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V
26585HASHEMITE KINGDOM
OF JORDAN
UPDATEThe WorOd Brank Group
PRIVATIZATION:The Jordanian Success Story
Background industrial and service sector just starting and
others which arecompanies, including various financial drawing to a
close. These transactions
The World Bank Group has been institutions. Recently the Program
has include: Royal Jordanian Airlines;
assisting Jordanian privatization since started to consider
activities in the Jordan Phosphate Mining Corporation;
1995 in collaboration with USAID and social sectors. postal
services; Electricity Sector
other development partners. At (distribution and generation);
Petra
present, the World Bank Group Ol Outcomes Drilling Corporation;
Assamara Watermanages a substantial trust fund for Treatment Plant;
Royal Jordanian Air
USAID that supports the Jordan This Program ranks as one of, if
not Academy; Ministry of Supply agri-
Privatization Program (the Program). the most, successful
programs in the business facilities; Customs
The World Bank Group has been Middle East region. To date the
Department warehouses; and the Water
actively assisting the Jordanian following has been achieved:
(i) a 33 Authority at Petra. They are scheduled
Government through the Executive percent sale of the Jordan
Cement for completion in the later part of this
Privatization Commission (EPC) in Factories (JCF); (ii) the
granting of year and next year.
crafting a privatization strategy, four bus concessions in the
Greaterdesigning an institutional framework Amman area [Public
Transport El Executionfor implementing the Program, and Corporation
(PTC)]; (iii) the grantingsupporting the implementation of the of a
concession for the Ma'an Spa; (iv) The Jordanian
Government'sProgram. a 49 percent sale of the Jordan privatization
strategy has a multi-track
Telecommunications Corporation approach with appropriate modes
for
The Program primarily covers the (JTC); (v) a water management
each situation: capital sales, e.g., IPO,
Jordanian state-owned enterprises contract for the Greater Amman
areawhich are concentrated mainly in the [Water Authority of Jordan
(WAJ)];
Infrastructure Sectors (Transport, (vi) the granting of a
concession for Recent Economic Developments 6
Electricity, Water and Tele- Aqaba Railway (ARC); and (vii)
thecommunications) and investments by divestiture of Government
shares in B pthe Jordanian Investment Corporation approximately 44
companies at Wy 13
(JIC), the state-owned investment approximately US$113 million.
Total Poverty Alleviation in Jordan 14
agency. The Government has proceeds are in excess of US$900
Global Developmentsubstantial share-holdings in a number million.
There is a large pipeline of Learning Network 17
of small- and medium-sized industrial current activities, some
of which are World Bank Publications 18
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.___!_______________ 2=':] lS MngdOM 0 t JW H . . .
For non-infrastructure enterprises the "holding company"
successful divestiture required that several conditions be
or "state property fund" approach was used in Jordan in met.
There needed to be full cooperation between the JIC
the form of the fIC. In this approach, Government-owned and the
EPC, as the latter provided important technical
shares in enterprises were held in a corporate entity, which
support and at all times played an oversight role.
assumed the governance functions on behalf of the Management
support was critical, but ultimately the
Government owner. With the Program, JIC actually commitment and
support of the Ministry of Finance was
evolved from being an investment arm of the Govermment, what
made the completion of the transactions possible.
to adopting divestiture as its main objective. The key to
divestiture etc.; sales to strategic persistence and
steadfastness of the unequivocal support at the highest
investors; concession agreements; leadership of the EPC and JIC
(see level. This was an essential element
management contracts; franchising; Box) paid off. The first
breakthrough without which the privatization
and other modes including BOT, BOO, came when some of the
impeding program would not have moved in
and BTO schemes. issues (such as foreign control and Jordan.
This support also allowed
valuation of assets) were innovatively some of the more
difficult issues such
As mentioned, an organizational addressed in designing the JCF
as labor, valuation, and the "Crownstructure was created to set
polici'es, transaction and the deal was Jewels" issue, to be
resolved more
provide oversight and implement the completed in December 1998.
The easily.Jordan Privatization Program. Key success of this
transaction helped toelements of this organizational bolster
institutional confidence and the A First Transaction is Crucial: A
firststructure included the Higher Ma'an Spa transaction was
completed major transaction needed to beCommittee for Privatization
(HCP), the quickly thereafter. At about the same completed
successfully in order to get
EPC and the Privatization Steering time the PTC concessions were
signed the Program going. In Jordan's case,Committees, and the WAJ
transaction soon this helped to allay many of the
followed. One of the country's largest apprehensions regarding
privatization,transactions, JTC, also began to move provided
institutional confidence to
.n spite of the strategy and the and was soon in bidding and
pursue other transactions, andinstitutional arrangements having
been negotiations. The sale of a 40 percent demonstrated the
benefits ofput in place, progress in privatization...was initially
slowgan on begvianion strategic share for US$508 million
privatization.was initially slow and only began in wscmltdimaur
00was completed in January 2000.earnest after August 1998. The
mainissues slowing down the Program in Balance Transparency
andJordan included: the question of the * Effectiveness: However,
in order toTherl\_ Lessons of complete the first major transaction,
itabsorptive capacity of the Jordanian
was necessary to resolve one crucialfinancial market; public
preferences on A closer look at how Jordan managed im nementato
issue t nerliesstrategic or foreign ownership; and to activate a
stagnant privatization implementation issue that underlies
, . , . ~~most privatization programns - where topublic
perceptions of the impact of program and achieve so much in
soprivatization on labor and consumer short a time holds important
lessons strike the balance betweenprices. Before privatization
could for governments as well as transparency and effectiveness:
(i) in
. . ~~~~setting up the institutional structure forproceed, these
issues needed to be privatization practitioners. prvtizatinstit)tin
sttup the
adrse n onessbit privatization; (ii) in setting up theaddressed
and consensus built. decision making process; and, last but
Get Support at the Highest Level: not least, (iii) in the design
andDuring this difficult period, EPC First and foremost, a major
underlying structure of individual transactions.
played a crucial role in moving the and significant contributing
factor toprivatization agenda forward. The these successes was the
emerging and
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Hashemite Kingdom of Jordan Update
* Institutional Structure: The main was more sustainable and on
a more privatization process better and withquestion here was where
to locate the solid foundation with support from progressively less
external help.responsibility and authority for most of the major
constituencies in theprivatization. Locating the country. Ensure
Commitment in Sectorprivatization responsibility at each
Institutions: This institutionalSector Ministry would have
increased .Transaction Design and approach of sharing
responsibility foreffectiveness (provided there was the Structu re:
Here too effectiveness the sake of transparency required thewill to
privatize at the Sector Ministry) needed to be balanced with
support and commitment of the Sectorfor individual transactions,
but t I tri t that to ensure effectiveness. This includedreduced it
on an overall basis as the process was transparent the not just
Sector Ministries, but also thebenefits of experience would not
Civil Service and Enterpriseeasily be shared. Transferring the
program sometimes encountered Management. In every case,
whereverresponsibility for a PE privatization delays and waste. The
selection of and whenever there was not support orentirely to the
EPC could also increase financial advisors and other interest at
the Sector level,effectivenessl but would meet ine consultants
might not always have privatization inevitably stalled,
andresistance and could reduc been optimal, and often process
conversely, when the Sector hadtrensitarnc. and couldan re e
undermined speed, for example whentransparency. In Jordan, the
ready buyers had to be put on hold comtet th
piaztinPrcsresponsibility was shared between the until trsac co be
avtised moved forward rapidly.
until transactions could be advertised.EPC and the Sector
Ministries, with However, the initial investment inthe EPC
providing technical resources transparency paid off in allowing the
Let Privatization Expedite the
and~ ~ ~ ~ ~ ~ ~rnsaec suppor off th process (thes Regulatory
Framework: Regulatoryand support to the process (thus, later stages
of transactions to be issues needed to be resolved for
experience, for example, in bidding completed smoothly.
privatization to be effective. The issue
and negotiations), as well as, of a regulatory strategy in the
contextperforming an oversight function. Unit Of privatization was
a difficult one.This provided just the right balance of is Key: The
leadership of the EPC has Trying to achieve a perfect
regulatory
effectiveness and transparency needed been a key catalyst
contributing to the environment before starting tofor the Jordanian
circumstance, success of the Program. The ability of privatize, had
the risk of Sector
the EPC to access and influence top specialists protracting this
process toDecision Making Process: A decision-makers was crucial in
garne- avoid privatization. On the other hand,
salient feature of Jordan's ring support at the top. Sometimes
the not having an adequate regulatoryprivatization approach was
that it EPC was the flag bearer for framework in place beforestrove
to achieve its objectives privatization, especially when progress
privatization might not providethrough consensus, and thus, with a
for one reason or another slowed. At adequate protection of
consumer (andhigh priority on transparency.' The other times, it
helped ensure investor) interest. Jordan chose to
transparency - especially when sector proceed in parallel with
privatizationaondsabenefit. Tpproachehadb cost worganizations were
moving ahead and setting up of the requiredprogressnoften appeared
too e wasl t rapidly with privatization on their regulatory
framework. This strategywithoarges ommittappeares and sevl own.
