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TRANSITION TO TRANSITION (T2T) INITIATIVE

“Stimulating Growth and Investment During Transition”

Dead Sea, Jordan, 28 May 2012

REPORT

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TABLE OF CONTENTS

1. FULL REPORT 3-16 2. ANNEX

• Transition to Transition Initiative concept note 17-21 • T2T event in Jordan

o Programme 22-30 • Contact information 31

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Introduction: On 28 May, 2012, the European Bank for Reconstruction and Development (EBRD) organized the “Stimulating Growth and Investment during Transition” conference at the Dead Sea, Jordan. This was the fourth conference held under the EBRD’s “Transition to Transition Initiative”1 and it was held in cooperation with the Centre for Mediterranean Integration (CMI), the Ministry of Planning and International Cooperation of Jordan, the Jordanian Businessmen Association, the Young Entrepreneur’s Association, the Business and Professional Women of Amman, the Jordan Chamber of Commerce and the Jordan Chamber of Industry. Prominent figures from the public and private sectors from Jordan, Central and Eastern Europe (CEE) and Turkey attended the event, including H.E. Jan Krzysztof Bielecki, former Prime Minister of Poland; H.E. Ivan Miklos, former Deputy Prime Minister and Minister of Finance of the Slovak Republic; H.E. Meglena Kuneva, former European Commissioner for Consumer Protection and former Minister of European Affairs of Bulgaria; H.E. Hamdi Tabba’a, Chairman of the Jordanian Businessmen Association, H.E. Jafar Hassan, Minister of Planning and International Cooperation and Erik Berglof, Chief Economist of the EBRD among more than 350 other participants.

Opening Plenary: Understanding the Economic Challenges Facing Jordan through Transition and Reform Insights from Central and Eastern Europe

The opening plenary sought to garner insights on reform from CEE countries experiences emerging from transition, and gauge how to achieve growth in Jordan while overcoming social exclusion. Jonathan Charles, Director of Communications of the EBRD, introduced the Bank’s new mandate in the Southern and Eastern Mediterranean (SEMED) region and its commitment to work with the private sector to spur growth and investment. He noted that for every EUR 1 invested by the EBRD, EUR 2 will be mobilized by the private sector, stressing the importance of tailoring programmes to specific country needs while learning from the experiences of others. H.E Jafar Hassan, Minister of Planning and International Cooperation of Jordan delivered the keynote address on behalf of H.E. Prime Minister Fayez Tarawneh, thanking the EBRD for its support of reform in transition countries and for including Jordan as its latest member. H.E. Hassan mentioned the negative repercussions that the 2008 global financial crisis had on the country’s economy and highlighted the unsustainability of the current water and energy models and use. He reaffirmed the government’s dedication in collaborating with the private sector to move towards a more inclusive society and economy where growth is accessible to all Jordanians and wealth distribution is more equitable, by proposing economic reform measures including laws for investment, Islamic sukuks and consumer protection. H.E. Hassan regarded the presence of representatives from CEE and Turkey as invaluable to impart lessons learned in breaking the vicious cycle facing transition governments; tackling low revenues due to the economic slowdown and high infrastructural expenditure, necessary for growth. He expressed the desire for the conference to create networks of partnerships where technical expertise can be provided in several areas: investing in competitive industries to spur GDP growth in line with the country’s target of 6% per year, reducing unemployment gradually over the coming years, fostering a more inclusive society, encouraging young entrepreneurs, and setting strategies for infrastructure

1 The initiative is a framework within which the EBRD can facilitate a “peer-to-peer” exchange of transition and reform experiences between the Bank’s current countries of operations in Central and Eastern Europe and Turkey with countries of the Southern and Eastern Mediterranean basin. Additional information is found in the Annex

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investments of USD 35B in the utilities sector given Jordan’s commitment to produce no less than 200MW of renewable energy each year by 2020. H.E. Ivan Miklos, former Deputy Prime Minister and Minister of Finance of the Slovak Republic, shared lessons learnt from his country’s experience. He recounted the Slovak experience in the 1990’s when the country’s politics and economy were characterized by mismanagement, leaving the country to drag behind its neighbours and isolating it politically and economically. He explained that EU accession and the election of a government with a vision and the political will to undertake tough reforms provided the preconditions for economic growth. Economic openness attracted investments which required a sound institutional system and efficient management of public finances. The results have been tangible; Slovak Republic has achieved the highest cumulative economic growth of all EU 27 countries since 2000, spearheaded by its car manufacturing industry. The country boosted its credit ratings from Baa3/BB+ in 2000, the lowest of the V4 countries (Czech Republic, Slovak Republic, Poland and Hungary), to A2/A in 2005, the top of the V4 countries, and reached A1/A+ rating in 2011 (Moody’s/Fitch). H.E. Miklos stressed the importance of passing broad legal and structural reforms that improve the business environment in achieving this economic success. H.E. Hamdi Tabba’a, Chairman of the Jordanian Businessmen Association, presented the country’s priorities for growth from the perspective of the private sector in the short and medium term: water, energy and absorbing unemployment. He touted the government’s efforts to promote renewables and diversify sources of energy as the recent disruption of natural gas from Egypt highlighted the unsustainability of the country’s current model. H.E. Tabba’a stressed the importance of strengthening the information and communication technology sector by lowering production costs to enhance competitiveness and attract investments. H.E. Meglena Kuneva, Former European Commissioner for Consumer Protection and former Minister of European Affairs of Bulgaria, presented insights from her country’s transition on best practices and lessons learned. Her remarks focused on the advantages to opening up the country and cooperating with international organizations She also called upon Jordanians to be patient in reaping the fruits of transition; reminding them that despite their frustrations, reforms, especially difficult ones, will take time to materialize. Government and civil society should work together to raise awareness and garner public support for proposed reforms. She explained that as digital technology further empowers the public, any government decision taken without legitimacy from the people will prove hard to implement. Hence, the system of governance in Jordan would benefit from moving towards a more participative democracy in order to achieve growth. H.E. Jan Krzysztof Bielecki, former Prime Minister of Poland, discussed the path his country took to become the poster-child of successful transition. In his view, there were many elements that contributed to Poland’s success. Firstly, luck and geography were important; proximity to stronger European nations proved to be advantageous in promoting integration into the European Union (EU) (the country’s proximity to Germany has also benefited it economically). He noted that Poland’s attractiveness and competitive advantage lies in its low-unit labour cost. The government has been adamant that unit labour cost should rise only in line with productivity increases in order to remain competitive. He pointed out that Greece’s labour costs which increased by 60% over the past decade whereas Germany’s only rose by 8%. He also shared his preference for locally denominated debt, despite the appeal

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of cheaper foreign credit. Currency mismatches and heavy external indebtness are in his view, the root of economic collapse for many vulnerable transition economies. H.E. Jafar Hassan, Minister of Planning and International Cooperation, laid out Jordan’s competitive advantages in attracting foreign investors compared to other countries in the region. He began by pointing out that Jordan is transitioning though an evolution rather than a revolution. This nuance suggests lower risks of uncertainty and a certain political stability, which is crucial to investors. Still, it is imperative that the public be convinced of reform efforts in order to encourage investment in the country, because so long as the streets are restive, capital will remain fearful. H.E. Hassan also noted that in the early 1990s, Jordan’s per capita income was in the same category as Turkey and Slovak Republic. Although it has doubled in the past decade, today the country lags significantly behind these peers because of slow movement in innovation and productivity. Erik Berglof, Chief Economist of the EBRD, placed Jordan’s challenges in the context of EBRD’s experience working with other transition countries. He acknowledged that Jordan has its own transition history and that the EBRD will need to take that into account when shaping the Bank’s strategy. He pointed to three lessons from the transition experience of Eastern Europe: the importance of developing the private sector, not only through privatisation, but most importantly by facilitating new private enterprise; the need for social and political inclusion in reforms as well as building constituencies for those reforms; and the necessity of having an anchor and an end goal for transition. The choice of anchor - in Jordan's case between the GCC and Europe - has important implications for what type of economy and political system will emerge.

