Brief Expo
sé of Jordan's Economy
USEFUL LINKS
Amman
Chamber of Industry
Jordan Export Development & Commercial Centers Corporation
Banks & Law Firms
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Brief History |
Jordan has been dedicated to building up its economy over the last two decade. Devoted to this cause, more recently Jordan has been working with the World Bank and International Monetary Fund (IMF) to establish the economy. Jordan’s economy suffered immensely when the aid it was promised from certain countries did not come through and it had to pay back the debts from the programs it had already started, and from the sanctions imposed on Iraq, a major trading partner. With the help of the World Bank and IMF, Jordan has established itself as a model developing country. Jordan has proven to be very serious and responsible and has shocked everybody with what it has managed to do in past year and a half. It was able to join the World Trade Organization (WTO) in 11 months; an extraordinary feat which people doubted could be accomplished. Jordan’s success has caused the international community to be very responsive. As a result, Jordan has had many foreign investors. It has free trade with the European Union and with many Arab countries. Jordan has Qualifying Industrial Zones (QIZ) that allow free trade into the United States. This creates tremendous opportunities for investing in Jordan. It has taken very important steps towards building its economy and continues to advance. Jordan is very eager to establish good relations with everybody which was initiated by King Hussein and which King Abdullah plans to continue.
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Overview - Land of Opportunities |
Jordan has a free market oriented economy. It has made significant progress toward economic reform due to the governments five year growth-oriented economic program in 1989 which was supervised by the World Bank and the IMF. There has been a privatization program to liberate the national economy and increase the flow of foreign capital. This program activated the role and efficiency of private investors in the long term development and plans of the kingdom.
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Investor Friendly Jordan |
In the belief that an efficient regulatory framework stimulates the role of the private sector, Jordan has recognized the need to establish business-friendly structures with strong emphasis on supporting entrepreneurial initiative. His Majesty King Abdullah has identified national goals such as increasing foreign and domestic direct investments. His Majesty is the surest catalyst for creating sustainable economic growth.
With the establishment of the Investment Promotion Law in 1995, and with other subsequent actions designed to enhance the investment environment, Jordan has opened its economy to the wealth and prosperity business and investment should bring.
The Investment Promotion Law grants generous and attractive incentives to domestic as well as international investors in terms of: freedom from customs duties, tax holidays, income tax exemptions and unrestricted transfer of capital and profits. The implementation of this law is vested in the Jordan Investment Board which is the only national entity responsible for promoting and facilitating investment in Jordan. The law irrevocably affirms that both Jordanian and non-Jordanian investors are treated equally.
Jordan provides an attractive investment climate where the investor can enjoy total customs exemptions on imported fixed assets, ease of licensing and registration procedures, export industries are not subject to customs duties on imported raw materials, free repatriation of capital, profits and salaries. Moreover, projects approved by the Investment Committee enjoy a ten year exemption from income and social services taxes at the following rates depending on the sector and the area in which the project is located. Some more advantages can also be enjoyed like Jordan's strategic location near Asia, Africa and Europe, Future regional markets, Abundance of space and lands, Access to foreign markets, Competitive qualified labor, Conducive investment climate and The fact that Jordan is part of the MENA region which provides a vital economic power.
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Jordan in the Global Economy |
Located in the heart of the Middle East, Jordan serves as a transit hub between the more populous countries of Iraq, Syria, Egypt, Israel, the Palestine National Authority territories and the Gulf States. Jordan’s privileged, multi-border location assures its reputation as the “place to be” for companies seeking to do business in this part of the world.
International investors seeking to diversify their portfolios will find excellent investment opportunities in Jordan. As an emerging market, Jordan offers great development potential and promising economic growth. With its competitive advantages, Jordan is an ideal springboard for access to regional and international markets. High caliber human resources, low labor costs, a stable political climate, attractive investment incentives and preferential trade agreements combine to make foreign investment in Jordan both profitable and secure.
