Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-81270) ON A SERIES OF TWO LOANS IN THE AMOUNT OF US$ 500 MILLION TO THE

Transcription

1 Public Disclosure Authorized Document of The World Bank Report No: ICR Public Disclosure Authorized IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-81270) ON A SERIES OF TWO LOANS Public Disclosure Authorized IN THE AMOUNT OF US$ 500 MILLION TO THE THE HASHEMITE KINGDOM OF JORDAN FOR DEVELOPMENT POLICY LOANS I-II Public Disclosure Authorized April 28, 2017 Middle East and North Africa Region 1

2 ABBREVIATIONS AND ACRONYMS CURRENCY EQUIVALENTS Exchange Rate Effective as of 28 April, 2017 Currency Unit = JD 1.00 = US$ US$ 1.00 = JD FISCAL YEAR January 1 st December 31 st AB CoM CPF CPS DPL EDP EU GDP GIC GoJ GWP KPI IACC ICR JICA LOB MoF MoPIC MoPSD OSS PA PDO PPP SME TA Audit Bureau Council of Ministers Country Partnership Framework Country Partnership Strategy Development Policy Loan Executive Development Program European Union Gross Domestic Product Global Integrity Country (report) Government of Jordan Government Work Program Key Performance Indicator Integrity and Anti-Corruption Commission Implementation Completion and Results Report Japan International Cooperation Agency Legislative and Opinion Bureau Ministry of Finance Ministry of Planning and International Cooperation Ministry of Public Sector Development One Stop Shop Prior Action Program Development Objective Public Private Partnership Small and Medium Enterprise Technical Assistance Senior Global Practice Director: Country Director Practice Manager: Task Team Leader: ICR Team Leader: ICR Primary Author: Carlos Felipe Jaramillo Ferid Belhaj Pablo Saavedra Eric Le Borgne Léa Hakim Robert Keyfitz 2

3 JORDAN First and Second Programmatic Development Policy Loans CONTENTS Data Sheet A. Basic Information... 4 B. Key Dates... 4 C. Ratings Summary... 5 D. Sector and Theme Codes... 6 E. Bank Staff... 7 F. Results Framework Analysis... 7 G. Ratings of Program Performance in ISRs H. Restructuring (if any) Program Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1 Bank Lending and Implementation Support/Supervision Processes Annex 3. Stakeholder Workshop Report and Results Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders Annex 6. List of Supporting Data Annex 7. List of Supporting Documents

4 A. Basic Information Program 1 Country Jordan Program Name Jordan First Programmatic DPL Program ID P L/C/TF Number(s) IBRD ICR Date 11/30/2016 ICR Type Core ICR Lending Instrument DPL Borrower JORDAN Original Total Commitment USD M Disbursed Amount USD M Implementing Agency: Ministry of Planning and International Cooperation (coordinator) Cofinanciers and Other External Partners: Japan International Cooperation Agency Program 2 Country Jordan Program Name Jordan Second Programmatic DPL Program ID P L/C/TF Number(s) IBRD ICR Date 11/30/2016 ICR Type Core ICR Lending Instrument DPL Borrower JORDAN Original Total Commitment USD M Disbursed Amount USD M Implementing Agency: Ministry of Planning and International Cooperation (coordinator) Cofinanciers and Other External Partners: Japan International Cooperation Agency B. Key Dates Jordan First Programmatic DPL - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 12/09/2010 Effectiveness: 02/02/2012 Appraisal: 12/20/2011 Restructuring(s): N/A N/A Approval: 01/24/2012 Mid-term Review: 12/02/ /02/2012 Jordan Second Programmatic DPL - P Closing: 12/31/ /31/2013 Process Date Process Original Date Revised / Actual Date(s) Concept Review: 11/18/2013 Effectiveness: 05/08/2014 4

5 Appraisal: 12/09/2013 Restructuring(s): N/A N/A Approval: 03/13/2014 Mid-term Review: N/A N/A Closing: 09/30/ /30/2015 C. Ratings Summary C.1 Performance Rating by ICR Overall Program Rating Outcomes Risk to Development Outcome Bank Performance Borrower Performance Moderately Satisfactory Substantial Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Performance Performance C.3 Quality at Entry and Implementation Performance Indicators Jordan Programmatic Series: First and Second Programmatic Policy Loans (P and P125483). Implementation Performance Potential Problem Program at any time (Yes/No): Problem Program at any time (Yes/No): DO rating before Closing/Inactive status No No Indicators QAG Assessments (if any) Quality at Entry (QEA) Quality of Supervision (QSA) None None Rating: 5

6 D. Sector and Theme Codes Jordan First Programmatic DPL - P Sector Code (as % of total Bank financing) Original Actual Central Government (Central Agencies) Health Other Industry, Trade and Services Other Non-bank Financial Institutions 7 7 Services 7 7 Theme Code (as % of total Bank financing) Debt management and fiscal sustainability Health system performance Micro, Small and Medium Enterprise support Other accountability/anti-corruption Regulation and competition policy Jordan Second Programmatic DPL - P Original Actual Sector Code (as % of total Bank financing) Capital Markets 6 6 Central Government (Central Agencies) Other Industry, Trade and Services Public Administration - Health Theme Code (as % of total Bank financing) Debt management and fiscal sustainability Other Private Sector Development Other accountability/anti-corruption Public expenditure, financial management and procurement Regulation and competition policy

7 E. Bank Staff Jordan First Programmatic DPL - P Positions At ICR At Approval Vice President: Hafez M. H. Ghanem Inger Andersen Country Director: Ferid Belhaj Hedi Larbi Practice Manager/Manager: Pablo Saavedra Bernard Funck Task Team Leader: Eric Le Borgne Ndiamé Diop ICR Team Leader: Léa Hakim ICR Primary Author: Robert Keyfitz Jordan Second Programmatic DPL - P Positions At ICR At Approval Vice President: Hafez M. H. Ghanem Inger Andersen Country Director: Ferid Belhaj Ferid Belhaj Practice Manager/Manager: Pablo Saavedra Bernard Funck Task Team Leader: Eric Le Borgne Eric Le Borgne ICR Team Leader: Léa Hakim ICR Primary Author: Robert Keyfitz F. Results Framework Analysis Indicator(s) 7

8 Jordan Programmatic Series: First and Second Programmatic Policy Loans (P and P125483). Original Target Formally Actual Value Indicator Baseline Values (from Revised Achieved at Value approval Target Completion or documents) Values Target Years Transparency and accountability: Strengthened effectiveness of the Indicator 1 : Anti-Corruption Commission measured through question 75 Is the corruption agency effective? of Jordan s Global Integrity Country Score). Value (quantitative or 61.1 out of out of out of 100 Qualitative) Date achieved Comments (incl. % achievement) Indicator 2 : Value (quantitative or Qualitative) Achieved (and exceeded). The target was exceeded by an estimated 8.3 percentage points. The effectiveness of the Anti-Corruption Commission (now Integrity and Anti-Corruption Commission) is expected to improve with technical assistance and the implementation of the new National Integrity Charter. Transparency and accountability: Improved access to information measured by indicator 1.3 Public access to government information of Jordan s Global Integrity Country Score 64.6 out of out of out of 100 Date achieved Comments Achieved (and exceeded). The indicator improved by 12.5 percentage (incl. % points from the baseline, exceeding the target by 2.1 percentage points. achievement) Indicator 3 : Value (quantitative or Qualitative) Transparency and accountability: Strengthened effectiveness of the Audit Bureau through question 59 Is the supreme audit institution effective? of Jordan s Global Integrity Country Score). 63 out of out of out of 100 Date achieved Partially achieved. The indicator was almost achieved improving 8.9 Comments percentage points. The effectiveness of the audit bureau is expected to be (incl. % further strengthened once it withdraws from 100 percent of ex-ante achievement) audits with current progress on track for end

9 Indicator 4 : Value (quantitative or Qualitative) Government spending efficiency: Effective application of the new PPP law and effective use of the PPP Unit for all PPP transactions. The new PPP law applies to all New PPP law and new PPP 1 PPP project by-laws approved. transactions, the achieved financial PPP Unit has PPP Unit has close in identified an identified an This is down from 2 initial pipeline of initial pipeline of in potential PPP 5 potential PPP projects. projects, subject to validations. Date achieved /9/ /9/2015 Achieved. By January 2017 there were 13 projects in the PPP Unit s Comments pipeline. The Ministries of Energy and Water obtained 2-year temporary (incl. % waivers from applying the new PPP Law provisions to avoid slowing achievement) current projects in their respective pipelines. Indicator 5 : Value (quantitative or Qualitative) Debt management: Availability of new debt tools that improve risk and exposure profile. No Sukuk can be GoJ issues a issued Sukuk security A new Sukuk law was in place (Law 30, ratified 2012) Date achieved /9/ /9/2015 Comments (incl. % achievement) Achieved (with delay). NEPCO Sukuk issued in May 2016; Government Sukuk issued in October A second NEPCO Sukuk was issued in March Indicator 6 : Value (quantitative or Qualitative) Government spending efficiency: Share of generic medicines in total medicines purchased by the Ministry of Health. Increase share by 50 percent 30 percent to percent percent. Date achieved Not achieved. The Ministry of Health cites a number of factors for the Comments declining share of generics including the higher need for original drugs (incl. % that do not have a generic version given the increased population due to achievement) the Syrian refugee crisis. 9

