Identifier
Created
Classification
Origin
08AMMAN146
2008-01-15 09:09:00
UNCLASSIFIED
Embassy Amman
Cable title:  

JORDAN 2008 INVESTMENT CLIMATE STATEMENT: OPENNESS TO

Tags:  EINV EFIN ETRD ELAB PGOV OPIC KTDB USTR 
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DE RUEHAM #0146/01 0150909
ZNR UUUUU ZZH
R 150909Z JAN 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 1490
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPCIM/CIMS NTDB WASHDC
UNCLAS AMMAN 000146 

SIPDIS

SIPDIS

STATE PLEASE PASS TO USTR
STATE FOR NEA/ELA AND EB/IFD/OIA
TREASURY FOR SETH BLEIWEIS

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB PGOV OPIC KTDB USTR
JO
SUBJECT: JORDAN 2008 INVESTMENT CLIMATE STATEMENT: OPENNESS TO
FOREIGN INVESTMENT

REF: 07 STATE 158802

OPENNESS TO FOREIGN INVESTMENT

UNCLAS AMMAN 000146

SIPDIS

SIPDIS

STATE PLEASE PASS TO USTR
STATE FOR NEA/ELA AND EB/IFD/OIA
TREASURY FOR SETH BLEIWEIS

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB PGOV OPIC KTDB USTR
JO
SUBJECT: JORDAN 2008 INVESTMENT CLIMATE STATEMENT: OPENNESS TO
FOREIGN INVESTMENT

REF: 07 STATE 158802

OPENNESS TO FOREIGN INVESTMENT


1. Since King Abdullah succeeded to the throne in 1999, Jordan
has taken several 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; tourism, including
conference facilities; hospitals; transportation; and
distribution of water, gas, and oil/oil derivatives using
pipelines. The laws also allow the cabinet flexibility in
offering investment incentives to other sectors.


2. 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. Investment promotion
activities have been consolidated under the Jordan Investment
Board (JIB),which provides a "one-stop shop" for investors and
is working to pass a new investment promotion law in 2008.
Jordan aims to conclude negotiations for a WTO Government
Procurement Agreement by early 2008. Jordan's current
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.
-- 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, or land transportation of passengers

and cargo using trucks, buses or taxis.
-- Under the same agreement, foreign investors are limited to 50
percent ownership in printing/publishing and in aircraft or
maritime vessel maintenance and repair services. Also under the
FTA, foreign investors are limited to 50 percent ownership in a
number of businesses and services. The most up-to-date listing
of limitations on investments is available in the FTA Annex 3.1
and may be found at the following internet address:
http://www.ustr.gov/Trade_Agreements/Bilatera l/Jordan
/Section_Index.html.


3. A minimum capital requirement of JD 50,000 (U.S. $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.


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


5. The government has engaged in an extensive privatization
program since 1999, with significant achievements in 2007 in
electricity generation and aviation. Following successful
privatizations in the telecommunications sector, government
sentiment now strongly supports privatization. The number and
size of future privatization projects, however, is expected to
shrink as most government assets have already been privatized.
The majority of future projects are expected to be public-
private partnerships rather than pure privatization deals.


6. In October 2007, the Jordanian Government completed a
significant privatization deal in the energy sector by selling
51 percent of the Central Electricity Generating Company (CEGCO)
to the newly formed Enara Company, and transferring 9 percent of
its shares to the Social Security Corporation. The government
plans to sell its remaining 55 percent of shares in the Irbid
District Electricity Company (IDECO),and 100 percent of the
Electricity Distribution Company (EDCO). Jordan has also
announced its intent to begin privatizing the As-Samra
electrical power plant.


7. Throughout 2007, the Government of Jordan made considerable
progress in privatizing its aviation sector. The national
carrier Royal Jordanian's initial public offering (IPO) began in
December 2007. 74 percent of the shares were available for

sale, with the government keeping 26 percent. The government-
owned Queen Noor Aviation College was also privatized and was
sold to the private Royal Jordanian Air Academy. Concurrent
with these privatizations, the role of the regulatory body, the
Jordan Civil Aviation Commission, is evolving. In the spring of
2007, the GOJ also accepted a build-operate-transfer (BOT) bid
for the expansion and management of Queen Alia International
Airport.


