Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report no. P 7542-JO

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ONA

PROPOSED LOAN

IN AN AMOUNT OF US$ 120 MILLION

TO

THE HASHEMITE KINGDOM OF JORDAN

FOR A

SECOND PUBLIC SECTOR REFORM LOAN

May 31, 2002

Social and Economic Development GroupMiddle East and North Africa Region

This document has a restncted distnbution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EOUIVALENTS(As of May 2002)

Currency Unit = Jordanian Dinar (JD) JD 1.00 = US$ 1.43UD$ 1.0 = JD 0.708 JD 1.00 = fils 1,000

WEIGHTS AND MEASURES

Metnc System

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMS

AMF = Arab Monetary FundASCUDA = Automated System of Customs DataBOP = Balance of PaymentsCAS = Country Assistance StrategyCBJ = Central Bank of JordanCFAA = Country Financial Accountabilhty AssessmentCPAR = Country Procurement Assessment ReportDDSR = Debt and Debt Service ReductionDFID = Department for Intemational Development (UK)EFF = Extended Fund FacilityERDL = Economic Reform and Development LoanEU = European UnionGDP = Gross Domestic ProductGNDI = Gross National Domestic InvestmentGOJ = Govemment of JordanGTZ = Deutsche Gesellschaft fur Technische Zusammenarbeit

(German Technical Cooperation Bureau)IFC = Intemational Finance CorporationIMF = Intemational Monetary FundMICT = Mnistry of Information and Communications TechnologyMoAD = Ministry of Administrative DevelopmentMoF = Minstry of FinanceMoJ = Ministry of JusticeMoP = Ministry of PlanningMTBF = Medium Term Budget FrameworkNFA = Net Foreign AssetsNTB = Non Tariff BarrierODA = Official Development AssistancePPG = Public and Publicly GuaranteedPSET = Program for Social and Economic TransformationPSRL = Public Sector Reform LoanSDR = Special Drawing RightSOE = State Owned EnterpriseUK = United KingdomUNDP = United Nations Development ProgramUS = United StatesUSAID United States Agency for Intemational DevelopmentVAT = Value Added TaxWTO = World Trade Orgamzation

Vice President: Jean-Louis SarbibChief Economist and Director: Mustapha NabliCountry Director: Joseph P. SabaSector Manager: Dipak DasguptaTeam Leader: Charles Humphreys

FOR OFFICIAL USE ONLY

THE HASHEMrrE KINGDOM OF JORDANSECOND PUBLIC SECTOR REFORM LOAN

Table of Contents

LOAN AND PROGRAM SUMMARY

L INTRODUCTION .1............

II. THE ECONOMIC SITuATioN ........................... 1.. . ... . . . . ...... .

PoucIEs, PERFORMANCE AND PRosPECTS ........................................................................................................FISCAL PERFORMANCE AND PuBLIc DEBT MANAGEMENT ARE THE KEY REMAINING MACROECONOMICCHALLENGES .2THE IMPORTANCE OF PROPOSED ADJUsTMENT LENDING IN THE MEDIUM-TERM ECONOMICFRAMEWORK ,,...... 4

III. THE GOVERNMENT'S PUBLIC SECTOR REFORM PROGRAM .............................................................. 6A. BACKGROUND AND CONTEXT .............................................................. 6B. MAIN COMPONENTS OF REFORM PROGRAM . ............................................................. 7

B. 1. Civil service and Administration Reform .................................... . 8a. Background .............................................................. 8b. Improvements to the Civil Service and Administration ......................................................... 8

o Civil Service Reform .............................................................. 8o Improvements in Services to the Pubhc .............................................................. 9

c. Expected Program Results .............................................................. 10B.2. Budgetary and Financial Management Reform .................................................... 10

a. Background .............................................................. 10b. Improvements in Financial and Budgetary Management ..................................................... 10

o Budgetary Improvements .10o Investment Programming and Better Integration of Capital and Recurrent

Spendinge.1o Fostering Results-Orientation .11o Financial Management .12

c. Expected Program Results .12B.3. Reform of the Judicial Sector ................................ . . . 12

a. Background ..................................... 12b. Improvements in the Judicial System ..................................... 13c. Expected Program Results ........................ 14

C. PROGRAM LJIPLEMENTATION .............................. ,,,.,.,,. 14

IV. THE PROPOSED LOAN ................. . . 15A. LOAN RATIONALE .................. 15B. LOAN AMOUNT, DISBURSEMENTS, FINANCIAL MANAGEMENT AND AUDITING ..................................... 15C. REQUIREMENTS FOR SUBSEQUESNT BANK QUICK-DISBURSING LOANS ................................................. 16D. SUPPORT FROM OTHER EXTERNAL PARTNERS ......................................................... 18E. BENEFITS AND RISKS .......................................................... 18

V. RECOMMENATION ......... 19

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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TABLES:TABLE 1: Key Macroeconomic Indicators ........................................... 3TABLE 2: Financing Plan for Balance of Payments ....... 5.....................................TABLE 3: Key World Bank Exposure Indicators ...... 6.....................................6

Box:Box 1: Program for Social and Economic Transformation ............................................ 4

ANNEXES:ANNEX 1: Policy MatrixANNEx ii: Letter of Development PolicyANNEX iii: Improving Public Services in JordanANNEX Iv: Structural reform in Jordan, 1989-2001ANNEX v: Paris Club Debt Rescheduling Agreements with JordanANNEX vi: Statistical information

Jordan At a GlanceKey Economic IndicatorsSelected IndicatorsKey Exposure IndicatorsStatus of Bank Group OperationsStatus of IFC' s Held and Disbursed Portfolio

MAP 29234

THE HASHEMITE KINGDOM OF JORDANSECOND PUBLIC SECSTOR REFORM LOAN

LOAN AND PROGRAM SUMMARY

Borrower: The Hashemite Kingdom of Jordan.

Amount: US$ 120 million.

Terms: LIBOR-based Single Currency Loan

Loan Objectives: This loan would be the second in a series of three quick-disbursing publicsector reform loans (PSRLs) proposed in the current CAS. Bank financingwould contribute to the Government's growth promoting fiscal program.At the same time, the external resources would reinforce the country'sforeign reserve position and underpin nominal exchange rate stability. Bycontributing to the Government's fiscal sustainability, the loan wouldfacilitate continued implementation of its reform program, begun in 1996.Preparation and supervision of these loans provide a vehicle for the Bankto pursue a dialogue and to monitor progress on key elements of publicsector reform program.

Loan Description: The loan would be disbursed on the basis of satisfactory progress in thegovernment's program to strengthen public sector management generally,as measured by several actions to improve the Government's institutionalcapacity and incentives to deliver quality public services, and on the basisof continued sound overall macroeconomic management.

Benefits: The loan would contribute to maintaining the Government and the countryin a stronger financial position to weather economic and political shocks,in a Region always marked by high volatility but especially so now. Sucha cushion of stability should also enhance the Government's attention tocontinuing to implement its public sector reform program, as laid out in itsletter of development policy. This program aims, inter alia, to improve thecontractual environment for the private sector through judicialstrengthening and reform, to improve the delivery of public services viaimproved management of the civil service and administrative reforms, andto strengthen public expenditure management and accountability.

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Risks: First, continuing uncertainty in the Middle East could pose a risk to theimplementation of government programs, both macroeconomic and publicsector reform. However, such uncertainty is a persistent problem forJordan, and its past record suggests it can cope with it effectively. Recenteconomic performance has been robust, and the Government has continuedto implement a wide range of economic reforms despite significanttensions, unrest and related economic strains. Thus, while the risk is real,it is important that its potential impact not be overstated.

Second, as public sector reform is an inherently long term andcomprehensive task, there is the risk that the program will be implementedmore slowly than envisaged, and that fragmentation will sap its coherency.Within Jordan, substantial impetus for reform comes from the King himself,and the Government is strengthening the management of its program by theappointment of an interministenal steering committee. In addition,continued dialogue with the Bank (for example through the PSRL series)and the many other external partners can help by emphasizing theimportance of commitment and leadership, by helping design feasiblereforms and realistic targets, and by helping establish benchmarks forperformance. The evidence would suggest this risk - while ever present -- ismanageable.

Disbursement: The loan would be disbursed in one tranche of US$ 120 million.

Financing Plan: Not Applicable

EnvironmentCategory: C

Poverty Category: Not Applicable

I. INTRODUCTION

1. I submit for your approval the following report and recommendation on a proposed second quickdisbursing Public Sector Reform Loan to the Hashemite Kingdom of Jordan in an amount of $120million. This loan will help support the Government's growth promoting fiscal program and reinforce itsforeign exchange position to underpin nominal exchange rate stability. In conjunction with this request,the Government has reaffirmed its commitment to deepen its program -- begun in 1996 -- to strengthenpublic sector management generally, as measured by several actions to improve the its institutionalcapacity and incentives to deliver quality public services. The Government has implemented reformsspecified in the First Public Sector Reform Loan P 7455-JO and laid out an ambitious series of measuresit intends to carry out over the coming 12-18 months. Its program focuses on three main components:civil service and administrative reform, budgetary and financial management, and judicial reform. Theproposed Bank support is fully consistent with the form and level of lending proposed in the most recentCAS and would be part of a much larger package of financing from the IMF, bilateral and multilateraldonors, and the Paris Club.

II. THE ECONOMIC SITUATION

Policies, Performance and Prospects

2. Jordan, a small, resource-poor', open economy with a per capita GDP of about US$ 1760 in2001, belongs to the group of lower middle income countries. Jordan's performance is influenced by theeconomic and political events of the region, its vulnerability to regional shocks and oil prices stems from:the special importance of its exports of labor services (worker remittance inflows amount to 20 percent ofGDP); the tight links between the evolution of regional income from oil and its exports of goods; and thesensitivity of its tourism receipts to political instability at its borders.

3. The growth collapse after the mid-1980s essentially challenged the Jordanian economy to find avery different development model from the one that had prevailed until then. The specific challengeswere to restructure the economy from public sector domination to private sector leadership, from relianceon non-traded goods and services to export-led growth, from regionally oriented protected domesticindustries to globally competitive sectors at home and international markets, and from low-skill to high-skill workers employed in the domestic economy. Responding to these challenges, the Government haspursued an ambitious reform agenda since 1989 to stabilize the economy, improve efficiency, andbroaden the role of the private sector (see Annex 4). These reforms have produced some significant shiftsin the economy. Public sector demand 2 has decreased by 5 percentage points of GDP, private non-residential investment as a share of GDP has doubled to 8 percent over 1990-98, exports have becomeincreasingly diversified with the share of top 10 products declining from 74 to 64 percent and the share oftop 5 destinations declining from 57 to 40 percent.

4. Macroeconomic stabilization was secured over 1990-95 by a tight fiscal policy to generateprimary budgetary surpluses (after grants), and by an exchange rate policy that progressively depreciated

' Only 6 percent of land is arable, water scarcity is severe, and mineral resources are limited to potash andphosphates.

Public sector demand excludes govermment transfer and interest payments which are significant and rising inJordan.

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the Dinar (22 percent in real terms over 1989-95)3. Tight monetary policy helped bring inflation rapidlydown to 3 percent and build reserves. At the same time buoyant private sector demand generated by Gulfreturnees and export supply response encouraged by currency depreciation helped generate strong annualeconomic growth of around 8 percent on average.

5. More recently (1996-2001), annual GDP growth slowed initially to 3 percent (until 1999),followed by a pick up in the last two years (2000-01) to around 4 percent. Since population growth isabout 3 percent per year, real income per capita has registered modest increases, barely above the peakreached in the 1980s in real terms. Also, given the fast pace of labor force growth at 3.8 percent andpersistent unemployment of 14-15 percent, at least 6 percent growth would be required to lower thebacklog of unemployment.

6. Inflation has remained very low for much of the period (under 2 percent), as a result of theexchange rate policy which has kept the nominal Dinar-US dollar rate unchanged since 1996. Thismonetary and nominal exchange rate stability came at some cost, however, as the real effective exchangerate appreciated by about 20 percent between 1995 and 1999. Partially as a result, exports have remainedessentially flat over 1996-2000, although there appears to have been a recovery in 2001 with a 21 percentgrowth, helped mainly by the exports from Qualifying Industrial Zones that were created in 1998 topermit duty-free and quota-free exports from Jordan to the United States.7. The near-term prospects for growth could be in the range of 5 to 6 percent, in part because of thespecial stimulus package - the Program for Social and Economic Transformation (PSET) (See Box 1) -expected to be implemented over the next four years. Inflation is targeted to fall back to under 2 percentafter a moderate increase in the current year because of the elimination of subsidies on petroleumproducts. As the economy picks up momentum, the current account of the balance of payments isexpected to gently rise to moderate deficit after grants, around 1 percent of GDP in the medium term.The need for government borrowing (after grants) is targeted to decline gradually below 4 percent ofGDP, in line with the Government's debt policy. However, a capital account financing gap at or above 2percent of GDP is projected because of debt service obligations and the need to maintain reserves in linewith targets agreed with the IMF.

Fiscal Performance and Public Debt Management are the Key Remaining Macroeconomic ChaUenges

8. While significant adjustment efforts have taken place and overall quality of governance is goodamong MNA comparators, a continuing concern over Jordan's economic policy stance is that the fiscaldeficit and the public debt have remained high, while the budget structure leaves limited room formaneuver.

9. Fiscal Performance The overall fiscal deficit amounted to about 8 percent of GDP before grantsduring the second half of the 1990s. Though the programmed fiscal deficit target slipped, the authoritiesover performed in limiting expenditures (as they have in the past), but the revenue target was missedbecause of "teething troubles" of implementing a new base for General Sales Tax, cuts in customs duties,and loss in non-tax revenues caused by low international prices of phosphates. As the revenue efforts ofJordan are respectable at 30 percent of GDP, the primary cause for large fiscal deficits is the size ofexpenditures. Total public wages, salaries and pension contributions amount to about 12 percent of GDP(high but at least stable over the last decade), roughly half civilian and half military.4 Pension

3 Jordan's real effective exchange rate is double weighted - weighted with exports to trade partners, and in eachexport market weighting for third country competition.4 Jordan's civilian government employment as a share of population at about 3 percent is well below the MNA andworld averages.

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expenditures, especially for security and military personnel, are rising, now at about 4-5 percent of GDP. 5Military and security expenditures are substantial at over 8 percent of GDP. Though roughly one half(between 3.5 and 4 percent of GDP) of the fiscal deficits is covered by external grants, which make thehigh fiscal deficits sustainable in the short-term, fiscal adjustment remains an appropriate strategy in themedium-term.6

Table 1Key Macroeconomic Indicators

l _ ll_ l 3 ~~~~~~~~~~(Projf won)Real GDP (market prices) growth, annual percent 7 2 310 4.2 5.i 6.0 5.8

Gross national savings, current prices, percent of GNDI 19 2 2159 20.9 20.9 20.6 207

Gross fixed investment, current prices, percent of GDP 29.3 25 81 25.91 26.51 26.31 26.6

Inflation (CPI), annual percent 4 2 2 E I.EI 3.51 2.4 I.E

Growth in merchandise exports, annual percent, nominal 10.7 1.4 20.7 10.0 7 8 7.6

Fiscal balance (central Government), percent of GDP'

Excluding grants -5.3 -8.3 -7.9 -9.9 -10.1 -9.3

Including grants -0.6 -4.3 -3.7 -4.1 -4.3 -3.9

Financing 0.6 4.3 37 4 1 4.3 3.9

Foreign borrowing (net) 1.2 2.2 I.S 2 ( 0.9' 1.

Privatization (net) -_._ _ 2.0 2.7 2.5

Domestic borrowing (net) -0.6 2.1 2.31 0_1 0 | O_ I

Primary balance, including grants 4.9 0.4 0.5 0 0 0 1 -0 1

Fiscal revenues, including grants, percent of GDP 368 30.8 304 31.6 31.7 31.

