Identifier
Created
Classification
Origin
06AMMAN303
2006-01-17 13:20:00
UNCLASSIFIED
Embassy Amman
Cable title:  

JORDAN - INVESTMENT CLIMATE STATEMENT, 2006

Tags:  EINV EFIN ETRD KTDB JO OPIC USTR 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 14 AMMAN 000303 

SIPDIS

STATE FOR EB/IFD/OIA - JN HATCHER, P BROWN
STATE PASS TO USTR
USDOC/CIMS NTDB WASHDC

E.O. 12958: N/A
TAGS: EINV EFIN ETRD KTDB JO OPIC USTR
SUBJECT: JORDAN - INVESTMENT CLIMATE STATEMENT, 2006

REF: 05 STATE 201904

UNCLAS SECTION 01 OF 14 AMMAN 000303

SIPDIS

STATE FOR EB/IFD/OIA - JN HATCHER, P BROWN
STATE PASS TO USTR
USDOC/CIMS NTDB WASHDC

E.O. 12958: N/A
TAGS: EINV EFIN ETRD KTDB JO OPIC USTR
SUBJECT: JORDAN - INVESTMENT CLIMATE STATEMENT, 2006

REF: 05 STATE 201904


1. In response to reftel request, post submits the
Investment Climate Statement for 2006 for Jordan. As
requested, post will also send a copy of the ICS via email
to EB/IFD/OIA.

BEGIN TEXT OF INVESTMENT CLIMATE STATEMENT, JORDAN:

Jordan

2006 Investment Climate Statement - Jordan

Openness to Foreign Investment
--------------

Since King Abdullah II succeeded to the throne in 1999,
Jordan has taken steps to encourage foreign investment
and realize the vision of transforming Jordan into an
outward-oriented, market-based economy competitive in
the global marketplace. Key reforms have been
undertaken in the information technology,
pharmaceuticals, tourism, and services sectors. Foreign
and domestic investment laws grant specific incentives
to industry, agriculture, hotels, hospitals, maritime
and rail transportation. Leisure and recreation
projects, convention and exhibition centers,
transportation and distribution of water, gas, and
oil/oil derivatives using pipelines were added to this
list. The laws also allow the cabinet flexibility in
offering investment incentives to other sectors.

Jordan acceded to the World Trade Organization (WTO) in
April 2000. In addition, a U.S.-Jordan Free Trade
Agreement (FTA) entered into force on December 17,

2001. In May 2001, the government converted the Aqaba
port and surrounding area into a special economic zone
(SEZ) offering special incentives to investors (see
below). The government is revamping the investment
promotion system in Jordan. It is re-examining
investment incentives, with the consolidation of all
investment promotion activities under a renewed Jordan
Investment Board (JIB),while investment development
would fall under a "Jordanian Agency for Economic
Development (JAED)" that was just getting off the
ground at the end of 2005. These developments will
likely lead to expanded investment opportunities in
Jordan for U.S. investors.

Jordan's investment laws treat foreign and local
investors equally, with the following exceptions (as

per regulation No. 54 of 2000, entitled "Non Jordanian
Investments Promotion Regulation"):

-- Under the terms of the U.S.-Jordan FTA, ownership of
periodical publications is restricted to Jordanian
natural persons or Jordanian juridical entities wholly
owned by Jordanians.

-- Under the same agreement, foreign investors are
limited to 60 percent ownership in printing/publishing
and in aircraft or vessel maintenance and repair
services.

-- Also under the FTA, foreign investors are limited to
50 percent ownership in the following businesses and
services:

Architectural services
Engineering Services
Urban planning and landscape architectural services
Leasing or rental services relating to other machinery
and
equipment(excluding engines and turbines)
Advertising Services
Geo-technical testing
Placement and supply services of personnel
Related scientific and technical consulting services
(part of CPC
8675),excluding prospecting, surveying,
exploration,
Exploitation and map making.
Motion picture and video- tape production and
distribution
services
Motion pictures projection services
Sound recording
General Construction Work for Buildings
General Construction Work for Civil Engineering
Installation and Assembly work
Building Completion and Finishing Work
excluding site preparation work for mining
Wholesale Trade (Except wholesale trade of firearms or
pharmaceuticals)
Retailing Services (Except retail trade of
pharmaceuticals)
Franchising
Refuse Disposal Services: Collection and treatment of
solid waste
services (part of CPC 9402) excluding collection and
treatment
of hazardous waste.
Agency services
Hotel and Motel Lodging services, excluding casinos
Meal serving services with full restaurant services
Meal serving services in Self-serving facilities
(cafeterias)
Beverage serving services for consumption on the
premises,
excluding casinos
Air catering services
Travel agencies and tour operators
Passenger transportation
Freight transportation
Rental services of sea-going vessels with operator
Storage and warehousing services
Shipping agents
Maritime freight forwarding services
Food supply catering
Rental of vessels with crew
Maintenance and repair of vessels
Pushing and towing services
Computer reservations systems
Freight forwarding services
Packing, crating and de-packing
Freight inspection services, excluding pre-shipment
inspection for
customs valuation purposes on imports

The FTA Annex 3.1 has a complete listing of limitations
on investments and may be found at the following
internet address:
http://www.ustr.gov/Trade_Agreements/Bilatera l/Jordan/S
ection_Index.html

Foreign investors may not have whole or partial
ownership of:

-- Investigation and security services;

-- Sports clubs (except for health clubs);

-- Stone quarrying for construction purposes;

-- Customs clearance services; and,

-- Land transportation of passengers and cargo using
trucks, buses and taxis.