10 Indicator 7 : Value (quantitative or Qualitative) Access to finance: Existence of a private sector credit bureau None One credit bureau established. The Central Bank of Jordan approved a preliminary license for a credit bureau in December Date achieved /9/ /9/2015 Achieved. The first license for a Credit Bureau operation was issued in Comments (incl. % achievement) December Work is ongoing to (1) increase the share of transactions between debtors and commercial banks entered in the system and (2) integrate non-bank institutions (utilities, insurance and leasing companies, microfinance institutions and others) into the system. Indicator 8 : Value (quantitative or Qualitative) Access to finance: Existence of a functional Moveable Asset Registry. A good quality draft secured One moveable lending law has None asset registry been submitted to established. Parliament but has not yet been approved. Date achieved /9/ /9/2015 Not achieved. The ratification of the 2014 draft law is a prerequisite to Comments (incl. % achievement) establish a moveable asset registry. Awaiting ratification, the Ministry of Industry and Trade has undertaken the technical work, while IFC in collaboration with USAID has set up the registry platform to prepare for the law being passed. Indicator 9 : Value (quantitative or Qualitative) Private-sector led growth: Increase in the average growth rate of Greenfield FDI in core services (where core services exclude real estate and tourism) average: US$ million average: a 20 percent increase compared to baseline percent (based on updated data and methodology) Date achieved Given updated methodology and revised data from fdi Markets used to Comments (incl. % achievement) calculate Greenfield FDI in core services, the comparable baseline grew to an average of US$ million with average at US$ million, a 40.2 percent decrease, with an improvement to US$ million in 2016 (the highest since 2013). 10

11 Indicator 10: Value (quantitative or Qualitative) Private sector-led growth: Median and dispersion in the number of days to obtain all required licenses to effectively start a business (spread percentile). Reduce the administrative time needed to effectively start a business. 10a. Median: 26 days 10b. Dispersion: 22.6 days 10a. Median: 12 days 10b. Dispersion: 10 days Median: 18.0 days Dispersion: 19.4 days Date achieved /9/ /9/2015 Comments Partially achieved for the median. By end-2016: median 16 days, (incl. % dispersion 27.4 days. achievement) Program Development Objectives (from Program Document Loan and Program Summaries) The series was built around three pillars, which are also the operation s PDOs: (i) improve transparency and accountability; (ii) improve debt management and the efficiency of government spending; and (iii) promote private sector-driven growth. G. Ratings of Program Performance in ISRs Jordan Programmatic Series: First and Second Programmatic Policy Loans (P and P125483). Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 03/13/2012 Satisfactory Satisfactory Moderately Moderately 2 03/19/2013 Unsatisfactory Unsatisfactory 3 06/29/2015 Moderately Satisfactory Moderately Satisfactory H. Restructuring (if any) N/A 11

12 1. Program Context, Development Objectives and Design This Implementation Completion and Results Report (ICRR) assesses the results of the programmatic series of Development Policy Loans (DPL) to the Hashemite Kingdom of Jordan. The DPL series aimed to (i) improve transparency and accountability; (ii) improve debt management and the efficiency of government spending; and (iii) promote private sector-driven growth. The first operation (DPL1) of $250 million was approved by the World Bank s Board of Directors on January 24, The second operation (DPL2) of US$250 million was approved on March 13, Context at Appraisal 1. Jordan is an upper middle income country, with a stable political system and comparatively good socio-economic indicators. The UNDP s Human Development Index ranks Jordan as a High Human Development country, above the average for Arab states. Structural reforms and a favorable external environment contributed to sustained rapid growth for much of the decade preceding the DPL. 2. In Jordan confronted mounting challenges on a number of fronts. These included: (i) sharply slower growth and deteriorating external and fiscal balances in the wake of the global financial crisis (see Table 1); (ii) constraints on fiscal space with public debt rising above 60 percent of GDP; (iii) repeated sabotage of the Arab Gas Pipeline, disrupting Egyptian gas supplies and causing large quasi-fiscal losses by NEPCO, the electric utility; and (iv) aspirations for more open and accountable government, fanned by the Arab Spring. 3. The Government responded to these developments with fiscal stimulus, including price subsidies and increased public investment. 1 However, growth remained stubbornly tamed in the percent range, lower than the 6.5 percent average prior to the global financial crisis while the fiscal deficit widened progressively from an average of 3.5 percent of GDP in to 5.6 percent in 2010 and 6.8 percent in 2011 (Table 1). With growth and fiscal policy becoming a concern, the Government approached the Bank in late 2010 for budget support in the form of a US$500 million programmatic DPL series focused on fiscal consolidation, governance and private sector development. The first US$250 million loan disbursed in early As economic and political stresses continued to build, the Government sought help from the International Monetary Fund. A three-year, US$2.1 billion Stand-By Arrangement (SBA) in August 2012 marked a turning point. The program concentrated on fiscal adjustment, through reductions in energy subsidies and other expenditure 1 Two packages totaling 4.7 percent of GDP were adopted in 2011 as part of the Budget and supplemental to the budget including higher fuel and grain subsidies, a one-time cash transfer to public sector employees, and additional investment in small-scale infrastructure projects in lagging regions. 12

13 restraint in the short term and revenue enhancement in the medium term. 2 With the Syria crisis becoming more protracted, Jordan was affected by spillovers affecting economic growth and the fiscal burden of hosting a more than 600,000 Syrian refugees. 3 NEPCO s losses were now as high as 6 percent of GDP. 5. By the time the second DPL was appraised in early 2014, Jordan had resumed progress on fiscal consolidation and economic conditions were beginning to look more favorable. 4 This enabled attention to shift to longer-term structural reforms. The Fund s program recognized the need to stimulate longer term private sector growth. Jordan s small and medium enterprises (SMEs) that generate the largest number of jobs, faced major access to finance constraints. As such, the IMF added licensing of a credit bureau (a DPL indicator) as a structural benchmark on inclusive growth which provided further impetus for its achievement. 5 The program also echoed the DPL and other WB work related to Public Investment Management. Bank staff participated in IMF supervision missions and the operation benefited from the Fund s oversight of Jordan s short term macroeconomic performance. Throughout the period, the Fund took the view that the economy was facing temporary external shocks and broadly agreed with the Government s policy stance. The Bank assessed the macroeconomic policy framework as adequate. Table 1. Macroeconomic Indicators GDP growth (%) Overall fiscal balance (% of GDP, incl. grants) Primary balance (% of GDP, incl. grants) Gov t Gross Debt (% GDP) Current account balance (% GDP) Net Private Investments (FDI and Portfolio, % of GDP) Unemployment rate (%, nsa) Source: World Bank, Jordanian authorities. Note: Figures are actual outturns. 2 The elimination of subsidies on gasoline, diesel and kerosene, a significant reform, was implemented as of November 2012 coupled with a cash transfer scheme for households. 3 The IMF s preliminary estimates at the time indicated that the Syrian conflict cut Jordan s real GDP growth by one percentage point in According to UNHCR, over 600,000 registered refugees arrived in Jordan in IMF, 2014 Article IV Staff Report. 5 The SBA structural benchmarks also included a benchmark to establish a public investment decisions process to cover the prioritization (based on benefit-cost analyses), financing modalities (e.g., on-budget or through PPPs), and continuous monitoring of fiscal affordability of all projects. This was linked to the DPL PPP indicator and the WBG was and continues to work on a PIM framework and PIM-PPP training and coordination. 13

