US embassy cable - 04AMMAN9917

C O N F I D E N T I A L SECTION 01 OF 05 AMMAN 009917 
 
SIPDIS 
 
E.O. 12958: DECL: 12/15/2014 
TAGS: EAID, EFIN, PREL, JO 
SUBJECT: JORDAN'S NON-U.S. AID FUNDS 
 
REF: AMMAN 9602 
 
Classified By: CDA David Hale for Reasons 1.4 (b) and (d) 
 
1. (SBU) SUMMARY: Jordan receives substantial non-military 
aid from sources other than the U.S. Government.  According 
to the Ministry of Planning and International Cooperation 
(MOPIC), non-U.S. development assistance pledged in 2004 
amounted to US$141 million in grants and US$111 million in 
soft loans. Non-U.S. aid, however, comes primarily either in 
the form of soft loans and therefore adds to Jordan,s debt, 
or entirely in the form of programs.  Bilateral aid from the 
Gulf in the form of oil grants is even larger (US$614 
million) and by its nature substantially more flexible than 
Jordan,s development assistance, but it is unlikely to 
continue at present levels for very long.  The U.S. remains 
Jordan,s primary donor country - the donor Jordan believes 
it can count on.  END SUMMARY. 
 
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CAVEAT 
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2. (U) Calculating the amount of foreign aid coming into 
Jordan from various countries by year is an inexact science 
for a variety of reasons, including variation between 
countries on the date beginning each fiscal year, varying 
definitions of when money is awarded, and the sometimes s 
ecret nature of support (especially as regards the GCC 
states, oil grants).  MOPIC, Jordan,s coordinating Ministry 
for development assistance, tracks foreign aid and 
coordinates use of donor funds, and has the best bird,s-eye 
view of the aid inflows.  However, its method of reporting 
these inflows - based on the time at which money is pledged 
rather than disbursed - distorts the reality for donors like 
Germany and Japan, whose steady stream of disbursements to 
fulfill pre-committed project targets appear in MOPIC,s 
figures as long periods of low grants, punctuated by years in 
which grants are very high. 
 
3. (C) MOPIC delivered to the Embassy the following table, 
which they asked be kept confidential (amounts are in 
millions of US$, and reflect money pledged rather than money 
disbursed): 
 
Foreign Assistance for 2004 by Source of Funding 
 
Donors            Grants   Loans    Total 
 
United States   346.1    -      346.1 
Canada            6.0    -        6.0 
Japan             0.8    -        0.8 
China             7.8    -        7.8 
World Bank        2.4   38.0     40.4 
Korea             5.0   24.0     29.0 
Italy              -     5.5    5.5 
United Kingdom    3.3    -        3.3 
UNIFEM            0.073  -        0.073 
Int,l Labor Org   0.03   -        0.032 
France - AFD      1.2    -        1.2 
Arab Fund           0.34  40.0     40.34 
Sweden              3.531  3.412    6.94 
UNDP                0.12   -        0.12 
Islamic Dev. Bank 0.12   -            0.12 
 
Total           376.82 110.9  487.73 
 
(NOTE: The above chart does not take include the 30 million 
euro grant pledged in late November by the EU) 
 
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"WE ARE NOT NEO-LIBERALS:" EU SUPPORT 
------------------------------------- 
 
4. (SBU) The most comprehensive and integrated assistance to 
Jordan outside of USAID is funded by the EU and directed by 
the office of the European Commission in Amman.  This aid is 
divided, for 2004, into three main branches: a 10 million 
euro (US$13.5 million) direct cash transfer to the GOJ; 
several major economic modernization programs - the 
Euro-Jordanian Action for the Development of Enterprise 
(EJADA) program, the Support for the implementation of the 
Association Agreement Programme (SAAP), and the Support for 
Regulatory Reform and Privatization (SRRP) program; and 
political and social development programs. 
 
5. (SBU) The latter were the subject of this year,s only 
sizable EU pledge to Jordan: 30 million euros going to 
poverty alleviation and rural social development, the major 
EU deliverable in King Abdullah,s late November trip to the 
EU.  However, none of the money from this recent pledge is 
likely to be disbursed in the near future.  EJADA, SAAP, and 
SRRP, on the other hand, are all at the peak of their 
disbursement only now, despite having had their seed money 
pledged years ago by the EU.  These latter programs are 
worthy of further elaboration. 
 
