Merchandise Trade

• The free trade agreements (FTAs) signed by Jordan are slowly reducing the weighted average applied tariff rate, which currently stands at a regionally average 4%. Import tariffs remain considerable for goods arriving from states not covered by FTAs, particularly for foodstuff, clothing and other manufactured products. Beverages and tobacco face the highest tariffs, of up to 81.3%, with the next highest duties dropping to 19.7% for fruits and vegetables.


• Jordan joined the World Trade Organization (WTO) in April 2000 and has been pursuing an open trade regime.


• Jordan has bound its most favoured nation (MFN) tariffs on almost all products, with tariffs levied on an ad valorem basis. The applied MFN tariffs generally range between 0% and 30%, but some products – such as lighters, tobacco products, alcohol and alcoholic beverages – face a tariff up to 200%. Jordan reduced its simple average applied MFN tariff rate from 14.7% in 2000 to 10.2% in 2014, with average rates of 17.4% for agricultural products (WTO definition) and 8.9% for non-agricultural products. Customs duties are assessed on the basis of the cost, insurance and freight (CIF) value of imports on the registration date of the customs valuation form. In 2015 there were 6,767 tariff lines in Jordan's applied MFN tariffs, of which 33.7% of agricultural products and 56.4% of non-agricultural products were duty-free.


• Imports of some agricultural goods remain subject to additional licensing requirements, adding to the bureaucratic burden; however, a number of reforms, including fewer physical inspections of traded goods and the introduction of online customs services, have reduced non-tariff barriers for importers and exporters. This is indicative of continuing improvement to Jordan's operating environment for businesses engaged in international trade. Logistics and security issues will continue to hamper Jordan's cross-border trade in the short term.


• The Jordanian government has worked to reduce the burden of bureaucracy and other non-tariff barriers for importers. Customs regulations have been standardised and streamlined to improve efficiency.


• Companies seeking to import must obtain an importer's card from the Ministry of Industry and Trade in order to clear customs. While import licenses are not required for most goods, there are a few exceptions, including telecommunications equipment and some processed food products. Sanitary requirements and technical inspections can cause delays for food imports.


• With the challenges to Middle East and European countries as a result of the Syrian refugee crisis, the European Union (EU) is engaging in deeper diplomatic and trade cooperation with Jordan. In 2016 the EU committed to increasing aid to Jordan and easing the rules of origin for Jordanian goods emanating from companies located in the country's special industrial estates and development zones that employ Jordanians and a minimum proportion of Syrian refugees. This allows products with a minimum Jordanian content of 30% to enter the EU under the EU-Jordan FTA over the next 10 years. Such change offers positive long-term prospects for Jordan's exports to the European market.


• Jordan has not applied anti-dumping measures or countervailing duties, but safeguard measures are in place.


• Jordan has signed preferential trade treaties, including a number of FTAs, with its major trading partners.


• In 1997 Jordan, the United States and Israel reached an agreement on establishing qualified industrial zones (QIZs) in Jordan. QIZs are designated areas where manufactured products in the zones enjoy duty-free access to the US market with no quota limit, provided that specific requirements on the rule of origins have been satisfied. The importance of QIZs has declined in the wake of the Jordan-United States FTA concluded in 2001, under which qualified Jordanian goods entering the United States market are both duty and quota free.


• In recent years, Jordan has further opened up its economy to attract foreign direct investment. The Investment Promotion Law provides tax exemption on fixed assets from foreign investors for three years and duty-free import of raw materials into Jordan.


• Regional instability, including the civil war in Syria and the expansion of Islamic State (IS) in Iraq, has resulted in border closures which have significantly disrupted international trade. Overland supply chain routes to trade partners in the Middle East have been cut off, and access to the Iraqi market in particular has been restricted since 2014. The border crossing with Iraq reopened in 2017 following the removal of IS militants from the border province of Anbar, which will ease trade flows somewhat.

