WB: Jordan faces daunting short-term challenges due to the Syrian conflict
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Amman, Oct. 18 (Petra) -- Jordan is shouldering a particularly heavy
economic and social burden from the worsening of the Syrian crisis as
estimates show a negative impact of about one percentage point on Jordan’s
GDP due to the conflict, a senior World Bank official said.

The crisis has also created a large scale population exodus which Jordan is
struggling to absorb (620.000 registered refugees as of October 2014), and
the additional demand for public services is adding a significant burden to
the country’s already weak public finances, Inger Andersen, Vice President,
Middle East and North Africa at the World Bank told Petra in an interview on
the sidelines of the recent WB-IMF meetings.

She pointed out that the WB has stepped in with a combined loan and grant
package of about $200 million to help Jordan maintain access to healthcare
services and basic household needs and help municipalities strengthen their
service delivery capacity.

While regional tensions and their recent extension to Iraq are weighing down
heavily on the Jordanian economy through a widening trade deficit and weaker
investor confidence, the economic impact of the Isis move into Iraq is so
far broadly contained, Andersen added. The official said: "While a key
direct negative impact is the disruption of trade routes (Iraq being the
largest export destination for Jordan), the largest impact on growth is the
indirect impact on confidence, both related to consumers and investors."
However, she noted that the global outlook for Jordan remains positive as a
reduced energy bill and higher government investment are expected to boost
economic growth in 2015 and 2016 (to 3.4 and 3.9%, respectively).

Following are some excerpts of the interview: Jordan is receiving military,
humanitarian and development aid from a number of donors, but additional
resources are still direly needed to help the country mitigate the impact of
regional shocks. We should also not lose sight of the continued need for
reforms to foster growth and job creation in the medium term in order to
reduce the large deficits and mitigate macroeconomic vulnerabilities.

The World Bank Group is actively supporting the development of a thriving
private sector in Jordan which is critical in order for the economy to grow
and for jobs to be created - a goal whose relevance is all the more obvious
as the country grapples with the impact of the regional situation. In the
context of a recent World Bank project, a number of important steps have
been taken to strengthen the investment climate with the adoption of
critical laws on public private partnership (PPP), secured lending and
investment. The Bank is also supporting access to finance through a $70m
project for micro, small and medium enterprise development which has helped
create over 2.000 private sector jobs, in particular for women and
youth/most disadvantaged segments of society.

The International Finance Corporation, the World Bank’s private sector arm,
has considerably scaled up its program in Jordan in recent years and is
mobilizing other investors into the Jordanian market. In FY14, IFC
investments totaled around $420 million, bringing its total investment
portfolio (including mobilized funding) over $1 billion. The portfolio is
mostly concentrated in the chemical, pharmaceutical, transportation, power
and financial sectors. IFC is also providing advisory services to strengthen
Jordan’s financial infrastructure (credit bureau, secured lending) and
corporate governance, build the capacity of microfinance institutions as
well as simplify business regulations.

Energy demand in Jordan has grown dramatically in the past years, reflecting
both population and economic growth. At the same time, regional tensions
have hurt Jordan’s energy supply and forced the country to substitute cheap
gas from Egypt with expensive oil products imports, thereby imposing a major
strain on the budget. The securing of fuels and diversification of Jordan’s
energy sources are among the country’s most critical challenges to reduce
macroeconomic vulnerabilities. The government has been exploring ways to
invest in and attract private capital for wind and solar to help satisfy
growing demand and decrease its reliance on imported fuels.

The Bank has supported government in setting up an institutional structure
for energy efficiency, and to assist in the promotion of a wind power
market. The Bank is also supporting Jordan with a technical assistance
program assessing financial sustainability of the sector. The International
Finance Corporation (IFC), the World Bank’s private sector arm, has a
growing program in renewable energy in Jordan.

It has recently signed project financing totaling $207.5m to support Jordan’s
renewable program, in particular with 7 solar projects which will help
transform Jordan’s power generation base away from expensive, imported
fossil fuels towards sustainable, clean renewable energy. IFC also recently
financed the development of a 117 MW wind farm in Tafilah (US$221 million) –
the country’s first privately-owned renewable energy facility.

We are at a critical juncture for the region with complicated transitions
and tragic conflicts bearing destabilizing impact for the world. In this
context, the international community has a collective and historical
responsibility to scale up its support and respond to the current "Bretton
Woods moment". In 1944, the world came together while World War II was still
raging to think into the future and to establish the Bretton Woods
institutions to rebuild the shattered economies in Europe and to promote
economic cooperation. It is today a similar moment for the MENA Region.

MENA faces a triple challenge that threatens stability and prosperity: (i)
long-standing distortions that generated jobless growth and poor service
delivery as well as low financial access and inclusion; (ii) severe
imbalances (including regressive and costly fuel subsidies) that threaten
macroeconomic stability; (iii) deep political and social tensions,
escalating into violence.

The World Bank Group is building its engagement through a two-pronged
approach: (i) address the urgency of the immediate crises through the
provision of emergency assistance aiming at alleviating the suffering of the
people and improving their livelihoods; (ii) while at the same time keeping
a sustained focus on the investments that are needed for medium and long
term development, inclusive growth and enhanced service delivery.

The World Bank Group’s engagement in MENA continues to be driven by its
strategic pillars (jobs, inclusion, governance and private-sector-led
growth), with a special focus on vulnerability, exclusion, poor service
delivery and weak government institutions, lack of voice and opportunity
which define the twin goals.

In Jordan, the Bank is responding through both emergency operations,
including grants to service the hosting communities and strengthen the
capacity of local governments, and with medium to longer term investment
projects aimed at providing the people with infrastructure in such sectors
as water, electricity, water and transport.

//Petra// AA
18/10/2014 - 09:20:19 PM