Friday, December 12, 2014

Capping Jordan’s private schools tuition fees: A myth-based Government action!

Jordan’s educational sector is massive. In 2013, 1.726 million students attended government, quasi government and private schools across Jordan. 69% of students attend governmental schools, 24.6% attend private schools and 6.5% attend UN funded UNRWA schools in the refugee camps. Total expenditures of the governmental schools totaled 758 million JDs in 2013.

Overcrowding remains a problem in government and UNRWA schools. In 2013, 8% of Government schools still used the double shift system where students are split between a morning shift and an afternoon shift. In UNRWA school, the double shift system spans an alarming 90% of its schools. In private schools, double shifts do not exist.

What of the educational quality difference between public and private schools? The best indicator remains a mystery: Despite officially writing to the Ministry of Education to get the overall Tawjihi pass rate for private schools and public schools separately, the ministry was adamant in not supplying this data point in specific. The simple figure of the pass rate for private schools students in Tawhiji vs. that of government schools seems to be a state guarded secret that an official letter and 2 months of follows-ups could not reveal! There are tell-tale signs though: In the recent 2014 Tawjhi results, 342 public schools had a zero% pass rate in Tawjihi. Moreover, all but one of the top scorers in the scientific stream came from private schools.

Reliance on private schools varies by region in Jordan. Nationally, private schools had 425,000 students across Jordan, with the majority being in Amman. In Amman, only 55% of students attend government schools (lowest rate in the country) while in Mafraq 92% of students attend government schools (highest rate in country). The rest of the students – not enrolled in government schools- are primarily served by private schools.

A big myth on education in Jordan is that public schools are free. In fact, government schools are far from free: On average government schools effectively collected a tuition fee of 637 JDs per student in 2013. These tuition fees are paid by tax payers (Government tax receipts), donor countries (aid funds) and future tax payers (Jordan’s public debt). The Government school system received 758 million JDs in 2013 in funding from the central government (the budget for Government education). I.e. the operational expenses of the Government schools amounted to 637 JDs per student in 2013. And this does not take into account the cost (and opportunity cost) of real-estate used by the Government schools. According to statement by the association of private schools, 90% of private schools in Jordan have annual tuition fees of less than 1,000 JDs per student, a figure that is not too far from public schools.

The draft bylaw that classifies private schools and puts caps on their tuition fees based on their classification is misguided. The government _whose own record in education is dismal and far from cost effective_ seems to think it has the recipe for optimizing private sector education. It is wrong. The private schools sector is a competitive and for profit sector that should be left free of government meddling in setting the prices of the educational services provided. Private schools owners tie up expensive real-estate in Jordan’s major cities to provide educational services in demand by large swathes of the population. They also pay taxes, create jobs and incur major operational costs in addition to relieving the government budget from massive extra costs tied to serving a quarter of the student population. They have a right to seek a respectable return on investment. Else they are better off selling that real-estate to housing projects and exiting the educational sector all together. Making a profit does not preclude them from being good educators.

Setting price caps, in a fully competitive sector, is bad policy. The notion that offering educational services must not be profit seeking, or self sustaining, could also result in a much reduced supply of private schools. Furthermore, price caps, if set well-above average tuition fees may actually back fire and result in higher tuition fees as schools raise fees citing the government approved/recommended tuition cap! Government oversight of private schools is of course still needed. Schools must abide by rules and regulations that insure respectable educational standards are followed.

There is no denying that tuition fees of private schools remain an issue for parents. On this, the Government can help by mandating 12 year tuition fees contracts. This is far different from setting or capping tuition fees. In a 12 year tuition fees framework contract, parents would be given the full tuition fees scale for all grades when their children enroll in the school. The school would be allowed to increase tuition fees for already enrolled students by a maximum rate every year (capped at the official inflation rate of that year). Every year, the private school will be free to change its tuition fees scale for all new enrolling students. In this approach, a school whose success drives more demand for its services can raise its rates for new incoming students as it sees fit, without penalizing existing students already enrolled in it by a massive rise. This is especially suitable because the existing students’ word of mouth and achievements are influential in enhancing the school’s reputation and brand. If the school sets its tuition fees rates well above what is considered reasonable, parents of prospective new students will shop around for other options. While students already enrolled in the school will be shielded by the 12 year tuition contract.

