ESIS extension / Jordan / Regulatory Developments / Update Memo 3

The following report outlines new developments in the past three months and the state of on-going developments.

Investment in Jordan has grown by 20 percent in the first eight months of this year. Haider Murad, president of the Jordan Chambers of Trade Federation, said that most of the new projects were made in the private sector. Meanwhile, the Kingdom received 234 new investment projects this year worth JD 426.5 million in capital. About JD 172 million were invested in foreign projects. The industrial sector came first with JD 312 million, followed by tourism with JD 61 million and agriculture with JD 28 million.

ISO 9000 certificates play a key-role in developing efficiency and quality of Jordan's industry. Many believe that implementing and consolidating ISO systems in Jordan will make the country more eligible to the rules and legislation of the World Trade Organization (WTO).

The Jordanian government announced the 40% acquisition of Jordan Telecom by France Telecom in order to modernize the JTC and enhance the telecommunications infrastructure in the country.

The first regional telecommunication project between Israel and Jordan is under construction, expected to be in operation at February 2000, creating a greater competition in between the two countries. The American Education Corporation (AEC) announced that its Learning Pathways, Ltd. (LPL), Derby, U.K. division has entered into an letter of intent to license AEC's software technology to Educational Solutions, Ltd. (ESL) of London, U.K. and its Jordan-based subsidiary EduSol-Jordan.

The construction later this year of two 10-kilometer fiber optic cables linking Israel and Jordan will mark the first regional telecommunications project between Israel and any of its Arab neighbors. The links, which cost a total of $3.5 million and are due to be operational from February 2000, are expected to result in greater competition in both countries.

The agreement between Tel Aviv-based Bezeq International Ltd., a wholly owned subsidiary of Bezeq Telecom, and Amman-based Jordan Telecommunications Company (JTC), was announced on September in Amman during a visit by Israeli communications minister Benjamin Ben-Eliezer.

The resumption of peace talks between Israel and the Palestinian Authority following the May election of Israeli Prime Minister Ehud Barak has led to a warming up of economic ties between the two countries. "Telecommunications cooperation is key to expanding the economic ties between Israel and Jordan as well as in the Middle East," said Ben-Eliezer during his visit to Jordan.

In fact, Iraqi-born Ben-Eliezer is also proposing the construction of a similar fiber optic cable between Israel and Egypt. On 18 October the Israeli minister met with his Egyptian counterpart, Ahmed Nadif, for discussions on a proposed fiber optic link similar to the one to be built between Israel and Jordan.

Construction of the two Israel-Jordan cables, which will have a total capacity of 10 gigabits, is to begin by the end of the year. The fiber optic cables will link the countries at two locations: at either the Allenby or Sheikh Hussein bridge border crossings; and at the southern border between the two countries at the towns of Aqaba, Jordan and Eilat, Israel.

At present all communications between Israel and Jordan are through microwave links. "This often means that the traffic between the two countries is routed via the U.S. or western Europe," said Ori Yogev, president and chief executive of Bezeq International.

Ben-Eliezer added that this is due to a lack of direct connections and is both costly and a waste of resources for all sides.

Initially, the two cables will handle the traffic between Israel and the Palestinian Authority to Jordan. Voice traffic between Israel and the Palestinian Authority and Jordan ranks fourth in terms of the number of call minutes for both Bezeq International and JTC.

Data traffic is currently insignificant, but this is likely to change according to the two operators. But the significance of the link goes far beyond improving voice traffic between the two countries. "This will give us a direct link to the FLAG cable for the growing telecommunications traffic from Israel to the Far East and via the Suez Canal to Europe," noted Bezeq's Yogev.

He added that the Jordanians will have an additional option for their traffic to Europe and the United States via the Med-1 cable. The $80-million Med-1 cable, which links Israel to Cyprus and Italy, began operating in March and has a capacity of 20 gigabits.

