Cabinet adopts economic reform package proposed by EPC

By JT - Sep 08,2016 - Last updated at Sep 08,2016

His Majesty King Abdullah chairs a meeting of the Economic Policy Council in Amman on Wednesday (Photo courtesy of Royal Court)

AMMAN — His Majesty King Abdullah on Wednesday headed the Economic Policy Council (EPC) meeting, during which the first set of recommendations by the council to aid the government in surpassing economic obstacles and boost the national economy were discussed, according to a Royal Court statement.

Meanwhile, the Cabinet adopted the 38 recommendations made by the panel in its session on Wednesday, announcing that the suggested plans would go into effect immediately after making the necessary arrangements and prerequisites, the Jordan News Agency, Petra, reported.

The recommendations were made in cooperation and coordination among the sub-committees of the council and the concerned government parties, which were approved according to an executable and practical programme.

During the meeting, King Abdullah expressed his satisfaction with the level of public-private cooperation during the discussions held by the EPC, aimed to salvage national economy and work out and stimulate growth.

For his part, Prime Minister Hani Mulki, who chairs the council, stressed continued cooperation between the government and the different concerned authorities from the public and private sectors.

The meeting covered the EPC committees’ recommendations and their potential impact on the targeted sectors that contribute to the investment and business environments.

The first set amounted to 38 recommendations by the EPC, most significant of which include continuing work to establish a Jordanian fund for entrepreneurship at a cost of $100 million and having the Central Bank of Jordan (CBJ) increase the upper limit of loan guarantees for start-ups from JD50 million to JD100 million.

They also include establishing a private equity fund to be owned by Islamic and commercial banks.

A major plan is to transform Amman Stock Exchange into a public shareholding company.

They also included amending the law governing the Jordan Securities Commission and the Companies Law to delegate more authorities to the commission and enable it to issue the necessary regulations to introduce new investment tools and encourage further investments.

The EPC already decided to form several sub-committees specialised in the field of economic legislation, taxes, customs, refunding and entrepreneurship, transpiration trade and business environments, the statement said, adding that the sub-committees include members of the EPC as well as the concerned ministers.

His Majesty ordered in June the formation of the EPC, whose mandate is to discuss economic policies, programmes and development plans.

Functioning under the direct supervision of the King, the 15-member body is also tasked with identifying the main constraints holding back economic growth and propose solutions to overcome them, according to a letter His Majesty sent to Mulki.

The premier is the only representative of his government on board. Other members include the governor of the Central Bank of Jordan and the director of the Department of Economic and Social Development at the Royal Hashemite Court as a rapporteur, along with private sector representatives and economic experts.

The first package of EPC-proposed economic solutions

Startup financing

Setup a $100m venture capital fund with the World Bank (WB) and the Ministry of Planning and International Cooperation (MoPIC) in coordination with the Central Bank of Jordan (CBJ), $50m by WB and CBJ to secure additional $50m in 2016. (Withdrawal of WB loan will be in beginning of 2017)

CBJ to increase the Jordan Loan Guarantee Corporation (JLGC) JD50m start-up loan guarantee programme established in 2016 to JD100m in 2017

SME financing

Endorse Movable Assets Law (2016) — activate the existing law through issuing by-law and withdraw the draft law from parliament for review.

Allow banks to give out direct loans to SMEs under CBJ’s refinancing programme (immediately)

Allocate 15% of the soft loans extended by international and regional financial institutions to SME’s startups (CBJ/ 2016)

Export and growth financing

Allocate JD100m to JLGC for export guarantee programme (CBJ/ 2016)

Banking sector to setup private equity fund of JD150m JD110m from commercial banks and JD40m from Islamic Banks (Banks, CBJ/ 2016)

Raise allowable guarantee ceiling to JD1m (from JD550,000) for service and industrial loans (MoPIC, JLGC/ 2016)

Governorate financing

Decrease the CBJ’s refinancing programme rate from 1.75% to 1% for projects located outside Amman (immediately)

Expand the maturity period of the CBJ’s refinancing programme (immediately)

Capital market

Privatise ASE — Public shareholding company (Jordan Securities Commission (JSC)/2017)

Enable e-trading on ASE (JSC/2017)

Amend JSC and companies laws to grant securities commission more discretion in issuing instructions to set policy (JSC/2017)

Enforce corporate governance stipulated in laws on public shareholding companies (JSC/2017)

Enact Exchange Traded Fund (ETF) and Mutual Funds (JSC/2017)

Financial instruments

Expand the “Issuing of Savings Bonds” campaign to include Jordanian expats as well as locals (Ministry of Finance (MoF), CBJ/2016)

Expand the “Issuing of Islamic Sukuk” target market to include individuals (MoF, CBJ/2016)

Microfinance and insurance

Furnish banks’ lending and loan guarantees with microfinance institutions that successfully complete licensing process as per CBJ regulations (banks, CBJ/2017)

Incentivise mergers of insurance and microfinance companies (CBJ/2017)

Enable general partners/limited partners — Investment Limited Partnership (ILP) legal setup. Introduce Investment Limited Partnership (ILP) legal structure in companies

Allow for enforceability of shareholders agreements — except for PLCs. Introduce an article in companies law to allow for annexation and enforceability of shareholders agreement

Remove Goodwill Tax. Amend article (3-A7) of Income Tax Law (2014) to remove Goodwill Tax

Allow for tax deductions on investments in startups. Introduce an article to Income Tax Law (2014) that allows for tax deductions on investments in startups of three-year-old

Allow for “virtual office” registration. Amend Companies Law to allow for “virtual office” registration

Create a flat low rate for customs and goods and services tax while reconsidering exemptions

Align resource allocation with international best practice on compliance vs auditing (5-10%) , as well as creating specialisations within tax department

Limit tax evasion

Adopt receipt-based system

Automate and link services through building an e-database

Enforce imprisonment for tax evasion

Encourage payment of outstanding tax dues through adopting incentive settlement programme.

Lower cost of compliance for SMEs:

Allow semi-annual reporting

Cash-based accounting (vs accrual), for applicable sectors

Automate legal case assignment processes within judicial system (assign commercial cases to specialised judges)

Train employees on proper use of judicial police licence (law enforcement authority)

Facilitate company insolvency

Amend legal notification process (electronic)

Create tax clearing house

Overarching economic legislative framework

Ensure economic rights of private sector interaction with government are clear and met

Exempt Social Security Investment Fund and Securities Commission from Civil Service by-law (hiring procedures)

Re-engineer, digitise and outsource (when possible) business related processes. Project to commence with top 10 business related to government processes

Reach out to Gulf Cooperation Council to secure accreditation and recognition of Jordanian professional service qualifications (eg: auditing, accounting, engineering and architecture)

Enable low-cost carriers (LCCs). Develop Marka Airport through private sector BOT participation to become Amman’s primary airport for LCCs.

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