A final point on accountability. Badly run private schools will never be sustainable. Parents who pay tuition fees are much more likely to move their kids to different schools if they feel they are not getting good value for money. Private schools that lose money will eventually go out of business. It is in the government schools that accountability is lowest: Funding is guaranteed regardless of academic results and the students are a captive audience with little options as they cannot afford the alternative. It is in introducing accountability in government schools that the efforts of the ministry should be focused, not on meddling with private schools tuitions whose results far outshine those of the government ones.  

Sunday, November 23, 2014

تنكة او اقل: نمط تعبئة البنزين في عمان ودلالاته على الوضع المالي للسكان

في دراسة حديثة حلل زميلاي في مجموعة المرشدين العرب _عمر الجعبري ومحمد ياسين_ انماط تعبئة البنزين في عمان الغربية استنادا الى بيانات فعلية لواحدة من محطات البنزين الكبيرة في عمان. والنتائج كانت مثيرة للاهتمام:
-        41% من مجمل عمليات التعبئةكانت بقيمة عشرة دنانير او اقل.
-        56% من مجمل عمليات التعبئةكانت تعبئة عشرين لتر بنزين او اقل. 23% تعبئة 10 لتر بنزين او اقل.
-        لبنزين 90 تحديدا نصف عمليات التعبئة كانت بعشرة دنانير او اقل و 61% تعبئة بعشرين لتر او اقل (25% تعبئة 10 لتر بنزين او اقل).
-        لبنزين 95 فقط 15% من عمليات التعبئة كانت بعشرة دنانير او اقل. و 42% من مجمل عمليات التعبئةكانت تعبئة 20 لتر بنزين او اقل.
-        بلغ معدل تعبئة مستخدمي بنزين 90 ستة عشر دينار لكل تعبئة فيما بلغ معدل تعبئة مستخدمي بنزين 95 ثلاث وثلاثون دينار لكل تعبئة بنزين.

اعلاه _وباقي نتائج الدراسة _ يبين بوضوح ان مبدأ " تفليل السيارة" قد اضحى مربوطا باقلية من معبئي البنزين في عمان متركزة بمستخدمي بنزين 95 اساسا. ويمكن ان نقوم ببعض الاستنتاجات:
-        بسبب ارتفاع كلفة البنزين نسبة لمستويات الدخل فان معظم مستهلكي مادة البنزين في عمان يحبذون تعبئة السيارة بكمية قليلة نسبيا من البنزين كنوع من ادارة دخولهم ومصاريفهم الشهرية.

-        قد يكون استخدام ذات السيارة من عدة اشخاص في نفس العائلة احد اسباب تعبئة السيارة بكمية قليلة من البنزين كل مرة. حيث يقوم كل فرد من العائلة (خصوصا الاخوة المتشاركين بذات السيارة) بتعبئة البنزين الذي يلزم لمشواره القادم فقط!

-        الفرق بين سعري بنزين 90 و 95 يجعل بنزين 95 اختيارا للاقلية فقط ويمكن الاستنتناج ان مستخدمي بنزين 95 هم الموسورين اساسا مع بعض غير الموسورين الذين تتطلب سياراتهم استخدام بنزين 95 حصرا.   
ان انماط تعبئة البنزين كل شهر في الاردن مفيدة جدا في الدلالة على الوضع المالي للسكان. واعتقد انه معيار حري بالمتابعة من كافة المعنيين بالحكومة خصوصا عند دراسة او اقتراح اي رفع لرسوم وضرائب تؤثر على الغالبية من السكان.

