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RUCPCIM/CIMS NTDB WASHDC

UNCLAS AMMAN 000237 
 
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STATE FOR NEA/ELA AND EB/IFD/OIA 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ELAB ENRG ETRD PGOV OPIC KTDB USTR JO
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