A minimum capital requirement of JD 50,000 (US $70,000)
is set for foreign investors. This requirement does not
apply to participation in public shareholding
companies.

There is no formal screening or host government
selection process for foreign investment. However,
investors in large projects find that the informal
approval of local and central government officials
helps to ensure governmental cooperation in project
implementation.

The law stipulates that expropriation is prohibited
unless deemed in the public interest. It provides for
fair compensation to the investor in convertible
currency.

The government plans to accelerate and broaden the
privatization program. As regards the power sector, the
Jordanian Government has created separate generation,
transmission, and distribution companies (CEGCO, IDCECO
and EDCO) and has established an effective regulatory
body for the industry. A new electricity law has been
passed paving the way for the privatization of the
sector through a new regulatory and tariff regime.

The GOJ sold its remaining 14.3% stake of the Jordan
Cement Factories Company to the social security
corporation in February 2002. In 2000, the GOJ sold 40%
of Jordan Telecom shares to JITCO, an 88% France
Telecom owned company. The GOJ sold an additional 10.5%
of Jordan Telecom shares via an initial public offering
(IPO) in October 2002. In October 2003, the GOJ sold
half of its 52% stake in the Arab Potash Company to a
strategic Canadian partner. The Government is committed
to hold its remaining 26% in the company until the end
of 2006, when it may arrange to sell the balance of its
shares. The government continues to consider its
options in the privatization of Royal Jordanian (RJ)
Airline's operating division. The government concluded
the sale of 80 percent of RJ's aircraft maintenance
division. RJ's engine overhaul facility is also for
sale. In addition, the government is conducting a study
of the Jordan Civil Aviation Authority with the goal of
privatizing all but its core regulatory functions. Non-
core areas likely to be sold off or put under private
management in the medium term include all three civil
airports, an aviation services training school, and an
airport hotel.

Jordan has also announced that it intends to sell a
majority stake as well as management control in the
Jordan Phosphate Mines Company. A management contract
for the handling of the container terminal in the port
of Aqaba was signed with a Danish company in March 2004
and a tender for a 25-year contract is under review. An
international consortium has arranged to develop a 400
km gas-pipeline from Aqaba to Syria on a BOO basis, to
be completed in early 2006. The postal service has been
transformed into a public shareholding company pending
its eventual privatization. The Government expects to
conclude major privatization deals in 2006 in the
electricity generation and distribution sectors and the
Phosphate company. The government also expects to sell
its remaining shares in Jordan Telecom (about 42% of
the company) in early 2006, and other investments
managed by Jordan Investment Corporation.

While these efforts have combined to make Jordan's
investment climate more welcoming, some large U.S.
investors have reported "hidden costs" when investing
in Jordan due to bureaucracy, red tape, vague
regulations and conflicting jurisdictions. As they
would in other countries, investors should execute due
diligence in exploring investment opportunities and
concluding purchases.

Conversion and Transfer Policies
--------------

Jordan's liberal foreign exchange law entitles foreign
investors to remit abroad, in a fully convertible
foreign currency, foreign capital invested, including
all returns, profits, and proceeds arising from the
liquidation of investment projects. Non-Jordanian
administrative and technical employees are permitted to
transfer their salaries and compensation abroad.

The Jordanian Dinar is fully convertible for all
commercial and capital transactions. The JD is pegged
to the U.S. dollar at an exchange rate of approximately
1 JD to US $1.41.

Licensed money-exchangers are supervised by the central
bank, but are free to set their own exchange rates
depending on market conditions. Unlike banks, they do
not pay the central bank commissions for exchange
transactions, giving them a competitive edge over
banks.

Other foreign exchange regulations include:

--Non-residents are allowed to open bank accounts in
foreign currencies. These accounts are exempted from
all transfer-related commission fees charged by the
central bank.

-- Banks are permitted to purchase an unlimited amount
of foreign currency from their clients in exchange for
JD on a forward basis. Banks are permitted to engage in
reverse operations involving the selling of foreign
currency in exchange for JD on a forward deal basis for
the purpose of covering the value of imports.

-- There are no restrictions on the amount of foreign
currency that residents may hold in bank accounts, and
there are no ceilings on the amount residents are
permitted to transfer abroad.

-- Banks do not require prior central bank approval for
the transfer of funds, including investment-related
transfers, although stricter measures are now in place
to monitor bank wire transfers to boost Jordan's
ability to participate in the global fight against
illicit financial flows.

