doing business with
Jordan
doing business with
Jordan CONSULTANT EDITORS PHILIP DEW JONATHAN WALLACE MIDDLE EAST SERIES EDITOR ANTHONY SHOULT
GMB
Publisher’s note Every possible effort has been made to ensure that the information contained in this publication is accurate at the time of going to press and neither the publishers nor any of the authors, editors, contributors or sponsors can accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editors, authors, the publisher or any of the contributors or sponsors. Users and readers of this publication may copy or download portions of the material herein for personal use, and may include portions of this material in internal reports and/or reports to customers, and on an occasional and infrequent basis individual articles from the material, provided that such articles (or portions of articles) are attributed to this publication by name, the individual contributor of the portion used and GMB Publishing Ltd. Users and readers of this publication shall not reproduce, distribute, display, sell, publish, broadcast, repurpose, or circulate the material to any third party, or create new collective works for resale or for redistribution to servers or lists, or reuse any copyrighted component of this work in other works, without the prior written permission of GMB Publishing Ltd. GMB Publishing Ltd. 120 Pentonville Road London N1 9JN United Kingdom www.globalmarketbriefings.com This edition first published in 2004 by GMB Publishing Ltd. © GMB Publishing Ltd. and contributors Hardcopy ISBN 0-7494-4141-0 E-book ISBN 1-9050-5058-5 British Library Cataloguing in Publication Data A CIP record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Doing business with Jordan / consultant editors, Philip Dew, Jonathan Wallace, Anthony Shoult. p. cm. ISBN 0-7494-4141-0 1. Jordan–Economic conditions. 2. Jordan–Economic policy. I. Dew, Philip. II. Wallace, Jonathan. III. Shoult, Anthony. HC415.26.D65 2004330.95695–dc22 2004005727
Contents
Foreword His Majesty King Abdullah II
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Foreword HE Dr Bassem I Awadallah, Minister of Planning and International Cooperation
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Foreword Mike O’Brien, Minister of State for Trade, Investment and Foreign Affairs
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List of Contributors
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Acknowledgements
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Map 1: Jordan and its infrastructure Map 2: Jordan and its neighbours
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Part One: Background 1.1 1.2 1.3 1.4 1.5
Geography, Geology and History of Jordan Philip Dew Political Structure and Decision Making Sana Abdallah Overview of National Economic Development in Jordan Marwan A Kardoosh, Economist Government Planning Ministry of Planning and International Cooperation External Trade Salah S Ghunaim, Acting Director-General, Jordan Export Development and Commercial Centers Corporation (JEDCO)
3 14 23 39 60
Part Two: Sector Overviews 2.1
Mining and Minerals in Jordan Munther J Akroush, Natural Resources Authority
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2.2
2.3 2.4
2.5 2.6
2.7 2.8 2.9 2.10 2.11 2.12 2.13
Contents
The Growing Role of Industry – A Statistical Overview Juma’a Abu-Hakmeh, Director-General, Amman Chamber of Industry Transportation Export and Finance Bank Information and Communications Technology Ministry of Information and Communications Technology, Amman The Electricity Sector in Jordan Ahmad Hiyasat, National Electric Power Company Agriculture and Agro-industry in Jordan Souheil Marto, Eastern Company, and Abdullah Arar, Amman Construction Export and Finance Bank Tourism Jordan Tourism Board and Philip Dew Water Ministry of Water and Irrigation Health Export and Finance Bank Pharmaceuticals Export and Finance Bank Apparel and Textiles Export and Finance Bank Oil and Gas Munther J Akroush, Natural Resources Authority
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94 109
117 126
135 144 152 162 172 183 189
Part Three: Establishing a Business 3.1
3.2
3.3 3.4
Forming a Business Venture in Jordan Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman The Law of Commercial Agents and Intermediaries Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman Jordan Investment Board and Foreign Direct Investment Jordan Investment Board Privatization, Liberalization and Adjustment Programmes in Jordan Ahmad Hiyasat, National Electric Power Company
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206
212
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Contents
3.5 3.6
Qualifying Industrial Zones Export and Finance Bank Jordan Free Zones Ali Madadha, Jordan Free Zones Corporation
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222 229
Part Four: Aqaba Special Economic Zone 4.1 4.2
4.3
4.4
Aqaba Special Economic Zone: An Introduction Aqaba Special Economic Zone Authority Aqaba Special Economic Zone: Modern Infrastructure and Services Aqaba Special Economic Zone Authority Aqaba Special Economic Zone: Starting and Operating a Business Aqaba Special Economic Zone Authority Aqaba Special Economic Zone: A Destination for Investment Aqaba Special Economic Zone Authority
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Part Five: The Fiscal and Regulatory Framework 5.1
5.2
5.3
5.4
5.5
5.6
Taxation in Jordan Asem P Haddad, CPA MBA, Audit and Tax Partner, Deloitte & Touche (Middle East) – Jordan Accounting Principles and Reporting Requirements in Jordan Naim S Khoury, Partner, Deloitte & Touche (Middle East) – Jordan Legal Environment in Jordan Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman Procedures for Handling Legal Disputes Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman Intellectual Property Law Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman Environmental Laws and Regulations Subhi A Ramadan, President, Environmental Consultants Branch, Ramadan Technical Services Co
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270
273
280
286
293
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Part Six: The Financial Structure and Banking System 6.1
6.2 6.3 6.4 6.5
Commercial Banking in Jordan Samer Sunnuqrot, Assistant General Manager, Jordan National Bank The Investment Banking Industry in Jordan Omar M Masri, Atlas Investment Group, Amman Amman Stock Exchange Jalil Tarif, Chief Executive Officer, Amman Stock Exchange Insurance and Insurance Regulations Jordan Insurance Federation Banking Regulation and Supervision Faris Sharaf, Central Bank of Jordan
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309 313 323 332
Part Seven: Marketing 7.1 7.2 7.3
The Media and Advertising Suleiman I Matouk, Managing Director, DDB Jordan Conferences, Exhibitions and Trade Shows in Jordan Events Unlimited, Amman Jordan Export Development and Commercial Centers Corporation (JEDCO) Salah S Ghunaim, Acting Director-General, JEDCO
339 342
349
Part Eight: Labour Issues 8.1 8.2
Compensation and Benefits Philip Dew and Jordan Investment Board The Jordanian Labour Law Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman
355 358
Part Nine: Living and Working in Jordan 9.1
9.2 9.3
Living and Working in Jordan Mark Timbrell, Area Director of Sales and Marketing, Jordan/Palestine, InterContinental Hotels Group, Amman Commercial Property Market Alma Alic, Abdoun Real Estate, Amman Residential Property Market Alma Alic, Abdoun Real Estate, Amman
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374 378
Contents
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Part Ten: Appendices Appendix 1:
Appendix 2: Appendix 3: Appendix 4: Index
The Aqaba Special Economic Zone Law, Law No. 32 for the Year 2000 Aqaba Special Economic Zone Authority Useful Information Useful Addresses and Contact Details Contributor Contact Details
385 416 427 436 443
Foreword By His Majesty King Abdullah II
I take the opportunity to welcome the readers of the first edition of Doing Business with Jordan, a timely publication introducing the Kingdom as a nation poised for significant growth over the coming period. We are a small country with a rich history, and even richer potential. Our nation of just over 5 million people is strategically situated at the heart of the Middle East. A region associated in the minds of many with conflict, instability but also a region of unrealized and untapped potential. Within this environment we have earned a reputation of being a voice of reason and a beacon of hope, a tribute to the legacy of my late father His Majesty King Hussein, who succeeded in building a society where understanding, dialogue and the respect for life were at its core. Ours is a society where education, equality, and a sense of purpose are not only attainable, but essential elements of being a Jordanian citizen. Jordan has long advocated that the most effective means of promoting peace among nations, combating terrorism and addressing injustice is through providing people with the hope of a better future. It is a future where justice, equal opportunity and personal freedoms are not the privilege of the few, but the rights of all. Today, many countries in the Middle East are finding themselves at a crossroads. While facing poverty, disenfranchisement and restlessness among their respective citizens, they must decide on a path that will lead them to a better future. This is the path Jordan has chosen – a path of reform, sustainable development and peace. More recently, Jordan has witnessed significant progress towards realizing our vision of becoming an active and dynamic contributor to the global economy and society. Our adoption and implementation of an aggressive reform programme in the educational, legislative, administrative, judicial and financial sectors has laid the foundations for an effective public–private partnership, one that has fostered a culture of competitiveness and entrepreneurship, the opening of markets and the elimination of trade barriers. Jordan today stands at the threshold of great promise for nations that aspire to participate, not just witness, the dynamic opportunities presented through economic openness and global integration. If we are successful, our experience will serve as evidence that nations can continue to leapfrog stages of development and bridge the economic and
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social divides that are still very much prevalent between ‘North’ and ‘South’, and are most often the cause of extremism and fundamentalism. I invite you to explore the opportunities that Jordan offers, and to play a direct role in bringing peace and prosperity to the Middle East region.
Foreword
Jordan is a country that understands the ever-changing requirements of today’s complex and highly competitive global market. It is a country that has endured, and continues to endure, regional turmoil, but nevertheless strives to create a modern liveable state with substantial potential for growth and prosperity. Jordan has embarked on a major economic and political transformation process in recent years that is aimed at elevating the standard of living of the Jordanian people, and creating a liberal democratic state that cultivates the vast potential of its young people. During the decade of the 1990s, Jordan succeeded in attaining macroeconomic stability and an increased real growth rate through the implementation of deep structural reforms. Yet Jordan is still faced with many challenges, including a relatively high rate of unemployment (15 per cent) and poverty (almost 12 per cent). Reform efforts were hence revisited in 1999 when His Majesty King Abdullah II ascended to the throne, prompting an accelerated pace of reforms and the launch of new strategies and initiatives aimed at enhancing the welfare of the Jordanian people and propelling economic growth to higher and sustainable levels. During the past five years, the government has focused on devising and implementing measures to combat the critical challenges facing the economy, while at the same time laying the foundation for building a new Jordanian model that is resilient to external factors and that is commensurate with the evolving global trends. This new model is based on the premise of transforming Jordan into a knowledge-based economy that is built on the vast potential of the Jordanian people. It is also based on creating an enabling business environment, and integrating Jordan into the global economy through export-oriented growth, all of which is aimed at enhancing growth and ushering in an era of social and economic stability. This has necessitated a sweeping fiscal, legal, judicial, administrative and educational reform agenda. To that end, external public debt was significantly lowered as a percentage of GDP from around 96 per cent in 1999 to 77 per cent in 2003, and a number of other fiscal measures were taken, including the gradual removal of subsidies, in order to create a self-sustaining budget. Additional measures in the pipeline will include
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further actions in the context of pension reform and the rightsizing of the public sector in order to curb the level of current expenditures. These measures are aimed at developing a budget that is responsive to socioeconomic developmental needs, and is capable of self-financing and covering the recurring costs of ongoing projects, as well as new ones. The privatization process has also progressed at a reasonable pace, and was ranked by the World Bank as one of the most successful programmes in the Middle East and North Africa (MENA) region. The government adopted a multi-track approach to privatization including divestitures of shares, sales to strategic investors, management contracts, and other methods such as BOO and BOT. The wide-scale privatization programme has succeeded in enhancing the efficiency of privatized firms, creating a competitive market where demand and supply can freely interplay, and attracting investments. It has also allowed the private sector to participate in infrastructure investments, and facilitated the development and deepening of the financial markets. But most importantly, the privatization process has limited the role of the public sector to that of the regulator and facilitator rather than that of the producer. Legislative reform focuses on creating an enabling legislative environment that is responsive to the needs of the private sector, and the evolving global market trends. This has necessitated the implementation of sweeping legal reforms, which encompassed passing new laws and amending a number of existing laws related to intellectual property, public debt, e-transactions, securities, copyrights, patents, telecommunications and others. In parallel, the judicial reform process was aimed at enhancing the efficiency of the court system, strengthening its autonomy, training judges and lawyers, establishing an integrated information system network and ensuring transparency. Administrative reform, on the other hand, is focusing mainly on decentralizing the decision-making process and eliminating red tape. This continuous process aims at improving the quality of civil servants through training and education, in addition to enhancing the efficiency of the system through the introduction of information and communications technology into every facet of government work. The e-government pilot project has successfully connected five ministries, and work is under way to connect the rest. Creating an enabling environment in Jordan necessitates an investment in our young people. Jordan boasts impressive human development indicators given its meagre natural resources, with a literacy rate reaching 90 per cent. By regional standards, Jordan possesses a highly educated and skilled young population, which is its most valuable resource. Nevertheless, our demographic composition poses yet another challenge for the development process in Jordan. Around 72 per cent of our population is below the age of 29, and it is thus imperative to forge
Foreword
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ahead with the reforms already started to harness the potential of the Jordanian people. To this end, our investment in human capital has begun to take a new course in recent years. The focus is not only on the size of the investment, but more importantly on the quality of this investment. The ultimate goal is to equip the graduates with the quality education and skill levels that are required by today’s highly competitive and productive global labour market. This effort represents a very critical element in facilitating our transformation into a knowledge-based economy that will be enabled by a highly educated, broadly skilled and adaptable young workforce. Additional steps are also being taken to enhance research and development (R&D) as a stepping stone in raising the competitive capacity of the country and supporting its development in the global information economy. In building this new economic model, the government seeks to create new roles for the private and public sectors, and foster a vibrant partnership between them by engaging the private sector at the highest decision-making level. By its identification as the primary engine for economic growth, the private sector is being encouraged to take a more proactive role in the development process, through spearheading innovation, creativity, dynamism and entrepreneurial spirit. In closing, I would like to extend my gratitude for the tireless efforts of the team of experts who prepared this book, and I hope that it will provide the information that allows you to explore the vast array of opportunities available for investors in Jordan. HE Dr Bassem I Awadallah Minister of Planning and International Cooperation
Foreword
I am delighted to be asked to write a foreword for this timely book. Britain has maintained a close political and trading relationship with Jordan for many decades. It is important that this relationship prospers as Jordan plays an increasingly important political and economic role in the region. Jordan’s geographical position, sharing borders with the Occupied Territories and Iraq, coupled with its status as a moderate, stable and progressive state, marks it out as unique. In 2004 Jordan is using its geographical position to maximize these advantages in order to offset its relative poverty in natural resources. Trade is playing a key role in this strategy. Jordan’s relationship with Israel and its vital role in providing access to the Iraqi markets is of key strategic interest to the United Kingdom. Coupled with this, Jordan’s own economy offers excellent opportunities and an increasingly business-friendly environment to UK companies. King Abdullah has proved a highly effective and modernizing ruler during a difficult period of regional instability. He has presided over an ambitious agenda to develop the economy, and has driven through economic reforms that have made investment in Jordan easier and more competitive. Jordan offers an educated workforce with increasing training resources being directed at key sectors, for example information technology. It has developed a modern and liberalized banking system, and there are no restrictions on foreign ownership. Additionally, Jordan has an excellent transport and telecommunications infrastructure. The EU–Jordan Association agreement, ratified in 2002, offers full trade liberalization with the EU within 12 years, and Jordan became a full member of the World Trade Organization in 1999. All these aspects make Jordan an increasingly good place to do business. UK Trade and Investment (UKTI) is closely monitoring opportunities for British companies in Jordan. In 2004–2005 UKTI will be focusing on several key sectors, including leisure and tourism and associated construction projects, IT, healthcare and education. There are particular opportunities here and in other sectors, and UK companies are in an excellent position to benefit. Jordan is seeking to attract foreign investment and offers many incentives to businesses willing to take advantage of the opportunities available.
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In both Britain and Jordan, UKTI is ready and equipped to help new and established exporters, in trade or services. This book complements these services, and I believe will play an important role in providing crucial information to enable UK companies to enter the Jordanian market. Mike O’Brien Minister of State for Trade, Investment and Foreign Affairs March 2004
List of Contributors Abdoun Real Estate is owned by Wael AlJaabari, General Manager, who established the business in 1988. Abdoun Real Estate is a turnkey company for all real property needs, whether commercial or residential, lease or purchase, long-term or short-term. The company is the biggest and most advanced real estate service provider in Jordan and has 20 employees. Alma Alic is Head of Relocation and Area Orientation. Abdullah Arar is Director, Arar Establishment for Water and Agriculture Technology, Amman and has an MSc and a PhD from UK and German universities respectively. For seven years he was Senior Land Reclamation Engineer, Development Board of Iraq, and for 27 years (1964–90) FAO Senior Regional Adviser in Land and Water Development for FAO Near East Region. He has also held leading positions on different irrigation, effluent reuse and soil reclamation missions with FAO, WHO, UNDP, World Bank and ICARDA. Since his retirement from FAO he has operated as a freelance consultant as well as running a 230-dunum irrigated farm in the Jordan Valley, producing asparagus, barhi and medjool dates and seedless grapes. Amman Chamber of Industry (ACI) was established in 1962 as a non-profit organization that groups manufacturing firms varying in size from large to the medium and small under one umbrella. ACI, whose membership totals 8,000 firms, includes those engaged in mining, energy, fertilizers, chemicals and pharmaceuticals and is run by 12 board members, elected for a four-year term by the Chamber’s General Assembly. The Chamber serves as a forum for the views and opinions of the country’s industrial sector, with the aim of promoting economic development in Jordan. It conducts studies and surveys, and builds databanks to serve industrialists, investors and researchers. It cooperates closely and maintains regular contacts with all government ministries and departments that are involved in the country’s economic planning. There are 14 consulting committees, representing various industrial sub-sectors. They are elected for a two-year term to coordinate with the board on all issues relevant to the sectors they represent. The ACI also cooperates with the government in enacting laws and regulations relevant to the needs of industry. It sponsors panel discussions and seminars on various economic issues relating to industry.
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It also organizes and participates in trade fairs. Furthermore, the Chamber serves on a number of national, regional and international bodies including: the Arab Labour Organization, the International Labour Organization, the International Organization of Employers, the General Union of the Chambers of Commerce, Industry and Agriculture for Arab Countries, the Social Security Corporation, the Vocational Training Institute and the Jordan Industrial Estates Corporation. Juma’a Abu-Hakmeh is the Director-General of ACI. His career has included the following positions: planning and development engineer for Jordan Fertilizer Industry, Amman; Head of Anodizing, Paint and Water Treatment Section and Production Manager at Arab Aluminum Industry (Aral), Amman; Production Manager and Assistant Managing Director, Advertising Publicity & Decoration Products Manufacturing Co Ltd, Electro De´cor, Jeddah; Partner, Palestine Drug Store, Amman; General Manager, Rum Metal Mfg Co. Amman Stock Exchange (ASE) was established in March 1999 as a non-profit, private institution with administrative and financial autonomy. It is authorized to function as an exchange for the trading of securities. Jalil Tarif is the Chief Executive Officer of the Amman Stock Exchange, a position he has held since the creation of the ASE in March 1999. During this period the ASE has implemented an electronic trading system and all of the rules and regulations required to run the ASE. The ASE has also started remote trading, allowing brokers to trade from their offices instead of the stock exchange floor, and completed the infrastructure of the ASE. Prior to his work at the ASE, Mr Tarif was the Deputy DirectorGeneral of the Amman Financial Market (AFM) where he oversaw Jordan’s entire capital market. During his six years as Deputy Director-General, Mr Tarif assisted in writing the new securities law that implemented the three separate entities that make up Jordan’s capital market today. He also supervised all of the regulatory and operational aspects of the AFM. He has published several works, including External Debt and Economic Development of Jordan, Obstacles of Attracting Foreign Investment in Jordan and The Legal Structure of Arab Stock Exchanges. In addition to those, Mr Tarif was awarded a certificate of merit from the International Development Center of Japan (IDCJ). In 1995, he earned the certificate of distinguished delegate in the alternative structure for securities markets conference that was held at Georgetown University, USA. Mr Tarif is the Chairman of NSC-Unix users’ group (countries using the French trading system), Atos – Euro Next. He is also the Chairman of the Technical Committee of the Federation of Euro-Asian Stock
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Exchanges (FEAS). He received his undergraduate degree and Master’s degree in economics from the University of Jordan and began his career in 1978, as an assistant director at the Central Bank of Jordan. Aqaba Special Economic Zone Authority (ASEZA) is the financially and administratively autonomous institution responsible for the management, regulation and development of the Aqaba Special Economic Zone. Asem P Haddad is audit and tax partner with Deloitte & Touche (Middle East), academically and professionally qualified from the USA and Jordan, with more than 18 years of experience in auditing and tax consultancy services to clients in different industries. He has functioned as a member of many national economic committees and participated in different business and economic forums and conferences, and has an indepth knowledge of the business laws and regulations of Jordan. He has also intensive and specialized training skills with multinational expertise and extensive experience in the following areas: business advice and counselling; due diligence studies and diagnostic studies; business appraisal; tax consultancy; training and research; international and US accounting and auditing standards. Atlas Investment Group is the premier Jordanian investment banking firm, playing a leading role in the development of the local and regional capital markets. As the oldest and only full-fledged investment banking firm in the country, Atlas offers its clients integrated financial activities that include corporate finance, asset management, brokerage and research. In November 2003, the Arab Bank acquired Atlas, which will now be merged into the Arab Bank to become the bank’s investment banking arm. Omar M Masri is the Founder and Managing Director of Atlas Investment Group (Atlas). Prior to establishing Atlas, he worked as a fund manager at Foreign & Colonial Emerging Markets Limited in London, where he structured, marketed and managed the first ever regional Middle East investment fund, which was listed on the New York Stock Exchange. He was the first individual in Jordan to be granted the certified financial consultant, broker and investment manager licence by the Jordan Securities Commission. Central Bank of Jordan is the country’s central banking organization tasked with the supervision of banks; the definition and implementation of monetary policy, including credit policy; the conduct of exchange rate policy; the holding and management of official international reserves; the promotion, regulation and oversight of the smooth operation of the payments and settlement system; the performance of the tasks of
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banker and financial agent of the government; and participation as a member in international monetary and economic organizations. Faris Sharaf is currently the Executive Director of Banking Supervision at the Central Bank of Jordan. Prior to joining the Central Bank, Faris was the Managing Director for Investment Banking and Capital Markets at the Export and Finance Bank in Jordan. He also held positions as an investment analyst with the International Finance Corporation in Washington, DC, and as an economic researcher with the Amman Financial Market. Faris holds Master’s degrees in money and banking and economics, and a Bachelor’s degree in economics and political science. DDB Jordan. In March 2000 Modern Jordanian and IDEA DDB merged. Both founding agencies had strong reputations, and the objective of the merger that became DDB Jordan was to combine resources in order to offer clients a new level of creative excellence. The partnership has successfully brought together diverse perspectives and strong individuals, now bound together by a shared vision and a common goal ‘to find a better way’. Suleiman I Matouk is the Managing Director of one of the fastestgrowing and most creative agencies, DDB Jordan. In addition to his position as Managing Director, Suleiman also heads the client-servicing department. After a successful career with Arthur Anderson & Co in Dubai, Abu Dhabi and Damascus, Suleiman moved back to Jordan, a country he believed in. In late 1996, Suleiman and some friends talked about an idea that led to the birth of IDEA Advertising, an agency that would reshape the advertising scene in Jordan. This agency caught the attention of DDB not by the size of its billings, but by its enthusiasm, creative spirit and the will to succeed. DDB found in IDEA a partner that would add another cultural dimension to an already multinational spirit, one that they believed was on its way to becoming another success story. Under his management, IDEA DDB built up a list of prestigious accounts on a local and regional level including NABISCO, the British Embassy, Aramex World Wide, Q-Line, Unium, Austrian Airlines, Adritec, and Trust International Insurance Co. Events Unlimited was established in 2001 to fill a gap in the local market for professional event management services in order to attract more international events to Jordan. The company specializes in planning and implementing corporate events including international trade fairs and conferences. Events Unlimited strives to become the leader in event management services in Jordan, carefully planning its way forward with great attention dedicated to customer satisfaction.
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Export and Finance Bank was established in 1996 and began operations with the basic strategy of attempting to link trade and project finance with capital markets in order to ensure a full service approach to the bank’s client base. The bank has gained a distinct and sustainable competitive advantage due to the provision of a comprehensive range of banking and financial services including but not limited to trade finance, corporate and project finance, asset management and various other investment banking-related services. Jonathan Wallace is a consultant publisher with Kogan Page, with responsibility for titles on the Middle East, Central Asia and Eastern Europe. He was, from 1965, the editor-in-chief and latterly chairman of the Middle East Economic Digest (MEED) Group, which he sold to the UK publishers EMAP in 1987. Since then he has worked as Middle East editor-in-chief for United Press International (UPI), as publisher for the Arab Bankers Association and as a consultant to a number of Arab and European companies. He is a frequent visitor to the region, with a particular interest in Libya and the Gulf Cooperation Council (GCC) states. Jordan Export Development and Commercial Centers Corporation (JEDCO), Jordan’s official trade development and promotion organization, was founded in 1972 by the Ministry of Industry and Trade, Federation of Jordanian Chambers of Commerce and the Amman Chamber of Industry. Its activities cover trade development and promotion, trade fairs, trade information services and human resources development. JEDCO also provides specialized support services and services in the areas of packaging, export finance and the implementation of trade agreements. Salah S Ghunaim is Acting Director-General of JEDCO. He has a BA in accounting (Beirut) and a Master’s and a PhD in business administration from the USA. Jordan Free Zones Corporation was established under the terms of the Free Zones Corporation Law No. 32 of 1984 to carry out the following tasks and duties: to establish free zones; to establish warehouses, stores and any other establishments necessary for managing and developing the free zones in such a manner that ensures their growth and expansion, including joint venture free zones; to manage, invest and develop free zones and gear them to serve the national economy, promote international trade exchange, transit trade and export-oriented industries; to implement the conditions and provisions relating to customs control and foreign exchange control and set up any establishments necessary for this purpose; registering establishments and companies at any free zone; issuance of licences and approvals
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related to exercising economic activities at the free zones in accordance with the provisions of the law, regulations and instructions issued in this regard; protecting and preserving the environment in the free zones and ensuring continuous development in accordance with standards and foundations to be determined pursuant to a regulation to be issued for this purpose, provided that the level of such standards and foundations is no less than that applicable elsewhere in the kingdom. For this purpose the Corporation shall exercise the power of the Ministry of Environment and the Minister shall exercise the power of the Minister of Environment in accordance with the in-force Protection of Environment Law. Ali Madadha is the Director-General of the Jordan Free Zones Corporation. Jordan Insurance Federation. The Association of Insurance Companies was established in 1956 as the first authority for regulating the business of the insurance sector in Jordan and presided over by several pioneer members of the Jordanian insurance industry of that time. Then, in 1987, the Unified Insurance Office was created for the insuring of motor vehicles and started its work under the control of this society, which remained in business until 1989 when a royal decree was passed for the establishment of the Jordan Insurance Federation followed by the definition of its basic by-laws. Jordan Investment Board. The Investment Law of 1995 established the Jordan Investment Board as a governmental body enjoying both financial and administrative independence, as a result of the government’s realization of the importance of increasing foreign direct investment to Jordan to create new job opportunities and the transfer of technology. Jordan National Bank is the third-largest bank in Jordan. It was established in 1955 and offers all commercial, retail and investment banking services. Samer Sunnuqrot is Assistant General Manager of Jordan National Bank and holds a Master’s degree in financial markets and a BBA in business administration with an accounting minor from Georgia State University, USA. He has published several economic articles in specialized magazines and daily newspapers and has prepared several studies and research on the financial and capital markets. Jordan Tourism Board was officially launched in March 1998 as an independent public–private sector partnership committed to utilizing marketing strategies to brand, position and promote the Jordan tourism product internationally so as to make Jordan the destination of choice.
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Mark Timbrell has been in the hotel business for 25 years, graduating with a Higher National Diploma in management from Ealing Hotel and Catering College. He worked for 10 years in central London at various five-star hotels including the Dorchester, the Stafford, Brown’s, the Westbury and Grosvenor House. Ten years ago he moved to Jordan to pursue his career overseas and, but for a two-year stint at the Regency InterContinental in Bahrain, he has been working in Amman. Currently he is Area Director of Sales and Marketing for InterContinental Hotels Group, Jordan. Mark is married with two daughters. Marwan A Kardoosh is a Jordanian national who read economics at Brunel University in London, from which he graduated with honours in 1997. He is currently acting as a non-resident economic consultant to the General Secretariat of the Higher Council for Science and Technology in Amman (in addition to being a freelance economic consultant). In 2000–01 he worked as an economist at the Arab Bank’s then newly founded think-tank, the Arab Bank Centre for Scientific Research. His numerous studies and publications include: an in-depth analysis of the Jordanian economy into the third millennium; a look at the Jordanian growth experience in the 1980s; a study on employment and the labour market in Jordan and another on Jordan’s various trade agreements; a critical evaluation of the QIZ model (forthcoming), and an appraisal of the Aqaba Special Economic Zone (forthcoming). Mr Kardoosh is currently involved in a number of projects funded by the World Bank. He is at present a member of the Global Research Project (GRP) team for the MENA region, doing research on the Jordanian growth experience since 1950; and is also involved in an ERF–ZEF research project on the enhancement of the process of law making for economic reform in the Arab countries. Mr Kardoosh writes regularly in the Lebanese Daily Star and the Jordan Times on developmental issues. He has edited a number of books and publications. Naim S Khoury is a former Chairman of the Jordanian Association of Certified Public Accountants (JACPA), a member of the Higher Commission for the Audit Profession in Jordan, author of many articles on accounting and auditing, and a partner in Saba & Co Deloitte & Touche (Middle East) – Jordan. National Electric Power Company (NEPCO) is responsible for electricity transmission and control activities, as well as for interconnection with neighbouring countries. Ahmad Hiyasat has a PhD in electrical engineering and is Managing Director of National Electric Power Company.
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List of Contributors
Natural Resources Authority (NRA) was established in 1965. Since 1985, the Minister of Energy and Mineral Resources has been the President of NRA, which is entrusted with the following responsibilities: suggesting policies to investigate, develop and exploit energy and mineral resources; exploring and prospecting for mineral resources in the form of executing geological, geophysical, geochemical, technical and economic studies; adopting plans and programmes to administer laws and regulations in various fields of mineral resources; issuing permits and licences for prospecting explorations, mining, quarrying and mineral rights certificates; coordinating cooperation with various international entities; supervising all hydrocarbon activities within the borders of Jordan including granting concession, exploration and exploitation agreements; and whatever other duties are assigned to it by the Council of Ministers, such as investment promotion activities in mining. Munther J Akroush is Assistant Director-General for Information and Investment at the Natural Resources Authority (NRA), Amman. He has a Master’s in economic science/energy economics from California State Polytechnic University, Pomona, and a High Diploma in mechanical engineering from Hellenic Mitsovion Polytechnic in Athens. Prior to his present appointment his career had included positions as Director of Promotion and Research and Planning Director of the NRA and as Deputy Projects Director of Jordan Cement Factory. The Philip Dew Consultancy Limited was founded in 1982 to support local and international principals in the comprehensive development of their businesses in the Middle East. The basic services provided include: identification, investigation and evaluation of market opportunities; market research and feasibility studies; identification of partners, principals and associates; development of marketing and business strategies; and on-the-ground support and assistance to market entrants, including the provision of background and cultural information. Philip Dew owns and manages his own business development consultancy, has worked and resided in the Middle East for over 30 years, is an Arabic speaker and has undertaken many assignments for clients from across the world. This is the seventh Doing Business book on which he has been Consultant Editor, the others being on the United Arab Emirates, Bahrain, Iran, Oman, Qatar and Cyprus. Over the past 18 months he has authored three business books on the Middle East: Saudi Arabia: Restructuring for growth, which has now undergone revision; The Kingdom of Bahrain: The financial capital of the Middle East; and Jordan: Shaping the future. Rajai KW Dajani & Associates was established by the senior partner, Rajai KW Dajani, in 1990 in Amman with the aim of creating a highstandard law firm to serve a diverse range of specializations. The firm
List of Contributors
xxvii
offers comprehensive legal services to meet the needs of clients, and acts for a multitude of domestic and international clients that are engaged in a wide spectrum of activities at local and international levels. The firm collaborates and cooperates with law firms worldwide. The practice’s members, paralegals and counsels are geared towards the rapidly developing legal sector worldwide. The team of lawyers and associated offices in Amman and throughout Jordan possess highly valuable experience and provide qualified services within many aspects of the law. The areas covered include civil law, commercial law, corporate law, government, telecommunications, media, e-commerce, contracts, international trade, construction law, foreign investment, insurance law, taxation, banking law, franchise and distribution, agency law, intellectual property, marine insurance, maritime law, securities, immigration, citizenship, mergers and acquisitions, labour law, aviation law, litigation before all courts, and arbitration. Yousef S Khalilieh, Member, Rajai KW Dajani & Associates, was born in Jordan in 1969, and admitted to the bar in Jordan in 1995. Education: University of Westminster, LL B (Hons), 1992; University of London, LL M in international business law, 1993. Member: Jordanian Bar Association; the ad hoc Jordanian Copyright Law Review Committee, 1995. Languages: Arabic and English. Noor A Jundi, Associate, Rajai KW Dajani & Associates, was born in 1979. Education: University of Jordan, LL B. Member: Jordanian Bar Association. Languages: Arabic and English. Shereen S Said, Associate, Rajai KW Dajani & Associates, was born in 1980. Education: National University of Amman, LL B. Member: Jordanian Bar Association. Languages: Arabic and English. Sana Abdallah is a Jordanian journalist based in Amman. She is the correspondent for United Press International, a Washington-based news service, and for the Middle East International, a London-based biweekly publication. Souheil Marto is the President of Eastern Company, which was established in 1946. He has a BSc in international business from the American University, Washington, DC, and a BSc in agricultural engineering from the University of Maryland, College Park. He has been President of Eastern Company since 1999, President of Scattini Seeds since 1997, and has worked for 22 years in the agricultural field as an importer of seeds, fertilizers and chemicals. Subhi A Ramadan has an MSc in sanitary/civil engineering from Syracuse University, USA, and a BSc in civil engineering from Al-Hikma American University of Baghdad, Iraq. He has many years’ experience mainly in management, construction and environmental
xxviii
List of Contributors
projects, including operation and maintenance, and tendering, assessments, health aspects, water quality management and pollution prevention. He has undertaken many consultancy and evaluation assignments on projects related to the World Bank-IFC, CIDA and IDRC of Canada, UN, WHO, RSS of Jordan and others. For 10 years he has been a self-employed consultant based in both Jordan and Canada performing environmental consulting, environmental studies, impact assessments of projects and business activities, mainly in the water, environmental and EIA fields including undertaking management, quality, pollution control, monitoring and resources studies.
Acknowledgements
xxix
Acknowledgements The Editors would like to thank the following for their help, kindness and patience in the course of preparing this book: HE Dr Bassem Awadallah, Minister of Planning & International Cooperation . Dr Tayseer Al-Sumadi, Director, Policy & Studies Department and Sherif Abdullah bin Zeid, Ministry of Planning & International Cooperation . Ali Madadha, Director General, Free Zones Corporation . HE Dr Taher Kenaan, Secretary General, The Higher Council for Science & Technology . Faris Sharaf, Executive Director, Banking Supervision Department, Central Bank of Jordan . Dr Faris Ayed Dababneh, Director, Information Centre, Ministry of Health . Rajai Dajani, Yousef Khalilieh, Nour A Jundi and Shereen S Said, Rajai KW Dajani & Associates, Advocates and Legal Consultants . Mazen Homoud, Deputy Managing Director, Jordan Investment Board . Karim Nabulsi, Naim Khoury and Asem Haddad, Saba & Co, Deloitte & Touche (Middle East)-Jordan . Ali Al-Husry, Chairman & CEO and Abeer Arafat, Jane Manneh, Heba Allaf and Amani Ayoubi, Export & Finance Bank . Eng. Munther Akroush, Director, Information & Investment, Natural Resources Authority . Souheil Marto, Eastern Company and Yousef Marto . Omar Masri, Managing Director and Rana Najati, Atlas Investment Group . Mazen Khalaf, Director, Empretec Jordan . Marwan H Khoury, Managing Director, Waleed Muhajer, Director of Marketing and Sherifa Nofa Nasser, Cultural Heritage Unit, Jordan Tourism Board . Jalil Tarif, Executive Manager and Lina AlQotob, Amman Stock Exchange . Sameh Asfour, General Manager and Alia Abboushi, Amman World Trade Centre . Mark Timbrell, Area Director of Sales & Marketing and Reema Baroudy, Christine Na’eem, Assem Abdel Ghani, Jehad Eisa and Ghazi Abu Hamdan, Intercontinental Hotel, Amman . Edgar Solonthaler, General Manager and Abedrabo Twaissi, Executive Assistant Manager, Movenpick Hotel, Dead Sea . Aysar A Krawi, Petra National Trust . Emile Cubeisy, Advisor, e-Initiatives, Ministry of Information & Communications Technology . Evon Abu Taieh, Ministry of Transport . Emad Kilani, Division Head, Orayb Akeel, Senior Officer, Business Development & Marketing and Shadem Qandil, Aqaba Special Economic Zone Authority . Dr Fuad Werr, Deputy CEO and Samer Sunnugrot, Assistant General Manager, Investment Banking Services, Jordan National Bank . Dr Salah Ghunaim, Acting Director General and Ghaith Bakri, Director Export Promotions Dept, Jordan Export Development & Commercial Centers Corporation . Maher Al Hussein, Secretary General, Jordan Insurance Federation . Subhi Ramadan, President, Environmental Consultants
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Acknowledgements
Branch, Ramadan Technical Services Co . Dr Ahmed Hiyasat, Managing Director, National Electric Power Co . Juma Abu-Hakmeh, Director General, Amman Chamber of Industry . Wahib Shair, Chairman, Financial Information & Services Company, AlTajamouat Group . Sana Abdallah, United Press International . Suleiman Matouk, Managing Director, DDB Jordan . Adnan Al Zoubi, Secretary General’s Assistant for Awareness & Information, Ministry of Water & Irrigation . Hassan Dabbas, Head of Marketing & Sales and Nada Al-Waked, Royal Jordanian Airlines . Jennifer Harmaneh, Jordan Times. Marian Nimry, Riad Al Khoury; Marwan Kardoosh, Lesleyar and Jude Masri, Elizabeth Randolph, Al-Mourir Al-Aboushi, and the many secretaries and office managers met in the course of enquiry who were so integral to ensuring success in obtaining information. Philip Dew & Jonathan Wallace March 2004
Map 1: Jordan and its neighbours
Map 2: Jordan and its infrastructure
Part One
Background
1.1
Geography, Geology and History of Jordan Philip Dew
Background The Hashemite Kingdom of Jordan officially came into existence in 1946 and is bounded to the north by Syria, the north-east by Iraq, the east and south by the Kingdom of Saudi Arabia, and the west by Palestine and Israel. Overall, the country comprises a total area of 91,880 square kilometres (35,490 square miles) of which 88,802 square kilometres (34,286 square miles) is land and 540 square kilometres (208 square miles) is water. In late 2003, the population of Jordan was officially estimated at 5.48 million, a vast majority of whom, 98 per cent, are Arabs of various tribal origins. The remaining number is made up of Circassians, whose forebears arrived from north of the Caucusus in the 19th century, Chechens, Armenians and expatriates of many nationalities. Although the population is overwhelmingly Muslim, mainly Sunnis (90 per cent), Jordan is officially a secular state whose constitution grants freedom of religion, race and colour as a statutory right. Arabic is the country’s official language although English is widely spoken.
Physical geography A major part of Jordan comprises a plateau lying some 700 to 1,000 metres above sea level and which continues on into the neighbouring countries of Syria, Iraq and Saudi Arabia. The borders between Jordan and these countries are artificial, being a series of straight lines connecting defined map references. To the west of the plateau is a mountainous area rising a further 300 to 700 metres above the plateau and which falls to the Jordan Valley to the west. This valley, at the northern end of the Great Rift Valley, contains the Dead Sea, the lowest point on the earth’s surface and whose surface is 416 metres below sea level and whose maximum depth is
4
Background
396 metres. The valley also contains the Jordan River, some 152 kilometres of which lie within Jordanian territory, and is the country’s most fertile area.
Climate Climatically, Jordan has hot summers and fairly cold winters. A maximum temperature of 498C has been recorded in the Jordan Valley, while on higher ground temperatures can fall to zero with frosts and some snow. However, average temperatures during the summer are nearer 328C and in winter approximate to 138C. Strong winds can also be anticipated, sometimes from the south or south-east accompanied by heavy dust storms, and at other times from the north or north-west. Of particular importance to Jordan, which is exceptionally short of water, is the annual rainfall, the occurrence of which is highly unpredictable. In the higher parts of the country, 380 to 630 millimetres of rainfall occurs, mainly between November and April, sufficient to support the agriculture of the eastern Jordan Valley. Elsewhere, an absolute maximum of 200 millimetres of rain falls and, in some areas, none at all. The net result is that only about a quarter of the country can be cultivated and in much of the cultivable area only at a subsistence level.
Geology1 Jordan is located in the north-western part of the Arabian Peninsula. About 85 per cent of Jordan’s territory is underlain by sedimentary rocks, which attain a thickness of more than 12 kilometres in the Jordan Rift graben. Further to the east, in the Azraq and Risha areas, sedimentary rocks are approximately 7 kilometres thick. Most of the country is covered by 4 to 5 kilometres of sediments. The section overlying its crystalline basement consists of units ranging in the age from late Proterozoic to Holocene. In its simplest form, the geology of Jordan consists of a sequence of mainly marine sediments, which surround a small area of Precambrian crystalline outcrop in the south-western part of the country and thicken toward the north and the east. Close to the Precambrian outcrop, the units are thin and separated by many unconformities. Proceeding in the basin-ward direction, the unconformities diminish as more of the units missing in the outcrop are encountered. Structurally, Jordan can be divided into a series of broad, carbonateplateau arches and gentle dipping desert-covered basins. The basic 1
This information has been provided by the Natural Resources Authority.
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Background
tectonic features, which developed at different rates, are intersected by long, essentially linear graben and half-graben, along which significant strike slip movement has occurred. The most fundamental of these linear fault zones strike north-west, parallel to the Red Sea trend. They are cut off obliquely by the Dead Sea Rift trend striking north and northeast. The Dead Sea Rift is a tertiary feature with left lateral displacement of about 107 kilometres. It is technically linked to the Red Sea spread centre and the Gulf of Suez graben system, with its oil-productive horst feature. The Dead Sea Rift forms the western boundary of the Arabian Plate and transforms from spreading in the Red Sea to compression in the Taurus Zagros compressional margin. In Jordan, the Dead Sea Rift has a significant extensional component, giving rise to both the sub-sea depressions in the Jordan Valley and the thick late Tertiary sediments that underlie the valley. Several sub-basins occur along the rift and probably reach a thickness of up to 12,000 metres. Transgressive and regressive movements within the Tethys seaways entering from the north largely controlled the tectonic trends within the late Palaeozoic and Mesozoic basins. The basalt plateau is covered by approximately 11,500 square kilometres of thin basalt over a basin that contains a thick Mesozoic section with Palaeozoic elements beneath. Direct natural evidence for the existence of oil in Jordan is provided by surface occurrence of oil and gas seepages, bituminous calcareous sediments, asphalt and tar sand. Some of these features have been known since the beginning of recorded history.
History Jordan, as we know it today, has been home to some of the oldest civilizations in the world with archaeological remains on the west bank of the River Jordan being dated back as far back as 9000 BCE and those at Beidha, in the south of the country close to Petra, being regarded as the first ever recorded human settlement. However, the country’s documented history begins around 2000 BC, when the Ammonites settled along the River Jordan in Canaan and the warring kingdoms of Edom, Gilead and Moab, mentioned many times in the Bible, prevailed on the country’s east bank and in the nearby mountains. From that time and for the succeeding 3,000 years, a succession of invaders and settlers arrived in the area including the Hittites, Egyptians, Israelites, Assyrians, Babylonians, Persians, Greeks, Romans, Arab Muslims, Christian Crusaders, Mamelukes, Ottoman Turks, who ruled the region for 400 years between 1517 and 1918, and, finally, the British. After the end of the First World War, the League of Nations, as the mandate holder for Palestine and Transjordan, awarded the territory now comprising Israel, Jordan, the West Bank, Gaza and Jerusalem to
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Background
the United Kingdom. Subsequently, in 1922, the British divided the mandate by establishing the semi-autonomous Emirate of Transjordan under the nominal rule of Abdullah bin Hussein, while continuing its direct administration of Palestine. Six years later, in 1928, Transjordan obtained a degree of independence from Great Britain but it was not until three days after the mandate ended on 22 May 1946 that the country became the independent Hashemite Kingdom of Transjordan. Transjordan was one of the Arab states that assisted Palestinian nationalists opposed to the creation of Israel in May 1948 and that took part in the ensuing war with the newly founded state of Israel. On conclusion of the hostilities, the armistice agreements of April 1949 left Jordan in control of the West Bank but provided that the demarcation lines be without prejudice to future territorial settlements or boundary lines. In 1950, Transjordan, including those areas of Palestine annexed by King Abdullah, became the Hashemite Kingdom of Jordan. Subsequently, in 1957, Jordan ended its special defence treaty relationship with the United Kingdom. In May 1967, Jordan signed a mutual defence pact with Egypt and participated just one month later with that country, Syria and Iraq in hostilities against Israel. During this war, Israel gained control of the West Bank and all of Jerusalem, and substantial numbers of Palestinians moved to Jordan, whose Palestinian refugee population grew to total 1 million. The power and importance of Palestinian resistance elements within the diaspora in Jordan constituted a growing threat to the sovereignty and security of the Hashemite state, and open fighting erupted and subsided in June 1970. No fighting occurred along the 1967 River Jordan ceasefire line during the October 1973 Arab–Israeli war but Jordan did send a brigade to Syria to fight Israeli units on Syrian territory. Later, in 1988, Jordan renounced all claims to the West Bank but retained an administrative role pending a final settlement. Jordan did not participate in the Gulf War against Iraq in 1991 but agreed that year, along with Syria, Lebanon and the representatives of the Palestinians, to participate in direct peace negotiations with Israel, ultimately signing a peace treaty in 1994, since when Jordan has sought to remain at peace with all its neighbours.
1.2
Political Structure and Decision Making Sana Abdallah
Introduction The 1952 Constitution of the Hashemite Kingdom of Jordan, one of the most modern constitutions in the region, is the source of the country’s political structure, and specifies the role of each branch of government. A hereditary monarchy with a parliamentary system, the political structure is divided into the executive, legislative and judicial branches, with the reigning king as the head of state, chief executive and the commander-in-chief of the armed forces.
The Constitution Comprising six chapters and 109 articles, the Jordanian Constitution, first drawn up in 1947 and amended in 1952, illustrates the blueprint for the country’s system of government, legislation and the rights and duties of Jordanians, calling for the separation of the three branches of government. It defines the kingdom as an ‘independent sovereign Arab state’ with Islam as the state’s religion. However, the Constitution also insists that ‘the state shall safeguard the free exercise of all forms of worship and religious rites’. The Constitution stipulates that all Jordanians are equal before the law, prohibits discrimination between them on the grounds of race, language or religion and guarantees personal freedom. Often used by civil and political rights advocates as the basis for protecting these rights, the document bans detention or imprisonment except in accordance with the provisions of the law, prohibits deportation of any Jordanian and protects freedom of opinion, free expression and freedom of the press. It also gives Jordanians the right to free assembly and freedom to establish political parties – regulated by law – so long as their methods
Political Structure and Decision Making
15
are peaceful. It bans the extradition of political refugees on account of their political beliefs or for the defence of liberty. Since most of these liberal rights guaranteed by the Constitution are regulated by law, Bills have often been issued, whether as provisional laws by the government in the absence of Parliament or endorsed by the National Assembly in session, that sometimes restrict these freedoms. However, the reigning king, Abdullah II, has instructed his government to ensure greater freedoms for his subjects by drafting liberalized amended legislation that would fulfil the spirit of the Constitution.
The king Jordan’s King Abdullah II became the country’s fourth monarch since the inception of the kingdom in 1921 under the reign of King Abdullah bin al-Hussein, son of Sharif Hussein of Mecca. The ruling monarchs have been: King Abdullah (1921–51); King Talal bin Abdullah (1951–52), eldest son of King Abdullah; King Hussein bin Talal (1952–99), eldest son of King Talal; and King Abdullah bin al-Hussein (1999–present), eldest son of King Hussein. The Hashemite family members are direct descendants of Prophet Muhammad through his daughter, Fatima, and her husband, Ali Bin Abi-Talib, the Prophet’s paternal first cousin and the fourth Caliph of Islam. The throne of the kingdom is hereditary to the dynasty of King Abdullah bin al-Hussein, with the royal title being passed from the king to his eldest son, and to the eldest son of that son in linear succession thereafter. An amendment was introduced to the Constitution in 1965 allowing the king to select one of his brothers as heir apparent, which King Hussein did when he named his younger brother, Hassan, as Crown Prince. The amendment came amid repeated attempts on Hussein’s life and when his eldest son Abdullah was only three years old. Shortly before his death, however, Hussein replaced his brother with his son Abdullah, who inherited the throne from his father when he died in February 1999 after a battle with cancer.
The executive branch King’s role As the chief executive, the reigning king, Abdullah II, appoints the prime minister who then forms a Cabinet in close consultation with the palace. As head of state, the monarch is immune from any liability and responsibility. The king’s powers in the executive branch include the following:
16
Background
.
. . . .
. . . . .
.
appointment and dismissal of the prime minister and dismissal of any Cabinet minister upon the recommendation of the prime minister; appointment of the Upper House of Parliament members; ordering the holding of parliamentary elections; dissolving the Lower House of Parliament; endorsing laws before they are enacted, although they can be overruled by a two-thirds majority of the National Assembly, or both Houses of Parliament; authorizing the appointment and dismissal of judges, regional governors and the mayor of the capital, Amman; approving constitutional amendments; declaring war as commander-in-chief; concluding and ratifying treaties and accords, with the approval of the Cabinet and National Assembly; creating, conferring and withdrawing civil and military ranks, medals and honorific titles, and the delegation of this authority to any other person by special law; granting special pardons and commuting sentences, as well as general amnesties determined by a special law.
Prime minister and Cabinet The prime minister, who also takes the portfolio of defence minister, and Cabinet members must be endorsed by the Lower House of Parliament in a vote of confidence after the prime minister presents his government’s policy statement. If the Lower House votes against the prime minister, he and the entire Cabinet must resign. A single Cabinet minister must also resign if he or she is voted out by the Lower House. The prime minister and Cabinet are responsible for the administration of all Jordan’s internal and external affairs. The Cabinet usually meets twice a week to discuss matters of state, take administrative decisions, issue regulations and draft legislation to be presented to Parliament for debate and approval. Each minister is responsible for running the affairs of his or her department in line with the policy statement presented to the legislature. The latest Cabinet was formed on 25 October 2003 by Prime Minister Faisal al-Fayez, who was hand-picked by King Abdullah to form a new government. Al-Fayez, who worked closely with the king and held the post of Minister of the Royal Court upon his new assignment, was tasked in a royal letter of designation to begin acting on domestic political, social and economic reforms that would specifically focus on political development by raising the ceiling of public and press freedoms, root out
Political Structure and Decision Making
17
administrative corruption and nepotism, alleviate poverty and unemployment, achieve sustainable development, and give attention to women and youth issues. Al-Fayez trimmed down the Cabinet from the previous 29 members to 21, including the prime minister, merged some of the ministry departments and dissolved the Ministry of Information, whose tasks would be handed over to the Higher Media Council that would regulate the stateowned media and liberalize the independent press. It was also the first government in Jordan’s history that included three women Cabinet ministers.
The legislative branch The National Assembly Legislative power is shared by the king and the National Assembly, or Parliament. The National Assembly comprises an elected 110-member Lower House of Parliament, or House of Deputies, and a 55-seat Upper House of Parliament, or Senate, whose members are appointed by the king. The normal parliamentary term is four years, but the king has the power to dissolve both Houses of Parliament and dismiss any of their members although dismissal of a member of the lower house is subject to specific conditions. The Senate is a component of the king’s legislative powers and its appointed members normally represent the king’s vision. The Senate cannot constitutionally make up more than half of the elected Lower House, though it enjoys the same degree of free expression when speaking in Parliament. The Lower House benefits from powers that the Upper House does not, such as questioning the government on any public issues. It can also hold a no-confidence vote against the government or any individual Cabinet minister, who must then resign if voted out by a majority. The National Assembly can submit legislation to the government in the form of a draft law. It also initiates debates and votes on proposals submitted by the prime minister to the Lower House of Parliament, which can endorse, amend or reject them. Each proposed piece of legislation is referred to a specialized committee in the Lower House for review and, if accepted, is conveyed back to the government for the drafting of the proposal in the form of a Bill. The government draft law is then debated by the Lower House. If approved, it is sent to the Senate for discussion and a vote. If the Senate rejects the draft Bill, it is returned to the Lower House with its proposed amendments. Should the two houses disagree, they hold a joint session in which the matter is settled by a two-thirds majority vote by both. When the Upper House approves a draft Bill as accepted by the Lower House, it is submitted to the king, who can endorse it, thus enacting the
18
Background
law, or return it unapproved to the Lower House of Parliament for another review and vote. If both houses insist on approving the Bill in a joint session with a two-thirds majority, it becomes an Act of Parliament, overruling the king’s veto. Parliamentary elections Jordan’s first free parliamentary elections in more than 25 years were held under King Hussein’s reign in 1989, in which the electorate were entitled to as many votes as the number of seats allocated for their district. A quota was placed for the country’s minorities, giving six seats to the Bedouins, three to the Circassian and Chechen communities, and nine for the Christian minority. These polls brought to the Lower House, which was an 80-seat Parliament at the time, a cross-section of representatives of the country’s diverse socio-political and ethnic communities. A few months before the 1993 polls, a provisional Bill issued by the government amended the elections law according to the principle of ‘one person, one vote’, whereby the country was divided into 20 electoral districts, and each voter could vote for only one candidate. This law remained in place when the following elections were held, prompting a boycott by the opposition parties, led by the Islamic Action Front, the political arm of the influential Muslim Brotherhood Movement. General elections that were due to be held in 2001 were delayed for two years by the government, citing ‘regional circumstances’, in reference to the Palestinian uprising and clashes with Israeli occupation forces across Jordan’s western borders, and the growing tension in the kingdom’s eastern neighbour, Iraq, which eventually led to the US-led military operations against the Arab country in March 2003. The government did not want what it said were ‘radical voices’ to exploit the situation across the two borders to win seats in a Parliament that could have brought a large percentage of opposition figures into power by a population that was frustrated by US policies in the region. But an election day was finally set shortly after the US forces overthrew the regime of Saddam Hussein in Iraq in April 2003. By the time the polls were held in June 2003, the elections law had been amended again, raising the number of seats from 80 to 110, including a six-seat quota for women for the first time. Although the ‘one person, one vote’ system remained in place, the Islamic Action Front and other opposition groups ended their boycott and fielded their candidates across the country. Despite the relatively low voter turnout of 58.8 per cent of the 2.3 million eligible voters, the 2003 parliamentary elections brought to the Lower House of Parliament a majority of 62 seats for pro-regime candidates, including former government officials, former legislators
Political Structure and Decision Making
19
and tribal leaders known for their loyalty to the ruling Hashemite monarchy. The Islamic Action Front seized 17 seats, while an additional eight independent Islamists secured membership. The remaining legislators were independent, leftists and pan-Arab nationalists. None of the 54 women candidates managed to win seats outside the six-seat quota, and those who obtained the highest percentage of votes for the quota were all from districts outside the capital, Amman. After a two-year absence of parliamentary life, the new legislature inherited 211 provisional Bills, most of them economic, issued by the government, which needed to be reviewed during its four-year term. In November 2003, King Abdullah issued a royal decree increasing the number of seats in the Senate from 40 to 55, appointing representatives from all sectors of society, including seven women – the highest number of women seen in the Jordanian Upper House of Parliament. With six women in the Lower House, seven in the Senate and three in the Cabinet, Jordan became the Arab country with the highest percentage of women representatives in government. Local councils Women are also well represented in the kingdom’s municipal councils, half of whose members are elected and the other half appointed by the government. If a woman is not been elected to a council, the government appoints at least one in every district. Jordan is divided into 12 regional governorates headed by a governor appointed by the king through the Ministry of Interior. Each governorate is divided into smaller administrative sub-regions. The district government is responsible for executing Cabinet decisions on the local level, and is directly supervised by the Ministry of Interior. The kingdom’s 99 municipal councils are headed by appointed mayors. The mayors supervise the daily affairs of towns and cities that are handled by the municipal councils.
The judiciary Introduction The Jordanian Constitution specifically states that the role and functions of the judiciary must be completely independent of any influences by the executive and legislative branches. The courts are subjected to no other authority than that of the law. Judges are appointed by the Ministry of Justice but require endorsement by a royal decree. They are normally graduates of recognized universities who have served as clerks and officers of the court. The
20
Background
Ministry of Justice, with approval of the king, assigns judges to serve in courts, transfers, promotes and dismisses them. There are three types of courts: the civil, religious and special courts, made up of one or more judges, but no juries. Civil courts The civil judiciary is a four-level system: the 14 magistrates’ courts, seven courts of first instance, the Court of Appeals and the Court of Cassation (the supreme court of the kingdom). The jurisdiction of the magistrates’ courts is to hear civil and criminal cases of issues involving small fines and a maximum prison term of two years. The courts of first instance have general jurisdiction over all criminal and civil matters not granted to other courts’ jurisdiction, and also hear appeals for judgments of the magistrates’ courts. The next judicial tier, the Court of Appeals, is presided over by a tribunal of three judges in Amman. It hears appeals of the decisions of the magistrates’ courts, and decides appeals from decisions of the courts of first instance and the religious courts. The Court of Cassation, the highest judiciary, is presided over by a judge appointed by the king and who serves as the country’s chief justice. All the court’s seven judges sit in full panel when important cases are being argued, but, for most appeals of verdicts made by the Court of Appeals, five judges hear and rule on the cases. Religious courts The religious courts are divided into the sharia (Islamic law) courts for the Muslims, the tribunals of religious communities for non-Muslims or the ecclesiastical courts for the minority Christian communities. These courts have jurisdiction over cases of personal status, such as marriage, divorce, child custody, alimony and inheritance, as well as communal endowment. Rulings of religious courts may be appealed at the Court of Appeals in Amman. Individuals not of the same religion who do not agree to the jurisdiction of a religious court are allowed to bring their case to the specialized civil court. If there is a conflict of jurisdiction between two religious courts, or between a religious and civil court, the president of the Court of Cassation forms a three-judge tribunal to decide jurisdiction or to hear the case. One judge sits in each sharia court and rules on cases according to Islamic law, and sometimes based on parts of the civil status law if divorce, for example, is involved. Each Christian court is made up of three judges, usually members of the clergy, who base their rulings on different aspects of canon law
Political Structure and Decision Making
21
interpreted by the Greek Orthodox, Roman Catholic and Anglican traditions. But they apply Islamic law in inheritance cases. Special courts Special courts mainly involve the State Security Court, which hears cases related to drug trafficking, illegal smuggling, economic crimes and security-related cases. The State Security Court, which replaced the military courts of the martial law period in Jordan between 1956 and 1990, comprises two military judges and one civilian judge who try both military personnel and civilians. Its verdicts are not final and may be appealed at the Court of Cassation. Special courts also include the Supreme Council, the Special Council and the High Court of Justice. The Supreme Council interprets the Constitution at the request of the prime minister or the Lower House or Upper House of Parliament. The Special Council, called on by the prime minister at any time, interprets any law that has not been interpreted by the courts of law. The High Court of Justice is constituted when necessary by the Court of Cassation. Its jurisdiction includes hearing petitions, issuing injunctions involving public servants charged with wrongdoing and trying Cabinet ministers charged with offences.
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1.3
Overview of National Economic Development in Jordan Marwan A Kardoosh, Economist
Introduction Jordan is a small country with very few natural resources; its social and economic well-being have been intricately tied to its relations with neighbouring Arab states in terms of population movements and flows of trade and finance. With a population of about 5.3 million,1 it is similar in size to Lebanon (4.4 million) and Palestine, but much smaller than Egypt (66.4 million), Syria (17.2 million) and Iraq (24.3 million).2 In per capita terms Jordan is classified as a lower middle income economy.3 Before the current and still evolving period that dates from 2003, the kingdom had passed through five distinct phases of economic and social development, spanning the five decades between 1950 and 1999.
The first and second periods – 1950 to 19854 The first period started with the formation of the Hashemite Kingdom of Jordan at the turn of the 1950s and lasted up to the Six Day War and occupation of the West Bank of Jordan and other Arab lands in 1967. It was also the period of recovery from the events of 1948, the adjustment to the territorial expansion of Jordan to include the West Bank and the increase of Jordan’s citizenry to include Palestinians of the West Bank and refugees from Palestinian territory following the creation of the state of Israel in 1948. 1 2 3
4
Central Bank of Jordan, Monthly Statistical Bulletin, October 2003, p 1. Population figures are from the World Bank (www.worldbank.org). According to the World Bank Social and Economic Development Sector Unit, Middle East and North Africa Region, Report No. 24425-JO, ‘Jordan development policy review: a reforming state in a volatile region’, November 2002. The analysis for this period draws heavily on T Kanaan and M Kardoosh, ‘The story of economic growth in Jordan 1950–2000’, a paper prepared for the Economic Research Forum (ERF) in Cairo, Egypt (unpublished).
24
Background
The second period began with efforts to recover from the effects of the 1967 war, adjustment to the loss of territory and absorption of the second wave of refugees, with such efforts gaining assured success and mutating to a period of high economic growth that lasted up until the mid-1980s, when its sustainability became questionable with the ending of the second boom in oil prices in 1983. The cushion was provided by an increased inflow of Arab aid, which brought total foreign assistance to just over JOD 40 million in 1967/68, compared with an annual average of JOD 13.5 million between 1964 and 1966. With the advent of the oil boom in 1973, total foreign aid averaged JOD 126 million per annum in the period 1974–78 and then, following the Baghdad Arab summit in 1979 and the second oil boom, the figure for financial assistance climbed to an average of JOD 382 million per annum between 1980 and 1983. Further stimulation of the high growth rates that characterized the years 1973–84 was provided by: .
A boom in transit trade through the port of Aqaba. During the Iran– Iraq War, Aqaba became an indispensable part of Iraq’s supply line. By early 1981, Jordan had already become the main supply route for war material and civilian goods destined to Iraq, and appeared to be holding up well under the strain of massive expansion.5
.
The remittances sent home by Jordanians working abroad. The capital flows transmitted officially through the banking system almost quadrupled from JOD 129.6 million in 1976 to JOD 475 million in 1984. This figure falls short of actual flows during that period if one takes account of capital flows remitted ‘informally’, or in the form of consumer durables and other merchandise.
.
The civil war in Lebanon, which began in 1975, and its troubled aftermath, from which Jordan benefited, albeit to a limited extent, by attaining the role of provider of the banking, insurance and professional services formerly supplied by Lebanon.
The average GDP growth rate in real terms for the period 1974–82 was 11.6 per cent, one of the world’s highest during that period. Economic policy during that period continued on the lines established in the previous pre-1967 era, ie using official development assistance to bolster physical and human infrastructure and to lead investment in expensive resource-based projects in collaboration with the private sector. It also continued the policy of support for domestic private sector investments, according them tariff protection and monopolistic concessions. Concurrently, the government became more and more interested in attracting foreign investment and, in 1972, enacted an investment encouragement law to this end. 5
L Brand, ‘Jordan’s inter-Arab relations: the political economy of alliance making’ (www .ciaonet.org).
Overview of National Economic Development in Jordan
25
Government economic policy continued also to rationalize and to seek consistency of public investment through a series of five-year plans authored by the National Planning Council (NPC), which succeeded the earlier Development Board in the task of programming public investment projects. Responsibility for implementation of such projects, however, was decentralized to the various ministries, with the NPC maintaining only a monitoring brief.
The third period – 1985 to 1991 The third period lasted from the mid-1980s to the outbreak of the Gulf crisis and war in 1990/91. It was a period of retardation in economic growth and performance, culminating in the collapse of the value of the national currency and a rapidly mounting external debt burden. Compared to the robust growth observed up to the mid-1980s, real GDP at factor cost registered weak or negative annual rates of expansion during the period 1986–90. A rapid deceleration in GDP growth is discerned as of 1986 with that year indicating a mere 2.1 per cent real growth (significantly lower than the population growth rate) though rising to 4 per cent in 1987. The economy, already showing signs of acute economic slowdown at the outset of 1986, fell into a fully fledged recession in 1988. GDP recorded negative rates of change of 0.8 per cent, 10.5 per cent and 1.1 per cent in 1988, 1989 and 1990 respectively. Living standards, which had risen strongly between 1972 and 1983, dropped sharply after that. That deterioration was accompanied by higher levels of domestic unemployment, falling investment and a mounting deficit in the balance of payments. In that environment, the budget deficit was largely monetized, as foreign exchange reserves dropped sharply and access to external borrowing virtually ceased, due in part to diminishing creditworthiness and shrinking flows of aid to the kingdom. What had been a necessity for a very poor country emerging from war and a massive movement of refugees in the early 1950s had become a serious addiction, even when the kingdom accomplished phenomenal improvement in its national income during the good years of the 1970s and early 1980s.6 The addiction was encouraged by the high levels of Arab financial assistance during the same period, but continued in subsequent years even with the disappearance of that assistance. Instead of exercising fiscal discipline to adjust to the changing times, the government resorted to internal and external borrowing. Contracted foreign loans were not confined to concessionary development loans to finance capital expenditure but included sizeable borrowing at 6
Brand, ‘Jordan’s inter-Arab relations’.
26
Background
commercial rates to sustain the current expenses of an inflated civil administration. The crisis came to a head in 1988, when the government of Jordan failed to meet its debt service obligations, which had reached USD 1 billion for the first time. This was followed soon after by a devaluation of the Jordanian dinar in an attempt to reduce imports and shore up Jordanian exports by making them more price competitive. Prior to this, the dinar, pegged to the IMF’s Special Drawing Rights (SDR), had long been one of the most stable currencies in the Middle East (albeit at an overvalued rate). Between 1982 and 1987, the value of 1 Jordanian dinar varied only slightly against the US dollar, from about USD 2.8 in 1982 to USD 3 in 1987, reflecting fluctuations in the value of the US dollar in international markets. But over the 12 months ending December 1989, the dinar depreciated by more than 37 per cent, from an official rate of USD 2.7 to USD 1.7.7 The kingdom’s external public debt in relation to GDP, on the one hand, and the cost of debt servicing (instalments and interest payments) in relation to the export of goods and non-factor services on the other, exemplified the magnitude of Jordan’s debt problem during the period 1986–90. Jordan’s outstanding external public debt ratio to GDP averaged 203.4 per cent over that period compared to an annual average of 49.8 per cent between 1976 and 1980.8 Instalments and interest payments as a percentage of the export of goods and non-factor services averaged 23.4 over the same years, a 10 percentage point increase over the corresponding ratio between 1981 and 1985, and three times the comparable figure during the second half of the 1970s.9 Whereas in 1980, foreign exchange reserves covered nearly six months’ imports, they suffered steady reduction because of an illadvised attempt to continue financing high levels of imports by drawing down reserves. As a result of Jordan’s strong reserves position in the early 1980s, the country found it relatively easy to raise funds on international markets and used the money to cover current as well as capital spending. At the same time, the ratio of foreign debt to GDP and to exports rose sharply. Repayment was bunched in the late 1980s and as a result 20 per cent of spending in the 1989 budget was allocated to servicing public debt. By spring 1989, the burden had become too large and IMF assistance was required to reschedule debt repayments. 7
8
9
Central Bank of Jordan, Department of Research and Studies, Yearly Statistical Series (1964–95), Special Issue, May 1996, p 21. Ratios are from the World Bank, ‘The Hashemite Kingdom of Jordan: sources of growth’, unpublished report, October 2001, Table 2.6, p 27. World Bank, ‘The Hashemite Kingdom of Jordan’.
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28
Background
The structural adjustment measures agreed with the IMF called for an austerity programme that involved deep cuts in public expenditure together with the removal of food subsidies and upward revisions of petrol prices and import duties on luxury goods. The IMF agreed to lend Jordan USD 150 million to help fund economic restructuring.10 The consequences of the economic measures taken in accordance with early structural adjustment, particularly the abrupt way in which the government attempted to raise fuel prices, provoked riots in one southern city, resulting in 11 deaths. Higher import prices and the marked depreciation of the dinar against the US dollar and other hard currencies resulted in a 25.8 per cent increase in the cost of living index in 1989.11 However, the rate of inflation subsided over the next three years, from its high point in 1989, at annual rates of 16.1 per cent, 8.2 per cent and 4.0 per cent respectively.
The fourth period – 1991 to 1999 The fourth period commenced with the end of the Gulf War in 1991 and the ensuing economic boom stimulated by the influx of Jordanians returning from Kuwait and other Gulf states. Four years of relatively high economic activity, 1992–95, were followed by several years (through to 1999) of reduced growth in gross domestic product (GDP) at a rate below the population growth rate. This period started with a second round of macroeconomic reform measures that focused on re-establishing fiscal and monetary stability, which had been shaken in the wake of the 1988 debt crisis. Reform measures emphasized fiscal discipline and decreasing bias against exports. Salaries and wages in the public sector were frozen and new recruitment was curtailed. Government subsidies were cut and protectionist levels of import duty were scaled down. A sales tax was introduced as a preliminary step to eventual full-scale tax reform based on a system of value added tax. With the eruption of the Gulf crisis in 1990 and because of Jordan’s lack of enthusiasm for the ensuing war against Iraq,12 tourist trade plummeted and the Gulf states curtailed their ties with the kingdom. A large number of Jordanians resident in Kuwait and Saudi Arabia found it necessary to return home at this time, depriving Jordan of a major source of factor income, while the kingdom also lost much of its export market in the Gulf as well as an important source of financial aid and 10 11 12
Economist Intelligence Unit, Country profile: Jordan, 1990/91, pp 11–12. Central Bank of Jordan, Department of Research and Studies, Annual Report 1990, p 2. Jordan instead proposed the Arab League mediate the dispute between Iraq and Kuwait within the framework of international law and UN resolutions. Unfortunately, that attempt failed and the rest is history.
Overview of National Economic Development in Jordan
29
official development assistance. UN sanctions against Iraq – Jordan’s largest pre-war trading partner – caused further hardship. Finally, the sudden influx of about 300,000 returning Jordanians from the Gulf countries initially exacerbated unemployment and strained the government’s ability to provide essential infrastructure and education, health and other relevant services. A second Structural Adjustment Programme (SAP II) was initiated in October 1991 for continued reform of macroeconomic policy. Because of this intensive effort, inflation was reduced (from 25 per cent in 1989 to 0.6 per cent in 1999), the current account of the balance of payments was stabilized (from a deficit of 16 per cent of GDP in 1992 to a healthy surplus of 5.0 per cent of GDP in 1999) and budget deficits (including grants) were reduced from an average of 6.9 per cent in the mid-1980s to 3.9 per cent in 1999. The reform programme enabled Jordan to reschedule some of its debt repayments and allowed for some of its bilateral debt to be forgiven. By the end of the decade (2000) the ratio of external debt to GDP had declined to 84.2 per cent from an average of 203.4 per cent between 1986 and 1990. Even though the Gulf crisis resulted in war, the Jordanian economy grew by 2.6 per cent in 1991. Once the fighting was over, a major turnaround in the economy took place under the influence of returning Jordanians. These came back with their savings (about USD 719 million) and, more importantly, with their dynamic working habits, skills and entrepreneurial spirit. As a result, real economic growth shot up by 11.1 per cent in 1992 and gross fixed capital formation (GFCF) rose by 55 per cent in 1992 and 24 per cent in 1993.13 Massive expansion took place in the form of residential construction, urban infrastructure and investment in various productive activities both directly and via the then revived Amman Financial Market. The average GDP growth rate for the period 1992–95 was a healthy 6.7 per cent in real terms.14 After the consumption- and investment-led boom between 1992 and 1995, economic growth slowed to a trickle during 1996–99, with real GDP growth during this period averaging only 2.9 per cent. As the same period witnessed more than 3 per cent annual population growth, real per capita GDP stagnated. As a result, unemployment remained stubbornly high, at around 15 per cent, throughout the second half of the 1990s. The kingdom’s long-term economic outlook appeared favourable in the context of the envisaged reforms, but progress in their implementation was not determined or persistent enough to offset the negative 13
14
Central Bank of Jordan, Department of Research and Studies, Yearly Statistical Series (1964–95), Special Issue, May 1996, p 49. Jordan Department of Statistics.
30
Background
structural flaws in the economy. Some external factors over which Jordan had little control contributed to the slowdown, but many internal ones were also to blame. Expectations of increased tourism and trade with Israel suffered disappointment, and economic cooperation between the two countries has been limited to the Qualifying Industrial Zones (QIZs) that came into existence in the kingdom in the late 1990s. QIZs are areas within Jordan from where goods can be exported dutyfree to the United States,15 provided there is an element of Israeli added-value in their manufacture.
2000 to 2002 The fifth period started with the relative recovery of positive, albeit modest, per capita income growth in 2000, which continued up to 2002.16 On an annual average basis, GDP in constant 1994 basic prices rose by 4.8 per cent, more rapidly than any other economy in the MENA region.17 With an average rise in the population rate of growth for this period of just over 2.8 per cent, per capita incomes were rising in the kingdom at a rate higher than at any time since the early 1990s. Of particular importance in this recovery was the fact that all that could go wrong did in fact go wrong, and in a big way. The Al-Aqsa Intifada, which broke out in September 2000, put a severe damper on growth in the tourism sector, and the fallout from the 11 September 2001 attacks on the United States made things even worse for the travel business and other related industries through the multiplier effect. The adverse impact of these events has been mitigated somewhat by a reform process hinging on private–public sector partnerships and involving amendments to critical legislation to create a more competitive, investor-friendly environment, aimed at retaining domestic savings and attracting foreign capital; opening the economy further through the elimination of trade barriers; and increasing productivity growth. A combination of positive factors had buoyed the economy: the pharmaceutical industry was booming and the demand for imports was still very strong. Exports, benefiting from a number of extra-regional preferential trade arrangements, played to the full their role as locomotive for the domestic economy. Jordan added to its long-standing membership of the Arab Free Trade Area accession to the World Trade Organization in April 2000; entered 15
16
17
It should also be noted that, since Jordan is free from any quota restrictions on its exports, products manufactured in QIZs may be admitted into the customs territory of the United States without being subject to quota limits. For a more critical analysis of economic developments in Jordan during 2000–02, see M Kardoosh (2003) The Jordanian Economy into the Third Millennium II: Staying the course in a dim regional climate, Higher Council for Science and Technology, Amman, August. Jordan Department of Statistics.
Overview of National Economic Development in Jordan
31
into a free trade area pact with the United States in 2001; and signed an Association Agreement with the European Union in 1997, which was ratified by the EU parliaments in 2002. The kingdom’s economic relations with Israel have also developed through the Qualifying Industrial Zones, a special form of extra-territorial economic arrangement whose exports to the US market are tarifffree by US decree. As a result of the success of the QIZs, the United States is now one of Jordan’s largest trading partners. Through these and the other accords for preferential trade access (bilateral or otherwise), Jordan has managed to improve its balance of payments position, with its current account (including public grants) having shown a surplus since 1997 (with the notable exception of 2001). Preliminary estimates put the current account surplus in 2002 at 4.9 per cent of GDP.18 On the debit side of the overall performance of the economy in recent years are three significant challenges that still need to be addressed: .
the continued dependence of the economy on the availability of massive inflows of foreign aid;
.
the tendency of the outstanding external debt and its servicing burden to resist contraction over the last couple of years;
.
the fact that unemployment has remained stubbornly high, at 15.3 per cent in 2002 (there were approximately 196,000 unemployed persons in Jordan in 2003).
Jordan’s total public debt (including collateralized Brady bonds) reached JOD 7,006 million in 2002 (equivalent to 105.3 per cent of GDP), up from JOD 6,366 million or 100.9 per cent of GDP the previous year.19 Recent years have witnessed a significant rise in domestic borrowing as the government has increasingly issued Treasury bills and bonds replacing a good portion of loans and advances from the Central Bank. In 2002, gross domestic debt increased by 18.5 per cent while external debt (including collateralized Brady bonds) rose by 7.6 per cent to reach JOD 5,350 million.20 As it stands today, Jordan boasts one of the highest ratios of public indebtedness to GDP in the MENA region, with only Lebanon having a (much) worse debt position.21 Meanwhile, the fiscal deficit remains high. The 2002 fiscal deficit (including grants) reached 3.9 per cent of GDP (at current market prices), somewhat higher than 3.6 per cent of GDP, the corresponding figure in 2001, but lower than initially budgeted.22 Excluding grants, 18 19 20 21 22
Central Bank of Jordan, various monthly bulletins. Jordan Ministry of Finance, Government Finance Bulletin, December 2003, Table 14, p 21. Jordan Ministry of Finance, Government Finance Bulletin, December 2003. World Bank, ‘Jordan development policy review’. Central Bank of Jordan, various monthly bulletins.
32
Background
the 2002 fiscal deficit rises to 8.1 per cent of GDP, significantly higher than 7.6 per cent, the corresponding ratio for 2001. A sustainable reduction of the fiscal deficit requires the government to address structural rigidities associated with the budget and to consider, inter alia, the rapidly rising expenditure on public pensions and how such outlays can be curbed. Almost 80 per cent of current government spending goes to wages, pensions, interest payments and military expenditure.23 The situation in the labour market remains problematical, with little improvement foreseen in the near future. The most worrying feature is the inability of the productive system to develop fast enough to provide employment for young people entering the labour force every year, therefore causing unacceptably high joblessness among the young. The rate of unemployment among those aged 20 to 24 is estimated at almost twice the national average (28.9 per cent as opposed to an overall rate of 15.3 per cent in 2002). A high concentration of unemployment among Jordan’s youth can be looked upon as socially destabilizing, with bright young people emigrating for better opportunities elsewhere in the region and beyond.
The present The sixth and current period started in January 2003 following the elections in Israel, which saw the Likud Party return to power with an almost doubled number of seats. In the light of this, the prospects for a political breakthrough towards comprehensive and genuine peace in the region looked bleaker than ever by the end of 2003. Not long after the Israeli elections, in March 2003, the United States launched a massive military campaign against Iraq. For Jordan, where Iraqi crude oil had been virtually subsidizing its aid-dependent economy, this war and its aftermath have threatened seriously to derail a nascent economic recovery, something that neither the second Palestinian uprising nor the events of 11 September 2001 had managed to accomplish for any meaningful length of time. National accounts data for 2003 indicate a slowdown in economic activity. Annualized quarterly percentage changes in GDP for 2003 indicate that real economic growth in the first, second and third quarters reached 3.2 per cent, 2.8 per cent and 4.3 per cent respectively. The comparable quarterly growth figures in 2002 were 4.5 per cent, 5.9 per cent and 5.3 per cent. Prior to the start of the war, the kingdom was importing Iraqi oil worth about USD 700 million, half of which was offered free as an
23
World Bank, ‘Jordan development policy review’, pp 6–7.
Overview of National Economic Development in Jordan
33
annual grant while the other half was not only supplied at a generously discounted price, but was mostly paid for in kind in the form of Jordanian products, under an annually agreed trade protocol. For more than a decade, cheap Iraqi oil and the method of settling its cost constituted not merely a steady source of annual support for the country’s finances, but also a considerably secure market for much of Jordan’s manufacturing industry and transportation services. According to the Jordan Department of Statistics, the total value of two-way trade between Jordan and Iraq reached JOD 844.3 million in 2002, much of this volume resulting from Iraqi exports to Jordan (JOD 532.5 million), with trade in the other direction amounting to JOD 311.8 million, equivalent to 20.0 per cent of Jordanian exports that year. In 2003, a rapid deceleration in export earnings is also discerned, with Jordanian exports to Iraq from January to the end of August close to JOD 107.8 million compared to JOD 191.2 million during the same period the year before. Without a trade or aid offset to compensate for such huge losses, pressures on the Jordanian budget and on the country’s foreign exchange reserves will be immense. Indeed by one estimate, that of the Jordan Ministry of Finance, the kingdom could lose up to USD 1.5 billion in 2003 in tourism income and business opportunities, along with the rupture of its extensive commercial ties with Iraq. According to the Ministry, for every USD 1 increase in the price of crude oil, the state’s annual oil bill rises by JOD 20 million. For its part, the government of Jordan has ordered the formation of a special committee, which will study first the possible ramifications of war in Iraq on the various sectors of the economy and, second, will propose solutions to some of the problems facing these sectors. However, home-grown attempts at finding solutions to these challenges are thought likely to fail unless mixed with and augmented by outside interference. In the short term, attempts to adjust and effectively respond to the various challenges Jordan is currently facing are likely to be constrained by the economic pressures referred to above. External assistance to compensate Jordan for the costs it incurred as a result of the war in Iraq is not a bonus but a condition for the required adjustment. To be sure, the only way for the government to reduce the projected net loss to the economy would be to seek assistance from donors. The overriding sense is that the United States has promised Amman a one-off aid package (USD 700 million) to help minimize the impact of the war in Iraq, in addition to the USD 448 million in aid and military equipment that Congress had previously approved for 2003. Of the promised USD 700 million aid package, Jordan received in May USD 500 million as budgetary support, which amount was sufficient
34
Background
to transform the deficit in the budget into a surplus, with the remaining USD 200 million being held over until 2004. Apart from direct assistance in the form of a major aid package, Washington has been pressing its allies in the Gulf to help ease the financial pressures on Jordan as a result of the war in Iraq. Up to December 2003 Jordan had been able to obtain all of its oil needs from Saudi Arabia, Kuwait and the United Arab Emirates free of charge. However, this has now changed; and it is the responsibility of the government to find an alternative source of financing for the country’s oil needs, should it wish to avoid sinking into a recession. In the medium to long term, stabilization of the situation in Iraq, removal of the economic sanctions and the gathering of momentum in the efforts to rehabilitate and reconstruct the Iraqi infrastructure and economy will no doubt open immense opportunities for Jordanians to market their products and to provide their professional and contracting services. The benefits of these opportunities, however, are conditional upon upgrading the quality of Jordanian products and services to become competitive with similar commodities and services that will certainly be on offer from other Arab and foreign countries. In view of the uncertain Iraqi situation after the war, and the unabated violence in the Palestinian-occupied territories, the gradual economic recovery of 2000 to 2002 could remain hostage to the uncertainty that characterized 2003, and so continue to delay any significant resumption of recovery in the short term. The danger is that further attacks and military retaliation could result in an extended period of turmoil, forcing dramatically tightened security and new barriers to travel and trade. Those restrictions would strike at the heart of the Jordanian economy, which depends on its close relations with Iraq. Should, however, the process of the reconstruction of Iraq and the rehabilitation of its economy gather momentum in early 2004, Jordanian productive capacity in contracting, professional services, banking, transport and manufacturing should have ample opportunity to become engaged in that process. If such expectations materialize, the medium term should witness the resumption of economic recovery in Jordan. In any event, the period ahead will be a defining one for the Jordanian economy. A clean break with lethargy and a determined effort to reform the system of governance and rejuvenate institutions in both the public and private sectors are prerequisites for meeting the challenges and tapping the opportunities. In the narrow economic sphere, creative and dynamic policies are needed to be directed towards efficient and effective participation in the reconstruction of Iraq. Failure to meet these conditions would seem likely to cause the Jordanian economy to continue to be buffeted by forces beyond its control.
Overview of National Economic Development in Jordan
35
Table 1.3.1 Jordan: key macroeconomic indicators 1976–2002 (period averages unless otherwise indicated) 1976–80 1981–85 1986–90 1991–95 1996–2000 2000–02 Real GDP growth (in constant 15.8 1994 basic prices)
5.2
71.1
7.2
3.1
4.8
Inflation(CPI)
11.6
5.4
9.2
42
28
1.4
Fiscal balance/GDP ratio (including grants)
711.5
76
76.9
1.1
74.2
73.6
Current account balance
73
75.1
733
710.6
0.6
1.9
External public debt/GDP, end 49.8 period (in %)
77.6
203.4
102.0
91.8
80.4
Total public debt/GDP (in %)
64.9
95.9
241.6
121.5
110.7
105.3
Exchange rate, US$/JOD
3.33
2.5
2
1.42
1.41
1.41
Source: World Bank (November 2002) and Jordan Department of Statistics
Table 1.3.2 Jordan in numbers (1999–02) 1999
2000
2001
2002
4,430.4
4,641.7
4,860.3
5,103.2
Real GDP growth (in 1994 basic prices, %)
2.8
4.8
4.7
5
Cost of living index (yearly average, in %)
0.6
0.7
1.8
1.8
1.41
1.41
1.41
1.41
8
6.5
5
4.5
Gross Domestic Product at constant 1994 basic prices (JOD million)
Exchange rate (average, USD/JOD) Rediscount rate (%)
Total revenues and grants Fiscal deficit/GDP ratio (including grants) Outstanding external debt (including collateralized Brady bonds, JOD million) Same as above but as a percentage of GDP
1,815.90 1,850.30 1,968.00 2,029.50 3.9
3.4
3.6
3.8
5,510
5,043
4,969
5,350
95.5
84.2
78.7
80.4
Merchandise exports (JOD million)
1,298.80 1,346.60 1,626.70 1,945.10
Merchandise imports (JOD million)
2,622.50 3,245.20 3,426.50 3,517.80
Current account position including official grants (JOD million) Source: Jordanian authorities
287.1
41.5
73
324
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1.4
Government Planning Ministry of Planning and International Cooperation Introduction Throughout the late 1970s and early 1980s, Jordan enjoyed unprecedented economic growth patterns boosted by outside assistance and loans, increased exports to regional countries, and workers’ remittances of Jordanians working abroad. The inflow of foreign capital led to increased domestic consumption and investment, both public and private, which was interrupted by the crash in oil prices in 1982. The decline in oil prices instigated a major regional economic slowdown, which adversely affected the performance of the Jordanian economy. To resuscitate a collapsing economy, the government embarked on an extensive spending programme financed through external borrowing. The consequence was a deteriorating current account, a general rise in prices and a rapidly mounting foreign debt. This ultimately led to a serious economic crisis by 1988.
