Overseas Business Risk – Jordan
Political and Economic
Jordan has a . King Abdullah II is the ultimate decision-making authority and he has the power to dissolve parliament and to appoint the Prime Minister. That said, the popularly elected national assembly has some input into the policy making process. The country’s political power structure is divided along lines of tribal affiliation as opposed to party politics.
King Abdullah II succeeded his father King Hussein following the latter’s death in February 1999. King Abdullah moved quickly to reaffirm Jordan’s peace treaty with Israel and its relations with the United States. King Abdullah, during the first year in power, refocused the government’s agenda on economic reform.
Legislative power rests in the bicameral National Assembly. The National Assembly (Majlis al-Umma) has two chambers. The Chamber of Deputies (Majlis al-Nuwaab) has 110 members, 104 elected for a four year term in single-seat constituencies and 6 female members by a special electoral college. The Assembly of Senators (Majlis al-Aayan) has 40 members appointed by the king for an 8-year term. The Assembly of Senators is responsible to the Chamber of Deputies and can be removed by a "vote of no confidence".
The ongoing Arab-Israeli conflict and the Gulf war have had a huge impact on the economy of Jordan, as a large number of Palestinians, Lebanese and Iraqis have flooded into the country, which in turn has stretched the government’s finite resources. The recent Arab uprising resulted in a number of weekly demonstrations, which were modest in size but which have resulted in number political reforms. Jordan is currently being considered for GCC membership and it remains a key partner for the UK and EU, as it sits geographically between Iraq, Israel, Syria and Saudi Arabia.
Jordan’s economy has seen growth of around 6%-7% every year since 2000, reaching highs of 8% in 2004 and 7.8% in 2008. Whilst the world financial crisis slowed growth to 2.8% in 2009, it did not stop it. Growth is expected to be around 3% in 2011.
Jordan’s unique position in the Middle East, coupled with its track record of stability and openness, means that it can be an attractive starter market in the region. Jordan is a stable and democratic country and is regarded as a moderate beacon in a volatile region. Limited in natural resources, Jordan depends on its educated population, its political stability and its integration with world and regional markets. There has been a long standing policy of signing Free Trade Agreements with a wide range of countries and regions to facilitate easier trade and investment. The Central Bank is a regional role model in terms of the stringent controls that were maintained over the banking sector and as result; Jordan was not as exposed as some markets to the credit problems. Jordan has successfully attracted significant investments, especially from the Gulf countries
Jordan’s focus on attracting investments has resulted in the creation of Development Zones in key locations across the country. This offers specialised business clusters, reliable infrastructure, proximity to resources and markets, in addition to a package of fiscal incentives. Whilst UK investments in Jordan have amounted to over £200 million in recent years, new contracts have been signed with Shell (oil shale) and BP (gas) and other UK companies like HSBC, Standard Chartered and Halcrow are all present in the market. Jordan has traditionally been seen as a hub for doing business in Iraq, with an estimated 450,000 Iraqi nationals based in Amman. Most leading Iraqi businesses have their headquarters in Jordan.
Jordan’s healthcare services and facilities are regionally recognised as very advanced. Existing hospitals are expanding and renovating their facilities, while new private and public sector facilities continue to be established. ICT is the third largest contributor to Jordan’s economy with revenues accounting for 12% of Jordan’s GDP.
Despite the world economic turndown, the construction sector is still active in Jordan. Interest in the sector from Arab developers is increasing as Jordan is viewed as an economically and politically stable country in the Middle East. In 2009 the developer Almaabar UAE announced a US$10 billion project in Aqaba and a US$200 million project which comprises a five-star hotel and several residential apartments. There is an increasing demand for building materials and techniques that are considered “green”
With around 67% of Jordan’s population under the age of 30 and a relatively high population growth rate, Jordan has a strong and diverse talent pool. In addition, English is widely spoken, especially within the business community and the younger generation, so it is an attractive market for UK companies.
The Jordanian Constitution and Human Rights Treaty ratifications are designed to protect freedom of association and the right to organise. Jordan was also the first Arab country to enter into a Free Trade Agreement (FTA) with the United States that committed the country to uphold core labour standards.
The International Labour Organization (ILO) and the General Federation of Jordanian Trade Unions (GFJTU) have highlighted some concerns with foreign workers employed in the Qualifying Industrial Zones (QIZs). In particular, there were some specific concerns about the general working conditions, the long hours and the limited rights of the employees. As a result of this and other similar concerns about domestic workers, the Philippine government imposed a ban on its citizens working in Jordan. Child labour is another serious issue that the Jordanian Government are actively trying to tackle. They are working hard to encourage children to attend school rather than start working, although this is still a problem area, particularly in the economically deprived areas of the country.
Whilst there has been some improvement in the area of woman’s rights, the female labour force is still very low and female unemployment rates are still very high.
Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.