"Only half a giga is currently being utilized," said Amos Lasker, president of privately owned Tel Aviv-based Med-1 Submarine Cables Ltd. The owners include several Israeli telecommunications companies including Aurec Ltd. and Globescom Ltd., as well as Telecom Italia and the state-owned Cyprus Telecommunications Authority (CYTA).

"With our capacity we can handle all the future growth of Israel, Jordan and the Palestinians for the next five to seven years," said Lasker.

The new fiber optic links between Israel and Jordan are expected to handle voice primarily, but Bezeq International hopes that JTC will opt to use the cables for Internet services, creating additional traffic, because Israel has a better connection to the IP backbone than Jordan.

The American Education Corporation (AEC) announced that its Learning Pathways, Ltd. (LPL), Derby, U.K. division has entered into an letter of intent to license AEC's software technology to Educational Solutions, Ltd. (ESL) of London, U.K. and its Jordan-based subsidiary EduSol-Jordan.

Under terms of the letter of intent, ESL will have access to AEC's A+dvanced Learning System® authorable, software engine technology, proprietary K-12 content and related development tools to develop an Arabic-language version of the Company's A+dvanced Learning System version 2.14 software technology. The terms of the letter of intent call for ESL to make a series of fixed, annual license fee payments to the Company of a total of approximately $1,700,000. The payments commence June 30, 2000 and end June 30, 2003.

The Company's Version 3.0 Java-2 technology will be available for licensing at a later date. LPL's U.K.-based staff will provide additional training and consulting services to ESL's engineering and instructional specialists. ESL will have the exclusive worldwide rights to market the resulting Arabic-language products to the Arabic-speaking world and will have limited rights to market the English-language version. ESL is owned by United Investment Group, a general trading and publishing concern based in Amman, Jordan. The announced yearly turnover of the group's business activities in Jordan is $40 million.

The management of both LPL and ESL really view this relationship as a long-term partnership to extend AEC's world-class software, instructional design models to the Arabic countries.'' Mr. Aref Al-Tarawneh, Director of ESL, commented: ``This is a great opportunity for this company, the nation of Jordan and the rest of the Arabic world. The Middle East expects strong growth in schools' investment in technology, and we look forward to working with Learning Pathways for many years.''

2. Regulatory Framework: Ongoing talks between the Jordan Telecommunications Company, the Telecommunications Regulatory Commission and Fastlink on decreasing the cost of cellular calls

The Jordan Mobile Telephone Services, Fastlink, described as "promising" the firm's ongoing talks with the government on decreasing the cost of cellular calls. Talks between the two sides had not yet ended, and any cost reductions would depend on the "size of the government tax cut for Fastlink." The Fastlink official was responding to a question, from "Jordan Times", on a report in the Arabic daily newspaper "Al Ra'I" that the government had decided to decrease the charges for cellular calls. "Al Ra'I" quoted an unnamed source at the Ministry of Post and Telecommunications as saying that the ministry had decided to reduce mobile phone subscription rates from JD20 to JD15 per month and that the ministry had agreed to reduce charges for mobile telephone calls to 80 fils.

The Fastlink's source declined to comment on the prices given in the Al Ra'i article but said things would become clear once talks between the two sides were finalised.

"If the government reduces their taxes [on us], we will reconsider the cellular phones charges, but no solid agreement has been reached in that regard," the source told the Jordan Times.

"But there are positive signs that we will reach an agreement," the source added. "We hope to announce something to the public soon. But no concrete results have been achieved yet."

"The government's current taxes are very high. If any tax reduction took place, it would be reflected positively in the cellular phones charges. The decision, will include price cuts for other services offered by Fastlink, the Kingdom's only mobile telephone services provider.

The UN Social and Economic Commission for West Asia (ESCWA) held a three-day regional conference in Amman. "Consumer Protection in the Middle East" was held in cooperation with the German Freidrich Neumann Foundation, and focused on the best methods to promote mechanisms and plans to protect consumers and their rights to the best kinds of commodities.