Reform efforts of the 1990s In 1989, inflation reached an annualized 25.6 per cent, and real economic growth contracted by an annualized rate of 13.4 per cent, while the Jordanian dinar depreciated by 35 per cent against the US dollar. Furthermore, the balance of payments and the foreign reserves at the Central Bank were at record low levels of USD 34 million, while the balance of outstanding external debt as a percentage of GDP reached 180.6 per cent and its service as a percentage of exports reached 24.9 per cent. Therefore, reform efforts were primarily focused on attaining macroeconomic stability and rectifying fiscal imbalances throughout the decade of the 1990s. The government was compelled to turn to the IMF in 1989 to negotiate debt rescheduling and committed to a stern economic restructuring programme to reinstate a sustainable economic growth pattern. This denoted a radical departure from the former economic practice of ‘state paternalism’, which was the prevalent characteristic of government conduct for decades.
40
Background
Figure 1.4.1 Salient economic indicators 1990–99 The overall definition of the public–private and government–citizen affiliation was to be reformulated. The government gradually had to disengage from assuming the role of mass employer and producer of goods and services, to that of regulator. In parallel, the private sector was encouraged to engage in broader economic activities, while the country was moving towards being a more vital member in the world economic community. Throughout the 1990s, and under the supervision of the IMF and the World Bank, the government embarked on a sweeping economic reform programme, which necessitated the rehabilitation of the regulatory framework and the amendment of the overall legislative structure. By 1999, the stringent reform efforts were successful in sustaining an efficient macroeconomic management policy, which included the gradual reduction of high fiscal imbalances, and the implementation of a structural reform agenda. This success was mostly evident in propelling real gross domestic product (GDP) growth to higher levels, lowering the external debt/GDP ratio from 189 per cent in 1990 to 90 per cent in 1999, containing inflation from 16 per cent in 1990 to 0.6 per cent in 1999, and boosting exports from USD 857 million in 1990 to reach USD 1.48 billion in 1999 (see Figure 1.4.1). Most importantly, real GDP growth recorded 3.1 per cent in 1999 compared with 70.3 per cent in 1990.
Government Planning
41
Despite the deep structural reforms and success in achieving macroeconomic stability during the 1990s, strong and sustainable growth in real output was low, and per capita income remained stagnant. This, combined with the high population and labour force growth, has led to a marginal reduction in unemployment and poverty levels, as unemployment remained stubbornly high at around 15 per cent during the second half of the 1990s, and poverty, almost non-existent during the 1980s, stagnated at around 12 per cent. Furthermore, Jordan was faced with a number of other critical challenges such as a high external debt and budget deficit, which represented around 96 per cent and 4 per cent of GDP, respectively, in 1999, a chronic water deficit, an unproductive private sector and ineffective government services. Moreover, the economy remained highly vulnerable to external factors. Reform efforts were hence revisited in 1999 when King Abdullah II ascended to the throne, prompting an accelerated pace and the launch of new strategies and initiatives aimed at enhancing the welfare of the Jordanian people and propelling economic growth to higher and sustainable levels. During the past four years, the Government of Jordan (GOJ) began to focus on devising and implementing measures to combat the critical challenges facing the economy, together with the private sector, while at the same time laying the foundation for building a new Jordanian model that is resilient to external factors and accommodates the evolving global trends. This new model was based on the premise of transforming Jordan from a primary-driven economy into an investment-driven and knowledge-based one. Jordan witnessed an accelerated economic reform process through dynamic privatization schemes, and rapid integration into the world economy as evidenced by the country’s accession to the WTO, and the signing of the Free Trade Area Agreement with the United States, the Partnership Agreement with the European Union, and the Arab Free Trade Area. The strategy focused on export expansion through competitiveness, minimizing government intervention in the economy to give way for market forces to shape the future of Jordan, integrating the private sector into the highest policy-making framework, and facilitating a private sector-led growth. Since the private sector is to be the main engine of growth and the driving force of the economy, the GOJ was keen to develop a partnership with the private sector and civil society institutions to reach a national consensus on the path that Jordan is to take to realize its developmental objectives. Accordingly, the First National Economic Forum was held at the Dead Sea during the period 26–27 November 1999, which brought together over 160 people from both the private and public sectors to address and present recommendations on the means to achieve sustainable economic and social development. The meeting produced a substantial number of
42
Background
recommendations, which addressed five main areas: economic liberalization and development, financial reforms, administrative reforms, legislative reforms and general and higher education reforms. Subsequently, and based on the recommendations of the First Economic Forum, and in accordance with the directives of King Abdullah II, the Economic Consultative Council (ECC) was established in December 1999. The mandate of the ECC includes setting national strategies, following on the implementation of the recommendations of the First Economic Forum, activating the role of the private sector in decisionmaking processes, activating and institutionalizing the public–private partnership, setting time-bound plans to accelerate economic growth, and forming task forces that address core areas of the development process such as public sector reform, capital market development, and suitable legal and institutional frameworks (the task forces include experts from the ECC as well as experts from the private and public sectors and civil society institutions). The ECC worked with the government, the private sector, and civil society institutions to translate the recommendations of the First National Economic Forum to action plans in preparation for their implementation. Topics addressed included the formulation of strategies to increase the role of banks in economic development; establishing the port city of Aqaba as a special economic zone; administrative reform; tourism promotion; making English language and computer courses mandatory in schools; computerization of government services; privatization; judicial reform; recommendations on the national strategy to decrease the budget deficit; and promoting information technology as an enabler of economic growth. The Second National Economic Forum was held during the period 31 March to 1 April 2001 with the aim of assessing the performance of the ECC in addressing the First National Economic Forum’s recommendations, in addition to formulating national strategies to reassess policies pertaining to the following areas: agriculture, administrative reform, investments, cultural and civic education, rural development, human resource development and governorates’ development. King Abdullah II acknowledged the importance of the ECC recommendations and the need to implement all the policies, plans and reforms that have been formulated as a result of the process of building a national consensus on the development needs of Jordan, reached at the First and Second National Economic Forums and all the task forces and working groups that followed. Thus, on 25 October 2001, the king instructed the GOJ to chart an integrated socio-economic programme to accelerate the pace of social and economic reforms and raise the quality and standard of living of Jordanians. As a result of the royal directive, the GOJ launched the Social Economic Transformation Programme (SETP) on 15 November 2001.
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The SETP is an investment in reforms that was designed with the main objective of achieving sustainable social and economic development by, inter alia, reducing poverty and unemployment, in order to improve the quality and standard of living of all Jordanians by setting time-bound projects to address better their basic social needs such as healthcare, education, water and rural development. The SETP is meant to establish a new socio-economic operational methodology through timely implementation of the reform agenda of the GOJ, combined with a targeted approach to spurring investments. The approach aims at initiating a sustainable progression through the realization of positive change, with limited impact on macroeconomic stability, and the strengthening of Jordan’s credibility with the international financial community.
Figure 1.4.2 Main objectives of the SETP The SETP therefore comprises three main components, which encompass: .
Private investments. This component aims to identify the measures that ought to be taken to accelerate the implementation of major developmental projects and privatization schemes. The underlying goal is to enable the private sector to assume a leading role in the development process. To that end the GOJ has committed to a privatization schedule that will allow corporations to function more efficiently and transparently and attract increased investment in the Jordanian economy. For example, in 2000 the GOJ sold 40 per cent of the JTC to France Telecom/Arab Bank and 8 per cent to the Social Security Corporation, while 10.5 per cent was sold in 2002 through an initial public offering at the Amman Stock Exchange. Furthermore, the GOJ has been embarking on developmental
44
Background
.
.
projects that encourage further investment in the economy. For instance, the Aqaba Special Economic Zone Authority was created to transform the port city of Aqaba into a lucrative investment capital destination and thus encourage further tourism activity, by offering a package of investment incentives such as providing custom duties exemptions and lowered tax rates. In June 2002, Bechtel Corporation was contracted to manage the economic zone. Critical enablers (legislation, policies and regulatory framework). The programme identifies the main legislation and policies that need reform, and puts in place a clear working plan and timetable to address them. To this end, a large number of laws and regulations were either amended or newly passed in order to improve the investment climate and align the legislative environment with the evolving global trends. For example, company law was amended to ensure the independence of private sector corporations from government institutions and to facilitate a better environment for establishing corporations. Public investments. The SETP invested USD 1,084 million over the three-year period 2002–04 in human resource development, basic government services, rural development and poverty alleviation, and institutional and structural reform. Fund allocation pertaining to the public investment component of the SETP is illustrated in Table 1.4.1.
Table 1.4.1 Fund allocation pertaining to the public investment component of the SETP Major components
2002* USD m
2003** USD m
2004*** Total USD m USD m
64.070
81.804
73.955
Basic government services
65.010
167.980
282.791
515.781
Rural development and poverty alleviation
30.747
91.582
167.460
289.789
0
12.980
45.643
58.623
Human resource development
Institutional and structural reforms
219.829
Total
159.827
354.346
569.849
1,084.022
Secured funds
159.827
354.346
224.997
739.170
0
0
344.852
344.852
Funding gap
* Initial estimates for public investment in 2002 amounted to USD 354.3 million. However, only USD 159.8 million was secured. ** Initial estimates for public investment in 2003 amounted to USD 626.5 million. However, only USD 354.3 million was secured. *** The National Social and Economic Action Plan (2004–06) will incorporate all new and ongoing SETP projects.
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In order to maximize the benefit of the public investment component of the SETP, and because of the shortage of funds, the projects included in the programme were identified using a prioritization model that takes into account projects with the most significant impact on the standard of living of Jordanians. The prioritization model, which was prepared with World Bank assistance, uses a group of economic, social and capacity implementation indicators to identify projects, and includes priorities within each sector as well as between different sectors. The prioritization criteria give varying weights for the indicators, with a special weight attached to unemployment and poverty incidences in each governorate. Other indicators employed by the model include the ratio of current expenditures to capital expenditures, estimated future recurrent expenditures, the share of domestic inputs and imported inputs needed for each project, the sequencing of implementation of various projects, and the multi-project capacity of implementing ministries and departments. Moreover, the prioritization process includes priorities within each sector and between the different sectors. Although it is early to assess the quantitative impact of the SETP on the national economy at present, channelling additional resources to implement needed projects and programmes, particularly in 2003, will undoubtedly have a positive qualitative and quantitative effect on growth. Moreover, failure to invest in the SETP projects would have left major developmental projects in various sectors, such as education, health and infrastructure, unfounded. In short, the SETP provided a main vehicle to channel qualitative public investment according to prioritized developmental needs, helped fuel the legislative reforms of the last two years and served as a catalyst to expedite the progress of many private sector-funded projects. It is also worth noting that the GOJ plans to conduct an impact assessment study to evaluate the performance of the SETP and identify its strengths and weaknesses. Towards this end, the World Bank is assisting the GOJ in conducting an impact assessment study of the SETP through providing a shortlist of potential consultants as well as agreeing on supervising their work.
The status quo At the macroeconomic level, Jordan has, since 2001, managed to achieve some favourable results (see Figure 1.4.3) despite the political and economic instability in the world in general, and the Middle East region in particular. In spite of the encouraging macroeconomic results, however, social development remained lagging.
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Background
Figure 1.4.3 Salient economic indicators
2004 and beyond As mentioned earlier, the SETP was successful in implementing a sizeable segment of the reform agenda. Notwithstanding, new requirements have emerged, therefore necessitating a rigorous review of the reform agenda for the next three years (2004–06). It is against this background that the government will embark on implementing the National Social and Economic Action Plan (2004–06). The Action Plan will aim to achieve and sustain a GDP growth rate of 6 per cent per annum by 2006, and lead to growth of per capita income of 3.6 per cent by that same year. The government will also work on reducing poverty and unemployment through enhancing qualitative investment in rural development and introducing programmes that aim to empower and enable citizens, especially the youth and women, as well as encourage more private investment, in order to create 50,000 additional job opportunities every year. At the macro level The next set of reforms will work within a new macroeconomic framework, and set a number of targets to be achieved by 2006 through the
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implementation of a number of policy measures. The main underlying objective will be to stimulate real growth to 6 per cent by 2006, and produce a positive trickle-down effect on the standard of living of every Jordanian, especially in the poor rural and remote areas of the country. Quantitatively, this trickle-down effect should translate into a real and sustainable per capita income growth of 3.6 per cent per annum by 2006 onward. This, coupled with the current decelerating rate of population growth, which currently stands at 2.8 per cent, should effectively lift a sizeable segment of the population over the poverty line. Furthermore, the GOJ aims to create additional job opportunities in the local labour market, through a number of long-term pro-poor growth programmes in the rural areas and productivity enhancement measures. Enhancing economic and labour productivity will be a key factor in sustainable development. The target will be to raise economic productivity by 1 per cent per annum by 2006, and labour productivity by 1.6 per cent by 2006. The ultimate goal will be to achieve a more equitable distribution of income, and bridge the development gap between regions and governorates throughout the country. Mainstreaming gender development is also a cross-cutting issue that forms another critical social objective in the development vision. For example, Jordan has achieved universal basic education for its citizens, both male and female. The GOJ has emphasized its commitment to increased female participation by instituting a female quota in Parliament (six members), including three female ministers in the Cabinet that was appointed on 25 October 2003, as well as promoting increased female participation in all levels of government and public life. The GOJ is encouraging increased participation by women in the development process in a manner that is commensurate with the Millennium Development Goals, as it aims to raise the participation of women in the labour force from the current level of 15 per cent to around 17–18 per cent by the end of 2006. On a parallel track to social development, the GOJ will work through a number of fiscal and monetary tools to maintain the macroeconomic stability that has been successfully achieved over the last decade. Policies will continue to focus on rectifying market distortions and fiscal imbalances, maintaining price stability and opening up the local market to the global economy. Attaining fiscal stability will be achieved in part through a number of prudent measures to lower the budget deficit from 3.9 per cent in 2002 to 2.8 per cent by the end of 2006. These prudent measures include curbing current expenditures and lowering public debt as a percentage of GDP of 73.4 per cent by the end of 2006 (53.4 per cent external debt and 20 per cent domestic debt), in order to reduce the level of debt service and increase reliance on domestic financial resources. The targeted real GDP growth rate of 6 per cent by 2006 will also help in reducing the budget deficit to GDP ratio.
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Background
Preserving monetary stability will be achieved through upholding the exchange rate of the Jordanian dinar,1 keeping a healthy cushion of foreign reserves that covers no less than eight months of imports, and sustaining an inflation rate that does not exceed 2 per cent per annum by 2006. Enhancing the safety and resilience of the financial sector, through the adoption of modern monitoring measures, will also rank high on the agenda. Monetary growth tools will incorporate, among others, increasing local liquidity at rates that are consistent with the growth of GDP at current prices. The government realizes that, unless serious steps are taken in order to reduce dependence on foreign aid, reform efforts will never yield the desired results. Therefore, a number of fiscal measures were taken, including the lifting of subsidies, in order to create a self-sustaining budget in the medium and long term. Additional measures in the pipeline will include further pension reform and the rightsizing of the public sector in order to curb the level of current expenditures. Those measures are aimed at developing a budget that is responsive to socioeconomic developmental needs and is capable of self-financing and covering the recurring costs of ongoing projects and all new and prioritized projects. The government is committed to continuing the process, which has already started, of correcting distortions and increasing revenue through revising the General Sales Tax and gradually reducing subsidies on petroleum products. Successful global integration will also necessitate enhancing the competitiveness of the export base. Government efforts will focus on increasing the level of exports to constitute more than 46 per cent of GDP by the end of 2006 (from 30 per cent in 2002), diversifying the export base to include more high-value-added products and services, and facilitating the penetration into new non-traditional markets around the globe. The GOJ is keen to promote the private sector as the primary engine of growth as Jordan shifts from a primary-based economy to an investment-driven and knowledge-based economy. Wholly two-thirds of GDP is generated by the private sector, which is thus an indispensable partner and the critical variable in the success of the Action Plan. Therefore, the GOJ is preparing the legal and institutional frameworks to enable further private investment, both domestic and foreign, in the Jordanian economy. Moreover, the GOJ will institutionalize the public–private partnership through conducting periodic meetings to exchange views and debate policies, such that the government may react more swiftly to the needs of the private sector and be able to address its concerns. 1
The Jordanian dinar was pegged to the US dollar in 1995. The exchange rate since then has been set at USD 1 = JOD 0.709.
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At the micro level In order to achieve the aforementioned macroeconomic targets, the government will continue the thrust of the reform process through the implementation of sectoral development strategies, which encompass a number of policy measures and time-bound action plans in a number of critical domains at the micro level. Development strategies for each sector of the economy were devised by the related ministries, in coordination with leading stakeholders from the private sector and civil society organizations, including NGOs. Development strategies revolve around four main areas: human resource development, basic government services, rural development and poverty alleviation, and institutional and structural reform. Human resource development Human resource development will continue to rank high on the GOJ’s development agenda, because enhancing the quality of investment in the human capital will determine Jordan’s ability to transform into a knowledge-based economy. Policy measures will aim at channelling additional qualitative investment into education and technical training from early childhood to adulthood in order match the output of the educational and training systems with the requirements of the labour market, both domestically and internationally. Focus will be made on re-evaluating and modernizing curricula and programmes, in addition to reorienting education and training policy objectives and strategies through administrative and governance reform. One important element of the education reform effort will also be to institutionalize a mechanism that fosters innovation and excellence in education, a necessary element for the realization of Jordan’s development vision. Public education In the public education sphere, the GOJ will adopt an approach that will revamp the current educational system to meet the requirements of the new knowledge economy. The main part for government investment in public education is the Education Reform for the Knowledge Economy Programme (ERfKE), which was devised by the GOJ in close coordination with the World Bank and other donors. ERfKE will work to structure the educational system to ensure lifelong learning, responsiveness of the educational system to the economy, increased incorporation of information and communications technology (ICT) to support effective learning and system management, and enhanced quality learning experiences and environments throughout the country. The goal is to ensure quality public education for all Jordanians. It sets out a coordinated and integrated plan of action to meet the current and future needs of society in Jordan in the context of the knowledge economy. Further additional public investment will also be directed at school maintenance and equipment, in addition to upgrading the current
50
Background
infrastructure of a number of schools, especially in impoverished areas. Efforts will be geared towards improving the overall teaching process and performance of schools. Focus will be made on strengthening the teachers’ basic ICT skills and fortifying their various teaching and communications abilities through the utilization of ICT methodologies. Curriculum development will be commensurate with the requirements of the knowledge economy. Focus will be made on equipping students with the skills needed to acquire knowledge, particularly through research, critical thinking, creativity and excellence.
Figure 1.4.4 Education reform for the knowledge economy
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Higher education While there has been a rapid quantitative expansion of the higher education system in Jordan, it has not yet been accompanied by a sufficient qualitative shift. Jordan’s capacity to reach its goal of becoming more competitive within the global economy will be largely dependent on the orientation of its higher education graduates. There are currently 21 universities in Jordan (13 private and 8 public), with around 150,000 enrolled students. The GOJ has recently identified the major issues for higher education reform, and will embark on a major reform agenda that will encompass the following: . . . . . .
strengthening and enhancing the accreditation process to meet the highest international standards; focusing on quality control issues to enhance the efficiency of higher education; updating and modernizing curricula to meet the hard and soft skill requirements of the labour market (domestic and international); revisiting admission requirements to allow students to pursue their desired career tracks; channelling more funding for higher education; amending the necessary legislation to allow for greater private sector participation in higher education and allow for their affiliation with prominent higher education institutions.
Promoting R&D in higher education institutions forms another critical element in the development equation. Universities in Jordan are solely viewed as vehicles for higher academic attainment. This view will be revisited with the aim of transforming universities into major research centres, and linking their objectives with those of the industrial sector. Enhancing cooperation between the various research centres will also promote networking and gear the limited resources towards more focused R&D. In accordance with the policy of further involving the private sector in the development process, should it be able to achieve sustainable and tangible improvement in the citizens’ lives, the GOJ will provide incentives to the private sector within a restructured legal and institutional framework to channel additional qualitative and quantitative investment into R&D in order to assume the lead role in enhancing productivity, innovation and creativity, the main driving engines for growth in today’s global economy. Labour, and vocational and technical training In order to link the output of the vocational and technical training system with the requirements of the labour market both domestically and internationally, additional public investment will be channelled to reorient the focus of training from an information-based training model to one that is
52
Background
demand driven and competency based and provides the employability skills required to increase worker productivity, technological adaptation and innovation. Specifically, reform efforts will focus on improving the coordination of vocational training programmes and services; computerizing training centres to encourage the acquisition of information technology skills; developing competency-based training programmes and curricula that are more responsive to labour market needs; upgrading instructor skills; encouraging private sector participation in adapting training to meet their human resource requirements; and supporting additional activities for upgrading and updating the current technical labour pool. Furthermore, support will also be provided for specialized, regional-based technical vocational training centres, such as training centres for women and training centres responsive to domestic labour market needs, such as those for the hospitality services, electronics, construction and metal industries. Youth, sports and culture While additional investment in the formal education and training systems will be imperative to enable graduates to enter the workforce and subsequently enhance their standard of living, it will not be sufficient to create autonomous, supportive, responsible and committed youth. Jordan’s demographic composition is predominantly young, with over 70 per cent of the population below the age of 30. As a first measure, the GOJ will devise, in collaboration with all stakeholders in the society (the private sector and NGOs), a national strategy for youth development. Government efforts will continue to be geared towards giving priority to the transfer of knowledge and the structuring of personality and acquisition of values among youth through educational programmes, in addition to sponsoring excellence and innovation in all spheres of life. Additional investments will also be channelled towards building recreational and sport facilities throughout the country, since youth grows up in communities and not in programmes. Enhancing the participation of the young in public life will also be critical for their self-development and the development of society as a whole in Jordan. Therefore, efforts will be geared towards enhancing the representation of youth in public life by upgrading the quality of services delivered to the young by the government and related NGOs. Another essential element in human resource development is to widen the cultural mindset of the Jordanian people. Fostering the appreciation of culture in its various forms necessitates additional public investment in building cultural centres throughout the country, where people – especially the young – can actively engage in cultural activities during their leisure times. These centres will be an important vehicle for artistic and intellectual interaction, in addition to preserving the various components of knowledge as part of the national heritage.
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The GOJ will also support public libraries throughout the country and develop their services, including the incorporation of ICT, in order to enhance access to knowledge for all Jordanians. Moreover, the GOJ will provide support to production and publishing entities. Basic government services Providing quality government services will effectively translate into higher standards of living for all citizens, especially for the poor in remote and rural areas. The GOJ will therefore continue to channel additional investments to improve the implementation capacity of the related public institutions to enhance their delivery of services to the public, in addition to engaging the private sector on a wider scale through the accelerated implementation of large development projects in the areas of water, energy and infrastructure development. This will entail taking swift policy reform measures, in addition to improving the basic infrastructure needed to attract private capital, both local and foreign. During the next stage of reforms, the GOJ will also aim to complete the privatization process, which in part will hand over to the private sector the management of some basic services in the water, electricity, transport and energy sectors. This will enhance the efficiency of service delivery to the public, and increase the level of private investment in the country in each governorate. Policy measures will also work on restructuring the tariff structure of those services in a gradual manner to reflect better their true economic costs. To some degree, this will help mitigate or fully eliminate market distortions and thus realign incentives, and generate additional domestic revenues to support the budget. Public investment in basic government services will continue to adhere to the prioritization model in the areas of health services, water and infrastructure development, including construction, energy, ICT, tourism and transport.
Figure 1.4.5 Requirements for healthcare services 2004–06
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Background
Health services Although improvements in healthcare services have been achieved over the last three years, the structure of governance in the health sector still requires additional reform in order to provide citizens with access to quality health services in an efficient and effective manner in all governorates, especially in remote and rural areas, where private sector services are lacking (see Figure 1.4.5). As a first measure, the GOJ will work on devising and adopting a comprehensive health and healthcare policy, in cooperation with stakeholders from the private sector as well as NGOs, to tackle the issues of inefficient distribution and suboptimal use of health services throughout the country. The policy framework will aim at coordinating all disjointed efforts to meet the prioritized healthcare needs of all Jordanians. Capacity-building measures at the Ministry of Health (MOH) will also be imperative to enable the swift implementation of the reform agenda. Additional reform efforts will also be needed to enhance the level of cooperation between the public and private sectors, through institutionalizing a mechanism of patient referrals between private and public health centres and hospitals. This will necessitate taking concrete measures to decentralize the management of public hospitals and healthcare centres, and rehabilitate human resources to meet the evolving needs of the sector in the areas of health management, effective planning, medical information and recording systems, accounting and quality control. Enhancing accessibility to health services requires the development of the health sector infrastructure. Additional hospitals and health centres will be constructed in a number of remote areas where private investment is lacking to ensure better proximity between local communities and healthcare outlets. Moreover, much of the existing infrastructure is in dire need of upgrading, ranging from rehabilitating the existing physical infrastructure to supplying modern and relevant medical equipment and supplies. Enhancing access to healthcare will necessitate improving the suboptimal use of primary healthcare clinics to become the entrance points to healthcare. This will require raising the standards of facilities, administration and performance in these centres, in addition to providing varied incentives to attract betterquality employees. The overall direction towards incorporating ICT into every facet of government will also extend into the realm of health services. Focus will be made on establishing a centralized database centre, connecting hospitals and healthcare centres throughout the country. Accordingly, staff members will also undergo a comprehensive technical training programme. Water Water scarcity is undeniably the largest natural constraint to economic growth and development in Jordan, as rapid population
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growth and increased industrial development have placed unprecedented demands on water resources. Today, total demand for water consumption is approaching an approximate 1 billion cubic metres per year, which tightly corresponds to the supply capacity of Jordan’s renewable and sparingly generated water resources. The next set of reforms will aim to accelerate the implementation of large development projects2 in water, and channel additional public investment in upgrading water, sanitary and irrigation networks throughout the country in order to manage demand for water resources better and augment supply. Development projects will require additional investment in infrastructure development in order to attract private capital on a BOO and BOOT basis. Efforts will also focus on enhancing the role of the private sector in the delivery of water services in certain areas through management contracts, particularly in the northern governorates.
Figure 1.4.6 Requirements for the water sector 2004–06 A number of water companies will be established and managed on a commercial basis, especially in Amman and the northern governorates. The water tariff rates will also be restructured in a manner that will better reflect their true economic cost. In order to reduce the unbalanced use of water and avoid degradation, the GOJ will work on establishing an independent body for water management to ensure the efficient allocation of scarce water resources. A centralized database system will also augment efforts to manage the deteriorating capacity of finite water resources better, and minimize the exploitation of renewable groundwater resources at unsustainable and unbalanced rates. Furthermore, with over 60 per cent of water currently consumed by the agricultural sector, the GOJ will work on devising a
2
Projects include Disi, Wehda Dam, Kherbet Al-Samra for water treatment, and the Dead Sea East Coast Development Project.
56
Background
national policy that will coordinate the efforts of both sectors. The policy will focus on rationalizing the use of water for agricultural activities. Infrastructure The GOJ will continue to channel additional public investment to build a modern infrastructure throughout the country in order to attract investment, stimulate growth and accelerate the implementation of large infrastructure development projects by the private sector. Focus will be made on developing a modern transport sector to meet the requirements of the highest world standards. This will include upgrading and extending the existing network of major roads in order to enhance road safety, and strengthen Jordan’s comparative position as a regional land transport hub. Land border points will also be upgraded and furnished with the latest technology tools and systems in order to expedite entry and exit in and out of the country. Additional investments will be channelled towards connecting local communities in rural and remote areas with the main economic activities, through extending the network of rural and agricultural roads in all governorates. Another major element in the development of the transport sector will be to develop and modernize the shipping sector at the port of Aqaba, Jordan’s sole outlet to open seas. Additional investments will be channelled to upgrade the port’s facilities and services, in addition to establishing a maritime academy to improve the skills of this sector. The GOJ will also focus on resuming the privatization of the transport sector. To date, the GOJ has successfully privatized the land transport sector, in addition to the non-core businesses of the airline industry. Additional schemes in the pipeline include privatizing the core airline business (Royal Jordanian Airlines), the Civil Aviation Authority, the Aqaba Railway Company and the Queen Noor Civil Aviation College. Privatization schemes will include the energy sector, as the GOJ continues along the track of privatizing the generation and distribution of natural gas and electricity. The goal for the government is to retract fully from the energy sector and lift all subsidies in order to rectify market distortions and allow the private sector to take the lead role in the delivery of energy services. Government services will also be upgraded through the introduction of ICT into every facet of government work (e-government). This will enhance the efficiency of government-to-government, government-tobusiness and government-to-citizen work. The goal is to utilize ICT as the main catalyst for socio-economic development and the transformation into a knowledge-based economy. The ICT sector will be a prime engine of economic growth that will be fuelled by the private sector. Therefore, the GOJ will continue to enhance the legislative and policy framework for the ICT sector in order
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to improve its ability to attract additional private capital and enable it to compete on a global level. Rural development and poverty alleviation The next set of reforms will continue to pay particular attention to rural development and poverty alleviation through sustained long-term pro-poor economic growth mechanisms. The ultimate goal will be to effect an immediate and visible improvement in the productivity of individuals and their communities through the implementation of sustainable enterprise development, and integrated community development projects in each governorate. Focus will continue to be made at fostering the development of small and medium enterprises (SMEs) by providing financial and non-financial services, supporting job training in local communities, directing public and private investment in social infrastructure, financing local community development and creating an enabling environment for investments in large-scale tourist and agricultural enterprise projects in rural areas. Focus will be made on the competitive advantages of each governorate, emphasizing in particular projects in tourism, agriculture support industries, and services. The long-term vision will be to increase the role of the private sector in developing and directing investment to poverty areas. Furthermore, a number of rural agricultural development projects are also planned, focusing on the protection of natural resources and improved allocation of arable lands to new farmers. In order to achieve the latter, the GOJ will focus on creating a new development mechanism in local areas by asking for the active participation of local communities in defining development priorities, identifying budget requirements, and executing and following up on the implementation of projects. This will also necessitate restructuring the cooperative sector in order to enhance its role in rural development and poverty alleviation. Furthermore, rural development necessitates restructuring municipalities throughout the country. Municipalities were encouraged to merge3 and cooperate in services delivery, in order to allow local governments to improve their basic public service functions and, more importantly, to get them involved in the national dialogue on poverty reduction and increasing the standard of living of Jordanians. As a next step, the GOJ will focus on building local capacity by improving the quality of civil servants in municipalities through training and education, in addition to introducing accountability mechanisms and enforcing budget constraints and sound financial procedures. Though the GOJ focuses primarily on enabling Jordanians to be productive members of society, it remains keen on providing a security 3
The merging of municipalities reduced their number from 328 to 99.
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Background
net for its least privileged citizens via direct poverty alleviation mechanisms (through supplemental family income and other national aid programmes). Institutional and structural reform The next set of reforms will aim at institutionalizing policy formulation at the Cabinet level on all national programmes, and encouraging further autonomy and separation of implementation from policy making. Furthermore, the GOJ will adhere to a strict time-bound action plan for all decisions and adopt a clear capability-building process to ensure the proper management and implementation of the reform agenda. This will entail taking the appropriate measures regarding the restructuring of the public sector to ensure more efficiency in governance and swifter implementation of privatization projects and private sector initiatives. Specific focus will be made on restructuring the budget in order to assure full flexibility in dealing with current and capital expenditures. This includes the preparation of a medium-term budgetary and fiscal framework and the move towards creating a performance-based budget. Moreover, lowering current expenditures in the budget will continue to rank high on the reform agenda of the GOJ. Accelerated steps will be taken to curb this budget drain, through rigorous public sector reform efforts. These include rationalizing the size of the public labour force and reforming the pension system. Without such measures, there would be only limited funding for capital expenditure to carry out the reform agenda. The GOJ will continue working on setting clear criteria for the performance of the judicial system and administrative bodies, in addition to establishing an effective monitoring mechanism. Focus will therefore continue to be made on developing a judicial system that is based on integrity, transparency and autonomy. The GOJ will channel more public investment to improve the efficiency of the court system and provide adequate training for judges and to support administrative staff. Specifically, the GOJ will work on simplifying judicial procedures; training and rehabilitating employees in the system to enhance efficiency, productivity and performance; accelerating the speed of arbitration procedures qualitatively and quantitatively; and extending ICT into every aspect of the judicial system. Liberalizing the media features prominently on the government’s reform agenda. The GOJ will work on revising the legislative and policy framework governing this sector in order to allow the private sector to take the lead role in the development of media channels. The vision focuses on developing new intellectual and social concepts that are based on knowledge, participation and clear understanding of responsibilities that will assist in accepting change. It also focuses on raising awareness among citizens of their rights and duties, and promoting the
Government Planning
59
concepts of equality and the rule of law, as well as the respect for human dignity. The GOJ will work on raising the ceiling for responsible free media in order to promote professionalism. In order to enhance global integration, the policy framework for industrial and trading activities will concentrate on eliminating market distortions and providing additional opportunities for local industries to tap into non-traditional global markets. This will require the adoption of a comprehensive programme that aims to eliminate all existing custom tariffs and sales taxes on industrial production, and increase the value added and competitiveness of the industrial base by encouraging horizontal and vertical integration. The GOJ will facilitate the provision of additional technical assistance to the private sector in this domain. Sustainable development will take into account provision of a healthy environment in order to safeguard the physical well-being of all citizens, in addition to sustaining natural resources. This requires integrating the environmental component in all socio-economic activities, raising awareness among the public and enforcing environmental laws and regulations. Financing the Action Plan In order to complete the reform agenda over the next three years, the GOJ must invest a total of USD 4,229.1 million in development projects in the sectors of human resource development, basic government services, rural development and poverty alleviation, and institutional and structural reform, as detailed in Table 1.4.2. Table 1.4.2 Investment required in development projects Investment by subcomponent
Total financial requirements (USD million) 2004
2005
2006
Total
Human resource development
226.3
167.2
166.5
560.0
Basic government services
912.5
793.5
725.1
2,431.4
Rural development and poverty alleviation
313.0
345.4
345.7
1,004.1
87.2
68.9
77.5
233.6
1,539.4
1,375.0
1,314.7
4,229.1
Institutional and structural reform Total investment
1.5
External Trade Salah S Ghunaim, Acting Director-General, Jordan Export Development and Commercial Centers Corporation (JEDCO)
Introduction Economic openness has become a basic pillar of Jordan’s economic policy, aiming at integrating the Jordanian economy with the world economy. Within this context, Jordan became the 136th member of the World Trade Organization and signed a free trade agreement with the EU, United States, EFTA and AFTA (Arab Free Trade Agreement) countries.1 In 2002, the external trade of Jordan amounted to JOD 5.5 billion, of which imports constituted 64.4 per cent, domestic exports 28.2 per cent and re-export 7.4 per cent. The balance of external trade in 2002 at a deficit of JOD 1.6 billion showed evident improvement over the year before, decreasing by 12.7 per cent, which was attained through the economic policies and reforms adopted by the Jordanian government (see Table 1.5.1 and Figure 1.5.1). Table 1.5.1 Jordan’s external trade 2000–02 Year
Domestic exports JOD 000
Re-exports JOD 000
Total exports JOD 000
Imports JOD 000
Trade balance JOD 000
%
2000
1,080,817
265,765
1,346,582
3,259,404
71,912,822
43.1
2001
1,352,371
274,362
1,626,733
3,453,729
71,826,996
74.5
2002
1,556,748
407,194
1,963,942
3,558,960
71,595,018
712.7
2003
1,639,407
487,469
2,126,876
3,955,579
71,828,703
14.6
1
For further information about Jordan’s agreements and its facilities please refer to the following Web site: http://www.agreements.jedco.gov.jo.
External Trade
61
Figure 1.5.1 Jordan’s external trade 2000–02
Jordan’s exports Introduction Domestic exports increased from JOD 1.1 billion in 2000 to JOD 1.4 billion in 2001 and reached JOD 1.6 billion in 2002, a growth rate of 15.1 per cent compared with 2001. Re-exports increased from JOD 265.8 million in 2000 to JOD 274.4 million in 2001 and recorded JOD 407.2 million in 2002 (see Table 1.5.2). Table 1.5.2 Jordan’s exports 2000–02 Year
Domestic exports JOD 000
Growth rate %
Re-exports JOD 000
Growth rate %
2000
1,080,817
2.8
265,765
7.4
2001
1,352,371
25.1
274,362
3.2
2002
1,556,748
15.1
407,194
48.4
2003
1,639,407
5.3
487,469
19.7
In 2002 domestic exports comprised 53 per cent consumer goods, 42 per cent crude materials and intermediate goods and 5 per cent capital goods (see Figure 1.5.2). Re-exports comprised 27 per cent consumer goods, 47 per cent crude materials and intermediate goods and 26 per cent capital goods (see Figure 1.5.3). Jordan’s main exports are potash and phosphate, cement, fertilizers, foodstuff, chemicals (paints, detergents, pharmaceuticals), cosmetics, carpets, clothes, plastic and wooden products and ceramics (see Figure 1.5.4).
62
Background
Figure 1.5.2 Domestic exports by economic function in 2002
Figure 1.5.3 Re-exports by economic function in 2002
Figure 1.5.4 Domestic exports by commodity in 2002
External Trade
63
Table 1.5.3 Domestic exports by commodity Item
2000 JOD 000
2001 JOD 000
2002 JOD 000
2003* JOD 000
Vegetables
59,109
82,283
95,296
99,043
Fruits and nuts
12,740
12,110
11,744
11,522
Beverages
3,082
6,189
3,348
12,483
Tobacco and manufactured tobacco substitutes
5,514
16,585
26,944
27,562
90,864
90,485
96,446
90,810
138,061
138,334
136,744
144,849
44,731
42,735
67,819
41,407
8,835
7,311
7,396
7,140
73,687
37,012
61,709
60,618
9,935
9,506
10,683
11,270
110,875
129,716
142,791
130,948
Polishing and cleaning preparations and perfume materials
34,813
33,490
52,264
47,078
Fertilizers
59,768
61,099
63,952
73,660
Paper and cardboard
39,427
50,084
37,316
30,136
Textile yarn, fabrics, made-up articles and related products
20,290
21,223
17,053
13,659
Cement
16,327
25,251
28,288
24,850
Clothes
75,916
203,851
357,697
478,142
Plastic products
11,429
8,240
9,446
8,990
Buses
15,213
24,206
17,483
6,971
1,080,817
1,352,371
1,556,748
1,639,407
Phosphates Potash Animal and vegetable oils, fats and waxes
Calcium carbonate Phosphoric acid Dyeing, tanning and colouring materials Medical and pharmacy products
Total
* Preliminary Source: Central Bank of Jordan, Monthly Statistical Bulletin, Feb 2004
64
Background
As can be ascertained from Table 1.5.3, the export of vegetables increased from JOD 82.3 million in 2001 to JOD 95.3 million in 2002, while beverages declined from JOD 6.2 million in 2001 to JOD 3.3 million in 2002. Chemicals, including pharmaceuticals, cleaning preparations, and tanning and dyeing materials, increased from JOD 345.1 million in 2001 and reached JOD 391.9 million in 2002. Clothes moved up from JOD 203.9 million in 2001 to JOD 357.7 million in 2002, achieving a growth rate of 75 per cent. Geographic distribution of domestic exports Major export markets in 2002 were Arab markets, mainly the Iraqi market, which recorded JOD 311.8 million in 2002, followed by the Saudi market registering JOD 105.3 million the same year. The Qualifying Industrial Zones (QIZs) initiative boosted Jordanian exports to the US market, which increased in value from JOD 164.6 million in 2001 to JOD 304.4 million in 2002 including 20 per cent from domestic exports. New markets also emerged in 2002 specifically in Europe, South America and South Asia. (See Table 1.5.4.) Table 1.5.4 Geographic distribution of domestic exports Year
Iraq
2000 JOD 000
2001 JOD 000
2002 JOD 000
2003* JOD 000
100,053
299,356
311,836
221,719
Saudi Arabia
92,049
95,556
105,339
108,473
UAE
47,638
58,861
56,570
65,720
Syria
16,540
25,636
46,721
63,858
The Netherlands
1,934
1,252
9,174
11,265
Spain
4,718
5,891
4,661
8,191
Germany
4,509
16,761
7,786
7,916
Italy
4,783
4,793
5,366
7,260
Bulgaria
1,657
2,215
1,050
6,915
Russia
397
731
927
545
1,135
872
1,246
890
44,848
164,552
304,393
467,904
Brazil
2,493
2,384
950
438
India
172,240
145,322
159,744
141,068
Romania USA
External Trade
65
Table 1.5.4 (cont’d) Year
2000 JOD 000
2001 JOD 000
2002 JOD 000
2003* JOD 000
Israel
55,275
72,853
87,115
66,288
China
32,999
29,547
32,438
25,532
Indonesia
20,028
21,046
14,780
19,211
3,418
6,310
8,003
18,858
1,080,817
1,352,371
1,556,748
1,639,407
Iran Total
* Preliminary Source: Monthly Statistical Bulletin, Central Bank of Jordan, Feb 2004
Jordan’s imports Introduction Jordan’s imports increased from JOD 3.5 billion in 2001 to JOD 3.6 billion in 2002 (see Table 1.5.5 and Figure 1.5.5), because of increased demand for consumer goods, and crude materials and intermediate goods, which constituted 27 per cent and 52 per cent respectively. Table 1.5.5 Jordan’s imports 2000–02 Year
Imports JOD 000
Growth rate %
2000
3,259,404
23.7
2001
3,453,729
6
2002
3,558,960
3
2003
3,955,579
11.2
Figure 1.5.5 Jordan’s imports 2000–02
66
Background
Jordan’s imports by commodity Jordan’s imports are primarily foodstuff, machinery, transport equipment, manufactured goods, mineral fuels and lubricants, and live animals. The main Jordanian imports are: .
food and live animals: – live animals; – meat and fish; – wheat and wheat flour; – rice; – barley; – maize; – nuts; – sugar; – coffee, tea, cocoa, spices; – fodder;
. .
beverages and tobacco; crude materials, inedible, except fuels: – wood and cork; – pulp and waste paper; – textile fibres;
.
mineral fuels and lubricants: – crude oil; – petroleum products;
. .
animal and vegetable oils, fats and waxes; chemicals: – ammonia; – dyeing, tanning and colouring materials; – medical and pharmacy products; – polishing and cleaning preparations; – fertilizers; – plastic;
.
manufactured goods: – furniture; – rubber products; – cork and wood manufactures; – paper and cardboard;
External Trade
67
– textile yarn, fabrics; – clothing and footwear; – iron and steel; .
machinery and transport equipment.
Figure 1.5.6 Geographic distribution of Jordan’s imports 2002 Table 1.5.6 Geographic distribution of Jordan’s imports 2003 Year
Arab countries:
2000 JOD 000
2001 JOD 000
2002 JOD 000
2003* JOD 000
773,740
823,157
907,847
705,604
1,074,188
1,089,482
1,030,612
1,049,459
NAFTA countries:
345,096
294,138
271,753
268,355
USA
321,982
280,722
258,298
254,470
South American countries:
86,937
104,189
91,769
117,552
Asian (non-Arab countries):
718,857
839,659
962,819
1,141,643
3,259,404
3,453,729
3,558,960
3,955,579
EU countries:
Total
* Preliminary Source: Central Bank of Jordan, Monthly Statistical Bulletin, Feb 2004
A majority of Jordan’s imports emanate from the European Union, Arab and Asian countries and the United States, the specific countries of origin being Germany, France, the United Kingdom, Italy, Iraq, Japan and China (see Figure 1.5.6). In 2002, Jordan’s imports from the EU recorded some JOD 1.031 billion compared with JOD 1.090 billion a year earlier, and from Arab countries nearly JOD 907.8 million in 2002 as compared to JOD 823.2 million in 2001 (see Table 1.5.6).
Part Two
Sector Overviews
2.1
Mining and Minerals in Jordan Munther J Akroush, Natural Resources Authority
Introduction Ancient mining activities took place during the Bronze Age in what is today the Hashemite Kingdom of Jordan. Evidence of this occurs in Wadi Araba, which is a unique place to observe the technology of copper mining and smelting from that time. Subsequently, iron ore was mined and smelted during the Ayyubid-Mameluke period from AD 1250 to 1517. The first modern-day reconnaissance geological survey of Jordan was carried out during the 1930s, with a more detailed survey being made between 1946 and 1948. This earlier work was subsequently revised and published in a descriptive handbook in 1959 to accompany a 1:250,000scale geological map of Jordan made by Friedrich Bender in 1959. A West German geological mission carried out a detailed programme of mapping and prospecting of the whole country between 1961 and 1966 in collaboration with Jordanian geologists. Their principal results were embodied in a set of five maps on a scale of 1:250,000 and one of 1:750,000. In addition, a descriptive book, The Geology of Jordan, was published by Bender (Borntraeger, Stuttgart, 1974). During this period, in 1965, the Jordanian government established the Natural Resources Authority (NRA) to carry out investigations into mineral resources, to undertake geological mapping and to maintain the continuity and systematic work needed in this field. In the 1980s, the need for a systematic modern national geological survey led to the establishment of a programme of national geological mapping, which remains under implementation in late 2003, and is currently publishing the 1:50,000- and 1:100,000-scale geological maps. As a result of the exploration activities conducted by NRA, numerous minerals and deposits have been studied or explored. Feasibility studies have also been conducted into the exploitation of various commodities
72
Sector Overviews
and, as a result, several industries utilizing raw materials have been in operation for some time. This chapter provides an overview of all minerals and mineral occurrences and their potential within the context of the economic development of Jordan.
The Natural Resources Authority (NRA) profile NRA was established in 1965 from many directorates including those for mining, geology, water and irrigation, and subsequently, in 1968, Law No. 12 was ratified to regulate the NRA’s tasks, responsibilities and management. Since 1985, the Minister of Energy and Mineral Resources has been assigned as President of NRA, and the water and irrigation directorates were transferred to form an essential component of the Water Authority. NRA is entrusted with responsibilities to: .
suggest policies to investigate, develop and exploit energy and mineral resources;
.
explore and prospect for mineral resources by executing geological, geophysical, geochemical, technical and economic studies;
.
adopt plans and programmes to administer laws and regulations in various mineral resource fields;
.
issue permits and licences for prospecting, exploration, mining and quarrying as well as mineral rights certificates;
.
coordinate cooperation programmes with various international entities;
.
supervise all hydrocarbon activities within the borders of Jordan including granting concessions, and making exploration and international exploitation agreements;
.
carry out other duties assigned to NRA by the Council of Ministers such as investment promotion activities in mining.
Mining sector investment climate The economy of the Hashemite Kingdom of Jordan operates according to free market and free trade principles. In its attempt to help the industrial sector, a major legal and institutional reform has been in progress for the last five years. The new framework seeks to attract foreign direct investment (FDI) and to create the conditions for entrepreneurial growth. To these ends incentives have been introduced and recognized according to the Investment Promotion Law and its by-laws.
Mining and Minerals in Jordan
73
Of specific interest to foreign investors in relation to the investment climate in the mining sector of Jordan are the following: .
Article 117 of the Constitution of Jordan allows for foreigners to invest in mineral resources under special agreements. These are negotiated with prospective investors on a win-win basis and thereafter sanctioned by Parliament as special laws, binding the government to the extent of their articles. Under such agreements investors have a legally secure title and mining rights permitting the investor to explore, mine and market the resulting products without risk.
.
Stability of the fiscal regime. As a special law overrides normal laws and all mining-related agreements are ratified as special laws, changes in the fiscal regime are not possible. It is thus the case that a project’s IRR can be calculated on terms that are the same for the lifetime of the project. The fiscal regime is stable and is secured by both the government and Parliament under the constitution. The prime features of the fiscal regime are: – Taxes. Income tax is set at 15 per cent, which is comparably lower than in most countries worldwide. – Royalty. The new policy limits royalty to approximately 3 per cent, making it highly competitive by international standards. – Profit sharing. Profit sharing in mineral agreements is usually considered at a level that produces an acceptable IRR to the participating company in line with international practices. The division of interests in the production-sharing agreements for the oil and gas sector is set by the government at a level most favourable to participating companies when compared with international norms. – Foreign exchange and repatriation of capital. There is freedom of movement of capital into and out of Jordan. Also, there are no restrictions on foreign exchange, and companies are permitted by law to have offshore accounts and to repatriate their profits from wherever they may sell their mining products.
.
Project ownership. According to the new investment promotion regulations foreigners may own up to 100 per cent of any project in the mining sector.
.
The right to assign. As of the effective date of any mining agreement and at all stages of the project, companies are free to assign partially or entirely their interest in the project, and all the rights and assets of the project can be used for financing purposes. In those limited cases where government approval is required, such approval will never be unreasonably withheld.
74
Sector Overviews
.
Right to market mining products. Companies are free to market the products mined wherever they deem profitable without any restrictions.
.
Arbitration. The Hashemite Kingdom of Jordan is a member of the International Centre for Settlement of Investment Disputes (ICSID) but international arbitration for the settlement of disputes is acceptable. The particulars of the arbitration are a negotiable matter.
.
Freedom of commercial operations. Companies, after the effective date of an agreement, are free to conduct their commercial operations as they wish, as long as they are in line with the environmental and safety regulations and also with the development plan.
.
Stability in environmental management. The local environmental regulations are no tighter than those applied internationally, with an environmental management plan being regularly agreed upon after completion of the feasibility study. Such a document becomes binding on both the company and the government and thus environmental requirements should never pose a risk to any project.
The mining sector’s economic indicators During 2002, the Jordanian national economy witnessed marked progress, enhanced by the positive performance of most economic sectors, especially the commodity production sector. This progress was best reflected in the overall growth in gross national product of 4.1 per cent over 2001. Similarly, the Jordanian mining sector recorded noticeable growth in total revenues, domestically and externally, reaching JOD 671 million in 2002 as compared to JOD 597 million in 2001, an increase of 12.6 per cent. The contribution of mining sector revenues to GNP During 2002, the total revenues of the Jordanian mining sector (both mining and manufacturing) accomplished growth in their contribution to GNP reaching 10.1 per cent during the year as compared to 9.3 per cent in 2001 (see Table 2.1.1, Figure 2.1.1 and Figure 2.1.2). Indeed, during the last few years the contribution of mining sector revenues to GNP has ranged between 8.5 per cent in 2000 and 10.1 per cent in 2002, a direct result of the special policies and facilities applied by the government to encourage local industries. Mining industry revenues contributed 5.47 per cent to GNP during 2002, and 54.36 per cent to total mining revenues, while mining-related
Mining and Minerals in Jordan
75
manufacturing industries contributed 4.6 per cent to GNP and 45.64 per cent to total mining sector revenues. Table 2.1.1 Contribution of mining sector revenues to GNP 1998–2002 Year
Gross national product (GNP) JOD million
Mining sector revenues JOD million
Contribution %
1998
5,604
551
9.8
1999
5,759
558
9.7
2000
6,098
520
8.5
2001
6,393
597
9.3
2002
6,669
671
10.1
Figure 2.1.1 Mining sector revenues 1998–2002 Table 2.1.2 The most important mineral products as a percentage of GNP during 2002 Commodity
Contribution %
Potash
2.1
Phosphate
2.1
Cement
2.0
Fertilizers
1.3
Acids
1.1
Quarries and mines
1.1
76
Sector Overviews
Figure 2.1.2 Mining sector as a percentage of GNP 1998–2002
The contribution of the mining sector to domestic exports Mining sector export revenues (mining and manufacturing) reached JOD 428 million during 2002 as compared to JOD 402 million in 2001, an increase of 6.7 per cent. Likewise, Jordanian domestic exports, as a whole, recorded an increase of 15.1 per cent compared with 2001. The increase in mining export revenues was a direct result of growth in the export of most products of the sector, but especially of phosphates, potash, cement and phosphoric acid (see Table 2.1.2). However, and in contrast, the contribution of the mining sector to total domestic exports actually declined by 2.21 per cent compared to 2001 with a contribution of 27.52 per cent against 29.73 per cent in 2001 (see Table 2.1.3 and Figure 2.1.3). Table 2.1.3 The mining sector’s contribution to domestic exports 1998– 2002 Year
Total domestic exports JOD million
Mining sector revenues JOD million
Contribution %
1998
1,046
355
33.94
1999
1,051
384
36.54
2000
1,081
366
33.86
2001
1,352
402
29.73
2002
1,557
428
27.52
Mining and Minerals in Jordan
77
Figure 2.1.3 Mining sector as a percentage of domestic exports 1998– 2002
Figure 2.1.4 Relative importance of gross domestic product at 1994 prices for mining sector
Minerals of Jordan Detailed exploration studies for various mineral ores in Jordan have been carried out for the purpose of industrial utilization. Minerals are divided according to their mineralogical groups as shown in Table 2.1.5.
78
Sector Overviews
Table 2.1.4 Mineral products as a percentage of the mining sector 2002 Commodity
Contribution %
Potash
20.8
Phosphate
20.7
Cement
18.7
Fertilizers
12.8
Acids
10.6
Quarries and mines
11.1
Table 2.1.5 Minerals in mineralogical groups Industrial minerals
Decorative stones
Metallic minerals
Radioactive Hydrocarbons minerals
Glass sand Phosphate Potash Clay/kaolin Pure limestone Feldspar Gypsum Cement raw materials Natural sand Zeolite and tuff Diatomite
Dimension stones Granite Marble
Copper Gold
Uranium Thorium
Oil and gas Oil shale Tar sand
Industrial minerals Glass sand Principal deposits occur in the following areas: . .
.
Ras En Naqab, 35 kilometres south-west from Ma’an, 80 kilometres north-east of Aqaba along the desert highway; Qa’ Disi, 55 kilometres north-east from Aqaba, 70 kilometres by asphalt road from Aqaba and 100 kilometres by asphalt road from Ma’an; Wadi Es Siq, 65 kilometres north of Aqaba, along the Wadi Araba highway to Aqaba.
Reserves (within studied areas) are: . .
Ras En Naqab: exceeds 10 billion metric tons; Qa’ Disi, Wadi Es Siq and Aqaba: not determined.
Mining and Minerals in Jordan
79
Phosphate Principal deposits occur in the following areas: . . . .
Ruseifa mines, located 15 kilometres north-east of Amman (abandoned); Wadi Al Abyad mines, located 120 kilometres south of Amman; El-Hasa mines, located 140 kilometres south of Amman; Ash-Shadiya mines, located 250 kilometres south-east of Amman.
Reserves (within studied areas) are: . . .
Wadi Al Abyad: 41 million tons; El-Hasa: 49 million tons; Ash-Shadiya: 825 million tons.
Potash All potash is sourced from the Dead Sea where a total of some 43 billion tons of salts are thought to be available, of which almost 2 billion tons are potassium chloride (potash). In addition to agricultural and industrial-grade potash, the concession-holding company and its subsidiaries also produce table salt, bromine and NPK fertilizers. Clay/kaolin Principal deposits occur in the following areas: . . . . . .
Mahis, located 15 kilometres west-north-west of Amman; Ghor Kabid, located 30 kilometres west-north-west of Amman; Rashadiya-Fujij, located 30 kilometres south of Tafila; Batn El-Ghoul, located 60 kilometres south-east of Ma’an; Al-Mudawwara, located 130 kilometres south-east of Ma’an; Al-Hiswa, located 80 kilometres south-east of Ma’an.
Reserves (within studied areas) are: . . . . .
Mahis and Ghor Kabid: 5 million tons; Rashadiya-Fujij: 30 million tons; Batn El-Ghoul: 400 million tons; Al-Mudawwara: 9.7 billion tons; Al-Hiswa: not determined.
Pure limestone Principal deposits occur in the following areas: . . .
Qatrana-Siwaqa area, located 50–90 kilometres south of Amman; El-Lubban area, located 20 kilometres south-east of Amman (abandoned); El-Hallabat area, located 60 kilometres north-east of Amman.
80
Sector Overviews
Reserves (within studied areas) are: . . .
Qatrana-Siwaqa: 50 million tons; El-Lubban: 10 million tons (abandoned); El-Hallabat: not determined.
Feldspar Principal deposits occur in the following areas: . . .
Wadi Hawd Es Sufun, located 7 kilometres south of Aqaba; Jebel Abu Al-Ghoufran, located 18 kilometres north-east of Aqaba; Wadi Mahlaba, located 51 kilometres north-east of Aqaba.
Reserves (within studied areas) are not determined at all locations. Gypsum Principal deposits occur at the following areas: . . . . .
Zarqa River area, located 50 kilometres north of Amman, in Wadi Huni and Wadi Azab; in the area between Wadi Mujib and Tafila (South Jordan), ranging from 70 to 200 kilometres south of Amman; Azraq area, located 90 kilometres east of Amman; Lisan area, located 120 kilometres south-west of Amman; Jabal Bany Hamidah area, located 60 kilometres south of Amman.
Reserves (within studied areas) are: . . . . .
Zarqa River: 10 million tons; southern areas: 8 million tons; Azraq: 3 million metric tons; Lisan: not determined; Jabal Bany Hamidah: not determined.
Cement raw materials Limestones for Portland cement are widely abundant in Jordan with practically unlimited reserves because these rock units are exposed in a broad belt along the mountainous area bordering the east of Wadi Araba–Dead Sea–Jordan Rift. Natural sand Sand, gravel and crushed stone (aggregates) are produced from occurrences in the areas of Aqaba, the eastern Dead Sea shores, the Jordan River, Ramtha and Sukhneh. Reserves are considered to be unlimited.
Mining and Minerals in Jordan
81
Zeolite and tuff Principal deposits occur in the following areas: . . .
Tell Remah, located about 175 kilometres north-east of Amman; Jebel Aritain, located about 135 kilometres north-east of Amman; Tell Hassan, located about 125 kilometres north-east of Amman.
Geological reserves for volcanic tuff that contain zeolite are considered to amount to about 471 million tons. Many other locations are covered with volcanic tuff with very low percentages of zeolite. Geological reserves at these other locations amount to about 870 million metric tons. Diatomite Principal deposits occur at Azraq basin, located about 110 kilometres east of Amman. This area is situated between four faults. Reserves (within studied areas) amount to about 1,250 million metric tons. Decorative stones Dimension stones Principal deposits occur in the following areas: . .
Ma’an, located 210 kilometres south of Amman; Azraq, located 90 kilometres east of Amman;
. .
El-Aal, located 15 kilometres south of Amman; Ajloun, located 60 kilometres north of Amman.
Granite There are three sites, with different granites, located in the South of Jordan, in Wadi Rum area, with another situated 50 kilometres south of Aqaba. Reserves (within studied areas) are unlimited. Marble Five prevailing colour types are distinguished: green, brown with greenish tint, brown, violet and black. Principal deposits occur in the area between Daba’a and Qatrana, 50 to 90 kilometres south of Amman as follows: . . . .
west of Daba’a; east of Daba’a; south of Siwaqa to Khusheim Maatruk; Roman pillars, east of Daba’a (Tulul El Hammam).
82
Sector Overviews
Reserves (within studied areas) are: .
west of Daba’a: types D and E, 60,000 cubic metres;
.
east of Daba’a: total deposits of 130,000 cubic metres and type B deposits of 32,000 cubic metres;
.
West Tulul El Hammam: total deposits of 120,000 cubic metres and type B deposits of 12,500 cubic metres;
.
Tulul El Hammam: total deposits of 260,000 cubic metres and type B deposits of 45,000 cubic metres;
.
Roman pillars: total deposits of 60,000 cubic metres;
.
south of Siwaqa: total deposits of 560,000 cubic metres and type B deposits of 135,000 cubic metres.
Metallic minerals Copper Copper ore occurs within an approximately 70-kilometre-long and 15kilometre-wide area along the eastern side of the central Wadi Araba from the southern end of the Dead Sea to Wadi Abu Khushieba. Principal deposits occur in the following areas: .
Khirbet El-Nahas (Wadi El-Jaryia) area, located in the central part of Wadi Araba, 50 kilometres south of the Dead Sea, and covering about 5 square kilometres;
.
Feinan area (Wadi Khalid, Dana and Ratyia), located in the central part of Wadi Araba, 150 kilometres north of Aqaba, and covering about 12 square kilometres;
.
Abu-Khushieba area, located in the southern part of Wadi Araba, 100 kilometres north of Aqaba, and covering about 28 square kilometres.
Reserves (within studied areas) are: .
Khirbet El-Nahas (Wadi El-Jaryia): 25 million metric tons (geological reserves);
.
Feinan: 19.8 million metric tons;
.
Abu-Khushieba: 8 million metric tons.
Gold Gold as a prospect has been discovered in the northern parts of the Arabo-Nubian Shield in Southern Jordan. It is located 90 kilometres north-north-east of Aqaba. The prospect lies 8 kilometres east of the Wadi Araba–Aqaba highway.
Mining and Minerals in Jordan
83
Radioactive materials Uranium and thorium are the principal radioactive minerals to have been discovered in variable concentrations in the south-east of Jordan. Secondary uranium minerals are disseminated in the phosphate rocks in the range of 95–1,780 parts per million. During the airborne geophysical survey in South-East Jordan, a thorium anomaly was recorded and confirmed by the zircon exploration project. Recently, a superficial deposit of uranium has been discovered in the Siwaqa–Attarat area, with a concentration between 140 and 2,200 parts per million. The principal deposits are to be found at Siwaqa, Khan Ez-Zabib and Attarat Umm Ghudran. Reserves are estimated to be about 18,000 tons.
2.2
The Growing Role of Industry – A Statistical Overview Juma’a Abu-Hakmeh, Director-General, Amman Chamber of Industry Introduction Industry plays a key role in the process of modernization and economic development, as it provides the framework within which national resources and factors of production are utilized, know-how acquired, technologies transferred and new skills developed. It is also the one central activity that links all the economic activities of society together and interacts with them in ways meaningful for their growth. Industry is also one of the key contributors to economic growth and a main generator of national income. Some 22.8 per cent of Jordan’s gross domestic product in 2002, or USD 1,765 million, was contributed by the relatively fast-growing industrial sector. More importantly, industry contributes about 90 per cent of the total value of national exports, a very significant and welcome phenomenon for a country keen to develop its export position in world trade and establish itself on world markets. Jordanian industry has also developed a significant degree of diversity. The Amman Chamber of Industry classifies its associated range of productive activities into 14 sub-sectors. These include several traditional ones, such as the mining of natural resources (potash and phosphate), and a number of new ones, such as engineering and manufacturing industries that provide products to meet consumer needs and other requirements of the local market and export demand. The total value of national industries exports reached about USD 2.01 billion in 2002 of which USD 1,600 million were made up of manufactured industrial products. These figures are especially significant in that they indicate an advance beyond the previous reliance on mining industries for export earnings to new diversification into industries that rely on know-how, technology and human skills.
The Growing Role of Industry
85
Table 2.2.1 Industrial sector basic indicators 2002 Indicators Number of firms
28,000*
Number of employees
160,000
Industrial exports** (USD million)
2,000
Employee salaries and compensation (USD million)
528
Share of industrial exports to national exports
90%
– Contribution of manufacturing
17%
– Contribution of mining
3.1%
– Contribution of electricity
2.7%
* Preliminary estimates, of which about 11,000 are industrial services firms ** Main industrial exports
Table 2.2.2 Industrial production index 2002 2000
2001
2002
125.5
129.5
140.0
115.6
130.0
145.4
– Food
106.8
108.0
119.8
– Paints
112.5
136.0
130.7
– Pharmaceuticals
185.1
204.2
178.5
80.4
98.7
80.7
– Iron and steel
Table 2.2.3 Quantities produced by major industries 2000–02 2000 000 tons
2001 000 tons
2002 000 tons
– Phosphate
5,506
5,878
7,107
– Potash
1,936
1,963
1,956
620
671
695
Chemical acids
1,684
1,408
1,649
Cement
2,640
3,173
3,455
Electricity
7,208
7,366
7,865
Mining and quarrying
Fertilizers
Source: Amman Chamber of Industry
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88
Sector Overviews
Experience and access to foreign markets Being aware of the small size of Jordan’s economy, and in an endeavour to reach new markets, Jordanian companies have developed over the years excellent marketing expertise and knowledge of the markets of the Middle East and North Africa, and especially the Arab countries. They are not only exploiting their cultural affinity in the region, but also the easy access by land, air and sea to such markets. What makes this access even more attractive is the fact that Jordan has developed, over the last two decades, a network of bilateral agreements of counter-trade with several major countries in the region. Jordan joined the EuroMediterranean agreement, the World Trade Organization, the Arab Free Trade Agreement, the EFTA Trade Agreement and the Jordan– USA Free Trade Agreement, which together provide links through Jordan to other countries of the region.
Main industrial exports Jordan’s main industrial exports are phosphates, potash, medicines, fertilizers, detergents and soap, cement, textiles and clothing, plastic products, paper and cardboard, and paints. Total exports of industrial sectors in each of the years 2000 to 2002 were USD 1,378 million, USD 1,738 million and USD 2,010 million, overall growth over the period of USD 632 million or 46 per cent. Of this total by far the highest growth rate was seen in clothes and textiles, which alone accounted for actual growth of USD 477 million or 75 per cent of the increase. (See Table 2.2.4.) Table 2.2.4 Main industrial exports 2000 USD million
2001 USD million
2002 USD million
Clothes
107
287
584
Medical, pharmacy products
156
183
201
Potash
195
195
192
Phosphates
128
128
136
58
57
92
104
52
87
Cleaning and perfume
49
47
73
Paper and cardboard Beverages and tobacco
56 12
71 32
52 43
Cement
23
36
40
Buses
21
34
24
Plastic products
16
12
13
Industrial exports
1,378
1,738
2,010
National exports
1,524
1,907
2,195
Vegetable oils Phosphoric acid
The Growing Role of Industry
89
Destination of exports .
Other Arab countries: 48 per cent, of which fruit and vegetables alone account for 16 per cent, with the remainder being a comprehensive range of industrial products.
.
USA: 20 per cent, of which more than 90 per cent is apparel from the Qualifying Industrial Zones.
.
South-East Asia: 18 per cent, mainly phosphates, potash and fertilizers.
.
European Union countries: 3 per cent.
.
Other countries: 11 per cent.
Industry in Jordan by sector Table 2.2.5 provides detailed statistics for industry in 2001, the latest year for which figures are available. Table 2.2.5 Industry in Jordan by sector Activity
No. of Compensation employees of employees JOD 000
Gross output JOD 000
Gross value added JOD 000
No. of enterprises in 2001
Extraction of crude petroleum and natural gas
73
532.2
9,082.0
8,590.7
1
Quarrying of stone, sand and clay
688
1,366.9
9,856.7
4,745.5
123
Mining of chemical and fertilizer minerals
6,832
57,532.0
321,656.9
185,689.2
6
Production, processing and preserving of meat and meat products
1,627
4,339.9
53,980.0
9,235.0
27
Processing and preserving of fruit and vegetables
853
1,763.8
12,004.0
3,032.0
19
Manufacture of vegetable and animal oils and fats
2,403
6,109.3
65,639.8
16,348.0
96
Manufacture of dairy products
3,273
6,211.2
61,747.7
15,834.8
582
Manufacture of grain mill products
903
2,285.6
67,106.3
7,748.2
197
Manufacture of prepared animal feeds
360
878.6
24,176.4
4,268.9
8
Manufacture of bakery products
9,384
12,235.5
93,064.2
28,637.9
1,809
Manufacture of cocoa, chocolate and sugar confectionery
779
1,355.6
14,070.4
3,909.5
35
90
Sector Overviews Table 2.2.5 (cont’d)
Activity
Manufacture of other food products
No. of Compensation employees of employees JOD 000
Gross output JOD 000
Gross value added JOD 000
No. of enterprises in 2001
2,644
5,074.0
44,078.5
13,689.6
383
463
1,842.8
21,298.6
15,671.1
8
2,606
9,302.5
83,194.7
38,528.8
31
Manufacture of tobacco products
996
5,022.1
200,939.3
130,046.9
6
Preparation and spinning of textile fibres; weaving of textiles
798
2,826.2
29,188.0
12,151.0
20
1,021
672.9
5,013.7
1,973.0
351
Manufacture of carpets and rugs
745
2,100.4
14,201.8
5,991.5
40
Manufacture of other textiles
216
346.0
1,396.2
548.2
53
Manufacture of knitted and crocheted fabrics and articles
547
732.8
3,314.1
1,328.2
100
16,938
22,204.4
88,219.5
51,872.6
2,083
Distilling, rectifying and blending of spirits; ethyl alcohol production from fermented materials Manufacture of soft drinks; production of mineral waters
Manufacture of made-up textile articles, except apparel
Manufacture of wearing apparel, except fur apparel Tanning and dressing of leather
218
799.3
4,727.6
1,325.1
29
Manufacture of luggage, handbags and the like, saddlery and harness
217
162.2
568.7
251.7
45
2,077
2,795.0
16,665.7
6,132.5
271
382
413.2
3,056.9
1,261.4
38
Manufacture of builders’ carpentry and joinery
1,893
1,085.0
8,171.1
2,753.1
1,028
Manufacture of wooden containers
106
87.4
520.3
229.7
27
Manufacture of other articles of cork, straw and plaiting materials
243
150.4
1,130.3
406.9
75
Manufacture of pulp, paper and paperboard
897
2,781.8
25,767.7
5,956.0
14
Manufacture of corrugated paper and paperboard and of containers of paper and paperboard
854
2,999.4
35,738.4
12,572.8
53
Manufacture of footwear Sawmilling and planing of wood
The Growing Role of Industry
91
Table 2.2.5 (cont’d) Activity
No. of Compensation employees of employees JOD 000
Gross output JOD 000
Gross value added JOD 000
No. of enterprises in 2001
Manufacture of other articles of paper and paperboard
1,091
2,997.6
42,905.3
15,259.6
28
Publishing of newspapers, journals and periodicals
1,736
8,837.0
43,070.6
23,696.4
25
Printing
2,410
5,656.8
34,552.3
12,602.4
322
131
204.7
1,207.0
653.2
47
Manufacture of refined petroleum products
3,291
21,896.0
547,528.3
63,672.6
1
Manufacture of basic chemicals, except fertilizers and nitrogen compounds
1,202
8,167.7
82,465.5
42,537.5
14
Manufacture of fertilizers and nitrogen compounds
1,426
11,314.2
197,554.9
19,565.0
10
Manufacture of plastics in primary forms and of synthetic rubber
605
1,129.5
10,339.0
3,029.5
10
Manufacture of pesticides and other agrochemical products
45
78.6
2,259.3
478.8
8
Manufacture of paints, varnishes and similar coatings, printing ink and mastics
1,204
3,366.0
48,993.1
12,819.9
55
Manufacture of pharmaceuticals, medicinal chemicals and botanical products
4,253
20,888.0
151,604.9
67,484.4
25
Manufacture of soap and detergents, cleaning and polishing preparations, perfumes and toilet preparations
2,726
8,408.4
85,997.2
27,224.0
87
Manufacture of other chemical products
191
616.6
6,178.4
1,800.8
10
Manufacture of rubber tyres and tubes; retreading and rebuilding of rubber tyres
117
277.0
1,724.3
469.7
14
Manufacture of other rubber products
116
229.2
1,156.0
566.0
12
4,976
11,288.4
99,883.3
33,981.8
220
261
581.3
3,446.6
1,352.5
47
Service activities related to printing
Manufacture of plastics products Manufacture of glass and glass products
92
Sector Overviews Table 2.2.5 (cont’d)
Activity
No. of Compensation employees of employees JOD 000
Gross output JOD 000
Gross value added JOD 000
No. of enterprises in 2001
Manufacture of non-structural non-refractory ceramic ware
327
904.1
5,802.9
2,656.7
7
Manufacture of structural nonrefractory clay and ceramic products
944
2,213.3
13,414.5
6,086.3
14
Manufacture of cement, lime and plaster
2,121
13,048.9
142,747.4
89,670.4
4
Manufacture of articles of concrete, cement and plaster
6,174
9,105.9
80,905.9
22,333.6
1,581
Cutting, shaping and finishing of stone
4,121
6,443.6
36,048.0
14,605.8
615
270
585.2
3,972.2
1,592.6
20
Manufacture of basic iron and steel
1,622
5,435.2
110,005.9
38,690.9
24
Manufacture of basic precious and non-ferrous metals
657
1,955.5
25,366.2
10,603.4
6
Manufacture of other nonmetallic mineral products
Casting of iron and steel
299
883.5
7,680.6
1,787.8
12
6,888
7,001.3
57,193.9
21,391.5
2,801
Manufacture of tanks, reservoirs and containers of metal
398
305.2
1,647.6
658.7
153
Treatment and coating of metals; general mechanical engineering on a fee or contract basis
485
343.7
1,570.0
1,036.7
45
Manufacture of cutlery, hand tools and general hardware
429
588.4
2,931.8
992.6
36
3,025
5,759.4
57,261.6
20,877.6
737
172
607.4
2,532.2
1,004.4
3
1,175
3,665.5
24,280.2
8,465.5
17
238
345.9
3,087.0
944.5
77
Manufacture of machine tools
60
159.5
2,070.4
1,469.4
10
Manufacture of machinery for mining, quarrying and construction
309
417.1
1,741.0
927.4
23
Manufacture of structural metal products
Manufacture of other fabricated metal products Manufacture of lifting and handling equipment Manufacture of other general purpose machinery Manufacture of agricultural and forestry machinery
The Growing Role of Industry
93
Table 2.2.5 (cont’d) Activity
No. of Compensation employees of employees JOD 000
Gross output JOD 000
Gross value added JOD 000
No. of enterprises in 2001
Manufacture of machinery for food, beverage and tobacco processing
218
223.0
657.8
279.5
4
Manufacture of other specialpurpose machinery
89
332.5
1,531.1
715.6
5
1,191
3,513.4
22,423.1
7,116.9
51
85
304.5
3,033.1
831.3
4
Manufacture of electricity distribution and control apparatus
187
437.4
3,878.6
1,591.3
10
Manufacture of insulated wire and cable
717
2,750.0
56,061.4
11,078.7
4
Manufacture of electric lamps and lighting equipment
363
1,073.0
8,774.1
4,443.4
18
1,074
1,918.9
8,078.7
3,070.9
172
Manufacture of bodies (coachwork) for motor vehicles; manufacture of trailers and semi-trailers
945
2,193.6
24,183.8
7,966.9
28
Manufacture of parts and accessories for motor vehicles and their engines
382
1,004.7
6,196.4
1,976.1
21
8
18.6
54.0
21.9
3
Manufacture of domestic appliances Manufacture of electric motors, generators and transformers
Manufacture of medical and surgical equipment and orthopaedic appliances
Building and repairing of pleasure and sporting boats Manufacture of furniture
10,322
11,259.0
67,241.2
27,009.8
3,211
Manufacture of jewellery and related articles
765
499.6
8,118.6
1,999.2
87
Other manufacturing
493
969.0
8,398.8
2,209.6
83
6,639
35,477.2
261,204.5
118,203.0
5
140,009
383,688.4
3,740,536.0 1,352,233.8
18,384
Production, collection and distribution of electricity Total: Industry
Source: Amman Chamber of Industry
2.3
Transportation
1
Export and Finance Bank
Introduction Strategically located as Jordan is, surrounded by Syria, Iraq, Saudi Arabia, Palestine and Israel, the country has as yet to exploit fully its potential as a regional transport hub. That said, the country has in recent years become a major transit route for goods arriving at Aqaba by sea but ultimately destined primarily for Iraq. Development of the transportation sector is essential to the integration of Jordan with its neighbours and to the country’s tourism industry. The demand for freight and passenger traffic is expected to continue to grow in coming years and thus there is a marked need for expanding, modernizing and upgrading the transport infrastructure. The sector in Jordan is divided into four sub-sectors, road, rail, sea and air, and contributes some 15 per cent to GDP each year and employs around 10 per cent of the national workforce.
Road transport Passenger A considerabe percentage of Jordan’s population depend on public transport for their daily commuting. Although private ownership of cars has increased in recent years owing to the decrease in customs on imported cars, it still remains very low. It is currently estimated at 8 cars per 100 of the population in the Amman area and 2–3 cars per 100 of the population in the rest of the kingdom. The demand for public transport is expected to increase in the future owing to the high population growth rate and the increase in economic activity. Established in 1975, the Public Transport Corporation (PTC) was the government body responsible for public transport of passengers in the greater Amman area. The decision to privatize PTC was taken back in 0
The information contained in this chapter has been derived from a number of sources including Export and Finance Bank reports (the primary resource), the Ministry of Transportation, the Ministry of Public Works and Housing, the Jordan Civil Aviation Authority and the Ports Corporation.
Transportation
95
1997. During 1999 a 10-year contract was signed with three local companies to operate the bus lines in the greater Amman area, for an annual fee of JOD 0.5 million paid to the government. Operations of the privatized bus lines began in 1999, and 150 new buses were introduced. Immediate results of privatizing PTC were witnessed in passenger numbers. The number of passengers per day immediately increased from 45,000 to over 100,000. Prior to November 2001, three government institutions were responsible for this sub-sector. Their responsibilities were divided as follows: .
.
.
Ministry of Interior: to regulate the issuance of licences for operators and to set standards and specifications for vehicles. The Ministry also issued licences for the buses, medium cars and small cars. Ministry of Transport: to set fares and the regulatory framework for the sector and to prepare and sign agreements with other countries. Public Transport Corporation (PTC): to supervise operators and to grant licences to operate in areas within its jurisdiction.
The involvement of three government entities responsible for passenger transport had an adverse impact on the level of service provided to the general public. This was primarily exemplified by the poor condition of the vehicles. In November 2001, the Public Transport Regulatory Authority was established to replace the above institutions and thus became the only body that regulates this sub-sector. This important step has improved the quality of services available for passengers and encouraged further private sector participation.
Table 2.3.1 Number of public transport vehicles 1998
1999
2000
2001
2002
20,001
18,361
17,266
21,420
20,606
Small (tourist) cars
3,377
3,264
3,420
2,872
2,840
Medium cars
4,672
4,208
4,157
4,731
4,347
957
889
800
982
1,025
Small cars
Buses
Source: Ministry of Transport
Freight Trucks in Jordan primarily transport goods to and from Aqaba as well as transit goods to neighbouring Arab countries. During the 1980s, transit goods represented a major part of transported cargo, but owing to the
96
Sector Overviews
greater competitiveness of other ports in the region this sub-sector experienced a fall in 2000 and 2001. Since then, the sector has again seen marked growth as Aqaba has become a major entrepoˆt for goods transiting to Iraq. Some 85 per cent of the total truck fleet in Jordan is privately owned but there are two main companies that operate in this sub-sector: .
.
Jordan–Syria Land Transport Company. Established in 1975, the company transports goods to and from the port of Aqaba to various destinations in Jordan, and phosphate from the local mines to Aqaba. The company also transports goods from Syria and Lebanon. During 2002 total freight transported reached 857,415 tons (see Table 2.3.2). The company’s fleet comprised 392 trucks at the end of 2002. Iraqi Jordanian Road Transport Company. The company was established in 1980 as a result of an agreement between the Jordanian and Iraqi governments. The company primarily transports oil from Iraq to Jordan, transit cargo from Aqaba to Baghdad, phosphate from the local mines, and potash and salt from the Dead Sea to the port of Aqaba (see Table 2.3.3). The company’s fleet consisted of 300 trucks at the end of 2002.
Table 2.3.2 Jordan–Syria Land Transport Company, quantities transported 1998–2002 Description
1998 tons
1999 tons
2000 tons
2001 tons
Aqaba/Internal
224,348
193,086
164,510
108,207
90,051
Mines/Aqaba
383,020
438,682
336,892
158,722
286,201
Jordan/Syria and Lebanon
13,792
13,496
32,746
59,966
360,823
Syria/Jordan
32,652
36,500
35,241
74,758
77,209
7,435
18,000
63,714
113,074
40,101
27,864
14,178
3,010
5,289
–
689,111
713,942
636,113
520,016
857,415
Lebanon/Jordan Within Syria
Total
2002 tons
Source: Ministry of Transport
A third company, known as Unified Company, was established in 1982, with its headquarters in Amman. The company does not own any trucks; instead it organizes and monitors transportation in Jordan especially in Aqaba and Zarqa Free Zone.
Transportation
97
Table 2.3.3 Iraqi Jordanian Road Transport Company, quantities transported 1998–2002 1998 tons 1999 tons
2000 tons
2001 tons
2002 tons
External transport
99,488
58,390
45,953
95,656
102,484
Domestic transport
48,880
240,076
295,916
98,658
99,204
339,263
237,956
231,222
73,962
65,995
48,043
68,495
99,235
24,075
65,259
137,536
148,919
85,197
91,203
111,146
Phosphate Potash and salt Oil
Source: Ministry of Transport
Road network The total length of the national road network is 7,927 kilometres (2,911 kilometres of main roads, 2,954 kilometres of secondary roads and 2,062 kilometres of village roads). The design, construction and maintenance of the road network is the responsibility of the Ministry of Public Works and Housing, with municipalities also responsible for the roads within their jurisdiction. There are three main road corridors in Jordan that are given priority in network development: .
. .
The Central North–South Corridor runs from Syria to Saudi Arabia. In the north, the corridor has two branches: the eastern branch, which starts at the city of Jabr, and the western branch, which starts at the city of Ramtha. Both branches eventually meet south of Amman and pass through Al Qatrana. In Ma’an the corridor splits again, one branch going towards the city of AlMudawwara near the Saudi border while the other continues south to Aqaba. The Western Border Corridor runs from the Syrian border through the Jordan Rift Valley to Aqaba and the Red Sea. The Eastern Corridor branches off from the Central North– South Corridor at the city of Ma’an, passing through Al-Azraq and then to the Iraqi border.
Maritime transport and ports The port of Aqaba is Jordan’s only seaport, and is operated by the Ports Corporation. The Ports Corporation is publicly owned and is managed by the Ministry of Transport. The port provides various services including importing, exporting and transit operations for passengers, vehicles and goods. The port has played a major role over the years as a transit port for goods heading to Iraq.
98
Sector Overviews
Aqaba has three main ports: the main port, the container port and the industrial port. The main port is located to the south of Aqaba town, and handles mainly general cargo, and liquid and solid bulk such as phosphate and grains. The container port is smaller than the main port. However, it is the most financially lucrative of the three ports and is likely to be increasingly so in the future. Around 80 per cent of seaborne cargo is actually containerized. The container port is used for ro-ro traffic and has dedicated berths for bulk rice imports and bulk cement exports. The industrial port is located close to the Saudi Arabian border and comprises three primary berths used for bulk exports of chemical fertilizers and potash; a berth for the import of livestock; and an oil jetty for the import of oil. There are approximately 5,000 employees working at the ports, approximately 3,000 of whom are permanent employees while the rest are daily workers, who mainly do the loading, unloading and storing.
Source: Ports Corporation, Aqaba
Figure 2.3.1 Goods exported and imported through the port of Aqaba Throughout the 1980s, goods passing through the port were on the rise, reaching a maximum of 20 million tons in 1988. The sanctions imposed on Iraq, however, began to suppress the volume of transit cargo. By 1994, it reached a low point of 10 million tons. In 2000 total goods passing through the port reached 12.5 million tons. According to the Aqaba Special Economic Zone (ASEZ) Master Plan, the volume of cargo handled at the port will rise gradually to surpass the 20-million-ton mark by 2020 (see Figure 2.3.1). The breakdown of cargo passing through the port has changed over the years. Back in 1988, transit goods, primarily to Iraq, represented approximately a third of all goods passing through the port but in 2002 phosphate exports represented approximately 45 per cent by weight of all goods, with fertilizers and potash accounting for 13 per cent and 21 per cent respectively.
