Will infrastructure projects redraw the map of Jordan’s economy? | economy

Jordan has moved towards a comprehensive modernization of infrastructure and the establishment of strategic projects, along with the development of the transportation sector. This trend emerged following the announcement of the economic modernization vision in June 2022, which aims to achieve comprehensive and sustainable growth through modernizing economic and administrative paths.

Infrastructure

Infrastructure is a pillar of the economic modernization vision, as the government aims to build an integrated transportation system that supports economic and social development.

According to the summary of the modernization of the transportation strategy (the Jordanian Ministry of Transport), the link between social impact and economic growth will be through increasing transportation efficiency, improving mechanisms for citizens’ access to jobs, education, and health care, and raising the quality of life, which will ultimately generate economic growth concurrent with this modernization.

The government considers infrastructure the main tool for attracting direct investments, which reduces pressure on the public budget. Modernization also includes the digitization of transactions and the modernization of technological and communications infrastructure to increase the efficiency of trade and promote the growth of the digital economy.

Economist Hossam Ayesh believes that these projects represent a driving force for an economic process with greater returns and impact, noting that they will provide new job opportunities in light of a high unemployment rate exceeding 21%. These projects are also expected to contribute to raising the citizen’s share of the gross domestic product and improving living standards.

But economic expert Amer Al-Shoubaki calls for correcting the strategic arrangement of the economic modernization vision, to include an executive vision that reduces the gap between reality and ambition, instead of distributing effort over multiple projects that consume effort and resources. The priority should also be for economic feasibility and water security in addition to employment and local production, and avoiding cosmetic projects laden with debt, according to what he said during an interview with Al Jazeera Net.

Innovative financing models

The Jordanian government has adopted 3 innovative financing models that provide work more quickly and do not put pressure on public funds, as follows:

• A model based on partnership between the public and private sectors, and focuses on attracting the private sector to be a partner in providing the necessary investment and financing.
• A model that transfers responsibility for design, construction, financing, operation, and ownership from the government to a private partner, such as a road project Oman – Ajloun Al-Madou, where the private partner will design and implement a modern road with improved safety standards, in addition to implementing advanced traffic management systems to reduce congestion and improve travel time, and toll collection systems.
• The real estate development financing model is based on linking public transportation projects with real estate development investments along the route of these projects, such as the light rail project between Amman and Zarqa, with the aim of achieving operational sustainability and generating financing revenues for the project.

Water security

Given that Jordan is one of the world’s poorest countries in terms of water, the national desalinated water carrier project is of great importance. The project, with an estimated cost of more than $2.8 billion, will provide about 300 million cubic meters of desalinated water from the Red Sea, expanding the business base for water-intensive sectors such as agriculture and industry.

Al-Shoubaki asserts that the high economic and security priority of this project will make any failure in it a gateway to social unrest, given the country’s severe water poverty, as the citizen’s share does not exceed 60 cubic meters annually (the global average is about 500 cubic meters annually), in addition to the increasing dependence on water imported from Israel, which constitutes a strategic threat to independence and water sovereignty. The project also faces doubts about its governance, which requires greater transparency.

Developing ports

At the port level, an agreement was signed to develop and jointly manage the container port in Aqaba (the only sea port) with a direct investment amounting to $242 million, in order to improve the efficiency of the port and maximize the revenues of the special economic zone in Aqaba.

The government paid attention to the aviation sector by working to reactivate Amman Civil Airport “Marka” (in East Amman) to receive flights and cargo, after developing Queen Alia International Airport and increasing its capacity, which reached 9 million passengers annually, which will enhance economic and tourism opportunities, especially with the increase in low-cost air traffic.

Major transportation projects

• Light Rail Project (Amman – Zarqa)This project is expected to reduce traffic congestion and add a high-quality public transportation option. The possibility of benefiting from the infrastructure of the Hejaz Railway will also be studied, and it is expected to serve 50,000 passengers daily.
• Paid methods: Its construction has begun to secure sustainable sources of funding for the maintenance and development of road infrastructure. The process of collecting fees has actually begun on the Al-Harrana Road and the Al-Omari border crossing, and the government confirms that the new paid roads are an additional option while providing a free alternative road, while the Amman-Ajloun paid road is expected to create a shift in government revenue, not only in terms of transportation, but also by increasing safety, supporting the agricultural sector, and facilitating access between 3 governorates.
• Amman Bridge (Sweileh to Naour)The construction of this bridge aims to solve the problem of traffic congestion and ensure the smooth flow of movement between the north and south of the Kingdom without passing through the center of the capital. The bridge will include a special lane for the “rapid bus” to integrate with public transportation plans.

Hossam Ayesh expects that paid road projects will transform the way the government approaches the value and return from these projects. The expected return for the government is not only limited to improving transportation and road maintenance, but also to increasing safety on them as well.

Ayesh adds that other transportation projects, especially the Sweileh Naour Road and others, are in the public economic interest. The cost of congestion in Jordan, according to the World Bank, has reached about 1.5 billion dinars ($2.11 billion) annually, and the transportation sector’s contribution to the gross domestic product is still weak and does not exceed 6%, and the return becomes zero given that the cost of the sector’s poor quality has also reached 6%, which is a major problem.

But from Al-Shoubaki’s point of view, despite the magnitude of these projects, their impact on real growth and job opportunities is limited, as the infrastructure sector does not create quality job opportunities or sustainable added value, and the focus is often on material achievement and not on economic integration after implementation.

Al-Shoubaki adds that the dependence of these projects on external financing increases the dilemma of expanding investment spending and bearing new burdens without the ability to service the debt, which turns these projects from development opportunities into a long-term financial burden.

Al-Shoubaki cites a report by the Organization for Economic Cooperation and Development, which indicated that foreign investment in Jordan does not achieve the desired impact unless it is linked to policies to enhance production and innovation, and that Jordan has great opportunities in infrastructure, but the limited financing capacity constitutes a major weakness.

Strategic objectives

A number of strategic goals that the Jordanian government seeks to achieve through the infrastructure development process. According to Ayesh, the government, through these projects, presents Jordan as a regional center for energy and logistics movement, driven by the transformations that the region has witnessed, especially those related to Syria, where Jordan sees great and promising opportunities, and through them, Jordan can cross and activate trade lines to Türkiye and Europe.

Ayesh points out that these projects do not only serve an internal economic process, but they serve a regional integration process in which Jordan is an important player, especially through new relations or the return of momentum to Syrian-Gulf relations, as Jordan is considered a logistical corridor and an important player in the reconstruction process.

Frequent criticism

In the context of the criticisms directed at a number of new projects, Al-Shobaki limits them to focusing on appearance and implementation with a mentality of rapid completion, as happened in the “rapid bus” project and its faltering for years due to weak institutional coordination and technical and financial governance, which caused a decline in real feasibility compared to the time and material cost.