This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 14 AMMAN 000303 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA - JN HATCHER, P BROWN 
STATE PASS TO USTR 
USDOC/CIMS NTDB WASHDC 
 
E.O. 12958:  N/A 
TAGS: EINV EFIN ETRD KTDB JO OPIC USTR
SUBJECT: JORDAN - INVESTMENT CLIMATE STATEMENT, 2006 
 
REF: 05 STATE 201904 
 
¶1. In response to reftel request, post submits the 
Investment Climate Statement for 2006 for Jordan.  As 
requested, post will also send a copy of the ICS via email 
to EB/IFD/OIA. 
 
BEGIN TEXT OF INVESTMENT CLIMATE STATEMENT, JORDAN: 
 
Jordan 
 
2006 Investment Climate Statement - Jordan 
 
Openness to Foreign Investment 
------------------------------ 
 
Since King Abdullah II succeeded to the throne in 1999, 
Jordan has taken steps to encourage foreign investment 
and realize the vision of transforming Jordan into an 
outward-oriented, market-based economy competitive in 
the global marketplace. Key reforms have been 
undertaken in the information technology, 
pharmaceuticals, tourism, and services sectors. Foreign 
and domestic investment laws grant specific incentives 
to industry, agriculture, hotels, hospitals, maritime 
and rail transportation. Leisure and recreation 
projects, convention and exhibition centers, 
transportation and distribution of water, gas, and 
oil/oil derivatives using pipelines were added to this 
list. The laws also allow the cabinet flexibility in 
offering investment incentives to other sectors. 
 
Jordan acceded to the World Trade Organization (WTO) in 
April 2000. In addition, a U.S.-Jordan Free Trade 
Agreement (FTA) entered into force on December 17, 
¶2001. In May 2001, the government converted the Aqaba 
port and surrounding area into a special economic zone 
(SEZ) offering special incentives to investors (see 
below). The government is revamping the investment 
promotion system in Jordan. It is re-examining 
investment incentives, with the consolidation of all 
investment promotion activities under a renewed Jordan 
Investment Board (JIB), while investment development 
would fall under a "Jordanian Agency for Economic 
Development (JAED)" that was just getting off the 
ground at the end of 2005. These developments will 
likely lead to expanded investment opportunities in 
Jordan for U.S. investors. 
 
Jordan's investment laws treat foreign and local 
investors equally, with the following exceptions (as 
per regulation No. 54 of 2000, entitled "Non Jordanian 
Investments Promotion Regulation"): 
 
-- Under the terms of the U.S.-Jordan FTA, ownership of 
periodical publications is restricted to Jordanian 
natural persons or Jordanian juridical entities wholly 
owned by Jordanians. 
 
-- Under the same agreement, foreign investors are 
limited to 60 percent ownership in printing/publishing 
and in aircraft or vessel maintenance and repair 
services. 
 
-- Also under the FTA, foreign investors are limited to 
50 percent ownership in the following businesses and 
services: 
 
Architectural services 
Engineering Services 
Urban planning and landscape architectural services 
Leasing or rental services relating to other machinery 
and 
   equipment(excluding engines and turbines) 
Advertising Services 
Geo-technical testing 
Placement and supply services of personnel 
Related scientific and technical consulting services 
(part of CPC 
   8675), excluding prospecting, surveying, 
exploration, 
   Exploitation and map making. 
Motion picture and video- tape production and 
distribution 
   services 
Motion pictures projection services 
Sound recording 
General Construction Work for Buildings 
General Construction Work for Civil Engineering 
Installation and Assembly work 
Building Completion and Finishing Work 
   excluding site preparation work for mining 
Wholesale Trade (Except wholesale trade of firearms or 
pharmaceuticals) 
Retailing Services (Except retail trade of 
pharmaceuticals) 
Franchising 
Refuse Disposal Services: Collection and treatment of 
solid waste 
   services (part of CPC 9402) excluding collection and 
treatment 
   of hazardous waste. 
Agency services 
Hotel and Motel Lodging services, excluding casinos 
Meal serving services with full restaurant services 
Meal serving services in Self-serving facilities 
(cafeterias) 
Beverage serving services for consumption on the 
premises, 
   excluding casinos 
Air catering services 
Travel agencies and tour operators 
Passenger transportation 
Freight transportation 
Rental services of sea-going vessels with operator 
Storage and warehousing services 
Shipping agents 
Maritime freight forwarding services 
Food supply catering 
Rental of vessels with crew 
Maintenance and repair of vessels 
Pushing and towing services 
Computer reservations systems 
Freight forwarding services 
Packing, crating and de-packing 
Freight inspection services, excluding pre-shipment 
inspection for 
   customs valuation purposes on imports 
 
The FTA Annex 3.1 has a complete listing of limitations 
on investments and may be found at the following 
internet address: 
http://www.ustr.gov/Trade_Agreements/Bilatera l/Jordan/S 
ection_Index.html 
 
Foreign investors may not have whole or partial 
ownership of: 
 
-- Investigation and security services; 
 
-- Sports clubs (except for health clubs); 
 
-- Stone quarrying for construction purposes; 
 
-- Customs clearance services; and, 
 
-- Land transportation of passengers and cargo using 
trucks, buses and taxis. 
 