Transportation
99
Table 2.3.4 Transit goods imported via Aqaba port 1998–2002 1998 tons
1999 tons
2000 tons
2001 tons
2002 tons
510,018
411,011
297,664
519,396
816,667
1,285
996
728
769
6,618
92,844
60,318
69,405
71,836
54,202
2,501
5,504
4,625
7,337
6,225
Kuwait
26,473
13,734
11,464
8,720
11,266
Yemen
1,036
231
730
30
36
29,951
41,438
21,495
16,216
14,751
Palestine
0
2,003
5,595
3,924
888
Israel
0
11,238
3,714
17
0
18,681
146,634
9,286
13,491
8,367
682,789
561,107
424,706
641,736
919,020
Iraq Syria Saudi Arabia Lebanon
United Arab Emirates
Other countries Total transit goods Source: Ports Corporation
Table 2.3.5 Types of goods imported via Aqaba port 1998–2002 2002 tons
2001 tons
2000 tons
1999 tons
1998 tons
170,130
170,910
184,395
210,462
216,481
19,658
15,060
23,761
32,100
25,435
Ammonia
243,231
253,090
164,102
173,311
194,890
Gas/cement
28,102*
78,905
43,314
70,244
71,247
0
0
0
0
57,829
Flour
6,938
12,472
8,528
5,334
5,407
Rice
88,089
127,471
100,263
114,910
104,230
1,479,469
1,516,960
1,594,531
1,167,088
1,093,046
Tea/coffee
16,904
15,288
21,736
19,934
21,202
Sesame/fava beans
13,634
12,702
13,855
18,496
22,590
443,739
494,943
375,717
450,981
316,700
Timber
78,335
47,340
80,519
80,903
102,228
Cattle
34,289
49,921
30,054
44,043
42,466
Fodder
256,488
304,368
307,028
213,775
222,850
Vegetable oils Mineral oils
Other
Wheat/barley/corn
Iron
100
Sector Overviews
Table 2.3.5 (cont’d)
2002 tons
2001 tons
2000 tons
1999 tons
1998 tons
Construction material
7,362
12,128
11,745
4,117
3,077
Potatoes
4,259
1,752
4,157
4,263
2,779
612,516
569,942
637,962
173,697
245,787
Fertilizers
27,168
11,015
14,019
5,716
4,941
Cars
46,837
53,640
92,538
98,553
99,000
Tyres
14,637
14,735
12,246
15,149
18,566
Government supplies
15,919
8,764
15,021
15,772
1,252,947
139,484
155,028
168,664
195,018
161,234
Frozen goods
41,420
44,050
48,896
36,864
60,134
General goods
862,330
842,149
981,855
1,459,150
22,092
Sulphur
Sugar
Source: Ports Corporation
Table 2.3.6 Types of goods exported via Aqaba port 1998–2002 1998 tons
1999 tons
2000 tons
2001 tons
2002 tons
Fertilizers
1,068,521
1,165,669
1,158,394
989,545
1,174,238
Phosphate
3,728,535
3,632,652
3,125,717
3,548,789
3,993,927
Potash
1,508,163
1,653,495
1,865,391
1,857,365
1,882,462
Cement
332,762
312,937
354,038
406,925
310,103
Re-export
45,775
32,655
13,502
14,605
5,519
Transit
64,537
66,642
42,187
31,916
28,401
Sundry
389,425
417,689
229,112
507,015
584,956
15,794
27,652
4,570
7,356
3,653
343,115
383,033
400,037
427,927
473,714
7,310,256
7,480,047
7,192,948
7,791,443
8,872,683
Trans-shift Containers (loaded and empty)
Total exports
Source: Ports Corporation
Rail transport Railway transport in Jordan dates back to 1901, when the Hijaz railway was built. The railway was meant to connect Damascus in Syria with Madina in Saudi Arabia, passing through Jordan. The total length of the railway is 1,303 kilometres; approximately 425 kilometres of it passes
Transportation
101
through Jordan. At that time, the railway was considered an important means of transportation; today its importance is being questioned owing to the high cost of building a new rail network or even renovating the existing one. In 1975, the Hijaz railway was renovated and extended to transport phosphate from Al-Hasa and Al-Abyad mines to Aqaba. The length of the railway is 292 kilometres. This part of the railway (from Al-Hasa and Al-Abyad to Aqaba) is managed and operated by the Aqaba Railway Corporation (ARC). The northern part of the Hijaz railway (from AlHasa to the Syrian border) is controlled under the rules of the Waqf properties, a holding company that cannot be sold but can be operated by other enterprises for a fee. The Hijaz railway has the potential to be an attractive sight for tourists in terms of its history and Islamic significance. The Aqaba Railway Corporation runs six trains a day and had the capability to transport 2.5 million tons of phosphate in 2003, a figure expected to rise to 2.9 million tons in 2004. Table 2.3.7 Jordan Hijaz Railways Corporation, passengers and freight movement 1998–2002 1998
1999
2000
2001
2002
Ton/km
266,344
256,880
536,952
1,028,872
1,477,000
Passenger/km
1441204
2402183
1807505
1201968
1,364,000
School trips
119 trains, 20,410 passengers
100 trains, 24,010 passengers
79 trains, 15,270 passengers
75 trains, 14,330 passengers
74 trains, 15,180 passengers
Tourist trips
47 trains, 2,640 passengers
57 trains, 4,219 passengers
66 trains, 4,548 passengers
27 trains, 2,008 passengers
19 trains, 1,136 passengers
Amman– Damascus round trips
104 trains, 1,622 passengers
183 trains, 6,476 passengers
206 trains, 3,958 passengers
208 trains, 3,632 passengers
204 trains, 3,514 passengers
Source: Ministry of Transport
The locomotives and wagons are old, and much investment is needed to upgrade them. During 2001 a maintenance project was launched to increase the transport capacity from 1 wagon a day in June 2001 to 3.5 wagons a day in August. It is also expected to increase even further to reach 6–7 wagons a day in the near future. ARC used to be an overstaffed corporation: in 1992, the total number of employees reached 1,300; currently ARC employs 530 workers. Overall the total number of employees working in the rail transport sector reached 700 in 2001.
102
Sector Overviews
The government sought to privatize the Aqaba Railway Corporation. In 1999 this privatization transaction was in the form of a lease agreement, which included the financing and constructing of two 40kilometre rail extensions to the JPMC mine at Eshidyeh and to Wadi/II. The objective of the project was to improve rail transportation of phosphate from the mines to Aqaba and also to prepare for the increase in volume owing to the Norsk-Agre/JPMC joint venture. In 2000 Norsk Hydro withdrew from the joint venture and plans for the railway were brought to an end. In 1995 plans were made to construct rail extensions to link Jordan with neighbouring countries and also connect Jordanian cities by rail. Those plans were based on either constructing new rail networks or renewing existing ones by converting the narrow gauge to standard gauge. If this is done, the rail will be able to handle longer and heavier wagons. The projects are as follows: .
Amman–Syrian border railway link. The plan is to connect Amman with the Syrian border passing by Zarqa and Al-Mafraq. There would also be a branch connecting Al-Mafraq with Irbid and the Jordan Valley. The total length of the railway is 124 kilometres with an estimated cost of JOD 100 million.
.
Iraqi border–Zarqa railway link. The construction of this railway is expected to facilitate the transport of goods and petrochemicals to and from Iraq. The cost of this project is estimated at JOD 180 million for building the railway and JOD 260 million for locomotives. The Ministry of Energy and Mineral Resources is also considering building an oil pipeline from Jordan to Iraq. If the ministry goes through with the project it will decrease the economic feasibility of building the railway.
.
Amman–Aqaba link. The cost of this project would reach a total of JOD 660 million.
None of the projects have as yet materialized owing to a requirement for finance.
Air transport Air transport plays an important role in any country’s integration with other economies as well as the tourism industry. Its importance becomes even more apparent in a country like Jordan that has invested heavily in tourism projects over the past decade. Thus it is important for destinations to be linked – as directly, rapidly, frequently and inexpensively as possible – by means of air transport. Jordan has two airline carriers and three airports.
Transportation
103
Royal Jordanian airlines (RJ) The privatization of Jordan’s heavily indebted national carrier started in 1998, when its financial debt reached USD 643 million and was incurring losses of USD 60 million per year. In 2000 RJ was transformed from a corporation into a holding company fully owned by the government to prepare for its privatization. RJ’s current fleet comprises 16 planes (four Airbus A340-200, seven Airbus 310-300 and five Airbus 320-200). The core business of RJ, the airlines, was expected to be privatized by the end of 2000 following an extensive marketing campaign that was carried out in the United States, Europe and the Gulf region. Initially, British Airways/Speed Wings and KLM/Alitalia expressed interest in a strategic partnership; however, the coalition dissolved and the parties withdrew from the offer. RJ’s core business was incorporated on January 2001 as a public shareholding company fully owned by the government, with a capital of JOD 40 million. The privatization of RJ’s core business has proved to be a lengthy process, as the world airline market is currently in a severe slump following the events of 11 September 2001. The government is presently looking into restructuring the aviation activity and proposing the best investment method, which might include a financial investor and/or a strategic partner. RJ’s restructuring programme encompasses redefining its organizational structure, downsizing and adopting the most feasible route networks. RJ might abandon altogether its long-range route network and focus on shorter networks in the MENA region and Europe. RJ’s non-core business units were separated from RJ and incorporated into a limited liability business to ease the privatization process. The privatization of some of RJ’s non-core businesses was finalized while others remain to be sold.
Table 2.3.8 Development of the number of passengers on Royal Jordanian regular flights 1998–2002 Year
Number
1998
1,186,720
1999
1,252,196
2000
1,281,825
2001
1,178,058
2002
1,299,699
Source: Ministry of Transport
passenger
104
Sector Overviews
Jordan Aviation The liberalization of this sector allowed for the creation of Jordan’s first private airline company, Jordan Aviation. Operations of this company commenced in October 2000 with chartered flights on routes not serviced by RJ. Today flights are made mainly within the Middle East and to Europe and Africa. The airline uses Amman Marka International Airport; handles both passengers and cargo; and has a current fleet of two aeroplanes (a Boeing 737-400 and an Airbus A310-300). Airports Jordan has three main airports: the Queen Alia International Airport (QAIA), Amman; Amman Marka International Airport (AMIA); and Aqaba International Airport (AIA). During 2000 the total number of passengers and cargo passing through Jordanian airports reached 2.35 million and 82.2 tons of cargo respectively. All three airports are managed and controlled by the Civil Aviation Authority (CAA). The Cabinet of Ministers has approved the restructuring of the CAA and the privatization of the airports. Queen Alia International Airport Established in 1983 and located 25 kilometres south of Amman, QAIA is Jordan’s main hub airport. It was built to accommodate the future growth in air traffic and thus has a capacity of 4 million passengers per year. The total number of passengers passing through the airport reached 2.4 million in 2000 but fell back to 2.2 million in 2001 (see Table 2.3.9). The total cargo arriving at the airport reached 82,185 tons in 2000 (see Figure 2.3.2). The government is expected eventually to register the airport as a shareholding company to pave the way for its privatization. This would lead to improving and upgrading the facilities at the airport. Table 2.3.9 Passengers passing through Queen Alia International Airport 1999–2001 1999
2000
2001
January
145,069
158,404
161,843
February
119,895
160,191
170,586
March
169,794
208,159
201,838
April
191,103
205,721
186,796
May
158,410
186,033
166,004
June
207,461
212,057
203,545
July
232,066
242,681
250,434
Transportation
105
Table 2.3.9 (cont’d) 1999
2000
2001
August
259,197
270,929
287,574
September
216,737
222,353
195,278
October
199,427
198,975
139,716
November
180,038
165,905
122,719
December
154,758
153,452
145,473
2,233,955
2,384,860
2,231,806
Total
Source: Jordan Civil Aviation Authority
Source: Jordan Civil Aviation Authority
Figure 2.3.2 Passengers and cargo passing through QAIA 1996–2000 Amman Civil Airport or Amman Marka International Airport AMIA is Jordan’s first international airport established in 1950 by the British. Over the years, the airport grew in size, but spiralling air traffic and AMIA’s limited facilities called for the establishment of Queen Alia International Airport. Currently Royal Wings and Arab Wings operate from AMIA. Most of the flights are to Gaza, Aqaba, Tel Aviv, Haifa and some Red Sea resorts. Total passengers passing through the airport reached 51,000 in 2000.
Source: Jordan Civil Aviation Authority
Figure 2.3.3 Passengers passing through AMIA 1996–2000
106
Sector Overviews
Aqaba International Airport AIA was established in 1972 for domestic flights to assist in the development of the Aqaba region. During 2000 the total number of passengers passing through the airport reached 126,000, representing an increase of 17 per cent over the year before. This airport is expected to witness a significant increase in air traffic as a result of transforming Aqaba into a special economic zone, which should lead to an increase in tourist and business activity.
Sector outlook The growth in population and the increase in economic activity intensify the need for a strong and reliable transport system. Thus, having a wellestablished transport system in Jordan has become a necessity. Liberalization of this sector would allow the private sector’s participation and would also decrease the ministry’s role from operator to that of regulator and policy maker only. Problems in the transport sector have been identified, and major steps are being taken to tackle them. The privatization of the transport sector is very ambitious and has progressed quite effectively. On the other hand, road transport still needs major improvements. The establishment of the Public Transport Regulatory Authority is expected to improve significantly the quality and service of passenger transport in the near future. Furthermore, the government is devising a new strategy to provide investors with incentives to create freight transport companies, which will eradicate the obsolete trucking fleet in Jordan. Transportation is one of the sectors to receive incentives under the Investment Promotion Law. Improving transportation would allow Jordan to capitalize on its role as a regional transportation hub.
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2.4
Information and Communications Technology Ministry of Information and Communications Technology, Amman
Introduction At the onset of the 21st century, the Hashemite Kingdom of Jordan is poised to make a dramatic leap into the networked world. With a young, literate and well-educated workforce already providing human resources and technical expertise throughout the Arab region, Jordan is uniquely well placed to play an increased role both regionally and globally. In accordance with its new responsibilities under Law No. 13 of 1995 as amended by Law No. 8 of 2002, the Ministry of Information and Communications Technology (MoICT) will work to ensure that the country takes maximum advantage of the opportunities presented by the Information Age.
Information Information, broadly defined, has become a source of wealth in its own right. The industries associated with the manipulation, transmission, storage and retrieval of information, or ICT, have become the drivers of significant change in countries able to harness their potential. In order to maximize the role of the ICT sector in the country’s economic development, the Government of Jordan has combined the disciplines of ICT under the umbrella of a single ministry, the MoICT. The restructured ministry has added IT to its traditional responsibilities for telecommunications and post to establish a policy framework in which all can jointly grow. The MoICT is committed to creating the environment within which the citizens of Jordan have the widest possible access to the best telecommunications, post and IT services at the lowest possible price. It will also serve as a single point of contact
110
Sector Overviews
for governments, investors and other stakeholders interested in the ICT sector in Jordan. There are three broad areas of responsibility inherent in the above framework: for policy, where the broad intentions of the Government of Jordan are made explicit; for regulation, where procedures are put in place, where appropriate, to implement government policy, thereby ensuring a healthy competitive environment and protecting the rights of consumers; and for operation, where maximum scope is given to the private sector – within the constraints of the policy and regulatory framework – to bring about the desired economic activity. An ICT policy document was prepared by the MoICT and presented for the consideration of the government. On 4 September 2003, it was approved by the Council of Ministers as the official policy of the Government of Jordan. It is available on the MoICT Web site at moict.gov.jo. The MoICT is also aggressively looking for quality staff to discharge its responsibilities, and is hiring talented Jordanians to fill full-time positions in the ministry. Even in an environment of private sector involvement and competition, there is a role for government to foster and nurture the growth of ICT. In the area of regulation, the hand of government will be light. However, where competition is not present – or where the interests of consumers cannot be otherwise protected – it will play a carefully structured role. Under the new law, the Telecommunications Regulatory Commission (TRC) has become a five-member, full-time commission, more independent from the government. The government will ensure that the commission is equipped with the legal and technical resources necessary to discharge its duties fully. Specification of a revised interconnection framework, including service level agreements, a new national numbering plan, and procedures for dealing expeditiously with critical regulatory issues, is an effort that is already under way. But the main focus of the reform effort will be to ensure that the TRC has the resources and the leadership necessary to take the enforcement actions that must underlie any successful regulatory regime.
Telecommunications Telecommunications and post have traditionally been considered public utilities with universal service obligations, and regulation of these sectors will follow traditional models. Given the complexity of the technical and legal issues in IT, however, other laws and regulations must ensure competitiveness, technical standards, privacy, data integrity, security and the safeguarding of intellectual property. Thus, no formal regulatory regime is envisaged for the IT sector. The MoICT will take steps to prepare the laws that are necessary in an electronic environment. The first of these, the Electronic Transactions Act, has
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112
Sector Overviews
already been passed. Others must follow to ensure a fully enabled environment. In telecommunications, the government has committed itself to a range of measures in keeping with its obligations under the World Trade Agreement (WTO), including liberalization of the mobile service beginning in 2004 and the fixed-line service in 2005. Studies to recommend the specific policies of the government in the mobile and fixed-line subsectors after those dates were awarded to international consulting firms with wide experience of telecom liberalization. The mobile study was completed in late 2002 and, in accordance with the dates specified in the ICT policy document, the TRC is working to specify the mobile licensing regime that will prevail in the liberalized environment. The intent is to introduce a third infrastructure-based operator as soon as practicable after 1 January 2004. In spite of rapid growth in subscribers, from approximately 100,000 when a second operator was introduced in late 2000 to over 1.2 million in 2003 (a penetration rate of 23 per cent), there is still a question as to whether competition has delivered all that it can in the way of lower prices and improved services to Jordanian subscribers. In the fixed–line sub-sector, the monopoly provider, Jordan Telecom, suffers from many of the problems of fixed-line providers worldwide, and has seen a decline in the subscriber base over the first half of 2003. Fixed-line teledensity remains in the region of 12.5 per cent. Nonetheless, a similar study to recommend a licensing regime in a liberalized environment after 2005 is currently in progress. The intent of both studies is to recommend licensing policies that will allow maximum use of existing infrastructure at the same time that the benefits of competition accrue to Jordanian consumers. The radio-frequency spectrum is a national resource. With the rapid development of wireless technologies, the value of this resource has increased, at the same time that investors demand clear policies with regard to its use. The amended Telecom Law provides a framework within which the value of this resource will be optimized, including coordinated management by the agencies concerned and the possibility of spectrum auctions. In addition, a complete national register of frequencies will be maintained by the agencies on the premises of the MoICT, making Jordan one of the few countries in the world where the complete – civilian and government – spectrum usage will be kept in a single place. Taking into consideration the needs of national security, the MoICT, the TRC, the armed forces and the security agencies are working together to put in place the procedures that bring clarity and transparency to the spectrum-management process. In this way, investors will be assured that their investments can be made on a rational and predictable basis. Jordan Telecom will remain a key player in the plans to connect Jordanians. However, it is believed that a competitive environment will
Information and Communications Technology
113
benefit the company as well. The pie will have grown larger and all participants will benefit from increased opportunities. The success of the initial public offering (IPO) in Jordan Telecom in late 2002 demonstrated that a well-planned sector, a strong and respected regulator, and a clear path to liberalization will only increase the share value of the company. After liberalization in 2005, experience elsewhere has shown that everyone – the sector, the companies and the subscribing public – will be a winner.
Data communications In data communications services, the market is already liberalized, with a wide range of Internet service providers (ISPs). However, Internet subscription remains low at about 1.5 per cent of the population, and the government will continue its efforts to reduce the cost of Internet access to service providers and consumers. The challenge of increased Internet access by Jordanians should not be underestimated, and the very slow growth in the number of Internet subscribers is cause for concern. All aspects of the connectivity equation, including the costs of personal computers (PCs) and metered Internet access, and the profitability of Internet provision, must be taken into consideration. It may be that the most productive use of government resources may be in encouraging community rather than individual access, whether through schools or community access centres. Developments in technology mean that services and delivery methods – such as voice and data, television and the Internet – originally thought to be separate are now converging. The MoICT will work to ensure that the opportunities presented as a result of convergence are not missed and that the Jordanian consumer is the beneficiary of those opportunities. The increasing spread of, and need for, converged applications based on the IP or Internet protocol – including voice and data collaboration, contact centres, e-commerce, e-learning, unified messaging and IP telephony – means that Jordan must not fall behind in this critical technology area.
E-government E-government is a national programme to harness the advantages of ICT, and will require the commitment of all government entities at the highest executive level. It will mean a new definition of government, as a service provider, dedicated to providing the best possible service at the lowest possible cost to the citizens of the country. E-government will have a positive impact on the quality of life of citizens, and will improve and develop the relationship between government and business, leading to a more entrepreneurial business spirit. This joint partnership will set
114
Sector Overviews
a new standard for professionalism in the ICT sector, enable partnerships with international firms and establish Jordan firmly on a level with world leaders in the ICT area. The e-government effort has a dual focus: creating the basic infrastructure and standards necessary to automate services, and bringing those services gradually on to an e-government portal. Connecting all of government over a secure network will be the first step. The network will be implemented in parallel with the retraining of government employees to ensure that they effectively use the new technologies. In addition, steps will be taken to ensure that government-to-government, government-to-citizen and government-to-business contacts are made on the most modern and productive basis. That means using ICT. The egovernment programme will be a mix of all of the above, and will allow Jordan as a nation to improve dramatically the lives of its citizens. Much progress has already been made, with the hiring of a world-class systems integrator, creation of a project management office (PMO) and the publication of an e-government roadmap and blueprint.
Post The post will be reorganized, both to improve the service to citizens and to remove the financial drain on the government. With passage of the new Postal Law, the Board of Directors of the corporatized Public Postal Operator has been appointed and the company vested as of 1 January 2003. A series of options for the company, including immediate privatization, is being evaluated. Whatever option is chosen, it will be carried out in the framework of providing basic postal services at affordable prices to Jordanian citizens. Other services will be liberalized. Here, with postal operators worldwide moving into non-traditional, IT-based services, scope must be created for an entirely new postal service in Jordan, greater benefits for Jordanians, and a profitable postal operator that is no longer a drain on the government budget.
Information technology Information technology (IT) is the key to many of the services listed. The Government of Jordan has identified the IT industry, including its related and supporting activities and building on the nation’s human capital, as a key enabler of the future economic growth of the country. The government will continue to examine the legal, institutional and fiscal environment in Jordan and will take the steps necessary to ensure that this vital industry is competitive locally, regionally and globally. A start has already been made with REACH, a public–private partnership dedicated to developing a joint IT strategy for the nation. The government is fully committed to the REACH process, particularly to its
Information and Communications Technology
115
sustainability. For this purpose a public–private ICT advisory council has been created to ensure that the strategy is regularly reviewed and updated. Much, however, remains to be done in further developing the legislative framework, adopting an IT-friendly taxation regime, developing an always-on infrastructure, creating a corporate environment attractive to outside investors, and ensuring that local IT firms have the widest possible opportunity to participate in joint ventures with industry leaders. The government is actively considering several creative ways in which to do business differently, including outsourcing IT projects to the private sector, entering into build, own and operate (BOO) and build, own, operate and transfer (BOOT) projects with private companies, and requiring that all foreign companies doing business with the government offset a portion of their sales to local firms. Jordanian IT firms are already regional leaders, but these arrangements will allow them to grow in cooperation with the best the industry has to offer. In this way, the nascent private–public partnership in Jordan will continue to develop, bringing benefit to both parties.
Connecting Jordanians Connecting Jordanians is an initiative dedicated to ensuring that all Jordanians have access to the knowledge economy. Through this initiative, the MoICT is taking the lead to bring high-speed broadband connectivity to all the nation’s schools and public access points by the end of 2004. Experience elsewhere has shown that market forces are not always responsive to national goals, and government leadership and investment may be necessary to fill the void. All public resources, physical, financial and managerial, will be marshalled to build a private network initially dedicated to education. However, the private sector will not be excluded, and requests for expressions of interest by local, regional and international providers will be solicited to partner with the government in the effort. The Connecting Jordanians initiative has already begun with approval for construction of the university network, and the Discovery Schools programme will soon connect 100 schools as a pilot of the larger network. A proposal for the K-12 school network will follow. A programme management office (PMO) is in the process of formation in the MoICT to oversee the implementation of the Connecting Jordanians initiative. The nation’s future lies with its children. A new pedagogical approach that makes use of IT, not merely as a tool but as the basis of a new educational paradigm, must accompany the improvements in connectivity. This has already begun under the leadership of the Ministry of Education. Many countries have articulated educational reform as a belief, but Jordan is doing something about it. With
116
Sector Overviews
adequate connectivity, schools will be able to create an entirely new and more effective means of teaching the country’s children. The costs are affordable, and will more than pay for themselves in the medium term. When Jordan has achieved this level of connectivity, it will have moved into the realm of the top five most connected countries in the world. Connectivity is not a luxury, even for a developing country like Jordan. It is a necessity, and the MoICT intends to see that every Jordanian has every opportunity to realize his or her potential.
2.5
The Electricity Sector in Jordan Ahmad Hiyasat, National Electric Power Company Introduction The Hashemite Kingdom of Jordan, a constitutional monarchy, stands at the crossroads of trade and cultural exchange in the Middle East and Africa. Through its active pursuit of economic growth and its welleducated human resources, the country is now positioned to realize its full potential as a hub for development and a regional catalyst for investment opportunities. Jordan is almost entirely dependent on imported oil to meet its commercial energy needs, importing about 5.291 million tonnes of oil equivalent (TOE) in 2002, about 2.7 per cent more than the year before. The country’s modest energy resources consist of small amounts of proven oil and natural gas reserves near the eastern border with Iraq and oil shale deposits (about 40 billion tonnes of proven reserves) mainly in the central part of the country. As a result of this situation, substantial efforts have been made to promote solar and wind energy. The year 1947 is recognized as the one in which the electricity industry in Jordan began. That year the first electrical power company was established by private investors, to be responsible for generating and distributing electricity in the Amman area. This company is known as Jordan Electrical Power Company (JEPCO). In 1961 another privately owned electrical power company, called Irbid District Electricity Company (IDECO), was established to serve the northern area of the country. However, it was not until the 1960s that real development of national electrification began, but it required huge investments outside the capabilities of the two private shareholding companies, JEPCO and IDECO. Therefore, the government established Jordan Electricity Authority (JEA) in 1967 as an independent government utility to take care of electricity generation and transmission all over Jordan, and to complete the electrification of the country outside the concession areas of JEPCO and IDECO, including in rural areas.
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Sector Overviews
In 1984 the Ministry of Energy and Mineral Resources (MEMR) was established, the role of which has been to formulate a coherent set of national policies to achieve energy security through improving efficiency, diversifying supply sources and ensuring the efficient and reliable operation of the entire energy system. In September 1996, JEA became a shareholding company owned completely by the government. The new company was named the National Electric Power Company (NEPCO) and was later to split into three companies. Jordan now has a modern electricity system including many power stations and a national network extending over almost all of the country, with the remaining areas likely to be covered in the very near future (see Figure 2.5.1). Table 2.5.1 shows the significant figures for the electricity sector in Jordan in 2002. Table 2.5.1 Electricity sector 2002 2002
Growth rate %
Peak load of Jordan (MW)
1,410
12.4
Available capacity (MW)
1,578
–
Generated energy (GWh)
8,127
7.7
Steam units
7,205
9.1
Diesel units
71
69.0
Gas turbines/diesel
115
38.6
Gas turbines/natural gas
680
711.6
53
23.3
3
–
6,900
7.9
Net energy exported (GWh)
1.1
742.1
Energy imported (GWh)
322
20.6
Loss percentage (%)
18.32
–
Average (kWh) consumed per capita
1,585
5.2
Electricity fuel consumption (thousandtons (EHFO)):
2,013
7.1
– Heavy fuel
1,763
8.1
195
78.9
55
61.8
3,037
0.4
Hydro units Wind energy Consumed energy (GWh)
– Natural gas – Diesel National grid transmission lines: – 400 and 132 kV (Circuit-Km)
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119
Table 2.5.1 (cont’d) 2002
Growth rate %
Substations installed capacities: – 132/33kV (MVA)– 400/132/33 (MVA)
2,6701,280
2.40
969
5.7
5,324
2.8
– All Jordan
99.9
–
– Rural
99.8
–
No. of consumers (thousands) Population under supply (thousands) Percentage of population under supply (%):
Figure 2.5.1 National electrical grid in Jordan
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Sector Overviews
Privatization and restructuring programmes of the electricity sector (See also Chapter 3.4) Background The Government of Jordan has encouraged private sector participation and ownership in several public sector institutions, this having been planned for in the Economic and Social Development Plan (1993–97). The plan was based on a range of basic principles, which determine the future course of the national economy. Some of these principles are related to the role of the private sector, namely: .
reducing the government role in direct production and enhancing the role of the private sector, through improving incentives for domestic and foreign investment;
.
activating the role of the private sector in the areas of infrastructure and basic services and increasing private sector participation in the management and ownership of public sector institutions on an equitable and well-considered basis.
In conformance with this prevailing trend toward privatization and restructuring, the government has taken certain steps in reforming, restructuring and privatizing several sectors. Electricity was among the first major sectors selected for privatization. Policies of the privatization and restructuring programmes The main policies of the privatization and restructuring programmes for the power sector in the areas of technical, administrative and financial activities are as follows: .
utilization of local energy sources including available natural gas as well as the utilization of imported energy resources for electricity generation on a commercial basis;
.
encouragement of electrical interconnection links and power exchange with neighbouring countries;
.
implementation of load research and load management programmes to define the consumption patterns of consumer categories, to reduce long-run investment in generation projects and to improve the system’s performance.
Objectives of the privatization and restructuring programmes The major objectives of the privatization and restructuring programmes for the electricity sector in Jordan can be summarized as follows:
The Electricity Sector in Jordan
.
.
. .
.
121
to develop and maintain a good quality of supply of electricity to meet the needs of the people of Jordan on a continuous basis, at the lowest possible cost, giving attention to energy rationalization and environmental protection; to develop, operate and maintain power plants and transmission and distribution networks to meet customers needs with high reliability and safety; to develop, operate and maintain transmission and distribution networks to meet customers’ needs with high reliability and safety; to implement safety instructions, programmes and procedures to improve safety and security of all personal and equipment and to have qualified, trained, motivated and productive human resources of the appropriate size and skills; to achieve the planned financial targets agreed from time to time, and to acquire the financial requirements necessary to fulfil the operational and development plans for the sector’s utilities on the best terms and conditions.
Implementation mechanism of the privatization and restructuring programmes In 1994, the Cabinet of Ministers decided to restructure Jordan Electricity Authority (JEA) as a first step towards privatization of the electricity sector in Jordan. In September 1996 the new Electricity Law No. 10 was issued and, in accordance with this law, JEA was converted into a public shareholding company fully owned by the government and named National Electric Power Company (NEPCO). In 1997, the Cabinet decided to proceed with the restructuring of NEPCO and the unbundling of its activities into three different functions: generation, transmission and distribution. Also, the Cabinet decided that the construction of any new power station should be executed by the private sector (IPP) through the BOO model. The modified General Electricity Law No. 13 was issued in 1999 in order to ensure a suitable competitive environment that encouraged the private sector to invest in developing electricity projects. To accomplish this in line with the new Electricity Law, NEPCO was restructured by dividing it into three companies, as follows: .
. .
National Electric Power Company (NEPCO): responsible for transmission and control activities, besides responsibility for interconnection with neighbouring countries; Central Electricity Generating Company (CEGCO): responsible for electricity production from the available power stations; Electricity Distribution Company (EDCO): responsible for the distribution of electricity in the areas outside the concession of the
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Sector Overviews
two existing private distribution companies and mainly in the southern and eastern areas and the Jordan Valley. NEPCO’s assets were re-evaluated and divided between the three companies, each according to its activities, and some of NEPCO’s employees were transferred to CEGCO and EDCO. Since the beginning of 1999, the three companies have been working successfully as separate entities. In February 2000, the Ministry of Energy and Mineral Resources appointed a consultancy firm to study and make recommendations on the tariffs to be applied between the different electricity companies, identifying the technical boundaries between the three companies and the allocation of the loans payable by NEPCO to the three companies that resulted from its restructuring. In 2001, and in accordance with the new General Electricity Law No. 13, a regulatory commission for the power sector was established In December 2001, the Ministry of Energy and Mineral Resources appointed another consultancy firm to advise the Government of Jordan in developing and implementing the strategy for the privatization of the government assets in CEGCO, EDCO and IDECO.
Figure 2.5.2 Structure of the electricity sector in Jordan Strategy of the privatization and restructuring programmes The privatization and restructuring programmes are being implemented to a defined strategy in two stages:
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123
.
Stage I: – the analysis and evaluation of all viable privatization options of the above-mentioned companies; – making recommendations on the groupings of generation plant and distribution entities to ensure successful privatization, and assisting the government in implementing these recommendations; – providing recommendations on the legal and regulatory framework for the industry to support the efficient development and operation of the electricity sector.
.
Stage II: – all generation and distribution to be majority-owned and managed by private sector companies; – all new generation to be provided by the private sector; – the legal and regulatory framework for the industry to be designed to promote efficient development and operation of the sector while in private sector ownership; – the transmission activity, performed by NEPCO, to remain in government ownership.
The new General Electricity Law of 2003 The General Electricity Law was reviewed and amended by the consultants and a new version of the law was issued in 2003, the main features of which are: .
Electricity sector structure: According to the new electricity law, the following structure for the electricity sector in Jordan will be implemented: – Separate generation, transmission and distribution utilities. (Implemented) – Independent Electricity Sector Regulatory Commission (ESRC). (Established) – Ministry of Energy and Mineral Resources with policy role and responsibility for IPPs. – Single buyer model, transition to bilateral contract. – Cost-reflective tariffs, by distribution companies.
.
The role of MEMR: According to the new electricity law, the Ministry shall assume the following mandate and powers:
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Sector Overviews
– To set and prepare the general policies of the sector and submit them to the Council of Ministers for approval in accordance with the needs of economic and social development in the kingdom, and to follow up the development of these policies. – To cooperate with other countries for the purpose of electrical interconnection and trade of electric power, as well as to conclude the agreements necessary to that effect with the consent of the Council of Ministers, and to follow up performance of the contractual obligations with those countries. – To promote the interests of the kingdom with other countries and regional and international organizations on issues relating to electric power, and to represent the kingdom before such organizations. – To adopt the necessary measures for the provision of supplemental sources of generation of electric power in case of prolonged shortfalls if no alternative means to overcome the shortfall are available. – To request the bulk supply licensee, if necessary, to provide fuel for electricity companies set for privatization and licensed for generation, whether before or after their privatization, and for independent power producers. – To promote the use of renewable energy for generation. – To recommend to the Council of Ministers to switch to a competitive electricity market pursuant to this law. .
The role of ESRC: According to the new electricity law, the Electricity Sector Regulatory Commission will assume the following mandate and powers: – To license persons engaged in generation, transmission, supply, distribution and system operation. – To regulate persons engaged in generation, transmission, supply, distribution and system operation in the kingdom so as to provide reliable electricity services to consumers in an efficient and economic manner that accords with the developments in electricity technology, taking into account the provisions of this law. – To determine the electric tariff, subscription fees, services fees, disbursements, royalties and the connection charges to the transmission system and distribution system. – To participate in determining the technical standards relating to the electric appliances and electrical installations, by way of consulting with other concerned parties, in order to have such standards issued by the Standards and Metrology Corporation.
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125
– To participate in determining the necessary requirements for the implementation of the environmental standards to which electrical installations ought to conform, by way of consulting with other concerned parties, and to have them issued according to the legislation in force. – To render expert advice and opinion on any issue that is related to the sector in a way that fulfils the commission’s purposes and objectives. – To make recommendations to the ministry to switch from the single buyer model to a competitive electricity market structure in accordance with this law. – Any other activity or mandate pertaining to the functions of the commission pursuant to the provisions of this law. .
The licences: According to this new law a separate licence will be given to each activity as follows: – No person is allowed to construct, own or operate an undertaking or in any way engage in the business of generation, transmission, system operation, supply or distribution, except in accordance with a licence issued pursuant to this law or in accordance with a permission granted by the Council of Ministers in accordance with this law. – Notwithstanding the above, a person may without holding a licence: 1) construct, own or operate an undertaking for generating electric power not exceeding 1 megawatt (MW) in aggregate at the same site; 2) construct, own or operate an undertaking for distribution of electric power to serve a peak demand not exceeding 100 kilowatts (kW) in aggregate at the same site; 3) construct, own or operate an undertaking for autogeneration. The commission may, by a directive, grant exemption to a class of persons from the requirement of: – having a generation licence for a power station with an installed capacity not exceeding 5 megawatts in aggregate at the same site, subject to compliance with such conditions as may be specified by the council for that purpose; – having a supply licence, subject to compliance with such conditions as may be specified by the council for that purpose, provided that the council shall not grant any exemption in any area falling within the area of supply of a licensee except with the consent of that licensee.
2.6
Agriculture and Agro-industry in Jordan
1
Souheil Marto, Eastern Company, and Abdullah Arar, Amman
Background People living and working in the rural environment form an important part of Jordanian society with respect to their contribution to the national economy and rural development, and their role in enhancing social and economic stability, achieving food security and conserving natural resources as well as the environment. Agriculture constitutes the backbone of the rural economy and needs to receive the appropriate attention and support in order to sustain the rural population and thus their multifunctional role. Therefore, the Ministry of Agriculture of Jordan has initiated an agricultural sector development programme for the period 2001 to 2010, which aims at addressing the needs of rural people and contributing to balanced development in Jordan. This chapter has used extensively the relevant data available from the agricultural development programme dated April 2001.
The agricultural sector As the agricultural sector is of vital socio-economic importance for the rural population and at the same time is strongly interlinked with the natural environment, it is described briefly so as to help in drawing appropriate conclusions concerning the sector’s relevance to the country’s development strategies. 0
References: Agricultural Sector Development Programme 2001–10; National Strategy for Agricultural Development in Jordan (in Arabic); and Annual Report 2000, Directorate of Information and Computer Technology, Department of Planning, Ministry of Agriculture (in Arabic).
Agriculture and Agro-industry in Jordan
127
Geography and climate The total area of Jordan including the Dead Sea is about 90,000 square kilometres. The country can be divided into three main geographic and climatic zones: the rift valley, the highlands and the eastern desert. The rift valley can be divided into the Jordan Valley, the Dead Sea and Wadi Araba. The Jordan Valley is the most fertile region in the kingdom, being several degrees warmer in winter than the rest of the country, which permits year-round agricultural production. Fertile soil and the provision of extensive irrigation during the dry summer months and supplementary irrigation to the rain that falls in winter, which varies from 100 millimetres in the south to 300 millimetres in the north, have made the Jordan Valley the food basket of the country. The Jordan Valley is divided into north and south Ghors, with the former extending from the northern border of Jordan down to the Dead Sea with altitudes ranging between 220 metres below sea level in the north to 407 metres below sea level at the Dead Sea. The area that has been developed in the valley has reached 360,000 donums out of a total of 427,000 donums and is mostly fully irrigated. The south Ghors are situated at the east and south-east of the Dead Sea, and contain about 64,000 donums under irrigation. The highlands extend from the north to the south throughout the western part of Jordan and thus separate the rift valley from the eastern desert. Elevation in the highlands varies from 600 metres to about 1,500 metres above sea level. This area receives the highest rainfall in Jordan and is the most vegetated region in the country. However, because of the steep slopes and shallow soil over most parts of the region, the area of good agricultural soils is limited. About 90 per cent of Jordan’s population lives in this region, which developed rapidly agriculturally over the last 20 years as hundreds of thousands of olive trees and tens of thousands of stone-fruit trees were planted. Also afforestation programmes by the government have succeeded in increasing forest areas to 77,000 donums (about 1 per cent of the country). The eastern desert constitutes around 88 per cent of Jordan’s total area with elevations varying between 600 and 900 metres above sea level. Rainfall is extremely low throughout the year ranging from 200 millimetres to zero precipitation with an average of less than 50 millimetres annually. The climate of Jordan is generally arid, with more than 90 per cent of Jordan’s total area receiving less than 200 millimetres of rainfall per year, with more than 70 per cent of the rain actually falling being less than 100 millimetres a year. Only around 2 per cent of the total area, located in the north-western highlands, receives rain in excess of 300 millimetres although in the northern highlands it can reach up to 600 millimetres. Around 5.5 per cent of Jordan is considered dry land with
128
Sector Overviews
annual rainfall ranging from 200 to 300 millimetres. The pattern of rainfall is characterized by uneven distributions over the various regions and strong fluctuations from year to year in terms of quantity and timing; thus Jordan is one of the poorest countries in the world in terms of water resources (see Table 2.6.1). Table 2.6.1 Distribution of precipitation in Jordan Climatic zone Desert (Badia) Arid Semi-arid Semi-humid
Average annual rainfall mm per m2
Area km2
Area % of total
< 200 200–300 300–400 > 400
80,800 4,900 1,700 1,900
90.5 5.5 1.9 2.1
89,300
100.0
Source: Agricultural Sector Development Programme 2001–10, Table 1
Land resources The total available land in 1999 was around 9 million donums (1 donum = 0.1 hectare), with a cultivated area in the 1990–99 period of about 3 million donums, representing 3.4 per cent of the total Jordanian area and less than 1 donum per capita. Range land extends over wide parts of the eastern desert and comprises approximately 81 million donums, which constitutes about 90 per cent of the land. As mentioned before, rainfall is low, irregular and uneven in distribution. These lands are in a general state of degradation owing to harsh environmental conditions, misuse from overgrazing and the cultivation of marginal areas. Forest land comprised about 1.3 million donums in 1999, mainly in elevated regions, of which about 770,000 donums were covered with natural and manufactured forests. The total irrigated area was 284,000 donums in 1967 and has constantly increased to reach almost 538,000 donums in 1990 and over 1 million donums in 1998 (see Table 2.6.2). Table 2.6.2 Irrigated area in Jordan (crop area) 1990 000 donums
1992 000 donums
1994 000 donums
Jordan Valley Other areas
227.5 310.4
304.8 507.7
291.2 492.5
Total
537.9
812.5
783.7
1996 000 donums 293.3 552.5
845.8
Source: Agricultural Sector Development Programme 2001–10, Table 2
1998 000 donums 323.8 705.7
1,029.5
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129
Owing to the variation in rainfall, the increase in the irrigated area, the move to cultivating more profitable crops and major changes in the traditional markets for Jordanian agricultural products, the irrigation pattern has changed as follows: . .
.
The area of field crops declined from 14 per cent of the total irrigated area in 1990 to 8.1 per cent in 1998. Owing to the shrinking of export markets and declining comparative profitability, the vegetable areas decreased from 45.5 per cent of the irrigated area in 1990 to 39.7 per cent in 1998. Fruit production increased dramatically, reaching 40.5 per cent of the irrigated area in 1990 and 52.2 per cent in 1998.
Water resources The average renewable freshwater resource is about 680 million cubic metres per year or approximately 135 cubic metres per capita for all uses. The current rate of water use already exceeds the available renewable supplies, and Jordan covers the increasing deficit through overdrawing from highland aquifers and exploitation of non-renewable groundwater. The annual average of overdrawing of groundwater resources, during the period 1990–96, reached more than 230 million cubic metres. Total water consumption increased from 755 million cubic metres in the years 1985 to 1990 to 859 million cubic metres during 1994–96. The water for municipal uses showed the highest increase from 153 million cubic metres to 216 million cubic metres (from 20 per cent to 25 per cent of the total water used) and in regard to irrigation its share dropped from 75 per cent to 70 per cent of the total water used during these two periods. However, in quantitative terms it increased from 560 million cubic metres in 1985–90 to 600 million cubic metres between 1991 and 1996. Industrial water use is about 33 million cubic metres, which is around 4 per cent of the total water consumption. It has to be noted that the share of agriculture in water resource consumption is about 70 per cent, and the present government policy is to reduce this share in order to minimize the over-exploitation of the groundwater and to meet the increasing demand for fresh water for municipal uses. However, to minimize the negative impact of this on agricultural production, efforts are being made to increase the water resources by the use of treated wastewater for irrigation purposes together with the increase of water use efficiency by improved irrigation methods and maximizing the production per unit of water used for irrigation. Table 2.6.3 shows that the water allocation for agriculture will be reduced from 2010 and the contribution of treated wastewater will increase from 12 per cent of the total allocated water for irrigation at present to reach 32.3 per cent of the total in 2020.
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Sector Overviews
Table 2.6.3 Conventional and treated wastewater use for irrigation Year
1998
2005
2010
2015
2020
Conventional water
486
656
597
519
461
Treated wastewater Total
69 555
93 745
156 753
197 716
220 681
% of treated to the total
12.4
12.4
20.6
27.3
32.3
Source: Ministry of Water and Irrigation, 2001
Economic situation Population The population of Jordan increased from about 4.3 million in 1995 to about 5.5 million in 2002, with a growth rate of about 3.3 per cent in 1999. In that latter year the average annual income per capita was USD 1,524 and unemployment was estimated at about 17 per cent. Agricultural production The agricultural sector achieved a high growth rate owing to the expansion of irrigated farm areas. The introduction of modern production technology, the provision of a favourable environment for investments in the sector, especially the planting of fruit trees, the establishment of commercial-scale livestock projects and the absence of major obstacles for Jordanian exports to traditional and foreign markets all played a major role in increasing agricultural production. By the end of the 1980s and the early 1990s, the growth rate of the sector had declined, owing to the economic crisis in Jordan, the regional and international political developments and the Gulf crisis, with the ensuing closure of most of the traditional markets for Jordanian agricultural exports. Development of crops and livestock The following paragraphs give an overview on the development of crop and livestock products during the 1990s. Table 2.6.4 Agricultural crop production in Jordan 1990 Area ’000 donums
1994 Production Area ’000 ’000 tons donums
1999 Production Area ’000 ’000 tons donums
Production ’000 tons
Field crops
1,196
137
1,448
100
173,056
25*
Vegetables
338
978
405
1119
396
1,214
Fruit trees
311
240
366
360
449
440
Olives
623
73
793
97
1,056
43*
2,468
1,428
3,012
1,676
2,074
1,722
Total
* The figures mirror the effect of a serious drought in the 1998/99 season. Source: Agricultural Sector Development Programme 200110, Table 4
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131
From Table 2.6.4 it can be noted that the total cultivated area fluctuated owing to high variations in precipitation, with the area under field crops declining because it is dependent on the amount of rainfall. Vegetable production, which depends on irrigation and is mainly in the Jordan Valley, has stabilized around 400,000 donums. Fruits and olives have increased steadily in area and production, which reflects the growing awareness of the limited water resources. Although the total area has declined, the total production output has stabilized at around 1.7 million tons. Table 2.6.5 Livestock production in Jordan 1990
1994
1999
Heads ’000
Meat tons
Milk tons
Heads ’000
Meat tons
Milk tons
Heads ’000
Meat tons
Milk tons
Sheep Goats Cattle
1,556 479 42
6,300 1,800 1,700
25,200 12,100 59,100
2,211 814 61
9,000 2,900 3,900
35,800 19,700 95,900
1,581 631 65
13,395 3,425 3,913
20,491 11,962 140,617
Total
2,077
9,800
96,400
3,086
15,800
151,400 2,277
20,733
173,070
Heads ’000
Meat tons
Eggs ’000
Heads ’000
Meat tons
Eggs ’000
Meat tons
Eggs ’000
17,500
50,000
530,000
26,000
90,700
871,000 29,400
110,700
762,000
Poultry
Heads ’000
Source: Agricultural Sector Development Programme 2001–10, Table 5
From Table 2.6.5 it can be noted that: .
. .
The total number of sheep, goats and cattle have increased into the mid-1990s by about 50 per cent and decreased again towards the end of the 1990s by about 30 per cent because of the prolonged drought. Total meat and milk production has increased mainly because of a sharp increase in cattle productivity resulting from improved cattle breeding and good management. The number of head of poultry increased between 1990 and 1999 by about 170 per cent. Poultry meat production has more than doubled, and egg production has increased by about 44 per cent, indicating that broiler keeping is considered of higher priority than layer raising.
To sum up, water is the main limiting factor for the increase of crop and livestock productivity. However, there is a consensus between institutions working in rural areas that the most suitable, feasible and practicable agricultural activity for the rural population in the dry areas is sheep, goat and cattle breeding.
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Sector Overviews
Agricultural contribution to GDP The contribution of agriculture to GDP decreased from JOD 187.8 million in 1990 to JOD 147.5 million in 1997, and the agricultural share of total GDP was only 3.5 per cent in 1997 compared to 8.1 per cent in 1990 (see Table 2.6.6). This declining share of agriculture is a direct result of structural changes in the Jordanian economy. However, it has to be emphasized that, if agriculturally related activities (upstream and downstream linkage like agribusiness services, inputs and agro-industry) are included, the share in GDP would increase to about 29 per cent. Table 2.6.6 GDP of Jordan and the agricultural sector GDP at current prices Year
Jordan JOD million
Agriculture JOD million
Share of agriculture %
1990
2,324.5
187.8
8.1
1991
2,505.6
213.5
8.5
1992
2,960.9
246.9
8.3
1993
3,204.9
193.3
6.0
1994
3,332.0
193.2
5.8
1995
3,879.7
171.8
4.4
1996
4,019.7
160.7
4.0
1997
4,226.2
147.5
3.5
Source: Agricultural Sector Development Programme, 2001–10, Table 6
Contribution of agriculture to employment On average, agriculture employed almost 50,000 Jordanian nationals or around 7.5 per cent of the total Jordanian workforce in the period 1975– 97. Agriculture currently employs 5.7 per cent of the national workforce, which provides an important income source for about 15 per cent of the population (see Table 2.6.7). Women constitute 6.6 per cent of the labour force in the sector and about 4 per cent of the total number of the workforce in all sectors. In addition, registered foreign labour in the sector amounts to about 62,000.
Exports, imports and home consumption Table 2.6.8 shows that agricultural exports increased from JOD 57.3 million (about 9.4 per cent of total exports) in 1990 to JOD 181.3 million (about 17 per cent of total exports) in 1997. Over the same period agricultural imports increased from JOD 403.9 million (23.4 per cent
Agriculture and Agro-industry in Jordan
133
of total imports) to JOD 539.5 million (18.6 per cent of the total). This table clearly shows Jordan’s increased dependency on imports to meet its consumption requirements for agricultural commodities and a slightly aggravated deficit of the agricultural commodity balance.
Table 2.6.7 Employment in Jordan and in the agricultural sector Number of employed persons Year
Jordan 000
Agriculture 000
Share of agriculture %
1975
343.1
47.0
13.7
1979
407.1
46.0
11.3
1988
522.4
39.7
7.6
1989
523.6
37.7
7.2
1990
523.9
38.3
7.3
1991
629.6
40.8
6.5
1992
705.9
44.4
6.3
1993
752.4
55.0
7.3
1994
1,140.7
60.0
5.3
1995
1,076.7
61.8
5.7
1996
1,092.7
62.5
5.7
1997
1,132.4
65.0
5.7
Source: Agricultural Sector Development Programme, 2001–10, Table 7
Table 2.6.8 Exports and imports of Jordan and the agricultural sector Year
All sectors JOD million Exports
Agricultural sector JOD million
Imports Exports
Imports Re-exports
Agricultural share % Deficit
Exports
Imports
1990
612.3
1,725.8
57.3
403.9
5.0
?341.6
9.4
23.4
1991
598.6
1,710.5
81.3
417.7
28.0
?308.4
13.6
24.4
1992
633.7
2,214.0
92.0
416.0
19.0
?305.0
14.5
18.8
1993
691.3
2,453.6
140.0
435.1
7.6
?287.5
20.3
17.7
1994
793.9
2,362.6
91.2
409.7
10.2
?308.3
11.5
17.3
1995
1,004.5
2,590.2
99.5
419.2
11.3
?308.4
9.9
16.2
1996
1,039.8
3,043.6
160.1
685.9
9.6
?516.2
15.4
22.5
1997
1,067.1
2,908.1
181.3
539.5
10.3
?347.9
17.0
18.6
Source: Agricultural Sector Development Programme 2001–10, Table 8
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Sector Overviews
Future plans The national strategy for agricultural development for the period 2002– 10 has identified priorities and action plans for the development of Jordanian agriculture on a sustainable basis. Some of these plans that may be of interest to investors may be enumerated as follows: .
.
.
The formation of agricultural production and marketing cooperatives or associations of farmers of specific important crops, such as citrus, dates, grapes and vegetables. Such organizations are to be capable of supporting expensive facilities for post-harvest activities as well as for marketing services locally and abroad. The need for strong private companies for the production, processing and export of fresh fruits and vegetables. The private sector is to play a major role in this activity. There is a need for the establishment of centres for grading, packing, cooling and fumigation, if needed, for farmers’ produce of fresh vegetables and fruits and the provision of assistance in their marketing.
Agricultural processing is lacking in the country, such as: . . . . . .
tomatoes – paste and juices; potatoes – chips and puree; dates – fruits and by-products; asparagus – drying and canning; canning of different vegetables: strawberries, peas, beans and the like; processing and marketing of olive oil.
Jordan is encouraging: . the introduction of high-value crops, such as medical and aromatic plants as well as fruit trees; . the introduction of organic farming for the production of vegetables, medical and aromatic plants and olive trees, and the processing and marketing of the resulting produce; . the expansion of flower and ornamental plant production for local and overseas markets; . the expansion of protected horticulture (greenhouses); . the increased use of localized irrigation systems in irrigated areas to increase water-use efficiency; . production of animal feed from the farms’ by-products; . utilization of the by-product of date palms in the manufacture of containers, floor mats and the like.
2.7
Construction Export and Finance Bank
Introduction A modern nation built on ancient lands located at the crossroads of major trade routes between the east and west, Jordan has been going through structural and development programmes that have turned the country into one of the most open economies in the Arab world. However, its economy has been adversely affected by its geopolitical situation, the fallout from which has had a negative impact on all sectors of the economy.
History and background Since the late 1950s the construction industry in Jordan has grown and developed into one of the most vital sectors of the economy. In that and the succeeding decades the Jordanian government implemented construction projects through government branches in both the Ministry of Public Works and the Ministry of Planning. Until the late 1950s few contracting firms were established to implement and carry out such projects. Today the construction industry in Jordan consists of two main categories: the public sector and the private sector, although to some extent there is a third category, quasi-government. The focal point for investment in Jordan came after the Gulf War (1991) and the signing of the Jordanian–Israeli Peace Treaty. However, these investments decelerated owing to the diminishing political situation in the Palestinian territories. In 2000 investment opportunities improved and investors began to flood into the country, mainly in the sectors of tourism and light industries, following the development and restructuring programme that Jordan began to undertake.
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Sector Overviews
Source: Central Bank of Jordan
Figure 2.7.1 Growth of the construction industry The pursuit of a sustainable development programme brings the construction industry into focus where it is the sixth-largest employer in the country employing more than 7 per cent of the total labour force. The golden years of this sector were witnessed from 1992 to 1995 following the return of over 300,000 Jordanians from the Gulf, recording a 12.63 per cent annual growth rate in 1993 compared to 5.15 per cent in 1992. By 1993, the construction sector had contributed over 9 per cent to GDP. Houses, apartments, factories, offices, schools, roads and bridges are only some of the projects implemented during this period.
Source: Department of Statistics
Figure 2.7.2 Percentages of the labour force in various industries The influx of over 300,000 Jordanians set off a massive boom in the construction sector, not only in the residential sector of the economy but in all sectors, ranging from tourism, health, education and energy to infrastructure. According to the Central Bank of Jordan, the number of new building permits in 1993 totalled 16,469 and later increased considerably by 13 per cent in 1995 where it recorded 18,558 permits. But soon after 1995 the number dropped to reach a low of 13,195 in 1997.
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However, in 2001 the construction industry enjoyed a renewed upward trend, recording 19,561 new permits, representing an increase of 48 per cent since 1997. These permits allow for utilization of an area of around 6.1 million square metres. Table 2.7.1 summarizes the number of permits given in 1997–2001. Table 2.7.1 New building permits issued 1997
1998
1999
2000
2001
Amman
5,017
5,140
5,070
4,979
5,631
Irbid
2,164
2,377
2,635
3,491
4,657
Zarqa
1,418
1,411
1,416
1,614
1,722
Other
4,596
5,496
5,137
6,297
7,551
Other permits
1,643
1,547
1,113
1,544
1,687
13,195
14,424
14,258
16,381
19,561
Total
Source: Central Bank of Jordan
Structure The construction industry is divided into three major segments: first are the general building contractors, which build residential, industrial, commercial and other buildings; the second segment of this industry comprises the heavy construction contractors, which are involved in building sewers, roads, highways, bridges, tunnels and other like projects; the third segment is the special trade contractors, which are engaged in specialized activities such as carpentry and painting. Overall, the industry has seen substantially increased growth since 1982, when 380 national consultancy firms were registered. Today there are well over 600 such firms, which are classified according to a recommendation from a special committee within the Ministry of Public Works and Housing in cooperation with the Jordanian Engineers Association. This increase is attributed mainly to the economic growth in 1992, recording a real growth rate of 16 per cent. This was primarily spurred by the growth in consumption and housing demand, in addition to construction activity, following the return of Jordanians from the Gulf states, injecting in the vicinity of JOD 1 billion in the real-estate sector. Even though the Jordanian market is vast in terms of construction activity, contractors and consultants face a saturated market. Other than consultants, contractors play a major role in any project, be it large or small. As of the end of 2003 there are approximately 1,400 contractors in Jordan. Even though to some extent the number of contractors has decreased slightly over the years, high competition remains a feature of the market.
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Sector Overviews
Table 2.7.2 Members of the Jordan Construction Contractors Association Year
1996
Members joining
1998
1999
2000
2001
142
91
91
110
50
20
56
91
120
153
97
100
1,599
1,599
1,570
1,527
1,480
1,400
Members terminated
Total members
1997
Source: Jordan Construction Contractors Association
Table 2.7.3 Contractors by specialization and grade Specialization
Grade 1
Grade 2
Grade 3
Road contractors
11
10
22
42
16
Earth-moving contractors
12
7
7
–
–
Building contractors
43
24
76
187
3
–
–
–
Electromechanical contractors
32
23
33
–
–
Bridges and culverts
15
2
7
–
–
Water and sewage contractors
21
19
19
15
43
General maintenance
9
2
–
16
–
Steelworks contractors
8
2
4
–
Well boring
4
–
Prefabrication
–
Grade 4
Grade 5
224 –
–
– 2
Source: Jordan Construction Contractors Association
Source: Department of Statistics
Figure 2.7.3 Levels of education in the construction sector As mentioned earlier, the vast number of contractors, and consultants, has saturated the market. Local firms are facing difficulties in competing on the local front. Furthermore, foreign companies have managed to
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penetrate this sector by bidding for the large-scale projects, which added additional competitive pressure on local firms competing for projects in Jordan.
Source: Jordan Construction Contractors Association
Figure 2.7.4 Volume of work in the construction industry
Market size Within Jordan, the construction industry plays a significant role in the development and growth of various sectors in the country, ranging from transportation, education and housing to telecommunication. Even though construction investments fluctuated between 1996 and 2001, a total of JOD 1.386 billion was invested in the construction of various development projects by the public sector. The construction industry’s contribution to GDP has hovered at around 4 per cent over several years, with around 3.9 per cent in 2000 and 4.2 per cent in 2001.
Source: Central Bank of Jordan
Figure 2.7.5 Contribution of the construction industry to GDP The construction boom subsided following the one-time capital injection into the real-estate sector during the golden years, leaving a large number of vacant apartments and houses. This caused a decline in the number of permits and built areas as supply naturally exceeded demand in this market. As economic growth began to recuperate following a near halt between 1996 and 1997, construction activity resumed with increased fervour as illustrated in Figure 2.7.6, which was reflected in the increase in the number of building permits issued, both residential and commercial.
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Sector Overviews
Source: Central Bank of Jordan
Figure 2.7.6 Building permits issued Over the years, public sector construction activity has witnessed an upward trend, hovering around JOD 200 million in 2001, as the government continued to build more hospitals, schools and roads to meet the growing social needs of its population. Private sector construction activity on the other hand has witnessed an opposite trend, mainly because of growing regional political turbulences, which led most private investors to shy away from such ‘fixed, long-term’ investments. Table 2.7.4 Public and private sector construction activity Year
Volume of public sector JOD million
Volume of private sector JOD million
1994
142.0
236.0
1995
204.0
216.0
1996
196.0
64.0
1997
182.0
94.0
1998
222.4
38.2
1999
192.2
26.0
48.502
280.659
149.148
6.131
2000 (local) 2000 (foreign)
Source: Jordan Construction Contractors Association
Contribution to the various economic sectors As a developing country, Jordan has invested heavily in both education and the healthcare system. In addition, its commitment to both of these areas has resulted in striking and remarkable figures. To date, Jordan has 22 established universities, most of which were established during the mid-1990s, showing a remarkable increase since 1962. Likewise the number of hospitals in the country has increased noticeably since 1997, when only 75 hospitals were established compared to 86 in 2000.
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The tourism sector in Jordan was the first to reap the dividends of the peace agreement signed with Israel in 1994. Between 1993 and 2000, tourist arrivals increased by 84 per cent to reach 1.4 million in 2000. Owing to this positive development, many Jordanians and foreign investors raced to invest heavily in hotel construction in order to get a share in the promising Jordanian tourism sector. Unfortunately, because of the political situation that prevailed in the region in later years, the tourism sector was the first to suffer as the peace treaty faded with the escalation of hostilities between Israelis and Palestinians. The number of hotels constructed over the years has nearly doubled since 1992, with 472 hotels being recorded in 2001.
Source: Central Bank of Jordan
Figure 2.7.7 Hotels constructed 1992–2001 The three main tourist markets in Jordan are the Dead Sea, Petra and Aqaba. Following the establishment of the Aqaba Special Economic Zone, the ASEZA embarked on developing the city into a lucrative business centre and an enticing tourism destination. Furthermore since the current tourism infrastructure is underdeveloped and the facilities are far inferior to those of nearby touristic attractions, the authorities at ASEZA are rapidly advancing the development of Aqaba, and the standard of living in that locale. There are currently a number of very promising projects in the pipeline, which will substantially elevate the tourism standards in Aqaba, thus accelerating the construction activities in that area. Other activities continue to develop the area along the shores of the Dead Sea, while for the time being Petra has ample tourist accommodation. In addition, Aqaba has witnessed a housing and real-estate boom since the formation of the zone, where, during 2000 and 2001, the ASEZ recorded a tremendous growth in construction of 107 per cent.
Materials The construction industry involves large quantities of materials, mainly cement, steel, glass, paint, gravel, sand, water and stone. In addition,
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Sector Overviews
the cost of materials accounts for approximately 55–60 per cent of the total cost in the construction project. Cement is the building block in the construction industry, where sales to the local market have increased slightly over the years, representing a 7.3 per cent increase over the past four years. In addition the industry is highly lucrative where construction materials are produced locally. Cement is produced in Jordan and so are steel rebars, while stone is quarried in the kingdom, thus ensuring the industry is more cost-effective. Other ancillary materials such as aluminium, kitchen cabinets, lifts, pipes and wires are also all produced and manufactured locally. In a growing economy such as Jordan, cement consumption increases in tandem with infrastructure and housing improvements, with public spending on construction being the most important factor behind the growth in cement demand in Jordan in recent years. The emphasis on tourism and potential export markets are additional positive factors driving growth in cement sales while natural population growth will continue to act to support cement demand through increasing the demand for housing.
Source: Central Bank of Jordan
Figure 2.7.8 Cement sales Furthermore, steel production is one of the main elements that contribute to the construction sector. With a saturated steel market Jordanian plants are able to supply the market effectively at low prices compared to higher world prices for steel rebars.
Outlook Since the 1980s Jordan has pursued intense development programmes, which became more active throughout the years as the population expanded owing to the repercussions of the Arab–Israeli conflict and the Gulf War. Jordan’s commitment to sustainable development has been of constant concern for both people and government, especially since the conditions for growth and development have been faced with threats from economic, social and political instabilities. Indeed, the
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regional political situation has introduced a host of new policy issues and challenges in a wide range of spheres, ranging from the economic policies of King Abdullah II, to the cultural and social aspects, which are all interconnected. Furthermore, the country has fulfilled major structural and largescale projects, mainly in the fields of transportation, tourism, education and health, and including highways, airports, the port of Aqaba, hotels, schools and hospitals, as well as water projects. Jordanian contractors and consultants have had minimal involvement in such large-scale projects, as they were let largely to foreign contractors. For the most part, construction activities contribute positively to sustainable development. Accordingly, Jordan has taken additional steps in liberalizing its economy, thus contributing positively to the construction sector. The Jordanian construction sector is a fundamental and vital contributor to the country’s development and restructuring process. The volume of work carried out by the construction sector has shown sharp fluctuations over the years, which are evident in both the public and private sectors. This may be attributed to the limited available funds, administrative and allocation inefficiencies, lack of sound institutional and legal frameworks, management and financial inadequacies and the political uncertainty that has shadowed the region. If these problems persist, the construction sector could see negative growth, causing the sector to suffer immensely. A positive result of this situation would likely be that Jordanian companies will eventually have to invest heavily in human resources, thus enhancing their efficiency, level of expertise and resourcefulness. The challenges are demanding and rising constantly in the construction sector, where competition in the local market is on the rise and foreign contractors have penetrated the market effectively. In order to rectify this situation, the Jordanian Construction Contractors Association would like to see the government give priority to Jordanian companies bidding for governmental projects, thus enabling them to gain knowledge, expertise and experience from foreign companies and, as a result, advance and develop their own capabilities.
2.8
Tourism
1
Jordan Tourism Board and Philip Dew
Introduction Jordan is a country with immense potential for attracting tourists, be they interested in history, archaeology, nature, religion, adventure tourism, relaxation by the sea, attending conventions, conferences and exhibitions or simply deriving the benefits of the curative properties of the products of the Dead Sea. However, the country’s attempts at fully developing the sector and deriving the undoubted benefits in return have constantly been held hostage to events in neighbouring countries, which have served only to discourage international visitors. Nevertheless, the Government of Jordan continues to ensure the country’s preparedness for receiving an increasing number of guests as and when the situation in the region is again peaceful. The current downturn in tourist arrivals owing to the protracted political turbulence in the region has as a consequence created an excess supply of hotel rooms and other facilities over demand, a situation that is likely to be exacerbated in the short term as yet further rooms are set to open. A debt overhang has also been created that could ultimately impact adversely on Jordan’s development objectives for the sector. To overcome this situation effectively, those directly involved in the tourism sector in Jordan agreed with the government the need for developing a new national tourism strategy that optimizes the sector’s sustainable performance and improves its contribution to economic growth and development. The strategy developed addresses both the supply and demand sides of tourism in an integrated way and assumes an in-depth approach to the development of all aspects of tourism. The strategy sets clearly defined economic and social targets and goals to be achieved over the years 2004 to 2010. Integral to this strategy, a much upgraded marketing effort has begun in an attempt to overcome travellers’ present disinclination to travel to the region. 0
All information in this chapter has been provided by the Ministry of Tourism and Antiquities and the Jordan Tourism Board.
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Tourism situation analysis Over the last decade, and in pursuit of a highly developed tourism infrastructure, Jordan achieved a high degree of private capital investment in the hotel industry. The investment decisions were predicated in part on information that the market would grow strongly, which proved to be incorrect. This drive to expand capacity increased the number of hotel rooms at a rapid rate, but this growth was not matched by tourist arrivals, whose number diminished by 7.1 per cent in 2003 over the year before. Table 2.8.1 Hotel capacity 1989–2002 Year Rooms
1989 5,970
1990 6,269
1991
1991
6,594
7,296
1993
1994
7,185
7,250
1995 8,565
1996
1997
2002
11,493
12,109
Year
1989
1990
1991
1992
1993
1994
1995
1996
1997
2002
19,389
Beds
11,074
11,695
12,438
13,520
13,586
13,692
16,093
22,735
23,777
35,000*
* estimate NB: figures only for first eight months of each year
Source: Ministry of Tourism and Antiquities
Table 2.8.2 Major statistical indicators for the tourism industry in Jordan 1994–2002 Year
Total number of tourists
Revenues JOD million
% of GDP
1994
857,610
406.40
9.02
1995
1,073,549
462.50
9.07
1996
1,102,752
527.20
10.06
1997
1,127,028
548.80
10.07
1998
1,256,428
548.05
9.08
1999
1,357,822
564.00
9.08
2000
1,426,879
512.04
8.54
2001
1,477,697
496.01
7.93
2002
1,621,850
557.03
8.46
Such a situation has had a marked impact on Jordanian private sector investors in the tourism sector, especially those in the hotel industry, in that they face a severe financial crisis that could well have a consequent adverse impact on, and therefore long-term implications for, the national economy. Likewise, ancillary industries such as tour operators,
146
Sector Overviews
tourist transport, tourist site facilities and the national airline have seen their projected revenues much reduced. Apart from the financial impact on the sector, the current crisis poses a strategic threat to investment as the principal determinant of future success and to Jordan’s market positioning. With the sharp decline in arrivals and demand from Europe and the United States, Jordan stands to sustain damage to its hard-earned distribution network in these key strategic markets for the holiday and package tour segments. Immediate measures are being taken to ensure that Jordan is not dropped from distributors’ portfolios, a move that could cause a severe setback in achieved marketing advances that are the product of considerable time and resource investment by the Jordan Tourism Board (JTB) (see below).
Tourism-related authorities in Jordan There are two main bodies with specific responsibility for tourism in Jordan: the Ministry of Tourism and Antiquities and the Jordan Tourism Board. Ministry of Tourism and Antiquities The ministry works towards developing tourism through a comprehensive and integrated approach to express the nation’s legacy, culture, history, heritage, inheritance, successive civilizations and economic prosperity as well as enhancing the noble human values based on peace and mutual respect among nations. In fulfilment of these aims the ministry seeks to: .
develop an advanced tourism industry capable of utilizing its comparative and competitive advantages through highly developed infrastructure facilities and superstructure services;
.
develop archaeological and tourism sites and resources to enhance the tourism product, extend tourist length of stay so to achieve higher tourism revenues and create new job opportunities;
.
expand the role of the private sector in tourism investment and capital attraction within a framework of mutual cooperation between the public and the private sectors;
.
upgrade the quality of tourism services to the highest international standards;
.
develop tourism awareness of the kingdom’s culture, heritage, civilizations and archaeological resources within the framework of sustainable tourism development in harmony with local communities and non-governmental organizations;
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147
.
strengthen the institutional set-up of the tourism sector by upgrading legislation, laws, by-laws, regulations and human resources development;
.
establish and lead marketing and promotion campaigns in international and regional markets, strengthen international cooperation and promote domestic tourism.
Jordan Tourism Board The Jordan Tourism Board was officially launched in March 1998 as an independent public–private sector partnership committed to utilizing marketing strategies to brand, position and promote the Jordan tourism product internationally as the destination of choice. The adopted strategies have been designed to reflect the true image of the Jordan product as a cultural, natural, religious and MICE destination. As part of its marketing plan, the JTB plans and executes an integrated programme of international promotional activities. This programme includes representations, trade fairs, workshops and road shows, familiarization trips, brochure production and distribution, and media relations. Underlining the importance attached to tourism, the 13-member board of directors is headed by the Minister of Tourism and includes nine private sector members representing hotels, incoming tour operators and tourism transport companies.
Tourist attractions in Jordan – a summary Amman and environs Amman was known historically as Rabbath-Ammon and in GraecoRoman times as Philadelphia. High above the city is the citadel, where remnants of Amman’s long history are to be found including columns from a Roman temple, the capitals of a Byzantine church and the ornate carvings in the Umayyad Palace. At the foot of the citadel is the Roman theatre, which is still used for plays. The historic Hijaz railway is also to be seen, part of which continues in use today, as are a number of museums and galleries covering archaeology, folklore, popular traditions, the fine arts and military memorabilia. Desert castles and Azraq and Shaumari reserves Jordan’s deserts and mountains are dotted with castles. The most important of these is Qusayr ‘Amra, which contains lively frescos from Ummayyad times and which is today a UNESCO World Heritage Site. Other castles include Qasr Azraq, in continuous use since Roman times and the headquarters of Lawrence of Arabia during the Arab Revolt;
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Sector Overviews
Qasr Al-Hallabat, Hammam as-Sarh, Qasr Al-Kharrana and Qasr AlMushatta. Near to Azraq castle is the Azraq Wetlands Reserve, much used by migrating birds, and not too far distant is Shaumari Wildlife Reserve, where Arabian oryx, ostriches and onagers are being bred prior to release into the wild. Madaba and vicinity Madaba’s main claim to fame is the 6th-century mosaic map in St George’s Church showing Jerusalem and other holy sites but there are other mosaics to be found in the vicinity. About 10 kilometres to the west is Mount Nebo and the memorial to Moses, where a Byzantine church has been excavated evidencing further mosaics. In close proximity to Madaba is Machareus, the hilltop fortress of Herod the Great; Hammamat Ma’in’s thermal springs; and Umm ArRassas, an old town fortified by the Romans and embellished by the Christians during subsequent Muslim rule in the region. Nearby is the highest standing ancient tower in Jordan, a puzzle for specialists as it has no door or inner staircase. Jordan Valley and ‘Bethany beyond the Jordan’ The Jordan Valley, the kingdom’s most fertile area, lies at the northern end of the Great Rift Valley. The valley is steeped in Christian history, including the site where John the Baptist baptized Jesus at ‘Bethany beyond the Jordan’. Today, a highway runs the length of the valley to Aqaba on the Red Sea shore. The Dead Sea, Mujib Nature Reserve and Lot’s Cave The Dead Sea, the lowest point on the earth’s surface at 400 metres below sea level, has a history all its own, being believed to have been the site of the biblical cities Sodom, Gomorrah, Admah, Zboiim and Zoar (Bela). Nearby is the Mujib Nature Reserve, located within the Wadi Mujib gorge, and extending to Kerak and Madaba. The reserve enjoys substantial biodiversity with some 420 species of plants, 10 species of carnivores, including the horned ibex and the caracal, and 102 species of birds being recorded here. Lot’s Cave or Sanctuary is one of Jordan’s most significant discoveries, dating back as it does to 3,000 BCE. It is here that Lot and his daughters are supposed to have sought sanctuary when God destroyed Sodom. Nearby is a salt pillar, supposedly the remains of Lot’s wife, who disobeyed God’s warning not to look back as she fled Sodom.
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The crusader castles Along the historic King’s Highway leading through the mountains of Moab from Amman to Aqaba are Karak and Shobak crusader castles. Dana village and nature reserve Dana village nestles at the foot of a cliff and has a magnificent view over the Dana valley. The whole area is now part of the Dana Nature Reserve, which covers an area from the peak of the mountains behind the village to the floor of the Jordan Valley. In this area are four quite separate climatic conditions and as a result 72 different families of plant adding up to 703 species; 45 species of mammals have been identified, as well as 300 of invertebrates, 2 of amphibians, 36 of reptiles and more than 215 of birds. Petra The famous ‘rose-red city half as old as time’, home to the Nabateans more than 2,000 years ago, is now a UNESCO World Heritage Site. This site is Jordan’s prime national treasure and a truly spectacular one in an equally spectacular setting. Wadi Rum and the desert vistas ‘Vast, echoing and God-like’ were Lawrence of Arabia’s words to describe Wadi Rum, Jordan’s largest and most magnificent desert landscape. Aqaba Jordan’s Red Sea resort is now being greatly expanded as part of the development of Aqaba Special Economic Zone. It is an excellent location for exploring the coral reefs. Jerash, Ajloun and Umm Al-jimal Jerash has been populated since Neolithic times, but is today recognized as one of the best-preserved cities of the Roman Empire. A short distance away is Ajloun where there is a castle built by a nephew of Saladin in the late 12th century. To the east is Umm Al-Jimal, an old town largely built in black basalt. Irbid, Um Qays, Al-Himma and Pella Irbid has two museums worthy of visits, and Umm Qays is the site of Gadara, the location of the famous miracle of the Gadarene swine. Thermal hot springs are the prime feature of Al-Himma, and at Pella (Tabaqat Fahl) there is an exceptionally rich collection of antiquities
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Sector Overviews
including the remains of a Chalcolithic settlement from the 4th millennium BCE, Bronze and Iron Age walled cities, Byzantine churches and houses, an Early Islamic residential quarter and a small medieval mosque. Table 2.8.3 Tourism sector key indicators 2000
2001
2002
2003
% change 2002–03
Total all arrivals
2,087,657 2,326,278 2,498,371 2,512,750
0.6
Total tourist arrivals,
1,036,486 1,109,247 1,164,387 1,081,507
77.1
including: – tourists overnight
679,158
634,567
76.6
– same-day visitors
485,229
446,940
77.9
American countries
98,853
59,730
51,631
56,857
10.1
European countries
233,539
163,040
108,812
104,168
74.3
40,548
31,199
50,618
49,713
71.8
4,045
3,199
3,777
Gulf countries
439,449
582,118
687,158
618,973
79.9
Other Arab countries
116,885
131,725
141,028
130,472
77.5
Israel
103,167
138,236
115,342
111,614
73.2
6,021
6,506
8.1
233,539
75.8
East Asia and the Pacific African non-Arab countries
Other countries
Air
268,780
247,872
Sea
17,918
12,545
822,421
903,866
128
104
977,689
962,564
Road Rail
Arrivals Departures Jordanians non-resident
Tourism receipts (million JOD)
1,069,878 1,173,487 1,160,510 232,165
254,646
251,831
354.9
352.2
381.7
3,204 715.2
8,887 729.2 839,004
77.2
77 726.0
960,256
70.2
991,147 714.6 215,078 714.6
382.9
0.3
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Table 2.8.3 (cont’d) 2000 Expenditures (million JOD)
184.4
2001 199.3
2002
2003 201
% change 2002–03
175.7 712.6
Nights spent in classified hotels
2,247,508 2,047,325 2,030,290 1,786,676 712.0
No. of rooms occupied
1,378,935 1,235,767 1,178,380 1,075,817
Nights spent by residents
273,658
330,947
404,054
385,875
78.7 74.5
Nights spent by non-residents 1,973,850 1,716,378 1,626,236 1,400,801 713.9
Arrivals of tourists overnight Nights on package tours Length of stay/package Day visit Cruise passengers STATISTICS DEPARTMENT
290,948
153,956
94,961
72,652 723.5
1,183,887
714,582
400,431
281,845 729.6
4.07
4.64
4.22
3.88
78.1
52,217
13,903
5,801
6,078
4.8
6,519
10,089
3,000
MOTA/JORDAN
HQ
226 792.5
2.9
Water
1
Ministry of Water and Irrigation
Introduction Economic and social development in Jordan depends in large part on the ready availability of good-quality water. Lying as the country does in an arid to semi-arid zone with low and unpredictable rainfall, Jordan has an exceptionally low per capita water supply of less than 1,000 cubic metres per person each year, one of the lowest on record worldwide. This situation is exacerbated by an increasing demand for water resulting from a rapid growth in population, owing in part to the arrival of refugees and displaced persons, increased urbanization, improved standards of living and the continuing demands of irrigation. The net result is a serious water supply–demand imbalance, which is further aggravated by increased water pollution and inefficiencies in the use of available resources. As a result, water prospects for Jordan in the coming decades are of major concern as shortages will inevitably impact adversely on the country’s desire to grow and develop. In the light of this situation, the Ministry of Water and Irrigation has drawn up a comprehensive investment programme covering the years 2002 to 2011, which seeks to provide solutions to both immediate and longer-term concerns.
Jordan’s water resources Jordan’s water resources consist primarily of surface and groundwater with renewable resources estimated at 780 million cubic metres a year. An additional 143 million cubic metres a year of groundwater is available from fossil aquifers, a non-renewable resource. Brackish aquifers remain to be fully explored but estimates indicate a further 50 million cubic metres a year could be available for urban use after desalination. To supplement these resources, treated wastewater is 0
The information contained in this chapter has been derived from official Ministry of Water and Irrigation sources.
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153
being increasingly used for irrigation, primarily in the Jordan Valley, at a rate of 80 million cubic metres a year.
Water authorities in Jordan The Ministry of Water and Irrigation The Ministry of Water and Irrigation (MWI) is the official body responsible for the overall monitoring of the water sector, water supply and wastewater system and related projects, planning and management, the formulation of national water strategies and policies, research and development, information systems, and procurement of financial resources. Its role also includes the provision of centralized waterrelated data and the standardization and consolidation of the data. The MWI was established in 1992 in response to Jordan’s recognition of the need for a more integrated approach to national water management. Since its establishment, MWI has been supported by several donor organization projects that have assisted in the development of water policy and water master planning as well as the restructuring of the water sector. The ministry embraces the two most important entities dealing with water in Jordan: the Water Authority of Jordan (WAJ), in charge of water and sewage systems, and the Jordan Valley Authority (JVA), responsible for the socio-economic development of the Jordan Rift Valley, including water development and distribution of irrigation. The Water Authority of Jordan (WAJ) Under the terms of the Water Authority Law No. 18 of 1988, the WAJ was established as an autonomous corporate body with financial and administrative independence linked with the Minister of Water and Irrigation. WAJ carries full responsibility for the public water supply, wastewater services and related projects as well as for the overall water resources planning and monitoring, construction, operations and maintenance. The responsibilities of WAJ are to: . .
.
survey the different water resources, conserve them and determine ways, means and priorities for their implementation and use; develop potential water resources in the kingdom, increase their capacity and improve their quality, protect them from pollution, supervise them and administer their affairs and put forth programmes and plans to meet future water needs by providing additional water resources from inside or outside the kingdom and through the use of water treatment and desalination; regulate, and advise on, the construction of public and private wells, investigate groundwater resources, drill exploratory, reconnaissance and production wells and license well-drilling rigs and drillers;
154
.
.
.
.
.
Sector Overviews
study, design, construct, operate, maintain and administer water and public sewerage projects including collecting, purifying, treating, disposing and the use of any other methods dealing with water; draw up terms, specifications and special requirements in relation to the preservation of water and water basins, protect them from pollution and ascertain the safety of water and sewerage structures, public and private distribution and disposal networks, and take the necessary action to ensure technical control and supervision, including all necessary tests; carry out theoretical and applied research and studies regarding water and public sewerage to achieve the authority’s objectives including the preparation of approved water quality standards for different uses and technical specifications concerning materials and construction in order to apply the findings to the authority’s projects in coordination with other concerned departments, and to publish the final findings and standards so as to generalize their application by all means available to the authority; issue permits to engineers and licensed professionals to perform public water and sewerage works and participate in organizing special training courses to qualify them in order to improve the standard of such works and to reduce water loss and pollution; regulate the use of water, prevent its waste and limit its consumption.
The Jordan Valley Authority (JVA) Originally established in 1973 as the Jordan Valley Commission, it was renamed Jordan Valley Authority in 1977, after the passage of Jordan Valley Development Law No. 18 of 1977. This law was subsequently modified by the Jordan Valley Development Law No. 19 of 1988 and its amendment in 2001. The area of JVA responsibility extends from the Yarmouk River in the north to the Red Sea in the south. The eastern extension of the area is limited by the 300-metre-above-mean-sea-level (amsl) contour line north of the Dead Sea and 500-metre amsl contour line south of the Dead Sea. The JVA service area comprises JV North, JV South, Southern Ghors and Wadi Araba. The Jordan Valley Authority is a governmental organization responsible for the social and economic development of the Jordan Rift Valley, including the development, utilization, protection and conservation of water resources. The King Abdullah I Canal represents the backbone of the JVA water distribution system north of the Dead Sea (JVA areas). The JVA is responsible for the development and utilization of water resources in the Jordan Valley for irrigated farming, municipal, industrial and touristic purposes, generation of hydroelectric power and other
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beneficial uses. Its responsibilities include water resources protection and conservation. In order to achieve its responsibilities the JVA: .
carries out the studies required for the evaluation of water resources including hydro-geological and geological studies, drilling of exploratory wells and the establishment of observational stations;
.
plans, designs, constructs, operates and maintains irrigation projects and related structures including dams, hydropower stations, water delivery and distribution networks in addition to surface and subsurface drainage works, flood protection works, and roads and buildings needed for operation and maintenance;
.
undertakes soil surveys and classification and reclamation of land suitable for irrigated farming;
.
settles disputes arising from the use of water resources;
.
organizes and directs the construction of private and public wells;
.
develops and improves the environment in the valley;
.
plans, designs, constructs and maintains the farm roads network;
.
develops tourism in the valley and the construction of touristic and recreational facilities.
Privatization of the water sector in Jordan In 1997, the Government of Jordan embarked upon a privatization programme, the goal being to orient Jordan’s economy more towards private sector participation and to present Jordan best before the international financial community. The specific objective of the programme included improving and consolidating the efficiency of the public sector, attracting private investment into the economy and moving towards a market economy. After detailed study it was concluded that the granting of management contracts (MC) was the preferred option for Jordan’s water sector since it gives comprehensive solutions with immediate short-term effects as well as sustainable long-term benefits. This approach was considered to be a good first step towards greater private sector participation. Management contracts for specific operations and management of facilities in Jordan’s water sector required no significant change in the existing regulatory or legal structure and therefore could be implemented quickly at relatively low cost and with a minimum of effort.
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Sector Overviews
Privatization projects in the water sector Northern governorates (Irbid, Jerash, Ajloun and Mafraq) MWI has made a decision to widen private sector participation in Jordan through implementing a management contract for the northern governorates. The proposed term of the MC is six years, which may be extended by another two years to allow sufficient time for the benefits of having a private operator to be fully realized. Aqaba Governmental Company MWI was delegated by the authority to privatize the water and wastewater sector by the law. As a result, it was decided to run Aqaba water and wastewater facilities as a governmental company completely owned during the first stage by the WAJ and subsequently, as a second stage, to be sold to private shareholders. As-Samra wastewater treatment plant MWI has awarded for the first time in Jordan a build–operate–transfer (BOT) contract for the largest wastewater treatment plant in Jordan, called As-Samra treatment plant. The contract was a partnership between the public and private sectors for the purpose of raising finance from the private sector and in order to share all risks, while ensuring technology and know-how transfer. (Further details of this project appear below.)
Major projects Red Sea–Dead Sea canal project – the Peace Conduit Background The Dead Sea is the lowest point on earth, about 400 feet below sea level. In 1935 the inflow to the Dead Sea was 1,300 million cubic metres a year, a figure that had reduced to 300 million cubic metres by 2000. As a result, the level of the Dead Sea has declined at a rate of about 1 metre per annum, a situation that has caused huge environmental damage to the sea and to the surrounding groundwater resources. Several studies have been conducted to assess the environmental damage, the most important of which was the Jordan Rift Valley study of the Trilateral Economic Committee (Jordan, Israel and the United States) together with the World Bank and the Trilateral Government (after 1994). The study concluded that there was a marked need to seek to replenish this lost water and that the construction of a canal from the Red Sea to the Dead Sea, to be known as the Peace Conduit, was the most viable. This project is bold and visionary and consists of a water conduit (a combination of tunnel and canal sections) to convey almost 1.8 billion
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cubic metres per year of seawater some 180 kilometres from the Red Sea near Aqaba to the vicinity of the Dead Sea. Implementation of the project would reverse the decline in the Dead Sea, gradually promoting an increase in the water level to historic levels, at a cost of about USD 800 million, which will necessitate and promote international cooperation. Implementation of the Peace Conduit is expected to save the Dead Sea from environmental disaster and allow the economic benefits of a restored Dead Sea to flourish, while enabling the self-sustaining development of very large quantities of renewable power and fresh water. The 1.8 billion metres per year of seawater that it is intended to bring from the Red Sea will utilize the 400-metre elevation difference between the Red Sea and the Dead Sea to generate a renewable source of power. This power will be used to operate reverse osmosis units to transform seawater to fresh water. A portion of this water (1.05 billion cubic metres per year) will be directed to the Dead Sea to reverse its decline at an ecologically prudent rate and the remaining fresh water (850 million cubic metres per year) will be directed to satisfy the freshwater demands in Jordan, Israel and Palestine, a quantity sufficient to meet the region’s needs for fresh water for the foreseeable future. The costs and financing of the project The cost of the project will be significant and will be dependent on the final configurations. However, current estimates indicate the construction costs at USD 0.8 billion for the Peace Conduit and USD 3 billion for the desalination project and conveyance-to-demand centres. International financing is sought for the Peace Conduit itself but it is believed that the desalination projects can be financed from within the region or through commercially self-sustaining ventures. Disi Amman water conveyor (BOT) Objective The main objective of the Disi-Mudawwara to Amman Water Conveyance System project is to supply additional sustainable potable water to the greater Amman area to satisfy water demands and nullify deficits. Although its capacity might eventually be increased, the project will initially produce and transport to Amman on average 100 million cubic metres of high-quality water per year, with a minimum flow of 80 million cubic metres per year during the winter months and a maximum flow of 120 million cubic metres per year in the summer. Project status A full feasibility study on all technical, economic, financial and environmental aspects of the project was completed in mid-1996.
