PROGRESS ON JORDAN PHOSPHATE MINES PRIVATIZATION

UNCLAS AMMAN 003082

SIPDIS

SENSITIVE

USDOC FOR 4520/ITA/MAC/ONE/THANOS
TREASURY FOR PIPATANAGUL

E.O. 12958: N/A
TAGS: EINV EIND EMIN JO
SUBJECT: PROGRESS ON JORDAN PHOSPHATE MINES PRIVATIZATION


SENSITIVE BUT UNCLASSIFIED; PLEASE HANDLE ACCORDINGLY

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SUMMARY
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1. (SBU) The GOJ is moving forward with the privatization of
the Jordan Phosphate Mines Company (JPMC),Jordan's largest
company and the largest, single exporter, with plans to sell
a substantial chunk of the firm to a Canadian company. If
successful, the transaction could bring in up to USD70
million for Jordan's new investment plan. The sale of the
ailing monopolist will mark a major milestone in Jordan's
ongoing, yet fitful, privatization process, but will face
domestic political hurdles. End Summary

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MORE THAN JUST A MINERAL
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2. (SBU) Jordan is the world's third largest exporter of
phosphate, a mineral used in the production of fertilizer.
In 2001, phosphate and potash (another raw material used in
fertilizer) exports comprised 17 percent of Jordan's domestic
exports. The mining sector has historically represented an
important earner of foreign exchange over the years, as well
as an important source of revenue in the form of mining fees,
taxes and dividends, and the GOJ has been loathe to part with
key contributors such as JPMC as it strives to privatize.


3. (SBU) JPMC is one of the biggest employers in Jordan, but
losses of USD179 million in 2000 forced JPMC to restructure,
and 1300 employees (out of 6500) were offered, and accepted,
early retirement. Due to a worldwide surplus of phosphate,
the price of the mineral has dropped over the last three
years, causing an attendant drop in sales for JPMC. But
overstaffing, inefficient production methods and facilities,
and chronic mismanagement continue to plague JPMC, and the
company reported net losses of USD 12 million in 2001. Jobs
at JPMC have traditionally been a key source of political
patronage in the southern part of the country, a region whose
stability is often seen as crucial to the stability of the
country as a whole. (For example, when the Aqaba Railway
Company (ARC) was privatized, 500 unskilled ARC workers were
hired by JPMC under government directive.) Under the
recommendation of the IMF, the company was slated for
privatization late last year.

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ENTER THE CANADIANS
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4. (SBU) According to recent press reports, the Canadian
mining concern Potash Corporation of Saskatchewan (PCS) is
negotiating with the GOJ to buy a stake in the company. Reem
Badran, Director of the Jordan Investment Board, confirmed
that talks were underway. She told us that, while other
companies had expressed interest in JPMC, the PCS bid seemed
to be the most serious. While PCS has offered to buy the
GOJ's entire 65 percent share of the company, Badran said
that the GOJ only would sell 40 percent at this time (valued
at approximately USD70 million at today's share price),with
the Jordan Investment Board retaining approximately 25
percent of the company. The remainder is owned by the
Jordanian Social Security Corporation, the Kuwait Investment
Corporation, and other private investors. Badran added that
there was as yet no timetable for the deal to be completed.
(Note: PCS is the largest producer of phosphate in the world.)


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COMMENT
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5. (SBU) Even a partial sale of JPMC would give Jordan's
privatization program a much-needed shot in the arm. A deal
could not come at a better time, as the GOJ needs money to
fund the its socio-economic plan, which calls for GOJ
investment in projects that encourage economic growth. A
sale could also demonstrate to the IMF and foreign investors
alike that the country is ready to break the privatization
logjam. But a challenge for a successful new management team
will be finding a politically acceptable formula for trimming
down to an efficient, productive work force.
Gnehm