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China

Executive Summary

In 2020, the People’s Republic of China (PRC) became the top global Foreign Direct Investment (FDI) destination. As the world’s second-largest economy, with a large consumer base and integrated supply chains, China’s economic recovery following COVID-19 reassured investors and contributed to higher FDI and portfolio investments. In 2020, China took significant steps toward implementing commitments made to the United States on a wide range of IP issues and made some modest openings in its financial sector. China also concluded key trade agreements and implemented important legislation, including the Foreign Investment Law (FIL).

China remains, however, a relatively restrictive investment environment for foreign investors due to restrictions in key economic sectors. Obstacles to investment include ownership caps and requirements to form joint venture partnerships with local Chinese firms, industrial policies such as Made in China 2025 (MIC 2025) that target development of indigenous capacity, as well as pressure on U.S. firms to transfer technology as a prerequisite to gaining market access. PRC COVID-19 visa and travel restrictions significantly affected foreign businesses operations increasing their labor and input costs. Moreover, an increasingly assertive Chinese Communist Party (CCP) and emphasis on national companies and self-reliance has heightened foreign investors’ concerns about the pace of economic reforms.

Key investment announcements and new developments in 2020 included:

On January 1, the FIL went into effect and effectively replaced previous laws governing foreign investment.

On January 15, the U.S. and China concluded the Economic and Trade Agreement between the Government of the United States of America and the Government of the People’s Republic of China (the Phase One agreement). Under the agreement, China committed to reforms in its intellectual property regime, prohibit forced transfer technology as a condition for market access, and made some openings in the financial and energy sector. China also concluded the Regional Comprehensive Economic Partnership (RCEP) agreement on November 15 and reached a political agreement with the EU on the China-EU Comprehensive Agreement on Investment (CAI) on December 30.

In mid-May, PRC leader Xi Jinping announced China’s “dual circulation” strategy, intended to make China less export-oriented and more focused on the domestic market.

On June 23, the National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) announced new investment “negative lists” to guide foreign FDI.

Market openings were coupled, however, with restrictions on investment, such as the Rules on Security Reviews on Foreign InvestmentsChina’s revised investment screening mechanism.

While Chinese pronouncements of greater market access and fair treatment of foreign investment are welcome, details and effective implementation are still needed to ensure foreign investors truly experience equitable treatment.

 

Table 1: Key Metrics and Rankings

 

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 78 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 31 of 190 http://www.doingbusiness.org/en/rankings 
Global Innovation Index 2020 14 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 116.2 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 10,410 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

Transparency of the Regulatory System

One of China’s WTO accession commitments was to establish an official journal dedicated to the publication of laws, regulations, and other measures pertaining to or affecting trade in goods, services, trade related aspects of intellectual property rights (TRIPS), and the control of foreign exchange.  Despite mandatory 30-day public comment periods, Chinese ministries continue to post only some draft administrative regulations and departmental rules online, often with a public comment period of less than 30 days. As part of the Phase One Agreement, China committed to providing at least 45 days for public comment on all proposed laws, regulations, and other measures implementing the Phase One Agreement. While China has made some progress, U.S. businesses operating in China consistently cite arbitrary legal enforcement and the lack of regulatory transparency among the top challenges of doing business in China.

In China’s state-dominated economic system, the relationships are often blurred between the CCP, the Chinese government, Chinese business (state- and private-owned), and other Chinese stakeholders.  Foreign-invested enterprises (FIEs) perceive that China prioritizes political goals, industrial policies, and a desire to protect social stability at the expense of foreign investors, fairness, and the rule of law.  The World Bank   Global Indicators of Regulatory Governance gave China a composite score of 1.75 out 5 points, attributing China’s relatively low score to stakeholders not having easily accessible and updated laws and regulations; the lack of impact assessments conducted prior to issuing new laws; and other concerns about transparency.

For accounting standards, Chinese companies use the Chinese Accounting Standards for Business Enterprises (ASBE) for all financial reporting within mainland China. Companies listed overseas or in Hong Kong may choose to use ASBE, the International Financial Reporting Standards, or Hong Kong Financial Reporting Standards.

International Regulatory Considerations

As part of its WTO accession agreement, China agreed to notify the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations.  However, China continues to issue draft technical regulations without proper notification to the TBT Committee.

Legal System and Judicial Independence

The Chinese legal system borrows heavily from continental European legal systems, but with “Chinese characteristics.”  The rules governing commercial activities are found in various laws, regulations, administrative rules, and Supreme People’s Court (SPC) judicial interpretations, among other sources. While China does not have specialized commercial courts, it has created specialized courts and tribunals for the hearing of intellectual property disputes (IP), including in Beijing, Guangzhou, Shanghai, and Hainan.  In 2020, the original IP Courts continued to be popular destinations for both Chinese and foreign-related IP civil and administrative litigation, with the IP court in Shanghai experiencing a year-on-year increase of above 100 percent. China’s constitution and laws, however, are clear that Chinese courts cannot exercise power independent of the Party.  Further, in practice, influential businesses, local governments, and regulators routinely influence courts.  U.S. companies may hesitate in challenging administrative decisions or bringing commercial disputes before local courts due to perceptions of futility or fear of government retaliation.

Laws and Regulations on Foreign Direct Investment

China’s new investment law, the FIL, came into force on January 1, 2020, replacing China’s previous foreign investment framework. The FIL provides a five-year transition period for foreign enterprises established under previous foreign investment laws, after which all foreign enterprises will be subject to the same domestic laws as Chinese companies, such as the Company Law. The FIL standardized the regulatory regimes for foreign investment by including the negative list management system, a foreign investment information reporting system, and a foreign investment security review system all under one document. The FIL also seeks to address foreign investors complaints by explicitly banning forced technology transfers, promising better IPR, and the establishment of a complaint mechanism for investors to report administrative abuses. However, foreign investors remain concerned that the FIL and its implementing regulations provide Chinese ministries and local officials significant regulatory discretion, including the ability to retaliate against foreign companies.

In December 2020, China also issued a revised investment screening mechanism under the Rules on Security Reviews on Foreign Investments without any period for public comment or prior consultation with the business community. Foreign investors complained that China’s new rules on investment screening were expansive in scope, lacked an investment threshold to trigger a review, and included green field investments – unlike most other countries. Moreover, new guidance on Neutralizing Extra-Territorial Application of Unjustified Foreign Legislation Measures, a measure often compared to “blocking statutes” from other markets, added to foreign investors’ concerns over the legal challenges they would face in trying to abide by both their host-country’s regulations and China’s. Foreign investors complained that market access in China was increasingly undermined by national security-related legislation. In 2020, the State Council and various central and local government agencies issued over 1000 substantive administrative regulations and departmental/local rules on foreign investment. While not comprehensive, a list of published and official Chinese laws and regulations is available here .

FDI Requirements for Investment Approvals

Foreign investments in industries and economic sectors that are not explicitly restricted on China’s negative lists do not require MOFCOM pre-approval.  However, investors have complained that in practice, investing in an industry not on the negative list does not guarantee a foreign investor “national treatment,” or treatment no less favorable than treatment accorded to a similarly situated domestic investor.  Foreign investors must still comply with other steps and approvals such as receiving land rights, business licenses, and other necessary permits.  When a foreign investment needs ratification from the NDRC or a local development and reform commission, that administrative body is in charge of assessing the project’s compliance with a panoply of Chinese laws and regulations.  In some cases, NDRC also solicits the opinions of relevant Chinese industrial regulators and consulting agencies acting on behalf of Chinese domestic firms, creating potential conflicts of interest disadvantageous to foreign firms.

4. Industrial Policies

Investment Incentives

To attract foreign investment, different provinces and municipalities offer preferential packages like a temporary reduction in taxes, import/export duties, land use, research and development subsidies, and funding for initial startups.  Often, these packages stipulate that foreign investors must meet certain benchmarks for exports, local content, technology transfer, and other requirements.  However, many economic sectors that China deems sensitive due to broadly defined national or economic security concerns remain closed to foreign investment.

Foreign Trade Zones/Free Ports/Trade Facilitation

In 2013, the State Council announced the Shanghai pilot FTZ to provide open and high-standard trade and investment services to foreign companies. China gradually scaled up its FTZ pilot program to a total of 20 FTZs and one Free Trade Port.  China’s FTZs are in: Shanghai, Tianjin, Guangdong, Fujian, Chongqing, Hainan, Henan, Hubei, Liaoning, Shaanxi, Sichuan, Zhejiang, Jiangsu, Shandong, Hebei, Heilongjiang, Guangxi, Yunnan provinces, Beijing, Shanghai FTZ Lingang Special Area and Hainan Free Trade Port.  The goal of China’s FTZs/FTP is to provide a trial ground for trade and investment liberalization measures and to introduce service sector reforms, especially in financial services, that China expects to eventually introduce in other parts of the domestic economy. The FTZs promise foreign investors “national treatment” investment in industries and sectors not listed on China’s negative lists.  However, the 2020 FTZ negative list lacked substantive changes, and many foreign firms report that in practice, the degree of liberalization in FTZs is comparable to opportunities in other parts of China.

5. Protection of Property Rights

Real Property

The Chinese state owns all urban land, and only the state can issue long-term land leases to individuals and companies, including foreigners, subject to many restrictions.  Chinese property law stipulates that residential property rights renew automatically, while commercial and industrial grants renew if it does not conflict with other public interest claims. Several foreign investors have reported revocation of land use rights so that Chinese developers could pursue government-designated building projects.  Investors often complain about insufficient compensation in these cases.  In rural China, the registration system suffers from unclear ownership lines and disputed border claims, often at the expense of local farmers whom village leaders exclude in favor of “handshake deals” with commercial interests.  China’s Securities Law defines debtor and guarantor rights, including rights to mortgage certain types of property and other tangible assets, including long-term leases.  Chinese law does not prohibit foreigners from buying non-performing debt, but it must be acquired through state-owned asset management firms, and it is difficult to liquidate.

Intellectual Property Rights

China remained on the USTR Special 301 Report Priority Watch List in 2020 and was subject to continued Section 306 monitoring. Multiple Chinese physical and online markets were included in the 2020 USTR Review of Notorious Markets for Counterfeiting and Piracy. Of note, in 2020, China did take significant steps toward addressing long-standing U.S. concerns on a wide range of IP issues, from patents, to trademarks, to copyrights and trade secrets. The reforms addressed the granting and protection of IP rights as well as their enforcement, and included changes made in support of the Phase One Trade Agreement. In April 2020, China National Intellectual Property Administration (CNIPA) issued the 2020-2021 Plan for Implementing the Opinions on Strengthening IP Protection which contained 133 specific “steps” that CNIPA and other Chinese government entities intended to take in 2020 and 2021 – to strengthen IP protection and implement China’s IP-related commitments under Phase One. The 2020-2021 Implementing Plan, together with the work plans of the SPC’s and IP-related administrative organs, portended a year of aggressive IP reforms in China. The Chinese legislative, administrative, and judicial organs issued over 60 new and amended measures related to IP protection and enforcement, in both draft and final form, including amendments to core IP laws, such as the Copyright Law, the Patent Law, and the Criminal Law. Updates also included administrative measures addressing trademark and patent protection and enforcement, as well as enforcement of copyright and trade secrets.

Despite these reforms, IP rights remain subject to Chinese government policy objectives, which appear to have intensified in 2020. For U.S. companies in China, infringement remained both rampant and a low-risk “business strategy” for bad-faith actors. Further enforcement and regulatory authorities continue to signal to U.S. rights holders that application of China’s IP system remains subject to the discretion of the PRC government and its policy goals. High-level remarks by PRC leader Xi Jinping and senior leaders signaled China’s commitment to cracking down on IP infringement in the years ahead. However, they also reflected China’s vision of the IP system as an important tool for eliminating foreign ownership of critical technology and ensuring national security. While on paper China’s IP protection and enforcement mechanisms have inched closer to near parity with other foreign markets, in practice, fair, transparent, and non-discriminatory treatment will very likely continue to be denied to U.S. rights holders whose IP ownership and exploitation impede PRC industrial policy goals.

For detailed information on China’s environment for IPR protection and enforcement, please see the following reports:

6. Financial Sector

Capital Markets and Portfolio Investment

China’s leadership has stated that it seeks to build a modern, highly developed, and multi-tiered capital market.  Since their founding over three decades ago, the Shanghai and Shenzhen Exchanges, combined, are ranked the third largest stock market in the world with over USD11 trillion in assets, according to statistics from World Federation of Exchanges.  China’s bond market has similarly expanded significantly to become the second largest worldwide, totaling approximately USD17 trillion.  In 2020, China fulfilled its promises to open certain financial sectors such as securities, asset management, and life insurance. Direct investment by private equity and venture capital firms has increased but has also faced setbacks due to China’s capital controls, which obfuscate the repatriation of returns. As of 2020, 54 sovereign entities and private sector firms, including BMW and Xiaomi Corporation, have since issued roughly USD41 billion in “Panda Bonds,” Chinese renminbi (RMB)-denominated debt issued by foreign entities in China.  China’s private sector can also access credit via bank loans, bond issuance, trust products, and wealth management. However, the vast majority of bank credit is disbursed to state-owned firms, largely due to distortions in China’s banking sector that have incentivized lending to state-affiliated entities over their private sector counterparts.  China has been an IMF Article VIII member since 1996 and generally refrains from restrictions on payments and transfers for current international transactions.  However, the government has used administrative and preferential policies to encourage credit allocation towards national priorities, such as infrastructure investments.

Money and Banking System

China’s monetary policy is run by the People’s Bank of China (PBOC), China’s central bank.  The PBOC has traditionally deployed various policy tools, such as open market operations, reserve requirement ratios, benchmark rates and medium-term lending facilities, to control credit growth.  The PBOC had previously also set quotas on how much banks could lend but ended the practice in 1998.  As part of its efforts to shift towards a more market-based system, the PBOC announced in 2019 that it will reform its one-year loan prime rate (LPR), which would serve as an anchor reference for other loans.  The one-year LPR is based on the interest rate that 18 banks offer to their best customers and serves as the benchmark for rates provided for other loans.  In 2020, the PBOC requested financial institutions to shift towards use of the one-year LPR for their outstanding floating-rate loan contracts from March to August. Despite these measures to move towards more market-based lending, China’s financial regulators still influence the volume and destination of Chinese bank loans through “window guidance” – unofficial directives delivered verbally – as well as through mandated lending targets for key economic groups, such as small and medium sized enterprises. In 2020, the China Banking and Insurance Regulatory Commission (CBIRC) also began issuing laws to regulate online lending by banks including internet companies such as Ant Financial and Tencent, which had previously not been subject to banking regulations.

The CBIRC oversees China’s 4,607 lending institutions, about USD49 trillion in total assets.  China’s “Big Five” – Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China – dominate the sector and are largely stable, but over the past year, China has experienced regional pockets of banking stress, especially among smaller lenders.  Reflecting the level of weakness among these banks, in November 2020, the PBOC announced in “China Financial Stability Report 2020” that 12.4 percent of the 4400 banking financial institutions received a “fail” rating (high risk) following an industry-wide review in 2019.  The assessment deemed 378 firms, all small and medium sized rural financial institutions, “extremely risky.”  The official rate of non-performing loans among China’s banks is relatively low: 1.92 percent as of the end of 2020.  However, analysts believed the actual figure may be significantly higher.  Bank loans continue to provide the majority of credit options (reportedly around 60.2 percent in 2020) for Chinese companies, although other sources of capital, such as corporate bonds, equity financing, and private equity are quickly expanding in scope, reach, and sophistication in China.

As part of a broad campaign to reduce debt and financial risk, Chinese regulators have implemented measures to rein in the rapid growth of China’s “shadow banking” sector, which includes wealth management and trust products.  These measures have achieved positive results. In December 2020, CBIRC published the first “Shadow Banking Report,” and claimed that the size of China’s shadow banking had shrunk sharply since 2017 when China started tightening the sector. By the end of 2019, the size of China’s shadow banking by broad measurement dropped to 84.8 trillion yuan from the peak of 100.4 trillion yuan in early 2017. Shadow banking to GDP ratio had also dropped to 86 percent at the end of 2019, yet the report did not provide statistics beyond 2019. Foreign owned banks can now establish wholly-owned banks and branches in China, however, onerous licensing requirements and an industry dominated by local players, have limited foreign banks market penetration. Foreigners are eligible to open a bank account in China but are required to present a passport and/or Chinese government issued identification.

Foreign Exchange and Remittances

Foreign Exchange

While the central bank’s official position is that companies with proper documentation should be able to freely conduct business, in practice, companies have reported challenges and delays in obtaining approvals for foreign currency transactions by sub-national regulatory branches. Chinese authorities instituted strict capital control measures in 2016, when China recorded a surge in capital flight.  China has since announced that it would gradually reduce those controls, but market analysts expect they would be re-imposed if capital outflows accelerate again. Chinese foreign exchange rules cap the maximum amount of RMB individuals are allowed to convert into other currencies at approximately USD50,000 each year and restrict them from directly transferring RMB abroad without prior approval from the State Administration of Foreign Exchange (SAFE).  SAFE has not reduced the USD50,000 quota, but during periods of higher-than-normal capital outflows, banks are reportedly instructed by SAFE to increase scrutiny over individuals’ requests for foreign currency and to require additional paperwork clarifying the intended use of the funds, with the intent of slowing capital outflows. China’s exchange rate regime is managed within a band that allows the currency to rise or fall by 2 percent per day from the “reference rate” set each morning.