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Additionally, a preliminary design study and tender documents including geotechnical investigation were completed in mid-1997 and subsequently updated. Pre-qualification has been completed and the tender documents have been delivered to the pre-qualified consortia. The technical and financial offers were received and opened on 20 August 2003 before evaluation by the Ministry. The project is to be implemented on a BOT basis. The estimated base capital costs of the project are USD 600 million, and a tentative timetable for the completion of the project is five years. The World Bank is ready to support the project financially through a partial risk guarantee. Al-Wehda dam Construction of this dam, located on the Yarmouk River, which forms part of the northern boundaries of Jordan with Syria, at about 120 kilometres from Amman, commenced on 26 May 2003 and will continue until late 2005. The dam will capture flood water and available base flow in the Yarmouk basin and will provide about 30 million cubic metres per year of water to irrigate 31,000 donums of cultivated land; supply Amman and its vicinity with about 50 million cubic metres per year of potable water; and generate yearly about 18,800 megawatt/hours of electricity on completion. The project cost of about JOD 89 million is being financed by the Arab Fund for Economic and Social Development (80 per cent), Abu Dhabi Fund for Development (10 per cent) and the Government of Jordan. As-Samra wastewater treatment plant project (BOT) Background Construction of the first sanitary sewers in Amman began in 1964 when the population was about half a million. The first wastewater treatment plant in Amman, and in Jordan, was an activated sludge facility at Ain Ghazal in the north-east of Amman, which was constructed in 1968. The facility quickly became overloaded, and so the 1982 Master Plan for Wastewater Disposal recommended the expansion of the existing activated sludge plant at Ain Ghazal (AGTP) and the construction of new plants at Upper Wadi Abdoun and Zarqa. The As-Samra Waste Stabilization Ponds (WSP) plant, with a 40-kilometre inverted siphon from Ain Ghazal to As-Samra, was then conceived as temporary, for use while the then overloaded Ain Ghazal treatment plant was expanded. After such expansion, As-Samra would be used to treat peak wet-weather flows. However, the occurrence of waterborne diseases in Zarqa and Russeifa, contamination of wells used for municipal supply and objectionable odours attributed to the Ain Ghazal plant led to
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permanent closure of its treatment facilities when the As-Samra WSP began operation in 1985. The As-Samra WSP became the sole municipal treatment facility in the Amman–Zarqa basin. Its original design was to treat 68,000 cubic metres per day, less than half the present inflow of 170,000 cubic metres per day. The decisions to abandon the Ain Ghazal plant and to connect Zarqa and Russeifa instead of building the proposed West Zarqa plant led quickly to an overloaded plant, with frequent complaints of noxious odours and an effluent quality that did not meet Jordanian water quality effluent standards. The WSP system is now hydraulically and organically overloaded with an estimated average daily flow to the WSP between 1998 and 2000 of about 167,000 cubic metres per day. As a result of this overloading, the quality of effluent from the WSP system has become degraded. A second Wastewater Master Plan financed by USAID for the period 2000 to 2025 has been prepared for Amman–Zarqa basin. It has identified and evaluated sites for new and expanded treatment plants and the needs for supporting conveyance lines. The Zarqa river (Seil Zarqa) basin includes most of the greater Amman municipality, all the sewered areas and most of the towns in Zarqa Governorate. The second master plan recommended the construction of a treatment plant at AsSamra site of a capacity of 267,000 cubic metres per day as the first stage that would be capable of treating the wastewater from the area until 2010, by which time another plant is recommended to be constructed below Zarqa to take the loads from Zarqa, Russeifa and parts of Amman until 2020–25, while As-Samra plant would be expanded in 2015 to treat the wastewater from Amman area until 2027. Project development In 1999, MWI, after studying different financial scenarios, started the preparation of the tender documents on the selected BOT. The project reached financial closing on 10 December 2003 after negotiating the facility and security documents with the lenders from the local banks led by the Arab Bank. Construction is to be completed by the end of 2006. The As-Samra WWTP BOT project The project includes the design, construction, procurement, commissioning, operation, maintenance and financing of the new wastewater treatment plant (WWTP), Phase 1, at As-Samra. The WWTP is to be built on the site of the existing stabilization ponds, to be taken over by the selected project company and potentially used in the project, and will have a capacity of 267,000 cubic metres per day.
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The project also includes expansion and upgrading of the pretreatment plant at Ain Ghazal and the minor refurbishment of the pumping station at West Zarqa, as well as operation and maintenance of the main conveyor lines from the pre-treatment facilities at Ain Ghazal to the WWTP and of the pumping stations at Hashimiyya and West Zarqa. The construction of As-Samra WWTP is divided into two stages. In the current project, Stage 1, the capacity for 2015 is to be attained, with expansion to the year 2025 to be included in the plans. Although it is a requirement of Stage 1 to design the layout of the plant to facilitate expansion to Stage 2, such expansion is not part of this project. Wadi Ma’in Zara springs water treatment and conveyance project Background Based on a request from the Government of Jordan, the Government of the United States of America agreed to provide technical assistance for engineering services for this project through the United States Agency for International Development (USAID) to include the following: .
preparing the feasibility study;
.
studying the environmental impact assessment;
.
preparing the minimum technical requirements for civil, mechanical and electrical requirements for the plant, pipeline and pumping stations (PS) including PS reservoirs;
.
preparing the minimum requirements for treatment;
.
preparing tender documents on design/build including operation for two years, which can be extended for a further five-year period upon the discretion of the employer;
.
preparing pre-qualification documents for choosing the consortia that are specialized in the related fields.
The primary objectives of this project are to supply the greater Amman area with 38 million cubic metres per year of desalinated drinkable water, thereby improving the water quality and decreasing the water deficit in the greater Amman area while reducing the salinity of the water at the As-Samra wastewater treatment plant and of the water stored at the Talal Reservoir for subsequent use in the irrigation of the mid-Ghor area of the Jordan Valley. Project financing The project is partially funded by a grant from the US government, with the balance plus land acquisition and about JOD 8 million for electricity
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supply for operating the system being covered by the Jordanian government. The USAID share is USD 104 million, covering 85 per cent of the project cost and 100 per cent of the engineering supervision services.
Conclusion Much has been done to address the shortage of water in Jordan but clearly much more remains to be implemented if the country is not to suffer serious economic and social problems in the years to come. The primary focus at this time is on the Peace Conduit, as implementation of that project alone would not only provide water to all of Jordan, Palestine and Israel but could have a long-lasting impact on the peaceful coexistence of all the people of the region well into the future.
2.10
Health Export and Finance Bank
Introduction Jordan’s commitment to health and welfare has so far resulted in impressive figures; in general the health system has performed well in terms of availability and access. There are six health providers in Jordan: the Ministry of Health, Royal Medical Services, United Nations Relief and Works Agency (UNRWA), Jordan University Hospital, King Abdullah The Founder University Hospital and the private sector. Public expenditure on the health sector in 2002 was JOD 136.7 million. The good reputation of Jordan’s private health sector across the region has already paid off in terms of an increase in the number of Arab patients seeking treatment in Jordanian hospitals, with approximately 30,000 coming every year.
Health sector key indicators Jordan’s population of 5.329 million in 2002 grew by 2.8 per cent, an annual rate that was higher than in some other countries in the region, such as Egypt and Lebanon where the rate reached 2.0 and 1.7 per cent respectively. Jordan’s population is also very young, with a median age of 19.3, which will exert pressure on the heath sector in 25–30 years’ time. In terms of health and welfare, Jordan’s infant mortality rate was 22 deaths per 1,000 births in 2002, much lower than the average for the Middle East. In 2002 life expectancy at birth for the total population was 71.5 years (70.6 for males and 72.4 for females) as compared to average life expectancy elsewhere in the Middle East of 65 years of age for males and 69 for females. Thus when compared to other countries in the region Jordan ranks well in terms of health indicators. In recent years the total number of hospitals has increased from 75 to 95, with the total number of hospital beds reaching 9,383. Table 2.10.1 illustrates some key health indicators.
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Table 2.10.1 Social indicators Indicator
2002 figures
Population (’000)
5,329
Population growth rate
2.8%
Crude birth rate (per 1,000 population)
29.0
Crude death rate (per 1,000 population)
5.0
Infant mortality rate (per 1,000 births)
22.0
Life expectancy: – females
72.4
– males
70.6
Population median age
19.3
Source: Information Centre, Ministry of Health
Jordan has a high number of physicians compared to other countries in the region. In 2002, the total number reached 11,715, representing 22 physicians per 10,000 persons. Bahrain, for example, has 13.6 physicians per 10,000, whereas Sudan has as low as 1.5, Lebanon has 21 and Kuwait 19. As for the number of dentists available per 10,000 of the population, Jordan has 4.5 whereas Egypt has 2.7, Kuwait 2.0, Morocco 0.52 and Lebanon 8.0. (See Table 2.10.2.) Table 2.10.2 Key health indicators 1997–2002 Indicator
1997
1998
1999
2000
2001
2002
22
22
23
23
26
27
Royal Medical Services (RMS)
9
10
10
10
10
10
Jordan University Hospital (JUH)
1
1
1
1
1
1
King Abdullah The Founder University Hospital
–
Ministry of Health (MOH)
Private
–
–
–
–
1
43
50
50
52
54
56
16.6
16.6
19.8
19.0
20.5
22
Dentists*
4.9
5.3
5.5
5.7
4.1
4.5
Pharmacists*
7.7
7.6
7.8
8.6
9.6
11.2
11.7
12.2
12.8
13.4
27.4
28.1
Physicians*
Registered nurses*
*per 10,000 of the population Source: Information Centre, Ministry of Health
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In 2002 the total number of surgical operations reached 211,595, while the total number of admitted patients reached 602,855. The average residential days fell in 2002 to 3.3 in 2002 from 3.5 just two years earlier, while occupancy rates at hospitals that year reached 64.1 per cent (see Table 2.10.3). This can be primarily attributed to the increase in the number of hospitals over the same period. Table 2.10.3 Hospital indicators 1999–2002 Indicator
1999
Number of beds Number of admitted patients Death rate Average lodging days Occupancy rate Number of surgical operations
2000
2001
2002
8,659
8,705
8,982
9,383
553,721
560,119
585,566
602,855
1.4%
1.4%
1.3%
1.3%
3.4
3.5
3.3
3.3
59.4%
61.7%
62.6%
64.1%
196,902
201,801
–
211,595
Source: Information Centre, Ministry of Health
The geographical distribution of hospital beds in Jordan is such that the capital has the lion’s share. Irbid and Zarqa with 14 per cent and 11 per cent of the total are second and third respectively. Table 2.10.4 illustrates the geographical distribution of hospitals and beds according to governorates. Table 2.10.4 Geographical distribution of hospital beds in Jordan 2002 Governorate
Population ’000
Total no. of beds No. of beds MOH
Amman
RMS
JUH*
Private
2,027.7
5,001
940
1,047
728
2,483
Irbid
950.7
1,391
602
259
–
333
Zarqa
838.3
897
424
200
–
273
Balqa
349.6
221
221
–
–
Mafraq
245.7
227
187
–
–
Karak
214.2
337
160
79
Jarash
156.7
135
135
–
–
Madaba
135.9
121
91
–
–
Ajloun
118.3
102
102
–
–
– 40 –
98 – 30 –
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Table 2.10.4 (cont’d) Governorate
Population ’000
Total no. of beds No. of beds MOH
RMS
JUH*
Aqaba
107.1
199
–
120
Ma’an
103.9
185
185
–
Tafila
81.0
86
–
86
–
5,329.0
8,902
3,047
1,791
728
Total
Private
–
79
–
– – 3,336
* including King Abdullah The Founder University Hospital Source: Information Centre, Ministry of Health
Expenditure on the health sector In Jordan, public expenditure on the health sector reached JOD 136.7 million in 2002, a slight decrease from the year before. In the period 1997–2002, spending on health as a percentage of the total government budget averaged 5.8 per cent (see Table 2.10.5). In the 1950s and 1960s, spending on health ranged between 2.2 and 3.6 per cent. Table 2.10.5 Ministry of Health budget 1996 JOD 1997 JOD 1998 JOD 1999 JOD 2000 JOD 2001 JOD 2002 JOD million million million million million million million Government budget MOH budget MOH budget as a percentage of government budget Public health insurance budget
1,745
1,916
1,987
2,160
2,221
2,300
2,413
95.957
106.819
116.167
120.774
131.000
137.270
136.717
5.5
5.6
5.8
5.6
5.9
6.0
5.7
22.784
22.070
24.057
27.000
26.575
–
–
Source: Annual Report, Information Centre, Ministry of Health
The Ministry of Health budget as a percentage of total government budget for other countries in the region ranges between a low of 2.7 per cent, as is the case in Egypt, to 9.6 per cent, as in Tunisia. According to a study conducted by Partnership for Health Reform (PHR) (PHR Project is the US Agency for International Development’s project in health promotion and policy), total health expenditure, including households, private firms, UNRWA, Royal Medical Services (RMS), Jordan University Hospital (JUH) and non-governmental organizations, reached approximately JOD 550 million in 2000 (the latest available figure). Thus, the per capita expenditure on health reached
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Sector Overviews
JOD 109. This figure will be difficult to maintain in the long run considering Jordan’s current high population growth rate of 2.8 per cent.
Source: National Health Accounts
Figure 2.10.1 Sources of health funds
According to the PHR study, 43 per cent of funds are from households, 39 per cent from the Ministry of Finance, 8 per cent from public and private firms, with the remaining 7 per cent from donor countries and UNRWA (see Figure 2.10.1).
Health insurance coverage Health insurance is an important aspect of a household’s financial security. In the event of chronic illness or regular medical treatment, health insurance can spare the family’s budget from the burden of paying medical fees. The major problem in Jordan, as in many developing countries, is that not everyone can afford such insurance. A study conducted by the Partnership for Health Reform indicates that 32 per cent of the Jordanian population is not covered by any health insurance plan. Furthermore, approximately 21 per cent of the population receives health insurance coverage from the MOH, while 33 per cent of the population is covered by the RMS, 18 per cent by UNRWA and 5 per cent by the private sector. On the other hand approximately 20 per cent of the insured population has multiple insurance coverage. Multiple insurance exists when an individual is covered by more than one insurance plan to cover certain gaps in the coverage. (See Table 2.10.6.) The Ministry of Health has embarked on plans to expand health insurance services to include the largest number of beneficiaries, mainly the poor. Insurance cards with the name of the insured and the health
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centres where they can receive medical treatment are being issued. This service will cover government employees, their dependants and the poor. Table 2.10.6 Breakdown of the insured population % Government employees
21
RMS beneficiaries
33
JUH beneficiaries
1
Private insurance
5
Insured refugees
18
Employees in self-insured firms
3
Total insured population as a percentage of total population
81
Uninsured population
32
Percentage of insured with multiple coverage
19.7
Source: Based on PHR studies
There are 26 private insurance companies in Jordan, of which 19 sell medical insurance. In 2000, the latest year for which information is available, the total health insurance premium reached JOD 16 million, whereas claims reached JOD 14 million. Overall this line of business incurred a total loss of approximately JOD 0.5 million during 2000. According to many in the insurance industry the loss was primarily due to the occurrence of insurance fraud. This happens when more than one individual uses the same insurance policy to pay medical expenses.
Healthcare providers in Jordan Healthcare in Jordan is provided through five channels. A brief description of the providers is given below. Ministry of Health (MOH) MOH was founded in 1950; its services include primary, preventive and curative care. MOH geographical distribution of services is spread throughout Jordan’s 12 governorates, except for Aqaba and Tafileh where the Royal Medical Services is available. MOH operates 26 hospitals with 3,462 hospital beds representing 37 per cent of total beds available. The Constitution of Jordan states that ‘Health is for all’; thus MOH is required to provide care for all Jordanian citizens at
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Sector Overviews
subsidized costs. It has been estimated that the MOH provides 23 per cent of the population with public health services at low prices. Public hospitals tend to be overworked with some having really high occupancy rates, which tends to have an adverse impact on the health services provided. Royal Medical Services (RMS) Established in December 1948 with the aim of serving the country’s military, RMS currently provides approximately 33 per cent of the population with comprehensive medical insurance. RMS runs 10 hospitals with a total of 1,791 hospital beds available representing 19 per cent of hospital beds available in the country. It is primarily financed by the government budget. The geographic distribution of the RMS hospital beds is such that the capital Amman has 59 per cent of the total, with the rest being in Irbid, Zarqa, Tafila, Karak and Aqaba. Jordan University Hospital (JUH) Established in 1973 by the MOH, Jordan University Hospital provides health services primarily for university students along with employees and their dependants. JUH also provides medical students with an opportunity for research and practical experience. The hospital is financed by the MOH and the Ministry of Finance in addition to fees paid by patients. In 2002 total admissions reached 22,909, the death rate reached 2.3 per cent and the total number of surgical operations that took place in the hospital reached 12,958. The occupancy rate the same year reached 68 per cent. A number of non-Jordanians were also admitted to the hospital from Iraq, Palestine, Egypt and Yemen. JUH revenues reached JOD 22 million during 2001, 39 per cent of which came from fees paid by patients, and its expenses reached JOD 20 million. King Abdullah The Founder University Hospital (KAUH) KAUH is a 650-bed facility, opened at the end of January 2002. KAUH is an affiliate of Jordan University for Science and Technology (a public university). The total cost of the hospital reached JOD 96 million. The hospital is expected to serve patients from the northern governorates where the population is approximately 1.5 million, including patients from Mafraq, Jerash, Ajloun and Irbid. KAUH will also provide medical students with an opportunity for research and practical experience. KAUH will provide clinical services in many fields but initially the services include paediatrics, internal medicine, and general and specialized surgeries.
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United Nations Relief and Works Agency (UNRWA) UNRWA began operations in 1950. Its main task is to provide assistance to thousands of Palestinian refugees uprooted as a result of the 1948 war. UNRWA was meant to be a temporary relief agency but it then became a permanent provider for the Palestinian refugees. UNRWA provides primary healthcare free of charge, contributes to the cost of secondary medical care for emergency and life-saving treatment and also assists in improving the environmental health in refugee camps, including the provision of food aid for poor families. UNRWA’s services provide for 3.6 million Palestinian refugees in Jordan, Syria, Lebanon, the West Bank and Gaza Strip. There are 10 official refugee camps in Jordan, with a total population of over 277,000. UNRWA operates 23 clinics with a total of 836 health staff; it is financed by voluntary contributions from governments and the European Union. Private sector The private health sector in Jordan provides primary and curative care for all those willing to pay, along with those covered by private medical insurance. The quality of service provided by private hospitals in Amman varies significantly from one hospital to another. Currently, there are eight deluxe hospitals operating in Amman, which are extremely competitive in size, services and medical treatments. There are 56 private hospitals in Jordan, with over 3,402 beds, representing 36 per cent of total beds available in the kingdom. The geographic distribution of private hospital beds is such that the Governorate of Amman has a substantial majority, with the rest being in Irbid, Zarqa, Mafraq, Karak, Madaba and Aqaba.
Private health sector in Jordan The lack of barriers to entry along with the potential for profits lured many investors to tap into this sector. This in turn led to the significant increase in the number of private hospitals. All new hospitals have to acquire a special licence from the Ministry of Industry and Trade, but other than for the high capital cost of setting up a new hospital there are no barriers to entry. Since 1997 the number of private hospitals has increased from 43 to 56 representing approximately 60 per cent of all hospitals in the kingdom. The good reputation of Jordan’s private health sector across the region has paid off in terms of an increase in the number of Arab patients seeking treatment in Jordanian hospitals, as Arab patients would rather be treated in an Arabic-speaking country where it is significantly less costly than the United States and Europe. The total number of foreign in-patients now treated annually is about 30,000.
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Sector Overviews
Table 2.10.7 Key hospital indicators 2002 MOH hospitals
RMS hospitals
JUH hospitals
KAUH
Private hospitals
Total
Admissions
264,131
118,454
22,909
6,180
191,181
602,855
Discharged alive
261,380
116,634
22,342
6,092
186,092
592,540
Discharged dead
3,199
2,732
528
88
1,545
8,092
Death rate (%)
1.2
2.3
2.3
1.4
0.8
1.3
Occupancy rate (%)
72.2
75.6
67.7
58.0
43.5
64.1
3.3
4.1
5.7
4.7
2.6
3.3
Surgical operations
76,879
40,101
12,958
2,423
79,234
211,595
Deliveries
70,505
23,445
2,553
379
39,255
136,137
Average length of stay (days)
Source: Information Centre, Ministry of Health
Private hospital beds accounted for 36 per cent of total hospital beds available in Jordan. During 2002, private hospitals received a total of 191,181 in-patients, representing 31.7 per cent of the total admitted. The average length of stay at private hospitals was less than 2.6 days, whereas at JUH the average length of stay was 5.7 days. The total number of deliveries in 2002 reached 136,137, of which 29 per cent took place at private hospitals and 52 per cent at MOH hospitals, figures which indicate the high cost of deliveries at private hospitals where only a small percentage of the population can afford to pay. The total number of surgical operations taking place in private hospitals amounted in 2002 to 79,234. In 1997, the total number of surgical operations in private hospitals was 76,697. General and obstetric/gynaecological surgery represents approximately 46 per cent of total surgery in Jordan. When compared to other hospitals, private hospitals tend to have the lowest occupancy rates and the lowest average stay per patient. The latter is largely due to the oversupply of private hospitals in the market, and to their high medical expenses compared to public services. This points to the possibility of having some private hospitals contracting out some of their facilities to the public sector during peak times. This is already taking place; for example, Luzmila Hospital and the Red Crescent Hospital have contracted out some of their facilities in this way. There are no price restrictions set by the Ministry of Health except on medical supplies and medicine. Prices of services rendered in the
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hospital are decided by its management and are approved by the MOH. The Jordanian Medical Association regulates doctors’ fees, by setting floor and ceiling prices for different types of specialties. Private hospitals can set their own fees and report them to the Ministry of Health.
2.11
Pharmaceuticals Export and Finance Bank
Introduction Over the past four decades, the Jordanian pharmaceutical industry has earned a reputation in the region as a pioneer in the production of high-quality products. Since 1991, pharmaceutical exports have quadrupled, reaching in value approximately USD 202 million in 2002 compared to USD 49 million in 1991, becoming Jordan’s third-largest export earner. Total sales reached USD 275 million that year compared to USD 68 million the year before. The growth in exports was attributed to the commitment of the pharmaceutical industry to develop the sector by exploring new export markets, where they have successfully managed to penetrate more than 60 export markets worldwide. In the first quarter of 2003, pharmaceutical exports surpassed their level in 2002 for the same period by approximately 3 per cent and represented 10.1 per cent of total exports, reaching in value USD 52 million. However, in order for the industry to continue with its impressive growth, pharmaceutical companies should go on penetrating new markets and increase their presence in their existing markets by focusing on improving their marketing strategies, enhancing their R&D efficiency and collaborating with international firms in the form of licensing agreements.
A global industry Despite economic challenges in the world’s leading markets, the global pharmaceutical industry grew by 8 per cent (at a constant dollar rate) in 2002, with sales estimated by IMS Health at USD 400.6 billion. North America was the leading region, representing more than 50 per cent of total global sales, with a 12 per cent growth rate in 2002. Japan, Europe and North America accounted for more than 85 per cent of worldwide pharmaceutical sales in 2002. Asia, Africa and Australia represented approximately 8 per cent of total sales, with their sales reaching USD 31.6 billion (see Table 2.11.1).
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Table 2.11.1 Global pharmaceutical sales 2002 World audited market
North America
2002 sales (USD bn)
% of global sales
% growth year over year*
203.6
51
12
European Union
90.6
22
8
Japan
46.9
12
1
Asia, Africa and Australia
31.6
8
11
Latin America
16.5
4
710
Rest of Europe Total
11.3
3
9
400.5
100
8
* growth measured in constant US dollars Source: IMS World Review 2003
Sales cover direct and indirect pharmaceutical channel purchases in US dollars from pharmaceutical wholesalers and manufacturers. The figures in Table 2.11.1 represent 52 weeks of sales data, include prescription and certain OTC data and represent manufacturer prices. According to the IMS Health projections, the global pharmaceutical market is forecast to grow at a 7 per cent compounded average annual rate over the period 1999–2003, thus predicting worldwide sales to reach USD 435 billion in 2003. Moreover, by the end of 2003, the Middle East is expected to be one of the fastest-growing pharmaceutical markets in the world where it is forecast to record a compounded growth rate of 10.4 per cent.
WTO and intellectual property rights Jordan became the 136th member of the World Trade Organization (WTO) on 11 April 2000. The WTO is the only global international organization that deals with the rules of trade between nations to help producers of goods and services, exporters and importers conduct their business. In order to gain admission to the WTO and obtain trade access benefits, Jordan had to abide by Trade Related Aspects of Intellectual Property Rights (TRIPs). TRIPs covers a broad range of intellectual property rights including patents, trade marks and trade secrets. Patents perform an essential role in stimulating the development of essential drugs, by offering incentives for investing in expensive and long-term research and the development of new drugs. The patent system requires significant disclosure of information, leading to the invention of new drugs. Without the patent system, such key technical information would remain unavailable or even secret. Moreover, a
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patent gives an inventor the right to prevent others from making, using and selling an invention for a certain period of time. In addition, unlicensed or counterfeit products lead to lost business revenue, threaten consumer health and safety, and tarnish corporate images. Therefore, TRIPs provides the necessary flexibility needed to achieve a proper balance between public health concerns and the interest of the patent owner that exist within the patent system. TRIPs facilitates access to medicines in three essential ways. First, patents provide incentives for the research and development of medicines, including medicines to treat diseases that are prevalent only in developing countries. Second, patent protections are an important part of the economic environment needed to attract investment by pharmaceutical companies in these countries. These companies play a significant role in the development of pharmaceutical production capacity and healthcare infrastructure. Third, TRIPs includes flexibilities that allow a country that has implemented the TRIPs agreement to issue a compulsory licence under specific circumstances to allow a domestic manufacturer to copy a patented product for the domestic market. One of the provisions that Jordan signed is the Bolar provision, which allows the member country to develop and test a drug before its patent expires, thereby ensuring that those products will be in the market as soon as the patent ends, instead of waiting until the patent expires and then start developing the product. This provision should help Jordanian companies to penetrate US markets and also acts as an incentive for multinational companies to invest in Jordan. Hikma Pharmaceuticals has previously used the Bolar provision against two of its products, which are currently in the US market. Moreover, the company is using the Bolar provision for about another 10 products in order for them to be in the US market as soon as their corresponding patents expire. The increasing awareness of the benefits of intellectual property as a developing tool can be seen throughout the Middle East/North African region. Jordan was the first Arab country to implement the TRIPs agreement and continues to lead the way with the most progressive intellectual property laws and other regulatory reforms that have led to increased trade and investment for the Jordanian pharmaceutical sector. In addition, European generic companies, which mostly do not have a Bolar provision in their patent laws, will therefore view Jordan as fertile grounds for contract development work. This, coupled with the highly educated Jordanian pharmaceutical workforce, will act as an incentive for foreign investment in Jordan.
The pharmaceutical industry in Jordan From its early beginnings in the 1960s, the Jordanian pharmaceutical industry has earned a reputation in the region for pioneering in the
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175
production of high-quality pharmaceutical products, which, as stated, have successfully managed to penetrate more than 60 export markets worldwide. Over the past four decades, the industry has grown to become an expert in the production of branded generics in various dosage forms such as tablets, capsules, suspensions, eye, ear, and nose drops, ointments, injectables and drips, as well as nicotine patches. By the end of 2002, the pharmaceutical industry was considered to be the third-largest exporting industry in Jordan where, according to the Central Bank of Jordan’s monthly statistical bulletin, medical and pharmaceutical product exports reached JOD 142.8 million compared to textile and apparel exports of JOD 357.7 million and mining exports of JOD 252.3 million. In addition, pharmaceutical sales reached an impressive JOD 195 million in 2002 compared to JOD 48 million in 1991. According to the Jordanian Food and Drug Administration’s Drug Directorate, total pharmaceutical production in Jordan for 2002 reached JOD 137 million, out of which around 74 per cent was exported. Moreover, in 2002, the per capita consumption was estimated at around JOD 35.6, a 3.7 per cent decline from its level in 2001. Of this consumption, 27 per cent was locally produced while 73 per cent was imported. Although we cannot explain the reason for the decline in the per capita consumption, we believe that it does not reflect the market trend. The pharmaceutical industry is believed to be vital to the national economy where the industry’s exports outnumbered those of other manufacturing industries such as cement, phosphate and potash, which recorded JOD 28.3 million, JOD 96.4 million and JOD 136.7 million respectively by the end of 2002. The growth in exports was attributed to the commitment of the pharmaceutical industry to develop the sector by exploring new export markets, especially in Europe and the United States. Furthermore, an intensive national campaign was carried out in July 2003 to promote further and boost demand for locally manufactured medicines. The campaign lasted for nearly eight weeks and included lectures in universities along with advertisements in the media to target both the consumer and the medical sector. The campaign aimed to increase the consumption of locally manufactured medicines, which consequently would decrease Jordan’s health expenditure bill.
Trade Since 1991, pharmaceutical exports have quadrupled, reaching in value approximately JOD 143 million in 2002 compared to JOD 35 million in 1991 (see Figure 2.11.1). In the first quarter of 2003, pharmaceutical exports surpassed their level in 2002 for the same period by approximately 3 per cent and represented 10.1 per cent of total exports, reaching in value JOD 37 million. However, the war in Iraq left its impact on the pharmaceutical sector where, between April and July
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2003, exports declined by 11.2 per cent to reach JOD 48 million, compared to JOD 54 million during the same period in the previous year. Furthermore, according to the Department of Statistics, during the period January to October 2003 pharmaceutical exports, of which around 90 per cent were exported to Arab countries, reached JOD 107.8 million compared to JOD 122.4 million during the same period in the previous year.
Source: Central Bank of Jordan, Monthly Statistical Bulletin
Figure 2.11.1 Pharmaceutical exports As a result of Iraq’s preferential agreements with several other countries, Jordanian pharmaceutical companies lost their monopoly in the Iraqi market. In 2002, Jordanian pharmaceutical exports to Iraq accounted for only JOD 28 million or 20 per cent of total exports, compared to JOD 50 million in the 1990s. Nevertheless, by the end of 2002, the Iraqi market was still one of the main export markets for Jordanian pharmaceutical products. However, as a result of the war in Iraq, its market has ceased to be one of the largest for local pharmaceutical products. Jordanian pharmaceutical exports to Iraq were halted in 2003 and became limited to donations given out to the wartorn country. Moreover, pharmaceutical contracts with Iraq worth USD 12 million have been on hold during 2003 under the supervision of the United Nations (UN). However, on 21 November 2003 the UN transferred responsibility for the administration of any remaining activity of the Oil for Food (OFF) programme to the Coalition Provisional Authority (CPA). The CPA along with Iraqi ministries have been working on continuing the delivery of priority goods to Iraq under approved and funded contracts. These deliveries are expected to extend until mid-2004. In addition, by the end of 2003 a number of Jordanian pharmaceutical companies have been able to ship some of their outstanding contracts under the OFF programme to Iraq and expect to ship the remaining contracts before the end of June 2004.
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Table 2.11.2 Main domestic pharmaceutical export markets Country
2002 Value (FOB) JOD million
Jan–Oct 2003 % of total pharmaceutical exports
Value (FOB) JOD million
% of total pharmaceutical exports
Iraq
27.9
19.5
5.2
4.9
Saudi Arabia
41.3
28.9
35.4
32.8
Algeria
23.5
16.5
22.4
20.8
Source: Department of Statistics
Furthermore, to improve the health and pharmaceutical standards in Iraq, a few Iraqi supervisors at the Iraqi Ministry of Health have expressed their desire to apply the European and US standards of importing drugs. Such actions will give Jordanian pharmaceutical companies a positive push since Jordan is considered to be the only Arab country that exports to European and US markets. Jordanian pharmaceutical companies are eager to recapture their lost market since they enjoy a geographic proximity to Iraq along with an expertise in the Iraqi market, in which they have been dealing since 1968. In addition, Jordanian pharmaceutical companies have been finding difficulties entering the Egyptian market. Egypt allows only products that do not compete with its local products to enter its market since 90 per cent of its production is consumed locally. Egypt faces severe competition from other countries within the region and outside it, particularly from India and South-East Asian countries since only 10 per cent of its local production is exported. Within the region, Jordan exports 74 per cent of its local production. This difference between Jordan and Egypt, according to a recent study by Boston University School of Public Health, is attributed to lack of an adequate marketing strategy for Egyptian goods and the fact that the quality of the product is often inconsistent and does not meet international standards. The Egyptian health authority has indicated a number of times that it would register up to five Jordanian products for each company, two of which could not have similar substitutes in Egypt. However, despite many years of trying to carry this process forward, there are hardly any Jordanian pharmaceutical products registered in Egypt while, according to the Jordanian Food and Drug Administration’s Drug Directorate,
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Sector Overviews
there are currently 72 Egyptian pharmaceutical products registered in Jordan. Nevertheless, the Jordanian Association of Manufacturers of Pharmaceuticals and Medial Appliances (JAPM) is optimistic that these efforts will not be fruitless, as the Egyptian health authorities have accepted around 16 registration files, which are currently in the process of registration and pricing. However, according to JAPM, the pricing process will be a lengthy one since the Egyptian currency has recently undergone major devaluation, which might result in selling the Jordanian pharmaceutical product at a price that is less than the product’s cost. Most pharmaceutical imports come from European countries. Pharmaceutical imports are of therapeutic classes such as cancer treatment drugs that are not covered by local production. In 2002, pharmaceutical imports reached JOD 124.5 million, of which 61 per cent came from the European Union. In addition, during the period January to October 2003, pharmaceutical imports reached JOD 126.3 million, of which around 65 per cent came from the European Union, compared to JOD 104.3 million during the same period in 2002. The rise in imports was mostly a result of the rise in the exchange rate of the euro against the US dollar during 2003, when the euro surged to a new high against the dollar on 28 November, trading above USD 1.20 for the first time ever. Therefore, we expect an increase in pharmaceutical imports of around 20 per cent for 2003 to reach almost JOD 150 million compared to the same period during 2002.
Source: Central Bank of Jordan, Monthly Statistical Bulletin
Figure 2.11.2 Pharmaceutical imports
Mergers and joint ventures There are currently 18 companies in the Jordanian pharmaceutical industry, of which six are listed on the Amman Stock Exchange (ASE).
Pharmaceuticals
179
However, five companies dominate the local market and account for more than 90 per cent of the country’s total production. Those are Hikma Pharmaceuticals, Arab Pharmaceuticals Industries (APHA), Dar Al Dawa (DADI), Jordanian Pharmaceutical Manufacturing (JPM) and United Pharmaceuticals (UPM). Furthermore, APHA and DADI are both listed on the ASE and represent around 86 per cent of the six listed companies’ total market capitalization. Since five companies dominate the market while the rest compete over the remaining share, mergers and consolidations have become a must. Such actions are expected to increase economies of scale and strengthen the Jordanian companies’ position when negotiating agreements with multinationals. In 2000, the first merger took place between two privately owned Jordanian companies – Rawhi Pharmaceutical Industries and Al Kindi Pharmaceutical Industries. The new company is currently operating under the name of Al Kindi Pharmaceutical Industries. An extraordinary assembly meeting held by the publicly listed AlRazi Pharmaceutical Industries (RAZI) on 27 December 2003 approved the merger with the privately owned Jordanian Pharmaceutical Manufacturing (JPM). According to JPM, the new company will be listed on the Amman Stock Exchange and will operate under JPM’s name with a total paid-up capital of JOD 16 million. The merger is the second of its kind between two Jordanian pharmaceutical companies. APHA and DADI have discussed the possibility of a merger between them a number of times and, in 2002, the deal was expected finally to be carried out but was later postponed with no given deadline. The announcement came after APHA’s general assembly meeting in early 2003 which decided that further studies needed to be completed before any decision was taken. In April 2003, DADI signed a memorandum of understanding with APHA in order to develop joint factories in both Egypt and Algeria. DADI’s management believes that these joint ventures are strategic moves to increase the company’s profits in the long run by having a bigger share in regional markets. Moreover, on 20 November 2003, Advanced Pharmaceutical Industries (ADPH) and APHA were suspended from trading at the ASE after announcing their plans to merge. Both stocks will remain suspended until the merger is complete. As a result of Jordan’s accession to the WTO, a number of multinationals have signed joint venture agreements with Jordanian companies. There are currently five joint ventures outside Jordan and one inside Jordan. In 1999, the Jordanian Pharma International Co signed a joint venture agreement with Schein pharmaceutical company – now a division of Watson Pharmaceuticals (the second-largest generic pharmaceutical company in the United States).
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Sector Overviews
Table 2.11.3 Joint ventures outside Jordan Company
Company
Joint venture
Hikma Pharmaceuticals
Ibn Al-Bitar of Tunisia
Hikma Ibn Al-Bitar
Hikma Pharmaceuticals
Saudi partners
Jazeera Pharmaceutical Industries
Dar Al Dawa
Libyan partners
Dar Al Dawa Libya
Dar Al Dawa
Saidal from Algeria
JORAS Algeria
Dar Al Dawa
Arab Pharmaceutical Manufacturing
Al Dar Al Arabia pour la Fabrication de Pharmaceutiques
Technical and scientific capabilities Jordan has attracted foreign investors as a result of having four clinical research organizations (CROs), one of which is the International Pharmaceutical Research Center (IPRC). The centres perform drug trials using their medical, clinical and bioanalytical expertise before submitting their studies to complete the registration process of the drugs. At IPRC, a study is designed and conducted according to strict guidelines under the European Agency for the Evaluation of Medicinal Products (EMEA) and the FDA (Food and Drug Administration) in the United States. According to IPRC, the bioequivalency study costs between JOD 30,000 and JOD 50,000 in Jordan and between JOD 70,000 and JOD 100,000 worldwide, thereby attracting foreign investors to Jordan where they can enjoy both high-quality and lower-cost research. In addition, Jordan has other supplementary services. The Arab Center for Pharmaceuticals and Chemicals (ACPC) is the only plant in the kingdom that manufactures empty, hard, bovine-gelatin, basefree capsules of various sizes. ACPC has been successful in selling these capsules to other local and regional manufacturers since 1984. By the end of 2002, ACPC’s total sales reached JOD 4.6 million, of which JOD 2.7 million represented the sales of the hard gelatin capsules plant alone. According to the company, ACPC produces 1.15 billion capsules annually and is considered to rank first in the Middle East and fifth worldwide. Furthermore, the industry is well known for its high-calibre and welleducated employees, and is more heavily weighted towards professional and technical staff with high salaries, which are almost double the salaries of those working in other manufacturing industries in the market. According to JAPM, over a span of 10 years the number of employees in the pharmaceutical industry has doubled from 2,000 in 1992 to 4,022 in 2002.
Pharmaceuticals
181
In addition, Jordan’s smooth accession to the WTO has opened the doors for pharmaceutical companies to enter non-traditional markets such as Europe and the United States. The companies need to comply with the highest international standards in order to gain approval by any health authority in the European Union and thus have the opportunity to market their products in the EU markets. Four Jordanian pharmaceutical companies – Dar Al Dawa, United Pharmaceuticals, Hayat Pharmaceuticals and Advanced Pharmaceuticals – have pursued EU approval through the Swedish Medical Products Agency (MPA), the official health certification body in Sweden. In addition, Hikma Pharmaceuticals has obtained EU approval through the Medicines Control Agency (MCA), the official health certification body in the UK, while Pharma International Co has obtained its EU approval from Germany in October 2003 along with a Swedish MPA approval in November 2003. As a result, these companies have the opportunity to market their products in any European country since they comply with European ‘Good Manufacturing Practices’ (EU-GMP) guidelines. The approvals indicate that these companies are manufacturing high-quality products, which meet the European criteria in terms of quality. Moreover, in addition to the EU-GMP certificate, a number of Jordanian companies are seeking to obtain other approvals such as the US FDA approval in order to enter the US market. Hikma Pharmaceuticals is the only Jordanian pharmaceutical company that exports to the United States after gaining FDA approval for two of its products. Furthermore, five local companies have 11 registered patents inside as well as outside Jordan.
Sector outlook Despite many arguments against joining the WTO, the Jordanian pharmaceutical sector has become a significant source of income for the Jordanian economy where the smooth accession has created a realm of new challenges for the pharmaceutical industry and opened doors to new businesses and investment opportunities in Jordan. The IPR and WTO agreements have strengthened multinationals’ confidence in Jordan’s commitment to provide a favourable climate to investors. Today, a number of Jordanian pharmaceutical companies have strategic alliances and licensing agreements with a number of leading international companies including Fujisawa, Roche, Takeda and others. Moreover, they have also managed to register their products on a global scale, especially in Europe and the United States, after complying to international standards by obtaining FDA and EU approvals. In addition to exploring new markets, mergers and consolidation have further strengthened the industry, as joint ventures and licensing agreements with local manufacturers have transferred the know-how
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Sector Overviews
to the local companies and improved Jordanian pharmaceutical quality up to international standards. However, the competition is becoming very tough, owing to the increasing number of pharmaceutical companies in the Arab world. Nevertheless, new challenges and competition are expected to push the industry towards new alliances, licence agreements and higher levels of concentration on research and development.
2.12
Apparel and Textiles Export and Finance Bank
Introduction Jordan has succeeded in creating a thriving apparel and textile industry. Exports of the sector have increased significantly in recent years, reaching JOD 375 million in 2002. Much of the credit for this situation goes to the Qualifying Industrial Zone (QIZ) agreement signed between Jordan and the United States in November 1997, whereby products manufactured in Jordan according to a certain formula can enter the US market duty- and quota-free. Currently there are 10 QIZs and one subzone in Jordan, of which a total of seven are operating. Although more companies aspire to work under QIZ conditions and to take advantage of the many privileges offered, they are reluctant to do so owing to the political instability of the region. Thus the pace of future growth in QIZ companies, and therefore of apparel and textile companies, at least in the short term, will be dependent on more stable circumstances. The WTO Agreement on Textiles and Clothing has set 2005 to be the cut-off date for all quota restrictions on textile and clothing imports being eliminated. Therefore, Jordan will be facing fierce competition from other WTO countries at that time and it remains to be seen whether Jordanian producers can remain competitive.
Apparel and textile facilities in Jordan The number of apparel facilities has increased steadily in recent years. In 1994, approximately 1,306 apparel facilities existed; the preliminary figures for 2000 (latest available data) indicate that there were then approximately 2,083, thus representing an increase of 60 per cent over a period of seven years. The highest growth was in 1998–99 when the number of apparel facilities grew by 27 per cent. This growth was due to the signing of the QIZ agreement with the United States. However, the number of textile facilities grew from just 83 in 1994 to 100 in 2000 (see Figure 2.12.1). This modest growth in textiles facilities when compared to the growth in apparel can be primarily attributed to the
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Sector Overviews
fact that this type of activity is a large consumer of water, which is a very scarce resource in Jordan.
Source: Department of Statistics
Figure 2.12.1 Number of apparel and textile facilities
Employment in the sector According to the Jordan Investment Board, 26,313 Jordanian workers were working at QIZ factories in 2003, which represented around 65 per cent of total employees in the QIZs. Non-Jordanian workers represented approximately 35 per cent of total employees in 2003, most of whom emanate from China, India or Pakistan. Foreign employees in the textile industry work exclusively in QIZs. Many Asian investors have moved their operations to QIZ Jordan to take advantage of the duty- and quota-free access to the US market. Although labour in Jordan is relatively more expensive and less skilled, it was still enticing for investors to come to Jordan to take advantage of the US market. QIZ factories began their operations with 50 per cent of the labour force consisting of foreign workers while the rest were locals. This was the case because most of the local workers did not possess the skills needed for the job. In addition, expatriate workers tend to work for longer hours, Jordanian workers preferring to work eight-hour shifts. A large segment of the unskilled workforce is expected to benefit from QIZ companies, which are willing to train them and enhance their skills. QIZs are expected to expand employment opportunities in Jordan, thus improving unemployment figures, which currently stand officially at 14.5 per cent. The government is calling for a decrease in the number of expatriate workers as a percentage of total employees to 10–15 per cent. In return the government has established new training centres to improve the skills and increase the efficiency of local workers in the garment industry.
Apparel and Textiles
185
Source: Department of Statistics
Figure 2.12.2 Employment in the apparel and textile facilities Labour is an important factor in apparel and textile manufacturing. Female workers represent a high percentage of all workers in the sector. This is important since the female unemployment rate reached 20.8 per cent in 2003 and is significantly higher than that for males, which reached 13.4 per cent. The cost per employee to an employer is approximately JOD 120; various deductions are made including income tax and social security, and thus the workers’ disposable income is approximately JOD 80–100. The wage increases according to position to JOD 250–350 for a supervisor and JOD 800–1,000 for a factory manager. The labour cost in Jordan is not cheap when compared to other textile- and apparelproducing countries and is not the main driving force behind growth in this labour-intensive sector.
Trade in textiles Exports Textile and apparel exports have increased considerably in the recent past to become Jordan’s number one export commodity; they represented around 24 per cent of Jordan’s total exports by the end of 2002. Total textile and apparel exports reached JOD 374.8 million in 2002, representing an increase of around 67 per cent over the previous year; in 2001, total textile and apparel exports reached JOD 225 million (see Figure 2.12.3). During the period January to October 2003, textile and apparel exports was JOD 392 million, compared to exports of JOD 306 million during the same period in 2002. Imports In 2002, clothing imports grew to JOD 76.8 million, an increase of around 41 per cent over 2001. Textile, yarn and fabric imports increased to JOD 269.9 million in 2002 compared to JOD 215.7 million in 2001 (see Figure 2.12.4). During the period January to October 2003, textile and
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Sector Overviews
clothing imports reached JOD 324 million, compared to imports of JOD 276 million during the same period in 2002.
Source: Central Bank of Jordan
Figure 2.12.3 Textile and clothing exports 1999–2003
Source: Central Bank of Jordan
Figure 2.12.4 Textile and clothing imports 1999–2003
The effect of various agreements on the apparel and textiles industry in Jordan Qualifying Industrial Zones (QIZs) A QIZ is any area that is specified as such by the US government and designated by the Jordanian authorities as an area from which manufactured products may enter the US market duty- and quota-free (for more information on QIZs, see Chapter 3.5). Exports to the USA In 1999 exports to the United States were JOD 9 million, representing only 0.88 per cent of total Jordanian exports. In 2001, total Jordanian exports to the United States reached JOD 165 million, representing an
Apparel and Textiles
187
increase of 267 per cent from the previous year and approximately 12 per cent of total exports. By the end of 2002, exports had increased by 84 per cent to reach JOD 304 million (see Figure 2.12.5). During the period January to October 2003, exports to the United States reached JOD 372 million, representing 28 per cent of total Jordanian exports. As a result, the United States has become Jordan’s largest export market. In the next couple of years, QIZ exports to the United States are expected to continue growing but at a decreasing rate.
Source: Department of Statistics
Figure 2.12.5 Jordanian exports to the United States. The asterisk indicates an estimate
Free Trade Agreement (FTA) Jordan’s Free Trade Agreement (FTA) with the US government was ratified on 28 September 2001 and came into force on 17 December 2001. Under the FTA, tariffs and quotas on goods and services are to be reduced gradually over a period of 10 years. Tariffs of less than 5 per cent (Category A) were eliminated in 2002; those that are between 5 and 10 per cent (Category B) will be phased out this year; those that are between 10 and 20 per cent (Category C) will be eliminated in 2005; and those that are now 20 per cent or more (Category D) will be eliminated in 2010. Textile and apparels have tariffs as high as 20–35 per cent, which will not be eliminated till 2010, whereas under the QIZ agreement they have already been removed. On the other hand, the FTA requires a 35 per cent Jordanian content. According to some investors this can be difficult to achieve. In contrast, the minimum Jordanian requirement under the QIZ is 11.7 per cent, but investors have to include an Israeli content, which many Arab investors
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Sector Overviews
would rather avoid. Some QIZ investors prefer to buy from Arab businesses that existed in 1948 in order to avoid dealing with Israelis. Also, in order to produce under the QIZ status, the area of production has to be designated as such by the US government whereas with the FTA the investor can produce wherever is suitable. World Trade Organization (WTO) Prior to the Uruguay Round of multilateral trade negotiations, the international trade in textiles under the Multi-Fibre Agreement allowed developed countries to place discriminatory quota restrictions on the import of textiles and apparel. However, during the Uruguay Round in 1994 WTO members signed the Agreement on Textiles and Clothing (ATC). This agreement requires the progressive elimination of all quota restrictions in the textile and clothing sector. The implementation period for the ATC is 10 years (1 January 1995 to 31 December 2004). Thus by 2005 all WTO members must conform to the agreement. Considering that Jordan is one of the countries that has a preferential agreement with the United States (ie QIZ and FTA), local producers will have to face stiffer competition by 2005. For example, countries like China, which joined the WTO in 2001, have relatively advanced technology and an abundance of cheap labour and are therefore expected to gain tremendously from the ATC by providing the world textile and apparel market with low-cost products. This will erode the advantage that Jordan currently has over other countries in this sector. Thus the sector aims to take advantage of the situation in the meantime while it still has preferential access to the US market.
Outlook In the short term, textile and apparel exports are considered likely to continue to grow as a percentage of total exports, with QIZ apparel and textile projects contributing significantly by increasing their exports, while also improving employment figures and increasing the expertise available. Textile and apparel manufacturers are also looking into diversifying their export markets, for example to European countries. Furthermore, they are looking into the market needs of their chosen export countries, so as to supply them with required products and to overcome the impact of the Agreement on Textiles and Clothing, which represents a threat to the industry in Jordan.
2.13
Oil and Gas Munther J Akroush, Natural Resources Authority
Exploration history Triggered by major oil finds in neighbouring Saudi Arabia and Iraq, exploration for hydrocarbons in Jordan was started in the late 1940s by Iraq Petroleum Company (IPC). Subsequently, Edwin Pauly/Phillips acquired a licence between 1955 and 1961, and geological and geophysical works were conducted, as was the drilling of six wells (Safra-1, Halhoul-1, Ramalla-1, Suweileh-1, Jordan Valley-1 and Lisan-1). Then, in the period from 1964 to 1978, activities by John Mecom, Total, Filon, Fuyo and NRA saw 14 wells drilled in addition to the undertaking of limited seismic, gravity and magnetic surveys. Later, between 1981 and 1995, the Jordanian government decided to increase oil exploration efforts from Treasury funds and drilled 92 wells in addition to acquiring a 30,000-kilometre line of seismic data. These efforts resulted in the discovery of oil in Hamzeh Field, Azraq area, in 1984 and commercial gas in Risha area in 1987. The Jordanian government then established the National Petroleum Company (NPC) in 1995, at which time the state-run Natural Resources Authority was restructured to include regulation of petroleum-related activities on behalf of the government. Since that time, a few further activities have been undertaken in Jordan by NPC and international oil companies, including the drilling of five wells, the re-entering of eight wells and the acquiring of 300 kilometres of 3-D and 200 kilometres of 2-D seismic data in Risha area. Many international oil companies have taken licences in Jordan under production-sharing agreements. The list includes Amoco (1986–89), Hunt (1986–90), Petrofina (1987–90), Hanbo (1992–94), Anadarko (1996–99), Benton (1997–2000) and Trans-Global (1997– 2004). In addition to some limited seismic data acquisition, international activities have resulted in the drilling of nine wells in different basins across the country.
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Sector Overviews
The only commercial hydrocarbons in Jordan are to be found in the Risha gas field, which produces an average of 28 mmscfd, equivalent to about 12 per cent of the country’s consumption of electricity. Additionally, Hamzeh oilfield is producing a limited amount of oil at an average of 38 barrels a day. Since the stoppage of petroleum operations by NRA in 1995, no new reserves have been added and the production of hydrocarbons has remained unchanged. There are other oil occurrences with potential, which require an intensive promotion campaign to call for international oil companies to invest in the country’s upstream sector. Exploration calendar 1986–2003 .
Amoco (PSA) 1986–88 (Azraq and Jordan Rift), two wells.
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NRA discovers Risha gas field 1987.
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OMV 1987–90 (Sirhan S), seismic option.
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Hunt (PSA) 1987–90 (Al-Jafr), seismic and one well.
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PCIAC 1987–92 Assistance, grant seismic.
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JNOC 1988–89 (Sirhan N), seismic option.
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Petrofina (PSA) 1987–90 (Basalt-P), one well and seismic.
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Hanbo (PSA) 1992–94 (Risha and Sirhan), seismic and two wells.
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Anadarko (PSA) 1997–99 (Basalt-P), one well (deepening), relinquished.
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Sonatrach 1997–98 (Sirhan W), studies with PSA option, relinquished.
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Medallion–Huber–Benton (PSA) 1997–99–2000 (Sirhan SW).
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Trans-Global (PSA) 1997–2002 (Jordan Valley and Dead Sea), two wells.
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Several memoranda of understanding (MOUs) and LoIs.
The current status of each block Risha block The Jordanian National Petroleum Company (NPC) was established in 1995, as stated, and has signed a concession agreement with the Jordanian government to develop and operate the Risha block of about 7,000 square kilometres, including the producing Risha gas field. The agreement extends for 50 years from its date of signature in 1996. This concession agreement was modified on 1 May 2002 under Temporary Law No. 15 of 2002, to allow NPC to bring in partners to participate in any gas development project. Cumulative gas production since 1989 exceeds 121 BCF.
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The Risha area has a proven petroleum system, with the Silurian hot shale playing the role of major source rock and seal at the same time. The Risha gas is contained mainly in the upper Ordovician sandstones, which are about 100 metres thick. There is also high potential that the underlying Ordovician clastics are of commercial value. Dead Sea block This area of about 7,000 square kilometres is under PSA agreement with the US Trans-Global Petroleum Ltd, which has already entered the second exploration term of the agreement ending on 17 February 2004. The drilling of Issal-1 well stopped at 3,315 metres on 5 March 2002. Operations in the Dead Sea block are now suspended pending further evaluation and issuance of the final well report, the contents of which the company is in the process of evaluating prior to integration with the 3-D seismic reinterpretation. The Dead Sea area is known for its oil seepages that reach the surface. Occurrences of oil in the Cambrian carbonates and sandstones have also been reported from the shallow wells drilled by NRA and international oil companies. The deep sub-salt play is of great hydrocarbon potential but is yet to be tested in the Dead Sea area. Northern Highlands block The North Highlands basin also occupies an area of about 7,000 square kilometres from the Syrian border in the north to the Zarqa River in the south. The area can be considered the south-western extension of the Palmyra province in Syria where new hydrocarbon discoveries were reported from the Triassic and Jurassic sequence. The well coverage in the North Highlands is sparse with only seven wells being drilled by NRA and the international operators. A seismic acquisition was carried out by Filon in 1975 when some 298 line-kilometres were shot but with no specific grid to account for geological and geophysical features. The Dinoseis was used as the energy source and the data quality was bad. GIS, in 1981, used a Vibroseis Source to acquire about 773 line-kilometres, and in 1984 the Iraqi National Oil Company (INOC) acquired 730 line-kilometres of data, both producing fair- to good-quality data. Source rock horizons are present in the Cretaceous section (TuronianMaastrichtian) and Triassic, as inferred from NH-1 and NH-2 well samples. Permian sandstones and carbonates have potential for oil and more probably gas resources sealed by Permian shales. The Triassic and Jurassic carbonates are prospective for oil and gas soured from shales and sealed by shales and evaporates. The upper Cretaceous sequence in well NH-1 contains an important oil-prone potential source rock of Cenomanian age with TOC values of
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Sector Overviews
0.12–3.4.8 per cent (Paleoservices, 1987). Some samples from the basal Ordovician sequence proved the presence of marginal source intervals (FJA, 1994). Oil shows were found in the core sample at 1,630 metres in the Jurassic section of well NH-2. The oil windows were penetrated at 2,090 metres where spore colours indicate mature organic matter in the middle Triassic section. The Northern Highlands block is open for licensing to international oil companies. Safawi block The Safawi area of about 17,000 square kilometres is located in the north-eastern part of Jordan and is covered by basalts. The area is very much underexplored, with only one well drilled, by Petrofina in 1990. The thick Triassic–Jurassic sediments play a major role in the hydrocarbon prospectivity of the area, especially after the large gas discoveries reported north of the block in Syria. The Safawi block is open for licensing to international oil companies. Azraq block The Azraq area of about 11,000 square kilometres contains a proven petroleum system, where modest oil quantities were discovered in the upper Cretaceous carbonates of the Hamzeh field in 1984. Additional reservoir potential is present with sandstones in the Kurnub formation of lower Cretaceous age, where several structures have been mapped and which may prove targets for oil. The Azraq block is open for licensing to international oil companies. Al-Jafr block The Jafr basin is located in the south-western part of Jordan. Overall, the basin has an area of about 19,000 square kilometres, and is one of a series of sag basins that originated in the late Infracambrian–Lower Palaeozoic period. The upper Ordovician sandstone of the Dubaydib formation is the main reservoir horizon in Al-Jafr area. Porosity value of 28 per cent and permeability of 300 mD were encountered in well JF-1 in parts of the Dubaydib sandstones. The Cambrian Disi and Salib formations can also be considered as potential reservoirs. Upper Cambrian sandstones in well JF-1 contain an interval with 12 per cent porosity. Important Palaeozoic seals include the carbonate and shales of the middle Cambrian Burj formation and interbedded shales within the lower Ordovician (Hiswa formation). Maturity assessment of the Jafr basin indicates significant oil generation from the rich Silurian sources in the area of wells JF-1 and JF-2 and areas to the south of these wells. However, just north of these, or in the depocentre of Jafr basin, thermal modelling indicates that the
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Silurian and lower Ordovician (Hiswa formation) sources are within the oil window. All seismically mapped structures in the area are worth serious investigation by deep drilling of the whole sedimentary section, which is estimated to be 5 kilometres. The middle Cambrian Burj petroleum system can also play an important role in charging the thick Cambrian clastics of the Disi formation. Porosity values of 13 per cent for the deep sandstone Salib formation suggest considerable reservoir potential. The Jafr area is currently open for licensing to international oil companies. Sirhan blocks The Sirhan basin occupies an area of about 11,000 square kilometres and is of early Palaeozoic origin. The upper Ordovician sandstone of Dubaydib formation is the main reservoir horizon in Sirhan area. Porosity values of 11–15 per cent were measured for the Dubaydib formation in many wells of Sirhan area. Other reservoir horizons include lower Cambrian Salib formation, where porosity of 13 per cent has been reported in WS-3. Important Palaeozoic seals include the carbonates and shales of the middle Cambrian Burj formation and interbedded shales within the lower Ordovician (Hiswa formation) and lower Silurian hot shales (Mudawwara formation). The upper part of the Silurian Mudawwara formation has average TOC values of 0.5 per cent. Higher TOC values ranging between 0.8 and 5.41 per cent were reported from the base Mudawwara Silurian hot shale. Well WS-3 has TOC values of 3–4 per cent and it is mature for oil (0.8 Ro). The base Mudawwara in wells WS-3, 4, 6, 9, 10 and 11 is mature for oil and represents a good petroleum yield of 2.5–8 mg HC/g of rock. Light oil of 43 API was discovered in the upper Ordovician sandstones of well WS-4 at 1,390–1,397 metres. Oil/source correlation strongly suggests that the WS-4 oil was sourced from the lower Silurian hot shales. Recent testing carried out by Benton Oil and Gas Co has confirmed gas flowage from the Dubaydib formation of well WS-9, and the Sirhan blocks are committed under an MOU to the Australian company NFG Development Pty Ltd. The company is performing geological and geophysical studies over a period of six months, effective from 16 October 2003.
Basic conditions and fiscal terms of the model agreement (PSA) The Natural Resources Authority is currently using an exploration and production sharing model (EPSA), which is based on the Egyptian model, modified in 1988 by NRA and the consulting firm of Arthur D
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Sector Overviews
Little. Several other modifications were introduced recently to accommodate the new government policy of encouraging international companies to invest in the oil and gas sector of the country with the lowest possible capital risk. The main highlights of this new policy include: . . . .
production sharing (see Table 2.13.1); cost recovery rates that can reach up to 70 per cent; letter of credit (performance guarantee) – the government requires a performance guarantee of USD 0.5 million; no royalty or signature bonus required.
Table 2.13.1 Production sharing Barrels of oil per day
Government share %
Contractor share %
0–10,000
40
60
10,001–20,000
45
55
20,001–40,000
50
50
40,001–60,000
55
45
60,001–100,000
60
40
100,001–200,000
65
35
200,001 and above
70
30
Natural gas
60
40
Other basic terms of the contract include: .
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All articles and annexes are negotiable, have the same force and effect and when completed take the power of law, subsequently being published in the Official Gazette. The exploration period of about eight years is divided into three phases whereas the development period is 25 years. The commitments for each exploration term usually include the drilling of one or two wells and/or seismic surveys. The contract terminates if no commercial discovery is made by the end of the third exploration term. However, a contractor may voluntarily relinquish a licence at any time if all relevant requirements have been satisfied. A contractor has the exclusive right to conduct petroleum operations from the described area to any delivery points in Jordan. The rights include construction of roads, pipelines, telecommunication systems, landing fields and other facilities. NRA will support and provide every assistance to the contractor in obtaining all necessary approvals, licences and permissions from the relevant Jordanian authorities.
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A contractor will bear all expenses of its petroleum operations and will look only for the cost recovery to which it is entitled under the terms of the contract. The budget for each exploration term is approximately USD 6.0 million but compliance with work commitments will relieve a contractor of the obligation to expend the minimum sum. All items brought into the country are exempt from duties if for use in petroleum operations, with all such exemptions being guaranteed by a licensed bank in Jordan. All contractors also enjoy free currency exchange, free use of land and the right to export all the petroleum to which they are entitled. The model contract contains many other articles on relinquishments, conduct of operations, training and production bonuses, assignment, gas and supply of internal demand in addition to other general provisions. The annexes to the contract include provisions on area, accounting procedures, tax implementation provisions, form of bank guarantee, letter of credit and parent company guarantee.
Oil and gas production Table 2.13.2 Risha gas field production history Year
Production in mmscf
1989
2,596
1990
5,516
1991
5,488
1992
6,062
1993
6,982
1994
10,289
1995
9,846
1996
9,730
1997
10,289
1998
9,359
1999
9,982
2000
10,147
2001
9,867
2002
9,105
Cumulative production in BCF
115
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Sector Overviews
Table 2.13.3 Hamzeh oilfield production history Year
Production in barrels
1985
23,005
1986
108,488
1987
160,196
1988
121,466
1989
84,281
1990
119,390
1991
50,272
1992
21,409
1993
11,323
1994
10,870
1995
13,956
1996
14,884
1997
14,680
1998
14,543
1999
13,268
2000
12,480
2001
11,196
2002
10,100
Cumulative production in barrels
815,707
Oil shale Geological studies and exploration programmes have shown that oil shale deposits are widely distributed in many parts of the country. In particular those in Central Jordan have been studied extensively and it has been ascertained that the organic content of the shale varies both laterally and vertically but such variation does not alter the general homogeneity and uniformity of the deposits. Oil shale reserves of all categories are estimated at more than 40 billion metric tons in Central Jordan. The proven reserves of the ElLajjun deposit amount to 1.2 billion tons and occur near the surface, attaining an average thickness of 32 metres with an overburden averaging 30 metres. The Klockner-Lurgi group of Germany has conducted technical and economic feasibility studies into utilization of the oil shale at El-Lajjun
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and the building of a retorting complex there, the results of which are awaited. In addition, the Jordan Electricity Authority has signed agreements with Pyro Power & Bechtel (a US–Swedish group) and Lummus (a Canadian consultancy) to conduct feasibility studies into the use of Jordanian oil shale for direct combustion in the generation of electricity. Furthermore, in late 2003 the Jordanian government was engaged in negotiations with international firms interested in exploiting a part of the Jordanian oil shale.
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Part Three
Establishing a Business
3.1
Forming a Business Venture in Jordan Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman
Introduction Business ventures in Jordan are regulated and governed by several laws and regulations including the Commercial Law No. 12 of 1966 (the ‘Code’), the Companies Law No. 22 of 1997 and amendments thereto (the ‘Companies Law’), the Investment Promotion Law No. 16 of 1995 (the ‘Promotion Law’) and the Non-Jordanian Investment Promotion Regulation issued pursuant to the Promotion Law (the ‘Regulations’). In general the Companies Law governs all registered companies undertaking commercial activities in the Hashemite Kingdom of Jordan (the ‘kingdom’) and organizes the foundation, administration, activities and liquidation of companies. Should the Companies Law be silent on any matter relating to corporate entities, then the Code applies, regulating matters such as, inter alia, the merchants’ status, the keeping of commercial books and the corporate register and details of commercial stores and their names. If neither of these addresses the subject then reference is made to the Civil Law, which regulates partnership contracts, some types of partnership, such as the joint venture partnership, and their prerequisites, management, consequences, dissolution, winding-up and division. Furthermore, the provisions of commercial practice, the guidance of judicial authorities, jurisprudent interpretations and the principles of equity also apply.
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Establishing a Business
Types of companies that can be registered at the Ministry of Industry and Trade The Companies Law confines those companies that can be registered at the Ministry of Industry and Trade (the ‘Ministry’) in the kingdom and supervised by the Controller of Companies (the ‘Controller’) to a number of forms in order to fulfil and meet the requirements and needs of each investor, whether an individual or an entity, Jordanian or non-Jordanian, as follows: .
General partnership company. A general partnership company may be formed by not less than two and not more than 20 partners, unless such an excess results from inheritance. Each partner shall not be less than 18 years old and shall therefore have acquired the capacity of a merchant.
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Limited partnership company. A limited partnership company consists of two types of partners, whose names must be listed in the partnership agreement, as follows: – general partners, who manage the partnership and its activities and who are jointly and severally liable for all debts and liabilities of the partnership to the full extent of their private property or assets; – limited partners, who contribute to the capital of the partnership without having the right to manage or operate the business and whose liability is limited to the amount of their individual shareholding in the partnership. However, if they do participate in the management of the business, then they will be liable to the same extent as a general partner.
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Limited liability company. The limited liability company has become a preferred form of corporate structure in the kingdom owing to the limited and independent liability of its shareholders, as it is only the company’s assets and property that can be used to settle any debts or obligations. A limited liability company must usually consist of at least two partners, although the Controller may approve such a company with just one partner.
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Limited partnership in shares company. A limited partnership comprises two types of partner: – general partners, who must number not less than two and who are liable for the company’s debts and obligations to the full extent of their personal property; and – limited partners, who may not number less than three and who are liable for the company’s debts and obligations in proportion to their respective shares in the business.
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.
Private shareholding company. This type of company was introduced to the Companies Law by Temporary Law No. 4 of 2002, which was published in the Official Gazette on 17 February 2002, and consists of two or more shareholders, each of whom is liable for the company’s debts and obligations to the extent of his/her shareholding. As of November 2003 approximately 23 such companies had been registered at the Ministry.
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Public shareholding company. The public shareholding company consists of two or more shareholders who subscribe to shares at the stock exchange, which shares may be negotiated and transferred pursuant to the Companies Law or any other applicable legislation, with each shareholder being liable for the company’s debts and obligations up to the value of his/her shareholding. Furthermore, the public shareholding company may operate as a holding company that has financial and administrative control over one or more companies and also may operate as a joint investment company (mutual fund company) that invests its own and third parties’ funds in different types of securities pursuant to the applicable Securities Law.
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Companies operating at the free zones. Such companies are registered at the Free Zones Corporation in Jordan pursuant to their relevant laws and regulations and with the Controller at the Ministry who maintains a special register of such companies.
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Non-profit company. The non-profit company is registered in a special register at the Ministry and may be of any of the abovementioned types.
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Civil companies. Civil companies are registered in a special register at the Ministry by specialized and professional partners and are subject to the Jordanian Civil Law and to their articles and memoranda of association.
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Exempt companies. The exempt company may be either a public or a private shareholding company, a limited partnership in shares or a limited liability company and must be registered as a Jordanian company carrying out its operations outside the kingdom. The company’s name must be followed by the word ‘Exempt’.
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Implied trust company. An implied trust company is a commercial understanding between two or more persons whose operations are carried out by an apparent partner and which is not subject to any registration procedures or licensing as it is does not have a corporate identity.
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Establishing a Business
Registration procedures Articles and memoranda of association of most of the defined companies should be prepared on the application forms provided by the Ministry for that purpose and with the articles stating the following information: .
the suggested name of the company (which should be in Arabic and not previously registered or similar to any other company’s name), its objectives and its headquarters;
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name of each shareholder, nationality, shares and address;
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the share capital;
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the management of the company (general manager or board of directors);
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the duration of the company;
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method of distribution of profit; and
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any additional information that the shareholder may submit.
Upon completion of the application it should be submitted to the Ministry and be signed before the Controller of Companies or a notary public or a licensed lawyer in Jordan and should be accompanied by a copy of the national identity card of each Jordanian shareholder or the passport of a non-Jordanian shareholder. The Controller has the right to reject any registration where the application violates applicable laws and regulations. However, the applicant may seek to remove the violation within the period prescribed by the Controller. Furthermore, pursuant to the objectives of each company, the Controller prior to approving the registration of any company may request pre-approvals on the said registration from other official entities, such as the Central Bank of Jordan, the Ministry of Press and Publication, the Ministry of Interior and the Ministry of Labour. Once a company has acquired pre-approval and the approval of the Controller, a certificate of registration of the company will be issued stating the company’s registration number, share capital and registration date.
Applicable fees Fees for registering companies at the Ministry vary from one type to another. For instance, the fees incurred for registering a limited liability company amount to five per thousand of the registered capital (three per thousand as registration fees and two per thousand as stamp duty) plus other minor fees such as publication fees and the costs incurred in issuing all documentation relating to the company’s registration.
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Non-Jordanian investors In general, a non-Jordanian investor may own any project or economic activity in the kingdom, in full or in part, but is limited to less than 50 per cent of the total share capital or to fewer shares than Jordanian shareholders in three sectors: . . .
construction and contracting; commerce and commercial services; mining.
Except in relation to the purchase of shares in a public shareholding company, the investment of a non-Jordanian investor must not be less than JOD 50,000. Furthermore, non-Jordanian investors may register an operating foreign company, which is a company registered outside the kingdom but which nevertheless operates within the country either on the basis of a tender awarded to the company by an official authority for a limited period of time or permanently through a licence granted to the company by the competent official authorities in the kingdom. A non-Jordanian investor may also register a non-operating foreign company, which must be an extension of a foreign company and not an independent entity. Hence, the non-operating foreign company is registered in the name of the foreign company and is permitted to manage business for and to coordinate with its headquarters, but is prohibited from carrying out any other business or commercial activity inside the kingdom. Such a company is exempted from payment of any fees. All documents submitted to the Ministry in other than the Arabic language must be notarized and legalized by all judicial and diplomatic authorities in the country of the company’s head office, including the Jordanian Consulate, and must then be translated into Arabic and subsequently notarized by a notary public in Jordan.
Main concern The main concern for a foreign investor is that, except for operating and non-operating foreign companies, the Ministry only registers companies with Arabic names, which may constitute an obstacle to companies wishing to expand and operate outside the kingdom.
3.2
The Law of Commercial Agents and Intermediaries Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman
Introduction Commercial agents, intermediaries and all the various activities undertaken by any person in Jordan on behalf of a principal are governed and regulated by the Law of Commercial Agents and Intermediaries No. 28 of 2001 (‘the Law’), which was published in the Official Gazette on 7 June 2001, and Regulation No. 31 of 2002.
Practice Article 2 of the Law defines the ‘principal’ as the producer or the manufacturer or the distributor adopted by either of them, or the exporter that supplies commercial services with its seat outside Jordan and appoints a commercial agent. Article 2 of the Law defines the ‘commercial agent’ as the person adopted by the principal to be his agent or representative in Jordan; or distributor of his products in the country whether as a commission agent or by any other consideration; or working for his own account by selling what he imports from the products of the principal. Article 2 of the Law defines a ‘commercial agency’ as the commercial contract concluded between a principal and the agent according to which that agent undertakes to import products of his principal, to distribute same, to sell same or to expose them or to provide commercial services within Jordan or for his own account on behalf of the principal. Based on the above definitions, the Law applies to all of various types of activities undertaken by any person in Jordan on behalf of a principal.
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Registration of commercial agents at the ministry Pursuant to Article 17 of the Law, any commercial agent, commercial intermediary or commercial agency registered under the Law is considered registered according to its provisions and must provide the registrar with the information required. Furthermore, Article 3 of the Law provides that the commercial agent must be a Jordanian, if a natural person, or a Jordanian company registered in accordance with the local applicable law. Article 5 of the Law provides that no person shall be entitled to practise the activity of commercial agency in Jordan unless registered in the registry of commercial agents at the Ministry of Trade and Industry (the ‘Ministry’). Based on the above, a commercial agent or intermediary must submit, within 60 days of appointment, an application for registration to the registry of commercial agents at the Ministry accompanied by the following documents: .
The agency contract duly notarized and legalized by all judicial and diplomatic authorities in the country of the principal, including by the Jordanian Consulate. Subsequently, the notarized document must be translated into Arabic and then notarized by a notary public in Jordan.
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The certificate of registration of the principal.
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A certificate issued by the Ministry confirming the principal’s authorized signatory.
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A certificate of affiliation to the Chamber of Commerce.
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A vocational licence.
The completed application must be signed by an authorized signatory of the commercial agent in the presence of the registrar. The registrar has the right either to approve or to reject a registration, the latter only where the application violates applicable laws and regulations. However, any such decision must be issued within 14 days. Once the commercial agent has received approval and paid the prescribed fees, a certificate of registration will be issued stating the number and date of registration. Pursuant to Article 7/b of the Law, such number must be quoted in all commercial correspondence and when the company is performing its activities or undertaking transactions. In the situation where a commercial agent fails to register in accordance with the provisions of the Law a penalty will be payable for nonregistration equal to double the registration fee if the default period does not exceed three months or fivefold if the default exceeds that period.
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Under Article 8 of the Law, a commercial agent or intermediary who discontinues his business or whose agency contract expires must request the registrar within a period not exceeding 30 days from the date of discontinuance or expiry of the agency agreement to strike out his registration or the registration of his agency. The registrar retains the right to cancel the registration of a commercial agency in the following instances: .
. .
if it is proved that the commercial agent’s or intermediary’s registration is based on an application that contains false information; if it has become evident to the registrar that the registration of the agency was based on false information; or if it is cancelled for any other reason.
Furthermore, third parties have the right to obtain information related to the name and number of a commercial agent, intermediary or agency, an agency’s registration number, the name of the principal and the date of the registration of the agency or its cancellation.
Applicable fees Regulation No. 31 of 2002 stipulated that the fees pertaining to the registration of the commercial agent and commercial agency at the Ministry are as follows: . . . .
JOD 100 (one hundred) for the registration of a commercial agent; JOD 50 (fifty) for the registration of a commercial agency; JOD 50 (fifty) for the registration of a commercial intermediary; and JOD 15 (fifteen) to register any amendment in connection with commercial agencies.
Importing and selling weapons Pursuant to Article 12 of the Law and to any other legislation in force, neither a Jordanian nor a non-Jordanian is permitted to practise the profession of commercial agent or intermediary for the importation or selling of arms, their spare parts or parts completing or developing them or for ammunition for supply to the Jordanian armed forces and security forces, including the maintenance of such weapons, their parts or their insurance. The Council of Ministers may, on an ad hoc basis and upon the recommendation of a related party, prohibit the practice of commercial agency or commercial intermediary or the intervention of the commercial agents or commercial intermediaries in any contracts related to the
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supply of instruments, equipment, machinery or their spare parts to the Jordanian armed forces and security forces. This restriction may include the maintenance of the said materials or their insurance and/ or services related thereto. Any person acting in contravention of the above article will be subject either to a punishment of not less than six months and not more than one year of imprisonment or to a fine of not less than JOD 10,000 (ten thousand) and not more than JOD 25,000 (twenty-five thousand) or both payment of a fine and imprisonment. In addition a fine will be imposed equal to the commissions received or profits made as a result of any such transaction, where these are known or, where this information is not known, assessment of the court. Nevertheless, in order to avoid impracticality with respect to sales of other products to the Jordanian armed forces, which could result in adverse repercussions on their tenders, in a letter from the Prime Ministry addressed to the Ministry of Industry and Trade it was stated that any limitation imposed by this law should not be ‘broadly construed’. As to the supply of goods without intermediation mentioned in Article 12, the Council of Ministers has not so far specified either the supplies or the services that may be purchased directly from manufacturers, producers or suppliers. Furthermore, the Higher Authority for Purchases Regulations No. 50 of 1994 has not so far been activated, which means that the authority’s council has not as yet been formed. Pursuant to Article 13 of the Law, no foreign company or institution registered to work in the Hashemite Kingdom of Jordan can act as a commercial agent or represent foreign companies established abroad, which restriction shall not include the commercial agencies registered in its name before the promulgation of the Law.
Penalties Without any prejudice to any higher penalty provided for in any other law, Article 18 stipulates that a person shall be subject to a penalty of not less than JOD 500 (five hundred) and not exceeding JOD 2,000 (two thousand) if the commercial agent: .
submits to the registrar or any official body, with a bad intention, false statements relating to the registration of the commercial agency, its amendments or substitution;
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claims in any correspondence or printed materials related to his commercial business or in any manner announces that he is a commercial agent or intermediary without being registered;
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contravenes the provisions of Articles 8 and 13 of the Law and does not remove the contravention. In such an instance the penalty will be doubled every three months until removal of the cause of the breach.
Termination of an agency Article 14 of the Law provides that, should a principal cancel or terminate a commercial agency before its expiry without any fault or breach on the part of the commercial agent, or without lawful cause, the agent has a right to compensation equal to the resulting damages and his loss of profit. However, the level of damages awarded by the Jordanian courts in such cases is not clear because the law has not laid down the basis for calculating the amount of compensation due for unlawful termination and there are no precedents to help in defining the sums due. Nevertheless, the Jordanian courts will take into consideration the following factors as well as the facts and particular circumstances of each case: .
the existence of a commercial agency;
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the duration of the agreement;
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the annual volume of trading and the net profits realized by the commercial agent arising out of the agency;
.
the particular terms and conditions of the commercial agency;
.
the initial and subsequent promotional activities, storage facilities and efforts of the agent as well as the expenses incurred towards those ends;
.
the particular type of business;
.
the standard of performance and the achievement of the targets, if any are agreed between the parties;
.
the true reasons for termination;
.
the period and manner of the termination notice;
.
the remaining stocks, if any, and the manner of their handling upon termination.
If any compensation is to be granted by the court, the actual damages and loss of profit must be strictly proved by the claimant in accordance with the proper rules of evidence. Usually, calculation of the amount of compensation resulting from unlawful termination is referred to a court-appointed expert involved in a business similar to that of the agreement. Naturally, such experts have to support their figures and assessment before the court and under cross-examination, if necessary.
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Pursuant to Article 15 of the Law, the principal and any newly appointed commercial agent will be jointly and severally liable for purchasing the goods covered by the commercial agency at their cost price or at the local market price, whichever is lower, and to perform all the obligations arising from the commercial agency to third parties to which the previous commercial agent was committed.
Jurisdiction Article 16 of the Law provides that the Jordanian courts will have the jurisdiction to adjudicate in any dispute or differences arising from a commercial agency or the application of the interrelated law. Furthermore, Article 16 of the Law provides that a court action in any commercial agency dispute will not be heard after the lapse of three years from the expiry of the contract or the date of its termination.
Concerns The primary concern in regard to such disputes is that the Law as it stands does not lay down the basis for calculation of the level of compensation payable for unlawful termination and so any final decision is subject to the discretion of experts.
3.3
Jordan Investment Board and Foreign Direct Investment Jordan Investment Board The Investment Law of 1995 established the Jordan Investment Board as a governmental body enjoying both financial and administrative independence. Prior to that, investment procedures were conducted by a department within the Ministry of Trade and Industry. The creation of this organization came about as a result of the government’s realization of the importance of increasing foreign direct investment to Jordan in a bid to create new job opportunities and the need for the transfer of technology. The law had two sections. The first was the investment law that regulates all investment incentives and procedures and the second gave birth to the board responsible for implementing the law and policies. The highest body overseeing the investment law was the Investment Council chaired by the prime minister and having several related ministers as members including the chief executive of the investment board, who also acts as the rapporteur for the committee. The private sector was also well represented on the committee. The council’s main scope of work was discussing all policy issues concerning investment and submitting recommendations to the Cabinet for decisions. Policy issues as a result of the committee and as stipulated in the law are implemented by the Jordan Investment Board. New investment-related laws were submitted to Parliament for approval in 2003. The new laws do not effect the actual investment incentives as much as they regulate and streamline the work of several departments that have links to the investment procedure. The new laws increase the private sector membership on the board of directors that is chaired by the Minister of Trade and Industry. To assist it in meeting its goals, the Jordan Investment Board has four departments and several committees affiliated to it. There is the Research Department that conducts market and sector research and compiles statistics, provides legal advice and provides and updates IT
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services for staff and investors. The Marketing Department promotes the investment opportunities in Jordan domestically and internationally along sectoral lines, attends exhibitions and conducts workshops and missions in countries of interest. The department staff are also responsible for producing the written and visual informative material. The Facilitations Department provides one-stop services for licensing procedures as well as tax and customs exemptions, and the Finance and Administration Department fulfils the internal activities its name implies. All services and materials provided by the board are gratis. According to the Investment Law of 1995, tax and customs incentives are made available to the sectors stipulated in the law. The sectors are industry including IT; hospitals; hotels; convention centres; theme parks; mining and products produced from the Dead Sea, such as cosmetics; maritime and railroad transportation; and the transportation and distribution of water and oil derivatives. Enterprises in these sectors enjoy full customs exemptions on the fixed assets needed for production. They also enjoy income tax holidays of up to 10 years, and 12 years should manufacturing take place within the boundaries of an industrial estate. Generally, the government charges 15 per cent income tax on profits in the sectors listed above. Depending on the geographical location of the enterprise, investors enjoy tax breaks from 25 per cent up to 75 per cent. The government does not charge income tax on profits resulting from exports. There is no discrimination of any type between domestic and foreign investors as the law regards them as of equal standing. Additionally, non-Jordanian investors can enjoy full ownership of their businesses in the sectors stipulated above and have full control over management. Disputes can be referred to local courts or to international arbitration in relevant courts. It is important to note that the Jordanian government has signed bilateral investment agreements with a host of countries guaranteeing investors in Jordan arbitration, repatriation of funds and other rights. The investment process in Jordan is a streamlined process and benchmarked against the practices of many of the developed countries. The process starts and ends in one building, that of the Jordan Investment Board located in one of Amman’s prime business districts, with access to leading hotels and governmental departments. Investors are invited to visit the JIB once they have decided to establish their businesses in the country. They can also visit for any investment-related advice or for studies and statistics in any sector. The JIB also provides free of charge a number of pre-feasibility studies in a number of sectors for those seeking to invest and open to suggestions on which sector to choose. Investors are then directed to the Ministry of Trade and Industry for company registration. The legal unit can provide full advice on company registration and types of companies in Jordan. Investors are
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also provided with a list of private sector lawyers specializing in this field. After this point, licensing, customs and tax exemptions and all other related matters including visas and work permits are conducted through the JIB, either through personal visits or by e-mail, as the JIB has prepared all necessary forms in electronic format. Foreign investors are strongly encouraged to contact the JIB before their arrival. The staff will tailor-make an itinerary according to needs, arrange appointments with relevant private and public sector officials, and visits to industrial estates, provide transportation, meet at the airport and assist through the JIB office and lounge located in the transit area of the airport. Jordan has witnessed increased interest from companies in many countries to establish their investments. They have found that the market access provided by the strategic trade agreements that Jordan has signed are very lucrative. Jordan’s accession to the World Trade Organization, its political and economic stability, modern laws, strong and independent legal system, democratic process and private-sectorled economy opened the door to the signing of the Free Trade Agreement with the United States that came into force in January 2001. This agreement gradually lifts tariffs on goods and services between the two countries over a 10-year period to 2010. Products listed in category A, such as home appliances, can reach US consumers with no tariffs imposed. It is important to note that Jordan is only the fourth country to sign such an agreement with the United States after Israel, Canada and Mexico, and it is thus considered recognition of Jordan’s notable achievements in political, economic and fiscal reforms. Another important agreement with the United States is the Qualifying Industrial Zones (QIZs). This measure came after the signature of the peace agreement between Jordan, the Palestinian National Authority and Israel in an effort to encourage regional economic cooperation. Products manufactured in Jordanian QIZs should have 8 per cent value added from Israel to be allowed entry into US markets, enjoying no taxes or quotas. This has been very lucrative to the garment industry especially in the Far East where quota restrictions hamper large production quantities. Over 70 garment factories have located their businesses in Jordan, increasing exports to US markets from less than USD 9 million in 1999 to over USD 550 million in 2003 and creating a labour-intensive industry for Jordanian workers. Garments produced in the QIZs can be found in major name brand stores in the United States. Of similar importance is the European Partnership Agreement, another strategic trade agreement signed by Jordan. This also allows the competitive entry of Jordanian manufactured and produced goods, attaining rules of content, to European markets. Jordan also enjoys free trade agreements with a number of Arab countries and is currently preparing for the Greater Arab Free Trade Agreement to come into force
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in 2005, which will open up all Arab markets. In addition, Jordan is now in serious consultations with Singapore for the signature of a mutual free trade agreement. Although only 5.2 million in population and with humble natural resources, Jordan offers its investors access to markets of over 700 million consumers in America, Europe and the Arab countries. Its strategic geographic location, solid political, economic, legal and judicial foundations and the publicly announced commitments by the leadership to a market-driven economy have all been factors in the 4.9 per cent growth rate witnessed in 2003. Foreign investors have also been attracted by Jordan’s lifestyle and beautiful and diverse tourist sites. The ancient city of Petra, a UNESCO World Heritage Site, not only stands as a historic monument dating back over 2,000 years but also as a testimonial to the importance of this land’s important business location, as Petra flourished on the ancient North–South trade route. Jerash, only 50 kilometres north of Amman, was one of the Roman Empire’s 10 Decapolis Cities that also flourished on trade. Despite its size, Jordan has 22 public and private sector universities, two world-renowned medical schools and over 55 hospitals, many of them incorporating the latest scientific knowledge and technology. The software development industry is also one of the fastest-growing economic sectors in Jordan. In recent years over 50 companies have been established that produce tailor-made software for insurance companies, banks, hospitals and businesses. Some have been leaders in Arabization while others have established joint ventures with famous software developers like Microsoft. With 18 medical drugs-producing plants, the pharmaceutical sector has been another flourishing area of the economy. Generic medicines produced in these plants have found competitive markets in the Arab world as well as Asia. The home appliance assembly sector has also picked up dramatically in recent years. LG began production a few years ago with a wide array of home appliances, and the Haiier group has recently begun production. JVC also announced the establishment of a large plant in Jordan in 2004. The products of these plants have found competitive markets in the Gulf Corporation Council and North African countries. During 2003, Jordan witnessed increased demand for foreign investment owing to the country’s geographical proximity to Iraq and the historical trade relationship that the two countries enjoy. Accessibility to the vast and potentially rich Iraqi market from a secure environment is highly regarded and especially with the reconstruction process after the war. Investors are increasingly finding that from Jordan they can easily access neighbouring markets as well as those of Europe and America. There are 10 industrial estates in Jordan located in all regions of the country. Some are owned by the private sector while others have public
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sector ownership. Investors have the choice of ownership of the land or renting. Many estates offer construction services for plants. All estates enjoy easy access to population densities and labour for which a minimum wage has been set at USD 120 per month. According to need, investors have the choice of locating their businesses in one of two free zones, one close to Amman and the other in Aqaba as part of the Aqaba Special Economic Zone. Most businesses pay a flat income tax rate of 5 per cent in the latter and have easy access to the port. Since its establishment, the JIB has been responsible for over 2,130 enterprises in the sectors mentioned earlier and having a total investment of over USD 5.6 billion. The majority of these investments are in the industrial sector followed by the hotel sector. Approximately USD 535 million are from Arab countries and USD 1 billion from North America and Europe. Foreign investments in the financial market, which are not included in the JIB statistics referred to above, amount to some 39 per cent of the total equity of the 161 listed companies quoted, which have a total capitalization of some USD 11 billion or 105.2 per cent of GDP. The banking and insurance sectors and other retail entities are not included in the mentioned statistics. It is important to note that JIB’s services continue throughout the investment cycle and do not stop with the establishment of the business. A complete array of streamlined after-care services are provided by the organization. These services and others resulted in the Jordan Investment Board being awarded third prize in the prestigious King Abdullah II Award for Excellence in Government Services and Transparency for 2003.
