Understanding Jordan’s new PPP law
The Jordanian Senate has recently approved and implemented a draft of the new Public-Private Partnership (PPP) Law amending the Public-Private Partnership Law No. 31 of 2014. The new PPP Law largely follows international best practice, providing a structure within which PPP Projects can be identified, developed and facilitated in Jordan. In addition, the new PPP Law provides a framework for the involvement of the private sector in PPP projects across Jordan.
It is expected that the new PPP Law will excite investment in the Jordanian market by underpinning a clear pipeline of opportunities for foreign and local investment in Jordan, thereby attracting international developers and lenders. In addition, it is expected that the new law will underpin confidence and transparency, providing the necessary regulatory framework under which the pipeline of PPP projects can be successfully implemented. Although the Government of Jordan has already allocated financing for some of the PPP projects in the pipeline, this signals a further positive step to ensure that these projects are structured in a way which is attractive for development finance institutions (DFI), multilateral and relevant ministry involvement.
The Government of Jordan has identified several projects to be procured between the years 2020 and 2023 under the new regime, including 24 significant projects which include the King Hussein Bridge Crossing Terminal and the Development of 15 schools for the Ministry of Education. Notably, and given that the Jordanian energy market has been saturated over the past few years, very few of the projects identified by the Government of Jordan include energy projects.
Key points to note on the new PPP Law:
The most notable change under the new PPP Law includes the establishment of a PPP Directorate in the Prime Minister's Office (PMO) which oversees the development of PPP projects across Jordan. This shift in authority should facilitate stronger and more efficient inter-ministries communication in order to avoid delays in the procurement and development of such PPP projects.
Under the previous PPP Law, the Ministry of Finance (MOF) was mandated with the procurement and implementation of any PPP projects in Jordan. Currently, the authority has shifted to the Jordan Investment Commission (JIC) headed by its chairman. The JIC is expected to receive PPP project applications from government bodies around Jordan, studying and registering such projects, and creating a database for each PPP project (including details on the feasibility studies, technical reports, bidder evaluation reports and the likes). The law, however, clearly highlights the important role of the MOF in the regulation of the financial commitments and liabilities in each relevant PPP project. Importantly, the law mandates that the MOF provides a MOF guarantee for projects that satisfy a specific criteria. Please see Government Guarantee section below for more detail on this point.
Project Development Fund
The new PPP Law also provides for the development of the Project Development Fund which is established to ensure proper spending on the preparation of bankable and attractive PPP projects. This will help to ensure that the projects which are issued to the market will be of a sufficiently high calibre and are structured on the basis of international best practice.
PPP Law application
Both the previous and current law allow PPP projects in all economic sectors, other than those identified by the Cabinet based on the Investment Council’s recommendation. The new PPP Law however, excludes projects with a capital expenditure of less than two million Jordanian Dinars from said law. The new law also revokes the exemptions previously granted to ministries or governmental bodies to develop their own PPP projects. This ensures that all PPP projects are developed and implemented through the PPP Directorate only and will therefore avoid instances where projects have been tendered out by ministries but then have not been completed.
Previously, any application for a government guarantee was submitted to the Minister of Finance, who then formed a committee of representatives from the Public Budget Department, the Public Debt Department and a unit established at the MOF to evaluate the necessity for such guarantee or government aid. The new PPP Law establishes a similar process which includes the JIC chairman. The decision to grant such guarantees and/or aid is ultimately made by the Investment Council created under the Investment Law No. 30 of 2014. It is likely that a structured approach will ensure that government guarantees will be granted to projects as necessary to ensure that such projects attract foreign and local investors and lenders.
Private sector projects
The new PPP Law states that private sector PPP Projects made on basis of a direct proposal may not benefit from guarantees, aids or any other form of state support. The new law has introduced a shorter direct proposal process for private PPP projects. The process requires the relevant government bodies to send sustainability reports to the PPP Directorate, which in turn reviews the project application and provides its recommendation to the JIC chairman. The JIC chairman then submits the application to the Investment Council who is the deciding entity. The new PPP law includes an authority matrix which distinguishes projects to be approved by the PPP Directorate, the JIC chairman and the Investment Council depending on the capital expenditure of such projects.
Notably, the new PPP law establishes a 35 year maximum term for any PPP project, unless the Investment Council agrees to a longer period.
Regulations to be issued
Following the introduction of the new PPP Law, eight regulations and/or instructions are expected to be enacted by the Government of Jordan, during the course of this year and the following year, to compliment the new PPP Law and develop strong management and governance systems with respect to PPP projects in Jordan. Such regulations shall include governance procedures for hiring advisors.
The enactment of the new PPP law greatly highlights Jordan’s commitment to develop and prioritise PPP projects across Jordan. The new PPP law is designed to attract greater investment in Jordan through offering well structured PPP projects in the country.
Outside the energy sector, the market for PPP projects in Jordan has not yet materialised to attract a significant number of international PPP investors to enter the market. However, the establishment of the new PPP Directorate and the Project Development Fund is expected to encourage the involvement of such investors in these projects.
Ultimately, and consistent with other regional markets, the key to a successful PPP programme in Jordan will be the extent to which well-structured and bankable projects (with a clear and predicable pipeline) are delivered to the market.