نقطة اخيرة على فرق التسعير بين بنزين 90 وبنزين 95. بنزين 95 اغلى باكثر من 20% من بنزين 90 بسبب فرق الضرائب اساسا. فالضريبة على بنزين 95 هي 24% ضريبة خاصة و 16% ضريبة مبيعات و 0.6% طوابع فيما تبلغ على بنزين 90 18% ضريبة خاصة و 4% ضريبة مبيعات و 0.6% طوابع. عند تفعيل هذه الضرائب انتقل عدد كبير من مستخدمي بنزين 95 الى استخدام بنزين 90 تفاديا للفرق الكبير بالسعر. ولربما كان الانتقال الى بنزين 90 دائما للكثيرين. فحتى لو خفضت الحكومة الان فرق السعر بين بنزين 90 و95 قد يقى الكثيرون على تعبئة سياراتهم ببنزين 90 الارخص ثمنا. الخطا اساسا كان عند رفع بنزين 95 الى دينار والابقاء على سعر بنزين 90 بالستينات مما جعل فرق السعر بين النوعين هائلا لمدة اكثر من عدة اشهر وهو الذي حفز الكثيرون الى الانتقال الى بنزين 90 وخفض تحصيل الحكومة الضريبي من بنزين 95.

Sunday, November 9, 2014

Royal Jordanian: Why the Government should get out of the the aviation industry

Jordan’s flag carrier, Royal Jordanian, offers great service. RJ is part of the prestigious One World alliance and avails a good choice of onboard entertainment. Its economy seats are spacious and business seats luxurious. In 2013, the airline’s 32 planes carried 3.3 million passengers: More than half of total passengers passing through Amman’s Queen Alia International Airport. It also generated 760 million JDs in revenues in 2013. All that remains for the airline is to find profits, any profits! 

Royal Jordanian’s balance sheet is dismal. The company recorded a loss of 39 million JDs in 2013, following a small profit of 1.1 million JDs in 2012 and a massive loss of 58 million JDs in 2011. Its cumulative losses are over three quarters of its capital and its book value is barely 10% of paid capital. Essentially, the losses have wiped out most of shareholders’ equity. The company has to raise capital by 50 million JDs before March 2015 in order to stave off liquidation and violation of loan terms it struck with its lenders.

RJ management has set out plans to reverse the airline’s fortunes. In addition to the 50 million JDs capital raise before March 2015, management plans to raise RJ’s capital by an extra 100 million JDs by 2018. If successful, this will increase its capital to 234 million JDs. A capital raise would solve the current major problem of negative working capital and also allow the airline to pay down some of its debt which exceeded 105 million JDs by end of 2013.

Management’s turnaround plans also include reducing the number of planes operated by the company to 29 by end of 2014, down from 32 in 2013. The airline will replace the old leased Airbus 340 and 330 by the new _also leased_ Boeing 787s whose fuel costs are 20% lower_ albeit at higher lease costs. Management also plans to offer voluntary layoffs for some of its employees whose numbers totaled 4643 people in 2013. The airline also plans to reduce the number of destinations served and drop some loss making routes.

Lower fuel costs would help as well. Royal Jordanian paid 284 million JODs for fuel in 2013, amounting to 37% of its revenues. In 2010, the last year the airline made a respectable profit of 9.6 million JDs, fuel cost stood at only 30% of revenues. Fuel cost as a % of revenues was 40% in 2011 and 36% in 2012. The government decision to allow RJ to buy fuel in the local market competitively, should save it some 12 million JDs every year. If Brent remains below 100 US$ a barrel for 2014 and 2015, the fuel yoke on RJ would become lighter.

All is not lost for Royal Jordanian. Other airlines in the region were able to do successful restructuring the brought them profitability and growth. Lebanon’s Middle East Airlines in Lebanon is one example. The recipe includes rationalized fleet, good service, restructuring routes and dropping chronically loss making ones and reducing total headcount.

But should Jordan’s government remain in the airline? Restructuring the airline and raising its capital maybe a good point for the Government to exit from Royal Jordanian all together. Jordan’s government had raised 185 million JDs when it sold 74% of the company in 2007. It was able to privatize RJ after waiving some 1 billion US$ in debts that RJ owed in fuel debt, effectively cumulative losses borne by the treasury. The presence of the government as the largest owner has also prevented a more streamlined operations and management of the company. The government’s best course is to exit the airline fully and allow RJ to be fully privatized through the capital increase required. This would certainly be better than increasing Jordan’s public debt to finance the Government paying for its share of capital increase.

For RJ to attract fresh capital from current and new shareholders, it must show a solid turn-around plan. This plan must certainly include regulatory certainty and visibility on issues related to taxes, route rights and the ability to restructure RJ’s labor. This is where Government action is most needed: It must provide such regulatory visibility and certainty, as it leaves the airline to chart out its own independent future.  

