Jordan - Special economic report : review of the five-year plan (1981-85)

Report No. 4129-IO COPYLE WY Jordan Special Economic Report Jordan Review of the Five-Year Plan (1981-85) May 1983 Country Programs Department II Europe, Middle East and North Africa Region FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS 1979 1980 1981 1 Jordanian Dinar (JD) = US$3.3270 US$3.3478 US$3.0654 1 US Dollar ($) = JD.301 JD.299 JD.326 I .I  FOR OFFICIAL USE ONLY ABSTRACT Jordan's overall development strategy is essentially based on tree enterprise and individual initiative, in a system characterized by an intensive promotional involvement on the part of the Government. Due to the paucity in natural resources and arable laad the structure of the economy is cbaracterized by a relatively narrow commodity-producing base. w'rom the early 1970s, bowever, a favorable regional environment combined with domestic political stability and sound economic management have helped Jordan achieve an excellent economic performance. Income and domestic employment have grown rapidly and significant progress has been achieved in modernizing and diversifying industry. A quite substantial inflow of workers' remittances and transfers from neighboring oil producing countries and a growing surplus in non-factor services have enabled Jordan to maintain a strong balance of payments, in spite of a large and continuously increasing merchandise trade deficit. Failure of domestic government revenues to keep up with the growth of the economy, and the increasing financial responsibility assumed by the Government in fostering the social and economSic development process are at the root of rising overall budget deficits, in spLte of the abundant supply of external grants for budget support. The new Five-Year Plan (1981-85) retains the following basic objectives: (i) maintaining the growth momentum of the economy, further diversification in favor of the commodity-producing sectors; (ii) reducing the reliance of the General Budget on external grants, as well as the relative size of the merchaidise trade deficit and; (iii) expanding basic social services to all regions of the Kingdom, and spreading the benefits of development among regions and and social groups. The Plan's investment program is ambitious, calling for over US$8 billion in capital cutlays at 1980 prices (equivalent to about US$670 per capita on average per year). The detail of the Plan's investment program is generally appropriate, and the envisaged macroeconomic scenario, even if somewhat optimistic in light of the recent deterioration in external conditions, is within feasible range. However, much will depend on the country's capacity to absorb such a massive investment program both in terms of available physical and human resources. Implementation of the investment program further critically depends on the realization of a rather tight financing plan, requiring a major domestic resource mobilization effort (particularly in the public sector), as well as a continuing inflow of external grants in the order of US$1 billion per annum. In the longer term, Jordan may be confronted with an external resource constraint, caused in part by the size of the current Plan. Based on the review and analysis of the Plan,, this report further addresses a number of specific issues relating to the planning process, the industrial strategy, human resource development, as well as fiscal and monetary management. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   SPECIAL ECONOMIC REPORI JORDAN REVIEW OF THE FIVE-YEAR PLAN (1981-85) Table of Contents Page No. Social Indicators SUMMARY AND CONCLUSIONS ................................... i - x I. CURRENT ECONOMIC POSITION .................................. I A. Economic Structure and Growth ............ .. ................. 1 B. Balance of Payments ..... .................................... 7 C. Resource Availability and Allocation . . 9 D. Public Finance .. ........................................... 12 E. Money and Banking ................... ....................... 16 F. The Five-Year Plan (1976-80) ...... ......................... 18 G. Recent Developments ........................................ 21 II. THE FIVE-YEAR PLAN 1981-85 ...... .......................... 24 A. Objectives, Strategy and Growth ...... ...................... 24 B. The Investment Program ................ ...................... 26 C. Agricultural Strategy and Projects ..... .................... 28 D. Water Supply ............................................... 31 E. Industrial Strategy and Projects .......... .. ............... 32 F. The Transport Sector ......... .............................. 40 G. Public Finance ..................... ........................ 41 H. Resource Mobilization and Investment Financing ..... ........ 45 III. HUMAN RESOURCES ......... .................................. 48 A. Labor Force Structure ...................................... 48 B. Manpower Planning ......... ................................. 55 C. Projected Global and Occupational Imbalances .... ........... 57 IV. PROSPECTS AND POLICY ISSUES ............................... 61 A. Medium-Term Economic Prospects ............................. 61 B. External Borrowing and Debt Burden ......................... 64 This report has been prepared by an economic mission which visited Jordan in October/November 1981. The mission consisted of Messrs. Antoine Schwartz (Mission Chief), Dinh Hinh (General Economist), Mansour Farsad (Fiscal Economist), James Socknat (Manpower Planning Specialist), and Bertil Walsteat (Industrial Economist, Consultant). Computing support was provided by Margaret O'Donnell.  Table of Contents Continued. Page No C. Longer Term Perspectives ................................ 66 D. Issues in Planning ...................................... 67 E. Issues in Manpower Planning, Employment and Training 69 F. Fiscal Issues ........................................... 71 G. Issues in Monetary Management ........................... 72 H. Industrial Strategy Issues .............................. 74 ANNEX A: Government Equity Participations in Mixed Enterprises .................................. 78 ANNEX B Investment Incentives and Industrial Protection ........ 81 STATISTICAL APPENDIX 88  Page I JORDAN - SOCIAL INDICATORS DATA SHEET JORDAN REFERENCE GROUPS (WEIGHTED AVERAGfl AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE) - TOTAL 97.7 MIDDLE INCOME AGRICULTURAL 14.7 MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b MIDDLE EAST LATIN AMERICA 6 CARIBBEAN GNP PER CAPITA (US$) . 380.0 1420.0/c 1253.6 1902.0 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 185.7 269.2 522.3 713.5 1259.4 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 1695.0 2299.0 3244.0 URBAN POPULATION (PERCENT OF TOTAL) 42.7 49.6 56.3 47.3 65.7 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 5.8 STATIONARY POPULATION (MILLIONS) 12.6 YEAR STATIONARY POPULATION IS REACHED 2085 POPULATION DENSITY PER SQ. KM. 17.3 23.5 32.0 35.8 35.2 PER SQ. KM. AGRICULTURAL LAND 132.4 163.6 212.7 420.9 92.5 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 44.4 45.8 46.5 44.3 39.7 15-64 YRS. 51.5 51.0 50.8 52.4 56.1 65 YRS. AND ABOVE 4.1 3.1 2.7 3.3 4.2 POPULATION GROWTN RATE (PERCENT) TOTAL 3.1 3.0 3.4 2.8 2.4 URBAN 5.2/c 4.5 4.7 4.6 3.8 CRUDE BIRTH RATE (PER THOUSAND) 47.4 47.6 44.4 41.2 31.4 CRUDE DEATH RATE (PER THOUSAND) 19.9 15.5 9.7 12.2 8.4 GROSS REPRODUCTION RATE 3.5 3.6 3.4 2.9 2.1 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) USERS (PERCENT OF MARRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 220.0 79.0 106.0 100.4 110.0 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 93.2 67.3 61.6/d 108.5 108.4 PROTEINS (GRAMS PER DAY) 60.9 40.2 40.37d 71.9 66.0 OF WHICH ANIMAL AND PULSE 14.6 10.7 11.O7/d 18.0 34.0 CHILD (AGES 1-4) MORTALITY RATE 26.3 12.4 5.8 15.1 5.6 HiEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 47.0 54.1 61.2 56.9 64.2 INFANT MORTALITY RATE (PER THOUSAND) 135.5 97.5 69.3 104.3 64.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL 21.3 .. 61.0/c 59.1 65.6 URBAN 48.6 .. 66.07 83.1 78.9 RURAL 2.1 .. 50.O7 39.8 43.9 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 59.3 URBAN .. .. ,, ,, 75.3 RURAL .. ., .. ,, 30.0 POPULATION PER PHYSICIAN 5804.7 3775.0 1956.4 4015.5 1617 R POPULATION PER NURSING PERSON 1930.2/e 1477.5 821.0 1802.2 1060.5 POPULATION PER HOSPITAL BED TOTAL 557.0 1351.5 1186.8/d 641.7 477.4 URBAN . 1097.6 687.271 538.3 679.8 RURAL .. 5543.6 .. 2403.3 1903.4 ADMISSIONS PER HOSPITAL BED .. 36.5 45.7/d 25.5 27.3 HtOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.3 6.1 6.7/c URBAN 5.5 .. RURAL 5.1 .. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. .. 6.5/c URBAN .. .. RURAL .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 17.0 .. 66.0/c URBAN 39.2 .. 90.07T* RURAL 1.4 .. 30.0L7E  Page 2 JORDAN - SOCIAL INDICATORS DATA SHEET JORDAN REFERENCE GROUPS (WEIGHTED AVERAG S - MOST RECENT ESTIMATE) - MIDDLE INCOME MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 lb ESTIMATE /b MIDDLE EAST LATIN AMERICA & CARIBBEAN EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 77.0 72.0/c 102.0/c 88.7 104.3 MALE 94.0 79.07T 106.07T 104.5 106.4 FEMALE 59.0 65.O7/c 99.0/c 72.0 103.3 SECONDARY: TOTAL 25.0 33.0/c 74.0/c,f 39.7 41.3 MALE 36.0 41.07o 81.07c f 49.3 40.4 FEMALE 13.0 2 4. 07o 66 .O7E 29.0 41.8 VOCATIONAL ENROL. (Z OF SECONDARY) 2.7 3.0/c 12.0/c 10.1 33.7 PUPIL-TEACHER RATIO PRIMARY 34.1 38.8/c 32.2/c 34.1 29.9 SECONDARY 20.0 23.07W 20.67W 23.7 16.7 ADULT LITERACY RATE (PERCENT) 32.4 .. 70.0 43.3 79.1 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 3.7 6.7 19.6/d 17.8 42.8 RADIO RECEIVERS PER THOUSAND POPULATION 37.8 160.9 171.5 131.3 270.5 TV RECEIVERS PER THOUSAND POPULATION .. 20.0 52.8 44.1 107.7 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 18.3 24.4 29.3/d 31.5 63.7 CINEMA ANNUAL ATTENDANCE PER CAPITA 3.0 0.9 4.0 1.7 2.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 432.3 568.6 768.9 FEMALE (PERCENT) 5.0 5.6 6.5 10.6 24.4 AGRICULTURE (PERCENT) 44.0 34.0 20.0 42.4 31.3 INDUSTRY (PERCENT) 26.0 9.0 20.0 27.8 23.9 PARTICIPATION RATE (PERCENT) TOTAL 25.5 24.7 23.7 26.0 33.6 MALE 46.7 45.5 43.4 46.2 50.4 FEMALE 2.7 2.8 3.1 5.6 16.8 ECONOMIC DEPENDENCY RATIO 1.9 2.0 2.1 1.9 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OP HOUSEHOLDS HIGHEST 20 PERCENT OF HOUSEHOLDS .. LOWEST 20 PERCENT OF HOUSEHOLDS .. LOWEST 40 PERCENT OF HOUSEHOLDS .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US PER CAPITA) URBAN .. .. 230.0/d 279.2 RURAL .. .. 100.07 178.6 184.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 206.0/d 403.6 518.0 RURAL .. .. 135.07o 285.6 371.1 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 14.0 22.1 RURAL .. .. 17.0 30.9 Not available Hot applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1978 and 1980. /c East Bank only; /d 1977; /e 1962; /f Includes preparatory education ages 12-14 years. May, 1982  Page 3 DEPINrITIS OP SOCIAL INDI CATOS amAt hthasgh the data -o draw from -o-r generaly judged the meat sotbrittfee sad -1ellabi, it hoold al- be notd that they may ot he inter- nationally comarable because. of the lack of sradardf.ed definition and concp. need by different -orien in coliectiog the date. Th. data are, ne theleon. useful to docribe ordern of magnitude, indicate trends, ood obarctrte certain major differences. htecc..ontrie.. The refernc fr.op. at (1) the non coartry froop of the subject conry and (2) a coon.try group with aenehut higher -vergf iocon thn thr country iron of tin nob) et country (ence.pt for "High IIoom Oil inportarn" group ther 'Middle Incm North Africa so Middle foot' 10 chosen hbcoone of uroe auuio-cni torol offinitino). In the reference- group data the a-tefe ore popoletion weighted arichntic mann fot eah odicotor and shee oiy when majority of the coun trios in group h.. dec for that indictotr. Sinc she coerge of cocrasaog tho indicotoro depends on the avilohility of date and i nor nifor, canon us beerised in tlafu nurae of oe indicator to anoher. The. seaerfnor ny ..nefu1 in -opariog the v-ie of OfAM (thousan.d sq.ha.) Population ea tospito1 Bed - total, rbho, und rura - l'pcluItiuc (totul. Total - Total narface area c-prisfg land are ond inland waters; igy9 data. rebs and rural) divided by their re-peociv nshe- of houpitl1 bedn Agricuitaca1 - oirnt f -eclurlae used temporarily or permnetly available Io public and private genera and apciloilud hoopital and re- fur crops. pontanen -rmcbe nod kitchen gorde- or to lie falils; 1979 data. habilitotooeteru. boupitalu are entbhIiuhmotn peenanetly stuffed bat leat one phyniciac. Eotblishsencu proiding principally cos to- "IMP PfCAPIT!,(1$) - fliP Pet capita esiae t curret macbe prices. o.I- dm1 core ore ou included. iRrul hoopitulo, bosonr, inclode bealtb citd by am -reioo method as World bank Atlaa (197f-80 basin); 1960, aed medicalireuters rot peeo-etly otaffod by o yhyulcino (hot by 1970, sod 1980 data. edicalasita-t nurse. nidalfe, et.) hich offer in-patient IC, dation sod proide a hlted canoe oi odical fuilitiro Poe stati- ENERGY CONSUMPTIONt PER CAPITA - Aeoa-l Isetn f c--risl enees (coal tical pnrpooa orbut houpitulo incado fWfO. yrincipal/go--Ia hosprits.. snd lignite, petroleum, sotora1 ga nod hydro-. ..I tolea 7n ohemleec n tota bopitss I lu1- or caro bo-pitl1 nod medicalund matrnity ericity) in bilogcsmn of coo equivalen pet capita; 1960 I Iy, n igy ct pecilleed hoapitals are Incldedonyudertotl data. Ad.doalona ec baseit1 Bad - Total nubor of odmioni... to or di-barges from hospitalsdiided hy the outer of hrdu. PIOPULATION AMNt VITAL STATItTICS Total Ppulation, Mid-year (th.....nds) - do of July 1; 1960, 1970, and 19800 HOUSINGI Urbn oulit(percent oftotl)- tinb ofahototuta popolatioo; A houaahald cnsits fagou fldvial naeltogqore diffeentdeinicion of ucbsn arasmy affect _eparsbility of data and ebeic main me. A bordar or lodger may orny no be included'in ...g uutrien; 19h0, 1970, and 1000 data, the h...ue.od for sttlot ical purpoats. Pouato rojeoth..nA-rrof u..e of rLEran pe r room - ctol, urba.. ond rural-.e1 g u Poeusr -ol 2000lgl-iCrrro. oplt ioprj-ciosc oab-lg ecferosPnconiollr . od rutlcpnc-cItou Itota populato byag and - and their martuit.y.no fr.tulity eote. dnl a respectively. Dwellings uclude... p-n-prcet ncctdenad Projeto par tnree for _artlity -n_o compriseoftheeleel anu-n cPied parts. log life enpoctia.cy at birth increasing with cootryn. per capita i.oom Accesn to flot-i.li (percen.t of d-e11inool - totol, urban, and ruro1 - leel ad 'fml ife enpc ony tobiliefg or 77.5 years. The por- Conventionalbdnrllicfn ich elecrliciy in living quarters on pe-cetog marern for fo:rt'ility tt lt uothree L_vel asuigdcIne in oftotal, arbn od rura daelliuguo-y-tiv-ly. fertility cording to ocom level anld Post fouly Pl-ing performance. Eochconr iste aicd ouI fthe. senn obisotiuns af metulity EUDCA.TIONf and fertility ternds f or prnJnctiou porp-se. Adjuate.d Enrol11nt lotion St_i_ory populatin - II a urationory pcp"-aiao there is no grwtb since Prmso, acef- rtotl, sole and femal - brunt totl, malt an fe-l the birth rate ia eqno to th:e death case..ad olu the age structure r- erllment ofal gea ut the primary leve as percentages of re-p-ci-v mai_ conot.oc. Tin_sshievdonly uftee fetildiY rotes decline to ptr ary nhouepopulotio..; -cenIly i-ludet c hildre n ugd 6-11 the elcoatlve If -tntrprudu-tio -rot, whenec genolueyern hot odju-d for differ-ot 1engthn of priory ooato;for owoarplouitsef., ciy The atatiory populotios nic n.. coonrin aIth nnra _dcnicerolet _ 0 nedIl otn etimatd.on the basis of the projected ch-rctriotic of the population since a- pupils are below or shove tho fficlul -choolIgo. in th year 7000. and tha rote of docline of fertility rote to replace- SInconary school - totl, male and female - Cnputed. auahuv-;t-coodory -en level. edction reuie at leas four yearn af oppr..ved primary natructon You sttionc toplaltill in tear ho - Th. year when tsatin....y populacine prvid..En . gnral, voctional, or coa cher traiclog i_nructiou orpt l sie,ill hettuobe. unuaIly of 17 to 17 pyaeu of age; c-rropond--ce..oran are goorally Per an. be.- Mid-year population por aquo- ktl-te- (100 hecioroa) of Vocation_ aorollma't (earcoo otf -econda-) - locational ic-titutiou foral ae;1960, 1970 and 19 79 dora. include trchi-Io, idnutril, or ocher prugea- hioh operat iodpe-d- Per oq. be.agiutrlan - Computed Is above for ogricuIu.ral land early or aa dcp-rmaitu of" unodary insticcon ooly; 1900, 1970 oan 1979 dsi._Paril-, achrraIo Icsr,ad _cudary -uT-l std-tut ro-1oild in "PorlaianAg Irun pe(erec - Children (0-li yeara), wohn-g 1-pimary and secondry level divided hy -user of techer it the .0 years) JN. adrtired (65 yraad _ovue) us prcettog- of mid-yaar popo- correupondioglels laIo;16.1970. and 19fi doto. Adult lterucy rat (percen) - literat udui- (ohie to rod ard onto) Ppuplaltion irou0.~th ba,te (percet) - cora - Anosol growth rotos of tut1 mid- aspe_ceniag of tcta1 adult pupo1aniun ugd 11 yearn aodIover year population foe 190-h. 1960_71, sod 1970-00. PPorletian iGroeth flore (porcet) - urhaa - dAncl gnoib rates of urban popa- COHSUMPTIONCIlI rt.-dp...i. aIons fo 19sf-Al, lgf0-P, asd 197-l.PunfaConperouadppucu)-'utgecrtopientr Crude Birth bate (pec tbou....d) - A-na liv birthe per tbhuaand of adyrorseiglntitnghpruc;tcud Iu=shlanec b -neesod population; 1960, 19701..sd 19f0 data, tillinary veticl-n Ceada Deth Rate (re thou...nd) - Aonoa. Id-sh per thousand of mid-year badic lece ivr (per tbou-od pplro)-All typen of -einorn for rodic population; 1960. 197g,. un 1980f dots. bruadr..ot to oural1 public per h..ct.nd ofpoult -c;ec ldro a- Groon tPecdootlon bate - A-roro . ntbac of dugbtcur ma ill boar in Ii ice.ned rcie in c..trieu and in re uh.on oiculcof radio hot _ul _o`udu-tive peridifthe onyri_nne prcntnrg-pcfcfe- ,tor non ino fc; uuf...ecnt...I-cy cc -r cnrraltn- ruinil proton; ua...lly five-yea.r. arergan ending in 1960, 1970, and 1900. _otc.. cauni_rn hoibed liconuig.S Pasily Pla..niug-Acepiern.. AnnuoI (thunsod) - Annual oute.r of accetor I TV Rflnivors (peortbouncd population) - TV -eci-cru Ic bloodrunt to of birth-coto- efe udraaie of tiocal foully panin rogra. genrul public Per ih.unand popu"atoc; euc lcdrul 1ic_n_dTt'eecc Pamily Plann.ing, - bra Iret of macrin woa)-Pectg fmridI onrendi yar Ica rognrn a fTiter u n fet sm of chil- eaing ae(5hyarn) whoca birti--ot-ol d-vo- to fiNspape- iculanioc (per rhiou..ndSppltlc hcou the anrne _ ulmried = 'man in-soaegru.-uaionofdaiyg .eo Incrr ua .defined a perindcl pohlicstion d-ro-d primarily ic recrdinggcr, eo tinouird POOD AND cNUTITION to ha "daily"- if itupp-avo or Ibot font noo a cek. loden cf rood Production per Capita (1969-71-lo0) - Inden of pee capita annual Cinema Ao-a1 Atte-dooce pee Capita per.. or-gated on the ..unber cf Prourin" of all fond -omdities. Predutico ou ld n td sod feed and rlrek- sold dcting rho yro- iltding udninnin- to driv-ic tineso is nclna year boom.. Co-ditilea covr primary goods fog. sug-r... and abile uLito. ineteo,d of. ..g.r. .bici are edible ad contain nttrent. (e.g. coffee aed tea are do led). Aggregteprod-ito of eah ..o.ctry in hone.d on ILABOR PORCf nat1ionl sracpuun pric woglgts; 19h1-hl, 1970, and 19b1 darn. Tuto Labor Fure(touacn F- .-tn -caly -tri-o p..... ncud Prcatsuply of oarie (porceut cf roguinsoots) - Cospoted true amed foru an-d uespltyod lot -nludlng ho-aerlce. nuct.e energy equivalen of oat food snppIi-oa-ilsble in country Per aI piaavriog papuluciun of oI ogen . iCililcoifacucc rr re peday.Available nupplies onspis domestic productioni.iportslean1 totop.rah1itI 960. 1970 and 1980 data. e_prrt. andoh-gea ic stock. Met supplies inclde anaa feed, seds, F.-I.e (per-r) - Fo-le lab-c forc-a pretecf ic-a labor fcr- quatities n-d in food procesaing. od losses in diatriiotlao. Raquire- Agricullo porent - .ac focI r artg, fu..ctry, bu-cln aod meotavereantit-td by PAl booedonphynio1ogicu1 needs fey no-ma soi- finigeprcru of tota lbhc furce 100.,1970o-d1.901%data,. nipy and heltIf o-soderiag noviro-tnia tosp-t-oe body -eigbts~.age Iuduntr- le.rc.t) -Labor force- citing . ooturtlon ma_ fotri und ... discribution of populotloc, nod a11awing 10 perce.t fur wat. t and eetr -rute-ocd gas -u percntge of total labcr force h,ou.ebold level1; 196~1-6.1970 and 1977 doto 19 60. 1970 and 1900 data. Per capita surely of Proti (oan er day) - Prorelo content of par capita Participation Rat (p-e...et) - to-l, sole, and femalt - P.rrticip-tlc c net npl ffo per day. eNt atopply of food in defind as ahr be- activity raten are c-putsd as total, sol, and fecale 1obor fcrc an quire=eart rfor d all ontri-a orthliohed by 0110 provide fond elima p-eeetrge of total, mal codfoa pultonfc all ag-v c-pec icely; alloesnoo of 60 from of total protein pot day ond 20 gram of aci- nod 1900, 1970. and 1990 dt. T eoebatd cc lLi, aricpolu rates palue protein, of hbich 11 gnma uhauld he . oi_al protein. These otand- reflectlog,age-set ...co of.. tIepopula tion. und long tic -red. A adar erthan, th... of 75 gram of rural protein and 21 gram of fee etimuenor-io atioca uc...e__ animal proteinassoavrage for the world, propoaed by PA in the Third economic Depeedoccy Outio Robtic of pcpulacioo under 11 ond 65 and ue World Pond gurney.;.P10141,iIf ad 977 dta to rho tota labor fce._ Percano rotinsurlyfro aima sd pus Protein oupply of food de- rivd rn elmlsmadpuse ingenoper da;1961465. 1970 and 177 dt. 11ffllTIiTf Child(sr 1-01Dat bate (car`h n ....ad) - .A.oI de-nha per thouad inProtaoe of Privat lu-n (both it t-h and bind) - iRt-i-d byrceo age greop 1-4 y.rara to uhildroo in this age grop; for must developin noun- 5 c ,richet 20) percent, poo-s 20 percen. and p--vu Al perc-t sties doto derived fine life tables; 196g. 1970 and 19i0 data, of houeholds. Lif.e . fntun..eyat Birtb fyrur) - Aversgn cuter of year of life remining The follosing rumre r very ppyroimane manret ofpvrY level. si birth; 1060, 1970 oad 1980 data. ard ahould be inrerp-etod nitb -o-ide-olr catio.. Infsot fartality fr.e free thuaand) - Aonul deatha of iofan- under one pea bai-ad Absolute Poverty noehni10 e cpita) - rbaan rural1 ofaepr thousand live birsha; 1960. 1970 ond 1900 dots..Aslt povrty ino_ leve inthalt inco_ leveIbelw nu aminiml kesto bate later lefoen.t of poenaton - oll urban- a rural - tin- nuriiouly adeqote diet pluI.ru....tia1 non-food requirevet is no her af people (total, rboo ed ea) with reasonabl naetasfaffoednil matr enpply(ioda trea:tedsfa-e wotere or untreated bun oncotoadasted Etimated Reative Poverty IIoom Level (USl peetoit,) - urhan ud rurl water snob as shut from pratectad harehols, spring,adsntr Ie as brol relstivo peerty income leve ia one-thlrd ofrvrg pecpt Fmcaagaa th r apctv aplton.I an rbnsapohlil prsonel isoom of the nountry. Urban lcL.i derived from the rural fonanor ssadpaa lcted not mare thn20 infers from a he..s may ha leve wish odjuatm t far higher cost of living In urbanaes ..a.eidered a. baing wirbin nasenbleses of that h.u.e. Is rural areas Etimated Popula:tion baaIAaaI Poet Incom Level (percent) - ubhn tenntble -oos wold imply then the h.--aif. or meebse of the hoa-ebld so ua eco fPopltino (urban and rro1) who sea "absolut da sot hays no epsode diapropoetiont pert of the. doy is fstohing the ee famiy'. awt-r sda. A..me to E.e.ata Di.eea fereno (- acoI stisnl - y,total, aea, a-d rural - tntebr of psaplsg (naal arbu, madIrura) e..a b moets diepac a pestgsof their emapstiem gopoLangas fanner dipani. may inaud the ubmsassd diapesl, with oe mitheat tesates, of a norms sai _ete_was by wera-bon spates or the as of pit prtniaa od aft- !!.lni. ~~- FPapltlendiridad by ....ar of proteing physi- Economic and Social bass Diwisin aLsasqsauiisd7i~ii edlol eheal as anin.ealty la-a. insomin Atolyaa and P-oJantious Depssmess tecbabe Kee urek ftrasm -papulatiom diwida by ntar af pematielso May 1982 mal sa famei gsdnats soas, aiatme mra,prausiasl macwe s   SUMMARY AND CONCLUSIONS Current Economic Position i. Following a period of political, social and economic turmoil in the latc 1960s and early 1970s, favorable external developments combined with domestic political stability and sound economic management have helped Jordan achieve an excellent economic performance in recent years. The 1973/74 oil price boom boosted the economies of the neighboring oil exporting countries and the effect has spilled over to Jordan in several ways. First, regional demand for Jordan's exports has risen rapidly. Secondly, remittances from a growing number of Jordanians working in the Gulf countries now constitute a sizable component of national income. Thirdly, the country benefits yearly from a large inflow of grants, mainly from Saudi Arabia, Iraq and Kuwait. Indirectly, Jordan has also benefited from two unfortunate developments in the region: the civil war in Lebanon, whicb transferred to Amman parts of Beirut's traditional banking and tourism activities; the Iranian-Iraqi war, whicb has led to a reorientation of Iraq's import activities toward the port of Aqaba and strengtbened its political and economic ties with Jordan. As a result, income and domestic employment have grown rapidly, significant progress has been achieved in modernizing and diversifying industry, and a strong balance of payments has been maintained. ii. Real GDP growth (at factor cost) averaged 10 percent p.a. during the period covered by the last Five Year Plan (1976-80). Industry, particularly mining and construction, has been the engine of growth of the Jordanian economy, offsetting a relatively poor agricultural performance due to several years of drought. The large available resources, a substantial proportion of which are external, sustained simultaneously a high rate of investment and consumption. Per capita income and consumption increased at the respective rates of 8 and 6 percent p.a. in real terms, a remarkable performance by international standards, particularly considering the very rapid increase In population (4.3 percent p.a.). This apparent improvement in income, however, has not been evenly shared among the various segments of the population or regions in the country. Low income groups, on the other hand, have benefitted from a rapidly expanding access to Government social services. iii. Due to the paucity in natural resources and arable land the structure of the Jordanian economy is characterized by a relatively narrow commodity producing base. From the early 1970s, however, a rather successful drive at widening and diversifying the productive base of the economy has been sustained. As a result, the share of industry in GDP almost doubled, to reach 30 percent in 1980. The overall industrial structure is dominated by a few very large enterprises (phosphate mining, phosphate fertilizers, potash, cement and petroleum refining), accounting for a major proportion of past and planned industrial investments. There are nevertheless more than 900 other enterprises, employing on the average about 20 workers each, reflecting the important role of private entrepreneurship and risk-taking capital in Jordan's industrial development. Industrial productivity, although increasing very rapidly, is still low, largely reflecting diseconomies of scale and the scarcity of managerial and technical experience.  -ii - iv. Rapid expansion and diversification of industrial production and the growing regional demand for Jordanian products have enabled Jordan to sustain a very strong export performance in manufacturing. Even though imports grew at a significantly lower rate, their disproportionate size in relation to exports is at the root of a large and growing trade deficit. It should. be emphasized, however, that a substantial proportion of imports (including military imports) is directly related to the inflow of workers' remittances and grants from abroad. Adverse terms of trade resulting from a drop in phosphate prices and the 1979/80 increase in oil prices have also contributed to the trade deficit, which increased fourfold since 1975, to reach US$ 2.5 billion in 1981. So far, workers' remittances and transfers from abroad, complemented by a growing surplus in non-factor services on account of tourism and transportation, have been more than sufficient to cover the merchandise trade deficit. Jordan has tbus enjoyed a modest surplus on the current account of its balance of payments throughout most of the 1970s, and was therefore able to maintain a liberal trade and exchange policy and follow a prudent course with regard to external borrowing and international reserves. By the end of 1980, Jordan's outstanding and disbursed external public debt stood at US$ 1.3 billion, equal to about one third of GNP, with a debt servicing ratio equivalent to about 5 percent of export earnings. V. In relation to GNP, the level of consumption has been declinicg steadily since the early 1970s, reflecting a considerable and sustained. improvement in the national savings performance, particularly in the private sector. As a result of the abundant supply of national and foreign resources and the favorable entrepreneurial climate actively promoted by the Government, Jordan has been able to maintain a very high and steadily rising investment rate. Thus, the share of GNP allocated to fixed capital formation increased from 16 percent in 1971 to 26 percent in 1975 and 33 percent in 1980. vi. In spite of the increasing external grants for budget support, total Government revenue did not keep pace with expenditures. This resulted in rising overall budget deficits which were financed by foreign and domestic borrowing. At the root of this basic imbalance is the small share of domestic Government revenue in relation to total expenditure (about 40 percent), reflecting on the one hand the failure of domestic revenues to keep up with the growth of the economy, and on the other hand the active role and increasing responsibilities assumed by the Government in fostering the social and economic development process. Another contributing factor has been the rising cost of consumption subsidies. Of some concern is that the efficiency and equity of Jordan's tax system seem to have suffered in recent years. vii. Jordan's banking system has experienced a very rapid expansion, reflecting a steady process of financial deepening in the economy. Most significant in that respect was the unprecedented growth of time and savings deposits with commercial banks, in spite of the low prevailing interest rates. A negative real return on financial assets bas also provided a strong incentive for directing private financial resources toward non-financial and speculative assets with positive returns, including real estate. This situation may eventually affect the ability of the banking system to mobilize  sufficient private resources for productive investment. The current structure of interest rates, witb a narrow spread between borrowing and lending rates, reduces the banks' willingness to extend credit beyond short term maturity. The Five Year Plan (1981-85) viii. The new Plan retains the basic objectives of previous Plans, namely: (i) maintaining the growth momentum of the economy, further diversification in favor of the commodity-producing sectors and, in particular, export industries; (ii) reducing the reliance of the General Budget on external grants, as well as the relative size of the trade deficit in the balance of payments; (iii) expanding basic social services to all regions of the Kingdom, and spreading the benefits of development among regions and social groups. A long list of related specific socio-economic objectives further addresses a variety of issues and problems, ranging from physical constraints (demographic and manpower characteristics, housing shortage, scarcity of water and other natural resources) to environmental and institutional issues. ix. GDP is to grow at a annual rate of 11 percent, essentially a continuation of the performance achieved during the previous Plan, led by the mining and manufacturing sector (18 percent p.a.). The combined commodity producing sectors would grow at about 15 percent p.a., as compared to a projected growtb of 8.5 percent p.a. for the services sectors. In external trade, domestic merchandise exports are assumed to grow at about 31 percent p.a., with a particularly strong contribution from the natural resource based industries (phosphate fertilizer, potash, and cement), while the growtb of imports would be limited to about 14 percent p.a. The trade gap, although increasing in absolute terms, would be further reduced in relation to GNP. Limiting the growth in final consumption to 8 percent p.a., largely through a drastic curb on Government current expenditures, the Plan further assumes a substantial improvement in the national savings performance. Gross fixed investment would continue to account for over one third of GNP on average throughout the Plan period. x. Past achievements have raised the planner's expectations regarding Jordan's absorptive capacity for investment. The plan's investment program is thus ambitious, calling for a total of JD 2.5 billion (over US$ 8 billion) in capital outlays at 1980 prices (JD 3.3 billion at current prices), almost two thirds of which are to be financed through the Central Government Budget. The investment program puts relatively strong emphasis on the social, regional, and infrastructural needs of the country. Of total investment 34 percent is for infrastructure (almost half of which in transportation), 21 percent for social sectors, and the remaining 45 percent for the productive sectors. The pattern of sectoral investment allocation reveals an awareness of the uneven distribution of achievements during the 1976-80 Plan period: there is a clear tendency towards strengthening those sectors where the implementation of the previous Plan's investment program has been inadequate, particularly in social sectors. xi. The Plan's agricultural strategy emphasizes the need to restrain the deficit in the agricultural balance of trade on the one hand, and to develop  -iv- the rainfed and livestock subsectors on the other hand, while promoting the conservation of agricultural resources. The first objective implies continuing concentration on increasing high-value fruit and vegetable production for exports, through further expansion and modernization of the irrigated sector, which is expected to play a predominant role in achieving an ambitious agricultural growth target (7.5 percent p.a.). Planned irrigation works would thus absorb more than half of overall investment in agriculture, which in itself accounts for 15 percent of the Plan's investment program. The lion's share of investment in irrigation, however, is reserved for one major project, namely the second phase of the Jordan Valley Irrigation project, comprising the construction of the Maqarin dam on the Yarmouk River. Since construction of the dam awaits the settlement of political and riparian issues with Syria, its completion during the Plan period is highly unlikely. The private sector is expected to carry the bulk of agricultural investment other than in irrigation; only a relatively small proportion of projected private sector investment, however, is explicitly project identified. xii. The Plan's industrial strategy spells out two corollary objectives; (i) there would be an infusion of advanced technologies and management methods, particularly through large key projects; (ii) growth would be based largely on individual entrepreneurial initiatives. Within a generally export-oriented framework, the Plan also outlines certain specific objectives, including : forward integration of the mining sector, with special emphasis on phosphate and potash derivatives; intensified exploration of the country's energy and mineral resources; decentralization of industrialization with a view to relieving industrial congestion in the Amman urban area. The export strategy will be supported through a drawback system and the creation of a special export risk insurance fund. Foreign participation in petroleum and minerals development will be facilitated by new legislation defining the principles and criteria of cooperation between foreign companies and the Government. The number of industrial estates will be increased, and there will be incentives to move existing industries and new projects into these estates. xiii. Projected investments in mining and manufacturing would absorb 23 percent of the overall investment program. The large projects (phosphate mining, phosphate fertilizers and derivatives, potash and derivatives, cement, and petroleum refining), of which several are now in an advanced stage of implementation, would account for about three quarters of the total investment, over 50 percent of the projected increase in mining and manufacturing output, and almost two thirds of the projected increase in industrial exports. Prospects for these large projects are generally favorable, provided past tendencies toward delays and cost overruns can be avoided in future. With regard to many medium and small investments in the mixed and private sectors, the Plan targets would seem fully achievable, taking into account the existing entrepreneurial talents and workers skills, Jordan's preferential access to the neighboring Arab markets, and the adequacy of its institutional support (e.g. development finance, industrial estates). However, a group of mediumrsized projects identified in the Plan woula seem to be predicated upon special incentives and public financial participation, indicating some of the obstacles faced by Jordan in pushing industrial  development at a fast rate, such as: diseconomies of scale (polyvinyl and polyester resins, window glass, electric cables); relatively high labour costs (garments manufacturing, iron foundry); tough international competition in the absence of any sizeable comparative advantage (timber processing). xiv. The Plan lays strong emphasis on the generation of savings in the Government sector. The overall objective is to realize full coverage of current expenditures by domestic revenues by 1985 (from a 67 percent coverage in 1980), and thus to free a larger share of foreign grants for financing capital expenditures. The basic strategy towards balancing the Budget is to curb the growth in current expenditures, rather than to generate more domestLc revenues. The revenue raising effort projected in the Plan is rather modest by past domestic standards. The Jordanian Government is aware of the structural issues facing the tax system (its heavy reliance on indirect taxation and relative inelasticity with regard to domestic income) and has enacted a new income tax law containing some adjustments. The new law, however, does not represent a sweeping reform of the tax system, although the introduction of the principle of self-assessment seems to have met positive reactions and led to encouraging initial results. In the absence of a more intensive resource mobilization effort, current expenditures would have to be drastically restrained, to a nominal annual growth of 10.5 percent (i.e. half the rate recorded in the preceding five years) if the budget is to be balanced. Achieving this goal may prove to be difficult, particularly with the empbasis that the Plan puts on social programs which tend to generate relatively high recurring outlays, and in view of the continuous upward pressure on the compensation of civil employees emanating from the competitive conditions prevailing in the private sector and in neighboring Arab countries. Inappropriate cuts in current expenditures may also result in inefficiencies and delays in the implementation and subsequent operation of investment projects. xv. The overall public sector capital expenditures program for the 1981-85 period would amount to JD 2,328 million in nominal terms, including loans and equity participation in mixed public-private ventures (JD 325 million). This total also includes about JD 400 million in carry-over projects from the previous Plan, about balf of which are in mining and manufacturing. Close to 40 percent of the public investment program is to be financed from current budgetary savings (JD 921 million). However, the realization of a Budget surplus of the indicated magnitude depends upon the securing of JD 1,220 million in external grants as budgetary support, as well as a rather drastic restraint on the growth of current expenditures. The financing of the Plan therefore remains quite vulnerable to possible interruptions and fluctuations in foreign aid receipts,. xvi. The Plan provides no explicit details regarding the sources of finance for the investment program outside the Central Government Budget. Available private resources would seem insufficient to finance non-Government investment. This would imply that some transfers or borrowing from abroad would be needed to finance the gap.  -vi- Human Resources xvii. Preliminary results of the 1979 Population Census reveal a surprisingly higher level of unemployment than expected (8.5 percent), in light of the rapid growth in employment (over 4 percent p.a. through 1972-79) and of unemployment rates previously recorded in bousehold surveys. Although the 1979 Census results are subject to reservations, they do nevertheless provide qualitative indications that unemployment may in fact have been on the rise in recent years, and that it is heavily concentrated in the young age groups with primary through post-secondary education. Almost half of these young unemployed (age 15-24) are "first time job seekers". Concurrently, female participation in the labour force has declined somewhat, in spite of Government pronouncements encouraging a greater participation. xviii. These findings, and a tentative assessment of domestic manpower requirements and supply for the Plan period undertaken by the Mission, call attention to the possibility that the manpower situation in Jordan could rapidly shift from one of selective shortages to one of finding employment for a very rapidly increasing domestic work force. The available supply of Jordanian labour (net of out-migration) is projected to increase at a yearly rate of about 6 percent, reflecting the high natural growth and young age structure of the population. In addition, the domestic supply of Jordanian labour could be further increased by a slowdown in out-migration, or even return migration, if the neighbouring oil countries find a need to curtail their growth or continue to rely increasingly on non-Arab workers. In parallel, a spectacular incrase in enrollments in the formal education system, particularly of females, as well as the rapid expansion and diversification of the education/training system itself, have considerably accelerated the supply of Jordanians in the higher education and skill ranges, who are now competing for employment in the domestic labour market. Economic Prospects xix. Overall, the Plan's growth objective for the period 1981-85 would seem within reach, taking into account that a substantial part of output will be generated from major new industries, the development of which was started in the past. However, sectoral performances are likely to differ from the prospective pattern figuring in the Plan. Specifically, the growth target in industry (17 percent p.a.) might be exceeded, depending mainly on private sector initiative and organization, and provided the Government maintains a healthy investment climate and carries out a needed reform of the industrial protection system. In agriculture, however, the growth target (7.5 percent p.a.) is high, given a record harvest in the base year (1980), the unlikely prospect of a major improvement in output performance in the rainfed sector, and the scarcity of water which, until completion of the Maqarin dam project, will limit the potential for expanding irrigated land. In services, a more cautious growth objective for non-Government sectors (10 percent p.a., according to the Plan) might be desirable in view of the special circumstances that benefitted particularly banking and transportation in the recent past.  -vii- Growth in Government services, on the other hand, would probably exceed the projected 3.5 percent p.a. in view of the past record and of the new requirements of the social and investment programs. xx. According to the Mission's assessment of sectoral and macroeconomic prospects, GDP growth could be maintained at about 10 percent p.a., i.e. close to the 11 percent Plan target as well as to the actual 1976-80 performance. A significant increase in the share of commodity producing sectors would be realized, correspondingly reducing Jordan's traditional dependence on the services sectors. A basic underlying assumption, however, is the realization of a high rate of implementation with regard to the planned investment program. In that respect, the heavy contribution assumed by the public sector, possibly combined with budgetary constraints, may again result in a shortfall in the implementation of its investment program. On the other hand, private sector investment may prove more buoyant than anticipated. xxi. The medium-term prospects for increasing exports are promising in view of the expected completion of major export-oriented industrial projects, which should result in significant increases in foreign exchange earnings after 1982. Even though imports would grow at a significantly lower rate than exports (11 and 16 percent p.a. respectively), the trade deficit will continue to increase and could reach the US $3 billion mark by 1985. In relation to GNP, however, the domestic resource gap is expected to show a further decline. Unlike the recent experience, net worker's remittances and foreign grants may in future not be sufficient to cover the growing trade deficit. Jordan would then have to rely more heavily on external borrowing. xxii. As reflected in the projected current account deficits, the net overall external financing requirements would amount to about US $3.5 billion throughout the 1981-85 period. Taking into account amortization obligations on existing and new foreign debts, as well as the need to maintain a prudent level of international reserves, a total of US$ 5.3 billion in gross disbursements would be required, of which US$ 1.2 billion in undisbursed commitments was available as of the end of 1980. This magnitude of external borrowings may represent a minimum requirement since it is based on the assumptions that external grants will be forthcoming in the anticipated amount, and that the savings target of the Government can be achieved. However, Jordan should not face difficulties in absorbing such a volume of external borrowing from a creditworthiness point of view, given its excellent initial external financial position and the expected continuing rapid growth in export earnings. The debt servicing burden is thus not likely to exceed 10 percent by 1985. Nevertheless, the timely securing of new external loan commitments in the amount required for smooth and full, implementation of the Plan will require special efforts. xxiii. In the longer term, Jordan may be confronted with an external resource constraint, caused in part by the size of the current Plan. Such a constraint would become stronger if foreign grants are reduced or even phased out. The next Plan will thus have to be less ambitious than the current one, leading the economy through a readjustment process, towards lower investment rates, lower overall growth and consequently lower growth of imports.  -viii- Issues xxiv. In planning, several issues merit consideration. First, as the major resource-based projects are nearing completion, the shift to small- and medium-scale industries increases the need for emphasizing the quality of projects, with particular attention to preparation and feasibility, so as to ensure efficient utilization of resource. Concurrently, steps need to be taken to channel more private savings, including workers' remittances, into financing of productive investment (para. xxviii and xxix). Second, private sector activities need to be organized so as to gradually assume a larger role in the development of the country and reduce the load on the Governmenl administrative capacity, which is already strained to the limit. Third, although the Plan very candidly recognizes the urgent need for institutional reforms in the Administrative machinery, a strong commitment on the part of the Government is needed to implement the proposed program. Fourth, the role of planning agencies need to be defined and strengthened with respect to identification, selection, and particularly to the monitoring and evaluation of projects. Fifth, the preparation of an Annual Plan is needed to enisure a consistent link between the Plan and the annual budget as well as to update the Five Year Plan in light of changing circumstances. Finally, a related issue which the Plan did not address is the inadequate and worsening quality of statistical data in fundamental areas such as national accounts, trade, and income distribution. Staff and financial constraints have considerably weakened the statistical departments of Government agencies, and particularly the Department of Statistics (the Government central statistical officie). More clearly defined status, responsibilities and coordinating powers of the Department of Statistics would serve to avoid duplication in data collection, too frequent revisions and delays, as well as to ensure an effective monitoring and evaluation of Jordan's economic performance as a basis for strategy planning and policy making. xxv. Industrial Strategy. Industrial growth during the Plan period will receive important contributions from several large projects initiated under the previous Plan and now approaching completion (notably potash, phosphate fertilizers, cement). These large new industries, however, are not likely to be able to carry the momentum of industrial growth much beyond the current Plan horizon. Identifying sources and outlining a strategy for future industrial growth therefore would seem a major area of concern. In the long run, because of the small size of Jordan's domestic market, industrial growth depends very strongly upon the development of exports. Even though the immediate growth prospects are favorable, the Plan should thus primarily be judged according to what it does to increase industrial productivity, and to create a strong basis for growth beyond 1985. In this respect, the following issues deserve attention: (i) there bas been in the past a tendency towards delays and financial overruns in large projects, reflecting a need for better management and contracting procedures, as well as for greater realism in estimating investment costs and construction periods; (ii) planning in transportation infrastructure is bebind schedule, and there is a risk that bottlenecks might hold up the achievement of otherwise attainable production and export targets in key industries; (iii) the system of industrial  -ix- protection and export incentives urgently needs resbaping; and (iv) the construction sector will .play a key role in ensuring timely implementation of the Plan; in this context, it would be a highly desirable objective to achieve, through appropriate measures, a higher participation of the local contracting industry in the large and more specialized jobs in Jordan. xxvi. Manpower. A substantial portion of unemployed Jordanians are those with little education or the young graduates seeking a first job. Appropriate vocational training combined with a program of labor market and career counselling would contribute to alleviate this problem and minimize the import of foreign labor when Jordanian job seekers exist. Further expansion of the apprenticeship and skill training programs offered by the Vocational Training Corporation, and of the supervisory and management training provided by the Jordan Institute of Management and the Institute of Public Administration is required. Female participation in the labor force could be encouraged by the Government, through diversifying the curriculum available to females, providing flexible work time schedules, and supporting experimental and innovative efforts to encourage female employment. The impact of the inflow of non-Jordanian labor on the employment opportunities of Jordanians, particularly the unskilled, needs to be assessed. In addition to providing training for unemployed unskilled Jordanians, labor offices might undertake negotiating efforts to place Jordanian job seekers in establishments which are currently employers of non-Jordanians. Efforts to intensify knowledge on the volume and characteristics of Jordanian workers and their dependents abroad should be continued. It is probable that return migration will increase even as out-migration continues, due to the changing industrial and occupational structure of employment demand in the Arab oil economies. In that respect, the development of an information system on job opportunities in Jordan and a strengthening of the system of labor attaches could be useful means to cbannel information on labor market conditions in Jordan and selected locations abroad. xxvii. Domestic Resource Mobilization. The high implicit savings target for the Government raises a number of questions. First, the emphasis in the social programs necessitates relatively more allocation for current outlays. Second, wages and salaries of civil servants in keeping pace witb those of the private sector and in neighboring countries, would further exacerbate the pressure on current Government expenditures. Overspending in the current Budget may eventually result either in under-implementation ot the investment program or the imposition of bigher inflationary pressures on the economy through additional credit expansion. To reduce the budgetary deticit, less drastic expenditure cuts than foreseen in the Plan could be accommodated, provided they ar'e complemented by exerting more fiscal discipline and improving fiscal management; there is also significant scope for raising domestic revenues through improving tax coverage and collection. xxviii. Mobilization of private savings could be further improved through expanding the range of assets in wbich savers can place their tunds, and providing greater incentives to attract workers' remittances from abroad, by improving investment opportunities inside Jordan and establishing bank brancbes in neighboring Arab states. Promoting the activities of institutional investors such as the Pension Fund and the Social Security  Corporation is complementary to the expansion of specialized bank activities, since these investment funds are allowed to lend directly to particulaLr sectors of the economy. To furtber the development of Jordan's capitcl market, active promotion of syndicated loans by commercial banks should be continued, while a broadening of ownership by the general public should be initiated. xxix. Monetary Issues. The course of monetaray expansion in Jordan is primarily influenced by the growth of private sector credit and the accumulation of foreign assets. The increase in the inflow of external resources necessitated by the current Plan may, in the absence of appropriate liquidity controls, generate inflationary pressures far in excess of those experienced during the previous Plan. To maintain a sound monetary and credit system compatible with the projected real growth of the economy, two policy issues need to be considered. First, the volume of credit needs to be carefully controlled. Furthermore, financial institutions should be strengthened to be able to handle the additional intermediation required for the purpose of carrying out the ambitious investment program. In this respect, reorientation of banking activities would be needed; specialized banks need strengthening and sbould only engage their lending in areas which commercial banks fail to serve. Banks should also be induced to increase their currently limited dealings with small-scale enterprises. Second, it is of paramount importance that the financial system allocates credit according to development objectives and priorities. It may thus be desirable to limit the renewal of short term credit to trade and commerce only, and to provide proper interest rate incentives to promote greater use of commercial banks' resources to the financing of longer term credit needs in the commodity producing sectors. Alternatively, the specialized banks could be allowea to directly increase their resources by issuing bonds. Both alternatives may necessitate adjustments in the current structure of interest rates.  Chapter I: CURRENT ECONOMIC POSITION 1. Jordan, excluding the West Bank, is a country of around 90,000 square kilometers and a population of 2.2 million. It has limited natural resources (mainly phospbate, potasb and limestone), a very narrow agricultural base (only 5 percent of the land is arable) and a traditionally services oriented economy. Energy needs are met entirely from imports. Water is an increasingly scarce resource facing competing demands for irrigation, urbanization and industrialization. 2. Jordan has one of the highest natural population growth rates in the world, close to 4 percent p.a., and 52 percent of its population is below 15 years of age. The country has experienced rapid urbanization, and the three major cities (Amman, Zarqa and Irbid) now account for almost half the population. Participation of the population in the labor force is low (20 percent), reflecting its age structure, traditionally low participation of women and, above all, a massive outflow of Jordanians to relatively well paid positions in the Gulf countries. Demographic factors thus exert heavy pressure on social services, while the continuous internal and external migration flows create pressure in both the labor and urban housing markets. 3. Conscious of the country's limited natural resources, its relatively narrow productive base and the sensitiveness of the economy to changes in its oil-rich regional environment, the Government has wisely pursued liberal; outward looking policies in trade, labor migration and foreign exchange transfers. Incentive policies are increasingly geared to promoting private enterprise. 4. Jordan offers a good example of close and relatively efficient cooperation between public and private sectors. The chief responsibility for industrial development is in the private sector, while the Government provides the required support in the form of capital and other financial contributions, assistance in project identification and preparation, and incentive policies. Government tends, as a general policy, to avoid majority ownership in its numerous participations with the private sector, unless there are overriding economic or social considerations. A. Economic Structure and Growth 5. Following a period of political, social and economic turmoil in the late 60s and early 70s, favorable external developments combined with domestic political stability and sound economic management have helped Jordan achieve an excellent economic performance in recent years. The 1973/74 oil price boom boosted the economies of the neighboring oil exporting,countries and the effect has spilled over to Jordan in several ways. First, regional demand for Jordan's exports bas risen rapidly. Secondly, remittances from a growing number of Jordanians working in the Gulf countries now constitute a sizable component of national income. Thirdly, the country benefits yearly from a large inflow of grants, mainly from Saudi Arabia, Iraq and Kuwait, partly for  - 2 - military purposes but also, to a very significant extent, as development assistance. Indirectly, Jordan has also benefited from two unfortunate developments in the region: the civil war in Lebanon which transferred to Amman parts of Beirut's traditional banking and tourism activities; the Iranian-Iraqi war which has led to a reorientation of Iraq's import activities toward the port of Aqaba and strengthened its political and economic ties with Jordan. As a result, income and domestic employment have grown rapidly, significant progress has been achieved in modernizing and diversifying industry, and a strong balance of payments has been maintained. 6. Real GDP growth in the period 1976-80 averaged 10 percent p.a. at factor cost and over 12 percent at market pricef, the latter due to a very rapid increase in net indirect taxes from an abnormally depressed level in 1975. Industry, particularly mining and construction, has been the eng&ine of growth of the Jordanian economy, offsetting a relatively poor agricultural performance due to several years of drought (Table 2). The large available resources sustained simultaneously a high rate of investment and consumption. Gross fixed investment increased by over 18 percent p.a. in real terms, accounting for close to one third of GNP during that period. Consumption grew more moderately, at about half the rate of investment, although its overall level exceeded GDP by more than 20 percent on average through 1976-80. Rapid income growth allowed private per capita consumption to grow at close to 6 percent p.a. in real terms, a remarkable performance by international standards. By comparison, per capita GNP increased by about 8 percent p.a., reaching US$1,610 in 1980 (at current prices and exchange rate). 1/ 7. This apparent improvement in living standards, however, may not have been evenly distributed among all segments of the population. Recent evidence 2/ shows the poorest 30 percent of the population sharing 11.5 percent of the country's total household income, and one fifth of this income accruing to the top earning 6.2 percent of the population. The general distribution of income has somewhat improved since the early 1970s, but this improvement seems to have benefited mainly the middle and upper middle income ranges. Real income gains would seem to have been relatively small for the lowest 30 percent of the population (in the order of half a percent p.a.) and probably negligible for the lowest 10 percent. Low income groups, on the other hand, have benefited from a rapidly expanding access to Government social services. 1/ According to the World Bank Atlas methodology, where for the purpose of international comparison country's per capita GNP are adjusted to minimize the impacts of recent real exchange rate fluctuations vis-a-vis the U.S. dollar, Jordan's 1980 per capita GNP would amount to US$1,420 (see Social Indicators in front of this report). 2/ Information is in a survey conducted in May 1981 among 1091 households in the Amman-Zarqa region, as part of a study on education and employment prospects for the Vocational Training Corporation (VTC).  -3- Table 1: COMPARATIVE STRUCTURE OF PRODUCTION (1980) GNP per Capita a/ Distribution of GDP (.) Country (us$) Agriculture Industry (Manufacturing) Services Jordan 1,420 8 30 (14) 62 Syria 1,340 20 27 (21) 53 Tunisia 1,310 17 35 (13) 48 Turkey 1,470 23 30 (21) 47 Middle-Income 1,400 15 40 (19) 45 Developing countries a/ World Bank Atlas methodology (see footnote 1, p.2). Source: Appendix Table 2.2, and World Development Report 1982. 8. Due to the paucity in natural resources and arable land, Jordan has traditionally utilized its relatively well-developed buman resources in service industries (banking, trade, transport), in accordance with its strategic position in the region. This tendency was accentuated by the loss of the West Bank. Consequently, the structure of the Jordanian economy is characterized by a narrow commodity producing base as compared to other economies at similar income levels (Table 1). From the early 1970s, however, a rather successful drive at widening and diversifying the productive base of the economy has been sustained. Notwithstanding a relatively poor agricultural performance, the sbare of the commodity producing sectors in GDP increased steadily from 31 percent in 1972 to 37 percent in 1980 (Table 2). This increase reflects mainly the expansion of phosphate production in the mining sector and, in more recent years, a boom in construction activity triggered by the huge inflow of workers' remittances as well as by massive investments. The rising importance of industry, however, was dampened in nominal terms by the adverse movement of phosphate prices throughout 1976-80; measured in 1975 prices, the commodity producing sectors grew at twice the rate of services, topped by the mining sector at 24 percent p.a., accounting for more than half of the absolute increase in output. 9. Agriculture. Jordan has very limited agricultural potential. Only 5.5 percent of its area is arable land, one tenth of which is irrigable.  -4- Table 2: GROWTH AND STRUCTURE OF PRODUCTION Nominal share Av. real growth 1972 1975 1980 1976-80 Commodity producing sectors 31.1 33.8 37.3 15.2 Agriculture 14.6 9.6 7.7 3.5 Industry 16.5 24.2 29.6 18.7 Mining 1.8 6.0 4.5 23.7 Manufacturing 8.3 11.2 14.2 14.9 Water & electricity 1.4 1.1 1.0 19.0 Construction 5.0 5.9 9.9 20.0 Services 68.9 66.2 62.7 7.2 Government Services 25.1 23.9 20.4 6.6 Other 43.8 42.3 42.3 7.5 GDP at factor cost 100.0 100.0 100.0 10.2 Source: Appendix Tables 2.2 and 2.4. Roughly two thirds of the latter (31,000 ba) is currently under irrigation. Water is in scarce supply. Given these meager resources, the strategy has successfully focussed on increasing productivity in the irrigated sector through the introduction of modern tecbniques such as drip irrigation, plastic hot houses, and mulching systems. Production in this sector is specialized in highly valued off-season produce, almost half of which is exported to neighboring countries. Vegetables and fruits accounted for slightly more than balf the value of agricultural production on average over the period 1976-80, wbile their output volume increased by half during that period. in the rainfed areas, the production of field crops was severely disrupted by successive droughts, the worst during the 1979 cultivating season. Rainfall fluctuations not only affected average yields but also the areas under production as farmers sought to minimize risks during bad years. As a result, production of field crops in 1979 was reduced to barely one tenth of the volume that had been achieved in the best year, 1974. Production of livestock also suffered from the droughts and is further hindered by meager rangeland resources and the limited capacity to produce fodder. Egg production increased more than fourfold between 1974 and 1978 and at a more moderate rate thereafter. Adequate rainfall in 1980 lead to a sharp recovery in agricultural output, particularly of wheat and barley, although its level still remained below that of 1974. Although the share of agriculture in total value added is only 8 percent, the sector contributed about one quarter of the increase in the value of domestic exports between 1975 and 1980 (excluding  -5- processed foodstuff). Net food imports have nevertheless been growing rapidly, more than doubling during that period, and constitute about 50 percent of domestic food consumption. Agriculture accounts for about 10 percent of total employment. Growing opportunities in the industrial sector, particularly in construction, have stimulated out-migration from the rainfed sector, a tendency that was accentuated by the effects of the prolonged drought period. Simultaneously, however, labor shortages in the irrigated sector have become apparent, mainly in the Jordan Valley, and have led to importing of foreign labor. 10. Industry. The mining and manufacturing industries today account for about one-fifth of GDP, one tenth of total employment and three quarters of domestic exports. The combined annual output growth of these sectors exceeded 18 percent, a highly satisfactory performance even considering that this growth started from a low base. Mining production, essentially phosphate rock, grew at close to 24 percent p.a. but manufacturing activities also exhibited a healthy performance (15 percent p.a.). Within the manufacturing sector, the largest increases occurred in the chemical sector (pharmaceuticals, soaps, detergents, paints and plastics), followed by the production of food, beverages and tobacco. In contrast, production of construction materials lagged behind demand with a resulting sharp increase in imports of steel, cement and glass (Table 3). II. Phosphate rock production reached close to 4 million tons in 1980 witb three mines in operation. Present capacity is 5.4 million tons and ongoing investments, including the development of a fourth mine, are expected to raise it to about 10 million tons by the end of 1985. Virtually all Table 3: GROWTH IN MINING AND MANUFACTURING PRODUCTION, 1975,80 1975-80 Growth 1975 share compound annual Incremental in output (X) growth rate (%) stiares (%) Mining 34.8 23.7 50.4 Manufacturing 65.2 14.9 49.6 Food, beverages & tobacco 13.8 16.9 12.4 Textile & clothing 7.4 11.5 4.1 Leather & footwear 5.9 -3.1 -.7 Petroleum refining 8.5 16.0 7.1 Construction materials 8.6 10.3 4.1 Chemicals 15.9 15.8 13.1 Otber 15.9 15.8 13.1 Total mining & manufacturing 100.0 18.3 100.0 Source: Department of Statistics and Central Bank of Jordan.  -6- phosphate rock output is currently exported, representing a value of US$160 million in 1980, i.e. close to 40 percent of total earnings from domestic merchandise exports. From late 1982 on, however, a fertilizer plant nearing completion at Aqaba will absorb part of the domestic phosphate rock production (about 1.4 million tons when operating at capacity). Value-added in mining and manufacturing is expected to record a further boost from the coming into operation of the Dead Sea potash project, a major proportion of which was completed during the 1976-80 Plan period. 12. Jordan's industrial sector in 1979 counted 931 establishments employing 5 or more workers (342 more than in 1974), of which 107 are in mining and quarrying and the rest in manufacturing (Appendix Table 8.2). Fixed assets totalled some US$650 million. In addition, there were about 2,000 small establishments accounting for about 16 percent of industrial employment although only 7.5 percent of value-added. Although industry has undergone a strong diversification since the early 1970s, the overall picture is still dominated by a few very large, mostly natural resource based enterprises. Jordan's five major companies (phosphate mining, phosphate fertilizers, potash, cement and petroleum refining) alone accounted for some 70 percent of gross fixed investments during the period 1976-80 and probably an even bigher fraction of current fixed assets. Government direct equity participation in these five companies averaged 47 percent in terms of paid-up capital at the end of 1980. Notwithstanding this apparent predominance of a few industrial "giants", the fact should be empbasized that there were more than 900 other enterprises employing on the average about 20 workers each. Private entrepreneurship and risk-taking capital are an important ingredient in Jordan's industrial development, and will probably continue to be in the future. The Industrial Development Bank portfolio by the end of 1980 showed 50 industrial loans to the private sector, for an average amount of JD 106,000, and 20 equity involvements averaging JD 150,000. 13. Starting from a low level, exports of manufactures recorded a sixfold increase in value between 1975 and 1980, reaching us$ 250 million. These exports represent a wide range of products, with particularly rapid growth in wood products, transport equipment and non-metallic mineral products. Chemicals (mainly detergents and soap) still account for the bulk of manufactured exports (11 percent), followed by wood products and cigarettes. The export markets are predominantly in neighboring Arab countries. Wfith a few exceptions (e.g. cement pipes), the main manufactured exports have a high import content. However, several large new export projects nearing completion or envisaged under the 1981-85 Plan (potash, phosphate fertilizers, cement and glass) will have far more favorable balance of payments effects. 14. Manpower productivity in the mining and manufacturing sector has been increasing very rapidly (10 percent p.a. on average between 1975 and 1979) reflecting, in part, large investments in several major projects. The overall picture, however, covers widely diverging productivity performances in the various subsectors. On the whole, industrial productivity is still low, reflecting, in large part, diseconomies of scale and the scarcity of managerial and technical talent and experience.  15. Investments in construction grew by about 11 percent p.a. in real terms between 1975 and 1980, with the share of non-residential construction remaining constant. The local construction industry participated in this expansion, as evidenced by an almost twice as high growth rate in value-added and a 40 percent increase in employment during that same period. Today, Jordanian contractors are involved in the construction of major hotels and other high-rise buildings, cold storage facilities, major hignway interchanges, water supply facilities, etc. Simultaneously, local firms of consulting engineers have grown into sizable enterprises. Management and planning, however, are still critical constraints for the local contracting industry in achieving a higher participation in the large and more specialized contracts, a very high proportion of which are awarded to foreign firms. On the other hand, subcontracting by foreign to local firms is common, particularly in civil engineering and increasingly for mechanical and electrical installations. 16. Services. Value added in the services sector has witnessed a decline in the sbare of government, from 36 percent in 1975 to 31 percent in 1980. This evidently reflects the relatively buoyant conditions that prevailed in non-government services, but to some extent also the dLfficulties experienced by the Administration in retaining its most able and qualified employees in the face of strong competing demands from the Gulf countries and the private sector. 1/ Among non-government services, trade and financial services have benefited from the declining attraction of BeLrut as a regional center. In recent years, tourism has been stimulated by the development of winter package tours to Aqaba from Western Europe. The transport sector has also shown strong expansion. The rapid development of the port of Aqaba since the reopening of the Suez Canal was further accelerated through the booming transit trade to Iraq, as a result of the conflict with Iran. An Iraqi-Jordanian Land Transport Company was established in 1980 to meet Iraq's import needs. The company has 300 trucks currently in operation and is expecting delivery of another 450 units shortly. In view of this substantial additional demand upon Jordan's already overburdened transportation infrastructure, the Iraqi Government has recently committed about US$ 240 million in loans for the improvement of road connections between the two countries. B. Balance of Payments 17. Rapid industrialization, strong expansion and diversification of production and the growing regional demand for Jordanian products have enabled Jordan to sustain a remarkable export performance throughout the 1975-80 period. Domestic merchandise exports almost tripled in real terms. Jordan's success as an industrial exporter within the region is illustrated by an average annual real growth in manufacturing exports in excess of 35 percent, i.e. almost twice the growth rate of primary exports and a reversal of earlier trends. Wbereas manufactures accounted for about one fifth of total merchandise exports in 1975, their share had increased to one third by L980. 1/ A study conducted by the Institute of Public Administration in 1980 confirms the existence of substantial wage differentials between the Civil Service and the private sector, particularly at the higher technical and managerial levels.  -8- 18. Merchandise imports grew at a significantly lower rate than exports. However, their disproportionate size in relation to exports (the level of merchandise imports was five times higher than that of exports on average between 1975 and 1980) is at the root of a systematic and steadily worsening deficit in merchandise trade. In addition, Jordan suffered a substantial terms of trade loss (about 30 percent) as a combined result of the drop in phosphate prices between 1975 and 1978 and the 1979/80 increase in oil prices. The deficit on account of merchandise trade therefore tripled, reaching US$1.8 billion in 1980. About one third of this deterioration was due to the adverse terms of trade effect. A growing surplus in non-factor services, mainly on account of tourism and transportation, contributed to reduce Jordan's trade deficit to US$ 1.6 billion in 1980. 19. So far, the trade deficit bas been more than offset by the net inflow of workers' remittances and transfers from abroad. Recorded net remittances increased from a very low level in the early 1970s to US$ 640 million in 1980. Transfers in the form of grants from Arab oil-producing countries were increased substantially following the Baghdad Arab Summit in 1978, where an annual aid level of US$ 1.2 billion was pledged to Jordan. Disbursements have been close to commitments. Total net transfers, including those from private and other official sources, exceeded US$ 1.3 billion in 1980, a record level. As a result of these inflows Jordan has enjoyed a modest surplus on the current account of its balance of payments throughout most of the 1970s. 20. The overall balance in the current account has enabled Jordan to follow a prudent course with regard to external borrowing and foreign currency reserves. Net disbursements on medium and long term loans totalled US$875 million through the 1976-80 period, one quarter of which from private sources; by contrast, the amount of transfers received in that period was four times as bigh. Over half of Jordan's external borrowing in that period was on concessional terms, most of it from OPEC and DAC Governments. As a result, the average interest rate on new loans was only 5.8 percent (6.8 percent in l980), with maturities averaging 17.3 years. By the end of 1980, Jordan's outstanding and disbursed external public debt (excluding military debt: 1/) stood at US$ 1.3 billion, equal to about one third of GNP, while undisbursed commitments represented another US$ 1.2 billion. The bulk of Jordan's outstanding debt has been contracted for the financing of infrastructural development; 35 percent of disbursed and no less than 70 percent of undisbursed commitments are concentrated in electricity and water supply, communication and transport (Table 4). In terms of disbursed commitments, the sectoral distribution of the outstanding debt is very close to the corresponding pattern of investment during the 1976-80 period. Although Jordan's foreign debt, in relation to its GNP, is moderately high by international standards, the debt servicing burden is comparatively low. Aside from the favorable borrowing terms, this reflects the specific structure of the Jordanian economy: with exports of goods and services, boosted by workers' remittances, reaching almost 70 percent of GNP in 1980 (i.e. twice the size of the outstanding external debt), the relative burden of debt: service payments was limited to about 5 percent of these export earnings. 1/ Information on Jordan's military debt is not available.  - 9 - Table 4: SECTORAL DISTRIBUTION OF DEBT OUTSTANDING a/ (in percentage) Debt Outstanding Sector Disbursed Undisbursed Total Agriculture 1.6 .7 1.2 Mining 8.2 4.2 6.2 Manufacturing 16.4 11.3 13.9 Electricity/water 14.7 22.3 18.4 Communication/transport 21.5 48.1 34.7 Hotels, restaurant & tourism .2 1.3 .7 Community & social services 8.7 7.9 8.3 Import finance 13.0 - 6.6 Unspecified 15.7 4.2 10.0 Total 100.0 100.0 100.0 id. US$ million 1266 1237 2503 a/ As of December 1980. Source: World Bank 21. Throughout the 1970s, the authorities have wisely followed a policy of maintaining a relatively high level of international reserves to meet possible effects of unfavorable regional developments. External reserves (including gold at the national valuation of $100 per ounce) were equivalent to over five months of imports of goods and services throughout 1976-79, and to 4.3 months of imports in 1980 (six months if gold reserves were valued at the actual 1980 market price). C. Resource Availability and Allocation 22. The specific and unusual structure of the Jordanian economy, in terms of the main macroeconomic aggregates, can be understood only against the background of the strong economic, social, and political ties between Jordan and its oil-rich neighbors. In addition to revenues from exports of goods and non-factor services, these ties have contributed to generating a massive inflow of external resources in the form of workers' remittances and grants. During the period 1976-80 the yearly inflow of remittances and grants represented on average close to two-thirds of Jordan's GDP. In the liberal trade and foreign exchange climate maintained by the Jordanian authorities, this disproportionate and potentially inflationary source has its natural counterpart in imports (the latter also including military imports financed from the external grants). Imports of goods and non-factor services, therefore, were on average 10 percent above the level of GDP througbout 1976-80, reflecting a level of final demand of more than twice domestic output as well as substantially negative domestic savings. The effects of such external factors on the structure of demand, as measured in terms of the conventional indicators, are particularly striking when comparing Jordan with other oil importing countries at a more or less similar income level as sbown in Table 5.  - 10 - Table 5: COMPARATIVE STRUCTURE OF DEMAND: JORDAN VS. MIDDLE-INCOME OIL IMPORTING DEVELOPING COUNTRiES (1980) (in percent of GDP) Jordan Middle-Income Oil Importers Consumption 117 82 Private (87) (68) Public (30) (14) Gross domestic investment 41 27 Exports of goods & non-factor services 54 22 Gross domestic savings -17 21 Resource balance -58 -6 Source: Appendix Table 2.1 and World Development Report 1982 23. This comparison, however, can be misleading if taken as a basis for judging the savings effort of the country, since it does not take into account the direct causal link that exists between net factor income from abroad and the size of investment and of the domestic resource gap. About one tihird of the Jordanian labor force is working abroad. The resulting inflow of remittances has contributed to maintaining Jordan's GNP at about 25 percent above the level of GDP since 1975. Evidence suggests that this margin may even be considerably higher, since a substantial part of remittances are not recorded. 1/ Under these circumstances, the conventional concept of domestic resource allocation does not seem very meaningful; domestic savings, for example, are biased downward by consumption from the substantial non-domestic income. The allocation of Jordan's national, as compared with domestic, resources reveals therefore a more balanced picture, one of incceasing mobilization and investment of these resources (Table 6). 24. Thus, in relation to GNP, the level of consumption has been declining steadily since the early 1970s, while gross national savings turned positive from 1976 to reach about 6 percent of GNP in 1980 (in contrast with a domestic savings rate of -17 percent). This trend reflects a considerable and sustained improvement in the national savings performance, as shown by a positive marginal savings rate of about 13 percent over the period 1975-80 compared to a negative rate of 4 percent through 1971-75. Furthermore, the true underlying savings performance is likely to have been even higher to the extent that public consumption includes an undetermined military component for whicb financing was specifically related to foreign grants. Differentiation of the resource balance between government and private sector (Table 7) shows a basically strong savings performance in the latter, as reflected by a marginal savings rate of 25 percent for the 1976-80 period. 1/ A sample survey conducted by the Jordanian Royal Scientific Society among more than 1,000 households with migrant workers, shows that only 35 percent of them transfer their remittances through official banking channels.  - 11 - Table 6: DOMESTIC VS. NATIONAL RESOURCE ALLOCATION a/ Domestic Resource National Resource (% of GDP) (Z of GNP) 1971 1975 1980 1971 1975 1980 Consumption 119 133 117 113 109 94 Gross capital formation 19 32 41 18 26 33 Exports a/ 16 43 54 21 54 69 Gross savings a/ -19 -33 -17 -13 -9 6 (Marginal savings rate) (-60.3) (-8.6) (-3.9) (12.7) Resource balance a/ -38 -65 -58 -31 -35 -27 Net transfers from abroad 20 50 46 19 41 37 a/ National resource is defined as GNP, i.e. including net factor income from abroad but excluding net unrequited transfers. The resource balance as well as gross savings therefore include net factor income in the national resource allocation, while it does not in the domestic; similarly, exports include factor income receipts in the former, but do not in the latter. Source: Appendix Table 2.1 This indicates that the nation's resource gap arises essentially in the government sector. This is bardly surprising in view of the beavy incidence of military expenditure in government finance 1/, as well as the extensive social and administrative services it supplies (see Section D). As far as the non-Government sector is concerned, its savings performance has obviously benefited from the rapid increase in workers' remittances, but also from the simultaneous development of Jordan's banking and financial sector. 25. As a result of the abundant supply of national and foreign resources and the favorable entrepreneurial climate actively promoted by the Government, Jordan has been able to maintain a very bigh and steadily rising investment rate. Coinciding with the 1973/74 oil price boom and with the ending of the internal political turmoil, the share of GNP allocated to fixed capital formation increased rapidly, from 16 percent in 1971 to 26 percent in 1975 and 33 percent in 1980. About half of the nation's fixed capital formation during 1/ During 1976-80 defense accounted for 40 percent of total current government expenditure. In addition, unknown amounts of military expenditure are financed outside the Government budget.  - 12 - Table 7: RESOURCE ALLOCATION IN NON-GOVERNMENT AND GOVERNMENT SECTORS (in percent of total GNP) Non-Government Government 1975 1980 1975 1980 Gross domestic income 79 71 3 10 Net factor income 13 18 5 1 Gross national income 92 89 8 1T Net transfers between Government and Non-Government a/ 2 1 -2 -1 Gross disposable income 94 90 6 10 Consumption 77 70 32 24 Gross capital formation 14 20 12 13 Resource balance 3 0 -38 -27 Gross national savings 17 20 -26 -14 Marginal savings rate b/ 24.9 -84.3 a/ Direct consumption subsidies, pension payments and contributions, direct taxes, and compulsory fees. b/ Gross national savings of government and non-government sectors, related to their respective gross disposable income Source; Department of Statistics, National Accounts 1975-80. the period 1976-80 was concentrated in the commodity producing sectors (including tourism), half of which in mining and manufacturing. Close to 70 percent of public investment was concentrated in three major infrastructural areas: transportation (35 percent); electricity and energy (19 percent); and water supply and irrigation (15 percent). Industry and housing, on the other hand, accounted for the bulk of private investments. As far as the financing of domestic investment is concerned, 13 percent was covered by national savings, 22 percent by net disbursements on foreign loans and 3 percent by direct private foreign investment; part of the net transfers from abroad covered the remaining financing gap (62 percent). D. Public Finance 26. The public sector in Jordan consists of the Central Government, local Governments, autonomous public agencies and corporations, and numerous mixed enterprises. Fiscal transactions of the Central Government are carried out primarily by three institutions: the Ministry of Finance, the Central Bank, and the National Planning Council. Local government is organized into five governorates and 105 municipalities, the largest being Amman which contains  - 13 - about half of the country's population. Local governments have virtually no taxing authority and their expenditures are thus entirely financed by transfers from the central government budget. The Amman municipality, however, has a special status as one o.- the autonomous public agencies. There are 27 autonomous public agencies and corporations concentrated in the areas of agriculture, public utilities, communications and social servizes. These public institutions, which do not figure in the central government budget, have a large degree of financial autonomy. A large number of mixed enterprises with joint government and private equity ownership are operating in industry, tourism and specialized banking, reflecting the widespread entrepreneurial role of the public sector in Jordan's economic development (see Annex A). There are 34 enterprises with direct equity participation by the Central Government averaging 18 percent of their combined nominal capital, or 44 percent of their paid up capital. In addition, the Jordanian Government participates in five joint ventures on a 50-50 basis with Syria and Iraq in the area of transportation and industrial development. Finally, the Central Government also has a substantial indirect participation in commercial and industrial activities through the numerous equity participations of some of the autonomous public institutior.s (e.g. Pension Fund, Post Office Savings Bank, Social Security Corporation, Jordan University) as well as some of the above mentioned mixed enterprises (e.g. Industrial Development Bank). The public and mixed enterprises carry out part of the government's investment program, and as such represent an important vehicle for the implementation of its development strategy. The degree of government control over these enterprises varies according to the legal nature of the enterprise, the sector in which the enterprise is involved and the degree of government ownership. 27. During the 1976-80 Plan period Jordan followed a moderately expansionary fiscal policy. Although overall expenditure of the Government increased at about the same rate as its domestic revenue, due to the relatively small magnitude of the latter (about 40 percent of total expenditure) it bad to rely increasingly on external grants for budget support. As the total revenue, including budgetary grants, did not keep pace witb rising expenditures, this period witnessed rising budget deficits financed by foreign and domestic borrowing. Major increases in expenditure took place in years wben the inflow of foreign grants was high. This was particularly evident in the case of capital expenditures which have a growth pattern similar to that of foreign grants. The overall budget deficit which was about JD 22 million in 1975 (8 percent of GDP or 6 percent of GNP) quadrupled in the following year, and reached a level of JD 148 million (17 percent of GDP, or 14 percent of GNP) in 1980. Thus, current budget savings have been systematically negative if only domestic revenues are taken into account, but systematically positive (except in 1976) if budget support is included. However, since the rise in the major component of current expenditures, defense, is closely linked to the level of external budget support, current budget savings do not adequately reflect the Government's savings efforts. The proportion of current expenditures covered by domestic revenues, which may be a better indicator, seems to register an improving tendency: whereas domestic revenues covered only two-thirds of current expenditures on average from 1976-80 (and even as little as 58 percent both in 1976 and 1979), this ratio had increased to almost 80 percent in 1981 and is expected to be maintained at that level in 1982.  - 14 - 28. Revenues. The most dominant factors in Jordan's Government revenues are the availability of foreign grants on the one hand and, on the other hand1 the failure of domestic revenues to keep up fully with the growth of the economy in recent years. According to Jordan's balance of payments, official foreign grants totalled JD 1.1 billion in the period 1976-80. However, only 60 percent of that amount was explicitly specified as budget support, the Table 8: STRUCTURE OF DOMESTIC GOVERNMENT REVENUES (1976-80) Average Annual Growth Rate(%) Ratio to GDP (%) Share in Total (X) 1973-75 1976-80 1972 1975 1980 1972 1975 1980 Tax Revenue 25.8 25.0 10.8 15.8 15.7 52.2 54.0 60.2 Taxes on net income and profits 42.7 24.6 1.5 3.3 3.2 7a5 11.3 12.3 Import duties 29.2 30.1 5.5 8.7 10.6 26.6 29.8 40.b Other taxes 11.1 9.2 3.8 3.8 1.9 18.1 12.9 7.3 Non-tax Revenue 36.3 21.9 5.1 9.4 8.2 24.5 32.2 31.7 Licenses & fees 33.6 23.1 2.8 4.8 4.4 13.3 L6.5 17.0 Interest and profits a/ 39.4 20.6 2.3 4.6 3.8 11.2 15.7 14.7 Miscellaneous b/ 4.5 9.9 4.8 4.1 2.1 23.3 13.8 8.1 Total domestic revenues 24.4 22.3 20.7 29.3 26.0 100.0 IU0.0U 10.0 Memo: GDP 10.8 25.3 a/ Including operating surpluses from post and telephone services. b/ Including proprietary receipts and sales of services, export duties, and oil transit dues. Source: Appendix Tables 5.2 and 2.1 remaining part being used to finance extra-budgetary expenditures, an unknown but probably substantial part of which is of a military nature. The proportion of foreign grants allocated to budget support has itself fluctuated between 80 percent in 1978 and 48 percent in 1980, independently it would seem, both from the fluctuations in the level of foreign grants and the magnitude of budgetary needs.  - 15 - 29. In addition to the fiscal dependence on external grants, the growth in domestic revenues fell somewhat short of the growth in domestic income during the second half of the 1970's. Whereas the ratio of domestic Government revenue to GDP increased from 21 to 29 percent between 1972 ana 1975, it had dropped back to 26 percent by 1980 (Table 8). Due to the rapid growth of imports in that period, revenues from import duties grew at above the average rate and accounted for over 40 percent of total domestic budgetary revenues by 1980 (up from 27 percent in 1972), as compared to only 12 percent for direct taxes on income and profits. 30. The growth of domestic Government revenues has fallen by 20 percent short of the targets set out in the five year Plan (1976-80). The shortfall, bowever, was more than compensated by an almost 50 percent higher tnan anticipated allocation of foreign grants to the Budget. The most substantial shortfall, in terms of Plan targets, was in non-tax revenues (40 percent), one-third of which consists of interest and profit transfers from Government agencies and public enterprises. Tax revenues were on target, with income tax revenue 27 percent below expectation, but compensated by higber receipts from import duties. 31. All in all, the efficiency and equity of Jordan's tax system seem to bave suffered in recent years. First, the decline in the ratio of tax revenues to GDP since 1976 reflects a relaxation in the mobilization ettort, particularly in the area of direct taxes, which remained at about 3 percent of GDP. Secondly, with its heavy reliance on indirect taxation, the tax system has become more regressive. Thirdly, income tax bas been inequitably enforced, with Government employees and wage earners in public and large private firms typically paying in full, side by side with widespread under-reporting and evasion on the part of employees of small firms, self-employed, and liberal professions. Finally, there has brfn no major effort made to broaden the tax base, improve the efficiency of tax collectlon, and eliminate the buge current backlog in income tax assessment and collection. For the ease of collection, the major part of domestic Government revenues are raised tbrough indirect taxatLon and licenses and fees, while the decline in tax revenues relative to their tax base is in some cases the result of generous exemptions. On the other hand, potential sources of revenue have remained untaxed, e.g. capital gains, and property taxes are negligible due to the outdated assessment of property values. 32. Expenditures. Total Government expenditures grew at a rate of 22 percent p.a. during the 1976-80 Plan period, slightly less rapidly than total domestic expenditures. Capital expenditures, accounting tor close to 40 percent of total budgetary outlays in that period, grew somewhat more rapidly than current expenditures. While the latter were about 6 percent higher than the Plan target, the former registered a shortfall of about 4 percent. Nevertheless, such achievements suggest a relatively satisfactory implementation of the Government spending targets. The largest single expenditure item in the Government's current budget has been defense outiays, which grew by 20 percent p.a. and accounted for 40 percent of total current expenditures in the Plan period. Together with other administrative expenditures, these overhead items absorbed over 60 percent of current  - 16 - expenditures in that period. Interest on public debt and subsidies accounted for another 14 percent, leaving a relatively small margin for current outlays in the social and economic sectors (18 and 6 percent respectively). Consumption subsidies, essentially on food and petroleum products, have increased rapidly in recent years, mainly as a result of the 1979/80 boom in world petroleum prices, and accounted for 14 percent of total current expenditures (i.e., over 5 percent of GDP) in 1980. 1/ The Government has announced its intention to gradually reduce subsidies in the coming years. Expenditures on subsidies, which amounted to JD 52 million in 1981, are projected to decline to JD 34 million in the 1982 budget, mainly as a result of repeated increases in domestic prices of petroleum products. In this connection, the recent decline in oil prices has significantly contributed to further reduce the burden of fuel subsidies. E. Money and Banking 33. Institutions in Jordan's financial system currently include the Central Bank, commercial banks, specialized credit institutions, insurance companies, institutional investors such as the Pension Fund and the Social Security Corporation, and a large number of foreign exchange dealers. In addition, there is a stock exchange which was established in 1978 and rapLdly expanded its activities, so that now it includes trading in Government. as well as corporate bonds. Of the sixteen commercial banks operating in the country, all are privately owned and half are branches of foreign owned banks. Branch banking, in principle restricted to Jordanian-owned banks, has expanded rapidly in recent years; the number of commercial bank branches doubled between 1975 and 1980 and currently exceeds 150. Of the six operating specialized credit institutions 2/, four are owned by the Government, one is semi-governmental (the Industrial Development Bank), and one is privately owned (the Housing Bank). 34. Jordan's banking system has experienced a very rapid expansion, reflecting a steady process of financial deepening in the economy. Thus, the consolidated assets of the monetary system recorded a fourfold increase between 1975 and 1980, as compared to a threefold increase in GDP. Commercial banks expanded their lending 4.5 times between 1975 and 1980, and the:Lr liabilities more than fivefold. This rapid increase in liabilities, however, did not erode their equity base. In fact, the overall debt/equity ratio of the commercial banks declined from 19 in 1975 to 14 in 1980. Probably the 1/ Prior to 1980, the Budget understates the true magnitude of consumer subsidies, since substantial extra-budgetary subsidies for oil products were financed directly by foreign aid. Throughout 1976-80, the amount of extra-budgetary subsidies represented over 40 percent of budgetary subsidies. 2/ The Agricultural Credit Corporation, the Jordan Cooperative Organization (agriculture), the Housing Corporation, the Cities and Villages Development Bank, the Industrial Development Bank, and che Housing Bank.  - 17 - most significant development in that period was the unprecedented growth of time and savings deposits, reflecting in part a shift in the composition of transaction balances away from cash holdings. Commercial banks remained highly liquid, witb a level of reserves far in excess of the requirements set by the Central Bank with the exception of the Housing Bank. Credit expansion by the specialized banks was relatively modest, at about half the rate of the cormmercial banks. Outstanding credit of the Housing Bank, however, recorded an almost twentyfold increase, reflecting the fact that this institution is the only specialized bank permitted to accept deposits; these increased elevenfold, and corresponded to three quarters of that institution's outstanding credit by 1980, as compared to one third in 1975. As a result, the Housing Bank alone accounted for two thirds of the outstanding credit of the combined specialized banks by 1980. Excluding the deposits with the Housing Bank, the resources of the specialized banks declined relative to those of the commercial banks. Lending activities of the banking system were heavily concentrated in the financing of trade, construction and real estate transactions; these combined categories accounted for over 60 percent of the overall credit expansion by the commercial banks, as compared to only 3 percent for agriculture and 12 percent for industry. 35. The Jordanian economy has experienced a very rapid liquidity expansion, as reflected in the growth of the money supply (currency plus demand, time and savings deposits), which averaged 29 percent p.a. for 1975-80. The increase in net foreign assets and the expansion of credit to the private sector each accounted for about 40 percent of the increase in the money supply and were thus the main sources of liquidity growth. Unlike in the early 1970s, Government borrowings were not a predominent source of liquidity expansion. Indirectly, however, the Government's domestic deficits, which were largely financed by foreign grants, did influence the liquidity level of the economy. Thus, in recent years, Government deficit and domestic liquidity have followed a very similar pattern. The overly liquid position of the banking system, providing a wide margin above the legal requirements of the Central Bank (reserve requirements and mandatory purchase of Government and public corporate bonds), has contributed to limit the effectiveness of traditional monetary controls. 36. Interest rates in Jordan have not been an active instrument of pol.icy. Their structure and level have remained fixed by law, with a maximum rate of 9 percent for commercial bank credit. 1/ Consequently, real interest rates have been negative throughout most of the 1970s. The Central Bank has recently been granted the right to adjust interest rate levels; legal procedures, however, have so far prevented a full exercise of this right, although, as a first step, the lending rate of commercial banks to non-residents was raised to 10 percent in June 1981. The impressive growth in time and savings deposits, in spite of the low prevailing deposits rates, suggests that savers primarily seek a safe place for their savings and has 1/ Commercial banks are allowed a surcharge of 2 percent comnission on their loans.  - 18 - been supported by the rapid expansion of branch banking. Nevertheless, the negative real return on financial assets has provided a strong incentive to direct private financial resources toward non-financial and speculative assets with positive returns, such as real estate. Such transfers have contributed to the recent boom in real estate prices. This situation may eventually affect the ability of the banking system to mobilize the private resources required for the financing of the large investment program foreseen in the new five-year Plan. 37. The structure of interest rates is another factor which has adversely affected the efficiency of monetary and financial management in recent years. First, the narrow spread between borrowing and lending rates, further reduced by statutory reserve requirements, has made the commercial banks reluctant to extend credit beyond short-term maturity. Similarly, the lending rates the specialized banks are permitted to charge were sometimes even below the borrowing rates of the commercial banks. The specialized banks, which in principle lend on medium and long term, have thus on occasion chosen to deposit funds with the commercial banks, which lend mostly on short term. The direction of this net flow, which represented about 17 percent of the increase in assets of the specialized banks between 1975 and 1980, was clearly contrary to the development objectives of these credit institutions. Secondly, the narrow spread between the Central Bank's discount rate and the domestic sources of credit (savings and time deposits) was not attractive enough to encourage commercial banks to use the Central Bank's rediscounting facilities, thus minimizing the role of discount policy. F. The Five Year Plan (1976-80) 38. The Five Year Development Plan (1976-80) was drawn around a comprehensive investment program and aimed at furthering the momentum generated in the preceding three-year plan, 1973-75. Its basic objectives were to accelerate growth, increase economic self-sufficiency by reducing the trade gap and the reliance on external budget support, increase equity of income distribution, provide full-employment, and ensure a balanced regional distribution of economic activity. The Plan also emphasized the important role of the private sector in development, expecting about one third of planned investments to be of private origin. In addition, Government contributions to mixed enterprises would bring up the share of the private sector in capital formation to one half of planned investments, totalling JD 765 million at 1975 prices (about one third of the GDP to be generated during the Plan period). The main macroeconomic targets, in real terms, were a GDP growth rate of 12 percent p.a. (agriculture, 7 percent; mining and manufacturing, 26 percent), and a substantial reduction in the resource gap, witb exports growing at 23 percent p.a. and import growth curtailed to 7 percent p.a. 39. In aggregate terms, performance under the Plan was rather successful. Actual GDP growth, at factor cost, was over 10 percent p.a., an impressive performance even if short of the 12 percent target. At market prices, GDP growth was above target, reflecting largely an abnormal shortfall in indirect taxes in the base year 1975. The overall volume of investment was about 12 percent above target. Beyond such aggregate performance indicators, however, there were several major discrepancies between target and realization.  - 19 - Table 9: GDP BY ORIGIN: 1976-80 PLAN TARGETS VERSUS REALIZATION (at 1975 prices) Average Real Growth 1980 Share 1/ Target Actual Target Actual Commodity producing sectors 17.0 15.2 44.1 42.3 Agriculture 7.0 3.5 8.3 7.0 Industry 20.0 18.7 35.8 35.3 Mining & Manufacturing 26.2 18.3 28.3 24.5 Water & Electricity 17.1 19.3 2.2 1.7 Construction 4.2 20.0 5.3 9.1 Services 8.6 7.2 55.9 57.7 Government Services 7.0 6.6 15.2 20.4 other 9.3 7.5 40.7 37.3 GDP at Factor Costll.9 10.2 100.0 100.0 1/ The differences between targeted and actual 1980 shares not only reflect the relative differences in the pattern of sectoral growth, but also divergences between the final 1975 national account data and those used in the Plan. Source: National Planning Council and Appendix Table 2.4 40. Growth in the agricultural sector was actually about balf the projected rate (Table 9), even allowing for weather circumstances that contributed to depress output in 1975 and boost it in 1980. Income from the mining and manufacturing sector rose at about 18 percent p.a. far short of its ambitious target of 26 percent p.a. This shortfall largely reflected delays in the completion of major projects such as phosphate mining, potash extraction, chemical fertilizers, cement, and expansion of petroleum refining capacity. On the other hand, value added in the construction sector increased at an annual rate of 20 percent, i.e. five times the target rate, reflecting the housing boom that was triggered by the massive inflow of workers' remittances. Overall, the share of the commodity producing sectors in total GDP, measured in 1975 prices, Lncreased from 24 percent in 1975 to 42 percent in 1980, i.e. close to the objective of the Plan (44 percent).  - 20 - 41. Realized total investment exceeded JD 1.2 billion in current prices (US$4 billion), reflecting an overall implementation rate of 112 percent of the Plan target. Sectoral implementation rate. are shown in Table 10, for both the public and private investment programs, together with the planned versus realized sectoral allocation of overall investment. A shortfall in public sector investment by 8 percent was more than compensated by tbe volume of private sector investment, wbich was more than 30 percent higher than anticipated in the Plan. Private sector investment in services produci.ng sectors was about twice the projected volume, reflecting mainly the boom in housing and Government building construction, as well as in transportation investment whicb was more than six times the anticipated amount. Private Table 10: GROSS FIXED CAPITAL FORMATION; 1976-80 PLAN TARGETS VERSUS REALIZATION (at 1975 prices) Implementation Rate (%) 1/ Allocation (X) Public Private Total Target Actual Commodity Producing Sectors 84 98 98 53.5 44.3 Agriculture 18 149 90 5.2 4.2 Water & Irrigation 53 - 53 12.7 6.0 Mining/Manufacturing 206 94 97 29.9 25.9 Energy & Electricity 181 55 162 5.6 8.1 Services 97 198 134 46.5 55.7 Tourism 45 116 96 3.2 2.7 Transportation 111 628 148 15.7 20.7 Other Economic Services 2/ 116 - 116 3.1 3.2 Social Services 3/ 74 49 71 11.8 7.5 Housing & Government Buildings 175 212 210 11.2 21.1 Other 4/ 63 26 29 1.5 .4 Total Investment Program 92 132 112 100.0 100.0 (id. excluding housing & Government Buildings) (91) (llu) (100) 1/ Actual 1976-80 fixed investment in percent of planned investment. 2/ Communication, trade and supply. 3/ Includes municipal and rural affairs. 4/ Includes science, technology and statistics. Source: National Planning Council  - 21 - agricultural investment, about 50 percent above target, was stimulated by high returns in irrigated farming of high value export crops. By tar the lowest public sector implemention rate was in agricultural investment, particularly in the rainfed areas. Public investment in irrigation also recorded a substantial shortfall, due to the non-implementation of the Maqarin Dam project, which is still awaiting political settlement with neighboring countries. The high ratio of actual to planned public investment in mining and manufacturing as well as in electricity and energy reflects in part cost overruns in major projects. Of potential concern is the low implementation rate in social sectors, such as health, social welfare, labour and vocational training, as well as in the area of rural and municipal affairs. Both the small initial investment allocation to these sectors and low implementation rate, reflecting bottlenecks in project implementation capacity in Government, conflict with the social objectives of the Plan and help to explain the relatively strong emphasis on social sectors in the 1981-85 Plan. 42. Overall, 44 percent of total actual investment was in the commodity producing sectors, as compared to the planned allocation of 54 percent. The sbare of the social sectors (including municipal and rural affairs) was limited to about 7 percent, against an initial allocation of 12 percent. On the other hand housing and transportation together accounted for 42 percent of total actual investment, as compared to a targeted 27 percent. As a result ot the delays in completion of major industrial projects, the much larger than anticipated volume of investment in the transportation sector, and a shift towards more capital intensive agricultural production through irrigation, the relation between capital formation and output was somewhat less favorable than anticipated in the Plan; this is reflected in an incremental capital/output ratio of 4.3, compared to the value of 3.4 underlying the Plan. 43. Domestic demand, growing at a rate of 11.2 percent in real terms, was much more buoyant than anticipated in the Plan (7.0 percent p.a.), on account primarily of fixed capital formation, and to a lesser degree of private consumption. In parallel, imports grew at more than twice the projected rate, reflecting an elasticity to GDP of 1.3 versus the somewhat unrealistic assumption of .6 underlying the Plan. Thus, while the export performance slightly exceeded its ambitious target (24 versus 23 percent real growth p.a.), the domestic resource gap reached 57 percent of GDP in 1980, almost three times the projected ratio of 20 percent. The national savings performance was also lower than anticipated in the Plan, national savings thus represented 13 percent of the overall volume of investment during the plan period, as compared to a 22 percent expectation. G. Recent Developments 44. Real output increased by about 8 percent in 1981, a rate significantly below that of 1980. Agricultural production, which had recovered sharply in 1980 from the effects of prior droughts, suffered again from inadequate rainfall in the main producing areas. A slowdown in construction activities was engendered by labor and material shortages, as well as by sharply increased land prices. The mining sector was further adversely affected by the slackening world demand for phosphates. The  - 22 - manufacturing sector, however, remained buoyant, reflecting mainly the bigh level of demand for Jordanian consumer goods in the Iraqi market, whicb also contributed to a strong performance in trade, transportation and other services. 45. Investment and private consumption both increased by close to 30 percent in value between 1980 and 1981, together accounting for more than three quarters of the increase in final demand. Preliminary estimates would seem to indicate that the investment target for the first year of the 1981-85 Plan has been exceeded. While the cost of living increased at about the same rate in 1981 as in 1980 (11 percent), the nominal rate of increase in private consumption was about twice as high, reflecting, in part, a record high inflow of workers' remittances from Jordanians abroad. As a result, the national savings rate (5.7 percent of GNP in 1980) underwent quite a significant drop but remained positive. 46. The upsurge in domestic spending was reflected in merchandise imports, the value of which rose by about 48 percent, i.e. more than double the rate of the preceding year. Even though imports were boosted by special factors, such as a high level of civilian aircraft imports, continuing strong re-exports to Iraq, and a depreciation of the Jordan dinar against the US dollar by about 8.5 percent, their underlying rate of increase would still be significantly above recent trends. On the other hand, merchandise exports maintained a high nominal growth rate (42 percent), in spite of difficult external marketing conditions which limited the increase in phosphate exports to about 16 percent in value, compared to an 80 percent increase in 1980. Also, exports of fruits and vegetables suffered from certain non-economic factors, such as a ban by Iran on citrus fruit imports from Jordan. Other domestic exports, however, performed very well, strongly tavored by the continuing strength of demand in the Iraqi market. 47. As a direct result of the import boom, Jordan's mercbandise trade deficit increased by as much as 50 percent, from a level of JD 543 million (US$ 1,819 million) in 1980 to JD 814 million (US$ 2,494 million). As in preceding years, however, the trade deficit was compensated by matching surpluses in the services and transfer accounts. In particular, net receipts from workers' remittances rose by as much as 51 percent, reflecting in part the efforts of Jordan's financial sector toward mobilizing the savings from nationals abroad, as well as the stimulating effect of the dinar depreciation against the US dollar. Net workers' remittances alone, at a level of JD 289 million (US$ 886 million), thus covered over one third of the merchandise trade deficit. When adding a sizable surplus in non-factor services (JD 57 million, mainly on account of travel and transportation), a doubling of net investment income (to JD 29 million) as well as of net private transfers (to JD 15 million), about half of the merchandise trade deficit was covered from national and private foreign sources. Most of the remaining deficit was covered by official transfers, which maintained their high 1980 level, at about US$ 1.3 billion. However, while the balance of payments' current account was thus approximately in balance (a marginal deficit of US$ 27 million), it nevertheless suffered a substantial deterioration when compared to the 1980 surplus of US$ 374 million.  - 23 - 48. The net inflow of medium and long term capital increased roughly by half, from JD 31 million in 1980 to JD 45 million in 1981, private capital accounting for the totality of the increase. In contrast to 1979-80, when the Central Bank bad encouraged the placement of a significant part of commercial bank liquid resources in foreign assets, it now responded to the decline in the balance of payments surplus by requiring commercial banks to reduce the share of foreign assets in their portfolios. As a result, the 1981 balance of payments recorded a sizable inflow (JD 24 million) of private short term capital. 49. The growth of the Jordanian economy underwent a further slowdown in 1982, mainly as a result of the rather unfavorable international, and more particularly, regional environment. Domestic exports to Iraq, which had more than doubled in value between 1980 and 1981, increased only modestly, while exports to all other Arab countries actually declined. Symptomatic for the weakness of demand from the region was also the quasi-stagnation of transit trade through Jordan. The substantial slowdown in domestic exports is reflected in the industrial production index, which increased by as little as 3 percent compared to 13 percent in the preceding year. Agricultural output recorded a better performance than in 1981, but construction activity has remained rather weak. A positive development, however, was a drastic reduction in the growth of domestic spending, hence in that of imports. As a result, the deterioration in the trade balance should be much smaller than in the preceding year. As in the past, considerable surplusses in the services and transfer accounts will have contributed to maintain the current account deficit within matiagable proportions. However, a likely shortfall in transfers from abroad, compared to the levels of recent years, will lead to the second successive deterioration in the current account since 1980.  - 24 - Chapter II: THE FIVE-YEAR PLAN 1981-85 50. Jordan's overall development strategy continues to be essentially based on free enterprise and individual initiative, in a system characterized by an active promotional involvement on the part of Government. This principle is c'early reflected in the preparation, elaboration and execution of the current Five-Year Plan. Thus, the preparation of the Plan has involved participation from practically all layers and sectors of the country's socio-economic structure, as reflected in a great number of committees and sub-committees under supervision of a 17 member General Committee, chaired by the President of the National Planning Council (NPC). An integrated draft of the Plan, drawn around a comprehensive investment program, was presented for approval to the Cabinet as well as to the National Advisory Council (the legislative body of Government) before being openly discussed in a National Conference in August 1981. This Conference included representatives from Government as well as from universities, syndicates, professional associations, and the business community. As a result of discussions (Luring the Conference, the size of the initially proposed investment program was raised by almost one fifth to its current level of JD 3.3 billion. A. Objectives, Strategy and Growth 51. The new Plan essentially retains the basic objectives of previous Plans, namely: (i) Maintaining the growth momentum of the economy, further diversification in favor of the commodity-producing sectors and, in particular, export industries. (ii) Reducing the reliance of the General Budget on external grants, and reducing the relative size of the trade deficit in the balance of payments. (iii) Expanding basic social services and facilities to all regions of the kingdom, and spreading the benefits of development among social groups and regions. (iv) Developing human resources, in particular increasing female participation in the labor market. Related specific objectives include achieving a higher degree of self-sufficiency in food; exploring and developing water, energy and other mineral resources; strengthening economic, social and technical cooperation with other Arab countries; promoting tourism; increasing domestic savings; and improving public sector efficiency. The long list of socio-economLc objectives adresses a great variety of issues and problems, very candidly detailed in the Plan document, ranging from physical constraints (demographic and manpower characteristics, housing shortage, scarcity of water and other natural resources) to environmental and institutional issues. With regard to economic objectives, strategies are generally clearly outlined and operationally defined, both in terms of projects and policy measures. Strategy to acbieve social objectives, however, remains vague, often limited to a repeated statement of the objective.  - 25 - 52. The macroeconomic targets of the plan are summarized in Table 11. Overall, real GDP is to grow at an annual rate of 11 percent, essentially a Table 11: MACROECONOMIC TARGETS' 1981-85 In % of GDP Aveatge-Annual Growth Rates Actual Plan Actual Plan 1980 a/ 1980 a/ 1985 1976-80 1976-80 1981-85 GDP (at factor cost) 100.0 100.0 100.0 10.2 11.9 11.0 Agriculture 7.7 8.5 7.2 3.5 7.0 7.5 Mining & Manufacturing 18.7 21.8 29.3 18.3 26.2 17.8 Electricity/Water 1.0 1.1 1.6 19.0 17.1 18.9 Construction 9.9 7.4 7.9 20.0 4.2 12.6 (Commodity Producing Sectors) (37.3) (38.9) (46.0) (15.2) (17.0) (14.9) Government 20.4 17.3 12.2 6.6 7.0 3.5 Other Services 42.3 43.8 41.8 7.5 9.3 10.1 GDP (at market prices) 100.0 100.0 100.0 12.3 11.6 11.1 Consumption 116.6 122.7 106.5 9.2 7.2 8.0 Investment 40.3 39.3 41.4 18.7 5.9 12.0 Imports Goods & NFS 110.7 113.0 126.7 16.3 7.3 13.7 Exports Goods & NFS 54.1 48.5 76.6 24.2 22.7 21.7 a/ 1980 actual data versus 1980 estimates used in the Plan. Source: Appendix tables 2.3 tbrough 2.4, 10.1 and 10.2 continuation of the performance achieved during the previous Plan. Mining and manufacturing, at a projected growth of 18 percent p.a., is the leading growth sector. The agricultural target calls for a 7.5 percent p.a. growth performance. The combined commodity-producing sectors would thus grow at about 15 percent p.a., as compared to a projected growth rate of 8.5 percent p.a. for the services sectors. In external trade, domestic merchandise exports are assumed to grow at about 31 percent p.a., with a particularly strong contribution from the natural resource based industries (phosphate fertilizer, potash, and cement), while the growth of merchandise imports (excluding re-exports) would be limited to about 14 percent p.a. (reflecting an elasticity of 1.31 with respect to GNP, as compared to 1.15 during the previous Plan period). As a result, the merchandise trade deficit, although increasing in absolute terms, would fall from 51 percent of GNP in 1980 to 48 percent in 1985. Taking into account projected surpluses in services (including worker's remittances), the national resource gap would be reduced to about 22 percent of GNP in 1985. Consumption is expected to grow at 8 percent p.a. 1/, reflecting an overall marginal savings propensity of 22 percent, which, compared to the 13 percent realized during the previous Plan, would represent a considerable resource mobilization effort. Gross fixed 1/ The Plan does not provide the breakdown between Private and Public consumption.  - 26 - investment is targeted at 45 percent of GDP (36 percent of GNP) on average throughout the Plan period; its growth being heavily concentrated in the first half of the period reflects the completion of major projects started uinder the previous Plan. 53. Interpretation of the Plan's quantitative objectives in a consistent historical context is complicated by the fact that there are substantial discrepancies between actual data and those used in the Plan for the base year, 1980. According to the data published by the Department of Statistics, the Plan understates the 1980 level of GDP (at factor cost) by about 8 percent. Sectoral dis-repancies, bowever, are mucb higher. 1/ Hence, if the sectoral growth targets of the Plan were to be achieved, the resulting GDP growtb rate would be 10.5 percent p.a. from the actual 1980 base, rather than the 11 percent in the Plan. The commodity-producing sectors, accounting for 37 percent of GDP in 1980, would tbus see their sbare increasing to 44 percent by 1985, rather than the 46 percent target in the Plan. B. The Investment Program 54. Past achievements have raised the planners' expectations regarding Jordan's absorptive capacity for investment. Even so, the Plan's investment program is very ambitious. It calls for a nominal total of JD 3.3 billion (about US$10 billion) in investment outlays, almost two-thirds of whicb are to be financed tbrougb the Government Budget. Measured in 1980 prices, the investment program (JD 2.5 billion) is about 75 percent bigher than actual investments during the 1976-80 period, and is equivalent to about US$ 670 per capita on average per year. No less than 86 percent of total planned investment is identified in terms of explicit projects (Statistical Annex, Table 10.3). 55. The investment program puts relatively strong emphasis on the social, regional and infrastructural needs of the country. Of total investment 34 percent is for infrastructure, almost balf of wbicb in transportation, 21 percent for social sectors (of whicb 43 percent in bousing, and 33 percent in education), and the remaining 45 percent is allocated to the productive sectors. The urban-rural distribution of planned investments is diff:icult to assess since the bulk of investment affects both sectors. It would nevertbeless seem that about 26 percent of investment would directly benefit rural areas, as compared to 16 percent for the urban sector. 56. The sectoral allocation of investment (Table 12) in general reveals a strengthening of those sectors where the implementation of the previous Plan's investment program bas been inadequate, and vice-versa. Thus, on the one band, education (including culture, information, and manpower development) 1/ Under-estimation (+) and over-estimation (-) percentages are disbriouted as follows: agriculture, -2.5; mining and manufacturing, -7.3; electricity and water, -8.7; construction, +45.4; trade, -3.6; transportation, -17.3; public administration and defense, +27.7; other services, +42.8. According to revised national accounts recently issued by the Department of Statistics (see footnote 2, page 88), these discrepancies are even larger.  - 27 - Table 12: SECTORAL DISTRIBUTION OF INVESTMENT 1976-80 Plan Distribution (% of total) 1981-85 Plan Implementation 1976-80 1981-85 (JD millions-current prices) Rate a/ Actual Plan Public Private Total Agriculture 90 4.2 7.1 52.6 181.9 234.5 Water & Irrig. 53 6.0 15.8 521.7 - 521.7 Mining & Manu. 97 25.9 23.0 23.0 735.8 758.8 Energy & Elec. 162 8.1 5.0 124.3 39.1 163.4 Tourism 96 2.7 2.0 16.9 48.8 65.7 Transportation 148 20.7 16.5 485.5 60.0 545.5 Communication 80 1.9 3.2 106.8 - 106.8 Trade & Supply 308 1.4 1.1 31.5 5.5 37.0 Education & Manpower b/ 77 3.8 8.1 154.b 113.8 268.4 Healtb 47 .5 3.1 80.7 20.0 100.7 Municipal & Rural Affairs 71 3.2 5.3 175.6 - 175.6 Housing & Gov't Bldgs. 210 21.1 9.3 17.9 290.2 308.1 Other 29 .4 .4 3.7 10.1 13.8 Total 112 100.0 100.0 1,794.8 1,505.2 3,3U0.0 a/ See Table 10. b/ Includes culture and information, representing JD 17.7 million (.5 percent of total) to be invested by public sector in 1981-85 Plan. Source: NPC would absorb 8.1 percent of planned investment, as compared to 3.8 percent achieved, and 5.5 percent planned during the previous Plan period. Health is to receive 3.1 percent of total investment, after accounting for only half a percent for 1976-80. Water supply and irrigation would now claim close to 16 percent, as compared to a 13 percent target and only a 6 percent achievement under the last Plan. In this case, however, the increased allocation and the underachievement in the previous Plan have both the same cause, namely the inclusion of the Maqarin dam project in the program; the same political and riparian issues which have so far prevented its execution are still prevailing, and therefore very likely to delay its implementation even beyond the current Plan. On the other hand, sectors such as housing, transportation, electricity and energy, which benefitted from substantially higher investments than planned under the last Plan, now face significant cuts in their allocation. Overall, the pattern of sectoral allocation thus reveals the planners' awareness of the uneven distribution of achievements during the 1976-80 Plan.  - 28 - C. Agricultural Strategy and Projects 57. Objectives and Strategy. The Plan's agricultural strategy emphasizes the need to restrain the deficit in the agricultural balance of trade on the one hand, and to develop the rainfed and livestock range subsector on the other hand, while promoting the conservation of agricultural resources (soil, water, and the vegetative cover) and the development of their uses in accordance with the specific environmental characteristics. The first objective implies continuing concentration on increasing high-value fruit and vegetable production for exports, through further expansion and modernization of the irrigated sector. Public support towards the second objective will be mainly in afforestatiou programs, planting of fruit trees in highlands, and developing rangeland (partly through conversion of low productivity areas currently cultivated with field crops). Organizational measures listed in the Plan include: (i) intensification of research and extension; (ii) creation of three joint boards, emanating from the Higher Agricultural Council, for grains, livestock, and fruit and vegetables, which would be responsible for formulating ancd following up the implementation of policies with regard to production, marketing and consumption of these commodities; (iii) creation of a permanent commission for agricultural credit, to review and coordinate agricultural credit policies, and to review and secure necessary financing needs; (iv) enacting necessary legislation to deal with the issue of landholdings fragmentation; (v) provision of farmers' subsidies to promote the expansion of fruit tree cultivation in the highlands; (vi) increaiug ttw resources of the Agricultural Credit Corporation, and amend its statute to permit equity participation in agricultural companies; (vii) financial support to the Jordan Cooperative Organization, mainly for the purpose of furthering agricultural development. 58. The Plan calls for a real increase in agricultural income of 7.5 percent p.a. Projected increases in average annual production of the main agricultural commodities are detailed in Table 13. Since vegetables production, with one of the highest growth targets, currently represents over 40 percent of total gras agricultural income, the irrigation sector is clearly expected to play a predominant role in achieving the overall agricultural growth target. This is also reflected in the explicit irrigation target for increasing the area of irrigated land by about 18,000 ha, from a current irrigated surface of about 34,000 ha.  - 29 - 59. Investments. Including irrigation, total investment in the agricultural sector (JD 510 million) would absorb 15 percent of the overall investment program. Planned irrigation works (JD 276 million) would,'in turn, Table 13: PROJECTED INCREASE IN AVERAGE ANNUAL PRODUCTION OF MAIN AGRICULTURAL COMMODIIIES Average Annual Production (in 000 tons) Percentage 1976-80 1981-85 Increase Field crops 109 142 30 Vegetables a/ 376 600 60 Fruits 76 115 51 Olives 24 32 33 Dairy products 39 45 15 Red meat 7 15 114 Poultry meat 25 36 44 Eggs (in million) 280 450 61 a/ including melons. Source: NPC. absorb 54 percent of the overall agricultural investment program. Although the current Plan's investment allocation to water supply and irrigation (1l percent) is bigher than under the 1976-80 Plan (13 percent), the share allocated to irrigation is much smaller (53 versus 74 percent), the other share being allocated to development of water resources, expansion and improvement of the water supply network, and recovery and treatment of wastewater. Even so, the current irrigation program is still about 70 percent higher (at 1980 prices) than the corresponding allocation under the 1976-80 Plan, which illustrates the de facto priority accorded to the irrigated sector in the 1981-85 Plan. 60. Almost four fifths of agricultural investment, other than in irrigation, is projected to be carried by the private sector (JD 182 million). However, only 26 percent (JD 48 million) of the projected private sector investment is explicitly project identified. Public sector agricultural investment would total JD 53 million (including the investment program of the Jordan Cooperative Organization of JD 20 million) of which about 11 percent is to be spent on research. Furtbermore, a number of agricultural support projects with a total close to JD 10 million (cold warehouses, fodder plants and poultry slaughterbouse) are included in the investment program of the Trade and Supply sector.  - 30 - 61. Major Projects. Among the major agricultural projects the Zarqa River Basin development project is the largest. This project aims at conserving soil and water and increasing agricultural production in the Zarqa river basin, as well as minimizing sedimentation in the King Talal Dam. It is to be implemented in a period of seven years, and sbould ultimately lead to the conservation and development of an area of approximately 83,000 ha through the following steps: (i) afforestation of 23,000 ha. (ii) subsidies to farmers to develop terraces and plant fruit trees in an area of 17,000 ha of sloping lands. (iii) development of 14,000 ha of rangeland by converting the area currently cultivated with grains (with less than 250 mm average annual rainfall) into improved grazing areas through the Introduction of shrub cultivation. % The project also includes the construction of agricultural roads. Total project cost is estimated at JD 30 million, of which JD 18.7 million is to be allocated during the Plan period. 62. The second largest project, JD 12.6 million for soil conservation and fruit tree planting, will extend financial support, technical and extension services to farmers, to belp them protect the land from erosion, maintain its humidity and plant it witb appropriate fruit trees. The objective is to plant about 13,000 ha of rainfed areas (with more than 250 mm average annual rainfall and a slope of 9 to 25 percent) with fruit trees. This project, togetber with part of the Zarqa River Basin project, should increase the area planted with fruit trees by 25,000 ha during the Plan period. To help meet this objective, the production of fruit tree seedlings will be increased througb the establishment of new nurseries and expansion of existing ones for a total project cost of JD 5.4 million. 63. Afforestation of 30,000 ha of state land registered as forestry land is to be implemented during the Plan period. This is to be effectuated through three specific projects: the Annual Afforestation program (JD 6.8 million), the afforestation component of the Zarqa River Basin project, and the National Afforestation Program (JD 1.6 million). 64. The agricultural investment program further contains two sizable projects aiming at increasing production of red meat, poultry meat and eggs. The red meat project (JD 8.6 million) is to be implemented through a public sbareholding company with 51 percent Government participation. Its objective is an annual meat production of about 2,000 tons, through fattening lambs in various regional centers. The second project consists of the establishment of a parent stock poultry farm (JD 6.5 million) in the Azraq area, expected to reach an annual production of about 500,000 female parent stock, 17 miIllion hatching eggs and 6 million chicks. Part of this production is for export. The project will be implemented by the Arab Livestock Company with the Jordanian Government contributing the land, required services at cost price, and a JD .5 million subscription. A support project (JD 4 million) aimed at improving the processing, transport and marketing of poultry and eggs, both  - 31 - for domestic consumption and exports, is further to be implemented through the establishment of a public shareholding company with Government participation. 65. Almost three quarter of planned investment in irrigation is reserved for one major project, namely the second phase of the Jordan Valley Irrigation project, comprising (i) construction of the Maqarin dam on the Yarmouk River which forms the boundary between Jordan and Syria, and (ii) expansion of the irrigation network. Total project cost is estimated at JD 350 million, of wbich JD 200 million is budgeted for the Plan period. Once completed, the project would provide an additional 18,000 ha of irrigable land. The Plan, however, does not specify the extent to which the project would actually contribute to the realization of the targeted increase in irrigated land in the 1981-85 period. Bearing in mind that completion of the Maqarin Dam within the Plan period is higbly unlikely, that contribution should be rather limited. D. Water Supply 66. With water one of Jordan's scarcest resources, the Government is rightly concerned with water conservation and recycling. The East Ghor Main Carrier Project that would convey water to the Amman Water Basin is the first major step in this direction, as the treated effluent would later flow downstream in the Jordan Valley to be used for irrigation. Both the existing and new sewage treatment plants are designed to maximize water conservation and recycling. Water's scarcity amplifies the importance of 1ts optimal allocation. Thus, the question arises of acquired water rights for industries that are presently depleting the aquifers used to supply the urban population with potable water. This will have to be addressed with a equitable and politically acceptable solution. 67. With the completion of the East Ghor Project, sufficient quantities of water, though quite expensive, should be available in the Amman water basin up to the year 2000. Other water projects under implementation or design in other parts of the country should also contribute to alleviating shortages in the meantime. However, in the long run other water schemes will bave to be developed. Because of the scarcity of water and the requirements for waste water treatment, the costs for water supply and sewerage services are high and will probably increase significantly as new projects are implemented. The sector is not yet financially self-supporting. Whilst this is acceptable tor rural areas, the objective of full cost recovery for urban areas should be maintained. The investments for the East Ghor Project give an indication of the water tariffs that would have to be charged to achieve full cost recovery. Although the Government is fully aware of the impact of a proper pricing policy on water conservation and cost recovery, the policy has in the past been eroded by inflation. In this context, recent increases in water tariffs were a significant step towards improving the financial situation of the sector. 68. Considerable progress has been made in the past to connect the urban population to piped water (87 percent). Whilst the supply is sometimes intermittent, actions are being taken to secure a continuous water supply. Only 26 percent of the urban households are connected to sewerage. Future investments will have to increase the connection rate in those areas where usage of seepage pits is no longer viable due to either the high costs of emptying or because of health hazards.  - 32 - 69. In terms of organization, the National Resource Authority (N]HA) and the National Planning Council (NPC) are involved in the allocation of water to various users and in the planning of the investment program for potable water and sewerage, including the securing of financing. However, the execution and operation of the projects are carried out by the Amman Water and Sewerage Authority (AWSA), the Water Supply Corporation (WSC) and the Jordan Valley Authority (JVA). Through the strong coordination by NPC inter-agency conflicts are kept at a minimum, and the present concern is to develop competent and efficient agencies. Progress has been made in this direction. However, there is still a need to establish an optimal set of policies covering development of water resources, allocation, use, waste water disposal, recycling, conservation and cost recovery. E. Industrial Strategy and Projects 70. Strategy and Policies. The Plan's industrial strategy spells out two corollary objectives. First, there would be an infusion of advanced technologies and management metbods, particularly through large, key projects but also through desired foreign investment in other areas. Jordan's industrial development options would thus be gradually expanded. Secondly, growth would be based largely on individual entrepreneurial initiatives; the Plan, in this respect, specifies the creation of an institutional framework and investment climate to assist the private sector and Government, including joint ventures. Within a generally export-oriented overall industrial framework, the Plan also outlines certain specific strategies, notably: (i) Forward integration of the mining sector, with special emphasis on pbosphate and potash derivatives; (ii) Encouragement of the development of competitive manufacturing export industries, with emphasis on inter-industry and inter-sector linkages, both at the domestic level and with Arab countries; (iii) Intensified exploration of the country's energy and mineral resources; (iv) Upgrading the capabilities of the local construction industry, permitting it to participate in large development projects in Jordan and other Arab countries; and (v) Creation of new geographical growth centers with a view to relieving industrial congestion in the -Axman urban area, as well as spreading industrialization to otber parts of the country. 71. Policies and measures designed to implement these objectives and strategies are enumerated in the Plan. Thus, the export strategy will be supported through a drawback system and the creation of a special export risk insurance fund. Foreign participation in petroleum and minerals development will be facilitated by new legislation defining the principles and criteria of cooperation between foreign companies and the Government. The number of industrial estates will be increased, and there will be incentives to move existing industries and new projects into these estates. Numerous measures are designed to improve the efficiency of government planning and  - 33 - administration, as it affects industrial development. These include legislation regarding an industrial register, improved procedures for the annual survey of industry, the collection of information on individual in4ustries through the Amman Chamber of Industry, and the enactment of a new law introducing a uniform accounting plan for enterprises that benefit from the incentives provided under the Encouragement of Investment Law. Other measures which might be expected to have an immediate effect on productivity are planned incentives for the reduction of production costs and the conservation of energy, as well as the organization of various training programs in the field of industrial management. Similar aims will be promoted by proposed action in the fields of standardization, quality control and controls against industrial pollution. 72. Investments. The new Plan projects investments in mining and manufacturing totalling JD759 million at current prices (JD 579 million at constant 1980 prices). Compared with the last plan this would represent more than a 50 percent increase in real terms. Thanks, in part, to these investments, the product of the manufacturing and mining sectors is expected to increase at an average annual rate of no less than 17.8 percent. The implicit capital-output ratio is about 2.8. The 1981-85 industrial investment program is outlined in Table 14, under four major headings. Table 14: FIXED INVESTMENTS IN MANUFACTURING AND MINING UNDER THE 1981-85 Plan Fixed Investments JD million Percent of at current prices total I. Institutional support 53.0 7.0 Minerals (including energy) surveys and exploration 27.0 3.6 Industrial estates, international fairs, Department of Standards 26.0 3.4 II. Large industrial projects 563.8 74.4 Copper mining 8.0 1.1 Phosphate mining 51.3 6.8 Phosphate fertilizers and derivatives 85.0 11.2 Potasb and derivatives 93.0 12.3 Cement 283.0 37.3 Petroleum refining and pipelines 43.5 5.7 III. Medium-sized projects in glass, timber processing, plastics, cables, garments, canning and iron casting 52.0 6.8 IV. Other investments in the private sector 9U.0 11.9 Total 758.8 100.0 Source: NPC  - 34 - 73. The large projects, of which several are now in an advanced stage of implementation, would account for about three quarters of the total investment, over 50 percent of the projected increase in mining and manufacturing output, and almost two thirds of the projected increase in industrial exports. 74. Among the large industrial projects, expansion of cement production is by far the largest, accounting for over one tbird of planned industrial investments (40 percent of directly productive investment). The Jordan Cement Factories, Ltd. (JCF), a public enterprise which was established in 1951, has a fifty year monopoly on the production and import of cement. Cement is sold at a uniform delivered price, controlled by the Government, based upon the average cost of imports and domestic production. This delivered domestic price is high compared to international prices, in spite of subsidized fuel consumption, which, however, is relatively high per unit of output. Domestic cement quality seems to be below average according to interviewed local and foreign contractors, the shortfall being variously attributed to the raw materials used (in the absence of a true quarrying plan, the best parts of the available limestone deposits have been gauged out in the past), insufficiently fine grinding, lack of quality control, etc. To a considerable extent, the low efficiency of production (i.e. relatively high fuel, power, and man-hours consumption) reflects a high proportion of old and obsolete plants and relatively small unit capacities for the kilns. In addition to the expansion and modernization of the existing Fuhais plant, the investment plan includes the construction of three new cement factories, all of which would have a strong international connection. Contracts for two of these plants have been awarded. The largest, Rashadiah in the South (2 million tons/year capacity), will be built by the Japanese under a turn-key contract. The new plants as well as the new kilns to be added to the existing plant will be of the most modern fuel-efficient design. Under these plans, domestic cement production is expected to increase five-fold between 1980 and 1985, and yield an exportable surplus by 1984. Exports, mainly from the Rashadiah plant to Saudi Arabia, should not pose a problem, given improved efficiency of production and the large transport cost advantage enjoyed by the local producers. 75. The Arab Potash Company (APC) project for the extraction of 1.2 million tons per year of potash from Dead Sea brines is by far the largest industrial project undertaken in Jordan. The World Bank has participated in the financing of this project. The Government holds 51 percent of the company's equity, with another 25 percent contributed by the Arab Mining Company (Armico). The main components of the project are a euccession of solar evaporation pans and a refinery which will extract eodium and potassium cblorides from the slurry piped from the final set of pans. Total project cost is estimated at Us$ 475 million, of which about US$ 170 million had been committed by the end of 1980. To this should be added part of the cosit of improving the road connection to the port of Aqaba and of constructing the port facilities for the bandling of potasb and phosphate fertilizer exports. Production was scheduled to start in mid-1982; this target was met 1/, a very creditable achievement. The main technical risk of the project was whether the hitberto untried method for harvesting the salt from the evaporation pans 1/ Production in 1982 was 6,000 tons, exported to Iraq, and is expected to reach 400,000 tons in 1983.  - 35 - would be successful. Initial tests with the first production unit seem to have been very encouraging. A remaining risk factor pertains to the availability of a sufficient number of qualified personnel to operate the barvesting and processing installations. Fortunately, the proximate effects of such production contingencies on the company's cash flow are likely to be counterbalanced by recent favorable trends in international markets and prices. In addition to potash, the Plan envisages the production of bromine, magnesium oxide and magnesia bricks, and refined table salt from the Dead Sea brines. A sister project for the production of potassium sulphate and di-calcium phosphate, although not included in the Plan, is also being developed. The feasibility studies for all these projects are presently being reviewed, and, with the exception of the bromine project, prospects for implementing them during the Plan period would seem quite favorable. 76. The phosphate fertilizer plant at Aqaba, now completed, will have an annual capacity of 740,000 tons of diammonium phosphate (DAP) and 104,000 tons of phosphoric acid. I/ The controlling shareholder in the Jordan Fertilizer Industry (JFI) is the Government of Jordan, directly (26 percent) and indirectly through the Jordan Phosphate Mines Corporation (25 percent), while another 30 percent of the equity is owned by other Arab institutions. The plant will process local phosphate rock; the other major raw materials, sulphur and ammonia, will be imported from neighboring countries. It is one of the largest plants of its kind, enjoying full advantages of scale. Production will be essentially for export, mainly to Asia, Australia, and Eastern Africa, where JFI would have a significant freight advantage. Commercial operations are expected to start towards the end of 1982, as compared with an original target of mid-1981. Total project cost is projected at US$ 440 million, as compared to an original estimate of US$ 300 million, not including related investment in port facilities and water supply. Of the total investment, about US$ 237 million would fall in the 1981-85 Plan period. If it were not for the fact that JFI will obtain phosphate rock at a 20 percent discount below the export price, today's prices for DAP would hardly cover the cost of the major material inputs, the prices of which have increased sharply since the project was appraised in 1978. DAP prices, bowever, are expected to recover, but the margin in relation to crude phosphate prices may not be as high as envisaged at the time the project was initiated. The original project design is for a plant with the flexibility of using either high quality phosphate rock or a beneficiated blend of medium and non-exportable lower quality rock. Technically, bowever, the problem of using the blend bas not been solved, and there are doubts wbetber the plant will be able to operate on low-grade rock, at least in the immediate future. Further expansion of phosphate fertilizer production is not foreseen in the Plan. However, the Plan does project the production of aluminum fluoride and uranium oxide from the wastes of the fertilizer plant. The uranium project does not appear to be in an advanced stage of preparation. In contrast, the aluminum fluoride project, with IFC financing, is likely to be implemeoted within the Plan period. 77. Jordan is currently the world's fourth largest exporter of crude pbosphate (after Morocco, the United States and the USSR). The Jordan 1/ DAP production was started in 1982 (118,000 tons, of which only 70,UO0 tons were exported), while phosphoric acid output will only become significant in 1983 (32,000 tons).  - 36 - Phosphate Mines Company (JPMC), 90 percent state-owned, presently mines phosphate at three locations, and a fourth mine is under development. Substantial investments have been made in the three existing mines in recent years. Further investments of JD 15 million, included in the Plan, are expected to raise the capacity of the existing mines from about 5 5 million tons in 1981 to 7 million tons by 1985. The major investments in the Plan, however, are reserved for the development of a new mine in Al Shidia, relatively close to the port of Aqaba. Feasibility studies are underway, to define the pace of development, the production methods, and the mode of transport to Aqaba. Production is unlikely to start before 1987 at the earliest, 1/ at a possible initial rate of 3 million tons; the potential annual output, however, could be at least three times that rate. The major issues facing the future development of the phosphate mining industry are the pace and direction of the future development of rock deposits, the extent to which this rock should be converted into phosphate fertilizers for export, and, finally, the most economical way of transporting the prospective huge tonnages of rock to Aqaba for export or further processing. Market and cost-wise, the long-term prospects for phosphate mining expansion would seem very good. Jordan is in a particularly favorable competitive position in view of the rapidly expanding export markets in India, Pakistan, the ASEAN region and East Africa, where it has a considerable freight advantage as compared with its major competitors. 78. Jordan's only refinery at Zarqa, close to Amman, is operated by the Jordan Petroleum Refinery Company Ltd. (JOPETROL), which has a monopoly on petroleum refining and derivative industries, and is also engaged in the transportation and distribution of oil products. Crude oil is obtained from two branches of the TAP-line, connecting with the refinery. Successive expansions have enabled the refinery, which went on stream in 1960, to meet the country's rapidly rising demand. The most recent expansion, at a cost of about US$ 240 million (of wbicb a small amount was invested in 1981), bas increased the capacity from about 5,000 to 12,300 tons per day (tpd), or more than twice the present level of domestic consumption. In aggregate, current refinery capacity is sufficient to cover the country's demand for oil products through the early 1990s, although a balance may not be attained for individual product categories. Refining capacity could eventually be furtber Increased to 17,000 tpd with a comparatively modest investment. The closeness to the TAP-line combined with the fact that so much of the Jordan market is concentrated in the Amman area make the economics of refining in Jordan per se favorable. However, this does not necessarily mean that refining operations at Zarqa are internationally competitive. There are diseconomies of scale, 2/ a comparatively lower efficiency (due to the successive expansions as compared 1/ The feasibility studies would also have to determine whether it would not be a more economical option to further expand production at the existing three mines, rather than developing an entirely new mine. Postponement of operations at Al Shidia is therefore not ruled out. 2/ The present capacity of 12,300 tpd at Zarqa compares with capacities as high as 40,000 tpd for the newly built Saudi refinery, or even 70,000 tpd for Abadan.  - 37 - to a grassroot refinery of similar capacity), and insufficient capacity utilization after the most recent expansion. In addition, some of the export refineries in neighboring countries benefit from a very low opportunity cost for capital. Under the Plan, JOPETROL would make the following new investments: a new connection to the TAP-line to handle the increased crude oil requirements; a jet fuel pipeline connecting with the new airport; increase in storage capacity at the refinery and in Aqaba; facilities for the production of lubricating base oils; facilities for regenerating used oils; and a pipeline connecting the refinery with a sea terminal at Aqaba. The latter project is by far the largest, with a total cost estimated at JD 60 million of which about one third would fall in the Plan period. This pipeline would be designed to serve a dual purpose (reversible flows), namely of pumping crude oil from Aqaba to the refinery (as a partial alternative to supply via the TAP-line) and fuel oil to the south of the country. Fuel oil is likely to be in excess supply at the refinery, while needed at Aqaba for power and fertilizer production. Thus far, only very preliminary studies have been made regarding the production of base oils. A new company is being formed, with majority participation by JOPETROL, to study the feasibility of regenerating used oils, a highly desirable objective since their disposal caused pollution. The justification for the proposed jet fuel pipeline will depend upon the growth of traffic at the new airport; in all likelihood, however, the project would be initiated during the Plan period. The optimum configuration of refinery output and other petroleum industry investments such as the proposed dual pipeline would depend upon the growth in demand and the assumed relationship between prices for crude and refined products, and, with regard to power generation, between prices for fuel oil and coal or natural gas. These questions are dealt with in a recent World Bank energy sector review. The relevant options presumably will be assessed in the feasibility study for the multi-purpose Zarqa-Aqaba pipeline recently contracted by the Government. However, even if that project is not found viable on strict economic criteria, it might be undertaken on strategic grounds, namely to free Jordan from exclusive reliance for its crude oil supply on the vulnerable TAP-line. 79. The medium-sized projects include: (i) A factory for the production of glass sheets (JD 12 million), expected to start in mid-1983. (ii) A factory for the production of glass bottles, jars and various household utensils (JD 6.6 million). Commercial production is expected to start in 1985. (iii) A timber complex to produce sawed, pressed and other timber products (JD 12 million). A public shareholding company has been established to undertake this project, which is expected to be completed in 1983. (iv) A factory for the manufacturing of intermediate chemical materials (JD 4 million). Trial production is expected to start in 1983. (v) A factory for the production of telephone and low-voltage electric cables (JD 8 million).  - 38 - (vi) The setting up of a garment industry on the industrial estate in Salt (JD 1.7 million, of which JD 0.2 million was invested in 1980). Production has been started in a first stage of the project, which is to be expanded in 1984. (vii) A metal casting project, as a first stage towards the establishment of an engineering industry. This first stage involves the production of important, but comparatively simple, metal items, such as pipes, manhole lids, etc. With the acquired experience, it is hoped that in a second stage (1985) the project could be expanded to include more sophisticated processes in the engineering industry field. Total project cost is estimated at JD 30 million, of which JD 6.5 mlllion would fall within the Plan period. (viii) A factory for the production of fruit and vegetable containers to meet the need in the local market and for export (JD 1.4 million). The project is sponsored by the Jordan Valley Authority, in cooperation with the Farmer's Association. 