Expropriation and Compensation
--------------

There are no known cases where the government has
expropriated the private property of an investor.
Dispute Settlement
--------------

Under Jordanian law, foreign investors may seek third
party arbitration or an internationally recognized
settlement of disputes. The Jordanian government
recognizes decisions issued by the International Center
for the Settlement of Investment Disputes (ICSID),of
which it is a member. Jordan is also a member of the
New York Convention of 1958 on the recognition and
enforcement of foreign arbitral awards. In cases where
the government (or its agencies) is a party to the
dispute, it generally prefers settlement in local
courts if an out-of-court settlement is not
forthcoming. Jordan abides by WTO dispute settlement
mechanisms. Dispute settlement mechanisms under the FTA
are consistent with WTO commitments.

Article IX of the Bilateral Investment Treaty (BIT),
establishes procedures for dispute settlement.

A dispute between a U.S. investor and the Jordanian
government that was brought before an ICSID tribunal in
2002 was settled in May 2004.

In another instance, a foreign company investing in a
joint venture with a state-owned Jordanian corporation
found that the management contract for that Jordanian
SOE partner had been given to a rival without prior
consultation. With substantial support from the
Embassy, the dispute was resolved to the satisfaction
of the foreign investor.

Jordan's Legal System
--------------

In the legislative process, draft laws prepared by
various ministries are then submitted to the cabinet
and subsequently presented to the lower house of
parliament for consideration. Once passed by the lower
house, draft laws must be approved by the Senate. All
laws require royal assent and must be published in the
Official Gazette before they come into force.

According to the constitution, the judiciary is
independent of other branches of the government. In
some cases, it is susceptible to political pressure and
interference by the executive.

The constitution classifies the judiciary into three
categories: religious courts, special courts (e.g.,
Military court, Customs court, Income Tax Court) and
regular courts. Verdicts rendered by the Jordanian
judiciary are based on decisions made by a judge or a
panel of judges.

General legal provisions are incorporated within the
Civil Code, unless a separate, more specialized law
governs the nature of the specific relationship.

Commercial activities are governed by the Commercial
Code. Business contracts, such as commercial agency and
commission agency contracts, are subject to the code's
provisions. Financial papers such as checks and
promissory notes are also dealt with under the
Commercial Code.

Various provisions in the Commercial Code, the Civil
Code, and the Companies Law govern bankruptcy and
insolvency. A temporary Bankruptcy Law came into force
in 2002.

Performance Requirements/Incentives
--------------

Following Jordan's accession to the WTO, the Trade-
Related Investment Measures (TRIMS) agreement came into
force. Investment and commercial laws do not contain
any trade-restrictive investment measures and have
generally been in compliance with TRIMS.
Investment incentives take the form of income tax and
custom-duties exemptions, which are granted to both
Jordanian and foreign investors.

The country is divided into three development areas:
Zones A, B, and C. Investments in Zone C, the least
developed areas of Jordan, receive the highest level of
exemptions.
However, all agricultural, maritime transport, and
railway investments are classified as Zone C,
irrespective of location. Hotel and tourism-related
projects set up along the Dead Sea coastal area,
leisure and recreational compounds, and convention and
exhibition centers receive Zone A designations.
Qualifying industrial zones (QIZs) are zoned according
to their geographical location, unless they apply for
an exemption. The three-zone classification scheme does
not apply to nature reserves and environmental
protection areas, which are granted special
consideration.

Specifically, the Investment Promotion Law allows:

-- Exemptions from income and social services taxes of
up to ten years for projects approved by the Investment
Promotion Committee (which includes senior officials
from the Ministry of Industry and Trade, Income Tax
Department, Customs Department, the private sector, and
the Director General of the Jordan Investment Board),
in accordance with the designated zone scheme:

-- 25 percent tax exemption for Zone A
-- 50 percent tax exemptions for Zone B
-- 75 percent tax exemptions for Zone C

An additional year of these tax exemptions is granted
to projects each time they undergo expansion,
modernization, or development resulting in a 25 percent
increase in their production capacity for a maximum of
four years.

-- Capital goods are exempt from duties and taxes if
delivered within three years from the date of the
investment promotion committee's approval. The
committee may extend the three-year period if
necessary.

-- Imported spare parts related to a specific project
are exempt from duties and taxes, provided that their
value does not exceed 15 percent of the value of fixed
assets requiring spare parts. They should be imported
within ten years from a project's commencement date.

-- Capital goods used for expansion and modernization
of a project are exempt from duties and taxes, provided
they result in at least a 25 percent increase in
production capacity.

-- Hotel and hospital projects receive exemptions from
duties and taxes on furniture and supply purchases,
which are required for modernization and renewal once
every seven years.

-- Increases in the value of imported capital goods are
exempt from duties and taxes if the increases result
from higher freight charges or changes in the exchange
rate.

--In addition to the Investment Promotion Law,
additional exemptions are granted to investments within
industrial estates designated as Special Industrial
Zones.

