1 Cost Recovery in Jordan March 2009 Eng. Kamal Zoubi Former CEO / Jordan Water Company

2 Jordan’s Drinking Water Sector Severe shortage in water resources WAJ the governmental entity responsible for the drinking water sector suffered from technical, financial, and governance problems To meet the challenges, WAJ went through a PSP program, including Management Contract for Amman, establishment of corporate companies in Aqaba and later in Amman, several BOT contracts

3 Sources of revenue Water and waste water charges Royalty fee (extraction charge) from the private ground wells owners according to the type of water use : industrial, commercial, agricultural Waste water tax as 3% of the rental value for any property in all cities of Jordan

4 Pricing philosophy Willingness and Ability to pay study was concluded, non residential sector is able to pay, residential sector able to pay up to 4-5% of the house hold income High flat rate to cover and exceed full cost for non residential uses Progressive rates for residential users, high consumers pay the full cost, low consumers are subsidized, bill value equal the consumption X price pf last meter consumed, prices in Amman are higher than other parts of Jordan Tariff was increased in 1997,1998,2002,2006 by about 5% each time

5 Comments about the tariffs 60% of customers with less than (13) m3/month consume 33% of the water, pay 23% of the charges / highly subsidized 36% of customers with (13-35) m3/month consume 54% of the water, pay 51% of the charges / subsidized 3.8% of customers with more than 35 m3/month consume 13% of the water, pay 26% of the charges / pay more than the total cost Non residential customers pay more than the total cost

6 Financial Results WAJ recover about 120% of the O&M costs, equals to about 60% of the total costs Amman Water Company recover about130% of the O&M costs equals to about 75% of the total cost Difference is covered by the Government and the donors Cost of new water supply projects is higher COST RECOVERY SHOULD BE INCREASED

7 Implications of low CR Continuous cash shortage Challenges to meet the capital investments required to rehabilitate the networks and reduce NRW Challenges to meet the growing costs of new projects needed to increase the water supply, water demand increases by 3-5% annually due to high population growth rate

8 Actions Suggested Reduce the NRW / this program has started Increase water prices annually at least by the inflation ratio Obtain more soft loans or grants More private management to reduce the costs and increase financial viability

9 Thank You