1. The Main Customers 2005 (Exports)

COUNTRIES	TOTAL (JD)
1 - USA1	790 204 400
2 – Irak	379 657 800
3 – India	246 367 700
4 – Saudi Arabia	172 318 400
5 – Syria	113 085 200
6 – United Arab Emirates	95 804 000
7 – Israel	75 682 500
8 – Algeria	59 181 400

¹ Around 95% of the QIZ production is destined to USA, which makes this country Jordan’s number one client.

From now on, we should put into perspective the importance of Iraq. With the fall of crude oil exports and a domestic demand that has decreased again, as a customer of Jordan: Iraq absorbed 20% of Jordanian exports and employed 20 000 people. Traffic with Iraq generated a large transportation activity.
The indirect effects of the conflict will be experienced in various fields such as hotel business, air traffic, etc.

American-Jordanian agreements, which were supposed to increase the commercial flows, especially American importations, remained stable, or even decreased.

This decrease in imports can be attributed to the disaffection of Jordanian consumers with American products because of US foreign policy. This decrease is to benefit the Europeans, as consumers prefer comparable products coming from the EU (for example, the decline in the sale of “Philip Morris” cigarettes for the benefit of “Gauloises”).

2. The main suppliers 2005 (Imports)

COUNTRIES	TOTAL (JD)
1 - Saudi Arabia	1 758 363 900
2 – China	686 691 500
3 – Germany	597 159 300
4 – USA	416 988 800
5 – South Korea	265 071 900
6 – Egypt	260 986 400
7 – Italy	249 699 400
8 – Japan	210 409 500

In 2005, Saudi Arabia was Jordan’s leading supplier of oil products. The Iraki reductions of oil products and difficulties in supply have forced Jordan to find other suppliers (Saudi Arabia, Kuwait and U.A.E.).

3. The Role of France.

France has a predominant role in the Jordanian economy. This position could not have been achieved if it was not for the privatization wave of the Jordanian economy.
companies that benefited from these privatizations are:
-Lafarge
-France Telecom
-Accor
-Lema (subsidiary of Suez Ondeo)
-Alpha (subsidiary of Sodexho)
-Alstom
-La Monnaie de Paris
-La Coface
-Pont à Mousson

This success is due to France’s active assistance in debt remission and/or its conversion into investment. In 2001, a draft agreement was signed for an amount of 38.2 million EUR and it concerned the conversion of foreign debt. In addition, France played an important role in the Paris Club agreements.

Sectoral distribution	French Exports 2001 2002 Variation	French Imports 2001 2002 Variation	Balance of Trade 2001 2002 Variation
Total Food-processing Industry Power Various products	250 369 48% 48,4   41,3 -14,7% 199 327,5 64,6% 0,5 0,4 -19,1% 1,7   0,2 -85,9	7 6 -14,1% 1,2   1,1 -12,7% 5,3 4,5 -15% 0 0 - 0   0 -	243 364 121 47,2   40,2 -7 193,7 323 129,3 0,5 0,4 -1 1,7   0,2 -1,5

4. Privatizations

The first privatization wave took place between 1998 and 2001. It was in conformity with the IMF expectations. The receipts of these privatizations reached 850 million USD, at the end of 2001. These receipts were mainly allocated to the repayment of foreign debt (85 % of the receipts), while the rest could be allocated to infrastructure and social expenditures. The result of these privatizations was an increase in the exchange reserves, reduction of public foreign debt, increase in balance of payment flows, stimulation of the Stock Exchange, and modernization and development of construction and equipment.

Principal privatizations:

Privatizations are put on hold and the Jordanian government tries to restore the foreign investor’s trust. Thus, Saskatchewan group purchased 26 % of the capital of the most important Jordanian company, the Arab Potash.

Source: Economic Department of the French Embassy/Amman.

5. American and International Aid

In order to offset the losses undergone by the Jordanian economy because of the war in Iraq, massive American aid came as a substitute.