8. The Government of Jordan also intends to privatize the Jordan
Silos and Supply General Company in 2008. In addition to
completed privatization projects, deregulation is also occurring
in the energy sector. The 50-year concession to the Jordan
Petroleum Refinery Company will end in March 2008, and the
government has drafted a new energy law to open up the
hydrocarbon sector for local and foreign investors. This
restructuring will involve unbundling the distribution and
storage facilities.


9. 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. Jordan's efforts have combined to make Jordan's
investment climate more welcoming, but some large U.S. investors
have reported "hidden costs" when investing in Jordan due to
bureaucracy, red tape, vague regulations and conflicting
jurisdictions. In the World Bank's (WB) 2008 Doing Business
Report, Jordan was ranked 80th out of 178 countries for the
regulatory ease of doing business. Jordan received its best
rankings for taxation and employment policies. Jordan received
its worst rankings for enforcing contracts and starting a
business, although the WB acknowledged reform in this area.
Jordan ranked 8th out of 141 countries in inward investment
performance in 2006, according to the 2007 World Investment
Report issued by the United Nations Conference on Trade and
Development (UNCTAD). As they would in other countries,
investors should execute due diligence in exploring investment
opportunities and concluding purchases.

CONVERSION AND TRANSFER POLICIES


10. 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.


11. The Jordanian Dinar (JD) is fully convertible for all
commercial and capital transactions. The JD has been pegged to
the U.S. dollar at an exchange rate of approximately 1 JD to US
$1.41 since 1995, and the Central Bank of Jordan (CBJ) is
expected to continue this policy. NOTE: This peg may benefit
American exporters able to serve a small market. END NOTE.


12. Licensed money-exchangers are supervised by the CBJ, the
banking system?s regulatory authority, but are free to set their
own exchange rates depending on market conditions. Unlike
banks, they do not pay the CBJ commissions for exchange
transactions, giving them a competitive edge over banks.


13. 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 CBJ.
-- 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 CBJ 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



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

DISPUTE SETTLEMENT


15. 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.


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


17. 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. Another U.S. investor began to file
arbitration proceedings against the Jordanian government in
ICSID in 2007. 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:


18. In the legislative process, draft laws are prepared by
various ministries, 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.


19. 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 branch.


20. 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.


21. 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.


22. 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. NOTE:
Temporary laws in Jordan are constitutionally permitted laws
passed when parliament is not in session. They remain in force
until parliament convenes and takes further action. END NOTE.

PERFORMANCE REQUIREMENTS/INCENTIVES


23. 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.


24. Investment incentives take the form of income tax and
custom-duties exemptions, which are granted to both Jordanian
and foreign investors.


25. 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. 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.


26. Specifically, the Investment Promotion Law allows for:
-- 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 exemption for Zone B
-- 75 percent tax exemption for Zone C


27. 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.


28. To pQote 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 2015.
-- Approximately 95 percent of foreign inputs used in the
production of exports are exempt from custom duties and all
additional import fees on a drawback basis.


29. The DAMAN program - a product conformity standards measure
that had been enforced through pre-shipment inspections - ended
in September 2007.

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT


30. 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.


31. Foreign companies may open 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.



32. 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.


33. 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


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


35. Jordan has passed several new laws to comply with the FTA
and meet international commitments in protection of intellectual
property rights (IPR). Laws consistent with "Trade Related
Aspects of Intellectual Property Rights" (TRIPS) 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 the protocol relating to the Madrid
Agreement Concerning the Registration of Marks, and amended
patent and trademark laws in 2007 to enable pending ratification
of the agreements. Jordan's pharmaceutical industry generally
abides by the new TRIPS-consistent Patent Law. Jordan acceded
to the World Intellectual Property Organization (WIPO) treaties
on copyrights (WCT) and performances and phonographs (WPPT),and
has been developing new regulations to the national copyright
law to meet international standards. Jordanian firms now seek
joint ventures and licensing agreements with multinational
partners.