A minimum capital requirement of JD 50,000 (US $70,000) 
is set for foreign investors. This requirement does not 
apply to participation in public shareholding 
companies. 
 
There is no formal screening or host government 
selection process for foreign investment. However, 
investors in large projects find that the informal 
approval of local and central government officials 
helps to ensure governmental cooperation in project 
implementation. 
 
The law stipulates that expropriation is prohibited 
unless deemed in the public interest. It provides for 
fair compensation to the investor in convertible 
currency. 
 
The government plans to accelerate and broaden the 
privatization program. As regards the power sector, the 
Jordanian Government has created separate generation, 
transmission, and distribution companies (CEGCO, IDCECO 
and EDCO) and has established an effective regulatory 
body for the industry. A new electricity law has been 
passed paving the way for the privatization of the 
sector through a new regulatory and tariff regime. 
 
The GOJ sold its remaining 14.3% stake of the Jordan 
Cement Factories Company to the social security 
corporation in February 2002. In 2000, the GOJ sold 40% 
of Jordan Telecom shares to JITCO, an 88% France 
Telecom owned company. The GOJ sold an additional 10.5% 
of Jordan Telecom shares via an initial public offering 
(IPO) in October 2002. In October 2003, the GOJ sold 
half of its 52% stake in the Arab Potash Company to a 
strategic Canadian partner. The Government is committed 
to hold its remaining 26% in the company until the end 
of 2006, when it may arrange to sell the balance of its 
shares. The government continues to consider its 
options in the privatization of Royal Jordanian (RJ) 
Airline's operating division. The government concluded 
the sale of 80 percent of RJ's aircraft maintenance 
division. RJ's engine overhaul facility is also for 
sale. In addition, the government is conducting a study 
of the Jordan Civil Aviation Authority with the goal of 
privatizing all but its core regulatory functions. Non- 
core areas likely to be sold off or put under private 
management in the medium term include all three civil 
airports, an aviation services training school, and an 
airport hotel. 
 
Jordan has also announced that it intends to sell a 
majority stake as well as management control in the 
Jordan Phosphate Mines Company. A management contract 
for the handling of the container terminal in the port 
of Aqaba was signed with a Danish company in March 2004 
and a tender for a 25-year contract is under review. An 
international consortium has arranged to develop a 400 
km gas-pipeline from Aqaba to Syria on a BOO basis, to 
be completed in early 2006. The postal service has been 
transformed into a public shareholding company pending 
its eventual privatization. The Government expects to 
conclude major privatization deals in 2006 in the 
electricity generation and distribution sectors and the 
Phosphate company. The government also expects to sell 
its remaining shares in Jordan Telecom (about 42% of 
the company) in early 2006, and other investments 
managed by Jordan Investment Corporation. 
 
While these efforts have combined to make Jordan's 
investment climate more welcoming, some large U.S. 
investors have reported "hidden costs" when investing 
in Jordan due to bureaucracy, red tape, vague 
regulations and conflicting jurisdictions. As they 
would in other countries, investors should execute due 
diligence in exploring investment opportunities and 
concluding purchases. 
 
Conversion and Transfer Policies 
-------------------------------- 
 
Jordan's liberal foreign exchange law entitles foreign 
investors to remit abroad, in a fully convertible 
foreign currency, foreign capital invested, including 
all returns, profits, and proceeds arising from the 
liquidation of investment projects. Non-Jordanian 
administrative and technical employees are permitted to 
transfer their salaries and compensation abroad. 
 
The Jordanian Dinar is fully convertible for all 
commercial and capital transactions. The JD is pegged 
to the U.S. dollar at an exchange rate of approximately 
1 JD to US $1.41. 
 
Licensed money-exchangers are supervised by the central 
bank, but are free to set their own exchange rates 
depending on market conditions. Unlike banks, they do 
not pay the central bank commissions for exchange 
transactions, giving them a competitive edge over 
banks. 
 
Other foreign exchange regulations include: 
 
--Non-residents are allowed to open bank accounts in 
foreign currencies. These accounts are exempted from 
all transfer-related commission fees charged by the 
central bank. 
 
-- Banks are permitted to purchase an unlimited amount 
of foreign currency from their clients in exchange for 
JD on a forward basis. Banks are permitted to engage in 
reverse operations involving the selling of foreign 
currency in exchange for JD on a forward deal basis for 
the purpose of covering the value of imports. 
 
-- There are no restrictions on the amount of foreign 
currency that residents may hold in bank accounts, and 
there are no ceilings on the amount residents are 
permitted to transfer abroad. 
 
-- Banks do not require prior central bank approval for 
the transfer of funds, including investment-related 
transfers, although stricter measures are now in place 
to monitor bank wire transfers to boost Jordan's 
ability to participate in the global fight against 
illicit financial flows. 
 
Expropriation and Compensation 
------------------------------ 
 
There are no known cases where the government has 
expropriated the private property of an investor. 
Dispute Settlement 
------------------ 
 
Under Jordanian law, foreign investors may seek third 
party arbitration or an internationally recognized 
settlement of disputes. The Jordanian government 
recognizes decisions issued by the International Center 
for the Settlement of Investment Disputes (ICSID), of 
which it is a member. Jordan is also a member of the 
New York Convention of 1958 on the recognition and 
enforcement of foreign arbitral awards. In cases where 
the government (or its agencies) is a party to the 
dispute, it generally prefers settlement in local 
courts if an out-of-court settlement is not 
forthcoming. Jordan abides by WTO dispute settlement 
mechanisms. Dispute settlement mechanisms under the FTA 
are consistent with WTO commitments. 
 