With the interruption of the Iraqi oil supplies, the American aid to Jordan became the country’s unique resort. After the request submitted by President Bush to Congress on March 25, 2003 for the whole of the region’s countries, Jordan is expected to receive, in total, some 1.1 billion USD of additional aid for the fiscal year 2003, which began on the 1st of October 2003.

With this increase in aid, which is to be added to the one already approved, Jordan would receive 950 million USD of direct civil aid and some 604 million USD of military aid (which means an increase of 715 million USD and 481 million USD respectively, in comparison with the year 2002). This would increase the global American aid to the country to a total amount of some 1.6 billion USD for the fiscal year 2003. As a result, this increase would widen the gap with the EU aid, which reaches, in total, 92 million EUR over the period 2002-2004 in the budget signed by the European Commissioner, Chris Patten, in October 2003 and reached 19.1 million EUR in 2004.

The support for the economy covers mainly the form of direct payments: approximately 300 million USD during the five last years, of which 87 million USD is aid to the balance of payments and 76 million USD is for the economic and social boosting plan in 2002, followed by the first emergency disbursement of 129.5 million USD in January 2003 and of 403.3 million USD in 2004. The agency also finances the interventions aiming at improving the local economic fabric: a 15-million-USD contribution to the infrastructure construction in the new Aqaba Special Industrial Zone. This action is completed by the US Trade & Development Agency (USTDA), which financed, in 2002, three studies of an economic nature: organization of Jordan’s airspace (350 000 USD), creation of a private company for gas cylinders production (201 000 USD) and planning of the opening of the Jordanian telephony market on January 1st, 2005 (420 000 USD).

As concerns the management of water resources, Water Resources Management, USAID mainly finances the projects of waste water treatment stations (stations of Wadi Mousa, Aqaba and As-Samra, the latter being a BOT) and those of water conveyance for Greater Amman and its suburbs (a 65 million USD contribution out of a total of 220 million USD for the reconstruction of the capital’s western and south-western network).

The As-Samra project (150 million USD) is half financed by USAID while the second installment of the desalination project, which starts from brackish water of Wadi Zar, Ma’in and Mujib (90 million USD) is entirely financed by the Agency.

Since these operations are being reserved, in priority, to American and Jordanian companies, it is an American subsidiary of SUEZ Ondéo who is currently the contractor of the As-Samra station.

As for the health sector, American aid is mainly concerned with birth control in a country that has a +2.6% population growth rate, which is still too high in comparison to its resources, as well as with the improvement of care in the country’s public hospitals (12.5 million USD in 2002).

In addition to the USAID interventions, a food aid of cereals (200 000 tons in 2002) can be added, as well as export loan facilities for the purchase of food processing products (loans reaching 5-year terms at American 90-day TB rates).

Military aid is particularly intended for the purchase of equipment (120 million USD in 2002), while a more modest fraction (2 million USD) finances the joint military training programs of the International Military Education and Training Program (IMET), which has trained 200 officers in the United States during 2002. Moreover, the agency devotes a fraction of its means (30 million USD over the period 1998-2001) to ‘AMIR’ program: which is concerned with delegation of management to American companies in order to provide financial support to professional organizations (3.5 million USD), micro-enterprises (11.5 million USD) and deep economic reforms (15 million USD).

The aid planned by Washington for Jordan offsets, in particular, the government’s loss of the only Iraqi oil receipts, estimated at least at 500 million USD annually, without taking into consideration other collateral damage to the Jordanian economy. In addition, the aid intervenes at the right moment in consolidating Jordan’s 2005 budget receipts prepared by the government with an estimated 7% growth.