Remittance Policies

According to China’s FIL, as of January 1, 2020, funds associated with any forms of investment, including profits, capital gains, returns from asset disposal, IPR loyalties, compensation, and liquidation proceeds, may be freely converted into any world currency for remittance. Based on the “2020 Guidance for Foreign Exchange Business under the Current Account” released by SAFE in August, firms do not need any supportive documents or proof that it is under USD50,000. For remittances over USD50,000, firms need to submit supportive documents and taxation records.  Under Chinese law, FIEs do not need pre-approval to open foreign exchange accounts and are allowed to retain income as foreign exchange or convert it into RMB without quota requirements. The remittance of profits and dividends by FIEs is not subject to time limitations, but FIEs need to submit a series of documents to designated banks for review and approval.  The review period is not fixed and is frequently completed within one or two working days of the submission of complete documents.  For remittance of interest and principal on private foreign debt, firms must submit an application, a foreign debt agreement, and the notice on repayment of the principal and interest.  Banks will then check if the repayment volume is within the repayable principal.  There are no specific rules on the remittance of royalties and management fees. Based on guidance for remittance of royalties and management fees, firms shall submit relevant contracts and invoice.  In October 2020, SAFE cut the reserve requirement for foreign currency transactions from 20 percent to zero, reducing the cost of foreign currency transactions as well as easing Renminbi appreciation pressure.

Sovereign Wealth Funds

China officially has only one sovereign wealth fund (SWF), the China Investment Corporation (CIC), which was launched in 2007 to help diversify China’s foreign exchange reserves. CIC is ranked the second largest SWF by total assets by Sovereign Wealth Fund Institute (SWFI). With USD200 billion in initial registered capital, CIC manages over USD1.04 trillion in assets as of 2020 and invests on a 10-year time horizon.  CIC has since evolved into three subsidiaries:

  • CIC International was established in September 2011 with a mandate to invest in and manage overseas assets.  It conducts public market equity and bond investments, hedge fund, real estate, private equity, and minority investments as a financial investor.
  • CIC Capital was incorporated in January 2015 with a mandate to specialize in making direct investments to enhance CIC’s investments in long-term assets.
  • Central Huijin makes equity investments in Chinese state-owned financial institutions.

China also operates other funds that function in part like sovereign wealth funds, including: China’s National Social Security Fund, with an estimated USD372 billion in assets; the China-Africa Development Fund (solely funded by the China Development Bank), with an estimated USD10 billion in assets; the SAFE Investment Company, with an estimated USD417.8 billion in assets; and China’s state-owned Silk Road Fund, established in December 2014 with USD40 billion in assets to foster investment in BRI partner countries.  Chinese state-run funds do not report the percentage of their assets that are invested domestically.  However, Chinese state-run funds follow the voluntary code of good practices known as the Santiago Principles and participate in the IMF-hosted International Working Group on SWFs. While CIC affirms that they do not have any formal government guidance to invest funds consistent with industrial policies or designated projects, CIC is still expected to pursue government objectives.

7. State-Owned Enterprises

China has approximately 150,000 wholly-owned SOEs, of which 50,000 are owned by the central government, and the remainder by local or provincial governments.  SOEs, both central and local, account for 30 to 40 percent of total gross domestic product (GDP) and about 20 percent of China’s total employment.  Non-financial SOE assets totaled roughly USD30 trillion.  SOEs can be found in all sectors of the economy, from tourism to heavy industries.  State funds are spread throughout the economy and the state may also be the majority or controlling shareholder in an ostensibly private enterprise.  China’s leading SOEs benefit from preferential government policies aimed at developing bigger and stronger “national champions.” SOEs enjoy favored access to essential economic inputs (land, hydrocarbons, finance, telecoms, and electricity) and exercise considerable power in markets like steel and minerals.  SOEs have long enjoyed preferential access to credit and the ability to issue publicly traded equity and debt.  A comprehensive, published list of all Chinese SOEs does not exist.

PRC officials have indicated China intends to utilize OECD guidelines to improve the SOEs independence and professionalism, including relying on Boards of Directors that are free from political influence.  Other recent reforms have included salary caps, limits on employee benefits, and attempts to create stock incentive programs for managers who have produced mixed results.  However, analysts believe minor reforms will be ineffective if SOE administration and government policy remain intertwined, and Chinese officials make minimal progress in primarily changing the regulation and business conduct of SOEs.  SOEs continue to hold dominant shares in their respective industries, regardless of whether they are strategic, which may further restrain private investment in the economy.  Among central SOEs managed by the State-owned Assets Supervision and Administration Commission (SASAC), senior management positions are mainly filled by senior party members who report directly to the CCP, and double as the company’s party secretary.  SOE executives often outrank regulators in the CCP rank structure, which minimizes the effectiveness of regulators in implementing reforms.  The lack of management independence and the controlling ownership interest of the state make SOEs de facto arms of the government, subject to government direction and interference.  SOEs are rarely the defendant in legal disputes, and when they are, they almost always prevail.  U.S. companies often complain about the lack of transparency and objectivity in commercial disputes with SOEs.

Privatization Program

Since 2013, the PRC government has periodically announced reforms to SOEs that included selling SOE shares to outside investors or a mixed ownership model, in which private companies invest in SOEs and outside managers are hired.  The government has tried these approaches to improve SOE management structures, emphasize the use of financial benchmarks, and gradually infuse private capital into some sectors traditionally monopolized by SOEs like energy, finance, and telecommunications.  In practice, however, reforms have been gradual, as the PRC government has struggled to implement its SOE reform vision and often preferred to utilize a SOE consolidation approach.  Recently, Xi and other senior leaders have increasingly focused reform efforts on strengthening the role of the state as an investor or owner of capital, instead of the old SOE model in which the state was more directly involved in managing operations.

8. Responsible Business Conduct

Additional Resources

 

Department of State

Department of Labor

Since 2016, China established an RBC platform but general awareness of RBC standards (including environmental, social, and governance issues) is a relatively new concept, especially for companies that exclusively operate in China’s domestic market.  Chinese laws that regulate business conduct use voluntary compliance, are often limited in scope, and are frequently cast aside when other economic priorities supersede RBC priorities.  In addition, China lacks mature and independent non-governmental organizations (NGOs), investment funds, independent worker unions, and other business associations that promote RBC, further contributing to the general lack of awareness.  The Foreign NGO Law remains a concern for U.S. organizations, including those looking to promote RBC and corporate social responsibility (CSR) best practices, due to restrictions the Law places on their operations in China.  For U.S. investors looking to partner with a Chinese firm or expand operations, finding partners that meet internationally recognized standards in areas like labor rights, environmental protection, and manufacturing best practices can be a significant challenge.  However, the Chinese government has placed greater emphasis on protecting the environment and elevating sustainability as a key priority, resulting in more Chinese companies adding environmental concerns to their CSR initiatives.  As part of these efforts, Chinese ministries have signed several memoranda of understanding with international organizations such as the OECD to cooperate on RBC initiatives.

9. Corruption

Since 2012, China has undergone a large-scale anti-corruption campaign, with investigations reaching into all sectors of the government, military, and economy.  CCP General Secretary Xi labeled endemic corruption an “existential threat” to the very survival of the Party.  In 2018, the CCP restructured its Central Commission for Discipline Inspection (CCDI) to become a state organ, calling the new body the National Supervisory Commission-Central Commission for Discipline Inspection (NSC-CCDI). The NSC-CCDI wields the power to investigate any public official.  From 2012 to 2020, the NSC-CCDI claimed it investigated 3.4 million cases. In 2020, the NSC-CCDI investigated 618,000 cases and disciplined 522,000 individuals, of whom 41 were at or above the provincial or ministerial level. Since 2014, the PRC’s overseas fugitive-hunting campaign, called “Operation Skynet,” has led to the capture of more than 8,350 fugitives suspected of corruption who were living in other countries, including over 2,200 CCP members and government employees. In most cases, the PRC did not notify host countries of these operations.  In 2020, the government reported apprehending 1,421 alleged fugitives and recovering approximately USD457 million through this program.

In June 2020 the CCP passed a law on Administrative Discipline for Public Officials, continuing their effort to strengthen supervision over individuals working in the public sector. The law further enumerates targeted illicit activities such as bribery and misuse of public funds or assets for personal gain. The CCP also issued Amendment 11 to the Criminal Law, which increased the maximum punishment for acts of corruption committed by private entities to life imprisonment, from the previous maximum of 15-year imprisonment. Anecdotal information suggests the PRC’s anti-corruption crackdown is inconsistently and discretionarily applied, raising concerns among foreign companies in China.  For example, to fight rampant commercial corruption in the medical/pharmaceutical sector, the PRC’s health authority issued “blacklists” of firms and agents involved in commercial bribery, including several foreign companies. While central government leadership has welcomed increased public participation in reporting suspected corruption at lower levels, direct criticism of central government leadership or policies remains off-limits and is seen as an existential threat to China’s political and social stability.  China ratified the United Nations Convention against Corruption in 2005 and participates in the Asia-Pacific Economic Cooperation (APEC) and OECD anti-corruption initiatives. China has not signed the OECD Convention on Combating Bribery, although Chinese officials have expressed interest in participating in the OECD Working Group on Bribery meetings as an observer.

 

Resources to Report Corruption

The following government organization receives public reports of corruption:   Anti-Corruption Reporting Center of the CCP Central Commission for Discipline Inspection and the Ministry of Supervision, Telephone Number:  +86 10 12388.   10. Political and Security Environment

10. Political and Security Environment

Foreign companies operating in China face a low risk of political violence.  However, the ongoing PRC crackdown on virtually all opposition voices in Hong Kong and continued attempts by PRC organs to intimidate Hong Kong’s judges threatens the judicial independence of Hong Kong’s courts – a fundamental pillar for Hong Kong’s status as an international hub for investment into and out of China.  The CCP also punished companies that expressed support for Hong Kong protesters – most notably, a Chinese boycott of the U.S. National Basketball Association after one team’s general manager expressed his personal view supporting Hong Kong protesters. Apart from Hong Kong, the PRC government has also previously encouraged protests or boycotts of products from countries like the United States, South Korea, Japan, Norway, Canada, and the Philippines, in retaliation for unrelated policy decisions such as the boycott campaigns against Korean retailer Lotte in 2016 and 2017 in response to the South Korean government’s decision to deploy the Terminal High Altitude Area Defense (THAAD); and the PRC’s retaliation against Canadian companies and citizens for Canada’s arrest of Huawei’s Chief Financial Officer Meng Wanzhou. PRC authorities also have broad authority to prohibit travelers from leaving China and have imposed “exit bans” to compel U.S. citizens to resolve business disputes, force settlement of court orders, or facilitate PRC investigations. U.S. citizens, including children, not directly involved in legal proceedings or wrongdoing have also been subject to lengthy exit bans in order to compel family members or colleagues to cooperate with Chinese courts or investigations. Exit bans are often issued without notification to the foreign citizen or without clear legal recourse to appeal the exit ban decision.     11. Labor Policies and Practices

11. Labor Policies and Practices

For U.S. companies operating in China, finding, developing, and retaining domestic talent at the management and skilled technical staff levels remain challenging for foreign firms, especially as labor costs, including salaries and inputs continue to rise. Foreign companies also complain of difficulty navigating China’s labor and social insurance laws, including local implementation guidelines. Compounding the complexity, due to ineffective enforcement of labor laws, Chinese domestic employers often hire local employees without contracts, putting foreign firms at a disadvantage.  Without written contracts, workers struggle to prove employment, thus losing basic protections such as severance if terminated.  The All-China Federation of Trade Unions (ACFTU) is the only union recognized under PRC law.  Establishing independent trade unions is illegal.  The law allows for “collective bargaining,” but in practice, focuses solely on collective wage negotiations.  The Trade Union Law gives the ACFTU, a CCP organ chaired by a member of the Politburo, control over all union organizations and activities, including enterprise-level unions.  ACFTU enterprise unions require employers to pay mandatory fees, often through the local tax bureau, equaling a negotiated minimum of 0.5 percent to a standard two percent of total payroll.  While labor laws do not protect the right to strike, “spontaneous” worker protests and work stoppages occur.  Official forums for mediation, arbitration, and other similar mechanisms of alternative dispute resolution often are ineffective in resolving labor disputes.  Even when an arbitration award or legal judgment is obtained, getting local authorities to enforce judgments is problematic.

The PRC has not ratified the International Labor Organization conventions on freedom of association, collective bargaining, or forced labor, but it has ratified conventions prohibiting child labor and employment discrimination. Uyghurs and members of other minority groups are subjected to forced labor in Xinjiang and throughout China via PRC government-facilitated labor transfer programs. In 2020, the U.S. government took additional actions to prevent the importation of products produced by forced labor into the United States, including by issuing a Xinjiang supply chain business advisory that outlined the legal, economic, and reputational risks of forced labor exposure in China-based supply chains. The U.S. Customs and Border Protection bureau issued multiple Withhold Release Orders  barring importation into the United States of products produced in Xinjiang, which were determined to be produced with prison or forced labor in violation of U.S. import laws.  The Commerce Department added Chinese commercial and government entities to its Entity List for their complicity in human rights abuses and the Department of Treasury sanctioned the Xinjiang Production and Construction Corps to hold human rights abusers accountable in Xinjiang. Some PRC firms continued to employ North Korean workers in violation of UN Security Council sanctions.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

 

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2020 $14,724,435 2019 $14,343,000 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 $87,880 2019 $116,200 BEA data available at https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States ($M USD, stock positions) 2019 $7,721,700 2019 $37,700 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP 2020 $16.5% 2019 12.4% UNCTAD data available at https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx  https://unctadstat.unctad.org/CountryProfile/GeneralProfile/en-GB/156/index.html 

* Source for Host Country Data:

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $2,938,482 100% Total Outward $2,198,881 100%
China, P.R., Hong Kong $1,430,303 48.7% China, P.C., Hong Kong $1,132,549 51.5%
British Virgin Islands $316,836 10.8% Cayman Islands $259,614 11.8%
Japan $147,881 5.0% British Virgin Islands $127,297 5.8%
Singapore $102,458 3.5% United States $67,855 3.1%
Germany $67,879 2.3% Singapore $38,105 1.7%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Destinations (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries $645,981 100% All Countries $373,780 100% All Countries $272,201 100%
China, P. R.: Hong Kong $226,426 35% China, P. R.: Hong Kong $166,070 44% United States $68,875 25%
United States $162,830 25% United States $93,955 25% China, P. R.: Hong Kong $60,356 22%
Cayman Islands $55,086 9% Cayman Islands $36,192 10% British Virgin Islands $43,486 16%
British Virgin Islands $45,883 7% United Kingdom $11,226 3% Cayman Islands $18,894 7%
United Kingdom $21,805 3% Luxembourg $9,092 2% United Kingdom $10,579 4%

14. Contact for More Information

U.S.  Embassy Beijing Economic Section

55 Anjialou Road, Chaoyang District, Beijing, P.R.  China  +86 10 8531 3000

+86 10 8531 3000

Hong Kong

Executive Summary

Hong Kong became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) on July 1, 1997, with its status defined in the Sino-British Joint Declaration and the Basic Law.  Under the concept of “one country, two systems,” the PRC government promised that Hong Kong will retain its political, economic, and judicial systems for 50 years after reversion.  The PRC’s imposition of the National Security Law (NSL) on June 30, 2020 undermined Hong Kong’s autonomy and introduced heightened uncertainty for foreign and local firms operating in Hong Kong.  As a result, the U.S. Government has taken measures to eliminate or suspend Hong Kong’s preferential treatment and special trade status, including suspension of most export control waivers, revocation of reciprocal shipping income tax exemption treatments, establishment of a new marking rule requiring goods made in Hong Kong to be labeled “Made in China,”  and imposition of sanctions against former and current Hong Kong government officials.

On July 16, 2021, the Department of State, along with the Department of the Treasury, the Department of Commerce, and the Department of Homeland Security, issued an advisory to U.S. businesses regarding potential risks to their operations and activities in Hong Kong.

 

Since the enactment of the NSL in Hong Kong, U.S. citizens traveling or residing in Hong Kong may be subject to increased levels of surveillance, as well as arbitrary enforcement of laws and detention for purposes other than maintaining law and order.

On economic issues, Hong Kong generally pursues a free market philosophy with minimal government intervention.  The Hong Kong government (HKG) generally welcomes foreign investment, neither offering special incentives nor imposing disincentives for foreign investors.

Hong Kong provides for no distinction in law or practice between investments by foreign-controlled companies and those controlled by local interests.  Foreign firms and individuals are able to incorporate their operations in Hong Kong, register branches of foreign operations, and set up representative offices without encountering discrimination or undue regulation.  There is no restriction on the ownership of such operations.  Company directors are not required to be citizens of, or resident in, Hong Kong.  Reporting requirements are straightforward and are not onerous.

Despite the imposition of the NSL by Beijing, significant curtailments in individual freedoms, and the end of Hong Kong’s ability to exercise the degree of autonomy it enjoyed in the past, Hong Kong remains a popular destination for U.S. investment and trade.  Even with a population of less than eight million, Hong Kong is the United States’ twelfth-largest export market, thirteenth largest for total agricultural products, and sixth-largest for high-value consumer food and beverage products.  Hong Kong’s economy, with world-class institutions and regulatory systems, is bolstered by its competitive financial and professional services, trading, logistics, and tourism sectors, although tourism suffered steep drops in 2020 due to COVID-19.  The service sector accounted for more than 90 percent of Hong Kong’s nearly USD 348 billion gross domestic product (GDP) in 2020.  Hong Kong hosts a large number of regional headquarters and regional offices.  Approximately 1,300 U.S. companies are based in Hong Kong, according to Hong Kong’s 2020 census data, with more than half regional in scope.  Finance and related services companies, such as banks, law firms, and accountancies, dominate the pack.  Seventy of the world’s 100 largest banks have operations in Hong Kong.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 11 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 3 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2020 11 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 81,883 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 USD 50,800 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Hong Kong is the world’s second-largest recipient of foreign direct investment (FDI), according to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2020, with a significant amount bound for mainland China.  The HKG’s InvestHK encourages inward investment, offering free advice and services to support companies from the planning stage through to the launch and expansion of their business.  U.S. and other foreign firms can participate in government financed and subsidized research and development programs on a national treatment basis.  Hong Kong does not discriminate against foreign investors by prohibiting, limiting, or conditioning foreign investment in a sector of the economy.

Capital gains are not taxed, nor are there withholding taxes on dividends and royalties.  Profits can be freely converted and remitted.  Foreign-owned and Hong Kong-owned company profits are taxed at the same rate – 16.5 percent.  The tax rate on the first USD 255,000 profit for all companies is currently 8.25 percent.  No preferential or discriminatory export and import policies affect foreign investors.  Domestic industries receive no direct subsidies.  Foreign investments face no disincentives, such as quotas, bonds, deposits, or other similar regulations.