36. Jordan's record on IPR enforcement has improved, but more
effective enforcement mechanisms and legal procedures are still
needed. 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 frequency
and improving in its targeting capability, resulting in the
first jail sentence in 2007 for software piracy in Jordan.
Government committees are examining means to provide more
comprehensive IPR protections, including more stringent
enforcement of existing laws and creation of an umbrella IPR
agency to coordinate government policy and enforcement efforts.

TRANSPARENCY OF THE REGULATORY SYSTEM


37. The government is gradually 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 local government level, have impeded investment.


38. Jordan?s 2004 Competition Law (similar to the Antitrust Law
in the U.S.) aims to improve the Jordanian economic environment

and attract foreign investment by providing incentives for
enterprises to improve their competitiveness, protect small and
medium enterprises from restrictive anticompetitive practices,
and provide consumers with high quality products at competitive
prices. The Competition Directorate at the Ministry of Industry
and Trade monitors market performance, conducts research,
examines complaints, reports violators to the judicial system,
and investigates cases referred by the courts. The Competition
Directorate has settled 127 cases since 2004, and referred four
cases to the courts in 2007.


39. In 2007, the government continued its strategy to promote e-
government. The government has pledged to make its services,
regulations, and procurement procedures more accessible and
transparent via e-government. Implementation to date has been
slow, but programs to register businesses and to view tax
records and pending legislation online are now available.

EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT


40. The three key capital market institutions are the regulator,
Jordan Securities Commission (JSC); the exchange, the Amman
Stock Exchange (ASE); and the custodian for all transaction
contracts, clearings and settlement, the Securities Depository
Center (SDC). The government passed the most recent Securities
Law in 2002, which brought the law more in line with
international best practices. The ASE suffers from intermittent
liquidity problems, which have meant that the bourse remains
prone to speculative movements. The ASE's market capitalization
grew rapidly between 2003 and 2005, experienced a correction in
2006 but grew over one-third in 2007.

Key Market Indicators (USD)
2007 2006
Market Capitalization $40.8 billion $30.3 billion
Market Capitalization/GDP 289% 234%
Index 7519 points 5518 points
Number of shares traded 4.5 billion 4.1 billion
Trading Volume $17.22 billion $19.8 billion
Number of brokerage firms 65 61
Number of companies on ASE 245 226
% of Shares owned by
- Jordanians 52.8% 54.9%
- Non-Jordanian Arabs 35.6% 34.3%
- Other Non-Jordanians 11.6% 10.7%

Source: Amman Stock Exchange


41. The CBJ, on behalf of the Ministry of Finance, conducts
regular treasury bill auctions of differing maturities. A tap
series of one-year treasury bills is held monthly and a tap
series of three- and five-year treasury bonds is held bimonthly.
The government issues development bonds, equivalent to treasury
bonds, as necessary. All government securities are listed on
the ASE, and ownership is registered at CBJ in a book entry
format. New issues for the first 10 months of 2007 reached $2.1
billion. The CBJ has 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. Commercial banks hold
securities for their clients in a sub-account format. Foreign
investors are welcome to participate in auctions and to purchase
government securities through banks.


42. The corporate bond market remains underdeveloped, and
continues to be overshadowed by traditional direct lending. One
reason is the absence of proper mechanisms for corporate
lending. Increasingly, however, some banks have started
introducing new products and corporate bond issues. New
corporate bond issues for the first 10 months of 2007 totaled
$122.8, compared to $79 million in 2006.


43. Jordanian banks have recovered from an economic slow-down of
the late-1990s, and had excellent years in 2005, 2006, and 2007
with high profits and low default rates. The Arab Bank and the
Housing Bank are the two largest banks in Jordan, with total
market capitalization in December 2007 of $10.7 billion and $2.2
billion, respectively. The difference between their values 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. Jordan no longer distinguishes
between "investment banks" and "commercial banks." Jordan has
commercial banks, Islamic banks, and foreign bank branches.


44. Banks offer loans, discounted bills, and overdraft
facilities, and all are permitted to extend overdraft facilities
in Jordanian Dinar. 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.
The CBJ permits banks to extend loans and credit facilities in
foreign currency but only for exporting purposes. In such
cases, it requires debt repayment to be in the denominated
foreign currency. A number of banks have established mutual
funds.


