In late 1995, a new Sales Tax
Law was passed, increasing the General Sales Tax rate and expanding its coverage. This new
tax structure aims at boosting the level of savings and investment and decreasing
consumption to manageable levels as noted earlier.
The Investment Promotion Law
This law, which was passed in 1995, provides both Jordanian and
foreign investors with additional incentives and tax exemptions. Projects in the industry,
agriculture, hotel, hospital, leisure recreational and touristic facilities, conference
and exhibition, centers, maritime transport and railway sectors now enjoy a number of
additional exemptions. The law has been recently amended to allow non-Jordanians to
entirely own and operate any project or activity in Jordan with the exception of three
sectors: construction contracting, trade and trade services, and mining. In other words,
under the amended law, national treatment is offered to all investors in most sectors and
MFN treatment is offered to investors in all sectors.
In the field of income and
social services tax exemptions, the Investment Promotion Law divides the Kingdom into
three different regions-A, B and C-according to the level of economic development. The
percentage of exemption depends on the location of the project as follows: 25% if the
project is in a class A development area, 50% if the project is in a class B development
area and 75 % if the project is in a class C development area. These projects will receive
what is called a “tax holiday” of 10 years, and these exemptions apply to the
already lowered income tax scale described previously. Projects being planned at one of
Amman's industrial areas-Sahab or El-Hassan Industrial Estate-receive another
“holiday” for two additional years.
The new Investment Promotion
Law also established the Investment Promotion Corporation (IPC), which is responsible for
marketing Jordanian investment opportunities internationally. The IPC works to create
linkages between national and foreign companies through joint ventures, and assists
investors at all stages of the investment cycle.
The Investment Promotion
Corporation enjoys financial and administrative independence. Specifically, it works to
identify investment opportunities and promote investment in them. It offers a
"one-stop window" at which investors can acquire all the necessary licenses and
permits from the proper authorities. It also provides advice, information and manuals to
interested investors.
The Securities Law
Jordan has one of the most
developed and fastest growing stock markets in the region. With a market capitalization
close to US$ 5 billion, the Amman Financial Market (AFM) is one of the largest Arab stock
markets that is open to foreign investors. Today, the AFM is considered the most
sophisticated financial market among the Arab countries. The role of the capital market in
Jordan's national economy is highlighted by the Amman Financial Market's 77% ratio of
market capitalization to GDP. This is one of the highest ratios among emerging markets,
indicating both a well-established stock market and a relatively high level of securities
trading.
Market capitalization at the
AFM has undergone accelerated growth in recent years, rising by 158% over the last five
years. About 39% of market value is owned by non-Jordanians. The government of Jordan,
through the Jordan Investment Corporation, owns approximately 18% of total market
capitalization. The banking and finance sector leads the market with 54.4% of total market
capitalization. The industrial sector ranks second with 33% of capitalization, with the
service and insurance sectors representing 10.3% and 1.5% respectively.
Trading at the AFM is
currently based on open outcry on the trading floor. However, in October 1996 a deal was
signed to make trading fully automatic by the end of 1998. This project, which is perhaps
the most important development in the history of the Jordanian stock market, will allow
every transaction taking place at the AFM to be conducted through a central computer
network. The process will allow quick documentation of all dealings, and, more
importantly, it will offer easy access for investors into details of the market situation
and thus facilitate the entry of foreign capital into the market.
In June 1997, a modern
Securities Law was enacted. The law separates the regulatory function from the technical
side of the market. It created a regulatory body, the Jordan Securities and Exchange
Commission (JSEC), with broad and well-defined powers over non-banking financial services,
to organize, develop and monitor the securities market. The objectives of the new
organization and its legal framework are to: adhere to internationally accepted and proven
standards and practices to increase investor confidence and interest; standardize market
practices and protect investor rights; establish a completely transparent,
well-functioning and regulated capital market; achieve effective and efficient
institutional operations; maintain a transparent flow of information among market
institutions, participants and investors; create sophisticated, professional and efficient
organizational and administrative functions of market institutions and the JSEC.
In addition to the JSEC, the
government is establishing four other entities: a private sector stock exchange, Jordan
Stock Exchange (JSE); a private sector depository, Jordan Stock Depository (JSD); an
institute to provide proper training concerning dealing in securities, and an association
to represent private sector participants in the securities industry in their dealings with
the JSEC. Considerable progress is being made in enhancing the technical expertise of the
stock exchange by computerizing the activities of the JSE and JSD, and the AFM.