80. Looking at productive investment only, the ratio of targeted investments to expected incremental output amounts to 4.3 for the combined major projects, as compared to 1.2 for all other investments and an overall ratio of 2.8 for the mining and manufacturing sector as a whole. 1/ Evidence suggests that the implicit incremental capital-output ratio in investments outside the major projects is on the low side, even when allowance is made for a high proportion of modernization and expansion projects as contrasted with trew plants. Higher investments would thus seem necessary to attain the output objectives outside the major projects. 81. Financing of industrial investment is shown in Table 15. Financing has already been arranged for the large industrial projects, with the possible exception of the Northern cement plant and some of the downstream projects of the Arab Potash Company and the Jordan Fertilizer Industries. The same holds true, for the most part, for those medium-sized projects where a decision has been reached in favor of execution. Net profits plus depreciation in manufacturing enterprises other than mining, petroleum and non-metallic mineral products totalled about JD 35 million in 1979, which should provide an adequate margin for self-financing. 82. The Industrial Development Bank expects to provide JD 45 million in new financing for industrial and tourism projects during the coming Plan. Based upon proportions in the two immediately preceding plans, some JD 37 million of these would be available for investments in manufacturing and mining. Other important sources of long-term finance for industry are the Pension Fund and the rapidly growing Social Security Corporation. By the end of 1980, the Pension Fund had invested JD 10.9 million, or about half its portfolio, in industrial equities, and is the leading promoter of some of the medium-sized projects in the Plan (e.g., clothing and foundry). 1/ These are not strictly speaking capital-output ratios since they do not take into account increases in output attributable to pre-1981 investments, nor increases in output after 1985 resulting from 1981-85 investments.  - 39 - Table 15: PROPOSED FINANCING OF INVESTMENT IN MINING AND MANUFACTURING (millions of JD, at current prices) Institutions Large Medium-sized Other & Infrastructure Projects Projects Private Total Budget a/ 29.8 8.1 - 37.9 Self-financing 7.5 233.8 26.9 45.0 c/ 313.2 Loans b/ 15.7 321.9 25.1 45.0 c/ 407.7 Total 53.0 563.8 52.0 90.0 758.8 a/ Including JD 1.3 million in foreign assistance in institutions and infrastructure investments. b/ The breakdown between foreign and domestic borrowing is not given in the Plan. c/ No breakdown of the financing of "other private investment" is shown in the Plan. It is assumed that these investments would be financed by loans and equity in equal portions. Source: NPC 83. General Evaluation. Out of the major projects sponsored by the large public sector companies, only the copper mining project would seem of doubtful economic viability. A question mark must also be set for the Northern Cement Plant which would be producing essentially for the Iraqi market. Since industry there is controlled by the state, access would be determined by political as well as commercial factors. In both these respects, the Rashadiya cement plant is different, since competition on the Saudi market is relatively free and since this plant would also be well located for supplying the rapidly growing Jordan market. Projected investments in derivatives and by-products of the phosphates and potash industries would be essentially for .he world market, and the projects presumably would be implemented only after further study had demonstrated commercial profitability. Preliminary indications, however, are favorable. In spite of favorable economics, successful execution of the phosphate fertilizer project is threatened by delays and cost overruns. The same also appears to be true for the expansion of the Fuhais cement plant. 84. The medium-sized projects identified in the Plan are all predicated upon special incentives and public financial participation. They suggest some of the difficulties faced by Jordan in pushing industrial development: (i) diseconomies of scale (polyvinyl and polyester resins, window glass, electric cables); (ii) relatively high labor costs (garments manufacturing, iron foundry); (iii) tough international competition in the absence of any sizeable comparative advantage (timber processing).  - 40 - Only in terms of their generally larger size do these projects differ from the bulk of the other investments projected for the mixed and private sectors, and the larger financial requirements can easily be parried, as is in fact contemplated, through a larger public involvement. Because metal castiLng is basic to the development of the metal manufacturing and engineering industries, which are still in their infancy in Jordan, the foundry project would be particularly rich in external economies. Hence, bigher protection and/or state subsidies would seem more justified for this project than for the other medium-sized projects signaled out in the Plan. 85. With regard to other medium and small investments in the mixed and private sectors, the Plan targets would seem fully achievable. This judgment takes into account the existing entrepreneurial talents and worker skills, Jordan's preferential access to the neighboring Arab markets and the adequacy of its institutional support (e.g., development finance, industrial estates). The relationship between the Government and the private sector is good, and the private sector has participated intensively in the discussions regarding the Plan. In order for growth to occur along the most productive lines, a comprehensive restructuring of the industrial protection and incentives framework is of high priority. 86. The major question, however, is not whether the industrial targets can be reached for the private sector, but how this sector could be expanded at an even more rapid rate than envisaged in the Plan. By 1985, investments in medium-sized and small industrial projects would still account for only 25 percent of the total industrial investments and there are no new large industrial projects on the horizon. Hence, unless private investments are stepped up beyond those envisaged in the Plan, there could be a hiatus in industrial growth in the period immediately following the Plan. F. The Transport Sector 87. Planned investment in Jordan's transportation sector accounts for JD 546 million (16.5 percent of the overall investment program), 90 percent of which in the public sector (JD 486 million). A rough breakdown is shown in Table 16. 88. The major transport demand in Jordan is for export of phosphate, potash, fertilizers and for import of general cargo. The backbone of Jordan's transportation system, the port of Aqaba and the railroad and highway from Aqaba to Amman, has in recent years accomodated a very rapid expansion of traffic flows, mainly as a result of the spectacular increase in exterrnal trade. Activity in the port of Aqaba increased fourfold between 1975 and 1980, and by another 40 percent in 1981. Railway usage is presently dominated by the transportation of phosphate rock to Aqaba, currently about 2 million tons a year. Roads and road transport have played a dominant role in recent years in handling the tremendous increase in the volume of transit traffic (5 million tons in 1981, including another 2 million tons of phosphate). As a result the north bound lane of the two-lane Desert Highway from Amman to Aqaba has been pounded almost to destruction by traffic volumes and loadings far in excess of those for which it was designed.  - 41 - Table 16: SUMMARY OF TRANSPORTATION SECTOR INVESTMENT PLAN, 1981-85 JD millions x of Total Public Sector 485.5 29.0 Roads 197.3 36.2 Railways 11.0 2.0 Aqaba Port 56.7 10.4 Civil Aviation 48.2 8.8 Royal Jordanian Airline (ALIA) 158.2 29.0 Meterological Services .7 .1 Public Transportation Corporation 13.4 2.5 Private Sector (unspecified) 60.0 11.0 Total 545.5 100.0 Source: NPC 89. A major issue relating to the transport infrastructure in its present state is therefore the risk that transportation bottlenecks might hold up the achievement of otherwise attainable production and export targets in key industr4,s. Railway capacity will have to double by 1985 (and triple by 1990) to aczommodate the projected increase in phosphate export shipments to Aqaba (a'oout 5.5 million tons), while at the same time relieving some of the tension *n the road transport system which will have to handle additional phosphate rl.ck shipments to the new fertilizer plant at Wadi 2 near Aqaba (about 1.3 mri 1lion tons by 1985). The Aqaba-Amman highway is in urgent need of reconstruction to heavier standards and should be expanded into four lanes throughouC:. Upgrading of the road connecting Aqaba to Sali, site of the new Dead Sea potash industry, is required for potash transport, projected at one million tons by 1985. In Aqaba, the convergence of in- and outward bound shipments of merchandise is a growing source of hazard, delay and pollution, which will require special infrastructure developments, the more so as further aggravation is bound to hurt the emerging tourism industry. 90. While the Plan's overall allocation for transport investments by the public sector would seem sufficient to cover these priority areas, timely and effective action, with particular emphasis on coordination between modes, is a prerequisite if major transportation constraints are to be avoided. A National Transport Study which is presently being carried out should provide a basis for a more detailed assessment of investment needs. G. Public Finance 91. The Central Government total expenditures are projected to grow at an average annual rate of 16.7 percent, with capital expenditures growing most rapidly, at 24 percent p.a., and current expenditures at 10.5 percent. Thus, current expenditures would decline as a share of total from about 60 percent in 1980 to 45 percent in 1985. On the revenue side, total revenues are projected to grow at an average annual rate of 14 percent. However, domestic  - 42 - revenues are projected to rise at 19.8 percent per annum, and to increase as a share of total from 54.5 percent in 1980 to over 69 percent in 1985, implying greater reliance on domestic resources for budgetary purposes (Table 1L7). Table 17: CENTRAL GOVERNMENT EXPENDITURE AND REVENUE TARGETS (JD millions, at current prices) Total Plan Average Annual 1980 1985 1981-85 Increase (X) Total Revenue 414.8 801 3,211 14.0 Domestic Revenue 226.1 557 1,991 19.8 (as % of total) (54.5) (69.5) (62.0) External Budget Support 188.7 244 1,220 5.3 a/ (as % of total) (45.5) (30.5) (38.0) Total Expenditure 563.1 1,219 4,523 16.7 Current Expenditure 336.0 555 2,290 10.5 (as % of total) (59.7) (45.5) (50.6) Capital Expenditure 227.1 664 2,233 24.0 (as % of total) (40.3) (54.5) (49.4) Current Budget Surplus 78.8 246 921 a/ External budget support is assumed constant throughout 1981-85, at JD 244 million per year at current prices. Source: NPC and Appendix Table 5.1. 92. Resource Mobilization Objectives. Although domestic Budgetary * savings are expected to remain negative throughout most of the Plan period, the deficit would be gradually eliminated and limited to JD 299 million (13 percent of current expenditure) for the entire period, as compared to JD 429 million (34 percent of current expenditure) throughout 1976-80. implicitly, the Plan thus anticipates a marginal propensity of current expenditure with regard to domestic revenue of .66, as compared to 1.47 during the past five years. This reflects the high priority that the Plan attaches to the improvement in the Government's current budget situation. 93. To achieve this goal, the Plan has set two major policy objectives: (a) to realize a 19.8 percent annual growth in domestic revenues; and (b) to restrain the growth of current expenditures to around 10.5 percent per annum (2.5 percent in real terms). This combination would insure the achievement of the underlying basic budgetary target of the Plan, namely to realize full coverage of current expenditures in terms of domestic revenues by 1985 (from a 67 percent coverage in 1980), and free a larger share of foreign grants for the financing of capital expenditures. 94. Despite the fact that the overall savings target of the Plan crucially depends on the realization of the Government's budgetary target, the revenue raising effort projected in the Plan does not depart in any significant way from the recent record. Although the expected buoyancy of domestic revenues with regard to GDP (around 1.0) shows a slight improvement compared to the last Plan, it is still substantially below the pre-1975 performance.  - 43 - 95. The anticipated resource mobilization effort tbrough taxation looks even less impressive when items such as proceeds from rapidly increasing natural resource based exports are excluded from tax revenues. The impact of mineral exports on tax revenues is in the form of income tax payable by companies in which the Government has a majority participation. 96. The Jordanian Government is aware of the structural issues facing the tax system, such as its heavy reliance on indirect taxation and its relative inelasticity with regard to domestic income (para. 31). In that respect, a new income tax law, recently enacted, contains some adjustments. However, the proposed rates are less progressive than the present structure. Moreover, it also proposes more generous exemptions and deductions. On the other hand, two new sources of income tax are being introduced: (a) capital gain tax on land and real estate; and (b) tax on interests and commissions accrued abroad to local financial institutions and exchange dealers. While the proposed tax law does not represent a sweeping policy reform in the tax system, it can provide an occasion for initiating basic improvements, particularly: broadening the coverage to include all forms of income; changing levels of exemptions, particularly when they are not equitable; repealing of exemptions, where they have not led to desirable results; improving assessment, audit, and the collection mech,anism; reviewing the trade tax policy with a view to coordinating revaenue and protection objectives; and, integrating different fees and suircharges into a unified tax structure. There are signs that a number of such reforms are underway, while others are under serious consideration. Particularly, the principle of self-assessment introduced in tie new income tax law, and accompanied by a radical purge and intensive training of the tax assessors corps, seems to have met a positive reaction f--^cm the public, and is credited for encouraging income tax returns in the first months of 1983. 97. The Plan's basic strategy towards balancing the Budget and achieving the ambitious Government savings target operates essentially through the expenditure side of the Budget. The growth of current expenditure is to be restrained to around 2.5 percent p.a. in real terms, so that by 1985 domestic revenues would finance the entire amount of current expenditure. However, the means to achieve this target are not defined in the Plan. Furthermore, with the emphasis that the Plan puts on social programs, which, by their nature, generate relatively high recurring outlays, 1/ the achievements of this goal may prove to be difficult, if possible at all. In addition, the high level of wages in the private sector and in neighboring Arab countries will probably continue to exert an upward pressure on the compensation of civil servants, making it more difficult to effectively control the growth in budgetary outlays. 98. Such a drastic slowdown in the growth of current expenditures can be interpreted as necessary to spare funds for the financing of the large investment program. In this case, however, the restriction would most probably result in under-financing of recurrent costs related to capital 1/ With the expected growth in capital expenditures of about 15 percent p.a. in real terms, the ratio of current to capital expenditures would fall from 1.48 in 1980 to .84 in 1985, representing a de-facto cutback of nearly 31 percent in current expenditures over the Plan period.  - 44 - investment. Even though restraining the increase in current expenditure is a welcome move in view of the persistently negative public sector saving performance, serious consideration should be given to the type of expenditure which is to be cut, as well as to the recurrent cost implications of various types of capital expenditures. Inappropriate cuts in current expenditures may result in inefficiencies and delays in the implementation and subsequent operation of investment projects. Unfortunately, no such attempt at differentiating the structure of current expenditures was made in the Plan. To determine with any degree of reliability the size of recurrent expenditure needs of the Plan, the annually recurring outlays of individual projects need to be examined in detail. However, very little information on the breakdown of these expenditures is available. A tentative assessment of required current outlays, focussing on social services, indicates that the size of current expenditure budgeted in the Plan is considerably underestimated. 1/ The pressure to maintain current expenditures (including defense) at the required level may eventually result either in under-implementation of the public investment program, or impose a higher inflationary burden on the economy, unless a greater share of private savings is mobilized by the Government. The conclusion suggests that the Government will have to consider alternative budgetary strategies if this is to be avoided. For example, the Government may reconsider some of its expenditure priorities (e.g. defense versus non-defense), or attempt to reduce the budgetary cost of some social programs (e.g. post-primary education) by inducing the private sector to bear a larger share of tbe cost. Finally, it could also reform the tax system in a truly comprehensive effort at mobilizing a higher share of domestic resources. To a large extent, all these options imply going beyond present policies, as well as a tighter fiscal discipline. Otherwise it would seem doubtful that the objective of balancing the budget could be achieved by the end of the Plan period. 99. The public sector investment program for the next five yearsE amounts to JD 2,120 million, consisting of direct investment of JD 1,795 million, and direct outlays of JD 325 million in the form of loans and equity participation in mixed public-private ventures. Amortization of domestic and foreign debt is estimated to be JD 148 million (JD 50 million and JD 98 million, respectively). These plus ordinary capital expenditures of JD 60 million yield a public capital expenditure target of JD 2,328 million over the Plan period, of which JD 95 million is to be financed from public institutions' own financial sources, leaving a total of JD 2,233 million to be financed through the Central Government Budget. The aggregate public investment program also includes about JD 400 million in carry-over projects from the previous Plan, about half of which are in the mining and manufacturing sector. 100. The public investment program is to be financed by a budgetary surplus (including grants) of JD 921 million; gross external borrowing of JD 1,162 million; and the sale of Government bonds of JD 150 million (Table 18). The Plan has not set a borrowing target from the banking system. As Table 18 shows, close to 40 percent of total capital expeditures would be financed through the anticipated Budget surplus. However, the realization of a surplus 1/ The assessment takes into account the gradual phasing out of subsidies, as envisaged in the Plan.  - 45 - of such magnitude depends upon the securing of JD 1,220 million in external grants as budgetary support, as well as drastically restraining the gro-.th of current expenditure. Financing the Plan therefore remains quite vulnerable to possible interruptions and fluctuations in foreign aid receipts. However, since the magnitude of external budget support depends on the political situation in the region, no meaningful quantitative assessment can be made. However, peaceful developments in the region that result in the reduction of military aid and grants would probably also result in a reduction of the high defense expenditures that the budget would have to carry. Table 18; PUBLIC SECTOR CAPITAL EXPENDITURE AND ITS FINANCING, 1981-85 (JD million, at current prices) Capital Expenditure 2,328 100.0 Public sector Investment a! 1,795 77.1 Participation and Loan to Mixed Sector 325 14.0 Ordinary b/ 60 2.6 Repayment of Domestic Loans 50 2.1 Repayment ur Foreign Loans 98 4.2 Financing 2,328 100.0 ;urrent Budget surplus c/ 921 39.6 Self-financing of Public Institutions 95 4.1 Government Bonds 150 6.4 External Borrowing 1,162 49.9 a/ Of which JD1,700 million is accounted for in the Central Government Budget. b/ Ordinary capital expenditure includes oulays for the acquisition of land, vehicles, office equipment, etc. c/ Including external grants for budget support (see Table 17). Source; NPC H. Resource Mobilization and Investment Financing 101. As mentioned earlier (para. 52), the Plan anticipates a considerably more intense effort towards mobilizing national resources for the financing of investment. The projected effort is particularly visible in the area of public finance, where the target is to cover current expenditures completely from domestic revenues by 1985 (para. 93). The Plan data do not allow a differentiation between public and private savings, since the required breakdown in final consumption of the two sectors is not available. A rough picture, bowever, can be obtained by combining aggregate budgetary and national account data, and determining residual savings for the "non-central Government" sector of the economy (Table 19). 102. The results, shown in Table 19, reveal a somewhat uncertain pattern. Although the improvement in marginal savings rate projected at the overall national level is high (at 22 percent compared to 13 percent for  - 46 - Table 19: COMPARATIVE MARGINAL SAVINGS PERFORMANCE OF CENTRAL GOVERNMENT AND REST OF THE ECONOMY Marginal Savings Rate (in %) Actual 1976-80 Plan 1981-85 Central Government -47 34 Rest of Economy a/ 27 18 Total 13 22 a/ The non-central Government marginal savings rate is residually determined by substracting domestic Government revenue from GNP, and Government current expenditure from total final consumption. Source: NPC and Mission estimates. 1976-80), it is by no means excessive, since it could allow private per capita consumption to grow by as much as 5 to 6 percent p.a. in real terms 1/, wbich is high by comparable international standards. However, due to the projected sbarp reversal in Government sector savings performance, the required performance of the non-Government sector would in fact be lower than in Lhe past. Were one to assume instead that the 1976-80 savings performance of .;.e non-Government sector is maintained, the central Government performance required for preserving the overall savings objective would be reduced to a marginal savings rate of 3 to 4 percent, a positive, and still substantial achievement by recent standards. In that alternative, the objective cf balancing the domestic revenues and current expenditures in the Budget would be achieved by the end of the 1980s, rather than 1985, allowing about double the rate of increase in the volume of current expenditures foreseen in the Plan (2.5 percent p.a.). 103. In spite of the projected overall improvement in resource mobilization, national savings, according to the Plan, will cover only 19 percent of total investment (including the projected increase in stocks), the remainder to be financed from foreign sources, i.e. 34 percent through net borrowing and as much as 47 percent from grants (Table 20). The net inflow of grants from abroad is assumed to be on the order of US$ 1 billion on the average per year throughout the entire Plan period, i.e. approximately the annual level of aid pledged by the oil-producing Arab nations at the 1978 Baghdad Summit. 104. The Plan gives no explicit details regarding the financing structure of the investment program. Only the financing of investment through the Central Government Budget is summarily documented. Thus, the residual 1/ Assuming public consumption to increase at the same rate as projected in the Plan for current Government expenditure, i.e. about 2.5 percent p.a. in real terms.  - 47 - financing of non-Government investment (including investment of Public enterprises not financed through the Central government budget) would seem to exceed available non-government savings and net foreign borrowing, This implies that part of the expected transfers from abroad would contribute to the financing of investment outside the Central Government, to an extent that substantially exceeds the inflow of private transfers recorded in the past (see footnote a. to Table 20). In case this implicit contribution does not materialize, the resulting shortage could cause disruptions in the private and mixed sector investment program. Table 20: CONSOLIDATED CAPITAL ACCOUNTS OF GOVERNMENT AND NON-GOVERNMENT SECTORS 1981-85 (at current prices) Central Government Rest of Economy Total JD In % of JD In % of JD In % of millions Total millions Total millions Total Resources: National savings -299 -8.6 969 27.9 670 19.3 Net domestic transfers -225 -6.5 225 6.5 Net transfers from abroad a/ 1,220 35.2 398 11.5 l,b18 46.6 Net external borrowing 1,064 30.7 118 3.4 1,182 34.1 Total Investment b/ 1,760 50.7 1,710 49.3 3,470 100.0 a/ Total transfers from abroad figure in the Plan's Balance of Payments projections (without breakdown into official and private); transfers to the "rest of the economy" are therefore determined as the difference between total transfers and the external grants figuring in the Plan's Central Government budget projections. b/ Including JD 170 million projected increase in stocks in non-Government sector. Source: NPC and Mission estimates. 105. In the Plan, foreign borrowing is only implicitly specified in the balance of payments as required net capital inflow, and the debt servicing implications are not spelled out. However, two critical assumptions underlying the projected magnitude of external financing requirements should be noted. First, a constant real level of international reserves is implicitly assumed tbroughout the Plan period, which implies a fairly rapid decrease relative to the projected level of imports. Considering the continuing instability in the region, maintaining, as in the past, a higher level of reserves relative to the import requirements of the Plan would seem desirable, but would require additional foreign resources to be secured. Secondly, the financing plan for the capital expenditure program relies on tne assumption that the Jordanian Government will in fact be able to realize a fairly optimistic budgetary target, dependilng on drastic cut in current expenditure growth and the availability of close to US$750 million on average per year in external budget support. A sbortfall in this objective would create a need for additional sources of finance if the Government's capital expenditure program is to be fully implemented.  -48- Chapter III. HUMAN RESOURCES A. Labor Force Structure 106. Population Growth. As of November 1979, the East Bank population was 2.147 million, of whom 2.045 million were Jordanian nationals 1/, compared to 0.901 million in 1961 (virtually all Jordanians). Extraordinary events during the 1961-79 intercensal period contributed to a far from smooth and normal demographic evolution. Following the 1967 war and the occupation of the West Bank by Israel, the East Bank received a large flow of refugees (over one quarter of a million in 1967). Soon thereafter, however, population outflows were triggered, first by the civil disturbances of 1970-71, and then by accelerated Jordanian migration for employment to Arab oil states. Over the 1976-1980 period there was a net out-migration of some 170 thousand Jordanians from the East Bank, of wbom an estimated 56 thousand were workers, and most of the remainder were dependents. The outflow was especially heavy in 1976 (83 tbousand) and 1977 (104 thousand). Thereafter there appears to have been a net return of Jordanians to the East Bank amounting to a few thousand in 1978, about 17 thousand in 1979, and falling to around one thousand in 1980. 107. In the second half of the 19709 Jordan also experienced significant inflows of non-Jordanian population. In 1976 particularly, there was a relocation to Amman of persons avoiding the conflict in Lebanon. Of greater magnitude was the inflow of Arab and other foreign labor responding to the labor shortages in the East Bank reflecting both the large scale outmigration of Jordanian workers and very liberal immigration policies. An attractive wage structure induced increasing numbers of Syrians in the mid 1970s and Egyptians in the late 1970s and early 1980s to seek employment in Jordan. By 1979, 102 thousand non-Jordanians were residing in the East Bank, of whom 45 thousand were participating in the labor force. The non-Jordanian share of the East Bank population may have risen from under 5 percent in 1979 to between 7 and 8 percent by 1981. 108. The bigh rate of increase of the East Bank population is attributable to a continued bigb rate of natural increase (close to 4 percent) among the Jordanian population as well as migration from West to East Bank and import of foreign labour. During the 1970s, the birth rate appears to have dropped from close to 50 to about 43 per tbousand, and the death rate reportedly also fell by about one third. Particularly striking is the sharp decline in the infant mortality rate (about 40 percent) between 1970 and 1979. The extremely high population growth rate experienced in the 1960s and 1970s will tbus be reflected in a very rapid labor force expansion throughout the 1980s and 1990s. 109. Labor Force. The East Bank labor force is estimated to have grown at an average rate of 3.7 percent per year from 1970 to 1975, when it reached 3b2 tbousand. Between 1975 and 197:, immigration raised the average annual labor 1/ It has been consistent practice in Jordan to include Palestinian refugees in "Jordanian" population figures whether the refugees' origins were in the West Bank, Gaza or pre-1948 Palestine.  -49- % force growth rate to 6.2 percent per annum and its level to 460 thousand, of whom close to 10 percent were non-Jordanians. Prior to 1975 the number of non-Jordanians in the labor force was negligible. 110. Rapid economic growth in the East Bank, combined with accelerated Out-migration of Jordanian workers, created a tight labor market, particularly in 1976 and 1977, which appears to have induced significantly higher labor force participation rates among Jordanian males. Thus, for the out-of-school Table 21: EAST BANK LABOR FORCE, 1979 (in thousands) Unemployed Labor Force Employed Total (X) of Labor Force Jordanians 415.4 377.6 37.8 (9.1) Males 382.5 348.6 33.9 (8.9) Females 32.9 29.0 3.9 (11.9) Non-Jordanians 44.8 43.5 1.3 (2.9) Males 41.6 40.5 1.1 (2.6) Females 3.2 3.0 0.2 (6.J) Total 460.2 421.1 39.1 (8.5) Males 424.1 389.1 35.0 (8.3) Females 36.1 32.0 4.1 (11.4) Source: Advance tabulation of 1979 Population Census returns. male Jordanian population age 15 and older, the labor force participation rate rose from 86.8 percent in 1976 to 92.7 percent in 1979. The increase was particularly sharp in the age categories of 15-24 and 45 and over. Among the Jordanian female out-of-school population age 15 and over, the Labor force participation remains very low but bas been steadily climbing, from 7.8 percent in 1972 to 9.5 percent in 1976. The 7.6 percent female participation rate found in the 1979 Census sample results is therefore surprising. This apparent decline in female activity rates is especially notable among those aged less than 35. Ill. Apart from possible non-representativeness of the sample (see para. 117), the drop may reflect a ratber classic response to the relative development of job opportunities. Against a background of remarkable expansion of female education, the growth of job opportunities considered "iappropriate" (see para. 114) in a relatively conservative society may not have kept pace with the rapidly increasing supply of better educated females seeking employment. In parallel, female unemployment rates would seem to have increased sbarply in the late 1970s. In Jordan, as elsewhere in the Arab region, there is a strong correlation between females' educational attainment and labor force participation. In 1979 Jordanian females not in school bad  -50- labor force participation rates ranging from 1.3 percent among illiterates, rising to 4.3 percent for primary school completers, 7.1 percent for preparatory school completers, 35.3 percent for secondary school completers, peaking at 89.0 percent for completers of the career oriented post-secondary institutes, and 77.7 percent for university graduates. 112. Employment and Productivity. The sectoral structure and growth of employment is summarized in Table 22. In terms of its overall impact, construction was the lead sector in employment growth, which was Ln large part attributable to the boom in housing construction since the mid-1970s, but also to infrastructure development. The related Non-Metallic Mineral Products sub-sector (mostly cement) consequently also recorded a very high employment growth, while employment in the Electricity, Gas and Water sector benefited particularly from the rapid expansion of the water supply sub-sector. The decline in employment in the Trade and Finance sector may, in a maturing economy, reflect a shift of labor from the "informal" trade sector to other sectors with relatively higher earnings, as well as high out-migration from that sector to neighboring countries. Table 22: SECTORAL GROWTH AND STRUCTURE OF EMPLOYMENT IN THE EAST BANK, 1972-79 Growth 1972-79 Structure in 1979 Average Annual X Share x Share of Rate in 000's in total Non-Jordanians Agriculture a/ - -3.5 42.1 10.0 7.3 Industry 11.2 117.9 28.0 22.3 Mining and Quarrying 11.9 4.4 1.0 2b.5 Manufacturing 5.9 40.8 9.7 21.8 (Chem. & Petroleum Products) (10.6) (4.2) (1.0) (23.2) (Non-Metallic Mineral Products) (13.3) (4.8) (1.1) (74.0) (Other Manufacturing) (4.5) (31.8) (7.6) (13.9) Electricity & Water 18.0 5.4 1.3 7.9 Construction 15.1 67.3 16.0 23.5 Services 3.6 261.1 62.0 5.4 Trade, and Finance b/ -2.3 50.1 11.9 8.7 Transport 6.1 32.2 7.6 2.4 Public Administration & Defense 5.2 151.U 35.9 2.5 Otber Services 6.7 27.8 6.6 18.9 Total 4.3 421.1 100.0 10.3 (id., Non-Agriculture) (5.5) (379.p) (90.0) (10.7) a/ Agricultural, employment in 1972 is estimated. b/ Including restaurants and hotels, insurance and real estate. Source: 1972 Sample Survey of Households and advance tabulation of 1979 Population Census.  -51- 113. In spite of the rapid growth in industrial employment, industry still accounted for a modest 28 percent share in total employment by 1979, of which only one-third was in manufacturing. Over one-third of the employed labor force is absorbed by public administration and defense. In that respect, there is a strong pattern of Government employment in the younger age groups, and a gradual shift to non-Government employment with increasing age, suggesting that Government employment represents a relatively easy entry into the labor market, with subsequent transfer to the private sector as experience is acquired. The substantially higher wage and salary structure in the private sector is obviously providing a strong incentive for such public to private sector mobility. 114. Female employment tends to be constrained by social and cultur\ factors to "appropriate" functions and professions, and is highly concentrated in the public administration. Of all employed Jordanian females, 69 percent work in the public administration, compared to 37 percent of the Jordanian males. Three quarters of working Jordanian females in 1979 were employed in teaching (54 percent) clerical (16 percent) and health (6 percent) related occupations. 115. Non-Jordanian workers appear to be heavily concentrated in industry, with above average concentrations in mining, and particularly in the manufacturing sub-sector "Non-Metallic Mineral Products" where they account for nearly three-quarters of employment. More than one-third of non-Jordanian workers are engaged in the construction sector, and relatively little in agriculture (7 percent). By far the largest proportion of non-Jordanians (43 percent) are semi-skilled manual workers. 116. Excluding agriculture, as well as the community, social and personal services sectors, 1/ labor productivity growth (value added per worker, at 1975 prices) is estimated to have averaged about 2 percent p.a. throughout the 1972-79 period. Productivity growth was very unevenly distributed among sectors and far from uniform during these years, reflecting the impacts of successive implementation phases of major industrial projects, and other radical structural changes that were taking place in the Jordanian economy. However, there has been a tendency towards higher productivity growth in recent years in most sectors. In the 1972-79 period, productivity growth was particularly strong in the mining and manufacturing sectors (about 9 and 5 percent p.a. respectively). In manufacturing, the performance was even higher (about 6 percent p.a.) when excluding the Chemical and Petroleum and the Non-Metallic Mineral Products sectors, which are each dominated by one major industry (the petroleum refinery and the cement company). 2/ On the other hand, productivity growth was particularly low in the construction sector (about half a percent p.a.), but a significant acceleration towards the end of the period may be indicative of the growing impact of more advanced technology and foreign contractors in project execution. 1/ Mainly Public Administration and Defense. 2/ Productivity growth in the Non-Metallic Mineral Products sector was persistently negative througbout the 1972-79 period.  -52- 117. Unemployment. The relatively high overall unemployment rate of 8.5 percent registered in the 1979 Census sample results (Table 21) is particularly surprising in light of the rapid growth in employment (Table 22), which was reflected in a declining unemployment trend recorded in prior Household Surveys (viz. 1972: 2.8 percent, 1974: 2.1 percent, and 1976: 1.6 percent). For various reasons, bowever, comparison of the 1979 Census results with unemployment rates recorded in earlier years may not be too meaningful. Firstly, census results obviously do not strictly compare with those of household surveys. Secondly, the 1979 Population Census is not yet fully processed, and only preliminary results, based on a 2 percent sample, are available; the sample may therefore not be sufficiently representative of the total population. Thirdly, the nature of the census questions relating to unemployment may have led to overestimation of actual unemployment according to conventional criteria. 