3.4
Privatization, Liberalization and Adjustment Programmes in Jordan Ahmad Hiyasat, National Electric Power Company
Background During the past decade, Jordan has adopted ambitious economic reform and structural adjustment programmes aimed at transforming the economic structure of the country into one that generates internal and self-sustaining activity. The country’s economic and legal environment has been adjusted, and continues to adjust, in order to create a more open market-oriented economy that is friendly to foreign investment and that activates market forces. Such economic measures aimed at liberalizing the economy, making it more competitive at the regional and international levels and integrating it with the world economy, are being implemented by: . . . . .
lifting subsidies; abolishing price regulations; liberalization of monetary policy; adopting fiscal reform; liberalization of trade policies.
To improve the economic situation further and in response to globalization, Jordan has made remarkable progress towards structural adjustment and is courageously facing the new economic trends. The set of measures leading to structural adjustment included endeavours to access global markets through signing a bilateral investment agreement with the United States, and concluding an association agreement with the EU in 1997. Jordan is currently a member of the World Trade
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Organization (WTO), and opted to implement the Greater Arab Free Trade Area. Moreover, in October 2000, Jordan signed an agreement for the establishment of a free trade area with the United States. Parallel to the economic stabilization and liberalization efforts introduced by the structural adjustment programmes in Jordan, a set of legal measures has been implemented to modernize existing laws in addition to introducing new laws. These are: .
National Economy Protection Law (3/1992);
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Investment Promotion Law (16/1995);
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Income Taxation Law (57/1995);
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Companies Law (22/1997);
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Stock Exchange Law (23/1997);
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Customs Law (20/1998);
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General Electricity Law (13/1999);
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Privatization Law (25/2000);
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anti-trust laws;
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other laws.
Moreover, among the legal measures introduced to create a more favourable investment environment are the provisions of these laws and regulations that allowed foreign parties to participate in the privatization process where foreign and local investors are equally treated according to the prevailing legislation in the country. Foreign investors can, in most sectors, acquire up to 100 per cent of a company’s shares. Furthermore, in order to liberalize the economy and increase the flow of capital, Jordan embarked on an ambitious privatization programme in the second half of 1996, which was the cornerstone of the structural policies agenda, the main goals of which were expanding the participation of the private sector in the economy and activating the role of the market economy and competitiveness. In this context, the government approved a National Privatization Strategy that aimed at achieving specific goals including: .
raising efficiency and productivity in a competitive manner;
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increasing private investment in infrastructure;
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developing domestic capital markets and consolidating public finance;
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attracting local and foreign investments, technology transfer and know-how;
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alleviating the Treasury’s debt burden.
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Institutional frameworks The privatization programme in Jordan is an organized, sustainable methodology supported by a strong political will, aimed at providing the appropriate environment for sustainable economic development. Privatization redefines the role of both the private and public sectors, where the government reduces its involvement in direct production activities and focuses on its core agenda of organization, regulation, control and provision of social services, while protecting the environment. The private sector, on the other hand, away from monopoly, will be involved in managing and operating production activities on commercial and financial bases. Furthermore, in order to regulate and institutionalize the privatization process in Jordan, the Executive Privatization Unit (EPU) was established as a governmental office within the Prime Ministry in 1996, entrusted with the main tasks of coordinating, directing, managing and implementing the privatization process in an effective and transparent manner. The Higher Ministerial Committee was established to supervise the unit, chaired by the prime minister, with key economic ministers and heads of the concerned departments and institutions as members. The Higher Ministerial Committee was delegated the authority to approve the privatization policy, objectives and programmes. On 2 July 2000, Privatization Law No. 25 (2000) was endorsed to provide for the legal and institutional frameworks that currently govern the programmes. As stipulated by this law, the Privatization Council was formed as the governing body of the privatization programme as successor to the Higher Ministerial Committee. The Executive Privatization Commission (EPC) came into existence to become the actual successor of the EPU. The EPC is currently the government’s arm in implementing the privatization programme. The Privatization Law also mandates the creation of the Privatization Proceeds Fund, where all privatization proceeds shall be deposited and utilized, by virtue of the law, to settle the government’s debts, finance feasible socio-economic projects and settle issues related to employees and workers of privatized enterprises in terms of rehabilitation, training and compensation. Attracting new investors to engage in major production projects and utilities and creating more job opportunities, while safeguarding the rights of employees, are goals of the privatization programme in Jordan. The expansion of the scope of certain enterprises and the entry of new firms to the privatized sectors created new job opportunities and consequently contributed to alleviating part of the unemployment problem. In this context, the government has taken serious measures to minimize the impact of privatization on labour. The privatization programme in Jordan has been gathering steam since it was launched in 1996 and has gained further momentum since
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1998. It is worth mentioning here that the success of the privatization programme in Jordan depends largely on the various privatization approaches and methods followed. Each sector has its own intricacy, specificity and particularity. Hence, it is vital to study each transaction as an individual case, opting for the best privatization strategy that will yield maximum socio-economic benefits. In implementing the privatization programme, a multi-track approach is usually adopted in order to achieve the goals. The main types of privatization followed in Jordan encompass partial and/or total sale; divestiture of government shares; concession agreements; leases and investment contracts; management contracts; and BOT and its derivatives. According to the nature of the enterprise, the best privatization method is adopted. To enhance the privatization process and warrant its success without defeating the purpose of its initiation, the way was paved for the creation of a number of regulatory commissions, such as the TRC and the ERC, entrusted with monitoring the performance of the enterprises in the post-privatization era while safeguarding the rights of both investors and consumers.
Types of privatization adopted The Government of Jordan (GoJ) has adopted a multi-track privatization approach in order to avoid the risks incurred when only one method is applied. In implementing such an approach, and according to the specificity and particularity of each transaction, one of the following methods applies: .
Total or partial sale. An asset sale is the transfer of ownership (whole or part) of government assets, commercial-type enterprise or functions to the private sector. In general, the government has no role in the financial support, management or oversight of a sold asset. However, if the asset is sold in an industry with monopolistic characteristics, the government may regulate certain aspects of the business. There are many examples of this type of method in Jordan, eg Jordan Cement Factories, Jordan Telecommunications and the RJ Duty Free Shop.
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Concessions. The government grants a concession agreement with specific terms for a certain period of time to the private sector to build, exploit and operate a particular enterprise pursuant to the concession.
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Lease contracts. Under this contract the government remains the sole owner of the enterprise but the private sector operates it for its own benefit for a certain fee, eg Aqaba Railway and Ma’an Spa Complex.
Privatization, Liberalization and Adjustment Programmes
.
.
221
Management contract. The operation of a facility is contracted out to a private company, with the government retaining ownership of the entity. An example of such a management contract is the Water Authority of Jordan. Private infrastructure development and operation models: – Build–Operate–Transfer (BOT). The private sector designs, finances, builds and operates the facility over the life of the contract, at the end of which ownership reverts to the government. – Build–Transfer–Operate (BTO). The private sector designs, finances and builds the facility and then transfers it to the government while retaining the right to operate it for a specific period of time. – Build–Own–Operate (BOO). The private sector designs, finances, builds, retains ownership of and operates the facility. – Build–Operate–Own–Transfer (BOOT). The private sector builds the project, owns it for a specific period, operates it and then relinquishes it to the public sector.
3.5
Qualifying Industrial Zones Export and Finance Bank
Introduction Qualifying Industrial Zones (QIZs) – a concept proposed by the United States – represent an exceptional opportunity to gain quota- and dutyfree access to the US market. In 1997, the governments of Jordan and Israel entered into a written agreement relating to the establishment of Al-Hassan Industrial Estate in Irbid as Jordan’s first QIZ. Jordan was among the three countries in the region classified for QIZ status. There are 11 qualifying zones throughout Jordan today, out of which seven are in operation including one sub-zone. As of the end of 2003, investors – mostly from Asia, the United States and Israel – have invested JOD 480 million and created around 26,300 job opportunities for Jordanians who work in more than 72 factories producing exclusively for the US market. US officials see these zones as a tool designed to encourage peace in the region and to stimulate the Jordanian economy by encouraging Jordanian exports to US markets. Economists and investors agree that these zones increase exports, and statistics show Jordan QIZs’ exports surged by 47 per cent in 2003 to reach JOD 563.9 million.
QIZ criteria QIZs are areas designated by the Jordanian and Israeli authorities and approved by the US government, and products of these zones are exported quota- and duty-free to the US market. As a result, exported QIZ products have a price advantage against similar products exported to the US market from other countries. A product is eligible for duty-free entry if it is a new and different article of commerce that has been grown, produced or manufactured in the zone, and if at least 35 per cent of the appraised value of the product consists of the cost or value of materials produced plus the direct cost of processing operations
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performed in the QIZ. A product is qualified under this agreement by one of the following methods: .
At least 11.7 per cent of the final product must be added by the Jordanian manufacturer in the QIZ and 8 per cent by the Israeli manufacturer (7 per cent for high-tech products). The remainder of the 35 per cent can come from QIZ Jordan, Israel, West Bank/Gaza Strip or the United States. As for the remaining 65 per cent production, expenditure can be from anywhere in the world.
.
Jordanian and Israeli manufacturers must each contribute at least 20 per cent of the total cost of production of the QIZ product.
QIZ manufacturers are allowed to mix and match between the first and second method in order to qualify their product. A Jordanian–Israeli joint committee with two co-chairs, each appointed by the respective government, and a US observer must approve all the eligible products, satisfying the requirements of the QIZ agreement and the rules of origin, thus granting duty-free entry to the United States or cancelling it if the requirements are no longer met. The approval is renewed every 12 months after the verification of the approval conditions.
Investments in QIZs During 2003, QIZs flourished in the kingdom such that by the end of the year the total number of QIZ projects reached 72 and total investments in QIZs were JOD 480 million. There are 11 QIZs located throughout Jordan: three located in publicly run industrial estates, seven in privately owned industrial estates and one sub-zone. However, only seven QIZs are currently in operation. Most QIZs are owned and operated by entrepreneurs from China, Taiwan, Korea, India, Pakistan, and the Philippines. Nevertheless, some Arab investors have also invested in QIZ Jordan. The three public zones are: .
Al-Hassan Industrial Estate. This was the first industrial estate to be designated as a QIZ, in 1998, and has a total area of 1,005,000 square metres. By the end of 2003, there were 21 QIZ projects in Al-Hassan Industrial Estate with JOD 124 million in investments, which represents 26 per cent of total investments in QIZs. It also enjoys the largest share of QIZ exports, which amounted to 47 per cent last year.
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Al-Hussein Ibn Abdullah II Industrial Estate (Al-Karak). By the end of 2003, there were three projects while the total amount of QIZ investments had increased significantly to reach JOD 55 million.
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Aqaba International Industrial Estate (AIIE). Designated as a Special Economic Zone (SEZ), AIIE registered enterprises will be subject only to a flat 5 per cent income tax on profits, and will enjoy duty-free imports including capital equipment, raw materials and other consumables. Moreover, imported materials are not subject to customs duty. There are two steel-structured factories within this QIZ: one produces mattresses and the other produces plastic bags for shipping purposes. Although both companies are in the QIZ, they do not play a part in QIZ activities, as they do not currently export to the United States, but have the option to meet the QIZ status in the future.
The other eight zones are privately owned and operated: .
Al-Tajamouat Industrial City. The industrial park is considered the largest QIZ in terms of investments and number of projects, as it is home to 28 companies with an enormous investment of JOD 180 million, which represents around 38 per cent of total investments in QIZs. By the end of 2003, 9,227 local employees were working at Al-Tajamouat Industrial City. In addition, based on the first 11 months of 2003, Al-Tajamouat Industrial City’s exports up to the end of 2003 are estimated to reach around JOD 112 million, an impressive increase of JOD 39.1 million compared to the same period a year earlier.
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Ad-Dulayl Industrial Park. Located in Central Jordan with a total area of 720,000 square metres, Ad-Dulayl Industrial Park has a strategic location that provides it with ready access to city services and an abundant, qualified labour pool. By the end of 2003, the total number of projects had increased to 14 with a total investment capital of JOD 75 million.
.
Cyber City Park. This is one of the largest information technology and light industrial parks with QIZ and special export free zone (SEFZ) status. Goods imported into the industrial park are not subject to customs duties, and revenues from projects within the free zone along with salaries of non-Jordanian persons are exempt from income and social services taxes for 12 years. Currently, there are three projects in Cyber City with a total capital of JOD 18 million and employing 740 Jordanians. Boscan Middle East Investment Ltd (BMEI), a holding group with established shareholders from the Far East and the Middle East, is engaged in developing the Cyber City project. BMEI previously undertook two activities: luggage and garment manufacture; however, the luggage division, which used to manufacture a variety of soft-sided travel luggage, is currently closed.
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225
.
Al Qastal Industrial Park. This is a privately owned industrial park with a total area of 4,000,000 square metres. It currently has two privately owned Jordanian projects: Prime Five produces knitted garments, yarn and fabric, and United Textile Group produces woven garments.
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Gateway Industrial Park. Gateway Park enjoys the same privileges as Cyber City, since it also has both QIZ and free zone status. The park now encompasses one factory called Micron Jordan, for jewellery manufacturing, which started operating in March 2003. There were 40 employees working at the park during 2003. This number is expected to increase to 70 in the near future. Gateway’s management will be establishing new environmentally friendly factories to produce medical equipment, air-conditioning systems and textiles.
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Hashemite University. This is an industrial park located near Zarqa that is not yet constructed. It is situated 30 kilometres east of Amman with a total area of 1,500,000 square metres.
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Al-Mushatta Qualified Industrial Complex. Since it has been designated as a QIZ, Al-Mushatta has not yet started its construction process. The Canadian International Development Agency (CIDA) gave Al-Mushatta a grant of JOD 407,675 to help it with the technical studies and consultancy work undertaken by Canadian firms. Currently, Al-Mushatta’s management is negotiating a soft loan agreement with CIDA. Unlike other QIZs, AlMushatta will be focusing on the pharmaceutical and information technology sectors rather than garments.
.
El Zay sub-zone. This is part of El Zay Ready Wear Manufacturing Company, a Jordanian public shareholding company specializing in the manufacture of high-quality men’s suits. The company is located in Russaifeh, with an investment capital of JOD 9 million, and with 621 Jordanian employees. Based on the first 11 months of 2003, the company’s exports up to the end of 2003 are expected to reach around JOD 5.13 million compared to JOD 3.22 million achieved by the end of 2002.
Macro effects of QIZs QIZs aim at developing the social and economic life in Jordan and have affected the economy at the macro level by increasing job opportunities for many unskilled labourers as well as increasing foreign currency earnings due to the increase in exports. On a broader level, QIZs have created more than 26,300 Jordanian jobs, as many restaurants and tourist attractions have benefited from QIZs by catering for QIZ employees.
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Exports QIZ exports to the United States have been growing substantially over the years; in 2002 they accounted for about 25 per cent of the kingdom’s total exports compared to 15.5 per cent the year before. QIZ exports for 2003 were running at a record pace of JOD 563.9 million, a 47 per cent increase from the previous year. Hence, the United States is increasingly becoming Jordan’s largest export market (see Figure 3.5.1 and Table 3.5.1). Moreover, Al-Hassan Industrial Estate still enjoys the largest share of QIZ exports; it achieved JOD 263 million compared to JOD 112 million in exports achieved by Al-Tajamouat in 2003.
Source: Jordan Investment Board
Figure 3.5.1 QIZ exports to the United States (* = estimate) Table 3.5.1 Exports to the United States QIZ zone
2002 JOD million
2003* JOD million
Change %
Al-Hassan Industrial Estate
197.1
263
33
Al-Hussein Ibn Abdullah II Industrial Estate (Al-Karak)
56.2
81
44
42
59
40
72.9
112
54
Ad-Dulayl Industrial Park Al-Tajamouat Industrial City Cyber City Al Qastal El Zay
Total
12
42
250
0.73
1.8
147
3.22
5.13
59
384.15
563.93
47
* approximate figure for the end of 2003 Source: Jordan Investment Board
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Employment By the end of 2003, 26,313 locals were working at QIZ factories, and the percentage of local workers at QIZs had soared from an initial 35 per cent to 65 per cent. The percentage of expatriates is currently around 35 per cent, most of whom come from China, India and Pakistan, working exclusively in QIZs. For many investors and manufacturers within the QIZs, recruiting foreign labour has many advantages, as foreign employees are more energetic and can work harder and longer than Jordanian workers, who look for higher wages and reduced working hours. Nevertheless, these QIZs offer significant opportunities for young Jordanians, especially women, to gain experience in dealing with the latest technology in industry and commerce and increase the potential of the younger generation in finding better job opportunities and career advancement. To enhance the recruitment of local workers and reduce the foreign labour presence locally, the government is starting to assume a larger role in improving the quality of vocational training centres. The project is one of the Ministry of Labour’s strategies to reduce the 15 per cent unemployment rate by encouraging training and providing job opportunities for Jordanians living in the kingdom’s remote areas, which will reduce the transportation costs borne by investors. The recruitment programme will enhance the skills of Jordanian employees and give them the experience needed to take over supervisory positions. In addition, this will decrease the cost of providing foreign employees with accommodation and the trouble of obtaining work permits, along with paying any additional fees.
Obstacles facing QIZ companies Al-Aqsa Intifada, the events of 11 September 2001 and the war in Iraq caused major cancellations of orders for QIZ factories. Israel has tightened its security measures and border control, which made tracking the movement of products to and from Jordan more difficult. As a result, prospective investors became more reluctant to invest. Although QIZ factories are showing signs of growth, some companies have failed to recover from the unsettling political events, owing to inexperienced management, poor feasibility studies, insufficient marketing, weak financial management and a fragile infrastructure. Some QIZ companies are reluctant to give out information regarding their financial status in terms of investment capital, exports and number of employees, along with the nationality of their owners. In addition, a number of QIZ factories have faced closure, and production was brought to an end as a result of significant losses caused by high production costs, delays in logistics, lack of supporting services and delays in government approvals. Other reasons might simply be the result of the improper
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screening of investors who decide to leave the country, taking their profits with them. The US administration is considering the creation of a QIZ in Turkey, which would present a threat to QIZs in Jordan, as Turkey has greater experience in the production of textiles and clothing. The QIZ proposed by the State Department as a result of President Bush’s joint declaration for development of a strategic economic partnership with the previous Turkish Prime Minister, Bulent Ecevit, during his visit to Washington last year, includes products vaguely defined as high-tech to be exported to the United States without quotas and custom taxes but excludes textiles and apparel, for which Turkey has vast resources and capabilities; textiles is a sensitive sector for the United States.
Future outlook While garment exports from Jordan are currently competitive, and will remain so over the next few years, QIZ survival and growth are heavily dependent on diversification of their industries. The long-term presence of QIZs in Jordan requires the development of high-quality products enabling companies to compete in the export market. In 2005, the effects of phasing out textiles and clothing quotas along with the abolition of the Multilateral Fibre Agreement (MFA) will provide other countries with substantial utilized production capacity a definite edge over Jordan, by increasing their access to the previously protected markets of industrialized countries. By 2005, Jordan will face tougher competition forcing investors in the QIZs to diversify out of garment production and target niches within the clothing industry. Unlike China, Jordan does not have its own textile industry nor India’s and Pakistan’s access to domestically produced fabrics. Moreover, China also has abundant cheap labour and will benefit from Hong Kong’s well-established financial and marketing expertise to produce high-tech designer-label garments. In addition, South Korea also has the benefit of its own raw materials along with its high productivity and overall efficiency. Such competitiveness might cause small QIZ companies to close as they may not be able to benefit from the economies of scale that might be practised and enjoyed by larger QIZ companies. Large-scale QIZ companies could produce significant quantities with good results and lower costs. However, the number of these large companies in Jordan is limited. Therefore, there is a belief that consolidation among QIZ companies in Jordan is essential. Moreover, Jordanian QIZs are expected to utilize the time they have available to position themselves better in their export markets and to work on exploring exporting opportunities in European countries.
3.6
Jordan Free Zones Ali Madadha, Jordan Free Zones Corporation
Introduction Jordan stands unique in the region with its democracy, political stability and free economy. These factors make the kingdom an ideal place for investors, while its strategic location at the crossroads of three continents and its comprehensive and ever-expanding infrastructure have qualified the country to play an eminent role as a major financial and trade centre. Jordan has also adopted several liberalization measures to serve as incentives for foreign investment in the various economic and development programmes and projects. These measures include: .
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investors and owners of projects in Jordan free zones enjoying exemption from income tax on their profits for 12 years following commencement of their projects; the salaries of their non-Jordanian employees being free of income and social services taxes; exemption of all goods imported into or exported from free zones from import fees, customs duties and all other fees and taxes, except service charges and rents; buildings and other constructions erected in the free zones being exempted from licence fees and buildings and land taxes and from rents for two to three years, as agreed; freedom to repatriate capital invested in the free zones and to transfer profits arising from them according to existing laws.
Jordan Free Zones Corporation Jordan Free Zones Corporation (JFZC) was established under the terms of the Free Zones Corporation Law No. 32 of 1984 to carry out the following tasks and duties: . .
to establish free zones; to establish warehouses, stores and any other establishments necessary for managing and developing the free zones in such a
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manner as to ensure their growth and expansion, including joint venture free zones; .
to manage, invest in and develop free zones and gear them to serve the national economy and promote international trade exchange, transit trade and export-oriented industries;
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to implement the conditions and provisions relating to customs control and foreign exchange control and set up any establishments necessary for this purpose;
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registering establishments and companies at any free zone;
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issuance of licences and approvals related to exercising economic activities at the free zones in accordance with the provisions of the law, regulations and instructions issued in this regard;
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protecting and preserving the environment in the free zones and ensuring continuous development in accordance with standards and foundations to be determined pursuant to a regulation to be issued for this purpose, provided that the level of such standards and foundations is no less than that applicable elsewhere in the kingdom. For this purpose the Corporation shall exercise the power of the Ministry of Environment, and the minister shall exercise the power of the Minister of Environment in accordance with the inforce Protection of Environment Law.
Objectives of the Free Zones Corporation The objectives of the Free Zones Corporation are: .
attracting local and foreign capital and employing it in the country in various investment activities;
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introducing technology and technical skills in the kingdom;
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employment of the local savings and investing them in industry, trade and various economic activities established in the free zones;
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activating the transport sectors and other services;
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providing work opportunities for Jordanians and enhancing their skills;
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developing new areas in the kingdom through the establishment of investment projects;
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encouraging export industries and activating transit trade;
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promoting the unique role of the private sector in establishing private and joint free zones, which use local raw materials in the production processes;
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supporting the national economy with hard currency to bolster the country’s balance of payments;
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strengthening the upstream and downstream links of the commodity and service production sectors in the free zones with their production complement in the multifarious economic activities in the kingdom so as to develop the national economy.
Affiliate branches of JFZC The following free zones have been established across the kingdom: .
Zarqa Free Zone, the main branch of JFZC, was established in 1983, has expanded to in excess of 5.5 million square metres and accommodates a range of investment activities across all sectors of the economy. Car shows and commercial fairs are also held here.
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Aqaba Free Zone, which was subsequently annexed to the Aqaba Special Economic Zone in 2001.
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Queen Alia International Airport Free Zone, which caters to high-technology light industries.
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Sahab Industrial Estate, which was established to serve various industries.
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Al-Karak Free Zone, which has only recently been inaugurated at Al-Hussein Ibn Abdullah II Industrial Estate in Al-Karak Governorate, on an area of 150 donums, with all infrastructure facilities, in order to serve and attract local and foreign investments in the southern part of the kingdom.
The private free zones Through the Corporation’s endeavours to activate the role of the private sector in economic development, many private free zones have been set up. Most of these are fully operational in various parts of the kingdom. They include huge investment projects such as the joint Jordanian– Indian Company for Manufacturing Phosphoric Acid and the joint Jordanian–Japanese Company. Additionally there are the Jordan Bromine Company, Industry and Information Technologies Parks Development Company, Jordan Media Company, Masbookat Al-Sahra for Movies Production, International Diamond Investment Company, private free zones at Jordanian airports, and Jordan Duty Free Shops Company, as well as agricultural and industrial private free zones. A number of free zones are also under establishment as at the end of 2003, including Jordan Magnesia Company, Jordan Gateway for Multi-projects Company and King Abdullah II Design and Development Centre Private Free Zone.
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Factors integral to the success of the free zones These factors are: . . . .
political stability and security in Jordan; the country’s location; the availability of skilled labour; and a complete and ever-expanding infrastructure.
Part Four
Aqaba Special Economic Zone
4.1
Aqaba Special Economic Zone: An Introduction Aqaba Special Economic Zone Authority
Background The Aqaba Special Economic Zone (ASEZ) is Jordan’s gateway to global commerce and a premier tourist destination. The ASEZ is strategically located at the crossroads of four countries and three continents. Situated on the northern tip of the Red Sea on the Gulf of Aqaba, the ASEZ covers approximately 375 square kilometres, and extends to the land borders of Saudi Arabia and Israel, and the territorial waters of Egypt.
History Aqaba has always stood at the crossroads of culture and trade. Human habitation of the city dates back to 4000 BC, a result of the city’s strategic location at the junction of trading routes between Asia, Europe and Africa. The city, once known as Ayla, grew in regional importance as a northern port on the Red Sea and as a centre for copper smelting. In Roman times, the great Via Nova Traiana passed through Aqaba, connecting Damascus with Egypt. The Aqaba Special Economic Zone was inaugurated in 2001 as a bold and timely initiative by the Government of Jordan to ensure that Aqaba’s commercial and cultural prominence continues into the 21st century. With this transformation, Aqaba is recapturing its historical role as a regional hub for trade, tourism and culture, and offers global business opportunities in a competitive location with a high-quality lifestyle.
Aqaba Special Economic Zone Authority The Aqaba Special Economic Zone Authority (ASEZA) is the financially and administratively autonomous institution responsible for the management, regulation and development of the ASEZ. The ASEZA is
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governed by six ministerial-level commissioners, each responsible for a major area of regulatory or operational activity. ASEZA is a serviceoriented organization offering one-stop assistance covering all investment needs. The law, regulations and board instructions that govern the ASEZ are made public in Jordan’s Official Gazette. The ASEZA board of commissioners is committed to stating publicly the rationale for major decisions that impact the living and business climate in Aqaba. ASEZA services and staff are available to every business in the zone, whether a small retail establishment, manufacturing operation or large tourism venture.
Benefits of doing business in the ASEZ The benefits are: . . . . . . . . . .
no foreign equity restrictions on investment in tourism, industry, retail and other commercial services; regional multi-modal transportation hub with a full service seaport and international airport; 5 per cent flat tax on business income, except banking, insurance and land transport services; no tariffs or import taxes on imported goods for individual consumption and registered enterprises; no land and property taxes for registered enterprises on utilized property; no foreign currency restrictions; full repatriation of profits and capital; streamlined labour and immigration procedures; multi-use commercial, tourist and residential environment; duty-free environment.
Market access The ASEZ provides easy access to regional and world markets through its location at a strategic crossroad of international trade. Investors in the ASEZ can also benefit from the preferential trading relationships that Jordan maintains with other countries. Jordan signed the US– Jordan Free Trade Agreement, making it the fourth country to enjoy a free trade relationship with the United States. Jordan has also concluded an association agreement with the European Union countries and is presently a member in the Arab Free Trade Agreement. Jordan’s active participation in the global trading system provides preferential business and trading benefits for businesses located in the ASEZ. Through another agreement with the United States, Jordan has
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established Qualifying Industrial Zones (QIZs) that provide duty-free and quota-free access to the US market. The Aqaba International Industrial Estate (AIIE) is a designated QIZ within the ASEZ. The ASEZ offers businesses an internationally recognized and respected manufacturing, trading and services environment. In April 2000, Jordan acceded to the World Trade Organization (WTO), highlighting Jordan’s commitment to market liberalization, privatization and liberalized telecommunications and financial services. Jordan is among the most advanced countries in the area of intellectual property rights protection and has passed legislation that protects copyrights, patents and industrial designs.
Unique tourism and cultural experience The ASEZ offers a unique tourism and cultural experience. Aqaba is the only historical city on the Red Sea coast of Jordan, offering a glimpse into the past through the Mamluk Fort and remains of the oldest purpose-built Christian church in the world. Aqaba’s natural beauty is punctuated by the red mountains, sparkling indigo waters and sandy beaches, the northernmost natural coral reefs in the world, and spectacular sunsets. Aqaba is an ideal base from which to explore the region’s other natural and historical wonders, including the rose-red city of Petra, the magnificent desert expanse of Wadi Rum, and many biblical and historical sites. A mild climate makes Aqaba a year-round haven for tourists, visitors and residents.
The ASEZ Master Plan In 2002, ASEZA adopted a new Master Plan, which will help promote and stimulate investment in the region. The plan is a comprehensive vision that defines long-term development strategies for growth in the ASEZ. The plan establishes goals and policies to sustain coordinated development throughout the area with respect to land use, zoning, density and design guidelines to simplify and streamline the planning approval process. The new Master Plan removes development barriers and encourages investment in industrial and port activities, urban tourism, residential development, commercial and retail ventures, academic and institutional development, coastal communities and recreational and openspace facilities. To date, detailed planning has been developed in five special areas: Aqaba town, the port areas, the coral coastal zone, the southern industrial zone and the airport industrial zone. A list of permitted uses for each special area has been defined and is available from ASEZA’s Physical Planning Directorate.
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Currently, all development in the region must follow the ASEZA General Building Regulations and Design Guidelines. Aqaba town The town of Aqaba is a desert and coastal oasis, which blends traditional and contemporary architectural and cultural elements to create a unique environment. The new Master Plan for Aqaba town was developed to complement the existing configuration of the city, while introducing new development opportunities for investors. Development in the town will centre around the Corniche, a continuous pedestrian promenade along the waterfront. Areas of future opportunity include the conversion of the main port to a mixed-use community containing retail, commercial, residential, educational and recreational uses, with the creation of a mixed-use tourist and residential development, the expansion of two urban tourist zones along the waterfront, and the introduction of a mixed-use retail and commercial development zone along Sharif Hussein Boulevard. Port areas The Aqaba port areas consist of three locations: the main port, the container port and the southern industrial zone port. Main port The Master Plan calls for the gradual shift south of the existing main port facilities in order to consolidate these industries into a common area. Currently, these port activities are being undertaken in three different locations, and merging them will make the port more functional and efficient. When this occurs, the existing main port will be transformed into a new, urban, mixed-use waterfront district. Future plans for this new waterfront district will contain a retail and entertainment complex, centred around a new inner harbour. Here cruise ships and ferries will dock, there will be a public walkway along the waterfront and people will be able to sit outside and enjoy waterfront cafe´s. The Master Plan for this district will create opportunities for a variety of waterfront restaurants, retail shops, entertainment facilities, residential and hotel development, cruise ship and ferry terminals and a customs centre. As part of this plan, the existing Main Port warehouses and outside storage areas will eventually be converted into a business incubator complex, which will encourage the growth of new international research, development and trading companies, or any suitable complementary mixed-use development, fostering the growth of new business in the ASEZ.
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Container port Currently, the container port is being expanded and upgraded to handle the increased demand for containerized cargoes. The capacity of the container port is being expanded with longer berths, a reorganized dockyard and more sophisticated equipment. The area surrounding the container port has now been zoned for warehousing, distribution, light industrial and vehicle-staging activities to support the existing land uses. A newly relocated coastal road bypasses the container port area, allowing safe passage of traffic to tourist areas along Aqaba’s southern coast. Southern industrial zone port The industrial port, located on the waterfront in the southern industrial zone, will be expanded in the future to include a new multi-purpose jetty and terminal. Additional areas have been designated for the relocation of the phosphate and other port facilities from the main port to the industrial port. Coral coastal zone The coral coastal zone is located along the Gulf of Aqaba between the Marine Sciences Centre and the Royal Diving Club. Private-sector-led development is currently transforming Aqaba’s coral coastal zone into a new resort community with a new marina, residential development and hotel and entertainment facilities. The development scheme for this area utilizes proper planning methods to ensure viable development parcels, protection of the beach and coral reefs, and encouragement to the incremental growth of a world-class resort community: .
Land may be leased for a period of up to 50 years, renewable under special circumstances.
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Land may be purchased for hotels, health, educational, residential and commercial buildings, including multi-use tourism complexes, warehouses and public service facilities. In this case, a land transfer tax will be collected, where 4 per cent is paid by the seller and 6 per cent is paid by the buyer.
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Land maybe also purchased for industrial uses only in the Aqaba International Industrial Estate (AIIE).
Southern industrial zone A natural mountain buffer separates the coastal tourist area from the southern industrial zone, which is located adjacent to the border with Saudi Arabia. This heavy industrial zone consists of an industrial area along the southern industrial zone port, adjacent to the industrial port facilities, and an upper expansion area on a plateau overlooking the lower industrial area.
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Reorganization of existing industrial parcels in the lower industrial area will improve vehicular circulation and will add more development sites and capacity. This includes a proposed railway terminal and a lower loop roadway. New access roads and extended utilities systems are planned to service the industrial expansion area. Airport industrial zone The airport industrial zone is located adjacent to the Aqaba International Airport and north of the main town. This site contains a vast area of flat land perfect for industrial facilities. A relocated airport road will provide highway access to the newly constructed Aqaba International Industrial Estate, designated as a Qualifying Industrial Zone with dutyfree and quota-free access to the US market. Land uses in this zone include warehousing, logistics, distribution, light manufacturing, high-tech industries, showrooms and smart-office complexes. Opportunities exist for airport-related business activities, including air cargo services and aircraft maintenance services requiring direct runway access. Environmental zones In addition to five development zones, the Master Plan includes designated environmental zones to protect and preserve natural areas and locations of historic and cultural significance: .
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Coral reserves. Three coral reserves protect the best coral reefs along the coral coastal zone. These reserves extend from a line 350 metres out into the water from the mean waterline to a line 50 metres inland from the mean waterline. Beach protection zone. The beach protection zone limits development in an area from 50 metres to 150 metres inland from the mean waterline to natural landscaping and certain recreational facilities. These limits protect the natural environment, water quality and health of the coral reefs. Archaeological reserves. Archaeological, historical and cultural reserves protect and buffer significant sites of cultural importance. New archaeological discoveries and their preservation are important to Aqaba’s attraction as a tourist destination. Natural area reserves. Natural area reserves protect mountain areas, scenic ridgelines, upper valleys and desert areas that have significant views or habitats.
4.2
Aqaba Special Economic Zone: Modern Infrastructure and Services Aqaba Special Economic Zone Authority
Introduction Aqaba’s modern infrastructure and services are the key catalysts for successful business ventures in the ASEZ. A highly effective multimodal transportation system links the ASEZ to the rest of the world via sea, air, road and rail. High-speed data and voice networks are ideal for firms engaging in international commerce, as well as in high-tech products and services.
Transportation The port of Aqaba The port of Aqaba is the anchor of the multi-modal transportation network in the ASEZ. The port facilities comprise bulk cargo (main), container and industrial terminals. The port offers a total of 23 berths that can accommodate different types of cargo (dry bulk, liquid bulk, conventional cargo, container, ro-ro and passenger simultaneously) up to 406,000 dwt and a maximum draught of 24 metres. The port can also accommodate all vessels of Panamax size to a maximum of 75,000 dwt. The approach to all berths is deep with a sand bottom and no obstructions close to shore. The port is equipped with gantry cranes, mobile cranes (1–120 ton), bulk cargo elevators, grain evacuators, vacuum extractors and cement-pumping machines. The port also maintains open and covered storage areas for bulk cargo, and power points for the supply of electricity to refrigerated containers.
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The port enjoys efficient, fast, safe handling and sufficient storage capacity, with efficient truck service and a network of modern highways connecting Aqaba with other cities in Jordan and neighbouring countries. The port operates 24 hours a day, seven days a week, 365 days a year with the exception of two days: Eid Elfiter and Eid Eladha. As part of the new risk-base system for control on food imports, ASEZA has established a refrigerated food inspection centre within the port, allowing for cargo examination and aseptic portion sample collection for reefer food containers. The port of Aqaba has one of the best-equipped shore radio stations in the Middle East. The coastal radio station is operational 24 hours a day. It transmits weather forecasts twice per day, and provides telephone, telex and telegraph services to ships in the Red Sea, Indian Ocean, Arabian Sea and Atlantic Ocean. King Hussein International Airport King Hussein International Airport is located inside the ASEZ and offers passenger and freight transportation to Amman and international destinations. The 3,000-metre runway can accommodate all classes of wide-body commercial aircraft. The airport has recently witnessed upgrades to its passenger terminal at a total budget of JOD 1 million. Further upgrades and expansions were under way at the end of 2003, mainly the building of a new cargo terminal at a budget of JOD 14 million and expansion of the taxiway and apron. Planned warehousing facilities will augment the airport’s freight-handling services. Business opportunities exist in logistics, trans-shipment, aviation services and aerospace industries. Road networks An 8,000-kilometre modern highway system criss-crosses Jordan, connecting Aqaba to surrounding countries and Europe via Syria and Turkey. The Desert Highway is the principal four-lane transportation route between Aqaba and Amman, with connecting roads leading east to Saudi Arabia and Iraq. The Dead Sea Highway provides access along Jordan’s western border to the resorts and mineral-processing centres on the Dead Sea. The Hijaz railway Aqaba is also accessible by train along the 677-kilometre Hijaz railway, with dedicated lines for hauling phosphates. Planned rail extensions will further increase Aqaba’s accessibility in coming years.
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Telecommunications Aqaba’s telecommunications infrastructure caters to the needs of businesses requiring global broadband voice and data connectivity. Jordan Telecom (JT), 40 per cent owned by France Telecom, offers reliable direct dial service throughout the kingdom via microwave relay, coaxial and fibre-optic cable. JT also owns and operates three satellite earth stations, connecting the ASEZ to the rest of the world. The ASEZ is an ideal location for businesses requiring high-speed Internet connectivity. The Fibre-Optic Link Around the Globe (FLAG) network is the cornerstone of Aqaba’s Internet infrastructure. This network links 75 per cent of the world’s population using 100,000 kilometres of submarine cable, with a node located in the ASEZ. This dedicated Internet network supports error-free data transmission between Jordan and the rest of the world that will expand e-commerce and other Internet applications. Jordan has a highly advanced mobile communications network, built upon the most advanced technology available from Motorola and Ericsson. There are currently two mobile telephone service providers in Jordan – Fastlink and MobileCom. Both offer a wide variety of services including Wireless Application Protocol (WAP), prepaid and subscription Global System for Mobile Communications (GSM) services, wireless data links, and General Packet Radio Service (GPRS). Additionally, Jordan Radio Paging Company (JRP) operates and provides paging services to the public.
Electricity Aqaba has a 650-megawatt thermal power station that provides electricity to the ASEZ and the rest of Jordan. The power-generating capacity of the plant will be expanded in the near future. A 13-kilometre underground cable can supply the ASEZ with an additional 600 megawatts of electricity from Egypt. In effect, Jordan is soon to become the electric focal point of three continents, ensuring Aqaba’s access to one of the most reliable and stable electricity supplies in the world.
Water The nearby Disi sandstone aquifer supplies approximately 17.5 million cubic metres of water to Aqaba each year. Water purity is excellent and requires no additional treatment for domestic use. The Jordanian government plans to upgrade the Disi wells as well as explore additional wells to meet the projected water demands of Aqaba for the coming 20 years. Desalination in the ASEZ is also being explored as a government priority and represents a major investment opportunity.
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The current wastewater treatment plant is being upgraded from a capacity of 10,000 cubic metres per day to 24,000 cubic metres per day, with the additional capacity based on mechanical treatment. Treated water is being utilized for landscaping, irrigation and industrial uses.
Natural gas Natural gas is currently being supplied to Aqaba through a 278-kilometre pipeline from El-Arish, Egypt. The pipeline carries 10 billion cubic metres of gas annually to Jordan, Syria and Lebanon. This will meet the ASEZ’s domestic and industrial demand and enable natural gas to replace diesel and oil in electricity generation.
Human resources Investors in the ASEZ will benefit from Jordan’s well-educated and productive workforce. Jordan has an excellent education system and boasts an 88 per cent literacy rate, one of the highest in the region and among developing countries. English language and computer literacy are obligatory in all Jordanian schools and more than 17 per cent of the Jordanian labour force has received higher education. With one of the most flexible labour markets in the region, the ASEZ offers investors a high degree of freedom in human resource management (HRM). Businesses are at liberty to employ up to 70 per cent foreign workers while ASEZA ensures streamlined visa procedures, work permits and residency permits for the entry of expatriate workers.
4.3
Aqaba Special Economic Zone: Starting and Operating a Business Aqaba Special Economic Zone Authority
Introduction ASEZA boasts truly streamlined and simplified registration and licensing procedures where investors can establish new legal Jordanian entities through the representative of the Ministry of Industry and Trade present at the ASEZA investor one-stop shop. This is also the streamlined window through which investors can register and benefit from the incentives offered by the ASEZ Law by registering as a ‘registered enterprise’. Investors can then proceed to obtain all the necessary public safety, health, environment and operational permits, approvals and requirements before commencing operation in the zone. Investors can also obtain all necessary forms for requesting land, work, visa and residency permits for foreign labour from the investor one-stop shop (see Table 4.3.1).
Registered enterprises Registered enterprise status confers the following benefits upon a business or organization: .
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5 per cent income tax on income generated from activities inside the ASEZ or outside Jordan except for banking, insurance and land transport services; duty-free import of goods in commercial quantities from the National Customs Territory and overseas (except automobiles and petroleum); exemption from social service tax; exemption from annual land and building taxes on utilized property;
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exemption from taxes on distribution of dividends and profits on activities in the ASEZ and outside Jordan; duty-free importation of vehicles under specific requirements.
Table 4.3.1 ASEZA investor one-stop shop Investor processes all his/her needs from a Form that investor completes in person, one-stop shop: electronically or by authorized representative: – establishing a legal entity if investor wishes to use a Jordanian legal entity
– company establishment form
– registering legal entity to benefit from incentives of the zone
– enterprise registration form
– purchase or lease of land
– land application form
– obtaining necessary permits, certificates – investment facilitation form and approvals – obtaining visas, work permits and residency permits
– visa, work permit and residency permit forms
Enterprise registration Registered enterprise status confers the ability to import commercial quantities of goods and take advantage of the zone’s duty-free privileges and exemptions. Becoming a registered enterprise in the ASEZ is very simple: .
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Step 1: Application. Becoming a registered enterprise begins by completing an application for registration and licensing. The application requires enterprises to declare their legal identity and provide details about their proposed business activities in the ASEZ. Enterprises not yet registered as legal entities either in Jordan or abroad may establish a legal identity with ASEZA to conduct activities in the ASEZ and abroad. Step 2: Certificate of registration and licensing. Upon approval of an application, ASEZA issues a certificate of registration and licensing, including a registration number that authorizes an enterprise to import goods duty-free into the ASEZ. If required, an investor service officer can be assigned to a registered enterprise to provide ongoing support from ASEZA.
It should be noted that registration is optional, and only necessary for enterprises wishing to benefit from the incentives offered by the ASEZ Law. Once registered, an enterprise should proceed with the permitting process within 30 days of registration.
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Permitting ASEZA’s Investor Services Directorate assists and facilitates all permits, certificates and environmental clearances necessary for establishing and operating a business project in the ASEZ. All enterprises engaging in economic activities in the ASEZ require a public health certificate, public safety certificate and environmental clearance, while an operational permit is required only for certain activities: .
Step 1: Submission of the investment facilitation form. The permitting process starts with the filling out of an investment facilitation form to provide details on the project. This entails the applicant filling out general information about the enterprise and a description of the proposed activities and facilities, capital, workforce and proposed dates of operation. ASEZA will provide the applicant with all the necessary permitting requirements within 14 working days of receipt of the investment facilitation form.
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Step 2: Permitting requirements. The Investor Services Directorate advises enterprises on permitting requirements for particular business projects. ASEZ permitting regulations adopt a risk-based approach to provide a fast-track procedure for low-risk enterprises, which may be exempted from pre-operational facility inspections. Depending on the nature of the activity, some enterprises are exempted from environmental clearances, while others may require a preliminary environmental evaluation or an environmental impact assessment (EIA).
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Step 3: Facility inspections. Investor Services will advise an enterprise on the need for facility inspections, and will arrange for the appropriate teams to inspect the premises. Upon successful completion of inspections, ASEZA will issue the necessary certificates and permits.
Obtaining a building licence and an occupancy permit ASEZA requires that all applicants obtain a building licence before constructing, modifying or expanding buildings and houses. An occupancy permit is also required to be able to connect to local utilities and occupy the premises: .
Step 1: Conceptual design approval. The Physical Planning Directorate provides plot plans to interested developers, which show the building regulations, zoning and site standards for land in the ASEZ. Developers must submit a conceptual design to the Building Licensing Division based on the plot plan, building regulations and design guidelines. Once the local building committee approves the
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design, and provides its comments, the developer may then proceed with a detailed engineering and planning design. Step 2: Review of detailed engineering design. All developers must submit their detailed engineering designs to the Building Licensing Division, which will review the drawings for architectural and engineering compliance and safety. Subsequently, the Building Licensing Division will approve or otherwise notify the developer whether the drawings are complete or require modification. Step 3: Construction phase. Upon receipt of the approval and once the building licence is obtained, the developer may then commence construction. Step 4: Occupancy permit. Upon completion of construction, an occupancy permit is required for building uses. The Building Licensing Division will inspect and verify compliance with permit requirements. The user will thereafter be able to connect to local utilities and occupy the premises.
Real estate commercialization process Once a company decides to make an investment and the specific project requires land, the first stop is the Real Estate Investment Division of ASEZA. The potential investor completes an application, which provides ASEZA with a profile of both the business and the proposed project. The investor is shown a selection of pre-priced property offerings and, once the investor and ASEZA agree on terms that are consistent with the investor’s needs and conforming to ASEZA’s land regulation requirements, a contract is executed to sell or lease the land. As soon as the investor takes possession of the land and after the signing of the contract, the investor is expected to commence construction of the proposed project within a set period of time (usually no more than two years for conventional projects). Some investment proposals will be exceptional, by virtue of their size, economic impact, job-creating potential or unique site needs. Such investments will be classified as special cases. If a proposed investment falls within this category then ASEZA’s Land Committee coordinates the activities of relevant departments to identify potential sites and draft suitable terms for a successful disposition of land to the investor. ASEZA’s recognition that every situation may be different is a reflection of its adaptability in responding to an ever-changing global investment environment.
Customs ASEZA operates a Customs Commission separate from the Jordanian National Customs. A friendly business environment has been created in
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Aqaba in order to optimize profits, lifestyle and efficient delivery of goods and services. Registered enterprises enjoy a low flat income tax rate and exemption from all taxes on imports into the zone. ASEZA customs officers are specially trained in the needs of businesses operating in the global marketplace for swift clearance and inspection of goods at all entry points to the ASEZ. ASEZ Customs utilizes the automated system for customs data (ASYCUDA), a computerized customs management system. ASYCUDA is configured to suit the needs of firms servicing the international market’s fast turnaround production cycle, ensuring minimal clearance time and reduced inventory costs. Registered enterprises are automatically included in the duty-free system of ASEZA Customs. Registered enterprises have access to a range of specialized ASEZA Customs services. Enterprises can undertake a pre-registration inspection of uncleared goods in order to expedite the customs clearing process.
Income tax ASEZA has created a simple corporate tax environment to maximize profits and minimize the complexities of doing business. Registered enterprises enjoy a low flat-rate income tax of 5 per cent. Non-registered enterprises are subject to the current income tax rates prevailing in the Customs Territory of Jordan. The Income Tax Division of ASEZA administers the tax regime within the zone. All enterprises in the ASEZ must submit annual self-assessment income tax returns no later than 30 April of every year. Companies and individual taxpayers are subject to an advance payment and a withholding tax system. Under this system, all enterprises and individuals must remit payments to the ASEZA Income Tax Division. Additionally, ASEZA requires employers to withhold and remit income tax from employees on a monthly basis, regardless of whether the employee resides within or outside the zone. Registered enterprises in the ASEZ enjoy the following special tax benefits: .
special 5 per cent tax rate on the total taxable income of registered enterprises accrued from activities within the ASEZ and outside Jordan;
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exemption from social services tax;
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exemption from annual land and building taxes on utilized property;
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exemption from taxes on distributed dividends and profits on activities in the ASEZ and outside Jordan.
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Goods and services sales tax In order to maintain the ASEZ as an attractive location for tourism and associated retail establishments, duty-free goods can be sold and consumed in the zone by residents and visitors alike. There is no sales tax on most goods sold in the ASEZ. Some consumer and industrial products and services, however, are subject to a sales tax of 7 per cent. Alcohol and tobacco products are subject to a special tax upon their importation into the zone. Additionally, ASEZA levies no sales tax on goods and services exported outside Jordan. An enterprise selling goods or services subject to the above taxes should apply to the ASEZA Revenue Directorate for the appropriate goods and services and special tax certificates before commencing any sales in the zone. It is important to note that all goods and services sold into the National Customs Territory (any areas in Jordan outside the ASEZ) are subject to prevailing sales tax and duties in Jordan.
Visas and work permits Businesses in Aqaba enjoy flexible labour policies that allow for the employment of foreign workers. Firms can employ up to 70 per cent foreign workers. This percentage can be exceeded with special permission from the ASEZA board of commissioners. ASEZA has the authority to issue work, visitor and residency visas and permits. Work visas or permits can be obtained from the Visa and Employment Affairs Directorate. Applications for visitor visas (if required, depending on nationality) can be obtained online at http://www.aqabazone.com/Forms/ Forms.html. There are no fees required for visit visas to the ASEZ. If visitors to the zone enter Jordan from any entry point outside the ASEZ, they are entitled to a free entry visa, provided they arrive in the ASEZ within 48 hours of their entry to the country.
4.4
Aqaba Special Economic Zone: A Destination for Investment Aqaba Special Economic Zone Authority As a premium business and leisure destination, Aqaba offers a variety of opportunities for both visitors and investors.
Investments in the tourism sector Investment opportunities in Aqaba include: three-, four- and five-star hotels and resorts, timeshare condominiums, theme and leisure parks, tourism adventure centres (mountain climbing and biking, etc), golf courses, marinas and cruise centres, duty-free shopping malls and souks (markets), retirement villages, bird-watching centres and exhibition and convention centres. Aqaba has many projects in the pipeline for the coming 10 years. Projects under or about to start construction as at the end of 2003 will add an additional 5,000 rooms of capacity in the short to medium term. Profiles of the major projects are given below. Aqaba Lagoon Tourism Site (ALTS) ALTS comprises a 300-hectare site with Red Sea frontage on the Gulf of Aqaba. ALTS is conceived as an integrated, multi-use leisure community built around a large artificial lagoon featuring upmarket hotels, residential communities, retail space, restaurants, conference facilities and entertainment components. ALTS is developed under a Master Development Plan over a 12-year period under three phases, which include minimum development hurdles such as a minimum of 1,500 hotel rooms of four- and five-star quality, 20,000 square metres of commercial space and 800 residential units. It is proposed that this development will include features such as marinas, golf courses, polo fields, equestrian centres, cinemas, cultural facilities, spas, office buildings, commercial services, nightclubs, entertainment centres, recreational facilities, theme parks and health and education centres.
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Aqaba InterContinental Hotel The InterContinental Hotel project (a five-star resort) on the northern beach of Aqaba, with a capacity of 304 rooms, is currently under construction on 20,000 square metres on the grounds of the old Aqaba Hotel. The hotel is expected to open in early 2004. Aqaba Marriott Hotel A new project also situated on the northern part of the Corniche has received approval from the ASEZA and is currently preparing the plans for development with a capacity of 300 rooms, 16 cabanas, five restaurants, a convention centre with eight ancillary meeting halls, an amphitheatre, a 3,000-square-metre spa facility, a receiving marina with a boat valet service, a beach clubhouse and water sports. Construction was due to commence in early 2004, and is expected to be complete by mid-2006. Five-star hotel (old Coral Beach Hotel) One of the oldest and best-known properties in Aqaba located right on the beach front at the northern shore was the Coral Beach Hotel. The hotel will be totally reconstructed with an architectural style that is appropriate for Aqaba, along with suitable facilities and outlets up to a five-star standard. Its name is expected to change, as the property will be affiliated with an international hotel chain. Tala Bay Resort This is one of the largest tourism development projects currently under construction. Located on the southern shore of Aqaba near the Royal Diving Club, Tala Bay will be an integrated resort destination. The Master Plan consists of several development phases, of which the first stage (five years) will include a Marina Town, the marina, a golf course, 1,900 hotel rooms, staff housing and the related infrastructure. Construction of the marina and the first 35,000 square metres of the Marina Town commenced in December 2001. In total the project will have 2.671 million square metres of land converted into an environmentally friendly integrated resort, which will be marketed as a premium vacation destination and an exclusive residential community. Completion date for this project is by 2010. Tala Bay will consist of many attractions, providing visitors and residents with a wide selection of activities for the entire family for both ‘day life’ and ‘night life’. Such attractions include: . . .
Marina Town with its restaurants, cafe´s (about 17 restaurants and cafe´s) and shops (about 105 shops); marina and water sports; various five-star hotels (with a capacity of approximately 1,500 rooms) and four-star hotels (with a capacity of 400 rooms);
ASEZ: A Destination for Investment
. . . . . . . . . .
253
villas and apartments (around 140 apartments); nightclubs and movie theatres; Aqua Park; golf course; beach club and sports facilities; cultural centre and conference facilities; retail/commercial centre; spa; community facilities (hospital, school, central bakery, laundry, etc); water desalination plant.
Royal Diving Club (RDC) The Royal Diving Club includes a scuba-diving training centre as well as swimming pools, a three-star restaurant and 54 boutique rooms equivalent in standard to a three-star hotel, which form a fully international integrated diving centre. This project was expected to be completed by the end of 2003. The RDC will stay operational throughout the whole upgrading period. The Aqaba Gateway This is a new entertainment and commercial centre located near the Royal Yacht Club. With a beautiful interior design by one of the leading Jordanian interior designers, the Gateway includes areas for retail and souvenir shops, restaurants and cafe´s as well as a three-dimensional cinema experience – the first of its kind in Jordan. World-class shopping malls The ASEZA has given approval for several shopping malls. A miniChinatown and Aqaba Mall are currently in their initial phases of design and construction, whereas the Aqaba city centre is in its final building stages, and the building of the Dream Mall commenced during the last quarter of 2002. These commercial centres will include shops, restaurants and cafe´s. There will also be entertainment areas, which will include cinemas. Dolphinarium Dolphins, one of the ocean’s most amiable creatures, will be bringing a bit of their magic to Aqaba’s coastal waters via a dolphin-assisted therapy centre for children with physical and neurological disabilities. Therapeutic exercises with the bottle-nosed mammal are said to have helped thousands of children with special needs, particularly those with Down’s syndrome, cerebral palsy and autism. Although still in the
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planning stage, the JOD 1.5-million-dolphinarium will be located on 16 donums of land allocated by the ASEZA, providing one of only a few such facilities in the world. Scheduled completion date of the dolphinarium is expected within a one-year period from the start-of-construction date. Traditional souk area A new area in the centre of Aqaba will be redeveloped into a traditional souk area with a carefully chosen Arabian design reflecting the cultural heritage of the region. The area will be home to many souvenir and handicraft centres where visitors can enjoy the traditional souvenirs and see the craftspeople at work. Aqaba town project A commercial tower, motel, bungalows, hotels and retail, commercial and residential centres are all to be established in Aqaba town as one project, and 108 donums have been committed to the project. It will be developed in stages, with the initial stages focusing on commercial and office space. Aqaba international convention centre A separate convention centre with numerous facilities for conferences, events and exhibitions, the centre will be located in a central and easily accessible area of Aqaba, offering its visitors and users world-class convention and exhibition facilities, along with numerous supporting outlets. All of these projects along with many others are being developed according to a detailed Master Plan for the Aqaba Special Economic Zone while adhering to strict architectural guidelines and environmental protection requirements of the highest standards.
Investment opportunities The following are some of the investment opportunities in Aqaba Special Economic Zone of likely interest to foreign investors: .
Tourism: – three-, four- and five-star hotels and resorts; – timeshare condominiums; – aparthotels; – theme and leisure parks; – golf courses, marinas and cruising faculties; – duty-free shopping malls and souks;
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– retirement villages; – exhibition and convention centres. .
Industries: – agricultural chemicals and fertilizers; – Dead Sea cosmetics; – electronics and electrical appliances; – engineering workshops; – pharmaceuticals; – automotive assembly; – textiles and garments; – food-related industries.
.
Services:
.
Location-based services: – cargo handling; – aircraft overhaul and conversions; – equipment storage and auctions; – freight forwarding and integrated logistics; – warehousing, cold storage and trans-shipment.
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Professional services: – engineering consulting; – information technology: software development, data conversion, remote processing, CAD/GIS digitizing, vectorizing and medical transcription; – call centres and claims processing; – medical centres for long-term recovery and rehabilitation; – conversion and repair of small vessels; – printing and publishing: Arabic translation and offshore English production; – Internet service providers.
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Infrastructure and land development: – real estate development: industrial parks, technology parks, warehousing parks, business incubators and residential complexes; – independent power providers; – water desalination.
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Privatization opportunities: – municipal services; – selected port and airport operations.
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Figure 4.4.1 Number of new registered companies in ASEZ
Table 4.4.1 Real estate & building licensing and permitting in ASEZ Licensed area in 2000
59,620 m2
Licensed area in 2001
123,667 m2
+107%
Licensed area in 2002
230,198 m2
+86%
Licensed area in 2003
203,756 m2
711%
Figure 4.4.2 Construction activity before and after becoming ASEZ
ASEZ: A Destination for Investment
Figure 4.4.3 Value of transit goods Table 4.4.2 Value of goods entering ASEZ 2003 JOD million
2002 JOD million
2001 JOD million
34
40.4
3.7
1st quarter
34.3
30.3
28
2nd quarter
46.2
30.8
32.3
3rd quarter
35.5
35.3
35.4
4th quarter
161
136.8
100
Total
+17%
+36%
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Part Five
The Fiscal and Regulatory Framework
5.1
Taxation in Jordan Asem P Haddad, CPA MBA, Audit and Tax Partner, Deloitte & Touche (Middle East) – Jordan
Introduction Most of the business laws and regulations of Jordan have been amended, revised and modernized during the last few years to attract direct and indirect foreign investments as well as national investments. Jordan has recently signed a free trade agreement with the United States and prior to that a partnership agreement with the European Union. Jordan also has Qualified Industrial Zones (QIZs) whereby certain goods produced in such QIZs are eligible to enter the US market tax-free or taxed at a reduced rate. Furthermore, Jordan is a member of the World Trade Organization.
Tax treaties Jordan has signed comprehensive tax treaties with the following countries: . . . . . . . . . . . . .
Egypt; France; Tunisia; Romania; Turkey; Indonesia; Poland; Malaysia; India; Canada; Algeria; Yemen; Bahrain.
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Corporate income tax The income tax regime in Jordan is based on the self-assessment concept, whereby the resident taxpayers are required to complete and file an annual tax return and pay the declared income tax by 30 April of the following year. Tax returns are subject to audit on a sample basis within one year of filing. Legal entities (companies) are taxed on net annual taxable income (taxable profits) generated in Jordan. The corporate tax rates range from 15 per cent to 35 per cent based on the industry of the legal entity. The following are the corporate tax rates for the different industries: .
banks and financial institutions – 35 per cent;
.
insurance, money exchange, brokerage, telecommunications, trading and commercial services – 25 per cent;
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mining, manufacturing, hotels and hospitals, transportation and construction – 15 per cent.
Income generated from agricultural activities, farming, livestock and fisheries is exempt from income tax. Only 20 per cent of net income after tax of foreign branches and subsidiaries of Jordanian companies is subject to income tax in Jordan at a rate of 35 per cent. Income from the rent of property is taxed as follows: 15 per cent of net income from the rent of property in Amman and 30 per cent of net income from the rent of property outside Amman is exempt from income tax. Operating foreign companies (branch offices) are entitled to claim taxfree up to 5 per cent of their net annual income earned in Jordan as head office allocated expenses (branch office’s share of head office expenses). Income realized from exported goods and certain exported services is exempt from income tax in Jordan in accordance with a Cabinet resolution. Incentives and fines Taxpayers are granted incentives (discounts) for early filing of income tax returns. Taxpayers who file their annual tax returns by 31 January will receive a discount of 6 per cent of tax paid, reducing to 4 per cent for filing in February and to 2 per cent for filing in March. However, a fine of 2 per cent of tax due is imposed for each month of delay in filing the annual tax return with an upper ceiling of 24 per cent. Extension of the filing date is not allowable. Furthermore, a late payment fine of 1.5 per cent is imposed for each month of delay in paying the income tax due, withholding tax and payroll taxes. This fine is not subject to any upper limit.
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Capital gains As a general rule, capital gains resulting from sale of property, land and securities are non-taxable for taxpayers other than banks and financial institutions. Banks and financial institutions enjoy a tax exemption of 25 per cent of capital gains.
Withholding taxes Employers are required to withhold income tax and social services tax due on employees from their monthly remuneration and pay them over to the Income Tax Department on a monthly basis. A withholding tax of 2 per cent is required on amounts paid to resident service providers. Amounts paid to non-resident service providers including royalties, franchise fees and know-how payments are subject to a withholding tax of 10 per cent.
Dividends tax and investment income In-cash and in-kind dividends, and distributions of profits to partners as well as transfer of profits and repatriation of capital are not subject to withholding tax in Jordan. Furthermore, dividends and interest earned by individuals and legal entities ‘other than banks and financial institutions’ on securities, Treasury bills and bonds as well as bonds and debentures are exempt from income tax, while profits on individual deposits are subject to income tax at a rate of 5 per cent. However, expenses and costs relating to exempted income are not allowable deductions provided that such costs and expenses do not exceed 50 per cent of the exempted income. Moreover, only 25 per cent of dividends and interest earned by banks and financial institutions on securities, Treasury bills and bonds as well as bonds and debentures are exempt from income tax.
General sales tax (GST) Unless listed in the schedule of exempted goods and services, locally produced and imported goods and services are subject to sales tax in Jordan. The general sales tax rate is 13 per cent but 87 of the listed goods and services were subjected to sales tax of just 2 per cent in 2002, a figure since increased, in 2003, to 4 per cent. Sales tax paid on inputs used for the production of goods and the provision of services can be offset against sales tax charged on outputs (sales). All taxpayers must register for GST if their taxable turnover in respect of goods or services exceeds the following threshold during 12 consecutive months:
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JOD 10,000 for manufactures subject to the special tax; JOD 60,000 for manufactures subject to the general tax; JOD 30,000 for service industries; JOD 100,000 for traders.
There is no threshold applied to importers. Therefore, all importers are required to register regardless of the amount of their imports unless such imports are exempted or intended for personal use.
Customs duties Goods entering the kingdom are subject to customs duties prescribed in the customs tariff except for goods that are excluded under the provisions of the Customs Law or the provisions of the Investment Promotion Law, any concession law or any international agreement. The customs duties are either a percentage of the value of goods or a lump sum for each unit of the commodity. The fees of the tariff could be both a percentage and a lump sum for the same kind of goods, subject to a ceiling of 30 per cent. The customs value of the imported goods is the transaction value, which is the price actually paid or payable for goods, when bought.
Investment Promotion Law Jordan has a very modern Investment Promotion Law that provides attractive incentives to investors in different sectors. The exemptions are dependent on the geographical location of the project. Projects falling within the following sectors or sub-sectors enjoy the exemptions and incentives provided by the law: . . . . .
manufacturing; the agriculture sector; hotels and hospitals; maritime transport and railways; any other sector or sub-sectors the Council of Ministers decides to add.
For the purpose of this law, Jordan is geographically segmented into three development zones, A, B and C, based on the degree of the economic development of each area in each of the sectors listed above, with A being the most developed and C the least developed area. The following is a summary of exemptions provided under the law: .
Exemption from income tax and social service tax. Projects approved by the Investment Committee enjoy a 10-year exemption
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from income tax and social services tax at the following rates depending on the sector and the area in which the project is located: – projects in zone A – 25 per cent; – projects in zone B – 50 per cent; – projects in zone C – 75 per cent. .
If a project is expanded, improved or modernized to increase production capacity, it shall receive an additional year of exemption for every increase in production of not less than 25 per cent, for a maximum of four years.
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Exemption from customs duties: – Imported fixed assets required for a project are exempted from customs duties and fees for a period of three years starting from the date of approval. – Imported fixed assets needed for expanding, modernizing or developing a project are exempted from customs duties and fees provided that they result in an increase of a minimum of 25 per cent of production capacity. – Spare parts imported for a project are exempted from customs duties and fees provided that their value does not exceed 15 per cent of the total value of the fixed assets utilizing these spares. – Hotel and hospital projects are granted extra exemptions from customs duties and fees on their imports of furniture and supplies for the purpose of renovation, once every seven years.
Free Zones Law Jordan established a number of public and private free zones throughout the kingdom to facilitate its role as a regional hub. Goods may pass through these zones, exempt from customs duties and import fees. Facilities may also be leased in free zones at reduced rates. Projects established in free zones enjoy the following exemptions and incentives: .
exemptions of profits from income tax and social service tax for a period of 12 years from the commencement of operations;
.
exemption from income tax and social services tax for the remuneration of non-Jordanian employees working in a free zone;
.
exemption from customs duties, import fees and sales tax for goods imported into the free zone;
.
exemption from taxes and fees for goods exported from the free zone;
.
exemption from customs duties and taxes of products produced in the free zone for domestic consumption is limited to the value of
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materials, costs and local expenditure involved in a product’s manufacture, provided this value is approved by the Free Zone Committee; .
exemption from licensing fees and real estate taxes for buildings constructed in the free zones;
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freedom to repatriate capital invested and profits generated;
.
10 per cent exemption of annual rent of land and structure for industrial projects.
Aqaba Special Economic Zone (ASEZ) Aqaba, the only Jordanian port on the Red Sea, has been designated as a special economic zone since 2000 according to a special decree legislated for this purpose. Projects in ASEZ are subject to tax laws and regulation other than those national tax laws and regulations applicable to projects located in other Jordanian territories. Projects located in ASEZ enjoy reduced income tax rates and reduced sales tax rates as well as other incentives.
Taxes on individuals Individuals are liable to the Jordanian income tax on income derived or earned in Jordan, irrespective of residence. Income arising outside Jordan and originating from non-resident deposits in foreign currencies is not subject to tax, provided that entry of such funds to the kingdom and the deposit abroad are made in accordance with the regulations and instructions of the Central Bank of Jordan. The tax jurisdiction is thus territorial, as in the case of corporate bodies. However, entitlement to personal allowances and some other relief is linked with residence. A Jordanian citizen is regarded as resident in Jordan if the individual spends at least 120 days in Jordan per year. A non-Jordanian is considered resident in Jordan if the individual spends at least 183 days in Jordan in a year. The days spent in Jordan need not be consecutive in either case. Taxable income includes employment income and the other types of income that are taxable in the case of corporate bodies. Employment income comprises salaries, wages, allowances and any other benefits from any employment in Jordan, subject to an exemption of 50 per cent of the first JOD 12,000 and 25 per cent of the remaining taxable income for private sector employees and 50 per cent for public sector employees. Subsistence allowances paid to private sector employees are not taxable provided that they are used for the purposes of the employment. Travel allowances not exceeding 10 per cent of the basic salary when incurred within the work centre
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and 20 per cent if incurred outside such a centre are exempt with ceilings of JOD 600 and JOD 1,200 per annum respectively. Entertainment allowances not exceeding 10 per cent of basic salary or JOD 300 annually, whichever is less, are excluded from taxable income. If these limits are exceeded, the excess is taxable. Allowable deductions and allowances .
Residents may deduct the following personal allowances from annual taxable income: – unmarried person – JOD 1,000; – married person – JOD 2,000; – for each dependent child – JOD 500; – for each dependent parent – JOD 500; – for each dependent relative – JOD 200 (maximum JOD 1,000); – for each son, daughter or close relative studying at university level and supported by the taxpayer – JOD 2,000; – for each taxpayer where that taxpayer is studying at university level – JOD 2,000.
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To claim a non-Jordanian as a dependant for tax purposes, the dependant has to be resident in Jordan. Costs of hospitalization and medications in Jordan incurred by a resident taxpayer on his or her own behalf or for the benefit of a dependant. Where medical expenses incurred outside Jordan relate to treatment not available in Jordan, or cover an operation in emergency conditions in accordance with the regulations, such expenses are acceptable provided the total amount does not exceed JOD 10,000 per annum in Jordan and JOD 15,000 outside Jordan. Any amount paid by the resident for an emergency surgical operation performed outside Jordan that could not have been performed in Jordan, for the resident or for a dependant for whom the resident is legally responsible, according to the regulations, provided that the total amount exempt shall not exceed JOD 10,000 per annum. Rent payable by a resident taxpayer or his wife for his own accommodation in the kingdom, provided that the total amount exempted shall not exceed JOD 2,000 per annum. Interest of up to JOD 2,000 per year on a loan applied by a resident taxpayer or his wife to acquire or build his own home. Contributions to the Social Security Corporation and approved pension and savings funds. Contributions to a medical insurance scheme.
.
.
.
. . .
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Personal tax rates The tax on taxable income of any person, except for companies, is charged at the rates shown in Table 5.1.1. The maximum marginal rate for individuals is 25 per cent. Table 5.1.1 Rates of personal tax on taxable income Slice of taxable income JOD
0–2,000
Rate of tax applicable to slice %
Tax on slice JOD
5
100
2,000–6,000
10
400
6,000–14,000
20
1,600
Over 14,000
25
–
A social services tax is payable, equal to 10 per cent of the income tax due.
Social security Companies that hire five or more people (Jordanian or non-Jordanian) are required to subscribe to the social security scheme and accordingly pay 16.5 per cent of the total monthly salaries and benefits to the Social Security Department, of which 5.5 per cent should be withheld from the employees’ monthly remuneration and 11 per cent is the employer contribution. The social security scheme provides two types of insurance: insurance against work injury and occupational diseases, and insurance against disability, old age and death. The insurance against work injuries and occupational diseases covers the medical care necessitated by the condition of the injured employee, such as the cost of medical treatment and hospitalization, daily allowances and the cost of rehabilitation, daily allowances for temporary disability, monthly salaries and fixed compensations, monthly salaries payable to the beneficiaries and funeral expenses. Pension payments become payable to male employees at the age of 60 and to female employees at the age of 55 provided that they fulfil certain requirements set out in the law. In addition to relieving the employer from compensating the employee for work injuries and occupational diseases, joining the social security scheme also relieves the employer from the end-of-service indemnity the employer is required to pay to the employee upon termination of employment as set out in the Labour Law. This means
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that the 11 per cent contribution of the employer covers end-of-service indemnities. Foreign employees are partially reimbursed for their contributions to the social security scheme upon leaving Jordan as follows: .
.
.
10 per cent of their average annual wages for each year of service if the period of subscription to the social security scheme is less than 5 years; 12 per cent of their average annual wages for each year of service if the period of subscription to the social security scheme is more than 5 years and less than 10 years; 15 per cent of their average annual wages for each year of service if the period of subscription to the social security scheme is 10 years or more.
However, employees not subscribing to the social security scheme are entitled to end-of-service indemnity equivalent to one month’s remuneration for every year worked multiplied by the latest average monthly remuneration.
Tax practice in Jordan Tax returns are subject to audit and verification by the Income Tax Department on a sample basis within one year of filing. Furthermore, the Sales Tax Department makes occasional scheduled visits to audit taxpayers. Payroll taxes are also subject to audit by the related departments, and an annual payroll certificate needs to be obtained and presented to the Corporate Tax Division. The Corporate Tax Division usually matches the figures in the payroll certificate with the reported payroll expenses. Although there are almost comprehensive tax-implementing regulations, certain areas are still discretionary and subject to discussion with the tax assessors. However, taxpayers have the right to object to a tax assessment and further appeal the assessment before the Income Tax Court of Appeal until a fair and satisfactory resolution of the dispute is attained.
5.2
Accounting Principles and Reporting Requirements in Jordan Naim S Khoury, Partner, Deloitte & Touche (Middle East) – Jordan Introduction Record keeping and financial reporting are governed by the following laws: . . . . .
the the the the the
Companies Law; Income Tax Law and Regulations; Sales Tax Law and Regulations; Securities Law and Regulations; Commercial Law.
Regulated industries, such as banking and insurance, have specific laws that stipulate the requirements for accounting and financial reporting. Companies with shares listed on the stock exchange are governed by the Securities Law and Regulations. Filing requirements for listed companies are shown at the end of this chapter.
Record-keeping regulations The laws in Jordan require that a company maintains proper books of account. The following books, records and registers are required: . . . . .
daily ledger; general ledger; shareholders’ register; minutes of board meetings; debenture holders’ book.
The accounts, records and reports must reflect the financial position and the results of the operations of the company.
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Commercial transactions in Jordan are governed by the Electronic Transactions Law. Transactions processed by electronic means are considered by the law as legal evidence. Electronic signatures, electronic contracts, electronic messages, electronic documents and electronic transfers of money are acceptable if they meet the provisions stated in the law. Jordan has a Securities Depository Centre to safeguard ownership of shares and to maintain all records and transfers of the ownership of shares.
Reporting requirements The board of directors should prepare the financial statements of limited liability companies within three months of the year end. The financial statements must comprise: . . . . .
balance sheet; income statement; statement of changes in equity; cash flow statement; notes to the financial statements.
The financial statements should be audited by a licensed auditor and should present fairly the financial position, the results of the company’s operations and the cash flows of the company. The financial statements, together with the auditor’s report and board of directors’ report, must be submitted to the general assembly of the company within four months of the year end. A copy of the annual report must be filed with the Controller of Companies, and the audited financial statements should be published in a daily newspaper (public companies only). Where the company is listed on the stock exchange, a copy of the annual report must also be filed with the Securities Commission. Holding companies should prepare consolidated financial statements for the company and its subsidiaries, which should subsequently be submitted to the general assembly. The presentation and disclosure of the financial statements should be in accordance with International Accounting Standards (now International Financial Reporting Standards – IFRS). Non-public shareholding companies are exempt from publishing their financial statements.
Accounting principles The International Accounting Standards (now IFRS) are required to be followed in Jordan by law and by the regulatory professional bodies in Jordan.
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In fact the Companies Law, Security Exchange Law and Regulations, and Income Tax Law and Regulations, as well as the specific laws for special industries, require that the accounts of a company should be prepared in accordance with International Accounting Standards and approved by the relevant professional body.
Auditing requirements The profession in Jordan is regulated by the law, and International Standards on Auditing (ISA) are adopted as national standards. The Companies Law and the Securities Law require the use of these standards by auditors in performing their audit on the financial statements. Jordan has a new provisional law for the profession of public accounting, under which a Higher Commission for the Audit Profession has been set up to oversee audit practice in Jordan. Any auditor has to be a member of the Jordanian Association of Certified Public Accountants (JACPA) and must be independent. By law, auditors of listed companies should adhere to International Standards on Auditing (ISA).
Listed companies Companies listed on the Amman Stock Exchange are subject to additional requirements. A brief summary of these requirements is given below: .
Annual reporting: – Audited financial statements, together with the report of the board of directors, should be filed with the Securities Commission within three months of the year end. – Audited financial statements should be filed with the Controller of Companies within three months of the year end. – Primary results of a company’s operations, after they have been subjected to preliminary review by the auditors, should be published within 45 days of the year end.
.
Interim reporting: – Semi-annual financial statements reviewed by the auditor should be filed with the Securities Commission within one month from the end of the period. – Semi-annual financial statements should be filed with the Controller of Companies within 30 days of the end of the period.
5.3
Legal Environment in Jordan Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman
Introduction The Hashemite Kingdom of Jordan has always been looked upon as a model for legal consistency by most nations. Jordanian laws have always followed a certain trend that is easy to follow and that gives most Jordanian legislation a certain character that is difficult to find in most other countries’ legislations. Although the country did not officially become independent until 1928, Jordan, as the Emirate of Transjordan, enforced much Ottoman and British Mandate legislation and kept it in force with only slight amendments until the period of legislative reform in the early 1950s, after the establishment of the Hashemite Kingdom of Jordan. At that stage, the Constitution was first legislated and most other laws introduced followed the same principles. This is one of the main reasons for the consistency of Jordanian laws. However, many important laws were legislated at a later stage, such as the Civil Law, which was introduced in 1976.
The Jordanian Constitution The Constitution was one of the first laws to be drawn up in the Hashemite Kingdom of Jordan and, although it was promulgated in 1952, it is frequently looked upon by other countries as a model constitution. The Constitution is divided into nine main chapters, each of which is vital to the political, economic and social life of most Jordanians. The first chapter discusses the system of government, making clear that
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Jordan is a parliamentary monarchy and expressing the importance of separation of the three main powers of the state. The second chapter is unique because it stipulates the rights and duties of Jordanians in a manner not common elsewhere. Many important rights like freedom of speech and freedom of the press are specifically mentioned in this chapter, as is the declaration that all Jordanians are equal before the law no matter what their religion, colour or race. The third, fourth and fifth chapters discuss the three main powers of the state, the authorities granted under these powers and the way in which they are separated. The fifth chapter states that the legislative power will comprise two chambers, the House of Deputies and the Senate, and goes on to explain that the members of the House of Deputies will be sworn in by direct election, while members of the Senate will be appointed by the king. In this chapter the Constitution also explains the method in which laws are legislated and amended and gives executive authority, represented by the government, to legislate temporary laws under certain conditions, which must be later ratified by Parliament in order to become permanent and regular. The Constitution allows the government to legislate temporary laws only in the case when the Parliament is not in session or the country is in a state of emergency. However, it still grants the executive power the right to issue statutes that either explain the method in which certain laws are to be implemented or deal with issues that either the Constitution or specific laws stipulate must be organized by statute. A good example of this is the Statute of Civil Service, which the Constitution itself provides should be organized using a statute. The government also has the right to issue instructions or regulations that have less force and value than statutes. These are usually used to organize the work in the governmental departments and to explain the way in which specific articles of laws or statutes in force should be implemented or applied. The sixth chapter talks about the authority of the judiciary and the way judges are appointed. The main article in this chapter declares that judges are independent and that no one shall have the right to influence their judgment. This chapter also discusses the different types of courts in the country, the main areas of jurisdiction for each type of court and the different stages of jurisdiction. The seventh chapter discusses the financial and monetary matters in the country and the way the budget must be ratified and implemented and the process that must be followed for the budget to be reviewed and legalized. The eighth and ninth chapters of the Constitution contain general provisions as well as directions applicable to amendment of the Constitution and the conditions that allow such amendments.
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In short, the Constitution provides the main premises around which most of the other laws in Jordan are legislated. It is also considered the highest legislation in the country and in the event that contradictions are present between the provisions of the Constitution and those of other laws, statutes or regulations then those of the Constitution have supremacy.
The Jordanian judiciary system The Jordanian legal framework Although Jordan was under the British Mandate for a considerable period of time, the kingdom follows Latin Civil Law as its main judicial system. This is because, after the fall of the Ottoman Empire, many laws of the period remained in force and were only amended slightly at first until the revolution of legislation that started in the early 1950s. Sources of jurisdiction The Jordanian Civil Law (the ‘Code’) was published in the Official Gazette on 1 August 1976 and came into force on 1 January 1977. Article 2 of the Code states that the sources of jurisdiction are to be followed in the order stipulated within the article. The first source is the law in its general sense. This includes laws enacted by Parliament, temporary laws, statutes and regulations. The second source is Islamic jurisprudence, which a court is supposed to follow if nothing related to the subject matter is mentioned in any part or section of the law. The third principle to be followed is legal precedence concerning the issues in question. When the court finds nothing in the above-stated sources of jurisdiction, it is expected to use the general principles of justice. On the other hand, in criminal issues Jordanian courts are bound to use the Magna Carta principle that states that neither crime nor punishment shall be applied if they are not specifically mentioned in the law. This means that courts in criminal matters are not free to return to as many sources as they deem necessary to govern the situation in question as is the case in civil disputes, for they can judge only according to the law in force at the time of the trial. Deeds that are not considered to be crimes according to the law will not be punished. In the administrative branch of the law, which is applied mostly by the High Court of Justice, the main principle for legislation is that there must be no penalty without legislation. This means that a court must not allow the administration to apply any penalties unless such punishments have been specifically stated by the law. In almost all other issues, the court discussing administrative issues has the right to return to the ‘general principles of administrative law’, which means it has full authority to return to the sources it deems necessary to govern the situation in question.
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However, as in most other civil law countries, Jordan considers precedent cases and legal jurisprudence as supplementary sources of jurisdiction. This means that, although not obligatory, courts are allowed to search for answers for matters in question in earlier precedence cases and writings of different authors about similar matters. However, this is mostly in theory because courts tend to follow the decisions of higher courts. This gives legal precedence a higher state of obligation than that stated in the law. Types of courts in Jordan The Constitution divides the courts in Jordan into three main divisions: .
regular courts;
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religious courts;
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special courts.
Regular courts This is the widest division of courts in Jordan and almost all disputes concerning civil, criminal and commercial issues are settled by regular courts, unless the Constitution or any other law in force specifically states that such a matter must be ruled by a religious or special court. The law that primarily addresses administration of the regular courts is the Law of Formation of Regular Courts No. 17 of 2001, which came into force on 11 June 2001. This law states that litigation must be in two stages and later stipulates the different types of regular court in Jordan: .
Magistrates’ courts. Magistrates’ courts are usually seen as the lowest level of regular court in Jordan. They usually comprise just one judge and their jurisdiction is specifically mentioned in the Law of Civil Procedures and the Law of the Magistrates’ Courts as being civil disputes not exceeding JOD 3,000 (three thousand) as well as some other small criminal issues that the Law of Criminal Proceeding states that they should oversee. In addition, Article 3 of the Magistrates’ Courts Law grants such courts jurisdiction over a few more issues such as those concerning vacation of rented property or division of immovable real estate. This type of court is part of the first stage of litigation, which means that the courts in this phase have the right to discuss the matter in question on its merits and by law. Courts of the second stage of litigation have the right to rule only if the first stage court erred in applying and implementing the law, unless otherwise specified by legislation.
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First instance courts. First instance courts enjoy the highest level of jurisdiction and are sometimes said to have a ‘general jurisdiction’. This means that any dispute that is not within the jurisdiction of the magistrates’ courts or any other special, regular
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or religious court according to the law must be judged by the first instance courts. These comprise one judge in civil matters and two judges when they are discussing crimes that are not under the jurisdiction of the High Court of Felonies. However, in those cases where they are dealing with criminal issues for which the penalty is execution, life imprisonment or imprisonment for periods not less than 15 years, first instance courts must be formed of three judges. In some specific cases, the courts of first instance act as a court of appeal for decisions issued by magistrates’ courts and other judgments that the law states should be appealed to them and not to the court of appeal. This type of court is also a part of the first stage of litigation. .
Courts of appeal. Article 6 of the Law of Formulation of Regular Courts establishes courts of appeal in Amman, Irbid and Ma’an. These courts have the authority to review decisions issued by the courts of first instance, and those other judgments made by the magistrates’ courts in instances where the law states that they should be reviewed by the court of appeal. These courts are usually formed of three judges although, in certain cases, a higher number of judges might be needed for the court to be in session. The court of appeal is almost always the second stage of litigation.