Fiscal expenditures, commitment basis, percent of GDP X 35.7 35.2 34.2 35.7 36 0 35.3

Of which PSET spending, percent of GDP N/A N/A N/A 2.9 3.7 3.5

Current account balance, including grants, percent of GDP -10.6 0.6 0.4 -0.3 -0.4 -0.8External debt service, percent of exports of goods and

services, including workers' remittances. 17.0 14.7 12.1 12.9 13.0 12.3

External public debt, end period, percent of GDP 2 1020 860 80.9 764 71.2 66.

Gross domestic debt, end period, percent of GDP 19.5 20.1 21 9 20.3 19.3 17.8

Projected BOP financing gap, percent of GDP N/A N/A N/A 2 2 2.9 3 6

Source: Based on Bank and Fund Staff estimates and projections.N/A is not applicable.I Including PSET expenditures.2 Excludes short term debt; includes collateralized Brady Bonds.

5 Pension expenditures in particular have been growing at an annual rate of 12 percent during the past decade whilecontributions have remained low, increasing the pension deficits from 2.6 percent of GDP in 1992 to over 4 percentof GDP in 2001.6 The largest component of budgetary grants is that from Iraq. The Iraqi grant typically varies between US$ 200 andUS$ 300 million per year, depending on the discounts applied to the sale of crude oil by Iraq to Jordan, as negotiatedannually.

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Box 1: Program for Social and Economic Transformation

Motivated by a sense of urgency to spread the fruits of development to ordmnary Jordanians, the JordanianGovernment announced in November, 2001 an ambitious four-year program to accelerate the social and economictransformation of the country (PSET). The program envisages a large additional expenditure package plusaccelerated reforms and projects in several areas to create a better environment for higher economic productivity andoutput, namely (i) direct public investment in education, vocational training, culture, media, youth care, health care,social productivity and poverty alleviation, water resources and rural development, telecommunications,construction and civil defense; (ii) fiscal reform; (iii) administrative reform; (iv) judicial reform; (v) majordevelopment projects (Disi water conveyance, power plants, natural gas pipeline from Egypt and the development ofAqaba, Amman and the Dead Sea) to foment private investment; and (vi) improvement in the legislative,institutional and regulatory framework. For 2002, the plan envisages an expenditure of JD 275 million contingent onthe availability of privatization proceeds (with no more than 30 percent of privatization proceeds to be used) andsupplementary foreign grants, so as to avoid increasing government debt. In projecting growth for 2002 at 5 percent,it is assumed that PSET spending will be somewhat less at JD 200 million, given implementation lags. If theprogram is scrupulously implemented as announced without endangering macroeconomic stability, it has thepotential to boost GDP growth between 0.5 to 1.0 percentage point, depending upon the actual size of the fiscalstimulus and supply side effects including the impact of the reforms.

10. Public Debt Jordan has one of the highest ratios of public debt to GDP in the MNA Region(though declining and with a very moderate debt service to GDP ratio, because half of the external debt isconcessional). Jordan has benefited from several debt restructuring agreements through the Paris Club(see Annex V), debt forgiveness of about US$ 750 million from the United States after the Oslo Accord,and, of late, debt for development swaps from European donors. Jordan made use of privatizationproceeds to retire Brady bonds of US$ 195 million at a discount of 50 percent. As a result, total publicsector debt relative to GDP declined from 123 percent of GDP in 1995 to about 100 percent in 2001 (ofwhich a fifth is domestic debt, reflecting a shift from external to domestic borrowing, especially fromcommercial banks). Reducing the debt burden is a clear objective of the Government, which hasintroduced legislation to limit the total (external and internal) debt to be no more than 80 percent of GDP,and neither of them higher than 60 percent individually.

The Importance of Proposed Adjustment Lending in the Medium-term Economic Framework

11. The current financial program of the Government, prepared in consultation with the IMF andwhich projects an increase in the nominal value of net foreign reserves judged essential to maintainconfidence in the official exchange rate, envisages an external financing gap for 2002 of US$ 330 million,before the proposed loan and any additional debt relief that may be accorded by the Paris Club later thisyear. The proposed loan would reduce the need for the Government to raise more expensive foreignprivate credit7 or to borrow domestically, which could potentially crowd out credit to the private sector.Tables 1 and 2 illustrate the financing plan for the fiscal and the balance of payments deficits under thecurrent medium-term framework, which assumes the PSET program will be funded as envisaged.

7 Jordan's Brady bond (par value bonds) have a sovereign spread of around 435 basis point as of April, 2002 and sellat a discount of 17.5 percent to face value.

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Table 2Financing Plan for Balance of Payments

(in millions of US dollars)

. 2000 2001 2002 2003 2004

Current Account 58 32 -24 -41 -85Foreign grants 404 442 647 734 731

Capital Account 871 -133 54 130 62

Public sector -361 -159 -98 -111 -272Disbursements 171 342 382 382 262

World Bank 38 161 160 48 128Of which PSRL2 N/A N/A 120 N/A N/A

Amortization 532 501 479 492 533World Bank 56 57 57 65 73

Private sector (net) 1232 26 152 241 334Overall balance 929 -100 30 89 -23Increase in NFA (including IMF/AMF) 1226 197 348 439 423Net financing requirements 297 287 318 350 447Debt relief 97 93 56 51 45Debt rescheduling (existing agreements) 200 204 51 0 0

Residual Financing gap 0 0 210 299 402

Net usable foreign reserves [ 276 25791 2737 27711 2818in months of imports (excluding re-exports) 7.5 7 6.7 6.21 5.9

Source: Bank and Fund Staff estimates, April, 2002.

12. The World Bank's share of Jordan's extemal debt will marginally rise to 14.3 percent with thedisbursement of the proposed PSRL-2 loan as shown in Table 3. However, this rise has to be seen in thecontext of a general improvement in credit worthiness indicators. The ratio of extemal debt (includingPSRL-2) to GDP is projected to decline over 2000-2002 by 10 percentage points to 76 percent, andWorld Bank debt service as a percent of the export of goods and services is projected to decline by nearlya quarter, to 1.4 percent, though it will rise subsequently. Jordan could be seen as moving into the groupof moderately indebted middle-income countries this year. The estimated net transfers from the WorldBank in 2002 with the disbursement of PSRL-2 are estimated at US$ 65 million conforming to the CASprogram.

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Table 3Key World Bank Exposure Indicators

(in millions of US dollars, unless otherwise noted)

Extemal debt service on PPG, percent of exports of goods and servicesincluding worker remittances 12.3 12.1 12.

Extereal public debt, end period, percent of GDP l 86 8_ 1 7World BankNew Commitments | 35_ 120 12_Disbursements t 38J 161| 165Of which PSRL-2 N/A N/A 12(Debt Service 10r 10_9'

Amortization 561 575Interest Payments _ 5 4'93

Net Transfers -7( 5' 6

Debt to World Bank (year end) 854 9411 1044iMemo.immsDebt to World Band as percent of external debt | 11.8| 13.A 14.3PDebt to World Bank as percent of GDP | 14.31 15.q I_5.4A

D)ebt service to World Bank as percent of exports of goods and services | .4 1.A 1.41Source: Bank and Fund staff estimates.N/A is not applicable.I Excludes short-term debt; mcludes collateralized Brady Bonds.

III. THE GOVERNMENT'S PUBLIC SECTOR REFORM PROGRAM

A. BACKGROUND AND CONTEXT

13. Public sector modernization in Jordan is timely and clearly needed, especially in light of thecountry's efforts at better integration into the global trading and financial networks. Fortunately, it can bebuilt on already reasonably solid base. The country has a reasonably well-functioning administration, anda strong nucleus of committed high-level civil servants. The discipline and work ethic of governmentemployees is better than in many developing countries. Well-qualified Jordanians hold important civil-service positions in the region, especially in the Gulf, in occupations ranging from nursing and teaching tomanagement and engineering.

14. As a lower middle income country, Jordan performs remarkably well along major components ofpublic sector management and governance, especially regarding the rule of law, governmenteffectiveness, and the regulatory framework. Efforts to assure voice and accountability, while on a parwith worldwide averages, are relatively weaker. Thus, the country's public sector reform program isbeing implemented on a comparatively sound foundation, with the aim of raising the effectiveness andaccountability of the public sector to the standards of higher-income countries.

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15. However, household surveys and other sources have documented substantial costs inflicted onusers by outmoded service delivery mechanisms and red tape. Accordingly the public sector could besignificantly improved by reducing regulatory rigidity and red tape, improving policy coordination andprogramming capacity, and developing a service culture, to ensure that service delivery and resourceallocation are radically improved. In the absence of institutional change across government, including inthe incentive framework and in organizational structures, Jordan's eventual transitional to developedcountry status will continue to miss a vital link. The conclusion is clear: modernization of the stateapparatus is both achievable and indispensable.

16. The major public sector management problems include compressed pay scales and ensuingdifficulties in recruiting skilled as well as managerial talent,8 large and variable monetary allowances,cumbersome recruiting procedures with too little weight given to the specific jobs to be performed, abudgeting system insufficiently linked to policies and without the medium-term perspective needed forpolicy change, focus on individual investment operations without programming of overall investment inthe context of policy priorities and resource availability, long delays and a heavy paper burden inflictedon citizens for mundane operations such as changing schools, operational rigidity due to the large numberof control layers imposed on ministries - and thus weak accountability for results, and some overlaps inresponsibilities among government organizations.

17. This diagnosis of the public sector has been a mainstream complaint since 1984.9 But progress hasbeen slow. Some of the reasons for lack of progress include: frequent cabinet reshuffles; lack ofcommitted resources to carry out reforms beyond diagnostics; and the role assigned to public sectoremployment in the delicate socio-political equilibrium of Jordan. A fresh start was made, however, withthe report ("Modernization and Development of the Public Sector") presented in July 2000 to His MajestyKing Abdallah Ibn Al-Hussein by the Committee for Administrative Reform. The report analyzed whypast efforts to reform the public sector have been ineffective. Among them were lack of institutionalownership for the reform program, lack of close oversight on the part of the Royal Court and a moregradual but systematic approach to the reform effort. Since then, the King himself has been more closelyinvolved in overseeing the overall reform effort. Following recent appointments, there is now in Jordan acritical mass of reform-minded ministers in key leadership positions. Moreover, the Government hasapproved a stronger implementation strategy and arrangements, and these were instrumental in achievingrecent progress.

B. MAIN COMPONENTS OF REFORM PROGRAM

18. The Government's program can be summarized in three main components: civil service andadministrative reform, budgetary and financial management, and judicial reform.

8 The lower levels of the civil service are overpaid by private sector standards, and generally over-qualified. Thehigher-level personnel are relatively underpaid as a result of the erosion of real salaries in recent years. As a result,there has been an exodus of good civil servants (largely reversed during and immediately after the Gulf War) both tothe private sector and to the Gulf countries. Thus, one specific characteristic of Jordan is that its higher level civilservants (including those in education and health) are directly subject to international competition. The challengefor the Government is to design a salary scale that can provide sufficient incentives to attract and retain such civilservants, while keeping total wage and pension payments within fiscal constraints.9 The King's programmatic note to the past 12 governments has a mandate to reform the public sector and improveits services.

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B.]. Civil Service and Administration Reform

a. Background

19. A main element of the program is to improve dramatically the interaction of the citizen withgovernment agencies. Thus, the vision for this component is one where the Government is providingcost-effective, fast and efficient services in all departments, where personnel management is fast,accurate and systematic, where the system provides the correct incentives to produce the appropriateenvironment for employees to carry out their tasks. The Government has chosen a two prongedapproach: on the one hand to make the public sector workforce more service friendly and client oriented,and, on the other, to render transactions with government agencies simpler, faster, more professional,and more transparent.

b. Improvements to the Civil Service and Administration

Civil Service Reform

20. Reforming Jordan's civil service has been on the national reform agenda since the early 1980s.The desired long term outcomes of this component are to substantially improve the management and theincentives of the workforce and to respond to the need for more accountability within the civil service.The vision is to ensure by 2004 a civil service able to retain and attract honest, efficient workers, wherethere is sufficient administrative capacity for continuous monitoring of the workforce, where theenvironment nurtures and capacity exists for change and improvement on a continuous basis.

21. Towards this objective, the government adopted a new civil service bylaw and its implementingregulations in May 2002. This law contains a new code of ethics for public employees and provisions formore meritocratic selection of senior managers, regular and more transparent evaluation and promotionof personnel, and greater scope for dealing with unsatisfactory staff. As part of the process ofstrengthening civil service recruitment and management, the Government has finalized the jobdescriptions (duties, reporting arrangements, and qualifications) for 58 public departments covering thegreat majority of civil servants and is now electronically posting all job openings as well as the pool ofeligible applicants on line. Civil service managers are being trained in English and computer skills tohelp them use new management tools. Finally, the Government has approved selective pay increases,especially for judges. A more comprehensive study of the incentive framework including pay andallowances in the broader context of Jordan and the region (since the country is an exporter of labor) isplanned over the coming years.

22. Finally, to ensure strengthened institutional oversight capacities for the civil service, theGovernment created in April 2002 a Ministry of Administrative Development (MoAD). Its role is tobecome essentially the "management ministry" with responsibility for human resources management,training, and monitoring of service quality. 10

10 Human Resource management was previously the responsibility of the Civil Service Bureau, which will maintainits regulatory functions. Training was formerly the responsibility of the Jordanian Institute of Public Administrationwhich will be merged into MoAD and reorganized to ensure the highest level of technical competence. It will focusexclusively on civil service training, both as a direct supplier of training services and as a facilitator for outsourcedtraining required by departments.

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Improvements in Services to the Public

23. The focus and objectives of this component are to obtain rapidly very tangible results inimproving service delivery to citizens in as many front line services as possible and, in so doing, lay thegroundwork for further self-sustaining improvements. Progress has been achieved in several areas,including publication of service directories in 33 public departments (ministries as well as autonomousorganizations) - which identify the available services, the time necessary for each transaction, thelocation of relevant offices, and the official cost of each service. These directories will continue to bepublished and posted over the next 2 years with the aim of covering all 1,400 services offered to thepublic. Under the e-government initiative, several services will be available electronically (including theincome tax, general sales tax, and land use and surveys departments). In addition, the governmentprogram has simplified procedures in a total of 40 public departments, significantly reducing the paperburden on users.'

24. In some instances, the streamlining and simplification of government services and procedures hasinvolved important restructuring actions, notably in the context of the privatization program12, and ineducation and health. The actions under the administrative reform program have eliminated redundantagencies involved in internal control and auditing.

25. Because the reform process is long term, the Government is establishing a permanent network forimproving quality and access to services. This network would be essentially made up of key civilservants within each agency and would take the form of task forces whose membership would changeaccording to the specific services being examined. A small core of leaders would drive the efforts in eachministry and provide the two-way contacts with the MoAD regarding training, system-wide qualityenhancement and change assessment. They will supply a way to test and refine the techniques andtraining managed by the MoAD, and provide a monitoring mechanism to ensure that simplification andstreamlining plans are carried out and produce the desired results. The program will oversee thedevelopment of a monitoring and evaluation system to help monitor implementation, and may includeservice delivery surveys, service standards, an increased use of internet feedback. In the future, forexample, departments will be expected to establish service standards and to conduct service deliverysurveys regularly to gauge satisfaction and to identify problems areas by getting systematic feedbackfrom users.

26. As a critical adjunct to other efforts to improve public service delivery, the Government hasestablished an e-government Program Management Unit in the Ministry of Information andCommunications Technology to promote the use of information technology within government, and ithas recently promulgated a law authorizing electronic transactions to help establish the legal foundationfor e-government.

27. Other elements in this field aim to address the accountability of providers. The Government hasadopted a requirement that all civil servants in contact with the public are to wear name tags and bepersonally accessible by phone. In addition, all government offices are to have customer service offices

" Examples of this process are included in Annex 3, including payment of income taxes, sending registered mailand postal orders, receiving aid from the National Aid Fund for disabilities and in securing admission to vocationaltraining, changing schools, registering real estate transactions, calculating and receiving state pensions, etc. Inaddition, discussions are continuing on streamlining investment promotion policies and procedures, which wouldcomplement earlier initiatives to improve the business climate and reduce overlaps, and on streamlining thefunctioning of government procurement agencies.12 The privatization program has dealt with the consolidation of SOEs and has operated in the context of themodernization of the regulatory framework.

