more efficient, transparent and
accountable public spending. The recently enacted new Unified Public Procurement Bylaw no. 28 for
2019 provides for the establishment of a central policy and oversight unit and an independent
complaints-handling unit. In addition, it contains provisions on framework agreements, electronic
Government Procurement (e-GP), and alignment of SOE procurement practices with the provisions of
the Bylaw.
50. The Government will allocate appropriate financial and human resources for its successful
implementation by: (i) operationalizing the central policy and oversight unit and the procurement
complaints handling unit by end of 2019; (ii) Issuance of regulations and standard bidding documents to
support implementation of the new bylaw by December 2019; (iii) conduct an awareness campaign by
October 2019; and (iv) develop and deliver a continuous capacity building program to all stakeholders
including the private sector.
51. In line with the e-transformation program adopted by the Government, the development of the e-
Government Procurement (e-GP) system, JONEPS, will ensure the highest levels of integrity,
transparency of the procedures and fair competition between the bidders and wider, more equitable
access to the procurement market for the private sector, including SMEs, women & youth, while also
facilitating access to information and inclusion of stakeholders, including civil society.
52. Following the endorsement of the JONEPS enhancement strategy and action plan in March 2019, the
Government made a commitment to allocate the needed financial and human resources in order to (i)
set-up of the institutional framework by November 2019; (ii) develop and implement the enhanced
system functionalities including measurement of procurement performance indicators by February
2020; (iii) support the Project Management Unit in implementation of JONEPS full roll-out and
deployment; and (iv) develop and implement sustainable training of buyers and sellers.
Digital Economy - Broadband
53. Over the past decade, the digital economy has transcended the boundaries of physical borders, and it
now provides a transformative opportunity for the world's economies to optimize growth and create
platforms for the youth of today. The Government set a goal of broadening the base of digital economy
in Jordan in its action plan (Reach 2025). Completion of the National Broadband Network (NBN), a key
element of Reach 2025, is expected by 2021. Through the PPP setup, the NBN will obtain an important
commercial value, increase the national penetration rates of broadband internet, reduce connectivity
costs, and enhance the competitiveness of local businesses, and provide high-speed internet access in
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PRIME MINISTRY
second tier cities. Entering into agreements with the private sector to lease the excess capacity of the
NBN, based on a PPP model, will extend the broadband fiber access to additional 170,000 households
as a direct result of NBN expansion.
54. In the coming months, the Government will select a company, following a competitive process, to
manage and expand the NBN (by March 2020). As complementary measures to support the digital
economy development, the Government will establish procedures mandating the use of digital
signatures (e-signatures) by businesses for statutory filings with Government agencies. We will also
negotiate current agreements with mobile operators to incentivize additional investments in the sector,
including extending the duration of current spectrum licenses, creating a fund for digital skills
development, and reviewing the current revenue-sharing model.
Transport and Gender
55. Related to reducing business cost and accessing newer markets is also the issue of transportation. The
transport and logistics sectors contribute 9 percent to GDP in Jordan, and are recognized as an important
driver of competitiveness, growth, job creation and social development. Government will focus on two
areas in the transport sector, which are urban transport and freight transport.
56. First, in urban transport, and the current state of the subsector add enormous direct and indirect cost to
commuting workers and poses an exceptional burden on women that want to enter the labor force. In
urban transport, the Government initiated the reform process through the 2017 Public Transport Law,
focused on consolidating the individual ownership of buses (80 percent) into companies, as a first step
towards enhancing the quality and service reliability of Public Transport. The Ministry of Transport is
piloting the reform in the city of Jerash, including the consolidation, the contracts with the new
operators and the ITS system (GPS tracking and e-payments).
57. The Ministry of Transport is also revising the Public Transport Strategy for the cities of Irbid, Madaba,
Zarqa and Salt, and consultations with the operators have started. The General Amman Municipality is
developing the first Bus Rapid Transit in Jordan, which will have an integrated fare with its feeder
buses, by 2021. The government also committed adopting e-payments for all public transport systems
following the consolidation.
