Jordan officially launched its PPP Program on 23 June 2008 as a way of continuing its privatisation programme. Based on its successful experience but also on the experience of failed projects, the government decided to enlarge the scope of PPP and to bring into force an improved legal framework dealing with PPPs.
The new legal framework for PPP - the Public-Private Partnership Law No 31 of 2014 (the “PPP Law”) - was based on the provisions of the Privatisation Regulation Number (80) of 2008 for Implementing Privatisation Transactions issued pursuant to Article (20) of the Privatisation Law Number (25) of 2000, and further elaborated by sector specific laws dealing with privatisation and allowing for PPPs in the water, electricity or telecommunication sector. The PPP Law has become the single legal framework for public-private partnership projects and covers all sectors, including water, energy, transport, municipalities and information technology and aims to encourage the participation of the private sector in economic development.
After the PPP Law was issued, Jordan also released the Public-Private Partnership Regulation No. 98 of 2015 (the “Regulation”). In order to clarify and further strengthen the provisions set down in the Law, the Regulation addresses the procedures set forth in the PPP Law for the various stages of the PPP procurement and tender process.
The PPP Law provides for the establishment of a new Association Council between the Public and Private Sectors (the “Council”) to evaluate and approve contracts entered into with the private sector.
The PPP Law also establishes the public-private partnership unit between the Public and Private Sectors (the “PPP unit”), which essentially acts as a central body for the supervision, regulation, and support of all PPPs conducted by the Government of Jordan. The PPP unit:
• Registers PPP projects;
• Stipulates the correct process for procurement;
• Reviews the due diligence reports;
• Reviews the contracts being negotiated;
• Provides technical support during the execution stage; and
• Facilitates and records the progress of the PPP projects.
Pursuant to Article 4 of the PPP Law, PPP projects may be established in any economic field, with the exception of certain areas as defined by the Council of Ministers upon the recommendation of the Council.
In this regard, Article 11 of the PPP Law stipulates that private sector entities may approach a governmental entity directly and propose a project. A set of conditions needs to be met in order for such a proposal to be considered, including that it has to be in line with the contracting authority’s priorities and that it must not contradict the Government’s development plan.
The bankability of projects is now being improved with the obligation to prepare a feasibility and sustainability study for the proposed PPP project. The competitive selection has also been improved, whereby the contracting authority now has to apply the competitive tender selection process as stated in the PPP Law and Regulation, with limited exceptions.
The process of dispute resolution now allows the parties to agree upon the use of international arbitration. Jordan is a party to the New York Convention on the recognition and enforcement of foreign arbitral awards, as well as to a number of bilateral agreements that regulate double taxation, which should reflect positively on the interest to invest in Jordanian PPPs.
Although there is no explicit provision, the PPP Law seems to allow for a range of concession PPP models and PFIs, as well as for adjustment of public tariffs in user-pays models.
The PPP Law has increased the threshold for the maximum extension of PPP contracts to a total of 35 years and has cancelled the Government's right to the profits when they exceed the agreed amount in the contract.
Further amendments are expected with a view to cancelling the need for parliamentary approval for all contracts agreed with the private sector.
No experience with the new laws yet
The new PPP legislation still has to be tested in practice to show that it is a step in the right direction. No significant new project has taken place since the PPP Law and the Regulation were adopted, although a pipeline has been developed by the PPP unit. Most of the pending projects are small and continue existing projects. There are no pending PPPs in the social sector. The “Red Sea-Dead Sea“ BOT for desalination is exempted from the Law and the Regulation. Based on the assessment, it appears that there is a tendency to exclude projects in the water and energy sectors from the application of the PPP Law and the Regulation.
The market doesn’t seem to have achieved the level of maturity required to efficiently implement such complex legislation in practice. It is crucial that the PPP unit raises awareness of the benefits of PPPs, as both the competent authorities and the public have limited knowledge of the features of PPPs.
PPPs seem to be regarded by the public as a synonym for hidden privatisation, often involving corruption, which results in a high level of antipathy towards PPPs. PPPs raise concerns about transparency and are perceived as yet another means of selling public wealth.
The country lacks a comprehensive PPP policy, which leads to uncoordinated actions by the institutions involved. Decisions are made and procedures are set up on a case-by-case basis, which jeopardises legal certainty.
The PPP unit seems to be staffed by the people previously working for the Privatisation Commission, which raises doubts in the public mind about its autonomy. The PPP unit should strengthen its capacity, both in terms of workforce and training, in order to be a kind of “task force“. The role of the PPP unit is also limited due to the administratively challenging two-level PPP approval process under which a PPP project proposal must be positively assessed by the Council first and then approved by the Council of Ministers.
The bankability of PPPs could be improved by providing for “direct agreements“ and “step in“ rights. International arbitration for projects outside Amman is rarely contracted. The development of model documents (such as a bible of documents and templates, explanatory guidelines, etc.) would be welcome.
Implementing these measures would ensure investors would place more trust in Jordan’s PPPs, which would positively reflect on Jordan's transaction record.