Article IX of the Bilateral Investment Treaty (BIT), 
establishes procedures for dispute settlement. 
 
A dispute between a U.S. investor and the Jordanian 
government that was brought before an ICSID tribunal in 
2002 was settled in May 2004. 
 
In another instance, a foreign company investing in a 
joint venture with a state-owned Jordanian corporation 
found that the management contract for that Jordanian 
SOE partner had been given to a rival without prior 
consultation. With substantial support from the 
Embassy, the dispute was resolved to the satisfaction 
of the foreign investor. 
 
Jordan's Legal System 
--------------------- 
 
In the legislative process, draft laws prepared by 
various ministries are then submitted to the cabinet 
and subsequently presented to the lower house of 
parliament for consideration. Once passed by the lower 
house, draft laws must be approved by the Senate. All 
laws require royal assent and must be published in the 
Official Gazette before they come into force. 
 
According to the constitution, the judiciary is 
independent of other branches of the government. In 
some cases, it is susceptible to political pressure and 
interference by the executive. 
 
The constitution classifies the judiciary into three 
categories: religious courts, special courts (e.g., 
Military court, Customs court, Income Tax Court) and 
regular courts. Verdicts rendered by the Jordanian 
judiciary are based on decisions made by a judge or a 
panel of judges. 
 
General legal provisions are incorporated within the 
Civil Code, unless a separate, more specialized law 
governs the nature of the specific relationship. 
 
Commercial activities are governed by the Commercial 
Code. Business contracts, such as commercial agency and 
commission agency contracts, are subject to the code's 
provisions. Financial papers such as checks and 
promissory notes are also dealt with under the 
Commercial Code. 
 
Various provisions in the Commercial Code, the Civil 
Code, and the Companies Law govern bankruptcy and 
insolvency. A temporary Bankruptcy Law came into force 
in 2002. 
 
Performance Requirements/Incentives 
----------------------------------- 
 
Following Jordan's accession to the WTO, the Trade- 
Related Investment Measures (TRIMS) agreement came into 
force. Investment and commercial laws do not contain 
any trade-restrictive investment measures and have 
generally been in compliance with TRIMS. 
Investment incentives take the form of income tax and 
custom-duties exemptions, which are granted to both 
Jordanian and foreign investors. 
 
The country is divided into three development areas: 
Zones A, B, and C. Investments in Zone C, the least 
developed areas of Jordan, receive the highest level of 
exemptions. 
However, all agricultural, maritime transport, and 
railway investments are classified as Zone C, 
irrespective of location. Hotel and tourism-related 
projects set up along the Dead Sea coastal area, 
leisure and recreational compounds, and convention and 
exhibition centers receive Zone A designations. 
Qualifying industrial zones (QIZs) are zoned according 
to their geographical location, unless they apply for 
an exemption. The three-zone classification scheme does 
not apply to nature reserves and environmental 
protection areas, which are granted special 
consideration. 
 
Specifically, the Investment Promotion Law allows: 
 
-- Exemptions from income and social services taxes of 
up to ten years for projects approved by the Investment 
Promotion Committee (which includes senior officials 
from the Ministry of Industry and Trade, Income Tax 
Department, Customs Department, the private sector, and 
the Director General of the Jordan Investment Board), 
in accordance with the designated zone scheme: 
 
-- 25 percent tax exemption for Zone A 
-- 50 percent tax exemptions for Zone B 
-- 75 percent tax exemptions for Zone C 
 
An additional year of these tax exemptions is granted 
to projects each time they undergo expansion, 
modernization, or development resulting in a 25 percent 
increase in their production capacity for a maximum of 
four years. 
 
-- Capital goods are exempt from duties and taxes if 
delivered within three years from the date of the 
investment promotion committee's approval. The 
committee may extend the three-year period if 
necessary. 
 
-- Imported spare parts related to a specific project 
are exempt from duties and taxes, provided that their 
value does not exceed 15 percent of the value of fixed 
assets requiring spare parts. They should be imported 
within ten years from a project's commencement date. 
 
-- Capital goods used for expansion and modernization 
of a project are exempt from duties and taxes, provided 
they result in at least a 25 percent increase in 
production capacity. 
 
-- Hotel and hospital projects receive exemptions from 
duties and taxes on furniture and supply purchases, 
which are required for modernization and renewal once 
every seven years. 
 
-- Increases in the value of imported capital goods are 
exempt from duties and taxes if the increases result 
from higher freight charges or changes in the exchange 
rate. 
 
--In addition to the Investment Promotion Law, 
additional exemptions are granted to investments within 
industrial estates designated as Special Industrial 
Zones. 
 
-- Industrial projects are granted exemptions on income 
and social services taxes for a two-year period. 
Established industrial facilities that relocate to an 
industrial estate also receive this benefit. 
 
-- Industrial projects are granted property tax 
exemptions throughout their lifetime. 
 
-- Industrial projects are granted partial or full 
exemptions from most municipality and planning fees. 
 