According to HKG statistics, 3,983 overseas companies had regional operations registered in Hong Kong in 2020.  The United States has the largest number with 690.  Hong Kong is working to attract more start-ups as it works to develop its technology sector, and about 26 percent of start-ups in Hong Kong come from overseas.

Hong Kong’s Business Facilitation Advisory Committee is a platform for the HKG to consult the private sector on regulatory proposals and implementation of new or proposed regulations.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors can invest in any business and own up to 100 percent of equity.  Like domestic private entities, foreign investors have the right to engage in all forms of remunerative activity.

The HKG owns virtually all land in Hong Kong, which the HKG administers by granting long-term leases without transferring title.  Foreign residents claim that a 15 percent Buyer’s Stamp Duty on all non-permanent-resident and corporate buyers discriminates against them.

The main exceptions to the HKG’s open foreign investment policy are:

Broadcasting – Voting control of free-to-air television stations by non-residents is limited to 49 percent.  There are also residency requirements for the directors of broadcasting companies.

Legal Services – Foreign lawyers at foreign law firms may only practice the law of their jurisdiction.  Foreign law firms may become “local” firms after satisfying certain residency and other requirements.  Localized firms may thereafter hire local attorneys but must do so on a 1:1 basis with foreign lawyers.  Foreign law firms can also form associations with local law firms.

Other Investment Policy Reviews

Hong Kong last conducted the Trade Policy Review in 2018 through the World Trade Organization (WTO).  https://www.wto.org/english/tratop_e/tpr_e/g380_e.pdf

Business Facilitation

The Efficiency Office under the Innovation and Technology Bureau is responsible for business facilitation initiatives aimed at improving the business regulatory environment of Hong Kong.

The e-Registry (https://www.eregistry.gov.hk/icris-ext/apps/por01a/index) is a convenient and integrated online platform provided by the Companies Registry and the Inland Revenue Department for applying for company incorporation and business registration.  Applicants, for incorporation of local companies or for registration of non-Hong Kong companies, must first register for a free user account, presenting an original identification document or a certified true copy of the identification document.  The Companies Registry normally issues the Business Registration Certificate and the Certificate of Incorporation on the same day for applications for company incorporation.  For applications for registration of a non-Hong Kong company, it issues the Business Registration Certificate and the Certificate of Registration two weeks after submission.

Outward Investment

As a free market economy, Hong Kong does not promote or incentivize outward investment, nor restrict domestic investors from investing abroad.  Mainland China and British Virgin Islands were the top two destinations for Hong Kong’s outward investments in 2019 (based on most recent data available).

2. Bilateral Investment Agreements and Taxation Treaties

Hong Kong has bilateral investment agreements with Australia, Austria, the Belgium-Luxembourg Economic Union, Canada, Chile, Denmark, Finland, France, Germany, Italy, Japan, South Korea, Kuwait, the Netherlands, New Zealand, Sweden, Switzerland, Thailand, the United Arab Emirates, the United Kingdom, and the Association of Southeast Asian Nations (ASEAN).  It has concluded but not yet signed agreements with Bahrain, Myanmar, and Maldives.  Hong Kong has also signed an investment agreement with Mexico, but it is not yet in force.  The HKG is currently negotiating agreements with Iran, Turkey, and Russia.  All such agreements are based on a model text approved by mainland China through the Sino-British Joint Liaison Group.  U.S. firms are generally not at a competitive or legal disadvantage.

Hong Kong has a free trade agreement (FTA) with mainland China, the Closer Economic Partnership Arrangement (CEPA), which provides tariff-free export to mainland China of Hong Kong-origin goods and preferential access for specific services.  CEPA has gradually expanded since its signing in 2003.  Under the CEPA framework, Hong Kong enjoys liberalized trade in services using a “negative list” covering 134 service sectors for Hong Kong and grants national treatment to Hong Kong’s 62 service industries.  Hong Kong also enjoys most-favored nation treatment, with liberalization measures included in FTAs signed by mainland China and other countries automatically extended to Hong Kong.  Hong Kong and mainland China have also signed an investment agreement and an economic and technical cooperation agreement.  The investment agreement includes provision of national treatment and non-services investment using a negative list approach.

Hong Kong also has FTAs with New Zealand, member states of the European Free Trade Association, Chile, Macau, ASEAN, Georgia, the Maldives, and Australia.  These agreements are consistent with the provisions of the WTO.  Hong Kong is exploring FTAs with the Pacific Alliance (Chile, Colombia, Mexico, and Peru) and the United Kingdom.  Hong Kong is keenly interested in joining the Regional Comprehensive Economic Partnership.

The United States does not have a bilateral treaty on the avoidance of double taxation with Hong Kong, but has a Tax Information Exchange Agreement and an Inter-Government Agreement on the Foreign Account Tax Compliance Act with Hong Kong.  As of April 2020, the HKG had Comprehensive Avoidance of Double Taxation Agreements (CDTAs) with 43 tax jurisdictions, and negotiations with 14 tax jurisdictions are underway.  The HKG targets to bring the total number of CDTAs to 50 by the end of 2022.  In September 2018, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters signed by mainland China entered into force for Hong Kong.  Effective January 2021, the number of reportable jurisdictions increased from 75 to 126.

Under the President’s Executive Order on Hong Kong Normalization, which directs the suspension or elimination of special and preferential treatment for Hong Kong, the United States notified the Hong Kong authorities in August 2020 of its suspension of the Reciprocal Tax Exemptions on Income Derived from the International Operation of Ships Agreement.

3. Legal Regime

Transparency of the Regulatory System

Hong Kong’s regulations and policies typically strive to avoid distortions or impediments to the efficient mobilization and allocation of capital and to encourage competition.  Bureaucratic procedures and “red tape” are usually transparent and held to a minimum.

In amending or making any legislation, including investment laws, the HKG conducts a three-month public consultation on the issue concerned which then informs the drafting of the bill.  Lawmakers then discuss draft bills and vote.  Hong Kong’s legal, regulatory, and accounting systems are transparent and consistent with international norms.

Gazette is the official publication of the HKG.  This website https://www.gld.gov.hk/egazette/english/whatsnew/whatsnew.html is the centralized online location where laws, regulations, draft bills, notices, and tenders are published.  All public comments received by the HKG are published at the websites of relevant policy bureaus.

The Office of the Ombudsman, established in 1989 by the Ombudsman Ordinance, is Hong Kong’s independent watchdog of public governance.

Public finances are regulated by clear laws and regulations.  The Basic Law prescribes that authorities strive to achieve a fiscal balance and avoid deficits.  There is a clear commitment by the HKG to publish fiscal information under the Audit Ordinance and the Public Finance Ordinance, which prescribe deadlines for the publication of annual accounts and require the submission of annual spending estimates to the Legislative Council (LegCo).  There are few contingent liabilities of the HKG, with details of these items published about seven months after the release of the fiscal budget.  In addition, LegCo members have a responsibility to enhance budgetary transparency by urging government officials to explain the government’s rationale for the allocation of resources.  All LegCo meetings are open to the public so that the government’s responses are available to the general public.

On March 29, 2021, the Hong Kong Financial Services and Treasury Bureau submitted to Hong Kong’s Legislative Council plans to restrict the public from accessing certain information about executives in the Company Registry.  If passed, companies will be allowed immediately to withhold information on the residential addresses and identification numbers of directors and secretaries.  Corporate governance and financial experts warned that the proposal could enable fraud and further hurt the city’s status as a transparent financial hub.   Media organizations criticized the plan for undermining transparency and freedom of information.

International Regulatory Considerations

Hong Kong is an independent member of the WTO and Asia-Pacific Economic Co-operation (APEC), adopting international norms.  It notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade and was the first WTO member to ratify the Trade Facilitation Agreement (TFA).  Hong Kong has achieved a 100 percent rate of implementation commitments.

Legal System and Judicial Independence

Hong Kong’s common law system is based on the United Kingdom’s, and judges are appointed by the Chief Executive on the recommendation of the Judicial Officers Recommendation Commission.  Regulations or enforcement actions are appealable, and they are adjudicated in the court system.

Hong Kong’s commercial law covers a wide range of issues related to doing business.  Most of Hong Kong’s contract law is found in the reported decisions of the courts in Hong Kong and other common law jurisdictions.

The imposition of the NSL and pressure from the PRC authorities raised serious concerns about the longevity of Hong Kong’s judicial independence.  The NSL authorizes the mainland China judicial system, which lacks judicial independence and has a 99 percent conviction rate, to take over any national security-related case at the request of the Hong Kong government or the Office of Safeguarding National Security.  Under the NSL, the Hong Kong Chief Executive is required to establish a list of judges to handle all cases concerning national security-related offenses.  Although Hong Kong’s judiciary selects the specific judge(s) who will hear any individual case, some commentators argued that this unprecedented involvement of the Chief Executive weakens Hong Kong’s judicial independence.

Media outlets controlled by the PRC central government in both Hong Kong and mainland China repeatedly accused Hong Kong judges of bias following the acquittals of protesters accused of rioting and other crimes.  Some Hong Kong and PRC central government officials questioned the existence of the “separation of powers” in Hong Kong, including some statements that judicial independence is not enshrined in Hong Kong law and that judges should follow “guidance” from the government.

Laws and Regulations on Foreign Direct Investment

Hong Kong’s extensive body of commercial and company law generally follows that of the United Kingdom, including the common law and rules of equity.  Most statutory law is made locally.  The local court system, which is independent of the government, provides for effective enforcement of contracts, dispute settlement, and protection of rights.  Foreign and domestic companies register under the same rules and are subject to the same set of business regulations.

The Hong Kong Code on Takeovers and Mergers (1981) sets out general principles for acceptable standards of commercial behavior.

The Companies Ordinance (Chapter 622) applies to Hong Kong-incorporated companies and contains the statutory provisions governing compulsory acquisitions.  For companies incorporated in jurisdictions other than Hong Kong, relevant local company laws apply.  The Companies Ordinance requires companies to retain accurate and up to date information about significant controllers.

The Securities and Futures Ordinance (Chapter 571) contains provisions requiring shareholders to disclose interests in securities in listed companies and provides listed companies with the power to investigate ownership of interests in its shares.  It regulates the disclosure of inside information by listed companies and restricts insider dealing and other market misconduct.

Competition and Antitrust Laws

The independent Competition Commission (CC) investigates anti-competitive conduct that prevents, restricts, or distorts competition in Hong Kong.  In December 2020, the CC filed Hong Kong’s first abuse of substantial market power case in the Competition Tribunal against Linde HKO and its Germany-based parent company Linde GmbH for leveraging substantial market power in the production and supply of medical oxygen, medical nitrous oxide, Entonox, and medical air to maintain a stranglehold over the downstream maintenance market.

Expropriation and Compensation

The U.S. Consulate General is not aware of any expropriations in the recent past.  Expropriation of private property in Hong Kong may occur if it is clearly in the public interest and only for well-defined purposes such as implementation of public works projects.  Expropriations are to be conducted through negotiations, and in a non-discriminatory manner in accordance with established principles of international law.  Investors in and lenders to expropriated entities are to receive prompt, adequate, and effective compensation.  If agreement cannot be reached on the amount payable, either party can refer the claim to the Land Tribunal.

Dispute Settlement

ICSID Convention and New York Convention

The Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) apply to Hong Kong.  Hong Kong’s Arbitration Ordinance provides for enforcement of awards under the 1958 New York Convention.

Investor-State Dispute Settlement

The U.S. Consulate General is not aware of any investor-state disputes in recent years involving U.S. or other foreign investors or contractors and the HKG.  Private investment disputes are normally handled in the courts or via private mediation.  Alternatively, disputes may be referred to the Hong Kong International Arbitration Center.

International Commercial Arbitration and Foreign Courts

The HKG accepts international arbitration of investment disputes between itself and investors and has adopted the United Nations Commission on International Trade Law model law for domestic and international commercial arbitration.  It has a Memorandum of Understanding with mainland China modelled on the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) for reciprocal enforcement of arbitral awards.

Under Hong Kong’s Arbitration Ordinance emergency relief granted by an emergency arbitrator before the establishment of an arbitral tribunal, whether inside or outside Hong Kong, is enforceable.  The Arbitration Ordinance stipulates that all disputes over intellectual property rights may be resolved by arbitration.

The Mediation Ordinance details the rights and obligations of participants in mediation, especially related to confidentiality and admissibility of mediation communications in evidence.

Third party funding for arbitration and mediation came into force on February 1, 2019.

Foreign judgments in civil and commercial matters may be enforced in Hong Kong by common law or under the Foreign Judgments (Reciprocal Enforcement) Ordinance, which facilitates reciprocal recognition and enforcement of judgments based on reciprocity.  A judgment originating from a jurisdiction that does not recognize a Hong Kong judgment may still be recognized and enforced by the Hong Kong courts, provided that all the relevant requirements of common law are met.  However, a judgment will not be enforced in Hong Kong if it can be shown that either the judgment or its enforcement is contrary to Hong Kong’s public policy.

In January 2019, Hong Kong and mainland China signed a new Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the mainland and of Hong Kong to facilitate enforcement of judgments in the two jurisdictions.  The arrangement, which as of February 2021 is still pending implementing legislation, will cover the following key features: contractual and tortious disputes in general; commercial contracts, joint venture disputes, and outsourcing contracts; intellectual property rights, matrimonial or family matters; and judgments related to civil damages awarded in criminal cases.

Bankruptcy Regulations

Hong Kong’s Bankruptcy Ordinance provides the legal framework to enable i) a creditor to file a bankruptcy petition with the court against an individual, firm, or partner of a firm who owes him/her money; and ii) a debtor who is unable to repay his/her debts to file a bankruptcy petition against himself/herself with the court.  Bankruptcy offenses are subject to criminal liability.

The Companies (Winding Up and Miscellaneous Provisions) Ordinance aims to improve and modernize the corporate winding-up regime by increasing creditor protection and further enhancing the integrity of the winding-up process.

The Commercial Credit Reference Agency collates information about the indebtedness and credit history of SMEs and makes such information available to members of the Hong Kong Association of Banks and the Hong Kong Association of Deposit Taking Companies.

Hong Kong’s average duration of bankruptcy proceedings is just under ten months, ranking 45th in the world for resolving insolvency, according to the World Bank’s Doing Business 2020 rankings.

4. Industrial Policies

Investment Incentives

Hong Kong imposes no export performance or local content requirements as a condition for establishing, maintaining, or expanding a foreign investment.  There are no requirements that Hong Kong residents own shares, that foreign equity is reduced over time, or that technology is transferred on certain terms.  The HKG does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

The HKG allows a deduction on interest paid to overseas-associated corporations and provides an 8.25 percent concessionary tax rate derived by a qualifying corporate treasury center.

The HKG offers an effective tax rate of around three to four percent to attract aircraft leasing companies to develop business in Hong Kong.

The HKG has set up multiple programs to assist enterprises in securing trade finance and business capital, expanding markets, and enhancing overall competitiveness.  These support measures are available to any enterprise in Hong Kong, irrespective of origin.

Hong Kong-registered companies with a significant proportion of their research, design, development, production, management, or general business activities located in Hong Kong are eligible to apply to the Innovation and Technology Fund (ITF), which provides financial support for research and development (R&D) activities in Hong Kong.  Hong Kong Science & Technology Parks (Science Park) and Cyberport are HKG-owned enterprises providing subsidized rent and financial support through incubation programs to early-stage startups.

The HKG offers additional tax deductions for domestic expenditure on R&D incurred by firms.  Firms enjoy a 300 percent tax deduction for the first HKD 2 million (USD 255,000) qualifying R&D expenditure and a 200 percent deduction for the remainder.  Since 2017, the Financial Secretary has announced over HKD 120 billion (USD 15.3 billion) in funding to support innovation and technology development in Hong Kong.  These funds are largely directed at supporting and adding programs through the ITF, Science Park, and Cyberport.

In February 2009, HKD 20 billion (USD 2.6 billion) was  earmarked for the Research Endowment Fund, which provides research grants to academics and universities.  In February 2018, another HKD 10 billion (USD 1.3 billion) was set aside to provide financial incentives to foreign universities to partner with Hong Kong universities and establish joint research projects housed in two research clusters in Science Park, one specializing in artificial intelligence and robotics and the other specializing in biotechnology.  In February 2018, another HKD 20 billion (USD 2.6 billion) was appropriated to begin construction on a second, larger Science Park, located on the border with Shenzhen, which is intended to provide a much larger number of subsidized-rent facilities for R&D which are also expected to have special rules allowing mainland residents to work onsite without satisfying normal immigration procedures.

The Technology Talent Admission Scheme provides a fast-track arrangement for eligible technology companies/institutes to admit overseas and mainland technology talent to undertake R&D for them in the areas of biotechnology, artificial intelligence, cybersecurity, robotics, data analytics, financial technologies, and material science are eligible for application.  The Postdoctoral Hub Program provides funding support to recipients of the ITF, as well as incubatees and tenants of Science Park and Cyberport, to recruit up to two postdoctoral talents for R&D. Applicants must have a doctoral degree in a science, technology, engineering, and mathematics-related discipline from either a local university or a well-recognized non-local institution.

In July 2020, the HKG launched a USD 256.4 million Re-industrialization Funding Scheme to subsidize manufacturers, on a matching basis, setting up smart production lines in Hong Kong.

The Pilot Bond Grant Scheme launched by the Hong Kong Monetary Authority (HKMA) in May 2018 is aimed at improving Hong Kong’s competitiveness in the international bond market by enhanced tax concessions for qualifying debt instruments.  The HKG supports first-time issues with a grant of up to 50 percent of the eligible issuance expenses, with a cap of HKD 2.5 million (USD 320,500) for issues with a credit rating from a credit rating agency recognized by the Hong Kong Monetary Authority (HKMA), or a cap of HKD 1.25 million (USD 160,200) for issues that do not have a credit rating and where neither the issuer nor the issue’s guarantor have a credit rating.