Sources: WTO – Trade Policy Review, Fitch Solutions, Global Trade Alert

Multinational Trade Agreements

Active

1. Greater Arab Free Trade Area (GAFTA): GAFTA comprises Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the United Arab Emirates (UAE) and Yemen. The GAFTA was declared within the Social and Economic Council of the Arab League as an executive programme to activate the Trade Facilitation and Development Agreement that has been in force since January 1, 1998. Trade liberalisation benefits all member states and reduces the cost of imports to Jordan. However, regional instability and the consequent domestic security concerns have diminished the effect of this agreement and created security-related trade barriers. Bilateral FTAs between Jordan and non-MENA countries have also largely superseded this agreement.


2. United States-Jordan FTA and Economic Integration Agreement: Jordan has benefitted considerably from its extensive economic partnership with the United States through a comprehensive FTAs that entered into force on December 17, 2001. The United States is the country's top export partner and the agreement has facilitated significant United States investment in high value-added industries, such as textiles manufacturing.


3. Jordan-EU FTA: Jordan and the EU signed an association agreement that came into force in May 2002 as part of the EU's efforts to enhance Mediterranean trade. The FTA covers trade in industrial products, as well as fish and marine products and processed agricultural products. Among the objectives of the agreement is to promote the harmonious development of economic relations through the expansion of reciprocal trade. By 2014 virtually all customs duties on trade in industrial goods and fish and other marine products were eliminated. Medium-term growth is, therefore, expected in trade volumes between Jordan and this important bloc.


4. Jordan-European Free Trade Association (EFTA) FTA: The EFTA consists of Switzerland, Norway, Iceland and Liechtenstein, and its FTA with Jordan covers trade in goods and came into force on September 1, 2002.


5. Jordan-Turkey FTA: Turkey is an important trade partner for Jordan, providing a key market for phosphate and fertiliser exports, and is also a source of refined fuel. Although trade flows have been disrupted by regional instability, economic ties between the two countries remain strong.


6. Jordan also has FTAs and economic integration agreements with Singapore (August 22, 2005) and Canada (October 1, 2012). Although these agreements will assist with trade diversification, overall trade flows with both countries remain low compared with other FTA partners.


7. Jordan-Agadir Agreement: The FTA between Egypt, Jordan, Morocco and Tunisia (Agadir Agreement) is an FTA for trade in goods that came into force on March 27, 2007.


8. Pan-Arab Free Trade Area (PAFTA): Jordan is a member of the PAFTA Treaty, with members including Egypt, the UAE, Bahrain, Tunisia, Saudi Arabia, Sudan, Syria, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Morocco and Yemen. The Agreement is an FTA for trade in goods and came into force on January 1, 1998.

Signed But Not Yet In Effect

The Trade Preferential System of the Organization of the Islamic Conference (TPS-OIC): The agreement would see to the promotion of trade between member states by including most-favoured nation principles, harmonising policy on rules of origin, exchanging trade preferences among member states, promoting equal treatment of member states and special treatment for least developed member states and providing for regional economic bodies made up of OIC nations to participate as a bloc. The agreement will cover all commodity groups. The OIC comprises 57 members, making a full realisation of such an agreement highly impactful, encompassing approximately 1.8 billion people. Although the framework agreement, the protocol on preferential tariff scheme and the rules of origin have all been agreed on, a minimum of 10 members are required to update and submit their concessions list for the agreements to come into effect. As of Feburary 2019, only 14 nations have done so.

Sources: WTO Regional Trade Agreements database, Fitch Solutions, Jordan Investment Commission Investors Guide

Foreign Direct Investment

• Value Added Tax: 16%
• Corporate Income Tax: 20% (standard)

Sources: Jordan Ministry of Finance, Fitch Solutions

Important Updates to Taxation Information

• According to the World Bank Doing Business 2020 report, in 2019 Jordan made paying taxes easier by introducing electronic filing and payment for labour taxes and other mandatory contributions.
• The Jordanian government has traditionally taken a relaxed attitude towards tax collection, which has contributed to the country's current fiscal issues, and external funding is needed to supplement limited government revenue and shore up public spending. Only a small proportion of Jordan's population pays income tax at present, highlighting the need to significantly broaden the tax base. Consequently, the government has proposed tax reforms in order to tighten fiscal policies as part of its commitment to the IMF's Stand-By Arrangement.

