JORDAN 2010 INVESTMENT CLIMATE STATEMENT: OPENNESS TO

UNCLAS AMMAN 000237

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SUBJECT: JORDAN 2010 INVESTMENT CLIMATE STATEMENT: OPENNESS TO
FOREIGN INVESTMENT (CORRECTED COPY)

REF: 09 STATE 124006

OPENNESS TO FOREIGN INVESTMENT
--------------


1. In the ten years since King Abdullah ascended to the throne,
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 banking, information technology,
pharmaceuticals, tourism, and services sectors. Foreign and
domestic investment laws grant specific incentives to industry;
agriculture; tourism; hospitals; transportation; and energy and
water distribution. 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 Area 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. A new
investment promotion law stalled in the parliament during 2009 but
is expected to be resubmitted once a new parliament is elected.
Jordan is still conducting negotiations on a WTO Government
Procurement Agreement and is conducting interagency consultations
with the aim to try to conclude an agreement in 2010. Jordan's
current investment laws treat foreign and local investors equally,
with the following exceptions:

-- Under the terms of the 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 services including buses or taxis.
However, the Cabinet may decide to approve projects in such
categories upon the recommendations of the Investment Promotion
Committee. The Committee 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. To qualify for exemptions, projects have
to be highly valuable to the national economy and recruit a large
number of Jordanians. The Prime Ministry deals with such
exceptional cases and provides exemptions accordingly.

-- Under the FTA, foreign investors are limited to 50 percent
ownership in printing/publishing companies 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.

-- A minimum capital requirement of JD 50,000 (USD $70,000) is set
for foreign investors. This requirement was lowered for Jordanian
businesses in 2008 to JD 1,000 (USD $1,400). This requirement does
not apply to participation in public shareholding companies.


3. Local and foreign investments are screened by JIB's Incentives
Committee. In addition, investors in large projects find that the
informal approval of local and central government officials helps to
ensure governmental cooperation in project implementation.


4. Jordanian 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 ongoing achievements in recent years in energy and
aviation. By 2008, the majority of Jordan's energy sector had been
privatized including two distribution companies - Electricity
Distribution Company (EDCO) and the Irbid District Electricity
Company (IDECO) - and one generation company, the Central
Electricity Generating Company (CEGCO). The privatization of a
second generation company, Samra Power Plant (SEPGCO),remains in
progress. The Amman East Power Plant was built and is owned and
operated by AES Jordan PSC, a consortium of AES Oasis (a subsidiary
of U.S.-based AES Corporation) and Japan-based Mitsui and Co. AES
Jordan PSC will operate the plant on a build-own-operate (BOO) basis
for 25 years. The plant project, worth $300 million, was financed
jointly by the U.S. Overseas Private Investment Corporation (OPIC),
Japan Bank of International Cooperation (JBIC),and the Sumitomo
Banking Corporation (SMBC),with International Bank for

Reconstruction and Development (IBRD) risk guarantees.


6. In early 2008, the Government of Jordan concluded the initial
public offering of national air carrier Royal Jordanian. Concurrent
with this privatization, the role of the regulatory body, the Jordan
Civil Aviation Regulatory Commission, continues to evolve with
greater separation between regulation and aviation management.
Related to this regulatory change, management of Amman's Queen Alia
International Airport was fully transferred to a private company and
the build-operate-transfer (BOT) airport expansion is well underway.



7. The number and size of future privatization projects, however,
is expected to shrink as most government assets have already been
privatized, with the small number of remaining assets, such as
Jordan Silos and Supply, eliciting little private sector interest.
The majority of future projects are expected to be public-private
partnerships (PPP) rather than pure privatization deals and the
government has changed the mandate of its privatization commission
to focus on partnerships.


8. The Executive Privatization Commission recently initiated a
medical and industrial waste project. Among the projects still
seeking investors are passenger and cargo rail, the postal system,
and the nation's refinery. The 50-year concession to the Jordan
Petroleum Refinery Company ended in March 2008, and the government
has drafted a new energy law, which is still pending, to open up the
hydrocarbon sector for local and foreign investors. This
restructuring will involve unbundling the distribution and storage
facilities and creating several new companies. The cabinet decided
in late 2009 to halt all actions pertaining to the refinery
expansion project, the concession agreement, and the naming of a
strategic partner. A ministerial committee is currently reviewing
all aspects of the refinery expansion and is expected to submit its
report to the Prime Minister before the end of January 2010. Some
U.S. companies have expressed frustration with a lack of
transparency, unexpected delays, and changing requirements during
the tendering process of several large energy PPP projects.