Sector	2000	2001	2002	2003 (initial aid)	2003 (additional aid)
USAID: - Economic assistance - Water resources - Health	200.0 97.0 83.0 20.0	150.0 88.0 44.0 18.0	235.0 163.0 45.0 27.0	250.0	700.0
Military assistance - Donations - Training (IMET) - Mine clearance	229.2 225.0 1.6 2.6	79.3 75.0 1.7 2.6	122.8 120.0 2.0 0.8	198.0	406.0
Food aid (cereal)	49.0 (380 000 tons)	26.0 (200 000 tons)	26.0 (200 000 tons)	30.0	NC
USTDA	NC	0.75	1.5	NC	NC
Loan insurance - Food processing - Ex-Im Bank	65.0 NC	91.3 75.0 16.3	75.0 NC	NC	NC
Total	543.2	347.3	460.3	NC	1106.0

The scope of the additional international aid received by Jordan: massive American support, in addition to Arab support (3 months of free oil supply, which is the equivalent of 170 million USD), Japanese support (100 million USD) and European support (35 million EUR) in 2004.

After the suspension of the agreement with Iraq, some emergency solutions were found. An agreement with some Arab states, in order to replace the Iraqi oil supply during three months (free 75 000 barrels per day, which is the equivalent of 170 million USD), has been renewed for an equivalent duration. An agreement with Kuwait was recently concluded to that end.

6. Repatriation of Expatriate Capitals

With a large community abroad, Jordan profits from substantial transfers. In 2004, these transfers rose to almost 1.6 billion USD.

7. Debt (Rescheduling)

Debt rescheduling agreement:

Within the approved scope of arrangements of the Paris Club July 2003, France and Jordan signed in Paris, October 3rd 2003, a bilateral agreement concerning the rescheduling of more than 300 million EUR of Jordanian debt to France over the next twenty years. The Jordanian Council of Ministers approved this agreement on October 29th, 2003. On the other hand, in 2003 Germany benefited from His Majesty King Abdullah II’s official visit to Berlin in order to sign a similar agreement with Jordan, concerning some 97 million EUR.

Source: Economic Department of the French Embassy/Amman

8. Investments

• A favorable legal framework for investment.
• FDI in Jordan

The Government reformed the investment laws and simplified the procedures allowing the Jordanian market to be more attractive. The exemptions or reductions of taxes, which Jordan can offer, are more interesting than those offered in the rest of the MENA (Middle East & North Africa) countries. In addition, intellectual property problems are being solved.

In 2005, FDI remained modest attaining only 3.5% of the world flows covering the Near and Middle East region and of which 75% were oriented towards Tunisia, Morocco, Egypt and Lebanon.

2004 (Dec.)		2005 (Dec.)		2006 (Dec.)		2007 (June)
Saudi Arabia	2.33	Saudi Arabia	3.099	Saudi Arabia	2.197	Others	2.151
Others	1.60	Others	2.129	Others	2.005	Saudi Arabia	2.112
Kuwait	1.20	Kuwait	1.716	Kuwait	1.4	Kuwait	1.406
Lebanon	0.90	Lebanon	1.209	Lebanon	0.842	Lebanon	1.288
Bahrain	0.60	Qatar	0.857	Qatar	0.67	Qatar	0.651
United States	0.60	Bahrain	0.489	Bahrain	0.526	Bahrain	0.595
France	0.60	Libya	0.485	France	0.397	United States	0.463
Qatar	0.50	United States	0.478	Libya	0.383	France	0.388
Libya	0.40	Palestine	0.431	United States	0.376	Libya	0.38
Arab Citizens	0.30	France	0.358	Palestine	0.323	Palestine	0.313
Total	9.10	Total	11.251	Total	9.119	Total	9.747

Source: Securities Depository Center

FDI: Foreign Direct Investments

- The increase of Kuwaiti investments in Jordan
Kuwait places its marker in order to enter the Iraqi market through Jordan. This is what the rate of direct investments in Jordan makes us think. Kuwait has multiplied the creation of companies in order to more easily reach the Jordanian market, especially when it comes to communication, oil sector and services. Thus, we notice an increase of 40 % in the number of newly set up companies. In addition, these investments go hand in hand with the increase of transactions at the Amman Stock Exchange.

• Repurchase of the Egyptian Orascom (92 %) in Fastlink, a Jordanian operator of mobile telephony.
• Opening a Kuwait National Bank branch in Jordan.

In total, around 500 million USD will be invested.