The Insurance Law
Jordan is in the process of
drafting and adopting a new Insurance Law and creating a new independent Insurance
Supervisory Agency (ISA). The objectives of the law are to: strengthen the insurance
market and coverage while protecting consumers; harmonize laws and regulations with
international standards; strengthen the insurance supervisory body through a twinning
agreement with a European insurance controllers office (there is a proposed twinning
agreement with the Irish Insurance Controller's Office) which would provide a vehicle for
the transfer of know-how and technical expertise.
The new law will adopt
European Union solvency margins to ensure that companies maintain an adequate capital base
and discourage inefficient low premiums. The ISA will monitor insurance companies to
ensure that they maintain required levels of insolvency margins.
The Secured Financing and Leasing Law
The government is expected to
submit to parliament shortly a Draft Secured Financing and Leasing Law. The law is
expected to enhance financial growth by providing risk management tools and improving
security through lease financing and increased asset-backed lending using movable property
as collateral. The law provides legal bases for lease financing and for using movable
property as collateral. Additionally, to facilitate the proper implementation of the law,
a computer-based Register of Interests in Movable Property (RIMP) would be established
with both registration and inquiry functions.
The Mutual Funds and Trust Law
A trust law is in the drafting
stage to create the necessary environment for private sector mutual funds, which are at
the center of the financial sector reform strategy. The law would regulate: the standards
and fiduciary duties of administrators to beneficiaries and to third parties; requirements
for security and insurance; delegation of authority; presumptions of sound investment;
apportionment profits and expenditures; accounts, reporting, and disclosure; termination;
and liabilities, warranties, and status in solvency.
The Safeguard Law
This law has been drafted to
protect domestic industry from dumping or any other illegal practices that may arise in
international trade. It is consistent with the safeguard measures provided in the
agreements administered by the WTO and internationally recognized best practices.
The Competition (Antitrust) Law
The government drafted this
law with participation from the private sector in an up-to-date manner that aims at
encouraging competition in domestic markets, improving existing market structures,
fostering economic efficiency and enhancing consumer welfare. Furthermore, the law
addresses issues related to entry barriers to trade, and advocates sound, internationally
recognized and accepted business practices.
The Companies Law
The new law has been drafted
as an amendment to the previous Companies Law. Under the amended law: approval
requirements for several sector-specific economic activities are abolished; company
registration requirements are simplified; other previously centralized and duplicated
licensing requirements are annulled; and, corporate governance and finance are improved.
The Customs Law
This law is consistent with
WTO requirements, and establishes the principle of invoice-based valuation of goods
combined with a post-auditing system. Furthermore, the principle of self-declaration will
be implemented upon completion of the computerization of the Customs Department. The law
allows for voluntary pre-shipment valuation by international companies, as well as a
"green channel" for exporters. Customs procedures are streamlined and the
delivery of goods and services is enhanced via efficient, state-of-the-art techniques that
reduce costs to importers and exporters, thereby increasing productivity and efficiency.
In order to further boost
Jordan's attractiveness to investors and strengthen the Kingdom's export competitiveness,
the government recently cancelled all customs duties on 492 capital imports. Moreover, in
recognition of the pivotal role of the private sector in expanding exports, and keeping in
line with the overall drive toward liberalizing the economy, the government has taken a
number of steps to improve the capacity of national industries for competing in
international markets. Within this framework, a project for modernizing and upgrading the
efficiency of the customs system was launched in mid-1997 and is now well underway.
A key component of the project
involves the computerization of procedures and data through the introduction of an
Automated System for Customs Data and Management (ASYCUDA), which is recognized as the
international standard for customs clearance and information. The new system will play a
vital role in the government's implementation of an effective economic and fiscal policy
by providing policy makers with accurate and timely trade and revenue data. ASYCUDA will
enable the customs department to disseminate trade-related information to relevant
institutions as well as to importers and exporters. It will facilitate exporting
procedures by permitting established exporters to benefit from the establishment and use
of the "green channel" in importing materials, equipment, and components used in
the production of exports.
Intellectual Property Rights (IPR) Legislation
Also under consideration is a
new Copyright Law that is consistent with the guidelines of the World Intellectual
Property Rights Organization (WIPO) and the Trade Related Aspects of Intellectual Property
Rights (TRIPS) Agreement of the WTO. In addition, the Trademark Law and the Patent Law are
being made consistent with TRIPS. Also, a WTO and WIPO compatible Copyrights Law has
recently been passed. These pieces of legislation are being introduced to protect the
rights of creative persons in all fields, including authors, publishers, inventors,
innovators, composers and others. The new legislation enhances present IPR laws and
enables their efficient implementation in Jordan.