Roundtable Discussion 1: Promoting Growth and Employment Through Development of Small and Medium Enterprises (SMEs)

The discussion session was co-chaired by Adli Kandah, CEO of the Association of Banks in Jordan and Selin Oz, SME Marketing Manager of Garanti Bank, Turkey. The discussion was well attended with more than 90 representatives from commercial banks, micro finance institutions (MFIs), SMEs, public sector agencies, research institutions, and representatives from the EBRD and other IFIs Kandah opened the discussion by explaining the importance of SMEs in the Jordanian economy – they account for more than 99% of firms, yet they generate only about 32% of employment. Access to finance remains the main obstacle to SME growth together with access to markets and other structural barriers, including competition from imports. The discussion addressed the challenges and priorities for the growth and development of SMEs from both the demand side and the supply side including lack of collateral, adequate business plans, financial literacy and financial transparency and the presence of an active informal economy as well as the lack of sources of funding beyond bank lending such as equity and venture funds and MFIs, which are at the early stages of development. Participants shared lessons learned from the CEE transition experience and discussed these experiences and relevance for the Jordanian context. Several session discussants explained that banks do not lend enough to SMEs despite their apparent excess liquidity. Their lending to SMEs accounts for only 10% of total lending (although some banks challenged this claiming that 80% of their lending goes to SMEs as

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most bank clients are SMEs according to the definition used by the commercial banks). Representatives from the Chamber of industry presented statistics that out of the JD 2billion bank credit invested in the corporate sector, JD 1.5billion goes to the largest 50, and JD1.9 billion to the largest 100 companies. Bartosz Urbaniak, Executive Director of BGZ Bank, Poland described the Polish experience, which included similar demand and supply side obstacles in SME lending. SMEs were not bankable, there was a lack of trust in financial institutions, high taxation and the existence of an informal economy. In order to build stronger relationships with SMEs and communicate more effectively, banks hired sector specialists to understand business and sector specificities, in particular for the agricultural sector. This enabled banks to assist SMEs in developing business plans. BGZ also developed innovative ways of dealing with the issue of opaqueness in SMEs’ balance sheets by providing loans to SMEs not based on their balance sheet but based on average market statistics, which they used as benchmarks to compare performance of SMEs. They increased trust by providing transactional banking free of charge for an initial period. Oz offered similar experience from Garanti Bank, Turkey emphasising the importance of relationship banking in the SME area. Garanti Bank is an SMEs Bank, with SMEs accounting for 25% of profit and 35% in balance sheet. The bank has 1.5 million SME customers. Garanti Bank has achieved much of its success with SMEs through training programmes with entrepreneurs. The bank has dedicated programmes that finance and train women entrepreneurs, which have disbursed USD 259 million. Other session participants mentioned that relationship banking that is the basis of the MFIs business model has not been extended to bank lending to SMEs. MFIs, however, face constraints in how to graduate from serving micro to small enterprises. The importance of SMEs for innovation was also stressed by session participants. Unlike SMEs in many other countries, SMEs in Jordan are too small to address the issue of unemployment and do not have the capacity or ability to innovate. Access to finance and the cost of bank finance is an important impediment for SMEs ability to innovate. A significant problem is the government expenditure on R&D is very small compared to other countries. The government also does not have a programme to promote innovation in education. In order to address the supply and demand issues facing the sector, the Jordan Enterprise Development Corporation (JEDCO), a public sector agency that initially focused on export promotion, has now established a programme, which supports access to finance for SMEs and addresses the main challenges on both the demand and supply side. The programme has three components:

• Technical assistance for SMEs in two phase feasibility studies, which include business plans and credit plan for banks;

• Guarantee facility from donors; • Establishment of two venture capital funds together with the EIB and with a

government development fund Participants from the Jordanian private sector focused on equality in access to finance for women as a priority. While stressing that there is no formal gender discrimination, participants emphasised women have less access to any type of finance. Women account for half of the population but only one third of entrepreneurs in the country. Women use one third of the capital that men use and are less likely to access external finance for growth.

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Another challenge facing the sector is the crowding out effect from the government. This is both due to high domestic borrowing (which is also expensive and sets a high minimum interest rate for lending including to SMEs), as well as lending to state-owned utilities that are government guaranteed. On an institutional level, reform of the credit guarantee fund, central registry, and credit information system (although a private credit bureau is currently being developed) is needed. Recommendations:

• Establish a unified and standardized definition of SMEs • Develop an appropriate business climate infrastructure for SMEs by improving legal

frameworks, establishing credit bureaus and registries, and implementing the small business act for Jordan.

• Reform the credit guarantee fund to be a common vehicle of all banks rather than a profit oriented organization.

• Set a national strategy for SMEs as a priority and follow through with it in order to understand and identify funding gaps, especially those that cannot be filled by the banking system. The strategy should be consistent with and part of a national strategy for economic development.

• Improve the infrastructure for SME information by creating a hub or portal. • Build SME capabilities by developing an SME advisory services market, which would

help SMEs to improve their financial literacy. • Banks can and should contribute by developing specific, focused business units for

SMEs and possibly for micro, small and SMEs separate from corporates and further develop an approach to SMEs that is in-depth and relationship-based; banks should reach out to the SMEs. Banks should also invest in training of SME owners and women entrepreneurs.

• Allow banks to contribute every year 5 out of their 30% tax to a fund for SME equity investment and encourage banks to take more, calculated risks.

• Develop sources of risk capital outside of the banking system

Modernising the Agribusiness Value Chain and Investing in Food Security: Finding Opportunities in Constraints

This session was co-chaired by H.E. Said Al Masri, Managing Partner of JORICO and former Minister of Agriculture and Michael Whitney, Managing Director of MRW Associates.. The discussion was attended by approximately 80 participants from the local business community, the Ministry of Agriculture, government agricultural finance institutions, representatives from the EBRD as well as policy makers and private sector representatives from CEE including Milan Djakov, Director from the Indemnity Fund, Serbia, who shared his experience from the EBRD sponsored warehouse receipt (WHR) programme in Serbia and Vladimir Dzaja, who presented the advantages of vertical integration from the Croatian Agrokor Group. Given the importance of SMEs along the food value chain the insights from Dragijana Radonjic Petrovic, State Secretary for SMEs from Serbia received a lot of attention.

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The discussion addressed several themes and priorities for modernising and developing the sector. The lack of access to finance in particular for smaller companies in the sector was raised as a primary constraint for further modernisation. This is driven both by risk aversion and by the lack of proper credit assessment instruments at the banking level, but equally by the inadequate business plans and financial documentation of small agribusiness firms. Given the importance of these smaller farmers and agribusiness companies, in particular for employment in rural areas, more attention is needed to improve the performance and sustainability of these businesses. The discussion also addressed water use in food production as a priority for further growth and development of the sector. Given that Jordan is one of the most water stressed countries in the world, the interdependence of food, water and energy was stressed by virtually all participants. Jordan has already made progress in this area, however, better utilisation of the Jordan Valley water sources as well as innovative technologies for desalination and alternative drilling methodologies need to be developed. Access to finance is important in order to develop this more advanced agricultural infrastructure, which would reduce the quantities of water used for irrigation. Renewables should also be introduced to reduce costs of energy. There is need to improve quality standards in order to export and compete in global markets. This is a challenge along the whole value-chain including packaging, storage, and distribution. Access to finance would also improve the quality of fresh and processed products by the introduction of post-harvest technology. Recommendations:

• Increase access to finance through capacity building in banks and the development of new financing products such as seasonal working capital facilities, specialised agricultural lending products with adequate grace periods, and better risk assessment technologies at bank levels. In addition, financial reporting and business plans at the borrower level need to be improved.

