Jordan's King Abdullah Inaugurates Aqaba Free Zone

by Lorys Charalambous, Tax-news.com, Cyprus

18 May 2001

Jordan's King Abdullah yesterday officially inaugurated the Aqaba special economic zone (ASEZ) and laid the foundation stone for a multi-million-dollar resort to be built by a joint Egyptian-Jordanian company.

The Aqaba zone, on the Red Sea, opened in February. Incentives in the zone include a 5 per cent flat income tax rate and no annual property taxes, capital gains taxes or social security charges. Privileges for foreign investors include long-term leasing of land that may extend to 100 years, and full exemption from custom duties and tariffs.

Aready more than 400 enterprises have registered. About 75 percent of investments in the ASEZ are commercial, while industrial investments comprise about 10 percent. The remaining 15 percent include touristic and service enterprises. Investmetn so far is reckoned to be about $1.5bn.

Tourism is expected to be one of the main activities in the ASEZ, with such investment expected to reach $3 billion within the next 20 years. The project, however, has stirred controversy in Jordan, with critics charging that Aqaba will be a money-laundering and gaming centre for rich Arabs. However, officials said Jordanian regulations against money laundering would apply in Aqaba.

King Abdullah, who succeeded the late King Hussein in 1998, is pinning high hopes on Aqaba to help revive Jordan's faltering economy and reduce unemployment, estimated at around 20%. The ASEZ Law allows foreign investors to employ 70 percent of their workforce from overseas, while the remainder must be Jordanians. The government expects the recently signed free trade agreement reached with the US - yet to be ratified by Congress - and Jordan's association accord with the European Union to help convince foreign investors of Aqaba's merits.

Some Jordanians have voiced fears that Israeli companies might set up in the ASEZ. "The law implemented in the zone treats foreign companies with the principle of reciprocity. All world investors and companies are welcome to the zone but with certain conditions," said Imad Fakhoury, commissioner of investment development at ASEZ, but denied that any of the registered companies in the zone were of Israeli origin. "If the Israeli law approves for Jordanian investors and companies to lease lands inside Israel, they will be welcomed in Jordan."

The layout and design of the Aqaba zone is in line with international standards drawn up through a masterplan made jointly with the US Agency for International Development (USAID). The plan is currently under execution in the zone, dividing the Aqaba zone into industrial, commercial, touristic and social/service sectors. The 380-square-kilometer zone is run by six high commissioners, who are each responsible for different sectors.

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