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Can Jordan establish its sovereign investment fund

Jan 16,2021 - Last updated at Jan 16,2021

How can we talk about establishing sovereign investment fund if Jordan’s General Budget registers successive deficits year after year? The definition of a sovereign fund, in the global and even regional sense, is a fund that the state establishes from its surplus monies and diverts its funds from current uses and expenditures. Those funds are usually left for future generations to be used in difficult times when the state goes through financial hardship or difficult circumstances like the one the Kingdom went through during the Corona pandemic, for example.

The first time a term close to the concept of the sovereign fund or the generations fund was mentioned in Jordan on July 2, 2000, when the privatisation law was approved. That concept was in principle stillborn at the time. Why was it born dead? Because the articles of the law allowed the use of proceeds generated from privatisation for the purposes of paying and buying debts with a discount (what a discount!) and other current uses. It would have been more expedient for a large amount of that money to be neutralised in favour of a "sovereign fund", because those funds were, in fact, sovereign funds. It was money that was diverted to the treasury from the proceeds from the sale of state assets. But the whole concept was permanently closed during that period as the privatisation law was cancelled by another law in 2015. So what kind of a sovereign fund are we talking about now?

As the general budget records successive deficits year after year, what is actually inherited to future generations are debts and obligations, the price of which is great and their burden is heavy on the treasury and its institutions and more on citizens. The next question that arises is; how to talk about a sovereign fund that is open to expatriate citizens? A sovereign fund can be called sovereign when it is 100 per cent owned by the state, i.e., the Kingdom's treasury, and no other partner is in it. But if we talk about an investment but not a sovereign fund, then let that be left to the private sector and investment funds that are managed by the private sector. Then the government's intelligence will be to bring these funds to invest in different sectors in Jordan that achieve sustainable development and fill real development gaps in the infrastructure sector in the Kingdom.

Let's talk more realistically and clearly. The surplus funds in Jordan are located in four sectors. The first is the banking sector, which has more than JD55 billion in assets, and these are mostly funds for the private sector and its companies. And the second, is the stock market, the volume of its funds is measured by the market value of the shares listed that market, which reached 12.9 billion dinars at the end of 2020. This is also mainly owned by the private sector, the Social Security Investment Fund (SSIF) and non-Jordanian investors.

Third, the Central Bank’s foreign assets, which are estimated at about $16 billion. These are sovereign assets, but these assets can only be used for monetary policy purposes. As for the fourth sector, it is the SSIF, and its money is not for the treasury but for social security subscribers, and these funds cannot be touched by anyone except the board of SSIF. The investment policy for the funds of the SSIF must remain left to the management of the fund, which I believe needs to be revisited, developed and improved to be in line with global investment strategies in this area. So the question remains, can Jordan establish a sovereign investment fund?

The answer to this question, from my point of view, is associated with many necessary and difficult, but not impossible conditions. This requires special sessions, brainstorming, firm legislation and governance, and foundations for a different management polices of treasury funds and state assets, which are abundant in the skies of Jordan, on its soil and under the soil as well.

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