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Higher capital expenditure fails to cheer up contractors

By Omar Obeidat - Feb 03,2013 - Last updated at Feb 03,2013

AMMAN –– The government’s 2013 budget which envisages a 76 per cent increase in capital expenditure has failed to cheer up contractors.

Early this year, the government endorsed a draft law of a JD7.45 billion budget with JD1.24 billion allocated for capital spending.

According to Finance Minister Suleiman Hafez, the growth in capital expenditure from nearly JD700 million in 2012 to JD1.24 billion shows the government’s determination to stimulate the economy as the funds will be used to finance vital energy, water, transport and governorate development projects.

But Jordan Construction Contractors Association (JCCA) President Ahmad Tarawneh was skeptic that the government will be able to secure such an amount to be spent on development schemes.

“This figure is not realistic but only reflects the wishes of officials,” Tarawneh said, explaining that when budget planners allocated the funds for capital spending they were relying on grants to be extended to the Kingdom by the Gulf Cooperation Council (GCC) over five years.

In 2011, the GCC countries announced financial grants worth $5 billion to support economic development in Jordan by allocating $1 billion a year to finance development schemes included in the state budget.

Part of the Gulf grants will go to ongoing projects in various sectors, the JCCA president elaborated, saying that funds for construction schemes will not be enough to revive the sector that has been hit by a severe slowdown over the past few years due to cutting government’s capital spending.

According to official figures, capital expenditure in the 2012 budget law was estimated at JD962 million, while real spending was only JD700 million as authorities decided to freeze the implementation of several projects.
Last year, contractors complained that government’s austerity measures were driving many construction firms out of business.
Tarawneh also pointed out that another problem for the construction sector is the unpaid debt owed by the government to construction companies.

He estimated the amount of unpaid government dues between 2011 and 2012 at JD120 million.

The Jordan Times tried to contact officials at the Ministry of Finance but the calls were not answered.

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