14 6. The DPL represented a continuation of the WBG s long standing partnership with Jordan in such areas as budget management, economic competitiveness, investment climate reforms, and public-private partnerships. Over the years, the Bank has provided both Analytical and Advisory services and lending, including a US$300 million, standalone Recovery under Global Uncertainty DPL in A new Country Partnership Strategy (CPS) for FY12-FY15 was being prepared concurrently with the DPL which became a central vehicle for its policy dialogue. 7. The implementation of the DPL series occurred at time of large and unexpected shocks that generated severe regional instability and strain on Jordan; the country nonetheless was able to implement significant and sustainable reforms. During the course of the operation, Jordan faced a number of large exogenous shocks including repercussions from the Global Financial Crisis, the Arab Spring, and severe disruption of gas supply from Egypt, which at the time was the almost exclusive source of input for electricity generation in Jordan. Security spillovers from neighboring conflicts in Iraq and Syria started to mount. Growth faltered; the influx of Syrian refugees --with those registered with the UNHCR alone accounting for about 9 percent of Jordan's population--put unexpected and weighty pressure on public finances and the provision of public services. These developments affected many of the outcome indicators for example related to investment, the investment climate and share of generic medicines. Many of the missed result indicators are related to some extent to the unexpected and large nature of these shocks. Despite these, the DPL series resulted in concrete, meaningful results that are expected to have significant sustainability over time. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 8. The Loan and Program Summary of DPL1 stated the PDO as: The overall objective of the proposed operation is to support key elements of Jordan s Executive Development Program, the country s medium-term development plan ( ). It is structured around four pillars: (i) enhancing transparency and accountability; (ii) improving the budget and debt management; (iii) improving public sector efficiency and services; and (iv) supporting private sector growth. Key indicators are shown in Table 2 below. 1.3 Revised PDO and Key Indicators, and Reasons/Justification 9. DPL2 modified the PDO by merging together objectives (ii) and (iii) of the PDO in DPL1. In DPL2, the PDO was as restated as: The proposed operation is built around three pillars, which are also the operation s PDOs: (i) improve transparency and accountability; (ii) improve debt management and the efficiency of government spending; and (iii) promote private sector-driven growth. The consolidation made sense because of dropping a DPL2 indicative trigger on public sector restructuring from part (iii) of the original program. The remaining policy action was too specific and narrow to stand as a pillar on its own and it was conceptually linked to other actions on budget and debt 14

15 management. Apart from dropping the indicative trigger there was no change to the scope or objectives of the operation. The key indicators expected to be achieved by the end of the DPL series were as presented in the third column of Table DPL2 also made some changes to selected indicators. Some adjustments aimed at capturing actual results on the ground rather than de jure, legal changes and were motivated by delays in approving underlying legislation. Others made the indicators more precise and tightened the linkage to prior actions. The changes were aligned with the interpretation of the original objectives and capturing progress towards them. Table 2 presents the two sets of indicators in the form of a concordance between them. Table 2 DPL1 and DPL2 Key Performance Indicators per Pillar The revised PDO and indicators will be used to evaluate the DPL series. 15

16 1.4 Original Policy Areas Supported by the Program (as approved): 11. DPL1 had four policy areas aligned with the DPL1 PDO: 1. Transparency and Accountability: Anti-corruption was a prominent theme of Jordan s National Agenda , but little progress had been realized prior to the DPL series. 6 Since 2006 various legal reforms had been introduced: the Anti- Corruption Commission Law 2006; Financial Disclosure Law 2006; Anti-Money Laundering Law 2007; and Code of Conduct for Government Officials However, limited capacity and a lack of independence in administering the laws impeded their effectiveness and conflicts had arisen with privacy rights. The DPL series supported measures to increase the effectiveness of the Anti-Corruption Commission (ACC), including by strengthening protection for whistleblowers and building awareness of its work. Other policy measures sought to encourage citizen participation in the process of drafting legislation; enhance access to information; and strengthen the independence and operational effectiveness of the Audit Bureau. 2. Budget and Debt Management: In response to drastic cuts to public investment during the downturn, the DPL series supported innovative ways to enhance public finance and debt management. The PPP reform was one of them, which needed a stable and consistent approach and a strong legal framework to bring private sector investment to needed infrastructure projects. Prior actions included adoption of a new PPP law clarifying responsibilities in developing policies and procedures, and managing the project pipeline throughout the cycle of identification, negotiation, monitoring, and impact evaluation. A second initiative was strengthening debt management and the development of a legal framework to issue Sukuks (Islamicfinance-compliant bonds) in order to create a new source of finance that also diversifies the investor base. 3. Efficiency of Government Spending and Services: An objective of the National Agenda was raising efficiency in the public sector. To support this, the DPL series focused on procurement, specifically by increasing the use of generics in the purchase of pharmaceuticals by the Ministry of Health. This required updating the national drugs list to include generics, adopt generic selection principles in tendering, and develop standard treatment guidelines to promote their use. 4. Private Sector-driven Growth: With the Government controlling over 30 percent of the economy, the National Agenda recognized the need to rebalance the economy and 6 See National Agenda, , p. 24, ( Details/ArticleId/5/ National-Agenda). The National Agenda set a target of raising Jordan s percentile ranking in the World Bank s World Governance Indicators (WGI) Control of Corruption index from 64.9 in 2005 to 80 in 2012 and 90 in The 2012 outturn was a decrease to

17 promote private sector development. Lack of access to finance was an obstacle to growth and job creation in the small and medium enterprise (SME) sector, with the great majority of bank lending going to large firms. Limited availability of credit information and weak frameworks for secured transactions and insolvency were critical constraints. The DPL supported legal reforms to facilitate the establishment of a credit bureau and a moveable asset (collateral) registry. In addition, it supported reform of the Investment Law to consolidate various investment promotion schemes and establish a one-stop-shop (OSS) for investors to facilitate starting a business. 1.5 Revised Policy Areas 12. DPL2 merged together the second and third policy areas to align with DPL2 s reconfigured PDO. However, except for dropping a DPL2 indicative trigger on public sector restructuring there was no change to the DPL program matrix or the scope of the operation. 1.6 Other significant changes N/A 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance 13. The programmatic series consisted of two single-tranche DPL disbursed upon effectiveness, in the total amount of US$500 million (Table 3). The DPL funds were disbursed in a single tranche as reflected in the Financing Agreement. Table 3: Key Dates of the DPL Series Operation Disbursed Amount Approval Effectiveness Closing Date DPL1 US$ 250 mn 1/24/2012 2/2/ /31/2013 DPL2 US$ 250 mn 3/13/2014 5/8/2014 9/30/ Though all DPL1 prior actions were satisfied before approval, nevertheless the operation soon began to slip off track mostly due to delays in the legislative process. Parliament had to pass the legislation prior to DPL2 because of indicative triggers that called for adopting by-laws and regulations based on the new laws. Other DPL2 triggers called directly for Parliament to adopt legislation. All of these actions were still pending, as were two other triggers that entailed executive action by the CoM. As the deadline for DPL2 approached seven of nine indicative triggers remained to be satisfied and the operation was rated as Moderately Unsatisfactory. 7 7 A programmatic DPL is considered to have lapsed 24 months after Board approval of the previous operation in the series. Hence the deadline was 1/24/2012. The Regional Operating Committee (ROC) agreed to a minor extension and to treating the operation as a Programmatic Series. 17

18 15. To renew reform momentum on the reform agenda supported by the DPL series, DPL2 included several prior actions aimed at strengthening de facto development capacity. This critically complemented the strong de jure content of DPL1. The de jure reforms of DPL2 continued to be pursued and progressed throughout the programmatic series. This allowed more flexibility in implementation and provide an opportunity for the WBG to engage with the Parliament and other stakeholders in support of enacting the required laws. The shift represented an attempt to enhance development impact and ultimately it salvaged the operation. After the approval of DPL2, the Parliament approved most of the legislative agenda envisioned in the triggers, although two laws are still pending approval, namely the Secured Lending Law and the amendments to the Audit Bureau law. 16. Table 4 shows all prior actions together with subsequent follow up required to fulfill the objectives. As indicated in the second column headed Status and follow-up action all prior actions were completed. In addition, the column details the timeline of other measures that were also implicitly part of the program. For example, the PPP law submitted to Parliament in June 2011 in accord with DPL1 (PA#4) was not passed until November As a result, an indicative trigger calling for approval of PPP by-laws (based on the PPP Law), was modified instead to call for establishment and staffing of a PPP Unit in the Ministry of Finance (DPL2, PA#4). Note that any laws passed after DPL2 approval (March, 2014) required some adjustment to the program. Table 4: Status of prior actions and follow-on measures List prior actions from Legal Agreement/ Program Document First Operation Prior action #1: The draft amendments to the Anti-Corruption Commission Law that strengthen the effectiveness of the Anti-Corruption Commission and protect whistle blowers is approved by the Council of Ministers and submitted to the Parliament Prior action #2: The Anti-Corruption Commission has published the 2010 report of the commission and posted it on the commission s website Prior action #3: The Council of Ministers has approved the Internal Control By-Laws that strengthens the internal controls in line Ministries and enables the Audit Bureau to withdraw from ex-ante controls and reviews Prior action #4: The new draft PPP Law is approved by the Council of Ministers and submitted to Parliament Prior action #5: The Minister of Health has taken the following actions to enhance the efficiency of pharmaceutical usage in the public health system: (i) updated the national drugs list to include cost-effective generic and generic substitutes, (ii) adopted generic selection principles in tenders and (iii) developed standard treatment guidelines for the main chronic disease in view of reducing the spending on pharmaceuticals in public hospitals Prior action #6: The Council of Ministers has approved the Credit Information By-Laws that enable, inter alia, the creation of a credit bureau Prior action #7: The draft of the new investment law has been approved by the Council of Ministers [and] submitted to the Parliament. Second Operation Prior Action #1 (Increase Citizen Consultations and Participation in Policymaking). The Council of Ministers has approved on November 25, 2012, Status and follow-up action Completed. Amendments approved by CoM and submitted to Parliament, subsequently passed as Law #10, Completed Annual Reports are published on Completed. Audit Bureau expects to complete withdrawal from exante auditing by end Completed. Draft law approved by CoM and submitted to Parliament June 2011, passed November Completed. The Ministry regularly reviews the drug list and saves costs by using generics where possible. Completed. By-laws approved July 2011; license issued and credit bureau established December Completed. CoM approval June 12, 2011; passed Completed. 18