45. 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
electronic banking practices and money laundering. In addition,
the CBJ set up a separate and independent Deposit Insurance
Corporation in late 2000 that insures 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 checkbooks and any other
facilities for a period of time.


46. The CBJ issued a number of circulars in 2003-2005 to
implement money-laundering regulations that are consistent with
the recommendations of the Organization of Economic Cooperation
and Development's (OECD) Financial Action Task Force. Jordan's
parliament passed an anti-money laundering bill that became law
in July 2007. The law criminalizes money laundering, and
specifies that any money or proceeds gained from any felony
offense or crimes stated in international agreements to which
Jordan is a party are subject to the provisions of the law. The
law is also the legal basis for the creation of the Anti-Money
Laundering Unit, Jordan's Financial Intelligence Unit. Jordan
has no record of major money laundering incidents.


47. 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


48. Some incidents of political violence and terrorist
activities have occurred in Jordan, including the shooting to
death of a tourist in downtown Amman in September 2006, the
November 2005 hotel bombings in Amman, and the August 2005
rocket attack on a U.S. Navy ship in Aqaba. The hotel bombings
targeted foreign business interests specific 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 demonstrations of anti-
U.S. hostility. The assassination of American diplomat Larry
Foley outside his west Amman residence on October 28, 2002 was
attributed to former Al Qaida in Iraq leader Abu Mus'ab Al-
Zarqawi, who was killed in Iraq in June 2006.


49. The Government of Jordan is proactive in maintaining public
security, containing demonstrations and preventing terrorist
attacks, and has increased its efforts since the November 2005
hotel bombings. The potential for politically motivated
violence, however, remains. Visitors should consult current
State Department public announcements.

CORRUPTION


50. Corruption is a crime in Jordan. In September 2006,
parliament approved a financial disclosure law requiring public
office holders and specified government officials to declare
their assets. Parliament also enacted an Anti-Corruption Law in
2006 that created a commission, reporting to the Prime Minister,
to investigate allegations of corruption. Jordan's law defines
corruption as any act that violates official duties, and all
acts related to favoritism and nepotism that could deprive
others from their legitimate rights, as well as economic crimes
and misuse of power. The General Intelligence Directorate (GID)
also 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.


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

BILATERAL TRADE/INVESTMENT AGREEMENTS


52. In 1996, the U.S. Congress established the "Qualifying
Industrial Zone" (QIZ) initiative to support the Middle East
peace process. Under this agreement, goods produced in the
thirteen designated QIZs in Jordan can be imported into the
United States tariff- and quota-free if 35 percent of the
product's content comes from the QIZ, Israel, and the West
Bank/Gaza. Of that 35 percent, a minimum 11.7 percent must be
added in the QIZ, eight percent in Israel, and 15.3 percent in
either a Jordanian QIZ, Israel, 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. As of December 2007, the bulk of QIZ
exports have been garments. Since 1999, the QIZs have attracted
over $450 million in capital investments, generated about $4
billion in exports to the U.S., and created over 55,000 new
jobs, of which about 15,000 are held by Jordanians and 57% by
Jordanian women.


53. The U.S.-Jordan FTA, which entered into force in 2001, does
not supersede or eliminate the QIZ initiative. Whereas the QIZ
agreement grants immediate duty- and quota-free access to the
U.S. for goods produced in the QIZs that meet certain rules of
origin, the FTA mandates a gradual phasing out of import duties
and other trade barriers by 2010. FTA rules of origin require
35 percent Jordanian content. The agreement incorporates labor,
environmental, and intellectual property rights provisions.


54. 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.


55. While the U.S. remains Jordan's top trading partner, Jordan
maintains an active trade relationship with neighboring
countries, and has been actively pursuing enhanced trade
arrangements globally. Jordan is a member of the Greater Arab
Free Trade Area (GAFTA),which has been in force since 1998.
The GAFTA reached full trade liberalization of goods in January
2005 through full exemption of customs duties and charges for
all 17 Arab members, with the exception of gradual reductions
for Sudan and Yemen which are expected to benefit from full
exemption by the end of 2010. Jordan has also signed several
trade preference agreements and bilateral free trade agreements
with Arab countries, including Egypt, Syria, Morocco, Tunisia,
the UAE, Algeria, Lebanon, the Palestinian Authority, Kuwait,
Sudan, and Bahrain. The bilateral agreements are generally
applied in parallel to the GAFTA, with the GAFTA often providing
more trade preferences than most of the bilateral trade
agreements (see www.mit.gov.jo for more information).


