III. Economic Trends and Outlook

Major Trends and Outlook

Jordan's economy boomed in 1992 and 1993 due to an influx of investment for
construction starts and industrial ventures, largely from returnees from the
Gulf.  Despite experiencing two years of its highest growth ever (11 percent
GDP and 5.8 percent in 1992 and 1993 respectively), Jordan is currently in
recession, in part due to past business uncertainty resulting from the slow
pace of the peace process with Israel.  Jordan still suffers from a
significant debt load, but has met or surpassed structural adjustment targets
set for it by the International Monetary Fund (IMF).  The Jordanian dinar has
been stable since 1989 and central bank officials strongly deny rumors of
devaluation.


However, Jordan's economy is and has always been dependent on inputs of
outside capital, whether from foreign assistance or remittances from
Jordanians working abroad.

Despite these mixed reports, Jordan's outlook for the future is positive.
Jordan has a well-trained labor force and is capable of absorbing new
investment.  It is improving its infrastructure in order to grow into the new
century.  The successful conclusion of the peace process with Israel will
bring

New Investment and Business Opportunities to Jordan:  A gradual warming of
relationships with Arab Gulf states, estranged by the Gulf war, or a change in
the political situation in Iraq will further open up trade opportunities for
Jordan.  Preparing for the future, Jordan is in the process of liberalizing
its investment and customs laws in an effort to attract foreign investment.
Foreign investors are now allowed to invest in Jordan's stock market and
financial markets.


Principal Growth Sectors

Sectors which are experiencing significant growth include the agro-chemical,
environmental, computer and information-technology, and light manufacturing,
particularly textiles, pharmaceuticals and food processing.

Jordan is embarking on expansions of its phosphate and potash works.  Joint
venture agreements have been signed recently with Indian and Japanese firms
for the production of fertilizers.  A U.S. company recently signed a joint
venture agreement valued at USD 250 million over ten years for the extraction
of bromine from the dead sea.  These new projects will lead to significant
expansion in downstream industries.

The environment has become more of an issue in the past few years.  The
government and private sectors are both interested in reducing energy and
water use and in reducing wastes that are harmful to the environment.

The computer and information-technology field is also experiencing rapid
growth.  Computer software development, data networks and voice mail services
are expanding with a growing cadre of experienced software engineers.  A
number of the most competitive firms have U.S.-trained engineers or are
cooperating with U.S. companies on specific projects.


In light manufacturing, textiles and garments have grown faster than any
sector.  Several firms regularly export finished goods to the U.S..
Pharmaceuticals are a second area of growth, with rigorous standards and a
wide variety of products.  Food processing is a third high-growth area.


Government Role in the Economy

The government plays an active role, controlling about 62 percent of the total
economy.  It is also the largest employer in the country.  Government
entities, such as the social security agency, maintain significant investments
in shareholding
Companies.  Government regulations and procedures are
bureaucratic, although the liberalization of investment laws is
expected to reduce the bureaucracy.

The government is slowly beginning to move toward the privatization of some of
its holdings, including the cellular telephone market and parts of the Jordan
Electricity Authority (JEA) and Royal Jordanian Airlines (RJ).  JEA is
spinning off its distribution network into a shareholding company, still
largely owned by the government.  RJ intends to move from direct government
ownership to a combination of indirect government ownership through
governmental entities such as the social security corporation and the
conversion of debt to equity through the issuance of shares.


Balance of Payments Situation

Jordan has successfully managed its balance of payments situation through a
combination of payments, renegotiating government-to-government (Paris Club)
and commercial banking loans (London Club), and arranging for an IMF
structural adjustment and standby agreement.  Jordan has surpassed the IMF
targets established for it in the last two years.  The overall balance of
payments deficit amounted to USD 786 million in 1993.  This amount was covered
by rescheduling debt, reconciliation of arrearages with international lending
organizations, remittances and other foreign exchange receipts, such as
tourism.

As of July 1994, Jordan's overall indebtedness stands at about USD 7.9
billion, approximately 140 percent of GDP.  Paris Club debt reduction expects
$200 million. The trade deficit increased as a result of an influx of imports
and a drop in exports due to the depressed global market for Jordan's
traditional exports such as phosphate and fertilizers.  However, increased
levels of worker remittances and tourism receipts led to an improvement of
23.5 percent in the current account deficit, to USD 614 million in 1993.
Foreign exchange reserves dropped from approximately USD 710 million in 1993
to USD 450 million in mid-1994, partly as a result of Jordan's success in
renegotiating its debt.


Trade and Investment Barriers

One of the main barriers to investment in Jordan is the law which requires 51
percent Jordanian ownership in any business entity.  Exceptions are possible,
although rare, through the council of ministers.  A second barrier is that
non-arab investors do not receive the same incentives.  These laws are being
reviewed and are to be eliminated by a new draft investment law expected in
1995.

U.S. firms also face unclear policies and implementation of the secondary and
tertiary boycott of Israel by Arab nations.   Jordanian enforcement of the
boycott is weakening.  U.S. firms have been able to do business regardless of
their status on the blacklist.  Jordanian entities continue to make boycott
requests in commercial documents which place U.S. firms in the position of
having to act affirmatively to stay within the requirement of U.S. law.  In
many instances, these terms will be deleted or disregarded to enable exporters
to transact business.  Advice on boycott and antiboycott related matters is
available from the U.S. Embassy in Amman or from the Office of Antiboycott
Compliance in Washington at (202) 482-2381.

