Jordan's economy suffered from the significant impacts of the coronavirus disease (COVID-19) pandemic. The Asian Infrastructure Investment Bank (AIIB) is helping Jordan recover and create more jobs by capitalizing on emerging opportunities in green growth, private sector investment and participation of women in the labor force.
Located at the crossroads of three continents—Asia, Africa and Europe—Jordan is home to 10 million people. At the onset of the COVID-19 pandemic, the country implemented rigorous health measures to slow down the spread of the disease. They also put measures in place to minimize the pandemic's impact on their economy. Despite their efforts, Jordan's economy was not spared. Its gross domestic product contracted by 1.6 percent in 2020. Unemployment rose to 24.7 percent toward the end of the year. Women suffered more than men, with an unemployment rate of 22.6 percent for men compared to 32.8 percent for women.

Prior to the pandemic, Jordan recognized the need to transition from a consumption- driven to an investment-driven growth model. They initiated work to stimulate economic performance. In 2018, the government had created the Five-Year Reform Matrix to focus their efforts on strengthening the country's economy and promoting growth and made good progress on clearing their backlog of pending reforms.
The Reform Matrix was developed by the Government of Jordan with the support from the World Bank and development partners. It lays out horizontal and vertical structural reforms that have a transformational impact on growth, job creation and fiscal stability. It also serves as a guiding document for the plans and programs of the government on one hand, and donors and development partners on the other.

Following the COVID-19 pandemic, the Reform Secretariat at the Ministry of Planning and International Cooperation (MoPIC) led a review of the Reform Matrix with the aim to revisit growth and reform priorities in alignment with the government’s Indicative Executive Program while taking into consideration post COVID-19 reform priorities. The review went through a structured process that included close coordination and consultation with the government agencies, subject matter experts, donor community and most importantly, the private sector. In addition, environment and climate change mainstreaming were integrated into the updated Reform Matrix. As a result, the Reform Matrix was expanded to 12 pillars, which included adding two new pillars on public sector efficiency and governance and tourism and expanding on agriculture reforms. The Reform Matrix was extended for two years to 2024. These changes are expected to have many positive impacts on the country's economy and its people. However, due to regional turmoil and the pandemic, these have not been visible and people have yet to experience the benefits of these reforms.

"The economic environment is likely to remain challenging this year before our economy returns to the pre-crisis path of internal and external adjustment over the medium term. We expect growth will gradually accelerate to around 3 percent over the medium term. " said Nasser Shraideh, Minister of Planning and International Cooperation. "AIIB’s financing support will lead to more and better-quality investment, including in strategic areas such as tourism, lower business costs and greater market contestability, greener economy and lower quasi fiscal imbalances, jobs created in green sectors, and achievement of Jordan’s nationally determined contribution goals and raising climate ambition."

Meanwhile, the effects of climate change are exacerbating these challenges. Jordan faces a number of climate hazards including significant temperature increase, and decline in precipitation leading to increased drought incidents and evaporation. All of these, compounded by the impacts of the pandemic, have deepened the crisis.

In July 2021, the government officially sought support from AIIB and requested the bank to co-finance with the World Bank and provide a loan of USD250 million to support the government’s efforts on economic recovery and resilience in response to the impact of the COVID-19 pandemic.

"I personally believe this would mark an excellent opportunity to launch the first cooperation between Jordan and AIIB, and a starting point for future partnership," said Shraideh.

"To help member countries respond to the negative impact caused by the COVID-19 pandemic, AIIB responded proactively through the establishment of the COVID-19 Crisis Recovery Facility. The request of the government fits under the Facility," said AIIB Principal Investment Operations Specialist Hongliang Yang. "Since receiving the government request, AIIB has been closely working with the World Bank and the government on this program."

In August 2021, AIIB approved USD250 million in sovereign financing for the Inclusive Transparent and Climate Responsive Investments Program for Results, its first engagement in Jordan. The World Bank had also approved a USD500-million for the same program.

The program aims to improve accountability to foster climate-responsive investments and growth during and after the COVID-19 pandemic. The program has three result areas: (1) improving the accountability and fiscal space for public investment, including toward national climate goals; (2) improving business enabling environment and the capacity of key institutions to attract private investment and climate finance, including for tourism sector; and (3) generating evidence and data for policy making, implementation, and stakeholder dialogue. AIIB financing will cover the first two result areas.

"We're working together with the government and the World Bank to ensure that the objectives of the program are achieved," said Yang. "The program's environmental and social risks and impacts were assessed in accordance with the World Bank’s Policy on Program for Results. We also established several measures, including a results and monitoring evaluation system and a strict results verification and disbursement procedure."

The Reform Secretariat at MoPIC is responsible for monitoring and reporting on the result indicators, and will coordinating with relevant ministries, and regularly providing detailed monitoring reports to AIIB and the World Bank," said Shraideh.

"Disbursements will be made based on verified results, as measured by disbursement linked indicators," said Yang. "Specific verification protocols have been established and verification will be carried out by the Jordanian Audit Bureau."

Fully aligned with the country’s Five-Year Reform Matrix, the program supports the implementation of critical reforms and shall help Jordan accelerate its recovery and create more jobs by capitalizing on the economy’s potential and especially its green growth opportunities, and to strengthen the government’s accountability mechanisms for delivery.

"We made sure to incorporate lessons learned from previous projects in this program," said Yang. "We focused only on the priority areas of the Reform Matrix and these reforms being supported were prepared in consultation with donors, especially those conducted by the World Bank under previous loans, and benefitted from extensive technical assistance to ensure their alignment with international best practices."

The reforms under the program are designed to promote public investments including public-private partnerships in climate financing as well as the tourism sector and address the major challenges to Jordan's competitiveness.

"These reforms are expected to help Jordan capitalize on emerging opportunities for post-pandemic recovery particularly in green growth, private sector investment, and participation of women in the labor force," said Shraideh. "With AIIB's support, we're on our way toward a greener, more climate-responsive and competitive economy."
Jordan: Fostering Climate-responsive Investments for Economic Growth