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The Court of Cassation. The Court of Cassation is the most senior court in Jordan. Its location, according to the law, is Amman and it comprises five judges as a minimum and nine as a maximum. The Court of Cassation is a second-stage court of litigation, which means that it has the authority to review a case only by reference to the law and not on its merits. It has jurisdiction to review judgments issued by the courts of appeal in civil disputes that exceed JOD 5,000 (five thousand). In criminal matters, it has jurisdiction over judgments issued by the courts of appeal in felonies and on any other issues that the law specifically mentions it should review. It is worth mentioning that decisions taken by the Court of Cassation in its full formation are considered to be general principles of law, which the lower-degree courts in the kingdom are obliged to follow.
Religious courts Article 105 of the Constitution deals with the formation of religious courts in Jordan. It stipulates that religious courts are either sharia courts or tribunals of other religious communities. Sharia courts have jurisdiction over civil status for Muslims and waqf (religious tax) issues. The tribunals of other religious communities deal with the civil status of non-Muslims and are regulated by special laws relating to these special communities.
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Special courts Special courts are those formed by special legislation as an exception to the general rule that grants jurisdiction to regular courts. Examples of such courts include the Court of Income Tax, the Court of Customs and the Highest Court of Felonies. Such courts are usually created in areas that the legislator deems should be governed by specialized courts with more experience and knowledge in specific matters than other, regular courts. However, many of the decisions of the special courts, such as the Highest Court of Felonies, are usually reviewed by the Court of Cassation in the second stage of litigation. It is worthy of mention that some of these special courts have their own courts of appeal, such as the Court of Income Tax, most of whose decisions can be appealed before the Court of Appeals of Income Tax.
The different stages of legislation The Constitution provides a clear path for the introduction of new legislation in the kingdom, stipulating that the draft must pass through the four different stages of legislation before it can be considered an enforceable law. In cases of emergency requiring the government to issue temporary laws, such legislation must pass through almost the same procedure as the draft law in order to become a regular permanent law. However, statutes, which are issued by the Council of Ministers, and regulations, which are issued by administrators, do not need to pass through this procedure. The first stage of legislation is the proposition, which is considered as the stage in which the law is formulated and prepared before being passed to Parliament to be voted upon. The government retains the right to propose that a certain law should be voted upon together with any 10 members of the House of Deputies or the Senate. The second stage of legislation is the voting in regard to the proposal presented to Parliament. In Jordan the first chamber to discuss the draft is the House of Deputies. If the draft is passed there then it will be sent to the Senate for their decision. At this stage, if the Senate also passes the draft then it will be sent to the king for ratification. If the Senate does not pass the draft it will be sent back to the House of Deputies with the amendments that the Senate recommmends. If the House of Deputies agrees with the Senate on the amendments then the draft will be sent directly to the king for ratification. If not then both chambers must meet in a joint session to vote on the draft. If the draft passes the vote, then the legislative procedure will be pursued. The third stage of legislation is the promulgation or ratification by the king. This stage is usually considered to be the true birth certificate of the law, which enables the head of the executive authority to exercise the power to introduce the new law. In any case in which the king does
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not ratify the law within six months then it will be considered automatically ratified. The fourth and final stage of legislation is publication of the law in the Official Gazette. By default, the law will be considered enforceable after 30 days of such publication unless otherwise specified by the law itself.
Conclusion Jordan enjoys a very advanced legal system that has been undergoing substantial revision and modernization in recent years. Many of the old laws have been either amended or replaced to allow the country to follow other advanced countries in providing the best legal protection for the state and its citizens. Some of the new or amended laws are the Companies Law, the Banking Law, several concerning intellectual property issues, the laws of Civil and Criminal Procedures and the Landlords and Tenants Law. However, many of these await ratification by Parliament as at the end of 2003.
5.4
Procedures for Handling Legal Disputes Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman
Introduction Legal disputes in Jordan are settled in one of two ways: 1) through the competent legal authority in Jordan, ie regulated and governed by several laws such as the Law of Civil Procedures No. 24 of 1988, the Law of Criminal Procedures No. 9 of 1961, the Law of Magistrates’ Courts No. 15 of 1952 and the Law of the Formation of Regular Courts of 2001; or 2) through arbitration, upon the mutual agreement of the disputed parties, ie regulated by the Arbitration Law No. 31 of 1997.
The competent legal authority in Jordan The competent legal authority is represented by the courts, the system of which is hierarchical, whereby each court is bound by the ratio decidendi of a case decided by another court if the first court is lower in the hierarchy and will not be bound by it if it is higher. Courts in Jordan are divided into three types: . . .
ordinary courts; courts of religious affairs; and special courts.
Ordinary courts are represented by: .
Magistrates courts, which are specialized in hearing: – small civil claims not exceeding JOD 3,000 (three thousand). The court judgment in these claims is only final if the total amount of
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the claim does not exceed JOD 250 (two hundred and fifty) excluding evacuation of leased premises claims; and – criminal claims such as offences and misdemeanours where two years’ imprisonment would be the likely outcome. .
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First instance courts, which are specialized in hearing most of the civil and criminal claims that are outside the jurisdiction of the magistrates’ courts or any other claims referred to their jurisdiction by any applicable law. Furthermore, judgments issued from magistrates’ courts in criminal claims may be appealed to the first instance court in regard to violations where the maximum penalty for the offences committed does not exceed imprisonment of one month and a fine of JOD 30 (thirty). The Court of Appeal, which is considered a second-degree court, has a presence in three districts, Amman, Ma’an and Irbid, and is specialized in hearing appeals against the judgments issued from the magistrates’ and first instance courts. The Court of Cassation, which is the highest judicial authority in Jordan, sets judicial precedents and is specialized in hearing civil claims exceeding JOD 5,000 (five thousand). Claims under JOD 5,000 (five thousand) may be heard with the specific permission of the cassation panel. Furthermore, the said court may only hear claims with certain specified conditions, as it does not examine the subject matter of a claim, just the legal issues. The High Court of Justice (located in Amman), which hears all appeals related to administrative decisions issued by the public authorities in addition to violation of applicable laws and the Constitution. All judgments issued by this court are final.
Courts of religious affairs are specialized in hearing matters of personal status, including marriage, divorce, inheritance and alimony. Persons of the same religion are subject to the appropriate religious courts, the sharia courts for Muslims and ecclesiastical courts for Christians. As for the special courts, they are specialized in hearing certain and specific cases such as those related to income tax, customs and state security matters. They are governed and regulated through separate laws and regulations such as those laid down for the State Security Court, the Income Tax Court and the Capital Felonies Court.
Arbitration If a dispute is referred to arbitration, whether related to a civil or commercial dispute between public or private persons or whether the legal relationship is contractual or not, the arbitration will be based on the written agreement of the disputing parties; otherwise it is void.
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The said arbitration agreement may be prepared prior to or after the dispute is referred to the court. Furthermore, unless otherwise agreed by the two parties or the arbitral tribunal, the arbitration must be conducted in Arabic. The arbitrating parties are free to agree on the place of arbitration, whether in the kingdom or abroad, but, if they fail to agree on the place of arbitration, the arbitral tribunal will determine the location. In general the arbitration procedures are very flexible and may be determined by the arbitral parties, including determination of the applicable law that will apply to the dispute, the time limitations for issuing the arbitral award and any specific conditions that will apply to the award. Furthermore, the arbitration may be terminated by the following: . .
issuance of an arbitral award terminating the dispute; issuance of a court order terminating the arbitral proceedings;
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mutual agreement of the arbitral parties; abandonment of the dispute submitted to arbitration by the plaintiff, unless the arbitral tribunal decides, at the defendant’s request, to continue the arbitral proceedings;
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the arbitral tribunal finding that the continuation of the arbitral proceedings has become ineffective or impossible; failure to reach the majority required for the issuance of the arbitral award.
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An action for nullity of the arbitral award must be raised within 30 days following the date on which it was notified to the party against whom it was rendered. Such action will only be admissible if the party requesting the nullity had waived the right to do so before the issuance of the arbitral award. When the above-mentioned period has lapsed, an application for the enforcement of the arbitral award will be submitted to the competent court along with the following documents: .
a copy of the arbitration agreement;
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the original award or a signed copy; an Arabic translation of the arbitral award authenticated by an accredited authority if it was not originally issued in Arabic.
The competent court will examine the application without hearings and will order its execution unless it ascertains either that: the award violates public order in the kingdom (if the part in the award that includes such a violation can be separated from other parts of the award, the court may order the execution of the other part); or that the award was not duly notified to the party against whom it was rendered.
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The judgment enforcing any arbitral award is not subject to appeal. Nevertheless, a judgment refusing such enforcement can be appealed before the Court of Cassation within 30 days from the date of notification of the decision.
Procedures for settling disputes Any dispute arising in Jordan may be referred either to the courts or to arbitration. Where a dispute is referred to the courts, the legal procedures in civil claims are initiated by filing a written statement of claim to the competent court together with all court and stamp fees due. If filed with the magistrates’ court, the written statement should be signed by either the plaintiff or the plaintiff’s advocate. The court fixes the date for hearing the claim and notifies the disputing parties. The judge hearing the claim will seek to conciliate between the disputing parties; if this fails, the judge will hear the claim by examining all of the submitted documents and then hear the personal evidence of first the plaintiff and then the defendant. The judge may decide to dismiss certain evidence, whether documentary or personal, if it is deemed unproductive or legally unacceptable. Thereafter, the court will hear the pleading of both parties and issue its final judgment in a public hearing. The judgment will state the names of the plaintiff and the defendant and their advocates, the subject matter and facts of the claim and the court’s final decision. The procedures implemented at first instance courts are initiated by filing a written statement of claim attached with a list of evidence, whether written or personal, signed solely by the advocate for the plaintiff. The court will notify the defendant by providing him or her with the above-mentioned documents and the date fixed for the pre-trial hearing of the claim. The defendant will submit to the court a written statement of reply attached with a list of evidence, whether written or personal. At the pre-trial hearing, the judge will hear evidence and examine all of the submitted documents. If some documents are missing the parties will be requested to provide them to the court. In general the pre-trial judge will try to solve the dispute amicably but, if the disputing parties have no desire to reach a settlement, then the pretrial judge will seek to simplify the matter by requesting the disputing parties to determine what issues are agreed and which remain subject to dispute. When the pre-trial judge has completed the above-mentioned procedures, the claim will be referred to another judge who will also examine the claim and hear the evidence of the disputing parties, and who may decide to dismiss certain evidence, whether documentary or personal, if
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it is deemed unproductive or legally unacceptable, and then, finally, the pleadings of each. Thereafter, the court will issue its final judgment in a public hearing. The judgment shall state the names of the plaintiff and the defendant and their advocates, the subject matter and facts of the claim and the court’s final decision. Procedures implemented in regard to criminal claims are regulated by the Law of Criminal Procedures, and differ from those implemented in regard to civil claims as they are filed with the public prosecutor, who will initiate investigations and collect available evidence. Based on such investigations the public prosecutor may either decide that the suspect is innocent or will issue an indictment. The matter will then be referred to the appropriate court and an arrest warrant may be issued to hold the suspect for trial or, alternatively, to release the suspect on bail. The trial will commence with the hearing of the statements of the public prosecutor and the advocate of the defendant. Thereafter, the court will hear the testimony of the defendant, the witnesses of the public prosecutor and those of the defendant. The court will examine their submitted written evidence and final pleadings. Based on this, the court will issue its final judgment in a public hearing, which will include all the details stated in the civil judgments in addition to the penalty imposed on the defendant, if found guilty, or the defendant’s innocence due to lack of evidence or failure of the public prosecutor to prove the claim.
General conditions In general, all court hearings are open to the public, unless the court decides otherwise because the subject matter of the claim is sensitive or personal or may affect public order. Furthermore, the court may prohibit certain people, such as teenagers, from attending hearings. In civil claims, the judgment debtor will be responsible for payment of all court expenses and fees. In criminal claims, the court may exempt the judgment debtor from payment of the expenses and fees if the complainant acted in good faith when initiating the complaint. All matters related to accepting or dismissing evidence submitted to a court in civil claims are subject to the Evidence Law No. 30 of 1952 and its amendments. Claims may be heard either by only one judge, as in magistrates’ court claims, or by more than one judge, as in some first instance claims. All Court of Appeal claims will be heard by at least three judges and Court of Cassation claims by at least five judges and as many as nine judges in cases of great importance. Furthermore, any document submitted to the court should be in Arabic. Any document submitted in any other language must be accompanied by an Arabic translation.
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Concerns Owing to the numerous and increasing number of claims filed with the courts and the limited number of judges, the litigation process in Jordan is very slow, each claim being likely to take more than one year to be finally settled. As a result, disputing parties usually resort to arbitration.
5.5
Intellectual Property Law Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman
Introduction Since Jordan became an official member of the World Trade Organization (WTO) on 11 April 2002, the Jordanian legislator has been working extensively on amending all the applicable legislation, laws and regulations related to intellectual property rights in order to conform with and adhere to the standards and provisions of the WTO and its agreements such as TRIPS and the Berne and Paris Conventions. Intellectual property rights are defined as the distinctive creations or inventions of the mind such as industrial designs, integrated circuits, trade marks, geographical indications, copyrights and all rights related thereto. In general and pursuant to the applicable laws and regulations of intellectual property, any inventor or owner of any of the abovementioned rights shall benefit (morally and/or materially) from his or her creation or invention. Owing to the great and significant importance given to intellectual property rights in Jordan, as well as in any other country, the Jordanian legislator is supported by several laws and regulations including: . .
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the Patent of Invention Law No. 32 of 1999 amended by the Temporary Law No. 71 of 2001 and Regulation No. 97 of 2001; the Trade Marks Law No. 33 of 1952 amended by Law No. 34 of 1999 and its Regulation No. 1 of 1952 amended by Regulation No. 37 of 2000; the Protection of Layout-designs of Integrated Circuits Law No. 10 of 2000 and the Regulation of the Protection of Layout-designs of Integrated Circuits No. 93 of 2002; the Industrial Designs and Models Law No. 14 of 2000 and the Regulation of Designs and Models No. 52 of 2002;
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the Copyright Law No. 22 of 1992 amended in the years 1998, 1999, 2001 and lately amended by the Temporary Law No. 78 of 2003;
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the Geographical Indications Law No. 8 of 2000;
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the Law of Unfair Competition and Trade Secrets No. 15 of 2000.
Competent authorities in Jordan There are several competent authorities in Jordan responsible for the registration, implementation and protection of the rights related to the above-mentioned laws and regulations, including the Ministry of Industry and Trade represented by the Department of the Protection of Industrial Property, which is responsible for registering trade marks, patents, industrial designs and layout-designs of integrated circuits; and the National Library Department, which is responsible for the filing and certification of all literary works and for following up all crimes and violations related to computer and recordings’ piracy.
The Copyright Law No. 22 of 1992 and subsequent amendments The Copyright Law protects rights such as innovative literary, artistic or scientific works of any kind and works expressed in writing, sound, drawing, photography or movement. Furthermore, the protection provided encompasses the title of the work unless the title is a common term used to indicate the subject matter of the work. It also includes collections of literary or artistic works such as encyclopedias, selections and collected data whether or not collected in a machine-readable form in addition to their translation if translated into another language. Provided that such collections represent innovative intellectual works, protection will also encompass selective extracts of poetry, prose, music or other such material, provided that the sources and authors of the extracts are specified in the said collections and that they do not infringe the copyright of any work that represents a part of these collections and without prejudice to the rights of the original author. All the above-mentioned works, whether published or printed in Jordan by either a Jordanian or a non-Jordanian author or whether they are the work of Jordanian nationals if distributed inside Jordan and published or printed outside, may be filed with the Department of National Library free of charge. The filed copies must be identical in all aspects to the original work and must have the highest quality among the copies produced. The protection of copyrights stipulated in this law shall be for the lifetime of the author plus 50 years after death or, where there is more than one author, 50 years after the death of the last surviving author.
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The 50-year period commences from 1 January of the calendar year following the actual date of death. As for photographic and applied works of art, they are protected for 25 years from the assumed date of their production, which is 1 January of the calendar year in which they were actually produced. Other works such as cinematic and television productions, works whose author or rights holder is a juridical person, works that are published for the first time after the death of the author and works that do not bear the name of their author or carry a pseudonym enjoy the same protection. However, if authors reveal their identity during the protection period, the said period will begin from the death of the author and the works will be protected for 50 years from the deemed publication date, which will be the following 1 January. Furthermore, rights of the performers and producers of sound recordings remain in effect for 50 years, starting from 1 January of the calendar year following the year in which the performance or the production took place, and for 20 years for broadcast programmes that are transmitted by a broadcast or television organization commencing from 1 January of the calendar year following the year in which the programmes were broadcast for the first time. It should be noted, however, that the Copyright Law does stipulate that the non-filing of any work in the defined manner does not prevent a work from enjoying the same protection.
The Trade Marks Law No. 33 of 1952 and amendments The Trade Marks Law defines trade marks as any clear sign used or to be used by any person to distinguish that person’s goods, products and services. Furthermore, the Trade Marks Law also protects ‘well-known’ trade marks, which are marks with a worldwide reputation on goods exported from their country of registration and which have acquired fame and reputation in the relevant sector among the consuming public in Jordan. A registered trade mark must be distinctive whether in words (Arabic or English), letters, numbers, figures, colours or other signs or any combination thereof and visually perceptible and should also not be similar or identical to any other registered trade mark. An application for the registration of a trade mark must be filed with the trade mark registrar at the Ministry of Industry and Trade on the form provided for that purpose. The registrar will examine the application and if it fulfils all the legal requirements and conditions will grant the applicant a preliminary acceptance for subsequent publication in the Official Gazette. Any person may submit, within three months of the
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date of such publication, an opposition to the registration of the trade mark. Then the registrar upon hearing both the applying and opposing parties, if necessary, and considering the evidence, may decide whether and subject to what conditions registration may be permitted. The decision of the registrar may be appealed to the High Court of Justice within 20 days from the date of the registrar’s decision. If no opposition was filed or the opposition was rejected, the registrar will register the said trade mark and issue a certificate to that effect following the collection of the prescribed fees. The right of ownership for a trade mark is for 10 years from the date of registration and may be renewed for another 10 years. Should the trade mark owner fail to renew the trade mark registration, within one year of the anniversary, then it shall be regarded as cancelled and any third parties may apply to have the mark registered in their name after the elapse of another year.
The Patent Law No. 32 of 1999 and amendments thereto The Patent Law defines an invention as an idea in any of the fields of technology that relates to a product or a manufacturing process or both and solves practically a specific problem in any of the aforementioned fields. Furthermore, any invention should meet the following conditions: .
It has to be novel as regards the prior industrial art, and unprecedented as regards disclosure to the public in any place in the world by means of written or oral disclosure, by use or by any other way that allows awareness of the invention’s content before the relevant filing date of the patent application or the priority of the application claimed under the provisions of this law.
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The disclosure of the invention to the public shall not be taken into account if it occurred 12 months before the filing date of the application or before its priority date, if any, and it occurred due to actions taken by the applicant or the applicant’s predecessor or due to an abuse made by third parties against the applicant or the applicant’s predecessor.
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If it involves an inventive step, that, having regard to the prior art relevant to the patent application, it would not have been obvious to a person having ordinary skill in the prior art.
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If it is industrially applicable, that it can be made or used in any type of agriculture, fishing, service or industry in their widest senses including handicrafts.
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An application for the registration of a patent must be filed with the patents registrar at the Ministry of Industry and Trade, on the form provided for that purpose, stating the detailed description of the invention. The description must disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person having ordinary skill in the art while stating the best mode for carrying out the invention known to the person on the application date or the priority date. The registrar will examine the application and, if it fulfils all the legal requirements and conditions laid down, will grant the applicant a preliminary acceptance prior to publication in the Official Gazette. Any person may submit, within three months of the said publication date, an opposition to registration of the patent. The registrar shall issue a decision in the case after hearing both parties but, if neither of them wishes to give a statement, the registrar can adjudicate the case and notify both parties of the decision. If no opposition is filed or if the filed opposition is rejected, the registrar will then issue the patent certificate subsequent to the collection of the prescribed fees. The ownership right of the registered patent shall be for 20 years from the registration date.
The Industrial Designs and Models Law No. 14 of 2000 The Industrial Designs and Models Law has defined the industrial design as any composition or arrangement of lines that gives the product special form and appeal and that may be used for industry or handicrafts including textile designs. As for an industrial model, it is defined as a three-dimensional form, whether associated with lines and colour or not, which also has a special form and may be used for industry or handicrafts. An application for the registration of an industrial design or model must be filed with the registrar of industrial designs and models at the Ministry of Industry and Trade, on the form provided for that purpose, stating the kind of product and attaching drawings, photographs and other illustrative data embodying the design or model. The registrar shall examine the application and may invite the applicant to make adjustments to ensure fulfilment of all legal requirements and conditions, after which a decision to accept the application will be made subject to collection of the fees prescribed. The ownership right of the registered industrial design or model shall be for 15 years as of its registration date, and the ownership right of a layout-design shall be for 10 years as of the date of its first commercial exploitation anywhere in the world, provided that such period does not, in any case, exceed 15 years from the date of the creation of the layout-design.
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Furthermore, any industrial design or model displayed by any creator at exhibitions, whether held in Jordan or abroad, will be temporarily protected pursuant to the procedures and conditions of the regulations issued in accordance with the provisions of the Industrial Designs and Models Law.
The Geographical Indications Law No. 8 of 2000 The Geographical Indications Law is based entirely on the TRIPS Agreement Articles 22 to 24, as it introduces the definition of geographical indication in addition to other special provisions relating to the protection of geographical indications for wine and spirits.
The Law of Unfair Competition and Trade Secrets No. 15 of 2000 The Law of Unfair Competition and Trade Secrets is based on the Paris Convention granting protection for unregistered trade marks that may confuse consumers while also stipulating the conditions for considering any information a trade secret. In general, unfair competition is defined as an act that is contrary to honest practice in industrial or commercial matters such as: .
acts that may create confusion with the establishment, the goods or the industrial or commercial activity of a competitor;
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false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activity of a competitor;
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indications or allegations that may mislead the public as to the nature, manufacturing process, characteristics, suitability for their purpose or the quantity of the products;
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any practice that may discredit the reputation of a product, cause confusion in its external appearance or the way it is displayed, or mislead the public, in the course of announcing the price of the product or in the way of calculating it.
Furthermore, the Trade Secret Law stipulates that any applicant requesting authorization for pharmaceutical or agricultural chemical products, similar to items already in production, may not rely on the data of the original before the lapse of the term of protection, which is five years.
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The Fiscal and Regulatory Framework
Concerns Jordan has not yet joined the Madrid Convention, which governs the protection of trade marks internationally, but is actively pursuing participation. Therefore, any registered trade mark in Jordan is only protected locally but, if registered abroad, will be given a priority right from the date of registration in Jordan. Furthermore, in order to encourage persons to register their trade marks in Jordan, no person shall have the right to file a lawsuit to claim damages for any infringement upon a trade mark unless registered in Jordan. However, if a trade mark is well known and not registered, then its owner may demand the competent court to prevent third parties from using it on identical or non-identical goods or services provided that such use indicates a connection between those goods or services. An application may be submitted to the registrar in order to cancel a trade mark registered in Jordan by a person who does not own it after it was registered abroad may also be made.
5.6
Environmental Laws and Regulations Subhi A Ramadan, President, Environmental Consultants Branch, Ramadan Technical Services Co
Introduction Environmental laws and regulations in Jordan cover technical, cultural and socio-economic impacts and are similar to those of developed countries. However, law enforcement is still weak, although improving continuously. As to Jordanian standards and specifications (JSS), these have been prepared for essential goods and services and are increasing progressively in quality and quantity. Jordan has signed many international environmental and trade agreements, including a free trade agreement with the United States, some of which have environmental, socio-economic and labour components in addition to trading regulations. Environmental laws, regulations, standards and specifications (ELRSS) are better organized and enforced in Jordan than in many neighbouring Arab countries, but remain less developed than those in Western countries. These ELRSS were derived from many wellrecognized references such as the EPA of the United States, the World Bank, the World Health Organization and similar, but have been tailored to suit Jordanian conditions.
Ministry of Environment Environmental protection was initiated in Jordan in the 1960s. Laws and regulations were and still are scattered over many ministries. However, in 2003 the Ministry of Environment (MOE) was established in Jordan to replace a previous governmental organization that had been in charge of environmental affairs. Environmental Protection Temporary Law No. 1 of 13 January 2003 is now the governing law in
294
The Fiscal and Regulatory Framework
Jordan; ‘temporary’ means that this law is implemented as of January 2003, but will be subject at a later stage to Parliament’s modification and approval. The previous Environmental Law No. 95 of 1995, which itself replaced earlier laws, is null and void, with the exception of the regulations that emanated from it until such time as these are replaced or cancelled. However, JSS come under a separate entity in Jordan, and the Aqaba Special Economic Zone (South Jordan) has its own environmental laws and regulations, Law No. 21 of 2001, which are similar to those mentioned above. The MOE is actively involved now in all environmental affairs in Jordan but will only gradually become fully responsible, as many aspects remain the responsibility of several other ministries. In the light of this, it is expected that within the coming few years environmental protection will be at an advanced level in Jordan under the MOE.
Practical aspects of environmental regulation Local environmental experts in all fields are available in Jordan, who can perform and follow up on all Jordanian requirements. Accredited testing laboratories are also to be found locally, although international accredited laboratories’ certificates remain acceptable in the kingdom. Doing business in Jordan falls mainly into one of the areas of services, trading or manufacturing. Trading, whether it is import or export, is subjected to ELRSS. Goods imported into Jordan must meet JSS or well-established international standards, where there are no JSS. However, the standards and specifications applicable to exported manufactured goods from Jordan are those of the importing country; otherwise, they must at least meet JSS, if they are going to be sold in the Jordanian market. ELRSS and labour practice applied must also meet the terms of signed agreements in that regard between Jordan and the importing country or be in accordance with internationally signed agreements and, as a minimum, should meet the laws of Jordan. The manufacturing of goods in Jordan is an attractive activity and has many advantages and incentives. Environmentally, manufacturers must follow the above-mentioned trading rules as well as the following: .
Before establishing an industry, the industry owner must perform a comprehensive environmental impact assessment (EIA), in a form basically similar to that of the World Bank. The level of detail needed depends on the type and capacity of each industry. Industries are categorized (similar to categories of the World Bank) in accordance with the expected pollution emissions (quality and quantity) of the manufacturing process, with a minimum requirement of JSS regarding pollutants in addition to the management and monitoring requirements of the MOE. Standards are available
Environmental Laws and Regulations
295
in the field of drinking water, treated wastewater, air pollution and noise pollution, while other factors that have to be taken into consideration include solid and hazardous wastes, a public participation process, and occupational health and safety. Any such EIA can be performed by Jordanian experts. .
If financing for an industry is to be obtained from a foreign entity that requires an EIA, then the EIA has to meet that entity’s environmental requirements in addition to those of Jordan. For example, if a loan is obtained from the International Finance Corporation (IFC), then IFC environmental requirements have to be followed in addition to Jordanian requirements, with the stricter taking priority. Monitoring reports covering construction and operation phases of the project are required, as are annual monitoring reports. The yearly reports must include socio-economics, in addition to emissions, for a category A project.
A comprehensive EIA report for a category A project includes the following: .
scoping (stakeholders);
.
public participation;
.
detailed project description;
.
analysis of alternatives;
.
detailed baseline data;
.
all environmental and ecological components, including marine studies if the project is at Aqaba shore;
.
mitigation measures;
.
monitoring (during construction and operation);
.
policy, legal and administrative framework;
.
environmental management plan; and
.
the socio-economics of the project.
Other categories require fewer details. Nevertheless, all depend on impact and emissions. The nature of the project itself is the deciding factor of how it will be classified, as will the approvals obtained regarding the terms of reference of the EIA for the project. Examples of categories/classification of projects Examples include: .
category A: refineries, power generation, ports, airports, large hotels, solid waste disposal, petrochemical industries, industrial cities, mining, steel production and cement industries;
296
.
.
The Fiscal and Regulatory Framework
category B: poultry, fish and livestock farms, large excavations, desalination, special mining, storage of oil and gas, metals treatment, glass manufacturing and food processing; category C: other smaller projects, parks and small hotels, treatment plants and small storage facilities.
It should be noted, however, that some projects do not require an EIA, and these are defined on a case-by-case basis.
Sampling and penalties Ministries and governmental organizations concerned with compliance with the regulations in place obtain samples of goods in order to check that they meet JSS requirements, and also measure emissions to insure compliance with ELRSS. Penalties are imposed in the case of violations.
Part Six
The Financial Structure and Banking System
Export and Finance Bank Col. ad to go here
6.1
Commercial Banking in Jordan 1
Samer Sunnuqrot, Assistant General Manager, Jordan National Bank
Introduction The first month of 2002 witnessed a strong start for Jordanian banks, which was to turn rapidly into a severe crisis now known as ‘the Credit Facilities Case’, and which resulted from the perpetration of fraud by three debtors to Jordanian banks. This crisis brought about confusion leading to reduced public confidence in the Jordanian banking sector, not least because the incident also raised some concerns and doubts about the soundness of the system. However, the turbulence started to subside over time and especially after the government had taken several measures aimed at ensuring creditors’ rights. Importantly, it became clear that the banks involved in the case had sufficient reserves and provisions to overcome the crisis; indeed, Jordan National Bank and Jordan Investment and Finance Bank subsequently succeeded in raising their paid-up capital to reinforce their financial positions. However, the Jordan Gulf Bank was unable to procure a capital increase despite the readiness of a number of its biggest shareholders to raise about JOD 25 million conditional on the Central Bank of Jordan granting the bank certain preferential advantages. However, the Central Bank felt unable to provide the requested support and instead announced that the Arab Bank would be acquiring Jordan Gulf, a move that ultimately failed as a group of major shareholders signed a memorandum of understanding with the Central Bank to inject more capital and to restructure Jordan Gulf. 0
This chapter uses a rating system for Jordanian banks in terms of several main indicators including size, performance, profitability, operational efficiency, assets and liabilities management, and credit quality. The chapter studies 20 licensed banks operating in Jordan. It should be noted that the study used the figures of the financial statements of the banks’ branches in Jordan and abroad since the expansion of Jordanian banks in foreign markets signifies their capacity for growth and realization of profits. The study did not include the figures of Philadelphia Investment Bank and Rafidein Bank because their financial statements had not been issued at the time of writing.
300
Financial Structure and Banking System
During 2002, the Jordanian banks focused their efforts on offering competitively priced retail banking services, with many of them embarking on re-engineering and restructuring programmes or on overcoming the Credit Facilities Case.
Size indicators The size indicator measures each of assets, shareholders’ equity, market capitalization, deposits and credit facilities. Table 6.1.1 shows the rank of the banks in terms of this indicator, with the largest seven banks during 2001 maintaining the same rank in 2002. The evidence suggests that the Credit Facilities Case gave a signal to the Jordanian banks in 2002 to be prudent and conservative in granting facilities and to adopt a selective approach in lending, as it can be noted from Table 6.1.2 that the total of net facilities fell during the year by 1.9 per cent to JOD 8.58 billion, compared with JOD 8.75 billion in 2001. However, part of this decline can also be attributed to building additional provisions for doubtful credit facilities. It is clear also from this table that the Arab Bank alone accounted for about 60 per cent of all net credit facilities of the banking sector at the end of 2002, a figure not dissimilar to the year before despite a decline in its credit portfolio of 1 per cent. In terms of total assets, the one change that occurred (see Table 6.1.3) was that the Jordan Islamic Bank managed to occupy fifth place above Bank of Jordan, albeit each bank constituted about 3.3 per cent of the total assets of the sector. It is the case also that the share of the five largest banks represented about 80 per cent of the total assets of the sector, which grew overall by 2.4 per cent and totalled JOD 24.4 billion at the end of 2002 as compared with JOD 23.9 billion a year earlier. The star performer of all Jordanian banks year after year is the Arab Bank, whose overall share of the sector always hovers around 60 per cent, whether in terms of customer deposits, net credit facilities or net shareholders’ equity. Of particular note in 2002 is that the total customer deposits of the Arab Bank exceeded JOD 10 billion for the first time in its history, recording a growth rate of 9.6 per cent. The Housing Bank also recorded a growth in its deposits of 3.1 per cent, but while ranked in second place its share of total customer deposits amounts to just 7.6 per cent of the overall figure. The sleeping giant, Jordan National Bank, has maintained its position among the top three despite a slight decline in deposits of 4.4 per cent following the repercussions of the Credit Facilities Case. This was attributed to its solid capital base and the strength of its reserves and provisions. Total deposits of the banks under study rose by 7.7 per cent from JOD 15.6 billion in 2001 to JOD 16.8 billion in 2002, a figure that exceeds the average interest rate on term deposits
Commercial Banking in Jordan
301
during 2002 of 3.97 per cent, thereby indicating that the growth in deposits was the result of new funds entering the banking system rather than accumulation of interest on the principal of existing deposits (see Table 6.1.4). In spite of the recovery in the stock prices of shares listed on the Amman Stock Exchange during 2002, the banking sector price index decreased by 7.1 per cent during the year. This decline was attributed to the negative effects of the Credit Facilities Case and the fears of potential war in Iraq. Furthermore, the fall in the Arab Bank share price from JOD 200 at the end of 2001 to JOD 184 at the end of 2002 has contributed substantially to the overall decline in the general price index of 1.6 per cent, and has impacted particularly hard on the banking sector index. This factor has led to a decrease in total market capitalization of the banking system (as a main indictor of size) of 6.6 per cent to JOD 2.4 billion, compared with JOD 2.6 billion at the end of 2001 (see Table 6.1.5). No change has occurred in the rank of the first six banks in terms of shareholders’ equity, with the Arab Bank, the Housing Bank, Jordan National Bank, Bank of Jordan, Jordan Kuwait Bank and the Jordan Islamic Bank all maintaining their status. Of particular note is that Jordan Gulf Bank had negative shareholders’ equity at the year end due to the realization of provisions in 2002. Nevertheless, total shareholders’ equity for the banking sector grew by 4.7 per cent to reach JOD 2.1 billion (see Table 6.1.6). The total net profit after tax for the sector (net of losses) recorded a decrease of 8.5 per cent from JOD 204.2 million in 2001 to JOD 186.7 million in 2002. The cost/income ratio edged up to 69 per cent in 2002 compared to 67.9 per cent in the previous year, and the average return on equity fell to 8.8 per cent in 2002 versus 9.9 per cent in 2001. The ratio of non-performing loans as a percentage of gross loans for the banking sector increased to 13.1 per cent in 2002 against 12.1 per cent in 2001.
Conclusion Despite the modest fall in the performance of Jordanian banks in 2002, the overall condition of the sector looks very healthy in 2003 after containing the Credit Facilities Case. The banking sector is currently focusing on the retail market and investment banking operations as well as re-engineering the banking processes, especially with the entrance of three new Arab banks to the already over-banked Jordanian market. The Central Bank of Jordan requested all licensed banks to raise their paid-up capital to a minimum of JOD 40 million by 2007 in an attempt to force smaller banks to merge and hence to strengthen their financial positions.
302
Financial Structure and Banking System
Table 6.1.1 Composite index of bank size Bank name
Rank 2002
2001
Arab Bank
1
1
Housing Bank for Trade and Finance
2
2
Jordan National Bank
3
3
Cairo Amman Bank
4
4
Bank of Jordan
5
5
Jordan Islamic Bank
6
6
Jordan Kuwait Bank
7
7
Union Bank for Saving and Investment
8
10
(HSBC) Middle East Investment Bank
9
11
Jordan Investment and Finance Bank
10
8
Arab Jordan Investment Bank
11
13
Arab Banking Corporation
12
12
Arab Islamic Bank
13
16
Export and Finance Bank
14
15
Arab Egyptian Land Bank
15
14
Jordan Gulf Bank
16
9
Standard Chartered Bank
17
17
Citibank
18
18
Industrial Development Bank
19
19
Middle East Investment Bank (Socie´te´ Ge´ne´rale Group)
20
20
Table 6.1.2 Net credit facilities Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
5,189,256 5,235,743 60.5
% growth 2002
2001 2002 70.9
1
1
Arab Bank
2
2
Housing Bank for Trade and Finance
600,015
584,751
7.0
2.6
3
3
Jordan National Bank
459,004
540,842
5.3
715.1
4
4
Bank of Jordan
337,697
323,149
3.9
4.5
5
5
Cairo Amman Bank
283,310
310,100
3.3
78.6
6
6
Jordan Islamic Bank
269,371
243,892
3.1
10.4
Commercial Banking in Jordan
303
Table 6.1.2 (cont’d) Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
% growth 2002
2001 2002 7
7
Jordan Kuwait Bank
264,415
237,368
3.1
11.4
10
8
Union Bank for Saving and Investment
146,162
132,946
1.7
9.9
9
9
Arab Egyptian Land Bank
133,182
142,028
1.6
76.2
8
10
Jordan Gulf Bank
125,271
232,765
1.5
746.2
13
11
Export and Finance Bank
116,126
112,190
1.4
3.5
12
12
Arab Banking Corporation (ABC)
115,863
121,627
1.3
74.7
14
13
(HSBC) Middle East Investment 113,747 Bank
95,654
1.3
18.9
11
14
Jordan Investment and Finance 101,669 Bank
131,445
1.2
722.7
16
15
Arab Jordan Investment Bank
69,475
71,998
0.8
73.5
15
16
Industrial Development Bank
68,239
76,603
0.8
710.9
17
17
Standard Chartered Bank
60,351
45,255
0.7
11.2
18
18
Arab Islamic Bank
50,694
51,928
0.6
72.4
19
19
Citibank
48,622
28,104
0.6
73.0
20
20
Middle East Investment Bank (Socie´te´ Ge´ne´rale Group)
30,416
22,122
0.4
37.5
Total of banking sector
8,582,885 8,749,150 100.00
71.90 7
Table 6.1.3 Total assets Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
14,714,153 14,548,835 60.2
% growth 2002
2001 2002 1
1
Arab Bank
2
2
Housing Bank for Trade and Finance
1,769,517
1,708,812
7.2
1.1 3.6
3
3
Jordan National Bank
1,384,868
1,353,923
5.7
2.3
4
4
Cairo Amman Bank
896,186
930,121
3.7
73.6
6
5
Jordan Islamic Bank
809,086
703,843
3.3
15.0
5
6
Bank of Jordan
806,548
737,365
3.3
9.4
7
7
Jordan Kuwait Bank
625,121
569,982
2.6
9.7
304
Financial Structure and Banking System
Table 6.1.3 (cont’d)
Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
% growth 2002
2001 2002 12
8
Union Bank for Saving and Investment
371,425
306,277
1.5
21.3
13
9
(HSBC) Middle East Investment Bank
364,391
300,033
1.5
21.5
10
10
Arab Jordan Investment Bank
362,514
329,742
1.5
9.9
8
11
Jordan Investment and Finance Bank
352,612
415,753
1.4
715.2
14
12
Arab Islamic Bank
314,741
253,246
1.3
24.3
11
13
Arab Banking Corporation (ABC)
298,685
310,488
1.2
73.8
16
14
Export and Finance Bank
273,418
237,563
1.1
15.1
9
15
Jordan Gulf Bank
260,541
386,526
1.1
732.6
15
16
Arab Egyptian Land Bank
245,576
247,618
1.0
70.8
17
17
Standard Chartered Bank
240,188
212,817
1.0
12.9
18
18
Citibank
176,344
153,693
0.7
14.7
19
19
Industrial Development Bank
118,097
121,540
0.5
72.8
20
20
Middle East Investment Bank (Socie´te´ Ge´ne´rale Group)
64,058
53,385
0.3
20.0
24,448,069 23,881,562 100.0
2.4
Total of banking sector
Table 6.1.4 Total customer deposits Rank
Bank name
2002 JOD 000
10,052,167
2001 JOD 000
% share of total 2002
% growth 2002
2001 2002 1
1
Arab Bank
2
2
Housing Bank for Trade and Finance
9,175,787 59.7
9.6
1,278,092
1,239,300
7.6
3.1
3
3
Jordan National Bank
819,728
857,656
4.9
74.4
4 5
4
Cairo Amman Bank
725,934
720,734
4.3
0.7
5
Jordan Islamic Bank
710,520
621,509
4.2
14.3
6
6
Bank of Jordan
616,104
562,666
3.7
9.5
7
7
Jordan Kuwait Bank
397,943
357,813
2.4
11.2
9
8
(HSBC) Middle East Investment Bank
300,470
256,732
1.8
17.0
Commercial Banking in Jordan
305
Table 6.1.4 (cont’d) Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
% growth 2002
2001 2002 11
9
Union Bank for Saving and Investment
286,804
206,663
1.7
38.8
8
10
Jordan Investment and Finance Bank
260,350
320,947
1.5
718.9
10
11
Jordan Gulf Bank
209,215
255,059
1.2
718.0
13
12
Standard Chartered Bank
200,249
188,941
1.2
6.0
14
13
Arab Jordan Investment Bank
186,694
181,968
1.1
2.6
12
14
Arab Banking Corporation (ABC)
180,471
197,021
1.1
78.4
15
15
Arab Egyptian Land Bank
171,582
151,502
1.0
13.3
17
16
Arab Islamic Bank
152,328
112,436
0.9
35.5
18
17
Export and Finance Bank
132,861
90,859
0.8
46.2
16
18
Citibank
117,812
113,013
0.7
4.2
19
19
Middle East Investment Bank (Socie´te´ Ge´ne´rale Group)
42,047
33,330
0.2
26.2
20
20
Industrial Development Bank
145
0
0.0
100
16,841,516 15,643,936 100.0
7.7
Total of banking sector
Table 6.1.5 Market capitalization Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
1,619,200
1,760,000
66.6
78.0
242,000
236,000
10.0
2.5
% growth 2002
2001 2002 1
1
Arab Bank
2
2
Housing Bank for Trade and Finance
3
3
Jordan Kuwait Bank
96,750
83,750
4.0
15.5
4
4
Bank of Jordan
72,765
80,062
3.0
79.1
5
5
Jordan National Bank
41,587
52,500
1.7
720.8
6
6
Export and Finance Bank
41,400
46,552
1.7
711.1
8
7
Jordan Islamic Bank
40,800
42,735
1.7
74.5
9
8
Arab Islamic Bank
40,000
40,000
1.6
0.0
7
9
Cairo Amman Bank
32,000
44,600
1.3
728.3
10
10
Arab Investment Bank
30,400
33,600
1.3
79.5
306
Financial Structure and Banking System
Table 6.1.5 (cont’d)
Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
% growth 2002
2001 2002 14
11
Union Bank for Saving and Investment
26,400
21,400
1.1
23.4
12
12
Jordan Investment and Finance Bank
25,777
28,600
1.1
79.9
15
13
Industrial Development Bank
23,520
18,480
1.0
27.3
13
14
Arab Banking Corporation (ABC)
20,200
25,200
0.8
719.8
11
15
Jordan Gulf Bank
16,800
28,800
0.7
741.7
16
16
Arab Egyptian Land Bank
15,000
15,000
0.6
0.0
17
17
(HSBC) Middle East Investment Bank
14,000
14,000
0.6
0.0
18
18
Standard Chartered Bank
13,000
13,000
0.5
0.0
19
19
Citibank
10,000
10,000
0.4
0.0
20
20
Middle East Investment Bank (Socie´te´ Ge´ne´rale Group)
9,248
9,089
0.4
1.7
2,603,368 100.0
76.6 7
Total of banking sector
2,430,847
Table 6.1.6 Total shareholders’ equity Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
1,286,026
1,167,932
60.3
10.1
265,180
256,455
12.4
3.4
% growth 2002
2001 2002 1
1
Arab Bank
2
2
Housing Bank for Trade and Finance
3
3
Jordan National Bank
64,129
69,310
3.0
77.5
4
4
Bank of Jordan
61,055
55,603
2.9
9.8
5
5
Jordan Kuwait Bank
57,675
53,830
2.7
7.1
6
6
Jordan Islamic Bank
55,592
53,578
2.6
3.8
8
7
Arab Islamic Bank
47,085
45,559
2.2
3.3
9
8
Industrial Development Bank
42,248
38,675
2.0
9.2
7
9
Cairo Amman Bank
39,956
52,492
1.9
723.9
11
10
Export and Finance Bank
37,590
32,107
1.8
17.1
10
11
Arab Jordan Investment Bank
35,717
34,412
1.7
3.8
Commercial Banking in Jordan
307
Table 6.1.6 (cont’d) Rank
Bank name
2002 JOD 000
2001 JOD 000
% share of total 2002
% growth 2002
2001 2002 12
12
Union Bank for Saving and Investment
33,129
30,413
1.6
8.9
15
13
Jordan Investment and Finance Bank
30,861
24,905
1.4
23.9
14
14
(HSBC) Middle East Investment Bank
29,221
24,923
1.4
17.2
13
15
Arab Banking Corporation (ABC)
28,850
27,604
1.4
4.5
19
16
Standard Chartered Bank
17,422
13,263
0.8
31.4
17
17
Arab Egyptian Land Bank
16,158
16,175
0.8
70.1
18
18
Citi Bank
15,020
14,723
0.7
2.0
20
19
Middle East Investment Bank (Socie´te´ Ge´ne´rale Group)
7,779
7,459
0.4
4.3
16
20
18,270
71.7
7300.3
2,037,688 100.0
4.7
Jordan Gulf Bank Total of banking sector
736,591 2,134,102
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6.2
The Investment Banking Industry in Jordan Omar M Masri, Atlas Investment Group, Amman Finance, including investment banking services, is of vital significance to the development of a country, and the flows of capital to the daily welfare of its citizens. Jordan, like many Middle Eastern economies, is facing the challenge of mobilizing larger domestic and external resources in order to finance productive investments aimed at sustaining high economic growth rates. As such, Jordanian policy makers have been devoting more attention over the past several years to improving the operation of domestic capital markets. Jordan is potentially the clearest case of private sector financial development among its regional peers. The private sector has taken the initiative and established an investment banking industry built on four key lines of business: corporate finance, asset management, brokerage and research. This industry began with the establishment of Atlas Investment Group in 1996, followed by the Jordan Investment Trust in 1997 and an investment banking unit of the Export and Finance Bank, a newly established commercial bank. Today, there are a total of 28 active brokerage firms along with five investment banking firms and commercial banks, including two not mentioned above, the Arab Jordan Investment Bank and the Jordan Investment and Finance Bank, offering one or more of the four key investment banking services. Jordanian investment banks, which have survived and adapted to the new global and regional realities, are emerging stronger, smarter and more resilient. The standards of professionalism are improving, as players strive to compete and prove themselves against their larger and more experienced international counterparts. Local investment banks have gained the credibility, faith and respect of the corporate community and governmental bodies. These developing relationships are translating into larger and more frequent mandates being awarded to such local investment banks, as opposed to non-resident, foreign consultants and/or investment banks. This phenomenon has been further reinforced as foreign investment banks, primarily from Europe
310
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and the United States, witness higher lay-offs or turnover levels among their MENA teams, resulting in these banks having to send in their ‘B’ teams on assignments in the region. As the investment banking industry in Jordan continues to develop, it has increasingly been attracting young and bright individuals who are shying away from traditional financial services jobs in search of more entrepreneurial environments. There is growing awareness and appreciation of the significance of obtaining certifications such as the prestigious chartered financial analyst (CFA) designation. At Atlas, for example, there are four CFAs, which is one of the highest of any investment bank in the region. Atlas has also sponsored the establishment in Jordan of the third chapter in the region of the Association of Investment Management and Research (AIMR), which administers the CFA programme and certification. On the corporate finance front, products that are typically offered by local investment banks include initial public offerings (IPO), private placements of shares, corporate bond issues and advisory services on mergers and acquisitions (M&A). Despite some M&A activity in the pharmaceutical, telecommunications and mining sectors, the M&A market is nowhere near the maturity stage, as more consolidations are expected in sectors like banking, insurance, pharmaceuticals and telecommunications. This wave of consolidation will be largely driven by the overcapacity that has built over the past 12 years and by heated competition arising from the integration of Jordan into regional and global economies. Jordan’s privatization programme will also deepen the market for M&A advisory services. The bond market has witnessed some activity during the past two years, in the light of a lower interest rate environment and increased awareness of the need to diversify financing sources. Investment banks that have the underwriting licence and balance sheet capabilities have managed the highest number of bond issues. The prevailing low interest rate environment will continue to provide an incentive for corporates to tap the bond market for a lower-cost and more diversified source of funding. With the local stock market at its highest in late 2003, it is expected that the wave of IPOs is yet to begin. Many privately held companies are now considering floating their shares on the Amman Stock Exchange to take advantage of the bull market and to finance their growth plans. One area where investment banks may see increasing activity is that of project finance. Well-functioning infrastructure services in Jordan, especially electric power, transportation systems and telecommunications networks, are crucial to the growth of internationally competitive private sectors. The government budget is increasingly constrained, and in recent years there has been a growing trend for private investment to
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supplement or supplant public financing of infrastructure through BOT, BOO and BOOT schemes. In regard to asset management, where tangible activity began in 1999, it is believed that there are significant opportunities in Jordan on the individual, corporate and quasi-governmental levels. Low interest rates and a global slowdown in the developed markets have caused tens of billions of dollars to be repatriated back to the region in search of regional opportunities. Over the past few years, Jordanian individuals and corporates have been channelling more money to capital guaranteed funds to minimize risk. Investors, however, are becoming more discriminating and are demanding new products, which is giving rise to such vehicles as private equity, mutual funds and provident and endowment funds. Product development by investment banks in Jordan will be a vital element in the industry’s future growth. Integral to this was the recent launch by Atlas and its partners, Deutsche Bank and Foursan Group, of the Jordan Fund, which is a USD 50 million private equity fund targeting Jordanian opportunities. The Jordanian government has committed to seed the fund with USD 20 million as part of its efforts to encourage investment into the country. On the brokerage front, activity by local and regional investors on the Amman Stock Exchange has been strong, as evidenced by the trading volumes over the past few years. Intra-regional portfolio flows have been on the rise, particularly from Gulf investors within their own markets as well as into neighbouring stock exchanges. Noteworthy is that the largest US pension fund has recently given its vote of confidence to some of the region’s stock markets by deciding to invest in Jordan. The USD 133 billion California Public Employees’ Retirement System (CalPERS) agreed in February 2003 to begin targeting Jordan. Its decision was based on analysis that gives equal weight to country factors – namely political stability, transparency and labour practices – and to market factors, which include market liquidity and volatility, market regulation and investor protection, capital market openness, settlement proficiency and transaction costs. Meanwhile, investment banks have been channelling more resources towards the production of more in-depth research products, primarily to support their brokerage operations. The objective has been to provide investors with a demonstrably informed opinion on investment opportunities and associated risks currently available in the country. Such research products include country reports, which provide realistic assessments of economic conditions in Jordan, as well as sector reports, which provide the reader with overviews of particular sectors and an analysis of the trends and outlook in any given sector. Investment banks are also producing weekly stock market briefs as well as equity research reports that provide in-depth analysis of companies listed on the Amman Stock Exchange and associated stock recommendations.
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In summary, one can expect some consolidation in the investment banking industry in Jordan as players search for larger balance sheets either through mergers or by selling out to commercial banks, which in turn are seeking to capture investment banking revenues. A prime example of this occurred in November 2003, when it was announced that Atlas Investment Group was being acquired by the Arab Bank, one of the oldest and largest commercial banks in the region. There will be less room in Jordan and the region for smaller, niche investment banks and an overall need in the future for larger investment banks that can offer clients a wider array of products and services and can successfully participate in larger and more frequent cross-border M&A transactions.
6.3
Amman Stock Exchange Jalil Tarif, Chief Executive Officer, Amman Stock Exchange
Historical background to the capital market in Jordan The history of securities trading in Jordan can be traced back to the 1930s but it was not until 1976 that the Amman Financial Market was established to create a regulated trading market. More recently, as part of Jordan’s move to upgrade its capital markets, a Securities Law was enacted in 1997, separating the supervisory and legislative roles from those of operating an exchange. As a result, the Amman Stock Exchange (ASE) was created along with the Jordan Securities Commission (JSC) and Securities Depository Centre (SDC). The JSC supervises the issuance of and trading in securities and monitors and regulates the market. The SDC oversees clearance and settlement and maintains ownership records. These three institutions replaced the Amman Financial Market, which had performed the dual roles of market operator and market regulator, serving the market’s needs successfully for many years. But such an arrangement no longer complied with international practices, and hence the change. Recently, a new Securities Law No. 76 for 2002 has been issued, which authorizes the setting up other stock exchanges and allows the forming of an independent investor protection fund, stricter ethical and professional codes, and a more stringent observance of the rule of law.
The Jordan Securities Commission The JSC regulates the issuance, primary offering and secondary trading of securities; monitors the ASE and SDC; and licenses and regulates entities conducting securities business (such as financial brokerage, investment management, financial advisory services, underwriting and custodial services) and their personnel. Its aims are to facilitate the dealing of securities in a sound environment and to protect investors.
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The JSC’s powers are vested in a board of five full-time commissioners, who are appointed by the Cabinet. Implementation of commission decisions is the responsibility of the Chairman of the Commission, the Chairman’s delegate or, in the Chairman’s absence, the Deputy Chairman. Financial services companies are subject to periodic inspection by the JSC Inspection Department. The JSC Capital Market Monitoring Department monitors the market for insider trading, market manipulation and other breaches. It works closely with the ASE Surveillance Department, which pursues real-time monitoring of ASE trading, and the SDC Surveillance Department. JSC Disclosure Division monitors issuers’ compliance with disclosure requirements. Enforcement is primarily the responsibility of the JSC. It can suspend financial services companies, remove their licences and refer to the prosecuting authorities persons who carry on regulated activities while unlicensed or who commit insider dealing or market manipulation offences.
The Amman Stock Exchange The ASE was established in March 1999 as a non-profit, private institution with administrative and financial autonomy. It is authorized to function as an exchange for the trading of securities. The exchange is governed by a seven-member board of directors. An executive manager oversees day-to-day responsibilities and reports to the board. The ASE membership comprises Jordan’s 33 brokerage firms. The ASE is committed to the principles of fairness, transparency, efficiency and liquidity. The exchange seeks to provide a strong and secure environment for its listed securities while protecting and guaranteeing the rights of its investors. To provide this transparent and efficient market, the ASE has implemented internationally recognized directives regarding market divisions and listing criteria. To comply with international standards and best practices, the ASE works closely with the JSC on surveillance matters and maintains strong relationships with other exchanges, associations and international organizations. The exchange is an active member of the Union of Arab Stock Exchanges, and the Federation of Euro-Asian Stock Exchanges (FEAS), a correspondent of the World Federation of Exchanges (WFE) and an affiliate member of the International Organization for Securities Commissions (IOSCO). The ASE is charged with: .
providing enterprises with a means of raising capital by listing on the exchange;
Amman Stock Exchange
315
.
encouraging an active market in listed securities based on the effective determination of prices and fair and transparent trading;
.
providing modern and effective facilities and equipment for trading, recording trades and publishing prices;
.
monitoring and regulating market trading, coordinating with the JSC as necessary, to ensure compliance with the law, a fair market and investor protection;
.
setting out and enforcing a professional code of ethics among its member directors and staff; and
.
ensuring the provision of timely and accurate information of issuers to the market and disseminating market information to the public.
Market regulation and transparency are major priorities for Jordanian capital market institutions, where strict enforcement serves to enhance Jordan’s reputation and attract foreign as well as domestic investment. The ASE works closely with the JSC to monitor trading on the exchange and regarding matters of surveillance. In this regard the ASE has introduced and passed a number of rules and regulations that govern its work and comply with international standards, such as: the ASE Internal By-Law, the Directives on Code of Ethics of ASE, the Directives on Disclosure Related to the ASE, Regulations for the Fees and Commissions of the ASE, Directives for Trading in Securities at the ASE, Directives for Listing Securities on the ASE, the ASE Internal By-Law for Disputes Settlement, and the Directives for the ASE Financial Brokers’ Guarantee Fund.
Technological development at the ASE Technological development includes: .
Electronic trading system and remote trading. The ASE’s trading system is a sophisticated electronic system that provides transparency and fairness of dealing for market participants, enhances liquidity and market depth and facilitates the market surveillance controlled by the ASE and the JSC. It is an automated, order-driven system that affords brokers immediate access to stock prices and orders and enables members to trade remotely, which improves dealers’ performance at the ASE and provides brokerage firms and dealers in securities with more flexibility and ease.
.
The intranet. The intranet connects all the ASE members and its employees, supplies information and a correspondence channel for internal e-mail. It is an important step towards developing means
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of communication between its employees that saves time, effort and expense. .
Management information system (MIS). The MIS is Oraclebased and replaces an old COBOL and Access-based system. It facilitates business within all the ASE departments by ensuring swift reporting and enables members to have access to their reports in the shortest possible time. It also enforces surveillance by the ASE Trading Department and the JSC Surveillance Department, while offering the possibility of having immediate, during-thesession access to client reference numbers.
.
Wide area network (WAN). The ASE brokers, issuers, investors, data providers and other financial institutions are electronically connected to the exchange, depository and securities commission through a wide area network (WAN), which links the stock exchange and depository to more than 130 market participants in Jordan who have electronic data dissemination screens (plasma screens) to view real-time changes in the market.
.
Expansive data dissemination. Disclosure and dissemination of market information is a key priority for the ASE, and the exchange has made tremendous strides in its campaign to raise awareness and provide information about Jordan’s capital market to the general public. The advancements include the adoption of the electronic trading system, and the development of other real-time displays of information. Investors can access ASE information including listings and members’ details through multiple channels from anywhere in the world. The ASE provides access to data 24 hours a day on its Web site at www.ase.com.jo, which receives more than 12 million hits per month. Data vendors also provide ASE quotes and information such as that provided by Reuters. In addition, share prices are displayed on Jordan Television on both Channel One and its satellite channel as well as on the specialized economic channel CNBC Arabia. The ASE’s Investor Gallery links the exchange, other capital market institutions, member brokerage firms and financial institutions through state-of-the-art technology. This real-time disclosure of information is symbolic of the ASE’s commitment to using top-quality products and innovative services to support its clients. The ASE also produces publications that are widely dispersed to the public and include: the public shareholding companies’ guide on CD ROM, a monthly newsletter, the monthly statistical bulletin and its annual report.
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317
The ASE’s performance overview The ASE is one of the largest stock markets in the region, with a market capitalization of more than USD 11 billion. The exchange currently lists 161 companies and has more than 500,000 investors. Jordanian corporate and individual investors hold 54 per cent of shares on the exchange; foreign investors account for 39 per cent of share ownership (see Figure 6.3.1); and the government, through the Jordan Investment Corporation, holds the remaining shares.
Figure 6.3.1 Foreign ownership in ASE (end of November 2003) The ASE has experienced tremendous growth in recent years and especially during 2002 and 2003. The share price index of the ASE reached an all-time high during the trading session of 23 December 2003 when it reached 263 points, a rise of 54 per cent since the beginning of the year. The cumulative volume also reached an all-time high, trading for the whole period reaching JOD 1,855 million or a 95 per cent rise. The number of shares traded doubled, and executed contracts increased by 75 per cent over the figures for 2002. The capitalization of the ASE rose by 55 per cent to reach JOD 7.8 billion (see Figure 6.3.2), constituting 117 per cent of GDP, a figure that is considered high compared to those prevailing on international exchanges.
Clearing and settlement Applicable instructions provide for immediate cash settlements among brokers themselves and between brokers and their clients in order to avoid any default by clients towards their brokers, which would in turn influence settlements among brokers and ultimately create financial instability and confusion. Settlement procedures require that the SDC enters trading data into its system via the ETS of the ASE on the same day as execution of sales and purchases. On the following day (T+1), the SDC issues settlement
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Financial Structure and Banking System
records for brokers and cash settlements are undertaken among them. On T+2, the SDC hands over the transfer of ownership contracts to the issuers. In turn, the issuers must transfer ownership of shares within three days of receipt of transfer contracts. Thus, all procedures of transfer of ownership of shares are completed within five days of execution of transactions (T+5).
Figure 6.3.2 Market capitalization of the ASE
Taxation and regulations affecting foreign investors There are no restrictions on the repatriation of the proceeds of the sale of securities, or on the income arising from them. A 10 per cent tax on distributed dividends was removed as of 1 January 2002 and there is no tax on capital gains. Jordan has double taxation treaties with Egypt, France, India, Indonesia, Malaysia, Poland, Romania, Tunisia, Turkey, Yemen and, collectively, the members of the Council of Arab Economic Unity. According to the Non-Jordanian Investment Regulation No. 54 of 2000 issued pursuant to Article 24 of the Investment Promotion Law No. 16 of 1995, no ceiling exists on non-Jordanian ownership of companies listed on the ASE.
Prospective developments The ASE is continuing its efforts to: .
make comprehensive revisions and amendments to its rules and regulations in order to comply with the new Securities Law, which
Amman Stock Exchange
.
. .
319
was issued on 31 December 2002 and which accords with international standards in the securities industry; activate its role in the privatization process by encouraging companies being privatized to make their IPOs through the ASE and subsequently to list their shares on the exchange; strengthen cooperation with regional and international institutions and federations; develop its policy in regard to data dissemination.
Key figures Market statistics Table 6.3.1 Market size at 31 December 2003 Listed companies
161
Unlisted companies
46
Market capitalization
JOD 7,773 million
Trading statistics Table 6.3.2 Trading floor (equity) Volume million
Value JOD million
1999
271.1
389.5
2000
228.4
334.7
2001
340.6
668.7
2002
461.8
950.3
2003
1,008.6
1,855.2
Table 6.3.3 Largest companies by market capitalization Position
Company
Value at end 2003 JOD million
1
Arab Bank
2,684.0
2
Jordan Telecom
3
The Housing Bank for Trade and Finance
433.0
4
Arab Potash
385.8
5
The Jordan Cement Factories
326.4
555.0
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Financial Structure and Banking System
Table 6.3.4 The five most actively traded shares during 2003 Position
Company
Value traded JOD million
Volume traded million shares
1
Arab Bank
177.5
0.7
2
Arab Potash
139.0
25.2
3
Jordan Steel
84.3
32.3
4
Specialized Investment Compounds
75.7
35.8
5
Jordan Islamic Bank
68.3
51.2
ASE share price index and other main indices The ASE has had a share price index since 1980. In 1992 the index was revised and updated in cooperation with the International Finance Corporation of the World Bank. The index comprises the 70 most liquid companies from the first and second markets. The weight of each company in the index is determined by its relative percentage of the total market capitalization of the 70 companies. The ASE share price index has a base value of 100 and a base date of 31 December 1991. The index is divided into four sectors: banking, insurance, services and industrial. Table 6.3.5 Year-end share price index, p/e ratios and yields Year
Index JOD
Market p/e
Dividend yield %
1999
167.35
14.30
2.88
2000
133.05
14.80
3.64
2001
172.72
15.33
2.70
2002
170.02
12.97
3.21
2003
261.45
21.75
2.36
Securities traded Securities traded include stocks, development bonds, corporate bonds, Treasury bonds and investment units. Commission rates and other client costs The main cost of dealing is commission. Commissions for trading in equities on the first, second or third markets of the ASE vary between 0.0054 and 0.0074 of value traded. The commission will include: the brokerage firm’s own commission, which is limited to between 0.004 and
Amman Stock Exchange
321
0.006 of value traded; and fees totalling 0.0014 of value traded payable to the key market authorities as to 0.0005 (Jordanian Securities Commission), 0.0006 (ASE) and 0.0003 (SDC) and levied by the broker on their behalf. Commissions on bonds traded on the ASE vary between 0.00045 and 0.00095 of value traded. As with equities, this will comprise the brokers’ commissions (between 0.0003 and 0.0008 of value traded) and fees payable to the key market authorities. Brokers receive commissions calculated on the basis of the market value of both buying and selling transactions of the security, according to Table 6.3.6.
Figure 6.3.3 The ASE weighted price index Table 6.3.6 Brokers’ commissions Security traded
Lower limit JOD per thousand
Upper limit JOD per thousand
Shares
5.4
7.4
Bonds
0.45
0.95
2.0
2.2
Investment units
Trading hours Office hours are Sunday to Thursday, 8 am to 4 pm. Official trading hours are Sunday to Thursday for the following sessions:
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Financial Structure and Banking System
pre-opening session for bonds, mutual funds, third market companies: 9.30 to 9.35 am; pre-opening session for first and second markets: 9.30 to 10 am; opening session for bonds, mutual funds, third market companies: 9.35 am; trading session for bonds, mutual funds, third market companies: 9.35 to 9.55 am; opening session for first and second markets: 10 am; trading session for first and second markets: 10 am to 12 noon; block trades: 12 noon to 12.15 pm.
6.4
Insurance and Insurance Regulations 1
Jordan Insurance Federation Historical background During the 1940s Jordan had a population of not more than 400,000 people and its economy was facing great difficulties following the Second World War, owing to a marked reduction in the import of goods. At the time, insurance was not commonly used, except for those imported goods that required marine or road transportation cover, which the Ottoman Bank used to insure with Eagle Star Company in London. However, 1946 saw the beginnings of an insurance market in Jordan when Ra’ouf Abu Jaber established an insurance agency affiliated to the Egyptian Orient Insurance Company, which itself was established in Cairo in 1921 with joint Egyptian and French capital. Then, in the 1950s noticeably increased activity occurred in the field of vehicle insurance and marine transportation as Jordan was forced to discharge goods at Aqaba port, thereby creating the need for a strong insurance sector to cover road transportation. As a result, a number of insurance companies were established, Jordan’s Insurance Company being the first. At that stage, it became necessary to organize the sector better in order to limit the high competition that had arisen in the market and to ensure prevention of the inability of insurance companies to meet the larger demands of some companies and authorities. As a result, the Association of Jordanian Insurance Companies was established under the presidency of Mr Ledger, with Ra’ouf Abu Jaber and Ilias Habaib as managers. Over the ensuing decade, the Jordanian market witnessed an increase in the number of insurance companies when Middle East Insurance Company was established with a capital of JOD 200,000, to be followed by National Insurance Cooperative Company. 0
Sources for this chapter include Insurance Sector Report 2000, Jordan Insurance Market Report 2001, Dictionary of Insurance Terms, Web site of Jordan Insurance Federation, Web site of Insurance Federation, Web site of General Sales Tax, Insurance Regulatory Act No. 33 of 1999, Sales Tax Law No. 25 of 2001, and Web sites of insurance companies.
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Financial Structure and Banking System
This situation prevailed throughout the next 20 years as the number of companies, agencies and branches increased to 33, with 23 of them local and the rest branches of foreign companies. It was the case, however, that the overall market had premium income not exceeding JOD 33 million. As a result of the economic recession in the late 1980s, the random competition in a small market and a marked decrease in insurance premiums to below the technical level, many insurance companies faced losses, which caused the government to issue the Insurance Practice Monitoring Act No. 30 of 1984, Article 56, which forbade the issuance of new licences for insurance companies. In addition, Article 6/a imposed increased capital for all insurance companies at JOD 600,000 and obliged them to correct their status either by merging or by increasing their capital. This led to a decrease in the total to 17 local companies and one foreign company in 1987. This action largely stabilized the situation until 1995 when Law No. 9 of 1995 was issued, which law once again allowed establishment of new insurance companies while obliging an increased capital base for Jordanian insurance companies of JOD 2 million for those practising direct insurance and JOD 20 million for those specializing in reinsurance. At the same time foreign companies’ capital was to increase to JOD 4 million. As a result, eight new insurance companies entered the market and the number of working companies increased to 25 local companies and one foreign company. A further company was also under establishment at this point in time. The number of insurance companies in 2000 reached 27, all of them working in a relatively small market when compared with other developing and developed countries, with the Jordanian insurance sector contributing just 1.7 per cent to the gross domestic product (GDP) and with average individual premiums paid per capita of just JOD 20 annually. These figures are considered very low and do not fairly reflect on the income, culture and modernity that characterize the local community. Furthermore, the share of life insurance in the market amounts to just 18 per cent of total insurance premiums paid, while the figure is 50 per cent in the more developed countries.
Organizational structure of the insurance market in Jordan Insurance Commission This authority was first established under the Insurance Supervision Act No. 33 of 1999, thereby succeeding the Insurance Practices Control Directorate. It is an independent entity in terms of finance and management and is responsible for regulating the insurance sector and
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325
controlling and supervising its activities so as to provide an environment conducive to the sector’s development and to enhance the role of the insurance industry in assuring persons and properties against risks, to protect the national economy, to accumulate national funds and to promote and invest these to support economic development in the kingdom. The duties of this authority, which are directed through its three bodies, the Council, the Director-General and its Executive Staff, are to protect the rights of insured parties; control the financial solvency of insurance companies; promote the efficiency of their performance and achieve positive competition among them; seek to provide an efficient workforce well qualified in the practice of insurance; disseminate insurance awareness; and strengthen relations with the regulatory authorities at both Arab and international levels. Jordan Insurance Federation The Association of Insurance Companies was established in 1956 as the first authority for regulating the business of the insurance sector in Jordan, and presided over by several pioneer members of the Jordanian insurance industry of that time. Then, in 1987, the Unified Insurance Office was created for the insuring of motor vehicles and started its work under the control of this society, which remained in business until 1989 when a royal decree was passed for the establishment of the Jordan Insurance Federation followed by the definition of its basic by-laws. This federation is concerned mainly with the development of technical activities such as defining the principles and custom for the practice of insurance in Jordan, and the presentation of researched studies to the local insurance market, analysing all its aspects so as to regulate and coordinate insurance practices according to the market’s requirements. The federation also issues directives in relation to insurance premiums to be charged and as to determination of the rules for granting discounts from those rates for the clients of insurance companies that are members of the federation. Its seeks also to unify insurance policies and establish insurance and reinsurance pools as required by the market; to enhance trust in the insurance companies that are members of the federation; to assume responsibility for arranging insurance seminars, conferences and training courses with the aim of promoting insurance business; and to conduct scientific research and prepare statistics that better inform the insurance sector. Compulsory Unified Insurance Office (established in 1987) This office carries out all work related to vehicle insurance with the licensing departments located in all governorates of the kingdom and
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Financial Structure and Banking System
insures at the point of entry any vehicles crossing the borders (in transit) against civil liability under the compulsory insurance regulation for vehicles. The office is also in charge of allocating the relevant portions of the Jordan vehicle compulsory insurance tenders to insurance companies and for settlement of their local accident claims, including those related to accidents involving Arab vehicles insured under the ‘orange card’ and Jordanian vehicles insured by the unified Arab offices located in Arab countries. Insurance companies and the type of insurance they practise There are 26 companies practising insurance of real estate, 19 companies practising life and health insurances in addition to real estate insurance and one foreign company practising just life insurance. These companies offer their services through insuring imported and exported goods (marine insurance), motor insurance, and insurance against fire, earthquakes, theft and other risks, as well as issuing contracts for life and health insurance. There is no company in Jordan in late 2003 specializing in reinsurance, but Jordanian insurance companies do take reinsurance cover after deducting their retentions with both Arab and other reinsurance companies. Local companies also exchange reinsurance through joint operations for the larger risks that arise. Life insurance In Jordan, American Life Insurance Company (Alico) is the only company that specializes in life assurance. Total life insurance premiums in Jordan reached JOD 44.3 million in 2002 as compared to JOD 41 million in 2001. The total of life insurance claims paid reached JOD 32.7 million in 2002 compared to JOD 29.3 million a year earlier.
Figure 6.4.1 Life assurance share of the market and Alico’s share of life assurance premiums
Insurance and Insurance Regulations
327
General insurance General or non-life insurance includes motor third-party liability, motor comprehensive, fire comprehensive, professional liability, credit and marine cargo. There are five insurance companies specializing in general insurance, and 20 selling both general and life insurance policies. Total non-life premiums in 2002 reached JOD 102.6 million compared to JOD 79.4 million in 2001, and total claims of the non-life insurance paid reached JOD 53.5 million in 2002 compared to JOD 50.6 million a year earlier. Motor insurance According to Regulation No. 32 of 2001, which came into effect on 3 April 2002, there are two types of motor insurance in Jordan: compulsory, which covers the owner of the insurance policy as well as a third party, and third-party liability, which only insures the parties other than the owner in an accident. This regulation has several advantages over the previous regulation, No. 29 of 1984, such as exempting the third party and the insured from paying any excess, in addition to offering indemnity for depreciation of the vehicle after an accident or for loss of use. Moreover, indemnity amounts for death or disability were increased. Total premiums for motor business in 2002 amounted to JOD 64.6 million, representing 44 per cent of total premiums, whilst motor claims reached JOD 42.2 million, representing 49 per cent of total claims paid in 2002. (See Figure 6.4.2.)
Figure 6.4.2 Motor insurance premiums and claims 2000–02 Marine insurance Marine cargo insurance covers the loss or damage to goods transported by ship, whether all or restricted risks. Total marine insurance premiums in 2002 reached JOD 10.4 million, and total paid claims reached JOD 2.4 million (see Figure 6.4.3).
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Financial Structure and Banking System
Figure 6.4.3 Marine insurance premiums and claims 1996–2002 Fire insurance The fire insurance policy is a comprehensive policy covering losses caused by earthquake, riots, strikes, malicious intent and floods. Although fire insurance is not mandatory, many banks require that certain property be covered against fire, so that they would be able to recover money lent. Total fire insurance premiums in 2002 reached JOD 13.6 million and total paid claims amounted to JOD 4.1 million that year (see Figure 6.4.4).
Figure 6.4.4 Fire insurance premiums and claims 1996–2002 Personal accident insurance The personal accident policy covers the life of the individual in case of an accident. This policy type covers death along with permanent disability (it can be offered with life insurance policies or with general accident policies). No figures are available for this sector. Credit insurance Credit insurance is essential to provide protection against financial risk, especially for instalment, commercial and export credit. It aims to assist, advise and supply a view and more especially a complete protection against customer risk. Only two companies in Jordan are specialized in credit insurance, which are Arab Life Accident Insurance Co and
Insurance and Insurance Regulations
329
Jordan French Insurance Co. No figures are available for either premiums or claims.
Figure 6.4.5 Profits and losses of insurance branches 2002 Reinsurance There are no reinsurance companies in Jordan and so most domestic insurers have reinsurance treaties with European companies like Swiss Re and Munich Re. Some risks are, however, shared between the companies in the market in the form of facultative reinsurance or coreinsurance. Numbers of general and life insurance companies are: General insurance companies Life and general insurance companies Life insurance companies
5 20 1
Reinsurance companies
Nil
Total
26
Insurance intermediaries In addition to the insurance companies, a number of companies offer supplementary services. For 2002 the numbers of different professions involved were: Insurance agencies licensed under the title of Jordan Insurance Federation
156
Insurance brokers
16
Loss adjusters/surveyors
30
Third-party administrators
7
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Financial Structure and Banking System
Insurance legislation The activities of insurance companies in Jordan are conducted under the Insurance Regulatory Act No. 33 of 1999, and the regulations, instructions and decisions issued under this Act, as amended on 17 November 2002. This Act was issued within the framework of the economic adjustment programme adopted by the Hashemite Kingdom of Jordan for restructuring all economic sectors, with the aim of reforming them according to the requirements of the World Trade Organization (WTO) and European Partnership Agreement, of which Jordan has become a member in the recent past. The Act incorporates advanced principles as well as regulatory and control instruments better suited to new international developments and not addressed by the previous legislation. Regulations issued under this Act include: .
Compulsory Insurance Regulation No. 32 for 2001. This regulation was issued to replace Regulation No. 29 for 1985, and its enforcement was delayed until the instructions being prepared for defining the rates of insurance and limits of liabilities were finalized. The regulation incorporates new concepts and tackled the pitfalls of the old one, and expanded the limits of insurance protection to include personal risks in addition to death, physical injury and material damages.
.
Insurance Practice Fees Regulation No. 36 of 2000. This regulation is concerned with the annual fees levied on the total realized premiums and fees for application for practising insurance business, collected by the Insurance Regulatory Commission. A Decision under No. 2 of 2000 was issued by virtue of this Act incorporating a mechanism for settlement of due fees to the authority.
.
Insurance Companies Minimum Capital Regulation No. 66 of 2001. This regulation determines the minimum paid-in capital for an insurance company practising general insurance, after the Act for control of insurance practices comes into force, of JOD 10 million; for practising life insurance the amount fixed is JOD 15 million; and for reinsurance practices JOD 50 million, while also noting that the minimum paid-in capital for existing companies is JOD 2 million.
Taxation Sales tax Except for life, health and personal accident, all insurance policies issued in Jordan are subject to 13 per cent sales tax according to Sales Tax Law No. 6 of 1994.
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331
Income tax The profit incurred by insurance companies from their insurance activities is subject to 25 per cent income tax according to Article 14 of the Income Tax Law No. 25 of 2001.
6.5
Banking Regulation and Supervision Faris Sharaf, Central Bank of Jordan Market structure overview Jordan’s economy is supported by a high level of intermediation. It has a large banking system representing around 221 per cent of GDP in terms of assets, and a stock market capitalization equivalent to 75 per cent of GDP. The diversified banking system plays a predominant role in the financial system. There are 21 licensed banks in Jordan, comprising 14 domestic commercial banks, two Islamic banks and five foreign banks with total assets of around JOD 14.7 billion, of which JOD 5 billion is in the form of direct credit facilities (see Table 6.5.1). The banking system is generally well capitalized with the average ratio of regulatory capital to riskweighted assets close to 17.2 per cent for the sector overall. There is no significant difference in capitalization between large and small banks, and the leverage ratio averaged 7.8 per cent, reflecting a large share of liquid bank assets. Table 6.5.1 Banking sector aggregates 30 June 2003 JOD million Total assets
14,725
Total loans
5,045
Total deposits
9,511
Total equity
931
Net profits
49
The regulatory framework The Central Bank of Jordan has been vested under the Central Bank of Jordan Law of 1971 and the Banking Law of 2000 with the sole responsibility for regulation and supervision of the banking system.
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The Central Bank of Jordan Law provides that the objectives of the Central Bank shall be to maintain monetary stability in the kingdom, to ensure the convertibility of the Jordan dinar and to promote sustained economic growth in the kingdom in accordance with the general economic policy of the government. The law states that the Central Bank shall accomplish these objectives, among others, by supervising licensed banks to ensure the soundness of their financial positions and the protection of the rights of the depositors and shareholders. Anyone engaged in ‘banking activity’ is required to comply with the provisions of the Banking Law 2000. ‘Banking activity’ has been defined in the law as ‘accepting deposits from the public and using these deposits in full or in part to grant credit, or for any other activities designated by the Central Bank as banking activities pursuant to special orders issued for this purpose’. No person can engage in banking activities without first obtaining a final licence from the Central Bank of Jordan. The permissible activities of banks are defined in Article 37/a, which outlines the financial activities a bank may practise, subject to its licensing by the Central Bank: . . . . . . . . . .
. . .
accepting deposits in various types; granting all types of credit, including financing commercial transactions; providing payment and collection services; issuing and administrating instruments of payment, including bank acceptances, debit and credit cards, and traveller’s cheques; dealing in, selling and purchasing money and capital market instruments for its own account or for its customers’ accounts; purchasing and selling debts with or without the right of recourse; financing through leasing; dealing in foreign exchange at forward and spot markets; management of security issues and underwriting, distribution of and dealing in security issues; providing management and consultative services for investment portfolios and investment trustee services, including the management and investment of funds for others; management and safekeeping of securities and precious items; providing financial agent or adviser services; and any other related banking activities approved by the Central Bank in special orders issued thereby for this purpose.
The banks are permitted to set up subsidiaries for undertaking nonbanking activities like securities and insurance business, with the prior permission of the Central Bank of Jordan, but their supervision is left to the functional supervisor.
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The Banking Law requires the board of directors of a bank to assume the responsibilities of formulating and monitoring the general policies of the bank including adopting a written credit and investment policy, which defines criteria and terms for granting credit facilities and principles of investment. In addition, the Central Bank’s Regulation on Internal Control requires that prudent credit-granting and investment criteria, policies, practices and procedures are approved, implemented and periodically reviewed by bank management and boards of directors.
Disclosure regime The Central Bank of Jordan requires banks to make periodic disclosures of information that are timely, accurate and sufficiently comprehensive to provide a basis for effective market discipline. The reliability of disclosed information should be assured by sound internal control and risk management systems, and complemented by effective external and internal audits. A bank is required by law to maintain its accounts in accordance with recognized accounting principles, and to prepare its financial statements comprehensively to reflect the actual financial position of the bank and its branches and subsidiaries with due compliance with the requirements specified by the Central Bank in this regard. The Central Bank has issued regulations to banks asking them to comply with the IAS 39 while finalizing their balance sheet and profit and loss account. In addition to the adoption of internationally accepted accounting standards, the Central Bank sets asset valuation rules that are consistent, realistic and prudent, and loan loss provisions that reflect realistic repayment expectations.
Banking supervision The supervisory system in Jordan contains a mixture of off-site and onsite inspection, periodic reporting and ongoing discussions with banks’ senior management and their boards of directors. An essential part of the Central Bank’s supervisory system is the independent evaluation of a bank’s policies, practices and procedures related to the granting of loans and making of investments and the ongoing management of the loan and investment portfolio. During onsite examinations, which are conducted using Central Bank in-house resources only, examiners have direct access to the books and records of the financial institution being examined. This enables examiners to make a fair and realistic assessment of the condition of the institution in various risk areas. The evaluation of the financial soundness of the institution is achieved by assessing: 1) CAMELS (capital adequacy, asset quality, management, earnings, liquidity and sensitivity to
Banking Regulation and Supervision
335
market risk); 2) ROCA (risk management, operational controls, compliance and asset quality) for foreign bank branches; and 3) adherence to statutory prudential limits in each of these areas. In order to ascertain the prudence of the practices and procedures adopted by a bank, an assessment is made of its risk management policies and systems as well as its adherence to them. The practices and procedures adopted are outlined in the examination manual and are designed to reveal the extent to which the financial institution employs adequate measures to ensure the safety and soundness by effective identification, measurement and control of risks that are inherent in the banking operation. The Central Bank requires banks, through loan loss provision regulations, to have mechanisms in place for continually assessing the strength of guarantees and appraising the worth of collateral. A loan is classified as sub-standard after 90 days, as doubtful after 180 days and as a loss after 360 days. For non-collateralized loans (or the part of the loan that is not covered by collateral) the following provisions are required: sub-standard – 25 per cent; doubtful – 50 per cent; and loss – 100 per cent. Returns are filed on a daily, weekly, monthly, quarterly, semi-annual and annual basis. Data reported to the Central Bank cover numerous areas including on- and off-balance sheet assets and liabilities, profit and loss, capital adequacy, liquidity, large exposures, non-performing loans, sectoral distribution of credit, loan loss provisioning, market risk and deposit sources. The Central Bank of Jordan has regular contact with the banks’ management and their boards of directors. The Governor of the Central Bank of Jordan along with the Executive Director of the Banking Supervision Department meets periodically with all the banks to discuss general issues. In addition, the Central Bank follows a consultative process with the banks and their association for formulation of regulations, and takes into account the views and comments received on the draft regulations before formalizing them. The Central Bank meets with banks as and when any areas of supervisory concern emerge. In the normal course, the Central Bank has two structured meetings with senior and middle management of the banks: during the annual on-site inspection and during the semi-annual review of the financial statements. In addition, senior management of the Central Bank hold quarterly meetings with the audit committees of all the banks’ boards of directors.
Anti-money laundering The Central Bank of Jordan has taken steps to put in place a substantive anti-money laundering regime in Jordan. This includes strict
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Financial Structure and Banking System
‘know-your-customer’ rules that promote high ethical and professional standards in the financial sector and prevent a bank from being used, intentionally or unintentionally, by criminal elements. In addition, banks are required to keep records on any transaction exceeding JOD 10,000, and to report any suspicious transaction to the Anti-money Laundering Unit at the Central Bank of Jordan. The Central Bank of Jordan inspects compliance with anti-money laundering regulations as part of its annual on-site inspection procedure, and has the authority to use its general sanctioning powers under the Banking Law in case of non-compliance.
Compliance with international standards for effective supervision The Central Bank of Jordan aims to build a solid foundation of prudent capital regulation, supervision and market discipline, and to enhance risk management and financial stability. Banking supervision is constantly being strengthened, and most prudential standards are in line with international best practice. A recent assessment of compliance with the Basel Core Principles for Effective Banking Supervision showed generally high levels of compliance with regard to licensing and structure, methods of ongoing supervision, and accounting standards. The Central Bank has capital adequacy standards on the lines of the Basel Accord of 1988, and 1996 Market Risk Amendment. Presently, all banks are required to achieve a minimum capital-to-risk-weightedassets ratio of 12 per cent, on an ongoing basis. The Central Bank of Jordan has officially announced its intention to be fully compliant with Basel II guidelines by the 2006 year end, and has already initiated several measures toward conformity. The Central Bank of Jordan is upgrading banking supervision in several areas, including reviewing the applicable laws with a view to making them more responsive to emerging needs. Other areas that are being addressed are mainly with regard to strengthening the regulatory framework for good governance and efforts for banks to improve risk management and disclosure practices. These steps will further improve Jordan’s compliance with the Basel Core Principles and ensure successful migration toward Basel II observance.
