The OECD has long been a strong advocate for water management that contributes to economic growth, environmental sustainability and social welfare. With a multi-disciplinary team drawn from across the organisation, the OECD provides analysis to improve the information base, identify good practice and provide a forum for exchanging country experiences. Specific areas of OECD expertise and tools of relevance to water involve financing, governance, regulatory policy and private sector participation. This report builds on this expertise to diagnose the main governance and financing challenges to private sector participation (PSP) in the water supply and wastewater sector of Jordan, and provides ways forward to address these challenges.

Jordan has experience in both small- and large-scale private sector participation (PSP) projects, from financing to operation and from greenfield to brownfield. The government is considering involving the private sector in even larger capital projects (in particular the Jordan Red Sea Project). PSP is seen as potentially making an important contribution to the development of Jordan’s water sector, particularly to meet the upfront costs of investment and to transfer technical knowledge. Nevertheless, experience shows that to reap the benefits of PSP, a number of framework conditions need to be in place, in particular in relation to the regulatory framework, administrative capacity, financial sustainability and strategic planning of projects.

The water sector in Jordan is under increased pressure. The Syrian refugee crisis has resulted in important strains on the sector, particularly in the northern governorates. This is compounded by rising electricity costs, which represent a significant share of water costs. Moreover, fiscal stress has led the government to accept a 36-month Stand-by Agreement from the International Monetary Fund (IMF), which contains significant reforms of public expenditure. There is, therefore, little domestic fiscal space in the short to medium term to meet capital and operating requirements in the water sector. Given the pressing financing needs, the rationale for harnessing private sources of finance and know-how is thus apparent.

This chapter provides a diagnostic analysis of the governance challenges to private sector participation in the water sector in Jordan. First, the chapter provides a mapping of the main public agencies involved in various functions in the water sector, including institutions involved in private sector participation (PSP). It reviews the capacities of public authorities (and other entities involved in water and wastewater services) to carry out their activities. Second, the chapter provides an overview of the country’s experience to date with PSP in water services, some lessons learnt and areas that could be avenues for further private sector involvement. Third, the chapter analyses the policy, legislative and regulatory framework for water PSP and identifies related challenges. Fourth, the chapter discusses the financial sustainability in the water service sector, including affordability for budget. Lastly, the diagnostic analysis takes stock of the existing mechanisms for ensuring the accountability of responsible authorities and private partners, including the ways and means to engage stakeholders in related policies and service provision.

Based on the diagnostic analysis, this chapter suggests ways forward to overcome the main governance challenges faced by Jordan in delivering on its ambitious pipeline of projects with the private sector in the water sector. This chapter focuses on three main areas of recommendations: i) managing PPPs in a fiscally constrained environment through appropriate budget processes; ii) reducing the regulatory risk through supporting the development of a high-quality water regulatory framework; and iii) enhancing stakeholder engagement to improve accountability and buy-in. The Jordanian authorities are active in these three areas and a number of reform initiatives are already underway. This chapter seeks to support the existing efforts by providing a set of practical recommendations, building on the compendium of principles and good practices developed by the OECD and international experience.

This chapter provides an action plan building on the diagnostic analysis provided in Chapter 1 and related recommendations provided in Chapter 2. It presents the practical steps that the Jordanian authorities, together with various stakeholders including donors, could take to make water reforms happen in Jordan. The concrete actions are defined in a time frame. They are related to relevant reforms and initiatives currently underway in Jordan and refer, where appropriate, to international practices.