• Improve risk management through better storage and the introduction of soft collateralisation options such as warehouse receipts.

• Prioritize and support the development and use of water efficient technologies such as desalination and new deep well technologies as well as the utilisation of shallow brackish water sources both indirectly through financial institutions and directly through financing food producers and processors.

• Limit energy usage in water transportation and irrigation systems by investing in renewable energy for water pumping and water distribution along the food chain.

• Better public-private sector coordination is needed. A number of participants criticised the lack of consultation by the Ministry of Agriculture with the private sector in policy making and targeted support.

• Improvement of quality standards to compete for export markets globally, in particular to Europe.

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Roundtable Discussion 3: Preparing for a Sustainable Future The session was co-chaired by Raouf Dabbas, Senior Advisor to the Minister of Environment of Jordan and H.E. Milko Kovachev, former Minister of Energy of Bulgaria. Around 50 participants represented both the local business community, the Ministry of Energy and Mineral Resources, and Ministry of Planning and International Cooperation as well as policy makers and businessmen from CEE and Turkey, and representatives from EBRD and other IFIs present in Jordan. Despite a growing increase in the consumption of energy as industrialisation and consumer demand grow, Jordan remains heavily dependent on fuel imports to meet energy needs. Although the government has set targets to reduce energy consumption by 20% and increase the share of renewables in electricity generation by 10% by 2020, the country is only now starting to exploit it’s renewable potential, especially wind and solar energy, which currently account for less than 1% of generation. Distortions in the electricity pricing system have frustrated the development of renewable generation. Currently there is also a financing gap for energy efficiency projects as low energy prices and an uncertain regulatory framework are risky for investors and financiers. The session focused on these challenges from the perspectives of the public and private sectors. Hedi Larbi, Country Director for Jordan of the World Bank, presented a broader context of the challenges facing the sustainable energy sector in Jordan, including the tight fiscal situation in the country, which has been aggravated by unsustainable energy subsidies, lack of financial sustainability of the key players, threatened energy security and incomplete legal framework for renewable energy and energy efficiency. Representatives from the public sector discussed the renewable energy targets and recently passed law on renewable energy as well as the status of tenders for wind and solar projects. They also stressed the high cost of imported fossil fuels and need for fundamental transition from traditional fuels to renewable energy that requires adequate price signals and market liberalisation. This would also improve competitive environment for investors by weakening the dominant position of monopolies. Representatives from the private sector underscored the importance of the long term regulatory visibility for renewable energy sources, even if the support can be phased out over time as technologies mature. Market liberalisation would help clarify roles for public and private sector and facilitate access to adequate finance, including equity that can leverage long-term debt. Zbigniew Prokopowicz, CEO of Polish Energy Partners, Poland and Kemal Yuce, Loan Officer of Yeni Elektrik Uretim A.S., Turkey presented their experiences as private developers of renewable energy projects. Prokopowicz suggested that tradable green certificates applied in a number of EU countries and US may be safer to investors in Jordan than feed-in tariffs (tendered as long-term PPAs with NEPCO). Market based support system would relieve the indebted government from the burden of long-term liabilities and replace regulatory risk with market risk, which is more transparent to investors. Long-term project finance may be more readily available if investors see predictable market structure both on the demand and supply sides. The contribution of renewable production into the energy mix is still subject to questions. Some discussants were of the opinion that focus should remain on large fossil (primarily gas

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fired) plant to address the bulk / base load need, while others were interested in further promoting renewables. Clarification is still required to position renewable generation aside conventional generation, not as a substitute but a complement Weak price incentives for energy efficiency and solar water heaters in buildings prevent substantial investment from the private sector in this area. Market based pricing that reflects the true cost of energy would attract investors and financial institutions more effectively than grants and government guarantees. The recent increase of electricity prices for certain industrial and commercial sectors has already stimulated several low cost efficiency improvements. However, such a cross-subsidisation of energy costs is likely to decrease competitiveness of the most prosperous sectors and to continue encouraging energy waste in other sectors of the economy. Some discussants called for a predictable and stable regulatory framework for renewable energy, given that state guarantees for renewable electricity purchases are no longer available. Questions were raised about the regulatory risk of a long term power purchase agreement given that NEPCO as a buyer is in systemic financial stress because of its inability to pass generation and system operation costs to final consumers. Diversification of sources of fossil fuels such as the extension of an LNG terminal and the development of domestic shale oil and gas was also mentioned by several participants. There was concern over the development of nuclear power, which does not seem to be suitable for a country the size of Jordan, due to high investment costs, security risks, inflexibility in the small power system, and scarcity of water needed for cooling. Government representatives participating in the session were aware of most of these concerns. There are several new regulatory initiatives aim at addressing these concerns, including one on renewable energy, net metering or road map for energy efficiency. Filling remaining gaps, fine-tuning of secondary regulations, consistent implementation and project experience needs to follow. Capacity building and financing will be needed. Recommendations:

• There is a strong need for reforms and commercialization of energy sector, as fiscal constraints render the status quo unfeasible. Reforms should aim at gradual liberalisation of electricity and gas markets associated with an increase of energy prices and energy service tariffs to ensure financial sustainability of key players along the electricity value chain (including NEPCO). This is also needed to make energy saving projects financially attractive, boost economic competitiveness, mitigate higher price impact and reduce budgetary burden.

• Reform subsidies by gradual transition from blanket energy price subsidies and cross-subsidies that encourage energy waste by wealthier segments of the population to a more efficient support, better targeted at poor and vulnerable part of population.

• Create a predictable framework for renewable energy support, which would encourage cost-effective renewable technologies, while reducing risk to investors and off-takers.

• A greater emphasis should be placed on removing regulatory and institutional barriers to energy savings and demand side management.

• Plans for a nuclear power programme and its suitability to Jordan should be re-examined.

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• Diversify fuel supplies through alternative gas supply routes and exploration of local resources subject to sustainability constraints.

• Promote investments in energy infrastructure to cope with penetration of new intermittent sources of energy (mostly wind and solar).