6. (SBU) The 45 million euro (US$60 million) EJADA program, 
initially allocated funding in 2000, provides 
capacity-building assistance to private Jordanian firms and 
is based on the USAID-funded JUSBP program. The disbursement 
of the initial grant has been fairly slow, but it has finally 
run through most of its original grant and the European 
Commission is considering expanding the program.  The 
Commission therefore currently plans to allocate 40 million 
euros (US$53.2 million) in additional funding to the program 
in 2005. 
 
7. (SBU) Initially funded in 2002 with 20 million euros, the 
SAAP is intended primarily to harmonize Jordanian regulations 
with those of the EU.  One of the primary tools in this 
system has been "administrative twinning," under which 
Jordanian departments are paired with their counterparts in a 
selected EU member state to implement a specific 
harmonization project.  The implementation of this project 
has been substantially quicker than many of the EU,s other 
Jordan-based programs.  This is in part because the mechanism 
of transfer has been to turn the money over to the Ministry 
of Planning for disbursement rather than handle the 
disbursement directly; an EU representative suggests that the 
Commission is moving toward this model in Jordan.  The 
Commission currently plans to allocate a further 10 million 
Euros (US$13.5 million) in 2005, as most of the initial 
funding of the program has been disbursed. 
 
8. (SBU) An area of substantial focus for the Commission has 
been support to Jordan,s regulators. A 20 million Euro 
(US$26.6 million) grant to Jordan pledged in 2002 for the 
EU,s four-year SRRP program is being used to fund 
consultants posted to Jordan,s regulatory agencies, 
including the Civil Aviation Authority (CAA), Electricity 
Regulatory Commission (ERC), Executive Privatization 
Commission (EPC), Public Transportation Regulatory Commission 
(PTRC), and Telecommunications Regulatory Commission (TRC). 
Per EU rules, all of the consultancy service contracts 
awarded thus far have gone to European firms: the CAA will be 
advised by a group led by Lufthansa and including the Irish 
Aviation Authority and the French Sofreavia, the ERC by 
Spanish Atos Origin, and the EPC by German POHL Consulting 
and Associates.  Conspicuous by their absence from the 
targeted group have been a variety of Jordanian regulatory 
agencies - such as the Insurance Commission and the Jordan 
Security Commission - that are unable to set specifications 
that would influence the purchase of big-ticket equipment 
such as airplanes, busses, power-generating equipment, and 
telecommunications equipment. 
 
9. (C) The SRRP has had its effectiveness somewhat diluted, 
however, by the strictures placed upon it by EU rules.  Until 
the past year, no EU-funded consultant was in place in any of 
the agencies.  For the TRC, EU procurement rules set the 
per-day maximum charge by consultants too low, and therefore 
TRC has been unable to attract bids by consultants offering 
the requisite telecommunications expertise.  Even when 
contracts have been awarded, the inflexible nature of the 
EU,s stipulations has made it difficult for the Jordanian 
regulatory agencies to get the help that they need.  The 
EPC,s experience with POHL over the past year of its 
contract is a good example of this difficulty: the terms of 
the contract have too tightly limited the consultants, scope 
of work, and the per-day maximum charges have apparently also 
meant a lower quality of consultants sent to work with the 
EPC.  The result has been that in the course of an entire 
year, the consultants whose job was to identify good 
prospects for privatization have not identified even one. 
 
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DIFFERING PRIORITIES: EU MEMBER BILATERAL ASSISTANCE 
--------------------------------------------- ------- 
 
10. (SBU) The bulk of EU members, assistance to Jordan is 
contributed through the European Commission,s assistance 
program.  However, several of the larger EU member states 
also contribute bilaterally to Jordan.  The most active 
bilateral assistance program run by an EU member state is 
that of Germany, which has both of its primary aid 
organizations - GTZ and KFW - active in Jordan.  KFW directs 
virtually all of its aid to the water sector and towards 
social development in rural areas; GTZ is active on a 
substantially wider scale.  The two agencies are working on 
projects with total budgets of some 80 million euros 
(US$106.5 million), though no one in either agency or the 
German embassy seems to have any clear idea of the actual 
size of the budgets for these projects or the amount 
disbursed this year.  MOPIC figures show Germany as having 
made no pledges of program assistance in 2004, after four 
successive years in which pledged grant and soft loan 
assistance was above US$20 million annually.  Germany is 
currently finalizing its assistance budget for 2005, and may 
commit to levels of program funding similar to that seen in 
previous years. 
 
