Jordan's economy benefits from privatization, amid criticism

Published June 29th, 2001 - 02:00 GMT

Jordan's state coffers have grown by $935.8 million thanks to a series of government privatization schemes begun in 1998, but critics charge that the government has failed to make the most of the financial windfall. 


The money has been raised by the full or partial privatization of seven state-owned firms, the head of the privatization authority Adel Qodah told AFP


Yet, despite the effort, Jordan's sluggish economy still faces $6.8 billion (7.9 billion euros) in foreign debt, equal to 90 percent of its Gross Domestic Product. 


"The government has already used a third of the revenues generated from the privatisation schemes to finance infrastructure projects, pay part of its foreign debt and build homes for soldiers," said economist Fahd Fanek. 


"They should have instead placed all these funds in an account at the Central Bank but, as a result of financial pressure, they had no other choice but to spend some of these earnings." 


Munir Hamarneh, a professor of economy at Jordan University, also believes that the government should have made better use of the revenues. 


"They should have invested these revenues in projects aimed at creating jobs and reducing unemployment," Hamarneh said. 


Plagued by poverty, the desert kingdom's unemployment rate has remained at between 10-12 percent officially since 1999 and as high as 25 percent unofficially. 


But, the privatization schemes, recommended to Jordan by the International Monetary Fund, do have an upside. Jordan's foreign reserves now stand at two billion dollars, compared with 900 million dollars in 1999, thanks to the liberalisation of the economy. 


"These revenues helped put an end to government subsidies to those firms which were making losses, improved their performance and allowed the state to raise taxes and to increase its foreign currency reserves," Qodah said. 


The privatization scheme kicked off in November 1998 with the sale of 33 percent of the national cement company, one of the country's flagship industries, to the French group Lafarge. 


The government then handed over the management of Aqaba railways to the US firm Raytheon Wisconsin Central under a 25-year-lease, and signed a similar deal with the French group Suez Lyonnaise des Eaux to run and develop Jordan's water sector. 


But the biggest deal of all was sealed in January 2000 when Amman sold 40 percent of its shares in Jordan Telecom to France Telecom for $508 million. 


After nearly three years, the government remains confident about its privatization campaign. Qodah has defended the sell-offs, stressing that privatization has not created mass lay-offs. 


He told AFP the government was pushing forward in its initiative to liberalize more state-owned firms in 2001. 


The electricity authority and the postal services are among the firms that are tipped to be restructured and privatized, along with the partial privatization of the national phosphates company, another flagship industry that is facing $500 million in debts. 


Several departments within the national airline Royal Jordanian have already been privatized, and the company itself is looking for a strategic partner. 


According to Fanek, the public sector contributed 14 percent of GDP before the liberalization process was launched in 1998 compared to seven percent today. — (AFP) 


© Agence France Presse 

© 2001 Mena Report (

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