Strategies for enhancing Jordan’s PPP bankability

Establishing an investment-friendly environment to allow PPPs to flourish in Jordan will require a number of important steps

The kingdom of Jordan is looking to create PPPs to help build a sustainable economy based on knowledge, innovation and diversity in line with its 2033 modernization vision.

Therefore, it is essential that Jordan creates 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. This strategy will help diversify the kingdom’s economic sources and drive development, while maximising productivity, governance, and accountability.

Projects with a total value of approximately 10 billion Jordanian dinars ($14.1trn) will be prepared and executed within the next decade, according to the government’s vision.

Additionally, wider investment initiatives have been announced, including 21 investment opportunities worth around one billion Jordanian dinars ($1.6bn), as well as eight priority investment sectors.

But in a world facing geopolitical complexities and economic setbacks, public-private investors are seeking viable, financeable projects. In this context, equitable risk distribution between the Jordanian government and the private sector is crucial. And beyond mitigating project risks, Jordan will also need to stick to its ambitious vision and promote a clear PPP programme to encourage investment confidence.

Middle East and North Africa infrastructure has seen a significant contribution from the private sector this year, reaching $2bon – an increase of 214% from 2021. Nevertheless, this figure only constitutes 0.13% of gross domestic product: significantly lower than the global regional average of $3.1bn.

Investors are seeking a stable environment that allows them to predict returns on their investments and earn reasonable profits. This necessitates a PPP framework that maximises 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.

Jordan must mindfully create consistent and stable policies that promote ease of doing business, including transparent and stable taxation, company registration, and ease of repatriating capital for foreign investors. Credit ratings and anti-money laundering indicators are also fundamental requirements to make projects more bankable. Additionally, local financing should be incentivised to facilitate deal structuring and reduce associated financing costs.

Another way that Jordan can encourage investors is through the creation of an effective project database that the planning and management of 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 PPPs to become a key government tool, they must be executed carefully and pragmatically. PPP execution should be bolstered by sectoral strategies and reforms to ensure impact, generate momentum and yield benefits, especially for procurement and contracting entities.

Thorough 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.

The writer 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.