19 the draft By-Law amending the Legislative and Opinion Bureau By-Law No. 1 dated 1993 mandating online publication of draft laws and amendments for online feedback and greater participation from civil society in the law drafting process. Prior Action #2 (Implementation of the Access to Information Law). The Prime Minister has issued Circulars No. 19/2012 dated November 27, 2012, No. 20/2012 dated November 27, 2012 and No. 4/2013 dated January 17, 2013 to enhance the administrative framework in support of the implementation of the Access to Information Law No. 47 of year Prior Action #3 (Strengthen performance audits of public spending). The Council of Ministers has (a) adopted on January 25, 2013, and submitted to Parliament for approval on February 14, 2013, a draft law amending the Audit Bureau Law No. 18 of year 2007, aimed at ensuring independence of the Borrower s Audit Bureau and improving performance audit and ex-post controls capacities of said Audit Bureau in a manner consistent with International Standards for Supreme Audit Institutions; and (b) approved the memorandum of understanding entered into between the MoF and the Audit Bureau to strengthen internal control units in line ministries and public agencies for better implementation of the Internal Control By-Law No. 3 of year Prior Action #4 (Establish and empower a PPP Unit within the MoF). The Minister of Finance has (a) established a private-public partnership (PPP) unit within the MoF; (b) appointed a director for the PPP unit reporting directly to the Minister of Finance and; (c) approved terms of reference and qualifications, satisfactory to the Bank, of four senior staff. Prior Action #5 (Approve a draft Sukuk Law). The Council of Ministers has adopted on June 5, 2012 and submitted to Parliament for approval on June 14, 2012, a draft Sukuk Law allowing the use of new cost-reducing debt tool and enabling access to Islamic finance liquidity. Prior Action #6 (Cost-reducing guidelines for pharmaceutical prescriptions). The Council of Ministers has issued Decree No. 910, dated July 31, 2012 endorsing cost-reducing guidelines for pharmaceutical prescription and use in the public health system. Prior Action #7 (New Secured Lending Law in line with international best practices). The Council of Ministers has adopted on February 9, 2014 and submitted to Parliament for approval on February 17, 2014 a draft law amending the Secured Lending Law No. 1 of year 2012 in line with international best practices. Prior Action #8. (Strengthen the one-stop-shop at the Jordan Investment Board (JIB) ahead of its move to the Jordan Investment Authority once the Investment Law is passed). The CoM has issued Decree No dated December 4, 2013 strengthening the One-Stop-Shop at the JIB by expanding delegated authority and mandating the Ministry of Industry and Trade to develop administrative solutions for cases submitted to JIB. Completed. Completed. Draft Audit Bureau Law approved by CoM and submitted to Parliament, February 2013, but never passed. Government intends to revise the draft law before resubmitting it to the new Parliament (2017). Completed. PPP by-laws adopted June 2015, completing the legal framework; working PPP Unit established in MoF with required staffing. Completed. Law passed 2012; bylaws finalized and Sukuk Steering Committee set up 2014; first Sukuk issued Completed. Completed. However, the 2014 Secured Lending Law not passed to date and Moveable Asset Registry not yet established. Completed. OSS set up and transferred to authority of Jordan Investment Commission in 2015; now fully operational. Further work on investment promotion is ongoing ex. the launch of an investment portal Major Factors Affecting Implementation: 17. A number of major factors affected implementation: Adequacy of Government s commitment: The government was reform minded and in principle strongly committed to the objectives. However, the executive was not able to fully control implementation because near-term priorities shifted with economic and political developments, and competing demands from other development partners strained capacity limits. Strong partnership: The program benefited from a close partnership between the Bank and the Government and a longstanding engagement in key elements of the 19

20 program. IFC s in-country presence and extensive portfolio covering the DPL s private sector development pillar were especially beneficial. Soundness of the background analysis: The program was supported by extensive analysis carried out by the Bank and other partners, including the IMF, OECD, USAID, EU and JICA. Specific recent ( ) Analytical and Advisory services from the Bank included a Development Policy Review; Public Expenditure Review; Technical Assistance (TA) on PPPs and Public Expenditure Management; Financial Sector Assessment Program Update; Investment Climate Seminar; Doing Business report; and Licensing and Inspection Reform Program. Assessment of the operation s design: The operation was underpinned by sound diagnostics and a shared understanding of Jordan s development constraints. However, the program was very ambitious, especially for a time of economic and fiscal stress, and expectations were optimistic about the time needed for deep legal and institutional reforms to be implemented and achieve their impact. Risks identified: Risks were adequately perceived, but their potential severity was underestimated. For instance, it was anticipated that the political crisis in Syria might disrupt trade but not that it might give rise to a massive inflow of refugees. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 18. The Ministry of Planning and International Cooperation (MoPIC) was notionally responsible for M&E with the assistance of 14 implementing agencies such as the Ministry of Health, Ministry of Finance, and the Jordan Investment Commission. (a) Design 19. The design of the M&E system emphasized institutions. Two-thirds of results indicators concerned the existence or quality of institution, such as effectiveness of the Anti-Corruption Agency, existence of a private credit bureau, and application of the PPP law. The rest measured outcomes such as the pattern of expenditure on drugs, and time required to obtain licenses to start a business. Even though institutions do not figure directly in the PDO, the DPL matrix conveys clearly that institutional development was meant to be a critical link in the chain between policy actions and outcomes. 20. The indicators were clear conceptually and for the most part linked to outcomes, but their construction was sub-optimal. Some examples: DPL1 used the composite Global Integrity Country (GIC) score to measure transparency and accountability. However, the score is a weighted average of 325 sub-components covering many aspects of public sector performance unrelated to the DPL: tax collection, law enforcement, financing of political parties, and much more. DPL2 substituted a more precise and relevant sub-component of the overall GIC score, although this turned out to be problematic too. Both DPL1 and DPL2 based indicators on Global Integrity data. Though it may not have been possible to anticipate at the time, Global Integrity suspended publishing its data in 2011, impairing the usefulness of the indicators, although 20

21 Bank staff attempted to replicate the methodology and make the calculations themselves. DPL1 used PEFA scores to measure effectiveness of the Audit Bureau, but PEFA reviews are not conducted regularly. No data for Jordan have been published since the base year, DPL2 substituted a Global Integrity score. The existence of a credit bureau was used to indicate SMEs access to finance, but without explaining what impact would be expected, especially for a credit bureau that had been established, but was not yet fully operational. An indicator on Greenfield FDI from a proprietary data source was too costly to be used for monitoring on an ongoing basis. The Government s data used a different methodology. (b) Implementation 21. Despite shortcomings in the design, the M&E system helped support a results-oriented dialogue. The M&E system does not appear to have been systematically used during DPL1 where attention was focused mainly on achievement of prior actions for DPL2. However, in DPL2 the system was maintained meticulously. (c) Utilization 22. Results indicators played a central role in the dialogue with authorities during DPL2. For instance, aides-mémoires urged the Government to take specific, concrete actions aimed at meeting indicator targets in order to achieve a satisfactory rating for the operation. Thus, while design flaws may have limited the system s ability to monitor outcomes, using the indicators as milestones in the dialogue about program implementation proved effective. Indeed, this purposeful and focused use of the M&E system almost certainly contributed to the difference in performance between DPL1 and DPL2. After the operation closed, the authorities apparently stopped monitoring the outcomes and the system was not maintained. 2.4 Expected Next Phase/Follow-up Operation: 23. The Bank has remained engaged in several of the DPL s policy areas. Targeted follow up was and continues to be provided through smaller TA projects, in governance, PPPs, the business climate and the financial sector. The new CPF (FY17- FY22) maps out an active program with a flexible and client-centered framework that anticipates the World Bank Group will remain involved in these areas. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation (a) Relevance of Objectives: Substantial 24. The objectives reflected shared priorities of the Government and the Bank. From initial approval through to closing and completion of the ICR, the DPL s objectives 21