In October 2020, the HKG launched a USD 38 million pilot subsidy scheme to encourage the logistics industry to enhance productivity through the application of technology.

Starting from December 2020, a USD 25.6 million Green Tech Fund (GTF) is open for applications.  The GTF provides funding supports to R&D projects which can help Hong Kong decarbonize and enhance environmental protection.  The amount of funding for each project ranges from USD 320,500 to USD 3.9 million, and each project may last up to five years.

In February 2021, the HKG announced a proposal to strengthen Hong Kong’s position as an asset management center.  The HKG planned to introduce in the second quarter of 2021 new legislation to facilitate the re-domicile of foreign investment funds to Hong Kong for registration as Open-ended Fund Companies (OFCs).  The HKG would provide subsidies to cover 70 percent of the expenses (capped at HKD 1 million or USD 125,000) paid to local professional service providers for OFCs set up in or re-domiciled to Hong Kong in the coming three years.

In February 2021, the HKG announced it would consolidate the Pilot Bond Grant Scheme and the Green Bond Grant Scheme into a Green and Sustainable Finance Grant Scheme to subsidize eligible bond issuers and loan borrowers to cover their expenses on bond issuance and external review services.

Foreign Trade Zones/Free Ports/Trade Facilitation

Hong Kong, a free port without foreign trade zones, has modern and efficient infrastructure making it a regional trade, finance, and services center.  Rapid growth has placed severe demands on that infrastructure, necessitating plans for major new investments in transportation and shipping facilities, including a planned expansion of container terminal facilities, additional roadway and railway networks, major residential/commercial developments, community facilities, and environmental protection projects.  Construction on a third runway at Hong Kong International Airport is scheduled for completion by 2023.

Hong Kong and mainland China have a Free Trade Agreement Transshipment Facilitation Scheme that enables mainland-bound consignments passing through Hong Kong to enjoy tariff reductions in the mainland.  The arrangement covers goods traded between mainland China and its trading partners, including ASEAN members, Australia, Bangladesh, Chile, Costa Rica, Iceland, India, New Zealand, Pakistan, Peru, South Korea, Sri Lanka, Switzerland, and Taiwan.

The HKG launched in December 2018 phase one of the Trade Single Window (TSW) to provide a one-stop electronic platform for submitting ten types of trade documents, promoting cross-border customs cooperation, and expediting trade declaration and customs clearance.  Phase two is expected to be implemented in 2023.

The latest version of CEPA has established principles of trade facilitation, including simplifying customs procedures, enhancing transparency, and strengthening cooperation.

Performance and Data Localization Requirements

The HKG does not mandate local employment or performance requirements.  It does not follow a forced localization policy making foreign investors use domestic content in goods or technology.

Foreign nationals normally need a visa to live or work in Hong Kong.  Short-term visitors are permitted to conduct business negotiations and sign contracts while on a visitor’s visa or entry permit.  Companies employing people from overseas must show that a prospective employee has special skills, knowledge, or experience not readily available in Hong Kong.

Hong Kong allows free and uncensored flow of information, though the imposition of the NSL created certain limits on freedom of expression and content, especially those that may be viewed as politically-sensitive such as advocating for Hong Kong’s independence from mainland China.  The freedom and privacy of communication is enshrined in Basic Law Article 30.  The HKG has no requirements for foreign IT providers to turn over source code and does not interfere with data center operations.  However, the NSL introduced a heightened risk of PRC and Hong Kong authorities using expanded legal authorities to collect data from businesses and individuals in Hong Kong for actions that may violate “national security.” For more information, please refer to the Hong Kong business advisory released jointly by the Department of State, along with the Department of the Treasury, the Department of Commerce, and the Department of Homeland Security on July 16, 2021.

The NSL grants Hong Kong police broad authorities to conduct wiretaps or electronic surveillance without warrants in national security-related cases.  The NSL also empowers police to conduct searches, including of electronic devices, for evidence in national security cases.  Police can also require Internet service providers to provide or delete information relevant to these cases.  In January 2021, the organizer of an online platform alleged that local Internet providers have made the site inaccessible for users in Hong Kong following requests from the Hong Kong government.  One ISP subsequently confirmed that they it blocked a website “in compliance with the requirement issued under the National Security Law.”

Hong Kong does not currently restrict transfer of personal data outside the SAR, but the dormant Section 33 the Personal Data (Privacy) Ordinance would prohibit such transfers unless the personal data owner consents or other specified conditions are met.  The Privacy Commissioner is authorized to bring Section 33 into effect at any time, but it has been dormant since 1995.

In January 2020, the HKG introduced a discussion paper to the LegCo and proposed certain changes to the Personal Data (Privacy) Ordinance with the aim of strengthening data protection in Hong Kong.  One of the amendments proposed was to require data users to formulate a clear data retention policy which specified a retention period for the personal data collected.  Feedback from the LegCo on this discussion paper formed the basis of further consultations with stakeholders and more concrete legislative amendment proposals.  There is no indication on the timeline of any legislative amendments to the Ordinance.

In December 2020, Hong Kong’s Securities and Futures Commission (SFC) required licensed corporations in Hong Kong to seek the SFC’s approval before using the following for storing regulatory records: 1) premises controlled exclusively by an external data storage provider(s) located inside or outside Hong Kong, such as cloud service providers like Google Cloud, Microsoft Azure or Amazon AWS; or 2) server(s) for data storage at data centers located inside or outside Hong Kong.

5. Protection of Property Rights

Real Property

The Basic Law ensures protection of leaseholders’ rights in long-term leases that are the basis of the SAR’s real property system.  The Basic Law also protects the lawful traditional rights and interests of the indigenous inhabitants of the New Territories.  The real estate sector, one of Hong Kong’s pillar industries, is equipped with a sound banking mortgage system.  HK ranked 51st for ease of registering property, according to the World Bank’s Doing Business 2020 rankings.

Land transactions in Hong Kong operate on a deeds registration system governed by the Land Registration Ordinance.  The Land Titles Ordinance provides greater certainty on land title and simplifies the conveyancing process.

Intellectual Property Rights

Hong Kong generally provides strong intellectual property rights (IPR) protection and enforcement and for the most part has instituted an IP regime consistent with international standards.  Hong Kong has effective IPR enforcement capacity, and a judicial system that supports enforcement efforts with an effective public outreach program that discourages IPR-infringing activities.   Despite the robustness of Hong Kong’s IP system, challenges remain, particularly in copyright infringement and effective enforcement against the heavy, bi-directional flow of counterfeit goods.

Hong Kong’s commercial and company laws provide for effective enforcement of contracts and protection of corporate rights.  Hong Kong has filed its notice of compliance with the Trade-Related Aspects of Intellectual Property Rights (TRIPs) requirements of the WTO.  The Intellectual Property Department, which includes the Trademarks and Patents Registries, is the focal point for the development of Hong Kong’s IP regime.  The Customs and Excise Department (CED) is the sole enforcement agency for intellectual property rights (IPR).  Hong Kong has acceded to the Paris Convention for the Protection of Industrial Property, the Bern Convention for the Protection of Literary and Artistic Works, and the Geneva and Paris Universal Copyright Conventions.  Hong Kong also continues to participate in the World Intellectual Property Organization as part of mainland China’s delegation; the HKG has seconded an officer from CED to INTERPOL in Lyon, France to further collaborate on IPR enforcement.

The HKG devotes significant resources to IPR enforcement.  Hong Kong courts have imposed longer jail terms than in the past for violations of Hong Kong’s Copyright Ordinance.  CED works closely with foreign customs agencies and the World Customs Organization to share best practices and to identify, disrupt, and dismantle criminal organizations engaging in IP theft that operate in multiple countries.  The government has conducted public education efforts to encourage respect for IPR.  Pirated and counterfeit products remain available on a small scale at the retail level throughout Hong Kong.

Other IPR challenges include end-use piracy of software and textbooks, internet peer-to-peer downloading, and the illicit importation and transshipment of pirated and counterfeit goods from mainland China and other places in Asia.  Hong Kong authorities have taken steps to address these challenges by strengthening collaboration with mainland Chinese authorities, prosecuting end-use software piracy, and monitoring suspect shipments at points of entry.  It has also established a task force to monitor and crack down on internet-based peer-to-peer piracy.

The Drug Office of Hong Kong imposes a drug registration requirement that requires applicants for new drug registrations to make a non-infringement patent declaration.  The Copyright Ordinance protects any original copyrighted work created or published anywhere in the world and criminalizes copying and distribution of protected works .  The Ordinance also provides rental rights for sound recordings, computer programs, films, and comic books and includes enhanced penalty provisions and other legal tools to facilitate enforcement.  The law defines possession of an infringing copy of computer programs, movies, TV dramas, and musical recordings (including visual and sound recordings) for use in business as an offense but provides no criminal liability for other categories of works.  In June 2020, an amendment bill to implement the Marrakesh Treaty came into effect.

The HKG has consulted unsuccessfully with internet service providers and content user representatives on a voluntary framework for IPR protection in the digital environment.  It has also failed to pass amendments to the Copyright Ordinance that would enhance copyright protection against online piracy.  As of February 2021, the Infringing Website List Scheme (IWLS) established by the Hong Kong Creative Industries Association to clamp down on websites that display pirated content reportedly included 137 infringing websites in the portal.  In addition, 27 HKG agencies have been assigned with an individual password for checking with the IWLS before placing digital advertisements and tenders.

The Patent Ordinance allows for granting an independent patent in Hong Kong based on patents granted by the United Kingdom and mainland China.  Patents granted in Hong Kong are independent and capable of being tested for validity, rectified, amended, revoked, and enforced in Hong Kong courts.  Hong Kong’s Original Grant Patent system, which came into operation in December 2019, takes into account the patent systems generally established in regional and international patent treaties, while maintaining the re-registration system for the granting of standard patents.

The Registered Design Ordinance is modeled on the EU design registration system.  To be registered, a design must be new, and the system requires no substantive examination.  The initial period of five years protection is extendable for four periods of five years each, up to 25 years.

Hong Kong’s trademark law is TRIPS-compatible and allows for registration of trademarks relating to services.  All trademark registrations originally filed in Hong Kong are valid for seven years and renewable for 14-year periods.  Proprietors of trademarks registered elsewhere must apply anew and satisfy all requirements of Hong Kong law.  When evidence of use is required, such use must have occurred in Hong Kong.  In June 2020, Hong Kong implemented the Madrid Protocol.  The HKG will liaise with mainland China to seek application of the Madrid Protocol to Hong Kong beginning in 2022.

Hong Kong has no specific ordinance to cover trade secrets; however, the government has a duty under the Trade Descriptions Ordinance to protect information from being disclosed to other parties.  The Trade Descriptions Ordinance prohibits false trade descriptions, forged trademarks, and misstatements regarding goods and services supplied during trade.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

6. Financial Sector

Capital Markets and Portfolio Investment

There are no impediments to the free flow of financial resources.  Non-interventionist economic policies, complete freedom of capital movement, and a well-understood regulatory and legal environment make Hong Kong a regional and international financial center.  It has one of the most active foreign exchange markets in Asia.

Assets and wealth managed in Hong Kong posted a record high of USD 3.7 trillion in 2019 (the latest figure available), with two-thirds of that coming from overseas investors.  To enhance the competitiveness of Hong Kong’s fund industry, OFCs as well as onshore and offshore funds are offered a profits tax exemption.

The HKMA’s Infrastructure Financing Facilitation Office (IFFO) provides a platform for pooling the efforts of investors, banks, and the financial sector to offer comprehensive financial services for infrastructure projects in emerging markets.  IFFO is an advisory partner of the World Bank Group’s Global Infrastructure Facility.

Under the Insurance Companies Ordinance, insurance companies are authorized by the Insurance Authority to transact business in Hong Kong.  As of February 2021, there were 165 authorized insurance companies in Hong Kong, 70 of them foreign or mainland Chinese companies.

The Hong Kong Stock Exchange’s total market capitalization surged by 24.0 percent to USD 6.1 trillion in 2020, with 2,538 listed firms at year-end.  Hong Kong Exchanges and Clearing Limited, a listed company, operates the stock and futures exchanges.  The Securities and Futures Commission (SFC), an independent statutory body outside the civil service, has licensing and supervisory powers to ensure the integrity of markets and protection of investors.

No discriminatory legal constraints exist for foreign securities firms establishing operations in Hong Kong via branching, acquisition, or subsidiaries.  Rules governing operations are the same for all firms.  No laws or regulations specifically authorize private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control.

In 2020, a total of 291 Chinese enterprises had “H” share listings on the stock exchange, with combined market capitalization of USD 906 billion.  The Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connects allow individual investors to cross trade Hong Kong and mainland stocks.  In December 2018, the ETF Connect, which was planned to allow international and mainland investors to trade in exchange-traded fund products listed in Hong Kong, Shanghai, and Shenzhen, was put on hold indefinitely due to “technical issues.” However, China approved two cross-listings of ETFs between Shanghai Stock exchange and the Tokyo Stock Exchange in June 2019, and between Shenzhen Stock Exchange and Hong Kong Stock Exchange in October 2020.

By the end of 2020, 50 mainland mutual funds and 29 Hong Kong mutual funds were allowed to be distributed in each other’s markets through the mainland-Hong Kong Mutual Recognition of Funds scheme. Hong Kong also has mutual recognition of funds programs with Switzerland, Thailand, Ireland, France, the United Kingdom, and Luxembourg.

Hong Kong has developed its debt market with the Exchange Fund bills and notes program.  Hong Kong Dollar debt stood at USD 292 billion by the end of 2020.  As of November 2020, RMB 1,203.5 billion (USD 180.5 billion) of offshore RMB bonds were issued in Hong Kong.  Multinational enterprises, including McDonald’s and Caterpillar, have also issued debt.  The Bond Connect, a mutual market access scheme, allows investors from mainland China and overseas to trade in each other’s respective bond markets through a financial infrastructure linkage in Hong Kong.  In the first eight months of 2020, the Northbound trading of Bond Connect accounted for 52 percent of foreign investors’ total turnover in the China Interbank Bond Market.  In December 2020, the HKMA and the People’s Bank of China (PBoC) set up a working group to drive the initiative of Southbound trading, with the target of launching it within 2021.

In June 2020, the PBoC, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, the HKMA and the Monetary Authority of Macau announced that they decided to implement a cross-boundary Wealth Management Connect pilot scheme in the Greater Bay Area (GBA), an initiative to economically integrate Hong Kong and Macau with nine cities in Guangdong Province.  Under the scheme, residents in the GBA can carry out cross-boundary investment in wealth management products distributed by banks in the GBA.  These authorities are still working on the implementation details for the scheme.

In December 2020, the SFC concluded its consultation on proposed customer due diligence requirements for OFCs.  The new requirements will enhance the anti-money laundering and counter-financing of terrorism measures with respect to OFCs and better align the requirements for different investment vehicles for funds in Hong Kong.  Upon the completion of the legislative process, the new requirements will come into effect after a six-month transition period.

In February 2021, the HKG announced it would issue green bonds regularly and expand the scale of the Government Green Bond Program to USD 22.5 billion within the next five years.

The HKG requires workers and employers to contribute to retirement funds under the Mandatory Provident Fund (MPF) scheme.  Contributions are expected to channel roughly USD five billion annually into various investment vehicles.  By September of 2020, the net asset values of MPF funds amounted to USD 131 billion.

Money and Banking System

Hong Kong has a three-tier system of deposit-taking institutions: licensed banks (161), restricted license banks (17), and deposit-taking companies (12).  HSBC is Hong Kong’s largest banking group.  With its majority-owned subsidiary Hang Seng Bank, HSBC controls more than 50.9 percent of Hong Kong Dollar (HKD) deposits.  The Bank of China (Hong Kong) is the second-largest banking group, with 15.4 percent of HKD deposits throughout 200 branches.  In total, the five largest banks in Hong Kong had more than USD 2 trillion in total assets at the end of 2019.  Thirty-five U.S. “authorized financial institutions” operate in Hong Kong, and most banks in Hong Kong maintain U.S. correspondent relationships.  Full implementation of the Basel III capital, liquidity, and disclosure requirements completed in 2019.

Credit in Hong Kong is allocated on market terms and is available to foreign investors on a non-discriminatory basis.  The private sector has access to the full spectrum of credit instruments as provided by Hong Kong’s banking and financial system.  Legal, regulatory, and accounting systems are transparent and consistent with international norms.  The HKMA, the de facto central bank, is responsible for maintaining the stability of the banking system and managing the Exchange Fund that backs Hong Kong’s currency.  Real Time Gross Settlement helps minimize risks in the payment system and brings Hong Kong in line with international standards.

Banks in Hong Kong have in recent years strengthened anti-money laundering and counterterrorist financing controls, including the adoption of more stringent customer due diligence (CDD) process for existing and new customers.  The HKMA stressed that “CDD measures adopted by banks must be proportionate to the risk level and banks are not required to implement overly stringent CDD processes.”

In November 2020, the HKG launched a three-month public consultation on its proposed amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.  Among other proposed changes, the HKG suggested introducing a licensing regime for virtual asset services providers and a two-tier registration regime for precious assets dealers.  The HKG will analyze feedback from the public before introducing a draft bill to the LegCo.

The NSL granted police authority to freeze assets related to national security-related crimes.  In October 2020, the HKMA advised banks in Hong Kong to report any transactions suspected of violating the NSL, following the same procedures as for money laundering.  Hong Kong authorities reportedly asked financial institutions to freeze bank accounts of former lawmakers, civil society groups, and other political targets who appear to be under investigation for their pro-democracy activities.

The HKMA welcomes the establishment of virtual banks, which are subject to the same set of supervisory principles and requirements applicable to conventional banks.  The HKMA has granted eight virtual banking licenses by the end of January 2021.

The HKMA’s Fintech Facilitation Office (FFO) aims to promote Hong Kong as a fintech hub in Asia.  FFO has launched the faster payment system to enable bank customers to make cross-bank/e-wallet payments easily and created a blockchain-based trade finance platform to reduce errors and risks of fraud.  The HKMA has signed nine fintech co-operation agreements with the regulatory authorities of Brazil, Dubai, France, Poland, Singapore, Switzerland, Thailand, the United Arab Emirates, and the United Kingdom.