Part Seven
Marketing
7.1
The Media and Advertising Suleiman I Matouk, Managing Director, DDB Jordan The late 1990s witnessed a real transformation in the advertising industry in Jordan. While many of the international ad agencies had an established presence in the local market, it was not until the arrival of the telecommunications companies around 1995 that advertising started taking on a new look. This coincided with a serious facelift in the media outlets available for advertisers to select from. During the 1970s and 1980s, the main medium for advertising was the newspapers, and even those were – to some extent – primitive. There were spot colours instead of full-colour advertising and a limited number of advertisers. The car companies were among the largest advertisers at the time. Jordan TV was limited in its programming and there was no access to regional and satellite TV stations. By the late 1990s there were five main daily newspapers, four of which were Arabic and only one in English. These were Al Ra’i, Ad Dustour, Al Aswaq, Al Arab Al Yawm (all Arabic) and the Jordan Times (English daily). There was also one English weekly, the Star, and a good number of weekly Arabic tabloids. But at the same time there were many changes and newcomers to the media scene. For one, an infant and largely unsophisticated outdoor advertising sector was developing into a larger and more mature one, which later proved to be a major source of competition to the better-established sectors. But this was not the only change. For the first time, a monthly magazine was established in Jordan, specifically targeting the local market. Sharqiyat was established as an Arabic magazine targeting women and often covering highly controversial, sometimes taboo, topics such as family abuse and crimes of passion – better known as ‘honour crimes’. In addition to all of this, today Jordanian advertisers have access to satellite TV stations and are now becoming more aware of the real values of advertising. Over the past five years, Jordan has seen several major changes. For one, Amman hosted one of the highest-profile funerals in modern history, whereby the world came to this small country to bid farewell to one of the most recognized monarchs in the world, the late King
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Hussein. During this very critical time with all that was, and still is, going on around us, a young king, Abdullah II, came as the fourth member of the Hashemite family to rule wisely and steer his kingdom in a very sensitive climate, both politically and economically. This was not made any easier by the worsening situation in neighbouring Palestine. And if this was not enough, there came the 11 September 2001 bombings of the World Trade Center and the Pentagon in the United States to make a bad situation even worse. But, as King Abdullah was able to safeguard his determined kingdom through all this, so the advertising industry witnessed an astronomical growth in terms of the size of spending and the noticeable change in the quality of creativity. Still, it should be pointed out that this growth is not equally attributable to all the sectors within the industry. The increase in spending is mainly attributable to the increase in advertising expenditure by the telecommunications companies, namely the mobile service providers (Fastlink and Mobilcom) as well as Jordan Telecom, which started advertising for the first time in 2000, and by the banking sector. During this period, one of the dailies, Al Aswaq, went out of business and a new weekly advertising newspaper, Al Waseet, was established. As Al Aswaq was no longer able to continue in what had become a very competitive environment, one that was dominated by the government-owned newspaper Al Ra’i, its place was taken by Al Waseet, a new concept in advertising newspapers. Soon enough, Al Waseet grew and established itself as a main source of competition to other daily and weekly newspapers. Al Waseet was such a success story that soon afterwards another weekly advertising newspaper was established under the name of Al Mumtaz. In the past two years more than 10 magazines have been introduced, most of which cover lifestyle topics. Many of these magazines are in English, the main ones being Layalina, Living Well, Jo, Sharqiyat, Sawa, Ahlan, Yahala, Al Oyoun and Luxury. Another major addition was the establishment of the first privately managed radio FM station, Radio Fann. Today, advertisers in Jordan have a more sophisticated media mix to select from and to put their messages across: the newspapers, a relatively large number of magazines, Jordan Radio and TV, Radio Fann, and the different outdoor networks, such as the unipoles, rooftops, 463s and advertising on the side walls of buildings. To cater for more sophisticated clients and manage a larger selection of media outlets, advertising agencies had to redesign their media departments and soon enough media buying units (MBUs) were introduced in the market. And, as media elsewhere are dependent on research, it is in relative terms the same in Jordan. Currently, there are two main media research companies to provide data to all the advertising agencies and the MBUs. These are Barq, which is part of the Pan Arab Research Center (PARC), and Ipsos-Stat.
The Media and Advertising
341
According to Ipsos-Stat figures, print advertising continues to lead the way in a still ‘traditional’ ad market, with a total spend of USD 80 million, followed by TV in second place at a distant USD 31 million. It is important to point out that the figures presented are according to official rate cards and include commercial, classified and social advertising. As for outdoor, radio, cinema and online advertising, they have still to reach their potential and are lagging behind. Since most of the regional and international network agencies are now represented in Jordan, and with more stability in the region, the future is promising, as Jordanians are becoming more aware of the importance of creative advertising, the more so as one witnesses greater advertising spend by regional and international brand names in the local market. The main international and regional advertising agencies with a presence in the Jordanian market include: AdPro Advertising (affiliate of BBDO), Afkar Promoseven (McCann-Erickson), AGA Profess Graphics, DDB, Grey, Horizon FCB, Intermarkets Advertising, Lowe Pimo CDC, M & C Saatchi, Memac-Ogilvy, Publicis-Graphics, Saatchi & Saatchi, TBWA, Team Y & R, and J Walter Thompson.
7.2
Conferences, Exhibitions and Trade Shows in Jordan Events Unlimited, Amman Jordan is rapidly emerging as a new destination for meetings, conferences, corporate events and trade shows in the Middle East offering business travellers an unparalleled experience that often brings them back on extended family holidays. A range of new high-standard facilities in Jordan has triggered a steady increase in the conference and exhibitions sector, unveiling the country as a unique destination for corporate functions. If an international company is looking for a distinctive venue for a meeting or a conference, Jordan is definitely a destination to consider. Jordan offers business travellers high-standard accommodation and facilities, excellent communication and transport infrastructure, a hospitable and friendly environment, easy access to regional markets, and a very safe and conducive business environment, as well as exquisite cuisine and countless activities that can provide business visitors with inspiration, motivation and relaxation. Jordan’s beautiful climate makes it an ideal location for conferences and trade exhibitions all through the year. The Red Sea city of Aqaba and the Dead Sea area – the lowest point on earth – are attractive winter venues for corporate events in Jordan. The new stream of luxury hotels that is emerging in Amman, Petra, Aqaba and the Dead Sea is adding quality to a refined product that is distinct, accessible and friendly. Many internationally operated hotel chains have entered the market in recent years, raising the standard of accommodation and offering modern, well-equipped meeting facilities. These include the Grand Hyatt, Sheraton, Mo¨venpick, Four Seasons and more recently the German Kempinski hotel management company. The boom in the construction of five-star hotels and tourist resorts in Jordan is far from over. Plans for many more hotels and tourist resorts and villages are under way, mainly in Aqaba and at the Dead Sea.
Conferences, Exhibitions and Trade Shows in Jordan
343
Jordanian and Arab investors have come together to develop major tourist projects in the tax-free city of Aqaba. These include the USD 500 million Tala Bay project featuring a marina, a golf course, 5,000 hotel rooms, housing units and other facilities. The Aqaba Lagoon Tourism Site is envisioned to be a world-class destination for tourist, recreational and residential communities in Aqaba. With a 235-metre frontage on the Gulf of Aqaba, the project will be anchored around the artificial lagoon that will increase Aqaba’s shorelines by around 10 kilometres. The site will be developed over a 12-year period at an overall cost of nearly USD 500 million. On the north beach, a huge tourist scheme built around the artificial lagoon, 1,500 hotel beds and a golf course is under development. The 300-room Aqaba InterContinental Hotel is near completion, in addition to a USD 100 million tourist resort project, a Kempinski hotel, a Marriott hotel and numerous other hotel projects of various capacities. Plans are also under way for a convention centre in Aqaba to cater for the increase in demand on the city as a winter destination for conventions. The proximity of the Dead Sea to the capital Amman and its fantastic hotel and spa facilities have turned the lowest point on earth into a haven for conventions offering a soul-pampering experience away from the hustle and bustle of modern-day life. The new conference facilities at the Dead Sea and the various resorts and projects springing up by the shores will enhance the attractiveness of the area and give a new thrust to Jordan’s booming business tourism industry. At least seven significant resorts and tourist villages at the Dead Sea are currently under construction or on the drawing board, including a 450-room Holiday Inn tourist resort; a Cham Palace tourist village; a 450-room Kempinski hotel; and several others. There is a wide range of recreational activities for the business traveller to indulge in. Whether it is a historical tour of ancient biblical and archaeological sites such as Petra and Jerash, scuba diving in the Red Sea, a lively nightlife and dining experience in Amman, a weekend camping trip in the marvellous desert terrain of Wadi Rum or the nature reserve of Dana, or a relaxing afternoon by the swimming pool of your hotel, the amicable and competent people of Jordan will ensure a oncein-a-lifetime experience. As a MICE destination, Jordan has hosted many international conferences and exhibitions. Thousands of senior business people flock to the Dead Sea each spring for the World Economic Forum gathering. Several other international and national associations and corporates choose the Dead Sea for their annual forums and retreats. Many specialized medical conferences take place in Jordan, and more recently several international conferences focusing on the rebuilding opportunities in Iraq have been held in Amman. Jordan’s regional position as a destination for conferences and trade shows is also enhanced by its proximity to Iraq and the important role it
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is playing in the rebuilding of the country. Jordan is acting as a gateway to Iraq and a base where many regional and international companies have set up offices to monitor closely opportunities in the vast country. Since mid-June 2003 Jordan has hosted many conferences and trade shows focused primarily on the Iraqi market. Many business travellers flock to Jordan to attend these events and benefit from networking opportunities with visiting Iraqi delegations, creating an even more vibrant business society in Jordan. In October 2003, for example, Amman’s hotels and conference centres were busy with a series of such conferences involving regional and international visitors taking part in these events and gaining further insight into the potential that the Iraqi market has to offer. Regional and international event organizers entered Jordan for the first time. Al Iktisad wal Aamal (a Beirut-based Arab conference organizer), for example, organized the Jordan Economic Forum, bringing together over 500 delegates from the Arab region including a high-level delegation from Iraq, while Kallman Group of the United States organized an international exhibition for the rebuilding of Iraq in January 2004. In between these events, the annual AJEX Conference and Exhibition organized by the Jordan American Business Association (JABA) took place, in addition to a British government-supported conference entitled ‘Iraq: a nation to be rebuilt’, which attracted over 400 delegates in December 2003. More and more such events are taking place in Jordan. In tandem with the buoyant activity in the conference business, trade shows have also seen a good boost in recent years. A clear shift away from public shows to more professional and focused trade shows is being steered by more professional exhibition organizers in Jordan. Foreign companies wishing to enter the Jordanian market will now find specialized trade shows held in Jordan a good entry point to the market and an excellent tool for identifying potential representatives or agents as well as clients. This trend has been supported by new facilities established in Jordan. The most recent exhibition and conference centre to be opened is Zara ExpoAmman. Situated in the heart of the capital city, Amman, it provides an ideal venue for exhibitions, conferences and international meetings. The exhibition facilities consist of three purpose-built halls providing almost 3,000 square metres of air-conditioned exhibition space. While the halls are not on the same level, they are linked through a wide staircase with a dedicated entrance foyer and dual passenger lifts on each level. Each hall is also equipped with its own organizers’ offices, toilets, registration/ticketing booths and cloakrooms. The exhibition floors are served by a large street-level loading bay linked to two dedicated heavy-goods lifts. The exhibition halls all feature underfloor service channels allowing easy distribution of services.
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345
The halls can be utilized together for larger events or rented on an individual basis. If additional exhibition space is required, the halls are linked by a pedestrian walkway to the Grand Hyatt Amman, which has an additional 1,800 square metres of exhibition and conference space, including the 970-square-metre Grand Ballroom, which can seat up to 1,000 guests and is an ideal venue for meetings, large banquets or exhibitions. Adjacent to the exhibition halls in Zara Expo is a luxurious 303-seat raked conference auditorium, which has its own foyer/reception area offering ample space for registering delegates. There are six breakout rooms alongside the auditorium as well as an administration office for conference organizers. Each breakout room features its own individual sun terrace, making it ideal for corporate hospitality as well as meetings. In addition there is a complete range of meeting rooms close to the main auditorium, which can be utilized, for example, as press offices or VIP rooms. Zara Expo can also provide a full range of event-planning and management services including stand supply and building services; electrical services; furniture hire; exhibition graphics and signage; marketing services; and registration services. Other exhibition halls in Amman include the recently upgraded Amman International Motor Show, which offers two adjacent halls of nearly 9,000 square metres. Located off the airport highway, the exhibition centre is 10 to 15 minutes away from central Amman and includes ample parking space. The Amman International Exhibition Center in Marj Al Hammam, some 8 kilometres south-west of Amman, also offers good exhibition facilities with a nearly 4,000-square-metre column-free hall. For smaller trade shows, various four- and five-star hotels offer a range of exhibition halls of up to 1,300 square metres. Shows in Jordan are being developed around narrower, more focused themes, which has stimulated higher interest in exhibiting in Jordan by regional and international companies.The International Hospitality Forum (IHF), for example, a business-to-business trade show that specializes in hospitality, catering and the food service industry, has helped lift the standards of trade shows in Jordan through its innovative approach, professional organization and targeted marketing campaign. Launched in 2001, IHF has become an event of major importance both to manufacturers and suppliers of a huge range of products and services used by hotels, restaurants and bakeries, and to owners, operators and developers. IHF has seen consistent growth in the number both of international exhibitors and of regional visitors. To achieve a higher standing of shows in Jordan, organizers are making changes in areas such as technology, customer service, logistics and marketing to align trade shows in Jordan with international standards. For example, Events Unlimited of Jordan and Hospitality Services of Lebanon, the joint organizers of IHF, are considered pioneers in Jordan in introducing a barcode registration system for visitors.
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The largest trade show in Jordan is the biannual Special Operations Forces Exhibition and Conference (SOFEX), which has grown to become an important defence and security exhibition in the region attended by many Arab statesmen and senior-ranking army officers. SOFEX, highly supported by King Abdullah II, covers an indoor display area of 15,000 square metres and an outdoor display area of 5,000 square metres. The sixth edition of SOFEX will take place in April 2006 (www.sofex.com.jo). Table 7.2.1 is a calendar of the main trade shows that will take place in Jordan between June and December 2004. Most of the shows will be repeated in 2005 and beyond in addition to other shows, including the biannual exhibition MAD Show, which covers media, advertising and visual communication (www.madshow.com.jo); there are also many country-specific trade shows. Table 7.2.1 Main trade shows taking place in Jordan, mid- to late 2004 Date
Show title
30 May–3 June
Jordanian International Medical and Healthcare Exhibition
5–7 June
Exhibition and Conference for Industrial Cosmetics and Cleaners
16–20 June
3rd Water, Heating and Cooling Technology Exhibition
27 June–1 July
2nd Media Transmission for Numerical Information Exhibition
7–10 July
The Wedding Expo
7–11 July
4th Household Accessories and Interior Design Exhibition – House Style
14–17 July
3rd Watches and Jewellery Exhibition
2–8 August
Jordanian Industries Exhibition
5–7 August
Child and Mother Care Exhibition
6–9 August
International Fashion Way Exhibition
28–31 August
2nd Housing and Investment Exhibition
2–5 September
Jordanian Arab Health Exhibition
28–30 September
4th International Hospitality Forum, an international exhibition for catering, foodservice and hospitality sectors (www.IHF-Jordan.com)
September
METS – Middle East Technology Show (www.jcs.org.jo)
October
International Motor Show
For a regularly updated calendar of trade shows in Jordan, visit the Web site of the Ministry of Industry and Trade, which regulates this sector in Jordan: www.mit.gov.jo.
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7.3
Jordan Export Development and Commercial Centers Corporation (JEDCO) Salah S Ghunaim, Acting Director-General, JEDCO
Introduction Jordan Export Development and Commercial Centers Corporation (JEDCO), Jordan’s official trade development and promotion organization, was founded in 1972 by the Ministry of Industry and Trade, the Federation of Jordanian Chambers of Commerce and the Amman Chamber of Industry. JEDCO’s activities cover trade development and promotion, trade fairs, trade necessary information services and human resources development. JEDCO also provides specialized support services and services in the areas of packaging, export finance and the implementation of trade agreements. In recent years, JEDCO has been actively involved in assisting Jordanian exporters through its participation in international trade affairs and exhibitions, along with organizing promotional technicalsupport programmes for manufacturing and service industries, and has been providing up-to-date and export-related information to companies.
JEDCO’S main objectives JEDCO’s main objectives can be summarized as follows: .
strengthening the position of Jordanian exports in traditional markets and expanding exports of Jordanian products and services to new markets;
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.
. . . . .
Marketing
developing Jordanian exports and assisting companies in enhancing their competitive advantage to meet international standards of quality and price; exploiting the use of information technology in helping Jordanian exporters; establishing specialized services centres to support industrial priority sectors; providing training and human resource development for companies and institutions engaged in export; establishing and enhancing cooperation between JEDCO and other trade-related organizations worldwide; assisting Jordanian exporters in maximizing the use of professional export support services and tools.
JEDCO’S role in the Jordanian economy JEDCO plays an important role in implementing government policies to develop Jordanian exports further. JEDCO also assists in expanding the geographic distribution of exports and to improve the quality and value added of Jordanian goods and services. In recent years, JEDCO has been actively involved in assisting Jordanian exports through its participation in international trade fairs and exhibitions, along with organizing promotional weeks and trade delegations. In addition, JEDCO has been implementing successfully technical support programmes for manufacturing and service industries, and has been providing up-to-date trade and export-related information to companies. JEDCO’s support programme has significantly boosted Jordanian exports and has strengthened Jordan’s presence in both traditional and non-traditional markets.
JEDCO’S services JEDCO provides an integrated set of services for domestic manufacturers, service providers and foreign buyers. These services, which may be adjusted in line with changing market conditions, encompass the following: .
Trade development and promotion. These activities represent a vital part of introducing Jordanian exports to buyers abroad and to helping Jordanians to explore such markets. JEDCO organizes the participation of exporters in general and specialized international trade fairs, Jordanian weeks, trade delegations, and Europartenariat and Medpartenariat events.
JEDCO
.
.
.
.
. .
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Direct company support. JEDCO has adopted policies and action programmes to assist Jordanian exporters to meet the requirements of international standards, product quality, design, packaging and labelling and to enhance their competitive edge. Information services. JEDCO’s keen interest in continuously improving its information services has been influenced by the rapid developments of e-commerce and information technology worldwide. This has resulted in the establishment of the Information Center at JEDCO, which has eventually become a focal point for a number of international information networks. The Information Center provides all the necessary and timely information Jordanian exporters may need about other markets as well as the possibility of promoting Jordanian products and services within these markets. Market research. A crucial factor, which influences the success of finding a niche in target markets, is the availability of accurate, upto-date and comprehensive information. Bearing this in mind, JEDCO provides Jordanian business people with market surveys, market studies and product surveys of targeted markets. These studies and surveys are usually conducted by JEDCO’s specialized researchers, and sometimes by subcontracted local and international consultants, to assess the opportunities of Jordanian products in targeted markets. These studies provide comprehensive information about selected markets, including specific export potentials, and economic, social and political trends. JEDCO has undertaken more than 50 market studies, covering selected markets in North and South America, West and East Europe, Asia, Africa and the Middle East. Regional and international cooperation. JEDCO has always been keen to enhance its ties with international trade-related organizations in order to benefit from their services in export promotion, exchange of expertise and information, training programmes and technical assistance. JEDCO has over the past few years concluded a number of bilateral cooperation agreements with similar international trade promotion organizations and also enjoys good relations with international import promotion organizations. Trade-related services. These include export finance and export credit guarantees for exporters. Human resources development. JEDCO designs and organizes training programmes for staff and exporters including those on international marketing, promotion, the EU Partnership Agreement, the WTO Agreement, technical requirements in export markets, management systems, e-commerce, information technology,
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industrial design and packaging. To ensure the provision of efficient and effective professional services to Jordanian businesses, JEDCO continues to invest in and develop its skilled employees and to enhance their qualifications and knowledge.
Part Eight
Labour Issues
8.1
Compensation and Benefits 1
Philip Dew and Jordan Investment Board The following information is provided as an indicative guide as to the likely personnel costs a company establishing a presence in Jordan would have to consider when considering an investment in the country.
Basic salaries Table 8.1.1 Salaries in Jordan Position
Salary in JOD
USD equivalent
General manager
1500–3500
2115–4935
Manager
800–1500
1128–2115
Senior engineer
600–1500
846–2115
Financial manager
500–1500
705–1410
Accountant
300–700
423–987
Engineer
250–600
353–846
Sales / Marketing
200–400
282–564
Administrator
200–350
282–494
Technician
200–400
282–564
Secretary
150–500
212–705
Skilled labourer
150–250
212–353
Labourer
80–150
113–212
Driver
100–150
141–212
Operator
120–200
169–282
Office boy
80–150
113–212
Maid services
71–150
100–212
5–10
7.05–14.1
100–120
141–169
Maid services (per day) Gardener / Driver 0
The information in this chapter is derived from the Jordan Investment Board publication Cost of Doing Business in Jordan.
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Benefits These salaries are sometimes supplemented by the following benefits: .
13th- and 14th-month bonus to all employees, always;
.
social security payment by employer, always;
.
medical insurance;
.
transportation;
.
subsidized meals;
.
profit bonus for management;
.
sales commission to sales/marketing staff.
Minimum wage The minimum wage is JOD 85 per month (USD 113) since 1 January 2003.
Severance pay This is one month’s salary for each year of employment.
Social security Social security is set at 16.5 per cent of basic salary, of which 11 per cent is paid by the employer and 5.5 per cent by the employee.
Overtime Overtime on a regular working day is paid at 1.25 hours for each hour worked, and on a holiday or weekend at 1.5 days for each day worked.
Personal income tax Rates The rates of deduction from taxable income are as follows: .
5 per cent on the first JOD 2,000;
.
10 per cent for the following JOD 4,000;
.
20 per cent for the next JOD 8,000;
.
25 per cent for the remaining amount.
Exemptions The following exemptions apply to personal income: .
an amount of JOD 1,000 as a personal exemption;
Compensation and Benefits
.
. . . . . . .
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an amount of JOD 1,000 for the employee’s wife and JOD 500 for each dependent child, as well as an amount of JOD 200 for each other legal dependant provided they are resident in Jordan; JOD 2,000 for dependants in university; JOD 10,000 for domestic medical treatment in severe cases; JOD 15,000 for foreign medical treatment in severe cases; 50 per cent of the first JOD 12,000 and 25 per cent of the remaining income from salaries (under certain conditions in the law); an amount of JOD 2,000 per year as rent allowance for residents; medical expenses (under certain conditions in the law); amounts paid as non-returnable payments for life and health insurance.
8.2
The Jordanian Labour Law Yousef S Khalilieh, Member, Noor A Jundi, Associate, and Shereen S Said, Associate, Rajai KW Dajani & Associates, Advocates and Legal Consultants, Amman
Introduction The Jordanian Labour Law No. 8 of 1996 (‘the Law’) was published in the Official Gazette on 16 April 1996, and came into effect exactly two months later.
Practice Generally, the Law organizes the rights and duties of both employers and employees and applies to any natural person who performs work for an employer in return for wages, whether the work is on a permanent, temporary or seasonal basis. However, the Law does not apply to: . . . .
civil servants; municipal employees; domestic servants; gardeners, cooks, agricultural employees and persons employed in similar occupations.
The Law prohibits, under any circumstances, the employment of juveniles who have not attained the age of 16 or the employment of anyone under 17 years of age in hazardous or exhausting circumstances.
Contract of employment The relationship between employees or a labour union, on the one hand, and employers on the other, is regulated either by an Arabic written contract of employment executed in at least two copies or by a verbal agreement that can be proven by all legal methods.
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A written contract regulating the relationship between an employee and an employer can be for a fixed duration, which expires at the end of a specified period (‘limited employment contract’), or for a term that is not fixed (‘unlimited employment contact’). The Law requires that every employer employing 10 people or more must maintain internal regulations for the establishment that set out the hours of work, the daily and weekly rest periods, work offences and the penalties and consequences thereof, including the method of termination of employment, and any further details that are relevant to the nature of the work in question. Such internal regulations are subject to the approval of the Minister of Labour and are applicable from the date of approval.
Wages A committee formed by the Council of Ministers on the recommendation of the Minister of Labour and comprising representatives of both employers and employees fixes the minimum wages payable in Jordanian dinars for specific jobs and professions. Subject to the relevant minimum, all wages must be stipulated in every contract of employment but, if not, an employee is entitled to receive a wage applicable to work of the same nature, if any. Otherwise, the amount payable will be based on the wage customarily paid in that field or, where there is no point of reference, the court will estimate the amount due in accordance with the provisions of the Law. All wages must be paid within a maximum period of seven days from the date of entitlement. Wages and other amounts payable to an employee, the employee’s heirs or those entitled subsequent to the employee’s demise will be considered as having a first-class general lien preceding all other debts including taxes, fees and other rights payable to the government and debts secured by real estate mortgages or in-kind securities.
Probation period Under the Law, an employee may be placed under probation for the first three months of his/her employment, during which period an employer may terminate the service of the employee without having to give him/her notice or even pay any gratuity. In the event that the employee’s services continue after the expiry of the probation period then the employment contract will be unlimited. The full probationary period must be included when calculating a total period of employment.
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Working hours An employee may not work more than eight hours per day or 48 hours per week distributed over more than six days. Nevertheless, an employer may require that an employee performs work for more than the ordinary working hours, in which event the employee is entitled to receive a wage for every hour of overtime at a minimum of 125 per cent of his/her ordinary wage. Also, if an employee works on his/her weekly rest day, a religious feast or during official holidays, he/she is entitled to receive a minimum wage for the work of at least 150 per cent of the standard wage.
Vacations and leaves The Law grants an employee two weeks’ fully paid holiday per year as annual leave, unless a longer period is stipulated in the work contract. If the employee has been employed by the same employer for a period exceeding five consecutive years then he/she is entitled to 21 days’ fully paid holiday annually. An employee shall also be entitled to two weeks’ sick leave fully paid per year provided that he/she has been working for six months in any year of employment. This period may be extended for another 14 days fully paid if the employee is hospitalized or with only half his/her usual salary if the leave was on the recommendation of a medical committee.
Female employees The Law grants female employees certain special privileges, including an entitlement to maternity leave with full pay for a total period of 10 weeks. Additionally, a female employee who works at an establishment that engages 10 employees or more has a right to leave without pay for a maximum period of one year in order to devote her full time to looking after her children.
Termination of contract A contract of employment can be terminated by mutual agreement, the expiration of its specified work, or if the employee dies or is disabled by a disease that prevents him/her from working and such fact is evidenced by a medical report. However, and with due observation of the above, an employer is prohibited from terminating the contract of a pregnant working woman as of the sixth month of her pregnancy or during her maternity leave; of an employee who is on conscription or reserve service, during such service; or of an employee when he/she is on annual or sick leave, leave
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granted to him/her for the purpose of labour, culture or pilgrimage, or during his mutually agreed-upon leave to serve on a full-time basis for a working syndicate or to join a recognized institution. The Law grants an employee who works for an unspecified duration, who is not subject to the provisions of the Social Security Law and whose employment is terminated for any reason whatsoever the right to receive end-of-employment compensation at the rate of one month’s salary for each year of actual employment. For periods of employment of less than one year, the employee shall be paid on a proportionate basis. The salary in such cases will be the last salary the employee received. In the event that the employee worked on the basis of commission or by piece, then the salary shall be calculated by taking the average monthly income that the employee earned during the final 12 months. In addition to end-of-employment compensation, the employee is also entitled to the benefits granted to him/her by any savings scheme, pension fund or similar scheme that the employing establishment has provided. In order to ensure an employee’s rights and to enhance his/her career, the Law compels an employer to provide, on termination of the contract for any reason whatsoever, a service certificate stating the name of the employee, the type of work and the employee’s dates of joining and terminating the employment. At the same time the employee is obliged to return to the employer all papers and tools in his/her possession belonging to the employer. Furthermore, employees in any profession or occupation may establish their own labour union to oversee their interests to ensure due application of the provisions of the Law.
Jurisdiction In the case of unfair dismissal, the Law entitles any employee the right of recourse to the courts. If the court decides that the employee was unfairly dismissed then it may rule either that the employee returns to work or that the employer pays compensation to the employee, including the payment of a month’s notice and all the other entitlements due to the employee pursuant to the Law and employment contract, provided that such compensation is not less than three months’ salary and not in excess of six months’ salary, calculated on the basis of the last salary the employee received. The Law provides for a Wages Authority, which entitles the employee to challenge the wages he/she was receiving prior to the termination of the employment, provided that such action is brought within a period not exceeding six months from the date of termination. Decisions issued by the Wages Authority shall have the force of court judgments, and may be appealed to the Court of Appeal within 10 days
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of being issued, provided that the value of the judgment exceeds JOD 100 (one hundred). Any labour dispute other than those relating to wages falls within the jurisdiction of the magistrates’ court, and any judgment issued by them may be appealed to the Court of Appeal within 10 days of issue. All claims submitted to the magistrates’ court are exempted from the payment of fees including those for execution of the decisions that it passes. No labour-related dispute may be heard by any court after the lapse of two years from the date on which the cause of action arose. Furthermore, the provisions of the Labour Law do not affect any of the rights granted to employees by any other law if that law gives the employee better rights than those granted to the employee under the provisions of the Labour Law. Every condition in a contract or agreement whether concluded before the Law or subsequently under which any employee waives any of his/ her rights under the Law shall be considered null and void.
Non-Jordanian employees It is not permissible to engage any non-Jordanian employee except with the approval of the Minister of Labour and on condition that the work delegated to such an employee requires experience and ability that are not readily found among Jordanian employees or where the number of employees so qualified in Jordan does not meet domestic market demand. Priority for employment of non-Jordanians must be given to Arab experts, technicians and employees. A work permit must be issued by the Ministry of Labour prior to the recruitment or engagement of any non-Jordanian employee, for which the employer must pay a fee on issue and subsequent renewal.
Conclusion The Labour Law in Jordan is in harmony with the rules and regulations of international and human rights labour agreements and is deemed to grant employees fair and special privileges. When issued, the Law was considered to be a modern model ensuring stability and equity of the rights of all parties.
Part Nine
Living and Working in Jordan
9.1
Living and Working in Jordan Mark Timbrell, Area Director of Sales and Marketing, Jordan/Palestine, InterContinental Hotels Group, Amman
Overview of the country ‘Diverse’ is the adjective that always springs to mind when looking for a word to describe Jordan. One can drive from the Syrian border in the north to Aqaba in the south in about four and a half hours, a distance of some 400 kilometres. So Jordan is not a big country by world standards, but packed into this fascinating kingdom is a history of humankind that dates back thousands of years. The main archaeological record starts at Beidha, some 15 kilometres from Petra, and David Attenborough in one of his TV series referred to it as the first ever recorded settlement of humans. Dating back 15,000 years, Beidha marks the point where human beings gave up hunting and gathering in favour of farming and a settled village life: the very first village of all villages, which led to towns and then to cities. Since that time, Jordan has been central to the emergence of civilization and, of course, religion. One can still drive around today and see signs to Moab and Edom, those violent kingdoms mentioned in the Old Testament of the Bible. History, archaeology, ecology, geography and climate are all encompassed in the diversity referred to. Millennia ago, Egyptians, Assyrians, Hittites and more besides criss-crossed the area now called Jordan, trading and warring. But it wasn’t until the arrival of the Greeks in about 330 BC, the rise of the Nabatean culture in the south and the later occupation by Rome in the 1st century BC that the archaeological evidence becomes obvious to the untrained tourist eye. They left behind them the awe-inspiring sites of Petra, Jerash, Umm Qais, Pella and the citadel of Philadelphia – modern-day Amman – as well as many more besides.
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In about AD 30, Jesus Christ was baptized at Al Maghtas in Jordan, ‘Bethany beyond the Jordan’, referred to in the Bible in John 1: 28. Christianity spread and the Roman Empire split. The Eastern Byzantines embraced Christianity and they left much evidence of their culture in the beautiful church mosaics seen in abundance across the country today, particularly at Madaba, Mount Nebo, Umm Ar Rassas and Petra. Next came the Ummayids bringing with them Islam and leaving behind a wholly new style of architecture whose best examples are known today as the desert castles, such as Qasr Amra and Qasr Kharaneh. The zealous crusaders came to Jordan in the 12th and 13th centuries in a vain attempt to establish Christianity by the sword, and both sides left behind fine examples of medieval military construction at Kerak, Shobak and Ajloun. Finally came the Ottoman occupation that ended with the Arab Revolt and the creation of the modern-day kingdom of Jordan. Still running today on special request are the original steam locomotives and carriages of the Hijaz railway made famous in Lawrence of Arabia– the ones that got away! Fifteen thousand years of extraordinary history crammed into a few sentences! That’s because this isn’t a history of Jordan – instead it should be a whetting of the appetite for anyone thinking of settling here for a few years or longer. There is so much to do and see, one need never have a boring weekend. Most of the ‘favourite trips’ mentioned below tend to capture a little bit of all of this history, together with the other dimensions of climate, ecology and geography. A good starting point is a visit to Iraq al Amir – a small palace building dating back to the 2nd century BC, which a French archaeologist reconstructed in the 1960s. Apparently he came to the site and made replica pieces of all the stones – then he returned to France and spent a couple of years reconstructing the palace as a model. When he had completed the model as best as he could, he returned to Jordan and repeated the whole thing in real life! The ‘Qasr’ is only a short drive from West Amman, about 20 minutes, in Wadi Elsir. It’s a lovely spot, especially in springtime, very green with lots of pretty flowers. It is fascinating to be walking in the very land where the stories of the Bible’s New Testament are set. One can do an absorbing full-day ‘biblical tour’ from Amman, providing an eye is kept on the time. Leave town at about 9 am and head for Qasr Mukkawir, located off the King’s Highway, south of Madaba. It takes about an hour and 20 minutes to get there. It’s great to go in springtime and, at the end of March, once off the highway, one can usually see the rare black iris growing in the fields and on the roadsides. If the iris is not to be seen, because it only blooms for a variable two-week period, there are plenty of other beautiful wild
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flowers to see – mainly from February to April. Mukkawir has fabulous views, stands in magnificent isolation and is great for an exhilarating short walk. It was the palace of Herod the Great where it is alleged that Salome danced and demanded from Herod the head of John the Baptist – what a piece of history! Madaba is on the way back to Amman and boasts some of the best Byzantine mosaics. There is the museum there (try to find the secret garden), as well as the famous map of the Holy Land inside St George’s Church. Try combining a trip to Madaba with lunch at Hareth Jdoudna. It’s a renovated traditional family house with open courtyard and it is particularly pleasant to sit out in the shade from spring to autumn. Along from Madaba, about 10–15 minutes’ drive, is Mount Nebo. Make sure to go when the weather is clear as from this point one can see for miles across the Jordan Valley to the West Bank. This site is purported to be the place from where Moses saw the promised land of milk and honey. The Dead Sea shimmers far below, with Jericho and Jerusalem in the distance – it’s pure magic! From Mount Nebo, take the road immediately down to the Jordan Valley and on to the Baptism site. It will take another 40 minutes or so. At first glance, the Baptism site certainly is not as impressive as Petra or Jerash, largely because one is not being bombarded by large numbers of well-preserved ruins. Instead, although the archaeological evidence is all around, the Baptism site is more of a ‘feeling’. It is a sense of realization that in this place, almost 2,000 years ago, Christ was baptized and one of the world’s biggest religious movements started – here in Jordan at Bethany beyond the Jordan. Pope John Paul II opened this site in 2000 and it would be no surprise if in years to come it became the number one attraction for tourism to Jordan. Beware; it can get extremely hot in the valley during the summer months, 40 degrees centigrade plus, and so it is best to visit from October to the end of April. While Amman shivers in winter, the Jordan Valley can be 10–12 degrees warmer. It is only 45 minutes’ drive to the Dead Sea from Amman but one is transported from winter to spring or spring to summer, without passing through airport lounges or facing custom formalities! One can relax in the luxury of any of the ever-increasing numbers of Dead Sea hotels. There are plenty of swimming pools, stunning views, good restaurants, great spas and, of course, the unique experience of being at the lowest point on earth and floating in the mineral-rich waters of the Dead Sea. It’s a real treat to save up for and a decadence to take advantage of when in Jordan! Useful tip: there are a lot fewer flies in spring than in autumn. If staying overnight between May and September, it’s worth considering combining the visit with a fun outing to Wadi Mujib. You
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need to arrange a guide in advance through the Royal Society for the Conservation of Nature (RSCN) and they will take you on a guided tour up the gorge. You need to be quite fit for this one, and have a sense of adventure. Arrange to be there early, at 7 to 7.30 am, and there will not be any disappointment! During the summer, a weekend away to the nature reserve at Wadi Dana is great fun. One can stay at the small guesthouse or, better, camp. The campsite is run by the RSCN and almost everything is available (tents, blankets, clean bathrooms, etc). The views from here across the Wadi Araba are spectacular, the site is very well managed and clean, and a guided tour can provide an education about the flora and fauna of this unique reserve. Depending on one’s energy levels, the walk can take hours, and keen bird watchers will love it! Try not to go during a public holiday period as it can get quite crowded and ruin the isolation that this wonderful location can provide. For jolly campers, there is an absolute must in Jordan: camping in Wadi Rum. To enjoy an overnight here to the maximum, it’s best to team up with at least two other vehicles – including someone in the group who has been a few times before and knows the way around! Take all your own kit, including a four-wheel-drive off-road vehicle, and follow the rules and advice given by the rest house in Rum village. From April to October or even mid-November is the season, and on a clear moonless night the stars are amazing; it is pure enchantment. Watch Lawrence of Arabia before going; it will enhance the experience. There are plenty of good guidebooks to read on all the options and it is well worth planning trips to make sure all the best are covered while resident here. Some useful organizations to be in touch with are the Friends of Archaeology, the Humane Centre for Animal Welfare and the Hash, all of which organize walking and hiking trips and will ensure one meets up with Jordanians and expatriates who have a sense of discovery and adventure.
Living in Jordan Most expatriates are based in West Amman, which is a very smart part of town. Finding one’s way around is relatively easy as the map of this area is quite clear when it comes to the main roads. Finding friends’ homes for the first time is not so easy as there is no such book as an A–Z! West Amman is growing rapidly and frankly such a book would have to be updated every six months just to keep up. Areas of open ground six years ago are now residential neighbourhoods. Luckily most invitations come with map attached! Settling down and making friends is easy. Obviously the children make friends at school but those who arrive without their families will find many activity groups full of welcoming faces, both expatriate and
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Jordanian. These associations and societies range from the more formal such as Rotary clubs and business associations (Jordan/British, Jordan/ French, etc) to the less formal such as British Ladies, American Women, Scandinavian-Speaking Ladies as well as societies like the Friends of Archaeology, 464 and the ubiquitous Hash. There are even the ‘Line Dancers’! Excellent schooling is available from kindergarten through to graduation, with excellent results being achieved in the Amman Baccalaureate, almost certainly among the best in the Middle East. British and US curricula are also available, as are those for the French and obviously the Arab population. The International Community School caters for children from 4 years to 16 years, covering the English curriculum, and has in the region of 40 nationalities. It is renowned for accepting and assimilating non-English-speaking children rapidly into the school and community. All schools have fleets of buses to transport children to and from home. Most expatriate schools also have very active parent–teacher associations and to a large extent the schools provide the majority of extra-curricular activities including clubs, outings and sports. West Amman has a good and increasingly upmarket selection of shops, cinemas, activity centres and sports clubs, offering among other activities golf, tennis, squash and swimming. Of course, Amman is not far away from the scuba-diving centres of the Red Sea and many take the opportunity of being in Jordan to get their PADI or BSAC certificate. There are several good supermarkets now, nothing international as yet, but by 2006 Carrefour should be open. Almost everything is available but some imported items can be a little expensive. There has been a massive improvement over the past five years in this field and this looks set to continue. In addition there are some speciality shops and, yes, surprisingly, there is also a pork butcher. Some supermarkets stock alcohol and this is also available at off-licences around town. Jordan has a quite developed brewing and distilling industry, and local beverages are of course much less expensive than the imported. Be aware, however, that alcohol is not permitted for sale during Ramadan and some religious holidays. Good-standard accommodation in West Amman is readily available and finding somewhere to live is easy through the real estate agents. It can be quite expensive but equally one can find excellent deals. A moderate three- to four-bedroom stand-alone villa can be as much as JOD 18,000 per year but good three-bedroom unfurnished apartments in a block can be found for as little as JOD 3,500 if one searches long enough. Neighbourhoods are generally quite quiet but, as anywhere in the world, it is worth making sure one is in a good area before making a commitment. Most apartment buildings come with a ‘guard’, who is usually non-Jordanian and takes on the role of a Mr Fix-it, taking care of
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arranging gas bottles and diesel deliveries as well as useful extras such as washing the car twice a week; and all for a relatively low, shared cost with other tenants. Getting around Amman is easy; there are plenty of cheap taxis (just make sure the driver puts the meter on before setting off!) but be prepared to have to direct the driver if not travelling to a major hotel or shop. A newcomer, and even some long-time residents, can find the driving a challenge. Others may find it relatively easy depending on where they come from. The road and traffic system has been significantly upgraded in recent years and is certainly above average for the region. For driving a hire car a Jordanian licence is not needed as a home country licence will be accepted. Hire cars start at about JOD 20 per day for a category A vehicle. If buying a car (vehicle tax is quite high if one is not exempted), then a Jordanian licence is necessary. A written test and a short drive around the block with an examiner is all that is needed but this can take two half-days and it is best to take along a friend or colleague who speaks Arabic. The large majority of Jordanians are Muslims, about 94 per cent, with a roughly 6 per cent Christian minority. All religions are well tolerated and there is a wide selection of churches in Amman representing many different denominations, including Catholic, Orthodox and Anglican. Hospitals are plentiful and in fact Amman is recognized as a medical centre in the Middle East. Most doctors have trained in the United States, UK or Europe, and many patients come to Jordan from around the region for relatively low-cost treatment. Amman is a modern city with good municipal management and infrastructure. Water is scarce in the region but is well supplied and should be conserved as much as possible. All houses have large reserve tanks and, if there is a shortage, a tanker can easily be arranged at short notice. It is a relatively quiet city and great for families.
Meeting and working with Jordanians Jordanians receive foreigners with genuine warmth and friendliness and they are very careful to separate the individual from the policies of the individual’s government. More than in most countries in the world, the people one works with will offer invitations to visit their homes or to join them for an outing or for a drink. Don’t be surprised if, in a group, most of the conversation ends up in Arabic; this may be a little disconcerting but there is no bad intention. Despite the excellent level of English generally encountered, it is worth remembering that, in social gatherings, Arabic is a Jordanian’s first language and therefore the best medium for general chit-chat, joking and storytelling. It is better, as an expatriate, to learn some Arabic
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words and expressions, as Jordanians are very proud of their culture and language and an expatriate’s interest to communicate in their language is very well received. If planning to stay in Jordan for a year or more it is very worth while learning about the ethnic and religious mix of the country. At first glance the unaccustomed eye would miss one of the most interesting aspects of Jordan. There is quite a class structure and it can be helpful to know who are the movers and shakers, who is related to whom and which family names come from where. Don’t be fearful of making a faux pas by wishing ‘Happy Easter’ to a Muslim or ‘Happy Eid’ to a Christian. Certainly in West Amman, no one gets the slightest bit offended. Two phrases in Arabic that can be used over any of these periods to anyone are ‘kul am wa-inta bkhair’ and ‘Eid Mubarak’. Working in Jordan can be challenging, owing to cultural differences, and either one will enjoy it and feel it very rewarding or alternatively one may find it very frustrating. Working with people of a different culture and with different values inevitably means one either works with or against the flow. Respecting local practices and culture is the most fundamental factor to understand in the workplace. For example, it is important to realize that the extended family is very much a part of local life for most, if not all, employees. There are times and periods when there is enormous family pressure on people to be present or to visit relatives. Of course there are events such as weddings and funerals that need no further understanding – however, in Jordan the period of condolences (three days) may need to be observed, especially if the deceased relative is close, and Eid holidays are important gathering periods. If someone is well known and loses a relative, attendance at the condolences is expected. A visit of no more than half an hour together with other work colleagues is highly appreciated. Greetings can vary in different circumstances but generally the handshake with the right hand is the most common. However, an exception to be aware of is that some conservative Muslim ladies will not shake hands with men at all. If uncertain, it is best to nod, smile, extend a verbal greeting and watch to see if a hand is extended before making a move. It will be noted that men greet each other with kisses; this is usual if both men are related or are friends. When invited out to dinner at a restaurant or to someone’s home, take a small gift for the hostess such as an arrangement of flowers or a box of chocolates; this is essential etiquette in Jordan.
Hotels and restaurants In early 1995 there were just three international-chain five-star hotels in Amman and none in Petra, the Dead Sea or Aqaba. Now, 10 years
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later, there are 10 hotels competing in Amman, five in Petra, two at the Dead Sea and two in Aqaba. This explosion in supply was largely due to the business confidence generated by the 1994 peace treaty with Israel. Investors saw a golden opportunity in a country with tremendous regional tourism potential (Jordan, Palestine, Syria, Lebanon, Israel and Egypt) and a growing economy supported by European and US aid. From 1998 to date, this increase has brought both benefits and drawbacks. On the plus side, the new products offer customers brand-new facilities and new services at very competitive prices by international standards. Unfortunately and inevitably, the available pool of quality, trained staff has been diluted in recent years and it will probably take a year or two at least to get back the equilibrium. Although there is only one new project in Amman for 2004 and Petra is at capacity, investors now see the Dead Sea and Aqaba as the golden growth opportunities over the coming 5–10 years. Prime examples of these are the 320-bedroom, beach-front InterContinental resort in Aqaba in early 2005 and a 450-unit Holiday Inn resort on the shores of the Dead Sea by 2007. The recent Iraq crisis has helped to provide a welcome boon for the hotels. Good supply, excellent rates and world-class conference facilities combine to place Amman firmly on the map as both a business centre for this region and a gateway to the huge Iraqi market with its pent-up demand. Clearly, opportunity is showing its face finally and hoteliers are all keeping their fingers firmly crossed. Many have said in the past, ‘All these hotel rooms! Who’s going to fill them?’ Well, already there are periods of excellent high demand and, providing all pieces of the puzzle stick together, business will be good for everyone. Of course all these new hotels have also brought with them a whole new array of restaurants and bars offering different themes and cuisines. In recent years there has been a massive improvement in the availability and supply of all sorts of new food products from the United States, Europe and the Far East. The king has taken a personal interest and supported the five-star hotels’ executive chefs in the efforts to streamline the importation of fresh products with a limited shelf-life. Amman may not yet be on the same level as other big cities in the region like Dubai or Beirut, but it is catching up fast. In addition to this, the local farmers are now experimenting with new fruits and vegetables, so variety is also improving considerably. Good restaurants in Jordan are not just confined to the hotels. There are plenty of ‘stand-alone’ restaurants. Competition is fierce in this arena and many establishments do not last the course. There are not that many customers and every proprietor is subjected to the fickleness of Ammanites, who tend to favour the new. However, a few places have stood the test of time and the reasons for their success vary. It can be the
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quality of the food and service but equally important are the ambience and the ability to attract the ‘in-crowd’. Some of the current names of ‘independents’ likely to be heard are the Blue Fig, Whispers, Romero and Fakhreldine.
9.2
Commercial Property Market Alma Alic, Abdoun Real Estate, Amman
Introduction Since 1992 Jordan has implemented a significant number of laws and initiatives designed to improve the business environment. Under the leadership firstly of King Hussein and now King Abdullah, Jordan has demonstrated its commitment to economic reform, including reform of the customs, taxation and investment laws, which has so improved Jordan’s business climate. As a result, Jordan is becoming an increasingly attractive market for global trade. Amman, the capital city, is the focus of the Jordanian economy, being the centre of government activity, commerce, services and manufacturing, and is being transformed into an international centre attracting substantial inward investment. Furthermore, Amman’s thriving business community has created a city of opportunities as continued privatization and forecast economic growth stimulate and accelerate the pace of both domestic and international investments. The main business areas in the city are located in West Amman close to a number of roundabouts and crossroads along Zahran Street, the main road from the city centre to Queen Alia International Airport. These road intersections are referred to as circles, are numbered one to eight from the city centre outwards and are the nomenclature widely used for getting around town. As the city has grown, so the commercial centre of Amman has moved to the west, with the main business district today being close to the third and fourth circles and expanding outwards to Shmisani. Many former residential properties in this area have almost overnight been converted for commercial use. International businesses are entitled to own their premises but nevertheless the market is characterized by widespread leasing activity. Indications are that the leasehold sector constitutes 75 per cent of commercial demand. Therefore there is a wide range of commercial
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properties available for leasing, including a significant number of goodquality office properties. In the past decade, the office rental market in Amman has remained stable with little fluctuation in rental rates but, nevertheless, consulting a representative from a reputable real estate agency is strongly recommended to ensure that a company attains the property required on the best terms.
Commercial lease structures There are no standard lease formats in use within the commercial sector and therefore leases vary considerably depending upon the landlord and the landlord’s managing agents, but a majority of leases are short-term of between one and five years. It is not uncommon for a real estate agent to negotiate lease clauses until common ground has been reached between landlord and tenant. In some cases such negotiations extend to the rental price, although this is less likely in prime office buildings.
Payment terms Rent is usually paid yearly in advance on the signing of the lease although in some instances this can be negotiated to six months in advance. Since the rent is paid in advance it is not a common practice to leave post-dated cheques or deposits with a landlord.
Service charges Service charges are common for all commercial office space, will vary between 10 per cent and 20 per cent of the rent and are always paid in advance in addition to the rental price. The charge usually covers the maintenance of the building, security and cleaning of the common areas. The tenant is usually responsible for all the other bills within the leased office space (such as for electricity and water).
Agency fees Both the landlord and the tenant have the obligation to pay 5 per cent of the first year’s rental value by way of brokerage fees. If the contract is renewed, both the lessor and the lessee pay 1 per cent of the rent for each subsequent renewal. Sales tax at the rate of 13 per cent is also applied to commission payments.
Fitting-out works/tenant improvements A landlord will usually allow a rent-free period for fitting-out works to be undertaken by a new tenant. This rent-free period will have to be
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negotiated at the start of the contract but usually ensures a couple of months of fitting-out work provided that the landlord has agreed the fitting-out proposals. The landlord, utilizing nominated maintenance contractors, can often give assistance with building or fitting-out works. All improvements undertaken by the tenant become the property of the landlord at the end of the lease.
Termination or renewal procedures Depending on the lease expiration clause, tenants are usually obliged to inform their landlord in writing two months prior to the expiration date of the lease term of their intentions. Early termination of a lease by a tenant can be a problem since the rent is paid in advance and is not, in most cases, refundable. Early termination of the lease can be possible if there is a diplomatic or a similar clause stating that the tenant has the right to terminate the contract if the company is leaving Jordan and ceasing all operations in the country. If neither party gives notice under Jordanian law, a contract is automatically renewed for another similar term subject to the same terms and conditions.
Dilapidation procedures The tenant and the landlord will inspect the premises on delivery of a termination notice and, as the tenant is obliged to leave the premises in good condition, fair wear and tear excepted, the tenant is expected to compensate the landlord for any direct damages or losses to the leased premises resulting from negligence or misuse. Any work needed has to be completed before acceptance of termination of the lease by the landlord.
Transport/parking Taxis are abundant in Jordan and operate on a meter system, while public buses run on limited routes but are not usually used by expatriates. However, the car is the primary mode of transport in Amman and, as a result, car ownership is high, which is reflected in the volume of traffic on the roads and the overly congested parking facilities. Parking spaces are limited and arrangements must be incorporated into the initial lease contract in order to secure adequate parking for staff. The lease will state the number of free parking spaces available, depending on the size of the leased property, but the tenant may have a separate agreement for additional parking spaces as needed and if available.
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Rentals Rentals are usually quoted on a square-metre basis, but lease agreements do usually state both the floor area and the annual rent. Approximate commercial rental rates in Amman as at mid-December 2003 are shown in Table 9.2.1. Table 9.2.1 Commercial rental rates in Amman at mid-December 2003 Office type
Rent per square metre per year JOD
Prime commercial
70–100
Secondary
60–80
Tertiary
30–60
JOD 1 = USD 0.708 approximately
9.3
Residential Property Market Alma Alic, Abdoun Real Estate, Amman
Introduction Situated in the heart of the Middle East, Jordan is the meeting point of three continents: Europe, Asia and Africa. Jordan’s image conveys a vibrant fusion of history and modernity, elements that are well interlaced in the capital, Amman, where one moment one can be wandering back in time at the ancient Citadel Hill and the next driving through the urban and contemporary streets of Abdoun. Jordan is often seen as the liberal and accessible face of the Middle East and widely regarded as one of the most promising and emerging markets in the region, with rising income levels and increased interest from foreign investors. Jordan’s vision of a thriving market includes a future that caters to the needs of the people and promotes business and investment opportunities in the region. All foreign nationals are allowed to purchase property in Amman, one of the fastest-growing cities in the Middle East and home to almost a third of the Jordanian population, although as of this time a substantial majority become tenants in locally owned premises.
Practicalities When leasing accommodation it is important that a prospective tenant produces a valid copy of his/her passport. Other permits are not essential at the outset as most landlords are prepared to leave that issue to one side, knowing that it takes time to obtain residence and work permits in Jordan. Landlords do, however, require all the necessary information about the client and in some cases will require a guarantee letter from the intending tenant’s company. A lease can be issued in a company’s name against a letter stating that the property will be for the exclusive use of the named employee and the employee’s family, although landlords do tend to prefer having a contract with the
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individual living in the property. This is due to the fact that the rent cannot be increased while the contract is with the same tenant and that properties rented by companies can sometimes be used by numerous different employees and as a result tend generally to be neglected by such transient tenants. Housing allowances tend to vary according to the status of the employee and can be either a basic allowance for unfurnished or semi-furnished accommodation or a fully furnished all-inclusive package. Once this information has been confirmed, approaches can be made to a reputable company agent, such as Abdoun Real Estate, which will help locate a suitable property. The property market in Jordan, unlike some other countries in the region, is not a free-for-all, as some real estate agents have exclusive property management agreements for defined properties and buildings, which are only listed and shown by those agents. Other properties might be listed by all agencies and are available through any one of them. To assist an agent in selecting a property it is absolutely essential that clear information as to what is required is provided. For example: .
What budget is available?
.
What sort of accommodation is required, a villa or an apartment?
.
Is the property to be furnished, semi-furnished or unfurnished?
.
Should the property be a ground-floor, rooftop or mid-floor residence?
.
Should it be a free-standing or a semi-detached house?
.
How many bedrooms or bathrooms are required?
.
Should the property be in a specific area of town?
.
Should the property be in or out of town?
Once a suitable property has been found, a quick decision is needed, and maybe also payment of a deposit pending availability of the full sum due, as availability changes daily. In the case of Amman, a majority of the expatriate community live in Abdoun, a newly developed area considered to be the most modern neighbourhood in the city. The people living in this area are usually families from all over the world who, needless to say, nearly all speak English. Other residential localities include Swafiyah, Al Rabia, Shmisani and Dair Gbar.
Financial and lease information Residential leases are usually for a term of one year, renewable under the same terms and conditions for a further similar period, with the annual rent payable in advance. Landlords do like occupancy to be
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longer than a year and are usually willing to compromise more on the rent payable in such instances. All contracts are signed under Jordanian law and are non-breakable, with any amount paid in advance being nonrefundable unless the agreement contains a diplomatic clause. Residential leases can also be on a monthly basis but rental prices are usually higher by some 20 per cent. Leases are automatically considered renewed for another term unless notice of termination has been given to a landlord in writing two months prior to the date of expiry. Real estate agents will act as intermediaries between landlords and tenants, where necessary, but all leases are made to protect the interests of both parties. Once a lease is signed, both parties and the real estate agent involved all retain an original copy.
Payment terms As mentioned, most landlords prefer an annual rent payable in advance on the signing of a lease and as a result tend to waive any requirement for a refundable deposit equal to one month’s rent and a security deposit of the same amount. However, some landlords will accept three or six months’ rent in advance on an individual basis and are even prepared to negotiate payment terms. In addition, a government tax equivalent to 2 per cent of the annual rent is payable by all tenants, except those entitled to a tax exemption. A real estate agent’s commission payable by both the lessor and the tenant is usually 5 per cent of the annual rent for the first year and 1 per cent of the annual rent for any renewal. Government sales tax of 13 per cent is applied to the amount of the commission paid.
Extras Rental prices usually do not include water, electricity, telephone, maintenance bills or the salary of the caretaker of the building, which are all paid monthly by the tenant. On occasion, property is rented on an all-inclusive basis, but rarely. Foreigners are required to pay a deposit of USD 400 to have a telephone line installed in their name and should make sure that the premises being rented have sufficient water storage as there is a watershortage problem in Jordan. An average water bill is USD 50 every three months, and electricity bills during the summer months approximate to USD 100–150 a month for an apartment that has three A/C units, the actual figure being dependent on their usage. In winter, electricity bills are about USD 70 a month. Every apartment building has a caretaker whose salary is approximately USD 30 a month paid directly to the caretaker by each tenant. The landlord has responsibility for maintaining the
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381
premises and all technical installations, but bears no responsibility if damages are caused by the negligence of the tenant. There is a separate clause in every rental contract referring to maintenance issues, and all responsibilities are always stated in writing prior to signing by both parties.
Rental prices Table 9.3.1 Indicative rental prices in Amman Flats/villas
2 bed JOD
3 bed JOD
4 bed JOD
5 bed JOD
800
1,000
1,300
1,600
– semi-furnished
1,000
1,300
1,500
1,800
– fully furnished
1,200
1,400
1,700
2,000
– unfurnished
500
600
700
– semi-furnished
750
800
850
900
– fully furnished
850
950
1,050
1,150
Abdoun – the most popular and the most expensive: – unfurnished
Other districts including Swafiyah, Al Rabia, Shmisani and Dair Gbar:
JOD 1 = USD 0.708 approximately
In quoting these indicative prices it should be noted that all rentals are affected by: . . . .
the age and condition of the property; market availability; the property’s proximity to schools and shopping areas; whether it has a garden, terrace or swimming pool.
Part Ten
Appendices
Appendix 1
The Aqaba Special Economic Zone Law, Law No. 32 for the Year 2000 Aqaba Special Economic Zone Authority
Article 1 This Law shall be known as the ‘Aqaba Special Economic Zone Law for the Year 2000’ and shall come into effect as of the date of its publication in the Official Gazette.
Definitions Article 2 The following words and phrases wherever used in this Law shall have the meanings ascribed thereto hereunder unless the context indicates otherwise: Zone Authority Board Chief Commissioner Registered Enterprise
Customs Territory Region
The Aqaba Special Economic Zone. The Authority of the Zone. The Board of Commissioners. The Chairman of the Board. The person registered with the Authority pursuant to the provisions of this Law. The lands and territorial waters of the Kingdom excluding the Zone. The lands of the Aqaba Governorate, which fall outside the perimeters of the Zone and are not within the perimeters of the Jordan Valley in accordance with the Jordan Valley Development Law.
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Admission
Importation
Admitting goods that are subject to custom duties and taxes in the Customs Territory to the Zone, without collecting such taxes and duties on such goods. Bringing goods into the Zone, including Admission, and excluding bringing goods from the Customs Territory into the Zone on which duties and tax are paid therein.
Establishment and perimeters of the Zone Article 3 The aim of the establishment of the Zone is to enhance economic capability in the Kingdom by attracting different economic activities and investments thereto. Article 4 The perimeters of the Zone shall be determined by a decision of the Council of Ministers upon the recommendation of the Board. The Council of Ministers may amend these perimeters according to the business requirements of the Authority and the exigencies of public interest. The decision and any amendment thereto shall be published in the Official Gazette. Article 5 The starting date of operation in the Zone shall be determined by a decision of the Council of Ministers upon the recommendation of the Board. Such decision shall be published in the Official Gazette. Article 6 All legislation in force in the Kingdom shall apply to the Zone. The provisions of this Law shall supersede in case of contradiction with the provisions of such legislation.
The Authority of the Zone Article 7 A. An Authority to be known as the ‘Aqaba Special Economic Zone Authority’ shall be established in the Kingdom and shall have a juridical personality with financial and administrative autonomy. As such, the Authority may acquire movable and immovable property and perform
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all legal acts necessary to achieve its objectives, including concluding contracts, accepting aids, grants and donations, and litigating. The Civil Attorney General or any attorney appointed by the Authority for this purpose shall represent the Authority in any legal proceedings. B. The headquarters of the Authority shall be in the Zone. The Authority may establish liaison offices within and outside the Kingdom. C. The Authority shall be associated to the Prime Minister. Article 8 A. As of the date specified by the Council of Ministers, the Authority shall become the legal and factual successor of the Aqaba Region Authority and the Municipality of Aqaba according to the provisions of this Law. B. All rights and obligations of the Aqaba Region Authority and the Municipality of Aqaba shall be transferred to the Authority. The Authority shall undertake to execute all contracts and agreements to which any of such entities was a party thereto at the date specified by the Council of Ministers as if such contracts and agreements were concluded with the Authority. C. Ownership of the Jordan Free Zones Corporation’s facilities and properties located within the perimeters of the Zone shall be transferred to the Authority for consideration determined by the Council of Ministers. D. All employees and personnel of the Aqaba Region Authority, the Free Zones Corporation in Aqaba and the Municipality of Aqaba shall be transferred to the Authority de jure. E. The Jordan Industrial Estate Corporation shall be considered in the Zone as a Registered Enterprise. Without prejudice to the Jordan Industrial Estate Corporation’s rights and obligations incurred prior to the enforcement of the provisions of this Law, the provisions of the Jordan Industrial Estate Corporation Law in force shall not apply in the Zone. Article 9 The Authority shall perform the following functions: A. Develop and qualify the Zone to attract investments and create an advanced investment environment to stimulate industry, trade, tourism and services in the Zone. B. Increase job opportunities for Jordanians, and coordinate and cooperate with investing entities in the Zone to train, qualify and enhance the capacity of Jordanian manpower and accord it priority in employment. C. Enhance the role of the private sector in participating in the development of the Zone, including providing infrastructure services and any public services.
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D. Encourage competition and prevent monopoly in the various economic activities within the Zone. E. Plan, design and execute projects for the development of the Zone in various fields, directly or through other parties. F. Protect the environment in the Zone. G. Encourage Registered Enterprises to conduct and support research and development. Article 10 A. The Authority shall assume the following responsibilities: 1. Administer the Zone and oversee its affairs according to its authorities entrusted therewith pursuant to this Law and the Regulations issued pursuant thereto. 2. Prepare the necessary plans and programmes for developing the Zone. 3. Establish the applicable basis for investment in the Zone. 4. Register enterprises wishing to enjoy the benefits and exemptions stipulated pursuant to this Law. 5. Promote the Zone in coordination and cooperation with the relevant bodies. B. Notwithstanding what is stated in any other legislation, the Authority shall according to the provisions of this Law assume within the perimeters of the Zone the functions and authorities relating to the following: 1. Regulating and monitoring economic activities to verify their compliance with the provisions of this Law and the Regulations and Instructions issued pursuant thereto, including the public health and safety affairs pertinent to such activities. 2. Issuing permits and certificates and any other authorizations which pertain to conducting economic activities in the Zone according to the provisions of this Law and the Regulations issued pursuant thereto. 3. Zoning of cities, villages and buildings. 4. Municipal affairs. 5. Protecting the environment, water resources, natural resources and biological diversity. 6. Controlling procedures of imported and exported food to or from the Zone and control and inspection procedures for all places for slaughtering, preparing, manufacturing, circulating, selling and catering foodstuffs and their derivatives in the Zone. For this purpose, the Chief Commissioner shall assume the powers of the Minister and the competent Commissioner shall assume the powers of the Director prescribed for such in the enacted Control of Food Law and the Regulations issued pursuant thereto.
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7. Customs procedures and matters. 8. Collecting the taxes, fees, fines and service charges stipulated in this Law and the Regulations and Instructions issued pursuant thereto. 9. Labourers’ affairs. 10. Any powers entrusted to other official bodies accorded to the Authority by the Council of Ministers. Article 11 A. In addition to its duties in the Zone, the Authority shall be responsible for developing the Region economically and socially and preparing the necessary plans and programmes for such. For this purpose, the Authority shall assume any authority accorded thereto pursuant to this Law as required for developing the Region in accordance with a Regulation issued for this purpose. B. The Authority shall also assume the authority of administering the State’s property within the Region according to the provisions of the Law on Administering the State’s Property in force and the Regulations issued pursuant thereto, provided that the following is taken into consideration: 1. Administering the antiquities and the antique sites within the Region according to the Law on Antiquities in force. 2. The Land and Survey Department shall collect the fees resulting from executing the transactions for registering State lands and disposing thereof in the Region. 3. Remitting the funds resulting from leasing, delegating or disposing of the lands to the Public Treasury. C. The Authority shall also assume the authority of protecting the environment in Wadi Rum according to the provisions of this Law, the Regulations issued pursuant thereto and any pertinent legislation in force.
Administering the Authority Article 12 A. The Authority shall be administered and supervised by a Board known as the ‘Board of Commissioners’, which shall be composed of six full-time members, including the Chief Commissioner and the ViceChief Commissioner who shall be appointed by a decision of the Council of Ministers upon the recommendation of the Prime Minister for a renewable four-year term, provided that such decision shall be endorsed by a Royal Decree. B. The membership term for the first Board shall be two years for half of its members and four years for the other half, provided that the Chief Commissioner and the Vice-Chief Commissioner are among the latter half.
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C. Within the term of the Board, the Council of Ministers may terminate the membership of any of its members and appoint a replacement in the same manner provided for in Paragraph A of this Article. D. Wages, allowances and all financial entitlements of the Chief Commissioner and the Board members shall be determined by a decision of the Council of Ministers upon the recommendation of the Prime Minister. Article 13 A. Whoever is to be appointed in the Board shall: 1. Be a Jordanian national. 2. Be qualified, experienced and specialized. 3. Not be convicted of felony or a misdemeanour affecting honour. B. 1. During their membership term, the Chief Commissioner, the Board members, their spouses and first-degree descendants shall be prohibited from having any benefit with the Authority in any way. 2. The Chief Commissioner and any Board member may not have any business relationship with any Registered Enterprise or investor in the Zone. 3. Upon appointment and prior to assuming his duty, the Chief Commissioner and each Board member shall submit a written declaration, ensuring that he has no benefit or any economic activity as stated in Subparagraphs 1 and 2 of this Paragraph subject to legal liability and dismissal from the Board’s membership. C. The Chief Commissioner and the Board members shall take the following oath before the Prime Minister prior to assuming their duties: ‘I swear by Almighty Allah to be loyal to the King and the Country, to abide by the laws and regulations in force and to perform the functions and duties entrusted in me with honour, honesty and dedication.’ Article 14 Upon entry of this Law into force, the Council of Ministers shall issue the necessary decrees for the establishment of the Zone and commencement of its activities, specifically the following: A. Appointment of the Chief Commissioner, the Vice-Chief Commissioner and the Board members. B. Upon the recommendation of the Board and subject to the plan prepared for this purpose, determine the procedures and dates for the transfer of the responsibilities and duties of the Aqaba Region Authority to the Authority. C. Upon the recommendation of the Board, determine the date on which the Board shall assume the functions of the Municipality of Aqaba and any necessary procedures for this purpose.
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D. Upon the recommendation of the Board, determine the procedures by which the employees and personnel of the Aqaba Region Authority, the Free Zones Corporation in Aqaba and the Municipality of Aqaba shall be transferred to the Authority. E. Any decision deemed necessary for enabling the Authority to perform its duties within the period prior to the date of commencing the operations in the Zone. Article 15 The Board shall assume the following functions and authorities: A. Prepare the general policy to develop the Zone with the approval of the Council of Ministers, and approve the necessary plans and programmes for the implementation thereof. B. Allocate investment areas in the Zone and determine land use therein on the basis of the different sectors. C. Approve the organizational structure of the executive body of the Authority, the Classifier Table and the job descriptions therein. D. Supervise the executive body of the Authority and the operation of the Authority in a manner that ensures good performance. E. The functions of the Municipal Council according to the provisions of the Municipalities Law in force and the Regulations issued pursuant thereto. F. The authorities of the Higher Zoning Council and the Province and Local Zoning Committees in accordance with the Cities, Villages and Buildings Zoning Law in force and the Regulations issued pursuant thereto. For this purpose, the Chief Commissioner shall assume the powers of the Ministers prescribed in accordance with these legislations. G. Expropriate lands and property necessary for the operations of the Authority’s activities or development of the Zone according to the provisions of the Eminent Domain Law in force. H. Approve contracts and agreements to which the Authority is a party thereto. I. Prepare the necessary draft legislation for the activities of the Authority and submit such to the Council of Ministers. J. Recommend to the Council of Ministers to appoint the certified auditor of the Authority. K. Approve the annual estimated budget of the Authority and submit such to the Council of Ministers for endorsement. L. Approve the annual report of the activities, balance sheet and yearend accounts for the previous fiscal year of the Authority and submit such to the Council of Ministers. M. Issue Instructions relevant to the activities and procedures of the Authority, particularly the following: 1. Regulating and monitoring the activities of Registered Enterprises.
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2. Regulating the activities of investors in the Zone. 3. Collecting the prescribed taxes, fees, fines and service charges in the Zone. 4. Issuing certificates of origin for goods produced in the Zone and determining the entities entitled to issue such. 5. Determining the fees, which the Authority collects in return for services rendered to any pertinent body to the Authority’s activities. 6. Ratifying the status of economic activities violating the provisions of vocational licence legislation prior to the date of commencing operations of the Zone. Article 16 A. The Board shall convene at least twice every month upon an invitation from the Chief Commissioner or the Vice-Chief Commissioner in his absence. The quorum of the Board meetings shall be met upon the attendance of the majority of its members, provided that the Chief Commissioner or the Vice-Chief Commissioner is among them. B. The Board shall issue its resolutions by a majority vote of the attending members, provided that it is not less than three votes. A member cannot refrain from voting, and each opposer shall record his opposing decision in writing in the minutes of the meeting and sign thereon. If the votes are tied, the vote of the Chairman of the meeting shall be determinant. C. The procedures for regulating the Board’s functions, meetings and all other matters shall be determined by Instructions issued by the Board. Article 17 A. 1. The Board may contract with financially and technically qualified entities to develop or administer the Zone. The basis and conditions of contracting shall be determined in accordance with a Regulation issued for this purpose. 2. Notwithstanding what is stated in any other legislation, the Authority shall be responsible for developing the Aqaba Port, Airport and the public utility services inside the Zone. The Board shall be entitled, upon the approval of the Council of Ministers, to contract with financially and technically qualified entities, and any of the entities referred to in Subparagraph 1 of this Paragraph for the purposes of developing or managing any of them, provided that the relevant bodies in accordance with the legislation in force participate in the negotiations conducted with the qualified entities and according to what is decided by the Council of Ministers in this regard. The contracts resulting from these negotiation shall not be considered enforced until they are ratified by the Council of Ministers.
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3. The Board may establish a company in which the entities contracted therewith according to the provisions of Subparagraphs 1 and 2 of this Paragraph may have equity participation in order to carry out the development or administration pursuant to the contract concluded with the Board for this purpose. 4. The Board may pursue any method for contracting with the entities referred to in Subparagraphs 1 and 2 of this Paragraph or with the entity managing the company referred to in Subparagraph 3 of this Paragraph in order to entrust therein the management of the projects and the utilities services subject of the development. The Board may lease these projects thereto or transfer the ownership thereof. Any agreement in this regard shall be subject to the approval of the Council of Ministers. 5. Any contract or agreement reached by the Authority according to the provisions of this Paragraph shall be subject to the provisions of the enacted Supply and Procurement Regulation of the Authority. B. Upon the Council of Ministers’ approval, the Board may borrow to finance the projects and activities of the Authority from domestic or foreign sources, including issuing bonds for this purpose. Article 18 A. The Chief Commissioner, as the chief executive of the Authority, shall assume the following functions and powers: 1. Execute the Board’s decisions. 2. Supervise the administrative, financial, supplies and works affairs of the Authority. 3. Sign contracts and agreements concluded between the Authority and third parties as authorized by the Board. 4. Prepare the annual estimated budget of the Authority and the Classifier Table thereof. 5. Prepare the annual report of the activities of the Authority, its balance sheet and year-end accounts of the previous fiscal year. 6. Any other powers accorded thereto in accordance with the Regulations issued pursuant to this Law or delegated thereto in writing by the Board. 7. The authorities of the Minister of Transport pursuant to the Ports Corporation Law or any other legislation in force pertinent to the transport sector within the Zone, excluding what is related to the marine transport without the services. 8. The Governor’s powers in the Governorate of Aqaba pursuant to the legislation in force if the Minister of Interior, upon the approval of the Council of Ministers, does not appoint a Governor for such, whereby in the event of his appointment a memorandum of understanding shall be prepared between the Minister and the Chief of the Board of
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Commissioners, which shall be approved by the Council of Ministers. The Governor shall, when performing his functions in accordance with the enacted legislation, take this memorandum of understating into consideration. In the event a dispute arises between the two parties when implementing the memorandum, the matter shall be referred to the Prime Minister for resolution. B. The Chief Commissioner shall represent the Authority before others. C. The Chief Commissioner may delegate any of his authorities stipulated in this Law and the Regulations issued pursuant thereto to the Vice-Chief Commissioner, any Board member or any employee at the Authority, provided that such delegation shall be in writing and specific.
The Authority’s financial affairs Article 19 The revenues of the Authority shall consist of the following: A. The annual funds allocated for the Authority in the General Budget. B. Any fees, taxes or returns accrued to the Authority according to the provisions of this Law and the Regulations issued pursuant thereto. C. Any fee collected by the Authority in exchange for services rendered to others. D. Fines and civil compensations resulting from implementing penalties for violating any of the provisions of this Law and the laws in force in the Zone, including implementing the penalties stipulated in Article 39 of this Law. E. The loans it obtains. F. Aids, grants and donations it receives, provided that such shall be subject to the approval of the Council of Ministers if the source is not Jordanian. G. Proceeds from disposition by the Authority of its assets according to the prescribed legal principles. H. Any revenue from any other source accepted by the Board and approved by the Council of Ministers. Article 20 A. The Authority’s fiscal year shall start on 1 January of each year and end on 31 December of the same year. B. The Authority shall have an independent budget, approved by the Board and endorsed by the Council of Ministers. C. Any surplus in the annual budget of the Authority shall be remitted to the Public Treasury, subject to the Authority’s obligations relating to the expenses of its future projects. D. The accounts of the Authority shall be post-audited by the Audit Bureau. The Authority may appoint a certified auditor who shall submit his audit report to the Council of Ministers.
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Article 21 A. The Authority shall enjoy the exemptions and facilities granted to Ministries and Government Departments. The Authority shall be entitled to benefit, in the Zone, from any privileges or exemption accorded to Registered Enterprises pursuant to this Law. B. The property of the Authority shall be considered as public property and shall be subject to the provisions of the Collection of Domanial Property Law in force. The Chief Commissioner or whom he authorizes for this purpose shall assume all powers of the Administrative Governor and the Committee for Collection of Domanial Property accorded thereof.
Economic activities in the Zone Article 22 A. Whoever is conducting any economic activity in the Zone and is willing to benefit from any privileges and exemptions as stipulated in this Law, shall apply to the Authority for registration as a Registered Enterprise. B. Procedures and conditions of registration, and registration fees collected by the Authority and any other related matters shall be determined in accordance with a Regulation issued for this purpose. C. Non-Jordanian companies registered with the Authority shall be exempted from registering with the Companies Controller. D. Subject to Paragraph A of Article 17 of this Law, the Authority shall be prohibited from owning stocks or shares in Registered Enterprises. E. All ministries, governmental departments, official corporations and public institutions operating within the Zone shall be treated as Registered Enterprises in order to enjoy the facilities and privileges prescribed to these Enterprises and on the bases of the statements relating to the movement of the goods belonging to these entities that should be presented to the Authority. Article 23 Any person not registered as a Registered Enterprise may conduct an economic activity in the Zone, provided that they comply with the basis and conditions determined in this Law and the Regulations issued pursuant thereto in relation to Registered Enterprises and any other conditions or basis determined by the Board. In such case, such person shall not be entitled to benefit from the privileges or exemptions accorded to Registered Enterprises in accordance with the provisions of this Law. Article 24 Any Registered Enterprise may conduct any economic activity except what is prohibited or restricted in the Zone in accordance with a
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Regulation issued for this purpose, which shall include the necessary basis and conditions for conducting the restricted activity and the amount of returns that the Authority is entitled to as a result thereof. Article 25 A. Importation of goods into the Zone shall be allowed according to the provisions of this Law and the Regulations and Instructions issued pursuant thereto. B. Whoever imports goods to the Zone shall take the necessary procedures, which guarantee that the disposition of such is not done in violation of the provisions of this Law and the Regulations and Instructions issued pursuant to any of them. C. In addition to what is stated in Paragraph B of this Article, the goods stipulated in that Paragraph shall be considered as being illegally admitted to the Customs Territory unless otherwise proven, whereby the provisions of smuggling stipulated in the Customs and Taxes legislation in the Customs Territory shall apply thereto. D. The Authority shall report to the relevant Customs Houses of any case to which the provisions of Paragraph C of this Article apply. Article 26 A. Registered Enterprises shall be allowed to admit goods into the Zone. Others may not admit goods into the Zone except according to the bases and conditions determined in accordance with Instructions issued by the Board for this purpose. B. Individuals may admit their personal or household effects into the Zone. Types and quantities of such effects shall be specified in accordance with special Instructions issued by the Council of Ministers for this purpose. Article 26 repeated As an exception from the provisions of Articles 25 and 26 of this Law, goods may be admitted or imported to the Zone to the entities indicated hereunder: A. Items admitted in the name of His Majesty the King. B. Gifts and donations to ministries, government departments, public institutions, state universities. C. The imports of the Jordanian Armed Forces and Security Forces and any Arab forces stationed in Jordan of ammunition, weapons, equipment, military fatigue, vehicles and spare parts thereof, and any other items specified by the Council of Ministers upon the recommendation of the Chief Commissioner. D. Notwithstanding any contradicting provision stated in any other legislation, items imported for the Military Consumer Corporation and
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the Civil Consumer Corporation, in the amounts, and for the classes of goods, and at the values set by the Council of Ministers, upon the recommendation of the Chief Commissioner, provided that the imports have no Jordanian counterpart approved by the Council of Ministers, upon the recommendation of the Chief Commissioner and the Minister of Industry and Trade. E. The personal effects of non-Jordanian and non-honorary heads and members of the diplomatic and consular corps who work in Jordan and are listed with the Ministry of Foreign Affairs, and the personal effects of spouses and underage children thereof residing in Jordan, provided that the principle of reciprocity is met and in correspondence to their actual needs. F. Items imported by embassies, legations and non-honorary consulates for official use, except food, alcoholic beverages and tobacco. Imports exempted must correspond to actual needs, and must be in reasonable amounts. Limits on certain imports may be set by the Chief Commissioner, upon the recommendation of a committee of representatives from the Ministry of Foreign Affairs and the Authority, provided that the principle of reciprocity is met. G. Subject to inspection, items such as personal effects, furniture and household utensils imported for the personal use of the administrative personnel of Diplomatic and Consular missions, who are citizens of such missions and who do not benefit from the set exemptions, provided that the principle of reciprocity is met. Such items shall be imported within six months from the arrival of the beneficiary, which period may be extended by six months by permission of the Minister of Foreign Affairs. Drivers and house attendants shall not be considered administrative staff for the purposes of applying the provisions of this Subparagraph. Article 27 A. For purposes of the Customs Law and the General Sales Tax Law, goods admitted by a Registered Enterprise to the Zone from the Customs Territory shall be treated as exported or re-exported goods. B. For purposes of the General Sales Tax Law, services sold from the Customs Territory to a Registered Enterprise in the Zone shall be treated as exported services. C. Duty- and tax-paid goods may move without restriction from the Customs Territory to the Zone, and in such instances shall not be deemed exported or re-exported goods for the purposes of the Customs Law and the General Sales Tax Law. D. Goods originating in the Zone, upon being exited from the Zone to the Customs Territory, shall receive the Most Favoured Nation treatment in the Customs Territory.
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E. Individuals arriving in the Zone from outside the Kingdom and entering the Customs Territory shall be considered as travellers as defined in the enacted Customs Law. F. Customs Houses established on the borders separating the Zone from the Customs Territory shall carry out their functions and execute their powers according to the provisions of the enacted Customs Law. Article 28 The Council of Ministers may, upon the recommendation of the Minister of Finance, which is based on the request of the Board, partially exempt goods originating in the Zone from customs duties when put into local consumption in the Customs Territory, subject to the following conditions: A. If the production requirements of the goods and the economic feasibility only exist in the Zone. B. The exemption shall be limited to the value of the local materials, expenses and costs introduced into production in the Zone, whereby all customs duties and other fees and taxes imposed on foreign factor inputs shall be collected according to the relevant legislation in force in the Customs Territory. C. The produced goods shall satisfy the rules of origin stipulated in the Customs Law in force. Article 29 A. The Zone shall be considered outside the perimeters of the Customs Territory and shall not be subject to the Customs Legislation except as stipulated by this Law. B. The Authority shall assume within the perimeters of the Zone customs powers in accordance with a Regulation issued for this purpose, which shall specifically include the following: 1. Controlling smuggling and other illegal commercial activities. 2. Issuing Instructions relevant to the importation to the Zone and exportation therefrom. 3. Preparing statistical data and information relating to import and export transactions.
Taxes and duties Article 30 A. The following fees and duties shall not be collected in the Zone: 1. Customs duties, importation duties and other taxes and duties on imports into the Zone. 2. The general sales tax or any other tax that substitutes it, on imports into the Zone or sales of goods and services therein.
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B. Subject to what is stipulated in this Law, a Registered Enterprise, from the date of its registration, shall be exempted from all taxes and duties, including the following: 1. Income tax, social services tax and tax on distributing dividends of company stocks and shares on the income of Registered Enterprises accrued from their activities in the Zone or outside the Kingdom. 2. Land and buildings tax for any buildings and land owned thereby within the Zone. C. The exemption stipulated in this Article shall not include the following: 1. Fees and service charges collected by other governmental bodies from government departments for services that do not fall under the functions, responsibilities and authorities of the Authority. 2. Tax on sale and transfer of land and property, which shall be collected for the account of the Treasury. 3. Any taxes or fees to be imposed or collected as stipulated in this Law. 4. Taxes and fees imposed on vehicles. D. Notwithstanding what is stated in Paragraph C of this Article, vehicles used by Registered Enterprises under temporary entry status may be exempt from customs duties and general sales tax pursuant to a Regulation issued by the Council of Ministers. Article 31 Where Registered Enterprises or established investments or operations in the Zone enjoy pursuant to any other legislation or special agreement, upon the enforcement of this Law, better privileges and exemptions than what is provided in this Law, such exemptions and privileges shall continue to be applied until the period prescribed thereto lapses. Article 32 A. The income of the Registered Enterprise accrued from its activities in the Zone or directly accrued from such activity outside the Kingdom shall be subject to a 5 per cent income tax on its total income, which basis of calculation and all other related matters shall be determined in accordance with a Regulation issued for this purpose. B. Notwithstanding what is stated in Paragraph A of this Article, income accrued for banks, financial institutions, insurance and reinsurance companies and land transport companies operating in the Zone shall be subject to the provisions of the Income Tax Law in force, whether or not such entities are Registered Enterprises. C. The income of any person, other than Registered Enterprises, accrued from his business in the Zone shall be subject to the provisions of the Income Tax Law, including what any natural person earns as
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salaries, wages, allowances, bonuses and the like, whereby such income shall also be subject to social services tax according to the Social Services Tax Law. D. If the income stipulated in Paragraph C of this Article is jointly accrued in the Zone and the Customs Territory, the Authority or the Income Tax Department, as the case may be, shall assess and collect the income tax and the social services tax from these persons. The basis for assessment and collection, the procedures for the self-assessment returns and any other pertinent procedures shall be determined in accordance with a Regulation issued for this purpose. E. The exemptions stipulated in the Income Tax Law in force shall apply to any income accrued in the Zone to the entities benefiting from such exemptions. F. The following shall be exempt from the income tax stipulated in Paragraph A of this Article: 1. Capital profits gained by the Registered Enterprise, including profits accrued from the buying and selling of lands, real estate, shares and bonds, except for the profits accrued from sale or transfer of ownership of assets governed by the rules of depreciation prescribed under the enacted Income Tax Law, provided that losses arising from the sale or transfer of ownership of such assets governed by the rules of depreciation are deducted as soon as they are realized. This loss shall be determined in what is equivalent to the depreciation deducted according to the provisions of the Income Tax Law. 2. The income derived from land invested in agriculture, gardening, afforestation or from poultry, cattle, fish or bees breeding, including income from the transformation of their products by simple manual labour. 3. The income gained from a concession granted from or agreement concluded by the government and which has been explicitly exempted from tax by the terms of the concession or the agreement. Article 33 Subject to the provisions of the Income Tax Law and the Social Services Law and the Regulations and Instructions issued pursuant to any of them, every person, Registered Enterprise or investor in the Zone shall abide by the following: A. Deduct the income tax and social services tax due on payments made to any natural person whether salaries, wages, allowances, bonuses or allocations and remitting such to the Authority. B. Deduct 10 per cent of any amount from a payment that is not exempt from income tax, paid to a non-resident person, except what is paid by a Registered Enterprise to an investor who invests in not less than 20 per cent of its capital and remitting such to the Authority.