To promote exports, all exporters are granted the 
following incentives: 
 
-- Net profits generated from most export revenues are 
fully exempt from income tax. Exceptions include 
fertilizer, phosphate, and potash exports, in addition 
to exports governed by specific trade protocols and 
foreign debt repayment schemes. Under the WTO, the 
exemption is extended until the end of 2005 and is 
expected to be extended again, on annual bases, until 
the end of 2007. 
-- Foreign inputs used in the production of exports are 
exempt from custom duties and all additional import 
fees on a reimbursable or drawback basis. 
In addition, Qualifying Industrial Zone investments may 
be eligible for further incentives and exemptions. For 
example, in 2005 the government lowered banks' 
guarantees and guest workers' work fees in all QIZ 
factories. Recommendations are being considered to ease 
and speed up the transport of QIZ production input and 
output materials. 
 
Foreign investors can bid for government-commissioned 
research and development programs that are slated for 
international or mixed bidders. Otherwise, they have to 
find a Jordanian partner. This qualification will be 
dropped if Jordan accedes to the WTO'S Government 
Procurement Agreement (GPA), for which it submitted an 
entities offer in 2004. 
 
Investors have been hampered by a performance 
requirement related to imports -- the so-called DAMAN 
program -- a product conformity standards measure that 
has been enforced through pre-shipment inspections. The 
program has not been implemented in a transparent 
manner and appears to be inconsistent with WTO 
principles of national treatment and non- 
discrimination. The government in 2005 exempted from 
DAMAN procedures certain imports from specified "low 
risk" countries (including those from the United 
States) and was looking into means to reduce further 
the problems with DAMAN at the end of the year. 
 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
In general, the laws on investment and property 
ownership permit domestic and foreign entities to 
establish and own businesses and engage in remunerative 
activities. However, activities relevant to military 
and national security are subject to different 
provisions and procedures. 
 
Foreign companies may open representative (regional) 
and branch offices; branch offices may carry out full 
business activities, while regional offices may serve 
as liaisons between head offices and Jordanian or 
regional clients. The Ministry of Industry and Trade 
manages the government's policy on setting up regional 
and branch offices. 
 
No foreign firm may import goods without appointing an 
agent registered in Jordan; the agent may be a branch 
office or a wholly owned subsidiary of the foreign 
firm, notwithstanding the limitations on foreign 
ownership in certain sectors. The agent's connection to 
the foreign company must be direct, without a sub-agent 
or intermediary. A Commercial Agents and Intermediaries 
Law governs the contract between foreign firms and 
commercial agents. It clearly delineates the 
distinction between commercial agency and distribution 
contracts relationships. Private foreign entities, 
whether licensed under sole foreign ownership or as a 
joint venture, compete on an equal basis with local 
companies. 
 
Foreign nationals and firms are permitted to own or 
lease property in Jordan for investment purposes and 
personal use, provided that their home country permits 
reciprocal property ownership rights for Jordanians; 
property intended for investment should be developed 
within five years from the date of approval. Depending 
on the size and location of the property, the Lands and 
Surveys Department, its Director General, the Minister 
of Finance or the Cabinet are the authorities that 
approve foreign ownership of land and property. Foreign 
companies holding a majority share in a Jordanian 
company, as well as wholly owned subsidiaries, 
automatically obtain national treatment with respect to 
ownership of land where the company's business 
objectives require (e.g., agriculture), or allow for, 
ownership of land or real estate. 
Protection of Property Rights 
----------------------------- 
 
Interest in property (moveable and real) is recognized, 
enforced and recorded through reliable legal processes. 
The legal system facilitates and protects the 
acquisition and disposition of all property rights. 
 
Prior to its accession to the WTO, Jordan passed 
several new laws to improve protection of intellectual 
property rights (IPR), patents, copyrights, and 
trademarks. TRIPS (Trade Related Aspects of 
Intellectual Property Rights)-consistent laws now 
protect trade secrets, plant varieties and 
semiconductor chip designs. The law requires 
registration of copyrights, patents and trademarks. 
Copyrights must be registered at the National Library, 
part of the Ministry of Culture. Patents must be 
registered with the Registrar of Patents and trademarks 
at the Ministry of Industry and Trade. Jordan has 
signed the Patent Cooperation Treaty and to the 
protocol relating to the Madrid Agreement Concerning 
the Registration of Marks but ratification was still 
pending at the end of 2005. Jordan's pharmaceutical 
industry generally abides by the new TRIPS-consistent 
Patent Law. In addition, in signing the FTA, Jordan 
committed to even stronger enforcement of IPR, 
particularly in the pharmaceutical sector. It acceded 
to the World Intellectual Property Organization (WIPO) 
treaties on copyrights (WCT) and performances and 
phonographs (WPPT). Jordanian firms are now seeking 
joint ventures and licensing agreements with 
multinational partners. 
 
Jordan's record on IPR enforcement has improved. 
However, effective enforcement mechanisms and legal 
procedures are still not completed and are in need of 
further refinement. As a result, the government's 
record on IPR protection remains mixed. A sizeable 
portion of videos and software sold in the marketplace 
continues to be pirated. Enforcement action against 
audio/video and software piracy is growing in quantity 
and improving in its targeting capability, but 
successful prosecution of piracy cases remains spotty. 
Government committees convened in 2005 are examining 
means to provide more comprehensive protections to IPR, 
including through more stringent enforcement of 
existing laws. 
 