Foreign Exchange and Remittances

Foreign Exchange

Conversion and inward/outward transfers of funds are not restricted.  The HKD is a freely convertible currency linked via de facto currency board to the U.S. dollar.  The exchange rate is allowed to fluctuate in a narrow band between HKD 7.75 – HKD 7.85 = USD 1.

Remittance Policies

There are no recent changes to or plans to change investment remittance policies.  Hong Kong has no restrictions on the remittance of profits and dividends derived from investment, nor reporting requirements on cross-border remittances.  Foreign investors bring capital into Hong Kong and remit it through the open exchange market.

Hong Kong has anti-money laundering (AML) legislation allowing the tracing and confiscation of proceeds derived from drug-trafficking and organized crime.  Hong Kong has an anti-terrorism law that allows authorities to freeze funds and financial assets belonging to terrorists.  Travelers arriving in Hong Kong with currency or bearer negotiable instruments (CBNIs) exceeding HKD 120,000 (USD 15,385) must make a written declaration to the CED.  For a large quantity of CBNIs imported or exported in a cargo consignment, an advanced electronic declaration must be made to the CED.

Sovereign Wealth Funds

The Future Fund, Hong Kong’s wealth fund, was established in 2016 with an endowment of USD 28.2 billion.  The fund seeks higher returns through long-term investments and adopts a “passive” role as a portfolio investor.  About half of the Future Fund has been deployed in alternative assets, mainly global private equity and overseas real estate, over a three-year period.  The rest is placed with the Exchange Fund’s Investment Portfolio, which follows the Santiago Principles, for an initial ten-year period.  In February 2020, the HKG announced that it will deploy 10 percent of the Future Fund to establish a new portfolio, which is called the Hong Kong Growth Portfolio (HKGP), focusing on domestic investments to lift the city’s competitiveness in financial services, commerce, aviation, logistics and innovation.  Between December 2020 and January 2021, the HKMA conducted a market survey to better understand the profiles of private equity firms with interest to become a general partner for the HKGP.

7. State-Owned Enterprises

Hong Kong has several major HKG-owned enterprises classified as “statutory bodies.” Hong Kong is party to the Government Procurement Agreement (GPA) within the framework of WTO.  Annex 3 of the GPA lists as statutory bodies the Housing Authority, the Hospital Authority, the Airport Authority, the Mass Transit Railway Corporation Limited, and the Kowloon-Canton Railway Corporation, which procure in accordance with the agreement.

The HKG provides more than half the population with subsidized housing, along with most hospital and education services from childhood through the university level.  The government also owns major business enterprises, including the stock exchange, railway, and airport.

Conflicts occasionally arise between the government’s roles as owner and policymaker.  Industry observers have recommended that the government establish a separate entity to coordinate its ownership of government-held enterprises and initiate a transparent process of nomination to the boards of government-affiliated entities.  Other recommendations from the private sector include establishing a clear separation between industrial policy and the government’s ownership function and minimizing exemptions of government-affiliated enterprises from general laws.

The Competition Law exempts all but six of the statutory bodies from the law’s purview.  While the government’s private sector ownership interests do not materially impede competition in Hong Kong’s most important economic sectors, industry representatives have encouraged the government to adhere more closely to the Guidelines on Corporate Governance of State-owned Enterprises of the Organization for Economic Cooperation and Development (OECD).

Privatization Program

All major utilities in Hong Kong, except water, are owned and operated by private enterprises, usually under an agreement framework by which the HKG regulates each utility’s management.

8. Responsible Business Conduct

The Hong Kong Stock Exchange adopts a higher standard of disclosure – ‘comply or explain’ – about its environmental key performance indicators for listed companies.  Results of a consultation process to review its environmental, social, and governance (ESG) reporting guidelines indicate strong support for enhancing the ESG reporting framework.  It has implemented proposals from the consultation process since July 2020.  Because Hong Kong is not a member of the OECD, OECD Guidelines for Multinational Enterprises are not applicable to Hong Kong companies.  The HKG, however, commends enterprises for fulfilling their social responsibility.  Hong Kong is not a signatory of the Montreux Document on Private Military and Security Companies.  Under the Security Bureau, the Security and Guarding Services Industry Authority is responsible for formulating issuing criteria and conditions for security company licenses and security personnel permits and determining applications for security company licenses.

Additional Resources

Department of State

Department of Labor

9. Corruption

Mainland China ratified the United Nations Convention Against Corruption in January 2006, and it was extended to Hong Kong in February 2006.  The Independent Commission Against Corruption (ICAC) is responsible for combating corruption and has helped Hong Kong develop a track record for combating corruption.  U.S. firms have not identified corruption as an obstacle to FDI.  A bribe to a foreign official is a criminal act, as is the giving or accepting of bribes, for both private individuals and government employees.  Offenses are punishable by imprisonment and large fines.

The Hong Kong Ethics Development Center (HKEDC), established by the ICAC, promotes business and professional ethics to sustain a level-playing field in Hong Kong.  The International Good Practice Guidance – Defining and Developing an Effective Code of Conduct for Organizations of the Professional Accountants in Business Committee published by the International Federation of Accountants (IFAC) and is in use with the permission of IFAC.

Resources to Report Corruption

Simon Peh, Commissioner
Independent Commission Against Corruption
303 Java Road, North Point, Hong Kong
+852-2826-3111
Email: com-office@icac.org.hk

10. Political and Security Environment

Beijing’s imposition of the National Security Law (NSL) on June 30, 2020 has introduced heightened uncertainties for companies operating in Hong Kong.  As a result, U.S. citizens traveling through or residing in Hong Kong may be subject to increased levels of surveillance, as well as arbitrary enforcement of laws and detention for purposes other than maintaining law and order.

As of March 2021, police have carried out at least 100 arrests of opposition politicians and activists under the NSL, including one U.S. citizen, in an effort to suppress all pro-democracy views and political activity in the city.  Police have also reportedly issued arrest warrants under the NSL for approximately thirty individuals residing abroad, including U.S. citizens.  Since June 2019, police have arrested over 10,000 people on various charges in connection with largely peaceful protests against government policies.

Please see the July 16, 2021 business advisory issued by the Department of State, along with the Department of the Treasury, the Department of Commerce, and the Department of Homeland Security.

The Department of State assesses that Hong Kong does not maintain a sufficient degree of autonomy under the “one country, two systems” framework to justify continued special treatment by the United States for bilateral agreements and programs per the Hong Kong Policy Act.  As a result of Hong Kong’s lack of autonomy from China, the Department of Commerce ended Hong Kong’s treatment as a separate trade entity from China, including the removal of many of Department of Commerce’s License Exceptions.  U.S. Customs and Borders Protection (CBP) requires goods produced in Hong Kong to be marked to show China, rather than Hong Kong, as their country of origin.  This requirement took effect November 9, 2020.  It does not affect country of origin determinations for purposes of assessing ordinary duties or temporary or additional duties.  Hong Kong has requested World Trade Organization dispute consultations to examine the issue.  As of March 2021, the Department of Treasury has sanctioned 35 former and current Hong Kong and mainland Chinese government officials and 44 Chinese-military companies identified by the Department of Defense.

The PRC government does not recognize dual nationality.  In January 2021, the Hong Kong government moved to enforce existing provisions of the Nationality Law of the People’s Republic of China in place since 1997, effectively ending its longstanding recognition of dual citizenship in Hong Kong.  The action ended consular access to two detained U.S. citizens as of March 2021 and potentially removed consular protection from about half of the estimated 85,000 U.S. citizens in Hong Kong.  U.S.-PRC, U.S.-Hong Kong and U.S. citizens of Chinese heritage may be subject to additional scrutiny and harassment, and the PRC government may prevent the U.S. Embassy or U.S. Consulate from providing consular services.

Hong Kong financial regulators have conducted outreach to stress the importance of robust anti-money laundering (AML) controls and highlight potential criminal sanctions implications for failure to fulfill legal obligations under local AML laws.  However, Hong Kong has a low number of prosecutions and convictions compared to the number of cases investigated.

Under the President’s Executive Order on Hong Kong Normalization, which directs the suspension or elimination of special and preferential treatment for Hong Kong, the United States notified the Hong Kong authorities in August 2020 of its suspension of the Surrender of Fugitive Offenders Agreement and the Transfer of Sentenced Persons Agreement.  The Reciprocal Tax Exemptions on Income Derived from the International Operation of Ships Agreement was also suspended.  In response, the Hong Kong government suspended the Agreement Between the Government of the United States of America and the Government of Hong Kong on Mutual Legal Assistance in Criminal Affairs, which entered into force in 2000.

11. Labor Policies and Practices

Hong Kong’s unemployment rate stood at 6.6 percent in the fourth quarter of 2020, with the unemployment rate of youth aged 15-19 rising to 17.6 percent.  In 2020, skilled personnel working as administrators, managers, professionals, and associate professionals accounted for 40.6 percent of the total working population.  At the end of 2019, there were about 399,320 foreign domestic helpers working in Hong Kong.  In 2020, about 8,842 foreign professionals came to work in the city, more than 10,089 fewer than the previous year.  The Employees Retraining Board provides skills re-training for local employees.  To address a shortage of highly skilled technical and financial professionals, the HKG seeks to attract qualified foreign and mainland Chinese workers.

The Employment Ordinance (EO) and the Employees’ Compensation Ordinance prohibit the termination of employment in certain circumstances: 1) Any pregnant employee who has at least four weeks’ service and who has served notice of her pregnancy; 2) Any employee who is on paid statutory sick leave and; 3) Any employee who gives evidence or information in connection with the enforcement of the EO or relating to any accident at work, cooperates in any investigation of his employer, is involved in trade union activity, or serves jury duty may not be dismissed because of those circumstances. Breach of these prohibitions is a criminal offense.

According to the EO, someone employed under a continuous contract for not less than 24 months is eligible for severance payment if: 1) dismissed by reason of redundancy; 2) under a fixed term employment contract that expires without being renewed due to redundancy; or 3) laid off.

Unemployment benefits are income- and asset-tested on an individual basis if living alone; if living with other family members, the total income and assets of all family members are taken into consideration for eligibility.  Recipients must be between the ages of 15-59, capable of work, and actively seeking full-time employment.

Parties in a labor dispute can consult the free and voluntary conciliation service offered by the Labor Department (LD).  A conciliation officer appointed by the LD will help parties reach a contractually binding settlement.  If there is no settlement, parties can start proceedings with the Labor Tribunal (LT), which can then be raised to the Court of First Instance and finally the Court of Appeal for leave to appeal.  The Court of Appeal can grant leave only if the case concerns a question of law of general public importance.

Local law provides for the rights of association and of workers to establish and join organizations of their own choosing.  The government does not discourage or impede the formation of unions.  As of 2019, Hong Kong’s 866 registered unions had 923,239 members, a participation rate of about 25.7 percent.  In 2020, 491 new worker unions formed to improve chances of winning seats in the legislature.  Hong Kong’s labor legislation is in line with international laws.  Hong Kong has implemented 41 conventions of the International Labor Organization in full and 18 others with modifications.  Workers who allege discrimination against unions have the right to a hearing by the Labor Relations Tribunal.  Legislation protects the right to strike.  Collective bargaining is not protected by Hong Kong law; there is no obligation to engage in it; and it is not widely used.  For more information on labor regulations in Hong Kong, please visit the following website: http://www.labour.gov.hk/eng/legislat/contentA.htm (Chapter 57 “Employment Ordinance”).

The LT has the power to make an order for reinstatement or re-engagement without securing the employer’s approval if it deems an employee has been unreasonably and unlawfully dismissed.  If the employer does not reinstate or re-engage the employee as required by the order, the employer must pay to the employee a sum amounting to three times the employee’s average monthly wages up to USD 9,300.  The employer commits an offense if he/she willfully and without reasonable excuse fails to pay the additional sum.

Starting from January 2019, male employees are entitled to five days’ paternity leave (increased from three days).

Starting from December 2020,  the statutory maternity leave increases to 14 weeks from ten weeks.

Effective May 1, 2019, the statutory minimum hourly wage rate increases from USD 4.4 to USD 4.8.

In February 2020, about 2,500 medical workers of the Hospital Authority took part in an industrial action, demanding the HKG close its border to mainland China to prevent the spread of  COVID-19.  They ended the strike a few days later without getting their demands realized.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance and Development Finance Programs

As a developed economy, there is little potential for the DFC to operate in Hong Kong.  However, there is scope for cooperation between companies based in Hong Kong with regional operations to work with the DFC.  Hong Kong is a member of the World Bank Group’s Multilateral Investment Guarantee Agency.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2020 $347,529 2019 $365,712 www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 $44,974 2019 $81,883 BEA data available at
https://apps.bea.gov/
international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) 2019 $14,679 2019 $14,110 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP 2019 507.5% 2019 506.5% UNCTAD data available at
https://stats.unctad.org/
handbook/EconomicTrends/Fdi.html

* Source for Host Country Data: Hong Kong Census and Statistics Department 

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 1,732,495 100% Total Outward 1,763,164 100%
British Virgin Islands 606,804 35% China, P.R.: Mainland 800,640 45%
China, P.R.: Mainland 475,641 27% British Virgin Islands 579,860 33%
Cayman Islands 152,048 9% Cayman Islands 70,492 4%
United Kingdom 139,120 8% Bermuda 55,091 3%
Bermuda 99,514 6% United Kingdom 53,858 3%
“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 1,830,229 100% All Countries 1,167,955 100% All Countries 662,274 100%
Cayman Islands 635,236 35% Cayman Islands 608,914 52% United States 156,543 24%
China, P.R.: Mainland 352,531 19% China, P.R.: Mainland 206,829 18% China, P.R.: Mainland 145,702 22%
United States 204,360 11% Bermuda 109,838 9% Japan 51,682 8%
Bermuda 112,021 6% United Kingdom 60,483 5% Luxembourg 42,742 6%
United Kingdom 85,496 5% United States 47,817 4% Australia 37,143 6%

14. Contact for More Information

Eveline Tseng, Consul, Economic Affairs
U.S. Consulate General Hong Kong and Macau
26 Garden Road, Central

Jordan

Executive Summary

Jordan is a Middle Eastern country centrally located on desert plateaus in southwest Asia and strategically positioned to serve as a regional business platform. Since King Abdullah II’s 1999 ascension to the throne, Jordan has taken steps to encourage foreign investment and to develop an outward-oriented, market-based, and globally competitive economy. Jordan is also uniquely poised as a platform to host investments focused on the reconstruction of Iraq and other projects in regional markets.

Jordan is committed to the promotion of investments as a key driver of economic growth and job creation, though in practice these policies face implementation challenges. The Government of Jordan offers a range of incentives to potential investors and has undertaken measures to review and enhance the economic, financial, and legal framework governing the investment process to take better advantage of available opportunities and spur growth through investment. However, despite improvement on the World Bank Ease of Doing Business report, doing business in Jordan is more difficult than elsewhere in the region.

Jordan’s economic growth has been limited for over a decade by exogenous shocks, starting with the Global Financial Crisis in 2008, followed by the Arab Spring in 2011 which resulted in interruptions of energy imports, the 2015 closure of Jordan’s borders with Iraq (reopened in August 2017 but still not flourishing) and Syria (partially re-opened in 2018), and an influx of Syrian refugees. Over this period, the government consistently ran large annual budget deficits but has been able to reduce the financing gap with loans, foreign assistance, and savings from economic reform measures enacted as part of an International Monetary Fund (IMF) Extended Fund Facility programs.  On March 25, 2020, the IMF Board approved a $1.3 billion Extended Fund Facility program for Jordan centered on fiscal consolidation, increased revenue collection, targeted social spending, economic growth, and job creation.

After growing by two percent in 2019, Jordan’s economy contracted by 1.6 percent in 2020 according to Department of Statistics data, largely due to the COVID-19 pandemic. The IMF estimates it will grow at 2.0 percent in 2021, though this number could be revised down as the effects of the pandemic’s second wave continue. Early in the pandemic, the Government of Jordan implemented a set of measures to contain the spread of the virus, which entailed a strict curfew and lockdown of schools, colleges, and 75 percent of all economic activity.  The economy gradually re-opened after the initial lockdowns, although evening and Friday curfews persisted through much of 2020 and into 2021. The IMF has released additional credit from a Rapid Financing Instrument to help Jordan manage its fiscal obligations during the pandemic.

Jordan introduced plans to mitigate the pandemic’s negative impact on the economy in both the short and medium terms.  The Central Bank of Jordan (CBJ) injected JD 1.5 billion ($2.1 billion) to increase liquidity in the banking system.  It also lowered the lending rate by 1.5 percent.  The CBJ launched a JD 500 million ($706 million) loan guarantee program at competitive interest rates to help small and medium enterprises (SMEs) resume their operations and pay their operational costs; this loan guarantee program increased in March 2021 to JD 700 million ($988 million). The CBJ also raised credit ceilings for the tourism sector and encouraged banks to reschedule and defer loans for those affected by the crisis through the end of 2021.

King Abdullah II activated the National Defense Law on March 17, 2020. Since then, the Government of Jordan has enacted 25 defense orders which stipulate measures to offset the socioeconomic impact of COVID-related restrictions and protect the economy. (List of all Defense Orders on Prime Ministry’s website in Arabic) . The government also announced measures to alleviate financial and operational burdens on businesses by postponing General Sales Tax (GST) payment and customs fees, reducing the cost of labor by exempting companies from paying social security retirement insurance for three months starting in March 2020, reducing energy costs for the industrial sector, reducing inspection rate of imported essential products, and halting judicial procedures on defaulting individuals/companies. The government issued Defense Order 6 which aims to protect employees’ rights and bans layoffs. It addressed employment conditions in the private sector, including required salary payments and temporary closure of entities/institutions largely hit by the pandemic.

The Social Security Corporation (SSC), in coordination with the government, initiated a number of programs to support workers in most affected sectors and their employers, including the relief program “Estidama,” launched in December 2020 to subsidize the salaries of workers in the sectors most affected by COVID.