56. An economic association agreement between Jordan and the
European Union (EU) entered into force in 2002 to establish free
trade over a twelve-year period. This agreement calls for the
free movement of capital, as well as cooperation on development
and political issues. Jordan also signed a Free Trade Area
Agreement in 2001 with the European Free Trade Association
(EFTA) states (Iceland, Liechtenstein, Norway and Switzerland),
which aims for complete trade liberalization by 2014.


57. In 2004, Jordan signed a Free Trade Agreement with
Singapore. In addition to enhancing bilateral trade ties, the
agreement aimed to create new export opportunities for Jordanian
products worldwide through the possibility of diagonal
accumulation of origin with countries that have concluded free
trade agreements with both Jordan and 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.
Jordan is also considering free trade agreements with several
other nations, including Turkey and Canada.

OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS


58. Investments in Jordan are eligible for Overseas Private

Investment Corporation (OPIC) insurance and private financing.


59. Jordan is 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.


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

LABOR


61. The rate of population growth (births minus deaths and
factoring in migration) is about 2.5 percent a year, based on
the most recent census in 2004. The 2007 population is
estimated by the Department of Statistics at 5.7 million. 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
about 1.5 million and an unemployment rate that hovers between
approximately 13 and 15 percent. In November 2007, the
Department of Statistics reported a 13.1 percent unemployment
rate.


62. There are an estimated 313,000 foreign laborers in Jordan.
With the exception of the approximate 36,600 that work in the
QIZs as textile workers, most foreign workers work primarily in
unskilled sectors, such as construction, agriculture, and
domestic service. There are also unofficial indicators which
suggest tens of thousands of unregistered foreign workers. 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 the current law to join unions,
though the Ministry of Industry and Trade maintains that such
workers enjoy any benefits and protections that unions obtain.
A new draft labor law includes provisions to allow foreigners to
join established unions.


63. Labor unions serve primarily as intermediaries between
workers and the Ministry of Labor, and may engage in collective
bargaining on behalf of workers. 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. According to
official figures, about 30 percent of the total labor force,
including government workers, belongs to either a union or a
professional association.


64. 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 national 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. With the
exception of foreigners not being allowed to join unions and the
restriction on forming new unions outside of the General
Federation of Jordanian Trade Union, the current law places
Jordan in compliance with international and Arab labor
agreements.


65. Since 2006, the Government of Jordan has been reforming its
labor inspection system and drafted a new labor law that will
more clearly address issues such as compensation for overtime,
salary deductions allowed for housing and meals, and punishment
for illegal labor practices by employers. Ministry of Labor

(MoL) inspections have recently identified problems at some QIZ
factories regarding delayed payment of wages, length of overtime
and physical abuse of workers. Under MoL's more rigorous
inspection regime, allegations of forced labor in 2007 decreased
substantially.

FOREIGN TRADE ZONES/FREE TRADE ZONES


66. As part of Jordan's efforts to foster economic development
and enhance the investment climate, the government has created
geographically demarcated, policy-favored commercial zones,
including industrial estates, free zones, and special economic
zones. The goal is to encourage "clustering" among related
firms within an industry and linkages to other industries. Some
of these zones overlap or have multiple designations.


67. The semi-governmental Jordan Industrial Estates Corporation
(JIEC) currently owns five public industrial estates in Irbid,
Karak, Aqaba, Amman, and Ma'an. There are also several
privately-run industrial parks in Jordan, including al-Mushatta,
al-Tajamouat, al-Dulayl, Cyber City, al-Qastal, Jordan Gateway,
and al-Hallabat. These estates provide basic infrastructure
networks for a wide variety of manufacturing activities,
reducing the cost of utilities and providing cost-effective land
and factory buildings. Investors in the estates also receive
various exemptions, including a two-year exemption on income and
social services taxes, total exemptions from building and land
taxes, and exemptions or reductions on most municipalities?
fees.