Business Taxes

Sources: National sources, Fitch Solutions
Date last reviewed: February 13, 2020

Foreign Worker Permits

Work permits are valid for up to one year and may be renewed. Foreign workers must apply for a new permit if they wish to change jobs in Jordan.

There are a number of barriers to employing refugees in Jordan, hindering integration into the labour market. The most notable obstacles include the cost of work permits and the difficulty for refugees to obtain the necessary documentation. Jordanian nationals are also favoured for employment by law, owing to high levels of unemployment in the country and the risk of social unrest.

Some measures have been introduced to ease the recruitment of refugees, including waiving permit costs and allowing companies in export zones to employ refugees in their workforce (up to 25% thereof). In addition, the Jordanian government agreed with the EU to open the labour market in Jordan to the massive Syrian refugee population (1.3 million registered but estimated to be more) in exchange for USD2.1 billion in grants and USD1.9 billion additional financing from 2016 to 2018 as part of the Jordan Compact Agreement in February 2016. As a result, issuing work permits for Syrians is being made easier, especially in low-skill sectors, such as construction and agriculture. Consequently, this has widened the pool of labour available for recruitment and has reduced compliance risk associated with employing refugees. The government also opened its first job centre in a refugee camp in August 2017, making it much easier for refugees to register for work permits and to integrate into the labour force.

Localisation Requirements

Under the Jordanian Labour Law, certain professions and occupations may not be filled by non-Jordanians, such as those in the fields of medicine, engineering, teaching, accounting and administration, clerical work (such as data entry and secretarial), warehousing, hairdressing, and mechanical and car repair work. While there is considerable slack in the Jordanian labour market, an absence of vocational or educational skills in these areas means that businesses will face difficulties filling vacancies and will also face higher training costs.

Visa/Travel Restrictions

Individuals of all nationalities must apply for work and residency permits if they want to work in Jordan, with priority given to Arab nationals. Work and residency permits are issued with the approval of the Ministry of Labour and the Ministry of Interior. An applicant may not begin working in Jordan before obtaining work and residency permits. Work and residency permits may not be transferred from one employer to another; therefore, if an employee changes employers, the previous work and residency permits must be cancelled and the employee must apply for new work and residency permits. The work and residency permits are valid for one year and may be renewed on an annual basis.

As a prerequisite to obtaining work and residency permits, the Ministry of Labour requires the employer to submit a bank letter of guarantee to the Ministry of Labour for each expatriate employee seeking work and residency permits in Jordan.

Sources: Government websites, Fitch Solutions

Sovereign Credit Ratings

Sources: Moody's, Standard & Poor's, Fitch Ratings

Competitiveness and Efficiency Indicators

Sources: World Bank, IMD, Transparency International, Fitch Solutions

Fitch Solutions Risk Indices

Source: Fitch Solutions
Date last reviewed: February 13, 2020

Hong Kong’s Trade with Jordan

Export Commodity	Commodity Detail	Value (US$ million)
Commodity 1	Telecommunications and sound recording and reproducing apparatus and equipment	75.8
Commodity 2	Textile yarn, fabrics, made-up articles, and related products	52.1
Commodity 3	Miscellaneous manufactured articles	36.9
Commodity 4	Photographic apparatus, equipment and supplies and optical goods; watches and clocks	18.0
Commodity 5	Power generating machinery and equipment	17.5

Import Commodity	Commodity Detail	Value (US$ million)
Commodity 1	Photographic apparatus, equipment and supplies and optical goods; watches and clocks	27.4
Commodity 2	Articles of apparel and clothing accessories	17.2
Commodity 3	Telecommunications and sound recording and reproducing apparatus and equipment	7.7
Commodity 4	Miscellaneous manufactured articles	1.1
Commodity 5	Road vehicles (including air-cushion vehicles)	1.0