22 remained broadly aligned with both Jordan s National Agenda and Jordan 2025; and the Bank s Country Partnership Strategy (CPS) FY12-FY15 and Country Partnership Framework (CPF) FY17-FY22. The Bank s current CPF comprises twin pillars of Fostering the conditions for stronger private-sector-led growth and better employment opportunities for all; and Improving the equity and quality of service delivery. The private sector pillar directly builds on or extends the DPL in areas such as improving access to finance, and strengthening the institutional and regulatory environment, while the public sector pillar retains fiscal sustainability, public investment management and PPPs at sectoral (water, energy) and regional levels. Transparency and accountability have notably been dropped, in favor of creating employment, developing education and skills, and addressing the needs of Syrian refugees. On balance, the relevance of the DPL objectives at the time of the ICR is substantial. (b) Relevance of Design: Substantial 25. The design of the DPL series incorporated findings of solid analytical work and coordinated with other development partners. The prior actions were clearly linked to objectives. The policy areas were aligned with the CPS matrix, including internal audit, access to information, PPPs, SME finance, and streamlining the regulatory environment. Many of the private-sector reforms had already been supported by the IFC in Jordan for many years but had not yet come to fruition. Many of these areas also complemented the interests of other development partners, for instance dovetailing with the EU s support for the Audit Bureau, and USAID s support for debt management and capacity building for the Legislative and Opinion Bureau (LOB). Cooperation was especially close with JICA which participated in preparation and used the DPL2 matrix for parallel financing. (c) Relevance of Implementation: Moderate 26. Implementation arrangements were relevant, even as some delays in the legislative process materialized. Initially anticipated preconditions for DPL2 were not satisfied because of the slow pace of Parliamentary approvals. The response was to delay DPL2 appraisal in the hope of maintaining the intended legal/institutional focus and to ensure adequacy of the macroeconomic framework. Robust implementation support by the Bank during DPL2 was instrumental in the operation. 3.2 Achievement of Program Development Objectives Overall Rating: Moderately Satisfactory 27. Achievement of the PDO was moderately satisfactory, measured in terms of progress on key indicators, institutional development, and reform momentum across the DPL pillars. As detailed below, progress was especially notable in the areas of strengthening anti-corruption and access to information, rolling out PPPs, introducing a new debt instrument (Sukuk) and financial sector development. 22

23 Objective 1: Improve Transparency and Accountability Rating: Satisfactory Anti-Corruption 28. The DPL supported measures to strengthen the legal framework of the Anti- Corruption Commission and increase awareness of its activities. DPL1, PA#1 required approval by the CoM and submission to Parliament of amendments to the Anti- Corruption Commission Law and these were subsequently passed into law in The amendments substantially strengthened whistleblower protection, and clarified and expanded the Commission s powers to investigate and seek remedies for corruption. 8 DPL1, PA#2 required the ACC s 2010 annual report to be published on the web, where it is currently available together with subsequent annual reports from In , 6,285 cases of corruption were reported (complaints and grievances) of which 4,016 were investigated further and wrongdoing found in 934. The volume of cases reported dropped sharply over the period though the proportion in which corruption was found increased, perhaps indicating the law s deterrent effect and a growing familiarity with its use. 29. These reforms have helped to bring Jordan s anti-corruption effort into line with international good practice. A results indicator was the Global Integrity Country score for Question 75, Is the anti-corruption agency effective? According to Bank staff estimates, the score increased from 61.1 in 2011 to 83.3 in 2015, exceeding the target value of 75. Unfortunately, this outcome is not informative because the increase in the score for question 75 does not appear to be linked to the prior actions. 9 With respect to whistleblower protection (not measured by Question 75), the 2012 amendments provided for broad and explicit legal protection. According to the IACC 10 there have been no cases of retaliation against whistleblowers, though evidently it may take more time to establish the credibility of whistleblower protection and persuade complainants to come forward in larger numbers. In general, it is difficult to assess the specific impact of the DPL and 8 See articles 4, 11, 17, Note that clauses printed in red are the 2012 amendments. 9 The score for Question 75 is calculated as the average of nine sub-indicators measuring various aspects of the anti-corruption agency s effectiveness. Only one sub-indicator pertains to the de jure (i.e. legal) situation whether the agency is protected in law from political interference; this sub-indicator already had the maximum value of 100 in the base year and did not change. The other eight sub-indicators pertain to de facto conditions, of which three increased: (i) protection of the agency from political interference; (ii) protection of the head of the agency from arbitrary removal; (iii) appointment to the Board based on professional criteria. None of the 2012 amendments bear materially on these conditions, hence there is no direct association between the prior actions and the increase in the score. Note that the GIC index for Jordan has not been published since The numbers reported are Bank staff estimates based on the GIC s methodology. 10 In 2015, the Anti-Corruption Commission (ACC) was merged with the Ombudsman s Bureau to form the Integrity and Anti-Corruption Commission (IACC). 23

24 associated Bank TA in this area. 11 However, the Government appears to have a genuine and strong commitment to good governance, which measures to publicize the IACC s activities and bring its legal foundations into line with good practice have undoubtedly helped to reinforce. Transparency 30. The mandate of the Legislation and Opinion Bureau was broadened to encourage public awareness and participation in the legislative process. In November 2012, the CoM approved a draft by-law mandating online publication of all draft laws, by-laws and regulations for comment as part of the legislative process (DPL2, PA#1). 12 The intent was both to inform stakeholders about pending legislation and invite their participation in the legislative process. Proposals are posted early in the drafting process, before they are presented to the CoM, thus maximizing the scope for public opinion to influence the outcome. In taking comments into account, the LOB weighs both the public good and the intent of the law. 31. The public response was highly positive. The initiative created great interest with more than a two-fold increase in traffic on the LOB s web site, with yearly visits rising from 44,134 in 2011 to 146,085 in 2016, suggesting a strong demand for the service (Refer to Annex 6). It is difficult to measure the impact on legislative outcomes, however opening a two-way channel for communication about the legislative process clearly represents an increase in transparency. After considering the comments, the LOB shares them on to entities sponsoring legislation so they know what response their proposals have received. The LOB perceives further benefits in terms of greater public awareness of forthcoming legislation; less need to burden Parliament with subsequent amendments to ratified laws; and bringing to the LOB s attention new ideas that it might not otherwise have considered. Access to information 32. Policy measures strengthened the administrative framework of the Freedom of Information Law. The Prime Minister issued a series of circulars strengthening the access to information framework, requiring public entities to provide information on request to the Information Council which administers it; organize and classify information to facilitate disclosure; and appoint Information Council liaisons to support the access to information regime (DPL2, PA#2). Bank staff concluded these measures left the freedom of information regime short of international good practice, but that such 11 The Bank has had an extensive engagement with both the Anti-Corruption Commission and the Ombudsman s Bureau, including TA for a new case management system put in place in December 2015 to track all new cases. 12 The website was established in 2007 with selected draft laws published as a trial period. It was only after the by-laws adoption in November 2012 that a substantial increase in the number of draft laws published, feedback received and number of visitors increased considerably (Refer to Annex 6). 24

25 steps constituted meaningful progress. 13 The number of liaisons increased to 62 for 59 entities by January 2016 and workshops for training of trainers and focal points continue to be planned to raise awareness. 33. More remains to be done, but staff assess that faster response times represent a significant gain. The results indicator measuring access to information was GIC indicator 1.3, public access to government information with a baseline value of 64.6 in 2011 and a target value of 75 in Staff estimate the actual 2015 value was 77.1, exceeding the target, largely due to an average faster expected response time. 14 Measures taken to organize information and improve liaison with the Information Council along with the Prime Minister s leadership seem likely to have been important factors. Safeguarding public resources (Audit Bureau) 34. DPL supported measures aimed to strengthen the Audit Bureau s independence and efficacy. A series of reforms since 2002 have moved the Audit Bureau (AB) toward best-practice standards set by the International Organization of Supreme Audit Institutions (INTOSAI). The DPL supported further modernizing the audit function through: (i) approval of by-laws to strengthen internal controls at line ministries to enable the AB to withdraw from ex-ante audits (DPL1, PA#3); and (ii) CoM approval and submission to Parliament of amendments to the Audit Bureau Law to strengthen the Bureau s independence, introduce performance auditing, and build capacity in line ministries and public agencies to implement the by-laws supported by DPL1 (DPL2, PA#3). 35. The AB is on track to withdraw from ex-ante auditing, but proposed legal reforms have not been enacted. The AB formulated a strategic plan for training and building internal audit capacity in MDAs beginning in 2014, to allow a withdrawal from 80 percent of ex-ante audits by 2016 and an anticipated 100 percent by the end of Implementation is on track. However, the effort to strengthen administrative and financial independence is incomplete. Amendments to the Audit Bureau Law satisfactory to the Bank were approved by the CoM and submitted to Parliament in February These conferred greater immunity on the Bureau s president by limiting the conditions under which he or she could be dismissed. A results indicator, the Global Integrity Country (GIC) score for question 59, rose from 63 to 71.9, short of the target value of 75. According to Bank staff the amendments would have achieved had they been enacted. However, they were never passed and following the September 2016 election they will need to be resubmitted to the new Parliament. The government has also indicated that it intends to redraft the proposed amendments first, so that it is impossible to ascertain the eventual outcome at this time. 13 Aide-Mémoire dated February 22, amendments to the Information Law include reducing the time to respond to information requests and answer appeals from 30 to 15 days each; provide information to non-jordanians, and broaden the Information Council composition to include representative from civil society (lawyer and journalism syndicates). 25