1/ 118. Nevertheless, even with due consideration for these reservations, one should perhaps still accept the 1979 Census sample results as qualitative indications that unemployment has in fact been on the rise in recent years (although not to the extent suggested by direct comparison of the 1979 Census and the 1976 Household Survey). In that connection, the difficulties for the rapidly growing number of relatively well educated Jordanian females in finding suitable employment were already mentioned (para 111). This is confirmed by the fact that in all years the proportion of unemployed with secondary and higher education is higher for women than for men (29 and 20 percent respectively in 1979). For Jordanian males, as well as females, several factors could each provide some grounds for the presumption of rising unemployment, bearing in mind that, according to the preliminary 1979 Census results, two thirds of all unemployed Jordanians had less than preparatory level education (Table 23). Firstly, since the output of schools grew very rapidly in the 1970s, job seekers with limited education and skills are undoubtedly at a disadvantage in comparison with better educated ones, in competing for the more sophisticated jobs created in the rapidly expan(ding modern sector of the Jordanian economy. In addition, in the absence of appropriate career counseling, job seeker expectations in some cases may have been at considerable variance with the realities of the labor market. Secondly, immediately after the 1973/74 oil price boom, virtually any Jordanian, regardless of education and skills had the option of migrat:Lon for employment to a neighboring oil producing country. By the late 1970s, however, the oil endowed countries had increasingly turned to South Asia and the Far East for cheaper sources of unskilled and semi-skilled labor, particularly for construction projects. Thirdly, in the meantime, Jorclan had itself become an importer of labor in the lower skills categories; wages of non-Jordanian workers are significantly lower than for Jordanians of si-milar skills. More recently, the slowdown in domestic economic activity (para. 44-49) has already led to partial layoffs (e.g. in phosphate mining) and there is legitimate concern that more may follow, particularly in industries producing mainly for the Iraqi market. 1/ E.g. there is no attempt at assessing the seriousness of the job searching effort of persons declaring to be available for, but not currentlyr working.  -53- 119. Although the 1979 Census sample results may not be too reliable as to the magnitude of the unemployment phenomenoo relative to earlier tindings, they do nevertheless provide valuable insight regarding its age and educational characteristics (Table 23). Thus, young job seekers (age 15-24) account for more than half of all unemployed Jordanians, and are strongly concentrated in the primary through post-secondary educational attainment range where they represent about 80 percent of the unemployed. Almost half of Table 23; DISTRIBUTION OF UNEMPLOYED JORDANIANS BY AGE AND EDUCATIONAL ATTAINMENT, 1979 a/ Age: 15-24 24-49 50+ Total Educational Attainment A B A B A B A B Illiterate 9.1 20.5 29.6 28.8 61.3 50.7 24.7 100.U Literate 12.6 38.3 23.5 30.9 27.6 30.9 18.3 100.0 Primary 31.5 77.1 15.0 15.9 7.7 7.0 22.7 100.0 Preparatory 18.5 79.1 9.9 18.3 1.7 2.6 13.0 100.0 Secondary 20.7 83.6 8.5 14.8 1.1 1.6 13.8 1OU.0 Post-Secondary 4.7 82.1 2.3 17.9 - - 3.2 100.0 University 2.2 37.8 10.3 59.5 .6 2.7 4.2 100.U Post-University - - .9 100.0 - - .2 100.0 Total 100.0 55.5 100.0 24.0 100.0 20.4 100.U 100.0 a/ In the columns labelled A, unemployed are expressed in percent of the age total. In the columns labelled B, unemployed are expressed in percent of the educational attainment total. Source: Advance sample of 1979 Population Census. the unemployed in that age group are "first time job seekers". As can be expected in a country where both the introduction of compulsory education (primary and preparatory) and the complementary increase in school facilities are still relatively recent, the proportion of unemployed with less than preparatory education rises rapidly with age (viz. 53 percent for age group 15-24, 68 percent for age 24-49, and 97 percent for age 50 and over). 120. The Educational and Training System. The growth of enrollments in Jordan's formal education system during the 1970s was spectacular. From the academic year 1971/72 through 1979/80, primary school enrollments grew at a compound average rate of 5.2 percent, preparatory enrollments at 10.7 percent, and secondary enrollments at 13.8 percent. At the higher education level, post-secondary institutes expanded enrollment at 28.6 percent per year, and Jordan and Yarmouk Universities increased enrollment at 17.9 percent per  -54- year. Meanwhile, Jordanian enrollments in higher education institutions abroad grew at 12.7 percent per year. At every level of education within Jordan, female enrollment growtb outpaced the growth of male enrollments. Thus, primary school enrollments are currently very close to equity on the basis of sex. According to the 1979 Census, primary and preparatory school enrollments in 1979/80 appeared to have reached virtual equity in terms of rural shares, but were still significantly below equity at the secondary level, although the greatest gains in the rural enrollment over the 1971/72-1979/80 period were achieved at that level. Not only did the formal education system expand spectacularly over the 1971/72-1979/80 period, but its efficiency also improved quite significantly. 121. One of the objectives of the Jordanian formal education system has been the expansion of the vocational share of secondary school enrollments. From 1971/72 to 1979/80, the vocational share of secondary enrollments grew from 9.1 percent to 11.0 percent of the total. The Vocational Training Organization bad 2,500 applicants for 900 training slots in 1981, suggesting that Jordanian youtbs are eager to accept meaningful training and employment, and there does not seem to be any strong evidence of aversion to manual occupations. Within the vocational secondary education sub-system, the shares of agricultural and commercial specialization have declined, while that of industrial specialization was greatly expanded and accounted for about 40 percent of enrollments in 1979/80. 122. In addition to the formal education system, there is a variety of training institutions in Jordan dedicated to the development of occupational skills of selected segments of the labor force. The Jordanian Institute of Public Administration was established in 1968 with the purpose of "raising the standard of efficiency of civil servants and employees of private institutions". By 1980 over 147 training programs had been conducted for nearly 3300 participants, of which approximately 2300 in the period 1975-1980. The programs cover a broad array of agencies and levels of personnel, from secretarial through top management. In 1976, the Jordan Institute of Management (JIM) was established to train middle and top level managers in private and mixed sector enterprises. With assistance from the Industrial Development Bank, with which JIM has a close affiliation, the staff provide courses in management, finance, marketing, production, accounting, and project appraisal. There were 261 participants in JIM courses in 1980, and 290 in 1981. 123. Another training institution of major significance is the Vocational Training Corporation (VTC) which began operation in 1977. The VTC provides several types of training. The apprenticeship program accepts preparatory school completers for a two month orientation course, following which the trainee joins an employing establishment and is given part time theoretical and practical training for about two years. In 1981 the intake for the program was 900. A limited skill level training program of 3-6 months duration is offered to school dropouts who have not completed preparatory level of education, as well as workers wishing to change jobs. The objective is to provide the trainee with entry level job ability. About 1,000 persons were trained in this program in 1981. The VTC also offers upgrading training for currently employed individuals, as well as supervisory and instructor  -55-. training in the methodology of training. With its staff of 250 full time employees, supplemented by 150 part-time employees and over 30 instructors on the payroll of industries, the VTC is becoming a component of major significance in the provision of industrial skills training for the country. B. Manpower Planning 124. The 1981-85 Plan puts great emphasis on the development of Jordan's buman resources, particularly in the field of vocational training, with investment in education and training to be substantially increased. Although the Plan aims at achieving a quantitative and qualitative balance in the labor market, and stresses the need for assessing future manpower requirements, it does not, in fact, include such an assessment. This would seem especially important since in the recent past both investments and production have often been constrained by selective manpower sbortages, particularly in technical and managerial occupational categories. 125. The Bank's Plan Review Mission has therefore devoted attention to manpower issues, as well as to their education and training implications. The analysis is based upon detailed projections of manpower requirements and supply for twelve economic sectors and fifteen occupational categories, using a computer based manpower model developed in the Bank. 126. Manpower Requirements are projected from 1979 as a base year, since for that year the Population Census provides sector/occupation specific employment data. Sectoral employment projections are based on sector specific output and productivity assumptions 1/ and the projected manpower requirements by category of occupation are subsequently derived on the basis of the 1979 sector/occupation matrix. At a global level, output is projected to grow at 10.3 percent p.a. through 1981-85 (Table 25), as compared to 11 percent in the Plan, and productivity at 5.6 percent p.a., roughly the same performance as recorded in the period 1976-79. 127. Projected manpower requirements are shown in Table 24, for fourteen occupational categories. In total, employment is projected to increase by 128 thousand between 1979 and 1985, i.e. at a rate of about 4.5 percent p.a. The projections show a net increase in the required number of professionals and technicians of about 17 thousand and about the same increase in managerial and supervisory functions. Over one half of the total increase in employment is in skilled and semi-skilled occupations, the bulk of which for semi-skilled manual workers, largely reflecting projected needs in the construction industry. Additional requirements for unskillea workers total about 23 tbousand. 128. Manpower Supply is projected on the basis of the existing stock of labor (including the unemployed) and the simulated output of the education/ 1/ In industry, e.g., the manpower requirements deriving from the major projects (about 2,500 jobs) have been explicitly taken into account.  -56- training system 1/ classified into occupational categories corresponding to those of the manpower requirements. The labor force participation rates for each category are assumed constant throughout the projection period, reflecting the results of the 1979 Census. The Government's plans for expansion of vocational/technical education and training were taken into account. 129. The manpower supply projections take into account the attrition of the domestic stock of Jordanian workers by natural causes or, quantitatively more relevant, by migration abroad for employment. Generally, the natural attrition rates are low, primarily because of the youthful age structure of the employed Jordanian population. With regard to migration, net departures for employment abroad were assumed to be in the order of 10 thousand on the average per year 2/. Resulting total attrition rates are higher among technical professionals (over 10 percent per year) and lower for unskilled workers (about 1.5 percent). 130. Overall, the supply of Jordanian labor is projected to grow at a rate of about 6 percent p.a. In addition to the high natural growth and young age structure of the population, such a projected rapid growth of the Jordanian national labor force also reflects the increased flow of women through the education/training system and the assumption that they will be economi,cally active to the same degree as they were in 1979 for each educational category. Under this assumption, women account for 24 percent of the Jordanian labor force entrants in 1985, as compared to 15 percent in 1980. For a number of occupations (specialized farm workers and managers, blue-collar supervisors, and semi-skilled manual workers) the projected output of the relevant vocational and technical programs in the existing education/training system would not be sufficient even to compensate for attrition losses, resulting in a decline in net supply. 131. Even though high, these labor supply projections carry an upward rather than downward risk, since the actual supply of Jordanian labor could be significantly affected by the volume and occupational composition of manpower requirements in the neighboring oil countries. These countries may find a need to curtail their growth, or may continue to rely increasingly on non-Arab workers (within limits imposed by necessity of Arabic language competence for 1/ The education/training system includes the formal general and vocational education system (public and private), the Vocational Training Corporation's programs, foreign ana local universities as well as post-secondary institutions. The efficiency of the system (promotion, repetition, dropout, etc.) is assumed constant, reflecting its 1978/79 and 1979/80 performance. With regard to Jordanians studying abroad, it is assumed that only half of them will return for employment in Jordan. 2/ Projected departures for employment abroad are based on the Bank's study on Manpower and International Labor Migration in the Middle East and North Africa (June, 1981). The assumption is equivalent to a growth of the stock of Jordanians abroad by about 4.5 percent p.a., i.e. about half the rate estimated for the period 1976-80 (see also para 140).  -57- certain categories of workers). Furthermore, while the growing resident non-national populations (including Jordanians) in these countries may fill an increasing share of job opportunities in their host country, if such opportunities are unavailable, they may seek employment in Jordan. C. Projected Global and Occupational imbalances 132. The projected manpower requirements and available Jordanian labor reveal potential imbalances, in terms of prospective manpower surpluses and shortages on an occupational basis (Table 24). It should be stressed, however, that these projected imbalances have a hypothetical cbaracter, since they do not take the dynamics of the labor market into account. Thus, in reality, there are substitution possibilities among various occupational categories, while a variety of other factors may each provide partial adjust- ment (migration, educational enrollments, labor force participation, etc.). In addition, these propective supply/demand imbalances are purely quantitative in that they ignore the important labor quality aspect embodied in practical experience and on-the-job training; thus, shortages of experLenced manpower (e.g. managerial and maintenance staff) can, and actually do, prevail in occupational categories which, overall, are in excess supply. 133. With manpower requirements increasing at a rate of 4.5 percent p.a. and the supply of Jordanian nationals in the domestic labor force increasing at a rate of about 6 percent p.a., a net overall manpower surplus of about 37 thousand would be generated by 1985. However, this net global surplus would be the result of gross surpluses in nine of the fourteen occupational categories (totalling 143 thousand) and shortages in the remaining five categories (totalling 107 thousand). This global imbalance illustrates the extent to which continuation of the policy of providing open access to Jordan's labor market to non-Jordanian job seekers may affect the employment prospects of Jordanians. The projected availability of Jordanian manpower of appropriate skills would on the whole be sufficient to cover the requirements in agriculture (with exception of specialized farm managers and workers) and in services. Selective shortages of Jordanian manpower may, however, affect industry, and particularly mining and construction, if not compensated by an increased reliance on foreign workers or, in the longer term, by appropriate intervention in the education/training system. 134. The largest imbalances in 1985 are the projected shortage of 66.4 thousand Semi-Skilled Industrial Workers and the projected surplus of 68.9 thousand Other Semi-Skilled Workers. Since the supply for both categories is composed of individuals with at least primary education, it would seem obvious that the sort of intervention that the Vocational Training Corporation can make through its limited skill 3-6 month training programs would be the appropriate sort of action, but that a scale of activity many times greater than present would appear to be justified. It would also appear logical to have the VTC expand its apprenticeship program to help transform the secondary scbool dropouts and graduates into skilled manual workers, which are also in short supply. The shortage of Blue Collar Supervisors and Foremen would most logically be met by the VTC's supervisory training program, and would undoubtedly draw upon experienced Skilled Manual Workers. This would further increase the need for preparation of skilled workers, either through apprenticeship or upgrading of experienced semi-skilled manual workers. However, the need for the VTC to maintain training program quality, recruit and retain qualified instructors, and mobilize appropriate facilities and equipment will necessarily limit the pace and extent of its program  -58- Table 24: PROJECTED MANPOWER REQUIREMENTS, 1980-85, AND POTENTIAL IMBALANCES BY 1985 (in 000's) Increase in Potential Total Manpower Imbalances Employment Requirements in Occupational Category in 1979 1980-85 1985 a/ Scientists & Mathematicians .5 .2 7.8 Architects and Engineers 3.5 1.5 4.3 Health Professionals/ Technicians 6.5 2.0 1.5 Teachers 29.8 10.6 8.1 Managers, Administrators and Other Professionals 19.2 7.4 2U.U Farm Managers & Specialized Farm Workers 18.6 1.5 -5.1 White Collar Supervisors 25.6 3.6 6.3 Science Technicians 2.1 .8 4.8 Blue Collar Supervisors & Foremen 17.5 6.9 -14.1 Skilled Office Workers 23.7 8.3 21.5 Skilled Manual Workers (Except Agric.) 42.6 14.8 -18.1 Semi-Skilled Industrial Workers 120.0 39.4 -66.4 Other Semi-Skilled b/ Workers 45.2 7.8 68.9 Unskilled Workers 66.2 23.4 -2.9 Total: 421.0 128.2 36.6 a/ Shortages are designated by a b/ Office, service and agricultural occupations. Source: Mission estimates. expansion. Over the long term, expansion of secondary industrial education would be highly beneficial, either in separate vocational courses or through vocational education provided in conjunction with secondary school programs. 135. In order to effectively meet the requirements for managers and administrators, there is a continuing need for management training of the experienced personnel who will in fact rise to assume the more senior management positions. This presents a challenge which would logically be handled by the Jordan Institute of Management, the Institute of Public Administration and the Universities, which should have abilities to contribute to the appropriate training and upgrading of managers and administrators.  -59- 136. The common tbread in the potential manpower shortage occupational categories is that their alleviation is probably not going to be the result of actions, at least in the short run, by the formal education system. To some extent, the market will provide clearance and some individuals will wind up filling the vacancies. This is particularly true for the supervisory and managerial jobs where employment experience is a prerequisite. It is the potential for increasing the effectiveness of these newly promoted members of the labor force that should be the objective of the training interventions. It is thus the non-formal elements of the education/training system which will be most called upon to assist in alleviation of manpower demand/supply imbalances. 137. For the shortages in the Skilled and Semi-Skilled Manual Occupations, there ia added reason to provide as much training as possible to Jordanian nationals to enable them to fill these jobs. For if the Jordanian job seekers are unskilled and are to be considered for semi-skilled or skilled jobs, employers are more likely to prefer to hire non-Jordanians whose wages are likely to continue for at least several years to be significantly below the wages required by Jordanians. The competitive edge of the Jordanian, whether at home or abroad, will thus continue to be his skill. 138. The projected surpluses in the professional, sub-professional and technician occupational categories are in large part attributable to the very rapid expansion of the education system during the 1970's, as reflected in the growtb of enrollments in higher education (see para. 120 and Statistical Appendix Table 1.6). From 1974/75 to 1979/80, in large part due to the opening of Yarmouk University, undergraduate enrollments in Jordanian universities grew at over 21 percent a year. This spectacular expansion of enrollments in higher education of the late 1970's will produce potential labour force entrants in the early 1980's, in numbers substantially exceeding the projected requirements of the East Bank labor market. Thus, as many as 75,000 students are projected to graduate from bigher education institutions in Jordan during the period 1981-85. 139. For the professional categories of workers, the situation is therefore likely to be especially difficult. First, there are no apparent sbortage categories against which surpluses could be matcbed, and solved througb adjustments in the direction of higher education enrollment. Given the apparent pattern of young Jordanians to seek Government employment as an entree into the labor market, there may be mounting pressure to expand Government employment faster than needed or can be afforded. And for both the public and private sectors, the estimated attrition of roughly 10 percent a year, due primarily to migration abroad for employment,. will likely mean a continuing felt shortage of experienced professionals (who are the most likely to be selected for employment abroad) at the same time as there exists a plentiful supply of young professionals with minimal experience. On the other hand, intensified diversification of the economy and, particularly with regard to engineers, further rapid expansion of engineering, consulting and technical services industries could provide relief in this emerging excess supply situation of post-secondary professionals.  -60- 140. As noted earlier (para. 129, footnote 2), lower, but still substantial, rates of outmigration of Jordanians have been assumed for the various occupational categories in this scenario. Althougb a conservative assessment is justified in view of the uncertain labour market prospects in neigbboring oil countries (see para. 131), and downside risks are all too real, future outmigration rates for professional categories could nevertheless prove to be higher than those assumed in this scenario. Higher outmigration of professionals could tbus contribute to mitigate the prospective surpluses in the domestic labour market 1/. 141. Alleviating potential longer term imbalances would best be tackled by addressing the problem areas of the 1981-85 period as quickly as possible. In that connection, the Government should increase its efforts to develop employment intensive activities. If the problems of the 1981-85 period are quickly and appropriately addressed, Jordan should be able to offer a well educated and trained labor force, which should be an attraction for industry. 142. Possibly the most severe manpower problem that might constrain the 1981-1985 Plan implementation will be the high turnover of experiencecl personnel at the professional, technical and skilled manual levels due to migration to neighboring oil-producing countries. This will likely intensify the difficulty of implementing projects, and at the same time absorb a substantial number of youtbful labor market entrants in need of on-the-job training, coaching, guidance and direction. It becomes crucial, therefore, that the training mechanisms that produce results most quickly be fully utilized. In essence, this means heavy reliance upon the Jordan Institute of Management, the Institute of Public Administration, the Universities and the Vocational Training Corporation to expand their programs as rapidly as their own manpower resources will bear. Care should therefore be taken that the incentive systems are reviewed and modified, as necessary, to enable these institutions to attract and retain the staff they will need. 1/ In 1975, about 50,000 Jordanian professionals and technicians were working in neighboring oil producing countries (excluding Iraq and including Libya), a number equivalent to 44 percent of total Jordanian supply in those occupational categories, and to 26 percent of employment in the combined importing countries. In the basic manpower scenario illustrated in Table 24, this number reaches 109,000 in 1985, representing 47 percent of Jordanian supply but only 19 percent of projected employment in the same combined labou-r importing countries. If, instead, one were to assume the share of Jordsaian professionals and technicians in these countries to remain at the 1975 level, the projected domestic surplus would be entirely absorbed; however, the number of Jordanians abroad in that case would be equivalent to no less than 65 percent of available national supply.  -61- Chapter IV: PROSPECTS AND POLICY ISSUES A. Medium-Term Economic Prospects 143. Overall, the Plan's growth objective seems within reach, taking into account that a substantial part of output will be generated from major new industries, the development of which began during the previous Plan. The Mission's sectoral growth projections for the Plan period are summarized in Table 25. 144. For industry, the Plan's growth target (17 percent p.a.) might even be exceeded, depending mainly on private sector initiative and organization, and provided the Government maintains a healthy investment climate and carries out a needed reform of the industrial protection system (para. 182). The construction sector is projected to contribute about one fiftb of the increase in industrial value-added throughout 1981-85 with an average growth of about 11 percent p.a. Resurgence of the bousing boom of recent years, however, may raise growth in the construction sector above the current projection. Mining and Manufacturing output is projected to grow at about 20 percent p.a., i.e. about two percentage points above the Plan target. Output from the five major industries in Jordan would grow at about 23 percent p.a., largely reflecting the impact of the new phosphate fertilizer and potash plants. Botb plants are assumed to start production in late 1982 and to add some JD 94 million (at 1980 prices) to the value added of the mining and manufacturing sector in the remaining tbree years of the Plan (i.e. a 7.5 percent contribution for the Plan period as a whole). In mining, production of phosphate rock is expected to reach 7 million tons by 1985 (from 4 million tons in 1980), while in manufacturing cement output from the expanded and modernized Fuhais plant and the new Rashadiah plant would reacb close to 4 million tons (from about one million tons in 1980). Manufacturing output otber than from the major industries is projected to grow at a rate of 16.5 percent p.a., in line with the 1976-80 performance. In agriculture, bowever, the growtb performance required by the Plan (7.5 percent p.a.) is rather on the high side by any standard. In the first place, the Plan starts from a base year (198U) that witnessed record barvests, resulting from abundant rainfall, which Ln itself flatters the performance achieved during the previous Plan (3.5 percent p.a.). Projected agricultural growth is also high, given the unlikely prospect of a major improvement in performance in the rainfed sector, at least within the Plan period. Furthermore, until completion of the Maqarin Dam, the potential for expanding irrigated land is limited by the scarcity of water, increasingly sharpened by competing demands from urbanization and industrialization. However, past investment in irrigation can be expected to generate some new output. In services, a somewhat more cautious growth objective for the non-Government sectors (currently set at 10 percent p.a.) might be desirable in view of the special circumstances that benefitted particularly banking and transportation services in the recent past. On the othler hand, the growth in Government services is projected to be higher than assumed in the Plan, reflecting the judgment that the target for the growth in Government current expenditures is unrealistically low (paras. 97 and 102).  -62- Table 25: SECTORAL GROWTH PROJECTIONS, 1981-85 (at 1980 prices) Projected Average Annual Growth (b ) Incrementa2 Plan Target Bank Projection Share (X) Commodity Producing Sectors 14.9 15.1 60.2 Agriculture 7.5 4.9 3.2 Industry 16.7 17.3 57.0 Mining and Manufacturing 17.8 20.1 44.4 (Major Industries) a/ (n.a.) (22.9) (29.0) (Others) (n.a.) (16.5) (15.4) Water and Electricity 18.9 18.9 2.1 Construction 12.6 10.8 10.5 Services 8.4 7.0 39.8 Government Services 3.5 5.4 9.7 Otber 10.1 7.7 30.1 GDP at Factor Cost 11.0 10.3 O0U.0 a/ Phosphate mining, Potash mining and refining, Petroleum refining, Phosphatic fertilizers, and Cement. Source: NPC and Mission estimates. 145. With agriculture growing at a maximum of 5 percent p.a., non-Government services at about 7.5 percent p.a., and industry at over 17 percent p.a., GDP growth could be maintained at about 10 percent p.a., i.e. close to the 11 percent Plan target. A significant increase in the share of commodity producing sectors would be realized (from 37 percent in 1980 to 46 percent in 1985), thus correspondingly reducing Jordan's traditional dependence on the services sector. The basic underlying asumption, however, is that of a reasonably high rate of implementation of the Plan's investment program, particularly in productive investments. In this context, the rather heavy contribution assumed by the public sector, possibly combined with budgetary constraints that could emerge as a result of the tightness of the financing program, may well lead to a repetition of past experience, namely under-implementation of the public sector investment program, reflected in delays and cost overruns. Private sector investment, however, may again prove more buoyant than anticipated. The Plan's overall investment volume (JD 2.5 billion, at 1980 prices) is therefore retained in the Mission's macroeconomic projections, summarized in Table 26.  -63- 146. The substantial improvement in the overall national savings performance called for in the Plan (reflecting a marginal savings rate of 22 percent compared to 13 percent through 1976-80) depends to a very significant extent on the anticipation of a continuing rapid increase in net factor income from abroad, particularly workers' remittances. The Plan projects a real increase as high as 10 percent p.a. in this respect, with GNP therefore increasing at about the same rate as domestic output. A more prudent assessment, however, would seem desirable, in view of current trends toward stabilization in the rate of out-migration, as well as the rapidly increasing interest payments on the foreign debt. On the other hand, effective measures towards mobilizing the savings of Jordanian workers abroad should help to increase the inflow of workers' remittances. In the Mission's projections, the real increase in net factor income is tberefore limited to 2.7 percent p.a., with an underlying increase in net workers' remittances of a little over 6 percent p.a. Consequently, GNP growtb is reduced to 9 percent p.a., as compared to the Plan target of 11 percent p.a. With final consumption increasing at about the same rate as foreseen in the Plan, the marginal national savings propensity would be close to 15 percent, still a significant improvement from the 1976-80 performance. Table 26: MACROECONOMIC PROJECTIONS, 1981-90 (at 1980 prices) Percentage of GNP Average Annual At Current Prices Growth Rate Actual Projected Plan Target Projected 1980 1985 199T0 1981-85 1981-85 1986-90 GDP 80.9 86.5 89.4 11.1 10.3 7.5 Gross Fixed Investment 32.6 34.3 23.4 12.2 10.1 -1.4 Final Consumption 94.3 89.0 88.7 8.0 8.1 6.4 Exports Goods & NFS 43.7 56.9 70.5 21.7 15.6 11.2 Imports Goods & NFS 89.6 93.7 93.2 13.7 11.0 6.1 Net Factor Income 19.1 13.5 10.6 10.0 2.7 1.6 GNP 100.0 100.0 100.0 10.9 9.0 6.7 Gross National Savings a/ 5.7 11.0 11.3 Resource Balance b/ -26.8 -23.3 -22.7 Memo Items: 1976-80 1981-85 1981-85 198b-90 ICOR 4.3 4.7 4.8 4.9 Marginal Savings Rate c/ 12.7 '21.8 14.6 11.6 Import Elasticity d/ 1.29 1.26 1.22 0.91 a/ GNP minus final consumption b/ Current account, excluding net current transfers. c/ Based on gross national savings and GNP, at current prices. d/ Goods and non-factor services with respect to GNP. Source: NPC and Mission estimates  -64- 147. The medium-term prospects for increasing exports are promising. The completion of the major export-oriented industrial projects now under implementation, together with the enterprise displayed by the private sector, should result in significant increases in foreign exchange earnings after 1982. In agriculture, the expected increase in vegetable and fruit exports will, however, be more than offset by growing imports of food, and the agricultural trade deficit will most probably increase. Even tbough total exports are projected to maintain a high rate of increase (16 percent p.a. at constant prices) while imports would grow at a significantly lower rate (11 percent.p.a.), the trade deficit would continue to increase and could reach the three billion dollar mark by 1985. In relation to GNP, however, the domestic resource gap is expected to show a further decline (from 46 to 37 percent). Unlike the recent experience, net workers' remittances and foreign grants may in future not be sufficient to meet the growing trade deficit. Jordan would therefore have to rely more heavily on external borrowing (para. 149). 148. All in all, the macroeconomic scenario envisaged in the Plan, even if somewhat optimistic, is within a feasible range. Much will depend, however, on the country's capacity to absorb the massive investment program foreseen in the Plan, both in terms of available physical and human resources. B. External Borrowing and Debt Burden 149. As reflected in the projected current account deficits (Table 27), the overall external financing requirement would amount to about US$ 3.5 billion throughout the 1981-85 period. In order to maintain international reserves at a prudent level, say a minimum equivalent of three months of imports, an additional US$ I billion in external financing would have to be secured. Taking into account the amortization obligations on existing and new debt, gross disbursements would exceed US$ I billion a year on average. (Undisbursed commitments at the end of 1980 were US$ 1.2 billion). The magnitude of the required gross disbursements (the projected yearly average is about three and a half times the amount received during 1979-80), will make it very difficult, if at all possible, to maintain the high proportion of concessional borrowing achieved in the past (half of total commitments during 1976-80). Direct foreign investment, even under optimistic assumptions, is not likely to be a financing source of importance relative to overall financing needs. It is therefore very likely that Jordan will have to significantly increase its borrowing at non-concessional terms, including borrowing in the financial markets. As a result, the average terms of borrowing would show some hardening. On the other hand, the rate of disbursement on commercial loans being more rapid than on concessional lending, the proportion of undisbursed commitments in Jordan's outstanding external debt, will most probably decline rapidly from its high 1980 level of 50 percent. All taken into account, the financing of the Plan within its prospective macroeconomic framework would require securing about US$ 4.5 billion in new external loan commitments during the 1981-85 period. Should external grants not be forthcoming in the anticipated amount of about US$ I billion per year, or the domestic savings performance, particularly in the Government sector, fall short of the Plan target, then the investment program would probably have to be cut down or some large projects delayed.  -b5- Table 27: BALANCE OF PAYMENTS, EXTERNAL CAPITAL AND DEBT (million uS$ at current prices) Actual Projected EyF0 1985 1981-85 a/ 1990 1986-90 a/ Net Trade -1647 -2997 -13101 -3436 -16017 Net Workers' Remittances 638 1213 4725 2131 8619 Net Investment Income 48 -113 -126 -535 -1820 Net Current Transfer 1335 600 5000 0 1600 Current Account 374 -1297 -3502 -1840 -7618 Private Direct Investment 27 44 183 71 295 Net MLT Loans 232 1429 4322 2334 9358 Official (240) (658) (3001) (1176) (5135) Private (-8) (771) (1321) (1158) (4223) International Reserves 1245 2274 4352 id., as months of imports (4.3) (3.3) (3.3) Gross Disbursements 308 1737 5303 3727 13659 Concessional loans (133) (375) (1652) (1046) (4190) Non-concessional loans (175) (1362) (3651) (2681) (9469) Outstanding and Disbursed External Debt 1266 5589 14947 Official (993) (3995) (9130) Private (273) (1594) (5817) Undisbursed External Debt 1237 1376 2360 Total Debt Service Payments 133 580 1760 2215 7246 id., as % of exports (5.4) (9.0) (7.8) (15.8) (13.8) a/ Cumulated period total. Source: Mission estimates. 150. From a creditworthiness point of view, Jordan should not face difficulties in absorbing such a volume of external borrowing, given its excellent initial external financial situation, as well as the prospects of continuing rapid growth in foreign exchange earnings through goods and services exports. Even though the outstanding and disbursed external debt may reach as bigh as two-thirds of GNP by 1985 (compared to one-third in 1980), the debt servicing burden, expressed as a percentage of total export earnings, is not likely to exceed 10 percent. Nevertheless, a problem facing the  -66- Jordanian authorities will be to secure the timely availability of new external loan commitments, which, for a country the size of Jordan, are relatively large. Securing these commitments at an early stage of the Plan, given disbursement lags, is tberefore an essential condition for its smooth and full implementation. C. Longer Term Perspective 151. The debt to be contracted during the current Plan period, even if well within the debt servicing capacity of Jordan, would most likely impose a serious financial constraint for the next Development Plan. Continuation of current growth trends, and of the very high rate of investment achieved in the past and envisaged in the 1981-85 Plan, would undoubtedly require a substantial addition to the already high external financial burden that will be outstanding by 1985. Even assuming a continuing rapid increase in export earnings, which is not likely given the one time boost that these are receiving from the completion of the major industrial projects under the current Plan, the debt service burden could under these circumstances easily increase to well above 20 percent of exports by 1990. Jordan may thus, for the first time, be confronted with an external resource constraint, caused in part by the size of the current Plan. Such a constraint would become even stronger if foreign grants are gradually phased out. By necessity, the next Plan would therefore have to be less ambitious than the current one, leading the economy through a readjustment process, towards lower overall growth, lower investment rates, and consequently lower growth of imports. To some extent, however, sucb a readjustment is already built in, since the completion of the large-sized industrial and infrastructure projects will in itself bring the economy back to a lower growth path. Increased reliance on small and medium-scale projects, with the private sector gradually taking over the development burden from Government, may increase pressure on available organization and managerial resources. Jordan has unaoubtedly a strong potential for the development of relatively skill-intensive industries for a range of products requiring botb sophistication in marketing anc efficiency in production. Nevertheless, to maintain the industrial growth momentum will require the elaboration of a strategy appropriate to the country's resource endowment and prospective markets, a radical shift in incentives to favor exports and major strengthening of the institutional frame for tne promotion of exports and of foreign manufacturing investments in Jordan (para. 180-182). 