Roundtable Discussion 4: Financing Private Enterprise to Support

Competitiveness, Innovation, and Inclusive Employment

The session was co-chaired by Laith Al-Qasem, Chairman of the Arabian Business Consultants for Development (ABCD) and Marcin Hejka, Managing Director of Intel Capital. It brought together representatives of the local business community active in ICT, R&D and venture capital, as well as stakeholders from civil society and education and public officials, and Evren Ucok, Partner at Earlybird Venture Capital, Turkey and Slobodan Djinovic, CEO of Orion Telekom, Serbia. Al-Qasem, started the discussion by highlighting the need for the country to develop beyond the industrial revolution business model in order to increase its competitiveness. In the past years, the Jordanian government and international donor agencies have taken steps in this direction by identifying six innovation clusters: ICT, Architecture and Engineering, Health Services (including pharmaceuticals), Cleantech, Higher education, and Logistics. The discussion was centred on the key question: whether Jordan has the right skills set and sufficient political leadership to transform from an industrial economy into a knowledge-based economy. Hejka stressed that one advantage of fostering development and growth of the ICT sector is that it can be created in a relatively short time frame. Jordan has certain characteristics compared with other countries in the region that should give the country an advantage in encouraging investment in the R&D related activities needed to grow the ICT sector, such as a solid human capital base, a Head of State open to the sector, pleasant living conditions and a central location within the region. In the past years, the country has seen a lot of FDI which Hejka suggested may be an easy answer to the problem, however, 90% of FDI went into the real estate sector and the impact on sustainable employment has been limited. Several discussants pointed to the contradiction between the high level of education and literacy in Jordan and the lack of jobs available to utilise this high-skilled labour force, which inevitably leads to a brain drain from the country. Also mentioned was the fact that the majority of registered companies are micro, small and medium enterprises which do not have the well-developed administrative and managerial systems, job descriptions and organizational structures to make use of the specific capabilities inherent in university graduates. At the same time some discussants believed that there are not enough quality graduates in the country and that it was difficult for venture capitalists to access talent, pointing to a perceived mismatch between the skills of graduates and the needs of businesses on the ground, more particularly in sectors likely to foster innovation and entrepreneurship. The importance of vocational training in general and in the context of ICT and R&D in particular seems to be neglected in the country. The proposal for private businesses to do more on-the-job training was viewed critically as there is no insurance for the employer that staff will stay once they are well trained. There is need to integrate women into the Jordanian labour force. While women perform well in school as well as on the job (including in technical professions), employers are

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reluctant to hire female workers because of higher costs, such as travel costs or fear that they will drop out either temporarily or permanently because of marriage or family duties. Political leadership was also a focal point of the discussion. While the government utilises a lot of resources analysing problems and drafting reform strategies, the implementation of these strategies is hampered by policies being bound to governments which change frequently and by weak accountability among public servants in carrying out agreed upon initiatives. This impression was complemented by the CEE and Turkish experiences that reforms need to be endorsed by the broader public in order to be successfully implemented. Discussants expressed a preference for the EBRD to invest within the framework of strategies drafted by the Jordanian government and to help consolidate the very fragmented development sector in the country. Recommendations:

• Liberalisation should be done at once. Slower reform does not necessarily make reforms less painful and the packets created by slow deregulation may be used by certain groups to enrich themselves.

• Accountability and acceptance are crucial for carrying out successful reforms. Reforms need to be endorsed by the government as well as the general public. Responsibility for their implementation needs to be clearly attributed. Reforms and strategies need to be decoupled from the political cycle.

• To achieve targeted development, government incentives provided to sectors should be time bound and performance based. If assessments reveal that targets are not met, incentives should be removed.

• Education reform is necessary and should focus on teaching more business relevant skills and developing sectoral specialisations. Vocational education needs to play a more prominent role in Jordan’s educational landscape.

• Jordanians working abroad, developing their skills and knowledge, together with an increasing number of skilled local fund managers, could mobilise significant resources to support existing and evolving innovation clusters.

Roundtable Discussion 5: Improving Water Security and Fostering Private Sector Investments for Urban Infrastructure

This session was co-chaired by H. E. Maysoun Zu’bi, Secretary General of the Ministry of Water and Irrigation of Jordan and Teodor Popa, Chief Financial Officer of the Brasov Water Company in Romania. The session was attended by representatives from the Water Authority of Jordan, Land Transport Regulatory Commission, Greater Amman Municipality, private sector water companies and consultancies, as well as Firat Akinal, from the Gaziantep Municipality, Turkey and representatives from the EBRD. The discussions focused on the current state of the water sector and other urban infrastructure services and the key reform challenges, drawing in part on the experience of CEE and Turkey. The discussion opened with an introduction on the current state of the water sector and the government efforts to address some of the key challenges. Jordan is one of the most water-poor countries in the world. Water demand is expected to continue to grow rapidly and is estimated to exceed the available supply by 200%. Climate change places additional pressures on supply.

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There are currently several initiatives and projects aimed at increasing supply, including the large-scale project to desalinate sea water from the Red Sea and transport it to high demand zones throughout the country. Wholesale transportation networks are under construction to transport fresh water from aquifers in southern Jordan to Amman. Furthermore, water re-use (treated wastewater) is growing, particularly for agricultural use in the Jordan valley. However, there are substantial challenges in the area of demand management. To date, the central government, which is de facto in charge of the entire water sector directly or through several public agencies including the Water Authority of Jordan and Jordan Valley Authority, has put in place a variety of instruments such as the Water Demand Management Unit, water demand management policies, strategic plans for the sector, action plans for implementation, standards, codes and regulations. Furthermore, the government often makes reference to the need to attract the private sector to invest in the water and urban transport sectors. Initial steps towards corporatisation and private sector participation (management contracts) have been made. However, tariffs are yet to address cost recovery and financial sustainability, many participants expressed that the tariff setting process continues to be dominated by the political affordability of tariffs, across the entire spectrum of municipal services. This is seen as a major obstacle to attracting private sector investment in the sector. Participants from CEE and Turkey shared experiences from their countries’ transition that can provide relevant guidance for Jordan: decentralisation of service provision, coupled with commercialisation and customer orientation resulting in more efficient and sustainable services. The importance of cost reflective tariffs was stressed – the availability of financial resources allows operators to maintain assets in an adequate condition, operate them effectively and finance much needed investments, whereas on the demand side they provide stronger incentives for demand management. The experience also shows that that tariff increases have led to a strong demand response thus limiting the impact on affordability. Another key aspect is related to retaining and using the water tariffs to support the water sector, rather than as a tax instrument. One criticism raised is the slow and uneven pace of reform implementation – although reform plans have largely been in place for almost a decade, implementation has not sufficiently advanced. The current tariff structure is overly complex and distortive. It does not provide adequate incentives for commercially oriented private investors. The state remains massively dominant in the water sector, which has generated an expectation of state led-financed-implemented solutions to all the problems facing the sector. Furthermore, participants expressed a need for public authorities to provide more support towards private sector initiatives. The on-going economic crisis should be used as a window of opportunity to move forward with the implementation of the reform agenda in the municipal sector, including more decentralisation of decision-making power. Recommendations:

• In addition to the administrative approach currently used, resource scarcity needs to be addressed with economic tools and allocation of resources needs to become more economically effective.

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• Tariffs in the water sector need to reflect the cost of service provision and provide the right incentives on the demand side. Tariff reform is required to attract and sustain private sector investments and operations in the sector. Tariffs should be used to support the upkeep and modernisation of the sector rather than as a tax instrument.

• A more concerted effort towards decentralisation is required. More responsibility and decision-making powers should be transferred to local authorities along with the means and instruments to deliver solutions.

• Policy stability beyond ministerial appointments is needed and stronger and longer lasting political support for the necessary reforms is a key condition to placing service delivery on a more sustainable footing and attracting private sector investment.

• Reforms need to be domestically driven and supported, as in the long term the costs of utility service delivery will be borne by Jordan – either directly by infrastructure service users or indirectly by taxpayers. IFI and donor financing and support should be used to build capacity towards this domestic sustainability; in this context a twinning arrangement between Jordanian and Romanian water utilities will be considered.