Customs practices can be arbitrary. High customs tariffs on certain categories
of products discourage their import (i.e.,  discriminatory customs tariffs
against automobiles with large engines).

Another trade issue is intellectual property rights (IPR).  dan has laws to
protect IPR, it has no effective enforcement mechanisms and does not appear to
be developing any.


Labor Force

Jordan has a labor force of 797,000.  In general, the labor force is
well-educated.  Literacy rates are 85 percent for men and 73 percent for
women.  Unemployment officially stands at about 15 percent, but unofficial
estimates for unemployment and underemployment reach 25 percent or higher.
Labor unions exist in Jordan but serve primarily as intermediaries between
workers and the ministry of labor.  While they may engage in collective
bargaining, they are not allowed to demonstrate without a permit. Closed-shop
systems do not exist in Jordan.

The government mandates worker benefits for many industries and businesses.
Wage levels are not mandated, although the government retains the right to set
wages for specific skills or regions.  Overtime is set at 125 percent of
wages, minimum annual leave is 14 days and there are approximately 20 paid
public holidays.  Social security regulations require employers pay 10 percent
and employees 5 percent of wages into the social security fund.  A new labor
law, expected by the end of 1994, will mandate further benefits for workers.


Major Local and Third-country Competitors in Specific Sectors

Competition in key sectors has come from the French, Japanese, Italians,
Germans, British and Koreans, in addition to local companies.

In construction, one of the largest local companies is Zeyad Salah and
Partners construction. The Japanese are among the most active foreign
companies in the construction section.  In telecommunications, the French and
Japanese have been the most aggressive competitors.  Local companies have
joined with foreign firms bidding on the cellular telephone tender.  Italians
and Germans supply nearly two-thirds of Jordan's requirements for machinery
used for manufacturing.  The U.S., Japan, France and Germany supply two-thirds
of high technology equipment such as medical and laboratory equipment.

Japanese, German and Korean automobiles dominate the local market, with
Russian and Ukrainian vehicles at the low end of the market.  American
vehicles have been hindered by high customs tariffs on large engines, although
U.S. firms are very competitive in the construction equipment market.


Infrastructure Situation   re: goods/services distribution

Jordan's road network, consisting of 8,000 km of surfaced roads, has improved
dramatically during the last ten years.  There are two major highways from the
north border with Syria to Amman, desert highways south to the port of Aqaba
and southeast to Saudi Arabia, and upgraded or new highways going east from
Amman to Iraq and west toward the West Bank and Israel.  By-pass roads


route long-distance trucking around Amman.  Jordan's railway line is currently
used only for transportation of phosphate rock from the mines to the port of
Aqaba.

The port of Aqaba is modern and well-organized with separate sections for
containers and bulk shipments.  The port was built to accommodate 35 million
tons per year.  Prior to the Gulf War, Aqaba processed 27 million tons of
cargo.  This figure dropped to 11 million tons due to the Gulf War and the
U.N. Sanctions against Iraq.

There are two international airports, Queen Alia International (QAI) near
Amman and Aqaba airport.  QAI was designed for three million passengers a year
and is expected to accommodate 430,000 tons of air cargo by the year 2000.
Both airports are adjacent to major highways.  Marka airport, the old Amman
airport, is still used for executive jet charter services.


Major Infrastructure Projects Underway

The Aqaba thermal power second stage expansion project is in the bidding
process.  This project will add two 130 megawatt generators to provide much of
the electricity to the south of Jordan as well as a possible supply to Sinai.
A least one U.S. firm is expected to participate in the bidding.  A later
third stage anticipates the installation of an additional two generators of
greater capacity.  Tenders to construct the connection of the electrical grid
with Egypt are expected in 1994.

USAID is providing between USD 10-12 million of a USD 40 million project for
the construction of a water treatment plant at Khirbet As-Samra.
Reconstruction of the water and sewage network in Irbid began in 1993.  Most
of the water and sewage projects are funded wholly or in part by development
assistance loans and grants.  The Al-Karamah dam will be a major construction
project to further develop Jordan's limited water resources.

Transportation projects nearing completion include the Naour-Dead Sea highway
and the Amman-Irbid highway.  Construction continues on a road bordering the
eastern shore of the dead sea. A rail line is expected to connect the new
Irshediyeh phosphate mine in southern Jordan to the main line going to the
port of Aqaba.  In Aqaba, a new general cargo jetty is planned for the near
future.

Telecommunications projects for the expansion of the number of land lines and
national and regional switching stations have been awarded.  Replacement of
Jordan's satellite earth stations has also been agreed upon.  For the cellular
telephone project, which has not yet been awarded, five of the seven firms
bidding are American.

Both the Free Zones Authority and the Jordan Industrial Estates are planning
expansion projects.  The free zones will expand in mafraq, the Jordan valley
and in Aqaba.  The Industrial Estates is planning new estates in Amman near
Qai, Salt, Tafila and Kkerak.

In the future, a dual water conveyance is expected to be built from a southern
Jordan aquifer to Amman.  A possible project which has been discussed for many
years is a canal from the Red Sea to the Dead Sea on the border of Jordan and
Israel, which would supply electricity, fresh water for drinking and salty
water to the Dead Sea.  Should peace become a reality, the Dead Sea region is
targeted for development as a tourist park.