Jordan Country Profile
General Information
Political Climate
Unlike other countries in the region, Jordan does not have a burdensome record of political violence and has generally been deemed as politically stable. However, Jordan has been no exception to the public unrest which has arisen in almost every Middle Eastern state in the Arabic world since the beginning of 2011. Since mid-January 2011, Jordanians have voiced their discontent with government policies and high levels of corruption which culminated in a call for its resignation. In an attempt to calm the growing unrest, Jordan´s king, Abdullah II, dismissed Prime Minister Samir Rifai and his cabinet in February 2011, and designated Maruf Bakhit to form a new government. The New government is assigned to quickly launch new reforms in order to ensure more effective and transparent policies. In a January 2011 article in Foreign Policy, however, critics point out that reforms and more transparent rule of law in Jordan will not be achieved through the overthrow of the government, as was the case for Tunisia and Egypt, but through the overthrow of the King himself. At several occasions the Prime Minister has been portrayed as only a mouthpiece behind which the king can carry out his agenda. The same article reports that de facto policy is, indeed, made by the king and a small group of trusted advisors, and that replacing the Prime Minister each time the monarchy has come under harsh criticism appears to become a habit; to appease discontent over the last twenty years, the Prime Minister has been changed all in fifteen times.
In recent years, the government in Jordan has taken several steps to combat corruption and the King has identified the fight against corruption as a top priority, just as the former Prime Minister stressed that fighting corruption is crucial to attracting foreign investors. Efforts that have been put into fighting corruption include the formation of an independent Anti-Corruption Commission (ACC), to draft a law to combat corruption, and the signing of a public sector Code of Conduct in 2008, outlining moral and legal principles for ministers and public employees. In addition, the Arabic revolution that is taking place has set a whirlwind of reform in motion and has put public and private sector flaws under the microscope. This also means that many anti-corruption measures have gained strength under the current circumstances. According to an April 2011 article by Al-Dostour, the Prime Minister of Jordan declares that the king urges quick and concrete political, economic and social reform as well as to merge municipalities to shorten administrative processes and to raise public employees´ salaries, these included civil and military workers as well as municipality and state company employees, in order to fight corrupt behaviour. In addition he states that corruption is high on the political agenda and that no official is immune from investigation. Nevertheless, prosecution of high-ranking civil servants and officials remains relatively rare, and the Bertelsmann Foundation 2010 maintains that corrupt officeholders are not prosecuted in a systematic way and that cases are only occasionally publicised. There have been some cases of conviction of high-ranking officials, most notably that of Samih Batikhi within the Governance Intelligence Directorate (GID), who was charged with fraud and embezzlement in July 2003. However, Batikhi's trial and subsequent conviction were considered by observers to be flawed and full of irregularities, and the extensive evidence of his alleged crimes remains secret. In 2010, former Finance Minister Adel al-Qadah, wealthy businessman Khaled Shaheen, the Prime Minister's economic adviser Mohammed al-Rawashdeh, and former Petroleum official Ahmed al-Rifa'I were arrested over allegations of corruption.
Societal interests in Jordan are generally not channelled through political parties, but through informal networks. Favouritism, cronyism, nepotism and bribery, as in the use of influence or personal and business connections to gain favours, such as jobs or access to goods and services, are covered by a particular phenomenon known as wasta. Literally, wasta means the middle-man; the connection linking two parties. According to a 2006 survey by the Centre for Strategic Studies of the University of Jordan, 46% of the respondents (the general public, businesspeople, journalists, politicians, political party leaders, and academics) believed that corruption had increased over the previous few years and the majority perceived both the public and private sector to be corrupt. Moreover, according to corruption study by Jordan Transparency Forum and the Centre for Strategic Studies at the University of Jordan, cited in two December 2009 articles, public trust in the government was recorded as very low as only 48% of the public considered governmental anti-corruption efforts to be effective; 87% believed that the wasta phenomenon would persist while 91.3% did not even consider wasta and favouritism to be corruption. This suggests perhaps that corrupt behaviour has become a norm embedded into daily life and that anti-corruption efforts will therefore not payoff overnight in Jordan.
Business and Corruption
Despite the absence of any significant natural resources, Jordan has succeeded in attracting foreign investments through economic reforms and has shown solid economic growth rates. During the reign of Abdullah II, Jordan has generally developed into a competitive and market-based economy, and many steps have been taken to attract foreign investors. The king, aware of the high costs of unrest, met in April 2011 with representatives of various economic sectors to listen to proposals in order to safeguard and improve Jordan´s investment potential as an April 2011 article in The Jordan Times explains. The proposals include, for instance, reducing the cost of residential and commercial construction licenses, increasing the ownership of foreigners and facilitate residency measures and travel visas. The representatives have also suggested the establishment of a duty-free business zone. According to the World Economic Forum World Competitiveness Report 2010-2011, corruption is identified by companies to be only relatively problematic in Jordan, and there are still many factors that are considered to be larger constraints, such as tax regulations and tax rates as well as access to financing and inadequately educated workforce. Nevertheless, according to the World Bank & IFC Enterprise Surveys 2006, 41% of the companies surveyed reported that corruption is a major constraint for doing business, while 18% report that they expect to make informal payments to public officials to get things done.