1- Arab Free Trade Agreement (AFTA)
Jordan, along with ten other Arab countries, signed the Arab Free Trade Agreement and its implementation commenced on March 9, 1998. According to the agreement, all Arab products moving among Arab member states will be afforded the status of national goods in accordance with the principle of gradual liberalization, which took effect January 1, 1998. By way of annual reductions of 10% of customs duties, fees and taxes, goods are scheduled to be moving duty-free among the States through the establishment of the Arab Free Trade Zone by 2008. As a result Jordan is expected to attract new Arab-based investments, and to enjoy unhindered access to the markets of the Arab world.
Jordan has signed agreements guaranteeing 100% free trade with Bahrain, Kuwait and Libya. Similar agreements are pending with Tunisia, Egypt and Algeria.
2-
Euro-Jordanian Association Agreement
Jordan is a signatory to the Barcelona Declaration in 1995, which calls for a
free trade zone in the Mediterranean by 2010. This would cover the fifteen
member states of the EU, twelve Mediterranean states and certain countries of
southeastern Europe.
On November 1997, the Hashemite Kingdom of Jordan and the European Union (EU)
signed a partnership agreement that will pave the way for a free zone area by
the year 2010. The Partnership Agreement which came into effect on the first of
May 2002 comprises three major parts and a number of protocols and annexes that
are considered original parts of the Agreement. The three parts are:
Political and security partnership: this underscores the importance of respect
for fundamental freedoms and the establishment of the rule of law. Moreover,
relations between states must be guided by certain principles acceptable to all.
Economic and Financial Partnership: this component aims at establishing a
Euro-Jordanian free trade area, liberalizing trade progressively by 2010. The
areas of co-operation cover: trade in agricultural and industrial products,
right of establishment and services, payments and capital movements,
competition, intellectual property rights, and financial and economic
co-operation.
Partnership in Social and Human Affairs: it aims at encouraging exchanges among
civil societies. In the context of decentralized cooperation, the emphasis is
placed on education, training and young people, culture and the media, migrant
population groups and health.
The new Partnership will
encourage more direct European investment in Jordan, facilitate technology
transfer and provide free access to EU markets for the Kingdom's agricultural
and industrial products. In addition, the EU will establish funds for the
rehabilitation of Jordanian industry and its agricultural sector.
Moreover, the EU has pledged to set up a special fund for assisting Jordanian
industries to adjust to the requirements of the agreement, enhance their export
capacity and improve their competitiveness. Currently, Jordan is hosting EJADA
program, a group of local and European experts funded by the EU that provide
technical and managerial support to businesses in Jordan.
Jordan’s parliament has ratified the Euro-Jordanian Partnership Agreement whereby the Kingdom will enjoy free trade status with the EU countries. Being approval of EU Parliaments, this accord came into force in 2000. In addition to benefits in the political, social and cultural fields, the new partnership agreement promises to play an important role in Jordan’s economic development. The accord encourages more direct European investments into Jordan, as industrial products manufactured in Jordan and exported to the EU are exempted from customs taxes and fees. Numerous industrial and agricultural products are enjoying privileged access to the EU markets by means of a range of custom tax and quota exemptions.
3- Promotion and Reciprocal Protection of Investment Agreements
In July 1997 Jordan and the USA signed a bilateral agreement on the promotion and reciprocal protection of investment. The agreement emphasizes the promotion of greater economic cooperation, and the free flow of investment between both nations. It grants investors from both sides free movement of capital and financial transfers, and awards US investments in Jordan national or most favored nation (MFN) status, whichever is more advantageous.
Similar bilateral agreements have been concluded with major European countries as well as with Malaysia, Indonesia, Tunisia, Egypt, Algeria and Yemen.
4- Qualifying Industrial Zones (QIZ)
The
Qualified Industrial Zones (QIZ) Agreement, which provides duty free
treatment for products manufactured in the designated areas, presents another
opportunity for Jordan to increase exports to the U.S. markets.
