EPPM2033 INTERNATIONAL BUSINESS

SET 2
SEMESTER 1 SESI 2017/2018

TOPIC ASSIGNMENT
EXPANDING INTERNATIONAL OPERATIONS INTO JORDAN:
WHY PERODUA SHOULD INVEST IN JORDAN

LECTURER

DR HAMIZAH BINTI ABD HAMID

GROUP MEMBERS:

NUR AIN AMALIA BINTI OTHMAN A162368 (GROUP LEADER)

SITI HAZIRAH LIYANA BINTI SALEH A157266
ATHIRAH NABILAH BINTI SHAABAN A159058
NUR AZIERA MUNIRAH BINTI HAMZAH A157321
NURAINI NABILAH BINTI MUHD ZAMANI A158713
NUR FATIHAHTUL ASNA BINTI ABDUL JALIL A161814
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TABLE OF CONTENT

1.0 EXECUTIVE SUMMARY 3

2.0 THE SELECTED HOST COUNTRY

2.1 BACKGROUND OF JORDAN 4
2.2 CRITERIA OF A GOOD INTERNATIONALIZATION 6
LOCATION
2.3 OPPORTUNITIES AND THREATS IN JORDAN 7
2.4 PERODUA 8
2.5 REASONS OF JORDAN SUITABLE AS AN INTERNATIONALIZATION 9
LOCATION

3.0 FOREIGN DIRECT INVESTMENT IN JORDAN 10

4.0 CONCLUSION 13

5.0 REFERENCES AND APPENDICES 14

APPENDIX A: How Jordan And Comparator Economies Rank
On The Ease Of Starting A Business
APPENDIX B: Country Profile (The World Data Bank)
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1.0 EXECUTIVE SUMMARY

This report consists of how and why Jordan is the best country for Perodua to conduct
Foreign-Direct Investment. The aim for this report is to have a better understanding on how a
host-country benefit its investors in providing a conducive environment as the investors
expand their market at their country. Various factors such as capital, human resources,
relationship with government, openness of the country, political and social condition of the
country itself were influenced and need to be considered in a process of making decisions
either they want to conduct the FDI or just stay at their country without building new
facilities at another country.

This report also include why Jordan deserves to be considered for Perodua to build
their facilities as all of us know it took a lot of efforts, costs and also ideas to conduct FDI.
Through this research we know that Jordan is the suitable country to conduct FDI as they
conduct refining petroleum activities and also the automotive industry is rapidly growing in
Jordan and a lot of big players in automotive industry such as Jaguar, BMW, Mercedes Benz
built their facilities there thus make Perodua, a producer of economic and affordable cars to
also do the same thing.

The openness of Jordan towards its investors also can be found during this research
and surprisingly, Jordan provides many tax exemptions which will attract new potential
investors like Perodua. This report also provides much more about Perodua and the
specialities of Jordan that met their preferred conditions. There are also other factors
influencing the FDI to be conducted throughout this report.
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2.0 THE SELECTED HOST COUNTRY

2.1 BACKGROUND OF JORDAN

Jordan is located at Southwest Asia which south of Syria, west of Iraq, northwest of
Saudi Arabia and east of Palestine and the west bank. Jordan also part of the rocky desert of
the northern Arabic peninsula. The highest point of Jordan which is also located along its
southern border with Saudi Arabia is called Jabal Umm ad Dami which rises up to 6082 feet
(1854m). Jordan also famous with a Dead Sea at the lowest point where at -1338 feet (-408m)
in the great Rift Valley. The small area in this country are along the Gulf of Aqaba where its
only port city. Now, Jordan have cover up 91880 square kilometres and its smaller than
Malaysia where Malaysia are 329613 square kilometres.

Jordan’s topography consists of Desert Plateau but there is a Highland area in the
west. The Highlands known as a big portion of Jordan that are divided north to south, into
three parts which Sawad al-Urdunn, Balqa Heights and Bilad al-Sharat. Bilal al Sharat are the
highest hill in the Jordan that reaching 1200 metres above the sea level in the north and 1854
metres in the south at Jabal Umm al-Dami. Besides, Desert Plateau consists quarters of the
area of modern Jordan which an extension of the Syrian Desert. Amman and Aqaba are the
important cities at Desert Plateau, Jordan. the deserts in Jordan are all impacted from its
weather. The average temperature in Jordan is 27 °C as the highest would hit up to 32.4 °C
and the lowest could go down up to 3.6 °C.

Other than that, Jordan has the smallest economies in where lack of water, oil and
other natural resources. Jordan has high unemployment poverty and inflation but these
problems has been cover up with number of major industries for an example, in clothing
manufacturing, fertilizers, potash, phosphate mining, pharmaceuticals, petroleum refining,
cement making, inorganic chemicals, other light manufacturing and tourism.

Based on The World Bank of Jordan Economic Outlook- October 2017, Jordan’s
economy remain sluggish, which undergoing a modest pick-up in 2017. 2.3 percent in real
GDP growth for 2017 are from recent development and its increase as much as 0.3 compared
in year 2016. Services are the major principal driver of GDP growth in 2017, and it has been
influenced with tourism. The tourism sector give big impacted for the declines GCC countries
by attracting visitors from other of the world especially Asia. Industrial sector in Jordan is on
the right track based on the growing 14.7 percent in the first quarter of 2017 compared from
first quarter of 2016 where 8.4 percent. Because of these developments and resurgence in
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potash prices, net exports of goods and services are projected to lead GDP growth on the
demand side in 2016. Lastly, in 2017 fiscal position of Jordan’s become goods this is because
based on the result government’s fiscal. Although the narrowing of fiscal imbalances were
likely to materialize at a slower pace than originally anticipated by the program due to
weaker economic growth. The total fiscal deficit from this program from 2016 will be largely
unvaried which 3.3 percent of GDP. In conclusion, despite a larger energy import bill
reflecting higher international oil prices, the large current account deficit is expected to
narrow driven mainly by the growth in tourism.
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2.2 CRITERIA OF A GOOD INTERNATIONALIZATION LOCATION

Jordan has many criteria that made it a good internalization location. Firstly, Jordan is
a unique country because it has strategic location because it situated at the convergence of
Europe, Asia and Africa. Furthermore, it has access to the Red Sea through the Port of Aqaba
through the Port of Aqaba and other ports via neighbouring countries.