-- Industrial projects are granted exemptions on income
and social services taxes for a two-year period.
Established industrial facilities that relocate to an
industrial estate also receive this benefit.

-- Industrial projects are granted property tax
exemptions throughout their lifetime.

-- Industrial projects are granted partial or full
exemptions from most municipality and planning fees.

To promote exports, all exporters are granted the
following incentives:

-- Net profits generated from most export revenues are
fully exempt from income tax. Exceptions include
fertilizer, phosphate, and potash exports, in addition
to exports governed by specific trade protocols and
foreign debt repayment schemes. Under the WTO, the
exemption is extended until the end of 2005 and is
expected to be extended again, on annual bases, until
the end of 2007.
-- Foreign inputs used in the production of exports are
exempt from custom duties and all additional import
fees on a reimbursable or drawback basis.
In addition, Qualifying Industrial Zone investments may
be eligible for further incentives and exemptions. For
example, in 2005 the government lowered banks'
guarantees and guest workers' work fees in all QIZ
factories. Recommendations are being considered to ease
and speed up the transport of QIZ production input and
output materials.

Foreign investors can bid for government-commissioned
research and development programs that are slated for
international or mixed bidders. Otherwise, they have to
find a Jordanian partner. This qualification will be
dropped if Jordan accedes to the WTO'S Government
Procurement Agreement (GPA),for which it submitted an
entities offer in 2004.

Investors have been hampered by a performance
requirement related to imports -- the so-called DAMAN
program -- a product conformity standards measure that
has been enforced through pre-shipment inspections. The
program has not been implemented in a transparent
manner and appears to be inconsistent with WTO
principles of national treatment and non-
discrimination. The government in 2005 exempted from
DAMAN procedures certain imports from specified "low
risk" countries (including those from the United
States) and was looking into means to reduce further
the problems with DAMAN at the end of the year.

Right to Private Ownership and Establishment
--------------

In general, the laws on investment and property
ownership permit domestic and foreign entities to
establish and own businesses and engage in remunerative
activities. However, activities relevant to military
and national security are subject to different
provisions and procedures.

Foreign companies may open representative (regional)
and branch offices; branch offices may carry out full
business activities, while regional offices may serve
as liaisons between head offices and Jordanian or
regional clients. The Ministry of Industry and Trade
manages the government's policy on setting up regional
and branch offices.

No foreign firm may import goods without appointing an
agent registered in Jordan; the agent may be a branch
office or a wholly owned subsidiary of the foreign
firm, notwithstanding the limitations on foreign
ownership in certain sectors. The agent's connection to
the foreign company must be direct, without a sub-agent
or intermediary. A Commercial Agents and Intermediaries
Law governs the contract between foreign firms and
commercial agents. It clearly delineates the
distinction between commercial agency and distribution
contracts relationships. Private foreign entities,
whether licensed under sole foreign ownership or as a
joint venture, compete on an equal basis with local
companies.

Foreign nationals and firms are permitted to own or
lease property in Jordan for investment purposes and
personal use, provided that their home country permits
reciprocal property ownership rights for Jordanians;
property intended for investment should be developed
within five years from the date of approval. Depending
on the size and location of the property, the Lands and
Surveys Department, its Director General, the Minister
of Finance or the Cabinet are the authorities that
approve foreign ownership of land and property. Foreign
companies holding a majority share in a Jordanian
company, as well as wholly owned subsidiaries,
automatically obtain national treatment with respect to
ownership of land where the company's business
objectives require (e.g., agriculture),or allow for,
ownership of land or real estate.
Protection of Property Rights
--------------

Interest in property (moveable and real) is recognized,
enforced and recorded through reliable legal processes.
The legal system facilitates and protects the
acquisition and disposition of all property rights.

Prior to its accession to the WTO, Jordan passed
several new laws to improve protection of intellectual
property rights (IPR),patents, copyrights, and
trademarks. TRIPS (Trade Related Aspects of
Intellectual Property Rights)-consistent laws now
protect trade secrets, plant varieties and
semiconductor chip designs. The law requires
registration of copyrights, patents and trademarks.
Copyrights must be registered at the National Library,
part of the Ministry of Culture. Patents must be
registered with the Registrar of Patents and trademarks
at the Ministry of Industry and Trade. Jordan has
signed the Patent Cooperation Treaty and to the
protocol relating to the Madrid Agreement Concerning
the Registration of Marks but ratification was still
pending at the end of 2005. Jordan's pharmaceutical
industry generally abides by the new TRIPS-consistent
Patent Law. In addition, in signing the FTA, Jordan
committed to even stronger enforcement of IPR,
particularly in the pharmaceutical sector. It acceded
to the World Intellectual Property Organization (WIPO)
treaties on copyrights (WCT) and performances and
phonographs (WPPT). Jordanian firms are now seeking
joint ventures and licensing agreements with
multinational partners.

