Jordan - Emergency Recovery Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No.P-5469-JO MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN OF US$10.0 MILLION TO THE HASHEMITE KINGDOM OF JORDAN FOR AN EMERGENCY RECOVERY PROJECT MARCH 4, 1991 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 witbout W orld Bank authorization.  Currency Equivalents Currency Unit - Jordanian dinar (JD) US$1.00 - JD .650 (December 1990) Nessures 1 kilometer (km) - 0.62 miles Abbreviations and Acronyms BOP Balance of Payments CBJ Central Bank of Jordan ERP Emergency Recovery Project GOJ Government of Jordan HRDSIL Human Resources Development Sector Investment Loan HSDL Health Sector Development Loan IDB Industrial Development Bank IMF International Monetary Fund ITPAL Industry and Trade Policy Adjustment Loan JCCC Jordan Commercial Centers Corporation JIM Jordan Institute of Management LGTF Loan Guarantee Trust Facility MOA Ministry of Agriculture MOE Ministry of Education MOF Ministry of Finance MOH Ministry of Health MOIT Ministry of Industry and Trade MPWH Ministry of Public Works and Housing MOS Ministry of Supply PHC Primary Health Care Centers PTC Public Transport Corporation SEMD Support for Export Market Development SME Small- and Medium-Scale Enterprises WAJ Water Authority of Jordan Government of the Hashemite Kingdom of Jordan Fiscal Year January 1 - December 31  FOR OFFICIAL USE ONLY iit THE HASHEEITE KINGDOM OF JORDAN MER-GKNCY RECOVERY PROJECT Loan Summary Borrower: The Hashemite Kingdom of Jordan Beneficiaries: The Ministries of Education, Health, Public Works and Housing, and Water and Irrigation; and the Public Transport Corporation Loan Amount: US$10.0 million equivalent Terms: 17 years, including 5 years grace, at the standard variable interest rate Financing Plan: USS million IBRD 10.0 Switzerland 25.0 Sweden 10.0 Canada 7.3 Luxembourg 1.3 Governtment 6.4 Total 60.0 Economic Rate of Return: Not applicable Staff Appraisal ReRort: Not applicable. A Technical Annex has been prepared This document has a iestricted distribution and may be used by recipients only in the perforn anae of their official duties. Its contents may not otherwise be disclosed without World Bank author&'atlon  MEMORANDUM AND REt,_M*ENDATION OF ITIE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE HASHEMITE KINGDOM OF JORDAN FOR AN EMERGENCY RECOVERY P'ROJECT 1. I submit for approvat the following report and recnM1!endat1ion Cn a propos-d loan for the equivalent of US$10 million to the Hashtemite Kingdom of Jordani to help meet the incremental needs generated by Jordanians returning home as a result of the Gulf crisis. The proposed loan would have a term of 17 years, includinlg a grace period of five years, at the Bank's standard variable interest rate. The proposed loan would hlelp finance the proposed US$60 million Emergency Recovery Project (ERP) which represents a part ot the Government's US$235 million Emergency Response Program (para. "'. 2. Background. Jordan is the most seriously affected front-line country involved in the Gulf crisis and needs substantial levels of quick-disbursing emergency assistance to cover the costs associated with the crisis. Prior to the crisis, an estimated 1.2 million Jordanian workers resided in Iraq, Kuwait and other Gulf states. Of this total, an estimated 400,000 were located in Iraq and Kuwait alone. By November 1990, an estimated 200,000 Jordanians had already returned home, and Government and ILO projections suggest that the final returnee total from Iraq, Kuwait, Saudi Arabia and other Gulf states may be as high as 400,000, or 13 percent of Jordan's population (para. 2.01 of the Technical Annex). 3. By late 1990, the economic and financial burden of absorbing even the initial returnee influx was already proving to be formidable in light of the severe impact of the Gulf crisis on the already weak economy. With the worsening of the economic situation in 1991, the task of meeting the needs of the returnee influx through domestir financing is becoming increasingly difficult. The main effects of the crisis, -sed on pre-war estimates, are as follows: (a) Financial Impact: The financial costs of the crisis are estimated at US$1 billion in 1990 and US$2.4 billion in 1991, equivalent to about 30 percent and 60 percent, respectively, of GDP. These costs, aggregated for the 1990/91 period, include, inter alia, lost remittances (US$650 million), exports (US$840 million), tourism revenues (US$1.1 billion), and transportation receipts (US$340 million). For 1991, these losses, combined with higher current budgetary expenditures for the incremental needs of returnees, are estimated to lead to a budgetary deficit of US$770 million equivalent. (b) Output and Emplo3ment: Productive sector outpu. has declined as a result of lost export markets and other costs of the crisis. Estimates suggest that GDP for 1990 has declined by 9 percent, reflecting, inter alia, output reductions of nearly 10 percent in manufacturing, 25-30 percent in agriculture, and 13 percent in transport. The combination of declining output and the influx of returnees is likely to have a massive adverse labor market effect. Jordan's pre-crisis unemployment rate was estimated at 16 percent, or about 96,000 workers. The joint impact of returnee workers and job losses in the domestic economy (e.g., as a result of the trade embargo, 15,000 transport workers are already unemployed) is likely to nearly double joblessness. (c) Physical Impact: Providing essential social services and infrastructure support for the returnees has taxed an already overburdened public sector. In the education sector, some 42,000 children of returning Jordanians had already enrolled in schools by late 1990; in response, the Government has had to hire additional teachers, increase the number of students per classroom, construct  2 sanitarv facilities, and rent buildings to serve as temporary classrooms. In the heialth sector, medical facilities have run out of supplies owing to the returnee itnflux as well as the estimated 800,000 refugees that passed through Jordan; and hiring of additionial staff and intensive maintenance of hospitals and medical equipment hlave become essential. The returnee population has generated an iticremental demand for potable water of about 26 million cubic meters per annum, or about 15 percent of Jordan's consumption. Considering that water had already been rationed for some time, it is necessary to expand the capacity of the system. The combination of returnee and refugee inflows has also overstretched the highways and public transportation sectors. The incremental traffic generated by the Gulf crisis has amounted to a peak level of over 3,000 vehicles per day, which in turn has led to severe deterioration of over 7 percent of the existing highway network. Similarly, the intensive use of the aging bus fleet coupled with the poor road conditions serving the refuge reception camps has caused about one third of the Public Transportation Corporation's fleet of vehicles to be written off. 4. Government Strategy and Emergencv Response Progrs. The response of the donor community to Jordan's crisis-related needs is being coordinated by the Gulf Crisis Financial Coordination Committee (GCFCC). Bank staff have participated as observers and have provided technical support to the GCFCC in defining and supporting Jordan's financing requirements. In addition, the Government requested Bank assistance in assessing the requirements for responding to the needs of the returning Jordanians as a result of the Gulf crisis. A Bank mission visited Jordan between November 17 and December 6, 1990, and jointly with the Government prepared and appraised an Emergency Response Program, costing US$235 million. The Program is designed to be supported by donors and implemented over a two-year period, and is an integral part of the overall donor effort to help offset the financial costs to Jordan resulting from the Gulf crisis, amounting to about US$3.4 billion during 1990-1991. To help Jordan finance the costs of the crisis, bilateral pledges of assistance totaling just over US$1 billion had been received as of February 1991 (para. 2.27 and Table 2.02 of the Technical Annex); the funds actually disbursed to the Government as of mid-February represented less than half of this amount, and are already being utilized to meet the most immediate needs of the population, including the returnees. Since even the total volume of pledges to date covers less than one third of Jordan's overall needs, significant additional assistance still must be mobilized during the coming months to meet the requirements of the general population, as well as of the returnees. The Government has made intensive efforts to obtain donor assistance bilaterally and has also sought Bank assistance in mobilizing support from those donors who wish to channel their funds through the vehicle of a Government/Bank project. To supplement the Government's efforts, the Bank has had extensive contacts with potential cofinanciers. Some of the donors contributing to the pledged US$1 billion considered cofinancing the Program with the Bank but, in order to help meet the urgent needs of the Jordanian Government and in line with the GCFCC decision to provide immediate assistance, committed their contributions for general purposes. 5. As a result of some of the donors' decisions to provide direct balance of payments support, a relatively smaller amount of bilateral cofinancing has so far been made available for the Emergency Response Program. The cofinanciers for the project are: Canada (US$7.3 million); Luxembourg (US$1.3 million); Sweden (US$10 million); and Switzerland (US$25 million). In order to utilize these funds immediately, the Government has decided to proceed now with a core Emergency Recovery Project (ERP) of US$60 million (comprising the above bilateral financing, a US$10 million Bank loan and a US$6.4 million Government contribution) that incorporates all of the critically needed social services and infrastructure  3 components of the Program, while retaining the flexibility to expand the project scope as more financing becomes available. The Government has asked that the Bank continue to help mobilize additional donor cofinancing for the wider Program. These efforts are continuing and when financing materializes, they will be used to support appraised Progr:im components not funded under the currently proposed ERP (paras. 8 and 9). 6. Rationale for Bank Involvement. Bank support for the Emergency Recovery Project (ERP), comprising key elements of the Emergency Response Program, is essential to meet the needs of the sudden and significant influx of returnees, and is appropriate on several grounds. First, it would respond to the "returnee dimension" of the crisis by covering Jordan's most critical returnee-based needs over a two-year time frame. These needs are distinct from relief efforts already addressed by other agencies. Second, the project falls within the broader framework of the "Special Program of Bank Assistance in Response to the Gulf Crisis.' Third, the suddenness and severity of the returnee-generated financial burden represents "an extraordinary event of limited duration" that qualifies Jordan for support under Bank guidelines for emergency recovery loans. The Bank's experience with previous emergency operations makes it well suited to provide the targeted, quick-disbursing assistance that Jordan needs. In this context, the lessons learned from Bank experience in emergency projects in other countries have been taken into account, particularly by simplifying project design and managing the project through existing institutions which have implemented previous Bank- financed projects. 7. Prolect Objective. The objective of the project is to support a set of core components from the Government's Emergency Response Program that would help meet immediate, incremental, returnee-induced needs for essential social services and physical infrastructure and to assi.t in returnees' integration into the economy by creating jobs associated with these expenditures. 8. Frolect Description. The project, to be implemented over a maximum of two years, would provide financing for the following components: (a) Education. The provision of teaching/learning materials, classroom equipment and furniture, building materials/equipment for sanitary facilities, maintenance services, rental payments for space to serve as temporary classrooms, and salaries for additional teachers (US$16.9 million); (b) Health. The provision of urgently needed medical supplies and drugs; salaries for additional medical staff; and intensive maintenance services to cope with the incremental load on physical plant and equipment (US$9.3 million); (c) Public TransRort. The replacement of about 100 of Greater Amman's aging fleet of 300 buses, which were badly damaged as a result of transporting returnees and refugees and their belongings; and the procurement of spare parts and workshop eqluipment (US$5.8 million); (d) Water SUPPlV and Sewerage. The expansion of facilities to meet estimated additional water demand of 26 million cubic meters per year, by financing new wells, increasing pumping capacity, constructing new water mains, increasing home connections, reducing water losses from ieakage in the existing distribution system, and expanding waste water and sewerage disposal systems to cope with the increased volume of effluent (US$20.5 million); and  4 (e) Highways and Roads. The provision ot urgently needed rehabilitatiot and maintenance feor about 3'35 km. of nTain roads between Azraq in northeast Jordan and Amman that were damaged by the extremely heavy refugee/returnee traffic (US$/1. million). 