Region: Middle East and North Africa
Country: Jordan
Topic: Financing and Risk Mitigation
Keywords: Knowledge Lab, Funding and Financing, Privatization
Document Link(s):
Document(s):
- Privatization: Lessons from Jordan744.69 KB
Document Summary:
While many governments in the Arab world have undertaken some privatizations since the early 1990s, many retain surprisingly large portfolios of fully, majority, or minority state-owned enterprises. As in other parts of the world, privatization often causes concerns among citizens. Workers fear loss of employment and benefits; consumers worry about price increases; and voters mistrust government officials.
Jordan’s experience during 1998 – 2008, when the Government of Jordan privatized 14 state-owned enterprises– in telecommunications, electricity, air transport, mining and other sectors – with technical assistance program financing from the U.S. Agency for International Development (USAID) demonstrates both how privatization can provide a wide range of benefits to society and how to implement a privatization program.
Document Details:
Jordan’s Privatization Program: The aforementioned privatization transactions substantially strengthened Jordan’s fiscal position. These privatizations generated $2.3 billion in sales proceeds, which were mostly used to buy Paris Club debt in 2008 at a discounted price. By supporting reductions in GOJ debt from 100 percent of GDP in 2000 to 89 percent in 2004 and 60 percent in 2008, the privatizations supported by the Program contributed to macroeconomic stability. Part of the substantial increase in annual payments (e.g., taxes) from these privatized firms to the Treasury can also be attributed to privatization. Firms restructured and privatized with Program support have shown substantial gains in their financial performance and productivity. Consumers have also benefited, for example from major service improvements and reduced connection charges and tariffs; increases in electricity supply with no real (i.e., inflation- adjusted) increase in average tariffs; and improvements in air service frequencies and services as a result of airline restructuring and privatization. As for workers, the GOJ avoided involuntary retrenchments. SOEs privatized with Program support witnessed only a 2 percent net loss in employment (448 positions), which were more than offset by an estimated 25,000 new jobs in telecommunications and IT-enabled businesses. Workers who remained at privatized firms experienced real wage gains in most cases, as well as better benefits and greater training opportunities. Local communities have benefited from the corporate social responsibility programs (and spending) by the new owners of privatized firms.
Updated: June 27, 2022