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) 2010 Doing Business Report, Jordan was ranked 100 out of 183
countries for the ease of doing business, up four places, but with a
ninth place ranking in the Arab world, lagged behind Saudi Arabia,
Bahrain, Israel, the UAE, Qatar, Kuwait, Oman, Tunisia, and Yemen.
Jordan received its best rankings for taxation and employment
policies. Jordan received its worst rankings for obtaining credit,
starting a business, and enforcing contracts. Jordan's 2009
Economic Freedom score is 65.4, making its economy the 51st freest
in the 2009 index. Its score has increased by 1.3 points since
2008, reflecting an increase in business freedom, trade freedom and
government size, and a decrease in freedom from corruption. It
ranked sixth out of the 17 countries in the Middle East/North Africa
region. As they would in other countries, investors should continue
to 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 USD $1.41
since 1995, and the Central Bank of Jordan (CBJ) is expected to
continue this policy.


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 without just compensation and a
just court process.

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. A small number of cases between
investors and the Jordanian government have been brought before an
ICSID tribunal in the last six years. 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.

JORDAN'S LEGAL SYSTEM
--------------


16. Members of Jordan's parliament do not have the power to write
legislation. According to Article 95 of Jordan's constitution, ten
members of the lower or upper house can propose an idea for a law.
If the majority of both houses agree, the idea is then submitted to
the government for drafting. Draft laws may be prepared by the
relevant government ministry, but in practice, the Legislative and
Opinion Bureau of the Prime Ministry drafts most legislation with
input from the appropriate bodies. Once drafted, laws are 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 upper house. All laws require royal
assent and must be published in the Official Gazette before they
come into force. "Provisional" (also referred to as "Temporary")
laws in Jordan are constitutionally permitted to be enacted by a
decision of the cabinet when the parliament is not in session or has
been dissolved. Provisional laws remain in force until parliament
reconvenes and takes further action, and retain their validity for
the time they were in force, even if they are later rejected by
parliament. The relevant ministry drafts implementing regulations
for approve legislation; regulations require cabinet approval.


17. 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. The
judiciary does not have an independent budget, and appointments to
the bench are not always done on the basis of merit.


18. 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.


19. General legal provisions are incorporated within the Civil
Code, unless a separate, more specialized law governs the nature of
the specific relationship. Commercial activities, including
business contracts and financial papers, are governed by the

Commercial Code.


20. 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. A new bankruptcy law is
expected to be presented to a new parliament once one is elected.

PERFORMANCE REQUIREMENTS/INCENTIVES
--------------


21. 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.


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


23. 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 incentives. 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.


24. 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.


25. An additional year of these tax exemptions is granted to such
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.

-- Industrial projects are granted exemptions on income and social
services taxes for a two-year period.

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

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


26. 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 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.

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
--------------


27. 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.


28. 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.


29. 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 contract relationships. Private foreign
entities, whether licensed under sole foreign ownership or as a
joint venture, compete on an equal basis with local companies.


30. Foreign nationals and firms are permitted to own or lease
property in Jordan for investment purposes and are allowed one
residence for 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
--------------


31. 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.


32. 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 National
Library, part of the Ministry of Culture, registers copyrights.
Patents are 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 domestic 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 updated laws for copyrights, trademark standards,
and customs to meet international standards. Jordanian firms now
seek joint ventures and licensing agreements with multinational
partners.


33. 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. In 2009, 2,883
violations of Jordan's current copyright law were referred to the
judiciary, which is a greater than 800% increase from 2008 and 2007
levels. Government committees are examining means to provide more
comprehensive IPR protections, including amendments to current laws
that would grant enforcement officers ex officio authority to seize
pirated items and bring cases against violators, as well as more
stringent enforcement of existing laws and the creation of an
umbrella IPR agency to coordinate government policy and enforcement
efforts.


TRANSPARENCY OF THE REGULATORY SYSTEM
--------------


34. 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 JIB has worked to
streamline the process, 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.


35. 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 261
cases and inquiries since 2003, including 66 new cases in 2009.


36. In 2009, 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,
existing and pending legislation, as well as filing complaints and
tracking traffic violations online are now available. A national
call center to answer government service-related questions was
launched in 2008.

EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT
-------------- --------------


37. The three key capital market institutions are the regulator,
the 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 has grown and shrunk
rapidly and repeatedly since 2003. Since 2008, the worldwide
financial crisis and economic slowdown reduced the market
capitalization nearly 40 percent from its record high in June 2008
of USD $57 billion. The market continued with the downward trend in
2009 with its index losing a further 8.1%. Trading volume stood at
USD $13.7 billion compared to USD $28.7 billion in 2008, a 52% drop.
Market capitalization dropped to USD $31.9 billion compared to USD
$35.9 at year end 2008, a decline of 11%.