152. A possible, and in the view of the Mission desirable, "readjust- ment" scenario, covering the period 1986-90, is shown in Tables 26 and 27 for illustrative purposes only. With a slowdown in overall GDP growth to a rate of 7.5 percent p.a., and the ratio of investment to GNP declining from 34 percent in 1985 to 23 percent by 1990, the growth of imports could be reduced to a rate of about 6 percent p.a. Even assuming continuing growth trends in net worker's remittances, the projected more rapid increase in interest payments on the foreign debt would further reduce the growth in net factor income and therefore limit GNP growth to about 6.5 percent p.a. The marginal savings rate, measured against the GNP, would therefore decline somewhat, eventhough a downward adjustment of consumption to a rate of about 6.5 ipercent p.a. would insure continuation of the domestic savings performance underlying the 1981-85 projections.  -67- 153. Exports would in this scenario increase at a rate of 11 percent p.a., basically the underlying rate of the 1981-85 period for exports other than those from the major industrial projects. Under these conditions, the national resource gap could be maintained at the level of about 23 percent of GNP (Table 26). Even under such a "readjustment" scenario, however, and assuming a gradual phasing out of foreign grants, external financing requirements would total more than tT7ice the amount required tor the 1981-85 period. Assuming that such a requirement could be financed, the debt servicing burden would rise very rapidly and correspond to about 16 percent of the value of overall export earnings by 1990. Although such a debt service burden is still manageable from a creditworthiness point of view, there are nevertheless significant downside risks affecting the longer term prospects for foreign exchange earnings. In order to avoid an excessive level of external indebtedness, the need for a sharper downward adjustment in Jordan's economic growtb than assumed here for illustrative purposes may therefore not be ruled out. D. Issues in Planning 154. The Five Year Plan 1981-85 reflects the Government's determination to maintain the Jordanian economy on a high growth path, designed to maintain, and even accelerate, the process of structural change the Jordanian economy embarked upon in the early 1970s, as well as to achieve pressing social objectives. Although a major aim would still seem to be the reduction and ultimate elimination of the economy's heavy reliance on foreign budget support, the Plan does not reduce the level of this reliance, but instead attempts to bring about a major shift in the use of these resources towards financing a larger share of capital formation rather than consumption. However, this commendable objective by virtue of its intensity and distribution seems to conflict in several respects with the Plan's social and regional objectives. While the Plan stresses the role of the private sector in the development process, the envisaged role and financial contribution of the public sector is nevertheless higher than in any of the previous development Plans. Given the large size of the investment program it would have been useful to relate it more closely to the macroeconomic and social framework, and to adress more explicitly the possible constraints which may affect its implementation (budget, manpower, water supply, transportation, construction). There is little doubt that full implementation of the investment program will tax available technical managerial and project implementing capacities to the very limit, particularly in the public sector. Perhaps because of the sensitiveness of the question, the treatment of financing the investment program is not openly examined and may become a major issue if aid expectations do not materialize, even though Jordan's economy is currently financially sound and creditworthy. 155. The need to focus on efficient utilization of resources shouid always be a main objective of planning. With the major, natural resource-based projects nearing completion, the shift to smaller and medium-scale industries increases the need for emphasizing the quality of projects, with particular attention to feasibility and preparation. The relative abundance of external capital in recent years may have favored capital intensive technology in project selection and less efficient use of resources. This would have to be  -68- considered carefully in future projects, if foreign resources are to be economized. In addition, the likely emergence of manpower surpluses would indicate the need to focus on more labor and skill-intensive investments. 156. Concurrent with the focus on project quality rather than size, steps will also need to be taken to tap private savings to finance a larger part of productive investment. The role of the banking system in this respect has to be examined. In particular, appropriate measures and incentives should be explored to promote the repatriation of savings of Jordanian workers abroad, as well as to channel their remittances through the formal banking system to priority investments. 157. The Government administrative capability is strained to the limit in its efforts to implement the proposed investment program. The Plan is candid in stating that Government Administration is characterized by too many institutions and agencies with overlapping duties and responsibilities, while, on the other hand, there is centralization of authority and decision-making at the top of the hierarchy without appropriate delegation of authority. Furthermore, higher wages in the private sector and the Gulf countries may continue to attract the most able civil servants. The Plan proposes several measures aiming at improving the administrative machinery, among which are greater decentralization, modernizing the laws to improve the institutional framework and upgrading the quality of manpower. Besides a strong commitment on the part of Government to implement these reforms it would seem necessary to prepare as soon as possible a detailed action program, including training programs and feasible plans to attract high level professionals, managers and administrators back from abroad. 158. At the project level, the role of planning agencies should be defined and strengthened, especially with respect to identification, selection, monitoring and evaluation of projects. Recently, some projects were prepared by NPC staff rather than by the institutions directly concerned. If this practice is to be continued, the project unit at NPC would need to be strengthened, and the re-establishment of a monitoring unit may be necessary. Alternatively (or in addition), planning units at the technicai ministeries will have to be strengthened. 159. At the national level, the preparation of Annual Plans is recomr- mended, both to update the Five Year Plan in light of changing circumstances, and to create a consistent link between the Plan and the annual Budget. At present the budget is more an indicative statement of expenditures than an annual plan consistent with the longer term strategy of the national develop- ment plan. There is thus a need for a closer functional integration oi planning and budgeting. The annual report prepared by NPC, broadly covering the state of progress in the implementation of the Plan, does not at present provide appropriate feedback for the formulation of the annual budget, because it is incomplete and subject to frequent delays in its preparation. In providing comprehensive and timely information, the NPC could make a major contribution to improving the budgetary control system. To improve the feedback process for monitoring purposes, the planning departments in Government agencies should also be strengthened, and be given more active participation in the formulation of sectoral policies and in the preparation of the annual budget.  -69- 160. Strategy planning and policy decisions in Jordan are often made against the background of inadequate statistical data, while there is generally a profusion of information at the specific project level, often prepared by consultants without reference to the overall soclo-economic framework. Data is insufficiently reliable in such important areas as national accounts (see footnote 2, page 88), trade, domestic price developments, income distribution, etc. Staff and financial constraints have considerably weakened the statistical departments of Government agencies, particularly the Department of Statistics, which is responsible for Jordan's National Accounts, as well as for the execution of various periodic surveys. As a result, the quality of information suffers and there are frequent revisions and delays. In addition, information regularly compiled in various Ministries and Government agencies is irregularly or incompletely passed on to the Department of Statistics, if at all. This raises questions as to this institution's status, responsibilities and coordinating powers. The Plan, however, does not seem to consider explicitly the need for reform in this area. E. Issues in Manpower Planning, Employment and Training 161. The Unemployment Phenomenon. In tne next five years, the manpower situation in Jordan could rapidly shift from one of selective sbortages, to one of finding employment for a rapidly increasing domestic work torce. The evidence suggests that a substantial portion of unemployed Jordanians are those who have little in the way of education or skills to commend them to employers, particularly in view of a relatively plentiful supply of lower wage non-national labor. To the maximum extent possible, these individuals should be offered the opportunity for appropriate vocational training. 162. A second category of unemployed Jordanians is the young graduates who are seeking a first job. A program of labor market and career counseling, utilizing the schools and Ministry of Labor's employment otfices, could make a modest contribution to expediting the placement process. Possibly the greatest short run contribution such a program could offer is to minimize the import of foreign labor when Jordanian job seekers exist. For the longer term the benefit of a better labor market information system would be the heightened career satisfaction to be expected when career choices are based upon fuller information. 163. Development of the Education/Training System. In the formal education system the expansion of comprehensive secondary schools or vocational education remains an elusive goal. Especially for the longer term, vocational empbasis in secondary education would complement badly needed training efforts in the non-formal system. The greatest need, however, is for expansion (consistent with maintenance of quality) of the apprenticeship and limited skill training programs which the VTC can offer, and for the supervisory and management training which can be provided by the Jordan Institute of Management, the Institute of Public Administration and the Vocational Training Corporation. These are precisely the organizations that would be most heavily relied upon, should return migration become a more significant phenomenon. In addition, it would be useful to institute regular inhouse, specially designed training programs in the administration and public or large private enterprises, that aim at expanding the experience and  -70- upgrading the specific technical skills of their employees, particularly the new entrants; such programs could be supported by the more experienced staff of these organizations. 164. Women in the Labor Force. The felt shortage of labor in the late 1970s appears to have acted as a catalyst for Government policy pronouncements encouraging greater participation of Jordanian women in the labor force. It is therefore ironic, but understandable in view of the recent rising unemployment trend, that female participation rates have somewhat declined. Traditional attitudes of females, parents, and potential employers may have contributed to the focus on teaching and clerical occupations, particularly Ln Government employment, as the bounds of respectable female employment. However, educational preparation for teaching careers, which still seems a preferred choice, will be increasingly inappropriate as the supply of teachers turns into a surplus. Government can play a role in diversifying the curriculum available to females, and by supporting experimental and innovative efforts to encourage female employment. Flexible work time schemes for working mothers, ensuring appropriate systems of transportation to and from work, and setting an example by active recruitment of females in a full range of occupations, are possible actions which Government as an employer could take to demonstrate its conviction of the appropriateness of women's participation in the labor force. 165. Regulating and Utilizing Non-Jordanian Labor. The open labor market policy of Jordan with regard to non-Jordanian labor ensured the domestic economy of a reasonably adequate supply of labor in the period when out-migration of Jordanians was at its height. That relatively plentiful supply of labor no doubt had a beneficial effect of preventing excessive wage increases. Now that in turn the inflow of non-Jordanian labor is at its height, however, there is need to assess its impact on the opportunities of Jordanians to find employment. This is particularly a matter for concern with regard to the less well educated or unskilled Jordanians who do not have a competitive advantage in finding employment in the Arab oil economies. In addition to the provision of training for unemployed, unskilled Jordanians, labor offices might undertake negotiating efforts to place Jordanian job seekers in establishments which are currently sizeable employers of non-Jordanians. Similarly, Jordanian contractors abroad may be given incentives to employ sucb groups, which also would provide a training opportunity. 166. Coping witb Jordanian Out-Migration and Return Migration. For future manpower planning it is recommended that the Government continue to intensify its study of the volume and characterisitics of Jordanian workers and their dependents abroad. The 1975 household survey which focussed on this question and the Royal Scientific Society's research in 1980 were very important contributions to a better understanding of the international labor migration pbenomenon and its impacts on Jordan. A topic of particular concern, however, is the extent of "settlement" by Jordanians in the neighboring oil-producing countries. Professionals and technicians will represent a higher proportion of Jordanian workers abroad, since it is these categories of personnel. which are most able to relocate their families to the host country. The behavior of these categories of expatriates may have quite a significant impact on the  -71- future level of remittances as well as on the possibilities of their return to Jordan. A study on Jordanian households abroad would thus be an important complement to the Royal Scientific Society's investigation via households in Jordan. 167. It is quite probable that return migration will increase even as out-migration continues, due to the changing industrial and occupational structure of employment demand in the Arab oil economies. Some return migration, for shortage occupations, may well be highly desirable. Consideration might, therefore, be given to the development of an information system in job opportunities in Jordan which would reach nationals residing abroad. In this respect, the system of labor attaches might be strengthened to serve as a two-way channel of communication on labor market conditions in Jordan and selected locations abroad. Selective recruitment campaigns may also be explored. F. Fiscal Issues 168. According to the Plan, the Government's main fiscal objective is to finance all its current expenditures from domestic revenues by 1985. The emphasis of the policy is more on restraining expenditures than increasing revenues. To balance the re-current budget by 1985, the growth of these outlays is targeted at 2.5 percent per annum in real terms, compared to 15 percent annual growth of capital expenditures, while domestic revenues are projected to increase in line witb GDP. 169. This ambitious savings target for the budget raises a number of concerns. Even though restraining the increase in current expenditures is a welcome move in view of the persistently negative public sector savings performance, consideration should have been given to the recurrent cost implications arising from the increase in capital expenditures. With the emphasis that the Plan puts on social programs, these may in fact become substantial in the latter part of the Plan period, thus necessitating more allocations for current outlays. In addition, the high level of wages and salaries in the private sector and in the neighboring countries will continue to exert an upward pressure on the compensation of civil employees. The Plan target witb regard to the growth in current Government expenditures will therefore be very difficult, if at all possible, to achieve. 170. Overspending in the current budget may eventually result either in under-implementation of the Government investment program or the imposition of higher inflationary pressures on the economy by financing these needs through additional credit creation. On the positive side, however, domestic revenues are rather conservatively estimated and there is significant scope for additional increase, in particular through improving tax coverage and collection. The Government is currently deploying considerable efforts to that effect. 171. Since an appropriate breakdown of the current expenditures is not available, it is difficult to identify areas for possible budgetary cuts and assess whether such reductions would in any way Jeopardize the investment programs. In this context, the Plan mentions the Government's intention of  -72- gradually phasing out subsidies on food and fuel products, constituting about 14 percent of current outlays in 1980, although the extent and timing of the envisaged reduction is not spelled out. 172. To reduce the budgetary deficit, less drastic expenditure cuts could be accommodated provided they are complemented by exerting more fiscal discipline and improving fiscal management. There are indications that Government is making a serious attempt to improve resource allocation and eliminate wasteful expenditures. There is no doubt room for saving on many expenditure items, especially those pertaining to duplication of functions among the Government agencies or even withLn agencies. However, as indicated earlier, the task becomes more delicate and self defeating when it comes to current expenditure items with a direct link to capital outlays. Improving the budgetary savings performance would also require a greater integration of the annual planning and budgetary process, and upgrading of the budgetary control system. G. Issues in Monetary Management 173. The Five Year Plan has not set any quantitative targets on the growth of money and credit for the next five years. The qualitative goal of the monetary policy in the Plan centers around two major objectives: (i) to maintain a sound monetary and credit system compatible with the projected real growth of the economy; and (ii) to mobilize domestic resources for development purposes. 174. To ensure the attainment of the first objective, two interrelated policy issues need to be considered. First, to control the volume of credit and to make sure that the financial institutions are able to handle the additional intermediation required for the purpose of carrying out the investment program. Secondly, to observe that the financial system allocates credit in accordance with the development objectives. 175. The course of monetary expansion in Jordan is primarily influenced by the growtb of private sector credit and the accumulation of foreign assets. The required increase in the inflow of external resources for the financing of the Plan may, in the absence of active instruments of monetary policy, generate inflationary pressures well in excess of that experienced during the previous Plan. Exercising closer monetary control will probably, therefore, become both more necessary and sensitive. 176. With the ambitious size of the new Plan, the need for financial intermediation also grows. The banking system has shown a rapid growth in the past, and its future growtb will come more into focus in view of the substantial contribution it is expected to provide in terms of expanded services and mobilization of private savings. In this context, the reorientation of banking activities becomes increasingly important. At present, there is no clear distinction between the activities of the commercial banks and the specialized banks. Specialized banks should preferably engage in lending activities only in sectors for which they are established, and in areas which commercial banks fail to serve. Specialized credit institutions should also expand and strengthen their project appraisal  -73- capabilities in order to assume a leading role in promoting investment. Commercial banks should be encouraged to regionalize their network of activities, in line with intermediation needs outside the Amman agglomeration. Banks should also be induced to increase their currently limited dealings with small-scale enterprises. 177. Directing financial flows to priority sectors, and in sufficient amount, will also be of paramount importance. Commercial banks should be encouraged within prudent limits to direct their resources into longer term credit, instead of their current practice of lending primarily on an overdraft basis, wbich is mostly renewable (their liquidity is relatively high). It may tbus be desirable to limit the renewal of short-term credit to trade and commerce only, and provide proper interest rate incentives to promote greater use of the commercial banks' resources to the financing of the longer term credit needs of the commodity producing sectors. Commercial banks could also be induced (subject to the same limits of prudence) to lend part of their resources to the specialized banks for longer term re-lending. Alternatively, the specialized banks could be allowed to directly increase their resources by issuing bonds. Both possibilities, however, may necessitate an upward adjustment in the lending rate of the specialized banks to reflect the cost of borrowed resources, depending on the prevailing differences between short-term and long-term interest rates, as well as on the lending differential that normally exists between these and commercial banks. 178. A key issue in the efficient management of the monetary system in future years is the required improvement in mobilization of private savings for developmental purposes. This objective could be achieved through various measures. First, the range of assets in which savers can place their funds should be increased. The Plan anticipates the sale of JD 150 million in Government bonds, compared to JD 73 million through 1976-1980. There seems to be scope for larger Government bond issues, however, as these bonds offer the highest nominal yield with a tax exempt status, therefore having a strong potential for attracting savings. Similarly, there is room to expand the bond market activities of corporations which have successfully traded shares. Success, however, would also require a flexible interest rate structure and competitive market conditions, under which bond issues can be traded free from intervention. For this purpose, the Central Bank may consider discontinuing pegging the Government bonds at par value, and allowing their yield to fluctuate, as private bonds, according to market forces. Secondly, greater incentives could be provided to attract workers' remittances. Even though part of the inflow of remittances is reflected in the growth of time and savings deposits, a substantial part also finds its way into domestic activities through the unorganized money market, with little or no control on the part of monetary authorities. To attract these remittances through the organized money market, opportunities both outside and inside Jordan need to be provided. In particular, branch banking in the neighboring Arab States should be encouraged for that purpose. With the establishment of new investment institutions, more domestic opportunities are now available to attract these resources and engage them into productive use. Extending the coverage of the Social Security scheme to include Jordanians working abroad is a positive example in this respect. Thirdly, the establishment of institutional investors, such as the Pension Fund and the Social Security  -74- Corporation, has widened the scope for savings mobilization and intermediation. 1/ However, these institutions are in their early stages of development and deserve particular attention if they are to be actively involved in handling of the financial assets. The important function of such institutions is to channel household savings into long-term investment projects. Promoting the activities of these funds is complementary to the expansion of specialized bank activities, particularly in view of a recent decision by the Central Bank to allow direct lending by investment funds to particular sectors of the economy. 179. Two issues relating to the mobilization of resources are of particular importance with regard to the development of Jordan's capital market. The first relates to medium-term financing by commercial banks. Recently, several commercial banks have re-financed outstanding commercial foreign loans through a syndication of Dinar denominated loans. 2/ These loans have the advantage of benefitting from a relatively low domestic interest rate, while at the same time shifting the foreign exchange risk to commercial banks. Furthermore, with the Central Bank's decision to rediscount 50 percent of each bank's participation in such syndicated loans, the medium-term credit activities of commercial banks could be expected to increase. Continuation of this policy will promote the development of the capital market in the country and encourage the use of commercial banks' funds in medium-term development activities. The second issue deals with broadening of the ownership base by the general public. It may be time for the Government to reconsider the extent of its ownership in publicly held companies, especially those that are profitable enough to be handed over to the private sector. The Government has not publicly announced its decision on this matter, but if it remains the priority objective of the Government to increase the extent of corporate ownership by the general public, and if mobilization of resources for development expenditure through equity issues is considered preferable to debt financing, the occasion of the new Plan may be the right forum for this purpose. H. Industrial Strategy Issues 180. Industrial growth during the Plan period will receive important contributions from several large projects, on a scale hitherto unknown in Jordan, initiated under the previous Plan and now approaching completion, notably in potash mining and refining, phosphate fertilizers and cement. These large new industries, however, are not likely to be able to carry the momentum of industrial growth much beyond the current Plan horizon. The Plan, on the other hand, reserves only about 20 percent of the overall industrial investment program for medium-sized projects and unspecified private sector investments. Even though investment in small and medium-sized projects is 1/ The Social Security Corporation, established in 1978, is expected to generate JD 180-200 million in revenues during the Plan period. 2/ The largest such loan has been a JD 12 million syndication for the Royal Jordanian Airline.  -75- very likely to exceed the rather conservative Plan projections, as they did in the last Plan, identifying sources and outlining a strategy for future industrial growth would nevertheless seem a major area for concern. Over the relevant planning horizon (say 10 years), Jordan cannot expect to be favored by relatively low wages or by a current low cost of capital. Instead, it must seek to develop a comprehensive advantage Ln skills, productivity, technology, and marketing. Ia the long run, because of the small size of Jordan's domestic market, industrial growth depends very strongly upon the development of exports. Aside from balance of payments and employment criteria, only exports could provide the markets necessary for meaningful backward industrial integration. 1/ 181. There would seem to be a considerable potential for manufacturing exports to neighboring countries, reflecting several factors: Jordan's favorable geographic location and cultural and political ties with these markets, and its relatively strong position with respect to entrepreneurship, labor skills, and industrial finance. In the long run, however, excessive reliance upon these few markets could very likely become a constraint to maintaining a high export performance. Industries in wnich Jordan is currently competitive in the region include those for which transportation costs are important, e.g. cement, glass, bricks, etc. In the regional context, it is almost certain that Jordan would not find it profitable to develop basic industries such as steel, petrochemicals or ammonia. However, there is ample scope for filling the crevices and gaps represented by medium and small fabricating, supplying, and service Lndustries. In order to increase the country's industrial flexibility it is also important to develop certain key industrial capabilities. According to this line ot thought Joroan might strive for at least a minimum presence in activities such as metals working and chemicals processing. Up to a point there is also an argument for conm:entrating resources upon certain clusters of industries, which would generate "external economies" in manpower as well as in supporting industries and services. Such clustering would also be consistent with the objective ot fostering regional "poles of development". Development of industries with some degree of sophistication in production, i.e. a relatively high skill and technological content would have implications for the design of industrial incentives, the education and training system, and policies with respect to foreign investment. 182. In view of the above introductory remarks, even though tne immediate growth prospects are favorable, the Plan should primarily be judged according to what it does to increase industrial productivity, and to create a basis for vigorous growth beyond 1985. In this respect the tollowing issues deserve attention: (i) There has been in the past a tendency towards delays and tinancial overruns in large projects. In some respects performance can be improved, 1/ Following the review of the Five Year Plan, the bank has conducted a special economic mission in Jordan, to review the industrial export strategy (Jordan: Export Strategy and Export Promotion in Manufacturing Industries, Report No. 4170-JO).  -76- e.g. through better management and better contracting procedures. To a greater extent perhaps, the need is for greater realism in estimating investment costs and construction periods. There is also scope for improved project supervision, both at the company and global level, which also seem to be hampered by the slow development of the accounting profession in Jordan. (ii) Planning in infrastructure, particularly transportation, is behind schedule and there is a risk that transportation bottlenecks might hold up the achievement of otherwise attainable production and export targets in key industries. The backbone of the transport system (the port of Aqaba and the railroad and highway from Aqaba to Amman) will be clogged by rapidly increasing outward shipments of phosphate rock, potash and cement and inward shipments of grain, machinery and general merchandise, both to Jordan and Iraq. A long term Master Plan for the transport sector is presently under preparation. Meanwhile, the transport section of the Plan seems to call for close scrutiny. I/ The program for secondary roads may be overambitious, both in terms of economic justification and Lmplementation capabilities. Secondly, theare is an indication that the truck transport sector is not contributing its fair share in road construction and maintenance costs; diesel fuel is heavily subsidized and vehicle taxes are not graduated according to the weight of the vehicles and the corresponding road user costs. Increased taxation of road traffic could help meet the rising maintenance expenditures on the road system. (iii) The system of industrial protection and export incentives urgentLy needs reshaping. Although nominal protection is not excessively high and softened by numerous exemptions, present effective rates of protection vary erratically, without apparent rationale. Historically, the current structure of protection may have had a certain rationale as a revenue-collecting instrument. Today that function could be taken over by other taxes. Meanwhile, the inadequacy of the existing tariff structure, as the single most important instrument for guiding industrial growth, is all too obvious. In fact, no single industrial policy measure is more urgent today than the reshaping of the protection and incentive structure to guide industrial entrepreneurs into the lines of activity most beneficial to the economy. The creation of an expert committee, to devise an appropriate tariff and incentive structure, is therefore to be recommended. 183. A frequently mentioned issue is the need for regional decentralization of industry. 2/ Regional development in the Jordanian context, however, would seem to imply primarily the decongestion of the main urban centers, and particularly Amman, rather than the creation of new regional development poles. The Government is aware of the problem. A major new industrial estate is being developed some 30 km. south of Amman, and a similar estate is being planned for Irbid in the North. In addition, there are preferential tax 1/ The Bank's Plan Review Mission did not review the Transportation sector in depth. 2/ Regional development issues are being addressed in a forthcoming Bank special economic report.  -7 7- incentives for location outside the major centers. Conceptually, little could be added to this scheme. Because of foreseeable delays in execution, however, congestion and the lack of developed industrial land could constrain industrial development to some extent during the Plan period. 184. The Contracting Industry. The construction sector will play a key role in ensuring timely implementation of the Plan. It would thus seem a highly desirable objective to achieve a higher participation of the local contracting industry in the large and more specialized jobs in Jordan. The local industry, however, has been criticized for the quality of work and its lack of technical and financial expertise. The industry has nevertheless made considerable progress since the early 1970s and has proven itself in many espects, even though management and planning are somewhat lagging. The Plan should therefore offer a good opportunity to local building and civil engineering contractors to upgrade their capabilities by increasing theLr stock of experience. With increased experience, the industry could aim at capturing a proportion of the enormous market in neighboring Arab countries, wbich would ensure continuity of work. As such, the Plan could thus indirectly contribute to the development of a new export industry. 185. Current difficulties also seem to reflect certain institutional weaknesses. There is no specific agency concerned with the development of the industry, and no special legislation regulating construction activities. A system for pre-qualification of bidders is lacking, and standards for construction work and materials remain to be established. In addition, Jordan's financial sector in general does not have adequate expertise with the construction industry. 186. The Government may tberefore want to consider the appointment of a commission, supported by local and foreign experts, to look into the development potential of the industry and the range of measures required to activate that potential. Pending sucb a full-scale review, certain interim measures could be taken pragmatically, including some restructuring of the industry, a degree of domestic preference and increased subcontracting by foreign bidders, and improved financial support.  - 78 - ANNEX A (Page 1 of 3) GOVERNMENT EQUITY PARTICIPATIONS IN MIXED ENTERPRISES 1. The Government's nominal equity share in mixed public-private enterprises (including participation by autonomous public institutions) varies from less than 25 percent (in 22 companies) to between 25 and 50 percent (in seven companies) and to 50 percent and more (in five companies); and its average participation in the enterprises' combined equity stands at 18.3 percent (Table A-1). However, as far as the paid-up capital is concerned, average Government participation is 43.6 percent. In some companies, like Jordan Cement Co., Agricultural Product Processing Co., Jordan National Maritime Co. and Arab International Hotels Co., the Government originally planned to own only a portion of outstanding equity, but is at present the sole owner. In some others like Jordan Mineral Co., Jordan Glass Co., Industrial Development Co. and Jordan Company for Tourism and Mineral Water the Government intended to be a minority shareholder but now holds a majority interest. In 12 companies the Government's share and its outstanding equity is the same as originally intended, and is marginally lower in only one company (Jordan Fertilizer Industry Co.) 2. The Central Government, in addition to equity participation in the companies listed in Table A-1, also has a substantial indirect participation in commercial and industrial activities through independent equity participations of some of the autonomous public institutions (e.g. Pension Fund, Post Office Savings Bank, Social Security Corporation, Jordan University) as well as through some of the same mixed enterprises listed in Table A-1 (e.g. Industrial Development Bank). The Industrial Development Bank has equity participations in 20 private and mixed enterprises (including 12 in Table A-1); the Pension Fund is part owner in 25 companies (including L4 in Table A-1); the Post Office Savings Bank is participating in 60 companies; the Social Security Corporation has equity participation in five companies (including one in Table A-1); and the Jordan University has engaged, through its savings fund, in eight companies (including 2 in Table A-1). 3. The control exercized by the Government over the corporations depends on the degree of ownership, the legal status and the sector in which the corporation is functioning. Financial control is carried out by the Ministry of Finance, while functional control is carried out by the Ministry most directly related to the function of the corporation. Moreover, the Government is represented in the governing board of these corporations and depending on its interest holdings and equity ownership participates in or supervises the management of the companies.  - 79 - ANNEX A (Page 2 of 3) Table A-1: GOVERNMENT SHARE IN MIXED CORPORATIONS:/ (Thousand JD) Nominal Capital Paid up Capital Total Government Total Government (Thousand JD) Share (%) (Thousand JD) Share (.) 