9. Scope for Expansion of the Proposed Project. Should additional resources become availahle from the itntertnatiotial donor community, the project scope would be expanded to support one or more of the following four components, depending on donor preferences: (a) Essential Food Supplies. Procurement of staple food products such as cereals, sugar, meat and milk powder, which Jordan cannot produce in adequate quantities and needs to import, and which are required to meet the incremental demand generated by the influx of returnees (US$66.5 million); (b) Inputs for Agriculture. Industry and Construction. Financing for essential raw materials, intermediate goods and spare parts to help restore output and employment in the productive sectors and to help meet the incremental, returnee-induced needs (US$88.5 million); (c) Technical Assistance for Export Market Development. Promotion of export-oriented activities and employment through technical assistance for industry-level market surveys; the establishment of marketing services in designated countries to promote market/product identification and export sales; and the product development efforts of individual exporters to help offset the loss of the Iraqi and Gulf markets (US$5 million); and (d) Loan Guarantee Trust Facility. Financing to expand an existing loan guarantee facility to enable returnees lacking collateral to obtain credit for starting new small businesses, and to assist existing viable but collateral- scarce businesses to expand their operations and employment. The facility would be available for a period of two years and would provide loan guarantees of up to US$100,000 (US$15 million). 10. Proiect Cost and Financing. The total cost (including contingencies) of the Government's Emergency Response Program is estimated at US$235 million, .fith a foreign exchange component of US$219 million (or 93 percent). The proposed project represents a self-contained portion of the Emergency Response Program and will fully cover the financing requirements for meeting the incremental needs generated by the returnee influx in the education, health, transport, water supply and highways sectors. The total cost of the project is estimated at US$60 million, of which the foreign exchange component amounts to US$43.7 million (73 percent). The Bank's contribution of US$10 million will cover about 17 percent of total costs, including 13 percent of the foreign exchange and 26 percent of local cost requirements. The Government contribution of US$6.4 million will cover 39 percent of the local cost requirements of the project. In addition, the Government intends to use some of the counterpart funds available from the bilaterally pledged US$1 billion (para. 4) to help finance part of the increase in budgetary expenditures related to returnee-induced need. II. Project financing from Sweden, Switzerland, Canada and Luxembourg, totaling US$43.6 million, will together finance 87 percent of the foreign and 35 percent of the local costs. The Canadian and Swedish contributions will be provided on a joint financing basis and administered by the Bank; the cofinancing from Switzerland and Luxembourg will be on a parallel basis. Proceeds of the Bank loan will be disbursed against approved lists of equipment and spare parts for the  5 public transport component, and against documented payroll statewents for additional educational and medical personnel hired subsequent to August 15, 1990 to meet returnee-induced incremental demand for services. Upon project completion, the Government will absorb the salaries of these additional staff. The Swedish and Canadian cofinancing is expected to be applied to the education and health components, The Swiss and the Luxembourg contributions are expected to finance the water supply and highways components. The project cost and financing plan have been agreed with the donors and are provided in Schedule A and further detailed in paras. 4.01-4.05 of the Technical Annex. Amounts and methods of procurement and the disbursement schedule are shown in Schedule B. After the loan has been made effective, a Special Account will be established in U.S. dollars in the Central Bank of Jordan (CBJ) with an initial deposit of US$2 million. Retroactive financing of up to US$2 million from the proceeds of the Bank loan is proposed to cover eligible project expenditures incurred before loan signing, but after January 1, 1991. The Bank loan is expected to be disbursed by the end of FY93. The timetable of key processing events and the status of Bank operations in Jordan are presented in Schedules C and D, respectively. 12. Implementation Arrangements. The project will be implemented by existing agencies, all of which have been involved ir Bank-financed operations of the type being financed under the ERP, and are familiar with Bank procedures and implementation arrangements. Their activities will be supervised at the operational level by a Project Coordination Unit which is already functioning with experienced full-time staff in the Ministry of Planning. A high-level Task Force, comprising the Governor of the Central Bank and the Ministers of Finance, Planning, and Industry and Trade, has been established to provide the oversight function. Day-to-day administration of social service components will be handled by the Ministries of Education and Health, and of infrastructure components by the Ministries of Water and Irrigation, Public Works, and Transport. The Government will apply standard cost recovery practices with respect to revenue-earning project components. To ensure quick disbursement, monitor progress towards timely and successful implementation, and agree on necessary adjustments in light of evolving needs, the Government and the Bank will hold semi-annual reviews of progress based on an action program incorporating monitoring benchmarks for each component (para 14). 13. Environmental Aspects. The proposed project has been reviewed under the provisions of Operational Directive 4.00, Annex A, "Environmental Assessment." The components concerning water supply and sewerage, and highways and roads, have been placed in environmental screening category "B" and would be addressed through the use of agreed design criteria. The remaining project components would have no environmental impact and have been placed in environmental screening category "C." 14. AUreements Reached. Government agreement has been obtained on an action program and monitoring benchmarks for implementing the ERP (Appendix I of the Technical Annex). The Government has also given assurances that the existing Project Coordination Unit and high-level Task Force will be maintained throughout the life of the project. 15. Benefits. The project would assist Jordan in coping with the main consequences of the returnee influx, by helping to maintain essential services to meet basic returnee needs, such as education, health, water and transport. In addition, in providing these essential services, ap'roximately 1,600 jobs, ranging from teachers, nurses and doctors to engineers and c.r.struction workers, would be created: no problems are envisaged with regard to sustainability (Technical Annex para. 5.01). Should additional financing become available, the provision of  6 support to the private sector through the export promotion component would help stimulate the economy and help maintain and open up employment: the loan guarantee facility (which would initially be expected to help finance about 750 jobs), and the importation of necessary productive sector inputs would also provide substantial stimulus to production and employment. 16. Risks. The risk of implementation delays has been minimized by designing simple project components and extending existing impleme-ntation mechanisms, including centralized coordination among implementation units within each project agency. In addition, the Bank has had a long relationship with each of the implementing agencies and sectors. To ensure quick disbursement, the Government has already prepared most of the tender documents. 17. Recommendation. I am satisfied that the proposed loan complies with the Articles of Agreement of the Bank, and recommend that the Executive Directors approve the proposed loan. Barber B. Conable President Attachments Washington, D.C. March 4, 1991  Schedule A THE HASHEMITE KINCDOM OF JORDAN IMRGENCY RECOVERY PROJECT Rstimated Cost and Financing Plan Estimated Project Cost a/ Local Foreign Totaibl ----- (US$ million)-------- 1. Education Sector 8.4 6.9 15.3 2. Health Sector 4.6 3.8 8.4 3. Water Supply & Sewerage -- 17.8 17.8 4. Highway Sector 2.2 4.4 6.5 5. Public Transport Sector -- 5.0 5.0 Total Base Costbl 15.1 38.0 53.1 Physical Contingencies 0.5 3.8 4.3 Price Contingencies 0.7 1.9 2.6 Total Project Costbl 16.3 /437 60 Notes. a/ Exclushe of taxes and duties. b/ Totals may not add up due to rounding. Financing Plan Local Foreign Totalb/ ------(US$ million) ----- Bank 4.2 5.8 10.0 Switzerland 0.8 24.2 25.0 Sweden 5.0 5.0 10.0 Canada -- 7.3 7.3 Luxembourg -- 1.3 1.3 Government 6.4 -- 6.4 a/ Totalb/ 43.7 60.0 Notes a, Including local taxes and dutfes of US$2 million equivalent. b/ Totals may not add up due to rounding.  8 Schedule B TUE HASHENITE KINGDOM OF JORDAN EMERGENCY RECOVERY fROJECT Procurement Kethods and Disbursements Procurement Methods Procurement Methods ICB ILSa/ Otherb/ N.A. Total'l --(US$ million)-------------- Civil Works - 7.5 -- 7-5 Special Maintenance 2.8 -- 2.8 Equipment & Materials 3.5 2.3 25.8 31.6 (3.5) (2.3) -- -- (5.8) Furniture -- -- 2.1 -- 2.1 Textbooks -- -- 0.5 -- 0.5 Medical Supplies -- 2.8 2.8 School Rent -- -- -- 1.3 1.3 Incremental salaries -- -- -- 11.4 11.4 (4.2) (4.2) TOTALc/ 3.5 2.3 25.8 15.5 60.0 (3.5) (2.3) (4.2) (10.0) Notes. Amounts tn parentheses represnt Bantt financing. al International or local shopping b/ Other donors procedures ci Totals may not add up due to rounding IBRD Disbursements Expenditures to be Financed Amount (USS million) Category X Equipment and 5.2 100% of foreign, 100% local Materials (ex-factory cost), and 80% of local expenditures for other items procured locally Incremental salaries 3.8 90% of local expenditures Unallocated 1.0 TOTAL 10.0  9 Estimated IBRD Disbursements Batik F'i seal Year FIY91 FY92 F\VY9 - - - US$ inil1 iozi - -- Aritiual 31) 5.0 2.0 Cumulative 3.0 8,( 10.0  10 Schedule C THE HASHENITE KINGDON OF JORDAN EMERGENCY RECOVERY PROJECT Timetable of Key Prolect Processing Events 1. Time Taken to Prepare Three months 2. Prepared By The Government and Bank staff 3. First IBRD Mission November 17, 1990 4. Appraisal Mission Departure Same as above 5. Negotiations February 25, 1991 6. Planned Date of Effectiveness May 1991 7. List of Relevant PCRs and PPARs None  it Sclwdu] t) I'agc. I of 2 THE HASHKMITE KINGDOM OF JORDAN Status of Bank Group Operations in Jordan (US$ Million) A. Statement of Bank Loans and IDA Credits (As of September 30, 1990) Loan/ Amount Credit (less cancellations) Number Year Borrower Purpose Bank/IDA Undisbursed 15 Credits/ 86.13 11. Loans fully 244.59 disbursed ------ 330.72 2068 1982 Jordan Education IV 21.4 2.0 2334 1984 " Amman Transport 25.0 9.2 2371 1984 " Energy 30.0 1.5 2378 1984 " Education VI 40.0 5.3 2463 1985 " Multi-Mode Transport 30.0 11.4 2531 1986 " Health 13.5 7.0 2587 1986 Urban Devt. II 21.6 9.7 2614 1986 CVDB II 11.0 1.4 2633 1986 Manpower Development 10.2 3.7 2694 1986 Water Supply & Sew. 50.0 14.7 2710 1986 " Power VI 27.5 6.3 2786 1987 Potash II 12.0 1.0 2841 1988 Nat'l Urban Devt. 26.4 22.5 2890 1988 " Education VII 40.0 26.2 2902 1988 Phosphate Mining 31.0 7.1 3106 1989 Human Res. Devt. 73.0 73.0 * 3142 1990 Ind. & Trd. Pol. Adj. 150.0 76.7 3172 1990 " Integrated Phosphate 25.0 25.0 GRAND TOTAL 968.3 303.5 Of which repaid 143.0 Total now outstanding 825.3 * Structural Adjustment Loan  12 Sc1;edule D l'age 2 of 2 THP HASHENITE KINCDON OF JORDAN Status of Bank Group Operations in Jordan B. Status of IFC Investments (As of September 30, 1990) Year Obligator Type of Business Loan Eauity Total 1974 Jordan Ceramic Ind.Co. Ceramic Tiles 1.6 0.2 1.8 1975/78/ Jordan Fertilizer Co. Phosphatic fertilizer 79.5 8.7 88.2 81/82 1979 Jordan Lime & Silicate Building Materials 2.5 1.3 3.8 1979 Jordan Securities Corp. Money & capital market 0.7 0.7 1980 Jordan Leasing Co.Ltd. Leasing 0.3 0.3 1988 Al-Hikma Pharmac. Co. Manufacturing 2.2 2.2 Total Commitments 85.8 11.2 97.0 Less: Total Commitments Repaid, Sold or Cancelled 79.7 11.2 90.9 Total Commitments Now Held by IFC 6.1 _0. _6.1  13 THE HASHEMITE KINGDOM OF JORDAN EMERGENCY RECOVERY PROJECT TECHNICAL ANNEX  THE HASHEMITE KRINGDOM OF JORDAN EMERGENCY RECOVERY PROJECT TECHNICAL ALNEX TABLE OF CONTENTS Page I. BACKGROUND ......... 1 II. THE NATURE AND COST OF THE RETURNEE INFLUX. 4 A. The Returnee Population ...................................... 4 B. Cost Assessment of the Returnee Influx ....... ................ 5 1. Education Services ..................................... 5 2. Health Services ..................................... - 6 3. Water Supply and Sewerage Services ...... ............... 7 4. The Highways Sector ..................................... 7 5. The Public Transportation Sector ....... ................ 8 6. Essential Food Supplies ............ .................... 8 7. Essential Inputs for Productive Sectors ..... ........... 9 8. Export Market Losses ................................... 11 9. Access to Credit ....................................... 11 C. Government and Bank Responses .............................. 11 1. Government Response . .............................. 1 2. The Bank's Response ............................... 12 III. PROJECT DESCRIPTION .14 A. Education ......................... 14 B. Health ......................... 15 C. Water Supply and Sewerage ..........................,.,.15 D. Highways and Roads ......................... 16 E. Public Transport ......................... 17 F. Scope For Expansion of the Proposed Project ................. 17 IV. PROJECT COST, FINANCING AND IMPLEMENTATION ., 18 A. Project Cost and Financing ................................... 18 B. Project Implementation ....................................... 20 C. Procurement ........... ............................ 21 D. Disbursements . ....................................... 22 E. Reporting, Monitoring and Supervision ........ ................ 23 F. Environmental Impact .................... 24 V. BENEFITS AND RISKS .................. 24 VI. AGREEMENTS REACHED .25 APPENDIX I. ACTION PROGRAM FOR PROJECT IMPLEMENTATION .26 APPENDIX II. EMERGENCY RESPONSE PROGRAM COMPONENTS THAT HAVE BEEN APPRAISED AND THAT WOULD BE INTEGRATED INTO THE PROPOSED PROJECT AS ADDITIONAL COFINANCING BECOMES AVAILABLE .29 APPENDIX III. LIST OF DOCUMENTS IN THE PROJECT FILE .33  TIIEHASHEITE KINGDOM OF JORDAN IAERGENCY RECOVERY PROJECT I. BACKCROUND I.)1 TIhe I r,( i i tivas ion ioi o uwait i n Aug,ust 1991() has htitd a (e vast at i1g effect on Jordan's economy, w:hich was already facitng serious problems owing to the r-egional recession that began iti the earlv 1980s. Until the Gulf crisis, the G;overnlment had been successful in starting to implement, with BaTik assistance, a rigorous economic adjustment program. The severe adverse macroeconomic effects of the crisis have vitiated these efforts and put Jordan's medium-term prospects for economic recovery and growth in the 1990s in jeopardv. 