Even while Jordan’s economy struggles, international metrics indicate Jordan’s investment regulatory environment is improving.  Jordan was selected as one of the top three most improved business climates in the World Bank’s “Doing Business Report 2020,” jumping 29 places from 104 to 75.  Jordan advanced 33 points in the simplified tax services index for implementing an electronic filing and payment system for labor taxes.  In ease of getting credit, Jordan ranked on par with the United States and Australia. Despite this progress, many investors complain the business environment continues to be challenging due to excessive red tape, shifting interpretations of laws and regulations, difficulties starting and exiting businesses, and other factors.

The Jordanian Investment Law grants equal treatment to local and foreign investors and incentivizes investments in industry, agriculture, tourism, hospitals, transportation, energy, and water distribution. In December 2020, the government submitted amendments to address loopholes related to tax breaks; the proposal is now awaiting parliamentary approval. The ongoing process to rationalize the tax structure and close tax loopholes may reduce incentives offered to foreign investors.

In January 2020, the Jordan Investment Commission (JIC) implemented an investor grievances bylaw which enables investors to file complaints concerning decisions issued by government agencies. Jordan also endorsed a new Public Private Partnership Law in 2020 to support the government’s commitment to broadening the utilization of the public-private partnerships and encouraging the private sector to play a larger role in overall economic activity.

Despite the pandemic, Foreign Direct Investment dropped only by 1.8 percent to JD 390 million ($551 million, equivalent to 1.7 percent of GDP) in the first three quarters of 2020 compared to the same period in 2019.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020  60 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 75 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2020 81 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $179 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 $4,410 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Jordan is largely open to foreign investment, and the government is committed to supporting foreign investment. Foreign and local investors are treated equally under the law. The Jordan Investment Commission (JIC) is the body responsible for implementing the 2014 Investment Law and promoting new and existing investment in Jordan, through a range of measures to incentivize and facilitate investment procedures.

The Investment Law established an Investment Council, comprised of the Prime Minister, ministers with economic portfolios, and representatives from the private sector, to oversee the management and development of national investment policy and propose legislative and economic reforms to facilitate investment.

The Investment Law also identifies JIC as the focal point for investors, capable of expediting the provision of government services and providing investment incentives such as tax and customs exemptions. The President of the Commission and the administrative team supervise and approve investment-related matters within the guidelines set by the Investment Council and approved by the government.

JIC oversees an investment-dedicated “Investment Window” to provide information and technical assistance to investors, with a mandate to simplify registration and licensing procedures for investment projects that benefit from the Investment Law. In 2018, the Commission launched a “Follow-Up and After Care” section with an aim to remove obstacles facing investors and find appropriate solutions as part of the investment process.

In 2018, the government issued the “Code of Governance Practices of Policies and Legislative Instruments in Government Departments for the Year 2018.” It aims to increase legislative predictability and stability to ensure the confidence of citizens and the business sector. The government developed guidelines for a regulatory impact assessment, to be adopted and implemented across all government entities by 2021.

Limits on Foreign Control and Right to Private Ownership and Establishment

Investment and property laws allow domestic and foreign entities to establish businesses that engage in remunerative activities.  Foreign companies may open regional and branch offices; branch offices may carry out full business activities and regional offices may serve as liaisons between head offices and Jordanian or regional clients.  The Ministry of Industry, Trade and Supply’s Companies Control Department implements the government’s policy on the establishment of regional and branch offices.

Foreign nationals and firms are permitted to own or lease property in Jordan for investment purposes and are allowed one residence for personal use, provided that their home country permits reciprocal property ownership rights for Jordanians.  Depending on the size and location of the property, the Land and Survey Department, the Ministry of Finance, and/or the Cabinet may need to approve foreign ownership of land and property, which must then be developed within five years of the date of approval.

In April 2019, the government amended its bylaw governing foreign ownership, expanding ownership percentage in some economic activities, while maintaining the following restrictions:

  • Foreigners are prohibited from wholly or partially owning investigation and security services, stone quarrying operations for construction purposes, customs clearance services, and bakeries of all kinds; and are prohibited from trading in weapons and fireworks.  The Cabinet, however, may approve foreign ownership of projects in these sectors upon the recommendation of the Investment Council.  To qualify for the exemption, projects must be categorized as being highly valuable to the national economy.
  • Foreigners are prohibited from wholly or partially owning investigation and security services, stone quarrying operations for construction purposes, customs clearance services, and bakeries of all kinds; and are prohibited from trading in weapons and fireworks.  The Cabinet, however, may approve foreign ownership of projects in these sectors upon the recommendation of the Investment Council.  To qualify for the exemption, projects must be categorized as being highly valuable to the national economy.
  • Investors are limited to 50 percent ownership in certain businesses and services, including retail and wholesale trading, engineering consultancy services, exchange houses apart from banks and financial services companies, maritime, air, and land transportation services, and related services.
  • Investors are limited to 50 percent ownership in certain businesses and services, including retail and wholesale trading, engineering consultancy services, exchange houses apart from banks and financial services companies, maritime, air, and land transportation services, and related services. • Foreign firms may not import goods without appointing an agent registered in Jordan; the agent may be a branch office or a wholly owned subsidiary of the foreign firm.  The agent’s connection to the foreign company must be direct, without a sub-agent or intermediary.  The Commercial Agents and Intermediaries Law No. 28/2001 governs contractual agreements between foreign firms and commercial agents.  Private foreign entities, whether licensed under sole foreign ownership or as a joint venture, compete on an equal basis with local companies.
  • Foreign firms may not import goods without appointing an agent registered in Jordan; the agent may be a branch office or a wholly owned subsidiary of the foreign firm.  The agent’s connection to the foreign company must be direct, without a sub-agent or intermediary.  The Commercial Agents and Intermediaries Law No. 28/2001 governs contractual agreements between foreign firms and commercial agents.  Private foreign entities, whether licensed under sole foreign ownership or as a joint venture, compete on an equal basis with local companies.

The bylaw authorizes the Council of Ministers, upon the recommendation of the Prime Minister, to grant a higher percentage ownership to non-Jordanian investors in any investment based on a certain criteria.

Under the U.S.-Jordan Bilateral Investment Treaty, U.S. investors are granted several exceptions and are accorded the same treatment as Jordanian nationals, allowing U.S. investors to maintain 100 percent ownership in some restricted businesses. The most up-to-date listing of limitations on investments is available in the FTA Annex 3.1 and may be found at http://www.ustr.gov/trade-agreements/free-trade-agreements/jordan-fta/final-text.

For national security purposes, foreign investors must undergo security screening through the Ministry of Interior, which can be finalized through the Commission’s “Investment Window” located at the Investment Commission or online https://www.jic.gov.jo/en/home-new/.

Other Investment Policy Reviews

Jordan has been a World Trade Organization (WTO) member since 2000. The WTO conducted Jordan’s second  Trade Policy Review  in November 2015.

In 2012, the United States and Jordan agreed to Statements of Principles for International Investment and for Information and Communication Technology Services, and a Trade and Investment Partnership Bilateral Action Plan, each of which is designed to increase transparency, openness, and governmental and private sector cooperation. The two parties also began discussions on a Customs Administration and Trade Facilitation Agreement.  All current treaties and agreements in force between the United States and Jordan may be found here:  https://www.state.gov/s/l/treaty/tif/.

As a follow-up to OECD’s Investment Policy Review of Jordan and Jordan’s adherence to the OECD Declaration on International Investment and Multinational Enterprises in 2013, the MENA-OECD competitiveness program issued a report in 2018 entitled “Enhancing the legal framework for sustainable investment: Lessons from Jordan”( http://www.oecd.org/mena/competitiveness/Enhancing-the-Legal-Framework-for-Sustainable-Investment-Lessons-from-Jorden.pdf ).

Business Facilitation

Businesses in Jordan need to register with the Ministry of Industry, Trade, and Supply’s Companies Control Department, or the Chambers of Commerce or Industry depending on the type of business they conduct. Registration is required to open a bank account, obtain a tax identification number, and obtain a VAT number. New businesses also need to obtain a vocational license from the municipality, receive a health inspection, and register with the SSC.  In November 2017, the government issued a decision to cancel all non-security related pre-approvals for registering a business and only require final approvals before starting operations.

JIC’s “Investment Window” at the Jordan Investment Commission ( www.jic.gov.jo ) serves as a comprehensive investment center for investors.  The window provides services to local and foreign investors, particularly those in the agricultural, medical, tourism, industrial, ICT-Business Process Outsourcing (BPO), and energy sectors.

In 2017, the Commission further streamlined procedures to register and license investment projects in development zones: it introduced a Fast-Track Investment Window, which reduced the number of committee approvals from 23 to 13, and reduced registration procedures from 15 to 5.  These changes reduced the typical time required to register in development zones from five days to one day.  Additionally, the time period to grant exemptions under the investment law has been reduced from two weeks to one, and the time period to grant exemptions under the decisions of the Prime Minister from seven days to one.

Jordan has also adopted a single security approval to replace the 11 approvals previously required for new investors.  The new approval covers registering and licensing the company, obtaining driving licenses for investors, possessing immovable property for the establishment of investment projects in the industrial and developing zones, in addition to granting residence permits to non-Jordanian investors and their family members. The commission has published a number of online guides, including the investor guide ( https://www.jic.gov.jo/en/investor-guide/ ).

In 2018, the Companies Control Department has developed and launched a portal for online registration:  http://www.ccd.gov.jo/ . Foreign investors can access it to register new companies. However, e-signatures have not been implemented, so investors must sign documents using notary services in their countries.

In November 2019, under the Jordan Investment Commission (JIC), the government introduced several new services including the issuance and renewal investor IDs, issuance and renewal of IDs for investors’ family members, registration of institutions in development zones, first-time registration of individual institutions, changing the method of use, registration and renewal of subscriptions to the Amman Chamber of Commerce (ACC), amendments to subscriptions to the ACC, and issuance of environmental permits. The introduction of these electronic services reduced the time needed to grant or renew the investor identification card (required to facilitate various transactions) to one day. ( https://www.jic.gov.jo/en/ ).

In December 2020, the Greater Amman Municipality (GAM) digitized thirteen of its licensing-related services, including vocational licensing and renewal.

In accordance with the Investor Grievances Bylaw No. 163 of 2019, the JIC established a unit to follow up on and address investor complaints, with the aim to resolve legal disputes outside of government the formal court proceedings and reduce related cost.

Jordan launched a National Single Window (NSW) for customs clearance. In 2020, all export and import custom declarations became electronic. This was supported by new regulations enforcing the use of electronic clearances.

The Ministry of Digital Economy and Entrepreneurship statistics said that total electronic transactions in 2020 reached 14 million, including services provided by institutions such as GAM, JIC, Tax Department, Ministry of Industry and Trade, and Jordan Customs. As of March 2021, the total number of available e-services is 404.

The 2020 World Bank Doing Business Report attributed Jordan’s rise to 75th globally to reforms regarding the legal rights of borrowers and lenders, the introduction of a unified legal framework for secured transactions, launching a notice-based collateral registry, improvements to the insolvency law, and implementation of an electronic filing and payment for labor taxes and other mandatory contributions.  The number of payments that businesses need to file every year was also cut from twenty-three to nine. However, Jordan ranked 120 in starting a business, with 7.5 procedures and 12.5 days to complete the process.

Outward Investment

Jordan does not have a mechanism to specifically incentivize outward investment, nor does it restrict it.

3. Legal Regime

Transparency of the Regulatory System

Legal, regulatory and accounting policies, applicable to both domestic and foreign investors, are transparent and promote competition.  The Jordanian Companies Law stipulates that all registered companies should maintain sound accounting records and present annual audited financial statements in accordance with internationally recognized accounting and auditing principles. According to the Jordanian Securities Commission (JSC) Law and Directives of disclosures, auditing, and accounting standards (1/1998), all entities subject to JSC’s supervision are required to apply International Financial Reporting Standards (IFRS).

In 2018, the government issued the “Code of Governance Practices of Policies and Legislative Instruments in Government Departments” to increase legislative predictability and the stability of legislative environment. A pilot project was initiated in 2018 that enforced online consultations for new business regulations across six major entities in preparation for the roll out of the regulatory impact assessment across all government entities by 2021. The Legislative and Opinion Bureau is developing a “Legislation Data Memorandum,” which all government entities submitting new regulations will be required to fill out. The memorandum will provide information on the type and details of consultations conducted with the public and private sector and proof that the parties impacted have been consulted. Currently, laws and regulations are usually published on the website of the Legislative and Opinion Bureau for public comment, in addition to executive branch consultations with the legislative branch and key stakeholders. The new steps are aimed at institutionalizing public-private sector consultations.

The government is gradually implementing policies to improve competition and foster transparency in implementation.  These reforms aim to change an existing system influenced in the past by family affiliations and business ties.  The Jordan Investment Commission (JIC), through its Fast-Track Investment Window, introduced a number of measures to streamline the investment process.

The commission issued and published a services and licensing guides outlining processes and fees, in addition to the incentives guide ( https://www.jic.gov.jo/en/services-guide/ ). Guides are currently available in Arabic.

Jordan is committed to its fiscal transparency policy; therefore the Ministry of Finance (MoF) publishes a monthly “General Government Finance Bulletin” and that includes detailed information on government’s debt obligations. ( www.mof.gov.jo/Portals/0/Mof_content/النشرات والبيانات المالية/نشرة مالية الحكومة/2016/Arabic PDF December 2016.pdf  ).

International Regulatory Considerations

Jordan recognizes and accepts most U.S. standards and specifications.  However, Jordan has occasionally required additional product standards for imports.  Some of these measures have been viewed as barriers to trade, such as a 2014 restriction imposed on packaging sizes for poultry available for retail resale.

As a member country of the WTO, Jordan is obliged to notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Jordan is a signatory of the WTO Trade Facilitation Agreement.  Jordan had implemented 88.7 percent of its commitments.  Jordan submitted its notifications for Category A before the agreement came into force, and is currently in the final review for categories B and C.

Legal System and Judicial Independence

Jordan has a mixed legal system based on civil law, sharia law (Islamic law), and customary law.  The Constitution establishes the judiciary as one of three separate and independent branches of government.  Jordanian commercial laws do not make a distinction between Jordanian and non-Jordanian investors.  However, plaintiffs complain of judicial backlogs and subsequent delays in legal proceedings. In 2018, Jordan has introduced economic judicial chambers, established under the Amman First Instance Court and Amman Appeal Court under the provisions of the Law of Formation of the amended Courts No. 30 of 2017.  These chambers specialize in the adjudication of certain commercial and investment disputes mentioned in Article 4 of the Courts Formation Law.

Laws and Regulations on Foreign Direct Investment

Jordan’s Investment Law governs local and foreign investment.  The law consolidated three entities – the Jordan Investment Board, the Jordanian Development Zones Commission, and the Free Zones Corporation – into the Jordan Investment Commission.  The law incorporates a statement of investors’ rights and a legal framework for the newly established Investment Window, which is located at the Investment Commission’s headquarters.

The commission issued and published services and licensing guides outlining processes and fees, in addition to other guides (  https://www.jic.gov.jo/en/publications/ ).  The commission also issued a new bylaw that regulates non-Jordanian investments to allow larger foreign investors’ ownership in previously restricted areas.

In September 2017, Parliament passed the Monitoring and Inspection of Economic Activities Law No. 33/2017, and amendments to Jordan’s Companies Law No. 34/2017. This law governs the requirements to establish venture capital companies for the purpose of direct investment, or for creating funds, to contribute or invest in high-growth companies that are not listed in the stock market.

In 2018, Jordan passed the Insolvency Law, Movable Assets and Secured Lending Law and Bylaw, the Venture Capital Bylaw, and the Income Tax Law, along with bylaws to ensure proper implementation.

In October 2019, Jordan published an amended Social Security Law stipulating temporary changes to the social security contributions of newly registered entities that meet specific conditions, with an aim to support new companies and startups.  The government also issued the Investor Grievance Bylaw and established a special unit to follow up on investors cases. As part of the government economic stimulus package announced in 2019, new investors are offered 10-year “incentive stability guarantees.” In January 2020, Jordan passed a new Public Private Partnership (PPP) law and established a PPP Unit to identify and study investment opportunities.  The PPP Law introduced a comprehensive PPP framework and created a special fund to finance PPP Projects.  The PPP unit reports to the Prime Minister and is authorized to provide technical assistance to the government by preparing feasibility studies and Financial Commitments Reports. The International Financing Corporation (IFC) and other donors are providing technical assistance programs to enhance the capacity and effectiveness of the PPP unit and framework.

There is no systematic or legal discrimination against foreign participation with respect to ownership and participation in Jordan’s major economic sectors other than the restrictions outlined in the governing regulations.  In fact, many Jordanian businesses actively seek engagement with foreign partners to increase their competitiveness and access to other international markets.  The government’s efforts have made Jordan’s official investment climate welcoming; however, U.S. investors have reported hidden costs, bureaucratic red tape, vague regulations, and unclear or conflicting jurisdictions.

Most economic regulations are available on the Jordan Investment Commission website ( https://www.jic.gov.jo/ar/investment-regulations-2/ ), or on the Ministry of Industry and Trade and Supply website (https://www.mit.gov.jo/Default/AR). All regulations are published in the Official Gazette ( http://pm.gov.jo/newspaper ) or the Legislative and Opinion Bureau ( http://www.lob.jo/ ).

For further details please contact:

Investment Window
Jordan Investment Commission
Telephone: +962 (6) 5608400/9 Ext: 120
P.O. Box 893
Amman 11821 Jordan
E-mail: info@jic.gov.jo

Competition and Antitrust Laws

Parliament passed amendments to Competition Law No. 33/2004 in 2011 to strengthen the local economic environment and attract foreign investment by providing incentives to improve market competitiveness, protect small and medium enterprises from restrictive anticompetitive practices, and give consumers access to high quality products at competitive prices.  The Competition Directorate at the Ministry of Industry, Trade, and Supply conducts market research, examines complaints, and reports violators to the judicial system.

The investor grievance unit established in 2019 at the Jordan Investment Commission can also look into unfair competition cases filed by investors.