In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
Although companies operating in Jordan rank corruption as a problematic factor for doing business in the World Economic Forum there are still many factors that are considered to be larger constraints, such as inefficient government bureaucracy, tax rates and regulations, inflation and lack of infrastructure and educated workforce. Nevertheless, according to the World Bank & IFC , 41% of the companies surveyed reported that corruption is a major constraint for doing business. 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 nepotism to advance business interests is very widespread in Jordan. This has in part affected some foreign companies and large American companies operating in Jordan have reported hidden costs stemming from bureaucracy, red tape, vaguely formulated regulations and conflicting jurisdictions. 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. The government though is working hard to tackle this problem and indeed, a number of cases of possible high level corruption are currently under review.
Since 1999, Jordan has privatised many of its state holdings with proceeds from the sales amounting to USD 1 billion since 1999. A special committee, the Executive Privatisation Commission (EPC) under the supervision of the higher privatisation council headed by the Prime Minister, is in charge of selecting and assessing privatisation projects and preparing offers for interested parties. Jordan’s privatisation programme has been praised by the World Bank for finding a good balance between effectiveness and transparency, while reports that the sale and privatisation of government assets have lacked transparency. This is partly due to the fact that the process of privatising a company is decentralised and public investment can be carried out by different ministries. The soundness of the privatisation process has also been affected by the fact that it is not necessarily the economic goals or fair competition that determine what is privatised, nor who is allowed to buy up the assets, but rather political considerations.
The threat of terrorism remains high in Jordan. Transnational terrorist groups, as well as less sophisticated local elements, have demonstrated the capability to plan and implement attacks in Jordan. The Al-Qaida in Iraq network in particular continues to carry out terrorist activities against U.S. and Government of Jordan (GOJ) targets in Jordan. The assassination of U.S. diplomat Larry Foley outside his west Amman residence in 2002 was attributed to the Al-Qaida in Iraq network. The same network claimed responsibility for the Aqaba rocket attacks in 2005, targeting a U.S. naval ship, which killed one Jordanian soldier and wounded another. The Al-Qaida in Iraq network also claimed responsibility for the 2005, bombings of three international hotels in Amman that killed 60 people and injured over 100. Other terror plots have been foiled in recent years. However, terrorists detonated a roadside IED near an Israeli diplomatic motorcade travelling on the Dead Sea highway in 2010. In April this year, a rocket landed at a refrigeration warehouse outside Aqaba.
Protective Security Advice
Crime is generally not a serious problem for travellers in Jordan but local media sources have reported a slight increase in petty crime, especially in the narrow streets of the older parts of the city centre. Visitors are urged to be more guarded in these areas and also, Jordanian police have warned visitors to exercise vigilance when leaving banks or ATMs, as thieves have reportedly preyed upon persons soon after using these services.
Whilst the number of demonstrations has decreased recently, small demonstrations still do take place, normally on a Friday afternoon, so it is advisable to avoid these areas, which are generally around the downtown area of Amman.
Western women, both visiting and residing in Jordan, have reported sexual harassment, stalking, and unwelcome advances of a sexual nature. There have also been isolated reports of harassment and sexual assault, many involving taxis and taxi drivers. Incidents typically involve verbal sexual harassment, staring, or following the victim after the victim exits the taxi but there are occasional violent attacks. Women are advised to take reasonable precautions, including dressing conservatively, not travelling alone, and avoiding travel to unfamiliar areas at night. Women should also never sit in the front seat of a taxi and should always carry a cell phone if possible.
Jordan has worked in close coordination with Arab governments and multilateral organizations on introducing an efficient Intellectual Property (IP) system that has brought up significant changes to the region.
With the new system, major multinational corporations have been given the confidence to expand to the region and plan major investments, as they are now assured that their investments are appropriately protected. In addition, the creative Arab individuals such as architects, artists, designers, scientists, musicians and writers are encouraged to render more creations, as their hard work is properly rewarded and their creations are effectively protected.
Jordan also supported governmental committees and officials charged with revising and drafting new laws and regulations for the enforcement of Intellectual Property Rights (IPRs) in several Arab countries such as, Bahrain, Lebanon, Yemen, Oman, Tunisia and the United Arab Emirates.
This commitment to IP protection has been reinforced through Jordan’s continued involvement with international organizations, including the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO); with NGOs such as the International Trademark Association (INTA), International Association for the Protection of Intellectual Property (AIPPI), International Federation of Intellectual Property Attorneys (FICPI) and with our funding of Arab NGOs, such as the Arab Society for Intellectual Property (ASIP) and the Licensing Executives Society-Arab Countries (LES-AC).
Organized crime in Jordan involves little more than small-scale smuggling. The country is not a trans-shipment point for drugs. Foreign firms working in Jordan should expect little or no contact with organized crime.
UK Trade & Investment Contact:
Topics: Insurance & Risk