1.02. Jordan's economy has traditionally relied on three factors for support: remittances from expatriate workers (particularly from the Gulf states, wthere in 1988 40 percent of Jordan's work force was employed); exports to regional markets; and grant aid, which has in the past financed about 30 percent of the country's imports and provided about 80 percent of domestic tax and non- tax government revenues. This arrangement was sufficient to maintain growth in the 1970s and early 1980s. However, the regional recession that began in the mid- 1980s sharply reduced these sources of income, leading to a severe deterioration in Jordan's balance of payments. Manufacturing and agricultural exports, which are sold almost exclusively in regional markets, fell substantially as a proportion of GDP (from an average of 16.5 percent during 1978-82 to an average of only 12.3 percent during 1983-89, although a substantial recovery was estimated for 1989). The annual value of remittances from expatriate workers was cut in half, from about US$1.2 billion in 1986 to just over US$600 million in 1989. Finally, grants from neighboring Arab states fell by 40 percent between 1982 and 1989. These trends led to major structural problems with respect to the balance of payments, external debt and public finance/budgetary deficits. 1.03. The Government responded to the regional recession by making significant reforms in the context of a stand-by arrangement with the IMF and an adjustment program with the Bank. The Government's program consists of measures to (i) reduce macroeconomic imbalances; (ii) generate growth by expanding and diversifying exports; and (iii) protect the poor during the adjustment period. The measures implemented since early 1988 include floating the dinar (with a consequent 40 percent depreciation in real terms versus the U.S. dollar); deregulating interest rates; reducing the budget deficit; adopting a package of measures to stimulate industry and trade; and establishing a social development fund. 1.04. Throughout 1989 and 1990 the adjustment program remained largely on track, and the Government made substantial progress in reversing the decline in the economy. The Gulf crisis, however, has devastated the Jordanian economy as a result of, inter alia, the following factors (which are quantified in Table 1.01 below): (i) lost export markets in Iraq, Saudi Arabia and Kuwait; (ii) lost income in the transit transport sector; (iii) lost remittances from Jordanian workers in Kuwait and to some extent Saudi Arabia; (iv) lost income from travel and tourism; (v) an increase in the import bill on account of higher oil prices for 1991; and  2 (vi) an increased burden on tthe budget because of higher outlays on schools and hleatltth facilities as a result of itncremental returnee needs. Table 1.01: Estimate of Incremental Financial Impaet of Gulf Crisis (millions of US dollars) 1990 1991 A. Non Oil Effects 1030 2245 Merchandise Costs Export losses (direct) 335 505 Service Costs Transportation 60 280 Worker Remittances 205 445 Tourism 300 750 Other Services 20 120 Capital Account Costs Lost debt repayments 110 145 B. Oil Effects 0* 170 TOTAL - 1030 2415 Note: During '99 Jorn obtained oil at prerctsis world prices and heno suffered no oilrealsed tsses. 1.05. Preliminary estimates indicate that in 1990 GDP at factor cost fell by 9% from its 1989 level. Nearly all of this fall was concentrated during the four month period after the crisis, implying an annual rate of decline in GDP of nearly 30 percent. The fall in GDP reflected substantial output losses in key sectors (Table 1.02); combined with the influx of returnees (paras 2.01-2.03), these developments could raise unemployment from its already high pre-crisis level of 16 percent to as much as 30 percent. 1.06. The structural problems with Jordan's budget and balance of payments (BOP), serious even before the crisis, have been exacerbated by the present crisis. The estimates presented in Table 1.01 show that the impact of the crisis on Jordan's balance of payments has been about $1 billion in 1990 and is expected to be at least $2.4 billion in 1991. There was a similar deterioration in the budget for 1990. In spite of a number of measures taken before August to contain expenditures and enhance revenues, there was no appreciable increase in revenues. On the other hand, there was an increase in subsidies and a large increase in extra-budgetary expenditures related to the crisis amounting to almost 7% of GDP. As a result, the overall deficit excluding grants increased from about 18% in 1989 to almost 25% in 1990.  3 Table 1.02: Estimated Output Losses in Selected Sectors Stemming From the Gulf Crisis Sector: Manufacturing -9% Agriculture -25-30% Transportation -13% Trade -35% Memo items: GDP growth (pre-crisis) +1.5% (post-crisis) -9% Unemployment (pre-crisis) 96,000 (16%) (post-crisis) 206,000* (30%) * Total includes estimates of up to 80,000 returnee workers plus 30,000 crisis-induced domestic job losses. 1.07. At the heart of the Government's strategy, following a resolution of the Gulf conflict, would be the correction of the severe macroeconomic disequilibrium resulting from the crisis. The restoration of markets for manufacturing and agricultural exports to their pre-crisis levels may take time. The prospects fot labor exports (and an increase in the associated remittances) are worse; and prospects for tourism, will continue to remain uncertain. All of this implies widening BOP deficits and increasing pressures on the JD. Similarly, there will be an upward pressure on Government expenditure due to returnee- induced incremental outlays for health, education, potable water, etc., combined with an eroding tax base due to low output and import growth, which will mean higher fiscal deficits. To counter these adverse factors and promote post-war recovery, Jordan will need to adopt a strong growth oriented adjustment program. 1.08. Even assuming that the situation in the Middle East will return to normal by mid-1991 and that an adjustment program is adopted, preliminary projections indicate that Jordan's economic prospects will be modest. GDP growth will continue to be negative in 1991 and barely positive in 1992; it could reach 3 percent to 4 percent per annum only in 1994-95. Low growth will be accompanied by an exacerbated disequilibrium in the budget and the balance of payments. In 1991, the budget deficit without grants could reach 20 percent of GDP. Similarly, the current account BOP deficit could also reach 20 percent of GDP or more, depending on the rate at which the Iraqi economy (Jordan's main export market) recovers, and how quickly Jordanians are able to return to their jobs in the Gulf. Even if a strong adjustment program is adopted by the Government, Jordan's creditworthiness will be questionable as long as exceptional financing and debt rescheduling are obtained on conventional terms. Preliminary analysis shows that debt service ratios could remain above 40%, and interest/GDP ratios would remain in the 13% to 16% range, until the end of the 1990s. Considerable additional financing on concessional terms as well as debt forgiveness/relief will therefore be required to achieve a sustainable balance of payments.  4 II. TIHE NATUJRE AiND COST OF THE RETURNEE INFLUX A. THE RETURNEF POPU ATION ( 01 An c(st iw;it , :n.(h;0 J(rda-niani workers and tlieir dependents have cilt*;adv returned to .Jor:in. s i ocet tle Ira(li invasion, and this number may e.ventulally reach a'; i;rav .s .l),0(0(. This is in addition to approximnately 800,000 refoigees passinig through Jordan. The tovorruueult faces the task not onlv of providliiy,g sserntial ha<.ic st-rvice, for returning .Jordanians but also of providing for their integration into an economy thiat was already in recession and has now lost its major export market . Managing the human resource problems created by the returnees ould he tormidable for a resource-poor-economy such as Jordan's even under the best of circumrstances: the fiscal impact alone of the returnee influx will be substantial, reflecting the costs of extra schooling, primary and hospital health care, municipal services such as water supply and sewerage, imported staple food supplies and productive sector inputs. Under current conditions, the task of responding to these needs is proving to be increasingly difficult. The proposed Emergency Recovery Project (ERP) is specifically designed to help the Government cope with the influx of the returnees and with critical aspects of the incremental needs their presence in Jordan has created. 2.02. Firm data on the returnees are limited owing to the speed and scale of the influx. However, the ILO estimates that 200,000 returnees had already entered Jordan by October 1990, while Government projections suggest that the eventual total number of returnees may be as high as 400,000. The ILO estimates that households from Iraq and Kuwait represented about 155,000 of the Fall 1990 "first wave" of returnees, with the balance of 55,000 coming from Saudi Arabia and other Gulf states. The ILO also estimated a 'second wave" inflow of 40,000 breadwinners from Kuwait alone (or 200,000 individuals, based on an average household size of five persons), bringing the ILO returnee estimates into line with the Government's 400,000. With a pre-crisis population of just over 3 million, the influx of returnees already amounts to an immediate increase in Jordan's population of 6-7 percent. Based on the ILO/Government projections, the population increase may soon amount to over 13 percent. 2.03. Because many of these persons have been fortunate enough to find shelter with family members who had remained in Jordan, there are no concentrations of Jordanian returnees in camps. As a result, data about the characteristics of the returnee population are difficult to obtain and not detailed. Preliminary government analyses suggest, however, that on a conservative basis, one third of worker returnees are professionals, over one quarter are skilled technicians and another one quarter are semi-skilled and clerical workers. These figures are in keeping with Jordan's traditional tendency to "export" highly skilled manpower in return for inflows of remittances. In an expanding economy, a return migration of well-qualified human capital might fuel further productive growth. Under current conditions in Jordan, however, the skills structure of the returnee population only worsens the labor supply/demand imbalance, since pre-crisis unemployment was concentrated among secondary and higher education graduates. In terms of age structure, it is estimated that about one half of the returnee population is under 20 years of age, implying a heavy incremental burden on the general and higher education system, on maternal/child health services and on future demographically-driven demands for publicly provided services of all kinds. For example, hv early October returning migrants had  5 already registered 42,000 adldit iorial children for schwool itn Jordan. The(se increased social expenditure requAirements have hit Jordan at a time wliln the Government has been tryinlg to contain the budgetary deticit. B. COST ASSESSMENT OF THE RETURNEE INYLUX 2.04. Providing essential social services and intrastructuL-e support for the returnees is pushing service provision to the breaking poinit and putting additional pressure on an already overburdened public sector budget. For 1989, 53 percent of current budget expenditures went to defense/security and interest payments alone. An additional 6 percent of current expenditures was allocated to administration. In contrast, even before the Gulf crisis, only 12 percent and 13 percent of total current expenditures went to health care and education, respectively; and only 3.4 percent went to infrastructure (including transportation and water). Meanwhile, the loss of the country's major export markets will impose heavy costs on private and public sector industries in terms of identifying and developing new export markets. Moreover, although many Jordanian repatriates are highly skilled workers who might normally be expected to start their own enterprises on returning home, the financial system's traditionally high collateral requirements are likely to dramatically limit access to essential capital. High unemployment is also a likely cost of the crisis. The loss of Jordan's traditional export markets and the influx of returnees has the potential to double the unemployed from the pre-crisis level of about 96,000, or about 16 percent of the work force, to more than 200,000 or over 30 percent (Table 1.02). In addition, it should be noted that some 800,000 refugees from Iraq and Kuwait have passed through Jordan on their way home. To date, the Jordanian Government has spent close to US$50 million of its own funds (over and above the amounts covered by donations) in assistance for these refugees. Assessments of the returnee-induced incremental requirements for specific social and infrastructure services, as well as for efforts to stimulate employment, especially for returnees, follow. 1. Education Services 2.05. As a result of both the Government's strong commitment to education (enrollments and outputs are the highest in the Arab world) and Jordan's very high population growth (3.6 percent p.a.), the costs of the public education sector have been rising rapidly in recent years (at an average annual rate of about 4 percent in real terms). The system is heavily overstretched and the quality of teaching and learning is increasingly inadequate. In terms of manpower, Jordan faced a shortfall of up to 2,000 teachers per year before the Gulf crisis. In terms of educational facilities and equipment, pre-crisis estimates for additional school construction costs over 1989-93 totaled US$114 million equivalent, and school equipment and furniture needs were estimated at US$35 million equivalent, Thus, even before the Gulf crisis, substantial new investment was seen as essential for the efficient provision of public sector education services. The Government has recently sought Bank assistance with a comprehensive ten-year reform of general education designed to improve system inputs (curricula, textbooks, teacher effectiveness, equipment, etc.), reduce overcrowding in schools and enhance system output in terms of well-qualified graduates. The Bank's US$73 million 1989 Human Resources Development Sector Investment Loan (HRDSIL) is assisting the Government with the 1989-92, US$250 million first phase of the reform program.  