Jordan's record on IPR enforcement has improved.
However, effective enforcement mechanisms and legal
procedures are still not completed and are in need of
further refinement. As a result, the government's
record on IPR protection remains mixed. A sizeable
portion of videos and software sold in the marketplace
continues to be pirated. Enforcement action against
audio/video and software piracy is growing in quantity
and improving in its targeting capability, but
successful prosecution of piracy cases remains spotty.
Government committees convened in 2005 are examining
means to provide more comprehensive protections to IPR,
including through more stringent enforcement of
existing laws.

Transparency of the Regulatory System
--------------

The government is slowly implementing policies to
improve competition and foster transparency. These
reforms aim to change an existing system that can be
influenced greatly by family affiliations and business
ties. Although in many instances bureaucratic
procedures have been streamlined, red tape and opaque
procedures still present problems for foreign and
domestic investors. The arbitrary application of
customs, tax, labor, health and other laws or
regulations, particularly at the level of local
government, have impeded investment.

In 2005, the government continued its aggressive
strategy to promote e-government. The government has
pledged to make its services, regulations, and
procurement procedures more accessible and transparent
via e-government.

Efficient Capital Markets and Portfolio Investment
-------------- --------------

Jordan's capital market capitalization reached US $41
billion at the end of Nov 2005 (around 356 percent of
GDP),breaking the record since the exchange was
established in 1978.

The Amman Financial Market (AFM) is divided among the
Jordan Securities Commission (JSC),the Amman Stock
Exchange (ASE) and the Securities Depository Center
(SDC). The SDC is the custodian for all transaction
contracts, clearing and settlement. The JSC was
established as the government's supervisory and
monitoring agency for the capital market in Jordan. The
government passed the Securities Law in 2002, which
brought it more in line with international best
practices.

There are 47 brokerage firms and 200 listed public-
shareholding companies on the ASE that cover the First
and Second markets. At the end of November 2005, shares
owned by non-Jordanians represented 45.3 percent of the
ASE market capitalization, where Arab investors own
36.4 percent and other foreigners own 8.9 percent.

The ASE also suffers from intermittent liquidity
problems, which have ensured that the bourse remains
prone to speculative movements. Structural problems
(such as lack of transparency, corporate governance,
and the dearth of mutual funds) have been exacerbated
by the insufficiency of institutional buying and
wavering investor confidence.
The Central Bank, on behalf of the Ministry of Finance,
conducts regular auctions of six-month treasury bills
and three-year treasury bonds. Treasury bonds and bills
and development bonds (equivalent to Treasury Bonds)
are listed on the ASE. . Trading volume for the first
11 month of 2005 was JD 2.2 million (US $3.1 million).
New issues for the same period reached JD 614 million
(US $866 million). The Ministry of Finance has been
issuing bonds of differing maturities since 2002. The
Central Bank also introduced a primary dealer plan
designed to increase liquidity in the secondary market,
though the program has to this point been unsuccessful
in achieving this goal. A Public Debt Law allows for an
increase in the volume of bond and bill issuance by the
Treasury.

Government bond and bill ownership is registered in
book-entry form at the Central Bank. Commercial banks
maintain sub-registries. Foreign investors are welcome
to participate in auctions and to purchase government
securities.

The corporate bond market remains under-developed, and
continues to be over-shadowed by traditional direct
lending. One reason is rigid interest rates; another
relates to the absence of a secondary market for such
issues. Increasingly, however, some banks have started
introducing new products and corporate bond issues. New
bond issues for the first 11 months of 2005 totaled JD
50.6 million (US $70.4 million),compared to JD 173
million (US $244 million) in 2004.

One flaw in the credit market is the lack of long-term
credit, owing to the short-term nature of banks'
deposit structure. On average, regular corporate loans
are extended for periods of 1-3 years, while syndicated
loans may reach up to 7 years. Long-term financing had
been stymied by the Ottoman-era law stipulating that
total interest payments over the life of a bond could
not be greater than the principal amount, thus
effectively impeding the development of longer-maturity
fixed-income instruments. However, the Public Debt law
scrapped this requirement, allowing for longer
maturities and increased volumes.

The absence of long-term credit discourages projects
requiring long development periods. As a consequence,
large investment projects often resort to foreign
markets to raise capital.

The Central Bank of Jordan (CBJ) is the banking
system's regulatory authority. Jordanian banks have
recovered from an economic slow-down of the late-1990s,
and in 2005 the CBJ estimated that non-performing loans
totaled less than 20 percent of all loans.

A banking law, which aims at improving the industry's
efficiency, came into force in 2000. The law protects
depositors' interests, diminishes money market risk,
guards against the concentration of lending, and
includes articles on new banking practices (e-commerce
and e-banking) and money laundering. The CBJ has issued
a number of circulars throughout 2003-2005 to implement
money-laundering regulations that are consistent with
the recommendations of the OECD's Financial Action Task
Force, and has recently drafted a law to codify these
regulations. Toward this end, the CBJ has established a
Financial Intelligence Unit (FIU). It also allows
market forces greater influence to encourage the
development of financial markets. In addition, the CBJ
set up a separate and independent Deposit Insurance
Corporation in late 2000 that ensures deposits of up to
JD 10,000 (US $14,000). The corporation also acts as
the liquidator of banks as directed by the CBJ.

