Provisonal Transcript:
Good morning, Ladies and Gentleman. It is a great honour to be discussing with you today the perspective of Jordan, at the heart of the Levant region within the Middle East, with regards to the pressing topic of our conference. Allow me first to extend my gratitude to the IISS for organising this event and also to the Kingdom of Bahrain for their great hospitality and for playing a major leading role in shaping the debate within our region on major policy issues. Let me also set the stage by talking about the experience of attracting investment in the post-financial-crisis world, not only from the geo-economic context but also for the geopolitical context. The story of Jordan is very much a story of achieving great successes in spite of some of the geopolitical constraints. Within the Middle East and North Africa (MENA) region, the challenge continues to be the same. We have to create close to 100 million jobs over the next 10 years, we have to attract over $300 billion to finance infrastructure, and we have to continue to diversify economies within the region.
2009 was a difficult year but, relatively speaking and benchmarked to the global scene, the region is expected in 2010 to rebound back to close to a 4.4% real economic growth rate, which is a very good story within the global scene. Last year was tough because we had to do both a fiscal stimulus package and a monetary stimulus package, which have led some of the non-oil-producing countries like Jordan to have challenging fiscal deficits. As we discussed yesterday, it has created a compelling need in 2010, at least for us, to come back quickly into fiscal austerity measures in order to continue our recovery. The 2009 story was characterised by real growth rates of 2.9%, so there has been a slowdown but not a recession in Jordan. We expect to go back to 4.5% this year and climb to 5.5% in 2011, and possibly go back to sustaining the 6% real growth rate average that we had up to 2008.
Jordan is also trying to create success in attracting investment in spite of the geopolitical challenges that surround us. We are trying also to transform some of these challenges into opportunity and making sure that our geo-economic situation becomes a platform for opportunities and investment cases. We have been working on attracting investment with both a targeted approach as well as basically implementing a comprehensive programme that started in 2004 with the launch of a national agenda programme for 2005‑17, which laid the groundwork for Jordan’s comprehensive economic and development framework with parallel political, economic, social, administrative, and judicial reform tracks, all kicking in at the same time.
Jordan is a small country with a GDP of $25 billion and a population of six million people. That has meant that we needed to work on liberalising our economy by integrating quickly into the global economy, so probably we are second to none in the region in terms of the number of free-trade agreements that we have developed with the US, the EU, most of the Arab countries, Singapore, Turkey, Canada etc., and the list continues year in, year out. We have developed a very strong privatisation programme to get out of state-owned enterprises and give the lead role to the private sector – national, regional, and international – to take over in terms of creating jobs and contributing to economic growth. We have been working very hard at creating competitive economic growth engines that are attracting investments in different platforms, diversified platforms, built on the comparative and competitive advantages of Jordan.
In ICT, pharmaceuticals, consulting and engineering services, tourism, and in launching a set of special economic and development zones across the country, we have been very successful at targeting specific investments in different sectors. We have also been working very hard as part of the recovery platform to use infrastructure-driven recovery in order to go back to sustaining our long-term high economic growth rates, so we are working on launching a series of mega projects in water, energy, and transport in order to assist us in attaining the economic growth rates and continuing our successful track record in bringing in investments.
Let me say that in the first quarter of 2010 the numbers look very good. We have had an increase of over 300% in attracting investments that are applying for exemptions and fiscal incentives in Jordan. Tourism is up by 30% in the first quarter compared to the same time last year. So it has been a good story in that situation. We are continuing to work on deepening Jordan’s positioning geo-economically speaking as a regional gateway, hub, and bridge, and I will make a few remarks on that. Moreover, we have developed a very comprehensive tax-reform programme that we launched early on this year. We are launching a very comprehensive public sector reform programme as well, moving government to results-oriented budgeting and governance models so that we improve the effectiveness and efficiency of government, streamline procedures, and continue to improve services to make Jordan more business-friendly.
