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ery and semi-finished goods. Although high larift rates are imposed on many consumer and luxury goods, tarist reducing measures have reæntly been taken. In November, for instance, the government' announced a duty reduction on auto mobiles, previously ranging from 110 L 310 percent, lo 44 to 200 percent. Also an. nounced were tarily reductions to 50 percent on numerous consumer products.
In recent years, customs collections have yielded a lower percentage of total gov. ernment revenues as other taxes have assumed greater importance. In June, 1994 the government enacted a general sales tax to replace a previously.imposed con. sumption tax. The sales tax applies to all durable and consumer goods except food staples and health care and education related products. An income tax is levied at a maximum marginal rate of 40 percent for all businesses. The marginal tax rale on individual income is capped at 65 percent, with high personal, educational and medical deductions permitted. Interest, dividend and capital gains earnings are ex. empt from taxation, except for income earned by financial institutions. In addition, income derived from agriculture is exempt. The government plans to submit changes to the income tax law to parliament in November, 1994 that will extend its coverage to capital gains in property and stock market transactions and limit total liability to 35-40 percent of income.
Regulatory Policies: Jordanian regulations pertaining to the licensing and oper. ations of regional offices of foreign firms are fairly clear. However, local American businessmen complain of difficulties with customs authorities regarding taris exemptions and licensing. Potential investors note that cumbersome and time consuming procedures delay registration and government approval of their projects. In Au. gust 1994, King Hussein announæd the formation of a Royal Development and Mod. ernization Commission under the leadership of Crown Prince Hassan. One of the Commission's stated goals is the facilitation of foreign investment through the elimination of major regulatory and bureaucratic impediments and disincentives. In one of its first recommendations, the Commission has proposed the establishment of a centralized office for foreign investment applications. 4. Debt Management Policies
Jordan's external debt as of December 1, 1993 stood at 6.8 billion dollars, about 130 percent of GDP. A week later, the government reached agreement in rescheduling its $895 million commercial debt under terms finalized with the London Club. Commercial creditors agreed to sell up to 35 percent of principal with a discount of 35 percent, on which Jordan would pay 50 percent of outstanding interest. The rest of the principal (at least 65 percent) was converted into 30-year par-value bonds guaranteed by U.S. zero interest cou pon bonds. Under this option, Jordan agreed to immediately pay ten percent of outstanding interest while converting the remainder into 12-year dollar bonds payable in 19 semi-annual installments after a threeyear grace period. The London Club agreement helped Jordan reduce 60 percent of its debt to the Club, or 12 percent of its total external debt.
Following successful negotiations in June 1994, Jordan and its bilateral creditors in the Paris Club reached a $1.2 billion debt rescheduling agreement covering principal and interest payments falling due between 1994 and 1997 in addition to arrearages from the first half of 1994.
Despite its success at rescheduling its foreign debt, the Jordanian government continued to pressure its bilateral creditors for debt forgiveness. After the Washington Declaration of King Hussein and Prime Minister Rabin of Israel in July 1994, the United States agreed to write off $705 million of Jordanian debt over a threeyear period. An agreement was signed in September 1994 to forgive the first tranche of $220 million. Other bilateral creditors have followed the United States' example. The United Kingdom, Germany and France agreed to write off $90 million, $53 million and $4.5 million, respectively. Even with these commitments, Jordan's total foreign debt remains above five billion dollars, one of the highest in the world on a per capita basis. 5. Significant Barriers to U.S. Exports
Import Licenses: The 1993 Import and Export Law abolished import licensing requirement. But due to the lack of implementing regulations, the Jordanian Customs Department continues to require licenses on all imports except for certain exemptions for agricultural commodities and imports by the royal family and government agencies. The continued need for import licenses, which are tied to the issuance of foreign exchange permits controlled by the Central Bank of Jordan (CBJ), hampers the free flow of trade between the United States and Jordan.