Companies	Share in the capital	Value (million USD)
Fastlink	97.0%	425.0
The Housing Bank for Trade & Finance	18.8%	26.5
Jordan Kuwait Bank	52.1%	18.3
Jordan National Bank Plc	11.5%	6.5
Jordan Phosphate Mines Co.	15.0%	20.0
Kuwait National Bank	100.0%	nc

The United States

The United States remains the leading investor.

The leading sectors where American investments can be found are tourist infrastructures and/or hotel businesses with the construction of hotels such as The Radisson, Marriott, Hyatt, Sheraton and Intercontinental.

To a smaller extent, the United States turns towards the textile industry (investments carried out by Americans of Jordanian origin), and more recently, towards the mining industry (123 million USD invested by Albemarle Holding Inc. in the joint-venture between Jordan Bromine Co. and the Arab Potash Co.) and oil exploration in the Dead Sea.

Other investors

The United Kingdom, Switzerland and Iraq are among the country’s leading investors mainly to the involvement of these countries in the Jordanian tourist industry. In fact, in 2001, Alpha Airport Group (Sodexho) acquired 51 % of Royal Jordanian’s catering business, while, in 2002, the Four Seasons chain opened a new hotel in Amman. In the same way, the Swiss M?venpick chain built an expansion to its Dead Sea hotel and Iraqi interests built a new hotel of international class, Le Royal, in the Capital.

The number of projects recorded by JIB of other investors (China, Pakistan, Taiwan) reflect an interest mainly in the industrial sector (almost 80 % of the FDI projects) and in particular in QIZ. In these zones of special status, the FDI are oriented, in majority, towards textile and luggage industries (China and Pakistan). Other projects treated by JIB concern the rubber industry (Lebanon), pharmaceutical sector (Saudi Arabia, Lebanon and Iraq, and others) and, to a lesser extent, food-processing (Iraq). Saskatchewan, the Canadian potash corporation (173.4 million USD invested in 26 % of Arab Potash Co. in October), dominates, in 2003, among FDI providers, while the new round of privatizations and the projects in BOT will open other perspectives for investors in Jordan.

Sectors	2004
	Total	Fr. C
Industry	1 727	3%
Trade	14 340	25%
Agriculture	50	0.01%
BTP	103	0.02%
Services	10 187	18%
Others	31 394	54%
G. Total	57 803

* Fr. C = Foreign Capital

9. QIZ

A privileged access to the American market was possible thanks to the creation of “QIZ” (Qualifying Industrial Zones). QIZ are industrial parks that allow selling on the American market without tax and quota-free. The main conditions of this agreement are related to the production’s contents: it must contain 11.7% of Jordanian value-added, 8% of Israeli value-added and 15.3% of the West Bank or Gaza value-added. The QIZ allowed the creation of 45 800 jobs and contributed with an investment up to 540 million dollars since 1999. These zones allowed the investors of various origins such as the Chinese, the Pakistanis and the Americans, to produce textile and leather at lower prices.
However, textiles represent 95 % of the total production of QIZ. Thus, the clothing industry became the first industrial export sector. In addition, QIZ made it possible to vitalize the exchange with the United States, from 13 million USD in 1999 to 400 million USD in 2002. In 2004, exports from QIZ were estimated at 919.9 million USD.

However, these zones are threatened by the application of the WTO agreements in 2005, when the trade of textiles should be entirely liberalized.

10. Inflation Rate

The inflation rate in 2004 is estimated at 3.4%. Since 1996, inflationary trends have decreased. Thus, the inflation rate went from 6.6% to 3.3% (see chart) with a noteworthy drop, in 2001, to 1.8 % (source JIB) and this, in spite of the liberalization of prices and the reduction in the subsidies granted to certain vital commodities. This control of inflation was achieved, above all, through economic austerity measures and the stabilization of public expenditures. Thus, prices tend to be close to those of the market.

With the end of the agreement with Iraq on supplying oil at preferential prices, even for free (agreements with certain Arab countries), Jordan has to pay for its energy supplies at the market price, unless an agreement is reached with the new Iraqi authorities.