Closing Plenary: Jordan’s Blueprint through Transition and Beyond

The closing plenary offered a platform to synthesize the day’s discussions. Loay Sehwail, Director General of Jordan Industrial Estates Corporation, moderated the panel of the roundtable session chairs who presented debriefed the plenary on the conclusions of their respective roundtable conversations. Reform was the word of the day, according to Sehwail, and Jordan should start shifting its focus on setting a path towards growth rather than fighting fires. H.E. Maher Sheikh Hasan, Deputy Governor of the Central Bank of Jordan, delivered the closing keynote address on the role played by the Central Bank during transition in maintaining price stability and trust in the Jordanian Dinar. The resilience of the banking sector is an advantage for the Jordanian economy, which H.E. Hasan suggested as a strength for development of the wider economy. He discussed public and private sector collaboration and the joint public-private lending bureau, which is expected to come online by the end of the year and provide low cost financing options for SMEs as an example of such initiatives. The government, however, still faces a challenge maintaining macro stability and addressing fiscal imbalances while reducing the crowding out effect on the private sector. Reforming subsidies and minimizing government inefficiencies are priorities for the country. H.E. Reem Badran, Member of Parliament, re-iterated that the country’s three main challenges are water, energy and democracy, calling for stronger private-public partnerships as a means of ensuring more inclusive policy discussions. Given the deficit in the government’s finances, the private sector should take on renewed significance in absorbing unemployment. The government should facilitate this by creating a more conducive legal environment for the establishment of SMEs. H.E. Badran stressed the importance of enhancing the role of women in business. Despite their strong presence at universities, females currently constitute only 17% of the workforce and have the potential to immensely improve the country’s productivity and growth. Adli Kandah, Co-chair of the roundtable discussion: “Promoting Growth and Employment through Development of Small and Medium Enterprises (SMEs)”, reported on the

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discussion’s findings, which focused on the need to stimulate the development of SMEs by building capacity within banks to provide SMEs with lending products tailored to their needs, as well as hiring sector specialists aware of the specific needs of SMEs. On an institutional level, participants suggested a need for further developing appropriate business infrastructure including an efficient and transparent legal framework, which would facilitate the process of doing business. Consistent with a national strategy for economic development, specialized SME credit bureaus would bridge funding gaps that are not covered by banks. The creation of an SME advisory institution would also build entrepreneurs’ capabilities in financial literacy. Banks should regard SMEs as a viable source of profit rather than simply a corporate social responsibility campaign. As such, specialized SME business units should be formed within banks to tailor their services and products to this clientele. H.E. Said Al Masri, Co-chair of the session: “Modernising the Agribusiness Value Chain and Investing in Food Security: Finding Opportunities in Constraints” explained that there is a need to increase access to finance for all companies in the sector, especially smaller primary producers, through the development of specialised lending products by banks. Discussion participants acknowledged the need to better utilise water resources of the Jordan Valley by investing in new technologies to reduce water waste. H.E. Al Masri stated that this could potentially double the Valley’s agricultural output, boosting the country’s competitiveness in reaching export markets, especially in Europe. Increased access to finance is particularly important in order to encourage further development of more advanced and water efficient agricultural infrastructure. Access to finance would also encourage further investment in post-harvest technologies, which would improve the quality of agricultural products. In keeping with the message of cooperation between the public and private sectors that had been underscored by several speakers, the session concluded that farmers and the government should collaborate in policy making. Raouf Dabbas, Co-chair of the session: “Preparing for a Sustainable Future” described the need for reforms of energy subsidies and commercialization of the energy sector in order to attract private sector investment in the sector. Access to flexible and creative financing would kick-start the country’s shift towards renewable energy sources. The panel’s recommendations also included the reform of energy subsidies from blanket price subsidies and cross-subsidies to more efficient supports, which would better target low-income groups. A move towards liberalisation and stronger private sector participation were also among the suggestions to enhance transparency and competitiveness. Finally, Dabbas advised the government to re-think its commitment towards a nuclear energy program given the challenges, costs and risks associated with such an endeavour. Laith Al-Qasem, Co-chair of the roundtable: “Financing Private Enterprise to Support Competitiveness, Innovation and inclusive Employment” began by quoting his co-chair Marcin Hejka, Managing Director of Intel Capital, who stated that any country is only as strong as its innovative sectors. In order to attract investment in R&D and innovative fields that would increase the country’s competitiveness, there is need for consensus-building of reforms from all relevant players in addition to continuity in policy implementation despite frequent changes in government. He also discussed the need to take advantage of previous transitioning countries’ experiences in setting systems for the measurement and accountability of the results of reforms. H.E. Maysoun Zu’bi, Co-chair of the roundtable discussion: “Improving Water Security and Fostering Private Sector Investments for Urban Infrastructure” reported on the findings from

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the discussion. Jordanian demand for water resources is expected to outstrip capacity by 200% per capita each year and as the population and economy grow, so will the demand for water, which is expected to double by 2030. Drawing upon the experience of CEE countries and Turkey, models for resource management were proposed to encourage more private sector investment in utilities. Urban planning, water allocation mechanisms, revised tariffs, which are more cost reflective, and decentralisation of decision-making power in addition to enhanced awareness and education were all proposed recommendations. Jordanian and Romanian participants of the roundtable agreed to consider a twinning programme to facilitate experience sharing in the field of resource management. Hildegard Gacek, Managing Director for the Southern and Eastern Mediterranean (SEMED) at the EBRD, presented her thoughts on the future of the partnership between the EBRD and Jordan. Gacek asserted the Bank’s readiness to provide technical assistance and engage in policy dialogue with the Jordanian government, as the first step towards putting the partnership in motion. Shareholders of the EBRD are expected to finalise the ratification process in the coming months, enabling the EBRD to start financing activities throughout the SEMED region from September onwards. The Bank will be able ti offer project financing through long-term loans, equity and guarantees. EBRD is currently in the process of establishing local offices in the region and presence of a team on the ground will facilitate project preparation and dialogue between the EBRD and the Jordanian government and private sector. Mats Karlsson, Director of the Centre for Mediterranean Integration concluded the conference by underscoring the importance of knowledge transfer in enhancing regional integration. Karlsson assured participants that while Jordan will require tailored strategies to address its particular needs, exchanges of best practices throughout the region can minimize errors. As such, he emphasised the importance of deliberations, such as the ones held during the EBRD conference, to help build knowledge-based economies and reduce transition costs while ensuring more sustainable growth.

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ANNEX

TRANSITION TO TRANSITION INITIATIVE

A peer-to-peer approach for transfer of reform experience to the Southern and Eastern Mediterranean region

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Summary of the T2T Initiative The Transition-to-Transition (T2T) Initiative is a framework within which the EBRD can facilitate and exploit a "peer-to-peer" exchange of transition and reform experience between the Bank's current countries of operations and countries of the Southern and Eastern Mediterranean region. In this spirit and among other activities, under the heading "From One Transition to Another", the Bank will help organize a series of events in the region in the coming months (Egypt, Morocco, Tunisia and Jordan). The Bank's role will be that of a facilitator, bringing old and new "peers" of reforms together, and a listener in order to better understand the differences between the reform experiences in the two regions. Focusing on private sector development, the transfer will involve plenary panel discussions with high-level policy makers, private and public sector experts and think-tanks on broader reform insights, including political and social aspects, as well as thematic, interactive parallel sessions on specific experience in EBRD priority sectors. Background and motivation At the summit in Deauville in May of this year, the G8 gave an ambitious new mission to the EBRD and other international financial institutions to assist the recovery and the transition of a number of economies in the North Africa and Middle East region. In this process, the EBRD would like to engage with a wide range of stakeholders in the private as well as in the public sector and civil society to assess and respond to those challenges in the best possible fashion and in a spirit of collegiality and shared purpose. The Southern and Eastern Mediterranean region has had a mixed reform experience thus far and the international institutions are to varying degrees associated with this record. In addition, there is an inherent negative sentiment about Washington Consensus conditionality and Western-imposed solutions. As a result, policy recommendations coming from sources associated with these institutions and such approaches are easily rejected. As the people in the Southern and Eastern Mediterranean region get to grips with the challenge of translating the civil values for which they fought in the recent popular protests into practical and sustainable policies and institutions, they are keen to hear and learn from other transition experiences and countries that have been through the process theelves and managed to implement transition successfully. Several countries in Central and Eastern Europe, as well as other emerging countries around the world serve as reform models for the new governments in the Southern and Eastern Mediterranean region. Some direct contacts have already been established, but there is scope for much more exchange. The EBRD was asked to enter the Southern and Eastern Mediterranean region because the European transition experience was deemed relevant and the Bank’s model of development in Central and Eastern Europe with a strong focus on the

