“Incentives As a Promotional Tools for Foreign Direct Investor (FDI) in Jordan” – with special emphasis on the role of Jordan Government”

Abstract

Jordan Government encourage foreign direct Investment (FDI) and is undertaking steps to improve the investment climate, most notably through the adoption of a new foreign direct investment law and the establishment of Investment Encouragement Department. The Improvement of the investment climate is an important part of the government's broader program to liberalize the country's trade and investment regime, diversify an economic overly depending on agriculture, tourism, manufacturing and join the world Trade Organization (WTO). The Government of Jordan promotes foreign investment in different ways, such as providing facilities to foreign Direct Investors (FDI). Foreign and Domestic investment in Jordan is regulated by the Investment Promotion Law no. 16 of 1995, and it's regulations no. 2 of 1996 and no. 39 of 1997. The law grants incentives to projects in Industry, Agriculture, Hotels, Hospitals, rail transportation, leisure and recreation, and convention and exhibition centers. The law also permits the Council of Ministers to designate other economic sectors for exemption. Non-Jordanians may invest in Jordan through full or partial ownership of investment projects, or by purchasing shares listed on the Amman Financial Market. Transactions involving the latter are carried out via licensed brokers. The Investment Law, which was passed in the year 1995, eased restrictions on international investments, allowing Foreign Investment in all projects and sectors, removing maximum foreign share holding limits, and reducing minimum capital investment requirements. Investors also have the right to repatriate capital, profits and dividends in any convertible foreign currency. Foreign companies are able to participate in public share holding companies with the approval of the Council of Ministers. Investors may open branches in Jordan after they have obtained a contract. Foreign companies wishing to register a regional office in Jordan receive certain customs duty exemptions including the exceptions of tax on the salaries of non Jordanian employees. Jordan Government is continuing to promote foreign Investors to enter its qualifying Industrial Zones (QIZ), which were established in 1988. Companies operating in the QIZ are allowed duty free entry to the US market if they can meet certain requirements, including securing joint Jordanian - Israeli input into their products. To qualify for a QIZ, 35% of the product must derive from materials produced in the QIZ, and the Jordanian and Israeli partners will each contribute one - third of the direct cost of production. QIZ have already led to several multi - Million dollar joint ventures between Jordanian and American firms that have generated thousands of jobs. In addition to the QIZ, the government has developed the Aqaba Special Economic Zone (SEZ). Within the zone, investors enjoy a range of privileges including full freedom from customs duties; a 5 percent income tax and 7 percent retail tax, compared with the 13 percent now in force in the rest of Jordan. The above mentioned introduction about the role Jordan Government plays in promoting foreign Direct Investment gives the researchers the power to identify the main tools Jordan Government utilized in fostering and encouraging FDI in Jordan.