Standards, Testing, Labeling, and Certification: All imports to Jordan are subject to the approval of the Standards and Measures Department. Foodstuffs and medicines must undergo laboratory testing and certification. Local traders who regularly
import from the United States complain that Jordanian testing standards for consumer and durable items are not fully transparent. They also complain that they are routinely fined for importing U.S. products that contain parts and components made outside the U.S.
Investment Barriers: There are no restrictions on the degree of foreign ownership in manufacturing enterprises. However, foreigners may not own more than 49 per. cent of hotels, restaurants, banks and businesses engaged in trading and transport. Although the government officially encourages foreign investment, an application requires prior approval by the Council of Ministers, which is often a lengthy process. To facilitate foreign investment, the Jordan Investment Promotion Department was separated from the Ministry of Industry and Trade and made an independent agency in January 1994. The Jordan Investment Corporation, a government agency that manages the pension fund of civil service employees, encourages foreign participation in projects that it promotes.
Government Procurement Practices: All government purchases, with a few exceptions, are made by the General Supplies Department of the Ministry of Finance. Foreign bidders are permitted to compete directly with local counterparts in international tenders financed by the World Bank. However, local tenders are not directly open to foreign suppliers. By law, foreign companies must submit bids through their agents. While Jordan's procurement law does not permit non-competitive bidding, the law does not prohibit a government agency from pursuing a selective tendering process. In addition to the review committees at the Central Tenders and the General Supplies Departments, the law gives the tender issuing department the right to accept or reject any bid while withholding information on its decisions. Foreign bidders may seek recourse only through the Jordanian legal system. In response to a recommendation of the Royal Development and Modernization Commission, a higher procurement commission was created in October 1994 to monitor the procedures of the Supplies Department.
Customs Procedures: Businessmen often comment that customs procedures are the greatest impediment to doing business in Jordan. While the government has often promised to reform its customs regime, overlapping areas of authority and numerous signature clearance requirements remain in place. Actual commodity, appraisal and tariff assessment practices commonly differ from written regulations. Customs officers often make discretionary decisions about tariff and tax applications when regulations and instructions are conflicting. To secure tariff exemptions, businessmen must document that imported raw materials will be used in export production, and that the final product will have at least a 40 percent Jordanian valueadded content. The Director General of Customs may grant temporary admission status to certain goods such as heavy machinery and equipment used for executing government or government-approved projects. Foreign construction companies operating alone or with Jordanian partners may apply for this temporary admission status. The government plans to present amendments to the customs law to Parliament in November 1994. These will delegate greater authority from the Minister of Finance to the Customs Department director, giving him increased discretionary powers to investigate violations and order confiscations. 6. Export Subsidies Policies
Under Central Bank regulations, 70 percent of profits earned from exports is exempted from corporate income tax, with a maximum exemption of 30 percent of a company's total income. Excluded are exports under bilateral trade protocols and phosphate, potash and fertilizer exports. The Central Bank has also implemented other export financing measures, such as reducing interest rates on advances from eleven to six percent, reducing the value-added requirement for financing from 40 percent to 25 percent, excluding export advances from outstanding lines of credit, offering long-term export financing for up to five years, and permitting the Industrial Development Bank to offer export financing loans on machinery imports for up to five years at no more than 8.5 percent interest. 7. Protection of U.S. Intellectual Property
Jordan is a member of the World Intellectual Property Organization (WIPO) and a party to the Paris Convention for Protection of Industrial Property. Domestically, Jordan's copyright law, passed by Parliament in 1992, is the country's only recent effort to extend legal protection to foreign intellectual property. The Trademark and Patents and Designs Laws have not been amended since the early 1960's. The Copy. right law deals with all aspects relating to the exclusive rights to 1) copy or reproduce works, 2) translate, revise, or otherwise adapt or prepare program derivatives work, and 3) distribute or publicly communicate copies of the work. Royalties may be remitted abroad under licensing agreements approved by the Ministry of Industry and Trade. However, only the intellectual property of Jordanian and foreign au. thors who register their works inside the kingdom are protected by law. Ininingement of U.S. intellectual property rights is not subject to any penaltica.