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private sector was seen as the most acceptable and appropriate for the new region. However, the historical and political context, as well as the specificity of the recent experience of the “new” region, would require the Bank to take a position of a “listener”, at least at the beginning, to better understand the differences in reform experience in the two regions and in that way respond adequately to the needs and the challenges of the ”new” region. The attractiveness of the peer-to-peer approach The ultimate choices, models of governance and policies will have to come from the people in the Southern and Eastern Mediterranean region theelves. However, without seeking to impose specific models, others who have been through the process can share opinions, experiences and best practices learned as developed by local actors. The process of dialogue and conversations can create new thinking and opportunities for exploring alternative perspectives. International experience shows that peer exchanges work best when the exchanges are designed as mutually beneficial, i.e. not strictly in a paradigm of teaching/learning (more advanced to less advanced). This does not mean that the skills exchanged/knowledge transferred have to be equally beneficial to all participants, but it does preserve the space to appreciate local conditions and stimulate creative thinking and perhaps new knowledge to adess the particular issue in the exchange. The greatest impact is achieved when the peers are actively engaged in the design of the transfer of experience, so peers are not seen as "outsiders," but rather as partners. This takes time and trust, and investment over time to provide opportunities for local actors to build their own knowledge (through learning other experiences) and to participate in meaningful civic discourse at home. This is why follow-up exercises and events will be most important. The role of the EBRD in the peer-to-peer transfer of experience The EBRD can facilitate the sharing and transfer of transition experience from the existing countries of operations to the Southern and Eastern Mediterranean region by formulating the adequate framework and creating a platform for such exchanges. The Bank's role will be that of a facilitator, bringing old and new "peers" of reforms together, and listener in order to better understand the differences between the reform experiences in the two regions. Focusing on private sector development, the transfer will involve events and activities in different locations with the participation of high-level policy makers, private and public sector experts and think-tanks on broader reform insights, including political and social aspects, as well as expert-to-expert exchanges on specific experience in EBRD priority sectors.

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High-Profile Advisory Board To give visibility to the initiative, a Board of prominent policymakers from the two regions will be approached to lend their names to it. The Board would provide advice on the framework and platfor for such exchanges of experiences, policy strategies, case studies and analytical tools, and meet in different constellations for high-profile “peer-to-peer” exchanges of experiences. A group of policymakers have already confirmed:

• Kemal Dervis, Former Finance Minister of Turkey ● Simeon Djankov, Finance Minister of Bulgaria ● Bozidar Djelic, Former Deputy Prime Minister of Serbia ● Jan Fischer, Former Prime Minister of Czech Republic ● Radoslaw Sikorski, Foreign Minister of Poland ● Valdis Zatlers, Former President of Latvia • Gordon Bajnai, Former Prime Minister of Hungary • Ivan Miklos, Former Deputy Prime Minister and Minister of Finance of the

Slovak Republic This group will be joined by a set of prominent policymakers from the countries of the Southern and Eastern Mediterranean. aft schedule of forthcoming events and activities i) Launch event at the World Economic Forum on the MENA region - 21-23 October 2011, Dead Sea, Jordan To launch this initiative, the EBRD Office of the Chief Economist (OCE), jointly with the WEF team, has conceptualized a panel on the transfer of reform experience from Central and Eastern Europe to the Southern and Eastern Mediterranean region, which will be held at the WEF regional meeting in Jordan in October. The EBRD Chief Economist will take part in several panels of the public and private programme of the World Economic Forum, including sessions on the transfer of reform experience, with findings and successful case studies from the transitional economies of the Bank’s existing region. An accompanying media effort prior to and during the Forum will be prepared jointly with the EBRD Communications Department. The launch event will be followed by a set of activities and events in the region. ii) EBRD ‘T2T’ events in the Southern and Eastern Mediterranean region – Q4 2011/Q1-2 2012 The Bank, jointly with local partners, will organize T2T events in each of the following countries of the Southern and Eastern Mediterranean:

• Egypt: Cairo – 24 October 2011 • Tunisia: Tunis – 12 December 2011

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• Morocco: Casablanca – 27 February 2012 • Jordan: Dead Sea- 28 May 2012

High-level policy makers from the “old” and “new” regions will be brought together on a panel to share insights about broad reform experiences, including political and social aspects, and potentially explore alternative perspectives for the “new” region. In addition, thematic, interactive parallel sessions on specific experience in the EBRD priority sectors will bring together public sector experts, think-tanks, entrepreneurs and banks for an exchange of views on how to stimulate private sector investment in the new region. A aft working agenda for the events in Egypt is included in the Appendix. Subsequent events in the other countries would follow a similar format, adjusted to local circutances. iii) Follow-up activities The EBRD will also seek to partner with other well-established international institutions and organizations to give further visibility to this initiative (tentatively through the Centre for Mediterranean Integration (CMI), but others could be contemplated), in the form of joint programmes and activities. To continue the sector dialogue, the Bank will consider hosting regional events across the Southern and Eastern Mediterranean events, focused on specific sectors, providing opportunities for further strengthening and deepening of the T2T dialogue across countries in this region.

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Stimulating Growth and Investment During Transition

Transition to Transition (T2T) Initiative

Organized by

European Bank for Reconstruction and Development (EBRD)

and

Centre for Mediterranean Integration (CMI)

with

Ministry of Planning and International Cooperation of Jordan

Jordanian Businessmen Association (JBA)

Young Entrepreneurs Association (YEA)

Business and Professional Women-Amman (BPW-A)

Jordan Chamber of Commerce

Jordan Chamber of Industry

King Hussein Convention Centre at the Dead Sea, Jordan 28 May 2012

The Transition-to-Transition (T2T) Initiative is a framework within which the EBRD can facilitate a "peer-to-peer" exchange of transition and reform experience between the Bank's current countries of operations (Central and Eastern Europe, and Turkey) and countries of the Southern and Eastern Mediterranean region. The aim of this meeting is to understand the short- and mid-term priorities for Jordan, particularly the private sector, by engaging and sharing of reform experiences among public and private sector experts from Jordan, Central and Eastern Europe (CEE) and Turkey.