Sunday, November 2, 2014

موضوعيا: تخفيض اسعار المحروقات الاخير صحيح

يتواءم التخفيض الاخير في اسعار المحروقات مع الاتجاه العالمي للاسعار ويتماشى الى حد كبير مع انخفاض الاسعار عالميا. ولهذا ناخذ سعر بنزين 90 مثالا:

-        بلغ سعر بنزين 90 للشهر الحالي (تشرين الثاني 2014) 730 فلسا منخفضا بنسبة 14.62% عن سعره في شهر تموز 2014 عندما كان 855 فلسا.

-        كان اعلى سعر لخام برنت في تموز 2014 حوالي 114 دولار وادنى سعر حوالي 106 دولار بمعدل بسيط 110 لشهر تموز 2014. ووصل اعلى سعر لخام برنت في شهر تشرين الاول 95 دولار وادناه 85 دولار بمعدل بسيط 90 دولار. وعليه يكون انخفاض معدل خام برنت في تشرين الاول 2014 بنسبة 17% عن معدله في تموز 2014. وهي نسبة قريبة من نسبة انخفاض بنزين 90 في الاردن.

-        بمقارنة اخرى بلغ معدل سعر البنزين في السوق الاميركي 3.63 دولار للغالون في تموز 2014 فيما انخفض الى 2.99 دولار للغالون في بداية تشرين الثاني 2014. ونسبة الانخفاض هي 17.6% بين الشهرين.

استنادا الى ما سبق نستطيع الاستنتناج بان الحكومة صدقت _ الى حد كبير_ في تسعيرها للمحروقات في الاردن. وان انخفاض الاسعار كان متماشيا الى حد عال مع اتجاه الاسعار عالميا.
ونتذكر هنا بان معادلة التسعير في الاردن شهرية مع ان اسعار النفط العالمية يومية. وان معادلة التسعير تعتمد معدل اسعار الشهر السابق لتسعير السهر اللاحق. وهذان الامران لوحدهما كفيلان بان لا يكون التغير في الاسعار في الاردن شهريا مطابق تماما لتغيرات اسعار النفط عالميا.
طبعا الاسعار بالاردن اعلى من دول كثيرة بسبب ضرائب المحروقات اساسا وكذلك بسبب عدم وجود منافسة حقيقية في السوق. فنسبة الضريبة على بنزين 90 تتجاوز 23% فيما النسبة تتجاوز 40% على بنزين 95.

ولان الحكومة تاخذ ضرائبها كنسبة فان التخفيض الاخير سيقلل من تحصيل الحكومة من ضرائب المحروقات. وهنا تجدر الاشارة الى ان الانسب في ضرائب المحروقات ان تكون مرتبطة بالحجم ومحددة بمبلغ مقطوع على كل لتر بدلا من ان تكون نسبة. لان المحروقات استخدامها واسع ولها تاثير على كافة القطاعات الاقتصادية ومستوى التضخم ولانها كذلك مصدر مهم واساسي من مصادر ضرائب الاستهلاك فان الضرائب المقطوعة على الحجم (لكل ليتر) تعمل كماص للصدمات في حالة ارتفاع او انخفاض الاسعار العالمية.

في الضريبة المقطوعة للتر تمتص الضريبة بعضا من صدمات الهبوط والارتفاع. فتنخفض نسبة الضريبة الحكومية مع ارتفاع السعر العالمي وتزيد نسبة الضريبة الحكومية مع انخفاض السعر العالمي مع ثبات ما تحصله الحكومة من الضرائب من الاستهلاك. فيكون تذبدب السعر النهائي للمستهلكين هبوطا او صعودا اقل في حالة استخدام اسلوب الضريبة كمبلغ مقطوع للتر. هذا له ايجابيات جمة من دون سلبيات تذكر. فليس من مصلحة اي اقتصاد تذبذب عال لاسعار النفط.

تخفيض الاسعار في الفترة الماضية تماشى الى حد كبير مع انخفاض الاسعار عالميا. هذا راي في تسعير المحروقات فقط .. لا اكثر ولا اقل. وهذا لا يعني موافقة على كل التوجهات الحكومية المالية والاقتصادية.