58. Recent studies show that about 47 percent of women reported that they turned down or gave up job
opportunities because of the current state of public transportation with harassment being one of their
main concerns. To respond to this, the Government developed the Code of Ethics and Professional
Conduct for the transport sector, which will regulate the passenger, the driver and the operator conduct
in public transport and which will address harassment in the public transport system.
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59. The code of conduct will be part of all the agreements to be signed with the new operators. It is very
important to support the Ministry of Transport in implementing the code of conduct to ensure it has an
impact on the ridership of women in public transport, and this includes communication, training of all
key entities and personnel, particularly those in customer front-facing roles, and creation of a Grievance
Redress Mechanism to ensure that complaints including on sexual harassment are addressed promptly
and effectively.
60. Here, it is worth noting that user-oriented and gender-responsive public transportation is a public good -
it can score environmental gains in terms of reducing traffic congestion, enhancing road safety and
improving environmental outcomes, such, as reduction in emissions - by encouraging move from
private to public transport usage, which can only be achieved if transport service providers
accommodate the needs of their diverse passenger base and meets both women's and men's mobility
needs.
61. A second very important area of concern for us is freight transport in the Amman-Aqaba corridor. The
freight market in Jordan is based on trucking, which is fragmented both in terms of firm characteristics
and market structure and runs an aged fleet that is subject to a range of regulatory constraints, including
access restrictions at Aqaba Port. We are keen on reforming the sector and reaping the benefits of
efficiencies of scale and scope. The Government will work with relevant stakeholders to develop an
action plan that will upgrade the sector through fleet renewal, professionalization, and firm
consolidation, while increasing overall trucking and logistics sector efficiency and reducing market
distortions.
62. The Government is working in all these areas. The primary emphasis will be on containerized cargo for
international trade. The Government is undertaking a number of measures to reduce the total cost of
transport on the Amman-Aqaba corridor through the establishment of an electronic platform through the
electronic system project of the way bill, and the introduction of e-payments. The Government will
explore updating existing incentives for fleet renewal, implement a scrapping program based on global
best practice and revise related regulations.
IV. Labor Market Reforms and Protecting the Poor
63. Creating good jobs for the fast-growing population is the Government's key aim where all reforms and
efforts are geared to creating an economy that produces good-paying jobs. That said, we are working on
addressing remaining challenges in the structure, performance and results of the labor market, including
issues related to labor market segmentation. To address labor market segmentation, the Government is
taking necessary steps to revise existing structures as well as legal and regulatory framework wherever
needed.
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64. In parallel, to promote a more inclusive growth process and help households manage the risks from
some necessary fiscal reforms, including price increases in certain sectors such as electricity and water
and the removal of subsidies, the Government will continue to expand and improve targeting of social
safety nets for the poor and vulnerable.
Labor Market Segmentation - Gender
65. The Government prioritizes the creation and facilitating employment opportunities especially for
women noting that Jordan's women economic participation is among the lowest globally and regionally
at 14 percent. In this respect, the Government is committed to continued revisions of laws and
regulations that may affect the opportunities and outcomes of women in the labor force. In line with
DPF-2, we have undertaken a number of actions to further improve and promote women economic
participation, including amendments to the Labor Law.
66. While good childcare is a family issue, not women's issue, in Jordan, access to good childcare does
affect women more than men. For this reason, reforms providing childcare and facilitating licensing for
establishing childcare establishments is an initiative to help women enter and stay in the labor force.
The new Labor Law makes it mandatory for all establishments with more than 20 parents (not just
mothers) to have childcare on their premises or to provide vouchers for private childcare. In addition to
the fact that access to affordable childcare is an important factor in their decision to join the labor force,
nurseries are a potentially important sector of employment for women.