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Agenda 28 May 2012

08:00 - 09:00 Registration and welcome coffee 09:00 - 10:30 Opening Plenary Dead Sea Halls 1 &2 Understanding the Economic Challenges Facing Jordan, through Transition and

Reform Insights from Central and Eastern Europe Transition experience in Central and Eastern Europe suggests that the benefits of moving to a more open and accountable government and economy are attractive to many stakeholders of society, but they may only materialize in the medium and longer term. During the period of transition, uncertainty can cause slow-down in investment, and political and economic challenges can emerge in the immediate term. Evidence from earlier transitions shows that the sequencing of political, economic and social refor in an uncertain economic and political environment is very important, and so is the role and effectiveness of state institutions, an enabling business environment as well as external anchors. How will the country achieve growth while overcoming social exclusion? What kind of Jordan will emerge from the current transition? Moderator: Jonathan Charles, Director of Communications of EBRD Keynote speaker: H.E. Fayez Tarawneh, Prime Minister and Minister of Defense of Jordan Panellists:

• H.E. Jafar Hassan, Minister of Planning and International Cooperation of Jordan

• H.E. Jan Krzysztof Bielecki, Former Prime Minister of Poland • H.E. Ivan Miklos, Former Deputy Prime Minister and Minister of Finance of

Slovak Republic • H.E. Bozidar Djelic, Former Deputy Prime Minister of Serbia • H.E. Meglena Kuneva, Former European Commissioner for Consumer

Protection and Former Minister of European Affairs of Bulgaria • H.E. Hamdi Tabba’a, Chairman, Jordanian Businessmen Association • Erik Berglof, Chief Economist, EBRD

10:30 - 11:00 Coffee break and networking 11:00 – 13:00 Parallel, interactive roundtables

Participation in all roundtables is by invitation only

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Format: Closed, by-invitation-only, interactive roundtables aimed at sharing of experience among all participants. The format will be a roundtable, with no formal presentations. The Chairs of each session will introduce the subject matter for discussion, request 3min introductory remarks by the introducers for a max of 25 minutes then open the discussion to all participants. 15 minutes before the end of the session, the Chair will formulate preliminary conclusions. The Chairs will report back in the closing plenary on the findings from their respective sessions. The Chairs of each session are expected to prepare the issues for discussion with the introducers ahead of the meeting and define and circulate a note on these issues to all the session participants in advance of the meeting. ROUNDTABLE DISCUSSION 1 Al Harannah 2

Promoting Growth and Employment Through Development of Small and Medium Enterprises (SMEs)

Although Micro, Small and Medium-Sized Enterprises (MEs) account for 98% of active businesses in Jordan and contribute to close to one third of GDP and 60% of total employment, they are yet to effectively realize their full potential in creating and sustaining inclusive growth in Jordan as access to private sector finance is still a major challenge for many MEs. Loans to MEs account for only about 13% of total lending and obtaining the necessary level of collateral and adequate historical financial information to borrow continues to be difficult for many ME entrepreneurs. In addition, the majority of ME lending tends to be in Amman, and access to finance in regional areas outside the capital remains scarce. Women-owned businesses are estimated at 18% in Jordan. Although this segment is profitable, it has traditionally not received adequate focus from the capital and banking markets. Support for this segment would further help create jobs and increase income levels for women. The institutional environment that should support lending to MEs in Jordan also faces a number of constraints, including high cost of contract enforcement, low coverage of public credit bureaus and high collaterals constraining lending. MEs often lack management skills to prepare appropriate business plans and have limited access to business information on financial services. What are the most appropriate ways of supporting the development of SMEs across Jordan, as the main contributor to employment and growth for the whole country? How can the availability of appropriate financing, including financing from private equity funds for SMEs be increased, in urban as well as remote rural areas? How can the financial literacy and bankability of SMEs improved? What is needed to deepen financial intermediation and strengthen business and the institutional environment to support SMEs, including lending to SMEs? What are the roles of the Central Bank, the government, commercial banks, the capital market and international institutions in ensuring a flow of finance to SMEs? What are the benefits of promoting women in business? What are the barriers to internationalising SMEs? Discussion Chairs: Adli Kandah, CEO, Association of Banks in Jordan and . Selin Oz, SME Marketing Manager, Garanti Bank, Turkey

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Introducers: • H.E Yarub Qudah, CEO, Jordan Enterprise Development Corporation

(JEDCO) • Yusuf Mansour, CEO, Envision Consulting Group • . Lina Hundaileh, Chairperson, Young Entrepreneurs Association (YEA) • Bartosz Urbaniak, Executive Director, Head of Agribusiness and SMEs, BGZ

Bank, Poland • Francis Malige, Director, Financial Institutions, EBRD

ROUNDTABLE DISCUSSION 2 Al Harannah 6

Modernising the Agribusiness Value Chain and Investing in Food Security:

Finding Opportunities in Constraints

Primary agricultural production in Jordan suffers from land ownership laws and regulations that restrict farm sizes and constrain land consolidation, leading to inefficient production. Upstream, the key challenge is to increase value-added processing industry, rather than exporting raw produce. A lack of adequate specialised transport and storage infrastructure poses an additional constraint in moving up the value-chain and increasing export volumes. In addition, the retail sector is underdeveloped with chain retailers primarily concentrated in Amman. However, the biggest obstacle for the sector is water efficiency and water quality for production at all stages of the value-chain. Two thirds of the country’s water supply is currently used for agriculture, often on low value crops. Modern irrigation technologies, water-efficient production and private R&D for water-resilient higher-value added crops are underdeveloped because of subsidies for water for primary production and lack of finance for investment in these technologies. Although the government is currently supporting technology transfer in order to promote the adoption of water efficient technologies by local farmers, private sector financing for the agriculture sector remains scarce. These challenges, however, can be attractive investment opportunities.

How can the private sector support the agricultural sector to promote greater productivity, competitiveness, efficiency and higher value-added products? How can access to commercial finance for investment in water-efficient technologies as well as investment in all other aspects of the value chain, including private R&D for water-resilient higher-value added crops, be improved? What are the challenges and opportunities for the private sector to invest along the entire food value chain and encourage transfer of skills and know-how, leading to a more productive, competitive sector? Discussion Chairs: H.E. Said Al Masri, Managing Partner, JORICO, and Former Minister of Agriculture and Michael Whitney, Managing Director, W Associates Introducers:

• H.E Radi Al Tarawneh, Secretary General, Ministry of Agriculture

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• Mouhamad Batayneh, CEO, Agri Jordan • Issa Halabi, Agri Input • Salman Al-Satari, General Manager, Jordan House Est. • Milan Djakov, Director, Indemnity Fund, Serbia • s. agijana Radonjic Petrovic, State Secretary for SMEs, Ministry of Economic

and Regional Development, Serbia • Vladimir Dzaja, Director, PIK Vinkovci, Agrokor, Croatia

ROUNDTABLE DISCUSSION 3 Al Harannah 1

Preparing for a Sustainable Energy Future

Despite a growing increase in the consumption of energy as industrialisation and consumer demand grow, Jordan remains heavily dependent on fuel imports to meet energy needs. Although the government has set targets to reduce energy consumption by 20% and increase the share of renewables in electricity generation by 10% by 2020, it is only now starting to exploit the country’s renewable potential, especially wind and solar energy, which currently account for less than 1% of generation. Distortions in the electricity pricing system have frustrated the development of renewable generation. Currently, however, there is a financing gap for energy efficiency projects as most local commercial banks are not familiar with funding such projects. What are the development levers that could enable Jordan’s transition to a liberalised, sustainable energy sector? How can Jordan implement robust legal frameworks to promote the development of renewable generation and energy efficiency across all sectors? What are the prerequisites for attracting private sector investments in state-of-the-art technology to improve energy efficiency and increase its use of renewable energy? What measures are needed to develop a competitively traded electricity market for renewable energy and adess institutional barriers to unlock potential for energy efficiency? Discussion Chairs: H.E. Raouf Dabbas, Senior Advisor to the Minister of Environment, Jordan and H.E. Milko Kovachev, Former Minister of Energy, Bulgaria

Introducers:

• Ziad Jebreel, Director of Renewable Energy, Ministry of Energy and Mineral Resources