The government has not yet begun to enforce its copyrigtit law. The pirating of audio and video tapes for commercial purposes is a widespread practice, over which the government exercises no control. Pirated books are also mold in Jordan, although few, if any, are published within the country. Although the government announced that it would issue strict measures on copyright protection in January 1994, it has issued only procedural notes for existing regulations thussar
Patents (product and process) must be registered at the Ministry of Industry and Trade to receive protection. A foreign company may register a patent by sending a power of attorney to a local patent agent or lawyer. Registration may be renewed once for a period of 14 years. Protection under the law is only available to domestic and foreign patents that are registered in Jordan. Insningement of a foreign patent, such as a manufacturing process for a chemical compound, is considered to be a vio lation by Jordanian courts only if it is proved to be an exact duplication.
New Technologies: Computer software piracy is rampant in Jordan's small, but growing, computer market. The Government of Jordan has announced that it will give priority to protecting computer software copyrights, but has not yet taken any action or issued clear policy directives.
There is no agreement between the United States and Jordan concerning the pro tection of U.S. exports of intellectual property. Although the impact of this lack of protection may not have been severe enough to cause losses to U.S. firms, it has created lost opportunities. 8. Worker Rights
a. The Right of Association.-While Jordanians are free to join labor unions, only about 10 percent of the work force is unionized. Unions represent their membership in dealing with issues such as wages, working conditions and worker layoffs. Seventeen unions make up the General Federation of Jordanian Trade Unions (GFJTU). The GFJTU actively participates in the International Labor Organization.
b. The Right to Organize and Bargain Collectively.--GFJTU member unions regu. larly engage in collective bargaining with employers. Negotiations cover a wide range of issues, including salaries, safety standards, working conditions and health and life insurance. If a union is unable to reach agreement with an employer, the dispute is referred to the Ministry of Labor for arbitration. If the Ministry fails to act within two weeks, the union may strike. Arbitration is the usual means of resolving disputes, and labor actions are generally low-key and do not lead to strikes.
c. Prohibition of Forced Compulsory Labor
d. Minimum Age of Employmeni of Children.-Children under age 16 are not permitted to work except in the case of professional apprentices, who may leave the standard educational track and begin part-time (up to 6 hours a day) training at
e. Acceptable Conditions of Work.—Jordan's workers are protected by a comprehensive labor code, enforced by 30 full-time Ministry of Labor inspectors. There is no comprehensive minimum wage in Jordan. The government maintains and periodically adjusts a minimum wage schedule of various trades, based on recommendations of an advisory panel consisting of representatives of workers, employers and the government. Maximum working hours are 48 per week, with the exception of hotel, bar, restaurant and movie theater employees, who can work up to 54 hours. Working conditions and minimum wage for foreign workers are stipulated in bilateral treaties, but are not strictly enforced or consistently adhered to. Jordan also has a workers' compensation law and a social security system which cover companies with more than five employees. A new drast labor law is under consideration, but does not appear to be a high priority.
f. Rights in Sectors with U.S. Investment.-Workers' rights in sectors with U.S. investment do not differ from those in other sectors of the Jordanian economy.
Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1993
(Millions of U.S. dollars)
Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1993—Continued
(Millions of U.S. dollars)
1 Suppressed to avoid disclosing data of individual companies.
Less than $500,000.
Income, Production and Employment:
Real GDP (1985 prices)
Government Health Education
Unemployment Rate (pct.)
Money Supply (M2) ...
Exchange Rate (USD/KD)
Exports to U.S. Total Imports (CIF)
Imports from U.S.
46.0 340.0 723.8 703.4
71.0 323.7 761.3 738.4
39 178 418 355 N/A 438 N/A 3,222
Key Economic Indicators Continued
(Millions of U.S. dollars unless otherwise noted]
Aid from U.S.