67. Moreover, concerns about the burden that requirements to provide childcare for employees place on
business are addressed. The Government is considering a pilot voucher system that will allow flexibility
both in the financing and provision of these childcare services. The gist is to show less costly, and
equally effective, modes of fulfilling the mandate to have more childcare services available to working
mothers and fathers. If successful, the pilot will allow the Government to exploit the flexibility the new
Labor Law provided private businesses to help finance some of the cost of childcare services.
68. In addition to the Code of Conduct adopted by the Ministry of Transport, the Ministry of Labor has also
recently introduced a Code of Conduct for Employers and Employees in the Workplace to be adopted
by companies as part of their annual registration process. Both codes of conduct make explicit
references to sexual harassment and gender-based discrimination and specify Grievance Redress
Mechanisms in the instructions. The Government expects that this will allay concerns, prominent in the
Jordanian streets, that women are not safe when using public transport and in the workplace. This
relatively modest measure is expected to begin to turn that view around and help women enter the
workforce.
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69. To address Jordan's relatively poor jobs performance, especially for young Jordanians, the Government
introduced more flexibility into the labor market. New legislation was approved to promote and regulate
flexible work (part-time work) with hourly minimum wage rates to encourage employment of women
and youth. The Government is also considering options such as temporarily reducing the employer's
contribution to the social security fund when the employer hires a new entrant to the labor market. The
Government is working with the World Bank to understand how such a temporary reduction would
impact the social security fund and to estimate whether there would be sufficiently added youth
employment to justify the costs.
70. The Government's ongoing efforts to reduce informality will also help promote demand for young
Jordanian workers. Government ongoing efforts to better manage the number of permits provided to
foreign workers through the Ministry of Labor's work permit reforms would help stem the flow of guest
workers entering the informal sector once their permits have expired. Informality attenuates incentives
for the economy to produce better quality low-skilled jobs, disadvantaging youth. Young workers, given
their relatively lean experience and comparatively low skills, compete for work that is most likely to be
the type informal workers do. Because of their informal status, these workers are likely less expensive
and more flexible than young workers protected by the law and expecting that worker-employer
relationship will not be abusive.
71. Finally, the Government and the World Bank are engaged in a study of the Social Security Corporation
regulations. This joint effort is studying equalizing, for example, the retirement age of men and women.
At present, women's eligibility to retire with full social security benefits comes earlier than for men and
may be encouraging women to leave their jobs when the Government may prefer them continue to be
productive at work.
High skilled Labor
72. The Government will stimulate job creation by allowing talented foreign workers to make contributions
to the local economy. To stimulate labor demand and increase job opportunities, the Government
liberalized visa requirements for high-skilled foreign workers. By allowing high-skilled foreign labor to
enter, this reform fills labor shortages for this segment of the labor market and keeps it working
efficiently. This visa reform is a job creation measure because high-skilled immigrants contribute to
technological adaptation that has been shown to result in jobs for less-skilled native workers.
73. The Government recognizes that high-skilled foreign workers are likely to complement less-skilled
workers-not replace them. The Government expects that high-skilled foreign workers add value to the
work of others and improve productivity and growth overall.
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Labor Market Segmentation - Supporting Syrian Refugees
74. One of the most pressing problems in unemployment and underemployment is found in the Syrian
refugee community. Many Syrian refugees have yet to receive work permits, but they nevertheless have
high employment rates. Their drive to work, regardless of their qualifications, likely means they seek
and gain employment in the informal sector. To increase formal participation of Syrian men and women
in the Jordanian labor market, the Government instituted a set of reforms that facilitate refugee access to
the formal labor market. The Government waived work permits fees for Syrians since 2016 (over
143,000 cumulative work permits were issued since 2016), introduced flexible work permits in
agriculture and construction sectors, and recently allowed home-based businesses for Syrians refugees.
