French companies challenged by Jordan's tax laws, bureaucracy
(Jordan Times) — Four French companies which have invested around $750 million in vital projects in Jordan have improved the quality of services but remain challenged by existing tax laws, pricing structure and entrenched bureaucracy.
The companies are LEMA, ACCOR, Lafarge and France Telecom whose investments were garnered through privatization deals, debt for equity swap and management contracts.
"We tried to change the attitude of people we are working with to deliver services away from bureaucracy," said Chris Decker, technical services director of LEMA company, a partnership between France's Lyonnaise and Jordan's Montegomery Arabtech Jardaneh.
LEMA has a four-year management contract funded through a $55 million World Bank loan to manage the Amman water & wastewater services for the country's Water Authority.
Decker, who is involved in the first such water project in the region, said the first priority was to reduce backlog on leak repairs and to improve labor efficiency including services.
French investments in the Kingdom materialized over the past two years, propelled by the peace process and the government's IMF-guided reforms.
The privatization process gained steam last year, nearly a decade and a half after the government began mulling its privatization program.
Last month a consortium of investors opened a four-star resort in Ma'in under a debt-for equity swap with France. French giant Accor Group which owns nearly 3,400 hotels in 90 countries, holds 50 percent of the Ma'in spa's shares, while ARAM International Investment and Jordan Tourism Investments claim 40 percent and 10 percent of the shares, respectively.
"The peace process allows development in a country well-known for its historical potential," said Jean Drouhet, Accor Jordan's operations director.
French investors discussed their achievements and objectives in a two-hour and 30-minute seminar organized by the Franco-Jordanian Business Club.
Describing the companies active, efficient and responsible, Finance Minister Michel Marto said the country's success "hinges on the ongoing structural reform," which will yield efficiency and increase investments.
"We are reforming the Income Tax Law to make it modern," in a bid to make Jordan attractive for investments, said Marto. Businessmen have long criticized the tax inspection procedures naming them inefficient, inaccurate and burdensome.
Marto said the government is expecting a 3 per cent economic growth for this year, and that it does not plan to cut the fiscal deficit rapidly, but gradually so as not to affect investments.
The finance minister said privatization proceeds would never be used to subsidize the government or finance the budget deficit. But part of the revenues will be spent in accordance with the Privatization Law, endorsed by Parliament two months ago.
Director General of Jordan Telecom Shabib Ammari, the company whose 40 per cent of shares were sold to a consortium led by France Telecom at $508 million last year, announced that it would deliver a mobile GSM service network in mid-September.
Ammari highlighted the company’s merits, which ranged from enjoying a backbone infrastructure of fiber network and global links through fiber optic connections.
"But still in Jordan we have price distortions, ... I am certain that with time those distortion will be eliminated so that we actually work along the (path) of private sector market led economy," he stressed.
Bernard Emie, French ambassador to Jordan said: "We were able to enhance our bilateral cooperation through signing an agreement to convert debts worth 500 million francs ($72.5 million) to investments and development projects. Emie added that the trade volume has improved in a satisfactory manner, even though it is unbalanced.
According to the ambassador, French exports to the Kingdom in 1999 amounted to 1 billion francs ($145 million). Exports rose by 24 percent during the first three months of this year.
Lafarge, a world leader in construction materials, bought out the government's 33 percent stake in the Jordan Cement Factories Company (JCFC) in 1998.
Samer Berekdar, general manager of JCFC, said the cement producer, among other things, introduced some cost reduction and improved the quality of major products.
In the coming months, Berekdar noted that JCFC will implement a new marketing policy including reinforcing its presence in the Palestinian market.
© 2000 Mena Report (www.menareport.com)