1. Jordan Cement Co. 22,500 29.7 6,172 100.0 2. Jordan Refinery Co. 32,000 3.1 32,000 3.1 3. Jordan Phosphate Co. 10,000 89.0 10,000 89.0 4. Arab Potash Co. 63,000 51.0 25,436 97.8 5. JordanFertilizer Industry Co. 40,000 25.8 25,725 24.1 6. Vegetable Oil Co. 500 11.0 500 11.0 7. Arab Pharmaceutical Industries Co. 2,000 7.0 2,000 7.0 8. Jordan Tannery Co. 800 18.7 800 18.7 9. Jordan Hotels & Tourism Co. 723 85.7 723 85.7 10. Jordan Electric Co. 6,660 9.0 4,657 13.1 11. Irbid Electric Co. 2,000 46.5 1,999 46.5 12. Holy Land Hotels Co. 600 83.3 600 83.3 13. Agricultural Industries Co. 2,250 2.2 1,151 4.3 14. Jordan Mineral Co. 1,000 3.5 62 56.5 15. Jordan Glass Co. 3,500 15.4 104 38.5 16. Jordan Textile Co. 600 23.8 600 23.8 17. Tourism Transport Co. 300 8.3 169 14.8 18. Industrial Development Co. 250 28.4 230 30.9 19. Jordan Dairy Product Co. 1,750 1.7 1,750 1.7 20. Aqaba Hotels Co. 300 43.3 293 44.4 21. Jordan Ceramic Co. 2,000 1.2 2,000 1.2 22. Industrial Development Co. 6,000 18.5 3,000 37.0 23. Agricultural Products Processing Co. 600 41.7 250 100.0 24. Carton and Paper Co. 1,500 7.4 1,500 7.4 25. Housing Bank 18,000 5.5 11,500 4.3 26. Public Mining Co. 1,000 51.0 1,000 51.0 27. Jordan National Maritime Co. 2,000 20.0 100 100.0 28. Arab International Hotels Co. 6,000 8.7 322 100.0  - 80 - Table A-1 (continuation) ANNEX A (Page 3 of 3) Nominal Capital Paid up Capital Total Government Total Government (Thousand JD) Share (%) (Thousand JD) Share (X 29. Arab Mining Co. 111,000 1.0 320 100.0 30. Jordan Co. for Tourism and Mineral Water 2,500 41.0 1,150 89.1 31. Livestock Develop- ment Co, 55,000 1.0 325 100.0 32. Arab Investment Co. 66,000 .5 305 100.0 33. Arab Co. for Maritime Transport 4,454 3.4 152 100.0 34. Jordan-Syrian Co. for Land Transport 8,000 50.0 2,500 100.0 35. Jordan-Iraqi Co. for Land Transport 7,500 50.0 3,750 100.0 36. Jordan-Syrian Maritime Co. 10,000 50.0 440 100.0 37. Jordan Syrian Industrial Co. 20,000 50.0 700 100.0 38. Jordan Syrian Free Industrial Zone 5,000 50.0 412 100.0 39. Jordan Holiday-Inn Co. 2,400 16.0 634 60.6 Total 519,687 18.3 145,331 43.6 Source; Budget Department End of 1980. a/ Includes participation by autonomous public institutions.  - 81 - ANNEX B (Page 1 of 7) INVESTMENT INCENTIVES AND INDUSTRIAL PROTECTION Investment Incentives 1. The incentives for industrial investments in Jordan are excellent. There is protection against import competition and the Encouragement of Investment Law (Law 53:1972) provides substantial incentives for approved projects. Benefits include exemption from all import fees on imported equipment and spare parts, both for the initial plant and subsequent expansion, and a nine-year tax holiday for public corporations (six years for private companies). 2. Generally speaking, the framework is sound, In fact, in the long run, it might be desirable to limit incentives to pioneering industries and gradually to phase out protection other than on infant industry grounds. It is true that these incentives are only available for projects involving a minimum investment in buildings and equipment of JD 5,000, that industrial land is expensive and equipment leasing not yet organized. The situation in the latter two respects, however, is about to be remedied. Industrial Protection 3. Though a license is required for most imports, this is generally only a formality. Some imports, however, are controlled. Thus, state enterprises in petroleum, cement and leather have an import monopoly on the products which they manufacture. Imports of steel tubes, paper and paper board are on the condition that importers obtain 50 percent, respectively 30 percent, of their needs from the sole local manufacturer in each industry. In these five industries there is at present no competition. These restrictive measures which were introduced when Jordan faced entirely different balance of payments and industrialization conditions, now have only negative effects. 4. For the main part, protection of local industry is provided by a system of tariff duries and by a 15.1 percent "surcharge" on dutiable imports. Historically, the major purpose behind these duties and taxes was revenue collection; the present customs law dates back to a period when very few local industries had been established. Normal criteria for gauging tariff policy cannot be automatically applied to a country where imports form a major portion of total supply, and fiscal charges against these imports a major portion of government revenue. 5. The Jordan tariff structure has been analyzed in some detail in a recent study.!! Information on the nominal tariff st!ructure, adapted from that study, is summarized in Tables B-1 and B-2. Several categories of goods pay little or no import duty. These include prominently coal and crude oil, fertilizers and pesticides, most categories of machinery and equipment, and 1/ Dar Al Handassah Consultants, Industrial Programming Study, Task 1.18: Tariff and Non-Tariff Protection Policies. Final Draft Report (June 1981).  - 82 - ANNEX B (Page 2 of 7) ships. In addition, inside a category of otherwise dutiable products, many individual items pay no duty. As a result, "zero-rated" items accounted for 38 percent of visible imports in 1979 (difference between Columns 1 and 2 in Table B-2). The weighted average duty on the remaining items was 23 percent; with full surcharges added, the nominal total rises to 40 percent. 6. The principles, by which the tariff was implicitly structured, may be studied in Table B-1. One limitation of that table is that it provides tariff information by 4-digit ISIC groups only. Hence, it does not show important variations within each ISIC-group or, vertically, as between the final product and specific major inputs (e.g. steel from imported billets or paper from imported pulp). With this reservation, the following main traits may be discerned: (i) Machinery and equipment, even apart from the high incidence of exemptions, carry a low rate of duty. The major and startling exception is office machines and computers, with a 123 percent average duty; (ii) Most construction materials carry a low rate of duty (10 percent or below). The outstanding exception is cement (18 percent) where, in addition, the only producer has an import monopoly; (iii) In the consumer goods area, the principle seems to be low duties on items of popular consumption, e.g. sugar, meats, athletic goods, with rather high duties, however, on some necessities (fats and oils, grain mill products, textiles, leather) and very high duties on luxury or semi-luxury items (including soaps, canned fruits and vegetables, plastic products). In the case of tobacco, the high duty is matched by an equivalent levy on domestic production. (iv) Though more detail would be required for a final judgement, th,ere seems to be a tendency for different stages in a given chain of production to carry the same rate of duty (e.g. textiles and clothing, paper and paper products). Thus, the tariff structure would seem neutral in its impact on vertical integration. 7. The actual import taxes paid differ, in important respects, from the theoretical structure described above. Some organizations are exempt from import fees and, under the industrial incentives scheme, promoters of new projects are typically allowed to import machinery and equipment free of duty. Finally, imports from some countries take lower duties. Therefore, the customs duties actually collected are typically well below the nominal  - 83 - ANNEX B (Page 3 of 7) protection. The following figures show the aggregate incidence of tariff duties and other import taxes, before and after exemptions: TARIFF DUTIES AND OTHER IMPORT FEES BEFORE AND AFTER EXEMPTIONS, 1979 (JD Million) Tariff Other Import Total Import Duties Fees Taxes Theoretical 83.8 62.4 146.4 Actually Collected 79.6 12.3 91.9 Source: Dar Al-Handasah Consultants, Industrial Programming Study, Task 1.18 (June 1981). 8. Results of the same consultant's study with respect to effective protection are summarized in Table B-3 for products grouped according to ascending rates of protection, with the corresponding nominal protection rates. In the computations underlying the protection rates shown in Table B-3, the average tariff rates on all imports were substituted for the rates on dutiable imports which are shown in Tables B-1 and B-2. This has two consequences. First, the average effective protection (of protected and unprotected items) is not necessarily representative for any product category. It might, therefore, have been better to pick a certain number of representative products and study these more intensively. Secondly, and most important, the weighting system introduces a strong downward bias in the protection measures. These may be correct as mathematical averages, but they do not reflect the incidence of protection where it really counts. Thus, if the duty on a certain product is prohibitive, i.e. there are no imports, this duty does not count at all in the weighted average. 9. With a reservation for the accuracy of some of the individual figures and the apparent downward bias, Table B-3 provides a reasonable facsimile of the structure of protection. Thus, although nominal protection is not excessively high and softened by numerous exemptions, present effective rates of protection vary erratically, without apparent rationale. Historically, this structure may have had a certain rationale as a revenue-collecting instrument. Today, that function could be taken over by other taxes. At the same time, the irrationality of the existing tariff structure, as the single most important instrument for guiding industrial growth, calls for a comprehensive reform.  -84 - ANNEX B (Page 4 of 7) Table B-1: Analytical View of Average Tariffs on Dutiable Imports According to 4-digit ISIC Classification Percentage Industrial Range of Beverages Other Consumer Construction Materials & Agricultural Duty Food & Tobacco Goods 6 Supplies Chemicals 00 - 01 Photo & Optical Fertil izers Equipment Pesticides 02 - 10 Meats (2) Watches & Clocks (9) Iron & Steel (6) Sugar (5) Sport & Athletic Sawnwood (8) Canned & Preserved Goods (10) Hardware (10) Fish (9) Metal Structures (10) 11 - 18 Fats & Oils (17) Paper & Board (16) Glass & Glass Products (16) "Other Chemicals" (13) Grain Mill Other Paper Products (17) Cement (18) Industrial Products (17) Paper Boxes & Chemicals (17) Containers (18) Printing & Publishing (18) Musical Instruments (18) 19 - 27 Leather (22) Paints & Varnishes (21) Radio/T.V. (25) Furniture (25) China & Earthenware (26) 28 - 36 Salt (28) Soft Drinks (36) Drugs & Medicines (28) Clay Products (33) Salt (28) Dairy Products (28) Leather Products (31) Cocoa and Clothing (32) Confectionary (34) Textiles (34) 37 - 45 Canned & Preserved Shoes (38) Fruits & Vegetables (37) Soaps & Perfumes (41) Bakery Products (42) 46 - 100 Wine (51) Other Food Products (68) Spirits (84) Plastic Products (79) Above 100 Tobacco (133) Malt Liquor (155) Source: Adapted from Dar Al-Handasab Consultants, Industrial Programing Study Task 1.18, Tariff and Non-Tariff Production Policies. Final Draft Report (June 1981), Table 17. 1/ Figures vithin parenthesis indicate average duty. Note that the figures shown are for tariff duties only, excluding the 16.1 percent combined "surcharge" on the c.i.f. price. There are numerous exemptions for various categories of importers as explained in the text.  - 85- - ANNEX B (Page 5 of 7) Table B-2: The Structure of Jordanian Protection, 1979 (Before allowing for exemptions) Total Tariff Dutiable Theoretical Import Taxes Import Taxes in Percent of ISIC Imports Imports Total Tariff Duties Value of Dutiable Imports No. 1/ Industry JD Million JD Million JD Million aa/ JD Million Total aa/ Tariff Only 1110,1210, 1220,1301 T Primary Agricultural Products 53.7 13.5 5.2 (4.00) 1.97 29.7 14.6 'IO0 X Coal 48.1 0.0 0.0 -- - 0.0 '200 X Crude Petroleum 69.0 0.0 4.2 -- 6.1 0.0 !901 Stone, Clay, etc. 1.0 .74 .23 .10 28.0 12.9 '902 Chemical Ores 1.4 .06 .04 (.01) .002 19.6 4.5 '903 T Salt .1 .09 .04 .02 43.1 28.0 '909 Other Mineral Products .1 .06 .015 .004 21.4 6.3 ill Meats, Raw & Processed 11.0 10.9 .74 (.44) .22 17.2 (6.8) 2.1 .112 Dairy Products 9.2 5.3 2.4 1.48 42.9 27.8 113 Canned & Preserved Fruits & Vegetables 2.3 2.1 1.0 .75 51.9 36.8 114 Canned & Preserved Fish 1.1 0.01 0.0 0.001 24.4 9.3 115 Vegetable & Animal Fats & Oils 6.9 3.5 1.2 .59 32.0 16.9 a/ 116 Grain Mill Products 11.1 5.1 1.8 .90 32.7 17.6 117 T Bakery Products .7 .7 .4 .29 56.6 41.5 118 T Sugar 8.9 8.9 1.8 .45 20.1 5.0 119 Cocoa & Confectionary 2.6 2.6 1.26 .87 49.1 34.0 121 T Other Food Products 5.4 5.4 4.5 3.66 83.4 68.3 122 X Animal Feeds 2.8 -- .06 -- -- -- 131 T Distilled Spirits .86 .86 1.07 .72 124.0 83.7 132 T Wine .17 .17 .135 .09 78.1 50.6 133 Malt Liquors .23 .15 .30 .23 204.0 155.0 134 T Soft Drinks & Bottled Water .54 .54 .19 .11 35.6 20.5 140 T Tobacco 3.2 3.2 4.7 4.25 147.7 132.6 211 Spinning, Weaving, & Finishing 15.5 13.2 6.6 4.46 49.0 33.8 212 (?) 2.1 1.8 .86 .57 46.9 31.8 213 T Knit Goods 1.7 1.7 .82 .57 49.5 34.4 214 T Carpets & Rugs 1.9 1.9 .94 .66 49.9 34.8 215 X Cordage, Rope & Twine .06 -- -- -- -- -- 219 Other Textiles 2.0 1.4 .53 .32 38.7 23.6 220 T Clothing 9.2 9.2 4.33 2.93 - 50.8 35.7 231 T Leather .14 .14 .05 .03 37.5 22.4 233 T Leather Products excluding Shoes .58 .38 .27 .18 46.1 31.0 240 T Footwear, other than Rubber or Plastic .05 .05 .03 .02 53.0 37.9 311 Sawn Lumber 11.7 11.5 2.5 .91 23.0 7.9 b/ 312 T Wooden Containers 1.1 1.1 .46 .30 43.1 28.0 319 T Other Wood Products 2.5 2.5 .73 .36 27.7 12.6 c/ 320 T Furniture 9.4 9.4 3.6 2.45 40.0 24.9 '11 Paper and Paperboard 4.7 2.8 1.1 .47 31.4 16.3 412 Paper Boxes & Containers 1.5 .5 .22 .085 33.0 17.9 d/ *19 Other Paper Products 1.2 1.0 .32 .16 31.9 16.8 420 Printing & Publishing 2.7 1.3 .45 .23 33.1 18.0 511 Industrial Chemicals 5.3 .81 .32 .14 31.8 16.7 512 Fertilizers & Pesticides 1.9 1.4 .25 .01 16.1 1.0 13 Synthetic Resins, Plastics, & Man-made Fibers 6.1 1.3 .65 .17 27.6 12.5 321 T Paints & Varnishes 1.2 1.2 .42 .24 35.8 20.7 522 Drugs & Medicines 7.9 .17 .42 .05 43.2 28.1 j23 T Soaps, Perfumes & Cosmetics 2.8 2.8 1.56 4.14 56.1 41.0 i29 Other Chemical Products 3.4 2.9 .79 .36 27.6 12.5 530 Refined Petroleum Products 4.8 4.8 1.37 .64 28.5 13.4 e/ i40 Miscellaneous Coal & Petroleum Products .16 .02 .01 .00 23.1 8.0 i51 T Tires & Tubes 6.0 6.0 1.66 .75 27.6 12.5 j59 Other Rubber Products 3.9 3.7 1.44 .88 37.0 21.9 i60 T Plastic Products 5.9 5.9 5.58 4.71 94.5 79.4  - 86 - ANNEX B (Page 6 of 7) Table B-2 (continued) I sic Total Tariff Dutiable Theoretical Import Taxes Import Taxes in Percent of o1 1C Imports Imports Total Tariff Duties Value of Dutiable Imports No. 1/ Industry JD Million JD Million JD Million ca/ JD Million Total aa/ Tariff Only 3610 T China & Earthenware 2.0 2.0 .81 .51 40.9 25.8 3620 Glass & Glass Products 4.5 3.4 1.12 .52 30.7 15.6 f/ 3691 T Clay Products 1.9 1.9 .91 .62 48.1 33.0 3692 Cement, Lime & Plaster 16.4 .75 1.21 .14 33.1 18.0 I 3699 Other Non-metal Mineral Products 1.3 .8 .31 .16 34.9 19.8 3710 Iron & Steel 52.6 45.4 9.47 2.89 21.5 6.4 h/ 3720 Non-ferrous Metals 4.3 3.3 .99 .44 28.5 13.4 3811 Hardware 4.9 4.9 1.00 (1.20) .46 24.6 9.5 3812 T Metal Furniture & Fittings .9 .9 .35 .21 38.1 23.0 3813 Metal Structures 10.4 8.6 1.97 .84 25.1 10.0 3819 Other Metal Manufactures 14.0 13.8 5.85 3.98 44.0 28.9 i/ 3821 X Engines & Turbines .1 - .01 -- -- -- 3822 X Agricultural Machinery & Equ ipment 1.0 -- .02 -- -- -- 3823 Metal & Woodworking Machinery 2.5 .68 .28 .07 25.8 10.7 3824 Special Industrial Machinery 14.5 3.2 1.34 (.91) .17 20.5 5.4 3825 T Office Machinery & Computers 1.4 1.4 1.95 1.73 138.1 123.1 3829 Other Machinery & Equipment 26.0 20.4 8.7 5.29 41.0 25.9 3831 Electrical Machinery 5.1 .3 .37 .05 33.2 18.1 3832 Radio, T.V. & Communication Equipment 12.2 12.0 4.7 2.82 38.6 23.5 3833 T Electrical Appliances 2.1 2.1 .83 .51 39.5 24.4 3839 Other Electrical Apparatus & Supplies 10.2 9.9 3.4 1.94 34.6 19.5 3841 X Ships & Ship Repairs .2 - .01 -- -- -- 3842 X Railroad Equipment 2.2 -- .14 -- -- -- 3843 Motor Vehicles 57.1 56.0 25.2 17.30 45.9 30.8 3844 T Motorcycles & Bicycles .7 .66 .37 .27 44.E 29.7 3845 Aircraft 8.7 2.5 1.24 .55 37.1 22.0 3849 T Other Transport Equipment .1 .12 .05 .03 43.8 28.7 3851 Scientific Equipment 4.0 3.5 .92 .35 25.0 9.9 3852 T Photograpbic & Optical Equipment 3.1 3.1 .59 (.50) .03 16.0 0.9 3853 T Watches & Clocks 1.1 1.1 .15 (.28) .10 24.3 9.2 3901 Jewelry 1.1 .6 .13 .02 17.9 2.8 3902 T Musical Instruments .1 .06 .02 .01 33.0 17.9 3903 T Sporting & Athletic Goods .2 .19 .05 .20 25.0 9.9 3909 Other Manufactures 3.1 3.0 1.38 .92 45.E 30.7 6100 Wholesaie Trade 2.7 1.8 .50 .14 22.8 7.7 6200 T Retail Trade .0 .02 :00 .01 19.0 3.9 8324 X Technical Services .0 -- .00 -- -- -- 9411 Motion Pictures 5 .45 .08 .01 17.9 2.8 9592 T Photographic Services .1 .07 .02 .01 29.0 13.9 Total 582.6 363.6 146.4 83.8 40.3 23.0 *a/ The figures for the theoretical total import tax (tariff duty plus normally 15.1 percent for dutiable imports plus normally 6.1 percent for non-dutiable'imports) were copied from the Dar Al Handasah Report - Table 17. Certain non-cutiable imports, including many foods, fertilizers, newsprint, and agricultural equipment pay only a 2 percent import fee. The mission recomputed the theoretical import taxes and, in most uses, arrived at either exactly the same figures as shown in the Dar Al Handasab study or very similar figures. For the few items where the mission arrived at a different result, the mission figure is shown within parenthesis. The column "Total Import Taxes in percent of Dutiable Imports" was derived by the mission by adding 15.1 percentage points to the percentage tariff duties shown in the immediately following column. a/ The duty on coumon vegetable fat ("samuch") is JD 10 per ton. b/ Apparently the full import fee is also payable on logs. c/ The duty on plywood and chipboard is 14 percent. d/ Newsprint, magazine paper and kraft paper enter free of duty, tissues and toilet paper pay 35 percent, most other papers 14 percent, envelopes 33 percent. e/ The duty on lubricating oil is JD 70 per ton, say _ percent. f/ The duty on flat glass is 14 percent. jL/ The duties on clinker and cement are also 18 percent. h/ There is no duty on steel serap or steel billets but a 6 percent import fee is levied on billets. The duty on concrete bars end rods is JD 5 per ton plus 5 percent plus 16 percent import fee. i/ Some manufacturers claim they pay import taxes of 50 percent (35 percent duty plus 15 percent import fee) or. tools and spare parts. 1/ For industry groups marked (X), all products enter duty-free. For industry groups marked (T), all products pay duty. In other industry groups, some products enter duty-free while otbers pay duties. The incidence of the tariff has been computed with reference only to those products on which a duty is actually paid. Source: Adapted from Dar-Al-Nandasah Consultants, Industrial Programing Study, Task 1.18. Tariff and Non-Tariff Protection Policies. Final Draft Report (June 1981), Table 17.  ANNEX B (Page 7 of 7) Table B-3: AVERAGE PERCENTAGE RATES OF INDUSTRIAL PROTECTION 1979 (excluding 15.1 percent surcharge) Effective Nominal Bakery products 103.8 29.0 Paper and products 71.9 38.9 Wood, cork, furniture 70.8 29.9 Confectionary 67.2 30.1 Products of rubber and plastics 60.8 21.7 Wearing apparel 47.6 32.0 "Other" non-metallic mineral products 44.5 24.0 Leather and footwear 43.5 24.3 Textile manufacturing 39.2 22.6 Pottery and glass 38.4 18.9 Beverages 33.9 22.4 Grain mill products 15.8 8.7 Fabricated metal products 12.4 11.2 Basic metals 11.1 10.2 other mining 6.2 7.4 Cement, lime, plaster 5.9 8.6 Industrial and other chemicals 4.2 9.0 Agriculture and livestock products 1.3 5.7 Printing and publishing -8.6 8.5 Electrical and transport equipment -17.1 22.5 Machinery, excluding electrical -26.5 2.5 Prepared animal feeds (-40.1) a/ 1.0 Petroleum refining (-59.7) a/ 26.4 Other food products (-217.6) a/ 10.6 Tobacco products (-326.6) a/ 88.0 a/ The effective protection measures for these items may be meaningless - almost certainly so in the case of petroleum products and tobacco products. It is true that many petroleum products are sold in Jordan at prices well below the international level but, in this case, the crude oil is custom-processed by the refinery and the losses arising from the difference between the Jordan price level and the world level absorbed in the Government budget. Imports of tobacco products are, with minor exceptions, prohibited. Possibly, the negative protection shown by the consultants results from the tax burden on domestic production but this ignores the fact that the local monopoly can set prices undisturbed by foreign competition. Source; Dar Al Handasah Consultants, Industrial Programming Study, Task 1.18: Tariff and Non-Tariff Protection Policies. Final Draft Report (June 1981), Table 24.  -88- STATISTICAL APPENDIX Table Number 0. Standard Tables 1/ 0.1 National Accounts Summary: in millions of dinars at current prices. 0.2 National Accounts Summary: in millions of US$ at constant 1978 prices 0.3 Balance of Payments: in millions of US$ at current prices 1. Population and Employment 1.1 Population of Jordan by Governorate 1.2 Jordanians Resident in the East Bank, by age and sex, 1979 1.3 Labor Force by Economic Sector 1.4 Labor Force Participation Rates of Jordaniaos, 1979 1.5 Employment by Sector and Occupation, 1979 1.6 Higher Education Enrollments and Projected Labor Force Entrants 2. National Accounts 2/ 2.1 Summary of National Accounts at current prices 2.2 Industrial Origin of Gross Domestic Product at current prices 2.3 National Accounts at 1975 prices 2.4 Industrial Origin of GDP at 1975 prices 2.5 Sectoral Allocation of Investment, 1976-1980 1/ These three tables were prepared in a standardized format to facilitate cross-country comparisons. The presentation, therefore, may differ somewhat from the one used by the Jordanian authorities. 2/ Jordan's national accounts are available at current prices only, even tbough the five-year development plans are basically elaborated at constant prices. For analytical and interpretational purposes, the mission has therefore undertaken to compute a summary of resources and expenditures and of GDP by industrial origin expressed in 1975 prices (Tables 2.3 and 2.4), consistent with the then available official nominal accounts, and based mostly on real activity indicators figuring in various Jordanian statistical publications. More recently, however, Jordan's Department of Statistics has issued a new national accounts volume, covering the period 1975-81, and containing some substantial revisions. Apart from the fact that this new publication became available too late ,for incorporation in this report, there are reasons to view tnese revised accounts with appropriate caution. The revisions have a very partial character: value added was adjusted upward in a number of sectors (e.g. quite substantially in construction, trade and business), almost proportionally throughout the 1975-80 period, with a corresponding increase in private consumption as unique correction on the expenctiture side (which seems to be inconsistent with the correction of underrecorded construction activity). The revisions are undocumented and their origin unexplained. Furthermore, in the absence of corresponding data at constant prices, the interpretation of the nominal revisions in terms of underlying volume and price tendencies is impossible, the more so since none of the relevant activity and price indicators available in other statistical publications have undergone revisions.  - 89 - 3. Balance of Payments 3.1 Summary Balance of Payments 3.2 Detailed Balance of Payments 3.3 Composition of Merchandise Exports 3.4 Composition of Merchandise Imports 3.5 Quantity and Price Indices for Exports 3.6 Quantity and Price Indices for Imports 3.7 Direction of Foreign Trade 3.8 International Reserves 3.9 Quantity of Domestic Exports by Commodity 3.10 Quantity of Imports by Commodity 4. External Debt 4.1 External Public Debt Outstanding as of December 1980 4.2 External Public Debt: Commitments, Disbursements, and Service Payments 5. Government Accounts 5.1 Summary of Central Government Budget 5.2 Central Government Domestic Revenues by Source 5.3 Government Current Expenditures by Sector 5.4 Central Government Expenditures by Ministry 5.5 Central Government External Receipts by Source 5.6 Outstanding Debt of the Central Government 6. Money and Credit 6.1 Monetary Survey 6.2 Factors Affecting Changes in the Money Supply 6.3 Assets and Liabilities of the Central Bank 6.4 Assets and Liabilities of Commercial Banks 6.5 Liquidity of Commercial Banks 6.6 Outstanding Commercial Bank Credit by Sector 6.7 Consolidated Balance Sheet of Specialized Credit Institutions 6.8 Outstanding Claims of Specialized Credit Institutions 6.9 Interest Rates 6.10 Interest Structure of Government Securities 7. Agricultural Statistics 7.1 Agricultural Production 7.2 Agricultural Income 7.3 Area and Land Use 7.4 Livestock 7.5 Number of Cooperative Associations in the East Bank during 1979  - 90 - 8. Industrial Statistics 8.1 Industrial Production 8.2 Structure of Mining and Manufacturing Industries 8.3 Gross Investment in Mining and Manufacturing 8.4 Production, Capacity and Reserves of Crude Phosphate 8.5 Demand and Supply for Cement 8.6 Electricity Generation and Consumption 8.7 Aqaba Port Trade 9. Price Indices 9.1 Cost of Living Index 9.2 Amman Wholesale Price Index 10. Five-Year Plan, 1981-1985 10.1 Summary of National Accounts, 1980-1985 10.2 Industrial Origin of Gross Domestic Product, 1980-1985 10.3 Major Projects by Sector, 1981-1985 10.4 Balance of Payments, 1980-1985 10.5 Exports of Goods and Non-Factor Services, 1980-1985 10.6 Imports of Goods and Non-Factor Services, 1980-1985 10.7 Central Government Budget, 1980-1985  -91- Table 0.1: JORDAN NATIONAL ACCOUNTS SUMMARY (Millions of Jordanian Dinar at Current Prices) 1976 1977 1978 1979 1980 1. Gross Domestic Product 404.7 481.0 589.1 712.0 869.0 2. Resource Gap (M-X) -247.1 -315.4 -340.2 -484.0 -492.0 3. Imports (g+nfs) 430.0 543.4 605.8 824.5 961.8 4. Exports (g+nfs) 182.9 228.0 265.6 340.5 469.8 5. Total Expenditures 1/ 651.8 796.4 929.3 1,196.0 1,360.1 6. Consumption 1/ 501.6 593.9 706.3 916.0 1,004.7 7. General Government 155.9 156.6 190.0 235.3 260.5 8. Private 1/ 345.7 437.3 516.3 680.7 744.2 9. Investment 150.2 202.5 223.0 280.0 356.3 10. Fixed Investment 138.0 197.0 229.1 294.5 350.0 11. Changes in Stocks 12.2 5.5 -6.1 -14.5 6.3 12. Domestic Saving -79.7 -95.8 -118.3 -205.0 -143.9 13. Net Factor Income 137.9 147.1 147.9 167.5 204.9 14. Current Transfer 4.1 -1.1 3.9 -3.6 7.9 15. National Saving 62.3 50.2 33.5 -41.1 68.9 Average Exchange Rates: 16. Dinar per US$ 0.332 0.329 0.307 0.301 0.299 17. Dinar per SDR 0.388 0.388 0.388 0.388 0.388 1/ Includes statistical adjustment due to differences in external data; 1976: 17.2, 1977: 17.1, 1978: -1.1, 1979: -1.0, 1980: -8.2  -92- Table 0.2: JORDAN NATIONAL ACCOUNTS SUMMARY (Millions of US$ at Constant 1978 Prices) 1976 1977 1978 1979 1980 1. Gross Domestic Product 1,649.9 1,748.6 1,918.9 2,127.7 2,360.8 2. Terms of Trade Effect 18.2 -16.5 0.0 -72.5 -73.1 3. Gross Domestic Income 1,668.1 1,732.1 1,918.9 2,055.2 2,287.7 4. Resource Gap (5-6) 903.4 1071.3 1,108.2 1,374.5 1,249.2 5. Imports (g+nfs) 1,572.0 1,845.7 1,973.3 2,341.5 2,441.9 6. Capacity to Import 668.6 774.4 865.1 967.0 1,192.7 7. (Exports (g+nfs)) 650.4 790-9 865.1 1,039.5 1,265.8 8. Total Expenditures 2,571.5 2,803.4 3,027.1 3,429.7 3,536.9 9. Consumption 2,009.3 2,084.8 2,300.7 2,581.3 2,605.9 10. General Government 630.0 555.7 618.9 646.2 650.7 11. Private 1,379.3 1,529.1 1,681.8 1,935.1 1,955.2 12. Investment 562.2 718.6 726.4 848.4 931.0 13. Fixed Investment 512.0 698.3 746.3 892.4 913.5 14. Changes in Stocks 50.2 20.3 -19.9 -44.0 17.5 15. Domestic Saving -341.2 -352.7 -381.8 -526.1 -318.2 16. Net Factor Income 545.1 519.1 481.8 481.1 524.7 17. Current Transfers 16.2 -3.9 12.7 -10.3 20.2 18. National Savings 220.1 162.5 112.7 -55.3 226.7 Dinar Deflators (1978=100) 19. Gross Domestic Product 79.9 89.6 100.0 109.0 119.9 20. Imports (g+nfs) 89.1 95.9 100.0 114.7 128.3 21. Exports (g+nfs) 91.6 93.9 100.0 106.7 120.9 22. Total Expenditures 1/ 82.4 92.3 100.0 113.4 127.2 23. Government Consumption 80.6 91.8 100.0 118.6 130.4 24. Private Consumption 1/ 81.6 92.6 100.0 114.2 127.2 25. Fixed Investment 87.8 91.9 100.0 107.5 124.8 26. Changes in Stocks 79.2 88.1 100.0 107.4 117.2 27. Exchange Rate Index (US cents per Dinar) .923 .931 1.000 1.020 1.026 1/ Calculated to include statistical discrepancy.  -93- Table 0.3: JORDAN BALANCE OF PAYMENTS (Millions of US$ at Current Prices) 1976 1977 1978 1979 1980 1. EXPORTS (g+nfs) 551.0 692.4 865.6 1,132.9 1,572.8 2. Merchandise (fob) 206.9 249.2 296.6 281.3 574.0 3. Non-Factor Services 344.1 443.2 569.0 730.6 998.7 4. IMPORTS (g+nfs) 1,295.2 1,648.4 1,973.8 2,740.3 3,217.5 5. Merchandise (fob) 1,020.3 1,377.2 1,494.9 1,954.6 2,390.6 6. Non-Factor Services 274.9 271.2 478.9 785.7 826.9 7. RESOURCE BALANCE -744.2 -956.0 -1,109.8 -1,607.4 -1,644.7 8. Net Factor Income 415.2 446.7 482.5 557.1 685.9 9. Factor Receipts 449.7 510.7 570.8 686.3 919.2 10. Factor Payments 34.7 63.5 88.7 128.9 232.8 11. (M&LT Interest Paid) 8.0 15.0 24.0 40.0 58.0 12. Net Current Transfers 12.4 -3.4 12.6 -12.0 26.5 13. Transfer Receipts 15.4 5.5 14.8 8.8 34.0 14. Transfer Payments 3.0 8.9 2.2 20.8 7.5 15. CURRENT BALANCE -316.6 -512.7 -614.7 -1,062.3 -932.3 M&LT CAPITAL INFLOW 16. Direct Investment 10.0 11.0 56.0 26.0 31.0 17. Official Grant Aid 369.6 507.0 334.5 1,058.1 1,308.1 18. Net M&LT Loans (DRS) 71.0 190.0 189.0 193.0 232.0 19. Disbursements 91.0 214.0 223.0 250.0 308.0 20. Repayments 21.0 23.0 34.0 56.0 75.0 21. Other M&LT (net -105.3 -49.4 47.8 -25.7 -155.5 22. Net Credit from IMF - - - - - 23. Disbursements - - - - 24. Repayments - - - - - 25. Net Short-Term Capital -20.8 -2.9 6.3 10.6 3.8 26. Capital Flows NEI - - - 4.0 4.0 27. Errors and Omissions -40.9 51.7 102.2 20.9 -128.9 28. Changes in Net Reserves 32.9 -196.7 -120.4 -212.0 -356.1 (-indicates increase)  TABLE 1.1 : ESTIMATED POPULATION OF JORDAN BY GOVERNORATE (1) ( IN THOUSANDS ) 1961 1975 1979 1980 AMMAN 434 957 1185 1233 MALE 231 509 621 646 FEMALE 203 448 564 587 BALGA 79 130 151 156 MALE 40 66 79 82 FEMALE 39 64 72 74 IRBID 273 564 609 634 MALE 137 286 314 327 FEMALE 136 278 295 307 KARAK 67 108 126 132 MALE 35 55 66 69 FEMALE 32 53 60 63 MA'AN 47 52 75 78 MALE 26 26 42 44 FEMALE 21 25 33 34 TOTAL 900 1811 2147 2233 MALE 469 942 1122 1167 FEMALE 431 869 1025 1066 SOURCE:STATISTICAL YEARBOOK FOR 1961 AND 1975; CENSUS DATA FOR 1979; DEPT. OF STATISTICS FOR 1980. (1) POPUlATION ESTIMATES ARE AS OF THF CENSUS DAYS: NOVEMBER 18, 1961 AND NOVEMBER 10, 1979; ESTIMATES FOR 1975 ARE FOR THE END OF THE YEAR; 1980 ESTIMATES BY THE DEPARTMENT OF STATISTICS. EMENA CP II C 09/29/82  - 95 - TABLE 1.2:JORDANIANS RESIDENT IN THE EAST BANK, BY AGE AND SEX, 1979 Males Females Total Sex Age No. % No. % No. % Ratio 0-4 200.4 19.4 193.8 19.2 394.2 19.3 103.4 5-9 183.3 17.7 175.8 17.4 359.1 17.6 104.3 10-14 155.7 15.0 148.6 14.7 304.3 14.9 104.8 15-19 118.5 11.4 106.1 10.5 224.6 11.0 111.7 20-24 72.2 7.0 76.2 7.6 148.4 7.2 94.8 25-29 48.6 4.7 55.0 5.5 103.6 5.1 88.4 30-34 49.2 4.8 48.9 4.9 98.1 4.8 100.6 35-39 46.9 4.5 45.2 4.5 92.1 4.5 103.8 40-44 40.8 3.9 43.4 4.3 84.2 4.1 94.0 45-49 33.4 3.2 31.3 3.1 64.7 3.1 106.7 50-54 26.4 2.5 22.3 2.2 48.7 2.4 118.4 55-59 18.0 1.7 18.2 1.8 36.2 1.8 98.9 60-64 15.4 1.5 13.7 1.4 29.1 1.4 112.4 65-69 9.8 0.9 9.4 0.9 19.2 0.9 104.3 70 + 18.0 1.7 20.1 2.0 38.1 1.9 89.6 TOTAL 1,306.6 100.0 1,008.0 100.0 2,044.6 100.0 102.8 Source: Advance Tabulations of the Housing and Population Census, 1979.  TABLE 1.3 : ESTIMATED LABOR FQ.NCE BY ECONOMIC SECTOR ( IN THOUTDS ) 1970 1972 1975 1979 EMPLOYMENT BY SECTOR: AGRICULTURE 58.2 54.2 48.8 42.1 MINING AND QUARRYING 2.4 2.0 2.6 4.4 MANUFACTURING 25.9 27.3 33.8 40.8 ELECTRICITY. GAS & WATER 1.6 1.7 2.6 5.4 CONSTRUCTION 25.3 25.1 29.9 67.3 WHOLESALE/RETAIL TRADE (1) 40.7 53.8 59.3 40.6 TRANSPORT & COMMUNICATION 18.2 21.3 28.5 32.2 FINANCE & BUSINESS SERVICES (2) 4.0 5.2 7.2 9.5 PUBLIC ADMINISTRATION/DEFENSE 111.4 106.0 121.6 151.0 OTHER SERVICES (3) 0.0 17.7 21.0 27.8 TOTAL EMPLOYMENT 291.6 314.4 355.2 421.1 SEEKING WORK 10.0 9.1 6.9 39.1 TOTAL LABOR FORCE 301.6 323.5 362.1 460.2 TOTAL POPULATION 1508.2 1617.5 1810.5 2147.1 LABOR FORCE PARTICIPATION RATE 20.0 20.0 20.0 21.4 SOURCE: 1970 FROM SECTOR REPORT ON MANPOWER; 1972 AND 1975 FROM FIELO/ HOUSEHOLD SURVEYS; 1979 FROM ADVANCED TABULATIONS OF POPULATION CENSUS RETURNS. (1) INCLUDES RESTAURANTS AND HOTELS (2) INCLUDES INSURANCE AND RESL ESTATE (3) INCLUDED IN PUBLIC ADMINISTRATION FOR 1970 EMENA CP II C 09/29/82  - 97 - Table 1.4: LABOR FORCE PARTICIPATION RATES OF JORDANIANS NOT ENROLLED IN SCHOOL. BY AGE. SEX AND EDUCATIONAL ATTAINMENT. 1979 Post- Post- Un- Illiterate Literate Primary Preparatory Secondary Secondary University University Specified Total tales 5-19 93.9 97.2 99.7 100.0 100.0 100.0 100.0 - - 99.0 0-24 95.4 99.3 99.3 99.6 100.0 100.0 100.0 100.0 - 99.3 5-29 98.8 99.3 99.3 99.3 98.4 100.0 100.0 100.0 - 99.3 0-34 99.2 99.5 99.0 98.5 99.3 100.0 100.0 100.0 - 99.3 5-39 99.0 99.2 98.5 97.0 100.0 100.0 100.0 100.0 - 98.9 0-44 97.7 97.8 98.2 94.8 98.3 100.0 96.4 100.0 - 97.6 5-49 96.6 97.6 96.0 92.6 89.4 71.4 100.0 100.0 - 96.2 0-54 93.1 96.2 95.4 77.7 100.0 100.0 92.3 - - 93.9 5-59 90.1 81.8 86.6 94.4 73.6 100.0 75.0 - - 86.4 0-64 70.0 76.3 80.9 75.0 70.0 - 83.3 75.0 - 72.7 5 + Dtal 80.7 93.2 97.6 97.4 97.6 99.1 98.3 97.3 - 92.7 amales 5-19 6.3 6.0 5.3 7.2 32.6 100.0 - - - 7.4 )-24 1.4 2.0 4.8 6.6 35.8 93.7 83.7 50.0 100.0 17.1 5-29 0.6 1.6 1.8 8.6 47.4 84.2 81.3 100.0 - 14.1 )-34 0.3 4.6 2.9 6.4 31.3 90.9 70.8 100.0 - 7.4 j-39 1.1 0.7 0.9 4.3 33.3 85.7 80.0 100.0 - 4.6 )-44 1.3 1.0 10.8 6.8 30.4 66.6 50.0 - - 3.5 i-49 1.8 - 9.5 16.6 14.2 - 66.6 100.0 - 2.9 )-54 0.8 - - 12.5 - - - - - 0.9 i-59 0.5 8.6 5.2 - - 100.0 - - 1.4 )-64 0.3 - 8.3 - 20.0 - 50.0 - - 1.2 )tal 1.3 2.8 4.3 7.1 35.3 89.0 77.7 77.7 100.0 7.6 )TAL 1-19 21.0 44.4 53.2 59.9 74.2 100.0 100.0 - - 49.0 )-24 17.5 41.4 58.3 56.9 71.9 96.8 93.5 83.3 100.0 55.7 i-29 15.9 46.0 53.8 62.1 80.9 92.2 94.1 100.0 - 53.9 )-34 17.7 .55.8 65.2 69.6 82.1 96.2 95.3 100.0 - 53.5 -39 23.2 66.5 71.3 73.4 79.3 95.2 97.0 100.0 - 52.4 1-44 28.5 73.2 72.4 70.7 79.5 92.8 88.2 100.0 - 49.0 -49 33.2 78.0 77.2 75.4 57.5 71.4 88.8 100.0 - 50.9 -54 32.2 83.3 80.9 62.8 59.0 100.0 85.7 - - 51.0 -59 30.7 70.1 67.0 80.6 66.6 100.0 75.0 - - 43.5 '-64 30.8 61.7 54.5 69.2 53.3 - 75.0 75.0 - 39.1 + 15.0 37.3 27.7 22.2 25.0 - 62.5 100.0 - 18.3 tal 24.2 58.9 61.0 63.0 75.5 94.5 93.3 95.2 100.0 49.1 urce: Advance Tabulations of the Population Census, 1979.  IC J1 C C C0 C C C C C C C C C C C 00 rC ' ' 9C C C ', C; C 9 C C C C CI I I 9 C C. C. . .C C C ~ C CCC?... ... CC CC CC CC ... ... ... ... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ C C CC C C C CCC C C a a CCCC CC C C C9 CCC. 99 ~~~~~~~9C 99 999 III CIC C9C CIC 999 CCC CCC C9C CCC~~~~~~~~~~~~~~~~~~~~~~z " C C C C C C C C C CCC C . . C.C..C.C .CC . . C . C C C C C C C C C  - 99 - TABLE 1.5: OOPWYMEST OP JORDANIAN NATIONALS & NO8-NATIONALS BY SECTOR & OCCUPATION 1979 (Continued) (B-3) (C-1) (C-2) (D-1) (D-2) (E) Blue Collar Skilled Manual Semi-Skilled Skilled Office Supervisors & Skilled Office & Services Manual & Service Unskilled Foremten Occupations Occupations Occupatlone Occupations Occupations Total No. Percent No. Percent No. Percent No. Percent No. Percent No. Percent No. Tercent riculture S Fishing Nationals 39 0.1 78 0.2 17,836 45.7 20,021 51.3 351 0.9 - - 39,027 100.0 Non-Nationals - - - - 256 8.3 2,693 87.5 129 4.2 - - 3,078 100.0 Total 39 0.1 78 0.2 18,092 43.0 22,714 53.9 480 1.1 - - 42,105 100.0 ning & Quarrying fationais 158 4.9 264 8.2 846 26.3 1,374 42.7 52 1.6 264 8.2 3,218 100.0 ion-Nationals - - - - 422 36.4 475 40.9 - - - - 1.160 100.0 total 158 3.6 264 6.0 1,268 29.0 1,849 42.2 52 1.2 264 6.0 4,378 100.0 croleue & Chemical Mnufacturing 4ationals 299 9.2 215 6.6 640 19.7 939 28.9 299 9.2 429 13.2 3,249 100.0 ion-Nationals - - - - 213 21.7 299 30.46 - - 299 30.4 983 100.0 :otai 299 7.1 215 5.1 853 20.1 1,238 29.2 299 7.1 728 17.2 4,232 100.0 -metallic Mineral Product Manufacturing ationals - - 86 6.9 342 27.6 513 41.4 715 17.3 42 3.4 1,240 100.0 on-National. 300 8.5 - - 1,160 32.9 860 24.4 42 1.2 388 11.0 3,525 100.0 otal 300 6.3 86 1.8 1,502 31.5 1,373 28.8 257 5.4 430 9.0 4.765 100.0 er Manufacturing ationals 657 2.4 931 3.4 11,694 42.7 11,530 42.1 548 2.0 876 3.2 27,387 100.0 on-Nationala - - SO 1.8 l.957 44.1 1,958 44.1 40 0.9 - - 4.439 100.0 otal 657 2.1 1,011 3.2 13.651 42.9 13,488 42.4 588 1.8 876 2.7 31,826 100.0 otricity & Watet stionale 342 6.9 729 14.7 2.182 44.0 684 13.8 169 3.4 84 1.7 4,958 100.0 1e-Nationals - - - - 299 70.0 - - 43 10.0 _ - 428 100.0 'tal 342 6.3 729 13.5 2,481 46.1 684 12.7 212 3.9 84 1.6 5.386 100.0 3truction atienale 979 1.9 619 1.2 1,443 2.8 43.303 84.0 670 1.3 2.371 4.6 51,551 100.0 mn-Natioea.I 599 3.8 46 0.3 2,305 14.6 9,566 60.5 173 1.1 1.658 10.5 13,796 100.0 'tal 1,578 2.3 665 1.0 5,748 5.6 52,869 78.5 843 1.3 4.,J29 6.0 67,347 100.0 esale 6 Retail Trade, taurants 6 Horael utiomnls 37 0.1 1,285 3.5 3.305 9.0 2,974 8.1 5,691 15.5 1.028 2.8 36,718 100.0 n-Natienals - - 169 4.4 1,027 26.7 812 21.1 600 15.6 258 6.7 3,847 100.0 'tal 37 0.1 1,454 3.6 4.332 10.7 3,786 9.3 6,291 15.5 1,286 3.2 40,565 100.0 .portation tionees 126 0.4 881 2.8 440 1.4 28,567 90.8 598 1.9 346 1.1 31,461 100.0 n-Nationala - - 85 11.1 85 11.1 428 55.5 43 5.6 85 11.1 769 100.0 'tal 126 0.4 966 3.0 525 1.6 28,995 90.0 641 2.0 431 1.3 32,230 100.0 nce, InaSurance, Real Estate .einees Services tional 45 0.5 2,604 29.0 296 3.3 45 0.5 251 2.8 853 9.5 8,977 100.0 n-Netionala 43 8.3 85 16.7 - - - - 43 8.3 42 8.3 513 100.0 tal 88 1.0 2.689 28.3 296 3.1 45 0.5 294 3.1 895 9.4 9.490 100.0 ic Administration & tionals 13,548 9.2 14.431 9.8 6,332 4.3 11,044 7.5 7,657 5.2 54,044 36.7 147,259 100.0 -Nationals 86 2.3 86 2.3 - - 896 24.1 44 1.2 1.625 43.7 3.719 100.0 :aI 13.634 9.0 14,517 9.6 6.332 4.2 11,940 7.9 7,701 5.1 55,669 36.9 150,978 100.0 r Cormunity Social & .o..I Services .ionals 203 0.9 766 3.4 6.713 29.8 3,086 13.7 2.703 12.0 1,149 5.1 22,527 100.0 -Nationals - - 258 4.9 941 17.9 599 11.4 2.135 40.6 342 6.5 5,258 100.0 .al 203 0.7 1,024 3.7 7,654 27.5 3,685 13.3 4.838 17.4 1.491 5.4 27.785 100.0 odenals 16,433 4.3 22.889 6.1 52,069 13.8 124,080 32.9 19,204 5.1 61,486 16.3 377,572 100.0 -Nationals L.0C8 2.3 809 1.9 8,665 19.9 18,586 42.7 3,292 7.6 4,697 10.8 43.515 100.0 al 17,461 4.1 23,698 5.6 60.734 14.5 142,666 33.9 22,496 5.4 66,183 15.7 421,087 100.0 cM: Advance Tabulation of Population Census, 1979,  - 100 - Table 1.6: HiRher Education Enrollments and Projected Graduates and Labor Force Entrants 1980-1985, by Field of Specialization (000's) a/ Enrollments Number of Graduates 19L0-85 Average Annual Projected to Field of Specialization Growth Rate Number Total Enter East Bank and Place of Study 1974/15-1979/80 (Z) in 1979/80 Labor Force d/ NATURAL AND AGRICULTURAL SCIENCES 15.2 8.7 13.6 8.4 in Jordan 20.3 2.9 4.6 4.0 abroad 13.7 5.8 9.0 4.4 ARCHITECTURE & ENGINEERING 27.7 15.5 21.3 13.0 in Jordan - b/ 0.8 4.9 4.9 abroad 26.4 14.7 16.3 8.1 MEDICAL SCIENCES c/ 1.4 9.7 7.9 4.2 in Jordan 12.8 1.4 0.5 0.5 abroad 0.1 8.3 7.5 3.7 EDUCATION c/ 22.4 11.3 37.4 31.4 in Jordan 21.6 9.5 34.7 30.1 abroad 25.4 1.8 2.7 1.3 OTHER FIELDS 11.8 41.8 60.9 33.4 in Jordan 17.8 5.8 9.1 8.3 abroad 10.9 35.9 51.9 25.1 Economics & Administration 63.5 11.8 17.3 10.2 in Jordan 17.5 2.3 3.6 3.4 abroad n.a. 9.5 13.8 6.8 Law and Sharia 15.2 5.5 8.0 4.6 in Jordan 20.1 1.1 1.7 1.5 abroad 14.1 4.4 6.3 3.1 Arts 3.9 24.5 35.6 18.6 in Jordan 17.1 2.5 3.8 3.4 abroad 2.8 22.0 31.8 15.2 POST-SECONDARY COMMERCIAL STUDIES 75.8 3.7 14.6 14.5 (all in Jordan) POST-SECONDARY ENGINEERING AND COMPUTER STUDIES 56.9 2.4 6.4 6.4 Call in Jordan) Notes: a/ sums of individual items may not equal totals due to rounding. b/ university engineering faculty did not exist in 1974/75. c/ Medical Sciences includes post-secondary nursing and health manpower institutes as well as university enrollments; Education includes post-secondary iteacher training institutes as well as university enrollments. d/ East Bank labor force participation by graduates of higher education institutions abroad is assumed to be at only one-half of the rates of comparable graduates of institutions in Jordan. Source! Ministry of Education Statist