Khaberni - Below is the U.S. Department of State's statement on the investment climate for the year 2024: Jordan
"Jordan attracts investors thanks to its stability, efficiency, and strategic location in the Middle East. The report highlights strong reforms, innovation, and sustainable growth"...
The Jordanian government welcomes foreign investment. It has taken steps aimed at facilitating procedures for foreign investors and developing an outward-looking, market-based economy that is globally competitive. However, in practice, government policies to encourage investment are implemented unevenly. Despite governmental efforts, companies still complain about poor public sector management of laws affecting the business environment or their poor execution. Additionally, companies cite high electricity costs and water scarcity as major challenges to the investment climate.
Despite these challenges, there are significant opportunities for foreign investors in Jordan. Despite Jordan's small market size, its numerous free trade agreements make it an attractive environment for manufacturing products that would otherwise be subject to high tariffs. Many of Jordan's underutilized workforce have university degrees (especially in engineering, information technology, and telecommunications) and are proficient in English, making Jordan an attractive destination for investment in many specialized technical fields. Additionally, its vast solar resources offer opportunities for advanced energy technologies (such as green hydrogen). Finally, Jordan has significant untapped potential in the tourism sector.
Traditionally, foreign investment has focused on the energy (traditional and renewable), tourism, real estate, manufacturing, and services sectors. In 2022, the Royal Hashemite Court launched its vision for economic modernization (EMV) aimed at enhancing economic growth by improving the investment environment. The vision aims to attract $60 billion in investments and create one million jobs over ten years. Priority investment sectors include film production, high-value-added industries, information and communications technology, healthcare, tourism, real estate, mining, chemicals, agriculture, and logistics.
1.
Openness to foreign investment and its restrictions
Direct foreign investment policies
In general, the Jordanian government supports foreign investment and seeks to attract it, but foreign investment is practically restricted in certain sectors, and the implementation of government policies and legislation occasionally frustrates foreign investors. Some sectors and sub-sectors are only open to Jordanian investors, while others are open only to foreigners up to 49% ownership. The complete list of prohibited sectors is outlined in the 2023 Investment Environment Regulation No. 7. In all other cases, American investors are almost treated the same as Jordanian investors under the bilateral investment treaty between the United States and Jordan.
The Jordan Investment Board, comprised of the Prime Minister and ministers involved in economic ministries and representatives from the private sector, is responsible for formulating high-level investment policy. The board also proposes legislative and economic reforms to develop the investment environment. On a more functional level, the Ministry of Investment is responsible for attracting, encouraging, and promoting investment, ensuring the sustainability of an attractive investment climate. The ministry is the main contact point for investors, facilitates the completion of government services and investment incentives. The ministry provides support services to investors, simplifies investment procedures, and aims to overcome obstacles they face. It also includes a monitoring and aftercare section and oversees a mechanism for receiving investor complaints.
Restrictions on foreign control and right to private ownership and establishment
Investment and property laws allow U.S. entities to establish businesses in many sectors, not all. Foreign companies may open regional offices and branches; branch offices may perform all commercial activities; regional offices may act as a link between the headquarters and Jordanian or regional clients.
Under the bilateral investment treaty between the United States and Jordan, American investors are granted several exceptions and are treated similarly to Jordanian citizens, allowing them to retain full ownership in most sectors. In certain sectors, including aviation, defense, travel and tourism, transportation, media, and entertainment, there are restrictions on American ownership and/or conditions for occupying key positions by Jordanian citizens, among other restrictions. The latest list of restrictions on American investments is available in the list of services exempted under the Free Trade Agreement between the United States and Jordan (Annex 3.1).
Foreigners and companies are allowed to own or lease property in Jordan for investment purposes, as well as one residence for personal use, provided that their countries allow reciprocal property rights for Jordanians. Depending on the size and location of the property, the Land and Survey Department, the Ministry of Finance, and/or the Cabinet may need to approve the foreign ownership of land and property, which must be developed within five years from the date of approval.
