OBG talks to Yahya Kisbi, Minister of Public Works and Housing

Interview: Yahya Kisbi

How involved, in your opinion, are foreign companies in the Jordanian projects market?

YAHYA KISBI: Several large-scale projects have been launched in Jordan by foreign firms, mainly under public-private partnership (PPP) and build-operate-transfer agreements. Notable examples include the Samra power plant expansion project, which was carried out by a South Korean conglomerate, and the ongoing expansion of Queen Alia International Airport, which is being implemented by the Airport International Group under a 25-year concession contract. In addition, international contractors have been involved in the Disi Water Conveyance Project and in ventures designed to transfer gas from Egypt to various parts of Jordan.

At present, two major areas where foreign contractors could become more involved in the local projects market are residential construction and general infrastructure development. In terms of housing, Jordan needs more affordable units for its young and growing population, especially in the areas surrounding Amman. In 2009, the government launched the “Decent Housing for Decent Living” initiative for low-income groups, the objective of which was to build 100,000 homes in five years.

Regarding infrastructure, the country requires significant investment in the construction of schools, health clinics and hospitals, as well as increased funding for the maintenance of highways and secondary roads. Although studies have demonstrated that the kingdom’s road system requires JD70m ($98.34m) per year in maintenance and upgrades, the government is only allocating JD7m ($9.84m) annually for this purpose.

Can you comment on what reforms are planned for the PPP process in the coming years?

KISBI: A draft PPP law has been endorsed by the cabinet and is now working its way through parliament. Once implemented, this legislation may very well usher in a new era of foreign direct investment in Jordan. Specifically, the law is designed to provide PPP investors with a wider range of tax exemptions and more streamlined regulations. This is something the country needs, as there are still too many bureaucratic obstacles in Jordan for foreign businesses. Moving forward, one much discussed construction project that might be reinvigorated by the new PPP law is the proposed GCC-wide railway, which would greatly enhance the kingdom’s connectivity to the region.

How have budgetary restrictions in Jordan affected the execution of large-scale projects?

KISBI: As might be expected, budgetary shortfalls and projected deficits have stalled some projects, largely because such ventures require sovereign guarantees to be issued as collateral against foreign loans. Currently, such guarantees are not authorised by the government due to the country’s difficult financial situation. In addition, local contractors also face funding challenges due to the global economic downturn and the overly conservative lending practices adopted by local banks in the wake of the financial crisis.

What opportunities and challenges exist for firms interested in reconstruction projects in Iraq?

KISBI: Given the scale of Iraqi reconstruction, there are many opportunities for Jordanian construction and design firms. As an example, a recent Iraqi delegation informed an audience of Jordanian contractors that Iraq needs to build roughly 2.5m housing units to support its population over the next 10 years. We must be prepared to compete in an uncertain security environment against companies from around the world. Many Jordanian contractors eager to penetrate the Iraqi market will need to enter into joint ventures with larger and more liquid enterprises. Nonetheless, Jordan has some competitive advantages in Iraq, in terms of cultural and language ties as well as our proximity to the country. Moreover, diplomatic relations between our countries is excellent. We have an early opportunity to support – and benefit from – Iraq’s economic development.