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Article 34 A. The Authority shall assess and collect the income tax in the Zone according to the provisions of this Law and the Income Tax Law in force and the Regulations and Instructions issued pursuant thereto. For this purpose, the powers accorded to the Minister and the Director-General pursuant to this legislation shall be invested with the Chief Commissioner, as appropriate. B. Notwithstanding what is stated in Paragraph A of this Article, the Income Tax Department shall continue to assess and collect in the Zone the income tax and the social services tax and any other amounts due on taxpayers in the Zone prior to enactment of the provisions of this Law, and shall follow up on all judicial and legal procedures pertaining thereto according to the enacted taxation legislation in the Customs Territory. Article 35 If the Authority or the Income Tax Department becomes aware that a Registered Enterprise is dealing with persons in the Customs Territory with whom they have a common financial benefit that is beyond the customary dealing between unrelated persons for the purposes of decreasing the due tax of any of such, the Authority or the Department, as the case may be, may assess the taxable income of the Enterprise or the related person without regard to this dealing. Article 36 A. The Authority shall provide the Income Tax Department with statements and data related to any taxable income it collects pursuant to the provisions of this Law. B. The Director-General of the Income Tax Department or any deputy thereof shall have the right to examine, if necessary, the records and documents related to income tax accrued and due in the Zone according to the provisions of this Law. Article 37 A. Notwithstanding what is stated in Article 30 of this Law, a sales tax shall be imposed on goods sold and services rendered in the Zone as follows: 1. A 7 per cent sales tax of the value of selling goods and services when sold into consumption in the Zone to be determined pursuant to a Regulation, provided that this Regulation shall include the provisions and procedures related to collecting and redeeming the tax. 2. A tax on the sales of local goods originating in the Zone from the Zone to the Customs Territory according to the provisions of the enacted
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General Sales Tax Law, provided that proof of payment of the tax is presented to the Customs House without being subject to the procedures of filing a customs declaration at the Customs Territory if the goods are not stipulated in Article 28 of this Law. 3. A tax on sales of services from the Zone to the rest of the Kingdom or abroad according to the provisions of the General Sales Tax Law in force. B. The seller of the good or service shall collect the tax stipulated in Paragraph A and shall remit it to the Authority. C. The Council of Ministers shall impose a special tax on sales of tobacco and its products and alcoholic beverages, liquor and beer when sold into consumption in the Zone according to Instructions issued for this purpose. D. For purposes of this Article, the Authority shall assume the powers of the General Sales Tax Department. The Chief Commissioner shall assume the powers of the Director-General and the Minister stipulated in the General Sales Tax Law, as the case may be. Article 37 repeated The following shall be exempt from the tax stipulated in Subparagraph 1 of Paragraph A and the tax stipulated in Paragraph C of Article 37 of this Law, as the case may be: A. The purchases and imports of goods and services for His Majesty. B. The goods and services indicated hereunder, as required by international agreement and protocols and provided that reciprocity is accorded: 1. Goods and services purchased in the Zone by embassies, commissions and non-honorary consulates for their personal use. 2. Goods and services purchased in the Zone by members of the diplomatic and consular corps assigned in the Kingdom, provided that they are non-Jordanians and non-honorary. 3. Goods and services purchased in the Zone by international and regional organizations operating in the Kingdom and their nonJordanian employees enjoying diplomatic status. C. The goods and services stated in Paragraph B of this Article shall be exempted and their quantities specified by a decision of the Chief Commissioner upon the recommendation of the Minister of Foreign Affairs. D. The Council of Ministers may, in special cases and upon the justified recommendation of the Chief Commissioner, exempt wholly or partially from the tax imposed on any goods, service or exempt any person or entity from such tax. Article 38 Subject to the provisions of the Income Tax Law, the General Sales Tax Law, and the Regulations and Instructions issued pursuant thereto:
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A. The Income Tax Court of Appeal shall have jurisdiction in reviewing appeals on tax assessment decisions and reviewing tax assessments conducted according to the provisions of this Law, as well as reviewing the claims relating to the fines and additional amounts due according to the provisions of this Law and reviewing any amounts that should be rebated, paid or deducted as a final tax or as an advance payment for the tax. B. The Customs Court of First Instance shall have jurisdiction in reviewing the following cases. The Customs Court of Appeal shall also have jurisdiction in reviewing appeals submitted in this regard: 1. All customs offences and violations committed in violation of the provisions of this Law and the Regulations issued pursuant thereto. 2. The offences committed in violation of the provisions of the Regulation referred to in Subparagraph 1 of Paragraph A of Article 37 of this Law and the import and export Instructions. 3. The challenges related to decisions determining the amounts subject to the sales tax according to the provisions of this Law. 4. Detaining and releasing persons accused of committing the crimes stipulated in Subparagraphs 1 and 2 of this Paragraph. If a case has not been referred to the court, the Chief Judge may ask the accused to provide monetary or notary bail, or face detention until a final decision is issued by the competent court or the bail is submitted. 5. Releasing any goods sequestered in the cases filed before it, in exchange for a bank or monetary guarantee in the amount of such goods’ value, as well as releasing sequestered transport means after marking such with the label for sequester at the competent bodies. C. For purposes of this Article, and upon a decision from the Judicial Council, a panel of the Income Tax Court of Appeal, the Customs Court of First Instance and the Customs Court of Appeal shall be charged to hold its sessions in the city of Aqaba periodically, as the case may be. Article 39 Penalties stipulated in the Income Tax Law in force shall apply to any crime committed in violation of the provisions of this Law and the Regulations issued pursuant thereto related to the income tax in the Zone. Article 39 repeated (once) A. Whoever commits any of the following acts shall be considered as evading the tax stipulated in Subparagraph 1 of Paragraph A of Article 37 of this Law and Paragraph C thereof: 1. Failing to submit the registration application at the Authority for a period exceeding one month from the lapse of the period prescribed for registration.
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2. Failing to submit the tax declaration for a period exceeding one month from the lapse of the period prescribed for submitting the tax declaration. 3. Submitting a declaration of the sales of goods or services subject to the tax if there is a discrepancy in the value of the taxable actual sales exceeding 10 per cent or 3,000 (three thousand) dinars, whichever is less. 4. Failing to keep accounting registers or their alternatives in technical means, whereas such results in a discrepancy in the value of the declared or due tax exceeding 200 (two hundred) dinars. 5. Cancelling the taxpayer’s registration upon his request if it becomes evident to the Authority that the taxpayer is still obligated to register according to the provisions of this Law. 6. Any person collecting undue tax, unless remitted to the Authority within the period specified in the Law for remitting the tax or it is actually remitted prior to its discovery. 7. Disposing of any of the goods exempted from the tax or used for other than the purpose for which they were exempted and this led to a discrepancy exceeding 200 (two hundred) dinars from the value of the due tax. 8. Not enabling the Authority’s employees to perform their duties or their powers of monitoring and inspecting according to the provisions of this Law. 9. The taxpayer collecting tax percentages or categories for taxable goods or services in violation of the provisions of this Law, which resulted in a discrepancy in the value of the due tax exceeding 200 (two hundred) dinars. 10. Submitting or issuing inaccurate statements, documents or data, which resulted in a discrepancy in the value of the declared tax exceeding 200 (two hundred) dinars. 11. Possessing taxable goods in the intention of trading therein, knowing that they are tax evaded. B. Whoever commits any of the acts stipulated in Paragraph A of this Article shall be punished by paying a civil compensation to the Authority not less than twice the tax and not exceeding three times the tax and a fine not less than 200 (two hundred) dinars and not exceeding 1,000 (one thousand) dinars. The fine shall be doubled in the event of repetition. If the act is repeated within a period not exceeding one year, the court shall be entitled to award the highest limit of the fine or imprisonment for a period not less than three months and not exceeding six months or both of such penalties. C. The Chief Commissioner or his delegate may conclude an amicable settlement regarding the tax evasion offences stipulated in Paragraph A of this Article before a final court judgment is reached in return for paying the tax that is the subject of the lawsuit, in addition to a fine as civil compensation for the Authority equivalent to the value of the tax.
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The settlement shall result in dropping the criminal lawsuit, suspending its procedures and revoking any consequences thereof. Article 39 repeated (twice) A. With the exception of the cases stipulated in Paragraph A of Article 39 repeated (once) of this Law, the Chief Commissioner shall be entitled to impose a fine not less than 100 (one hundred) dinars and not exceeding 500 (five hundred) dinars on whoever commits any of the following violations: 1. Failing to submit the registration application at the Authority for a period not exceeding one month from the lapse of the period prescribed for registration. 2. Failing to submit the tax declaration for a period not exceeding one month from the lapse of the period prescribed for submitting the tax declaration. 3. Submitting a declaration of the sales of goods or services subject to the tax if there is a discrepancy in the value of the taxable actual sales not exceeding 10 per cent or 3,000 (three thousand) dinars, whichever is less. 4. Failing to keep accounting registers or their alternatives in technical means, whereas such results in a discrepancy in the value of the declared or due tax not exceeding 200 (two hundred) dinars. 5. Failing to inform the Authority of the amendments on the data stated in the registration application within 30 days from the date of the amendment. 6. Failing to respond without a justified excuse to any of the subpoenas, notices or requests issued in writing by the Authority’s employees during their performing their duties or responsibilities according to the provisions of this Law. 7. Disposing of any of the goods exempted from the tax or used for other than the purpose for which they were exempted and this led to a discrepancy not exceeding 200 (two hundred) dinars from the value of the due tax. 8. The taxpayer collecting tax percentages or categories for taxable goods or services in violation of the provisions of this Law, which resulted in a discrepancy in the value of the due tax not exceeding 200 (two hundred) dinars. 9. Submitting or issuing inaccurate statements, documents or data, which resulted in a discrepancy in the value of the declared tax not exceeding 200 (two hundred) dinars. B. The violator shall be notified according to the followed principles of the fine imposed thereon. The violator must pay such within 30 days from the date of his notification. C. Fining decisions issued in accordance with the provisions of Paragraph A of this Article may be objected to in front of the Chief Commissioner within the period specified in Paragraph B thereof. The Chief Commissioner shall be entitled to cancel, reduce or fix the fine if
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there is indication that justifies such. The Chief Commissioner’s decision shall be subject to appeal at the competent court from the date of its notification. The court shall be entitled to confirm, amend or cancel the fine. D. The Chief Commissioner or his delegate may conclude an amicable settlement regarding the violations stipulated in Paragraph A of this Article before a final court judgment is reached in return for paying the tax once due, in addition to a fine not less than half the minimum limit and not exceeding half the maximum limit. The settlement shall result in dropping the criminal lawsuit, suspending its procedures and revoking any consequences thereof. Article 40 A. Each Registered Enterprise shall maintain its accounts and financial statements in accordance with a special Regulation issued for this purpose in conformity with the International Accounting Standards. B. The Registered Enterprise shall undertake to reflect in its financial statements its income accrued from its business within the Kingdom excluding the Zone and the expenses related thereto separately from its income accrued from its business in the Zone and outside the Kingdom. C. The Authority shall audit the Registered Enterprise’s accounts, records, books and registers pursuant to Instructions issued by the Board for this purpose. D. Where the Registered Enterprise fails to abide by the provisions of this Article and the Instructions issued by the Board, the Chief Commissioner shall have the right to cancel its registration, without any breach of the obligations imposed on it according to the legislation in force. Article 41 A. The Authority shall provide the General Sales Tax Department with statements and data related to purchases of goods and services by Registered Enterprises from the Customs Territory and their sales thereto. B. The Director-General of the Sales Tax Department or whom he authorizes, when necessary, may examine the records and documents related to the sales and purchases of Registered Enterprises in the Customs Territory according to the provisions of this Law. Article 42 Revenues accrued according to the provisions of this Law from income tax and sales tax shall be apportioned as follows: A. 75 per cent for the Treasury and shall be remitted to the Ministry of Finance at the end of each month. B. 25 per cent for the Authority.
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Lands and buildings zoning and administering coastal areas Article 43 A. The Zone and the Region shall be considered a regional zoning area according to the provisions of the Zoning of Cities, Villages and Buildings Law in force and the Regulations issued pursuant thereto. For this purpose, the Board shall assume the powers of the Higher Zoning Council and the Province and Local Zoning Committees. The Board may delegate the powers of these Committees to special committees formed for this purpose. The Chief Commissioner shall also, and as the case may be, assume the powers of the Minister stipulated in the enacted Zoning of Cities, Villages and Buildings Law and the Regulations issued pursuant thereto. The Council of Ministers may, upon the recommendation of the Board, issue a special Regulation in which it determines the bases for zoning and buildings in the Zone and other matters related thereto. B. The Board shall administer the coastal areas. The basis of administering such areas on land and in the sea shall be determined according to a Regulation issued for this purpose. Article 44 A. Ownership of lands registered in the name of the Public Treasury, which fall within the perimeters of the Zone, shall be transferred to the Authority according to the Council of Ministers’ decision. B. The Authority shall not in any circumstances sell any of the lands referred to in Paragraph A of this Article, except for purposes of establishing hotels, educational, health and therapeutic institutions and residential and commercial buildings, including multi-use tourism complexes, warehouses and public service facilities, according to the basis and conditions determined pursuant to a special Regulation issued for this purpose, taking into account the principle of reciprocity and that the laws of the purchaser’s country allow ownership of property by Jordanians. C. The Authority shall be entitled to dispose of the State’s lands, which are not registered with the Treasury by leasing or investing such according to Instructions issued by the Council of Ministers. Article 45 Notwithstanding what is stated in any other legislation, the Authority may conclude lease contracts with others for a period not exceeding 50 years. Upon the recommendation of the Board, the Council of Ministers may extend such period, as it deems appropriate, in certain circumstances if the lease is related to an investment activity in the Zone.
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Article 46 Notwithstanding what is stated in any other legislation, Registered Enterprises shall be entitled to hold, own and dispose of immovable properties within the Zone necessary for their activities pursuant to the Regulation issued in accordance with Article 44 of this Law. Article 47 The provisions of the laws relevant to the right of pre-emption and priority shall exclusively apply to residential areas in the Zone.
Entry and residency in the Zone Article 48 The Council of Ministers shall, upon the recommendation of the Board, issue special Regulations determining the basis, conditions and procedures for the entry of non-Jordanians into the Zone, residency and work therein, particularly the following: A. Entry visas for non-Jordanians into the Zone, including temporary entry visas, which are issued directly at the crossing points. B. Residency permits within the Zone. C. The basis for bringing foreign labour and employing such in the Zone, work permits for non-Jordanians and their percentage to the total workers in Registered Enterprises. D. The fees collected by the Authority for issuing entry visas, residency permits and work permits according to such Regulations.
Currencies and banking and insurance activities Article 49 A. Any Registered Enterprise, investor within the Zone or any person shall have the right to use the Jordanian or foreign currency in any commercial transaction or for any personal purpose, including opening bank accounts in any currency and buying and selling foreign currencies. B. Registered Enterprises may enter or transfer foreign currencies into or from the Zone without restrictions. Article 50 The provisions of the Banks Law and the Central Bank Law shall apply to any bank or financial company conducting banking activities in the Zone or opening branches therein.
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Article 51 Any insurance company may conduct insurance activities in the Zone or open branches therein in accordance with the provisions of the Monitoring of Insurance Activities Law.
Environmental protection Article 52 For implementation of the provisions of this Law, the Board shall be responsible for protecting and maintaining the environment in the Zone and for ensuring sustainable development according to the basis and standards determined pursuant to a Regulation, provided that such shall not be below the adopted levels in the Kingdom. For this purpose, the Authority shall assume the powers of the Public Corporation for Environmental Protection. The Chief Commissioner shall assume, as the case may be, the powers accorded to the Minister and the DirectorGeneral stipulated in the Environment Protection Law in force. Article 52 repeated A. The Aqaba Court of First Instance, in addition to its authorities granted thereto pursuant to other enacted legislation, shall adjudicate the following: 1. All environmental offences committed in violation of the provisions of this Law and the Regulations issued pursuant thereto. 2. The imposition and collection of damages, compensations and amounts due upon the occurrence of a maritime pollution incident according to the provisions of this Law and the Regulations issued pursuant thereto. 3. Detaining persons accused of committing the offences provided for in Subparagraph 1 of this Paragraph and releasing such according to the provisions of the enacted Criminal Proceedings Law. If a case has not been referred to the court yet, the Chief Judge may ask the accused to provide monetary or notary bail, or face detention until the case is settled or submit thebail. 4. Releasing any goods sequestered in the cases filed before it, in exchange for a bank guarantee in the amount of such goods’ value, as well as releasing sequestered transport means after adopting appropriate procedures thereon. B. 1. The Court may be held upon its own initiative outside official working hours and in any place deemed appropriate by the Chief Judge. 2. In emergency cases or if required by public interest, the Court may be held, upon the request of the Chief Commissioner and upon the bases stipulated in Subparagraph 1 of this Paragraph, to review any case
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relating toenvironmental offences referred to it by the Chief Commissioner as an urgent matter that cannot be delayed.
General provisions Article 53 A. For the purpose of implementing the provisions of this Law, the Chief Commissioner, any member of the Board, and any employee authorized thereby, any of them according to his authorities, shall be considered as a judicial officer. The authorized employee shall have the right to seize any violation to the provisions of this Law and the Regulations issued pursuant thereto and to inspect in the Zone for goods prohibited from being entered, stored or produced therein. For this purpose, the authorized employee may enter any place, audit documents, search persons, goods and ships and impound or detain any of the above. This shall include taking measures related to environmental protection. B. Notwithstanding what is stated in this Law or any other legislation, the Chief Commissioner, Board members and the Authority’s employees shall have the right to seize any violations committed in Wadi Rum in violation of the provisions of this Law, the Regulations issued pursuant thereto and any other legislation in force and refer the violations to the competent court according to the provisions of this Law and the pertinent legislation, with exception of the violations of infringing on antiquities and antique sites in the Region, which shall be seized and the necessary measures taken against the violators according to the enacted Antiquities Law and with the exception of the customs violations stipulated in the enacted Customs Law. Article 54 A. Whoever commits the following actions in the Zone shall be imprisoned for a period not less than one month and not exceeding one year, or a fine not less than 100 (one hundred) dinars and not exceeding 5,000 (five thousand) dinars, or both penalties: 1. Violating any of the terms and provisions of transit, internal manufacturing, temporary admission, bail and guarantees requested by the Authority on goods or the legal re-export or that stated in the Regulations issued pursuant to this Law. 2. Removing the customs seals or buttons from goods consigned by transit or prepared for exit or re-export. 3. Failure by the shipper or the enterprise to maintain the records and files obligatory thereto pursuant to the provisions of this Law and the Regulations issued pursuant thereto.
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4. Non-compliance by customs clearance agents with the Regulations which specify their duties. 5. Any other violations committed by any person or non-compliance with the provisions of the Regulation referred to in Paragraph B of Article 29 of this Law. B. Whoever commits the following actions in the Zone shall be punished with imprisonment for not less three months and not exceeding two years, or a fine not less than 300 (three hundred) dinars and not exceeding 10,000 (ten thousand) dinars, or both penalties: 1. Loading and unloading goods to and from any means of transport inconsistently with the Law and the Regulations issued pursuant thereto; anchoring ships,landing planesor parking other means of transport in other than the designated sites authorized by the Authority, or in emergency situations, without informing the nearest customs house about this; the departure of ships, planes or other means of transport from the harbour or the customs premises without the Authority’s authorization. 2. Transporting or possessing goods in a manner violating the provisions of the Law and the Regulations issued pursuant thereto. 3. Admitting, exiting, possessing or transporting any prohibited goods or those for which importation is forbidden, or restricted goods without presenting evidence that the goods are legally imported; failure for any reason to re-import goods whose exportation is prohibited or goods which are exported temporarily. 4. Obstructing the duties of the Authority’s officials according to the provisions of this Law and the Regulations issued pursuant thereto and their right to search, audit and inspect, and failing to stop upon the Authority’s officials’ request. 5. Taking a route other than the transit route designated by the Authority or failing to use the routes and methods designated for admission or exit of goods. 6. Disposing of goods admitted into the Zone under temporary entry status or transit in violation of the provisions of the Law and the Regulation issued pursuant thereto which pertains to customs, or their use outside permitted areas or for other than the purpose of import or in other than their intended function; transporting passengers or goods within the Kingdom by means of vehicles admitted under temporary entry status in violation of the provisions of Laws and Regulations. 7. Submitting false, forged or fabricated documents or invoices, or putting false marks on goods with the intent of importing or exporting prohibited, forbidden or restricted goods or in violation of the provisions of the Law and the Regulation issued pursuant thereto which pertains to customs. 8. Finding undeclared goods in hideouts, holes or spaces that are not usually intended for such goods, or bypassing customs houses at exit without declaring goods.
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9. The unavailability of a cargo manifest, or the availability of a manifest which is inconsistent with actual cargo. Failure to declare at entry or exit incoming or outgoing goods which are not listed in the manifest, including passengers’ belongings. 10. Unloading or loading the goods without prior permission from the Authority, or unloading or loading at locations other than the ones designated by the Authority or at a location other than the offices of arrival and exit designated by the Customs Department. 11. Overages, shortages or replacements in the parcels or contents thereof if discovered after the goods have passed the entry point. Unjustified overages or shortages against what is listed in the cargo manifest or the document equivalent thereto, whether the shortage is in the number of parcels, in the contents thereof or in the quantities of knocked goods. C. In addition to what is stated in Paragraphs A and B of this Article, the following fines shall be collected in the cases specified hereunder along with confiscating the goods that are the subject matter of the violation: 1. Three to six times the value of goods if the subject matter of the violation is prohibited or forbidden goods. 2. Two to three times the value of goods if the subject matter of the violation is restricted goods. 3. One to two times the value of goods if the subject matter of the violation is goods that are not prohibited, forbidden or restricted. Article 54 repeated (once) Subject to the provisions of Articles 54 and 54 repeated (twice) of this Law, and without prejudice to any more stringent penalty stipulated in any other legislation, whoever violates the provisions of this Law and the Regulations issued pursuant thereto or any other legislation enacted in the Zone shall be penalized with imprisonment for a period not less than a week and not exceeding one year or a fine not less than 10 (ten) dinars and not exceeding 5,000 (five thousand) dinars or both penalties, along with compelling the violators to provide compensation and remove the damage resulting from the violation. Article 54 repeated (twice) A. Without prejudice to any more stringent penalty stipulated in any other legislation, whoever violates the provisions of this Law and the Regulations issued pursuant thereto or any other legislation enacted in the Zone relating to seawater or the environment shall be penalized with the following, along with compelling the violators to provide compensation and remove the damage resulting from the violation: 1. Imprisonment for a period not less than a week and not exceeding six months or a fine not less than 50 (fifty) dinars and not exceeding
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10,000 (ten thousand) dinars or both penalties, for anyone polluting the sea or inflicting any damage to the environment in any manner or by any substance other than the ones specified in Subparagraph 2 of this Paragraph, or violating the terms, conditions or procedures set forth in the Regulations issued pursuant to this Law and pertaining to the protection of the environment. 2. Imprisonment for a period not less than one year and not exceeding three years or a fine not less than 50,000 (fifty thousand) dinars and not exceeding 10 million dinars or both penalties, for anyone substantially polluting the sea or substantially inflicting damage to the environment by means of throwing into the environment any substances which cause significant effects on the well-being of the environment and are impossible to remove or, although removed, are still negatively affecting the normal course of the ecosystems, or in any other manner impeding the soundness and stability of the ecosystems and uses thereof. Such substances, quantities and impacts thereof which amount to substantial damage shall be specified in a Regulation issued for this purpose, taking into account what is internationally known in this regard. B. The person responsible for any of the violations referred to in Paragraph A of this Article shall remove the violation’s causes within the period prescribed by the court. In cases where he fails to do so, the Authority shall remove such violation at his expense plus 15 per cent of the violation’s value as administrative fines. The violator shall be fined not less than 100 (one hundred) dinars and not more than 500 (five hundred) dinars for every day he refrains from removing such causes after the period prescribed by the court for this purpose. The source of the violation shall be placed under seizure until all due amounts by the persons responsible are paid. Article 54 repeated (thrice) A. Fines not exceeding 500 (five hundred) dinars, including the amount of fines assessed according to the provisions of Paragraph C of Article 54 of this Law, shall be imposed upon a decision of the relevant Commissioner or his delegate. B. The violator or his representative shall be notified of the fine imposed thereon pursuant to a written notice or through the registered mail. The violator must pay the fines within 30 days from the date of his notification or the date of his refusal to sign the notice. Article 54 repeated (four times) A. Fining decisions issued in accordance with the provisions of Article 54 repeated (thrice) of this Law may be objected to in front of the Chief Commissioner within the period specified therein. The Chief
414
Appendices
Commissioner shall be entitled, and for justified reasons, to endorse, reduce or cancel the fining decision. B. The Chief Commissioner’s decision issued pursuant to Paragraph A of this Article shall be subject to appeal at the competent court according to the provisions of this Law within 30 days from the date of its notification if the fine exceeds 500 (five hundred) dinars, including the amounts of the fines assessed according to the provisions of Paragraph C of Article 54 of this Law. The court shall be entitled to confirm, amend or cancel the fine. Article 54 repeated (five times) A. The Chief Commissioner or his delegate may, and for justified reasons, conclude an amicable settlement in the customs cases stipulated in the Regulation issued in accordance with the provisions of Article 29 of this Law, whether before action is instituted, or during proceedings, but before the judgment of first instance is reached. The settlement may be concluded with the violating entity according to the provisions and terms stipulated in the settlement contract, provided that the settlement contract covers all compensations and expenses that should be born by the violator. In all cases, the settlement contract shall not be held for less than the minimum limit of the penalty stipulated in this Law. B. The Chief Commissioner or his delegate shall issue a guide for the amicable settlements referred to in Paragraph A of this Article, which shall be published in the Official Gazette. C. Customs action shall abate upon amicable settlement. Article 55 The provisions of the Import and Export Law, and the provisions relating to incentives and limitations on foreign capital in the Investment Promotion Law and the Regulations issued pursuant thereto shall not apply in the Zone. Article 56 The Council of Ministers shall issue the necessary Regulations for implementing the provisions of this Law, including the following: A. Determining the fees imposed for the Authority according to the provisions of this Law. B. The Authority’s employees and personnel affairs. C. Supplies, procurement and works and financial affairs of the Authority. D. Formation of coastal police in the Zone, regulating its activities and determining its authorities. E. Regulating and administering the Aqaba Marine Park.
Appendix 1: The Aqaba Special Economic Zone Law
415
Article 57 The Aqaba Region Authority Law No. 7 for the year 1987 and any amendments thereto shall be repealed as of the date determined by the Council of Ministers according to the provisions of Article 8 of this Law, provided that the Regulations and Instructions issued pursuant thereto shall remain in force until repealed or replaced in accordance with the provisions of this Law. Article 58 The Prime Minister and the Ministers shall be responsible for executing the provisions of this Law.
Appendix 2
Useful Information Currency The local currency is the Jordanian dinar (JOD), which is made up of 1,000 fils (or 100 piastres). Currency notes occur in denominations of 50, 20, 10, 5 and 1 dinar and 500 fils (although the latter is being phased out). Coins are to be found in denominations of 5, 10, 25, 50, 100, 250 and 500 fils and 1 dinar. The dinar is pegged to the US dollar and the approximate rate of exchange is JOD 1 = USD 1.4.
Credit cards All major credit cards are accepted by hotels, restaurants, hire car companies and the larger stores. They may also be used in the increasing number of ATM machines in the country although, as yet, not all machines accept cards issued outside Jordan.
Health No specific vaccinations are needed for Jordan, unless entry is being made from countries where cholera and yellow fever are prevalent, when an inoculation document must be presented on arrival, although some doctors advise preventative injections against polio, tetanus, typhoid and hepatitis A. The taking out of health insurance prior to travelling to Jordan is recommended. Local medical services are generally of a high standard in Jordan, with most doctors being bilingual in Arabic and English, as medical science is taught in English. Large, well-equipped hospitals are to be found in Amman.
Water Tap water is generally safe to drink in Jordan, especially in the major towns and cities, but bottled water is readily available for those who prefer it. Water is a very scarce resource in Jordan and so visitors are asked not to cause unnecessary wastage.
Appendix 2: Useful Information
417
Clothing Businessmen are recommended to wear a suit and tie to meetings even though their hosts might be more casually attired. Businesswomen should wear long skirts or trousers and should always cover their shoulders and arms. In the summer, light clothing is recommended, but Amman in particular can be cold in winter and so warmer clothing as worn in northern Europe and the United Kingdom is suggested, including overcoats and/ or raincoats. During Ramadan, the month of fasting, conservative attire is recommended for both men and women.
Alcohol Alcohol is served in most hotels and restaurants in Jordan’s main cities. It may be purchased also from supermarkets and shops. Locally produced beers and wines are found, as is arak, an ouzo-like drink consumed with water and ice.
Working hours Banks Amman: Sunday to Thursday, 8.30 am to 3 pm, closed Fridays, Saturdays and public holidays. ATMs are increasingly to be found available 24 hours a day, and usually accept Visa and MasterCard. Aqaba: Sunday to Thursday, 8.30 am to 2.30 pm. Commercial Offices: 9 am to 1 pm and 3.30 to 6.30 pm (some work throughout the day or with a short break for lunch). Shops Hours are flexible with some open 9.30 am to 1 pm and 3.30 to 6 pm and others, especially smaller stores, 8 am to 8 pm (maybe with a midday break). Government Amman: Sunday to Thursday, 8 am to 3 pm. During Ramadan all working hours tend to be reduced. Aqaba: Sunday to Thursday, 7.30 am to 2.30 pm. Aqaba Special Economic Zone Authority: Sunday to Thursday, 8 am to 4 pm. (There is also a customer support hotline operating seven days a week.)
418
Appendices
Local time Local time is GMT + 2 between October and March, and GMT + 3 from April to September.
Car rental agencies Amman (code 06): Avis Budget Dalleh Firas Hertz National Payless Thrifty
5699420 5698131 5511112 4612927 5538958 5601350 5525180 5622232
Departure tax A departure tax, at variable rates, is payable in local currency on departure from the country. Non-Jordanians pay JOD 5 whether leaving by land, sea or air, whereas Jordanians pay JOD 8 if departing by land, JOD 25 by air and JOD 6 by sea.
Electricity 220 V AC, 50 Hz. Wall plugs are rounded two-pin.
Jordanian embassies overseas Algeria, Algiers Tel: +2 132 692 031 Fax: +2 132 691 554 e-mail:
[email protected] Australia, Canberra Tel: +61 262 959 906 Fax: +61 262 397 236 e-mail:
[email protected] Austria, Vienna Tel: +431 405 1025 Fax: +431 405 1031 e-mail:
[email protected]
Appendix 2: Useful Information
Bahrain, Manama Tel: +973 1729 1109 Fax: +973 1729 1198 e-mail:
[email protected] Belgium, Brussels Tel: +322 640 7755 Fax: +322 640 2796 e-mail:
[email protected] Brazil, Brasilia Tel: +5561 248 5407 Fax: +5561 248 1698 e-mail:
[email protected] Canada, Ottawa Tel: +1 613 238 8091 Fax: +1 613 232 3341 Chile, Santiago Tel: +562 228 8091 Fax: +562 228 8783 e-mail:
[email protected] China, Beijing Tel: +8610 653 23 926 Fax: +8610 653 23 283 e-mail:
[email protected] Egypt, Cairo Tel: +202 348 5566 Fax: +202 360 1027 e-mail:
[email protected] France, Paris Tel: +33 101 557 47 373 Fax: +33 101 557 47 374 e-mail:
[email protected] Germany, Berlin Tel: +228 354051/2 Fax: +228 353951
419
420
Appendices
Greece, Athens Tel: +301 677 5618 Fax: +301 674 0578 e-mail:
[email protected] India, New Delhi Tel: +9111 465 3099 Fax: +9111 465 3353 e-mail:
[email protected] Indonesia, Jakarta Tel: +6221 520 4400 Fax: +6221 520 2447 e-mail:
[email protected] Iran, Tehran Tel: +9821 205 9703 Fax: +9821 205 1872 Iraq, Baghdad Tel: +9641 541 2892 Fax: +9641 541 0343 Israel, Tel Aviv Tel: +972 375 17 722 Fax: +972 375 17 712 e-mail:
[email protected] Italy, Rome Tel: +3906 862 05 303 Fax: +3906 860 6122 e-mail:
[email protected] Japan, Tokyo Tel: +813 3580 5856 Fax: +813 3593 9385 e-mail:
[email protected] Kuwait, Kuwait Tel: +965 253 3271 Fax: +965 253 3270 e-mail:
[email protected]
Appendix 2: Useful Information
Lebanon, Beirut Tel: +961 592 2500 Fax: +961 592 2502 e-mail:
[email protected] Libya, Tripoli Tel: +21821 360 0236 Fax: +21821 361 4762 e-mail:
[email protected] Malaysia, Kuala Lumpur Tel: +603 452 12 684 Fax: +603 528 8610 e-mail:
[email protected] Morocco, Rabat Tel: +212 7 751 125 Fax: +212 7 758 722 Netherlands, The Hague Tel: +31 704 167 200 Fax: +31 704 167 209 e-mail:
[email protected] Oman, Muscat Tel: +968 692 763 Fax: +968 692 762 Pakistan, Islamabad Tel: +9251 823 459 Fax: +9251 823 207 e-mail:
[email protected] Palestine Authority, Gaza Tel: +9707 282 5134 Fax: +9707 282 5124 e-mail:
[email protected] Qatar, Doha Tel: +974 483 2202 Fax: +974 483 2173 e-mail:
[email protected]
421
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Appendices
Russia, Moscow Tel: +7095 299 4344 Fax: +7095 299 4354 e-mail:
[email protected] Saudi Arabia, Riyadh Tel: +966 1 488 0039 Fax: +966 1 488 0072 South Africa, Pretoria Tel: +2713 342 80 267 Fax: +2713 342 7847 Spain, Madrid Tel: +34 913 191 104 Fax: +34 913 082 536 e-mail:
[email protected] Sudan, Khartoum Tel: +249 11 475 090 Fax: +249 11 471 038 e-mail:
[email protected] Switzerland, Bern Tel: +41 313 840 404 Fax: +41 313 840 405 e-mail:
[email protected] Syria, Damascus Tel: +963 11 333 4642 Fax: +963 11 333 6741 Tunisia, Tunis Tel: +216 1 780 875 Fax: +216 1 780 461 e-mail:
[email protected] Turkey, Ankara Tel: +312 440 2054 Fax: +312 440 4327 e-mail:
[email protected] United Arab Emirates, Abu Dhabi Tel: +971 2 444 7100 Fax: +971 2 444 9157
Appendix 2: Useful Information
423
United Kingdom, London Tel: +44 207 937 3685 Fax: +44 207 938 8795 e-mail:
[email protected] United States of America, Washington, DC Tel: +1 202 966 2664 Fax: +1 202 966 3110 e-mail:
[email protected] Uzbekistan, Tashkent Tel: +9987 127 42 479 Fax: +9987 120 66 44 e-mail:
[email protected] Yemen, Sana’a Tel: +967 1 413 276 Fax: +967 1 414 516 e-mail:
[email protected] Yugoslavia, Belgrade Tel: +3811 136 91 950 Fax: +3811 136 91 091
Foreign diplomatic missions in Jordan All embassies are located in Amman (dialling code 06): Algeria Australia Austria Bahrain Belgium Bosnia Brazil Bulgaria Canada Chile China Czech Republic Ecuador Egypt
Telephone 4641271 5930246 4644635 5664148 5675683 5856921 4642169 5529391 5666124 5923360 5516136 5927051 462 5495 5605202
Fax 4616552 5931260 4612725 5664190 5930487 5856923 4641328 5539393 5689227 5924263 5518713 5927053 4750339 5604082
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Appendices
France Germany Greece Hungary India Indonesia Iran Iraq Israel Italy Japan Kuwait Lebanon Libya Malaysia Mauritania Morocco Netherlands North Korea Norway Oman Pakistan Palestine Philippines Poland Qatar Romania Russia Saudi Arabia South Africa South Korea Spain Sri Lanka Sudan Sweden Switzerland Syria Tunisia Turkey United Arab Emirates United Kingdom United States of America Vatican Yemen Yugoslavia
4641273 5930351 5672331 5925614 4622098 5528912 4641281 4623175 5524680 4638185 5931487 5675135 5929113 5693101 5696540 5535133 5921771 5930525 5666349 4644932 5686155 4622787 5677517 5518134 4637153 5607311 5667738 4641158 5924154 5811194 5930746 4614166 5930905 4644251 5931177 5930417 4641935 5674307 4641251 5934781 5923100 5920101 5929934 5923771 4647593
4659606 5932887 5696591 5930836 4659540 5528380 4641383 4619172 5524689 4659730 5931006 5681971 5929111 5693404 5696607 5925185 5930214 5931650 5689404 4611633 5661727 5518441 5512595 5607350 5684018 4647448 5921154 5920080 5930280 4614173 5820615 5854501 5930179 5930685 4651945 5605790 4641628 5932666 5920163 5689404 4647425 4647605
Appendix 2: Useful Information
425
Entry formalities Single entry visas are available on arrival at Queen Alia International Airport and at Aqaba International Airport for most nationalities at a fee of JOD 10. Entry to Jordan by land necessitates the obtaining of a visa in advance from a Jordanian diplomatic mission abroad. They are also available from Jordanian diplomatic missions overseas, from which multiple entry visas may also be obtained at a cost of JOD20. Contact with a Jordanian embassy overseas is strongly recommended prior to travel to ensure the existing regulations have not changed. Visas obtained from Jordanian consulates are valid for three to four months from the date of issue. Tourist visas are valid for a stay of one month initially but can be extended for up to another two months. After that date a visitor must exit and re-enter the country, or undergo immigration procedures. If a visa has not been properly renewed before leaving Jordan then a fine will be payable at the point of exit. Anyone planning to stay in Jordan for more than two weeks must register at the nearest police station.
Language Arabic is the official language of Jordan, with English also being widely spoken.
Weights and measures Jordan uses the metric system. Land is frequently measured in terms of the donum (dunum), which approximates to 1,000 square metres.
Public holidays 1 January 30 January 1 May 25 May 14 November 25 December
New Year’s Day Birthday of King Abdullah II Labour Day Independence Day Birthday of the late King Hussein Christmas Day
In addition the following are Islamic holidays, with their likely dates in the Gregorian calendar in 2004 (for each subsequent year each Islamic holiday will occur approximately 11 days earlier against the Gregorian calendar). Also mentioned is the approximate date of the start of the fasting month of Ramadan:
426
20 21 15 14
Appendices
February February October November
Muharram Eid al Adha Ramadan Eid al Fitr
Taxis Taxis are prolific and inexpensive. Yellow taxis may travel only inside cities, and require special permission to move outside. Beige taxis can travel between and inside cities. White taxis operate as service (shared) taxis on defined routes.
Telephone dialling codes The international code for Jordan is 962. Local codes within Jordan are: . . . .
06 03 02 05
– – – –
Amman; Aqaba, Karak, Ma’an, Petra and Wadi Mousa; Ajloun, Jerash, Irbid, Mafraq and Um Qais; Dead Sea, Jordan Valley, Madaba, Salt and Zarqa.
Tipping Tipping is not essential but always appreciated.
Some cultural considerations Jordan is predominately a Muslim country and so it is strongly recommended that both men and women dress conservatively. Public displays of affection should be avoided, although local people of both sexes may be seen kissing others of the same sex on each cheek. Hand-holding by friends of either gender is often seen and is generally acceptable. The freedom to practise faith by religions other than Islam is protected.
Appendix 3
Useful Addresses and Contact Details
Accountants and auditors (certified public accountants) BDO Jordan Nobani and Co Wadi Saqra Street Al Mirad Building, 2nd Floor Al Rabieh, PO Box 1219 Amman 11118 Tel: 5515036, 5515038 Fax: 5538618 e-mail:
[email protected] Ernst and Young P.O Box 1140 Amman 11118 Tel: 5526111 Fax: 5538300 e-mail:
[email protected] www.ey.com KPMG Khleif and Co Ommayya Street Block No 66, 2nd Floor Amman Commercial Complex Abdali, PO Box 830430 Amman 11183 Tel: 5685409 Fax: 5681748 e-mail:
[email protected]
428
Appendices
Advertising agencies DDB Jordan Jabal Alweibdeh Tel: 4653013 Horizon FCB Tla AlAli Tel: 5519606 Intermarkets Advertising Jabal Amman Tel: 4622571 M & C Saatchi Sweifieh Tel: 5885883 Memac Ogilvy Mather, Jordan Tel: 5524287 Fax: 5532487 Publi Graphics Tel: 5660160 Publicis Graphics Madina Munawara Street Tel: 5528174 TBWA/Jordan Shmeisani Tel: 5525545
Banks (Amman only) Arab Bank Shmeisani Tel: 5607115, 5607231 Arab Banking Corporation Abdali Tel: 5668549, 5664183 Arab Egypt Real Estate Bank Abu Alanda Tel: 4161890
Appendix 3: Useful Addresses and Contact Details
Arab Islamic International Bank Gardens Tel: 5694901 Arab Jordan Investment Bank Shmeisani Tel: 5607126 Arabian Banking Corporation Bayader Tel: 5826795 Bank of Jordan Khalda Tel: 5534169 Beit Al Mal Savings and Investment Bank Tel: 4641644 Cairo Amman Bank Wadi Saqra Tel: 4616910, 4639321 Citi Bank Shmeisani Tel: 5675100 Credit Lyonnais Jabal Amman Tel: 4642065 Egyptian Arab Land Bank Jabal Al Hussein Tel: 4637300 Export and Finance Bank, Amman Tel: 5694250 www.efbank.com.jo Housing Bank for Trade and Finance P.O Box 7693, Amman 11118 Tel: 5667126, 5607215, 5607315 Fax: 5678131, 5691675
429
430
Appendices
HSBC Bank Middle East 5th Circle, Jabal Amman Tel: 5518090 Industrial Development Bank Shmeisani Tel: 5688016 International Arab Islamic Bank Gardens Tel: 5691757 Islamic International Arab Bank Downtown Tel: 4643270 Islamic International Arab Bank Gardens Tel: 5694901 Jordan Bank Wadi AlRiman Tel: 4910037, 4645694 Jordan Gulf Bank Shmeisani Tel: 5603931, 4624171 Jordan Investment and Finance Bank Shmeisani Tel: 5665145, 5692470 Jordan Islamic Bank Shmeisani Tel: 5661220 Jordan Islamic Bank for Finance and Investment Abu Alanda Tel: 4732001 Jordan Kuwait Bank Abdeli Tel: 5629400, 5662126
Appendix 3: Useful Addresses and Contact Details
Jordan National Bank Jabal AlHussain Tel: 5673984, 4642391 Middle East Investment Bank (Socie´te´ Ge´ne´rale Group) Shmeisani Tel: 5695470 Philadelphia Investment Bank Salaf AlSail Tel: 4619235, 4647437 Standard Chartered Shmeisani Tel: 5655315 Union Bank for Savings and Investment Shmeisani Tel: 5607011
Business consultants Abbasi Consultancy (Abbasi Group – Nexia International) Tel: 5660709 Fax: 5676901 e-mail:
[email protected] www.abbasi-cpa.com Audit and Consult Consortium (Dweik and Co) Jabal Amman Tel: 4651931, 4648866 Fax: 4648866 e-mail:
[email protected] www.dweik-acc.com BDO Jordan – Al Jawad Co Ltd Wadi Saqra Street Al Mirad Building, 2nd Floor Al Rabieh, PO Box 1219 Amman 11118 Tel: 5515036, 5515038 Fax: 5538618 e-mail:
[email protected]
431
432
Appendices
Ernst and Young P.O Box 1140 Amman 11118 Tel: 5526111 Fax: 5538300 e-mail:
[email protected] KPMG Khleif and Co Amman Commercial Complex, 2nd Floor Abdali, PO Box 830430 Amman 11183 Tel: 5685409 Fax: 5681798 e-mail:
[email protected]
Hotels This is a non-inclusive list of some of the leading hotels in Amman: Amman Marriott Hotel Shmeisani Tel: 5607607 Fax: 5670100 www.marriotthotels.com Crowne Plaza Amman-Amra 6th Circle, Jebel Amman Tel: 5510001 Fax: 5510003 www.interconti.com Four Seasons Hotel 5th Circle, Jebel Amman Tel: 5505555 Fax: 5505556 www.fourseasons.com Grand Hyatt Amman Hussein bin Ali Street Jebel Amman Tel: 4651234 Fax: 4615037 www.amman.hyatt.com
Appendix 3: Useful Addresses and Contact Details
433
Hotel InterContinental Jordan Queen Zein Street, 3rd Circle Tel: 4641361 Fax: 4645217 www.interconti.com Le Meridien Amman Shmeisani Tel: 5696511 Fax: 5667137 www.lemeridien-amman.com Le Royal Hotel, Amman 3rd Circle, Jebel Amman Tel: 4603000 Fax: 4603002 www.leroyalhotel-amman.com Sheraton Amman 5th Circle, Jebel Amman Tel: 5934111 Fax: 5934222 www.Sheraton.com
Useful telephone numbers Local telephone directory enquiries International telephone directory enquiries Telephone problems Traffic bureau – operations Rescue police Capital police Ambulance/paramedic (emergency) Highway patrol bureau operations Directorate of public security Amman municipality fire department Civil defence headquarters Customs department Amman Chamber of Commerce Amman Chamber of Industry Jordan Businessmen Association Traffic collisions Highway police Royal Court Electricity emergency (Amman)
121 0132 139 190 191 192 193 194 196 198 199 4623186 5601742, 5666151 4643009, 4644747 5677426 4639141 5343402 4637341 4750981/2
434
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Industrial Cities Free Zone Aqaba International Airport Queen Alia International Airport, Amman Flight information Marka Civil Airport Airport enquiries
4022101 4029641 03 2012111 06 4452000 06 4452700 06 4891401 06 4453200
Telephone local area codes: . . . .
06 03 02 05
– – – –
Amman; Aqaba, Karak, Ma’an, Petra and Wadi Mousa; Ajloun, Jerash, Irbid, Mafraq and Um Qais; Dead Sea, Jordan Valley, Madaba, Salt and Zarqa.
Airlines All the following are on Amman code 06: Aeroflot Air Canada Air France Alitalia Austrian Airlines British Airways Continental Airlines Cyprus Airways Egypt Air Emirates Gulf Air Iberia KLM Kuwait Airways Lufthansa Middle East Airlines Olympic PIA Qatar Airways Royal Jordanian Saudi Arabian Airlines Sri Lankan Swiss Air Tunisair Turkish Airlines Varig Airlines
5521642 4625535 5666055, 5667824 4625203, 5656211 5660449, 4677509 5828801, 5866151 4640201, 5682140 5620115 4630011 4615222, 4612555 4646191 4637827, 4625197 4655267 5690144, 5690336 5601744 4603500 5664871, 4638433 4625981 5677414/5 5607300, 5605558 5527755, 5521007 5682145 4659791, 4642943 5685159, 5685195 4641710, 4659102 4628911
Appendix 3: Useful Addresses and Contact Details
Yemen Airways Yugoslav Airlines
435
5652713/4/5 5676515
Aqaba Special Economic Zone PO Box 2565 Aqaba 77110 Tel: Customer Support Hotline Investor Services Directorate Building Licensing Division Real Estate Investment Division Planning and Development Division Income Tax Division Goods and Services Sales Tax Division Visa and Employment Affairs Fax: Investor Services Directorate Building Licensing Division Real Estate Investment Division Planning and Development Division Income Tax Division Goods and Services Sales Tax Division Visa and Employment Affairs e-mail: Web site:
962 962 962 962 962 962 962
3 3 3 3 3 3 3
2035757/8 203575718 2091000 Ext 2091000 Ext 2091000 Ext 2014925 2091000 Ext
2078 2262 2146 2341
962 3 2091000 Ext 2335/2277 962 962 962 962 962 962
3 3 3 3 3 3
2091035 2030222 2091042 2091047 2013245 2035467
962 3 2091043
[email protected] www.aqabazone.com
Appendix 4
Contributor Contact Details Abdoun Real Estate Abdoun Almouhtaseb Center PO Box 830625 Amman 11183 Tel: +962 6 5920605 Mobile: +079 5530007 Fax: +962 6 5932605 e-mail:
[email protected] www.abdoun.com.jo Contacts: Wael N Aljaabari, General Manager, and Alma Alic Aljaabari Amman Chamber of Industry PO Box 1800 Amman 11118 Tel: +962 6 4643001 Fax: +962 6 4647852 e-mail:
[email protected] www.aci.org.jo Contact: Juma Abu-Hakmeh, Director-General Amman Stock Exchange PO Box 212466 Amman 11121 Tel: +962 6 5664081 Fax: +962 6 5664071 e-mail:
[email protected] www.ase.com.jo Contact: Jalil Tarif, Chief Executive Officer Aqaba Special Economic Zone PO Box 2565 Aqaba 77110 Tel: Customer Support Hotline Investor Services Directorate Building Licensing Division
962 3 2035757/8 962 3 203575718 962 3 2091000 Ext 2078
Appendix 4: Contributor Contact Details
Real Estate Investment Division Planning and Development Division Income Tax Division Goods and Services Sales Tax Division Visa and Employment Affairs Fax: Investor Services Directorate Building Licensing Division Real Estate Investment Division Planning and Development Division Income Tax Division Goods and Services Sales Tax Division Visa and Employment Affairs e-mail: Web:
437
962 3 2091000 Ext 2262 962 3 2091000 Ext 2146 962 3 2014925 962 3 2091000 Ext 2341 962 3 2091000 Ext 2335/2277 962 962 962 962 962 962
3 3 3 3 3 3
2091035 2030222 2091042 2091047 2013245 2035467
962 3 2091043
[email protected] www.aqabazone.com
Atlas Investment Group PO Box 143156 Amman 11814 Tel: +962 6 5522239 Fax: +962 6 5519064 e-mail:
[email protected] www.atlasinvest.net Contact: Omar M Masri, Managing Director Central Bank of Jordan PO Box 37 Amman 11118 Tel: +962 6 4630301 Fax: +962 6 4616400 e-mail:
[email protected] Contact: Faris Sharaf, Executive Director, Banking Supervision Dept DDB Worldwide Communications Group Inc PO Box 910437 Amman 11191 Tel: +962 6 4653013 Fax: +962 6 4627207 e-mail:
[email protected] www.ddb.com Contact: Suleiman I Matouk, Managing Director
438
Appendices
Eastern Company PO Box 131 King Hussein St (Abdali) Amman 11118 Tel: +962 6 5662670, 5605670 Fax: +962 6 5687095 e-mail:
[email protected],
[email protected] Contact: Souheil Y Marto, President Environmental Consultants Branch Ramadan Tech Services Co PO Box 851223 Amman 11185 Tel: +962 6 5929067 Fax: +962 6 5934267 e-mail:
[email protected] Contact: Subhi A Ramadan, President Events Unlimited P O Box 830998 Amman 11183 Tel: +962 6 5656550 Fax: +962 6 5656550 Mobile: +962 79 55 55 084 e-mail:
[email protected] Export and Finance Bank PO Box 941283 Amman 11194 Tel: +962 6 5694250 Ext 325 Fax: +962 6 5692062 e-mail:
[email protected] www.efbank.com.jo Contacts: Ali Al-Husry, Chairman and CEO e-mail:
[email protected] Abeer A Arafat, Senior Investment Analyst e-mail:
[email protected] Jane Manneh, Investment Analyst e-mail:
[email protected] Free Zones Corporation PO Box 20036 Amman 11118 Tel: +05 3826000 – 05
Appendix 4: Contributor Contact Details
439
Fax: +05 3826430 e-mail:
[email protected],
[email protected] Contact: Ali Madadha, Director-General InterContinental Hotels Group InterContinental Jordan PO Box 35014 Amman 11180 Tel: +962 6 4641361 Fax: +962 6 4645217 e-mail:
[email protected] www.ichotelsgroup.com Contact: Mark Timbrell, Regional Director of Sales and Marketing, Jordan/Palestine Jordan Export Development and Commercial Centers Corporation PO Box 7704 Amman 11118 Tel: +962 6 5603507 Mobile: +962 79 5013350 Fax: +962 6 5684568 e-mail:
[email protected] www.jedco.gov.jo Contact: Dr Salah S Ghunaim, Acting Director-General Jordan Insurance Federation PO Box 1990 Amman 11118 Tel: +962 6 5689266 Fax: +962 6 5689510 e-mail:
[email protected] Contact: Maher Al Hussein, Secretary-General Jordan Investment Board PO Box 893 Amman 11821 Tel: +962 6 5608400/15 Ext 102 Fax: +962 6 5608427 e-mail:
[email protected] www.jordaninvestment.com Contact: Mazen K Homoud, Deputy Managing Director
440
Appendices
Jordan National Bank PLC PO Box 3103 Amman 11181 Tel: +962 6 5622282/3/4/5, 5622621/2/3 Fax: +962 6 5604515 e-mail:
[email protected] www.ahli.com Contact: Samer M Sunnuqrot, Assistant General Manager, Investment Banking Services Jordan Tourism Board PO Box 830688 Amman 11183 Jordan Tel: +962 6 5678294 Fax: +962 6 5678295 e-mail:
[email protected] www.see-jordan.com Contacts: Marwan Khoury, Director-General, and Waleed Muhajer, Director of Marketing Marwan A Kardoosh Economist Mobile: +962 77 222112 e-mail:
[email protected] Ministry of Agriculture PO Box 2099 Amman 11180 Tel: +962 6 5686151 Fax: +962 6 5686310 e-mail:
[email protected] www.moa.gov.jo Ministry of Information and Communications Technology PO Box 9903 Amman 11191 Tel: +962 6 5859001 Fax: +962 6 5861059 www.moict.gov.jo Ministry of Planning and International Cooperation PO Box 555 Amman 11118 Tel: +962 6 4644466
Appendix 4: Contributor Contact Details
441
Fax: +962 6 4649341 e-mail:
[email protected] Contact: Tayseer R Al-Sumadi, Director, Policies and Studies Dept Ministry of Water and Irrigation PO Box 2412 Amman 11183 Tel: +962 6 5652279 Fax: +962 6 5652290 www.mwi.gov.jo National Electric Power Co PO Box 2310 Amman 11181 Tel: +962 6 5818230 Fax: +962 6 5818336 e-mail:
[email protected] Contact: Dr Ahmad Hiyasat, Managing Director Natural Resources Authority PO Box 7 Amman 11181 Jordan Telefax: +962 6 5826705 Mobile: +962 77 498015 e-mail:
[email protected] Contact: Munther Akroush, Director of Information and Investment The Philip Dew Consultancy Limited PO Box 11836 Bahrain Tel: +973 1779 0886 Fax: +973 1779 0729 e-mail:
[email protected] Rajai KW Dajani and Associates Jordan Tower Building Shmeissani PO Box 5590 Amman 11183 Tel: +962 6 5680111 Fax: +962 6 5680333 e-mail:
[email protected] www.dajanilaw.com
442
Appendices
Contacts: Rajai Dajani, Advocate, Senator, Member of International Court of Arbitration, Paris Yousef Salim Khalilieh, Advocate Noor A Jundi, Associate Shereen S Said, Associate Saba & Co Deloitte & Touche (Middle East) – Jordan PO Box 248 Amman 11118 Tel: +962 6 4622163 Fax: +962 6 4654197 e-mail:
[email protected],
[email protected], deloitte.com Sana Abdallah Journalist PO Box 137 Amman 11821 Tel: +962 6 5828603 Mobile: +962 77 308599 e-mail:
[email protected]
nkhoury@
Index
Abdullah bin al-Hussein (Abdullah I, King of Jordan) 8, 15 Abdullah bin al-Hussein (Abdullah II, King of Jordan) xix, xxii, 15, 19, 41, 42, 50, 143, 340, 374 accounting standards 270–72 advertising 339–41, 428 agency see commercial agents agriculture agricultural processing 134 crop production 129, 130 development projects 57, 134 economic situation 130–31 exports 88, 89, 132, 133 forest areas 127, 128 GDP 132 imports 132–33 investment 46, 130 irrigated land 127, 128, 129, 130, 134, 152–53, 158, 244 labour force 132, 133 land resources 128–29 livestock 130, 131 olive/fruit trees 127, 130, 131 production 130 sector overview 126–34 vegetables 129, 130, 131 water 4, 55–56, 127–28, 129–31 Al-Aqsa Intifada (2000) 30 Al-Fayez, Faisal 16–17 Al-Wehda dam 158 alcohol 417 Ali Bin Abi-Talib (fourth Caliph) 15 Amman airports 104–05, 374 banking 4328–31 Chamber of Industry (ACI) xxv, 84 commercial property 374–75 expatriates 368–70 Financial Market 29, 313 hotels 371–72, 432–33 public transport 94–95 residential property 369–70, 381 shops 369 tourism 147
water 157–60 Zara Expo 344, 345 Amman Stock Exchange (ASE) brokerage 311 commission rates 320–21 electronic trading 315, 317 establishment xxvi, 313 foreign investment 317 functions 314–15 information services 316 initial public offerings (IPOs) 43, 310, 319 intranet 315–16 key figures 319–22 management information 316 market capitalization 46, 179, 317, 318, 319 mergers and acquisitions (M&A) 179 performance overview 317 prospective developments 318–19 reporting requirements 272 share price index 317, 320 share price recovery (2002) 301 technological development 315–16 trading hours 321–22 apparel clothing/dress 417, 426 manufacture see textiles Aqaba airports 106, 240, 242 Aqaba Gateway 253 Aqaba Lagoon Tourism Site (ALTS) 251, 343 Aqaba Railway Company (ARC) 56, 101–02, 220 coastal radio station 242 construction 256 container port 98, 239 coral coastal zone 239, 240 dolphinarium 253–54 electricity 243 history 235 hotels 252, 342, 372 international convention centre 254 International Industrial Estate (AIIE) 224, 237, 239, 240
444
Index
labour force 244 main port 98, 238 maritime academy 56 natural gas 244 port/shipping 56, 97–100, 238–39, 241–42 reefer cargos 242 Royal Diving Club (RDC) 253 shopping malls 253 souk area 254 southern industrial port 98, 239 southern industrial zone 239–40 Tala Bay Resort 252–53, 343 telecommunications 243 tourism 44, 141, 149, 235, 237, 239, 251–54, 342, 343 town 238, 254 transit trade 24, 95–99 water 156, 243–44 Aqaba special economic zone (ASEZ) Authority (ASEZA) xxvii, 141, 235–36, 242, 244–50 business benefits 236 business ventures 245–50 customs duties 248–49 environment 240, 247, 294 facility inspections 247 foreign market access 236–37 foreign trade 98, 257 government planning 42, 44 infrastructure 241–44 investment 251–57 investment incentives 44, 216 Investor Services Directorate 247 land 237, 239, 247–48 legislation 385–415 licensing 246 Master Plan 98, 237–40, 254 one-stop shop 245, 246 permits 245, 247 registration 245–46 taxation 249–50, 266 telephone numbers 437 visas/work permits 244, 245, 250 Arab Bank 299, 300, 301, 312 Arab Center for Pharmaceuticals and Chemicals (ACPC) 180 Arab Free Trade Agreement (AFTA) 30, 41, 60, 88, 214–15, 218, 236 Arab Jordan Investment Bank 309 Arabic language 3, 204, 205, 207, 282, 284, 370–71, 425 arbitration 74, 213, 281–83, 285 archaeology 6, 240, 343, 365
armed forces 32, 112 As-Samra wastewater treatment 156, 158–60 asset management 311 Association of Investment Management and Research (AIMR) 310 Atlas Investment Group xxvii, 309, 310, 311, 312 auditing 271, 272 aviation airlines 56, 103, 104, 437–37 airports 104–06, 240, 241, 374 liberalization 104 tourism 102 balance of payments 25, 29, 31, 33 Bank of Jordan 300, 301 banking Amman 428–31 commercial banking 299–307 consolidation 301, 312 ‘Credit Facilities Case’ 299–301 customer deposits 304–05 disclosure regime 334 international standards 336 investment banking 309–12 market capitalization 305–06, 332 money laundering 335–36 net credit facilities 302–03 regulation 332–34 research reports 311 sector aggregates 332 shareholdings 306–07 size indicators 300–07 supervision 332–36 total assets 303–04 bilateral agreements 88, 213, 217, 261, 318 bonds bond market 310 Brady bonds 31 BOO projects xx, 55, 115, 121, 221, 311 BOOT projects 55, 115, 221, 311 BOT projects xx, 156, 157–60, 220, 221, 311 Brady bonds 31 brokerage 311 BTO projects 221 budget deficits 41, 42, 47 ratification 274 business ventures accounting principles 272–72 Aqaba 245–50 auditing 271, 272 Civil Law 201, 203
Index company law 201–04 company names 204, 205 consultants 431–32 Controller of Companies 202, 203, 204, 271, 272 corporate forms 202–03 corporate income tax 73, 249, 262, 331 record-keeping 270–71 registration 204, 213 reporting requirements 271 shareholdings 203, 271 capital gains 263, 318 car rental 370, 418 cement 75, 76, 78, 80, 85, 88, 100, 142, 175 Central Bank of Jordan bank mergers 301 building permits 136 ‘Credit Facilities Case’ 299 registration procedures 204 regulation/supervision 332–36 responsibilities xxvii Central Electricity Generating Company (CEGCO) 121, 122 Civil Law (Code) 201, 203, 273, 275 civil rights xvii, 14–15, 274 clay/kaolin 78, 79 climate 4, 127–28, 342, 367 clothing/dress 417, 426 commercial agents compensation 210, 211 definitions 206 disputes 211 legal regulation 206–11 offences/penalties 209–10 registration 207–08 termination of agency 210–11 companies see business ventures Compulsory Unified Insurance Office 325–26 concessions 220 conferences and exhibitions 254, 342–46, 372 constitution 14–15, 19, 73, 273–75 construction Aqaba 256 background 135–37 building permits 136–37, 139–40 contribution 140 GDP 139 industry structure 137–39 labour force 136–37 market size 139–40 materials 141–42
445
outlook 142–43 private sector 140 public sector 139, 140 sector overview 135–43 specialization 138 tourism 141 contributors xxv–xxxiv, 436–42 copper 78, 82 copyright 287–88 Council of Arab Economic Unity 318 courts civil courts 20 competent legal authority 280–81 Court of Cassation 20, 21, 277, 278, 281, 283 courts of appeal 20, 277, 281, 361–62 first instance 20, 276–77, 281 High Court of Felonies 277, 278 High Court of Justice 21, 275, 281, 289 income tax 278 magistrates 20, 276, 280–81 regular/ordinary courts 276–77 religious courts 20–21, 277, 281 special courts 21, 278, 281 State Security Court 21, 281 Supreme Council 21 credit cards 416 culture 52–53 currency 416 customs duties Aqaba special economic zone (ASEZ) 248–49 customs tariff 264 exemptions 248–49, 265 luxury goods 28 protectionism 28 Dead Sea geography 3–4, 127 minerals 79, 80, 96 oil exploration 191 Peace Conduit 156–57, 161 tourism 141, 144, 148, 342, 343, 367 debt service 26, 47 devaluation 26 diatomite 78, 81 dimension stones 78, 81 Disi Amman water conveyor 157–58 disputes arbitration 74, 213, 281–83, 285 commercial agents 211 legal procedures 280–85 dividends 263, 318
446
Index
Economic Consultative Council (ECC) 42 economic development 1st period (1950–67) 23 2nd period (1967–84) 24–25 3rd period (1985–91) 25–26, 28 4th period (1991–99) 28–30 5th period (2000–02) 30–32 6th period (2003–) 32–34, 46–59 critical enablers 44 development strategies 49 economic crisis 26, 28, 39, 130 foreign assistance 24, 25, 28–29, 33, 48, 58, 158–61 GDP 24–26, 28–32, 39–41, 46, 47, 48, 132, 139, 145 GNP 74–75 government planning 39–59 industry 84–93 investment see investment liberalization 217–21, 229 macroeconomic reform 28, 40, 46–48 micro level 49–59 openness 60 overview 23–35 structural adjustment xix, 28, 29, 39, 41, 217–21 sustainable growth 39, 41, 43, 59, 136, 217, 219 trickle-down effect 47 economic indicators 35, 40, 46, 74–77, 85 education equality 47 ERfKE 49–50 expatriates 369 ICT 42, 49, 50, 52, 53, 113, 115–16 languages 42 public education 49–50 qualitative investment 49 universities 51, 140, 215 vocational training 51–52 EFTA 60, 88 elections 18–19 electricity Aqaba 243 Distribution Company (EDCO) 121–22 licensing 124, 125 national grid 119 power supply 418 privatization 56, 120–25 sector overview 117–25 Sector Regulatory Commission (ESRC) 123, 124–25 statistics 118
embassies foreign missions 423–24 Jordanian 418–23 employment see labour force English language 3, 42, 244, 370, 425 environment Aqaba special economic zone (ASEZ) 240, 247, 294 Dead Sea 156 economic development 294–96 environmental impact assessment (EIA) 247, 294–96 free zones 230 law and regulation 293–96 mining sector 74 penalties 296 sustainable development 59 wildlife 148, 149, 343, 368 equality xvii, 14, 47, 59, 274 European Agency for the Evaluation of Medicinal Products (EMEA) 180 European Union (EU) Association Agreement (2002) xxii, 31, 41, 60, 80, 214, 217, 236, 330 pharmaceuticals 181 exhibitions and conferences 254, 342–46, 372 Export and Finance Bank xxviii–xxix, 309 exports agriculture 88, 89, 132, 133 Aqaba port 100 background 61–65 commodities 62, 63 destination 64–65, 89 diversification 48 domestic 61, 62, 64–65, 76–77 industrial products 84 merchandise 46 mining and minerals 76–77, 84 pharmaceuticals 172, 175–78, 215 preferential trade agreements 30 QIZs see Qualifying Industrial Zones re-exports/transit trade 24, 61, 62, 95–99 textiles 88, 89, 183, 185, 186 United States 31, 41, 88, 89, 186–88, 222, 226 external debt xix, 25–26, 29, 31, 39, 41, 46, 47 facilities Aqaba special economic zone (ASEZ) 247 textiles 183–84 Fatima 15
Index fees 204, 208, 284, 375 feldspar 78, 80 First National Economic Forum (1999) 41–42 fiscal imbalances 31–32, 39, 40, 47 Food and Drug Administration 175, 177–78 foreign assistance 24, 25, 28–29, 33, 48, 58, 158–61 foreign exchange exchange rates 26, 28, 39, 48, 416 profit repatriation 73 reserves 25, 26, 46, 48 foreign investment arbitration 74, 213 bilateral agreements 213, 217 company law 205 FDI 72, 212–16 foreign market access 88, 215 incentives see investment incentives licensing 205, 213 project ownership 73, 205, 213 foreign market access 88, 215, 236–37 foreign trade Aqaba port 56, 97–100, 257 Arab Free Trade Agreement (AFTA) 30, 41, 60, 88, 214–15, 218, 236 background 60–67 bilateral agreements 88 exports see exports global markets 59 imports see imports Iraq 29, 32–34, 175–77, 215 Israel 30 re-exports/transit trade 24, 61, 62, 95–99 US free trade agreement (2001) 31, 41, 88, 187–88, 218, 236 free zones xxix–xxx, 203, 229–32, 265–66 gas see natural gas geography 3–4, 127 geology 4, 6, 71 glass sand 78 gold 78, 82 government basic government services 53 cabinet government 15–17, 47, 58 decentralization xx, 25 delegated legislation 274 departments see Ministries e-government/ICT xx, 42, 54, 56, 113–14 institutional reform 58 planning 39–59 state paternalism 39
447
granite 78, 81 Gulf Cooperation Council 215 Gulf War (1990–91) 8, 25, 28, 29, 130, 135 gypsum 78, 80 Hashemite Kingdom 3, 8, 14, 15, 23, 273 health services expatriates 416 expenditure 162, 165–66 foreign patients 162, 169 government planning 54 health care professionals 163–64 health centres 54 health insurance 166–68 hospitals 54, 140, 162–65, 169–71, 215, 370 ICT 54 key indicators 162–65, 170 private sector 169–71 providers 162, 167–69 sector overview 162–71 Higher Ministerial Committee 219 Hijaz railway 100–101, 242, 366 history 3, 6, 8, 71, 235, 273, 275, 365–66 holidays 242, 360, 371, 425–26 hospitals 54, 140, 162–65, 169–71, 215, 370 hotels 141, 144, 145, 252, 342–44, 367, 371–73, 432–33 Housing Bank 300, 301 human capital education see education human resource development 49 indicators xx–xi returning Jordanians 28, 29, 136, 137 vocational training 51–52 Hussein ibn Talal (King of Jordan) xvii, 15, 18, 339–40, 374 ICSID, arbitration 74 imports agriculture 132–33 Aqaba port 99–100 background 65–67 commodities 66–67 duty see customs duties general sales tax (GST) 264 geographical distribution 67 oil 32–34, 117 textiles 185–86 weapons 208–09 industry economic indicators 85 foreign market access 88 industrial estates 215–16, 224, 237, 239
448
Index
know-how 84 sectors 89–93 statistical overview 84–93 inflation 28, 46, 48 information and communications technology (ICT) connectivity 115–16 data communications 113 education and training 42, 49, 50, 52, 53, 113, 115 electronic transactions 271 government xx, 42, 54, 56, 113–14 information 109–10 information technology (IT) 114–15 Internet 113, 243 joint ventures 215 judicial system xx, 58 liberalization 112, 113 policy 110 prioritization model 53 radio-frequency spectrum 112 REACH 114 sector overview 109–16 software development 215 telecommunications 110, 112–13 infrastructure Aqaba 241–44 government planning 56–57 transport xxii, 56 initial public offerings (IPOs) 43, 310, 319 insurance business written 326–29 credit insurance 328–29 fire 328 general insurance 327 health 166–68 historical background 323–34 intermediaries 329 legislation 330 life assurance 326 marine 327–28 market structure 324–29 motor vehicles 323, 325–26, 327 personal accident 328 reinsurance 329 taxation 330–31 Insurance Commission 324–25 intellectual property competent authorities 287 concerns 292 copyright 287–88 geographical indications 291 industrial designs 290–91 industrial property 287
law xx, 237, 286–92 legislation xx, 237, 286–87 Paris Convention 286, 291 patents 173–74, 289–90 pharmaceuticals 173–74 rights defined 286 trade marks 288–89, 292 trade secrets 291 TRIPs agreement 173–74, 286, 291 International Finance Corporation (IFC) 295 International Hospitality Forum (IHF) 345 International Monetary Fund (IMF) 26, 27, 39, 40 International Pharmaceutical Research Center (IRPC) 180 investment Aqaba special economic zone (ASEZ) 251–57 critical enablers 44, 213 development projects 59 fund allocation 44 investment banking 309–12 inward see foreign investment mining sector 72–74 prioritization model 45, 53 private 43–44, 53 privatization xx, 43, 53, 218 public 44–45, 53, 55 Qualifying Industrial Zones (QIZs) 223–25 rural development/agriculture 46, 130 tourism 57, 102, 135, 141, 145, 251–54 water 55, 152, 243 investment incentives industry sectors 213 legislation 24, 44, 72, 212, 213 tax 44, 213, 216, 249, 245–46, 264–66 transport 106 Iran-Iraq War (1981–88) 24 Iraq Coalition Provisional Authority (CPA) 176 foreign trade 29, 32–34, 175–77, 215 Gulf War (1990–91) 8, 25, 28, 29, 130, 135 Iran-Iraq War (1981–88) 24 Iraq War (2003) 18, 32–34, 175–76 Oil for Food (OFF) programme 176 oil imports 32–34 reconstruction 343–44 UN sanctions 29 Iraqi Jordanian Road Transport Company 96–97
Index Irbid District Electricity Company (IDECO) 117, 122 Islamic Action Front 18, 19 Israel armistice agreement (1949) 8 elections (2003) 32 foreign trade 30 peace treaty (1994) 8, 135, 141, 214 Qualifying Industrial Zones (QIZs) 30, 31, 214, 222–23, 227 Six-Day War (1967) 8, 23, 24 Yom Kippur War (1973) 8 joint ventures ICT 215 partnerships 201 pharmaceuticals 179–80 Jordan American Business Association (JABA) 344 Jordan Aviation 104 Jordan Construction Contractors Association 138, 143 Jordan Electrical Power Company (JEPCO) 117 Jordan Electricity Authority (JEA) 117, 118, 121 Jordan Export Development and Commercial Centers Corporation (JEDCO) xxix, 349–52 Jordan Free Zones Corporation (JFZC) xxix–xxx, 203, 229–32 Jordan Fund 311 Jordan Gulf Bank 299, 301 Jordan Insurance Federation xxx, 325 Jordan Investment Board (JIB) xxx, 184–85, 212–16 Jordan Investment Corporation 317 Jordan Investment and Finance Bank 299, 309 Jordan Investment Trust 309 Jordan Islamic Bank 300, 301 Jordan Kuwait Bank 301 Jordan National Bank xxx, 299, 300, 301 Jordan Rift Valley 3–4, 6, 80, 127, 153, 154, 156 Jordan River 4, 6, 148 Jordan Securities Commission (JSC) 271, 272, 313–16 Jordan Telecom 112, 113, 243, 340 Jordan Television 316, 339 Jordan Tourism Board (JTB) xxx, 146, 147 Jordan University Hospital (JUH) 162, 163, 165, 168, 170 Jordan Valley Authority (JVA) 153, 154–55
449
Jordan-Syria Land Transport Company 96 judicial system concerns 285 constitutional law 19, 274 courts see courts fees 284 general conditions 284 ICT xx, 58 judicial appointments 19–20 procedure 283–84 reform xix, xx, 58 training xx, 58 transparency xx, 58 King Abdullah The Founder University Hospital (KAUH) 162, 163, 168, 170 knowledge-based economy xix, xxi, 41, 48, 49–50, 56 labour force agriculture 132, 133 Aqaba 244 capital see human capital compensation/benefits 355–57 construction 136–37 contract of employment 358–59, 360–61 employment law 358–62 expatriates/foreign workers 184, 227, 244, 362, 365–73 holidays 242, 360, 371, 425–26 juveniles 358 minimum wage 216, 356, 359 overtime 356, 360 pharmaceuticals 180 ports 98 probation period 359 productivity 47, 52 Qualifying Industrial Zones (QIZs) 222, 225, 227 returning Jordanians 28, 29, 136, 137 salaries/wages 355, 359, 361–62 severance pay 356, 361 termination of employment 356, 360–61 textiles 184–85 unemployment xix, 25, 29, 31, 32, 41, 43, 46, 130, 185, 227 unfair dismissal 361 visas/work permits 227, 244, 245, 250 women 47, 52, 132, 185, 360 working hours 360, 417 land agency fees 375 building licensing/permits 136–37, 139–40, 247–48
450
Index
commercial leases 375, 376 commercial property market 374–77 commercialization process 248 coral coastal zone 239 dilapidations 376 fitting-out 375–76 housing see residential property industrial estates 215–16, 224, 237, 239 occupancy permits 248 rentals 262, 375, 377, 379–81 resources 128–29 service charges 375 tenant improvements 376 under irrigation 127, 128, 129, 130, 134, 152–53, 158, 244 languages Arabic 3, 204, 205, 207, 282, 284, 370–71, 425 English 3, 42, 244, 370, 425 Lawrence, Thomas Edward 147, 149 leases commercial property 375, 376 lease contracts 220 Lebanon 24 legal profession company registration 213–14 notaries public 205, 207 legal system administrative law 275, 281 Civil Law (Code) 201, 203, 273, 275 concerns 279 constitution 14–15, 19, 73, 273–75 courts see courts criminal law 275, 277, 278, 281, 284 Islamic law 20, 21, 275, 277 judiciary see judicial system legislation 17–18, 274, 278–79 precedent 276 rule of law 59 sharia law 20, 277 sources of law 275–76 legislature 17–19, 47, 274, 278–79 liberalization aviation 104 construction 143 economic development 217–21, 229 ICT 112, 113 legislation 218 mass media 58–59 telecommunications 237 licensing Aqaba special economic zone (ASEZ) 246 banking 333 electricity 124, 125
foreign investment 205, 213 intellectual property 174 telecommunications 112 life and work 365–73 limestone (pure) 78, 79–80 literacy xx, 109, 244 local government councils 19 municipalities 57 macroeconomic reform 28, 40, 46–48 magazines 340 marble 78, 81–82 market capitalization 46, 179, 305–06, 317, 318, 319, 332 mass media advertising 339–41 liberalization 58–59 mergers and acquisitions (M&A) Amman Stock Exchange (ASE) 179 corporate finance 310 Middle East and North Africa (MENA) xx, 30, 31, 103, 310 Millennium Development Goals 47 mining and minerals decorative stones 78, 81–82 economic indicators 74–77 exports 76–77, 84 industrial minerals 78–81 investment climate 72–74 metals 78, 82 minerals 77–83 radioactive minerals 78, 83 sector overview 71–83 special agreements 73 Ministries Energy and Mineral Resources (MEMR) 72, 118, 122, 123–24 Environment (MOE) 230, 293–94 Finance 33, 166 Health (MOH) 54, 162, 163, 165, 166, 167–68, 170, 171 Industry and Trade 169, 202–04, 207, 212, 213, 245, 287, 288, 290, 349 Information and Communications Technology (MoICT) 109–10, 112, 113, 115, 116 Interior 19, 95, 204 Justice 19–20 Labour 204, 227, 359 Press and Publication 204 Public Works and Housing 97, 137 Tourism and Antiquities 146–47
Index Transport 95, 97 Water and Irrigation (MWI) 152, 153 monarchy 14–17, 274 monetary policy 48 money laundering 335–36 Multi-Fibre Agreement (MFA) 188, 228 Muslim Brotherhood Movement 18 National Assembly 16, 17–18 National Electric Power Company (NEPCO) xxxii, 118, 121, 122, 123 National Library Department 287 National Petroleum Company (NPC) 189, 190 National Planning Council (NPC) 25 National Social and Economic Action Plan (2004–06) 46 natural gas Aqaba 244 privatization 56 Risha field 189, 190–91, 195 natural resources minerals see mining and minerals protection 57 relative poverty xx, xxii, 23, 215 water see water Natural Resources Authority (NRA) xxxii, 71, 72, 189, 190 natural sand 78, 80 newspapers 339, 340 non-governmental organizations (NGOs) 49, 52, 54 notaries public 205, 207 oil blocks, current status 190–93 booms 24 exploration 189–90 imports 32–34, 117 natural resources 6, 78, 117, 189–97 oil shale 78, 117, 196–97 price crash (1982) 39 production 196 production-sharing agreements (PSAs) 73, 189, 190, 193–95 sector overview 189–97 transport 96, 97 Palestine 6, 8, 135, 161, 340 Palestinian refugees 8, 23, 24, 169 Partnership for Health Reform (PHR) 165, 166 partnerships 202 patents 173–74, 289–90
451
penalties administrative law 275 commercial agents 209–10 environmental law 296 taxation 262 pensions xx, 32, 48, 58 Petra 6, 141, 149, 215, 237, 342, 365, 371, 372 pharmaceuticals Bolar provision 174 boom 30 companies 178–79 consumption 175 exports 172, 175–78, 215 global industry 172–73 intellectual property 173–74 joint ventures 179–80 labour force 180 outlook 181–82 production 85, 175 sector overview 172–82 technical/scientific capabilities 180–81 phosphates 75, 76, 78, 79, 84, 85, 88, 89, 96, 97, 98, 100, 101, 175, 242 politics geopolitics 135 political parties 14–15, 18, 19 structure 14–21, 23 women 18, 19, 47 population age distribution xx, 52, 162 capital see human capital ethnicity 3, 18 growth rates 47, 130, 162, 163 health see health services labour see labour force life expectancy 162, 163 size xvii, 23, 163 Ports Corporation 97 ports/shipping 56, 97–100, 238–39, 241–42 postal services 109, 114 potash 75, 76, 78, 79, 84, 85, 88, 89, 96, 97, 98, 100, 175 poverty xix, 41, 43, 46, 47, 57–58 prime minister 16–17 prioritization model 45, 53 private sector BOO/BOOT projects xx, 55, 115, 121 free zones 231 health services 169–71 investment see investment productivity 41 public partnership 30, 41–42, 48
452
Index
Qualifying Industrial Zones (QIZs) 224–25 privatization corporate finance 310 economic reform xx, 41, 43, 53, 58, 218–21 electricity 56, 120–25 Executive Privatization Commission (EPC) 219 Executive Prvatization Unit (EPU) 219 institutional framework 219–20 investment xx, 43, 53, 218 methods/types 220–21 National Privatization Strategy 218 transport 56, 94–95, 102, 103, 106 water 53, 55, 155–56, 221 profit repatriation 73, 213, 263, 318 project finance 310–11 protectionism 28 public investment see investment public sector xx, 28, 32, 40, 48, 58 Public Transport Corporation (PTC) 94–95 Public Transport Regulatory Authority 95, 106 public-private partnership 30, 41–42, 48 Qualifying Industrial Zones (QIZs) Aqaba 224, 237, 240 competition 228 criteria 222–23 economic development 222–28 investment 223–25 Israel 30, 31, 214, 222–23, 227 labour force 222, 225, 227 macro effects 225 obstacles 227–28 private sector 224–25 public sector 223–24 textiles 89, 183, 184, 186–88, 214, 228 railways 56, 100–102, 220, 242 real estate see land registration Aqaba special economic zone (ASEZ) 245–46 business ventures 204, 213 commercial agents 207–08 regulation banking 332–34 economic reform xx, 40, 44 electricity 123, 124–25 environment 293–96 telecommunications 110, 112, 220
transport 95, 106 religion Christianity 20–21, 148, 237, 366, 367 courts 20–21, 277, 281 equality/tolerance 14, 274, 370 groups 3, 370 Islamic law 20, 21, 275, 277 religious holidays 242, 360, 371, 425–26 remittances from abroad 24 research and development (R&D) xxi, 51 residential property Amman 369–70, 381 extras 380–81 financial/lease information 379–81 market 378–81 practicalities 378–79 rentals 379–81 restaurants 372–73 road transport 56, 94–97, 242, 370, 376 Royal Jordanian Airlines (RJ) 56, 103 Royal Medical Services (RMS) 162, 163, 165, 166, 167, 168, 170 Royal Society for the Conservation of Nature (RSCN) 368 royalties 73, 263 rule of law 59 rural areas agriculture see agriculture development 46, 57–58 poverty 46, 47, 57–58 transport 56 Saddam Hussein 18 Second National Economic Forum (2001) 42 Securities Depository Centre (SDC) 271, 313, 314, 317–18 sharia law 20, 277 small and medium enterprises (SMEs) 57 Social Economic Transformation Programme (SETP) 42–45, 46 social life 370–71 social security 268–69, 356 special economic zones, ASEZ see Aqaba special economic zone Special Operations Forces Exhibition and Conference (SOFEX) 346 Standards and Metrology Corporation 124 structural adjustment xix, 28, 29, 39, 41, 217–21 subsidies xix, 28, 48, 56
Index Talal bin Abdullah (King of Jordan) 15 taxation Aqaba special economic zone (ASEZ) 249–50, 266 bilateral treaties 261, 318 capital gains 263, 318 corporate income tax 73, 249, 262, 331 corporate tax rates 262, 331 courts 278, 281 deductions and allowances 267 departure tax 418 employees 249, 262 expatriates 266 free zones 265–66 general sales tax (GST) 28, 48, 250, 263–64, 330 ICT 115 import duty see customs duty investment incentives 44, 213, 216, 245–46, 249, 264–66 investment income 263 penalties 262 personal tax rates 268, 356 personal taxation 249, 266–68, 356–57 property rental 262 self-assessment 249, 262 social security 268–69, 56 tax practice 269 waqf 277 taxis 370, 376, 426 telecommunications advertising 340 Aqaba 243 liberalization 237 licensing 112 regulation 110, 112, 220 Telecommunications Regulatory Commission (TRC) 110, 112, 220 television advertising 339 share prices 316 textiles exports 88, 89, 183, 185, 186 facilities 183–84 imports 185–86 labour force 184–85 Qualifying Industrial Zones (QIZs) 89, 183, 184, 186–88, 214, 228 sector overview 183–88 trade agreements 186–88 World Trade Organization (WTO) 183, 188 thorium 78, 83
453
tourism Aqaba 44, 141, 149, 235, 237, 239, 251–54, 342, 343 attractions 147–50 aviation 102 construction 141 Dead Sea 141, 144, 148, 342, 343, 367 decline 28, 30, 33, 144, 145–46 entry formalities 425 GDP 145 Hijaz railway 101, 366 hotels 141, 144, 145, 252, 342–44, 367, 371–73 investment 57, 102, 135, 141, 145, 251–54 key indicators 150–51 marketing 144, 146 MICE destination 147, 343 overview of country 365–68 sector overview 144–51 situation analysis 145–46 World Heritage Sites 147, 149, 215 trade marks 288–89, 292 trade shows 346 Transjordan 8, 273 transport air see aviation buses 95 car ownership 94, 376 freight 95–97 infrastructure xxii, 56 outlook 106 passengers 94–95 privatization 56, 94–95, 102, 103, 106 railways 56, 100–102, 220, 242 regional hub 56, 106 regulation 95, 106 roads 56, 94–97, 242, 370 sector overview 94–106 taxis 370, 376, 426 TRIPs agreement 173–74, 286, 291 Turkey Ottoman Empire 6, 273, 275, 366 textiles 228 unemployment xix, 25, 29, 31, 32, 41, 43, 46, 130, 185, 227 UNESCO World Heritage Sites 147, 149, 215 unfair competition 291 United Kingdom British mandate 6, 8, 273, 275 UK Trade and Investment (UKTI) xxii–xxiii
454
Index
United States assistance 33–34 CalPERS 311 exports 31, 41, 88, 89, 186–88, 222, 226 Food and Drug Administration (FDA) 180 free trade agreement (2001) 31, 41, 88, 187–88, 218, 236 QIZs see Qualifying Industrial Zones terrorist attacks (2001) 30, 32, 340 USAID 159, 160, 161, 165 universities 51, 140, 215 UNRWA 162, 165, 166, 169 uranium 78, 83 visas/work permits 227, 244, 245, 250, 425 vocational training 51–52 Wadi Araba 71, 82, 127 Wadi Ma’in Zara project 160–61 water agriculture 4, 55–56, 127–28, 129–31 Aqaba 156, 243–44 aquifers/groundwater 129, 152, 153, 156, 243 canals 151, 154, 156–57 demand/consumption 55, 129, 152 desalination 152, 153, 157, 169, 243 drinking water 416 government planning 54–56, 153–54 investment 55, 152, 243 irrigation 127, 128, 129, 130, 134, 152–53, 158, 244 major projects 156–61
management contracts (MC) 155, 156, 221 privatization 53, 55, 155–56, 221 rainfall 4, 127–28, 152 resources/deficit 41 sector overview 152–61 tariffs 55 wastewater 129–30, 152–53, 156, 158–60, 244 Water Authority of Jordan (WAJ) 153–54, 221 weights and measures 425 West Bank 6, 8, 23 wildlife 148, 149, 343, 368 women gender development 47 labour force 47, 52, 132, 185, 360 politics 18, 19, 47 unemployment 185 working hours 360, 321–22, 417 World Bank xx, 40, 45, 49, 293, 294 World Economic Forum 343 World Health Organization 293 World Trade Organization (WTO) accession xxii, 30, 41, 88, 173, 179, 214, 218, 237, 286 insurance 330 telecommunications 112 textiles 183, 188 TRIPs agreement 173–74, 286, 291 Uruguay Round (1994) 188 youth development
52
zeolite and tuff 78, 81
