Strategic and legal analysis of the Jordanian free zone program

Jordan"s two existing free zones, Aqaba and Zarqa, have been almost entirely oriented toward commercial trade. There are only seven industrial firms in the Zarqa project, and none in Aqaba. While there are several constraints to industrial investment in free zones, the most fundamental barrier is presented by the shortcomings of the prevailing law. These shortcomings include: the definition of a free zone and the concept of extraterritoriality; ambiguities surrounding the applicability of other laws; the exclusive mandate of the FZC; lack of clear eligibility criteria and export focus; and FTC ownership of real assets with the zones. In the last instance, there is legislation prepared which will amend the law to allow firms to purchase land in the zones. The other constraints have yet to be addressed. Although customs procedures are reportedly streamlined and flexible in the zones, they are oriented toward control of transit goods and collection of duties, and not toward export manufacturing. Problems include overly complex procedures and overzealous enforcement. The FZC itself suffers from an unwieldy organizational structure, lack of computerization, shortcomings in data collection and information management, inadequate attention to promotion, and unclear objectives. The FZC is now in the process of expanding the Zarqa and Aqaba zones to address demand for both commercial space and export-oriented industry. The scope of the planned expansion is tremendous -- a 500% increase in total area. in Jordan the possibility of developing private industrial free zones (given appropriate legal reforms). Both public and private zone development face significant constraints, however. Detailed recommendations are made. (Author abstract, modified)