Occurrences of public-private corruption have been reported in the Qualified Industrial Zones (QIZ), in the Aqaba special economic zone, as well as in relation to the misappropriation of government oil revenues. The government encourages foreign investment, but companies should note that the use of wasta to advance business interests is widespread in Jordan. The 'middle-man' or wasta is, indeed, considered to be the most important 'currency'; one that is considered even more effective than bribes. An article states that wasta is deeply embedded into society and a family obligation which makes difficult for officials to uphold the law. According to a 2007 study by the German Development Institute, business executives with more wasta than others have better access to, for example, public sector services, information on business opportunities, government contracts, tax exemptions and political decision-making. At the same time, positions in the public sector are often assigned based on wasta, a situation that leads to overstaffing and the employment of unqualified staff, thus resulting in public services of poor quality and unnecessary and inefficient administrative procedures. The prevalence of wasta also has an impact on the development of the private sector in Jordan, as companies tend to invest money in social relations that will secure them better wasta, rather than in the quality of their products or services. The use of wasta has in part affected some foreign companies and companies operating in Jordan have reported hidden costs stemming from bureaucracy, red tape, vaguely formulated regulations and conflicting jurisdictions. Nearly 28% of companies surveyed by the World Bank & IFC Enterprise Surveys 2006 identify the practices of competitors in the informal sector as a major business constraint. It is recommended that foreign investors therefore implement integrity systems and carry out extensive due diligence when exploring investment opportunities, looking for partners, and concluding purchases agreements.
Since 1999, Jordan has privatised many of its state holdings. A special committee, the Executive Privatisation Commission (EPC) under the supervision of the Higher Privatisation Council and headed by the Prime Minister, is in charge of selecting and assessing privatisation projects, preparing offers for interested parties, appraising submitted offers etc. Jordan's privatisation programme has been praised by the World Bank for finding a good balance between effectiveness and transparency.
Regulatory Environment
Foreign and local investors are equal before the law. However, companies should note that there are some exceptions with regards to which domains foreign companies can invest in. These include activities pertaining to military and national security, as well as customs clearance services and land transportation. In some sectors and services, such as printing/publishing and maintenance of aircrafts or maritime vessels, foreign companies are only allowed 50% ownership. Jordan offers investment incentives in the form of exemptions on income tax and customs-duties. The level of exemptions varies depending on the geographical area wher investments are made, meaning that investments in the least developed areas receive the highest level of tax exemptions and vice-versa. More information can be found under the Investment Promotion Law of 1995. In a March 2011 article in Al-Dostour, the government is prepared to give exemptions and tax incentives reaching up to 20 and 30 years in an effort to encourage investment and economic growth in Jordan. According to the US Department of State 2011, exemptions will be made in accordance with the value the project as well as to the number of Jordanians employed. It is also stated that an amount of JOD 50,000 (USD 70,000) is required in order for foreign investors to register in Jordan and explains that local and foreign investments are screened by the Jordan Investment Board’s Incentives Committee and that the involvement of government officials in large projects helps to ensure overall governmental cooperation in project implementation. For more information on investment restrictions and incentives, see the US Department of State 2011.
According to the World Bank & IFC Doing Business 2011, Jordan is not ranked among the Arabic region's most efficient regulatory climates, but improvements have been made in relation to getting construction permits and trading across borders; yet procedures for starting a business, registering property, protecting investors and enforcing contracts remain relatively cumbersome. In addition, the US Department of State 2011 reports that the Jordanian government has been working towards making its procurement procedures, regulations and other services more transparent and accessible by promoting e-governance. The implementation of e-government has reportedly been slow, but company registration is now available online on the website of the Jordan Investment Board. Programs to register business, file complaints, and view tax records, existing and pending legislation, and traffic violations are now available online. In addition, a national call centre to answer government service-related questions was opened in 2008. Although numerous procedures have been streamlined, many remain non-transparent and, along with red tape, continue to pose problems to foreign and local investors. According to the World Bank & IFC Enterprise Surveys 2006, senior management can expect to spend an average of nearly 7% of its time dealing with the requirement of government regulations. Most bureaucratic obstacles and delays remain at the level of local government - especially the application of customs, tax and labour laws is arbitrary and acts as an impediment to investment.
Private property is well-defined and protected through sound legal processes, and there are no serious limitations to the acquisition, benefits and sale or use of property. The acquisition of property by foreigners is based on the principle of reciprocity. However, some areas are subject to different provisions and procedures. Expropriation is not permitted unless it is deemed to be in the public interest, in which case fair compensation in convertible currency is then provided to the investor. With regards to the resolution of disputes, Jordanian law stipulates that companies can seek third party arbitration or an internationally recognised settlement of disputes. Jordan is member of the International Centre for the Settlement of Investment Disputes (ICSID) and of the New York Convention of 1958. While some observers have noted the lack of transparency in connection with the settlement of disputes, others report that the judiciary has ruled to the advantage of foreign companies and that the judiciary is not significantly corrupt. Access the Lexadin World Law Guide for a collection of legislation in Jordan.
