Jordan, through its investment environment laws and
public-private partnerships (PPP), aims to build a sustainable economy based on
knowledge, innovation, competitiveness, expertise, and diversity that aligns
with the implementation of the
economic modernization vision.
اضافة اعلان
In a world facing geopolitical complexities, economic
setbacks, and various crises such as global fluctuations in prices and
supplies, resulting in market disruptions, public-private investors are
constantly seeking financeable projects. This equitable risk distribution
between the government and the private sector is crucial. However, beyond
mitigating project risks, it requires an ambitious and comprehensive vision to
reduce the general risks faced by the country and a clear program for
public-private partnerships.
Lastly, this plan must take into account financial reforms,
and must emphasize developments in the banking sector,
facilitating money transfer and investment in the Kingdom.
Jordan’s investment environment
Therefore, it is essential to create an investment-friendly
environment that encourages partnerships between the public and private sectors
to execute major projects, adopt unconventional financing methods, and leverage
the technical expertise of the private sector in infrastructure and public
facilities projects. This diversifies economic sources, drives development,
maximizes productivity, governance, and accountability.
According to the executive program of the
economic modernization vision, significant projects and public-private partnership
projects with a total value of approximately JD10 billion will be developed and
executed. Additionally, initiatives to boost the investment sector have been
announced, including 21 investment opportunities with an investment volume of
around JD1 billion.
According to World Bank data, the infrastructure sector in
the
Middle East and North Africa has witnessed a significant contribution from
the private sector, reaching $2 billion, an increase of 214 percent from 2021.
Nevertheless, it only constitutes 0.13 percent of the gross domestic product
and significantly lower than the global average over the past five years of
$3.1 billion.
The Arab Banks Union has committed to encouraging banks to
mobilize $1 trillion to support the implementation of Sustainable Development
Goals in the region by 2030. This ambitious initiative, in partnership with the
UN Economic and Social Commission for Western Asia (ESCWA), seeks to accelerate
the achievement of Sustainable Development Goals in all Arab countries and
support major transformations in six areas: social protection, energy,
education, food systems, digital transformation, environmental diversity, and
nature conservation.
Advancing infrastructure provisions
Typically, in developed countries, two-thirds of
infrastructure projects are funded by the private sector, with the remaining
third handled by the public sector. The private sector provides significant
freedom to design and construct high-quality structures, enabling efficient
operation and maintenance, and thus effectively managing the risks it bears.
This can also result in lower fees and
better deals for governments.
Investors seek a stable environment that allows them to
predict returns on their investments and earn reasonable profits. This
necessitates a public-private partnership framework that maximizes value for
money. When designed and executed well in a balanced regulatory environment,
these partnerships can achieve greater efficiency and sustainability in
delivering public services such as water, sanitation, energy, transportation,
communication, healthcare, education, and tourism. Moreover, these partnerships
can facilitate better risk sharing between the public and private sectors.
Creating an enabling environment for private sector
participation in infrastructure provision is the responsibility of the
government. Consistent and stable policies regarding ease of doing business,
including
transparent and stable taxation, company registration, and ease of
repatriating capital for foreign investors, are essential. Credit ratings and
anti-money laundering indicators are also fundamental requirements to make
project more bankable, including foreign investment. Additionally, local
financing should be incentivized to facilitate deal structuring and reduce
associated financing costs.
Balanced investment facilities and preparations
An essential factor in encouraging investors is the
existence of an effective project database that enables them to plan and manage
resources within a proper timeline. Furthermore, risk mitigation in projects
has become easier due to the availability of various credit enhancement tools.
While this may entail additional transaction costs, it allows governments to
implement vital infrastructure projects and structure innovative deals, thanks
to
multi-party development institutions that enable low-rated countries to
financially launch and close critical infrastructure facilities.
For public-private partnerships to become a key government
agenda, they must be pursued through a balanced programmatic approach. This
approach should be accompanied by sectoral strategies and reforms to ensure
impact, generate momentum, and yield benefits, especially for procurement and
contracting entities (executive ministries, departments, and authorities).
Proper project preparation, with absolute transparency regarding incentives,
privileges, and funding sources, is essential. Otherwise, financiers will add
extra costs, including
potential payment delays, affecting overall financing
costs, private sector confidence, and commitment.
Hamzeh S. Al-Alayani is a Jordanian public-sector government
investments management company board member and a regular regional energy and
industrial commentator. Hamzeh holds an MBA from the University of Aberdeen,
UK, and a BSc in Mechanical Engineering.
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