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providing guidance with clear signs and transformed physical layouts to facilitate transactions. Whenfeasible, single windows and decentralized offices would be established.

c. Expected Program Results

28. Over time, the reforms described above can be expected to lead to substantial improvements in thequality and deployment of the workforce and, by extension, in the quality and effectiveness of publicservices. In addition, if the reform program is successful, the process of improving administrative andcivil service performance will itself have become institutionalized and sustainable. Performanceindicators include: the extent to which new civil service selection procedures are followed; the extent towhich the new appraisal, performance criteria and career management system is put into practice; theextension and impact of process simplification in government agencies, as measured against benchmarksand standards, in part through service delivery surveys; the publication of up to date service directories;and the extension of e-government within the administration.

B.2. Budgetary and Financial Management Reform

a. Background

29. Jordan's budget process has functioned well in the 1990s to assure fiscal discipline, which hasallowed the Government to introduce reforms aiming to strengthen the link between sector policies andresource allocation to raise the efficiency of budgetary management. With support from UNDP and theGTZ, a variety of activities have sought a wide-ranging transformation of the entire system into full-fledged "performance budgeting" covering all ministries and spending units. In the face of limitedprogress, a September 2001 assessment, financed by the Bank at government request, endorsed theoverall vision of the reform effort but concluded that the scope of the initial activities had been tooambitious with limited government ownership. Based on lessons learned, the Government is"relaunching" its budgetary reform program, as outlined below.

b. Improvements in Financial and Budgetary Management

Budgetary Improvements

30. The design and implementation of new sectoral policies are hampered by the small (5-7%)discretionary margin typical of the annual budget. A medium-term budget framework (IvITBF) permits,among other things, to program expenditure consistent with new policy initiatives by providing a multi-year frame for the annual budget process. Full institutionalization of an MTBF, grounded on medium-term programs and cost estimates by and for all major ministries, will take time. The Government'sobjective is to have in place a first basic MTBF in time to frame the preparation of the entire budget for2005. Toward this objective, the Government has made a start in June 2002 by projecting medium term(3-5 years) resource availabilities for expenditures. During 2002-03, two or three sector ministries willprepare bottom-up sectoral medium-term expenditure programs within a results-oriented approach, andthe process will be extended to other ministries thereafter. In parallel, the budgeting capacity of lineministries needs to be strengthened, and the Government will formulate during 2002 a capacity-buildingprogram for line ministries, to be budgeted for and implemented beginning in 2003.

31. Because the lynchpin of good expenditure management is a robust estimate of revenues, theGovernment has established in May 2002 a special team to strengthen revenue forecasting, includingspecific targets for improving fiscal marksmanship in 2003 and beyond. It has also decided to include

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expenditure ceilings for each ministry and agency in the budget circular for 2003 - adding up to theprojected overall resource availabilities - to calibrate preparation of sector spending programs and toreduce gamesmanship, excessive bargaining and micro-intervention by the Ministry of Finance. -During2002-03, the Government intends to revise the budget circular as needed for consistency with the otherbudgetary reforms, and issue it as early as possible before July of each year to afford sufficient time forthe line ministries to prepare sound expenditure programs of their own, and for the subsequent iteration,negotiation, and parliamentary debate.

Investment Programming and Better Integration of Capital and Recurrent Spending

32. Raising the efficiency of investment will be crucial for realizing the ambitious goals of theProgram for Social and Economic Transformation and for development and poverty reduction in general.The institutional arrangements for investment selection and budgeting in Jordan carry a number ofweaknesses, however. These include the organization of the Ministry of Planning along sectoral lines;the separate budgetary handling of aid-financed projects, locally-financed projects, and the currentbudget; the lack of recurrent cost estimates for projects; and the lack of a comprehensive database,requiring a special exercise every time the government wishes to know the total cost of investmentprojects to which it has committed. The disconnect between investment decisions and the preparation ofthe current budget prevents consideration of complementarities, contradictions or duplications amongprojects, and thus leads to suboptimal resource allocation. In general, therefore, more cooperation isrequired at all stages in the budget process between the Ministries of Finance and Planning to achievesome integration between capital and recurrent expenditure decisions. In this process, the first essentialstep must be the integration of all investment spending, whether financed domestically or with foreignaid.

33. The MoP has made in May 2002 a strong start in this direction by establishing an internalcommittee to coordinate decision-making, and by embarking on the design of a comprehensive databaseof investment projects, whether aid-financed or not, to be operational by the end of 2002. During 2002-03, it will formulate proposals for improving the overall programming of public investment, includingassociated recurrent costs, with the aim of progressively integrating decisions on investment andrecurrent expenditures during preparation of medium term expenditure programs.

Fostering Results-Orientation

34. The need for re-orienting administrative procedures and civil servants' efforts away from soleattention to inputs and toward the results of government activity is clear in Jordan. The potential gains interms of public services access and quality from introducing performance orientation in theadministration, including through the budgeting process, are substantial. At the same time, internationalexperience and Jordan's own recent experiments point to the complexities and pitfalls of performancemeasurement in government activities. The Government has accordingly decided in June 2002 to adopt atimebound but progressive approach of learning-evaluation-feedback, with maximum feasibleparticipation by front-line employees and service users, beginning with a pilot for the immunizationprogram in the Ministry of Health. This will include a mechanism for continuous evaluation andmodification of the performance indicators, which should be few, simple, cost-effective, relevant, andmonitorable. During 2002-03, the exercise will extend to at least four other programs in this or otherministries, in time to affect the preparation of the budget for 2004, and then progressively to other partsof the government. At the same time, procedures for a systematic dialogue on results in the context of theannual budget preparation will be formulated to establish a meaningful but not mechanistic link betweenresults and future resource allocation.

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Financial Management

35. As noted in the most recent CFAA, the basic financial controls are complex and focused oncompliance but effective nonetheless in assuring a reasonably acceptable accountability framework:resources are spent in accordance with the budgeted amounts. Reforms in the late 1990s have succeededin eliminating unauthorized advances and arrears in payments to SOEs -- thus improving thepredictability of actual expenditure; budget execution is tightly controlled, largely through the control ofmonthly cash releases to mninistries and agencies; corruption is low; and external audit is reasonablyeffective from a compliance perspective. The Government is also working to establish a computerizedsystem of real-time budgetary reporting, to improve monitoring of budget execution. Streamlining ofcontrol systems is desirable, not only to speed decisions but also to allow more delegation of spendingmanagement to line ministries, as part of the gradual move towards results-oriented budgeting.

c. Expected Program Results

36. The process of budgetary and financial management improvement is continuous, and long term.There will be a continuing need for high level government commnitment, including leadership by theMinistry of Finance - commitment that exists in principle but remains to be solidly manifested in criticalareas of budget preparation. Over time, the reforms described above can be expected to lead to substantialinitial improvements in resource allocation and expenditure effectiveness. Because their design andimplementation, although ambitious, are consistent with the growth of administrative capacity, thelessons of international experience, and the changes in incentives generated by the other elements of theGovernment's public sector reform program, there is a reasonable likelihood that these improvementswill be sustainable. To help monitor implementation, quantitative or qualitative indicators may includethe discrepancy between actual and estimated revenue by major sources of revenue, and between actualand budgeted expenditure by major types of expenditure; the clarity of the links between sector policypriorities, ministries' major expenditure programs, and budget allocations; the accuracy,comprehensiveness, and user-friendliness of the aid and investment project database; the improvedinteraction between the MoP and line ministries regarding project selection, and between the MoF andMoP regarding the integration of investment and recurrent budget decisions; and an evaluation of theextent to which performance orientation has developed within the ministries piloting the approach, and ofits results'in terms of economy, efficiency, and effectiveness. This monitoring would be based in part onsurveys of key budget actors, as well as front-line administrative personnel and users of public services.

B.3. Reform of the Judicial Sector

a. Background

37. The Jordanian Government has entered the consolidation stage of its reform of the justice system,broadly defined. The efforts undertaken in the last couple of years, notably on the legislative level, werepart of the drive to place Jordan on an equal footing with its business partners in the EU, the USA (withboth of which Jordan has concluded free trade agreements), and the WTO. In addition, commendablelegislative progress has been made in matters related to the functioning of the judiciary, including thestrengthening of the independence of the magistrates, their career development and training, as well astheir compensation, and the simplification and rationalization of legal procedures through theintroduction of alternative dispute resolution mechanisms.

38. This initiative stems from a broad-based realization that Jordan is entering an era in which its legalframework and justice system are key factors in attracting domestic and foreign private investments.

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Private sector operatives, lawyers, judges and the citizens in general not only support the need forupgrading the justice system, they have triggered the reform, arguing that an antiquated legal frameworkand a flawed justice system are a drain on the economy. The simultaneous and important changes in alarge number of laws must be complemented by adequate enforcement with a justice system that is up tothe task. It is felt that the present justice system is not prepared to face this challenge and that itsimprovement is a priority task in improving the lives of citizens.

39. The progress made does not alter in any visible manner last year's assessment regarding thegeneral problems the legal and judicial system is encountering in Jordan. There still is inadequatepredictability of judgments. The judicial process is yet to become fully efficient and the backlog of cases,while dealt with in a partial manner, is still a central issue. Others problems include the heavy case load(nearly 2400 cases per judge a year according to ministry estimates), lack of transparency of judicialdecision-making, insufficient competency in matters of business law broadly defined, limited capacity toenforce judgments, poor dissemination of legal information, and antiquated processes and organization inthe Ministry of Justice. In short, progress is real, the Government's commitment to upgrade its justicesystem is also a reality and evidence is there to prove it. There is, however, still a long journey ahead.

40. The desired long term outcomes of this component are on the one hand to ensure a performanceand user oriented, business friendly judiciary capable of underpinning an engine for growth rather than animpediment to private sector investments and economic development and to bring Jordanian justicesystem up to par with international standards, in light of the free trade agreements and accession to theWTO.

41. Specifically, this will be achieved by (i) strengthening the independence of magistrates; (ii)simplifying and rationalizing legal procedures with a view to reducing delays; (iii) setting alternativedispute resolution mechanisms, with particular emphasis on commercial matters, to reduce the case loadof judges; (iv) increasing the transparency of judicial decision-making and predictability of judgments,(v) increasing competency of the present and future judicial corps in matters of business law broadlydefined, (vi) improving the judicial system's enforcement capacity, (vii) ensuring broader and moretimely dissemination of legal information through electronic access to speed archiving and dissemination,(viii) broadening the participation of stakeholders in drafting new legislation, and (ix) modernizing theMinistry of Justice's work processes, including but not limited to, the judicial inspection unit within theMinistry.

b. Improvements in the Judicial System

42. To respond adequately to the deficit in the number of judges across the country and to improvetheir working conditions, the Jordanian Government has embraced a comprehensive approach includingthe following: (i) improving the working conditions -- financial, training-wise and through provision ofan adequate environment in terms of new buildings and modern equipment -- of the existing and futurepool of judges, (ii) introduction of computerization to reduce the burden on them and to increase thespeed and security of judicial decisions, and (iii) devising an alternative dispute resolution system toreduce the backlog of cases.

43. To implement this program the Government has recently amended the statutes of the JudicialInstitute for training of judges to transform it into a more efficient and relatively autonomous publicagency; the Institute has revised the curriculum, including the introduction of new courses in businesslaw and foreign languages, and developed a training plan to upgrade the skills of existing judges andauxiliaries of justice. In 2001-02, the Ministry of Justice recruited some 80 new judges (both through the

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normal processes of hiring graduates of the Judicial Institute and through "lateral" hiring of lawyers) withincreased pay and improved pensions, computerized the Amman court system, and completed a detailedfeasibility study for a fully integrated, computerized case management information system for all ofJordan. To assure sufficient infrastructure, the Government is implementing a program to build newcourthouses across the country and to establish new tribunals in Amman, in addition to the main Palaceof Justice. Modem tools of case processing have been installed and the training required to operate themhas been delivered, as a first step in the introduction of a modern, country-wide case management system.

44. Finally, an Arbitration Code has been enacted to reduce the delays in the judicial process, notablyin matters of commercial litigation. Jordan has already adhered to and ratified all relevant internationalinstruments.

45. To increase the overall transparency of the system, plans for disseminating legislation over theinternet have been finalized, and an electronic database with reliable access for all potential users is inplace.

c. Expected Program Results

46. The ultimate result will be an improved judiciary system, providing faster, fairer and moretransparent judicial services. When achieved, the program will have established a legislative frameworkthat facilitates continuous reform and institutionalizes an independent judiciary, modernized casemanagement throughout Jordan, improved the size and quality of the judicial service, and assured fullaccess to judicial information for all users.

47. The program will also have fully computerized all courts throughout the Kingdom to the levelalready achieved in the Palace of Justice in Amman, allowing for more transparent, predictable and user-friendly delivery of justice, and at least 50 of the courts will have instituted a case management system.The Ministry of Justice itself will also have introduced new management procedures and informationsystems aimed at facilitating users' interaction with the Ministry.

48. The program will also improve the working conditions of the judges. Specifically, their workloadwill have been significantly reduced as measured against existing workloads from baseline surveys to beconducted. The reduction would be effected by the hiring of qualified new recruits, the introduction ofnew case management systems, and the successful implementation of out of court dispute settlementprocedures and alternative dispute resolution mechanisms. On-the-job training for sitting magistrates andauxiliaries of justice at high-level standards will have become systematized.

C. PROGRAM IMPLEMENTATION

49. Program implementation is primarily the responsibility of different ministries, working incoordination through a set of committees with overlapping membership. Civil service and administrativereform is led by the MoAD, with support from the Ministry of Information and CommunicationsTechnology for the e-govemment initiative. Financial management and budget reform is led by theMinistry of Finance, with some parts being led by the Ministry of Planning. Finally, the judicial reformis led by the Ministry of Justice. To strengthen overall guidance and coordination and to assure as rapidprogress as possible, the Government is establishing a high-level Interministerial CoordinatingCommnittee for Public Sector Reform chaired by the Minister of Planning. Mtmbers include theMinisters of Justice, Administrative Development, Finance, Information and CommunicationsTechnology, and Industry and Trade.

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50. Implementation is designed to be incremental and pragmatic but with clearly defined objectiveswith specific, time bound actions. The approach aims to obtain early successes that can ensure good willand build momentum for subsequent measures. Substantial attention has been devoted to building astrong capability for self-diagnosis in government agencies, with incentives to make continuousadjustments and improvements within the overall vision.

IV. THE PROPOSED LOAN

A. Loan Rationale

51. The proposed loan is the second in a series of one-tranche quick-disbursing loans associated withthe Government's public sector reform program, as outlined in its Letter of Development Policy (inAnnex 1). The most recent CAS (Report No. 19890-JO, 12 November 1999) identified public sectorreform as a necessary complement to the broad economic reforms (including fiscal and financialstabilization, trade and privatization) that had been implemented. As a follow on from the series of threeEconomic Reform and Development Loans (ERDLs) that had been accorded by the Bank, the CASproposed a second series of Public Sector Reform Loans (PSRLs) to provide financial resources to theGovernment during the implementation of this program.

52. The loan would be accorded on the basis of continued satisfactory progress in the Government'sprogram to strengthen public sector management generally and to maintain satisfactory overallmacroeconomic management. While the IMF has focused on the macro-fiscal framework (through aseries of EFFs), Bank dialogue has focused on the central issue of improving the institutional capacityand incentives of the Government to deliver quality public services with lower transactions costs forusers. In particular, dialogue has sought to strengthen reforms in three areas: civil service managementand public administration, budgeting and public financial management, and judicial reform.

53. Bank financing would contribute to the government's fiscal program, in line with Fund's medium-term economic framework, which includes limiting the use of high-interest commercial credit so as toimprove fiscal sustainability and of domestic borrowing that could crowd out credit to the private sector.At the same time, the external resources would help prevent a deterioration in the country's foreignreserve position, thus underpinning its fixed exchange rate regime and providing an added measure ofconfidence given the instability in the Region. The proposed loan would contribute to filling the externalfinancing gap, which is projected at US$ 330 million before this loan, any additional debt relief that maybe accorded by the Paris Club iater this year, and possible new purchases from the IMF.