However, the EPC never forced the Sectors to keep up with thewith
large committees and several approval levels. However, the benefit
attempted to dominate the process or privatization pace in putting
thewasttprogallevels.Howeveress oued b it be unilateral in its
actions, but relied regulatory framework together.
on consensus to mobilize support andresources. These leadership
skills have Find Solutions for the Employee
Transparency generally includes two helped the EPC, which
started as a Issue: Finally, Jordan had to solveaspects: (a)
ensuring coupetition in protected department within the Office
major labor redundancy issues orbidding and pricing to get the best
of the Prime Minister, to grow and privatization would not have
beendeal for the country, and (2) the build within itself the
needed technical achievable. The approach taken inavoidance of side
deals. competencies to better support the Jordan was interesting
and needs to be
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_._._._ _ Hashemite Kingdom of Jordan Update
explored for other countries. The Cumulative losses in the
Transport and first year alone, contributing an
Jordanian Government tailored its Water Sectors alone were by
end-1998 additional estimated US$3.5 million in
solutions to the labor issue on a case- more than 20 percent of
GDP. The tax revenues. Finally, privatization
by-case basis, but with some common Program is now: helping to
clean up proceeds have strengthened the
underlying threads. First, the financial balance sheets of the
PEs and international reserves position (at one
Government set up general rules making Government assets liquid;
point fragilc) of the Central Bank.
preserving the rights of employees in mobilizing foreign and
domestic Reserves are now at an all time high of
all privatized enterprises and private investment - both
directly in US$2.6 billion, or eight months of
institutions. Second, in some cases, the privatized companies,
as well as imports. This has contributed to a
transition packages -- including related spin-offs; creating new
jobs; significant reduction in interest rates,
generous compensation (with share and benefiting consumers in
terms of which may stimulate growth.
ownership in some cases), training, better services.and
placemcnt assistance helped the Investments directly related to
workers with the transition. But, in Privatization proceeds so
far have privatization, both current and
most cases, particularly in the more reached more than US$900
million or prospects for the next four years, are
difficult rural areas where alternative 12 percent of GDP. Of
course, making very promising. It is estimated that
employment opportunities are limited assets liquid does not in
itself change there has been approximately US$500
or where skill levels of workers are the net worth of the
Government, and million of these investments. Most of
limited, Jordan decided to privatize as such, should not affect
public the investments relate to the Tourism
first and solve the redundancy expenditure decisions directly.
and Telecommunication Sectors. In the
problem later. For example, in the case According to the new
Privatization Telecommunication Sector, it is
of ARC and PTC, none of the Law, privatization proceeds are
anticipated there will be close to
employees were to be laid off, but invested in a separate fund
to be used US$400 million of new investment.
were absorbed at other Government to repay loans owed by the
privatized
organizations. The redundancy firms to the Government, and
finance The ARC Project will result in overall
problem would be resolved after the economic and social
development investments of US$120 million in
privatization transaction was projects. railway tracks for the
new Shidiya
completed. The implicit logic seemed Phosphate Mine and for the
Port of
to be that if the labor issue prevented Privatization is
yielding additional Aqaba. Even more significant, the
privatization, the Government would direct fiscal benefits for
the ARC Management Contract and
need to continue to employ these Government. In the case of ARC,
the investment for the new tracks is
people anyway, so why not privatize. Government was immediately
relieved expected to pave the way for a
That way, at least the expected of some US$6.9 million in losses
for separate US$600 million Fertilizer
privatization-led investment and which it had to provide fiscal
support. Production and Export Project led by
growth could occur in the Sector and These losses, in the
unlikely event that Norsk Hydro. The private operators of
help to alleviate the employment they continued under private
the four bus route franchises have
burden down the road. management, were now the collectively
invested about US$12responsibility of the private operator. million
in new buses. In the Power
* The Benefits Similarly, in the case of PTC, the Sector, the
IPP is expected to invest aGovernment will no longer have to total
of US$300 million.
The Government of Jordan was in a make up the US$2.1 million of
annual
situation in which many of its public losses. In addition, the
US$0.8 million The WAJ transaction enabled Jordan to
enterprises had losses and future in annual franchise fees from
the new obtain a US$55 million World Bank
development of the economy was operators will now flow directly
to the investment loan. Furthermore, a new
hampered by lack of funds for Government's budget. Net profit of
water treatment plant costing US$150
necessary infrastructure development. JCF has increased by 50
percent in the million will bc funded (50 percent by
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Hashemite Kingdom of Jordan Update
the private sector on a BOT basis and telephone line has been
reduced from water from truck suppliers at muchthe rest through
donor grants). Also in years to weeks, and phone rates, higher
prices. Water is now flowingthe Water Sector, the 320km conveyor
though still high according to again on a more regular basis.
Streetof fossil water from Disi to Amman, at international
standards, have been flooding from water mains, once aa cost of
US$700 million would be reduced significantly. The PTC common sight
in Amman, is nowfinanced on a BOT basis. transaction has yielded
immediate rarely seen.
results. With private investment, busesThese
privatization-related are more frequent and ridership
hasinvestments, totaling more than increased dramatically from
60,000 to * ConclusionUS$2.1 billion, averaging seven 100,000,
while the fares have remainedpercent of GDP per year during the the
same (see Box). On a more
next four years, become important qualitative level, the buses
are new, PEs is of reirestroadrfactors for the revival of the
Jordanian clcan inside, and less polluting. This ba is complicated,
requires broad-economy. based consensus, and takes time to do
0 Beforc Privatization *AfterPrivatization transparently.
Transactions cannot beJobs are being created due to the new 200
micro-managed from outside, nor can
strict deadlines be set in advance. ThePnvate Sector investments
and _S D rn n ecnclAssacopportunities. Although it is still early
10 *IDF Grant and Technical Assistance
100 provided by the Bank and donors hasto assess the impact of
the Program onemployment, preliminary evidence 50 -_ i* r _i _ been
instrumental in getting theindicates that already more than 6,000
0- Program started and underway. Butjobs have been created on a net
basis No. of Buses Ridership the honors go to the Government
andrelative to a labor force of about one (thousands) people of
Jordan for steadfastly
million. As indicated above, Amman Bus Transport dealing with
the overwhelminglyaccording to the strategy, no one has complex
issues one-by-one andlost their jobs involuntarily, but the has
been a boon to the average working making the Program a grand
success.Program may have generated pockets person whose commute has
been The EPC is a major anchor andof hidden unemployment. The
significantly reduced, in some cases driving force behind this
success.employees of the old enterprises have from two hours each
way every day toeither been retained in the new under half an hour,
and has enabled Now funded through the Governmentprivatized
organizations or transferred them to seek employment opportunities
budget, the sustainability of the four-
or absorbed in other agencies, either in locations which were
previously year old program is further secured byinto vacant
positions or merely in difficult to reach except by car or taxi.
the expertise and enthusiasmpending outplacement opportunities.