Furthermore, the 2023 Investment Environment Regulation No. 7 specifies a list of sectors where foreign investment is prohibited:
Foreigners are prohibited from wholly or partially owning investigation and security services, quarrying for construction purposes, customs clearance services, and all types of bakeries.
Foreigners are prohibited from trading in arms and fireworks.
Foreign investors are limited to 50% ownership in certain businesses and services, including:
Retail and wholesale trade, including distribution, and import and export services, with limited exceptions.
Engineering consulting services, brokerage services (excluding banks and financial services companies), commercial agencies, insurance brokers, and food and beverage services (with some exceptions).
Transportation and clearance services, including maritime, air, and land transport services, and related services, with limited exceptions.
Foreign companies may not import goods without appointing a registered agent in Jordan; this agent may be a branch of the foreign company or a wholly owned subsidiary.
For national security purposes, foreign investors must undergo a security check through the Ministry of Interior, which is conducted as part of the registration process.
Foreign investment
The World Trade Organization conducted a review of Jordan's trade policy in 2023. The Secretariat's report, which can be accessed at the link: http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm, included no recommendations.
The Organization for Economic Cooperation and Development (OECD) issued a report "FDI Qualities Review of Jordan" in June 2022. The report provided a list of recommended policy reforms prioritized. It can be accessed at the link: https://www.oecd.org/publications/
fdi-qualities-review-of-jordan-736c77d2-en.htm.
The Jordanian Strategies Forum (JSF), a leading research center in economic development, regularly publishes the Investor Confidence Index and their opinion poll (in Arabic) on their website (http://www.jsf.org). In 2021, the Jordanian Strategies Forum published a policy paper on how to increase direct foreign investment flows to Jordan. In 2023, they published a policy paper titled: "Economics of Local and Direct Foreign Investment: Learned Lessons for Jordan", which provided a set of recommendations aimed at attracting direct investments in Jordan and maintaining them. The links below:
https://jsf.org/sites/default/files/Opportunities%
20Attract%20Foreign%20Direct%20Investment.pdf
https://www.jsf.org/uploads/2023/08/02/The%20Economics%20of%20Local
%20_%20Foreign%20Direct%20Investment-1690984102.pdf
Foreign investmentalaistithmar alkharijiu
2. Investment and Tax Treaties
In addition to the United States, Jordan has signed bilateral investment treaties with 57 countries or entities, including the European Union and Singapore and Canada. The Jordanian bilateral investment treaty with the United States entered into force in 2003, providing mutual protection for Jordanian and American investments for individuals and companies.
The Free Trade Agreement between the United States and Jordan entered into force in 2001. Additionally, Jordan is a member of the Greater Arab Free Trade Area (GAFTA), effective since 1998. Jordan has also signed preferential trade agreements and bilateral free trade agreements with several of its members in the Greater Arab Free Trade Area, including Egypt, Syria, Morocco, Tunisia, the United Arab Emirates, Algeria, Lebanon, the Palestinian Authority, Kuwait, Sudan, Bahrain, and Iraq.
The Economic Partnership Agreement between the European Union and Jordan entered into force in 2002. Jordan and the European Union are currently discussing possible amendments to this agreement. Jordan also signed a free trade agreement in 2001 with the European Free Trade Association (EFTA) (Iceland, Liechtenstein, Norway, and Switzerland).
Jordan also signed a free trade agreement with Singapore in 2004, and a free trade agreement with Canada in 2009. Jordan negotiated a new economic framework agreement with Turkey in 2019 to replace the Jordanian-Turkish free trade agreement, which was suspended in 2018.
Jordan has agreements to avoid double taxation with 31 countries, including the United Arab Emirates, Saudi Arabia, Qatar, Bahrain, Egypt, Algeria, Tunisia, Canada, the United Kingdom, France, and Turkey.