B. Loan Amount, Disbursements, Financial Management and Auditing

54. The proposed loan would be US$ 120 million, to be disbursed in a single tranche at effectiveness.

55. Disbursement will follow the simplified procedures in accordance with the 1996 OperationalDirective on the Simplification of Disbursement Rules under Structural Adjustment and SectoralAdjustment Credits. Loan proceeds will be placed in a Deposit Account opened by the Government inthe Central Bank of Jordan, before being withdrawn by Government into appropriate Treasury accountsto finance pari passu general budgeted expenditures, subject to normal budgetary policies, procedures andcontrols. The Government will submit to the Bank within one month of the closing date of the loan areport showing transactions on the Deposit Account, including evidence that withdrawals were paid into

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appropriate Treasury accounts. In addition, the Government will effect an independent external audit ofthe Deposit Account within three months of the closing date of the loan, to ascertain whether fundsdisbursed by the Bank were received into the Deposit Account and were subject to adequate policies andcontrols of the Central Bank, and whether the local equivalent of the funds withdrawn were paid intoappropriate Treasury accounts to finance budgeted expenditures, subject to normal budgetary policies,procedures and controls. If the proceeds are used for ineligible purposes as defined in the LoanAgreement, the Bank will require the Borrower either to return that amount to the Deposit Account, or torefund the amount directly to the Bank, in which case the Bank will cancel an equivalent amount from theoutstanding balance of the loan. The closing date for loan will be 31 July 2002.

56. The administration of the loan will be the responsibility of the Ministry of Finance, which willassure that withdrawals from the Deposit Account are not used specifically for ineligible governmentexpenditures. The MoF will maintain records of all transactions from the Account in accordance withgenerally accepted accounting practices.

57. The Bank carried out a CPAR and a CFAA on Jordan in 1999-2000. While both procurement andfinancial management systems are highly centralized, the reports concluded that rules and regulations areadequate and broadly respected, and that resources are spent in accordance with the budgeted amounts.Regarding procurement, the CPAR concluded that it is largely transparent and competitive and that "theoverall risk associated with corrupt practices affecting public procurement in Jordan is considered low byboth private and public participants." Regarding financial management, the CFAA notes "in general, theGovernment's management control system appears adequate with many layers of checking and counterchecking" though being driven by rules compliance rather than output performance, limited by cashaccounting methods, and hampered by sometimes slow response times. It recommended the eliminationof overlapping internal audit agencies, which has been done, phasing out ex-ante audits by the externalaudit bureau and having the audit bureau's budget set directly by Parliament. The view in the CFAA wasthat the progressive move toward the results-oriented budget reforms being proposed by the Governmentwould be one way of improving the efficacy of financial management (as well as overall budgetperformance), but noted that it would require, inter alia, new regulations, streamlined financialmanagement procedures, substantial capacity building and training, and computerization of financialtransactions. The Government's public sector reform program is addressing many of the key constraintsidentified.

C. Requirements for Subsequent Bank Quick-Disbursing Loans

58. The current series of quick-disbursing loans has been conceived to provide financial support to theGovernment while it carries out its program of public sector reform. The Government has agreed toachieve substantial progress in several key areas over the near term (the next 12-18 months), and anassessment of this progress would be taken into account in deciding on the subsequent PSRL, currentlyscheduled for late 2003 so as to provide financing at the beginning of the Government's 2004 fiscal year.Much of what Government expects to accomplish builds directly on the decisions and actions over theprevious few years, with the aim of refining approaches, extending pilots, and generally assuringsuccessful implementation of previous decisions -- rather than the introduction of totally new measures.However, major steps have recently been taken, and others are envisaged, to improve the annual budgetpreparation process and place it in a multi-year perspective. The following areas represent those whereprogress is most likely.

59. Three themes are interwoven through the specific reform areas, and action on these will, to someextent, be used in assessing commitment and progress under the Government's program. The first of

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these is better internal coordination among agencies with overlapping responsibilities (notably Ministriesof Finance and Planning) and among initiatives with related goals and activities (especially in e-government and information technology). The second is stronger capacity building, and in particularthe effort made by Government to design and to finance, within its budget, specific capacity buildinginitiatives critical to the success of policy reforms. The third is more effective monitoring and evaluation,both generally for the overall program and for specific initiatives, as a way of introducing mid-coursecorrections and assuring satisfactory progress. In addition, because so many donors are involved inpublic sector reform, the Government intends to set up a specific mechanism or procedure to helpcoordinate the substantive content of donor assistance in this area.

60. Civil Service and Administrative Reform. Actions cover five main categories: (1) effectiveimplementation of the new Civil Service Bylaw, with specific studies and reforms to strengthenincentives for improved performance of public officials; (2) introduction of a variety of measures toimprove delivery of key public services, notably by streamlining and simplifying government procedures,piloting results-oriented, medium-term budgets in a program in the health ministry (see below),institutionalizing regular and scientifically rigorous service delivery surveys, and by extending the use ofe-government to agencies that have substantial interface with the public; (3) wider use of informationtechnology within government; and (4) establishment of an "innovation" fund (within the 2003 budget)to encourage bottoms-up administrative reform notably by line agencies.

61. Budget and Financial Management Reform. The Government will continue the progressive movetoward a multi-year framework for the annual budgeting process, while strengthening the process itselfand gradually introducing elements of results orientation. To these ends, among other measures, theMinistry of Finance will formulate medium-term (3-5 year) expenditure projections and set sectoralexpenditure ceilings at the start of the budget preparation cycle, to be approved by Cabinet and includedin the budget circular for the subsequent year's budget; the process will begin in 2002 for preparation ofthe 2003 budget. As an adjunct to this process, the Ministry of Finance is improving its revenueforecasting. The Mvinistry of Planning is designing a comprehensive database of all investment projectsthat will be put in place by the end of the 2002. The Ministry of Health is launching a pilot exercise in itsimmunization program to improve the link between results and the budget, and the Government intendsto introduce similar pilots in at least four other programs during in 2003. The Ministry of Finance intendsto extend the budget classification nomenclature to accommodate program designations. The Ministriesof Finance and Planning are to formulate a program to assist line ministries to improve their budgetingcapacity and expenditure, to underpin the move toward medium term expenditure forecasting and greaterresults orientation. The Ministry of Finance intends to begin introduction of a unified, computerizedfinancial management information system - in part to speed internal reporting, while strengtheningcontrol procedures and capacity in the main spending ministries (health, education, and public works).

62. Judicial Reform. Actions cover five key areas: (1) refinement of the strategic approach to legalreform; (2) expansion of court capacity and efficiency through deployment of a nation-widecomputerized case management system, construction of additional court buildings, and better continuingprofessional education by the newly reorganized Judicial Institute; (3) strengthened procedures andcapacity to enforce judicial decisions, including those coming out of alternative dispute resolutionmechanisms; (4) better and wider dissemination of judicial information, especially electronically; and (5)establishment of new mechanisms for prior consultation on proposed legislation and regulation, toimprove content and to build consensus among those affected.

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D. Support from Other External Partners.

63. The IMF approved a third Extended Fund Facility for SDR127.88 million on April 15, 1999, ofwhich just over half has been released. The final drawdown is expected soon, and the Government hasrequested a subsequent EFF.

64. Several other donors, notably the EU and the US, provide substantial financing to Jordan, for bothprojects and as quick-disbursing budget support, increasingly in the form of grants. In fact, recent grantaid to Jordan amounts to nearly 5 percent of GDP, and disbursements from official loans, including fromthe World Bank, have been nearly 3 percent of GDP. Many other donors are actively involved inproviding technical assistance to the Government for public sector reform, notably DfID, GTZ, theUNDP and other UN organizations, the Netherlands, and Japan, as well as the EU and USAID.65. The Government's financial program has also been supported by five successive debt reschedulingagreements with the Paris Club (with the next one scheduled for July 2002), by a Debt and Debt ServiceReduction (DDSR) operation with the London Club, and by a debt buy-back arrangement with the formerSoviet Union. Several creditor countries (US, UK, Germany, France, Italy, and Switzerland amongothers) have reduced official bilateral debt on the order of US$ 1.2 billion. (See Annex 5.)

E. Benefits and Risks.

66. While the Government's program is being implemented, the Bank's loan would, as noted above,contribute to maintaining the Government and the country in a strong financial position to weathereconomic and political shocks, in a Region always marked by high volatility but especially so now.Such a cushion of stability should also enhance the Government's attention to continuing to implement itspublic sector reform program, as laid out in its letter of development policy. The program itself aims tocreate a more effective and efficient public sector and to provide better public services, key elements inthe Government's vision of Jordan as an efficient platform to attract foreign direct investment and toenhance the competitiveness of its exports of goods and services - to take advantage of Jordan'sattractive trade agreements with key partners. Dialogue on this program, in the context of the PSRLs,also provides a conduit for the Bank to convey good practice from international experience with publicsector management reform. While the program is not designed specifically to alleviate poverty,improved judicial and administrative services to the public - notably through greater attention toperformance in key front-line ministries like health and education -- can contribute to this objective. Inparticular, the reforms being implemented can help the Government meet the challenge of implementingits Program of Social and Economic Transformation, which has several targeted poverty alleviationinitiatives.

67. This loan can be considered risky for two reasons. First, continuing uncertainty in the Middle Eastcould pose a risk to the implementation of Government programs, both macroeconomic and public sectorreform. However, such uncertainty is a persistent problem for Jordan, and its past record suggests it cancope with it effectively. Recent economic performance has been robust, and the government hascontinued to implement a wide range of economic reforns despite significant tensions, unrest and relatedeconomic strains. Thus, while the risk is real, it is important that its potential impact not be overstated.

68. Second, as public sector reform is an inherently long term and comprehensive task, there is the riskthat the program will be implemented more slowly than envisaged, and that fragmentation will sap itscoherency. Within Jordan, substantial impetus for reform comes from the King himself, and thegovernment is strengthening the management of its program by the appointment of an interministerialsteering committee. In addition, continued dialogue with the Bank (for example through the PSRL series)and the many other external partners can help by emphasizing the importance of commitment and

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leadership, by helping design feasible reforms and realistic targets, and by helping establish benchmarks forperformance. The evidence would suggest this risk - while ever present - is manageable.

V. RECOMMENDATION

69. I am satisfied that the proposed loan complies with the Articles of Agreement of the Bank andrecommend that the Executive Directors approve it.

James D. WolfensohnPresident

By Shengman Zhang

Washington D.C.May 31, 2002

Annex IPage 1 of 7

POLICY MATRIX FOR THE MAIN COMPONENTS OF PUBLIC SECTOR REFORM PROGRAM

Component Actions taken as of May 2002 Additional Actions during Medium-term outcomes

.______________________ l l2002-2003 l

CIVIL SERVICE AND ADMINISTRATIVE REFORM

REFORM OF CIVIL Cabinet approval of new Civil Full implementation of Civil Service A civil service that is managedSERVICE Service Bylaw (and implementing Bylaw, including development by transparently, based on merit

regulations) containing (i) a new code MoAD of a monitoring and evaluation and performance, withof ethics, (ii) provisions for the system of civil service management flexibility to adapt as needed tomeritocratic selection of top civil (covering inter alia selection, appraisal, deliver more effective servicesservants, (iii) improved performance, and career management) to the public. The rnanagementappraisal and promotion procedures system would include clear

Establishment of a standard, oversight responsibilities (e.g.,Cabinet approval of a Ministry of centralized, computerized human in MoAD), regular managementAdministrative Development with resource information and training, up-to-datesufficient budget and competent staff administration system that is accessible computerized databases, use ofto oversee institutional reform and to by at least half of the line agencies e-government in recruitment,manage the civil service and a system to monitor and

Extension of managerial skills fine tune the managementFinalization of job descriptions upgrading to all managers system(duties, reporting arrangements, andqualifications) for 58 departments Formulation of a draft pay reform Adoption of a pay scale that is(covering the great majority of Civil action plan, based on results of study competitive at higher gradeServants) levels and that provides

incentives for client-orientedOnline posting of all civil service performancevacancies as well as the queue of alleligible applicants

Agreement on a system to monitor,testanid adapt new appraisal andpromotion procedures

Annex IPage 2 of 7

POLICY MATRIX FOR THE MAIN COMPONENTS OF PUBLIC SECTOR REFORM PROGRAM

Component Actions taken as of May 2002 Additional Actions during Medium-term outcomes

2002-2003

Creation and online posting of acomprehensive civil service database

Formulation of a terms of referencefor a study on a centralized humanresource information system

Completion of first cohort ofmanagerial skills upgrading (Englishand computers)

Formulation of a terms of referencefor a comprehensive study of payreform

IMPROVEMENT OF Simplification of processes in 15 Extension of process simplification and linplementation of processPUBLIC SERVICES government departments streamlining-- together with the simplification and streamlining

formulation of service standards--to at (or re-engineering) initiatives,Launch of service delivery surveys in least 15 additional departments, and including consolidation with e-5 departments where there have been adoption of a government-wide system government initiatives - in theprocess simplifications to track departmental initiatives majority of government

departments, together withPublication of public service Adoption of a government-wide regular conduct and publicationdirectories for 33 departments protocol for service delivery surveys of service delivery surveys,

(specifying standards for objectivity, under guidance from a ministryLaunch of e-government initiative methods, frequency, responsibility, like MoADthrough the creation of a Program dissemination and use) and conductingManagement Unit, the publication of a and publishing surveys in at least 5 Publication and regularreport highlighting the vision for the additional departments updating of service directories

| initiative, the drafting of a blueprint- l_I for all 1400 government

Annex IPage 3 of 7

POLICY MATRIX FOR THE MAIN COMPONENTS OF PUBLIC SECTOR REFORM PROGRAM

Component Actions taken as of May 2002 Additional Actions during Medium-term outcomes

.__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2 0 0 2 -2 0 0 3roadmap, construction of at least 20 t servicescommunity IT centers, and approval Initiatifion of governmentof a law authorizing electronic inratives- for dffcusson of governmenttransactions informatim and access to govern7ent

services-- in 7 agencies

Implementation of informationtechnology systems in theTelecommunications RegulatoryCommission, the Directorate ofCompanies Registration, the VehicleLicensing Department, the Income TaxDepartment, the General Sales TaxDepartment, and the Border andResidency Department, andgovernment-wide computerization ofpersonnel and budget

Creation of a "government innovationfund" to maintain the momentum ofpublic sector reform by encouragingand financing efforts by agencies todesign administrative reforms and to

l_____________________________ |build needed institutional capacity

EXPENDITURE PROGRAMMING AND BUDGET PREPARATION

MEDIUM-TERM BUDGET Commitment of MoF to prepare Formulation of medium-term Establish by mnid-2004 aFRAMEWORK U aggregate medium-term (3-5 years) expenditure programs in health and || systematic process of medium-

expenditure projections, to be education, approved by Cabinet and term expenditure programmingl_______________________ 1approved by Cabinet and included in incorporated into expenditure Zgrounded on resource

Annex IPage 4 of 7

POLICY MATRIX FOR THE MAIN COMPONENTS OF PUBLIC SECTOR REFORM PROGRAM

Component Actions taken as of May 2002 Additional Actions during Medium-term outcomes

_ _ _ _ _ _ _ _ _ _2002-2003the circular for the 2003 budget projections to frame the 2004 budget availability within a rolling

macroeconomic framework and

Extension of the medium-term on policy-based programs ofexpenditure programming process in at key ministries, approved byleast four additional nministries or extendedto all sprgendinglagnce agencies

BUDGET PREPARATION Commitment of MoF to specify the Cabinet approval of initial expenditure Regular observance of budgetPROCESS initial expenditure ceilings for each ceilings for all ministries and agencies calendar, providing sufficient

R ministry and agency, consistent with consistent with both resource time to ministries and agenciesrevenue projections, beginning with availability and sectoral for formulating budget requests,the circular for the 2003 budget policies/costing consistent with expenditure

ceilings and sectoral policyRevision of the format and instructionsof the budget preparation circular to be Implementation of measures toconsistent with medium-term policy- improve budgeting capacitybased budget preparation throughout government