haressed in the EPC.Nevertheless, the experience clearly City water
is a very scarce commodityshows that opening up sectors such as in
Jordan delivered once or twice aTelecommunication to Private Sector
week. Leakage and illegal connectionscompetition can produce new
jobs left 55 percent of water usagequickly. unaccounted for. Broken
meters and
"private arrangements" resulted inConsumer benefits are being
reaped inequitable access and cost-sharing.from the Program. The
wait for a Many households were forced to buy
_
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Hashemite Kingdom of Jordan Update
I RECENT ECONOMIC DEVELOPMENTS I* Resilient Growth tariff, trade
and fiscal reforms, and privatization) and
partly be due to a response to monetary policy stimulus.Real GDP
growth (at market prices) reached 3.9 percent The global events
following the September 11 terroristin 2000, after languishing at
or below three percent in the strikes have the potential to
adversely affect the prospectspreceding four years. Importantly,
the Jordanian for the rest of the current year and beyond
througheconomy showed some resilience to regional shocks as
diminished exports, tourism and private capital flows.GDP growth
rates recovered to a four percent average forthe first two quarters
of 2001, after dipping to 3.5 percent * Inflation Picking Up But
Stillin the last quarter of 2000. The Intifada in West Bankand
Gaza, now running for a year, affected Jordan Moderatedirectly
through reduced arrivals of non-Arab tourists, Inflation in Jordan
is moderate averaging only 2.8 percentreduced export of
construction material, vegetables and in the last five years,
helped partly by the unchangedfruits to West Bank and Gaza and
Israel. However, a exchange rate between the Dinar and the US
Dollar sincesurge in exports from Qualifying Industrial Zones 1996.
The US Dollar's strong appreciation against the(QIZs)' to United
States markets, pick-up in construction European currencies - an
area from which a third ofactivity, and revival of industrial
production and broad- Jordanan Imports are sourced - and Jordan's
import tarffbased service sectors, have helped Jordan pick up
growth cuts have helped in keeping Imported iput costs
low.momentum. All indicators - exports, imports, industrial
Inflation, as measured by Amman Consumer Price Indexlproduction,
private sector credit - up to the second which was declining
through the year and only averagedquarter of 2001 point to
increasing strength of the 07pce (a nnu rate) i20 began ocli
durig
econmy. he wlcom upsrgein te ecnomy desite 0.7 percent (annual
rate) in 2000, began to climb duringeconomy. The welcome upsurge in
the economy, despite the start of 2001. The broadening of the 13
percentrecent adverse neighborhood effects, could partly be due
General Sales Tax (phase two) base to trading sectorsto the result
of ongoing structural reform efforts (tax i ente d from January
2001 ban up ardriong stor
x Implemented from January 2001, and upward revisions to
Figure 1. GDP Growth Rate petroleum prices announced in
July-August 2001, are(in percent, annual rate, year on year) behind
the moderate increase in inflation, as shown in
Figure 2. Petroleum product price increases announced in4.4%
July and August have not been fully reflected in the
indices available up to July which registered an increase of4.2%
_ 2.8 percent compared to the previous year.
4.0% - - _ _ Figure 2. Inflation (in percent, year on year)3.8%
-- 3.0%-- 1 1 1 11
3.6% - - ~~~~~~~~~~~~~~~2.5%2.0% - - - - . - - -
34% 1.5% _ - - -1-1.0% - --
3.29,vo ~ ~~~~~0.5% - .. . - .- - - -3.0% ~ ~ ~ ~~-0.0%-
------
9' 9' 9' 9' 9'~E - 0. 5% - - - - -t - -0 0 0 0 -
-~~~~~~~~~~~~~~~~~~~~~~-10/
o c o o o -~~~~~~~~~~~~~~~~~~~~~~~~~1~91.0%-
Source: Department of Statistics, Jordan. -2.0%Note: GDP is
measured in constant 1995 market prices. o e - 0 0 O 0 0 - 0 0 0
0
ONO N0 0 0 0D 0 0-- -
Exports from QIZs are allowed to enter the United - - -States
duty-free and quota-free, as long as they meetspecific local
content requirements from Israel, Jordan Source: Central Bank of
Jordan (CBJ) Monthly Statisticsand West Bank and Gaza. Bulletin,
International Financial Statistics (IFS) and LDB.
-
o4ashawmMs I M nsd'm 1 f OIrdan Update
o Merchandise Exports Surge quarter of the current year.
However, there has beenAfter Five Years Of somewhat of a rebound in
the second quarter of 2001
with increased tourism receipts growing at six percentStagnation
(year-on-year). The main reason for this rebound appears
to be the increased arrivals from Arab countries withAfter
remaining flat at around US$1.8 billion for five different
perceptions of regional risk.years, exports2 jumped by 16 percent
in the first half of2001. Stellar performance in apparel, clothing
and Imports Climb Persistentlypharmaceutical products helped
overcome the drag ofmineral exports as shown in Table 1. Much of
this surge Helped partly by the strong Dinar and continuing
importin clothing exports is led by exports from QIZs. tariff
reductions as a part of the trade reforms, imports
Table 1: Analysis of Export Surge in the First Half of continued
to climb in the first half of 2001 to nearly 19
2001 percent annual rate in current US Dollar terms.
Thispersistent surge comes after a strong pick-up noted in2000,
when imports increased by 24 percent, ending a
'W'Y MD declining trend of the previous four years. More than
halfof this increase in the first half of 2001 came from the
Total 100.0 15.7 100.0 import of manufactured goods and
telecommunication
Clothes 7.0 172.3 0.3 equipment as a result of higher industrial
output and
Medical and Pharmacy investment demand. Given that merchandise
exportsProducts 10.3 15.0 10.7 covered only a quarter of
merchandise imports and that
the rise in imports outpaced the pick-up in exports,
theVegetables 5.5 29.5 9.9 trade balance continued to be large, at
around a third of
Cement 1.5 78.9 6.3 GDP.
Potash 12.8 7.5 6.0
Source: Staff estimates based on Central Bank of Jordan
Narrowing Current AccountMonthly Statistical Bulletin. Weights are
derived from data for Surplus2000.
In 2000, current account surplus (including grants)
Service Exports Moderate sharply narrowed to a small surplus of
0.7 percent ofGDP declining from the peak of five percent reached
in
Worker remittances and tourism receipts are two 1999. This was
the net result of import surge andimportant sources of service
exports for Jordan. In 2000, weakness in tourism receipts witnessed
in the year 2000.worker remittances were larger than merchandise
exports As expected, current account balance is turning into aby 30
percent and tourism receipts3 amounted to nearly deficit for the
first time in five years in 2001. Thoughhalf of the exports. Growth
momentum in Gulf exports surged strongly and the brisk pace of
importseconomies fueled by strong oil prices has probably slackened
somewhat in the first half of 2001, moderatehelped to increase
worker remittance inflows in 2000 by growth in service exports led
to a small deficit on the11 percent. The results for the first half
of 2001 show a current account of US$60 million - about 0.7 percent
ofpersistent trend with worker remittances continuing to GDP.
Foreign reserves (excluding gold) of the Centralflow at the same
rate. The decline in tourism revenues by Bank which reached a high
of US$3.5 billion innine percent in 2000 was attributed to the
regional September 2000 helped by UN compensation
paymentsuncertainty. This declining trend persisted into the first
and privatization proceeds, have been depleting at a
2 Does not include re-exports.3 Travel receipts are treated as
tourism receipts.
m _ _ _ _ _ _ _ _a__ _ __Il
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Hashemite Kingdom of Jordan Update
moderate rate to US$3.1 billion at the end of July 2001,
dramatic six-fold rise in trading volumes and the nine
still some eight months of merchandise import percent gain in
the Amman Stock Exchange Index by
equivalent4. July 2001 from the lows reached in September
2000.
Figure 3. Current Account Balance Ratio Figure 4. Growth in
Private Sector Credit(percent, year on year)
6.0%5.0% 16.0%
4.0% _ -0% -81. 14.0% - - _ I -2.0% 12.0% -.......-- r-- - -
-]--
0.0% -6 10.0% _ l -fl , --..8.0% -- _o
-2.0% 1 9 1 9 9 6 .9.- 1.0 % ; - t _ I a___l
-4.0% -- -3.8% -3.2% -4.0% - - I1 --609.300%--- -
-8.0%~~~~~~~~~~~~~~~~00
1994 1995 1996 1997 1998 1999 20000 0 0
Source: Central Bank of Jordan. Source: Central Bank of
Jordan.
