Regulatory Framework.

The legal basis for the current private sector intervention in the management and operation of water utilities is attributed to Article 28 of WAJ Law. This Article makes some provisions for WAJ to seek private sector participation through either lease contracts, or through commercial vehicles, i.e limited liability and/or public shareholding companies.

In all cases, approval and endorsement of the Cabinet is a mandatory requirement.

This Article was deemed to be by many commentators a breakthrough that made possible the incorporation of the commercialization principle into Jordan's Water Sector. It can be said that all major initiatives that took place recently, such as As Samra BOT, Amman Management Contract, Amman and Aqaba Water Companies, the managing consultant contract in the Northern Governorate, were possible only because of the amendment of WAJ Law by introducing the said Article.

However, the more the commercialization principle is embedded in Jordan's Water Sector the more crucial is the need to review the current regulatory framework to create an efficient, cost-conscious and results-driven water sector.

Under the Al Meyyah Project, the PMU is mandated to look at possible enhancement of the current regulatory framework. The PMU will largely benefit from the lessons learned and gained out of its current experience in involving the private sector. Also careful attention will be paid to what other stakeholders, such as other donors, have made in this direction.

Water Sector Audit Unit.

Why:

Given the fact that Jordan's Water Sector will witness a rapid increase in the role of the private sector in the management and operation of water utilities, there exists an immense need for an independent body to monitor and audit these private sector activities, and to report in an objective manner to decision-making authorities on what remedial action, if any, should be undertaken.

The PMU will create and build all infrastructure needed for this unit to operate effectively. Monitoring Protocols on the basis of relevant legal documents will be prepared by the PMU, which shall include mechanisms for collecting information, and reporting.

A point worth considering here is that this legal mandate should facilitate and support the natural evolution of the prospective Audit Unit into a fully fledged water regulatory body as soon as the internal capacity has been put in place and the regulatory know-how has been built, and once the political decision has been made to establish a water regulatory body for the water section of the kingdom.

To summarize the main reasons for establishing a Water Sector Audit Unit:
• Consumers will want to see safeguards that private sector involvement does not result in misuse of the (natural) monopolies of water service providers;
• Jordan authorities will want to see demonstrated that corporatization and increased private sector involvement indeed results in better performance and raised efficiency in the sector,
• The private sector would be attracted more easily when it knows its performance will be professionally monitored and audited.

The establishment of a Water Sector Audit Unit is in support of the institutional reform, and a Water Sector Audit Unit will be a critical element in the new institutional settings. The establishment of the WSAU, however, is not an end in its own.

Staged development:
From the start of the Al Meyyah programme until the formal establishment of the WSAU, monitoring and reporting functions will be undertaken by the PMU / Al Meyyah as such, continuing its present activities and under WAJ delegation.

At the same time the PMU / Al Meyyah will further build its monitoring and reporting capacities, and continue to undertake other preparatory activities as the further development of the PI-system.

Results from preparatory activities:
A number of activities have been undertaken to prepare the implementation of the Al Meyyah programme, including the development of an initial monitoring and reporting protocol and a monitoring and reporting exercise for the Aqaba Water Company, Miyahuna Company, and the BOT for the As Samra WWTP.
An important observation from this activity has been the urgent need to agree upon reporting standards, including the need to define the contents of business plans, which are to play a critical role in monitoring performance.

The development of a Water Sector Audit Unit will take place within the context of the reform of the water sector.