Making an investment promotion law 25/07/2022

The word “investment” has dominated the declarations, speeches, and promises of the Bishr Al-Khasawneh Cabinet since its appointment on October 12, 2020. A draft investment promotion law has been in circulation for some time now, and many parties, individuals and institutions have been invited to comment upon it. If passed, this law would become the 16th investment law that Jordan has enacted over the past 67 years; that is, a new investment law every four and a half years.

Investment promotion laws are an essential policy tool for investment promotion and regulation for many countries, as they constitute the basic legal framework for cross-border investment. Often, these laws contain provisions similar to those of international investment agreements.

UNCTAD research found that at least 108 countries have an investment law, of which 90 are developing countries or countries with economies in transition. Fifty-eight percent of the laws apply to both foreign and domestic investors, while the others target only foreign investors.

Jordan, like any other country, has to maintain a balance between modernizing legislation and keeping it stable, which means that we should shy away from changing such an important piece of legislation every four or even 10 years.

There are certain rules that should apply to any investment promotion law, which includes: 1) A clear and transparent set of incentives and conditions that is provided in an investor-friendly format. In other words, incentives and conditions should be simply stated, detailed and automatic (e-government). No need to go to the minister or prime minister every time an incentive is provided. 2) Avoid issuing by-laws and/or instructions later. If necessary, issue them at the same time as the law. 3) The smaller the country, the more it has to do to attract investors. Jordan, which has a very low economic growth rate, should do more than others to attract investment. 4) The investment law should be simple and clear, and the procedures must be transparent, to avoid discretionary power, which encourages not only bureaucratic delays but also corruption. 5) Incentives should go beyond tax breaks, which should be low anyway. They should aim at lowering the costs of production, and thus could include real estate, wages, energy, social security tax, water, interest on credit, fees, etc. 6) Additional incentives are provided to strategic investments, which should go beyond traditional incentives.

An investment promotion law should not be long, but short and clear. Avoid a bulky law — the investor does not need to become a legal and administrative expert before deciding to invest in Jordan.

It should not include penalties, authorities, the structure of the Investment Ministry, and administrative material in the investment promotion law because the investor does not care about all of these. This is a law for promoting investment, not for scaring investors away. If the legislator needs to mention penalties and administrative procedures related to investment, these can be placed in a separate law, not in an investment promotion law.

Most importantly, in the age of globalization where countries compete for foreign direct investment, the investment promotion law should be benchmarked against the best competitors for FDI. Does the new investment promotion law meet all these criteria? One would hope so.

Published in Jordan News:

https://www.jordannews.jo/Section-36/Opinion/Making-an-investment-promotion-law-19642