6 2.06. The returnee influx is imposing massive new demands on the system. As noted above, by late 1990 it had already added some 42,000 school age children to existing primary and secondary enrollments. With the "second wave" influx, this increment is estimated to more than double to over 90,000, adding over 10 percent to total, pre-crisis enrollments. Because most of these new enrollments are concentrated in Amman, Zarqa and Irbid, the actual burden imposed by the returnees otl available facilities is even greater. The Government has already recruited 700 additional teachers, rented extra classrooms, increased the number of students per classroom, and extended the existing double-shift system. If these pressures continue, however, the quality of teaching and learning can only decline. Details of the proposed ERP component to help the Government handle these returnee- induced incremental general education requirements are provided in paras. 3.03 and 3.04. 2. Health Services 2.07. As in the education sector, service delivery systems for health care in Jordan have recently come under heavy strain, notably as a result of rapid population growth, obsolescent plant and equipment, underqualified (and, in some key areas, substantially overstretched) staff and increasingly constrained budgetary resources. For example, the bed/population ratio in Jordan is an extremely low 1.18 per 1000. To bring this ratio to a more reasonable 2.0 per 1,000 by the year 2000 will require the renovation or addition of 5,872 beds over the next 10 years. In addition, Jordan faces a severe shortage of nurses, midwives, and other paramedical personnel. Moreover, unlike the relatively well- organized public education sector, health service planning, organization, management and administration are seriously inadequate. A Bank-supported Health Sector Development Project is under preparation and is designed to support major system-wide and subsectoral organizational reform and subsectoral service delivery improvements. 2.08. The influx of returnees, 25,000 of whom are under the age of three and 20 percent of whom are under 5 or over 55, is intensifying the strain on health service manpower, facilities, medical supplies and equipment and building maintenance, especially in the already overburdened hospitals of the Amman, Zarqa and Irbid areas where returnee families are concentrated. The existing returnee population already requires an additional 240 hospital beds and corresponding medical support staff, medical supplies and drugs. So far, the authorities have been able to cope with the situation using existing facilities. However, r:he incremental burden cannot be sustained permanently, and the primary and secondary health care systems would break down if the ntmber of returnees (and evacuees transitting through Jordan) increased significantly. Because maintenance resources are already inadequate for existing facilities, the increased number of patients will cause more intensive use of existing medical plants and equipment, which, in turn, will require more frequent, special maintenance. 2.09. If Jordan is simply to maintain its present ratios of medical professionals to population then the influx of even the first-wave estimate of 200,000 returnees (para. 2.01) will require the hiring of over 600 additional medical personnel. The returnee-generated increase in the population, combined with constant per capita expenditures on medical imports implies an increase of nearly US$3 million over a two-year period. The proposed ERP component to deal with incremental returnee-induced health service resource requirements and delivery system needs is provided in paras. 3.05-3.07.  7 3. Water Supplv and Sewerage Services 2.10. Water resources in Jordan are scarce and expensive to exploit. Irrigated agriculture Consumes approximately 15 percent of all water, but industrial and municipal uses have been rising in response to high population growth and increasing urbanization. Pre-crisis industrial demand was estimated at 32 million cubic meters p.a. and municipal water consumption at 145 million cubic meters p.a. At currernt growth rates, water demand will consume all available production by the mid-1990s, and even this estimate assumes the development of new sources. It also obscures the fact that in some areas, particularly Amman/Zarqa, groundwater resources are a]ready being exploited at unsafe levels, it long-term yields are to be protected. The Bank has helped the Government prepare a medium- and long-term strategy for water resource management. The strategy is based on improving the efficiency of water use, developing new sources (especially surface water), recycling waste water, reducing system losses and, eventually, moving -conomic activity away from water-intensive operations. 2.11. The return of expatriate Jordanians will have a major effect on domestic water needs. Countrywide, the incremental increase in water need is estimated at 26 million cubic meters p.a., or about 15 percent of potable water consumption. The effect of returnee-induced demand will be particularly severe in the Greater Amman area, where most returnees are expected to relocate; where the public delivery system, much of which is old, must supply virtually 100 percent of demand; and where water rationing has already existed for some time. Additional water rationing cannot be used to offset this increased demand: average consumption per capita is already a low 83 liters per day (cf. Morocco's 110 liters per day). The sewage treatment system is also going to be placed under added strain with attendant dangers of increased pollution and other health hazards. The proposed ERP component to address returnee-induced incremental water and sewerage service needs is described in paras. 3.08-3.10. 4. The Highways Sector 2.12. Jordan's highway network comprises approximately 3,200 km., excluding urban roads. The quality of the system is variable, ranging from modern, high strength roads to village roads of light construction. (Some of the main roads are also of light construction and nearing the end of their engineering lives.) The two transport projects in Jordan (Cr. 262-JOR and the ongoing Ln. 2463-JOR) have emphasized the design and implementation of road maintenance management. As a result, Jordan has developed one of the best maintenance management systems in the region, and no new road construction work has been approved during the past two years as an indication of the priority given to maintenance. Even before the onset of the Gulf crisis, however, the highway network had been hard hit by the legacy of the eight-year Iran-Iraq war (the nonenforcement of axle load limitations seriously weakened key sections of the network) and by increasing budgetary constraints. The 1990 routine and periodic road maintenance budget amounted to JD 8.95 million, compared to an indicated need of about JD 10 million. The situation will worsen in 1991; only JD 10 million of the estimated JD 13.95 million needed has been funded. 2.13. The incremental traffic generated by the Gulf crisis has amounted to a peak level of over 3000 vehicles a day. This additional traffic has led to severe deterioration in some 235 km (representing 7.5 percent of the existing network) of old and lightly constructe I roads between Azraq and Amman. Without urgent  8 remedial action, complete road failure may occur, leading to unacceptably high vehicle operating costs and expensive reconstruction. The proposed ERI' highways component is described in para. 3.11. 5. The Public Transportation Sector 2.14. The Public Transport Corporation (PTC) is Jordan's main public transport company. PTC operates 29 routes in the Greater Amman area. Approximately 45 million passengers are carried each year, and any major lailure of the system (which serves approximately 50 percent of Jordan's population) would have a serious impact on the region's economy. Most of the fleet, consisting of 55 Mercedes (series 302) and 240 MANs (series 16.240 HOC), is over eight years old and becoming difficult and expensive to maintain. Maintenance is carried out in PTC workshops on a 24-hour per day, three-shift system. 2.15. During the first three months of the Gulf crisis, PTC vehicles were used to help transport approximately 200,000 Jordanian returnees going primarily to the Greater Amman area and about 800,000 refugees and their belongings. This resulted in a significant loss in revenue (about 20 percent). Moreover, owing to the age of the buses, intensity of use, poor road conditions serving the refugee reception camps and the fact that the buses were not designed for this work, approximately 60 buses will have to be written off completely, while another 40 to 50 will require repairs averaging about JD 10,000 each. Thus, about one third of the PTC fleet of vehicles is currently inoperable due to the Gulf crisis. Unless unusable vehicles are replaced and/or repairs carried out, the operations of the PTC will be crippled, its financial status will deteriorate markedly and Greater Amman will be deprived of much of its scheduled public transport. The ERP Public Transport component is described in para. 3.12. 6. Essential Food Supplies 2.16. Jordan has traditionally imported substantial quantities of essential foodgrains and other commodities that are not economical to produce locally. The Government operates, through the Ministry of Supply (MOS), an overseas purchasing and importing program to help provide three quarters of Jordan's grain requirements for human and animal consumption, along with other staples such as sugar, edible fats and oils, some milk products (imported in powdered form), white meat and some frozen red meat. (Until recently the Government had also imported large quantities of chilled red meat, mainly from Bulgaria and Romania; the Government has now decided to eliminate these imports and substitute frozen meat to encourage the importation of live animals for fattening and slaughter by the private sector.) 2.17. The returnee influx will clearly exacerbate Jordan's food supply problems. Despite government proposals for increasing domestic wheat production, the potential for speedy substitution of hitherto imported commodities for currently unsalable fruit and vegetable export surpluses is very limited. Although some substitution in the consumption patterns of Jordanians will undoubtedly occur, such changes cannot be engineered rapidly. Hence, MOS must find incremental amounts of the staple foodstuffs not currently produced by Jordanian agriculture. 2.18. The United States and Saudi Arabia have, in recent years, been the principal suppliers of concessional food and feed grains to Jordan. In 1988 Saudi Arabia provided 90 percent of Jordan's imported wheat at about 75 percent of  9 itetsrn-<ational prices. The US has tvpically provided maize, rice and some wheat at concossionat pri ('eS and paymont terms under the GSM 102 and 193 Programs. In 1989, US$131/ inilliot worthl ot grains were provided under these programs. SimiilatIry, much )of Jordati's imported sugar and milk products have been obtained on ConCeessional terms fi-om EEC countries (primarily the Netherlands and Belgium). For 1990, the US allocation hias been muTh smaller, i.e., US$65 million. A side effect of the Gulf crisis is the reduction in the availability of concessional food/feed imports (particularly grains); thus, the per unit costs of imported food commodities will increase (para. 3.13 (a) and Appendix II). 7. Essential .nputs for Productive Sectors (a) Agriculture 2.19. Reflecting Jordan's agroclimatic conditions and the limited availability of arable land (only 5 percent), agricultural output contributes only 5-6 percent to GDP. The sector features both traditional, low-input rain-fed farming in portions of the highlands and modern, input-intensive, irrigated agriculture in other portions of the highlands and in the Jordan Valley. Agricultural exports, mainly from the irrigated areas, make up nearly 10 percent of total domestic exports by value. Nearly 90 percent of agricultural exports in 1989 consisted of vegetables/fruit, poultry products, and about 70 percent of these went to Iraq and Kuwait. In 1989, total fruit and vegetable exports amounted to over 500,000 tons and earned over JD 100 million. 2.20. The loss of the Iraqi and Kuwaiti markets and reductions in exports to other Gulf states have had a substantial adverse effect on the sector. From September to November 1990, fruit and vegetable exports fell to zero, for a foreign exchange loss of at least JD 25 million. This collapse reflected extraordinary increases in the cost of shipping produce to the increasingly important high-value European market as well as the loss of regional markets owing to the crisis. Air freight rates to Europe doubled in the wake of the crisis, for example, and transport by ship has become increasingly costly and unreliable. Meanwhile, private sector suppliers of inputs such as seeds, pesticides and herbicides report a 50 percent fall in orders since the beginning of the crisis-- partly reflecting a collapse of confidence in the wake of lost markets and unsalable products, and partly reflecting farmers' increasingly unmanageable debts and inability to collect the proceeds of sales they had made earlier in 1990. 2.21. The Ministry of Agriculture (MOA) has estimated on a preliminary basis that the above factors are likely to produce a fall of at least 25 percent in agricultural output. Even at reduced levels of activity, however, there will be some need for imported inputs to keep the agricultural sector operational. Categories of inputs that would need to be imported include cuttings and seecs for sowing, veterinary medicaments and equipment, fertilizers, insecticides, fungicides, weed killers, plastic sheeting and piping, and agricultural tools, pumps, machinery, tractors and trailers. Since the food needs of the returnees would have to be met from domestic as well as imported sources, some of the inputs needed for domestic food production can be attributed to the returnees (para 3.13 (b) and Appendix II).  