Transparency of the Regulatory System 
------------------------------------- 
 
The government is slowly implementing policies to 
improve competition and foster transparency. These 
reforms aim to change an existing system that can be 
influenced greatly by family affiliations and business 
ties. Although in many instances bureaucratic 
procedures have been streamlined, red tape and opaque 
procedures still present problems for foreign and 
domestic investors. The arbitrary application of 
customs, tax, labor, health and other laws or 
regulations, particularly at the level of local 
government, have impeded investment. 
 
In 2005, the government continued its aggressive 
strategy to promote e-government. The government has 
pledged to make its services, regulations, and 
procurement procedures more accessible and transparent 
via e-government. 
 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
Jordan's capital market capitalization reached US $41 
billion at the end of Nov 2005 (around 356 percent of 
GDP), breaking the record since the exchange was 
established in 1978. 
 
The Amman Financial Market (AFM) is divided among the 
Jordan Securities Commission (JSC), the Amman Stock 
Exchange (ASE) and the Securities Depository Center 
(SDC). The SDC is the custodian for all transaction 
contracts, clearing and settlement. The JSC was 
established as the government's supervisory and 
monitoring agency for the capital market in Jordan. The 
government passed the Securities Law in 2002, which 
brought it more in line with international best 
practices. 
 
There are 47 brokerage firms and 200 listed public- 
shareholding companies on the ASE that cover the First 
and Second markets. At the end of November 2005, shares 
owned by non-Jordanians represented 45.3 percent of the 
ASE market capitalization, where Arab investors own 
36.4 percent and other foreigners own 8.9 percent. 
 
The ASE also suffers from intermittent liquidity 
problems, which have ensured that the bourse remains 
prone to speculative movements. Structural problems 
(such as lack of transparency, corporate governance, 
and the dearth of mutual funds) have been exacerbated 
by the insufficiency of institutional buying and 
wavering investor confidence. 
The Central Bank, on behalf of the Ministry of Finance, 
conducts regular auctions of six-month treasury bills 
and three-year treasury bonds. Treasury bonds and bills 
and development bonds (equivalent to Treasury Bonds) 
are listed on the ASE. . Trading volume for the first 
11 month of 2005 was JD 2.2 million (US $3.1 million). 
New issues for the same period reached JD 614 million 
(US $866 million). The Ministry of Finance has been 
issuing bonds of differing maturities since 2002. The 
Central Bank also introduced a primary dealer plan 
designed to increase liquidity in the secondary market, 
though the program has to this point been unsuccessful 
in achieving this goal. A Public Debt Law allows for an 
increase in the volume of bond and bill issuance by the 
Treasury. 
 
Government bond and bill ownership is registered in 
book-entry form at the Central Bank. Commercial banks 
maintain sub-registries. Foreign investors are welcome 
to participate in auctions and to purchase government 
securities. 
 
The corporate bond market remains under-developed, and 
continues to be over-shadowed by traditional direct 
lending. One reason is rigid interest rates; another 
relates to the absence of a secondary market for such 
issues. Increasingly, however, some banks have started 
introducing new products and corporate bond issues. New 
bond issues for the first 11 months of 2005 totaled JD 
50.6 million (US $70.4 million), compared to JD 173 
million (US $244 million) in 2004. 
 
One flaw in the credit market is the lack of long-term 
credit, owing to the short-term nature of banks' 
deposit structure. On average, regular corporate loans 
are extended for periods of 1-3 years, while syndicated 
loans may reach up to 7 years. Long-term financing had 
been stymied by the Ottoman-era law stipulating that 
total interest payments over the life of a bond could 
not be greater than the principal amount, thus 
effectively impeding the development of longer-maturity 
fixed-income instruments. However, the Public Debt law 
scrapped this requirement, allowing for longer 
maturities and increased volumes. 
 
The absence of long-term credit discourages projects 
requiring long development periods. As a consequence, 
large investment projects often resort to foreign 
markets to raise capital. 
 
The Central Bank of Jordan (CBJ) is the banking 
system's regulatory authority. Jordanian banks have 
recovered from an economic slow-down of the late-1990s, 
and in 2005 the CBJ estimated that non-performing loans 
totaled less than 20 percent of all loans. 
 
A banking law, which aims at improving the industry's 
efficiency, came into force in 2000. The law protects 
depositors' interests, diminishes money market risk, 
guards against the concentration of lending, and 
includes articles on new banking practices (e-commerce 
and e-banking) and money laundering. The CBJ has issued 
a number of circulars throughout 2003-2005 to implement 
money-laundering regulations that are consistent with 
the recommendations of the OECD's Financial Action Task 
Force, and has recently drafted a law to codify these 
regulations. Toward this end, the CBJ has established a 
Financial Intelligence Unit (FIU). It also allows 
market forces greater influence to encourage the 
development of financial markets. In addition, the CBJ 
set up a separate and independent Deposit Insurance 
Corporation in late 2000 that ensures deposits of up to 
JD 10,000 (US $14,000). The corporation also acts as 
the liquidator of banks as directed by the CBJ. 
 
