SUPPORTING REFORM - JORDANIAN PLANNING MINISTER'S

UNCLAS SECTION 01 OF 02 AMMAN 005737

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SUBJECT: SUPPORTING REFORM - JORDANIAN PLANNING MINISTER'S
WASHINGTON VISIT



1. (SBU) New Jordanian Planning Minister Suhair al-Ali will
visit Washington the week of August 1. The articulate,
Georgetown-educated Citibanker is on the frontlines of
Jordan,s reform program, and was handpicked by the King.
Her intention is to brief on Jordan,s economic and fiscal
situation, and recent steps to impose austerity while moving
forward on comprehensive reforms, and to seek help to sustain
that difficult process. This trip comes at a time when King
Abdullah,s reform efforts are arguably at a make-or-break
point. Reformers throughout the region will watch Jordan
closely in the coming months, as they calculate whether or
not to take the risks that come with reform. Because of the
importance of King Abdullah,s agenda to the prospects for
regional reform, we urge al-Ali,s Washington interlocutors
to look carefully at our options for supporting reform in
Jordan through what promises to be a difficult stretch.


2. (SBU) King Abdullah,s reform agenda has just come
through a bruising encounter with the largely anti-reform
parliament. This cabinet team is both the most
reform-oriented and the most unpopular one in Jordan,s
parliamentary history ) which is no coincidence. We are
approaching the September rollout of the report of the royal
commissions charged with setting a reformist "national
agenda" and a regionalization program. It is likely that the
reports' prospects for a positive reception are already being
undermined by a worsening fiscal crisis and attendant,
belt-tightening measures that are highly unpopular.
Jordanian officials believe it will be hard to maintain, much
less advance, reforms given their fiscal situation.
Aggressive plans for tax reform, privatization, and
elimination of subsidies are proceeding, but are likely only
to close the government,s budget deficit. For capital
expenditures, Jordan remains dependent on external support.
Deputy Prime Minister al-Muasher expressed to us his concern
that if the unbudgeted National Agenda fails to deliver
rapidly on its promise of better, more representative, more
responsive government, the reform initiative and this
government will be permanently discredited. That outcome
would present the King with unpalatable choices: allow
formation of the conservative, backward looking sort of
cabinet that could gain parliamentary support, or dissolve
parliament and call for early elections. That second course
will create a political crisis and further confuse a public
that as yet is not fully committed to a reform program it
does not fully understand. Muasher puts the initial bill for
National Agenda implementation at 315 million Jordanian
dinars.


3. (SBU) Jordanian officials are grateful for the
exceptional support the U.S. continues to offer. Al-Ali will
arrive in Washington with plans to strategize on how Jordan
can gain the continued financial backing needed to see it and
its reform program through a challenging fiscal and political
environment. She will make the point that all other donors
look to the U.S. for leadership; if the U.S. is not
championing Jordan,s cause, the others turn a deaf ear.
Specifically, she will explore receptivity to additional U.S.
assistance in the following ways:

--Higher regular ESF assistance in the FY 2006 budget.

--Eligibility for assistance through the Millennium Challenge
Account; if Jordan is found eligible, al-Ali will develop a
proposal which advances the National Agenda. She has
mentioned a figure as high as $500 million, over two to three
years. A proposal can be assembled by October 2005.
Jordan,s case will include their demonstrated track record
on implementation of U.S. foreign assistance. As the Queen
told Secretary Rice in June, nowhere is the U.S. getting a
better return on its investment in reform than in Jordan.

--U.S. support for debt cancellation from the G-7.
Subsequent to her meeting with the Deputy Secretary, al-Ali
informed us that she will not seek U.S. debt cancellation,
but would like to focus on cancellation of Japan,s $1.6
billion debt. This alone would reduce the annual budget
deficit by about $70 million a year in debt service.


4. (SBU) The timetable for additional support will also be a
focus. For reasons cited, the government seeks additional
support in calendar year 2005, either through additional ESF
in U.S. fiscal year 2006 or through the MCA. We have made
very clear the obstacles in meeting such a timetable, but
al-Ali will begin that discussion during her Washington
visit, likely to continue in late September if the King
receives a favorable reply to his request for a Washington
visit.
HALE