26 Objective 2: Improve Debt Management and the Efficiency of Government Spending Rating: Moderately Satisfactory Increase fiscal space and reduce fiscal risks (PPP framework) 36. A legal framework for PPPs was completed and a PPP Unit established in the Ministry of Finance. The CoM approved a new draft PPP Law in 2011 (DPL1, PA#4) which was passed with some delay by Parliament in November 2014; subsequently in June 2015 by-laws were adopted completing the legal framework; a PPP Unit was established in the Ministry of Finance and senior staff appointed (DPL2, PA#4). The PPP Unit represents a signal achievement for which both the Government and the Bank deserve credit the culmination of ten years of sustained dialogue and support since a PPP Law was first proposed in WBG support included providing expertise in drafting the PPP law which was crucial to move this reform. The PPP Unit has responsibility for implementing policies and procedures, managing the project pipeline, and administering the project cycle from identification and negotiation through to monitoring and impact evaluation. The unit continues to build capacity, for instance by developing IT systems to track and monitor activity. So far, eight projects have been identified and approved with an average size of around 20 million JD. Though the projects are relatively small for instance there is no need to prequalify bidders they have afforded an opportunity to move up the learning curve. Most interest has been from local firms using domestic banks as transactions advisors although there is the potential to tap into the strong interest of Gulf investors and the PPP unit and law represent an important institutional step towards achieving this potential. 37. The PPP Unit is operational and has the potential to help meet Jordan s infrastructure needs. The target for the results indicator effective use of the PPP law and PPP Unit with a pipeline of 5 projects was met. The projects to date confirm that the PPP Unit is operational and gaining experience. It is an impressive first step with the potential to scale up to managing, bigger projects in partnership with sophisticated, international firms, thus helping to meet Jordan s infrastructure needs within fiscal constraints. WBG TA continues and is now focused on assisting with institutional challenges of integrating PPPs and Public Investment Management (PIM), and bringing the PPP Unit on water and transport projects where implementing Ministries already have in-house expertise and have sought temporary waivers from working with the PPP Unit. Funding is a possible constraint for the PPP Unit, which estimates it needs US$5 million for a Project Development Fund to cover the cost of project preparations. Increase fiscal space and reduce fiscal risks (Sukuk) 26

27 38. Legal and institutional reforms to enable Sharia compliant borrowing have been introduced. A draft Sukuk Law was approved by the CoM and submitted to Parliament in 2012 (DPL2, PA#5), and passed as Islamic Finance Sukuk Law No. 30 of Subsequently by-laws enabling Sukuk contracts and the transfer of assets to Special Purpose Vehicles (required for Sharia compliance) were finalized and issued in May 2014 and a Sukuk steering committee was set up. 39. An initial Sukuk issued by the Government demonstrated that the legal and institutional framework is now in place. In October 2016, the Government issued a landmark Sukuk for around US$48 million, maturing in 2021; this followed an earlier one from NEPCO in May 2016 for around US$106 million. 15 The Government s Sukuk narrowly missed the target in the results framework which called for issuance by September 2015, but its significance was to demonstrate that the legal framework and institutional capacity are now in place for both public and private sector borrowers to diversify financing sources and risks. This was further highlighted by the second NECPO Sukuk for around US$ 106 million issued in March There was a steep learning curve on the way to the first sovereign Sukuk issuance on account of legal complications and a demanding Sharia Council which set very stringent conditions for certification. In practical terms, the Government s Sukuk represents a small contribution of only a few percent to its financing requirement, but there is a large pool of excess liquidity in Islamic Banks (estimated at 1.4 billion JD) which can potentially be tapped. For Government, the challenge to scaling up Sukuk financing will be to identify suitable assets to back future issues. Reduce the high cost of health bill 40. The DPL supported efforts by the Ministry of Health (MoH) to increase the use of generic drugs as a cost saving measure. Required measures included reviewing and updating the list of approved drugs, adding generics where appropriate (DPL1, PA#5), and endorsement of cost-reducing guidelines for pharmaceutical prescription and use in the public health system by the CoM (DPL2, PA#6). Demand side measures to encourage the use of generics included a 15 percent price subsidy and restrictions on public entities purchasing branded drugs. According to Ministry officials, savings from the program have helped to offset the 50 percent increase in expenditure on medicines and vaccines in for a larger population including Syrian refugees. 41. More data would be needed to assess the impact of the policy measures, but in any case performance targets were missed. Neither results indicator for DPL1 (total expenditure on drugs) or DPL2 (share of generics in expenditure on drugs) met its target. DPL1 anticipated a 10 percent decline from , whereas spending rose instead by 20 percent, partly due to expenditure for Syrian refugees. 16 DPL2 modified the indicator to the share of generics and targeted an increase from 50 percent to 65 percent in 2010 to 15 NEPCO s Sukuk, although government-guaranteed, does not satisfy the DPL target because it was not a sovereign GoJ issue. 16 Until November 2014, the Government provided free health services for Syrian refugees. 27

28 2015. The share declined instead to 44 percent in 2015 and 39 percent in However, interpreting this outcome as a result of MoH policy on generics is uncertain in light of exceptional spending on Syrian refugees since the distribution between generics and branded drugs for this population might be very different. 18 The MoH cites a number of factors for the declining share of generics including the higher need for original drugs that do not have a generic given the increased population, the expensive nature of research and development for the creation of new drugs that prompt firms to raise the prices of original drugs to make up for high production expenses (Jordan has an advanced pharmaceutical industry), and the reflection of high price levels in countries of production on local market prices. Without micro data on costs and demands it is impossible to determine the impact of the policy. Improve the efficiency of the public sector by streamlining independent public institutions 42. The DPL2 indicative trigger was dropped. Independent government institutions accounted for 15 percent of civil service employment and 12 percent of the budget deficit in 2010, with the average salary approximately double that of the regular civil service. Thus, there is the potential to realize large budgetary savings. Despite dropping the indicative trigger calling for the adoption of a new legal framework governing the creation and function of public institutions, piecemeal reforms have been introduced, albeit not under the aegis of the DPL. 19 Objective 3: Promote Private Sector-Driven Growth Rating: Moderately Satisfactory 43. Important reforms were introduced to promote private sector-driven growth, but their impact on growth requires time to materialize. The impact of the credit bureau on improving access to finance for SMEs, the largest job-creators in Jordan, is expected to be significant once the bureau s services are more widely used. Likewise, the impact of the investment law and OSS on enhancing domestic investment and FDI has a time lag. Improve SMEs access to financial services at lower risk and cost 17 During the course of implementation support however, the WBG team was following the Ministry of Health Budget KPI which indicated progress and the target being met. However, final figures from the Ministry of Health indicated otherwise. The Ministry of Health cited the following reasons why budget allocation figures on generics could be different from actuals including: registration of new original drugs that do not yet have a generic version, offering a promotion on an original drug for a price lower than that of the generic drug (whether local or imported), requesting different quantities in bids which affects the share of generic and original drugs. 18 If increased spending went largely to branded drugs, the share of generics would decline regardless of the amount of savings. 19 See the Government s Memorandum of Economic and Financial Policies in the 2014 IMF Article IV Staff Report (p. 71): We have reduced transfers to public own-budget agencies by 0.2 percent of GDP. This reflects on-going efforts to freeze and realign the salaries of their employees with those of public servants, as well as to merge agencies with similar mandates. 28