* Easy Monetary Policy Is * Medium-Term Outlook forHaving an
Impact Fiscal Policy Improves
The Central Bank has been relaxing the monetary policy Fiscal
management continued to be focused on securing
to stimulate growth since mid-1999, and in the more medium-term
gains. The introduction of the Value
recent period the decline in United States interest rates Added
Tax Rate at 13 percent, the enactment of the new
have created more room for action in this regard. In mid- Public
Debt Law that empowered the Cabinet to set a
May 2001, the Central Bank re-discount rate was ceiling for
Total Gross Public Debt at 80 percent of GDP
lowered to 5.5 percent taking the cumulative reduction in (as
against the estimated ratio of 114 percent in 2000)
the preceding one year amounting to 150 basis points. In were
strong indicators that fiscal prudence would remain
response, the commercial banks have been lowering their the
overriding aim of fiscal policy. To reduce
lending rates, though by not as much. The prime lending
vulnerability to oil price changes, authorities announced
rates of commercial banks are in the range of eight-nine
increases (petrol - 15 percent; diesel - 3.8 percent; and
percent with the banks free to set the rate depending kerosene -
21 percent) in administered prices of
upon the borrower's credit risk. Growth in credit to the
petroleum products in July-August 2001. The overall
private sector is showing a strong, persistent pick-up fiscal
deficit (excluding foreign grants which average
since mid-2000 to reach a nearly 11 percent growth in about four
percent of GDP) as a ratio of GDP, estimated
July 2001, compared to a year earlier. This is a clear sign at
7.4 percent, by the authorities remained at the same
of pick-up in private sector activity compared to the level as
in the previous year because of short-falls,
sluggish six percent annual average credit growth mainly in
non-tax revenue. In the first half of 2001,
witnessed in the previous five years, 1996-00. The bulk again,
non-tax revenues declined by 7.1 percent, even as
of the new credit went towards buying shares (60 growth in tax
revenues outpaced total expenditures (6.2
percent) and the trading sector (30 percent) which helped versus
4.3, in percent). As a net result, as estimated by
stimulate a weak stock market as evidenced by the the
authorities, overall fiscal deficit, excluding grants, for
the first half of 2001 amounted to JD 233 million
4 Using merchandise imports for the year 2000. compared to JD
202 million for the previous year.
1911we a~~~
-
An important achievement of the year 2000 in public masks the
sharp reduction in the unemployment rate fordebt management was the
I 1 percent point reduction in females that has declined to 15.6
percent from thethe Government's external debt as a ratio of GDP to
85.3 average of 21 percent in 2000.percent. Active buying back of
Brady Bonds and debt-swaps contributed to this decline, in addition
to some Figure 5. Unemployment Ratecurrency revaluation effects.
(For total population aged 15 and up)
16.0%
a Unemployment Edges Up 15.5%Slightly 15.0%
Based on Quarterly Labor Force Surveys carried out by 14.0%-
-the Department of Statistics, Jordanian unemployment 13.5%- _rose
slightly (1.3 and 0.4 percent points respectively) for 13.0%the
first two rounds of 2001 (February and May) 12.5% compared to the
same rounds of the previous year. At .013.7 percent for Round 2 of
2001 (May), it is nearly the 12.0% -
same as the average for the year 2000. However, this c 0 0 -
l,~~ ~~ O O 0 . 0 0
[; XBANK GROUP OPERATIONS
* IBRD Projects in S Samra First Private Power together with
restructuring of keyProject (US$50 million Guarantee).
institutions, and preparation of an
The Pipeline The Project is designed to: (i) action plan for
reuse of treatedsupport the Government's initiative wastewater.
* Agriculture Exports Project for private power generation and
its(US$30 million). The objectives of the efforts in tapping new
sources of 0 Public Sector Reform LoansAgriculture Exports Project
are: (i) to private capital for the Power Sector; (PSRLs). The
foundation for Banksupport private investments for the (ii) add new
power-generating support to Jordan's Program of Publicproduction
and marketing of non- capacity, in line with the least-cost
Administration Reform is a series oftraditional high-value crops
with an development plan for the Power three one-tranche Public
Sectoreffective demand in the international Sector, and at
competitive prices, Reform Loans. The Loans will supportmarkets;
(ii) to introduce and while improving its efficiency; and an agreed
medium-term program ofdisseminate new technologies for the (iii)
strengthen the Ministry of step-by-step Public Sector
reforms,production and post-harvest handling Energy's capacity to
prepare future with a focus on budget reform, betterof these crops;
and (iii) to initiate the private projects and put into effect key
delivery of public services, andprocess of establishing Jordan as a
policies for sustainable development increased transparency
andreliable supplier of export crops to of the Energy Sector.
accountability. The Loans will buildhighly-demanding markets in on
the positive experience of theEuropean and Gulf countries, leading
* Jordan Rift Valley Improvement series of single-tranche
Economicto improvements in levels of farm Project (US$30 million).
The Project Reform and Development Loans,income and in the overall
agricultural would support improved water which supported a program
oftrade balance. management in the Jordan Rift Valley, structural
reforms aimed at
[E____ qvwi 2
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Hashemite Kingdom of Jordan Update
strengthening the environment for vocational and technical
education, potential of Jordan is even greater.private sector. The
PSRLs will support examinations and national assessment. Capturing
this potential, however,a strong, coherent program of reforms In
addition, measures are sought requires Jordan to develop the
Sectorin line with the policy framework for which aim at
economizing the use of in a coherent manner to ensure
itssingle-tranche and programmatic public resources. economic,
social and environmentaladjustment lending. The first PSRL
sustainability. To this end, thefor US$120 million was approved in
Govemment, with Bank assistance,June 2001. * Housing Finance and
Urban has formulated a medium- to long-
Sector Reform Project (HF USRP). term Tourism Development
Program.(US$20 million.) The Project supports The Second Tourism
Development
* IBRD Ongoing the Government's strategy to improve Project
finances Phase I investmentsthe efficiency of the Housing and
Poetfnne hs netet
Projects he Finance Sectors, and of the Program. The Project'sP
JoectP Housing Finance Sectors, promote development objectives are
to: (a)The current portfolio in Jordan Private Sector development
in land create the conditions for an increase inconsists of 10
projects for a total and housing production, and reduce sustainable
and environmentally soundcommitment amount of US$411.7 the role of
the Government in both tourism in Petra, Wadi Rum, Jerashmillion,
of which US$254.2 has been Sectors. The Project would establish a
and Karak; and (b) realize tourism-disbursed to-date. Secondary
Mortgage Facility to related employment and income-
improve the efficiency of medium- to generation potential at
Project sites* Health Management Project longer-term financial
flows for
(HMP). (US$20 million.) The mortgage lending mobilization; *
Community InfrastructureProject was designed to enhance the
facilitate and foster competition in Development Project (CIDP).