Source:
- National Information Centre
- Jordan Investment Board

11. The Population

• a. General features of the population
• b. The educational level of the population
• c. Distribution of active population
• d. Unemployment

Jordan counts 5,350,000 inhabitants (2004 estimations). It is a young country with 37.1% of the population under the age of 15 and with only 5.9% above the age of 60. In 2004, the population’s growth rate was 2.60% with a birth rate of 29.00 per 1 000 and a death rate of 7.0 per 1 000. The infant mortality rate is 22.00 per 1 000 births.

- Life expectancy:
The average life expectancy of the Jordanian population is 71.50 years. The fertility average is 3.70 children per woman at the age of procreation.

38.8% of the Jordanian population is located in Amman, 17.8% in Irbid and 14.9% in Zarqa. If we consider Amman and Zarqa together, 54% of the population would be concentrated in one single district.

Literacy rate: 91.0%, distributed as follows:
- Male population: 95.2%
- Female population: 86.7% (2004 estimations)

Jordan has the most significant literacy rate in the region and it is ranked among the most developed countries. At the present time, on average, 166,600 students are postgraduates.

Level*	Men (%)	Women (%)	Total (%)
Illiterates	2.9	2.4	2.9
Level lower than high school	57.6	16.9	52.4
High school	14.0	12.2	13.8
Intermediate Diploma	9.4	26.3	11.6
BA and above	16.0	42.2	19.3
Total	100.0	100.0	100.0

Source: Department of Statistics

* For citizens over the age of 15 years old

Thus, Jordan has a large market of skilled labor and is the region’s most important provider of executives and engineers. Its workforce is mainly sought for its qualifications, in particular the medical and IT fields. With the return of the country’s expatriates from the Gulf countries, not only was there a return of a highly qualified manpower, but that of great experience and knowledge, particularly in the field of telecommunication techniques.

International companies largely draw parts of the growing number of young Jordanians highly specialized in top technologies.

Services: 82.5%
Industry: 13.9%
Agriculture: 3.6%

	2003	2004
Agriculture	3.55	3.60
Fishing	0.00	0.00
Mining	1.26	1.20
Handicrafts	12.37	12.70
Electricity, gas & water	1.66	1.70
Construction	6.37	7.10
Wholesale and retail trade	17.81	17.90
Hotels & restaurants	2.45	2.20
Transportation, storage & communication	9.98	9.60
Financial intermediaries	1.76	1.60
Investment, rent & business activities	3.53	3.80
Public administration	16.62	16.60
Education	11.65	11.00
Health and social work	4.67	4.90
Other common activities	5.61	5.40
Individuals privately employing others	0.35	0.30
Extraterritorial organizations	0.32	0.30
TOTAL	100.00	100.00

Source: Department of Statistics

- Figures:
In 2004, unemployment affected 12.5% of the population.
It can be distributed as follows:

• Men 11.8%
• Women 16.5%
• 10.5% of unemployed men hold a BA
• 22.5% of unemployed women hold a BA

- Young people unemployment rate:
For the slice age of 15-24 years, 52.8% are affected by unemployment, with 30% of them located in Amman.

For the slice age of 25 years and more, the estimated figure exceeds 47.2%.

12. The Jordan Investment Board:

Sectors	Number	Local	Arab	US& Canada	Europe	Other	Non-Jordanian
Industry	1055	779 274 549	58 624 773	95 486 065	147 630 152	377 198 388	678 939 378
Hotel business	42	277 186 824	164 750 000	155 000 000	41 050 000		360 800 000
Agriculture	61	29 400 000	2 640 000	2 234 000	50 000	1 599 000	6 523 000
Hospitals	16	62 192 801	4 034 131	150 000	5 000 000		9 184 131
Conference centers & exhibitions	1	6 300 000
Amusement parks & Tourist promotion	5	4 078 000	1 400 000	2 412 000			3 812 000
TOTAL	1180	1 108 432 174	231 448 904	255 282 060	193 730 152	378 797 388	1 059 258 509