10 (b) Industrv and Construction , 2.)2. Jordan 's i uutist ria I anid cot,'; t ruL t ion secto-rs accourit for a bout 23 ltrcerit of GDP. The iidust rial sector is sliarpl y divided betwet-ii a few large NRIs (Onatural resource -based i ndust i i s adCcOUnlting tor about 9 pvrcetit of GDP and SMIs (sinall arnd medium industries) account itig for about 7 percent of GDP. Bank estitnates for 1988 put construc-tion at about the same le'vel as manufacturinig, or abotit 6.6 percenit of GDP. Data on( GDP shiares, however, tell only part of the stor0: manufacturing exports lhave become increasingly importanit during the 1980s, as illustrated by the followinig inidices: Table 2.01: Selected Indices of Manufacturing Exports, 1980-1989 Year Mfg. Exports Mfg. Exports Value Mfg. Exports Value Volume Index (in US$ million, (as X of total exports current prices) 1980 100 63 1 1984 125 88 12 1989 (est) 155 172 . 15 The two sectors combined (including NRIs) account for nearly 20 percent of all employment in establishments of five employees or more, while construction alone accounts for a very large share of fixed capital formation (nearly 70 percent in 1987) and bas a strong influence on manufacturing activity levels: nearly half of the SMI sector depends on the construction sector for its markets. 2.23. While the economywide effects of the Gulf crisis have had a sharp adverse effect on manufacturing, with an estimated output decline of 9 percent, the influx of returnees would produce new demand for final products. Similarly, returnee needs for shelter and some physical infrastructure can be expected to increase domestic construction demand. Restoration of industrial activity is a prerequisite for reducing unemployment and preserving the basis for the eventual recovery of productive domestic and export output, and such a recovery depends very heavily on the availability of raw materials and intermediate inputs. 2.24. Because Jordan is resource-poor, and because the manufacturing sector is relatively young, many of the inputs for manufacturing and construction must be imported: as a rough indicator, imported inputs represented over 37 percent of manufacturing output in 1987, the latest year for which firm data are available. Jordan's capacity to finance imports of necessary manufacturing and construction inputs to meet returnees' direct needs, help reduce returnee-swollen levels of unemployment and lay the foundation for eventual productive sector recovery has, however, been crippled by crisis-induced foreign exchange losses estimated at US$1 billion equivalent for 1990 and US$2.4 billion for 1991 (para. 1.04), or about 30 percent and 60 percent, respectively, of estimated total 1989 balance of payments current account receipts (para. 3.13(b) and Appendix II).  11 8. Export Market Losses 2 .25. As noted earlior, one of t ie major economic consequences of the Culf crisis thds been the loss of mo!,t ot Jordan' s traditionlw Export markets in the Gulf Region, especially Iraq and Kuwait, whici' tad previouslv accounted for an overwhelming share of Jordan'-s manufacturing and agricultural exports. The loss of these markets has had major adverse effects on productive sector output and employment (Table 1.0?) as well as on Jordan's capacity to import domestically unavailable staple foodstuffs and essential productive sector inputs (paras. 2.16 and 2.24). Jordanian enterprises must, therefore, quickly develop new markets if major layoffs of workers and potentially devastating business collapses are to be avoided. Investment in export development can be extremely costly, however, and Jordan's current economic difficulties, which have left many private firms strapped for cash, make export prospecting, however appropriate in principle, an unrealistic option for most entrepreneurs. On the other hand, the returnees represent a valuable pool of skilled and internationally experienced professionals who are in search of work. They could be invaluable in assisting Jordanian enterprises in finding the new markets that would permit them to revive output and maintain or even expand employment. The Government has prepared a pilot program of modest technical and financial assistance for exporters interested in prospecting new markets (para. 3.13 (c) and Appendix II). 9. Access to Credit 2.26. As noted earlier, there is a real danger that the returnees will swell Jordan's already high unemployment rate from the current 16 percent to as much as 30 percent (para. 1.05 and Table 1.02). Further, because most returnees are professionals (including businessmen) and skilled technicians, traditional job creation/training/placement programs are unlikely to ease their integration into the local economy. On the other hand, many returnees are capable of setting up businesses of their own or entering into partnership with existing businesses, provided they can obtain credit. There is currently no lack of liquidity in the banking system, but access to credit is seriously limited by the stringent collateral requirements typically imposed by Jordanian lenders. This requirement is particularly constraining for returnees, many of whom were forced to abandon their tangible assets when they left their host countries. A loan guarantee scheme, designed to improve access to credit for very small microenterprise borrowers was recently set up under the aegis of the Industrial Development Bank (IDB) with assistance from USAID. An extension of this scheme is needed to allow returnees with inadequate collateral but well-prepared business ideas (including ideas for businesses in the professional/financial services area) to borrow somewhat larger amounts. The Government has prepared a plan for such a scheme, to be called a Loan Guarantee Trust Facility (LGTF) (para. 3.13(d) and Appendix II). C. GOVERNMENT AND BANK RESPONSES 1. Government ResDonse 2.27. The Government of Jordan has responded in four main ways to the emergency needs generated by the returnee influx: (i) In the social and physical infrastructure sectors, it has already begun to take steps to provide the necessary services and facilities. in education, for example, it has hired additional teachers and rented  12 additional classroom spaic. It has also begun to Iiiire additional hiealth service personnel. In the infrastructure secrors, it has developed det(ailed, implementation-ready, costed programs for water supplv and sewe2rage expansion, highway rehabilitatiorn and bus fleet replacement. It hlas also developed, for 1991, a Supplementary Emergency Budget of JD 100.0 million (that would be subject to the availability of highly concessional external financing) for the above sectors (and also covering priority agricultural itivestmentF, support for exporters, low-cost housing, and Industrial Development Bank projects). (ii) It has sought Bank assistance in formulating an Emergency Response Program. (iii) It has initiated a survey of returnees to determine their socio- economic profiles. (iv) It has held extensive meetings with bilateral donors to solicit emergency concessional financing that could provide balance of payments support. Pledges that had been received or envisaged as of February, 1991 totaled US$1 billion (Table 2.02); as of mid-February 1991, however, less than US$500 million of this total had actually been disbursed to the Government by donors. Table 2.02: Cofinancing Pledges as of February 1991 (US$ million) Amount Amount to be DONOR/LENDER cY9o CY91 Total Disbursed Disbursed China -- 10.0 10.0 0.0 10.0 The European Community -- 200.0 200.0 150.0 50.0 France 15.0 5.0 20.0 0.0 20.0 Germany 120.0 -- 120.0 120.0 0.0 Italy 9.0 18.0 27.0 0.0 27.0 Japan 100.0 450.0 550.0 175.0 375,0 Korea -- 15.0 15.0 0.0 15.0 The Netherlands 9.0 9.0 18.0 12.0 6.0 Norway -- 10.0 10.0 0.0 10.0 Taiwan 1.5 18.5 20.0 10.0 10.0 Canada 15.0 7.3 a/ 22.3 15.0 7.3 Luxembourg -- 1.3 a/ 1.3 0.0 1.3 Sweden -- 10.0 at 10.0 0.0 10.0 Switzerland -- 25.0 a/ 25.0 0.0 25.0 TOTAL 269.5 785.4 1.054.9 482.0 572.6 Source: Central Bank of Jordan and Ministry of Planning a/ To be disbured a, cofinanng for the ERP. 2. The Bank's Response 2.28. In September 1990, the Bank prepared a "Special Program of Bank Assistance in Response to the Gulf Crisis," which was endorsed by the Executive Directors in October. The program envisaged the provision of assistance in three areas: (i) assistance in designing appropriate policy responses to the crisis;  13 (ii) reprogrammed or, creditworthiness permitting, expanded lending to deal with specific effects of the crisis; and (iii) aid coordination and assistance in mobilizing appropriate financing packages, including debt and debt-service relief. 2,29. The response of the donor community to Jordan's crisis-related needs is being coordinated by the Gulf Crisis Financial Coordination Committee (GCFCC). Bank staff have participated as observers and have provided technical support to the CCFCC in defining and supporting Jordan's financing requirements. In addition, the Covernment requested Bank assistance in assessing the requirements for responding to the needs of the returning Jordanians as a result of the Gulf crisis. A Bank mission visited Jordan between November 17 and December 6, 1990, and jointly with thie Government prepared and appraised an Emergency Response Program, costing US$235 million. The program is designed to be supported by donors and implemented over a two-year period, and is an integral part of the overall donor effort to help offset the financial costs to Jordan resulting from the Gulf crisis, amounting to about US$3.4 billion during 1990-1991. To help Jordan finance the costs of the crisis, bilateral pledges of assistance totaling just over US$1 billion had been received as of February 1991 (para. 2.26 and Table 2.02). Since the total volume of pledges to date covers less than one third of Jordan's overall needs, significant additional assistance still must be mobilized during the coming months to meet the requirements of the general population, as well as of the returnees. The Government has made intensive efforts to obtain donor assistance bilaterally and has also sought Bank assistance in mobilizing support from those donors who wish to channel their funds through the vehicle of a Government/Bank project. To supplement the Government's efforts, the Bank has had extensive contacts with potential cofinanciers. Some of the donors contributing to the pledged US$1 billion considered cofinancing the program with the Bank but, in order to help meet the urgent needs of the Jordanian Government and in line with the GCFCC decision to provide immediate assistance, committed their contributions for general purposes. 2.30. As a result of some of the donors' decisions to provide direct balance of payments support, only a relatively small amount of bilateral cofinancing has so far been made available for the Emergency Response Program. The cofinanciers for the project are: Canada (US$7.3 million); Luxembourg (US$1.3 million); Sweden (US$10 million); and Switzerland (US$25 million). In order to utilize these funds immediately, the Government has decided to proceed now with a core Emergency Recovery Project (ERP) of US$60 million (including a US$10 million Bank loan and a US$6.4 million Government contribution) that incorporates all the critically needed social services and infrastructure components of the program, while retaining the flexibility to expand the project scope as more financing becomes available. The Government has asked that the Bank continue to help mobilize additional donor cofinancing for the wider program. These efforts are continuing and, when financing materializes, they will be used to support appraised Program components not funded under the currently proposed ERP. 2.31. Discussions have also been held with the Government on the extent to which the undisbursed proceeds of the Bank loans for the ongoing Multi-Mode Transport, Water Supply and Sewerage, Education VII, and National Urban Development projects could be used to finance the Emergency Response Program. It was agreed that a large portion of the undisbursed amounts had already been committed or that reallocation of the funds would adversely effect the integrity  14 of the projects. In the case of the Human Resources Sector Investment Loan, which h,vs a large school const ruction component. the Government and the ERP appraisal mission agreed that new construction, with the exception of procuring building mdterials for additional sanitary facilities in the existing schools, would be excluded from the Emergency Response Program. Finally, the Bank is also working with the Government on refining estimates of the impact of' the crisis on Jordan's ecctnomy, in terms of both specific returnee-induced burdens and broader economywide effects. These discussions (in which the IMF is also participating) are ongoing, and are expected to lead to agreement on a medium-term macro framework and a revised action plan for the long-range structural adjustment effort successfully pursued by the Government prior to the onset of the crisis. III. PROJECT DESCRIPTION 3.01. Project Objective. The objective of the project is to support a set of core components from the Government's Emergency Response Program that would help meet immediate, incremental, returnee-induced needs for essential social services and physical infrastructure and to assist in the returnees' integration into the economy by creating jobs associated with these expenditures. 3.02. Project Description. The project, to be implemented over a maximum of two years, would provide financing for the following components. A. EDUCATION (Estimated Cost: US$16.9 million) 3.03. As noted in para. 2.06, the impact of the returnees upon the education sector has already been reflected in incremental enrollments of some 42,000 school-age children. The sector has coped well with the crisis but is under severe strain. Additional facilities will have to be provided, together with human resources and materials. This can best be achieved by implementing (and, if possible, advancing) the agreed action plan for the Bank-financed 1989 Human Resources Development Sector Investor Loan. Meanwhile, however, there is a clear need to support the current efforts of the Ministry of Education (MOE) to deal with the crisis during the years 1991 and 1992. 