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Jordanian privatization update
Business Middle East / September 2000

By Larry Luxner

Jordan's economy, like that of most other Arab countries, has long been dominated by an inefficient, bloated public sector that kept people employed but stifled economic growth. In 1997, the government introduced an economic reform program centered on privatising state-owned companies -- a policy that only now seems to be picking up steam.

King Abdullah and other officials hope the program, which hopes to auction off everything from power plants to post offices, will boost Jordan's competitiveness on a regional level; stop the bleeding of public funds to support money-losing companies, and attract new foreign investment which in the long run will slash Jordan's 20% unemployment rate, even though the new policy will inevitably put some civil servants out of work.

So far, each deal has been structured differently. For instance, the government sold 33% of Jordan Cement Factories Co. to Lafarage of France in November 1998. The Ma'in Spa, also state-owned, was turned over to the French hotel chain Accor under a 30-year leasing and management deal. Likewise, the Water Authority of Jordan has signed a performance-based management contract -- linked to a $55 million World Bank loan -- with French utility Suez Lyonnaise des Eaux to operate Amman's water system.

And in Jordan's first major privatisation, a consortium led by Raytheon, Wisconsin Central Transportation Corp. and other investors recently took a 51% of state-owned Aqaba Railway Corp. Under the build-transfer-operate agreement signed in August 1999, the investors will spend $130 million during the next three years to build two rail extensions that'll link Jordan's Eshidiya phosphate mine in the south to an industrial export jetty at the Red Sea port of Aqaba.

The privatisation effort got an even bigger boost earlier this year when the government sold 40% of its prize possession, Jordan Telecommunications Co. (JTC), to France Telecom and its minority partner, Arab Bank Ltd. The $508 million deal was the largest privatisation in Jordanian history.

France Telecom, which already operates telephone networks in Egypt and Lebanon, defeated two consortia for control of JTC; it plans to invest over $400 million to modernize Jordan's inadequate telecom infrastructure by 2003 -- the year JTC's monopoly ends. At the moment, JTC has 510,000 fixed lines and a teledensity of just under 11 per 100 inhabitants.

The next big prize will be Royal Jordanian Airlines, which is being privatised in pieces, such as catering, duty-free shops and aircraft maintenance. Yet many observers are skeptical that RJ can be privatised, given the airline's $840 million debt.

Other candidates for privatisation include the drilling unit of Jordan's National Petroleum Corp., various postal services, an industrial jetty in Aqaba and national electric utility NEPCO, which has been unbundled into three units: generation, transmission and distribution. Under Jordan's first Independent Power Producer (IPP) project, a $300 million power plant will be built in Al-Samra, north of the industrial city of Zarqa.

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