11. (SBU) The UK and France both have relatively small 
bilateral aid programs.  The British program, administered by 
DFID, goes primarily to technical support for Jordan,s water 
sector and rarely rises above US$5 million per annum; the UK 
also contributes small grants to the development of democracy 
and civil society.  DFID is also currently implementing a 
very large public sector reform project; however, DFID may be 
withdrawing from Jordan completely in June 2005.  France,s 
contribution is even smaller - in most years almost 
negligible - and goes almost entirely to the promotion of 
French language and culture in Jordan. 
 
12. (SBU) Italy has delivered its assistance to Jordan 
primarily in the form of soft loans, of which 88 million 
euros (US$117 million) is currently outstanding.  MOPIC 
figures indicate that US$5.5 million in loans came in over 
the past year.  The bulk of these loans are going to water 
sector projects, but they also fund SME development, the 
health sector, tourism, and cultural cooperation.  Italy also 
annually allocates to Jordan several hundred thousand euros 
in grants and has forgiven the majority of the official GOJ 
debt owed to it over the past several years.  It is currently 
looking at ways to convert Jordan,s 49 million euro (US$65.2 
million) debt to Italy,s export credit insurance agency into 
official bilateral debt, so that it can set up a possible 
swap for this debt as well.  Italy also fully funds UNIDO 
efforts in Jordan. 
 
13. (SBU) Spain continues to disburse previously pledged 
grants at a rate of approximately 2 million euros (US$2.7 
million) per year, primarily to small social development 
projects; it will be making a new three-year grant pledge in 
2005.  It has also nearly used up a US$50 million pool of 
soft loans for GOJ purchases of Spanish products (primarily 
computers and related equipment for Jordan,s schools and 
ministries but also for the modernization of communications 
equipment for the Civil Aviation Authority). 
 
14. (SBU) Sweden has increased its aid to Jordan from nothing 
(over the previous four years) to US$3.5 million each in 
grants and soft loans in 2004.  Other EU members such as 
Denmark, Norway, Belgium, and Greece have contributed small 
amounts of aid in the past but did not do so this year and do 
not appear to have any plans to do so next year. 
 
--------------------------------------------- 
OTHER BILATERAL DEVELOPMENT ASSISTANCE DONORS 
--------------------------------------------- 
 
15. (SBU) Japanese aid to Jordan rose to record levels in 
2003 - 6 billion yen (at the time, US$50 million) in 
budgetary support and almost 800 million yen (US$7.64 
million) in program assistance.  Japan pledged an additional 
US$50 million in programmatic assistance to Jordan upon the 
outbreak of the war in Iraq.  Two of the five projects to be 
funded with that aid have been initiated and 1.9 billion yen 
(US$18 million) have been disbursed by Japan,s aid agency 
JICA in 2004.  (MOPIC figures again credit the year the US$50 
million pledge was made, not the year in which disbursements 
were actually made.) 
 
16. (SBU) For 2005, a Japanese diplomat in Amman says that 
Japan will likely contribute no more than US$40 million in 
direct budgetary assistance (confirmed by Prime Minister's 
announcement yesterday following a meeting with King 
Abdullah), and that it currently has no plans to again 
reschedule Jordan,s debt (the most recent rescheduling, in 
2003, was for 139 million yen - US$1.3 million).  Nor are 
there currently plans for further JICA programs, though the 
US$32 million remainder of the programmatic aid pledged in 
March 2003 should be disbursed in 2005.  (Also, JICA is using 
Jordan as a venue for much of its Iraq-related 
capacity-building aid.) 
17. (SBU) South Korea,s assistance to Jordan is up sharply 
over the past year; after three years in which it gave no 
assistance, this year it has given Jordan US$5 million in 
grants to various small projects and US$24 million in 
30-year, 2.5 percent interest soft loans to Jordan,s water 
sector.  The Korean assistance coordinator links the spike in 
giving to the Korean government,s decision to place troops 
in Iraq. 
 