The CBJ established a credit bureau for bounced checks 
in 2001. The bureau requires banks to report on a 
timely basis the names of account holders with bounced 
checks. Following a third report of a bounced check, 
the CBJ circulates the names of the account holders to 
all banks with instructions to withhold check-books and 
any other facilities for a certain period of time. 
As of the end of 2004, the Arab Bank and the Housing 
Bank were the two largest banks in Jordan, with total 
assets of US $27.34 Billion and US $3.53 billion, 
respectively. The difference between their asset bases 
owes to the vast difference in their scope of 
operations; the Arab Bank has a worldwide presence, 
while the Housing Bank's prime focus is the local 
market. Although the Central Bank distinguishes between 
"investment banks" and "commercial banks", there are no 
significant differences in the operations of the two. 
 
Banks offer loans, discounted bills, and overdraft 
facilities. Investment banks are not permitted to 
extend overdraft facilities. The Central Bank permits 
banks to extend loans and credit facilities in foreign 
currency. In such cases, it requires debt repayment to 
be in the denominated foreign currency. 
 
A number of banks have established mutual funds. New 
capital instruments such as commercial paper and 
convertible bonds are under consideration. In addition 
to long-term instruments, securitization, short- 
selling, and treasury stocks are being introduced in 
some banks. 
 
Two individuals were convicted and sentenced to long 
jail terms for the embezzlement of around US $120 
million in February 2002, which involved some prominent 
Jordanians and loans drawn from three banks. The 
Central Bank took adequate action to reassure 
depositors and restore calm to the market. In addition, 
the sector did not suffer any significant shocks during 
the 2003 war in Iraq either due to significant exposure 
to trade with Iraq or to runs on bank deposits at the 
outbreak of the conflict. As a result, the health of 
the banking system and its resilience are not in 
question. Iraqi Government assets in Jordanian banks 
were frozen in early 2003 and US $250 million was 
returned to the Development Fund for Iraq. 
 
With respect to ownership and participation in the 
major economic sectors in Jordan, there is no apparent 
discrimination against foreign participation. In fact, 
many Jordanian businesses seek foreign partners, which 
are perceived as the key to increased competitiveness 
and easier entry into international markets. 
 
There are a number of internationally recognized 
accounting and auditing firms in Jordan. The 
government's accounting and auditing regulations are 
consistent with international standards and are 
internationally recognized. 
 
Political Violence 
------------------ 
 
Some incidents of political violence and terrorist 
activities have occurred in Jordan, most recently the 
November 9, 2005, hotel bombings in Amman and the 
August rocket attack in Aqaba. The hotel bombings 
targeted foreign business interests, but the attacks 
were limited to the hotel industry. Other industries 
with foreign business interests have remained 
unaffected by political violence. While Jordan enjoys 
political stability, events in the region, particularly 
in the West Bank and Gaza or Iraq, can trigger small 
demonstrations of anti-U.S. hostility. 
 
The government of Jordan is proactive in maintaining 
public security, containing demonstrations and 
preventing terrorist attacks, and has increased its 
efforts since the November 9 attacks. The potential for 
politically motivated violence, however, remains. 
Visitors should consult current State Department public 
announcements. 
 
Corruption 
---------- 
 
Corruption is a crime in Jordan. The General 
Intelligence Directorate (GID) has an anti-corruption 
department that is responsible for combating bribery, 
extortion, and other similar crimes. Attempts to 
establish similar, transparent entities outside the 
security service so far have not been successful. A 
draft financial disclosure law requiring public office 
holders and specified government officials to declare 
their assets is under consideration in parliament. 
 
Influence peddling and a lack of transparency have been 
alleged in government procurement and dispute 
settlement. "Wasta", the use of family, business, and 
other personal connections to advance personal business 
interests, is endemic. 
 
Bilateral Trade/Investment Agreements 
------------------------------------- 
 
A Free Trade Agreement (FTA) between the U.S. and 
Jordan entered into force in December 2001. The 
agreement mandates that a free trade area between the 
two countries will be attained following a gradual 
phasing out of import duties and other trade barriers 
over ten years. The agreement incorporates labor, 
environmental, and intellectual property rights 
provisions. 
 
A Bilateral Investment Treaty between Jordan and the 
United States entered into force in 2003. The agreement 
provides reciprocal protection of Jordanian and U.S. 
individual and corporate investments. 
 
Jordan is a member of a pan-Arab accord on facilitating 
the movement of capital between Arab countries. 
Countries that have signed the accord include Jordan, 
UAE, Bahrain, Tunisia, Saudi Arabia, Iraq, Oman, 
Kuwait, Libya, Egypt, Morocco, Qatar, Syria, and 
Lebanon. 
 
An economic association agreement between Jordan and 
the European Union that establishes free trade over a 
twelve-year period entered into force in 2002. This 
agreement calls for the free movement of capital, as 
well as cooperation on development and political 
issues. 
 
In 2004, Jordan signed a Free Trade Agreement with 
Singapore. In the same year, Jordan completed the 
Agadir trade agreement with Egypt, Morocco, and Tunisia 
and upgraded its trade agreement with Israel to take 
advantage of accumulation of content provisions in the 
EU's Pan-Euro-Mediterranean trade rules of origin. 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
Investments in Jordan are eligible for Overseas Private 
Investment Corporation (OPIC) insurance and private 
financing. 
 