The CBJ established a credit bureau for bounced checks
in 2001. The bureau requires banks to report on a
timely basis the names of account holders with bounced
checks. Following a third report of a bounced check,
the CBJ circulates the names of the account holders to
all banks with instructions to withhold check-books and
any other facilities for a certain period of time.
As of the end of 2004, the Arab Bank and the Housing
Bank were the two largest banks in Jordan, with total
assets of US $27.34 Billion and US $3.53 billion,
respectively. The difference between their asset bases
owes to the vast difference in their scope of
operations; the Arab Bank has a worldwide presence,
while the Housing Bank's prime focus is the local
market. Although the Central Bank distinguishes between
"investment banks" and "commercial banks", there are no
significant differences in the operations of the two.

Banks offer loans, discounted bills, and overdraft
facilities. Investment banks are not permitted to
extend overdraft facilities. The Central Bank permits
banks to extend loans and credit facilities in foreign
currency. In such cases, it requires debt repayment to
be in the denominated foreign currency.

A number of banks have established mutual funds. New
capital instruments such as commercial paper and
convertible bonds are under consideration. In addition
to long-term instruments, securitization, short-
selling, and treasury stocks are being introduced in
some banks.

Two individuals were convicted and sentenced to long
jail terms for the embezzlement of around US $120
million in February 2002, which involved some prominent
Jordanians and loans drawn from three banks. The
Central Bank took adequate action to reassure
depositors and restore calm to the market. In addition,
the sector did not suffer any significant shocks during
the 2003 war in Iraq either due to significant exposure
to trade with Iraq or to runs on bank deposits at the
outbreak of the conflict. As a result, the health of
the banking system and its resilience are not in
question. Iraqi Government assets in Jordanian banks
were frozen in early 2003 and US $250 million was
returned to the Development Fund for Iraq.

With respect to ownership and participation in the
major economic sectors in Jordan, there is no apparent
discrimination against foreign participation. In fact,
many Jordanian businesses seek foreign partners, which
are perceived as the key to increased competitiveness
and easier entry into international markets.

There are a number of internationally recognized
accounting and auditing firms in Jordan. The
government's accounting and auditing regulations are
consistent with international standards and are
internationally recognized.

Political Violence
--------------

Some incidents of political violence and terrorist
activities have occurred in Jordan, most recently the
November 9, 2005, hotel bombings in Amman and the
August rocket attack in Aqaba. The hotel bombings
targeted foreign business interests, but the attacks
were limited to the hotel industry. Other industries
with foreign business interests have remained
unaffected by political violence. While Jordan enjoys
political stability, events in the region, particularly
in the West Bank and Gaza or Iraq, can trigger small
demonstrations of anti-U.S. hostility.

The government of Jordan is proactive in maintaining
public security, containing demonstrations and
preventing terrorist attacks, and has increased its
efforts since the November 9 attacks. The potential for
politically motivated violence, however, remains.
Visitors should consult current State Department public
announcements.

Corruption
--------------

Corruption is a crime in Jordan. The General
Intelligence Directorate (GID) has an anti-corruption
department that is responsible for combating bribery,
extortion, and other similar crimes. Attempts to
establish similar, transparent entities outside the
security service so far have not been successful. A
draft financial disclosure law requiring public office
holders and specified government officials to declare
their assets is under consideration in parliament.

Influence peddling and a lack of transparency have been
alleged in government procurement and dispute
settlement. "Wasta", the use of family, business, and
other personal connections to advance personal business
interests, is endemic.

Bilateral Trade/Investment Agreements
--------------

A Free Trade Agreement (FTA) between the U.S. and
Jordan entered into force in December 2001. The
agreement mandates that a free trade area between the
two countries will be attained following a gradual
phasing out of import duties and other trade barriers
over ten years. The agreement incorporates labor,
environmental, and intellectual property rights
provisions.

A Bilateral Investment Treaty between Jordan and the
United States entered into force in 2003. The agreement
provides reciprocal protection of Jordanian and U.S.
individual and corporate investments.

Jordan is a member of a pan-Arab accord on facilitating
the movement of capital between Arab countries.
Countries that have signed the accord include Jordan,
UAE, Bahrain, Tunisia, Saudi Arabia, Iraq, Oman,
Kuwait, Libya, Egypt, Morocco, Qatar, Syria, and
Lebanon.

An economic association agreement between Jordan and
the European Union that establishes free trade over a
twelve-year period entered into force in 2002. This
agreement calls for the free movement of capital, as
well as cooperation on development and political
issues.