3. The Legal System: Transparency of the Regulatory System
Jordan's laws and policies apply to both local and foreign investors and are characterized by transparency. However, the application of these policies by government officials is often inconsistent, leading some companies - foreign and domestic - to perceive that the application of laws is not equitable. Practically, enforcement procedures are not subject to judicial review, and results are not published. There is no evidence to suggest that investors from any country, or foreign investors as a whole, are subject to systematic discrimination. Regulations (locally referred to as "regulations" and "instructions") are primarily developed by ministries at the national level, with limited authority for rule-making at the provincial and local municipal levels. Additionally, the Aqaba Special Economic Zone enjoys autonomous independence in several important aspects. The texts of adopted regulations are published in the Official Gazette of Jordan without summary or comment. While the rules are generally transparent, the rule-setting process in Jordan is not necessarily subject to public review or comment and may be announced without providing sufficient time for companies to adapt or comply. During the rule-setting process, the government may choose to publish laws and regulations on the Legislation and Opinion Bureau website to receive public comments or hold private consultations with relevant parties, including the Jordan Chamber of Commerce and the Jordan Chamber of Industry, which represent the private sector as a whole. When issuing new regulations, the ministries concerned are required to report any consultations held with the public and private sectors. Jordan's legal, regulatory, and accounting policies are characterized by transparency. All registered companies are required to keep proper accounting records and submit annually audited financial statements in accordance with internationally recognized accounting and auditing principles. Public companies are required to apply the International Financial Reporting Standards (IFRS), but disclosure of environmental, social, and governance aspects is not required and is not actively promoted. In 2022, the Jordanian authorities announced the Economic Modernization Vision and the Public Sector Modernization Plan. These ambitious documents together include comprehensive and significant reforms in the public sector and economic policies in Jordan. If successful, they would revitalize the Jordanian economy and provide diverse opportunities for investors. The government has begun implementing these reforms, but the work will continue over the ten years covered by the Economic Modernization Vision. Jordan is committed to financial transparency; the Ministry of Finance issues the "Public Finance Bulletin" monthly, which includes detailed information on government debt obligations.
International Regulatory Considerations
Jordan recognizes and accepts most American standards and specifications. However, Jordan has occasionally imposed additional standards for imported products. Some of these measures have been considered trade barriers, such as the restriction imposed in 2014 on the sizes of poultry packages available for retail resale.
As a member of the World Trade Organization, Jordan is obligated to notify the Technical Barriers to Trade (TBT) Committee of the World Trade Organization of all draft technical regulations.
The Legal System and Judicial Independence
Jordan has a mixed legal system based on civil law, Islamic Sharia, and customary law. The Constitution identifies the judiciary as one of three separate and independent branches of government. Jordanian commercial laws do not distinguish between Jordanian and non-Jordanian investors. However, litigants have complained about the accumulation of judicial cases and the resulting delay in legal procedures.
The Jordanian judicial system includes a unit in the Court of First Instance of Amman and the Court of Reconciliation of Amman, where judges specialize exclusively in commercial cases. The courts are independent of the executive branch. Allegations of discrimination and lack of transparency are rare, but parties sometimes complain about a lack of judicial expertise, especially in technically complex legal areas, such as intellectual property.
Government actions, whether regulatory or executive, are not usually subject to court review. However, state-owned companies are subject to legal procedures and are not treated preferentially. Companies sometimes complain that judicial decisions are technically incorrect, but they do not claim that they are non-transparent or discriminatory.
Foreign Direct Investment Laws and Regulations
The Jordanian Investment Environment Law of 2022 regulates local and foreign investment. The law defines the role of the Ministry of Investment as the main reference for investment in the country, and includes provisions clarifying investors' rights and regulating incentive programs for investors, both within and outside development and free zones, as well as registration and licensing procedures. The law also addresses issues related to investor grievances and contractual disputes.
In 2023, Jordan approved a new regulation for the investment environment, No. (7) for 2023, detailing the provisions of the Investment Environment Law. Among other things, the law clarifies standards for investment incentive decisions and also regulates issues related to foreign labor. In 2023, Jordan adopted an amended Social Security Law allowing the private sector to reduce social security contributions for employees under the age of 30.
All regulations are published in the Legislation and Opinion Bureau (https://lob.gov.jo/) and in the Official Gazette (https://www.pm.gov.jo/ar/Pages/NewsPaper), although these sources are not limited to laws and regulations related to investment.