Issuance of the circular for preparationof the budget as early as possiblebefore July of the preceding yearbeginning with 2004 budgetpreparation

Establishment of a process of regulardialogue between MoF and lineministries on effectiveness of budgetpreparation process

Formulation by Ministries of Finance

Annex IPage 5 of 7

POLICY MATRIX FOR THE MAIN COMPONENTS OF PUBLIC SECTOR REFORM PROGRAM

Component Actions taken as of May 2002 Additional Actions during Medium-term outcomes

2002-2003and Planning of a program to improvebudgeting capacity in the lineministries

REVENUE FORECASTING Creation of an intermninisterial Adoption of measures to reduce the Continuous improvement ofmechanism to improve revenue historical discrepancy between fiscal marksmanship, as theforecasting estimated and actual annual revenue basis for realistic expenditure

l_________________________ ________________________________ ________________________________ programming

INVESTMENT Establishment of a conmmittee within Full operationalization of the Maintenance of aPRVESTMEINT Ministry of Planning to coordinate investment database comprehensive aid-managementPROGRAMMING project decisions in different sectors and investment project

Establishment of procedures requiring information system (toDesign of a comprehensive database accurate projections of all recurrent maximize externalities andfor all projects, and definition of a costs of projects over the medium to efficiencies)work plan to put it in place long term

Systematic incorporation ofSystematic incorporation of rolling projected recurrent costs ofcapital and recurrent cost projections of projects into overall medium-projects into the MTBF and long-term expenditure

projections

More comprehensiveintegration of capital andrecurrent expenditure budgeting

EXPENDITURE Decision to launch a pilot exercise for Implementation of the pilot exercise in Deepening the performanceEFFICIENCY AND results-based budgeting in the health, including selective introduction culture in governmentEFFECTIVENESS immunization program in the Ministry of program classification, definition of administration, through realisticEl EFVNS of Health indicators, and mechanism for definition of objectives, targets,

evaluation and feedback - with indicators, and a systematicl___________________________ lmaximum participation by service dialogue on performance in the

Annex IPage 6 of 7

POLICY MATRIX FOR THE MAIN COMPONENTS OF PUBLIC SECTOR REFORM PROGRAM

Component Actions taken as of May 2002 Additional Actions during Medium-term outcomes

2002-2003users context of budgetary

discussionsExtension of results-based budgetingpilots for programs in at least fouradditional areas

Definition of appropriate qualitativelinks between efficiency andeffectiveness and the allocation offuture budgetary resources

LEGAL AND JIDICIAL REFORM

CONiMERCIAL DISPUTE Enactment of an arbitration code to Regular assessment of impact through Increased recourse to arbitrationRESOLUTION reduce the delays in the judicial informal surveys and implementation and procedural case

process, notably in matters of of refinements management (managedcommercial litigation resolution of civil and

commercial cases) with reducedIntroduction of procedural case burden on court systemmanagement through amendments torelevant laws (code of civil and

I commercial procedures)

MODERNIZATION OF THE Adoption and initial implementation Govemment adoption of a Full integration of caseCOURT SYSTEM of the Royal Scientific Society s2tudy comprehensive plan for country wide management in the judicial

on the modernization of the judiciary court management including training system, with widespread use offor judges and auxiliaries of justice the improved access to court

files and casesFull implementation of courtmanagement plan in Amman

_______________________ .___________ .___________._ _ Approval of plans and budgets for ans and.budgets_for

Annex IPage 7 of 7

POLICY MATRIX FOR THE MAIN COMPONENTS OF PUBLIC SECTOR REFORM PROGRAM

Component Actions taken as of May 2002 Additional Actions during Medium-term outcomes

l________ _ 2002-2003implementation in the rest of thecountry

JUDGES Provision of adequate budgetary Recruitment of an additional 140 Significant improvement in theresources i) to raise salaries of judges judges working conditions of judges,and ii) to hire an additional 80 judges Implementation of a system to monitor and more time to devote to the

the workload for judges management and resolution ofAdoption by the Government of a new the cases assigned to themplan aimed at establishing a flexibleand evolutionary salary scale and animproved pension scheme for judges

TRAINNG AND Amendment of the law regulating the Implementation of the National Better trained, more up-to-datePROFESSIONAL National Judicial Institute Judicial Institute's new curricula for corps of judges and auxiliariesSTANDARDS judges and auxiliaries of justice of justice, through regular

Introduction of new courses on continuing educationbusiness law broadly defined and onforeign languages

Adoption of a systematic trainingprogram for judges and auxiliaries of

I_______________________________ justice l l

THE HASHEMITE KINGDOM ;A:jUIi .LJlOF JORDAN -I

MINISTRY OF PLANNING i

AMMAN < ,l

Ref.No. ./........... ... . ..Date 1 6/2.9.JZ . ....................

ne_ ... ................. 43 l;

Mr. James D. WolfensohnPresidentThe World Bank Grou)Washington, D.C., U.E A.

Dear Mr. Wolfensohn:

This letter summarizes the comprehensive medium term program ofpublic sector reform ihat the Government of the Hashemite Kingdom ofJordan initiated at thc end of the 1990s and describes the status of itsimplementation. On -he basis of the substantial progress in strengtheningpublic sector management, and in light of Jordan's fiscal and externalfinancing needs, the Government is requesting a second public sector reformloan from the World Bank.

The Bank's support would provide the Government with the flexibilityit needs in a difficult regional and international environcment to ensure thatthe bard-won improvelnents achieved in the first stage of the public sectorreform program can be .;trengthened and extended. Furthermore, this supportwill help the Governmtnt in sustaining the multiyear efforts needed to bringthis ambitious reform t:o fruition, just as Jordan has done in the last fiveyears in moving towards greater integration within the global economy andin building the fundamentals for a market-led and export-led growthstrategy.

1: Economic Reformi; and Recent Developments:

As you know, Jonian is a small country with few resources beyond itspeople, and to survive and prosper in an economically and politicallyturbulent region presents a huge challenge.

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THE HASHEMITE KINGDOM d i.LJI ;jUI L.-JIOF JORDAN

M STRY OF PLANNING ,AMMAN

Rel.No . ......... ........Date ~....-. .. . -".__ J

D t..... ........ .... ........... .,iI

Since the econoraic crisis of the late 1980s and the Second Gulf War,Jordan has met this challenge with a development strategy that hasemphasized fiscal stat ility, pragmatic but far-reaching market liberalization,and greater participation from all stakeholders in the social, economic, andpolitical sustainable de zelopment process.

Following a period of considerable expansion in the first half of thepast decade, with annual real growth rate averaging around 8 percent, theeconomic performance in the second half of the 1990s experienced aslowdown, with annual real growth rate averaging 3 percent. That economicslowdown has provicled a challenge to our efforts towards achievingeconomic stabilization.

Consequently, we have carried out an aggressive economic structuraland. adjustment reform programs, supported by the World Bank and theInternational Monetary Fund, with a strong emphasis on fiscal and monetarystability, financial sector reform, trade liberalization, regulatory reform, andprivatization. We have made great strides in the area of international tradepolicy, in particular through the membership in the WTO since 2000, theFree Trade Agreement with the United States (2001) which made Jordan thefourth country in the world, and the first in the Arab world, to enjoy thebenefits of exporting tc the United States free of quantitative and qualitativerestrictions, and the Association Agreement with the European Union, whichwas signed in Septembar 1999 and came into effect, after due parliamentaryratification, last monthi. Moreover, we have signed with the United Statesand Israel the Qualifying Industrial Zones Agreement (QIZs) in 1998, whichgave the products of cernain areas the privilege to access the U.S. market freeof quota and tariffs. Fur1hermore, we established the Special Economic Zonein Aqaba, in early 2001, to allow for an integrated private sector-leddevelopment of this port city through a well-studied master plan, within aspecial and more favorat le fiscal regime.

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THE HASHEMITE KINGDOM X ;l I JIl4.aJIOF JORDAN

MINISTRY OF PLANNINGAMMAN -.

D ... .......... .. .

The impact of these structural and adjustment reform efforts was clearin various aspects. 'We succeeded in ransforming the economy from beingpublic sector oriented into one where the private sector plays a more activerole. Moreover, noticeable improvements in the macroeconomicenvironment were alchieved. This was reflected in high rates of realeconomic growth, which registered 4.0 percent and 4.2 percent in 2000, and2001, respectively. Inflation, measured by the percentage change in theconsumer price inde:;, remained low, registering 0.7 percent and 1.8 percentin 2000 and 2001, I'espectively. The outstanding external public debt as aratio to GDP noticeacbly decreased to reach 76.0 percent in the year 2001compared with 89.0 percent in 1998.

We are grateful for the World Bank's full support of these structuralreforms, in particular through the series of three Economic RefonnDevelopment Loans (EIRDLs) approved since 1995.

11 Social and EconDmic Transformation Program:

More recently, t1 ie Government has adopted the Social and EconomicTransformation Program to improve the standard of living of Jordanians, andto increase the resilience of the Jordanian economy to external shocks byaccelerating the pace of reforms. The overall development objective of theprogram is to achie"e sustainable social and economic development, whileimproving the quality of life and the standard of living for Jordanians. Thiswill be achieved through the following specific objectives:

Increasing the capacity of the economy to absorb more privatesector capilal by establishing and sustaining an enablingenvironment, accelerating government decisions, proceeding withprivatization, and allowing for private investment in largeinfrastructure projects.

* Developing htuman resources.

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THE HASHEMITE KINGDOM L J I ;i.;JI i4L-JIOF JORDAN

MINISTRY OF PLANNING & &l L )I)AMMAN

Ref.No . '..... . .

DaR e. ................................ ................Date .................. ............................... ......................... ......... .~~~~~........ ...- .................................................... e1;

* Improving the quality of basic Government services, especially inhealth and social services.

* Enhancing productivity, promoting local community developmentand businei;s outreach.

* Articulating fiscal, administrative, regulatory and judicial reformsin the form of public investment.

This integrated approach calls for the adoption of a perfonnance basedgrowth budget, sup,orting and further strengthening the role of the privatesector, creating a powerful enabling environment by enacting effectivepolicies, laws and regulations and by building institutional capacity.Acknowledging the fact that basic social services affect the quality of life ofall Jordanians, the program focuses on infrastructure and human resourcepolicies and projects in the areas of education, health, poverty reduction,training and employment.

The process of putting together this program has been extensive andlengthy. The first st>p was to obtain a national consensus on the program'sobjectives and the main areas it targeted. This was done through a uniquepartnership between the government and private sector and civil society thatwas manifested in the Dead Sea Economic Forums (I&II) held in November1999 and March 2001, respectively. The close inter-linkages between all thestrong synergetic eff cts of a well-thought out program that tackles alldynamic interaction between all the components has been the guidingpnnciple in deciding oi the goals and objectives of the program.

Above all, the strong commitment and valuable support afforded by HisMajesty King Abdullah IT to the program ensures that all national efforts arejoined together to ensure the timely success and continuity of the program.His Majesty has been personally following up on the progress of theprogram including its efiective implementation.

M;w," N A, 4e g PC n r%A .>NP -tN Wt.- tr :,, - (AII-1) SALf Elv%.-%1Vt %LrAVAeo 96c

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THE HASHEMITE KINGDOM LI.,LA1I a^1J '& iOF JORDAN

MINISTRY OF PLANNING 1AAW-01 iiAMMAN ' m\Po

Ref.No. ........ ..... ..

IDate ...... fi................................... ._, X_,............. .. ............ 1

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The Governmenkt recognizes that active private sector participation inthe projects includedl in the program is one of the key conditions for itssuccess, and the engine for sustainable real economic growth. Consequently,the program aims to provide an enabling legislative, institutional, andregulatory frameworkc to allow for accelerated privatization of many publicenterprises, and the implementation of major private projects in varioussectors, such as powe;, telecommunications, mining, transport, and water.

In line with th. Social and Economic Transformation Program, theGovernment is modernmizing the educational system by adopting a newcurriculum development process capable of meeting contemporary world-class standards. Moreover, we are integrating information andcommunication technologies (ICT) into the learning process throughdeveloping the neces sary infrastructure to enable e-learning, developing theJordanian educational network, and providing more computers to students.In parallel, and in ots endeavor to turn bold the vision of Mis Majesty KingAbdullah II to make Jordan a regional IT hub, we have opened manyinformation technolog,r community centers, particularly in the rural areas.

In the health area, the program emphasizes the importance of improvingthe quality of health services provided to Jordanian citizens, throughupgrading health facil ities and equipment, developing a health informationsystem, and providini; skill development programs for doctors and nurses,and moving towards results-oriented budgeting in health programs

The program paw s considerable attention to poverty alleviation andimproving the quality of life in rural areas. In this regard, the program aimsat expanding the finane,ial services to small and micro enterprises, providingbusiness counseling aInd training services, putting the Family IncomeSupplement Program into effect, restructuring the National Aid Fund,developing a geographic map of poverty areas, and building anelectronically-linked poverty information system.

Tel. (9626) 4A446670-4644381/85 - Telfa :4649341-4642247-Cable: NPC Jo -Telk: 21319 NPC Jo. -P.O.Box 555 Anuan 11118 Jw1=E-Mail: moplmop.govjo

THE HASHEMITE KINGDOM dLbJI jJUIi ;L. JOF JORDAN

MINISTRY OF PLANNINGAMMAN

Ref.No.. ..... ........ ..........- ...

D ate . .......................... .. ,

D Stronger Focua on Public Sector Reform:

All these efforts attest to the solid progress we have made in stabilizingthe economy, introducing market-oriented reforms, and integrating Jordaninto the world economy. However, the process of reform is not yetcompleted. In keepinlg with the practices in most countries, the reform of thecore ptblic sector i3 needed to underpin and reinforce the reform processengaged in other areas. The country must increase its ability to provideeffective public services to businesses and households as well as implementefficiently, on a day-to-day basis, the massive regulatory and legislativechanges its has effected.

Because the Government realized that administrative tefonns wereindispensable to achieve socioeconomic transformation, those reforms werefounded and born out within the framework of the new social and economicvision the Government started articulating in 1999 with the involvement andthe support of H.M. the King. Due to this fact, these reforms have formed amain pillar of the Social and Economic Transformation Program, and arecontributing to a new approach to public sector reform that is sound,comprehensive, and rsalistic. While it recognizes the need for more action inmany areas if reforni is to fiurther succeed, the approach is flexible, tacklingareas where the oppartunities best present themselves. It unfolds logicallywithin a wider p4irspective of economic and institutional changes,particularly over the frst stage, where it exhibits a high degree of ownership,and enjoys full unequivocal support from His Majesty the King. Theprogram is a homegrown initiative that reflects local realities.

Modern public services and regulations are key to an efficient, investor-friendly business environment, just as an effective judiciary is key toresolving private disrutes. But Jordan also pressingly needs better public

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M MSTRY OF PLANNING ,j

Ref.o. -AANDate..... -........-............. i

..-. 43 W II

services if it is to respond to the social needs of its citizens. It needs a civilservice that is more efficient, productive, and responsive, fully capable ofreducing to a minimum the bureaucratic burdens the citizens have to copewith. It needs to menage public financial resources in ways that promoteefficient, transparent, and accountable use of public funds, lead to betterplanning, and provide better oversight of how public money is spent

Until now, Jord3n has reformed its public sector functions in areas ofimmediate complemeitarity to its trade policy and economic frameworklegislation, including privatization, customs, and a limited range of servicesto business. The tim's has now come to modernize, and in depth, the corepublic sector because this is being increasingly required by the opeting ofthe economy and perbaps more importantly increasingly demanded bycitizens and businesseio at large.

As stated before, the Govermnent identified key areas where reformwas needed in the medium term, notably:

* Raising the efficiency of public services and improving theiraccessibility and quality.

* Modernizing financial management and budgetary processes tomaximize ac'ountability for results.

* Transforming human resources management in the public sector,with civil servants operating in a performance-led environment.

* Strengthening transparency and accountability in all aspects of thestate operations.

