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Jordan at a Glance - Reforms

Jordan’s Economic Overview

Jordan’s firm commitment of implementing comprehensive political and economic reforms has been vital to its stability during volatile times throughout the MENA region. This year, Jordan has accelerated the pace of reforms, in response to the people’s aspirations for enhanced accountability, transparency and a larger input in decision-making. Jordan’s political and economic comparative advantages, as well as various dynamic industrial sectors, make the nation attractive to global investors. Jordan provides an ideal gateway into the MENA region and beyond, situated at the convergence of Europe, Asia and Africa. The free market-oriented, highly educated and qualified labor force, and modern infrastructure offer facilitative conditions for business ventures and investments. 

Jordan’s economy is ranked as the 32nd freest out of 179 nations by the Heritage foundation, within the MENA region Jordan is ranked 3rd out of 17 countries. The KOF Swiss Economic Institute’s Globalization Index for 2011 ranked Jordan 38th out of 208 countries and territories. These rankings demonstrate Jordan’s progress in advancing its global stature through reforms pursuant of free and open economic infrastructure. In pursuance of furthering Jordan’s global competitiveness, reform has been structured around four fundamental pillars. 

      ·         Drafting legislation related to investment, consumer protection, and market regulation

      ·         Expanding the middle class and balancing developmental efforts across governorates

      ·         Identifying strategic plans to attract value-added investments needed for job creation

      ·         Ensuring delivery of capital projects related to energy, water, and infrastructure 

To this end, and upon His Majesty’s directives, the government formed a “Committee for Economic Dialogue”, with representatives from the private sector, civil society, and the Economic Development Committee. Six specialized subcommittees were established to determine economic impediments and their respective solutions.

  

Investment

Jordan maintains a high commitment to promoting and encouraging private investment by providing a attractive legal framework for investors.  The current Investment Promotion Law, in place since 2003, is designed to deregulate, simplify, and eliminate many of the burdensome procedures required for investment projects.   

While Jordan has had success in attracting foreign direct investment, the government recognizes that the investment climate can be improved even more.  In an effort to revamp its approach to investment, the Ministry of Industry and Trade has introduced a Draft Investment Law.  The primary focus of this new law is to simplify the means of establishing a business in Jordan by creating an independent ‘one-stop shop’ that breaks down bureaucratic obstacles. The ‘one-stop shop’ will handle permits, licensing, and registration in such a way that processing will take no more than one business day.  The Draft Investment Law also eliminates the 50% Jordanian partner ownership requirement and minimum capital requirements in order to promote foreign direct investment and to pave the way for investment from small and medium-sized enterprises.  

The Draft Investment Law is further designed to alter the overall approach to foreign direct investment by switching from a ‘positive list’ where only a few sectors are allowed for investment to a ‘negative list’ where only a few sectors are prohibited from investment.  It also establishes a national treatment firm such that any foreign firm operating in Jordan receives the same treatment as a domestic firm.  The result of this switch has important investment, productivity, and employment gains, as many more sectors are open to investment.  

Furthermore, suggestions from the Economic Dialogue Committee successfully resulted in investment-related reforms. This includes the acceleration of public sector restructuring and priority of local investors toward energy-related projects.    

 

Trade

Jordan’s foreign policy is heavily influenced by the concept of complete economic accessibility and integration in a globalizing world economy. It incorporates the nation’s vision of economic partnerships as a means to mutual interests and fair dividends. Jordan has made great strides on the path to economic and trade liberalization, in addition to reinforcing the foundations of a market-based economy built on the growing role of the private sector and the diminishing role of onerous government regulations. The Economic Dialogue Committee’s recommendations resulted in the acceleration of e-commerce facilitative legislation, local prioritization for government procurements, and promotion of Jordanian ICT products and services to the GCC.  

Jordan has expanded its regional economic times through joining the Great Arab Free Trade Area (GAFTA), signing several bilateral trade agreements and a free trade agreement with the United States of America, entering an association agreement with the European Union, and successfully joining the World Trade Organization (WTO) in 2000. Moreover, to further enhance Jordan’s investment environment the government has concluded an excess of 35 agreements on protection and promotion of investments, and more than 30 agreements on avoiding double taxes between Arab and non-Arab countries.  

Jordan’s Membership in the World Trade Organization (WTO)

In reforming economic policies during the application process to the WTO Jordan made several commitments to provide liberal access to foreign suppliers and investors for a myriad of service sectors. Tariff lines were lowered and bound to rates ranging from 0% to 30%, by the year 2010, the maximum bound rate for certain tariff lines was 20%. In late 1999 the WTO General Council approved Jordan’s Protocol of Accession, and the Jordanian Parliament ratified the law on February 24, 2000. 

 

 

Education

Jordan maintains a high standard pertaining to education standards and opportunities, and continues to reform education to meet growing demands and to remain competitive in the 21st century.   

The backbone of Jordan’s economy is a young, highly educated, talented workforce. The United Nations World Development Report has ranked Jordan among the most developed countries in terms of education; and the World Bank has ranked Jordan number one in education reform.  There are currently 23 public and private universities in Jordan and enrollment in higher education has increased about 14% annually.  Jordan boasts the highest per capita of engineers and the highest proportion of bilingual (English-Arabic) speakers in the region.  Many of the Jordanian students have grown up in an international environment which enables them to assume positions in international companies with relative ease.     