Competition Laws and Anti-Monopoly
The Competition Directorate of the Ministry of Industry, Trade, and Supplies is responsible for implementing and enforcing the Competition Law. The directorate also conducts market research, considers complaints, and reports offenders to the judiciary. It generally performs its duties with integrity and transparency, and its decisions are not practically subject to judicial review. No notable competition cases were recorded in 2023.
Expropriation and Compensation
The Constitution of Jordan permits the expropriation of property when considered to be in the public interest, provided that fair compensation in a convertible currency is provided to the investor. The statutory law also stipulates that expropriation must have a specific, legitimate public purpose and must be done according to law and in a non-discriminatory manner. No recent expropriation actions have been reported by "Post."
Dispute Settlement.
International Centre for Settlement of Investment Disputes (ICSID) Convention and New York Convention
Jordan is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Only a few cases between foreign investors and the Jordanian government have been presented to the courts of the International Centre for Settlement of Investment Disputes.
Dispute Settlement between Investors and States
Under Jordanian law, foreign investors may resort to arbitration by a third party as a means of settling disputes. The Arbitration Law of 2017 aims to facilitate the use of arbitration as an alternative to dispute resolution procedures. Furthermore, Article Nine of the bilateral investment treaty between the United States and Jordan outlines dispute resolution procedures between Jordanians and American persons.
A major foreign investor was adversely affected by the 2018 amendments to the Income and Sales Tax Law, which eliminated tax benefits within free trade zones. The investor filed a lawsuit before the Jordanian Primary Tax Court to enforce his right to income tax exemption. The court appointed an expert to assess the validity of this appeal. Ultimately, the court ruled in favor of the investor.
Judgments issued by American courts or other international arbitration panels may be endorsed by filing an enforcement petition with a Jordanian court.
Some companies in Jordan have complained about unjustified investigations and fines imposed by government officials; however, these complaints come from both locally owned and foreign-owned companies.
International Commercial Arbitration and Foreign Courts
In 2018, amendments to Arbitration Law No. 16 introduced changes to the procedural framework for arbitrators residing in Jordan, which can be traced back to the Model Law of the United Nations Commission on International Trade Law (UNCITRAL). The amended law grants greater authority to the arbitration tribunal and limits the role of the court of appeals.
Judgments from American courts or other international arbitration panels may be endorsed by filing an enforcement request in a Jordanian court.
The Ministry of Investment has a mechanism for investor grievances according to Investor Grievances Regulation No. 163 of 2019 and the Grievances Sessions Regulation No. 1 of 2020. This mechanism allows investors to submit complaints against government decisions outside the judicial scope; complaints can be submitted electronically through its website.
Bankruptcy Regulations
The Insolvency Law allows individuals and companies to settle their financial statuses through a debt management plan, and regulates insolvency proceedings for foreign organizations in accordance with international agreements ratified by Jordan. Voluntary liquidation is governed by the Companies Law.
Defaulting on loans or issuing checks without sufficient funds is a crime in Jordan, and may subject the perpetrator to imprisonment under the Jordanian Penal Code. Prison sentences for debtors remain a legal practice in Jordan. Investors should conduct a thorough and comprehensive study of potential partners and consult a local legal advisor to better understand business practices in Jordan and comply with local laws.
Bankruptcy Regulations
The Insolvency Law allows individuals and companies to settle their financial statuses through a debt management plan, and regulates insolvency proceedings for foreign organizations in accordance with international agreements ratified by Jordan. Voluntary liquidation is governed by the Companies Law.
Defaulting on loans or issuing checks without sufficient funds is a crime in Jordan, and may subject the perpetrator to imprisonment under the Jordanian Penal Code. Prison sentences for debtors remain a legal practice in Jordan. Investors should conduct a thorough and comprehensive study of potential partners and consult a local legal advisor to better understand business practices in Jordan and comply with local laws.
Full text:
Link
https://www.state.gov/reports/2024-investment-climate-statements/jordan