Expropriation and Compensation

Article 11 of the Jordanian Constitution stipulates that expropriations are prohibited unless specifically deemed to be in the public interest.  In cases of expropriation, the law mandates provision of fair compensation to the investor in convertible currency.

Dispute Settlement

ICSID Convention and New York Convention

Since 1972, Jordan has been a contracting state to the International Centre for Settlement of Investment Disputes (ICSID Convention).  Only a small number of cases between foreign investors and the Jordanian government have been brought before ICSID tribunals.  Jordan is also a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York convention).

In January 2018, the Parliament passed amendments to Arbitration Law 2017, which aims to facilitate the use of arbitration as an alternative to dispute settlement procedures.

Investor-State Dispute Settlement

Under domestic law, foreign investors may seek third party arbitration as a means of settling disputes. Jordan abides by WTO dispute settlement mechanisms, and dispute settlement mechanisms under the U.S.-Jordan FTA are consistent with WTO commitments.  Article IX of the United States-Jordan Bilateral Investment Treaty (BIT) establishes procedures for dispute settlements between Jordanians and U.S. persons.

Investment disputes are treated as any other commercial or civil dispute in the Jordanian judicial system.  Investment agreements with the Jordanian government as a party generally contain a dispute resolution clause that would refer cases to arbitration in Jordan.  On average, it takes three to four years for cases that go through the local court system to reach a verdict.  Cases settled through arbitration take between 12 to 18 months.  The main challenge in litigating cases is being able to conduct proper process of service upon all concerned parties. Another challenge is recently established Economic Chamber is still developing its expertise in complex commercial litigation.

Rulings by U.S. courts or other international arbitration committees can be upheld through the filing of an Enforcement of Ruling motion in a Jordanian court.

International Commercial Arbitration and Foreign Courts

In March 2018, King Abdullah II approved Arbitration Law No. 16, amending the 2001 law.  The amendment introduced changes to the procedural framework of arbitrators seated in Jordan, which can be traced in the UNCITRAL model law.  The amended law gives more authority to the Arbitral Tribunal and limits the role of the Court of Appeal.

Rulings by U.S. courts or other international arbitration committees can be upheld through the filing of an Enforcement of Ruling motion in a Jordanian court.

The Jordan Investment Commission (JIC) established an investor grievance mechanism in accordance with the Investor Grievance bylaw No. 163 of 2019, and Grievance Hearing regulation No. 1 of 2020. This mechanism allows investors to file complaints against government decisions outside of court system; complaints can be filed electronically through JIC’s website.

Bankruptcy Regulations

The Commercial Code, Civil Code, and Companies Law collectively govern bankruptcy and insolvency proceedings.  In December 2017, the cabinet endorsed a bankruptcy bylaw which stipulates procedures for optional and compulsory liquidation, along with the mechanism, liquidation plan, and required documentation and reporting.  In 2018, parliament passed the Insolvency Law, which allows individuals and companies to offset their financial position through a debt management plan.  The law was designed to help the insolvent entity continue its economic activity, rather than directly resorting to bankruptcy, and regulates insolvency proceedings for foreign organizations according to international conventions ratified by Jordan.  As of 2021, judges had dismissed almost all petitions for insolvency on technical grounds and no company has yet used the insolvency law successfully.

Defaulting on loans or issuing checks without adequate available balances is a crime in Jordan and may subject the offender to imprisonment under Jordan’s penal system.  While Jordan is reexamining these laws, prison terms for debtors remains a legal practice in Jordan.  Investors should conduct thorough due diligence on potential partners and avail themselves of local legal counsel in order to understand best business practices in Jordan and conform with local laws.  The U.S. Commercial Service office of the Embassy of the United States in Amman can assist American businesses in these endeavors.

4. Industrial Policies

Investment Incentives

Under Investment Law No. 30/2014, the Council of Ministers, upon the recommendation of the Investment Council, may offer investment incentives in accordance with the law and governing regulations for projects outside the Development and Free Zones.  The Investment Council and Investment Commission can also offer certain exemptions for projects in the following sectors:

1. Agriculture and livestock

2. Hospitals and specialized medical centers

3. Hotel and touristic facilities

4. Tourism-related entertainment and recreation

5. Contact and communication centers

6. Scientific research centers and medical laboratories

7. Technical and media production

Such incentives include customs exemptions, refunding of the general tax for production inputs, and no sales tax.  JIC can provide investors with further information on these exemptions ( https://www.jic.gov.jo/en/incentives-outside-the-dz-and-fz/ ). Automatic exemptions are also granted for specific services whether purchased locally or imported.  The Income and Sales Tax Department will refund the general tax levied within 30 days from submitting a written request in accordance with the terms and conditions determined by the Regulations Governing Investment Incentives (Number 33 of 2015).

A number of non-automatic exemptions are granted for production requirements and fixed assets used in industrial or handicrafts activities.  Such exemptions are subject to administrative procedures and approvals obtained from the Jordan Investment Commission Technical Committee and are governed by the previously referenced regulation.

Article 8-A of the 2014 Investment Law allows the cabinet to grant additional advantages, exemptions, or incentives to any economic activities in the Kingdom.  Under this article, the cabinet granted additional incentives to the ICT, tourism, and transport sectors in 2016, as published in the Official Gazette.

Net profits generated from most exports were exempt from income tax until December 2018. The new Income Tax Law No. 38 (2018) imposed taxes on income generated from exports, in accordance with WTO agreements.

In October 2019, the government announced an economic stimulus package granting direct incentives to investors in industrial and commercial sectors, offering cash incentives for companies that replace foreign laborers with Jordanian staff, and covering health insurance for employees and their families.

As the government implements reforms under the IMF Extended Fund Facility program and its own pro-growth reform agenda, several U.S. investors have reported the government has sought to reduce or eliminate incentives, guarantees, and/or tax exemptions previously expected.

Foreign Trade Zones/Free Ports/Trade Facilitation

The country is divided into three development areas:  Zones A, B, and C. Investments in Zone C, the least developed areas of Jordan, receive the highest level of incentives while those in Zone A receive the lowest level. All agricultural, maritime, transport and railway investments are classified as Zone C, irrespective of location. Hotel and tourism-related projects along the Dead Sea, leisure and recreational compounds, and convention and exhibition centers receive Zone A designations. Qualifying Industrial Zones (QIZs) are zoned according to their geographical location unless granted an exemption. The three-zone classification scheme does not apply to nature reserves and environmental protection areas.

Jordan’s Investment Law No. 30 of 2014 merged the Development and Free Zones Commission (DFZC) into the newly formed Jordan Investment Commission, an independent governmental body responsible for creating, regulating, and monitoring Jordan’s free trade zones, industrial estates, and development zones. The development areas are the King Hussein Bin Talal Development Area (KHBTDA) in Mafraq, the Ma’an Development Area, the Irbid Development Area (IDA), the Dead Sea Development Zone, the Jabal Ajloun Development Zone, and the King Hussein Business Park Development Zone. The Investment Law assigns the Jordan Industrial Estates Corporation (JIEC) and the Development and Free Zones Corporation (DFZC) as main developers of industrial estates and development and free zones, under the supervision of the investment commission.

As part of Jordan’s efforts to foster economic development and enhance its investment climate, the government has created nine industrial estates in Amman, Irbid, Karak, Mafraq, Madaba , Tafileh, Salt and Aqaba, in addition to several privately-run industrial parks, including al-Mushatta, al-Tajamouat, al-Dulayl, Cyber City, al-Qastal, Jordan Gateway, and al-Hallabat. These estates provide basic infrastructure for a wide variety of manufacturing activities, reducing the cost of utilities and providing cost-effective land and buildings. Investors in the estates continue to receive incentives until their contracts expire, and receive various additional exemptions, such as a two-year exemption on income and social services taxes, complete exemptions from building and land taxes, and exemptions or reductions on most municipalities’ fees.

Besides the six public free zones in Zarqa, Sahab, Karak, Karama, Mowaqaar, and Queen Alia Airport, Jordan has over 37 designated private free zones administered by private companies under the DFZC’s supervision. The free zones are outside of the jurisdiction of Jordan Customs and provide a duty and tax-free environment for the storage of goods transiting Jordan.

Jordan launched a new solar park in Ma’an development zone and announced plans to establish two new industrial parks in Zarqa and Jerash.

Under the Investment Law, establishments operating within development zones are subject to a unified tax rate of 5 percent.  However, Income Tax Law No. 38 of 2018 modified the tax rates applicable to entities operating in the Development Zones depending on the source of the income; industrial activities with a local value-added of at least 30 percent are subject to 5 percent income tax rate, while other projects and activities are subject to 10 percent.

The Investment Law also grants entities registered in the free zones a tax exemption on any activity conducted within the borders of the free zones, the export of goods and services outside the Kingdom, and associated transit trade.  Profits earned on activities pertaining to the sale, disposal, or importation of goods and services within the borders of the free zones are subject to tax based on the normal income tax rates applicable to each entity, depending on its status (corporation or individual).

The Aqaba Special Economic Zone (ASEZA) is an independent economic zone not governed by the Investment Commission or the articles in the Investment Law governing investments in free zones or development zones. It offers special tax exemptions, a flat five percent income tax, and facilitates customs handling at Aqaba Port.  In recent years, ASEZA has attracted projects, mainly in hotel and property development sectors, valued at over $8 billion.  The government continues to implement development projects aimed at attracting commerce and tourism through the Port of Aqaba.  The Aqaba New Port project became operational in 2018 and reached design capacity in 2019.  The new port, 20 kilometers south of the previous port, added four new terminals and expanded general ship berthing and marine services, in addition to adding dedicated terminals for grain silos, liquefied natural gas, phosphates, and propane.

Investors, foreign or domestic, face specific requirements in trade, services, and industrial projects in free zones. Industrial projects must be related to one of the following industries: • New industries that depend on advanced technology;

• New industries that depend on advanced technology; • Industries that require locally available raw material and/or locally manufactured parts;

• Industries that require locally available raw material and/or locally manufactured parts; • Industries that complement domestic industries;

• Industries that complement domestic industries; • Industries that enhance labor skills and promote technical know-how; or,

• Industries that enhance labor skills and promote technical know-how; or, • Industries that provide consumer goods and that contribute to reducing market dependency on imported goods.

• Industries that provide consumer goods and that contribute to reducing market dependency on imported goods.

In 2021, the government introduced a number of tax legislations to address gaps and loopholes in the current regime to prevent tax leakages and ensure transparency and fairness; including legislation on economic substance, transfer pricing, and to bring the Aqaba Special Economic Zone (ASEZA) under the national control for tax and customs administration.

For further details, please visit: • Jordan Investment Commission (http://www.jic.gov.jo/)

• Jordan Investment Commission (http://www.jic.gov.jo/) • Jordan Industrial Estate Corporation (http://www.jiec.com)

• Jordan Industrial Estate Corporation (http://www.jiec.com) • Aqaba Special Economic Zone (http://www.aqabazone.com/)

• Aqaba Special Economic Zone (http://www.aqabazone.com/)

Performance and Data Localization Requirements

Jordan has a well-educated and trained labor force of 2.5 million people, of which approximately 700,000 are registered foreign workers.  Unregistered foreign workers may be nearly double this number.  Most foreign laborers are employed in construction, agriculture, and domestic housekeeping sectors.  Approximately 70,000 also work in the QIZs as textile workers.

The Ministry of Labor regulates foreign worker licensing, licensing fees, prohibited sectors, and employer liability. Along with the Ministry of Interior, the Ministry of Labor is responsible for approving the hiring of professional foreign workers by private businesses.

Official unemployment reached 23.4 percent at the end of 2020, leading the Ministry of Labor to announce new labor regulations aimed at creating jobs for Jordanian youth through the reduction of foreign labor by 2024. The regulations stipulate increases in permit fees for non-Jordanians and closure of certain jobs to foreign employment altogether.

In February 2020, the Ministry of Labor increased the number of professions closed to foreign workers from 11 to 28.  However, employers may request the Ministry of Labor review applications for foreign workers in restricted sectors if local expertise cannot be found; these requests have generally been approved. The government issued Industrial Sector Tax Incentives Bylaw No.18 granting tax incentives to industries that employ certain percentages of Jordanians, with additional incentives to those who hire Jordanian women and people with disabilities. The bylaw also extends tax incentives to small and medium enterprises based on certain conditions. Beneficiaries of the bylaw are industries whose finished products contain at least 30 percent local content. The tax rate (after incentives) has a floor of 10 percent for pharmaceuticals and garment industries, and 14 percent for other industries.

Jordan does not have requirements for foreign IT providers to turn over source code or provide access to surveillance.

In 2020, the Ministry of Digital Economy and Entrepreneurship submitted a draft for the personal Data Protection Law, which supports Jordan’s digitization efforts. The Council of Ministers approved the law and sent it to the Legislative and Opinion Bureau for review. Jordan does not have a modern data protection law. The Criminal Law, Cybercrime Law, and Telecommunication Law offer partial protection of personal data.

5. Protection of Property Rights

Real Property

The legal system reliably facilitates and protects the acquisition and disposition of property rights.  Foreign ownership of land and assets is governed by the Leasing of Immovable Assets and Their Sale to Non-Jordanian and Judicial Persons Law No. 47/2006. Under Article 3 of the law, if the buyer’s country of residence has a reciprocal relationship with Jordan, foreign nationals are afforded the right of ownership of property within urban borders in Jordan for residential purposes. According to the law, foreign nationals may rent immovable assets for business or accommodation purposes, provided that the plot of land does not exceed 10 acres and the lease is for no more than three years in duration. Interest in real property is recognized and enforced once recorded in a legal registry.

Jordan approved an investment program that grants citizenship or permanent residency of non-Jordanians in February 2018. This program includes permanent residency for non-Jordanians who purchase properties worth a minimum of JOD 200,000 ($282,100) and hold the properties for 10 years.

A new Property law passed in 2019 consolidated 13 laws governing property ownership in one legislation and addressed issues such as zoning and the facilitation of ownership and leases for foreign investors.

All land plots in Jordan are titled and registered with the Jordanian Land and Survey Department; any land not titled as private property is considered government property.

According to the Ease of Doing Business report of 2020, Jordan ranked 78 out of 190 countries in “Registering Property.”

Intellectual Property Rights

Jordan has passed several laws in compliance with international commitments to protect intellectual property rights (IPR). Laws consistent with Trade Related Aspects of Intellectual Property Rights (TRIPS) now protect trade secrets, plant varieties, and semiconductor chip designs.

Copyrights are registered with the Ministry of Culture’s National Library Department and patents are registered with the Registrar of Patents and Trademarks at the Ministry of Industry and Trade.

Jordan is a signatory to the Patent Cooperation Treaty and the Madrid Protocol and amended its patent and trademark laws in 2007 to enable ratification of the agreements. Jordan is a signatory to World Intellectual Property Organization (WIPO) treaties on both copyrights and on performances and phonograms, and it has been developing updated laws for copyrights, trademark standards, and customs regulations to meet international standards. Jordanian firms are able to seek joint ventures and licensing agreements with multinational partners.  In 2017, Jordan acceded to the Patent Cooperation Treaty (PCT); the treaty entered into force October 2017. The Ministry of Industry and Trade introduced an e-filing service in 2018 through  https://ippd-eservice.mit.gov.jo/.

In 2017, Jordan acceded to the Patent Cooperation Treaty (PCT); the treaty entered into force October 2017. The Ministry of Industry and Trade introduced an e-filing service in 2018 through  https://ippd-eservice.mit.gov.jo/.

Amendments to Article 41 of Customs Law No. 33 of 2018 granted more time for legal agents to file trademark violation complaints.  Jordan’s record on IPR enforcement has improved in recent years, but more effective enforcement mechanisms and legal procedures are still needed. In particular, a large portion of pirated videos and software remain in the marketplace.

On January 1, 2020, Jordan issued a draft bylaw for the application of broader protections of intellectual property rights.  The bylaw stipulates the procedures to be followed by customs officials at the border to ensure the protection of intellectual property rights.  As of March 2021, the draft was still under review at the Legislative and Opinion Bureau.  On December 1, 2020 the Ministry of Industry, Trade and Supply issued instructions allowing the public to view patent applications once the legal period specified in the law has lapsed.

On December 1, 2020 the Ministry of Industry, Trade and Supply issued instructions allowing the public to view patent applications once the legal period specified in the law has lapsed.

Since 2000, 6,234 violations of Jordan’s current copyright law have been referred to the judiciary, including 218 cases in 2019 and 15 cases 2020.  The significant drop in cases between 2019 and 2020 is due to the COVID-19 pandemic, which necessitated closing courts several times during the year.  In addition, the Customs Department issued 163 infringement notifications to trademark owners or their legal representatives and seized 1,159,828 pieces of merchandise due to the infringement of intellectual property rights.

Jordan is not listed in USTR’s Special 301 Report and the Notorious Markets Report.

Resources for Intellectual Property Rights Holders:

Peter Mehravari

Patent Attorney

Intellectual Property Attaché for the Middle East & North Africa

U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office Tel: +965 2259 1455 Peter.Mehravari@trade.gov 

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

6. Financial Sector

Capital Markets and Portfolio Investment

There are three key capital market institutions: the Jordan Securities Commission (JSC), the Amman Stock Exchange (ASE), and the Securities Depository Center (SDC). The ASE launched an Internet Trading Service in 2010, providing an opportunity for investors to engage in securities trading independent of geographic location.

Jordan’s stock market is one of the most open among its regional competitors, with no cap on foreign ownership. As of March 2021, non-Jordanian ownership in companies listed on the ASE represented 50.7 percent of the total market value (32 percent Arab investors and 18.7 percent non-Arab investors). Non-Jordanian ownership in the financial sector was 52.8 percent, 19.3 percent in the services sector and 63.1 percent in the industrial sector.

In spite of recent reforms and technological advances, the ASE suffers from intermittent liquidity problems and low trading activity. The financial market peaked in 2007-2008, with average trading volumes topping $118 million per day. Following the global economic downturn, the market declined precipitously, with market capitalization falling from a record high of $41 billion in 2007 to $21 billion as of Dec 31, 2019 and dropped further to $18.2 billion in 2020 due to the pandemic.