18. (SBU) Jordan also has recorded what appears to be a 
breakthrough in Chinese grant assistance this year.  After 
providing soft loans in the US$5 million range periodically 
throughout the 1980s and 1990s, China began to provide small 
(US$1-2 million) grants in 1999, mainly going towards 
computerization of Jordanian schools and similar projects 
involving Chinese inputs.  In August 2004, however, China 
agreed to spend US$7.2 million for joint development 
projects; these are supposed to begin implementation next 
year. (China had already given a grant of US$600,000 in 2004 
to train 60 Jordanian officials "in economic fields.") 
19. (SBU) Canada,s bilateral assistance efforts, given 
through its development agency CIDA, are focused primarily on 
improving the quality of human resources available to Jordan. 
 Canada has given approximately US$6 million in 2004 to five 
education/capacity building projects, and plans to grant 
C$5-6 million (US$4-5 million) to Jordan in 2005. 
 
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INTERNATIONAL DEVELOPMENT AGENCIES 
---------------------------------- 
 
20. (SBU) Jordan cooperates with several UN agencies with 
offices in Amman.  In addition to UNRWA and UNHCR 
humanitarian assistance, which is offered to some Jordanian 
citizens but remains more or less extraterritorial, other UN 
agencies such as UNDP and UNIFEM carry out small projects, 
rarely amounting to more than six figures in cost in total in 
a single year.  Jordan, however, benefits from the presence 
of many UN agencies, Iraq offices in Amman, which in turn 
makes it convenient for holding lucrative capacity building 
sessions for Iraqis in Jordan. 
 
21. (SBU) Much more useful, from Jordan,s point of view, 
have been international lending institutions such as the 
World Bank, which this year is lending US$38 million, to be 
divided between public sector reform and the funding of the 
"Amman Development Corridor" (ADC), an eastern ring road 
intended to draw traffic and people to impoverished Eastern 
Amman.  Jordan has also received soft loan assistance for 
this same project from the European Investment Bank (EIB) in 
previous years (tens of millions of US$ in loans are 
outstanding), and it most recently received a cash infusion 
from a US$40 million soft loan given to it by the Arab Fund 
for Economic and Social Development.  The World Bank, EIB and 
Arab Fund have all been perennially reliable sources of 
funding for Jordan,s other major infrastructure projects - 
the three institutions are for instance the most heavily 
committed donors to the Jordanian project to computerize its 
schools, accounting for $197 million of the funding for a 
$382 million project. 
 
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HELP FROM THE GCC 
----------------- 
 
22. (SBU) While other Arab and Middle Eastern states have 
contributed virtually nothing to Jordan in the form of 
programmatic aid, two GCC members have provided a vital 
cushion for Jordan,s budget against the dramatic rise in 
crude oil prices over the past two years and the cutoff of 
Iraqi oil subsidies.  For the year beginning April 2003, 
Saudi Arabia supplied 50,000 barrels per day of refinable 
crude to Jordan, and Kuwait gave cash grants equivalent to 
25,000 barrels per day, between them accounting for over 70 
percent of Jordan,s crude consumption.  As crude is 
purchased by the Jordanian government at market rates and 
sold to the refinery (and thence to the open market) at fixed 
- and much lower - rates, the Saudi and Kuwaiti grants have 
flowed directly to fill the hole in Jordan,s budget. 
 
23. (SBU) The Saudi grant has been extended, with a mooted 
termination date of April 2005; the Kuwaiti grant has not. 
Jordan,s 2004 budget has therefore received a JD370 million 
(US$522 million) boost from the Saudi grant and a JD65 
million (US$ 91.7 million) boost from the Kuwaiti grant. 
Unless Jordan is able to secure either a further extension of 
the Saudi grant, a renewal of the Kuwaiti grant or some kind 
of financial support from some other Gulf country (the UAE is 
often bandied about as another potential donor), Jordan will 
likely receive no more than JD 130 million (US$183.3 million) 
in direct budgetary aid from the Gulf in FY 2005. 
 
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COMMENT 
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24. (C) Jordan has been very successful in drumming up donor 
support for its projects during the past year.  Jordan is 
going further afield than ever before in its search for 
funds, successfully tapping East Asian countries who have 
increased interest in the region, and making itself an 
exception to the normal rules of some donor countries who 
have previously focused on much poorer recipient countries. 
Despite Jordan,s success in these areas, however, even the 
largest non-U.S. development grants pale in comparison to the 
contribution that USAID can and does make.  With no real 
alternatives to the U.S. as assistance leader (and in full 
knowledge that much of its other assistance is in part the 
result of U.S. suasion), Jordan will continue to come to the 
U.S. for its most critical needs for the foreseeable future. 
 
25. (U)  Baghdad minimize considered. 
HALE