Jordan attracts flurry of foreign funds

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Strong relationships with allied nations and international financial institutions are paying handsome dividends for Jordan, with multiple entities extending considerable new funding in the form of aid, easy credit and/or investment.

 

In late October, the EU announced about $54m in new assistance to help Jordan cope with the costs and other impacts of hosting approximately 600,000 Syrian refugees. A large part of the funds will go to bolstering the education system, which has strained to provide access for school-age refugees, estimated to number some 78,000.

Just a few days later, the government closed on a seven-year, $1.25bn Eurobond with interest set at 2.503%, a rate made possible by a 100% guarantee from the US. Compared to other emerging-market sovereign issues with similar profiles, the below-market rate could save Jordan tens or even hundreds of millions of dollars over the life of the bond.

On November 17, the US International Development Agency (USAID) launched the Jordan Competitiveness Program, a $45m scheme aimed at attracting $700m in foreign direct investment and creating 40,000 jobs over the next five years. As part the process, USAID will target sectors judged most capable of new growth, from clean technology and information technology, to medical services and life sciences.

A week later, the European Bank for Reconstruction and Development (EBRD) officially conferred “Recipient Nation” status on Jordan, which henceforth can benefit from more of the EBRD’s regular products and services, including financing tools, soft loans and technical assistance. The EBRD, which opened a permanent office in Amman in October and has already provided a $100m soft loan to finance a power plant near the capital, plans to invest at least $1.1bn in the Middle East and North Africa in 2014, most of it for energy and development projects located in Egypt, Jordan, Morocco and Tunisia.

Also in November, the International Finance Corporation (IFC), the private sector arm of the World Bank, announced that it was heading a consortium of lenders that would provide $221m for construction of a 117-MW wind farm in Jordan’s southwest. The IFC said it would provide $69m, with the balance coming from the European Investment Bank and Denmark’s export credit agency, Eksport Credit Fonden.

On December 3, USAID trumpeted another initiative, this time an agreement to provide $235m for education development over five years. The funds will be used to address a variety of challenges in the kingdom, including training for both current and future teachers, construction of new schools and expansion of existing ones, and special programmes designed to prevent young people from vulnerable backgrounds from dropping out of the system. Since 2006, USAID says it has funded the construction of 27 new schools in Jordan and the expansion of 36 more.

Jordan is perennially among the largest per capita recipients of international aid, thanks largely to a unique geostrategic position that subjects the kingdom to particular costs and pressures, but also gives it added sway in key capitals around the world. In particular, foreign aid has been crucial in supporting public finances in the face of the Syrian crisis. While deficit spending is expected to come in at about 5.4% for 2013, some observers estimate that without outside funds, the figure would have been closer to 9%, an unsustainable figure for an economy like Jordan’s.

With even more funds now rolling in to address both direct and indirect effects of the situation in Syria, there are inevitable questions about how the money is being spent, but on this score Amman continues to enjoy a solid reputation.

According to Corruption Perceptions Index 2013, an annual study compiled by Transparency International, Jordan outperforms most countries, ranking 66th out of 177. Despite the additional challenges created by the Syrian crisis, the country’s score of 45 points was down just three points from 2012; by comparison, both Croatia and the Czech Republic received scores of 48, while Brazil was at 42.

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