The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

Credit is allocated on market terms.  The private sector has access to a limited variety of credit instruments relative to countries with more developed capital markets.

Money and Banking System

Jordan has 25 banks, including commercial banks, Islamic banks, and foreign bank branches.  Jordan does not distinguish between investment banks and commercial banks.  Concentration in the banking sector has decreased in over the past decade; the assets of the largest five banks accounted for 54.6 percent of licensed banks’ total assets at the end of 2019.  Licensed banks’ total assets reached JD 51.2 billion ($72 billion) at the end of 2019.  Banking sector assets grew by 5.6 percent in the first eleven months of 2020 to reach JD 56.5 billion ($79 billion). The banking system is capably supervised by the CBJ, which publishes an annual Financial Stability Report.  (  https://www.cbj.gov.jo/EchoBusv3.0/SystemAssets/PDFs/EN/JFSRE2019Final_23-11-2020.pdf )

Banks continue to be profitable and well-capitalized with deposits being the primary funding base.  Liquidity and capital adequacy indicators remain strong largely due to the banks’ conservative and risk averse approach, and due to strict regulations on lending, particularly mortgage lending.  Non-performing loan ratios have increased slightly and are expected to increase further in 2021 as a result of COVID-19.  Jordan’s rate of non-performing loans, as a percentage of all bank loans, was 4.9 percent at the end of 2018, reached 5 percent by the end of 2019, and increased to 5.4 in the first six months of 2020.

Jordan has historically had low banking penetration. The CBJ launched a Financial Inclusion Strategy in 2018 to increase access to the formal banking sector. Following the first iteration of the strategy, 42 percent of people in Jordan above the age of 15 had bank accounts, up from 33 percent previously.

Banking Law No. 28 of 2000 does not discriminate between local and foreign banks, however capital requirements differ. The minimum capital requirements for foreign banks are JD 50 million ($70.6 million), and JD 100 million ($141 million) for local banks.  The law also protects depositors’ interests, diminishes money market risk, guards against the concentration of lending, and includes articles on electronic banking practices and anti-money laundering. The CBJ set up an independent Deposit Insurance Corporation (DIC) in 2000 that insures deposits up to JOD 50,000 ($71,000). The DIC also acts as the liquidator of banks as directed by the CBJ.

Foreigners are allowed to open bank accounts with a valid passport and a Jordanian residence permit.

In January 2017, the CBJ established the Jordan Payments and Clearing Company, with an aim to establish and develop digital retail and micro payments along with the investment in innovative technology and digital financial services.  The CBJ actively supports technology and is running JoMoPay, a mobile payment system and provides regulatory support to a privately-operated electronic bill payment service eFAWATEER.com.

Foreign Exchange and Remittances

Foreign Exchange

The CBJ supervises and licenses all currency exchange businesses. These entities are exempt from paying commissions on exchange transactions and therefore enjoy a competitive edge over banks.

The Jordanian Dinar (JD or JOD) is fully convertible for all commercial and capital transactions. Since 1995, the JD has been pegged to the U.S. dollar at an exchange rate of JD 1 to USD 1.41.

Other notable foreign exchange regulations include:

  • Non-residents are allowed to open bank accounts in foreign currencies. These accounts are exempted from all transfer-related commission fees charged by the CBJ.
  • Banks are permitted to purchase unlimited amounts of foreign currency from their clients in exchange for JODs on a forward basis. Banks are permitted to sell foreign currencies in exchange for JODs on a forward basis for the purpose of covering the value of imports.
  • There is no restriction on the amount of foreign currency that residents may hold in bank accounts, and there is no ceiling on the amount residents may transfer abroad. Banks do not require prior CBJ approval for a transfer of funds, including investment-related transfers.
  • Jordanian law entitles foreigners to remit abroad all returns, profits, and proceeds arising from the liquidation of investment projects. Non-Jordanian workers are permitted to transfer their salaries and compensation abroad.

Remittance Policies

Jordanian law entitles foreigners to remit abroad all returns, profits, and proceeds arising from the liquidation of investment projects. Non-Jordanian workers are permitted to transfer their salaries and compensation abroad.

Sovereign Wealth Funds

Jordan does not have a sovereign wealth fund.

7. State-Owned Enterprises

A number of state-owned enterprises (SOEs) exist in Jordan.  Twenty-two SOEs of different sizes and mandates are fully owned by the government.  Wholly owned SOEs employ around 11,000 individuals, with assets exceeding $8 billion. The Government has more the 50 percent ownership in six companies, employing around 4,000 individuals, with total assets of $1.3 billion.

Most of the operational SOEs are small in terms of the size of operations, assets, number of employees, and income. The largest SOEs are: National Electrical Power Company (NEPCO), Samra Electric Power Company, the Yarmouk Water Company, and Aqaba Development Corporation (ADC).

Jordan’s economy is private sector led, accounting for 71 percent of GDP and 75 percent of net cumulative investment. SOEs in Jordan exercise delegated governmental powers and operating in fields that are not yet open for investment, such as managing the transmission and distribution of electrical power and water.  Other activities include logistics, mining, storage and inventory management of strategic products, in addition to economic development activities.  The government supports these companies as necessary, for example, the government has issued and guaranteed Treasury bonds for NEPCO since 2011 to ensure continuous power supply for the country.

SOEs generally compete on largely equal terms with private enterprises with respect to access to markets, credit, and other business operations.  The law does not provide preferential treatment to SOEs, and they are held accountable by their Board of Directors, typically chaired by the sector-relevant Minister and the Audit Bureau.

The government, enterprises and NGOs are progressively taking initiatives to incorporate Responsible Business Conduct into their practices.

Jordan is not a party to the Government Procurement Agreement.

Privatization Program

Over the last twenty years, the Jordanian government has engaged in a wide-scale privatization program, including in the telecom, energy, and transportation sectors.  The few remaining government assets not privatized, including Jordan Silos and Supply Company, have elicited little private sector interest.

In 2020, Jordan adopted a new Public Private Partnership Law to support the government’s commitment to broadening the utilization of public-private sector partnerships (PPPs) and encouraging the private sector to play a larger role in the economy.  The law does not limit PPPs to certain sectors, or nationalities.  A PPP unit housed at the Prime Ministry supports the government in identifying and prioritizing projects, provides funding resources to cover pre-feasibility and feasibility studies, and oversees tendering processes. The PPP unit interacts with private sector and potential investors through promotional activities, market sounding exercises, and to discuss proposals. Communication during the bidding phase is strictly governed by the PPPs bylaw in line with international best practices. Once a contract is awarded, line ministries or entities will take over as main POCs for projects and their implementation. The PPP higher council will handle investors’ grievances throughout the project’s lifecycle. The unit has already identified a list of potential PPP projects in several sectors: water, energy, transport, tourism, education, health, environment, and ICT.

8. Responsible Business Conduct

There is general awareness of responsible business conduct among both manufacturers and consumers in Jordan, with many local and multinational companies voluntarily developing and adopting corporate social responsibility (CSR) programs. CSR efforts predominantly focus on improving infrastructure in adjoining communities or providing better access to educational opportunities.

The amended Companies Law of 2018 regulates the work of companies by applying the rules of corporate governance and enhancing the monitoring authorities of shareholders at public liability companies.

The government, enterprises, and NGOs are taking initiatives to incorporate responsible business conduct principles into their practices. The authorities developed a Corporate Governance Code based on the OECD Principles of Corporate Governance and ratified human rights conventions, but further steps are needed to guarantee respect for human rights by enterprises. The legal and institutional framework for employment and labor relations has been reinforced. Environmental impact assessments are conducted. With a view to promoting the OECD Guidelines for Multinational Enterprises and their observance by companies, Jordan revived its National Contact Point within the Jordan Investment Board.

The American Chamber of Commerce published in 2016 a framework code of conduct for the private sector, the Jordan Integrity and Anti-Corruption Commission (JIACC) approved and embedded as part of the governance chapter in the amended Companies Law. The Customs Department released and revised a Golden List Program, which encourages good corporate citizenship amongst trading companies and international best practice for trade across borders.

The government issues a monthly financial bulletin highlighting all revenues, including taxes and royalties paid by extractive industries. Jordan initiated discussions with the Extractive Industries Transparency Initiative (EITI), but it has not joined.

Jordan is a signatory of The Montreux Document on Private Military and Security Companies since 2009.

Additional Resources

Department of State

Department of Labor

9. Corruption

The use of family, business, and other personal connections to advance personal business interests is endemic and regarded by many Jordanians as part of the culture. However, surveys found between four and eight percent of Jordanians reported paying a bribe in the previous 12 months. In February 2021 King Abdullah directed the General Intelligence Directorate (GID) to transfer responsibility for confronting corruption to the Audit Bureau, judiciary, and other civilian institutions. In June 2020 the government began a campaign to combat tax evasion which involved tax authorities opening hundreds of investigations and raiding over a dozen firms. Authorities have opened public corruption cases against several former senior officials since 2019 , but no trials have been completed as of April 2021.

Jordan was the first Middle Eastern country to sign and ratify the United Nations Convention against Corruption (UNCAC) in 2005. In 2006, Jordan issued a code of conduct for the public sector, enacted an Illicit Gains Law, and Anti-Corruption Law. Jordanian law defines corruption as any act that violates official duties, all acts related to favoritism and nepotism that could deprive others from their legitimate rights, economic crimes, and misuse of power.

The Illicit Gains Law requires designated officials, their spouses, and minor children to file financial disclosures with the Integrity and Anti-Corruption Commission (IACC). Designated officials include the prime minister, cabinet members, members of parliament, senior government officials, as well as municipal-level council members and executives.

Jordan created the IACC in 2016 through a merger of the Bureau of the Ombudsman and the Anti-Corruption Commission. In 2019, Parliament amended the IACC Law granting the IACC more authority to access asset disclosure filings of officials exhibiting unexplained wealth. The amendment empowers the commission to request asset seizures, international travel bans, and suspension of officials under investigation for corruption. The amendment also increases the IACC’s administrative autonomy by enabling the commission to update its own regulations and protecting IACC board members and the chairperson from arbitrary dismissal.

In 2018, the government issued the Code of Governance Practices of Policies and Legislative Instruments in Government Departments, to improve the predictability of legal and regulatory framework governing the business environment.

A new Audit Bureau Law was enacted in 2018 to strengthen audit performance, capacity and independence in line with International Organization of Supreme Audit Institutions (INTOSAI) standards. Other related laws include the Penal/Criminal Code, Anti-Money Laundering Law, Right to Access Information Law, and the Economic Crimes Law.

(INTOSAI) standards. Other related laws include the Penal/Criminal Code, Anti-Money Laundering Law, Right to Access Information Law, and the Economic Crimes Law.

Jordan is not a party to the OECD Convention on Combatting Bribery.

Resources to Report Corruption

H.E. Mohannad Hijazi
Chairman
Jordan Integrity and Anti-Corruption Commission (JIACC)
P.O. Box 5000, Amman, 11953, Jordan
+962 6 550 3150

Abeer Mdanat
Executive Director
Rasheed Coalition
P.O. Box 582662, Amman, 111585, Jordan
+962 5 585 2528
amdanat@rasheedti.org 

10. Political and Security Environment

The threat of terrorism remains high in Jordan. Transnational and indigenous terrorist groups have demonstrated the capability to plan and implement attacks in Jordan. Violent extremist groups in Syria and Iraq, including the Islamic State of Iraq and ash-Sham (ISIS), and al-Qa’ida, directly or indirectly have conducted or supported attacks in Jordan and continue to plot against local security forces, U.S. and Western interests and “soft” targets, such as high-profile public events, hotels, places of worship, restaurants, schools, and malls. Jordan’s prominent role in the Global Coalition to Defeat ISIS and its shared borders with Iraq and Syria increase the potential for future terrorist incidents.

Demonstrations occur frequently. They may take place in response to political or economic issues, on politically significant holidays, and during international events. In general, demonstrations remain peaceful. However, some have turned violent, even when intended to be peaceful, leading security officials to intervene. Visitors should consult current State Department public announcements at  www.travel.state.gov before traveling to Jordan.

Visitors should consult current State Department public announcements at  www.travel.state.gov before traveling to Jordan.

11. Labor Policies and Practices

According to the Department of Statistics Annual Report for 2020, the total population of Jordan is 10.8 million, of which 69 percent are Jordanians (7.4 million) and approximately 31 percent are non-Jordanians, including 1.3 million Syrian refugees.  UNHCR has registered 663,507 Syrian refugees in Jordan.

Approximately 70 percent of the population is estimated to be under the age of 30.  Literacy rates are 98.2 percent for men and 92.9 percent for women. Jordan has a generally well-educated labor force of about 2.8 million Jordanians.  According to the Department of Statistics, official unemployment in 2020 reached 23.9 percent.  Certain types of work are restricted to Jordanians only.  Local labor requirements in development and free zones vary based on the type of economic activity. Some reports estimate the share of informal laborers in the workforce to be 41 percent.

The labor law does not require employers to include retirement plans in employment packages.  However, if the employer agreed to provide retirement benefits when the worker was contracted, the employer must fulfill that commitment.  In 2017, Jordan introduced amendments to the labor law regarding flexible work hours and the provision of daycare; the amendments were approved and published in the official gazette in May 2019. The amendments enhanced the work environment for employees, including a definition for flexible work hours, and provisions against gender wage discrimination. The law granted paternity leave for three days, tied the eligibility for daycare to the total number of employees’ children under the age of five (minimum 15 children from the age 0-4 years old), and exempts non-Jordanian children of Jordanian women from needing a work permit.

Labor unions serve primarily as intermediaries between workers and the Ministry of Labor (MOL) and may engage in collective bargaining on behalf of workers. The 17 recognized unions are all members of the General Federation of Jordanian Trade Unions. Estimates put union membership at less than 10 percent of the labor force.  Additionally, there are 40 active professional associations, including many that have mandatory membership and 15 independent unions covering the rest of the professions and trades. According to official figures, about 30 percent of the total labor force, including government workers, belong to either a union or a professional association. In 2020, labor unions representing workers in garment, food, petrochemical and oil industries signed twenty different Collective Bargaining Agreements.

In February 2020, the Ministry of Labor increased the number of professions closed to non-Jordanians from 11 to 28.  However, employers may request the Ministry of Labor review applications for foreign workers in restricted sectors if local expertise cannot be found; these requests have generally been approved. Local labor requirements in development and free zones vary based on the type of economic activity

The Jordanian Labor Law addresses layoffs, and requires ministerial notification and guarantee of legitimate and entitled benefits and severance, but also allows firing without prior notice on certain conditions. Companies with the appropriate justification may obtain permission from the Ministry of Labor (MOL) to reduce their staff as a result of business restructuring. The social security system provides up to six months of unemployment benefits for formally registered workers.

On March 2020, the King issued a royal decree enacting the Jordan National Defense Law to grant the Prime Minister wide powers to undertake all necessary measures to combat the COVID-19 outbreak in the Kingdom, including the temporary suspension of ordinary legislation.

Accordingly, the government issued Defense Order No. 1 March 19, 2020, which provided temporary amendments to the social security law to mitigate the pandemic’s impact on the private sector. It temporarily suspended the implementation of retirement insurance for private sector employees, bringing the total monthly contribution down to 5.25 percent of the employee’s wage (4.25 percent payable by the employer and 1 percent deducted from the employee) from the original contribution of 21.75 percent of the employee’s salary subject to deduction (14.25 percent payable by the employer and 7.5 percent deducted from the employee).

Defense Order No. 6 sets measures addressing employment conditions in the private sector, including required salary payments and temporary closure of entities/institutions largely hit by the pandemic. Defense Orders 9, 14, 15 and 25 mainly introduced economic programs, to sustain businesses and job stability.

Articles 120,121 and 122 of the Jordanian law introduces a mechanism for labor dispute resolution beginning with labor inspector mediation. If mediation fails, the Minister of Labor reviews the case, followed by the Conciliation Council, then finally by the Labor Court under the Magistrate and Penalty Court to resolve the case within seven days.

Three labor disputes haven taken place since 2019. Teachers went on strike in 2019 to demand a 50 percent pay raise.  The government struck a deal with the teachers’ union which allowed for salary increases ranging from 35 percent to 70 percent. In April 2020, the government announced a freeze on public sector pay due to financial difficulties stemming from the COVID-19 pandemic. The teachers’ union responded by holding demonstrations to protest what it saw as the government’s failure to honor the 2019 agreement.  The government responded to the protests by arresting a number of union leaders and ordering a two-year shutdown of the teachers’ union for alleged “criminal and corruption charges.” In November 2020, migrant workers in a garment factory in al Hassan Industrial Zone went on strike demanding a wage increase.  Tensions eased when management offered to pay workers their annual productivity increase, normally paid in January, two months early. 

Starting January 2021, Jordan increased minimum wage to JD 260 ($367) from its original level of JD 220 ($310). 12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

 

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $44,628 2019 $44,503 www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $179 BEA data available at https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP N/A N/A 2019 83.5% UNCTAD data available at

https://stats.unctad.org/handbook/EconomicTrends/Fdi.html   

* Source for Host Country Data:  N/A

Table 3: Sources and Destination of FDI
Direct Investment from/in Jordan Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 728* 100% Total Outward 27* 100%

“0” reflects amounts rounded to +/- USD 500,000.
The Central Bank of Jordan does not collect or provide FDI data disaggregated by source.

*Aggregated number for 2020.

 Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries Amount 100% All Countries Amount 100% All Countries Amount 100%
United States 3,404 47% Bahrain 326 28% United States 3,249 54%
West Bank 1,080 15% West Bank 297 26% West Bank 783 13%
Bahrain 955 13% United States 155 13% Bahrain 629 10%
Luxembourg 425 6% UK 100 9% Luxembourg 404 7%
UK 221 3% Lebanon 79 7% Netherlands 137 2%

14. Contact for More Information

Shaden al-Majali
Senior Economic Specialist  +962 6 590 6317
+962 6 590 6317
Majalisa@state.gov

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