Key Market Indicators (USD)
2008 2009
-------------- --------------
Market Capitalization 35.8 billion 31.9 billion
Market Capitalization/GDP 477% 380%
Index 2758 points 2534 points
Number of shares traded 5 billion 6 billion
Trading Volume 28.7 billion 13.7 billion
Number of brokerage firms 70 92
Number of companies on ASE 261 272
Percent of Shares owned by
- Jordanians 50.8% 51.2%
- Non-Jordanian Arabs 35.9% 33.3%
- Other Non-Jordanians 13.3% 15.5%

Source: Amman Stock Exchange


38. 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. Treasury
bonds valued at USD $2.3 billion and treasury bills valued at USD
$2.39 billion were issued in 2009. The CBJ has introduced a primary
dealer plan designed to increase liquidity in the secondary market.
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.


39. 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. However, some
banks have started introducing new products and corporate bond
issues. Corporate bonds valued at USD $417 million were issued in
2007 and 2008; but, the financial crises of late 2008 hindered any
further issues in 2009.


40. Jordanian banks, due to strict regulations on lending,
particularly mortgage lending, and limited integration with global
financial markets, were reasonably buffered against the 2008
economic crisis. However, strong trade links with the region and
rest of the world negatively affected the domestic economy. The
worldwide slowdown impacted the Jordanian economy as a whole and
banks in particular, translating into slower economic and trade
activities along with an increase in non-performing assets. Jordan
does not distinguish between "investment banks" and "commercial
banks" and the CBJ has been encouraging bank mergers. Jordan has 23
banks in total, including commercial banks, Islamic banks, and
foreign bank branches. Three new banks are expected to be licensed
to begin operations in Jordan in 2010.


41. Banks offer loans, discounted bills, and overdraft facilities.
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 off-shore, due to
Jordanian tax issues.


42. 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 (DIC) in
late 2000 that insures deposits of up to JD 10,000 (USD $14,000).
In 2008, in response to the global financial crisis, the Prime
Minister pledged that the government will guarantee all bank
deposits in Jordan - to unlimited amounts - until the end of 2009.
In December 2009, this pledge was extended through the end of 2010.
The DIC 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 the names of account holders
with bounced checks. Following the report of one 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.


43. 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 was the legal basis
for the creation of the Anti-Money Laundering Unit (AMLU),Jordan's
Financial Intelligence Unit. Jordan has no known record of major
money laundering incidents. A Middle East North Africa Financial
Action Task Force (MENAFATF) review determined that Jordan is
deficient on some key recommendations for combating money laundering
and terrorist financing. The AMLU is working on addressing the
MENAFATF recommendations.


44. 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.

COMPETITION FROM STATE-OWNED ENTERPRISES (SOEs)
-------------- --


45. In the last quarter of 2009, the GOJ and the Jordan Armed forces
decided to enter the commodities market in Jordan in order to try to
contain basic commodity prices. The new entity is expected to begin
operations during the first quarter of 2010 and will trade in basic
commodities, beginning with importing meat. GOJ officials have told
media outlets that the new entity will follow commercial methods in
setting prices by examining wholesale prices and import costs, and
adding a profit margin. Imported products will be sold in existing
government-owned commissaries. GOJ officials assert that the

state-owned entity will lower costs for consumers because
commissions for middlemen will be eliminated.

CORPORATE SOCIAL RESPONSIBILITY (CSR)
--------------


46. Corporate Social Responsibility programs in Jordan continue to
evolve and are expected to grow in 2010. The Government of Jordan
extended some benefits to firms having certain types of CRS programs
during 2009, particularly those with a CSR focus on training and
hiring Jordanian workers. For example, the Ministry of Labor
offered reduced-cost work permits for non-Jordanian workers for
every Jordanian hired by a factory. The GOJ participates in
public-private-partnerships with firms that hire Jordanians by
providing vocational education and training for Jordanian workers
and helping secure employment opportunities for those who have
completed private sector training. There are also examples of
Jordanian firms, or non-Jordanian firms operating in Jordan,
implementing CRS programs in education and the environment. One
such American firm was selected as a finalist for the 2009 Secretary
of State's Award for Corporate Excellence.