3.04. The project will provide financing for: -- the procurement of equipment (US$5.3 million); -- the procurement of furniture (US$2.1 million); - - the purchase of teaching/learning materials (textbooks, exercise books, etc.) (US$0.5 million); - - the procurement of materials for construction of sanitary facilities (US$1.2 million); -- contracts for the special maintenance of schools (US$0.3 million);  15 the rental of additional facilities to serve as classrooms ('!S$l.3 million); and Incremental salaries for teachers (US$6.2 million). B. HEALTH (Estimated Cost: US$9.3 million) 3.05. Most returnees are concentrated in the urban areas of Greater Amman, Zarqa and Irbid, hence incremontal demand for services in these areas is much higher than the national population increase represented by the returnees. The returnee influx is clearly reflected in the increased demand for more medical services. So far, the authorities have been able to cope with the situation using existing facilities. However, the incremental burden cannot be sustained permanently, especially if the number of returnees and evacuees transitting through Jordan increases significantly. 3.06. Immediate assistance is needed to meet short-term requirements for incremental staff salaries, the maintenance of facilities, and the provision of supplementary medicines and equipment. Permanent improvements and the expansion of the system could not be undertaken in the proposed project but could be a longer-term program, perhaps based on the proposed Health Sector Development Project. 3.07. The items to be financed under the ERP would include: -- imports of supplies and medicines (US$2.8 million); - - special maintenance services (US$2.4 million) for MOH hospitals in areas of returnee concentration: Amman region (US$1.3 million) Zarqa (US$0.6 million) Irbid (US$0.5 million); -- incremental staff salaries (US$4.1 million). C. WATER SUPPLY AND SEWERAGE (Estimated Cost: US$20.5 million) 3.08. In 1989, the Water Authority of Jordan (WAJ) pumped a total of 171 million cubic meters of potable water; the increase in domestic water consumption due to the returnees is estimated at 26 million cubic meters (para. 2.11), or about 15 percent of this total. With the war situation, the water demand and supply imbalance will deteriorate further, Consequently, to meet incremental water consumption by the returnees, WAJ, which is part of the Ministry of Water and Irrigation, will: (i) exploit new water resources by drilling additional wells, reducing the amount of wasted water, and bringing to partial operation water projects currently under construction; (ii) improve water delivery systems by increasing pumping capacity, constructing new water mains, and reducing leakage; and (iii) ensure that the waste water and sewage system can cope with increases in the volume of effluent to be disposed. 3.09. To achieve these objectives, the ERP proposes:  16 (i) drilling 20 new wells to connect to the distribution network. Construction of one well takes approximately six weeks and would be undertaken by WAJ drilling units. Given suitable conditioris, and provided that WAJ's ageing drilling equipment does not break down, water supply could increase significantly, by about 10 million cubic meters by the middle of 1991 (Table 3.01). However, an increase to the full 26 million cubic meters would require the procuremnent of additional drilling equipment, especially if deep aquifers are to be tapped; procurement of this equipment would take about one year; (ii) upgrading the distribution system in some critical areas to limit water loss; (iii) improving the capacity of water testing and treatment through additional laboratory, field testing and monitoring equipment; (iv) improving the monitoring of waste-water treatment and discharge, especially in order to limit the pollution of water resources; and (v) enhancing the maintenance of both sewage disposal and water distribution systems. Table 3.01: Summary of Estimated Water Quantity and Drilling Costs of Project Wells Estimated Estimated Unit Total Average Quantity Quantity Cost Cost Basin Depth (m) (m3/hr) # Wells (m3/yr) (US$) (USS) Amnan 450 40 5 1,752,000 90,367 451,835 Aghowar 1000 70 2 1,226,400 182,000 364,000 Disl 600 110 3 2,890,800 148,817 446,451 Al Tahoun 200 50 2 876,000 47,154 94,308 Swaqa 300 50 3 1,314,000 67,895 203,685 Northern 400 50 5 2,190,000 94,616 473,080 TOTAL 10,249,200 2,033,359 3.10. The financing of US$20.5 million would be provided for imports of materials, equipment and supplies needed to exploit new water resources, increase pumping capacity and improve the distribution system and efficiency of operations. As regards cost recovery, the current water tariff would apply. D. HIGWRAYS AND ROADS (Estimated Cost: USS7.5 million) 3.11. The Ministry of Public Works and Housing (MPWH) estimates that about US$7.5 million is required for a program of 235 km of emergency main road rehabilitation and maintenance resulting from Gulf crisis traffic (para. 2.13). Average costs are about US$29,000 per km, mainly for repairing broken structures, filling potholes, and providing bituminous overlay where needed. The Jordanian contracting industry is now suffering from the economic slowdown, and the proposed program would help to provide employment opportunities e'stimated at 120,000 man- days, or about 600 man-years.  17 E. PUBLIC TRANSPORT (Estimated Cost: US$5.8 million) 3.12. As noted in para. 2.l', the corporation's aging fleet of some 300 buses has suffered considerably as a result of the crisis. At any one time, about one-third of the tleut hlas been employed in transporting evacuees and cheir belongings from reception camnps to Amman and Aqaba. To restore services to a minimum acceptable level, the PTC has proposed the procurement of (i) 50 Mercedes and 50 MAN buses, at an estimated cost of US$'4.5 million; and (ii) spare parts and workshiop equipment at an estimated cost of USS1.3 million. Without urgent action, the Greater Amman public transport system will rapidly deteriorate, causing hardship to the poorer segments of the community and hindering commercial activities. The buses will operate on a normal commercial basis at the current tariff, which currently covers oierating costs and includes a share of depreciation but not debt service. F. SCOPE FOR EXPANSION OF THE PROPOSED PROJECT 3.13. Should additional resources become available from the international donor community, the project scope would be expanded (as detailed in Appendix II) to support one or more of the following four components, depending on donor preferences. (a) Essential Food Supplies. Staple food products such as cereals, sugar, meat and milk powder, which Jordan cannot produce in adequate quantities and needs to import, and which are needed to feed the influx of returnees, would be procured (US$66.5 million). (b) Inputs for Agriculture. Industry and Construction. Essential raw materials, intermediate goods and spare parts to help restore output and employment in the productive sectors and to help meet returnee- induced needs would be financed (US$88.5 million). (c) Technical Assistance for Export Market Development. Export-oriented activities and employment through technical assistance for industry- level market surveys; the establishment of marketing services in designated countries to promote market/product identification and export sales; and the product development efforts of individual exporters to help offset the loss of the Iraqi and Gulf markets would be financed (US$5 million). (d) Loan Guarantee Trust Facility. Financing would be provided to enable returnees lacking collateral to obtain credit (via an expansion of the existing loan guarantee facility) for starting new small businesses. The expanded facility would also assist existing viable, but collateral-scarce, businesses wishing to maintain or expand their operations and employment. The facility would be available for a period of two years and would provide loan guarantees of up to US$100,000 (US$15.0 million).  18 IV. PROJECT COST, FINANCING AND I1)PLEMENTATION A. PROJECT COST AND FINANCING 4.01. Cost Summary. hlti' base cost of the project is estimated at US$53.1 million, with a foreign exchanige component of US$38 million, or 71.6 percent. Witht physical and pt-iee contitngencies of US$6.9 million, the total project cost is estimated at US$60 millioni atnd the foreign exchange component at US$43.7 million, or 72.8 percent of total costs. Table 4.01 provides the project cost summary. Table 4.01: Summary of Project Costs by Component (US$ OOOs) 2 Total Local Foreign Total Local Foreign Total 2 Foreign Base -----(JD million) -- -(USS million) ----- Exchange costs Education Sector 5.4 4 5 9.9 8.4 6.9 15.3 45 29 Health Sector 3.0 2.5 5.5 4.6 3.8 8.4 45 16 Water Supply & Sewerage -- 11.6 11.6 -- 17.8 17.8 100 34 Highway Sector 1.4 2.8 4.2 2.2 4.4 6.5 67 12 Public Transport Sector -- 3.3 3.3 -- 5.0 5.0 100 9 Total Base Cost 9.8 24.7 34.5 15.1 38.0 53.1 72 100 Contingencies: Physical 0.3 2.5 2.8 0.5 3.8 4.3 88 8 Price 0.4 1.3 1.7 0.7 1.9 2.6 74 5 Total Project Cost ld.f 28.4 39.0 16 3 43 7 0.0 73 113 Note: Totals may not add up due to rounding. 4.02. Table 4.02 provides a breakdown of the investment and recurrent costs of the project. Baseline investment and recurrent costs total US$39.7 million and US$13.4 million, respectively. Table 4.02: Summary of Project Costs by Category of Expenditures (US$ OOOs) S I Total Local Foreign Total Local Foreign Total Foreign Base -----(JD million) ---(USS million) --- Exchange Costs Investment Costs Civil Works 1.9 Z.8 5.7 2.9 5.9 8.8 67 17 Equipment 0.2 18.4 18.5 0.2 28.3 28.5 99 54 Materials 0.2 0.2 0.3 0.2 0.2 0.5 50 1 Furniture 0.5 0.7 1.2 0.7 1.1 1.8 60 4 Technical Assistance -- 0.1 0.1 -- 0.1 0.1 100 0 Total Investment Costs 2.7 23,1 25.8 4.1 35.6 39.7 90 75 Recurrent Costs Incremental Salaries 6.5 -- 6.5 9.9 -- 9.9 0 19 Materials -- 1.6 1.6 -- 2.4 2.4 100 5 School Rental 0.7 -- 0.7 1.1 -- 1.1 0 2 Total Recurrent Costs 7.2 1.6 t.8 11.0 2.4 13.4 18 25 Total Baseline Costs 9.8 24.7 p4.5 15.1 38.u 53.1 72 100 Contingencies: Physical 0.3 2.5 2.8 0.5 3.8 4.3 88 8 Price 0.4 1.3 1.7 0.7 1.9 2.6 74 5 Total Project Costs 10.6 8 39.0 16.3 43.7 60.0 73 113 Note: Totals may not add up due to rouriinng  19 4.03. Basis of Cost Estimates. Baise costs reflect December 1990 prices. Costs of civil works are derived from awarded contracts and cost analyses for comparable works. Special maintenarnce and supervision costs are derived from cost indices for similar works in the education and health sectors. Equipment, furniture, teaching/]earning materials, and medical supply lists are based on standard lists of the Ministries of Education and Health,. Items directly imported for the project are exempt from import duties and taxes, but locally procured goods, supplies and materials are estimated to include about US$2 million equivalent in duties and taxes. The foreign exchange component of US$43.7 million has been calculated on the basis of 67 percent for civil works; 60 percent for furniture; 50 percent for textbooks; 100 percent for imported equipment, materials and professional services, and 95 percent for classroom equipment. 4.04. Contingency Allowances. Estimated project costs include physical contingencies (US$4.3 million) representing an average of 8.1 percent of base costs). A 10 percent physical contingency factor has been applied to equipment, materials, furniture and civil works categories. Price contingencies (US$2.6 millicn) are based on the implementation schedule and the following expected annual price increases, which average 4.9 percent of base costs. Annual Price Increases 1991 1992 1993 Local (X) 7.7 7.0 6.5 Foreign (X) 3.4 3.4 3.4 4.05. Financing Plan. The proposed Bank loan of US$10 million would finance 17 percent of total project costs, including 13 percent of foreign exchange and 26 percent of local cost requirements. The Bank loan would finance: (i) 100 percent of the expenditures for the Public Transport component, comprising the purchase of buses, spare parts and workshop equipment (US$5.8 million, including contingencies): (ii) 16 percent of the total estimated cost of the Education and Health components. Bank financing would be US$4.2 million for these two components and would help, jointly with the Government and Sweden, salaries of additional education and medical personnel. The need to finar,ce salaries is of critical importance, given that these incremental and returnee-induced costs represent nearly 40 percent of the total financing requirement for the health and education sectors. The Government contribution of US$6.4 million would cover about 39 percent of local costs. Cofinancing from other donors amounts to US$43.6 million or 73 percent of total project costs. The financing plan has been agreed with the Government and the donors.  20 Table 4.03: Financing Plan by Disbursement Category (lS$ (J00s, ilicluding contingencies) St.0darl tanC *_ $.,11# e L.tck IS totel for (fact _.at a .,t * hit I jt_t S ~it I tt S _t a iZ* 1** ..n..t......t..si. af.f.. .i....n.............. ,., ...8......... ...................... 4.t e* so.'Q 25 50 a0 0 SQ C.0 30 C0 o 00 0.0 $5391 6e9 So?], 276 o. scba. ,f%jr-Ime eW36 e 99 12r5 I O t 0 0 00 0.0 v0 0 00 00 0Q0 116 9 I5 773s 843 C *tt* 2S.e o9.8 0 a 0o 265 1 *0 2 0.0 ..0 C0 .0 a. 0 0 .0 528 9 0 9 245.3 St . 0 4*yite'tu 00 00 two 870 1494 1s10 00 o 00 0a 0o 0 0o 0 11495 19 1149$ 0 itd moa itt e2s6 29 sO6 6I 00 00 0o 0 o 0 a0 0o0 00 0o0 62 0.5 189 6 92 *. ~her @18swir s9882 1S 9 24S 9 39 0 o0 0.0 0o0 0 0 00 00 2orr 9 .4 621S 0 10.4 00 o 21S. U $ChWt sept 1511.8 100 o 0 00 o 0 0 0.0 C o 00 0.0 0o0 0.0 1311o8 2 2 00 lift t. Spetl 0rc ant 7696 is I 56 e 9 0.0 00 0.0 00 0a 0.0 0 .0 0.0 Z723.2 39 53 .6 769. I *ttl 6ht f k. 0.0 0-0 1.6 too0 0 0 0 0 0.0 3o0 00 0o 0 0.0 0.0 14* 6 0.2 1466 0. *. ktUU Imvl ." 18O.1 4 4 2463.6 6e.0 0.0 0.0 0.0 0 0 0o0 0.0 1461.8 S.6 4106.1 68 0.0 .106. C. A I -Ws-% o0.0 0o0 9o s7 33 3 166 2 66 7 0.0 o o0 00 0 0 0.0 0.o 776t 9 46 e 77.9 0. 4.i eI 0* plyv .*.r o0 0 0 0.0 0.0 0o0 0.0 1920.2 91.7 1291 3 6. 0o0 0.0 20496S 34.1 2496 .S 0. U. Ain to tow el. st18 6 2 ? 7 0.0 0 0 0.0 0 0 $8.3 77 n 0oo 0.0 0.0 0.0 74U.9 12.A s02s.6 2459. PI* -C I' & wt 0 0 0.0 0 0 0.0 0 0 0.0 tO 0 00 00 0.0 5765.2 100.0 765.2 9. $765 . 0 10141 0'.a*iem.,c fft4 7 tO.? 10005.4 1..? f1.. .. .. . 4..3 41.6 29..3 7.. 99.8.8 6.. 60'03.8 100.0 3M7.9 16 . .......... .** ..**.**.S. . *---- ----------*- --------.