The first Qualifying Industrial Zone (QIZ) designated by the USTR is Al-Hassan
Industrial Estate in Irbid, in northern Jordan. The success of El Hassan
Industrial Park has prompted the establishment of another QIZ's, Al-Karak
Industrial Estate which is managed by the Jordan Industrial Estates Corporation
(JIEC), was designated in October, 1999 as the second QIZ in Jordan. It is
strategically located on the international highway connecting Al-Karak city with
the port of Aqaba and is 110km South of Amman. Other areas in the Kingdom have
also been designated QIZ.In 1996 the U.S. Congress
established the Qualifying Industrial Zone (QIZ) initiative to support the peace
process in the Middle East. These zones are industrial parks in Jordan or
Israel from which goods can be exported duty free to the United States.
This further enhanced
Jordan’s leverage over other
neighboring countries in the MENA Region, Jordan was granted the unprecedented
opportunity to establish zones which provide duty and quota free
access to the U.S. market for products manufactured in Jordan.
QIZs have been viewed as a gift to Jordan, cementing peace relations, inviting foreign direct investment and creating employment opportunities through increased exports to the US.
In terms of trade liberalization, Jordan made tremendous strides in the second half of the 1990s through several agreements including signing the EU-Jordan Association Agreement in November 1997; accession to the WTO in early 2000; signing the Greater Arab Free Trade Agreement in 1997; negotiating a free trade agreement with the countries of European Free Trade Area (EFTA); initialing a free trade agreement with the US; and the conclusion of a Mediterranean Arab Free Trade Area (MAFTA).
Through QIZs Jordanian goods manufactured in partnership with Israelis (a minimum of 8 per cent content, 7 per cent in the case of high-tech products) can access the US market quota and duty free, thereby extending to Jordan benefits that are traditionally enjoyed by the US free trade partners (Canada, Mexico, Israel, PNA).
The success of QIZs in Jordan has been witnessed mainly in labour intensive industries, such as the clothing industry where exports to the US have more than tripled during 1997-99, employing around 6,000 workers.
Cyber City is one of the largest Information Technology and Light Industrial Parks with QIZ and special Export Free Zone Status (SEFZ). It's a world class infrastructure, excellent key facilities and competitive cost makes it an ideal location to invest in Jordan. The 4 Sq.Km. Cyber City is strategically located near Irbid, Jordan 65 km north Amman, adjacent to J.U.S.T University.
5- World Trade Organization
On April 11,2000 Jordan was
officially accepted into the World Trade Organisation (WTO) as the organization
136" member. Jordan has long aspired to be part of the WTO. In order to gain a
commendable opportunity for entering global markets and promoting trade
improving and economy in general.
Jordan has preliminary sought to join the GATT (the WTO's predecessor) in 1994.
Encouragement of Foreign direct investments (FDI) is also a main reason for
Jordan's enthusiasm to join WTO. Free trade has always been a hallmark for
growth. Surely there are factors to take into account today by the term "trade"
over and above the free flow of goods and services. Foreign direct investments (FDI)
are regarded as a major phenomenon in their contribution to the globalization
markets and as a source of external capital in their contribution to the growth.
As Jordan remarks on an era of ambitious reform, trade liberalization, and
economic and legislative reform, it has reflected a determination to be a
committed member of the (WTO).
Accession to the World Trade Organization brings new opportunities and challenges to Jordanian businesses. WTO membership assures access to the entire world market for Jordanian manufactured products, but will also expose Jordanian companies to direct competition with international firms. The government has revised its laws, particularly those governing Intellectual Property Rights and Trade Secrets, in order to come into regulatory compliance with WTO standards.
6 - United States–Jordan Free Trade Agreement
On October 24th
2000, His Majesty King Abdullah II and US President Bill Clinton witnessed the
signing ceremony of the Jordan US Free Trade Agreement that would provide
Jordanian products unimpeded access to the world's largest market. The pact
includes precedent-setting provisions aimed at protecting worker's rights and
the environment. His Majesty has been instrumental in paving the ground for
reaching the Agreement. The Agreement will help Jordan's economy to shift from a
state of dependence on foreign aid to one of self-reliance and to prosper
through increasing customs-free exports, attracting foreign investments and
facilitating the transfer of technology.
The Agreement was ratified by the U.S. Congress on the 28th of September 2001 and it came into force on the 17th of December 2001