OBG talks to Abdullah Ensour, Prime Minister of Jordan

Interview: Abdullah Ensour

How will the new government ensure a greater sense of political continuity, confidence and struc-ture moving forward?

ABDULLAH ENSOUR: Under the vision of King Abdullah II, Jordan has put itself on a fast trajectory for political reform and for the gradual installation of proper democratic values and practices. The vitality of this process is ever pressing amidst the regional conflict that has the poten-tial to spill over into the kingdom. This process has been in motion for some time, but it was promulgated by a more encompassing and democratic elections law and furthered in January with credible legislative elections giving way to a lengthy consultation process with deputies, in order to form Jordan’s leanest government in decades. A number of challenges lay ahead for this government. Paramount among these will be contin-uing to provide the high level of security that Jordani-ans are accustomed to, while simultaneously boosting reforms to provide a balanced economic platform for the country to grow. As Jordan proceeds with demo-cratic reforms, increased dialogue between the public and private sector will ultimately yield the desired eco-nomic results and instil the necessary confidence.

What steps are most important for the government to take to better balance the budget?

ENSOUR: Under the parameters of the government’s four-year action plan, a number of measures will be enacted to help tighten the budget deficit. First, efforts will be made to enhance domestic revenues and tax collection procedures through amending the current tax law, reducing tax evasion and broadening the over-all tax base. The government will also restructure its expenditure with a focus on public expenditure reduc-tion. The government is working diligently on compre-hensive reforms in the electricity sector to recover the costs incurred by the National Electricity Company (NEPCO) and bring its growing debt under control. This will mainly be achieved via the diversification of ener-gy sources and further increases on electricity tariffs.

Despite some financial success, the reduction in fuel subsidies has been a difficult sell to the kingdom’s industrial base. What is being done to allay concerns?

ENSOUR: The government’s decision to reduce fuel sub-sidies came as part of its effort to bridge the country’s widening budget deficit, which accounted for 9.6% of GDP, international grants withstanding. The govern-ment has subsidised fuel prices for low-income fami-lies, so that each family whose monthly income is less than JD800 ($1125.20) or whose annual income is below JD10,000 ($4770), will receive JD70 ($33.39) per person annually, with a maximum compensation of JD420 ($200.34) per family annually. The decision to direct subsidies to only those who actually need them was highly accepted by the majority of Jordanians.

For the industrial sector, other measures were tak-en to encourage national manufacturers and raise their level of competitiveness. These steps have included continuing the provision of exemptions for industrial production inputs, facilitating the procedures at land border crossings, enhancing the position of Jordanian products in the global markets through entering new markets, and finding alternatives to the transit trade through Syria to the European and Turkish markets because of the unstable conditions there.

How worried are you that business will struggle to remain competitive in the current fiscal climate?

ENSOUR: Over the last year, the financing needs of the central government and NEPCO have not only crowd-ed out the private sector but have also put pressure on the Central Bank of Jordan’s reserves. To overcome these issues, the government made strong efforts in 2012 to reduce its fiscal deficit to 9.6% of GDP from 12.7% of GDP in 2011. To alleviate the crowding-out effect on the private sector, the government plans to borrow from the international market through the issu-ing of euro bonds pledged by the US government, ensuring easy access to finance for the private sector and positively impacting the business environment.