* Developing tie use of information technology as a focal point ofthe growth sirategy based significantly on better human resources.

The Government is committed to continuing its efforts in reforming thepublic sector functions in the areas stated below, to produce a public service

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THE HASHEMITE KINGDOM ; OF JORDAN

MINISTRY OF PLANNING -

AMMAN 4-'cb

Date ......... ...... ... _._.....D a te ..................................................~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~... ._ ... ................................................. ig

system, which is it ore productive and responsive to changes that will helpcreate an efficient investor- friendly business environment.

The Government recognizes the challenge in designing and pursingpublic sector reforn, which is complex and long term, involving the wholeof government in wide-ranging initiatives. While most of the worknecessarily involves specific departments, there ,is nonetheless value inhaving an interminie;trial structure both to provide guidance and impulseand to foster cross fertilization, learning, and synergies. In addition to aseries of implementation committees or commissions with membership fromvarious departments, the Government is also establishing an InterministerialCoordinating Committee for Public Sector Reform chaired by the Ministerof Planning.

The Governmer!t's public sector reform program coves four key areas,as outlined below:

I) Civil Service andAdministrative Reform:

The goal of this component is to improve the quality of governmentservices, both by cre ating a Civil Ser-vice that functions more on merit andperformance and b) simplifying or streamlining government agenciesresponsible for deliveiing services to the public.

Tangible progrea.s has been achieved in this field over the past 2 years.This includes the approval of the Civil Service Bylaw by the Cabinet (whichwill sharpen the focus on merit and perftrmance, at all levels), establishmentof the Ministry of AdIministrative Development with a mandate to draw thegeneral policy for administrative development and to improve theorganizational structuwe of the public administration, publication of servicedirectories in 25 public depaltments and simplification or streamlining ofprocedures in 40 public departments, which aim to facilitate the public's

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THE HASHEM1TE KINGDOM LLa4J&Ii-J.aJOF JORDAN

MINSTRY OF PLANNING

Ref .No AMMAN Ref.N o . ........ .... ............ ... . ...... .... .. . ._ .... - - , 11Date .. . -. -.............. ................... .......... . ............... . . . l

access to govemment services, finalization ofjob descriptions for 58 publicdepartments (coverirng some 175,000 civil servants), electronic posting ofjob openings and the pool of eligible applicants, training of managers inEnglish and computer skills, and dissolution of redundant agencies (namelythe Administrative Control and Inspections Bureau). Actions on e-govemment, noted below, reinforce these measures.

The actions the Government intends to take in the near term (over thecoming 1-2 years) to 'consolidate and extend these initial-measures include:

* Measures t(i assure full implementation of the new Civil ServiceBylaw, conplemented by the establishment of a centized,computerized human resource information and administrationsystem, skills training for all managers, and formulation of a draftaction plan For pay reform.

* Process simplification and streamlining - including adoption ofappropriate service standards in at least 15 additional governmentagencies, ini-luding investment promotion and procurement

* Adoption o:f a govemment-wide protocol for service deliverysurveys, anti conducting such surveys in at least five additionalgovernment agencies.

* Extending tIte use of E-government, including e-mail and internet,to seven governmenit institutions.

In addition, the Government intends to establish an Innovation Fund,within its 2003 budge-t, to encourage and help line agencies to design andimplement administralive reforms, train staff, and build needed institutionalcapacities.

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THE HASHEMITE KINGDOM XOF JORDAN

MINISTRY OF PLANNING , i 1 IJjAMMAN

D ateN ............ . ........ ...... ... . .. .. ................ ..... ,1DateN....... -. - PIl

2) Budgetary and Financial Management Reform:

The budget prlCess has functioned well in the past decade to assurefiscal discipline, wliich has allowed the Goverment to introduce manyreforms aiming at strengthening the link between sector policies andresource allocation to raise the efficiency of budgetary management.However, more reforms are needed in this area including more rigorousmedium-term results-oriented budget programming and improvedinstitutional arrangements for investment selection and budgeting.Specifically, the implementation of the Social and Economic TransformationProgram caLs for en}hancing the efficiency of investment programming.

To begin laying the foundation for a substantial move in this direction,the Government is committed to several concrete actions over the next 1-2years, including:

* StrengtheniLg the framework for budget preparation by issuing thebudget circular for 2003 before the end of July 2002, includingmedium termn projections of aggregate govemment expenditures,together with initial ministerial expenditure ceilings for 2003,vetted by C abinet. To facilitate the work of line ministries, thegovermmenl will align instructions in the circular with the movetowards mcdium term, policy-based budget preparation and willassure that subsequent circulars are issued in a timely fashion, asearly as possible before July of the preceding year. In addition, tobegin to imLprove the reliability of the medium-term expenditureframework, the Government intends to formulate medium-termexpenditure programs in at least the health and educationministries, wvhich will help frame preparation of the 2004 budget,and is takizig steps to improve revenue forecasting, and building amacroeconomnic model at the Ministry of Planning (expected bythe end of June 2002).

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THE HASHEMITE KINGDOM ,t 1J I ; .L. 4 JIOF JORDAN

MINISTRY OF PLANNING 1 jljjAMMAN t o

Ref.No . ... - 'fNo............. ...-...I.,,,,,,,,,,,,,, ,,,..... .... .

Date . ..............................................._.,... .. ........... iJ

* Increasing the focus on performance and results in public spendingby impletenting a pilot results-oriented budgeting in theimmunization program of the Ministry of Health in 2003, andextending this pilot approach to more programs during 2004.Recognizing that introducing this approach is a complex task, theGovernmeiit will pay close attention to the definition ofappropriate indicators, to the design of adequate monitoring andevaluation systems - including involvement of service users, andto articulation of the links between the efficiency and effectivenessof prograni design and execution and the allocation of futurebudget reso irces.

* Improving the technical basis for the budget preparation process,for examplt by setting up a comprehensive database of investmentprojects at the Ministry of Planning, establishing procedures toimprove thc projections of and budgeting for recurrent costs ofprojects.

* Setting an intermal committee at the Ministry of planning tocoordinate the decision-making process on projects in differentsectors.

* Strengtheninlt the institutional capacity for budget preparationboth by enlancing the dialogue between core anid line ministriesand by formulating a program designed to improve capacities formedium-term, results-oriented budgeting in line ministries.

3) Judicial Reform:

We recognize the fact that the legal framework and justice system arekey factors in attracting domestic and foreign private investment. We haveundertaken many efforts in the last couple of years on the legislative levelto place Jordan on an equal footing with its business partners. The

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THE HASHEMITE KINGDOM ib j; 4 4 1OF JORDAN

MINISTRY OF PLANNING , &- JAMMAN

Ref.No . . ..... ..........D ate .... ............. ..... ............... ..... -.,1

............... .. ........ l

Arbitration Law was enacted to reduce delays in the judicial process, a newprocedural case management was adopted to enhance the efficiency of thesystem and reduce :he transaction costs on citizens and businesses, the newcunricula for the . Judicial Institute was adopted to meet internationalstandards, and training courses for judges in English and computerapplications are being held regularly to expedite the use of the e-government and itnprove communication with foreign investors. Inaddition, the Goveimment introduced an evolutionary salary scale and animproved pension scheme for judges and hired 80 additional judges. As forthe near term (1-2) years actions, the Govemment intends to embark on:

* Developiag a strategic plan for legal and judicial system.* Pursuing efforts to build capacity and increase efficiency in the

court system.* Strengthening the procedures and capacity to enforce judicial

decision..* Widening and easing access to legal and judicial information

4) E-government initiative:

Like many cotmtries in the world, Jordan has taken a high-leveldecision that imprnved citizen services are key not only to a betterinformed and morm engaged citizenry, but also to its internationalcompetitiveness. The Jordanian e-Government Initiative, launclhed inSeptember 2000, is focusing on both the "e", or the provision of serviceselectronically, and tie "g", or government that is seen as a service providerto citizens. More than a project or program, the Jordanian e-GovernmentIitiative is a national agenda, bearing the slogan "your government at yourservice". The first .teps to institutionalize e-Govermncnt have been takenwith the creation of a Ministry of Information and CommunicationsTechnology (MoICT). This new entity has been made responsible for theimplementation of the initiative throughout Jordaln. The initial approach hasbeen on two tracks:

Tel. (9626)4644466/704644381/5 -Telefax 4649414642247- Cak NPC lJo- Telex: 21319 NPC Jo. -P OBx 555 Ama13 Jo g IIIInE-MnITh znoP@nop.g0v,Jo

THE HASHEMITE KINGDOM i> £.&.a3,Uii:< .4 JIOF JORDAN

MINISTRY OF PLANNINGAMMAN

RefNo . ............ Jl

Date ._ ........... _ . .. ... ........

* Developing a long tern strategy to create the building blocks ofe-Govercmment. A Bluepriit and Roadmap have been developedand are guiding the implementation. Leading this initiative is aProgram Management Unit, at the MoICT, that is managing thedelivery cf e-Govemment services nationwide.

* Delivering electronic services designed as "proof of concept"exercises. To date, two e-Services have been successfullycompletedl (telecommunications licensing and businessregistraticn), and 5 additional services are currently beingscoped for implementation (including the income taXdepartment, general sales tax departnent and the land use andsurvey department).

As a first phase of roll-out, over 10 govermment agencies are beingconnected via a secute private network, with email functionality introducedacross the participating agencies. A portal for e-Government is also underdevelopment. Additional elements for successful delivery of e-Services areworking in parallel, i.3cludijig legislative reform (the introduction of theelectronic transactions law), public access channels (the establishment ofover 20 IT commtunity centers), and training programs for governmentemployees.

The above actions, in the four components, are at or near fuition. cHowever, implementing this program will require resources, especially at atime when expenditure restraint is being vigorously pursued. This has meantcareful prioritization and demonstrates the importance the governmentattaches to the public sector reform program. For the reform of the judicialsector, the budgetary resources have already been allocated: they aresubstantial because of the need for capital investments in court buildings,information technology and the promotion of human resources. In the othercomponents, resources required have been more modest, because of theincremental nature of Ihe reforms and. The coming year will see a prudent

Tcl (9626) 44746443h1185 -Telefax .46493 114642247- Cable: NPC JOb Telex: 21319 NPC Jo.. P.O.BOX 555 Amnuat 11118 JcdaaE-Mail: mopomop.govjo

THE HASHEMITE KINGDOM L i:,JJ a41JIOF JORDAN

MINISTTY OF PLANNING & t 5% AMMAN

Ref.No . . .. ..D ate ............ ............................ _.

expansion of resou.-ces devoted to the other reform areas, and a continuedemphasis on mobilizing internal resources not only to economize but tobuild long-lasting ownership Donor grants, especially in technicalassistance, will also be vigorously sought.

As you can appreciate, the Government of the Hashemite Kingdom ofJordan is firmly comnmitted to the program it has designed and published forpublic sector reform outlined above and it would welcome the World Bank'sassistance. A pronammatic loan would provide us with the budgetaryflexibility that would1 enable us to implement fundamental structural changesin the public sectoi while continuing to maintain the successes achieved instabilizing and opening the economy. Such a loan would help Jordanmanage the particular risks it faces within the surrounding political andeconomic environment and would thus help sustain the competitive positionof the Jordanian ecotnomy and therefore the welfare of its citizens.

Please accept my high esteem and consideration

Sincerely,

Bassem AwadallahMinister of Planning

Thl. (9626) 4644466170-4644381,45 - Telefax: 464!3414642247. Cable: NPC Jo -Telex: 21319 NPC Jo. - P.O.BoX 555 Amman III18 JordatE-NkMalmop@MoP.go)vjo

Annex m

Improving Public Services in Jordan

1. Introduction:

A recurrent public complaint on the part of the Jordanian public regards excessive time requirementsassociated with delivery of even the most basic public services. For example, for a child to change aschool, the parent will have to visit six different departments, with procedures lasting as long asthirty days. There are occasionally complaints of arbitrariness in the delivery of public services,reflecting the fact that the same service in different locations typically requires differentdocumentation, supporting documents, and numbers of signatures, in each case requiring the visit ofmany offices and many return visits. In many cases, the process is so cumbersome that the requestorchooses to hire a facilitator to carry out the process on his or her behalf.

Starting 1999, the Jordanian authorities have implemented an aambitious program aimed atinvestigating and addressing these public complaints in a cost-efficient, but significant way.

A preliminary investigation revealed that government departments tended not to have preciseinformation regarding which services they were supposed to provide, or guidelines on how thoseservices were meant to be provided. This left much discretion to the individual civil servant who inthe best situation had to rely on word of mouth and or tradition to determine which procedure tofollow or what document to seek from the citizen. Some services required excessive bureaucracy,with steps being added as a result of practice, turf, or other internal requirements generally unrelatedto the service itself.

Fixing this problem therefore entailed acting along three separate tracks: first identify and documentservices, and simplify procedures; second, improve public information regarding these proceduresamong both civil servants and the public at large; and third, improve each department's day-to-dayinteraction with the public to ensure that the citizen is able to obtain public services in a timely,efficient and orderly fashion.

This note highlights the approach taken by the Jordanian authorities in terms of the first track ofsimplifying procedures, including the methodology and implementation, examples of the tangibleresults achieved thus far, and the steps planned for the future.

2. Simnlifying Drocedures

a. Approach

Starting with several key departments, with more interaction with the public, each departmentappointed a focal team which would be in charge of putting together the simplification proposals. Asa result, a taskforce of about 200 employees was created. The idea was to create a corps of changeagents throughout government to help overcome resistance and ensure that reforms are carried out.

At the same time, a supervisory committee composed of high-level senior employees from allrelevant departments, as well as representatives of the private sector and NGOs, was established tooversee the work of these focal teams and to approve their recommendations for implementation. Itis further in charge of the general framework for implementation and follows up and evaluates thewhole program.

A small group of specialists, under the supervision of the Minister of Administrative Development,focused on training this taskforce on the philosophy and methodology of the exercise. Theythereafter acted as facilitators for the focal teams, intervened when necessary on the day-to-day

Annex Im

implementation of the action plan, and provided training when needed, assistance, and direction forthe focal teams in the government departments. Focal teams were asked to provide recommendationswhich would have a significant positive impact on the user of the service (i.e. the public at large)especially in terms of reducing the time required to obtain a service. As a result they focused onreducing the distance traveled and other criteria which are likely to affect the processing time ofeach procedure. They were asked to focus on areas which lacked clarity, simplicity, and legitimacybut to remain practical in ensuring that the changes could be implemented quickly and would notnegatively impact on the overall quality of service provided. Finally they were asked to look intopotential areas of decentralization, ensuring that local offices deal with clients where possible, ratherthan having the central administration doing the whole process.

Each department's focal team was then asked to define the services it delivered. They were asked tospecify the name of service, the target audience (recipients), the number of procedures associatedwith each service, and the expected time to obtain it. It was further asked to estimate the physicaldistance in terms of steps and stairs that would be required of each applicant to get a service, thenumber of different civil servants an applicant would have to deal with, and number of sections ordepartments involved in responding to an applicant.

The teams documented the current process for each department, which constituted the benchmark forimproving the processes. The focal teams, with the help of the facilitator who assured a coherentmethodological approach, embarked in the process of simplifying those steps. The first task focusedon those procedures and steps for which there was no basis either in the law or the regulationsassociated with the delivery of those services. This entailed looking at the regulations relative toeach service, focusing on the essence and the purpose of each procedure, and recommending theoutright suppression of a step, combining several procedures within the same office, and evenchanging the agency floor plan and lay-out to allow for more efficient delivery of services.

The second task focused on reviewing regulations to ensure that the steps were still necessary, giventhe change in technology or even the changing circumstances of public administration. Any step thatdid not require Council of Ministers approval for modification was identified and reviewed. Thefocal teams in each of the departments then prepared recommendations for appropriate action wherenecessary.