(US$30health status of the population market-based mortgage
lending; and lion.)The Comunitythrough: (1) qualitative
improvements lengthen the term structure of Infrastructure
Development Projectin the Ministry of Health's primary mortgage
lending. represents the first (pilot) phase of a
and hospital services; and (2) reform longer-term program of
small-scaleof the Ministry's organization, its * Second Tourism
Development infrastructure improvements to poormanagement, finances
and planning Project (TDP-II). (US$32 million.) communities in
Jordan. This pilotcapacity. The Project finances Tourism is
Jordan's second largest phase tests the opportunities fortechnical
assistance, fellowships, generator of foreign exchange after
developing: (a) income-generatingtraining, teaching equipment,
health remittances. It results in foreign activities in
economically deprivedfacility construction and renovation, exchange
revenues of over US$750 areas; (b) approaches to promote
localcomputer hardware and software, and million equivalent, or
approximately participation in the identification ofmedical and
office equipment. 10 percent of GNP. The actual tourism priority
infrastructure needs; (e)
* Second Human Resources nDevelopment Sector Investment Approval
Loan AmountProject (H{RDSIP-11I). (US$60 Project Name Year Amount
Disbursed
US$ Millionmillion.) The central Project objective Health
Management 1993 20.0 17.8is to improve educational quality. The
Human Resources Dev. Sector Inv. II 1995 60.0 48.7focus is on
measures to enhance the Housing Finance & Urban Sector Reform
1996 20.0 19.1teaching/learning environment Tourism Development It
1997 32.0 10.2
Community Infrastructure Development 1997 30.0 12.9ncluding:
teaching competencies; Training & Employent Support 1998 5.0
1.5
curricula and textbooks; Amman Water & Sanitation Management
1999 55.0 16.6administration and management; and Health Sector
Reform 1999 35.0 9.3creating a strong institutional Higher
Education Development 2000 34.7 1.5framework, particularly in
relation to Public Sector Reforr Loan 1 2001 120.0 120.0
TOTAL 411.7 257.6
a l, . ,, 6 S . E l
-
Hashemite Kingdom of Jordan Update
criteria for eligible appropriate efficiency, management,
operation and introduction of formula-basedinvestments; and (d)
detailed delivery of water and wastewater allocation of higher
educationrelocation plans in squatter settlements services for the
Amman Service Area; recurrent funding from theto enable upgrading
basic and (ii) lay the groundwork for the Government; and (d)
support theinfrastructure in subsequent phases of sustainable
involvement of the Private rationalization of the communitythe
CIDP. The CIDP is one Sector in the overall management of college
sub-sector through the new Al-component of the Govermnent of these
services. These objectives Balqa' Applied University.Jordan's
Social Productivity Program complement the Government of(SPP),
which is a comprehensive Jordan's strategy for water supply and @
First Public Sector Reform Loanstrategy to address the problems of
wastewater services. (PSRL-I). (US$120 million.) Thispoverty and
unemployment through programmatic Loan is the first in
aproductivity improvements. * Health Sector Reform Project planned
series of three Public Sector
(HSRP). (US$35 million.) The Project Reform Loans (PSRLs). The
program* Training and Employment is based on the findings of the
Health supports Jordan by providing fast-Support Project (TESP).
(US$5 Sector Study, prepared jointly by the disbursing external
financing to meetmillion.) This pilot Project is intended World
Bank and the Government of anticipated gaps originating from itsto
introduce an efficient and effective Jordan (April 1997). The
Project is fiscal needs, while supportinglinkage between public
expenditurcs expected to increase the efficiency, fundamental
structural changes in itsfor short-term training, and business
quality, and long-term financial core public sector. The Loan aims
tocommunity skill requirements. It is sustainability of health
services in strengthen public institutional capacityanother
component of the Government Jordan. Indicators to measure the and
the quality of public services.of Jordan's SPP. The TESP has
achievement of these objectives Key objectives are to
strengthencreated a Fund (the Training Fund) include: increased
hospital occupancy private investment, diversify thethat issues
monetary awards to rates; adoption of treatment protocols; economy,
achieve closer integrationenterprises which provide or purchase and
a reduction in spending on with the global economy,
strengthentraining and related services (e.g., pharmaceuticals as a
share of total the country's human capital base, andintermediation,
needs analyses) expenditures. ensure better access to services
fornecessary for the recruitment of the citizens, particularly the
poor.unemployed to fill genuine vacancies. * Higher Education
DevelopmentThe objective of the pilot TESP is to Project (HEDP).
(US$34.7 million.)test the demand for, and the The objective of the
Project is to * IFC Ongoingeffectiveness and efficiency of,
initiate improvements in the quality, Projectsemployer-based
training supported by relevance and efficiency of Jordan'sa
Training Fund, i.e., whether training higher education, and to
supportcan be more cost-effective and Jordan's program to reform
Sector * Al-Hikma Pharmaceuticalsefficient when it is
demand-driven, governance. The Project will: (a) Limited (Jordan).
The Project isPublic Training Funds are establish system-wide
modern designed to help Al-Hikmacompetitively awarded between
public information technology, management Pharmaceuticals upgrade
and expandand privatc providers, and information systems, and
library its existing pharmaceutical andemployment services are also
offered infrastructure for higher education; (b) chemical plants,
and build a newby private offices whose operations support a Higher
Education plant.have been until recently illegal. Development Fund
providing grants to
public universities for innovative and * Zara Investment
Holding* Amman Water and Sanitation economically relevant
sub-projects Company. The investment ProjectManagement Project (A
WSMP). and for improving teaching and consists of the construction
and(US$55 million.) The objectives of the learning; (c) initiate
reforms of higher operation of an international standardProject are
to: (i) improve the education governance, including the 312-room
hotel and complex
_
-
comprising 44 apartments, partially terms and maturities not
otherwise Companzy (JHTC). The Project
serviced by the hotel; well-equipped available in Jordan. Also,
garment comprises an extensive refurbishment
exhibition/conference facilities; an manufacturing operations
typically of most of the InterContinental Hotel's
auditorium; a health club, managed by employ numerous people in
a existing 366 rooms and the addition of
Hyatt International; and a Wellness relatively confined factory.
Adequate 125 new rooms and facilities. The
Center and 231-room hotel complex on fire prevention at the site
is imperative, Hotel will also replace 15 of its
the Dead Sea, combining medical and as are sufficiently low
noise levels, elevators, its boilers, the kitchen, safety
recreational facilities, to be managed adequate lighting, and
sanitary and telecoms equipment. The
by M6venpick. Economic benefits facilities. IFC will require
that EI-Zay's management agreement between
accruing to Jordan include foreign new facilities comply with
World Bank InterContinental Hotels Corporation
exchange generation and the creation guidelines in this regard.
and JHTC has recently been extended
of about 600 direct jobs. IFC's main to 2007.
role in this Project is to provide long- * Arab International
Hotels
termn funding on terms and maturities Companj' (AIHC). The
Project 0 Jordan Investment Trust
not available in Jordan, and help the consists of the renovation
and (Jordinvest). The Project involves the
Zara Company mobilize local loans. expansion of the Amman
Marriott, a establishment of the first investmentleading hotel
located in the Shmeisani bank in Jordan. Jordinvest is expected
* Business Tourism Coinpany. The area of Amman. The work
comprises: to carry out a broad range of
Project consists of building and (i) the complete refurbishment
of all investment banking activities,
operating a resort of international the hotel's 294 rooms; and
(ii) the including: providing long-term private
standards, which will include: (i) a addition of conference and
banqueting equity; investing in quoted
230-key hotel; and (ii) a health/medical facilities, a health
club, retail space, investments; underwriting and private
spa and beauty care facility. The Dead movie theaters and an
underground placement of debt and
Sea, due to its unique therapeutic parking facility. The
proposed equity issues; corporate finance
characteristics and climate, has expansion and modernization of
the activities, especially restructurings,
established itself as a world-class Marriott will boost the
hotel to a 5-star privatization, and mergers and
center for the treatment of various skin international level,
allowing it to match acquisitions. Jordinvest would play a
and muscular-joint ailments, such as the quality level provided
by its critical developmental role in
psoriasis and rheumatism. The competitors. addressing the
financial needs of the
proposed complex will be managed by Private Sector in Jordan and
in
Marriott International and will target * Jordan Hotels and
Tourism developing its capital markets.both health and leisure
tourists. * - -*
* El-Zay (Textile). El-Zay Project Name Approval Loan Amount
specializes in the manufacture of high Year Amount DisbursedUSS
Million?
