Jordan Times
Thursday, August 19, 1999
International consortium to manage Aqaba Railway
Corp.
By Amy Henderson
AMMAN — Jordan passed a major milestone in its economic reform programme on Wednesday with the signing of a $20 million 25-year concession agreement leasing the Aqaba Railway Corporation to an international consortium.
Minister of Transport Jamal Saraireh, who signed the agreement with U.S. Ambassador to Jordan William Burns, said the agreement “will send a clear message to the world how serious Jordan is about reforming its economy.”
A consortium led by Raytheon, an American defence and engineering giant, Wisconsin Central, Mitsubishi of Japan, CCC Contractors of Greece and the Amman-based Kawar Group will assume the management, operation and expansion of the ARC.
The deal comes to fruition only after a month-long controversy over the fate of the company's 1,300 employees, the majority of whom are from Ma'an, the southern city where the company has its headquarters. The American-led consortium will hold 51 per cent equity in the ARC and is expected to invest at least $130 million to upgrade the rail.
Fifty-seven deputies in the 80-member Lower House of Parliament in December had demanded that the negotiations be suspended both to protect employees and because they believed that the government underestimated the value of the ARC's assets. The consortium valued the moveable assets of the corporation at JD15 million against JD68 million the government had invested in the company over the last two decades. The Ma'an mayor warned at the time that any move to lay off workers may spark social unrest.
The consortium has agreed to maintain a total of 500 people from the existing ARC staff, although a source at the Kawar Group said the new management reckons that no more than 200 are needed.
The transport minister said the government has committed itself to the employment of the remaining 800.
“One hundred and fifty have already been transferred to other government agencies, where they will remain according to the budget and according to agencies' needs,” he told the Jordan Times on Wednesday. “The remaining will go to the new phosphate operation in Shidiyeh.”
The south has historically been the most impoverished area of the Kingdom, and the most neglected, its citizens complain. Community leaders in the south had warned that any lay off of workers could trigger social unrest similar to the bread riots of 1996 that were sparked by a hike in bread prices
Under the concession, the consortium agrees to expand the railway network to serve the flagship Jordan Phosphate Mines Company at the Shidiyeh mine, close to the Saudi Arabian border and between Aqaba and the Aqaba industrial port on a build, transfer and operate basis.
The consortium will also spend from $6-8 million on spare parts required to upgrade and repair the existing rolling stock, particularly the line's locomotives.
The government will assume the company's JD70 million debt.
The sale and expansion of the railway is essential for another multi-million dollar project to move forward. Hydro-Agri Jordan, a joint venture between the Jordan Phosphate Mines Company and Norsk Hydro, a Norwegian fertiliser producer, will require the rail to transfer phosphoric acid from Shidiyeh to the Red Sea port of Aqaba. The 2.5-3 million tonnes of phosphate annually mined is currently transported to Aqaba via a trans-shipment facility. The $650 million Hydro Agri venture would up production to about 5-6 million tonnes.
All plans to privatise state-owned assets have encountered vigorous opposition since Jordan started its IMF-driven economic reform programme in 1989.
Privatisation of the ARC has only been preceded by the highly-successful sale of 33 per cent of the Jordan Cement Factories Company to Lafarge of France.
In October, the government is expected to relinquish a 40 per cent stake in the Jordan Telecommunications Company to an international consortium after a tug of war between economic reformists and a public wary that the privatisation of the company would open a back door to Israeli domination in a key sector.
On Saturday, Saraireh is expected to announce the number of qualified bidders for the cash cow.
The United States and European donors over the past months have been signalling that Jordan must do more to reform its economy, and the government of Abdur-Ra'uf S. Rawabdeh has been mandated to move quickly to do so in order to stave off double-digit unemployment and rising poverty.
Ambassador Burns, who also signed the agreement, said that the move to sell was “positive for economic growth.”
“This is an important signal of increasing investment opportunities in Jordan [and] reflects the very strong commitment of His Majesty King Abdullah and the Jordanian government to strengthening the investment climate in the country.”
King Abdullah later met with presidents and heads of the consortium, the Jordan News Agency, Petra, reported.
Petra quoted the King as expressing Jordan's desire to “study the possibility of linking Jordan via a modern railway with neighbouring countries.
He said the study will be discussed with concerned countries as soon as possible to find economic integration, Petra added.