Private Sector Participation (PSP)

Water is an indispensable input for any social or economical activity. Its scarcity can impede development and evolution and make negative impact on standards of living of the people.

 

Jordan lies in the Mediterranean Sea region, where the climate is arid and semi-arid with short rainy winter and long dry summer. Annual precipitation varies between 50mm in the desert area and 600mm in the north-west highlands.

 

The water resources scarcity leads to a large imbalance between supply and demand, leads Water Authority of Jordan (WAJ) to over pump the water from valuable aquifers, water supply is intermittent in summer, sometimes one day per week.

 

Due to the increasing of the water demand, Ministry of Water and Irrigation (MWI) adopted a Water Strategy in 1997 supplemented it with different water policies in water sector aiming to make a balance between water demand and supply and emphasizing to give major role for private sector. The Government of Jordan also embarked upon a privatization program, the goal was to increase the efficiency of management and attracting private investment into the economy.

 

WAJ, one of the authorities of the MWI entered into a management contract with a consortium led by a French Company on April 1999, for four years, for all water and wastewater related services in Amman Governorate.

 

MWI has considered other options for the largest wastewater treatment plant in Jordan (Al-Samra) as a Build-Operate-Transfer (BOT) system with a consortium led by an international company, and awarded a management contract to a consortium led by international company for the four Northern Governorates of Jordan (Irbid, Ajloun, Jerash and Mafraq), who started the implementation on the first of May 2006. MWI is studying the establishment of public companies for other water and wastewater services in other areas throughout the Kingdom. It is expected that a  new company will  start early 2007 for Amman water and waste water systems Privatization of the Water Sector in Jordan:

In 1997, the Government of Jordan embarked upon a privatization program, the goal being to orient Jordan's economy more towards private sector participation and best present Jordan towards the international financial community. The specific objective of the program included improving the efficiency of the public sector and consolidating it, attracting private investment into the economy and shifting into market economy.

 

The Government started to put strategies which suit the water situation in the Kingdom, so it started to implement Management Contracts and other privatization options and MWI issued policies to guarantee benefit from groundwater, irrigation water and wastewater.

 

Privatization is defined as the adoption of an economic policy that enhances the role of the private sector in the national economy especially public enterprises which should be managed on commercial basis. 

Privatization aims at:

• Contributing to the attraction and flow of local and foreign investments by providing favorable investment and inductive environment.

• Direct private savings towards long-term investment to strengthen and consolidate the internal capital market and the national economy.

• Alleviate the debt burden of the Treasury through ceasing its financial commitments in terms of loans and grants for those projects deemed unsuccessful and unproductive.

• Manage economic projects through modern techniques including the usage of developed technology to open up stable markets and to penetrate new markets by emphasizing its international competitiveness.

 

Privatization of the Water Sector Services in Amman Governorate (Capital)
MWI started to study the different options for private sector participation by making a comparison between three options as shown in table (1). It concluded that Management Contracts (MC) is the preferred option for Jordan's water sector since it gives comprehensive solutions with immediate short-term effects as well as sustainable long term benefits. So beginning of 1999 a four years MC started , then extended by another two years by a memorandum of understanding signed by the Programme Management unit and the Company (LEMA). WAJ is considering the option of creating a new company which is expected to start by Jan 2007.