quality men's suits. The Project Al-Hikma Pharmaceuticals
Limited (Jordan) 1987/90/ 0.34 0.34consists of: (i) an expansion
program 93/95to diversify El-Zay's product line by Zara Investment
Holding Company 1996 17.3 17.3
manufacturing men's outerwear; and Business Tourism Company 1997
4.6 4.6..i) a financial restructuring.designed El-Zay (Textile)
1997 3.6 3.6
(ni) a financial restructuring designed Arab International
Hotels Company 1998 3.6 3.6
to strengthen El-Zay's balance sheet by Jordan Hotels and
Tourism Company 1998 9.3 9.3
replacing most of its short- and Jordan Investment Trust 1998
1.4 1.4
medium-term debt with long-term Modern Agricultural Investment
Company 1999 1 0.8
debt. IFC's investment is to help the Middle East Investment
Bank Recapitalization 2000 2.2 2.2company complete the Project'Is
Boscan Jordan-I 2001 8.0 8.0
company complete the ProJecl s Jordan Gateway 2001 10 0
financial plan and improve its financial Boscan Jordan-lI 2001 1
0
structure by providing funding on Total 62.34 51.14
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Hashemite Kingdom of Jordan Update
Through its affiliation with its sponsor, and restnicturing
program for MEIB. It Israel border. The Project will beGulfinvest,
the Company would also complements the Technical Assistance
developed in thrcc phascs. Phase I ofattract foreign, as well as
Middle program in Jordan, provided by both the Project will
involve: (i) land andEastern, investors to the region. IFC and the
World Bank. infrastructure development of a 50 ha
area on the Jordanian side, and (ii)* Modern Agricultural
Investment * Boscan Jordan-l. The Project is to construction of
94,000 m2 ofCompaniy (MAICO). The overall expand the operations of
Boscan Jordan buildings, offices and factories forobjective of the
Company's operations Group, a Jordanian manufacturer of soft- rent,
on the Jordanian side, which areis to act as a market and
technology side luggage products selling primarily proposed to be
partially financed by
beacon to help diversify and upgrade to the United States
market. Boscan IFCthe range and combination of crops and Jordan's
existing facilities consist of 20irrigation methods, which would
production lines. The Project will add 40 * Boscan Jordan-Il. The
Project isdevelop a modemn Export Sector, additional production
lines. The to develop an integrated Industry andthereby maximizing
the economic Company's products are manufactured Information
Technology Parkreturn on irrigation water and and sold under brand
names by major Development (IITPD). The industrialultimately
rationalize its overall United States retail chains. Boscan park
has been granted the status of aconsumption. Jordan's speciality is
carry-on luggage, Qualifying Industrial Zone (QIZ), to
one of the fastest growing sectors of the provide companies
located there with
* Middle East Investment Bank luggage market. The Project is
expected the competitive advantage of quota-(MEIB)
Recapitalization. The Project to have a significant development
impact free and duty-free access to the Unitedinvolves both MEIB's
(the smallest in employment creation in Irbid, Jordan. States
market. In addition to the QIZ,
commercial bank in Jordan) the proposed park has been given
arecapitalization to meet the Central "Free Zone" status by the
JordanianBank of Jordan's minimum capital * Jordan Gateway Project.
The Government, which provides a 12-requirements, and its
restructuring, Project is to develop, construct and year tax
holiday and other incentivesmanaged by Societe Generale Libano-
operate an industrial estate covering for tenant
companies.Europeene de Banque. IFC investment about 65 ha (of which
about 50 hais part of this larger recapitalization would be in
Jordan) at the Jordan-
WORLLDIB--AA'NIK-'--iANCE STRATEGY
On December 16, 1999, the World been supported by the FLnd, the
Bank in the build-up of foreign exchangeBank's Board of Executive
Directors Group, the EU, and several bilateral reserves to a
healthy level (current
discussed the Bank Group's Country donors. The economy's initial
responsc balance of over five months ofAssistance Strategy (CAS)
for the to the Jordanian Government's Reforn coverage of imports).
The currentHashemite Kingdom of Jordan Program was strong. Economic
account during this period remained
covering the period 2000-2002. fundamentals in the first half of
this essentially balanced. The economicdecade were quite
satisfactory: a high situation began to deteriorate in 1996
* Country Context average growth rate of 7.6 percent per with
growth falling below theannum (until 1996 when it began to
population growvth rate resulting in
Since the early 1990s, Jordan has deteriorate); a reduction in
the fiscal approximately a two percent decline inundertaken
considerable stabilization deficit; low inflation; and sound per
capita income per annum duringand adjustment efforts. These have
monetary management, which helped the 1996-98 period. The
decline
-
Haslsemite Kingdom of Jordan Update
occurred largely because the country * Bank Strategy and IBRD
Guarantees could total US$200faced several unfavorable factors that
million for Private Sector infrastructure
were outside its control, including: Priorities for Bank
investments. The Bank Group expects tolack of progress in the peace
process; Assistance lend to projects in higher education,declining
oil prices, thus reducing the agriculture exports, vocational
market for Jordanian exports in education, tourism, social
protection,
neighboring countries; and spillover Based on detailed
discussions with the water, and Public Sector reforms. IFC
from the general slowdown in the Government and other
stakeholders in proposes to provide selective support for
Asian economies. the country, the Bank's assistance for viable
investment transactions where
The Government is focused on the 2000-2002 will focus on:
comparative advantages are present.
challenge of restoring the country to a . Reviving, maintaining,
and There will also be substantial
higher growth path. Actions are being accelerating economic
growth, nonlending services. MIGA Guarantees
taken in privatization (e.g., Aqaba cmphasizing higher levels of
will be available as appropriate.Railway, Jordan Telecommunications
private investment, export
Company); several key economic laws development, and tourism; c
Partnershipshave been passed; tariffs have been * Promoting human
development,
further reduced; and increased efforts including social
protection; and The CAS is a unified strategy of the
are being made towards fulfilling * Improving water resources
World Bank Group, IBRD, IFG, andrequirements of accession to the
management and the environment. MIGA - all will collaborate to
World Trade Organization. Moreover, IBRD loans to Jordan are
expected to implement the strategy. Many donorsPublic Sector
reforms have become anGobicecthveromeants average US$100-150
million per year are active in Jordan, and the Bankintegral part of
the Govemment' s between 2000-2002, assuming overall coordinates
its assistance closely withdevelopment plan for the next three
tofiveloymear This would maknextthee the satisfactory macroeconomic
theirs. To improve macroeconomicPie Sectors.Thiswould more ienth a
management, structural reforms and management, the Bank works
closely
PromcSeteopriva investmfient ind t portfolio perfor-mance. In
addition, with the IMF.promote private investment in the
country.
POVERTY ALLEVIATION IN JORDAN
The following is an abstract of Poverty Alleviation in P Poverty
Declined in JordanJordan - Lessons for the Future written by Radwan
between 1992 and 1997Shaban, Dina Abu-Ghaida, and Abdel-Salam
Al-Naimat,June 2001 (ISBN 0-8213-4958-9).
* The percentage of Jordan's population below the
The purpose of this report is to draw lessons for poverty line
was lower in 1997 than it was in 1992. Thisimproving the policy
design of poverty alleviation decline is not dependent on the
choice of poverty line.
schemes in Jordan. The conclusions herein are based onanalyses
of trends in consumption poverty' in Jordan and More specifically,
the fraction of the population
assessment of the impact of government programs living below the
poverty line of JD 313.5 per capita per
(including food subsidies and cash transfers) on poverty year"
(using per capita consumption expenditure)allevating thed su i d
declined from 14.4 percent in 1992 to 11.7 percent inalleviation in
the 1990s.
1997. Other measures of poverty also declined during thesame
period, as shown below.
6S. -.. .. ........ ... ._Sa
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Hashemite Kingdom of Jordan Update
Summary Table 1 * Inequality in per capita consumption
expenditure, asmeasured by the Gini Index4 , declined from 0.40 to
0.36during this period. This underlying level of inequality is
Poverty Line 148 261 313.5 essentially moderate by regional and
international(current annual JD per capita) standards.
Poverty MeasuresHeadcount Index 3.0 14.4 11.7 Programs(% of
population) 3 3.0e14.4nGovernmentPoverty Gap Index (%) 0.3 3.6 2.5
Contributed to Poverty
Absolute Magnitudes AlleviationNumber of Poor People ('000) 87.4
554.3 538.2Total Poverty Gap 1.3 35.9 36.6 * In 1992, govermment
programs consisted(current JD, millions) predominantly of food
subsidies, which benefited the
non-poor more than the poor.Sozurce: Based on Table 4 in mnain
report (1987 data are fromthe WVorld Bank [1994] Poverty'
Assessment). Welfare measure b n9 government cams tandser
constitued theis per capita consumption expenditure, obulk of
government programs and these benefited the
poor more than the non-poor.
