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French Version

Privatization creates controversy

Economic reform programs have become a source of much debate among Jordanians; one of the most apparent mechanisms, which evolved and is still under fire, is privatization. Officials believe that privatization is one of the primary basic principles for national economies to compete with the policies of open market, while nationalists believe the process only came for the benefit of "influential groups and individuals".

Jordan suffered an economic crisis in 1988, which forced the country to adopt several economic reform programs, the final of these ends June 2004.
"The privatization process enabled the Jordanian economy to create more investment projects and encouraged the local private sector to play a greater influential role in the economic development," Minister of Finance Mohammad Abu Hammour said.

In the mid 1990s, Jordan started to prepare the required environment for privatization. Nationally, this was done by enacting the necessary legislation, while on the international level it was by signing agreements.

After Jordan signed the partnership agreements with the European Union and the United States in 1997 the tendency towards more open economic policies became a must.

This concept was enhanced after Jordan became a member of the World Trade Organization (WTO) and after signing the US-Free Trade Agreement in 2000. The government launched its privatization plans at the behest of the World Bank and the United States Agency for International Development (USAID).

Abu Hammour believes the economic reform programs flourished in anticipation that the real GDP growth rate this year would reach 5 percent.

Meanwhile, the 2004 Executive Privatization Commission (EPC) report indicated that Jordan has managed to successfully deal with the privatization process, which started in 1996.

"Currently 58 projects were privatized including selling the government’s shares in the Jordan Investment Corporation portfolio," the report noted.

The report assures that the revenues of privatization have greatly contributed to ease the Treasury’s financial burdens, generating more than $800 million in direct and indirect private investments.

However, Member of the Lower House and of the Parliamentary Legal Committee Mahmoud Al Kharabsheh pointed out that this information is incorrect.

"The revenues have not augmented, instead they have decreased by 25-30 percent," he told The Star. Meanwhile, the government has a list of new companies to be sold partially to the private sector.

The privatization process differs in several cases, for instance, the Jordan Cement Factories Co, is now completely owned by the private sector. About 33 percent of the shares were sold to the French company Lafarge. However, the government sold 40 percent of Jordan Telecommunications Company’s stakes to France Telecom/ Arab Bank, 8 percent to the Social Security Corporation and 10.5 percent through a public bid in 2002. Meanwhile, the government received $173 million from the sale of 26 percent of the Arab Potash Corporation to the Canadian PCS Company in 2003, while retaining the other 26 percent as the government remaining portfolio in the company.

In addition to these firms, the government has also privatized the public transportation in the Amman Greater area; the Ma’in Spa; the Jordan Water Authority through a contract with the French Suez Lyonnaise des Eaux company; the Duty-Free markets at Jordanian airports to the Spanish Aldeasa for $60.1 million; and Royal Jordanian Aviation Academy to a local investor for $5.8 million.

According to the report, the revenues of privatizing all projects exceeded $1 billion. Part of this amount was allocated to pay for some of the accumulated foreign debts like the French and Spanish ones.

One of the significant facts that the government revealed was the sum of losses, which the Treasury bore before the privatization program was launched.

Meanwhile, the government is in the process of privatizing vital sectors like the National Electric Power Company, the Royal Jordanian aircraft maintenance company affiliate, Civil Aviation Authority, Queen Noor Technical College for Civil Aviation and others.

In May 2000, Parliament passed a new law establishing a Privatization Council to oversee the overall divestment strategy and decide on the use of proceeds. The law requires at least some proceeds to go to infrastructure projects, social programs and support workers affected by the privatization process.

"I believe it’s time for the government to stop to revise and reevaluate its privatization plans," Al Kharabsheh said.

He continued to criticize the tendency to sell public assets to foreign investors or strategic partners, which puts the most vital country’s assets in the hands of a group of individuals, capitalists and foreign investors.

"Members of the Lower House have repeatedly called for the creation of a fund for the privatization revenues; however, these were unjustifiably spent for other purposes not as previously planned," Al Kharabsheh added.

Other members of the Lower House called for more credibility and transparency when tackling the issue of privatization. "I believe the UK was one of the first countries to launch privatization plans, as I know, the UK has stopped these plans for re-assessment. We should stop for a while to revise our plans," he concluded.

Ibtisam Awadat
The Star

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