Jordan continues to reform education to ensure the highest quality education for all citizens and to streamline the movement out of universities and into jobs.  This progress ensures that Jordan has a workforce well equipped for the present and prepared for the future.     

 

Taxes

Taxes are one tool used by Jordan to regulate the business and investment, and to ensure a favorable climate for investors.  Jordan is ranked 29th overall in having a favorable tax environment.  This is largely due to the fact that the business tax rate is one of the lowest in the region and is lower than most OECD countries.  Jordan requires a tax of 31% of income while the average tax is 33% in the MENA region and 43% in OECD countries. 

In an effort to maintain this competitive advantage, Jordan has rigorously pursued reform that extends tax exemptions and offer the same personal income tax for both Jordanian citizens and international residents.  Also, Jordan has signed numerous agreements with Arab and non-Arab countries to prevent double taxation.  To facilitate the process of building a company in Jordan, qualified industrial zones and development zones have been established.  These economic zones offer tax breaks, special exemptions, and other incentives in order to capitalize on regional advantages and develop clusters of economic activity.    

 

Labor

Jordan maintains a high standard pertaining to employment conditions and opportunity, and continues to reform labor laws to facilitate greater equality and higher employment rates. Much of the legal framework for labor derives from the Labor Law of 1996 and its subsequent amendments. Such amendments have expanded the protection of the Labor Code to foreign workers, increased regulations on conditions and the fines for certain violations, and further prohibited forced labor, harassment, and other forms of abuse.  

The recent focus on administrative and institutional labor reforms has placed Jordan in the unique position as a positive model for countries at similar levels of economic development. The Ministry of Labor (MoL) has been rigorously drafting and implementing reforms since 2006; and through various public reports has increased transparency pertaining to MoL reform efforts. Collaboration between employers, workers, foreign governments and international organizations has strengthened the labor institutions as well as the national consensus for greater opportunities and an increased focus on the necessity of compliance.  

His Majesty King Abdullah II has directed the National Agenda of Jordan to focus primarily on reducing unemployment, addressing mismatches between labor supply and demand, increasing workforce participation of women, and developing coherent approaches to reducing poverty and expanding job opportunities. Under the National Agenda the employment-technical and vocational education (E-TVET) sector is under constant development. These reforms encompass a three-pillar approach, they serve to: strengthen institutional development, establish effective management and financial incentives, and to improve E-TVET through the establishment of the Quality Assurance Agency, instructor training, and re-equipping of relative institutions.  

The government of Jordan has also emphasized labor reforms on human trafficking and child labor. In 2010 Jordan adopted the National Strategy and Action Plan to Combat Human Trafficking (2010-2012). This progressive strategy provides a platform for integrated action to combat trafficking of persons. Recent success of the Children Labor Unit of the MoL facilitated the International Labor Organization to further support the project through a $1 million grant. These reforms are intended to eliminate the worst forms of child labor as well as eliminate such labor practices ubiquitously throughout Jordan. 

The Ministry of Labor report on recent progress of reforms can be found at:

            www.jordanembassy.org/new/LabourAdministrationandComplianceinJordanFinalLT.pdf

   www.jordanembassyus.org/new/aboutjordan/jordanpdf/LaborReport_Oct2009.pdf

 

 

 Dynamic Sectors of Jordan’s Economy

Jordan’s economy, like any other, has specific sectors that are developing at accelerated rates. Investing in these sectors guarantees greater investment security and will potentially yield greater profit margins. These facilitative sectors range from agriculture and pharmaceuticals, to information communication technology and tourism. Detailed below are just a few sectors and the factors that make certain economic-zones more attractive to investors than others.  

Jordan’s growing agricultural sector stems from population and tourism growth as well as increasing demands for high quality and frozen foods. The climate in the Jordan Valley is also highly conducive to the growth of vegetables, olive tress and stone-fruit tress. Beyond agriculture, Jordan is wealthy in its natural oil-shale resource, which makes up 70% of mineral exports of Jordan.  

The information communication technology sector has, in recent years, contributed greatly to Jordan’s GDP and provided expanding employment opportunities. Currently more than 1,500 ICT companies employ over 19,000 people and this rate is expanding around 15% annually. ICT, currently the fastest growing sector in Jordan, is an ideal investment opportunity and is expanding up to 50% annually. Jordan’s workforce is sufficiently trained to perpetuate growth in ICT, producing a higher proportion of university graduates in related fields than any other regional state. Jordan is also equipped with modern and reliable ICT infrastructure and strong government and policy support catalyze the sector.Tourism is predicted to remain the worlds fastest growing economic sector over the next decade or two, with a realized annual growth rate of 10-12% in Jordan. The security of Jordan continues to promote the nation as a safe destination for vacationers, furthered by ideal climate, adventurous terrain, rich history and religiously desirable sites for all major monotheistic religions.  

Jordan’s healthcare sector and its expanding privatization provide ample investment opportunities in what is ranked the leading healthcare industry of the region. The growing demand for healthcare in tandem with expanding healthcare related technology provides a vast opening for capital with promising prospects of returns. Furthermore, rising costs in the West and Jordan’s sustained and advanced abilities are turning Jordan into a popular destination for the outsourcing of medical services.