* The decline in incidence and depth of poverty * In addition,
the data indicate that the poorest tenth ofbetween 1992 and 1997 is
observed for any poverty line the Jordanian population benefited
from National Aidbelow JD 491 per capita per year. For example,
using a Fund assistance more in 1997 than in 1992. Thepoverty line
of JD 365 per capita per year, the fraction of Development and
Employment Fund and the Zakat Fundthe population that was poor
declined from 20.8 percent also target the poor.in 1992 to 18.2
percent in 1997.
* Despite the reduction in poverty between 1992 and * Poverty
Continues As1997, there is widespread belief that poverty actually
Major Policy Challenge forincreased in Jordan during the mid-1990s.
This belief is Jordanpartly in reaction to declining overall per
capita incomessince 1996 in the context of expectations of rapid *
The absolute number of poor people only droppedeconomic
improvements following the 1994 Jordanian- from 554,000 in 1992 to
538,000 in 1997 (sec SummaryIsraeli peace treaty. In addition,
poverty in Jordan in Table 1).1997 remained far higher than it was
in 1987.
* Declining per capita income leads to greater poverty,for a
given level of inequality. Thus, the decline in per
* Poverty Declined because capita GDP in Jordan since 1996 is
expected to lead toinequality Declined increasing poverty.
* The poor and near-poor remain vulnerable as a result* In 1997
prices, per capita expenditure levels went of the shallowness of
poverty in Jordan (many peopledown from JD 821 in 1992 to JD 762 in
1997. However, concentrated close to the poverty line) and the
adversethe poorer 40 percent of the population had higher per
effects of potential shocks. A 10 percent uniformcapita expenditure
levels in 1997 than in 1992, while the reduction in expenditure is
estimated to increase thericher 60 percent were worse off, number
of the poor by 35 percent.
* This clear reduction in inequality outweighed theeffect of the
decline in per capita expenditure levels andled to a lower poverty
rate in 1997 than in 1992.
X ___
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Hashemite Kingdom of Jordan Update
* Policy Conclusions One mechanism for reducing the
vulnerability of thepoor and near-poor to negative shocks is
through
I Sustainable reduction of poverty requires community-based
public works programs that offer
resumption and sustainability of growth. jobs at low wages.
These mechanisms providc
Government transfers had a role in bringing poverty insurance to
low-income households, encourage
down, but budgetary constraints limit their risk-taking, and
lead to higher incomes in the long
expansion and, in a recessionary economy, also their run.
sustainability. After several years of negative growthin per
capita incomes, Jordan needs to resume 3. The capacity of the
National Aid Fund (NAF) needs
growth to reduce poverty as well as improve overall to be
significantly enhanced. Increased reliance on
standards of living. Poverty projections for different targeted
cash assistance has had a measurable
growth scenarios are shown in the following figurc. impact on
poverty alleviation. Yet, more could be
Structural adjustment reforms that enhance and achicved with the
available resources if
accelerate growth are therefore critical for poverty
implementation inefficiencies are overcome. NAF
reduction in the future. requires capacity and institutional
strengthening insuch areas as its organizational structure,
mission,
800 - and business operations.
700 - .. _ 4. Continued priority needs to be placed on human
600- _ development policies, particularly those affecting
500- the poor. This investment is important to permit the
400- . | poor to benefit from growth and increased job.00
Current Growth Projection opportunities. Although overall
indicators of literacy
300 - and health are good in Jordan, the profile of the poor
200 - +Hyothetical 1% Additional Growth- clearly indicates that
the educational attainments of+-Hypothetical 2 % Additional Growth
the household directly impact the incidence of
100 ._. .- _ poverty. It is important to continue investing in
the
o - . health and education of the poor so they will be able
1997 1998 1999 2000 2001 2002 to benefit from higher growth and
increased job
opportunities.
Impact of Growth on the Number ' Consumption povertv r elates
the notion of pover(v toof Poor People (thousands) inzsuifficient
ineans to meet the cost of a basket of basic needs.
2 The povertv line of JD 313.5 per capita per year, in 1997Note:
All growth rates are real per capita GDP. Current prices, is an
update oJ the line used in the World Bank's 1994
growth projections are -2. 7, -2.1, -0.3, 0.4, and 1.4 percent
Poverty Assessmnent, ihich is an update of the official poverty
for 1998, 1999, 2000, 2001. and 2002, respectively. line
originally derived by the Ministry of Social Developmentfor the
year 1987.
2. There is a need for policy response to the 3 The 1992 Income
and Expenditure Suivey indicated 21.3percent of households as poor
using a household-based povertv
vulnerability of the poor and near-poor to economic line. This
report uses individual-based poverty lines.shocks. The current
government welfare program 4 The Gini Index measures inequality in
per capita income oraims at the permanently poor. It is therefore
not expenditure. It ranges between 0. Ofor perfect equality and
1.0
equipped to respond flexibly and quickly enough to for perfect
inequalih;.
relieve any hardship resulting from a negative shock.
MIR Ilion* lm
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Hashemite Kingdom of Jordan Update
Global Development Learning Network
"As we look at the challenges of poverty, it is clear that money
alone is not what is needed. We needcolleagues who can learn and
share experiences with each other. Distance learning is the tool
thatwill enable this and benefit us all. " James D. Wolfensohn,
President, The World Bank.
In the global economy of the network of learning centers. GDLN
of change, using two-way multimediainformation age, knowledge and
provides learning opportunities for video-conferencing sessions
with printinformation have become more vital to stakeholders in the
development packages, CD-ROMs, interactive Websustainable
development than bricks community and provides cost-
communications, and face-to-faceand mortar. Policymakers, Private
effective capacity-building programs tutorials; (b) fostering
globalSector leaders, community workers in countries that now - for
the first dialogues providing uniqueand other "agents of change" in
the time in history - are able to make a opportunities for
participants todeveloping world know that their sustained effort to
close the address pressing issues that call for asuccess depends on
bridging the gap knowledge gap with the rest of the common
international agenda orbetween the information-poor and the world.
require the formulation of local policyinformation-rich. That is
why the response. The participants at theWorld Bank and its
partners have As part of the Higher Education GDLN Center will be
governmentlaunched the Global Development Project (previously
described), and co- officials, universities, business andLearning
Network (GDLN), a financed by a Japanese Trust Fund, a trade
associations who will take partPartnership of organizations that is
Global Development Learning in distance learning activities
withleading the way in using 21 St Century Network Center is being
established at developmental emphasis.learning technologies to
share the University of Jordan. GDLN willdevelopment knowledge.
provide quality programming drawn The Center was opened on July
5,
from public and private sources, 2001 by His Majesty King
Abdallah.GDLN is an interactive, multichannel including the World
Bank Institute's His Majesty attended the first GDLNnetwork with a
mandate to serve the GDLN Center which promotes Session, which
included a multi-partydeveloping world. This flexible
development-related learning in all its session with the Tanzanian,
Ukrainianlearning system uses two-way aspects. Learning programs
include: GDLN Centers, the World Bank Parisvideoconferencing,
Internet and other (a) seminars, workshops, and courses Office, and
the Bank's Washingtonadvanced communications techno- targeted to
the needs of policy-makers, Headquarters Office.logies to link
together a global development practitioners, and agents
U
-
Hashemite Kingdom of Jordan Update
. 0 . m m * 06.I
35% ___________________________________________ Jordan joined
the World Bank in 1952, and received its
30% ______________________________________ first IDA credit in
1961. Over the past 40 years, a totalof 67 credits and loans have
been granted to Jordan for
25% a total amount of US$1,940.7 million. Jordan is also a
20% - member of IFC, ICSID, and MIGA.
15% IDA: US$86.1 million (15 credits)
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World Bank Publications
lessons for future policy designRecent Reports on improvements.
the Jordan Valley. In terms of theJordan financial challenge,
Jordan will have
Jordan Water Sector Review to redouble its efforts at
generatingPoverty Alleviation in Jordan - Update (Report 21946-JO).