In 2004, Jordan signed a Free Trade Agreement with
Singapore. In the same year, Jordan completed the
Agadir trade agreement with Egypt, Morocco, and Tunisia
and upgraded its trade agreement with Israel to take
advantage of accumulation of content provisions in the
EU's Pan-Euro-Mediterranean trade rules of origin.

OPIC and Other Investment Insurance Programs
--------------

Investments in Jordan are eligible for Overseas Private
Investment Corporation (OPIC) insurance and private
financing.

Jordan is also a member of the Multilateral Investment
Guarantee Agency (MIGA),a World Bank Agency, which
guarantees investment against non-commercial risks such
as civil war, nationalization, policy changes, etc. The
program covers investments in Jordan irrespective of
the investor's nationality, in addition to covering
Jordanian investments abroad.

Several European countries have official debt-for-
equity swap programs that are open to investors of all
nationalities.

Labor
--------------

The rate of population growth (births minus deaths and
factoring in migration) is about 2.5 percent a year.
50% of the population is under the age of 20. In
general, the labor force is well educated. Literacy
rates approach 95.2 percent for men and 86.7 percent
for women. Jordan has a labor force of 1.47 million and
an unemployment rate of approximately 13.4 percent.

The officially estimated 218,000 foreign laborers in
Jordan work primarily in unskilled sectors, such as
construction, agriculture, and domestic service. They
constitute around 15 percent of the labor force. The
Ministry of Labor regulates foreign worker licensing,
licensing fees, prohibited sectors, and employer
liability. Among its responsibilities, the ministry
approves the hiring of professional foreign workers by
private businesses. Non-citizens are not permitted by
law to join unions, though the Ministry of Industry and
Trade maintains that such workers enjoy any benefits
and protections that unions obtain.

Labor unions serve primarily as intermediaries between
workers and the Ministry of Labor, and may engage in
collective bargaining on behalf of workers. In order to
strike, workers must obtain permission from the
government. Currently, there are 17 recognized unions
in Jordan, all members of the General Federation of
Jordanian Trade Unions. Estimates put union membership
at 10 percent of the labor force. In addition to the 17
unions, there are numerous professional associations
active in Jordan, many of which have mandatory
membership. While these associations occasionally take
on characteristics of traditional unions, they are
primarily political bodies. About 30 percent of the
total labor force, including government service,
belongs to either a union or a professional
association.

Article 28 of the Labor Law specifies the conditions
under which an employer can discharge a worker without
notice. Article 31 allows employers to lay off
employees if economic or technical circumstances
necessitate reorganization. The law does not require
employers to include retirement plans in their
employment package. However, if the employer agreed to
provide retirement benefits when the worker was
contracted, the employer must fulfill his/her
commitment. The Social Security Law stipulates that if
the employer has more than five employees, they must be
enrolled in the social security system. The Labor Law
also addresses worker compensation and outlines
compensatory categories for work-related injuries.
Article 67 provides unpaid maternity leave for a
maximum of one year for mothers working in firms
employing 10 or more workers, and article 70 requires
full pay for 10 weeks of maternity leave. The law
provides for 14 calendar days of annual leave for
employees during the first five years with the
employer, and 21 calendar days after five years of
successive service. This law places Jordan in
compliance with international and Arab labor
agreements.

Foreign Trade Zones/Free Trade Zones
--------------

The Zarqa Free Zone is Jordan's major free zone area.
Other areas include the Sahab Industrial Estate Free
Zone, Queen Alia International Airport Free Zone, and
the Gateway Qualifying Industrial Zone.

In May 2001, the government converted the Aqaba port
and surrounding area into a special economic zone (SEZ)
with streamlined bureaucracy, lower taxes, and
facilitated customs handling.

Both Jordanian and foreign investors are permitted to
invest with few restrictions in trade, services, and
industrial projects in free zones. Industrial projects
must fulfill one of the following conditions:

-- New industries which depend on advanced technology;

-- Industries requiring raw material and/or locally
manufactured parts that are locally available;

-- Industries that complement domestic industries;

-- Industries that enhance labor skills and promote
technical know-how;

-- Industries providing consumer goods, and that
contribute to reducing market dependency on imported
goods.

The following incentives are granted to investors in
the designated free zones:

-- Profits are exempt from income and social services
taxes for a period of twelve years, with the exception
of profits generated from storage services that involve
goods released to the domestic market.

-- Salaries and allowances payable TO non-Jordanian
employees are exempt from income and social services
taxes.

-- Goods imported to and/or exported from free zones
are exempt from import taxes and customs duties, with
the exception of goods released to the domestic market.

-- Industrial goods manufactured in free zones enjoy
partial customs duties exemption once released to the
domestic market, depending on the proportion of the
value of local inputs and locally incurred production
costs.
-- Construction projects are exempt from licensing fees
and urban property taxes.

-- Free transfer of capital invested in free zones,
including profits.