Participants in the conference represented public and private sectors in 10 Arab countries. Many studies were presented at the venue and covered the issue of consumer protection. These studies came from Palestine, Egypt, Syria, Lebanon, Saudi Arabia, and Jordan.

All participants stressed on the similarity in consumer situations among all Arab countries. They called on the mass media to play a key role to increase awareness among Arab nations on the significance of protecting consumers.

Participants believe that many factors are affecting the work procedures of public and private sectors in the Arab world. One of these is the legislative framework that conducts the business of these institutions, their financial matters and human resources. A committee was formed to present recommendations to the participants in the conference for ratification.

Recommendations focused on five aspects: The legislative framework, the mass media, the public sector, the private sector and consumer's needs. As to the legislative framework, participants stressed on the need to prepare special legislation to strengthen consumer protection and establish a national council for consumer protection in each country including the public and private sectors. The participants pointed out that all concerned parties from public and private institutions should coordinate their efforts to enhance consumer protection.

Most of the recommendations stressed the importance of supporting the NGOs in Arab countries to make them fulfill their commitments. Participants say that such of support will not be achieved unless the public takes the initiative and builds a new legislative system to enact what is called an Arab food law.

Meanwhile, the conference urged the media to be more transparent in presenting information and data about all products in the market. They also noted that the visual and audio media must spend some of its time instructing and educating consumers economically to be more able to choose between different types of commodities and services provided in the markets. With this, participants said, consumers will guarantee their health and safety.

The conference ended its session by calling on Arab governments to develop their human resources in the most effective way to meet the upcoming challenges of the new millennium.

4. Ongoing changes in institutional structure: ISO 9000 certificates influence on Jordan's economy and liberalization

THE ISO 9000 certificates have a great influence on Jordan's economy. Experts consider the International Standards Organization (ISO) certificate as par for quality that any business and industry should apply for and achieve. In Jordan, ISO 9000 certificates play a key-role in developing efficiency and quality of Jordan's industry. Many believe that implementing and consolidating ISO systems in Jordan will make the country more legible to the rules and legislation of the World Trade Organization (WTO).

The WTO means liberalization that develops gradually and allow countries the opportunity to make the necessary adjustments in their businesses and thus stimulate growth. In this respect also, it allows countries to take contingency actions against import restrictions that are particularly damaging. For many experts, this development has nothing to do with the real adjustments that industrial companies in Jordan must pursue to promote their products and sales both on local and Arab levels. A study of 81 industrial companies in Jordan was recently carried out to see the readiness of these companies to apply for ISO certificates. The study, which was supervised by the Arab Engineering and Management Experts Corp., focused on six main industries: Food manufacturing, textiles, medical industries, mineral industries, chemical industries and services.

However, liberalization is one of WTO main criteria for developing successful industry. And in this respect, Jordan still needs more liberalism in its economic practices. However, when some countries feel that the necessary adjustments cannot be made, they resist the demands of the international markets, and such steps do harm their local industries and their economic relations with other world countries.

Experts in the study, pointed out that ISO 9000 certificates provide stable and confident steps towards perfection in industry. So far, only 35 companies in Jordan were granted the ISO 9000, representing only one-sixth of the total companies in the Kingdom. Experts suggested that most of the industrial companies in the country have improved their working procedures and mechanisms only to obtain fame and good exporting lines.

The study showed that since ISO certificates were introduced in Jordan in 1995, industrial companies have simultaneously decided to put fame and growing sales as their target before their eyes rather than improve the quality of products and develop the efficiency of employees.

The study noted that the ISO 9000 influenced Jordanian industry at large. Such an influence was apparent in different aspects, including the improvement of working procedures, organizing business and declining costs.

Economically, any industry needs to be evaluated from time to time, it must undergo inspection to safeguard itself against misconduct in production. For any industry, however, safety measures, developing human resources and efficiency are considered vital factors for a healthy and successful industry. It is part of a whole process to keep close with the latest developments in world industry and pave way for these industries to apply for ISO certificates.