- B. PROJECT DMPLEMENTATION 4.06. The ERP Implementation Schedule is provided in Appendix I. Individual components of the project would be implemented by the existing project units in the Ministries of Education, Health, Public Works and Housing, Water Supply and Irrigation, and in the Public Transport Corporation. Coordination among individual agencies would be provided by the Project Coordination Unit (PCU) which has been established at the Ministry of Planning. This unit has already designated full-time staff. comprising a project coordinator, one social sector and one infrastructure sector specialist, and a part-time accountant. The staff have previously served as sector liaison officers at the Ministry. The functions of the PCU are to: (i) manage the implementation of the ERP and monitor overall progress; (ii) coordinate with and help the sectoral coordinators to resolve implementation issues; (iii) coordinate donor assistance and help in dealing with donor procurement procedures; (iv) implement a system of monthly and quarterly reports for the Government and the cofinanciers on ERP's progress; (v) record and coordinate all submissions of withdrawal applications and audit reports under the project; and (vi) alert the Task Force (para. 4.07) of major obstacles impeding the timely implementation of the ERP. 4.07. A high-level Emergency Response Program Task Force, comprising the Governor of the Central Bank and the Ministers of Finance, Planning, and Industry and Trade, has already been established to provide the oversight function. The task force would meet at regular intervals and review progress as well as advise on major implementation issues. The Government and the Bank would hold semi- annual reviews to monitor progress against an agreed Implementation Schedule for each component (Appendix I) and to review the appropriateness of project components in light of evolving needs. During negotiations, the Government gave assurances that it will: (i) maintain the Project Coordination Unit at the Ministry of Planning, and the high-level Emergency Response Program Task Force (para. 6.01 (a)); (ii) implement the project in accordance with the action program and targets mutually agreed upon (para. 6.01 (b)); and (iii) hold semi-annual implementation review meetings with the Bank to monitor progress against mutually agreed targets and to make necessary adjustments (para. 6.01(c)).  21 C. PROCUREMENT 4.08. The procurement methods are summarized in Table 4.04. Table 4.04: Procurement Arrangements Procurement Methods ICB ILSC- Otherb" N.A. Total" -(US$ million)-------------- Civil Works 7.5 7.5 Special Maintenance -- -- 2.8 -- 2.8 Equipment & Materials 3.5 2.3 25.8 -- 31.6 (3.5) (2.3) -- -- (5.8) Furniture -- -- 2.1 -- 2.1 Textbooks -- -- 0.5 -- 0.5 Medical Supplies -- -.8 - 2.8 School Rent -- -- -- 1.3 1.3 Incremental Salaries -- -- -- 11.4 11.4 (4.2) (4.2) TOTALU/ 3.5 2.3 28.6 12.7 60.0 (3.5) (2.3) -- (4.2) (10.0) Notes: AAmounts In parentheses represent Bank ftnancing a/ lntemationa or ocal shopping b/ Other d nort procedures C/ Totals may not add up due to rounding 4.09. The contracts for goods estimated to cost more than US$150,000 would be carried out through International Competitive Bidding (ICB) procedures. 4.10. Exceptions to ICB would be contracts for goods with a value of US$50,000 each and a total estimated value of US$750,000. These contracts would be procured through local shopping. Also excepted from ICB would be contracts for goods of US$150,000 each with an aggregate amount of US$1.5 million. These would be procured through international shopping. Portions of the project being financed by other donors will follow the donors' procurement procedures. 4.11. The first contract for goods under ICB (to be used as a standard document for later procurement) would be subject to prior review by the Bank. Following the clearance of the standard bidding documents, there would be no further review by Bank staff of particular bidding documents or procurement decisions prior to contract awards, to avoid delaying transactions. Necessary procurement documents (such as bid evaluation reports) would be sent to the Bank for review prior to submission of the first withdrawal request.  22 4.12. Procurement for the Water Authority of Jordan, the Ministries of Public Works and Education, and the Public Transport Corporation would not exceed 18 months in duration and would be completed within the two-year implementation period for the proposed project. D. DISBURSEMNTS 4.13. Given the emergency nature of the proposed project, the implementation period would be 24 months and the Bank loan would be disbursed over 28 months. The Closing Date would be October 31, 1993. The additional four months have been provided to allow for the completion of disbursements. Table 4.05 shows the estimated loan disbursements by semester. Table 4.05: Disbursement Schedule Cumulative Bank FY & Disbursements Disbursements % of Total Semester -----------US$ million---------- 1991 2 3.0 3.0 30 1992 1 3.0 6.0 60 2 2.0 8.0 80 1993 1 1.5 9.5 95 2 .5 10.0 100 4.14. The proposed loan would be disbursed against 17 percent of total project expenditures. Disbursements of loan proceeds would be made on the basis of: (a) Equipment and materials--100 percent of foreign expenditures, 100 percent of local expenditures (ex-factory cost), and 80 percent of local expenditures for other items procured locally; and (b) Incremental salaries--90 percent. 4.15. Full docume-.ation would be sent to the Bank in support of withdrawal applications with respc to materials, equipment, vehicles and incremental salaries of over US$150,000 equivalent. Expenditures for these categories at or below US$150,000 equivalent would be reimbursed against Statements of Expenditure (SOEs) for which related documentation would be retained for review by Bank supervision missions. 4.16. Retroactive Financing. In view of the emergency nature of social service requirements and infrastructure works, and the strained foreign exchange position of the country, retroactive financing up to US$2 million from the proceeds of the Bank loan is proposed for expenditures incurred after January 1, 1991 but before loan signing. During negotiations, the Government agreed that all  23 cIa i ns for ret roac t I ve finatic ing will h e made in accordanice with Bank guidelines (para. 6 .01(d)). 4. 1/. Special Account, In order to facilitate quick disbursements, tthe (;overnment would, unider terms and conditions satisfactory to the Bank, open and maintain a Special Account in US$ at the Central Bank of Jordan (CBJ) for the Bank-financea portion of the loan, as well as other donor financinig unider joint cofinancing arrangements with the Bank. An initial deposit of US$2 million would be made. Contracts valued at over US$1.5 million would be paid outside the Special Account. CBJ would maintain separate fdentifiable accounts for project expenditures and retain all supporting documentation. CBJ would also ptovide the Bank with monthly statements of transactions in the Special Account. In addition, it would, on at least a monthly basis or when one half of the authorized initial deposit had been utilized, submit a replenishment request to the Bank with the necessary supporting documentation as described in para. 4.15. Documentation on expenditures would be retained In the Foreign Exchange Department of CBJ and be available for review by Bank supervision missions. 4.18. Accounts and Audits. CBJ would be the designated representative of the Borrower for withdrawing the proceeds of the Bank loan. The Project Coordination Unit would keep separate accounts for project expenditures, in accordance with accounting principles and practices acceptable to the Bank. These accounts and the Special Account would be audited annually by an independent auditor acceptable to the Bank, and copies of the audited statements would be forwarded to the Bank within six months of the end of the Jordanian fiscal year. During negotiations, the Government gave assurances that project accounts, including the Special Account, will be audited by auditors acceptable to the Bank and in accordance with appropriate auditing principles; and that the Bank will be provided within six months of the end of the Government's fiscal year with (i) certified copies of the project accounits; and (ii) an audit report of such scope and detail as the Bank may reasonably request, including a separate opinion by the auditor on disbursements against certified statements of expenditure (para. 6.01(e)). E. REPORTING. MONITORING AND SUPERVISION 4.19. ReRorting and Monitoring. The Project Coordination Unit (para. 4.06) would prepare quarterly progress reports on the basis of information obtained from sector ministries and other executing agencies. Contract awards, disbursement documents and joint Government/Bank missions, along with audit reports and monthly reports from the Project Coordination Unit and CBJ would form the basis for monitoring progress. An overall Project Completion Report, combining the reports of the various sector project units, would be submitted to the Bank by the Project Coordination Unit within six months after final disbursement of funds. 4.20. Supervision Plan. Four missions in the first and three missions in the second year will be required to supervise the project and carry out semi- annual reviews. The missions will comprise a PHN economist and an infrastructure engineer. At an average iost of US$7,000 for travel cost per Bank staff member per mission (for combine; missions), the total Bank cost of supervision missions for the project is estimated at US$98,000.  24 F. !MVRON=KAL IPACT 4.21. The proposed project has been reviewed under the provisions of Operational Directive 4.00, Appendix A, "Environmental Assessment.' The components concerning water supply and sewerage and highways and roads have been placed in environmental screening category tB" and would be addressed through the use of agreed design criteria. The remaining project cormponents have been placed in environmental screening category "C." The staple food and productive sector (agriculture, industry and construction) inputs components of the Emergency Response Program, which are currently outside the scope of the project pending availability of additional cofinancing, have also been assessed and placed in environmental screening category "B." The Bank would not finance these components. V. BENEFITS AID RISKS 5.01. Benefits. The project would implement the critical social service and Infrastructure components of the Government's action program designed to address the priority needs of Jordanian returnees from Kuwait, Iraq and other Gulf states in the wake of the Gulf crisis, estimated to reach as high as 400,000 persons, or 13 percent of Jordan's population. Specific benefits expected from the project include: (a) the maintenance of pre-crisis quality standards in educational and health care services; (b) the maintenance of pre-crisis water supply and sewerage services, public transport, and roads; and (c) the creation of an estimated 1,600 jobs associated with project expenditures. About 600 of these jobs are in the highways sector and are temporary; the remaining 1,000 jobs are in the health and education sectors and will be permanent. The Government is expected to be able to absorb the costs involved after project completion; sustainability is therefore not expected to be an issue. 5.02. Risks. The major project risk relates to the institutional capabilities of the five implementing agencies involved in the project to carry out their responsibilities in a timely and effective manner. To help contain this risk, the project components incorporate simple designs that have been built, wherever possible, around existing operations and schemes already established in the country. These established operations include agency-level project units and the centralized Project Coordination Unit at the Ministry of Planning. The implementing agencies are also experienced in implementing similar operations in the past familiar with Bank procurement, disbursement and reporting procedures. Further, the Government has established a high-level Task Force to oversee project implementation. A second project risk relates to possible delays in the quick disbursement required under the project. To minimize this risk, the Government has already prepared most of the tender documents. In addition, efforts have been made to limit, to the extent possible, the volume of civil works.  25 VI. AGREEEFNTS REACHED 6.01. During negotiations, agreement was reached with the Government that: (a) the Project Coordination Unit at the Ministry of Planning and the high-level Emergency Response Program Task Force will both be maintained (para. 4.07); (b) the project will be implemented in accordance with the action program and targets mutually agreed upon (para. 4.07); (c) joint semi-annual implementation review meetings will be held to monitor progress against mutually agreed monitoring targets and to make adjustments as necessary (para. 4.07); (d) all claims for retroactive financing of eligible expenditures incurred between January 1, 1991 and the date of loan signing, and not to exceed US$2 million equivalent, will be made in accordance with Bank guidelines (para. 4.16); and (e) project accounts, including the Special Account, will be audited by auditors acceptable to the Bank and in accordance with appropriate auditing principles; and that the Bank will be provided within six months of the end of the Government's fiscal year with (i) certified copies of the project accounts; and (ii) an audit report of such scope and detail as the Bank may reasonably request, including a separate opinion by the auditor on disbursements against certified statements of expenditure (para. 4.18).  26 APPENDIX I Page I of 3 THE HASHEMITE KINGDOM OF JORDAN EKMRCENCY RECOVERY PROJECT ACTION PROGRAM FOR PROJECT IMPLEMENTATION A. IMPLEMENTING AGENCIES AND ACTION SCHEDULES/MONITORING BENCHMARKS 1. MINISTRY OF EDUCATION Equipment. Furniture and Learning Materials: - - Draft bidding documents and advertisement sent to Bank: March 30, 1991 -- Clearance of above by Bank: April 15, 1991 -- Publication of advertisement: May 1. 1991 -- Response to advertisement and collection of bid documents: May 15, 1991 -- Preparation and submission of bids: June 30. 1991 - - Evaluation of bids: July 30. 1991 -- Contracts awarded: August 20. 1991 - - Delivery completed: August 20, 1992 Construction of Sanitary Units: Same as above except that construction will take up to December 31. 1992. Maintenance Contracts: - - Small contracts procured locally. Preparation of contracts and award could be finalized and signed by mid-June 1991. 2. MINISTRY OF HEALTH Procurement of Supplies and Medicines: - - Draft bidding documents and advertisement sent to Bank: 30 March, 1991 - - Clearance of above by Bank: April 15. 