Qualifying Industrial Zones (QIZs)
--------------

Approved goods produced in a "Qualifying Industrial
Zone" (QIZ) can be imported into the United States free
of duty if they involve economic cooperation between
Jordan and Israel, and if 35 percent of the product's
content comes from the QIZ, Israel, and/or the West
Bank/Gaza. This makes investment in a QIZ particularly
attractive to industries whose products are assessed
with high tariffs when they are imported into the U.S.
There are currently 13 QIZs, three of which are
publicly owned; the remaining ten are privately owned.
As of December 2005, the bulk of QIZ exporters have
been concentrating on garment exports. Since 1999, the
QIZs have attracted US $450 million in capital
investments, generated over US $3 billion in exports to
the U.S., and created over 45,000 new jobs.

Foreign Direct Investment Statistics
--------------

Official statistics on foreign direct investment (FDI)
are not publicly available.

The UNCTAD's World Investment Report 2005 estimates FDI
inflows into Jordan at US $64 million, $424 million and
$620 million for 2002, 2003 and 2004, respectively. The
Jordan Investment Board approved foreign investment
projects worth about US $118 million, $135 million and
$381 million for the years 2003, 2004 and 2005,
respectively. The following statistics should be
interpreted as indicating trends rather than exact
figures. Note that figures may differ from previous
years due to revisions in the data series.

Total Registered Capital by Economic Sector
(USD, at year end)

2003 2004
2005
Sector
USD USD USD
Industry 1,248,747,462 1,364,111,021
1,457,367,358
28.5% 27.2%
27.7%

Trade 1,893,711,966 2,027,428,883
2,173,085,245
20.8% 21.5%
22.6%

Agriculture 132,158,940 139,435,950
159,058,638
17.6% 20.4%
25.0%

Construction 319,270,457 330,153,894
361,074,861
2.4% 2.4%
4.6%

Services 1,986,785,396 2,261,465,725
2,864,875,764
43.5% 39.3%
38.7%

Total 5,580,674,222 6,122,595,475
7,015,461,867
29.5% 28.3%
29.4%


Annual Registered Capital Inflows by Economic Sector
(USD)
2003 2004 2005
Sector
USD USD USD
Industry 28,287,210 115,363,559
93,256,337
foreign 32.5% 12.9%
35.4%
Trade 246,085,160 133,716,917
145,656,361
foreign 63.8% 32.1%
37.9%
Agriculture 2,453,517 7,277,010
19,622,688
foreign 29.0% 70.1%
58.0%

Construction 9,507,489 10,883,438
30,920,967
foreign 1.9% 2.3%
27.5%

Services 43,853,779 274,680,329
603,410,039
foreign 16.9% 8.4%
36.8%

Total 330,187,155 541,921,253
892,866,392
foreign 52.8% 15.9%
37.0%

(* The Percentage Figure Reflects the Size of Foreign
Capital to Total Capital)

(Source: Ministry of Industry and Trade)


According to these measurements, FDI Stock and FDI
Inflows as a percentage of GDP at current market prices
are:

2003 2004 2005
(Projected)
Nominal GDP (JD million) 7,203.6 8,164.4
9,062.5
Nominal GDP (USD million) 10,160.2 11,515.4
12,782.1
FDI Stock 16.2% 15.1%
16.2%
FDI Inflows 2.3% 3.3%
5.0%



Total Foreign Registered Capital by Country of Origin
(USD)
2003 2004
2005

Country of Origin

1 Jordanian 3,919,751,286 4,372,302,874
4,927,108,044
2 Saudi 297,849,168 305,292,581
413,760,056
3 Iraqi 236,166,142 268,521,749
383,145,238
4 Egyptian 214,492,076 218,804,488
230,711,540
5 Kuwaiti 147,717,267 157,184,629
173,757,265
6 UAE 144,050,071 144,399,470
168,489,738
7 Syrian 152,021,113 156,062,016
166,311,381
8 Libyan 61,393,178 61,534,221
61,745,787
9 British 45,873,961 50,087,958
57,742,401
10 Qatari 47,561,614 47,716,762
48,069,371
11 American 31,295,994 34,079,491
38,425,047
12 Indian 35,687,764 36,396,509
36,925,423
13 Lebanese 31,027,168 32,630,546
35,127,020
14 Palestinian 18,297,049 19,389,010
25,554,877
15 Sudanese 24,375,811 24,728,420
25,095,134
16 Japanese 14,221,439 16,023,977
16,063,470
17 Chinese 8,733,429 11,356,137
16,045,853
Total 5,568,621,886 6,110,711,186
7,003,854,453
(Source: Ministry of Industry and Trade)

NOTE ON PREVIOUSLY LISTED DANISH FDI:

Registration statistics issued by the Ministry of
Industry and Trade include all companies with the
exception of publicly listed companies. The statistics
on FDI differ each year because some privately held
companies are subsequently listed on the Amman Stock
Exchange. An important example is Jordan Telecom -
France Telecom invested in Jordan Telecom through a
Danish subsidiary, thus the previously reported Danish
FDI is now classified as portfolio investment and not
included in the above FDI statistics.

END TEXT OF INVESTMENT CLIMATE STATEMENT

HALE