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Private Sector Helps Expand Amman Airport Terminal

FrontLines - February 2009

Mission of the Month: Jordan

Challenge

In recent years, Amman, Jordan, has become an important international destination for people traveling through the Middle East. When Jordan’s government first opened Queen Alia International Airport (QAIA) in May 1983, the terminal could accommodate around 5.5 million passengers per year, which seemed more than adequate.

Now the population in the region is growing at about 2.2 percent annually. Economic activity is also thriving, with imports increasing 20.8 percent and exports 21.2 percent per year. Annual increases in tourism are reported at about 6 percent.

All of these figures mean more airport traffic. The number of travelers is projected to double over the next two years and triple within the next 12 years. Without construction of an additional terminal, airport officials say, they cannot keep up with demand.

Innovative Response

Jordan is undertaking reforms that include an increase in private participation in the aviation sector. In support of these reforms, USAID has agreed to help construct a new airport terminal at QAIA.

The sun rises over Queen Alia International Airport terminal and runways in Amman, Jordan, in this rendering of plans for an expansion to the facility. USAID is helping the Jordanian government expand the airport to meet the demands of increasing numbers of travelers in the region.

With a hefty price tag of approximately $680 million, the Jordanian government would not be able to proceed with this project alone. Not only was financing a challenge, but finding the special technical expertise necessary to complete the project in the Middle East – let alone in Jordan – posed serious obstacles.

Jordan received a $1.3 million USAID grant to recruit and pay two international legal and technical firms to implement the new terminal project.

Working with USAID to find qualified candidates, the Jordanian government selected firms to apply high technical standards and perform in a legal and transparent manner. By operating under more efficient commercial practices rather than getting tangled up in bureaucratic red tape, these firms should employ solid management and design principles and allow Jordan to reduce costs.

"One of the most important activities that USAID supported as part of Jordan’s privatization program was the first major PPP [public private partnership] transaction whereby the management of … QAIA was outsourced to the Airports International Group for a period of 25 years," said Jamal Al-Jabiri, former deputy director of the Economic Growth Office at USAID’s Jordan mission.

"This was the first such transaction in Jordan and resulted in $700 million in infrastructure expansion to the airport as well as an improvement in service delivery that can already be felt by travelers transiting through the facility," he said.

Result

While traditional public procurement would have required Jordan to provide direct financing, partnering with USAID has allowed the country to finance all capital expenditures privately. This airport expansion builds the capacity of Jordan to serve as an international travel destination and shows the muscle that partnerships can bring to such projects.

"The private sector can mobilize financing and provide the necessary expertise to help meet the infrastructure needs of Jordan’s growing economy," said Bernard Sheahan, the International Finance Corporation’s advisory services director. "This project serves as a model and sets an important precedent for future initiatives. The design and transparency of the tender will encourage further private sector participation in the country’s infrastructure projects."

The first phase of the expansion at QAIA will create enough space for 9 million passengers and the second phase should allow the airport to accommodate up to 12 million passengers. Phase one should be completed in the summer of 2011.

Projections suggest the government of Jordan will earn roughly $1 billion in taxes and revenues during the 25-year concession period. ★

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