Experts recommended in their study that all companies should implement computerized programs and work mechanisms to increase the efficiency and quality of their businesses. They also urged public departments in the Kingdom to ease the financial burdens on industrial companies and to form national evaluation systems that would help these companies to apply for ISO certificates.

The study concluded by saying that any successful industry requires joint cooperation and coordination between the government and the private sector to exert and stimulate their influence on the economic growth in Jordan.

5. On-going changes in the regulatory framework: Consultative Committee on privatization of state-owned institutions

At the end of October, the committee, headed by Minister of Information Mr. Ayman Majali, responsible for the reconstruction of the Ministry of Information and the media institutions discussed the future of state-owned institutions and the possible transition process to independent commercial entities, enabling them to enter the next Millennium. The committee's focused on introducing a solution to end the government's monopoly on media institutions (like the Jordan Radio and Television and the official news agency, Petra) and replace it with a board grouping private and public sector ownership.

According to Petra News Agency, the committee appointed a team to complete the study of the laws and regulations that govern the Ministry of Information and its institutions. The ten-member committee will propose a new strategy and recommend appropriate legislation change to the government for the restructuring of the public media institutions. Members of the committee are: Mr. Majali, Minister of Information, Mr. Abdul Salam Abaddi, former Minister of Information, Mr. Mahmoud Sherif and other officials from media institutions.

6. Media and telecommunication markets: Jordan Telecom to be 40% purchased By FT-Led Group

Jordan's King Abdullah during his last official visit to Paris he discussed economic ties with French leaders and signed four agreements focusing mainly on Jordanian debt. Two of the three investor groups who submitted initial bids in early October met the government's minimum price sought for JTC sale - based on a higher-end of the scale median $1.27 billion asset evaluation of the profitable firm. Their price offers were an identical $508 million. The first of the two groups was France Telecom joined by National Bank of Kuwait, National Commercial Bank of Saudi Arabia and Amman-based Arab Bank. Emirates Ein Investment Group, the investment arm of the United Arab Emirates' royal family, which has U.S. giant GTE as technical partner, was the second group.

On the last week of November Jordan opened negotiations with France Telecom on the sale of a 40 percent stake in Jordan Telecommunications Company (JTC). Deputy Prime Minister Ayman al-Majali, said that a government decision was taken to initiate a dialogue with a France Telecom-led consortium, one of three international bidders which had expressed readiness to purchase the government's stake in JTC.

The Jordanian government announced (29 of November 1999) that the Jordan Telecom's 40% acquisition by a consortium led by France Telecom (FT) has been agreed in principle. The final agreement (due to be signed in 20 December 1999) was put off until after the Eid al-Fitr Moslem holiday in the second week of January. No major sticking points were hindering the conclusion of the $500 million deal with only legal documentation issues to be resolved.

The government is keen to sell to a consortium led by a global technical partner to help modernize the JTC and enhance the telecommunications infrastructure in the country. The success of the telecommunications sale is a key part of IMF-directed structural reforms and is seen as being critical to boosting Jordan's credibility among foreign investors. The government has been trying to attract outside investors to help revive its economy, weighed down by a heavy external debt service burden.

According to a report issued in early October by JTC, a committee has been formed in order to deal with the Y2K problem. Mr. Mohammad Khasawneh is the Head of JTC - Y2K committee. A steering committee was also formed for developing an emergency plan regarding the millennium bug. The Chairman is one of JTC's board members and is also comprised by seven deputies of the General Director and the Project Advisor. Seven working groups will do all the development.(see also JOkpcoQ3 report)

The head of the Y2K department at the Jordan Telecommunications Company, Mohammad Khasawneh, stated that the sole provider of landlines has prepared almost its entire network, including every switchboard in the country, to deal with the problem.

Please note that this report has been prepared under the sole responsibility of the ESIS II contractors.
It does not necessarily reflect the views of the Commission, nor does the Commission accept responsibility for the accuracy or completeness of information contained herein.
The ESIS Team of contractors welcomes any additional information or corrections.