Jordan is also a member of the Multilateral Investment 
Guarantee Agency (MIGA), a World Bank Agency, which 
guarantees investment against non-commercial risks such 
as civil war, nationalization, policy changes, etc. The 
program covers investments in Jordan irrespective of 
the investor's nationality, in addition to covering 
Jordanian investments abroad. 
 
Several European countries have official debt-for- 
equity swap programs that are open to investors of all 
nationalities. 
 
Labor 
----- 
 
The rate of population growth (births minus deaths and 
factoring in migration) is about 2.5 percent a year. 
50% of the population is under the age of 20. In 
general, the labor force is well educated. Literacy 
rates approach 95.2 percent for men and 86.7 percent 
for women. Jordan has a labor force of 1.47 million and 
an unemployment rate of approximately 13.4 percent. 
 
The officially estimated 218,000 foreign laborers in 
Jordan work primarily in unskilled sectors, such as 
construction, agriculture, and domestic service. They 
constitute around 15 percent of the labor force. The 
Ministry of Labor regulates foreign worker licensing, 
licensing fees, prohibited sectors, and employer 
liability. Among its responsibilities, the ministry 
approves the hiring of professional foreign workers by 
private businesses. Non-citizens are not permitted by 
law to join unions, though the Ministry of Industry and 
Trade maintains that such workers enjoy any benefits 
and protections that unions obtain. 
 
Labor unions serve primarily as intermediaries between 
workers and the Ministry of Labor, and may engage in 
collective bargaining on behalf of workers. In order to 
strike, workers must obtain permission from the 
government. Currently, there are 17 recognized unions 
in Jordan, all members of the General Federation of 
Jordanian Trade Unions. Estimates put union membership 
at 10 percent of the labor force. In addition to the 17 
unions, there are numerous professional associations 
active in Jordan, many of which have mandatory 
membership. While these associations occasionally take 
on characteristics of traditional unions, they are 
primarily political bodies. About 30 percent of the 
total labor force, including government service, 
belongs to either a union or a professional 
association. 
 
Article 28 of the Labor Law specifies the conditions 
under which an employer can discharge a worker without 
notice. Article 31 allows employers to lay off 
employees if economic or technical circumstances 
necessitate reorganization. The law does not require 
employers to include retirement plans in their 
employment package. However, if the employer agreed to 
provide retirement benefits when the worker was 
contracted, the employer must fulfill his/her 
commitment. The Social Security Law stipulates that if 
the employer has more than five employees, they must be 
enrolled in the social security system. The Labor Law 
also addresses worker compensation and outlines 
compensatory categories for work-related injuries. 
Article 67 provides unpaid maternity leave for a 
maximum of one year for mothers working in firms 
employing 10 or more workers, and article 70 requires 
full pay for 10 weeks of maternity leave. The law 
provides for 14 calendar days of annual leave for 
employees during the first five years with the 
employer, and 21 calendar days after five years of 
successive service. This law places Jordan in 
compliance with international and Arab labor 
agreements. 
 
Foreign Trade Zones/Free Trade Zones 
------------------------------------ 
 
The Zarqa Free Zone is Jordan's major free zone area. 
Other areas include the Sahab Industrial Estate Free 
Zone, Queen Alia International Airport Free Zone, and 
the Gateway Qualifying Industrial Zone. 
 
In May 2001, the government converted the Aqaba port 
and surrounding area into a special economic zone (SEZ) 
with streamlined bureaucracy, lower taxes, and 
facilitated customs handling. 
 
Both Jordanian and foreign investors are permitted to 
invest with few restrictions in trade, services, and 
industrial projects in free zones. Industrial projects 
must fulfill one of the following conditions: 
 
-- New industries which depend on advanced technology; 
 
-- Industries requiring raw material and/or locally 
manufactured parts that are locally available; 
 
-- Industries that complement domestic industries; 
 
-- Industries that enhance labor skills and promote 
technical know-how; 
 
-- Industries providing consumer goods, and that 
contribute to reducing market dependency on imported 
goods. 
 
The following incentives are granted to investors in 
the designated free zones: 
 
-- Profits are exempt from income and social services 
taxes for a period of twelve years, with the exception 
of profits generated from storage services that involve 
goods released to the domestic market. 
 
-- Salaries and allowances payable TO non-Jordanian 
employees are exempt from income and social services 
taxes. 
 
-- Goods imported to and/or exported from free zones 
are exempt from import taxes and customs duties, with 
the exception of goods released to the domestic market. 
 
-- Industrial goods manufactured in free zones enjoy 
partial customs duties exemption once released to the 
domestic market, depending on the proportion of the 
value of local inputs and locally incurred production 
costs. 
-- Construction projects are exempt from licensing fees 
and urban property taxes. 
 
-- Free transfer of capital invested in free zones, 
including profits. 
 
Qualifying Industrial Zones (QIZs) 
--------------------------------- 
 
Approved goods produced in a "Qualifying Industrial 
Zone" (QIZ) can be imported into the United States free 
of duty if they involve economic cooperation between 
Jordan and Israel, and if 35 percent of the product's 
content comes from the QIZ, Israel, and/or the West 
Bank/Gaza. This makes investment in a QIZ particularly 
attractive to industries whose products are assessed 
with high tariffs when they are imported into the U.S. 
There are currently 13 QIZs, three of which are 
publicly owned; the remaining ten are privately owned. 
As of December 2005, the bulk of QIZ exporters have 
been concentrating on garment exports. Since 1999, the 
QIZs have attracted US $450 million in capital 
investments, generated over US $3 billion in exports to 
the U.S., and created over 45,000 new jobs. 
 
