Time to Build

Jordan has signed multimillion dollar funding deals for a wide array of new infrastructure projects. But not everyone is happy about who gets to build them.

Jordan has inked more than $600 million worth of funding agreements in recent months, with much of it earmarked for the building of key infrastructure projects in the utilities, health, and ICT sectors.

While industry participants have expressed concerns over whether Jordanian contractors will benefit from the new projects, the government continues to highlight the construction sector’s importance not only in terms of providing jobs, but also for accelerating progress on Jordan Vision 2025, the national development plan announced in May.

With funding secured for key energy projects, the Kingdom is on track to accomplish many of its major development goals, while both local and foreign contractors stand to benefit from a broader portfolio of projects.

In July, France approved a $265 million soft loan for three water and energy infrastructure projects around the country. This included the Wadi Al Arab water treatment facility in Irbid, which is set to receive $43 million of the funding package to ensure adequate water supply in the north-west of Jordan.

The loan also extends $55 million to the Green Corridor project, a set of electricity grid upgrades being executed by the state-run National Electric Power Company (NEPCO). The company plans to build a new electricity substation and two new transmission lines, in addition to improving three existing lines. The project aims to reinforce the country’s high-voltage infrastructure backbone to increase reliability and accommodate the addition of more renewable power sources, according to the European Investment Bank, which is co-funding the project. Progress is already taking place on the Green Corridor project, with NEPCO inviting prospective contractors to compete for pre-qualification on three separate tenders, which are set to close in mid-December.

Construction of a new LNG terminal located close to the Red Sea port of Aqaba was completed in June. The terminal was a joint venture between Netherlands-based BAM International and Jordanian engineering firm MAG, which were awarded the $65.6 million engineering, procurement, and construction contract by the Aqaba Development Corporation in December 2013.

The new terminal is supplying the country with an alternative to more expensive oil imports, which Jordan was forced to turn to after a string of attacks on a natural gas pipeline from Egypt.

The construction industry is also set to benefit from recent funding agreements for a series of major health and ICT projects scheduled for the coming months.

In February, Jordan signed five grant agreements worth some $176 million with the Saudi Fund for Development to finance health care expansion. The funds come as part of Saudi Arabia’s $1.25 billion commitment to the $5 billion, five-year GCC development funding program for Jordan, which the regional organization announced in December 2011.

The Saudi grants include $6 million for the construction of laboratories for the Jordan Food and Drug Administration, $12 million for an x-ray center, and $37 million for renovations and maintenance work on Amman’s King Hussein Cancer Center. But the largest share of the funding will go towards constructing the Princess Basma Hospital in Irbid, at a cost of around $70 million.

Additional Saudi grants, signed in May, provide funding for other strategically important infrastructure projects across Jordan, including $50 million to construct a fiber-optic Internet network, and $30 million to develop industrial cities in the governorates of Tafileh, Madaba, Jarash, and Salt.

The grants are expected to create a steady stream of development projects, with the potential to offer local contractors much-needed work. The industry saw a 20 percent year-on-year decline in new building licenses in the first five months of 2015, according to the Department of Statistics.

As construction plans move forward, local players have highlighted the importance of enforcing regulations on contract work to ensure Jordanian firms maintain an adequate share of upcoming contracts. Wael R Toukan, president of the Jordan Contractors Association, told local media in September that 30 percent of the work should by law go to local contractors, but in reality they only receive around 10 percent.

For its part, the government is trying to strike a balance. While striking deals with multi-national industry majors allows the Kingdom to tap foreign expertise, fast-track projects, and draw on industry best practices, the government also wants to encourage partnerships with local contractors to allow these firms to benefit from more business and knowledge transfers.

Closer coordination between the relevant authorities and industry representatives on the raft of planned infrastructure projects could help foster mutually beneficial partnerships, thereby boosting the competitiveness of the Kingdom’s domestic construction sector.

By Oliver Cornock, Regional Editor THE INSIDE EDGE