The focal teams submitted their recommendations to the supervisory committee for approval.

b. Results

The process of evaluating the procedure simplification and streamlining is ongoing and is obtainingencouraging early results, including the potential for very important gains in efficiency (see Table 1).But this is only a first step. The new procedures are now being tested on the ground, and the actualgains are being evaluated. This process requires constant supervision in terms of implementation,monitoring and further review. Furthermore, a system to integrate the client's feedback forsubsequent improvements must be further developed. One approach is the use of service deliverysurveys to evaluate client satisfaction and these are being undertaken in several pilot departments.The results will be made public and will help refine and focus the improvement of the process.

Annex III

Table 1IMPACT OF PROCEDURE SIMPLIFICATION IN JORDAN (SELECTED EXAMPLES)

INCOME TAX DEPARTMENT BEFORE SIMPLIFICATION AFTER SIMPLIFICATION IMPACT ON THEService CLIENT

No. of Time of No. of procedures Time of Time ofProcedures implementation Implementation implementaffon

(minutes) (minutes) (minutes)Opening a new taxpayer file 13 45 9 21 -58%Issuing a tax number certificate 1 8 4 4 -50%Issuing a tax statement 7 5 2 2 -40%Paying taxes (whether in full or 20 40 10 25installments)Notice of protest of tax estimation 12 30 5 23 -23%Estimating lump sum tax 17 80 5 40 -50%Clearance Certificate 23 45 9 20 -56%Release mortgages of fixed and 54 95 20 32 -66%current assetsPresenting a self-estimate of tax 20 33 12 28 -15%burden I_I_I _I

MINISTRY OF INDUSTRY & BEFORE SIMPLIFICATION AFTER SIMPLIFICATION IMPACT ONTRADE THE CLIENTService

No. of Time of No. of procedures Time of Time ofProcedures implementation Implementation implementation

(minutes) (minutes)Registering Industrial company 6 15 6 10 -33%Registering of personal company 16 20 10 10 -50%Registration of trade mark for a 16 20 10 10 -50%personal company

Registration of trade mark 18 20 10 25Registration of commercial agency 24 1 working day 10 15 -97%Registration of partnerships and 10 60 8 10 -83%limited partnership companiesRegistration of limited 16 30 9 15 -50%responsibility company .

Annex IV

Structural Reform in Jordan, 1989-2001

Structural reform programs in Jordan encompassed domestic taxation/subsidy policies, tradepolicies, monetary/financial sector policies, exchange rate policies, administered prices and privatization.The reforms initiated since 1989 have given Jordan one of the best policy environments in the Middle-East and North Africa. It is notable that Jordan has moved steadily forward in reforms in the last 12 yearsdespite several changes in government and adverse external shocks throughout the 1990s.

In domestic taxation, the narrowly based, small consumption tax has been replaced first with a 7percent General Sales Tax in 1994, which was raised to 10 percent in 1995, and which in turn wasreplaced with a 13 percent VAT in 2001. As a result, indirect tax revenues, as a ratio of GDP, havedoubled from 8 percent in 1989 to 16 percent in 2000, which compares well with other lower-middleincome countries. Food and fodder subsidies have been eliminated and energy prices have been broughtin line with international prices. In direct taxation, the number of tax bands have been cut from ten to sixand the maximum individual income tax rate has been brought down to 30 percent from 45 percent in1995 and further lowered to 25 percent in 2001. Corporate tax rates have been reduced from 38-55percent to 15-35 percent in 1995.

In trade reforms, Jordan moved since 1987-88 from a 40 percent coverage ratio for NTBs, a 34percent weighted average tariff rate, and a 26 percent tariff dispersion to virtually no significant non-tariffbarriers, a 13.5 percent weighted average tariff rate, and a tariff dispersion of 13 percent. Most of thecapital goods (since 1999) and intermediate goods (since 2000) enter with zero import duties. Customsadministration procedures have been improved with adoption of the ASCUDA system for the valuation ofimports since 1997. Also notable are the declaration of Aqaba as a special economic zone to provide a -world class environment for private investors and creation of six Qualifying Industrial Zones elsewherethat promote joint Jordanian-Israeli-Palestine quota and duty free exports to United States.

In monetary policy instruments, Jordan has moved progressively away from being a financiallyrepressed economy with direct controls on credit and interest rates to a mature, liberalized one whereindirect controls play the lead role. Deposit and lending rates are set by market conditions since 1990, theCBJ issues certificates of deposits since 1993 to control domestic liquidity, reserve requirements havebeen unified across deposit types and institutions, the CBJ started overnight deposit and repurchaseagreements with commercial banks since 1998 to stimulate the inter-bank market, and regular auctions ofTreasury Bills are used to set benchmark interest rates since 1999.

In foreign exchange market, Jordan has witnessed substantial liberalization. Jordan ended its dualexchange rate system and adopted a basket peg (the five currencies of the SDR with Jordan specific trade-partner weights) from 1989 to 1995 and a US dollar peg afterwards. The distinction between resident andnon-resident accounts ended in 1996. Residents are allowed to hold foreign currency accounts. Fullcapital account convertibility is in force since 1997.

In the area of administered prices, key utility prices such as for water, electricity and petroleumproducts have been revised upward. Water prices were quadrupled in 1994. Electricity prices were raisedby 12 percent in the same year. More recently, though Jordan receives all of its oil products from Iraqunder a generous subsidy, oil product prices have been increased by between 15 and 47 percent to bringthem more in line with world oil market trends.

In privatization, Jordan began in a small way (US$ 102 million) in 1998 with the divestiture ofJordan Cement Factories Corporation, but moved quickly to a massive (US$ 508 million) sale of theGovemment's 40 percent share in Jordan Telecommunication Corporation in 2000. Close to US$ 1billion, or, 12 percent of GDP, has been realized in privatization proceeds in transactions through 2001

Annex IV

with several more transactions (airline, electricity, mining, water companies) worth more than a billiondollars waiting to be taken to the market in the coming years.

Annex V

Paris Club Debt Rescheduling Agreements with Jordan

In 1989, Jordan's public debt was rescheduled for the first time with the Paris Club official creditors.Since then, Jordan's debt has been rescheduled four more times, every two or three years, with the totalamount adding up to US$ 3.7 billion. Following the Paris Club principles, the debt treated forcancellation and rescheduling has only included debt contracted by Jordan before January 1, 1989, andeach negotiation has only concerned debt service due in the near future.

The first two debt reschedulings were made on so-called Classic terms, in which all credits, whetherclassified as official development assistance (ODA) or not, are rescheduled at the appropriate market rate,with a repayment profile negotiated on a case-by-case basis. As of 1994, however, Jordan has benefitedfrom rescheduling on Houston terms, which generally apply to severely indebted lower middle-incomecountries with a relatively high share of official bilateral debt in their debt stock. On Houston terms, non-ODA credits are rescheduled at the appropriate market rate over around 15 years with 2-3 years grace andwith payments rising progressively. ODA credits are rescheduled at an interest rate at least as favorableas the original concessional interest rate applying to these loans, over 20 years with a maximum 10 yearsof grace. Houston terms also include the possibility for creditor countries to conduct, on a bilateral andvoluntary basis, debt swaps with the debtor country. The last two reschedulings, in 1997 and 1999, wereundertaken conditional upon, and in support of, Jordan's consecutive programs with the IMF in 1996 and1999.

The dates, amounts and terms of rescheduling agreements on both concessional debt (ODA) and non-concessional have been as follows:

Debt consolidation on Classic terms, including payment arrears

* July 19, 1989, US$ 586 million, 9 years maturity with 5 years grace period (this has now beenfully repaid)

* February 28, 1992, US$ 771 million, 19 years maturity with 10 years grace period for ODA, 14years maturity with 8 years grace period for non-ODA debt.

Debt consolidation on Houston terms, including payments arrears and previouslW rescheduled debt

* June 28, 1994, US$ 1,147 million, 19 years maturity with 9 years grace period (ODA), 17 yearsmaturity with 2 years grace period (non-ODA).

* May 23, 1997, US$ 400 million, 19 years maturity with 10 years grace period (ODA), 14 yearsmaturity with 3 years grace period (non-ODA).

* May 20, 1999, US$ 821 million, 20 years maturity, 10 years grace period (ODA), 18 yearsmaturity, 3 years grace period (non-ODA).

New rescheduling negotiations between Jordan and the Paris Club are to take place around mid-2002.

ANNEX VI

Jordan at a glance 5t31tO2

M. East Lower-POVERTY and SOCIAL & North middle-

Jordan Africa Income Development diamond'2001Population, mid-year (millions) 5.0 296 2,046 Ufe expectancyGNI per capita (Atlas method, US$) 1,750 2,040 1,140GNI (Atlas method, US$ billions) 8.8 602 2,327

Average annual growth, 1995-01

PopulaUon (%) 3.0 2.0 10Labor force (X) 4.1 2.8 1.3 GNI 9, Gross

per ~ ~primaryMost recent estimate Oatest year available, 1995-01) capita . enrollment

Poverty (% of population below national poverty line) 12 .Urban population (% of tota population) 75 59 42lie expectancy at birth (years) 71 68 69Infant mortaiity (per 1,000 lIve births) 26 44 32Child malnutriton (% of children under 5) 5 .. 11 Access to improved water sourceAccess to an improved water source (% of population) 96 89 80Illiteracy (% of populaton age 1.5.) 10 35 15Gross primary enrollment (% of school-age population) 71 95 114 Jordan

Male 70 102 116 Lower-middle-income groupFemale 72 88 114 _

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1981 1991 2000 2001Economic ratios

GDP (US$ billions) 4.4 4.2 8.5 8.8Gross domestic investmentGDP 45.4 25.9 27.2 25.9 TmdExports of goods and servicestGDP 43.0 59.5 41.8 44.2 radeGross domestic savings/GDP -8 7 2.6 0 5 1.0 rGross national savlngstGDP 42.2 15.0 27.9 26.3

Current account balancetGDP -0.9 -10.1 0.7 0.4 DomesticInterest paymentstGDP 2.1 6.7 3.5 3.5 DomesUc-7-- i investmentTotal debt/GDP S1.5 227.7 94.4 89.0 savngsTotal debt service/exports 10.1 24.2 12.3 12.1Present value of debt/GDP .. .. .. 85.0Present value of debt/exports .. .. .. 118.1

Indebtedness1981-91 1991-01 2000 2001 2001-05

(average annual growth)GDP 1.5 4 5 4.0 4.2 5.7 -JordanGDP per capita 2.5 1.0 0.9 1.2 3.0 Lower-middle-Income groupExports of goods and servIes 4.5 2.5 2.1 7.9 5.7

STRUCTURE of the ECONOMY1981 1991 2000 2001 Growth of Investment and GOP (%)

(X of GDP) 3Agrculture 6.1 8.5 2.2 2.1 3.Industry 29.8 26.2 24.8 24.7

Manufacturing 14.5 13.7 15.6 15.3 Services 64.1 65.3 73.0 73.2 -f 99 00 01

Private consumption 77.7 71.4 74 5 76.0 40General govemment consumption 31.1 26.0 25.1 23.0 GDI -GDPImports of goods and services 97.2 82.8 68.6 69.0

(average annuial growth) 1981-91 1991-01 2000 2001 Growth of exports and Imports

Agriculture 8.5 -3 2 7.1 20Industry -0.5 4.3 3.8 .. 15

Manufacturng 0.7 5.4 5.6 .. 1sServices 1.6 5 0 4.9 .. 5

Private consumption -0.1 4.8 10.9 6.1 0General govemment consumption 0.6 5.0 6.8 -4.6 - 9D 9D 99 00 01Gross domestic investment -2.4 1.7 10.6 -0.9 Exports -l ImponsImports of goods and services -0.3 2.5 14.5 3 4

Note: 2001 data are preliminary estimates.The diamonds show four key indicators In the country (in bold) compared with its Income-group average. If data are missing, the diamond will

be incomplete.

ANNEX VI

Jordan

PRICES and GOVERNMENT FINANCE

Domestic prices 1981 1991 2000 2001 Inflation (%)

(% change) 9

Consumer prices 7.7 8.2 0.7 18 eImplicit ODP deflator 18.9 5.1 -0.1 0.3 4

Govemment finance 2 v\ _/4

(% of GDP, includes current grants) 0 i i Current revenue 49.1 448 29.8 30.4 .2 g 97 01Current budget balance 22.5 13.1 1.0 2.7 -GDP deflator 0CPIOverall surplus/deficit 7.2 8 3 -4 7 -3.7

TRADE

(US$ millions) 1981 1991 2000 2001 Export end Import levels (USS mill.)

Total exports (fob) 734 1,132 1,899 2,293 3000Food 100 126 164 191 e,oooPhosphates 166 181 128 130 4.000

Manufactures 215 403 933 1,269Total imports (cifl 3,170 2,512 4,577 4,812 2.0i0

Food 508 613 747 733 zOCFuel and energy 533 355 718 702 1.000Capital goods 1,256 369 1,313 1,311 0

9s Go 97 98 99 00 01Export price index (1995-100) 88 87 91 92Importpriceindex(1995=100) 124 97 106 108 M Exports flImportsTerms of trade (1995=100) 71 89 86 85

BALANCE of PAYMENTS

(U.8$ mi'llions) 1981 1991 2000 2001 Current account balance to GOP (%)

Exports of goods and services 1,909 2,484 3,536 3,899 6.-Imports of goods and services 4,215 3,429 5,796 6,094 e Resource balance -2,306 -945 -2,260 -2,195

Net income 87 -362 *27 9 2

Net current transfers 2,178 884 2,345 2,218 0 I

Current account balance -41 -423 59 32 2

Financing items (net) -5 397 622 -270 -4Changes In net reserves 47 26 -681 237 4.

Memo:Reserves including gold (US$nulilions) 1,300 1,112 3,430 3,192Conversion rate (DEC, locaVUS$) 0.3 0.7 0.7 0 7

EXTERNAL DEBT and RESOURCE FLOWS1981 1991 2000 2001

(US$ millions) Composition of 2001 debt (USS mill.)Total debt outstanding and disbursed 2,291 9,550 7,978 7,856

IBRD 45 511 856 941 | 710 A. 4IDA 78 76 57 55 0 A 4

Total debt service 316 739 723 770 c 4a9IBRD 3 97 108 106 F 1,020IDA 1 2 3 3

Compositon of net resource flows D '43Officiai grants 891 383 286 313Official creditors 305 417 -18 61Private creditors 29 -96 -115 -60Foreign direct investment .. -26 751 140Portfolio equity 0 0 104 -25 E. e3,4a

World Bank programCommitments 25 25 35 120 A IBRD E -BilateralDisbursements 22 40 38 153 B -IDA D -Other muLilaleral F -PrivatePrincipal repayments 0 56 59 60 c -IMF -Short-termNet flows 22 -16 -20 93 ___

Interest payments 3 43 52 49Net transfers 19 -59 -73 44

Development Economics 5/31102

ANNEX VI

Jordan - Key Economic Indicators

Actual Estimate ProjectedIndicator 1997 1998 1999 2000 2001 2002 2003 2004

National accounts (as % of GDP)Gross domestic producte 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Agicultre 3.3 3.0 2.4 2.2 2.1 2.0 1.9 1.8

Industry 25.2 25.5 25.6 24.8 24.7 23.4 23.2 23.0

Services 71.6 71.5 72.0 73.0 73.2 74.6 74.9 75.1

TotalConsumptiem 96.6 97.7 92.7 99.5 99.0 99.4 100.0 99.5Gross donesticfixedinvestnent 25.5 21.1 23.5 25.6 25.9 24.9 24.7 25.0

Government investment 5.5 6.0 5.8 5.3 6.0 6.3 5.6 5.6Private ivestment 20.0 15.1 17.7 20.3 19.9 18.6 19.1 19.4

Exports (GNFS)b 48.8 44.6 43.4 41.8 44.2 43.8 43.4 43.2Imports (GNFS) 70.8 64.0 61.3 68.6 69.0 69.7 69.6 69.3

Gross domestic savings 3.4 2.3 7.3 0.5 1.0 0.6 0.0 0.5

Gross nationalsavingsc 25.9 22.0 30.1 27.9 26.3 26.2 25.9 25.8

Memorandum itemsGross domesticproduct 7324 7959 8134 8451 8829 9563 10388 11185(US$ million at current prices)GNP per capita (JS$, Atlas method) 1590 1600 1630 1830 1830 1830 1930 2060