1991 - - Publication of advertisement: May 1. 1991 - - Response to advertisement and collection of bid documents: May 15. 1991 - - Preparation and submission of bids: June 30. 1991 - - Evaluation of bids: July 30. 1991 - - Contracts awarded: August 20. 1991 - - Delivery completed: August 20. 1992 Hospital Maintenance: - - Appointment of consultants to prepare contracts: April 15. 1991 - - Draft contracts for maintenance of hospitals prepared by consultants: June 30. 1991 - - Review by Bank: July 30. 1991 - - Draft bidding documents and advertisement sent to Bank: August 30, 1991 - - Clearance of above by Bank: September 15. 1991  27 APPENDIX I Page 2 of 3 Publication of advertisement: September 30. 1991 Response to advertisement and collection of bid documents: October 15. 1991 Preparation and submission of bids: December 15. 1991 Evaluation of bids: January 30. 1992 Contracts awarded: February 28. 1991 3. PUBLIC TRANSPORT CORPORATION: Buses. SRare Parts and Workshop Equipment: Preparation and submission of specifications, bid documents and advertisement to Bank (COMPLETED) Agreement and finalization of documentation by Bank: March 15. 1991 Publication of advertisement: March 31. 1991 Response to advertisement and collection of bid documents: April 21, 1991 Submission of bids: May 21. 1991 Evaluation of bids: June 19. 1991 Award of contracts: August 19. 1991 Delivery completed: August 31. 1992 4. WATER AUTHORITY OF JORDAN: - - Draft bidding documents and advertisement sent to Bank: March 15. 1991 Clearance of above by Bank: March 22. 1991 Publication of advertisement: May 1. 1991 Response to advertisement and collection of bid documents: May 14. 1991 Preparation and submission of bids: June 25. 1991 Evaluation of bids: July 25. 1991 Contracts awarded: August 9. 1991 Delivery completed: August 9. 1992 * it is possible that this programme may be advanced and retroactive financing required. 5. MINISTRY OF PUBLIC WORKS AND HOUSING Periodic Maintenance: Bank review of draft bidding documents (COMPLETED) Local Competitive Bidding advertisement for periodic maintenance allowing 2 weeks for response and collection of bid documents : April 15. 1991 Preparation and submission of bids 4 weeks: May 27. 1991 Evaluation of bids 3 weeks: June 17. 1991 Contracts awarded: JUly 1. 1991 Mobilization: August 1. 1991 Completion of works: August 1. 1992 (assuming each contract is for 50 km) Maintenance Equipment Procurement:  28 APPENDIX I Page 3 of 3 Draft bidding documents and advertisement to be sent to Bank: March 15. 1991 Clearance of above by Bank: March 22. 1991 Publication of advertisement: May 1. 1991 Response to advertisement and collection of bid documents: May 14. 1991 Preparation and submission of bids: June 25. 1991 Evaluation of bids:July 25, 1991 Contracts awarded: August 9. 1991 Delivery completed: August 9. 1992 Force Account Works: Submission of work programme to Bank: March 15. 1991 Progress Reports every two months following commencement of work. B. REPORTING AND OVERSIGHT ARRANGEMENTS (a) Procurement (quarterly). A list of tender packages, date of invitation for tenders, date of opening tenders, date of tender evaluation, date of contract award (name of supplier and contract amount in various currencies), date of contract signing, and delivery dates or contract duration; (b) Work program (quarterly). Detailed work program by quarters for: procurement of material and equipment by sector; construction start; and work to be completed; (c) Disbursements (monthly). Status of disbursement applications submitted to the Bank and payments received (amounts by categories, dates and currencies of payments); (d) Annual audits. Within six months after the end of the fiscal year, submit a copy of the annual audit report of project accounts for Bank review; (e) Gom_letion report. Within six months after the closing date of the loan, submit a project completion report for Bank review (format to be provided by the Bank); and (f) Joint reviews. Government/Bank review of project progress against agreed monitoring benchmarks and implementation schedule, and provision of adjustments as necessary.  29 APPENDIX II Page 1 of 4 THE HASHIEITE KINGDOM OF JORDAN EMERGENCY RECOVERY PROJECT MEMRGENCY RESPONSE PROGRAM COMPONENTS THAT HAVE BEEN APPRAISED AND THAT WOULD BE INTEGRATED INTO THE PROPOSED PROJECT AS ADDITIOK&L COFIN&NCINC BECOMES AVAILABLE 1. The Bank mission wnich visited Jordan in November/December 1990 appraised the Government's Emergency Response Program, including the three components described below. Donor financing for these components is being sought but has not yet been identified, and thus they have not been included among the components of the project that are ready for implementation. Each one of the three components would be considered eligible for inclusion in the project at such time as sufficient resources become available from the international donor community to enable a firm financing plan to be established. A. ESSENTIAL FOOD SUPPLIES (Estimated Cost: US$66.5 million) 2. To meet the imported essential food requirements of the returnees, fina;tcing of US$66.5 million is required. This amount has been calculated by prorating essential food import needs by Government and informal ILO estimates of returnee numbers. Ministry of Supply estimates of 1991 import needs for selected key commodities are as follows: - - wheat, rice and animal feed grains: estimated cost, US$157 million; - - sugar: estimated cost, US$52 million; -- powdered milk: estimated cost, US$21 million; -- white meat (chicken): estimated cost, US$14 million; - - frozen red meat: estimated cost, US$7 million; -- edible fats and oils: estimated cost, US$5 million; Total cost: US$256 million p.a. 3. Even assuming that quantities demanded and costs remain stable over the two-year period covered by the ERP, the MOS data imply a US$512 million import program for the above essential commodities alone. Of this total, the requirement attributable to returnees is estimated at US$66.5 million for the two-year project period. B. ESSENTMIL INPUTS FOR PRODUCTIVE SECTORS (Estimated Cost: USS88.5 million) 4. Agriculture. The list provided shows imported agriculture sector inputs and the related import bill for 1989.  30 APPENDIX II Page 2 of 4 BTN 1989 (JD) 6,7,12 (a) cuttings, veg. for sowing, seeds 4,786,594 30 (b) veterinary medicaments 1,611,445 31 (c) fertilizer 5,026,771 38 (d) insecticides, fungicides, weed killers 3,461,737 39,40 (e) plastic sheeting, plast./rubber piping (% ests.) 500,127 956,059 82 (f) agricultural tools 169,023 84 (g) pumps (X est) 787,036 (h) ploughs, harvesting/threshing/milking machinery 8,408,099 87 (i) tractors and trailers 4,729,731 TOTAL JD 29,480,563 5. Based on this total of JD 29.5 million (US$45.4 million equivalent), and taking into account an estimated 25 percent drop in agricultural output for CY91 and a proportionate drop in input requirements, the two-year input financing requirement to meet agricultural product needs attributable to the returnee population, based on Government and informal ILO estimates, is JD 5.7 million, or US$8.6 million equivalent. 6. Industry and Construction. In the case of industrial and construction sector inputs, notwithstanding the estimated 9 percent decline in manufacturing output (para. 2.23), some incremental demand for final goods (and therefore essential inputs) can be expected to result from returnee demand. Moreover, efforts to promote the recovery ^f employment (especially manufactu'ring) and output form an essential prerequisite for the revival of manufacturing production. The 1989 import bill for selected essential inputs for the manufacturing and construction sectors was JD 225 million (US$338 million equivalent). Allowing for estimated output losses and prorating the import bill down proportionately to the returnee population, the imported input requirements attributable to the returnees is estimated at JD 53.3 million (US$79.9 million equivalent). 7. The financing requirement for the returnee share of imported inputs for the agriculture (US$8.6 million), industry and construction (US$79.9 million) sectors is, therefore, estimated at US$88.5 million equivalent. C. TECHNICAL ASSISTANCE FOR EXPORT WAllET DEVELOPMENT (Estimated Cost: US$5 million) 8. Jordan's massive export market and income losses owing to the Gulf crisis have already been documented (para. 1.04 and Table 1.01). The reorientation of exports, in order to revive foreign exchange earnings and limit the pace of output and employment losses, is urgently needed and is seen as a top priority; the Government has prepared a program for this purpose, to be supported by a modest, but catalytic, ERP component. The program's main features are described below.  31 APPENDIX II Page 3 of 4 Because the search for new markets typically requires lumpy it ltial expenditures at sub)statntial risk to the enterpris- making, them, the Government proposes to make linited techtnical and financial assistance available to exporters. As witht the LGTF, the program is expected to be of special value to SMEs set up by returnees (in this instatnce for export production), but it would tiot lie limited to returnees because of the uneconomical and cumbersome admintistrative/entforcement problems involved. Three types of assistance would be sup)ported. (1) Marketing representatives would be established abroad by the Jordan Commercial Centers Corporation (JCCC), which would implement the component (see below). JCCC would station its own staff with overseas representative firms and would carry out marketing studies based on surveys and field investigations. Marketing and information services would be available to all Jordanian exporters but are expected to be of special benefit to smaller firms which lack the resources to undertake marketing efforts of their own. Such firms would fall into the size category likely to be set up by returnees. (ii) Small cash grants (not to ,xceed US$20,000 or 50 percent of the activity to be supported. whichever is less) would be made available to individual firms, aga a on a cost-sharing basis for the following activities: target mar; L identification/assessment; locating overseas buyers/distributors and surveying their products; contracting with overseas trade/marketing organizations to promote Jordanian products; contacting buyers to determine product demand, specifications and requirements; assessing marketing, distribution channels and networks in target markets; design/development/packaging research to target consumer tastes; and any other reasonable market study/development work. (iii) In order to exploit economies of scale and to supplement JCCC's efforts, Jordanian private sector service organizations would be encouraged to organize market development activities on a collective basis, as long as the results were available to all enterprises. A ceiling of US$100,000 per organization is proposed and funds would be made available only for clearly defined and detailed market development project proposals on a cost-sharing basis. D. LOAN GUARANTEE TRUST FUND (Estimated Cost: USS15.0 million) 10. The collateral requirements of the banking sector represent a critical constraint affecting the ability of small- and medium-scale entrepreneurs, particularly Jordanian returnees who were forced to abandon their tangible assets when they left their host countries, to obtain access to credit. To address this issue, the project would provide financing in the amount of US$15.0 million to help set up a Loan Guarantee Trust Fund (LGTF) to provide the high-end extension of an existing loan guarantee facility operated by the Industrial Development Bank (IDB). A sum of US$15.0 million would be deposited in a fund, which would be of direct benefit to skilled returnees. The main features of the LGTF are summarized below.  32 APPENDIX II Page 4 of 4 11. The existing IDB loan guarantee facility only provides guarantees for loans of up to JD 20,000 (US$30,000). Under the LGTF, coverage would be expanded to itnclude loan guarantees of up to US$100,000. The maximum guarantee level would be 75 percent for fixed asset loans; working capital loans would be guararnteed up to 50 percent. LGTF would be initially capitalized with US$15.0 million equivalent. Assuming an average guarantee of US$50,000, this would allow coverage of a loan volume of 300 loans at any given time. Based on IDB cost-per-job experience, it is estimated that the investments financed by this level of guarantee commitments would initially generate at least 'S0 jobs (and possibly substantially more if LGTF leveraged a larger total volume of business by guaranteeing lower percentages of loans than the maxima indicated above). Sectoral coverage would include both industrial and service enterprises. The maximum duration of guaranteed loans would be five years, including up to one year's grace. An LGTF Administration would be established to implement this component and would enter into agreements with participating banks that would govern the terms and conditions under which the guarantee facility would operate, including the establishment of a specified guarantee allocation level for each individual bank. Each bank could then use its guarantee allocation as it sees fit, without prior LGTF approval but in line with agreed appraisal criteria and subject to LGTF review. Cost recovery for LOTF's operations would be ensured by charging participating banks a fee (initially set at 2 percent) on the committed and uncommitted portions of its guarantee allocation; if experience showed that this fee was inadequate, it would be raised.  33 APPENDIX Irr Page 1 ot 1 THE HASHEMITE KINGDOM OF JORDAN EKERGENCY RECOVERY PROJECT LIST OF DOCUMENTS IN THE PROJECT FILE 1. Summary of the 1991 General Budget of the Covernment of Jordan 2. Summary of the 1991 Emergency Budget of the Government of Jordan 3. Summary of MOE and MOH Budgets for 1989 and 1990 4. Financial Status of Externally Financed Projects Under Implementation 5. List of Equipment and Materials to be Financed: -- Medical Supplies -- Water Supply Equipment -- Transport Equipment and Spare Parts (and specifications) 6. U.N. Report on Financial Impact of Security Council Resolution 661 on Jordan, October 17, 1990. 7. ILO Report on Migrant Workers Affected by the Gulf Crisis, circulated by EMNVP on January 23, 1991. 8. Working Papers: -- Technical Assistance for Export Market Development -- Loan Guarantee Trust Facility