Social Protection
75. The Government is committed to an ambitious social safety nets reform agenda to enhance the
protection of the poor and to facilitate their transition out of poverty. First, we are expanding the
coverage of NAF's cash transfers to an additional 85,000 households by 2021. The first phase of the
expansion, covering 25,000 new households will start very soon. The Government is committed to
ensuring adequate budget to cover 55,000 additional households in 2020 and 85,000 additional
households in 2021. The expansion of cash transfers is being accompanied by improvements in the
delivery system of the program, including the digitalization of payments to beneficiaries and improved
targeting. Second, the Government of Jordan will also, starting in 2019, complement income support
through NAF with other services, such as health insurance. Third, the Government of Jordan is also
envisaging the introduction of energy support benefits to help protect poor consumers. Fourth, starting
in 2020, the Government of Jordan will start providing employment support to selected NAF
beneficiaries, focusing on employable youth. Fifth, this enhanced support to the poor will eventually be
delivered through two interconnected platforms: the National Unified Registry (for income support and
social services) and the National Electronic Employment System (for employment support services).
Given the limited fiscal space, as income support and key services are expanded, programs with low
cost-effectiveness will be reformed.
Implementation of the Five-Year Growth Matrix
76. The Government is keen on paving the country's path for economic revival, through inclusive and
sustainable growth, and most importantly, through signaling to the world that Jordan is open for
business. The Government considers the reform agenda an essential part of its 2-year Work Plan, which
in turn, will reposition Jordan as a successful model in the region, as enabler and implementer of
reforms, and as a catalyst for development from every angle and in every sector.
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77. With the help of its development partners, the Government worked on developing a well-defined five-
year reform matrix, which identifies a sequenced set of priority reforms to be implemented as part of
Jordan's economic revival plan. The Government thus commits to focusing on implementing the prior
actions identified in the DPF-2 operation over the period 2019-2020, which are considered as critical
milestone for the release of the second tranche as stipulated in the operation's Program Document.
78. The international community has played, and continues to play, an important role in supporting Jordan
and the Jordanian people during challenging times. Jordan, in turn, has exerted every effort to establish
and maintain a long standing, strong partnership with its development partners. More recently, donor
support has been extended to the Government in terms of reinforcing a mechanism for delivery of
support and commitment to the priority reforms identified as part of the DPF2 operation. As Jordan
continues to carry the burden of large financing needs, an agreement has been reached that donor
financing will be sequenced based on the enactment of reforms.
79. We, hereby, reiterate that our Government considers the reforms identified in the Five-Year Growth
Matrix of highest priority, and as such, it dedicated serious efforts over the last months to mobilize the
Cabinet and relevant authorities to ensure that necessary laws have been passed accordingly, and that
adequate funding has been allocated to finance the implementation of prior actions.
80. Implementing these reforms as planned will also send an important signal to our partners. The
Government was keen on publicly discussing the priority reforms, to ensure a consultative process and
buy-in from the public. The Government of Jordan was also earnestly keen on developing a time bound
action plan for each of the tranche prior actions. Moreover, while a strong and efficient governance
structure for the Five-Year Reform Matrix is being established, the process has been accelerated for
energy reforms.
In conclusion, the Government reaffirms its commitment to the reforms supported by DPF-2. In
particular, the Government commits to implementing reforms envisioned under the second tranche of the
DPF-2 to which the Government's Cabinet decisions attest.
Our Government appreciates the seriousness of the country's fiscal conditions and financing needs,
and will continue to mobilize every effort towards implementing the Five-Year Growth Matrix, to benefit
from the important lifeline financing resources available such as DPF-2, and to further obtain Bank support
in devising projects and utilizing lending instruments that serve the reform process, and ultimately, serve
the interests of the Jordanian people.
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PRIME MINISTRY
Finally, allow me to take this opportunity to reiterate our sincere appreciation to the World Bank
Group continued support to Jordan and we look forward to a stronger partnership in the future.
Please accept my highest esteem and consideration.
Sincerely,
Dr. Omar Razzaz
Prime Minister
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