0 Aid from Other Countries
0 External Public Debt .....
5,500 5,500 6,216 Debt Service Payments (paid)
60 Gold and Foreign Exch. Reserves
3,104 4,034 3,847 Trade Balance
- 546 3,502
968 Trade Balance with U.S.
324 NA-Not available. 1 1994 figures are for the first and second quarters only. For first half of year, annual rate would be USD 24,152. These statistics are based on the Central Bank of Kuwait's The Economic Report 1990-1992" and "The Economic Report 1993." These reports reflects a number of post-liberation revisions and additions in statistics. Hence, previous statistical series should be revised to reflect current data. The estimates for the first two quarters of 1994 are U.S. Embassy estimates based on Central Bank of Kuwait data and general trends in the economy. The publications cited are avail. able from the Central Bank of Kuwait.
•May 1990 equals 100-actually the CBK domestic price index. 1. General Policy Framework
Kuwait is a politically stable emirate where rule of law prevails. The press is free and commercial advertising is available. Arabic is the official language but English is widely spoken. Kuwait has a small and relatively open, oil-rich economy which has created an affluent citizenry who benefit from a generous welfare state. In 1989, Kuwait's population was 2.3 million. Its current population is 1,752,000, of whom approximately 669,000 are Kuwaiti citizens. Kuwait's proven crude oil reserves amount to approximately 94 billion barrels (i.e., ten percent of total world reserves) making Kuwait, potentially, a very rich nation well into the next century.
The Kuwaiti economy has been subject to several severe shocks over the past two decades. These include a massive increase in government intervention and control of the commercial economy during the late 1970's and early 1980’s; the collapse of the Souk al Manakh-an unregulated curbside securities market in 1982; the collapse of world oil prices during the mid-1980's; the Iraqi invasion of 1990 and the massive rebuilding effort undertaken after the liberation in 1991. The Kuwaiti budget for FY 94/95 will be in deficit by over 1.7 billion Kuwaiti Dinars (USD 5.8 billion). Revenues will be KD 2,637.2 billion, virtually all from oil. FY 94/95 revenues will be 6.5 percent less than FY 93/94 projections while expenditures will be 11 percent higher than FY/94. The deficit increase is caused in part by the inclusion in the budget of almost KD 450 million (USD 1.5 billion) of arms purchases that were included in supplemental budgets rather than the regular budget.
A World Bank report summary, published in the local English press in the summer of 1993, advocates an economic program that will reduce the deficit, privatize many government-owned companies and services, reduce subsidies and promote employment of Kuwaiti citizens in the private sector. Most officials agree with the overall conclusions of the report. That said, little has been done to date to move toward specific implementation of the report's recommendations.
A “difficult debts” law passed the National Assembly in 1993. The Government of Kuwait purchased the commercial debts of the banking system with USD 20 billion worth of government bonds. The debtors were given the option of a twelve-year interest-free rescheduling of their debt or an “immediate payment" of approximately 45 percent of the balance of the debt. Local banks are administering the program for the Government of Kuwait. The law contains a September 1995 “immediate payment” deadline which has led to a more conservative investment posture on the part of the private sector. There may be revisions in the regulations governing the law. 2. Exchange Rate Policies
There are no restrictions on current or capital account transactions in Kuwait, beyond a requirement that all foreign exchange purchases be made through a bank or licensed foreign exchange dealer. Equity, loan capital, interest, dividends, profits, royalties, fees and personal savings can all
' be transferred in or out of Kuwait with out hindrance. The Central Bank maintained this policy during the uncertainties of October 1994 when Iraq mounted a serious threat on Kuwait's border. The Kuwaiti Dinar itself is freely convertible at an exchange rate calculated daily on the basi of a basket of currencies which reflects Kuwait's trade and capital flows. In practic