POLITICAL VIOLENCE
--------------


47. Some incidents of political violence and terrorist activities
have occurred in Jordan, including the shooting and wounding of six
people in downtown Amman in July 2008, the stabbing of a tourist in
downtown Amman in March 2008, 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 that may include 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.


48. 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
--------------


49. 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. The commission has yet to prosecute a
case to completion. Some domestic NGOs and some international
corruption watchdog groups have criticized Jordan's and the
commission's ineffectiveness. 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 a separate
anti-corruption department that is responsible for combating
bribery, extortion, and other similar crimes.


50. Influence peddling and a lack of transparency, 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 and seen by many Jordanians as simply part of the culture
and a part of doing business. In Transparency International's 2009
Corruption Perceptions Index, Jordan's rank was 49, ahead of several
European Union member states.

BILATERAL TRADE/INVESTMENT AGREEMENTS
--------------


51. 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 13 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 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. The QIZs have attracted over $987 million in capital
investments, generated over $5.6 billion in exports to the U.S.
between 2006 and 2009, and currently employ more than 33,000
workers, about one-quarter of whom are Jordanian. The bulk of QIZ
exports continues to be garments.


52. The U.S.-Jordan FTA, which entered into force in 2001 and came
into full effect in January 2010, 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, FTA rules of origin require
35 percent Jordanian content. The FTA agreement also incorporates
labor, environment, and intellectual property rights provisions.


53. 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.


54. While the U.S. remains one of Jordan's top trading partners,
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 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).


55. 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.


56. 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.
In 2009, Jordan signed a Free Trade Agreement with Canada, which
could come into effect as early as April 2010. The FTA with Canada
will eliminate all non-agricultural tariffs and most agricultural
tariffs. A similar agreement with Turkey was also signed in 2009.
The agreement with Turkey will come into effect gradually starting
in 2011.

OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
--------------


57. Investments in Jordan are eligible for Overseas Private
Investment Corporation (OPIC) insurance and private financing. All
eligible projects require a minimum of 25 percent U.S. equity. In
2008 and 2009, OPIC made significant investments in Jordanian
private equity ventures and in mortgage financing.


58. 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.


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

LABOR
--------------


60. 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 2009 population is estimated by the
Department of Statistics at 5.98 million. 59.4 percent of the
population is under the age of 30 and 37.1 percent is under the age
of 15. In general, the labor force is well educated. Literacy
rates approach 95.7 percent for men and 88.4 percent for women.
Jordan has a labor force of about 1.8 million. In 2009, the
Department of Statistics reported that unemployment was 12.9
percent, a slight increase over 2008's 12.7 percent.


61. Of the 1.8 million, there are an estimated 316,000 registered
foreign workers, a number which has fallen since 2007. Unofficial
indicators suggest that tens of thousands of foreign workers remain
unregistered. With the exception of the approximately 25,000 that
work in the QIZs as textile workers, most foreign workers work in
unskilled sectors, such as construction, agriculture, and domestic
service. 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, although the
Ministry of Industry and Trade maintains that such workers enjoy any
benefits and protections that unions obtain. In 2008, amendments
were drafted to allow full union membership for foreign workers but
they did not pass parliament. The union and the Ministry of Labor
have begun drafting a new amendment that would allow for membership
but only under certain conditions, such as requiring five years of
legal in-country work for full union membership. The textile union
provides medical and legal services to foreign workers in textile
factories, in addition to serving Jordanians. The union said it
resolved 1449 individual worker-related complaints in 2009 a major
decline from the 2,968 cases resolved in 2007.


62. 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 40 professional
associations active in Jordan, many of which have mandatory
membership. While these associations occasionally take on
characteristics of traditional unions, they more closely resemble
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.


63. 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. Article 71 provides for one hour per day of nursing leave
within a year of the date of delivery. 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. Article 65 entitles workers to 14 days of sick
leave with full pay per year, which may be renewed for another 14
days at half pay if the worker is hospitalized. With two exceptions
(the exclusion of foreigners from unions and the prohibition against
forming new unions outside of the General Federation of Jordanian
Trade Unions),the current law places Jordan in compliance with
international and Arab labor agreements.