29 44. Legal reforms enabled the establishment of a credit bureau. The DPL supported approval of credit information by-laws facilitating the establishment of a credit bureau (DPL1, PA#6) to reduce the cost and risk of lending to SMEs, including through mandatory sharing by commercial banks of information on borrowers. The Central Bank of Jordan approved the first license for a credit bureau in December 2015 and the bureau opened on December 15, This milestone is the result of a long and sustained engagement by the WBG and the bureau s General Manager acknowledges crucial technical support specifically from IFC which played a vital role in establishing the credit bureau A performance indicator with a target of establishing the bureau by September 2015 was narrowly missed, by three months. But, credit information services to financial institutions commenced only in October 2016 and much work still remains to be done. To make the bureau fully effective will require ensuring all relevant data are collected; at present, only 20 percent of transactions between debtors and commercial banks (whose participation is mandatory) are being entered. Beyond that, utilities, insurance and leasing companies, microfinance institutions and others will need to be integrated into the system. The credit bureau s experienced and professional management has developed a strategic plan and estimates another three years will be required for the bureau to become fully operational. Thus, efficacy toward the PDO promoting private sector growth is mixed. Realistically, impact to date has been limited, but substantial momentum has been generated toward establishing a key component of modern financial sector infrastructure. Secured lending law 46. Limited progress has been achieved toward establishment of a moveable asset (collateral) registry. A secured lending law supported by the WBG was approved by the CoM and submitted to Parliament in February 2014, but has yet to be approved. The law will establish a moveable asset registry to allow small borrowers to pledge collateral thereby increasing their access to credit. Once passed, critical by-laws will need to be developed with stakeholder consultation. So far, the Ministry of Industry and Trade (MIT) has undertaken some of the technical work, while IFC in collaboration with USAID has set up the registry platform to prepare for the law being passed. However, the current situation has been further complicated by the November 2016 issuance of by-laws to an earlier 2012 version of the law (which is not in line with best practices). Investment Promotion 20 IFC, with an office in Amman, has been a focal point for the Bank s activities in Jordan and the DPL drew extensively on its broader agenda, including not only support for the credit bureau and the rest of the private sector development pillar, but also PPPs. IFC advised the Government and helped to finance a pioneering PPP project to refurbish and expand Amman s Queen Aliya airport in

30 47. DPL supported legal reforms streamlined the system of investment promotion, albeit with some delay. DPL1 PA#7 called for approval by the CoM and submission to Parliament of a draft Investment Law consolidating the existing fragmented investment framework comprising the Jordan Investment Board (JIB), Jordanian Development Zones Commission and the Free Zones Corporation into a streamlined entity to be known as the Jordan Investment Commission (JIC). DPL2 had anticipated establishing a One-Stop-Shop (OSS) for investors under the auspices of the JIC. However, with the new law still awaiting passage at the time of DPL2 appraisal, the JIC did not yet exist. DPL2 instead turned to strengthening the JIB s already existing One-Stop-Shop by means of de facto reforms, paving the way to transfer it to the authority of the JIC once the Investment Law was passed (DPL2, PA#8). This provided the context within which a complementary technical assistance project, the Jordan Competitiveness and Investment Project (JCIP) under the MENA transition fund and in collaboration with OECD and IFC, was approved with the support of the Government of Jordan. The JCIP provided operational support for the implementation of a more efficient OSS system. The Investment Law was eventually passed in 2014 (although Bank staff expressed reservations about the extent of discretion in some areas and the treatment of foreign investment) and thus had limited impact on Greenfield Investment for the target period ( ). The OSS migrated to its new home, beginning operation in Justification of Overall Outcome Rating Rating: Moderately Satisfactory 48. The objectives drew from shared priorities of the Government and the Bank and were substantially relevant. Design was also substantially relevant. Policy actions were well selected, but a deep reform program coupled with a number of external shocks strained the Government s implementation capacity. Outcomes were satisfactory in one program area and moderately satisfactory in two others. In addition, the operation made important contributions to institutional development. Sustaining these important reforms over time should build greater awareness and confidence and further strengthen the results. On balance the overall outcome is rated as Moderately Satisfactory. 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 49. Improving governance and public sector efficiency, promoting private sector growth and increasing access to finance are all pro-poor. In general, policy measures aimed at raising the quality of public services and increasing growth and employment (through access to finance and attraction of FDI) are expected to benefit the poor. 21 Investment Law by-laws were issued almost two years after the Law s ratification. 30

31 Promoting the use of generics reduces the cost of drugs, some of which is charged to the MoH s budget, and savings have allowed an expansion of services to the uninsured. (b) Institutional Change/Strengthening 50. The DPL made significant contributions toward the legal framework and institutional capacity in many program areas. In transparency and accountability, the operation strengthened the Anti-Corruption Commission and expanded the mandate of the Legislative and Opinion Bureau to incorporate citizen participation in the legislative process. It clarified the framework for PPPs and set up a PPP Unit at the Ministry of Finance. It established a credit bureau, a key component of modern financial sector infrastructure, and pioneered a market for new asset class (Sukuk) of potential interest to both public and private borrowers. Elsewhere, it streamlined the administration of investment promotion and set up a new One-Stop-Shop for investors. In most of these areas, institutional capacity had been a longstanding objective of WBG support for Jordan and the progress realized by the DPL represented a major achievement towards impact and effectiveness. The de jure achievements were also important as these provided the enabling critical and underlying legislation to achieve those reforms that were completed such as for the PPP unit and Sukuk issuance. (c) Other Unintended Outcomes and Impacts (positive or negative) N/A 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4. Assessment of Risk to Development Outcome Overall Rating: Substantial 51. Macroeconomic and political risks emanating from regional conflicts, terrorist threats, commodity price volatility and large numbers of Syrian refugees are substantial over the medium term. However, the Government is reform-minded and so has supported the DPL program through five difficult and challenging years. Implementation risks are also substantial. In program areas such as freedom of information, internal audit, and access to finance, capacity limitations and political economy may slow the pace of change, especially where Parliamentary action is still required. Overall, the risk to the Development Outcome is high. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) 31

32 Rating: Moderately satisfactory 52. The operation had a long gestation period during which the program evolved from fiscal consolidation to a more extensive set of institutional reforms aimed at enhancing longer term economic performance. The team was responsive and client oriented as it adapted to changing demands. The resulting objectives were substantially relevant, well aligned with shared priorities of the Government and the Bank. However, implementation risks could have been anticipated better and mitigated, and a less ambitious program focused more sharply on a narrower set of reforms could also have facilitated dialogue and oversight by MoPIC. The M&E system was weak and extensively revised for DPL2. (b) Quality of Supervision Ratings: Satisfactory 53. During the six months after effectiveness the operation s rating slipped from Satisfactory to Moderately Unsatisfactory, mainly as a result of Parliamentary delays. By October 2012 three of nine results indicators were assessed as unlikely to meet their targets and six others were at risk. Management was kept informed, though Parliamentary delays in passing legislation were beyond both the Government s and the Bank s control. Once the situation was recognized, it took an intensive effort to turn the operation around, beginning with the adoption of a de facto approach for DPL2 that relied more on executive action and less on legal reforms. This was followed by a sustained and intensive dialogue, strong TA and close collaboration with other stakeholders which deserves credit for making up much of the ground that had been lost. Overall, supervision is rated as Satisfactory. (c) Justification of Rating for Overall Bank Performance Ratings: Moderately satisfactory Ratings: With quality at entry Moderately Satisfactory and quality of supervision Satisfactory, the overall rating for Bank performance is Moderately Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Moderately satisfactory 54. Senior levels of Government were (and are) committed to the DPL program which reflected National Agenda priorities of promoting good governance and accountability; improving infrastructure and service delivery; and promoting private sector development, especially SMEs. Under the general coordination of MoPIC, many MDAs were responsible for parts of the program, including the Central Bank of Jordan, Ministry of Finance, Ministry of Health, Legislation and Opinion Bureau, Information 32

33 Council, IACC, Audit Bureau, JIC, and others. Without exception, they appear to have genuinely supported and carried out the policy interventions, although some could have been more results oriented and proactive in monitoring the achievements. 55. Nevertheless, implementation capacity constraints due to external shocks were challenging. MoPIC s capacity is limited and tends to be overrun by donor demands. The timing was also problematic as the DPL coincided with a challenging period during which priorities shifted toward short term financing needs and macroeconomic adjustment. MoPIC recognizes that better project management and closer monitoring could have improved outcomes, although the Government does not directly control the Parliamentary agenda and so cannot be held responsible for the main delays that threatened to derail the project. (b) Implementing Agency or Agencies Performance (c) Justification of Rating for Overall Borrower Performance Ratings: Moderately satisfactory 6. Lessons Learned (both operation-specific and of wide general application) The results framework made legal and institutional reforms a core part of the operation. Strong supervision and TA together with close collaboration with key stakeholders enabled the DPL to succeed with both de jure and de facto reforms, many of which had proven elusive in the past. Representing this intent explicitly in the PDO would have ensured the operation was fairly credited for its significant achievements in this area. IFC s on-the-ground presence and close collaboration between IBRD and IFC were crucial to the DPL s achievements. The program reinforced longstanding advisory activities in Doing Business reform areas including also in financial inclusion such as establishing a credit bureau. IFC s office in Amman enabled staff to keep in close contact with stakeholders and support the private sector parts of the operation. Flexibility to adjust the indicative triggers and results indicators while remaining true to the development objectives was critical to preventing the DPL from failing after the first operation. The shift from de jure in the first operation to de facto in the second allowed the operation to continue and provided more time to complete the de jure reforms while working in parallel to have the institutional capacity in place once the legal framework became effective. Exemplary performance under DPL2 illustrates the value of rigorous supervision in response to performance slippages. A strong team, results-oriented dialogue 33