The significant additional operatingLessons for the Future (ISBNO-
Ministry of Water and Irrigation, income from drinking water
supply8213-4958-9). The incidence of Hashemite Kingdom of Jordan,
invited and irrigation services. Urban waterpoverty in Jordan
declined between the Bank to assist in updating the and irrigation
tariffs have not1992 and 1997. This decline is related Water Sector
Review of 1997 as an increased since 1997. Urgent action is
to the change in Jordanian input into the formulation of a five-
needed on tariffs to ensure fullGovernment policies from
generalized year action plan for the Water Sector. recovery of
operating costs andfood subsidies, (benefiting the rich Jordan
faces three critical challenges: periodic adjustments for
inflation.
more than the poor), to targeted cash 1) the resource challenge;
2) the Self-financing of water supply andassistance for the poor.
Yet poverty financing challenge; and 3) the irrigation services
must be a high
reduction remains a major policy institutional challenge. In
terms of the priority. In terms of the institutional
challenge for the country since the resource challenge, the
challenge of challenge, reforming the Waterimprovement was driven
by reduced water deficits is compounded by the Authority of Jordan
and Jordan Valley
inequality and not by positive need to ensure water quality and
Authority to focus on essential
economic growth. The sustainability environmental protection. A
strategic and bulk water management
of Jordan's social safety net is limited systematic action plan
for reuse of tasks while divesting retail water
by the growth of the budget and the treated wastewater needs to
be services to user or Private Sector
economy. The report therefore formulated in view of the
projected entities is a high priority. (2001)examines Jordan's
recent experience increase in the quantity of treatedin poverty
alleviation schemes to draw wastewater available for use in
-
Hashemite Kingdom of Jordan Update
Nonfarm Income, Inequality, and recent observations, with a
policies and inappropriatePoverty in Rural Egypt and Jordan
comparison for earlier decades, the macroeconomic and trade
policies.(WPS2572). Nonfarm income has a WDI has become an
invaluable source * In trade negotiations, the globalgreater impact
on poverty and to those in the Private Sector who economy faces the
criticalinequality in Egypt than in Jordan. In analyze business
opportunities in governance issue of adequaterural Egypt the poor
receive almost 60 developing countries and emerging standards for
health and safety,percent of their income from nonfarm markets,
labor practices, environmentalsources, while in rural Jordan they
Reforming Public Institutions and protection, and intellectual
propertyreceive less than 20 percent. The Strengthening Governance:
A rights.reason for this difference is land: in World Bank Strategy
(ISBN 0 * The influence of technologicalrural Egypt, agricultural
land is very 8213-4875-2) Poorly functioning innovations and what
electronicproductive, but access is quite limited, . . . commerce
means for trade and' ' ~~~~~Public Sector institutions and weak
d so the poor are "pushed" into governance are major impediments
to production in developingnonfarm work; while in rural Jordan, .
economies.' ' ~~~~~growth and equitable development inland is not
very productive, and accessIS not highly prized. In both countries
im i optant because of its centrality Voices of the Poor The Voices
ofthe best way to reduce poverty and t deI nt the Poor Project was
undertaken as ainequality might be to focus on multi-country
research initiative tononfarm unskilled labor. This strategy paper
reviews the World understand poverty from the eyes of
Bank's recent work on governance, the poor. The research
findings areOther Bank Public Sector institutional reform, and
being published in three books over
Other Bank capacity building, particularly in core the course of
this year.Pubblications public institutions. The agenda for the
next three years is to continue to * Can Anyone Hear Us? (ISBN
0-World Development Report foster changes through the 19-521601-6)
gathers the voices of2000/2001: Attacking Poverty (ISBN advancement
of analytic tools, new over 40,000 poor women and
men0-19-521129-4). At the start ofa new approaches to the design of
lending in 50 countries from the Worldcentury, poverty remains a
global operations, expanded emphasis on Bank's participatory
povertyproblem of huge proportions. Of the partnership with clients
and other assessments.world's six billion people, 2.8 billion
donors and progressive shifts in * Crying Out for Change (ISBN
0-live on less than US$2 a day and 1T2 staffing, incentives, and
evaluation 19-521602-4) pulls together newbillion on less than US$I
a day. The techniques. field work conducted in 1999 in 23report
argues nevertheless that major countries.reductions in all these
dimensions of Global Economic Prospects and the * From Many Lands
(ISBN 0-19-poverty are indeed possible - that the Developing
Countries 2001 (ISBN 0- 521603-2) offers regional
patternsinteraction of markets, state 8213-4675-X). Global Economic
and country case-studies.institutions, and civil societies can
Prospects and the Developingharness the forces of economic
Countries 2001 discusses three issuesintegration and technological
change that are central to the challenges To order by phone or
fax:to serve the interests of poor people facing developing
countries as they Phone: 1-800-645-7247and increase their share of
society's participate in the global trading or
703-661-1580;prosperity. system: Fax 703-661-1501
* Many developing countries,World Development Indicators
particularly some of the poorest To order on-line:(WDI) 2000 (ISBN
0-8213-4553-2). ones, have had little success sharing
http.//publications.worldbank.org/Enlarged to include more than 80
in the expansion of global trade, ecommerceltables and 600
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books(aworldbank.org
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Joseph Saba, Country Director Ghassan El-Rifai, Principal
Adviser, RegionalTel. (202) 473 2992 Strategy, Sectoral Policy, and
External AffairsFax (202) 477 1482 Tel. (202) 473 6162E-mail:
saba(a)worldbank.ori Fax (202) 522 0006
E-mail: elrifaiAi)worldbank.orgOsman Ahmed, Lead Operations
OfficerTel. (202) 473 7063 Christina Lin Hasley, Communications
AssociateFax (202) 477 1482 Tel. (202) 458 9659E-mail:
ahmed(@worldbank.org Fax (202) 522 0006
E-mail: hasley(q.worldbank.orgThirumalai G. Srinivasan, Senior
EconomistTel. (202) 473 1288 World Bank Internet Address:
www.worldbank.orgFax (202) 477 0432E-mail:
srinivasan(q),worldbank.or= To view and order World Bank
Publications:
http://publications.worldbank.org/ecommerce/Sophie Warlop,
Operations AnalystTel. (202) 473 7255 For more information on World
Bank programs inFax. (202 477 1482 Jordan:
www.worldbank.org/mna/jordanE-mail: warlop(aworldbank.org
World Bank Address:Dilys Quinn, Program Assistant 1818 H Street,
NWTel. (202) 473 6092 Washington DC 20433Fax (202) 477 1482E-mail:
quinn(@Dworldbank.org
Editorial Team:
Dilys QuinnRadwan ShabanJohn Speakman
Thirumalai G. SrinivasanSophie Warlop
With special thanks to Mary Saba
P r 4 ; __
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1 S- z
'oQ -S t
.E G >~~C>
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Hashemite Kingdom of Jordan Update
CORRIGENDUM
World Bank Contacts
Joseph Saba, Countiy Director Sereen Juma, Communications
AssociateTel. (202) 473 2992 Tel. (202) 473 7199Fax (202) 477 1482
Fax (202) 522 0003Email: Jsaba@ worldbank.orp. Email: Si uma
@worldbank.org
Osman Ahmed, Lead Operations Officer World Bank Internet
Address:Tel. (202) 473 7063 www.worldbank.orgFax (202) 477
1482Email: [email protected] To view and order World Bank
Publications:
http://publications.worldbank.org/ecommerce/Thirumalai G.
Srinivasan, Senior EconomistTel. (202) 473 1288 For more
information on World BankFax (202) 477 0432 programs in
Jordan:Email: [email protected]
www.worldbank.org/mna/iordan
Sophie Warlop, Operations Analyst World Bank Address:Tel. (202)
473 7255 1818 H Street, NWFax. (202 477 1482 Washington DC
20433Email: [email protected]
Dilys Quinn, Program AssistantTel. (202) 473 6092Fax (202) 477
1482Email: [email protected]
Editorial Team:
Dilys QuinnRadwan ShabanJohn Speakman
Thirumalai G. SrinivasanSophie Warlop
With special thanks to Mary Saba
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