68. Jordan also has public "free zones" (FZs) in Zarka, Sahab,
Karak, Karama, and Queen Alia Airport that are run by the
publicly-owned Free Zone Corporation (FZC). Over 30 private
free zones have also been designated, which are administered by
private companies under the supervision of the FZC. Considered
outside the Jordan Customs jurisdiction, the free zones provide
a duty- and tax-free environment designed for the storage of
goods transiting Jordan.


69. 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.


70. 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.


71. Jordan has established four Special Economic Zones which all
aim to alleviate poverty and create jobs in impoverished areas
of Jordan through development of industrial centers supported by
logistics, transport, utilities, and information technology
services. In May 2001, the government converted the Aqaba port
and surrounding area into the Aqaba Special Economic Zone (ASEZ)
with streamlined bureaucracy, special tax exemptions, a flat
five percent income tax, and facilitated customs handling. ASEZ
has attracted over U.S. $2 billion in foreign direct investment
in recent years, mainly in hotel and property development. In
November 2006, Jordan created the King Hussein Bin Talal
Economic Zone in the city of Mafraq. Plans for the Mafraq zone
aim to create 29,000 jobs by 2025 through a focus on industrial

activities, supported by logistics and transit services. The
Irbid Economic Zone was launched in May 2007 as a healthcare,
education, and information technology free zone in the northern
city of Irbid. Its proximity to the campus of the Jordan
University for Science and Technology (JUST) encourages
partnerships between the firms in the zone and the university
students. In September 2007, King Abdullah launched the fourth
Economic Development Zone in Ma'an, a governorate 210 kilometers
south of the capital, which will include infrastructure projects
estimated at U.S. $200 million.

FOREIGN DIRECT INVESTMENT STATISTICS


72. Jordan does not maintain official detailed statistics of
FDI. Aggregate inflows tracked by the Central Bank give an
indication of the overall volume, while registered capital and
projects that benefit from the Investment Promotion Law give an
indication of the break down of FDI by source and market
segment.


73. The Jordan Investment Board approved foreign investment
projects worth about $390 million, $1.2 billion and $1.48
billion for the years 2005, 2006 and 2007, respectively.


74. Foreign Direct Investment Inflows
Period USD Million
-------------- --------------
2007 1-3Q 1,021
2006 1-3Q 2,806
2005 1-3Q 1,917
2006 3,224
2005 1,777

Source: Central Bank of Jordan, Balance of Payments



75. New Projects under the Investment Promotion Law by
Geographical Area (in USD Million)

2007 2006 2005
Jordan 1,652 1,393 677
Arab 764 1,091 290
U.S. and Canada 126 30 16
Europe 56 13 55
Other 534 58 19

Total 3,132 2,585 1,056

Source: Jordan Investment Board



76. New Registered Capital by Industry (in USD Million)

Industry 2007 2006 2005

Manufacturing 44 144 81
Percent Foreign 62% 35% 43%

Trade 124 109 129
Percent Foreign 35% 47% 36%

Agriculture 27 110 9
Percent Foreign 60% 49% 67%

Construction 167 24 35
Percent Foreign 2% 23% 19%

Services 184 291 822
Percent Foreign 30% 34% 43%


Total 545 678 1,075
Percent Foreign 33% 39% 42%

Source: Companies Controller Directorate at the Ministry of
Industry and Trade



77. Registered Capital Stock at Year-End by Country (in USD
Million)

Country 2007 2006 2005

Iraq 667 569 470
Kuwait 583 566 461

Denmark 470 470 399
United Arab Emirates 300 279 273
Saudi Arabia 283 263 253
Egypt 214 199 176
Belgium 202 202 201
Bahrain 160 131 120
United Kingdom 149 145 136
Lebanon 93 86 82
Syria 92 83 73
Netherlands 89 88 88
United States 84 78 72
Switzerland 55 55 52
Palestinian Authority 44 41 40
India 40 40 38
Libya 39 39 38
Canada 33 31 27
China 32 28 24

Source: Companies Controller Directorate at the Ministry of
Industry and Trade

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