Source: JIB (Jordan Investment Board)
1 USD = 0,71 JD (fixed rate)

13. The Jordan Agreements Board:

Regional trade agreements
Jordan–European Union Association Agreement		Jordan-European Free Trade Association Agreement (EFTA)	Greater Arab Free Trade Area
Bilateral agreements
North and South America		Africa
Free Trade Agreement	Commercial Agreement	Free Trade Agreement	Commercial Agreement
-United States of America -Qualifying Industrial Zone (QIZ)	-Canada -Mexico -Cuba -Brazil -Uruguay -Chile	-Egypt -Algeria -Libya	-Morocco -Tunisia -Sudan -Ethiopia -Cameroon -Botswana -South Africa -Mauritania -Sierra Leone -Somalia -Nigeria -Djibouti -Ivory Coast
Middle East		Asia and the Far East
Free Trade Agreement	Commercial Agreement	Commercial Agreement
-Syria	-Palestinian National Authority -Israel -Lebanon	-Turkey -Indonesia -Iran -Philippines -Pakistan -Malaysia -Sri Lanka -North Korea -Brunei -Singapore -Azerbaijan -Armenia -Taiwan -Afghanistan -Nepal -Thailand -Japan -Uzbekistan -India -Vietnam< -China
Gulf Cooperation Council		Europe and East Europe
-Kuwait -Bahrain	-Yemen -Oman -Iraq (oil for food) -United Arab Emirates -Saudi Arabia -Qatar	Commercial Agreement -Cyprus -Malta -Moldavia -Slovak Republic -Bosnia -Ukraine -Yugoslavia -Russia -Poland -Hungary -Romania -Czech Republic -Bulgaria -Croatia
Australasia
-Australia

14. The economic situation of Jordan in 2004:

The economic situation of Jordan offers sharp contrasts just after the second Iraqi war.

Growth
Economic growth has reached 7.7% with an inflation that is under control of about 3.4 % (2004), a stable currency and significant foreign currency reserves (2.36 billion USD, the equivalent of 9 months of export).

Expatriate Transfers
Expatriate transfers bring significant liquidity (into the country) (+4%), which allows the Central Bank of Jordan to decrease interest rates.

Exports
The Jordanian economy demonstrates a real dynamism. Exports are growing especially because of QIZ (Qualifying Industrial Zones and free trade zones). The QIZ have allowed a real development, especially towards USA where products can enter exempt of taxes. These zones increased exports towards this country (+237%).

While exports to USA grew, they noticeably increased towards the Kingdom’s more traditional clients, such as Iraq (+16%), Saudi Arabia (+31%) and India (+12%).

Imports
While exports grew by 28.1%, imports knew a 42.1 % growth (in 2004 compared to 2003).

Role of Iraq
Iraq was very important to Jordan since it used to provide it with its hydrocarbon needs at ‘very’ preferential prices, besides the absorption of a significant percentage of Jordanian production (drugs, food products, etc). With the fall of the regime, Jordanian production will face a growing competition in this market.

Budget Deficit
Fiscal revenues have not reached the hoped-for amount, especially what initially was anticipated by the initial finance law. Expenditures reduction (2.6%), especially those on investments, had to be agreed upon, while the budget deficit scope remained around 2.7% of GDP.

On the other hand, the deficit structure, especially when it comes to protection social pensions of the State’s employees, still burdens public expenditures, in addition to the security and defense field, which will be difficult to decrease under the present circumstances (1/4 of the year 2004 budget).

Debt Rescheduling
Jordan managed to profit from an ultimate debt rescheduling at the Paris Club where 105 million USD of interests were deferred. This resort to debt has the consequence of increasing the internal public debt (in 2004, 26.7% of GDP).

American Aid
American aid, which helped the Jordanian economy face the Iraqi crisis, will be less generous next year. There is no doubt that the amount will be equal to that provided before the intervention. This aid helped the Kingdom overcome the Iraqi crisis.