Real annual growth rates (%, calculated from 1985 prices)Gross domesticproductatmanlketprices 3.1 2.9 3.1 4.0 4.2 5.1 6.0 5.8Gross DomesticIncome 3.6 2.8 3.4 2.6 4.3 6.7 6.1 5.2

Real annual per capita growth rates (%, calculated from 1985 prices)Gross domestic goduct at market prices 0.0 -0.2 0.0 0.9 1.2 2.2 3.3 3.2Totalconsumption 2.7 2.1 4.7 6.6 0.5 4.8 4.4 2.2Private consumption 1.7 4.0 -6.1 7.6 3.1 2.9 3.4 2.3

Balance of Payments (US$ millions)Exports (GNpS)b 3572 3548 3534 3536 3899 4193 4504 4828

Merchandise FOB 1836 1802 1832 1899 2293 2522 2718 2926ImportS (GNFS)b 5186 5090 4990 5796 6094 6665 7234 7750

MerchandiseFOB 4099 3826 3699 4577 4812 5296 5751 6152Resource balance -1613 -1542 -1456 -2260 -2195 -2472 -2730 -2922Netcurrenttransfers 1851 1702 2016 2345 2218 2524 2753 2826Curnent account balance 29 22 405 59 32 -24 -41 -85

Netipnvateforeigndirectinvestrment 180 189 154 751 78 120 206 297Long-terraloans (net) -226 -93 -37 -361 -159 161 136 21Offidal 259 145 204 -18 61 278 152 78Private -485 -238 -241 -343 -220 -117 -16 -57

Other capital (net, ind. carm & o=issions) 416 -598 238 233 -189 -374 -147 -142Changeireservesd -400 480 -760 -681 237 118 -154 -92

Memorandum itemsResource balance (% of GDP) -22.0 -19.4 -17.9 -26.7 -24.9 -25.9 -26.3 -26.1Real annual growth rates ( YR85 prices)

Merchandise exports (FOB) 2.9 4.0 4.2 8.5 19.1 5.7 7.3 8.2Piimary -0.3 5.2 -5.8 7.1 39.1 6.9 5.3 5.8Manufactures 1.0 5.9 11.0 11.4 36.7 4.3 9.8 11.0

Merchandise imports (CI1) -3.4 -5.9 -0.9 20.8 2.8 11.9 7.4 4.4

(Continued)

ANNEX VI

Jordan - Key Economic Indicators(Continued)

Actual Estimate ProjectedIndicator 1997 1998 1999 2000 2001 2002 2003 2004

Public finance (as % of GDP at narket prices)'Currentrevenues 30.3 29.8 30.7 29.8 304 31.6 31.7 31ACurrent expenditures 29.4 29.9 28.4 28.7 28.4 29.2 30A 29.8Currentaccountstrplus (+) ordeficit(-) 1.0 -0.1 2.3 1.0 2.0 2.4 1.3 1.6Capital expenditure 7.3 6.4 6.3 4.9 5.2 6.5 5.6 5.6PoreignLfinancing -0.1 0.2 2.0 -1.4 1.5 0.5 0.1 0.2

Monetary indicatorsM2/GDP 107.4 106.8 117.0 124.1 125.7 127.6 129.8 132.0Growth of M2 (%) 7.8 8.1 12.0 10.2 5.8 10.0 10.5 9.5Private sectorcreditgrowth/ 136.2 47.5 61.7 171.3 73.8 87.6 167.5 107.5total credit growth (%)

Price indices( YR85 =100)Merchandiseexpoxtpriceindex 100.0 94.4 92.1 88.0 89.2 92.8 93.2 92.7Merchandisernportprice index 100.0 99.2 96.8 99.1 101.4 99.7 100.8 103.3Merchandise terms of trade index 100.0 95.3 95.2 88.8 88.0 93.1 92.4 89.8Realexchangerate(US$/LCU) t 111.8 116.6 117.3 123.0 ..

Consumerpniceindex (% change) 3.1 3.1 0.0 0.7 1.8 3.5 2.4 1.8GDP deflator (% change) 1.1 5.6 -0.9 -0.1 0.3 3.1 2.5 1.8

a. GDP at factor costb. "GNFS" denotes "goods and nonfactor services."c. Inclades net unrequited transfers excluding official capital grants.d. Inclades use of IMP resources.e. Consolidated central governmentf. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation.

ANNEX VI

Jordan - Selected Indicators TableBase-case (most likely) projection

Actual Estimate Projection1997 1998 1999 2000 2001 2002 2003 2004

Part A: Main Macro AggregatesAnnual growth rates, calculatedfrom constant 1985 price data

GDP (mp) per capita 0.0 -0.2 0.0 0.9 1.2 2.2 3.3 3.2Total conrsumpuon per capita 2.7 2.1 -4.7 6.6 0.5 4 8 4.4 2.2

GDP at market pnces 3.1 2.9 3.1 4.0 4.2 5.1 6.0 5 8Total consumption 5.9 5.3 -1.7 9.9 3.4 7.7 7.2 4 7

Private consumption 4.9 7.2 -3.2 10.9 6.1 5.8 6.1 4.8Gross domestic investment (GDI) -11.9 -11.2 20.0 10.6 -0.9 9.9 4.5 5 8

Gross dom. fixed mvestment (GDFD -8.5 -14.0 15.2 11.5 5.4 10.2 4.4 5.8

Exports (GNFS) -2.8 1.4 0.9 2.1 7.9 5.2 5.6 5.8of which Goods 2.9 4.0 4.2 8.5 19.1 5.7 7.3 8.2

Imports (GNFS) -3.7 -0.3 -0.1 14.5 3.4 11.0 6.8 43of which Goods -3.4 -5.9 -0.9 20.8 2.8 11.9 7 4 4.4

Savings-inveshnent balances, as percentage of GDPGross Domestic investment 25.5 21.7 25 2 27.2 25.9 26.5 26.3 26.6

of which Government investment 5.5 6.0 5.8 5.3 6.0 6.3 5.6 5 6

Foreign savings -0.4 -0.3 -5.0 -0.7 -0.4 0.3 0.4 0 8Gross national savings 25.9 22.0 30.1 27.9 26.3 26.2 25.9 25.8

Govenment savings 1.0 -0.1 2.3 1 0 2.0 2.4 1.3 1.6Non government savings 24.9 22.0 27.8 26.9 24.2 23.9 24.6 24.2

Gross domestic savings 3.4 2.3 7.3 0.5 1.0 0.6 0.0 0.5

OtherGDP inflafion 1.1 5.6 -0.9 -0.1 0.3 3.1 2.5 1.8Annual average exchange rate (LCU/US$) 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7Indexrealaverageexchangerate(YR85=100) 111.8 116.6 117.3 123.0 ..

Tems of trade index (YR85 =100) 100.0 95.3 95.2 88.8 88.0 93.1 92.4 89.8incremental capital-output ratio (GDI based) 9.4 8.4 6.8 6 2 6.3 4.9 4 3 4.4Money growth 7.8 8.1 12.0 10.2 5.8 10.0 10.5 9.5

Part B: Government Finance IndicatorsPercentage of GDP

Total revenues, of which 30.3 29.8 30.7 29.8 30.4 31.6 31.7 31.4Tax revenues 15.4 15.2 15.3 16.1 16.3 16.0 19.1 19.6

Total expenditures, of which 36.7 36.2 34.7 33 7 33.6 35.7 36.0 35.3Consumption 17 3 18.4 16.9 16.9 16.9 18.7 19.4 19.3

Deficit(-YSurplus(+Y" -6.4 -5.9 -3.5 -4.7 -3.7 -4.1 -4.3 -3.9

Fmnancing: 6.4 6.4 4.0 3.9 3.2 4.1 4.3 3.9Foreign -0.1 0.2 2.0 -1.4 1.5 0.5 0.1 0.2Monetary sector -1.2 9.8 1.8 -14 3.3 -1.6 -1.6 -1.5Other domestic 7.6 -3.6 0.1 6.8 -1.6 5.2 5.8 5.3

OtherTotal DebtVGDPmp 105 8 108.6 107.7 100 1 97.6 91.9 86.1 80 1Total interest paymentsfTax revenues 33.7 27.6 30.7 31.0 259 26.0 22.8 19.4

Part C: Debt & Liquidity IndicatorsToal DOD and TDS

DOD (USS millions) 8111.4 8417.1 8909.8 7977.9 7856.1 8013.1 8101.7 81418DOD / GDPmp ratio 110.8 105.8 109.5 94.4 89.0 83.8 78 0 72.8TDS (USS mallions) 898.8 888.5 525.7 723.0 770.0 852.9 928.7 951.9TDS/exports(XGS)ratio 16.4 16.5 9.6 12.3 12.1 12.9 130 12.3

Total gross reserves (months'imports G&S) 5.3 4.3 6.1 6.5 5.9 4.9 4.6 4.4

Part D: External Financing Plan(US$, mUlions)

Private investment (net) 361.0 382.0 239.0 854.4 -34.5 151.8 240.8 333.8Net Long term borrowing excl IM -225.8 -93 0 -37 0 -360.8 -159.0 160.9 136.0 21.2

Adjustments to scheduled debt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0All other capital flows 235.2 -790.8 152.6 128.8 -76.1 -406.0 -181.5 -178.8

Financing Requirements (inci b{F) 370.4 -501.8 354.6 6224 -269.7 -93.3 1953 176.3of which current account deficit -29.3 -21.9 -404.9 -58.5 -32.2 24.2 41.3 84.7

ANNEX VI

Jordan - Key Exposure Indicators

Actual Estimate ProjectedIndicator 1997 1998 1999 2000 2001 2002 2003 2004

Totaldebtoutstandinganddisbursed 8111 8417 8910 7978 7856 8013 8102 8142

(TDO) (US$m)aTotallong-termdebt(US$m)' 7363 7824 8035 7268 7146 7303 7392 7432

Short-Termi Debt 748 594 875 710 710 710 710 710

Net disbursements (US$m) 489 -90 461 -320 11 55 11 -55

Total debt service (TDS) 899 889 526 723 770 853 929 952

(US$m)a

Debt and debt service indicators

(%)TDO/XGSb 148.1 155.9 162.0 136.0 123.6 121.0 113.1 105.6

TDO/GDP 110.8 105.8 109.5 94.4 89.0 83.8 78.0 72.8TDS/XGS 16.4 16.5 9.6 12.3 12.1 12.9 13.0 12.3

ConcessionaLITDO 42.5 45.1 45.6 47.4 46.8 43.6 44.5 44.2

IBRD exposure indicators (%)IBRD DS/public DS 13.4 12.9 22.8 16.0 13.8 11.1 15.9 16.5Preferred creditor DS/public 25.9 25.6 52.7 39.7 42.5 43.4 42.1 41.8

DS (%)Y

IBRD DS/XGS 2.1 2.0 2.1 1.8 1.7 1.4 2.1 2.0IBRD TDO (US$m)d 749 745 835 856 941 1044 1068 1110

IDA TDO (US$m)d 65 62 60 57 55 52 50 47

a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMP credits and net short-tern capital.

b. "XGS" denotes exports of goods and services, including workers' remittances

c. Preferred creditors are defined as MBRD, IDA, the regional multilateral development banks, the RAF, and theBank for Intemnational Settlements.

d. Includes present value of guarantees.e. Includes equity and quasi-equity types of both loan and equity instruments.

ANNEX VI

JordanStatus of Bank Group Operations (Operations Portfolio)

As of May 16, 2002Closed

Projects

IBRD/IDA-Total Disbursed (Active) 123 0

of which has been repaid 5 1Tota Disbursed (Closed) 1,686 2

ot whih has been repaid 924 8Total Disbursed (Active + Closed) 1,809 3

of which has been repaid 929.9

Total Undsbursed (Active) 126 8Tota Undisbursed (Closed) 1.8Total Undisbursed (Actve + Closed) 128 6

Active Prolects Difterence BetweenLast PSR Expected and Actual

Supervision Rating Amount In USS Millions Dlsbursements'"

Project ID Project Name DO Ysecal IBRD GRANT Canel Undlsb. Orig. Frm Rev'd

P049581 Community Infrastructure S S 1998 30.0 00 14.2 14.2 14.2P005237 Gulf of Aqaba EAP HS S 1996 0.0 27 0 1 -0.5 0.3P039749 Health Sector Reform S S 1999 35.0 0.0 22.7 2.4 0.0P005307 Human Res Devt.SIL S S 1995 600 0.0 8.1 81 58P048521 Amman Water & Sanitation S S 1999 55 0 0 0 30.3 20.7 0 0P069326 Higher Education Development S S 2000 34.7 00 30.0 48 0.0P035997 Second Tounsm Dev S S 1998 32.0 0.0 18.2 13.8 00P049706 ODS Phaseout II S S 1997 0.0 3.8 1.5 12 0 3P052297 Training & Employment S S 1998 5.0 0.0 3.2 3 1 0.0Total 251.7 6.5 0.0 128.5 67.8 20.6

JordanSTATEMENT OF IFC's

Held and Disbursed PortfoUloAs of March, 2002

IFC Data Warehouse (Amounts In US Dollar Millions)

IFC Held -I C Disbursed -

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

1998 AIHC 0.00 3.60 0.00 0.00 0.00 3.60 0.00 0.00

1987/90193/95 Al Hikma 0.00 2.37 0.00 0.00 0.00 2.37 0.00 0.00

2001 Boscan Jordan 8.00 0.00 0.00 0.00 8.00 0.00 0.00 0.00

1997 BTC 3.33 0.00 0.00 0.00 3.33 0.00 0.00 0.00

1997 El-Zay 3.21 0.00 0.00 0.00 3.21 0.00 0.00 0.00

2002 IITPDC 12.50 0.00 0.00 0.00 0.00 0.00 0.00 0.001995 Indo-Jordan 18.00 0.00 0.00 0.00 18.00 0.00 0.00 0.001998 JHTC 8.57 0.00 0.00 0.00 8.57 0.00 0.00 0.002001 Jordan Gateway 10.00 0.00 0.00 0.00 3.00 0.00 0.00 0.001998 Jordinvest 0.00 1.41 0.00 0.00 0.00 1.41 0.00 0.00

1999 MAICO 0.00 1.00 0.00 0.00 0.00 0.75 0.00 0.00

2000 MEIB 0.00 2.20 2.15 0.00 0.00 0.00 2.15 0.00

2002 SIC 8.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00

1996 Zara 13.76 2.97 0.00 0.00 13.76 2.97 0.00 0.00

Total Portfolio: 85.38 13.54 2.15 0.00 61.88 11.09 2.15 0.00I Approvals Pending Commitment I

FY Approval Project Name Loan Equity Quasi Partic

2001 Boscan Jordan 0.00 1.00 0.00 0.00

Total Pending: 0.00 1.00 0.00 0.00

Note: Values do not reflect off-balance sheet items such as guarantee and risk managenent products.Last Data Update: March 31,2002 Run Date: May 15,2002 Page: lofl

MAP SECTION

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300 (#-/1 ,-t RnNoqIo '5/} -o _S J O R D A N 30°-

( .M 'KI- / * NATIONAL CAPITAL

v ' w / a SELECTED CITIES AND TOWNS

. {Aqonq ' \ / ~~~~~~~~~~~~~~EXPRESSWAYS

V T --- AIMWdowworoht / ~ ~~~~~~ROADSMAFRAKs9s,, RAILROADS

0 9 5 5 5MIE -e~ PERENNIAL RIVERS AND STREAMS 290

0 25 50 75 100 125 KILOMETERS ---- o'--INTERMITTENT STREAMS AND WADIS

This map was produced by the Map Design Unit of The World Bank - - -GOVERNORATE BOUNDARIESThe boundaries, colors, denominations and onyother information shownon this mop do not imply, on the part of The World Bonk Group, any - - - INTERNATIONAL BOUNDARIESudgment an the leglsttus of any territorym or any endorsement or

acceptance of such boundaries

35°. 31°°337° 3B°DECEMBER 1997

'IMAGING-

Report No.: P 7542 JOType: PR