In 1995 Jordan’s parliament passed the Investment Pro-motion Law, a wide-ranging instrument aimed at attracting foreign and domestic interest to key sec-tors. In 2000 the law was amended, giving priority to eight areas of the economy and to two sub-sectors, with investments in these fields receiving benefits that ranged from tax incentives to one-stop-shop services. Then, in 2003, the government introduced three more provisional laws to further develop the investment climate. A decade later, in 2012, a new draft investment law was launched to enhance the exist-ing legislation and streamline procedures. It is also directed at boosting private sector involvement in the law’s implementation. As of early 2013, the draft law’s promulgation is being eagerly awaited.
For years, the investment promotions law has been one of the key legislative frameworks for Jordan’s economy. Now, a range of projects is being positioned to benefit from it, as there are several new schemes in the pipeline that are making international headlines. The giant Red Sea-Dead Sea initiative, major new pipelines, renewable and nuclear energy programmes, and oil shale development are all on the horizon, with opportunities for both new and old investors.
NEW STRUCTURE: The 2012 draft law, which was being reviewed jointly by the government, business leaders, economists and other interested parties in early 2013, will streamline the range of organisations involved in promoting investment. Most importantly, the Jordan Investment Board (JIB) and the Develop-ment Zones Commission are to be merged, a move designed to cut costs and simplify procedures.
The draft law also contains some 59 articles address-ing difficulties faced by investors in the kingdom, according to press reports published in August 2012. The new law thus represents an ambitious attempt to reduce obstacles to investment created by exist-ing legislation. The legislation aims to tighten up the framework and remove bottlenecks. The law estab-lishes a new higher investment council to survey national strategies as well as draw up, promote and implement targeted programmes.
This council will also have representation from the private sector, via five members of the board to be drawn from the business community, according to 2012 statements from the then-minister of industry and trade minister, Shabib Ammari.
DOING BUSINESS: The other aim of the law is to make it easier for investors to do business in Jordan.
In 2012 the kingdom ranked 96th out of 183 coun-tries in the World Bank’s “Doing Business” league table, down a notch from 95th in 2011. Delays in obtaining permits and property-related administrative procedures were cited among the reasons for its slip in the rankings. Other concerns cited were the diffi-culty of access to credit and investor protection in con-tract enforcement. The new law aims to cut red tape, make opening a business and bringing in financing easier, and strengthen the legal protections available.
TRACK RECORD: When passed, the new law will super-sede the existing legislation, which, despite its faults, has provided the framework for some robust invest-ment growth in the past. In the years leading up to 2008, foreign direct investment (FDI) in Jordan grew at a robust pace, reaching $2.8bn that year accord-ing to Central Bank of Jordan (CBJ) figures.
FDI began a steady decline a year later, down to $2.39bn in 2009, $1.69bn in 2010, and to $1.48bn in 2011. By the end of the third quarter of 2012, the FDI total stood at $1.1bn. However, the JIB announced in October 2012 that if domestic investment were added in, the combined total for the first nine months of 2012 was up 81% on the same period of 2011, having risen from $1.19bn at the end of third-quarter 2011 to $2.15bn at the same time in 2012.
The decline of FDI is unsurprising given the global downturn following 2008 and the regional turmoil since the Arab Spring. Competition for investment has grown as purse strings have tightened, while risk-averse investors have shied away from the region.
NEW INITIATIVES: Although domestic investment has been picking up some of the slack, doing more to boost inflows is essential if Jordan is to bring back the kind of investment levels it saw in the past. To this end, a range of projects currently either on the drawing board, in the planning stages or in the early stages of implementation, are set to improve this situation.
The sectors that have been highlighted since the original promotions law are industry, agriculture, hotels, hospitals, maritime transport and railways. Subse-quent amendments have added fields including leisure, recreational compounds, and conventions and exhi-bition centres. The JIB currently promotes a list that has been reclassified to include the following “vital sectors”: agro-foods, chemicals and allied products, construction and building materials, education, ener-gy and utilities, health care, information and commu-nications technology (ICT), minerals and processing, pharmaceuticals, real estate, textiles and apparel, tourism and transportation. “These are sectors where Jordan has a competitive and comparative advantage,” said Elias Farraj, the deputy CEO of the JIB.
In ICT, the emphasis has been on fostering the out-sourcing and software development segments. Prior to the regional turmoil of 2011, Jordan had become one of the world’s top 10 destinations for business process outsourcing (BPO), according to the AT Kear-ney Global Services Location Index, standing at 9th place in 2009. The ranking slipped to 22nd in 2011, however (although this was still out of 50 countries worldwide). Shared services is another important ICT area in the kingdom as well, with giants such as Microsoft based in Amman. The JIB has been active in encouraging these linkages: “Shared services com-panies such as HP, we help partner with local col-leges, entering materials into the curriculum so that any Jordanian ICT graduate can be plugged straight in to any international company,” Farraj said.
Health care and pharmaceuticals firms, meanwhile, take advantage of the kingdom’s long-established reputation in health care, providing doctors and nurs-es throughout the Middle East and beyond. To encour-age the bio-medical industry, the kingdom offers an incentive package that means health outfits only have to build a hospital shell to receive a 100% exemption from Customs duties and sales taxes for any other materials bought from the local market. Jordan has become a popular base for chemical research organ-isations, and several of its pharmaceuticals firms are listed on the London Stock Exchange.
ENERGY: The kingdom is making a major turn towards alternative energy and is also investing in nuclear power. Jordan has around 2% of the world’s uranium reserves, according to the JIB, with the first reactor planned for 2020; tendering for this project is already closed. Approval for the scheme has been granted from the International Atomic Energy Agency, the US and Israel, with the development zone now located on the Iraqi border, where it is able to take advantage of a 5% income tax incentive scheme. In renewables, solar power is making progress as Jordan has one of the world’s highest irradiation levels – reaching 2500-3000 KWh per sq metre in certain areas.
Jordan also has the world’s fourth-largest reserves of oil shale, with much of it close to the surface and spread around the country. The oil produced needs refining, which has spurred current moves to dismantle the state monopoly on this industry, opening up a new sub-sector to investment (see Energy chapter).
DEAD SEA CANAL: In construction and tourism, one of the most important projects is the Red Sea-Dead Sea link up. This supersedes a previous, joint Jordan-Israel-Palestinian Authority scheme to build a canal linking the two seas; Jordan is now going it alone and building a huge pipeline instead. This will help save to the Dead Sea, while also providing water and hydro-electric power. The World Bank published a report in early 2013 affirming the economic and environmen-tal value of the project, of which France’s Suez is one of the main interested parties.
Meanwhile, a Turkish company, GAMA, is working on the Disi Water Conveyance Project, a major scheme in the southern aquifer; in 2013 this project will deliv-er its first fresh water to Amman. Aqaba, at the same time, is also seeing its port facilities expanded, via two new floating jetties and the LNG terminal, which will also provide feedstock for a major new industri-al zone. Elsewhere, two tourism development zones have been created with the idea of boosting medical tourism. This is already a major area of commerce, with Jordan ranking number one in the region and fifth in the world for this segment.
These projects are all of great interest to foreign investors, and many have already generated signifi-cant FDI input. One challenge the kingdom presents is in supplying the human resources to undertake the work; this could present an opportunity for education providers and labour market suppliers, which could make up for the shortages of manual labour in the country. There is plenty ahead then, as Jordan’s econ-omy tries to win back more of its foreign investment.
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