• H.E Khalid El Shraideh, Secretary General, Higher Council for Science and Technology (HCST)

• Ennis Rimawi, Managing Partner, Catalyst Private Equity • Zbigniew Prokopowicz, CEO, Polish Energy Partners • Kemal Yuce, Loan Officer, Yeni Elektrik Uretim A.S., Turkey • Hedi Larbi, Country Director, World Bank

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ROUNDTABLE DISCUSSION 4 Al Harannah 5

Financing Private Enterprise to Support Competitiveness, Innovation and

Inclusive Employment Jordan struggles with high and persistent unemployment, especially among women who have unemployment rates of almost 25%. The gap between the male and female labour force participation is also considerable, especially in the private sector. Increasing employment is therefore a key priority for the country. While the education system generates a large number of tertiary-educated graduates, the economy is dominated by sectors employing mostly low-skilled workers. There is a need to transition to a high value-added, modern knowledge-based economy with higher-value added production and demand for skilled and well-paid workers, in order to keep educated graduates in the country and employed in the private sector. To achieve this shift, significant investments, including from private equity funds, in information technology and sustained improvements in competitiveness will be needed. Investments in human capital, promoting higher levels of research and development, modernizing production facilities, improving the management and transparency of SMEs, further development of technology clusters, incubators and related infrastructure are necessary now in order to compete in an innovation-based global economy. What can government and businesses do to create a better environment for innovation driven competitiveness and increased productivity, beyond the transition period? Which sectors have high potential for job creation and building of niche industries? How can the country best leverage on its human capital and support entrepreneurship, to generate inclusive high-value added, private sector employment and promote a more resilient and diverse market economy? What are the pre-requisites for attracting a stable international, regional and local investor base, promoting greater investor interest, including through investments in funds with a targeted investment strategy? How can fund managers create long-term value for portfolio companies in the innovation/ICT sector (including implementation of best practices related to environmental, social and corporate governance)? Discussion Chairs: Laith Al-Qassem, Chairman, Arab Business Consultants for Development (ABCD) and Marcin Hejka, Managing Director, Intel Capital Eastern Europe, Middle East and Africa

Introducers:

• H.E. Michael Nazzal, Senator and Chairman, Jordan Hospitality Association • Wisam Rabadi, Director, El Hassan Business Park and Bedaya Business

Angel Network • Alaa Duheriat, King Hussein Business Park Irbid Development Company • H.E Omar Razzaz, Advisor, World Bank • Slobodan Djinovic, CEO, Orion Telekom, Serbia • Evren Ucok, Partner, Earlybird Venture Capital, Turkey

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ROUNDTABLE DISCUSSION 5 Al Harannah 7

Improving Water Security and Fostering Private Sector Investments for Urban Infrastructure Although Jordan is one of the iest places on the planet, water distribution is inefficient, the tariff system encourages waste and the private sector is only now starting to get involved. Demand for water is also growing and already exceeds the available water supply. It is estimated that groundwater, which accounts for 54% of total net water supply, is being exploited at close to twice its recharge rate. The water sector is heavily subsidized and distribution is subject to a tariff system that encourages waste. If Jordan’s economic growth targets are to be achieved, its water resources will require more efficient management. Currently, however, there is a financing gap for water efficiency projects as most local commercial banks are not familiar with funding such projects. Although the private sector has a notable presence in the water and wastewater sector, increased private sector participation is needed to increase efficiency and develop new technologies. With more expensive sourcing, such as desalination, involving the private sector through transparent PPPs will be a key challenge. Given the rapid population growth and urbanisation process within the country, the urban transport sector also presents challenges. Issues ranging from rising congestion due to growing car ownership, the quality of public transport services, traffic and parking management, and regulation are all pressing. There is a need to develop non-sovereign solutions for the municipal infrastructure sector and to introduce private sector capital and skills as well as corporatisation and commercialisation, while taking into account ways to implement best practices related to environmental, social and corporate governance. How can Jordan implement robust legal frameworks to reform tariffs to reflect the scarcity of water and promote private sector investment in municipal infrastructure projects, including PPPs? How can Jordan more effectively regulate urban transport services through public service contracts? What are the development levers that would enable Jordan to advance the corporatisation process and increase private sector participation? How can Jordan implement robust legal frameworks to promote the development of water efficiency across all sectors? What are the prerequisites for attracting private sector investments in water, urban transport and energy efficient technologies for municipal infrastructure? Discussion Chairs: H.E. Maysoun Zu’bi, Secretary General, Ministry of Water and Irrigation and Teodor Popa, Economic Director, Brasov Water Company, Romania

Introducers:

• Bisher Jardanaeh, Executive Managing Director, Arab Tech Jardaneh • H.E Fayez Batyneh, Secretary General, Water Authority • H.E Dina Dabbas, Acting Chairperson, Executive Privatization Commission • H.E Jamil Mujahed, Director General, Land Transport Regulatory

Commission

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• Firat Akinal, Metropolitan Municipality, Department of Financial Services, Gaziantep, Turkey

13:00 – 14:30 Networking Lunch Sea Floor Lobby 15:00 - 16:30 Closing Plenary Dead Sea Halls 1 &2

Jordan’s Blueprint Through Transition and Beyond

Jordan’s foundations for future economic success are being laid in parallel with its ongoing political reform process. Government and business leaders will face the challenge of managing a delicate balance between uncertainty in the short term, protecting the economically vulnerable population, and accomplishing economic competitiveness in an increasingly complex and volatile global market. The key to unlocking Jordan’s full economic potential will be to match reforms with high corporate governance and transparency standards, so that those reforms are effectively implemented. This will help create a fully level-playing field that is needed for unhindered job creation and improvement in the efficiency, productivity and employability of Jordan’s well-educated population. What proposals, guidelines and strategic advice can the participants of this meeting offer the EBRD and Jordan for a successful partnership in building a sustainable and prosperous future for the country? The plenary will begin with the moderators of the group sessions reporting back to the plenary on the findings of their respective sector discussions, followed by the government responding to those challenges and ending with an interactive discussion and Q&A with the audience. Moderator: Loay Sehwail, Director General, Jordan Industrial Estates Corporation Keynote Speaker: H.E Maher Sheikh Hasan, Deputy Governor, Central Bank of Jordan Discussion Leaders

• H.E. Reem Baan, Member of Parliament, Jordan • Adli Kandah, CEO, Association of Banks in Jordan • H.E. Said Al Masri, Former Minister of Agriculture • H.E. Raouf Dabbas, Senior Advisor to the Minister of Environment, Jordan • Laith Al-Qassem, Chairman, Arab Business Consultants for Development

(ABCD) • H.E. Maysoun Zu’bi, Secretary General, Ministry of Water and Irrigation • . Hildegard Gacek, Managing Director, Southern and Eastern Mediterranean

(SEMED), EBRD • Mats Karlsson, Director, CMI

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16:30 - 18:00 Cocktail Reception Sea Floor Lobby

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CONTACT INFORMATION

Erik Berglöf Chief Economist European Bank for Reconstruction and Development One Exchange Square, London EC2A 2JN Tel: +44 20 7338 6805 Mob: + 44 78 0251 0725 Email: berglöfe@ebrd.com Bojana Reiner Adviser to the Chief Economist European Bank for Reconstruction and Development One Exchange Square, London EC2A 2JN Tel: +44 20 7338 6940 Mob: + 44 79 2103 9865 Email: reinerb@ebrd.com Rebecca Greenberg Intern, Office of the Chief Economist One Exchange Square, London EC2A 2JN Tel: + 44 20 7338 7235 Email: greenber@ebrd.com