(A) OBJECTIVES

In its detailed and comprehensive "Jordan Privatisation Note" of December 1995, the World Bank Privatisation Technical Assistance Mission sets out the rationale for, and the objectives of, the Jordanian privatisation program as follows:

(i) to increase private investment in infrastructure;

(ii) to raise enterprise efficiency;

(iii) to develop local capital markets;

(iv) to consolidate the public finances;

(v) to concentrate the government on core activities; and

(vi) to signal government commitment to reform.

(B) INSTITUTIONAL FRAMEWORK

With the abovementioned objectives in mind, the Government of Jordan ("GOJ") has embarked on an ambitious privatisation program to include most public enterprise sectors. The Council of Ministers has recently created a Cabinet Committee on Privatisation with the Prime Minister as its chairman. The Committee, which has as its members the main economic ministers (Finance, Planning, Energy, Industry & Trade, Central Bank and Transport), is responsible for setting broad policy and guidelines for the implementation agency, endorsing the major decisions related to sale method, valuation, restructuring, post-privatisation regulation, tariff-setting rules for utilities and providing general oversight of the implementation process. An implementation or executive agency with relatively large autonomy is soon to be created to design, coordinate and implement the GOJ's privatisation program.

(C) LEGAL FRAMEWORK

The GOJ's privatisation program is to be carried out in three distinct methods, namely (i) the sale of GOJ's shares in existing companies; (ii) the corporatization of existing state economic enterprises as a first step towards their privatisation and eventually the sale of their shares and (iii) the licensing of private investment in various activities, mainly utilities, which have hitherto been the subject of monopolies controlled fully by the GOJ.

The legal framework for the first two methods exists in Jordan and is being rapidly developed for the third method.

The GOJ's investment arm, Jordan Investment Corporation ("JIC"), has already successfully concluded a number of sales of its shareholdings in Jordanian private and public shareholding companies (mainly in the hotel and tourism sector) by means of open tenders. JIC has recently invited a select group of "strategic partners" to submit offers for the sale and purchase of 20% of Jordan Cement Factories in which JIC holds 49.5% of its capital and has issued a Request For Proposal for this purpose. The closing date for this offering is set for October 15th, 1996. JIC is also contemplating to invite other strategic partners to acquire part of its shareholdings in Jordan Phosphate Mines Company (which accounts for approximately 95% of the value of JIC's total holdings) and Arab Potash Company.

The corporatization of state economic enterprises is regulated by the Companies Law No. 1 of 1989 which allows for the transformation of state economic enterprises into public shareholding companies that are fully owned by the GOJ. The first such enterprise to be corporatized is the Jordan Electricity Authority ("JEA"), the state monopoly for the generation and transmission of electricity. As of September 1st, 1996, JEA has been corporatized in the form of a public shareholding company under the name of National Electric Power Company ("NEPCO"). The GOJ owns the entire share capital of NEPCO and plans to sell part of its shareholding in NEPCO in the near future.

The decision has also been made to corporatize the Telecommunications Corporation ("TCC") before the end of 1996. The Ministry of Post & Telecommunications has recently posted an advertisement in the international press requesting proposals from financial advisers interested in advising the GOJ in the sale of 26% of the share capital of the TCC to an international "strategic partner". Similar plans are underway to corporatise and eventually privatize Royal Jordanian Airlines, Aqaba Railway Corporation, Public Transport Company, Aqaba Port and Queen Alia International Airport.

The licensing of private investments in government controlled sectors (notably utilities) requires, in most cases, legislative amendments and reforms. This task has already been accomplished in the telecommunications and electricity sectors. The Telecommunications Law No. 13 of 1995 creates a public Telecommunications Regulatory Commission ("TRC") for this sector with the authority to license private sector projects. To this date, a GSM cellular license, a paging license and several data telecommunication licenses have been granted to private sector investors. The TRC is now planning to issue three trunked radio and public pay-phone licenses.

In the electricity sector, the newly enacted General Electricity, Law No. 10 of 1996 permits the licensing of independent power producers ("IPPs") and independent power distributors. The Ministry of Energy & Mineral Resources is currently planning to tender an IPP project (300-500 MW) and is considering proposals for a private refinery at Aqaba on the Red Sea. A number of private gas and LNG projects are also being considered by the Ministry. The General Electricity Law also allows industrial enterprises to set up their own power generating facilities and allows them to exchange their electricity with NEPCO and other IPPs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Ali Sharif Zu'bi & Sharif Ali Zu'bi Law Office - Amman, Jordan - Fax: (962) 6 634277.