We are also working in parallel, given the difficulty, at strengthening social safety nets, micro-financing, supporting business cooperatives, and providing a great deal of support to small and medium enterprises, especially those with export orientations. I think the most exciting part of the Jordan story is definitely the story of infrastructure. Given that Jordan is a non-oil-producing country, it has worked very hard on privatising the delivery of infrastructure in Jordan through public-private partnerships (PPPs), or private-finance initiatives (PFIs) as they were called in the UK. Over the next 20 years, Jordan has close to $30 billion of infrastructure projects that will come online, and they will all be packaged through PPPs with the government stepping in as a partner, supporting these projects, but also attracting private developers and operators to deliver these projects in water, energy, and transport. Some of these projects are quite exciting; they are unique on a global scale.
The first of those projects is called the Jordan Red Sea Project. This is a water conveyance system that will take water from the Red Sea and desalinate at the Dead Sea, which is the lowest point on earth, dump the brine into the Dead Sea, stop an environmental disaster in the making whereby the Dead Sea is shrinking by a metre annually, and then pump close to 900 million cubic metres of freshwater annually up to 1000 metres above sea level to the capital Amman and the surrounding cities, where 90% of the population lives. This is a fantastic project that is in the making right now with the expressions of interest having been completed and 29 consortia having applied to compete for it on a PPP basis. This is a $12 billion project with phase one looking at about $5 billion.
Second to that is the National Railway Project. It is a 1080 kilometre project that will develop the national railways, connecting the port city of Aqaba with Saudi Arabia, Syria, and Iraq through Jordan. This is a critical project because it builds on Jordan’s geopolitical and geo-economic importance as connecting the Gulf Cooperation Council (GCC) region with the Levant region and through that with Europe. This will ultimately connect the GCC markets via rail with the heart of Europe and, in the future, even Central Asia. Again, that project is about $5 billion. In the second part of this year, the expression of interest will be issued and, again, it will be packaged for private sector investment and development.
Third, Jordan is also developing its energy programme. We have just introduced the first renewable energy law in the region, trying to be competitive. That allows private developers to produce wind and solar energy, and negotiate off‑peak or long‑term power‑purchase agreements with the government directly. The government is working very hard using PPP frameworks to enable the accelerating and deepening of private sector participation to attract investment in infrastructure, which is a big challenge for us.
Finally, we are looking at our investment story quite competitively. We think that Jordan will continue to attract GCC funds within the region. GCC investors are the number one investors in Jordan, followed by France, which is the second‑largest investor in Jordan. We think that our direct attraction of sovereign and infrastructure funds within the Middle East, specifically the GCC, will continue to be a modality that we will work to incorporate, as well as the national pension fund, so that we create successful investments for the private sector. We think that the current price of oil will allow us to attract the necessary financing within the region and globally.
One of the challenges or key points that I would like to leave with the IISS is that the PPP pipeline is being challenged by the financial crisis. We have about $1 trillion of backlog in project finance, globally. That is about 1.7% of global GDP. We are trying to compensate for that by enhancing the feasibility of our PPP projects to attract investments. The government is stepping in and contributing some equity and subsidies. We are adding additional revenue streams to diversify the risk on the project, and we are committing to very long‑term power‑purchase or off‑peak agreements in many of these projects to enhance the feasibility, mitigate the risk and deal with the reality of the new norm in PPP financing within the globe, which requires additional equity, less debt and more risk‑sharing by the government to ensure the success of many of these projects.
I would like to stop here, and maybe open the door to a serious discussion on all of these issues.
Bill Emmott
Thank you very much, Minister Fakhoury, for presenting the investment situation in Jordan so very clearly. I feel that, if I had a few billion dollars in my pocket right now, I would be talking to you about some projects but, fortunately for me, I do not. You also reminded one of the real nature of PPPs – that the public side is very important. In the UK, where we invented this term, if not the concept, we have had a long debate about who really holds the risk and what is the real nature of these projects. Are they only ways to remove borrowing from the public‑sector balance sheet or are they genuine partnerships? Ambassador Park, I would like to hand over to you for the G20 perspective.
