The government of Jordan carries out its privatization program through three distinct methods. The government sells its shares in existing companies; it incorporates existing state economic enterprises as a first step towards their privatization and the eventual sale of their shares; the government also sanctions the licensing of private investment in various activities, mainly utilities that have previously been controlled by government monopolies.
The Telecommunications Law (No. 13 of 1995) created a committee with the authority to license private sector projects. In the electricity sector, the General Electricity Law (No. 10 of 1996) permits the licensing of independent power producers and independent power distributors. The General Electricity Law also allows industrial enterprises to set up their own power generating facilities and allows them to exchange their electricity with other independent power producers.
Jordan’s Telecommunications Corporation (TCC) and the Jordan Electricity Authority have both been commercialized. The government has already announced its intention to sell a 26 percent stake in the TCC, and new telecommunications services are open to the private sector. In October 1998, however, the sale of a 40 percent stake to a strategic shareholder was suspended indefinitely, when the Southern Bell Corporation pulled out. The Jordan Investment Corporation (JIC) plans to sell shares in a number of public companies, and has already sold a 33 percent stake in the Jordan Cement Factories Company (JCFC) to the French Lafarge.
There have also been extensive discussions regarding the privatization of Jordan’s national airlines, Royal Jordanian. In October 1999, the planned sale of a 49 percent stake to a strategic partner was announced. Banque Paribas, US consultant SHA, and Clifford Chance and Line & Partners, both of the United Kingdom, have been carrying out the airline's financial, legal and technical restructuring since October 1998. Once the airline is privatized, it will remain the sole Jordanian carrier and will retain exclusive rights for all network traffic for four years. It will also maintain exclusive rights for the route it will operate for a further four years.
The JIC functions as the investment arm of the Jordanian government. It has already concluded a number of sales of its shareholding in Jordanian private and public shareholding companies, mostly in the hotel and tourism sector.
The 1989 Companies Law allows for the transformation of state economic enterprises into public shareholding companies. Initially, such companies are to be owned by the government. They may be sold at a later stage, in whole or in part. A new Companies Law, which took effect in June 1997, helps streamline foreign direct investment in Jordan.
The Jordan Electricity Authority, which was incorporated in the form of a public shareholding company as of September 1996, was the first such enterprise to be incorporated. Next was the Telecommunications Corporation, which was incorporated as of January 1997. Similar plans are underway regarding the Royal Jordanian Airlines, Aqaba Railway Corporation, Public Transport Company, Aqaba Port and Queen Alia International Airport.In order to license private investments in government controlled sectors, legislative amendments and reforms are required. This task has already been accomplished for the telecommunications and electricity sectors. The Amman Financial Market (AFM) is a credible and regulated market that is one of the largest Arab stock markets. The AFM is open to foreign investors who may own up to 50 percent of any listed public shareholding company.
Bonds and shares of Jordanian public shareholding companies, government and municipal bonds may be traded on the AFM. Over-the-counter trades, options, futures and other derivative trading, however, are prohibited.A number of joint projects with Israel have been proposed (in energy, water, electricity, infrastructure and tourism), although, as yet, none have been undertaken.
During the November 1996 Cairo Economic Conference, Jordan presented 25 national projects in the industry, telecommunications, energy, water, transport and tourism sectors, requiring US$ 3.7 billion in private financing. None of the sectors, with the obvious exception of tourism, are directly affected by the regional political climate.
The industrial projects are concentrated on mineral exploitation, in which Jordan already has experience and a strong track record in attracting private investment. Interest in new telecommunications projects is already running high. Jordan's limited natural energy resources might make energy a rather hard sector to sell to international investors, but the government is not deterred. Its invitation for expressions of interest in building a private oil refinery attracted no less than 17 responses early in 1996. Additionally, the US Enron Development Corporation has reaffirmed its interest in building a liquefied natural gas (LNG) plant in Aqaba, importing the gas from the Gulf.
Tourism is the most vulnerable sector, but it has seen extraordinary growth since the signing of the peace treaty between Jordan and Israel in 1994. Leading international names, including Movenpick, Marriott, Hyatt, Four Seasons and ACCOR are already involved in new projects in Amman and the Dead Sea. The Aqaba Regional Authority has also issued licenses for four new hotels in Aqaba, including one for Jordan's first 100 percent Israeli-owned investment.
The Jordan Rift Valley is also on the agenda as a joint Jordanian-Israeli offering with 12 to 13 projects, with each of the two sides presenting two projects in detail. Israel presented a joint telecommunications project while Jordan has elected to offer the Aqaba/Peace airport and a logistics center for land transport. Jordan will also be involved in the EU-sponsored Regional Economic Development Working Group (REDWG) schemes, which link it with Israel, the Palestinian Authority and Egypt.
The following projects have been proposed in various economic sectors:
Energy: Expansion of power generation capacity, refinery expansion and development, oil and gas exploration.
Bids for the construction of Jordan's first major independent power project (IPP) were received in May 1999. The 300-450 MW build-own-operate station will be built at Al-Samra, north of the Zarqa industrial city, and is due to commence operating in 2001.
Telecommunications: The installation of new telecommunications services and data networks.
Tourism: Development of the Aqaba tourist area and the Dead Sea tourist area.
Industry and Mining: Production of magnesium oxide, magnesium metal plant, potassium sulphate, calcium phosphate and potassium nitrate. Glass sand production, gold exploration, copper exploration, kaolin/clay exploration.Jordan is also seeking private investors for the Amman-Zarqa light railway project, which it hopes to see launched as Jordan's first transport scheme carried out on a build-operate-transfer (BOT) or build-own-operate (BOO) basis. Austria Rail Engineering Company has completed a feasibility study for the 42-kilometer line, which would link Zarqa with Amman and may be extended to the Amman suburb of Suweileh. The government is now seeking international financing for the detailed feasibility studies and designs.
The US-based Corporate Holdings of America signed an initial agreement with the Jordanian government in June 1996 regarding the construction of an oil refinery in Jordan. The proposed plant is to have an installed refining capacity of 250,000 barrels per day. The project will also include the construction of a 165 MW power station as well as a 20,000 cubic meter per day desalination plant. The overall cost of the planned undertaking has been estimated at US$ 2.5 billion.
Construction is expected to take about four years to complete, and the concession is to last for a 20-year period effective from the beginning of commercial operations. At that time, a new Jordanian company capitalized at US$ 700 million is to be established upon final agreement. Although local investors will be offered up to a 45 percent equity stake in the venture, American investors will take a controlling interest and will be obliged to cover whatever stake Jordanian investors fail to take-up.Jordanian businessmen have expressed an increased interest in franchising, especially in industry, services, and fast food although retail and service franchises are rare in Jordan.
© 2000 Mena Report (www.menareport.com)