Foreign Direct Investment Statistics 
------------------------------------ 
 
Official statistics on foreign direct investment (FDI) 
are not publicly available. 
 
The UNCTAD's World Investment Report 2005 estimates FDI 
inflows into Jordan at US $64 million, $424 million and 
$620 million for 2002, 2003 and 2004, respectively. The 
Jordan Investment Board approved foreign investment 
projects worth about US $118 million, $135 million and 
$381 million for the years 2003, 2004 and 2005, 
respectively. The following statistics should be 
interpreted as indicating trends rather than exact 
figures. Note that figures may differ from previous 
years due to revisions in the data series. 
 
Total Registered Capital by Economic Sector 
(USD, at year end) 
 
                   2003             2004 
2005 
Sector 
                 USD              USD              USD 
Industry         1,248,747,462    1,364,111,021 
1,457,367,358 
                    28.5%            27.2% 
27.7% 
 
Trade            1,893,711,966    2,027,428,883 
2,173,085,245 
                    20.8%            21.5% 
22.6% 
 
Agriculture        132,158,940      139,435,950 
159,058,638 
                    17.6%            20.4% 
25.0% 
 
Construction       319,270,457      330,153,894 
361,074,861 
                     2.4%             2.4% 
4.6% 
 
Services         1,986,785,396     2,261,465,725 
2,864,875,764 
                    43.5%             39.3% 
38.7% 
 
Total            5,580,674,222     6,122,595,475 
7,015,461,867 
                    29.5%             28.3% 
29.4% 
 
 
Annual Registered Capital Inflows by Economic Sector 
(USD) 
                   2003             2004           2005 
Sector 
                USD              USD              USD 
Industry       28,287,210      115,363,559 
93,256,337 
foreign            32.5%            12.9% 
35.4% 
Trade         246,085,160      133,716,917 
145,656,361 
foreign            63.8%            32.1% 
37.9% 
Agriculture     2,453,517        7,277,010 
19,622,688 
foreign            29.0%            70.1% 
58.0% 
 
Construction    9,507,489       10,883,438 
30,920,967 
foreign             1.9%             2.3% 
27.5% 
 
Services       43,853,779      274,680,329 
603,410,039 
foreign            16.9%             8.4% 
36.8% 
 
Total         330,187,155      541,921,253 
892,866,392 
foreign            52.8%            15.9% 
37.0% 
 
(* The Percentage Figure Reflects the Size of Foreign 
Capital to Total Capital) 
 
(Source: Ministry of Industry and Trade) 
 
 
According to these measurements, FDI Stock and FDI 
Inflows as a percentage of GDP at current market prices 
are: 
 
                           2003       2004        2005 
(Projected) 
Nominal GDP (JD million)   7,203.6    8,164.4 
9,062.5 
Nominal GDP (USD million) 10,160.2   11,515.4 
12,782.1 
FDI Stock                     16.2%      15.1% 
16.2% 
FDI Inflows                    2.3%       3.3% 
5.0% 
 
 
 
Total Foreign Registered Capital by Country of Origin 
(USD) 
                    2003           2004 
2005 
 
Country of Origin 
 
1 Jordanian     3,919,751,286   4,372,302,874 
4,927,108,044 
2 Saudi           297,849,168     305,292,581 
413,760,056 
3 Iraqi           236,166,142     268,521,749 
383,145,238 
4 Egyptian        214,492,076     218,804,488 
230,711,540 
5 Kuwaiti         147,717,267     157,184,629 
173,757,265 
6 UAE             144,050,071     144,399,470 
168,489,738 
7 Syrian          152,021,113     156,062,016 
166,311,381 
8 Libyan           61,393,178      61,534,221 
61,745,787 
9 British          45,873,961      50,087,958 
57,742,401 
10 Qatari          47,561,614      47,716,762 
48,069,371 
11 American        31,295,994      34,079,491 
38,425,047 
12 Indian          35,687,764      36,396,509 
36,925,423 
13 Lebanese        31,027,168      32,630,546 
35,127,020 
14 Palestinian     18,297,049      19,389,010 
25,554,877 
15 Sudanese        24,375,811      24,728,420 
25,095,134 
16 Japanese        14,221,439      16,023,977 
16,063,470 
17 Chinese          8,733,429      11,356,137 
16,045,853 
Total           5,568,621,886   6,110,711,186 
7,003,854,453 
(Source: Ministry of Industry and Trade) 
 
NOTE ON PREVIOUSLY LISTED DANISH FDI: 
 
Registration statistics issued by the Ministry of 
Industry and Trade include all companies with the 
exception of publicly listed companies. The statistics 
on FDI differ each year because some privately held 
companies are subsequently listed on the Amman Stock 
Exchange.  An important example is Jordan Telecom - 
France Telecom invested in Jordan Telecom through a 
Danish subsidiary, thus the previously reported Danish 
FDI is now classified as portfolio investment and not 
included in the above FDI statistics. 
 
END TEXT OF INVESTMENT CLIMATE STATEMENT 
 
HALE