64. Since 2006, the Government of Jordan has been reforming its
labor inspection system and in 2008 amended its labor law to expand
coverage to domestic and agricultural workers, formalize a
tripartite Labor Affairs Committee, increase fines for violations of
the labor law, and include sexual harassment provisions. Ministry
of Labor inspections have identified problems at some QIZ factories
regarding delayed payment of wages, length of overtime and physical
abuse of workers. In 2008, the Better Work Jordan program was
launched as a five-year joint project between the Ministry of Labor,
the International Labor Organization (ILO) and the International
Finance Corporation to improve labor conditions and standards and
raise compliance levels through public reporting and technical
assistance. Under the Ministry's more rigorous inspection regime,
which included the hiring and training of additional inspectors in

2008 and 2009, allegations of forced labor continued to decrease in

2009. The Ministry of Labor is encouraging businesses in Jordan to
adopt the Better Work Program and is considering making the program
mandatory for factories. The U.S. Department of Labor's Bureau of
International Labor Affairs (ILAB) included Jordan in its 2009 "List
of Goods Produced by Child Labor or Forced Labor" pursuant to the
Trafficking Victims Protection Reauthorization Acts of 2005 and
2008, indicating that ILAB had reason to believe that there were
significant instances of forced labor present in Jordan's garments
sector.

FOREIGN TRADE ZONES/FREE TRADE ZONES
--------------


65. 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.


66. 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.


67. Jordan also has public "free zones" in Zarqa, 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.


68. 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 locally available raw material and/or
locally manufactured parts;

-- 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.


69. 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.



70. The Development Zones Commission (DZC),a financially and
administratively autonomous Jordanian governmental entity under the
Development Zones Law, is responsible for creating, regulating and
monitoring five Development Zones in Jordan. Established in 2008,
DZC aims at increasing Jordan's foreign direct investment (FDI)
through creating an advanced investment environment for economic
activities in the zones. A DZC Board of Commissioners, alongside a
one-stop-shop team administers, supervises and centrally approves
investment related administrative matters, expediting all
governmental services quickly and efficiently in one location, while
providing a number of investment incentive and tax & customs
exemptions. The five DZC development areas include the King Hussein
Bin Talal Development Area (KHBTDA) in Mafraq that includes $200
million in infrastructure projects, the Ma'an Development Area, the
Irbid Development Area (IDA),the Dead Sea Development Zone, and the
Jabal Ajloun Development Zone. The commission plans to expand its
coverage and open new development areas in other regions of the
Kingdom. The Aqaba Special Economic Zone (ASEZ) was established in
2001 when the government converted the Aqaba port and surrounding
area with streamlined bureaucracy, special tax exemptions, a flat
five percent income tax, and facilitated customs handling. ASEZ has
attracted projects valued at over $8 billion in recent years, mainly
in hotel and property development.

FOREIGN DIRECT INVESTMENT STATISTICS
--------------


71. 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.


72. Foreign Direct Investment Inflows (USD Million)
Period Full Year 1-3Q
-------------- -------------- --------------
2009 not yet available 830
2008 1,957 1,775
2007 1,952 1,341
2006 3,271 2,842

Source: Central Bank of Jordan, Balance of Payments


73. The Jordan Investment Board approved projects worth about USD
$2.35 billion in 2009. The highlight of foreign investment in
Jordan for 2009 was the Yahoo-Maktoob deal. In August 2009, Yahoo
acquired Jordan's Maktoob.com, the leading online community in the
Arab world with more than 16.5 million users. Two other important
projects approved in 2009 are joint ventures between Korean
companies and Arab companies with a total investment of USD $988
million: one will establish an electronics plant and the other, a
USD $700 million power generation plant.


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

2009 2008 2007
--------------
Jordan 1,362 1,938 1,652
Foreign 991 790 1,480
Total 2,353 2,728 3,132

Source: Jordan Investment Board



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

Industry 2009 2008 2007
(Jan-Nov)
--------------

Manufacturing 210 246 44
Percent Foreign NA 28% 62%

Trade 102 150 124
Percent Foreign NA 38% 35%

Agriculture 227 130 27
Percent Foreign NA 18% 60%

Construction 28 81 167
Percent Foreign NA 4% 2%

Services 132 221 184
Percent Foreign NA 17% 30%

Total 699 828 545

Percent Foreign NA 23% 33%

Source: Companies Controller Directorate at the Ministry of Industry
and Trade, NA = data not available as of cable transmission.


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

Country 2009 2008 2007
--------------
Iraq 497 739 687
Belgium 2 670 670
Kuwait 1,896 629 615
United Arab Emirates 177 470 410
Saudi Arabia 2,273 313 306
Bahrain 615 265 265
Egypt 82 228 212
Great Britain 56 161 161
Syria 121 102 92
Lebanon 1,674 100 94
United States 121 100 92
Netherlands 43 89 89
Libya 689 65 63
Switzerland 118 56 55
India 1 44 42
Palestinian Authority 359 39 35
China 0 37 32

Source: Securities Depository Center

BEECROFT