34 and a flexible approach turned the operation around and helped the client achieve its development objectives. Implementation arrangements, which consisted of assigning responsibility to MoPIC, were only briefly elaborated in the Program Documents. A more explicit implementation strategy, for instance with a formal steering committee and a schedule for reviewing the results indicators, could have strengthened the DPL s ability to compete with the authorities other day-to-day priorities. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies The Government of Jordan broadly agreed with the evaluation but stressed the role that external developments played in the achievement of objectives. The Government highlighted that given the significant changes due to regional instability it is misrepresentative to evaluate that indicators 6, 9 and 10 were partially achieved or not achieved (Refer to Annex 4). As such, the authorities perspective is that the operation should be rated Satisfactory. (b) Cofinanciers JICA, who provided parallel financing to the second operation, commended the exemplary collaboration and partnership with the World Bank that allowed for the successful outcome of the DPL (Refer to Annex 5). (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 34

35 Annex 1 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members P Jordan First Programmatic DPL Names Title Unit Responsibility/ Specialty Lending Ndiamé Diop Lead Economist Task Team Leader from GMF10 09/28/2010 to 09/25/2012 Eric Le Borgne Lead Economist Task Team Leader from GMF05 09/26/2012 Nazaneen Ismail Ali Sr. Procurement Specialist GGO05 Procurement Mona El-Chami Sr. Financial Management Specialist GGO23 Financial Management Chadi Bou Habib Sr. Economist GMF01 Haneen Ismail Sayed Lead Economist MNC02 Jad Raji Mazahreh Sr. Financial Management Specialist GG023 Murat Sultanov Sr. Financial Sector Specialist GFM2A Paul Scott Prettitore Sr. Public Sector Specialist GGO17 Umar Serajuddin Sr. Economist DECDG Wael Mansour Economist GMF08 William Peter Mako Sr. Private Sector Development Specialist GTC05 Behdad M. H. Nowroozi Sr. Finance and Private Sector Development Specialist - Loubna Ennadir Program Assistant GHNDR Komlan Kounestsron Sr. Operations Officer GSURR Catherine Laurent Consultant GGO13 Jean Michel Noel Marchat Lead Economist GTC07 Omar Razzaz Douglas Pearce Practice Manager GFM2B Olaf Smulders Husam Mohamed Beides Lead Energy Specialist GEE03 Rome Chavapricha Sr. Energy Specialist GEE02 Victoria Hilda Rigby Delmon Sr. Counsel GWA02 P Jordan Second Programmatic DPL Names Title Unit Responsibility/ Specialty Lending Eric Le Borgne Lead Economist Task Team leader from GMF05 09/26/2012 Ndiamé Diop Lead Economist Task Team Leader from GMF10 01/05/2011 to 08/06/

36 Jamal Abdulla Abdulaziz Sr. Procurement Specialist GGO05 Procurement Mona El-Chami Sr. Financial Management Specialist GG023 Financial Management Concepcion Aisa Otin Sr. Financial Officer Jad Raji Mazahreh Sr. Financial Management Specialist GG023 Léa Hakim Economist GMF05 Mirela-Iulia Cojocaru Sr. Private Sector Specialist GTC05 Emmanuel Cuvillier Sr. Public Sector Specialist Chadi Bou Habib Sr. Economist GMF01 Wael Mansour Economist GMF08 Rome Chavapricha Sr. Energy Specialist GEE02 Paul Scott Prettitore Sr. Public Sector Specialist GGO28 William Peter Mako Sr. Private Sector Dev t Specialist Behdad M. H. Nowroozi Aijaz Ahmad Sr. Public Private Partnerships Specialist GCPPP Wissam Harake Economist GMF05 Marc Schiffbauer Sr. Economist GMF04 Peter Mousley Program Leader MNC02 Muna Salim Sr. Program Assistant GMF05 (b) Staff Time and Cost P Jordan First Programmatic DPL Staff Time and Cost (Bank Budget Only) Stage No. of staff weeks USD Thousands (including travel and consultant costs) Lending FY , FY , Supervision FY , FY , TOTAL , P Jordan Second Programmatic DPL Staff Time and Cost (Bank Budget Only) Stage No. of staff weeks USD Thousands (including travel and consultant costs) Lending FY FY , FY , Supervision FY , FY , FY , FY17 1/ , TOTAL ,

37 1/ As of 28 March

38 Annex 2. Beneficiary Survey Results (N/A) 38

39 Annex 3. Stakeholder Workshop Report and Results (N/A) 39

40 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR The Government of Jordan did not prepare a separate ICR. The below summarizes comments received from the Government of Jordan on the ICR 24 April 2017: The Government highlighted the importance of this Programmatic DPL Series in pushing and achieving important policy reforms in Jordan across policy areas. The Government also broadly agreed with the evaluation but stressed the role that external developments played in the achievement of objectives. For instance, FDI had been adversely affected by regional instability, and expenditure on drugs by the Ministry of Health was severely impacted by the Syrian refugee crisis. As such, outcome-oriented indicators such as expenditure on generics, Greenfield FDI, and the median and dispersion in the number of days to obtain all required licenses to effectively start a business, did not accurately measure the impacts of the program because the results were influenced by changing macroeconomic and security conditions and as such should not be rated. The Government also noted continuing progress, for instance with recent decisions by the CoM in reform of the Audit Bureau and Doing Business. Given the above, the authorities view is that the operation s more accurate rating should be Satisfactory. 40

41 Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders Comments from the Japan International Cooperation Agency (JICA): The World Bank was an important partner and JICA collaborated with the Bank s second operation of DPL program to finance on parallel for the Government of Jordan with contribution of 12 billion yen. The DPL operation focused on three pillars of Transparency and Accountability, Debt Management and the Efficiency of Government Spending and Private Sector-driven Growth. The preparation and supervision of the DPL operation was coordinated in an exemplary manner with JICA. With close collaboration and clear demarcation with WB, JICA s TA for debt management including the support for Jordan s first sovereign Sukuk Issuance has been implemented efficiently and effectively that helped Jordan to avail a new and potentially large source of finance. JICA shared information and joint monitoring reviews with the Bank were conducted in a timely manner that enabled to succeed the important reforms under the DPL program. 41

42 Annex 6. List of Supporting Data Table 1. Access to Information in Jordan: Visitor traffic at the LOB's website ( ). Year Number of Proposal Number of Feedback No. of visitors (Sessions) 1/ , , , , , , , , ,085 Source: Legislative and Opinions Bureau. 1/ A 'Session' is defined as a series of clicks on LOB site by an individual visitor during a specific period of time. A Session is initiated when the visitor arrives at LOB site, and it ends when the browser is closed or there is a period of inactivity (session ends). Figure 2. Jordan: Visitor Traffic at the LOB website Source: Legislative and Opinions Bureau. 1/ A 'Session' is defined as a series of clicks on LOB site by an individual visitor during a specific period of time. A Session is initiated when the visitor arrives at LOB site, and it ends when the browser is closed or there is a period of inactivity (session ends). 42

43 Annex 7. List of Supporting Documents Hashemite Kingdom of Jordan, National Agenda Hashemite Kingdom of Jordan, Jordan 2025: A National Vision and Strategy International Monetary Fund, Jordan 2012 Article IV Consultation Staff Report (IMF Country Report 12/119, May 2012) International Monetary Fund, Jordan 2014 Article IV Consultation Staff Report (IMF Country Report 14/152, June 2014) International Monetary Fund, Jordan: Request For A Stand-By Arrangement (July 27, 2012) World Bank, Program Document for a Proposed First Programmatic Development Policy Loan in the Amount of US$250 million to the Hashemite Kingdom of Jordan (Report No JO, February 2, 2012) World Bank, Program Document for a Proposed Loan in the Amount of US$250 million to the Hashemite Kingdom of Jordan for a Second Programmatic Development Policy Loan (Report No JO, February 18, 2014) World Bank, Implementation Completion and Results Report on a Loan in The Amount of US$300 Million to the Hashemite Kingdom of Jordan For a Recovery under Global Uncertainty Development Policy Loan (Report No: ICR 1086, June 26, 2012) World Bank, Progress Report on the Country Partnership Strategy for the Hashemite Kingdom of Jordan for the Period Fy12-Fy15 (Report No JO, June 23, 2014) World Bank, Country Partnership Strategy for the Hashemite Kingdom of Jordan for the Period FY12-FY15 (Report No JO February 1, 2012) World Bank, Aides-Memoires for DPL Missions to Jordan (October 26, 2012; February 22, 2013; December 9, 2014; April 15, 2015; January 25, 2016) World Bank, Hashemite Kingdom of Jordan Development Policy Review: Reducing Unemployment Through Improved Growth-Enhancing Policies (May 2012). World Bank, Worldwide Governance Indicators, Aggregate Governance Indicators , 2016 Update (Excel) 43

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