Next, the political environment in Jordan is stable because it is supported by a

democratically elected Parliament. Jordan is always making political and diplomatic efforts to
achieve security and stability in the region, and to help resolve the crises facing it. With this,
a stable political environment will lead to stable economic hence will increase the demand of
Perodua products in Jordan.

In addition, Jordan has a package of incentives and exemptions to encourage

investment from other countries. For instance, projects are exempted from income and social
services taxes by 25%, 50% or 75% for a ten year period depending on the location of the
project. Imported fixed assets are 100% exempted from customs duties and taxes while
imported spare parts for fixed assets can be exempted from fees and taxes too. In short, the
cost of production of Perodua can be reduced as it has exemptions from taxes and customs
duties.

Besides, Jordan has an access to major international markets as it has duty and quota
free access to the United States market through the Qualifying Industrial Zones (QIZ) where
the manufacturing operation is situated in Jordan and Egypt. Jordan has also duty free access
to European Union markets and access to more than 10 Arab Countries through the Asean
Free Trade Area. This is a big opportunity to Perodua as an investment in Jordan can help
Perodua to increase its sales.

Moreover, Jordan has competitive human resources as most of the workers are
qualified. Jordan has abundant workforce that are young and highly educated population. In
Jordan, 87% of the population is literate and 17% of Jordanians receive higher education.
With this, Perodua do not have to hesitate as Jordan has a good quality of workforce.
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2.3 OPPORTUNITIES AND THREATS IN JORDAN

Jordan is strategically located in the Middle East. Bound by Syria to the north, Iraq to
the northeast, Saudi Arabia to the east and south, the Red Sea to the south, Israel and the
Palestinian National Authority to the west. Therefore, this strategic location gives greater
opportunities to investors like Perodua because it allows access to over one billion consumers
as it acts as a gateway to neighboring and global markets through its modern transportation
system and strong communication networks. Jordan’s membership in the World Trade
Organization (WTO) ensures access of Jordanian goods and services to 161 world markets.

Moreover, Jordan’s economy expanded by 2.1% in 2016 with GDP growth expected
to edge up slightly to 2.3% in 2017. The World Bank classifies Jordan as an emerging market
with an upper-middle income economy.

Besides that, the strongest assets for Jordan is the human capital. The government
provides training to produce a generation of highly qualified and talented workforce, from
executives to skilled laborers, Jordan invests in its human resources and shapes a competent
workforce, while keeping its labor costs the most competitive in the Middle East.

Although there are a lot of opportunities in Jordan, we cannot deny the fact that the
country also facing threat from all sides of the country, internally and externally. Jordan has
the misfortune of being located in one of the most unstable parts of the world. The civil war
in Syria is nearing its sixth year, the fight against ISIS is creating political dysfunction in
Iraq, and the conflict is spreading to Southern Turkey, as well as to Egypt and Libya. While
regional instability has negatively impacted Jordan’s economy, the ISIS also increases
Jordan’s political risks.
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2.4 PERODUA
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2.5 REASONS OF JORDAN SUITABLE AS AN INTERNATIONALIZATION

LOCATION
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3.0 FOREIGN DIRECT INVESTMENT IN JORDAN

Foreign Direct Investment (FDI) is a strategy in which the firm establishes a physical
presence abroad by acquiring productive assets such as capital, technology, labor, land, plant
and equipment. Foreign direct investment is distinguished from portfolio investments in
which an investor merely purchases equities of foreign-based company. The key feature of
foreign direct investment is that it is an investment made that establishes either effective
control of, or at least substantial influence over, the decision making of a foreign business.
An investor’s earnings on FDI take the form of profits such as dividends, retained earnings,
management fees and royalty payments.

The Jordan economy is market oriented economy. The economic system is based on
free entreprise and personal initiative. Since 1989, and with the help of international
organizations, efforts have been under way to restructure and revitalize the economy. The
results have been more than satisfying. According to the World Bank, Jordan’s economic
freedom score is 65.4, making its economy the 51st freest in the 2009 index. Its score
increased by 1.3 points since last year, reflecting a substantial increase in business freedom,
moderate increases in trade freedom, and government size and a slight decline in freedom
from corruption. Jordan is ranked 6th out of 17 countries in the Middle East/North Africa
region.

In accordance with the Foreign Exchange Control Law, No. 95, of 1966 and the
Foreign Exchange Control Regulation of 1979, the Central Bank of Jordan (CBJ) is the
ultimate authority in the enforcement of foreign exchange controls in Jordan. Its foreign
exchange controls cover all financial or monetary transactions in the Kingdom including
inflow and outflow of Jordanian Dinar and foreign means of payment, dealing or trading in
foreign currencies, resident and nonresident accounts in Jordanian Dinar and foreign
currencies, lending in foreign currencies, commercial payment practices, free trade zone
payments, capital transfer, financial guarantees, export earnings repatriation, commissions on
foreign exchange permits, reporting requirements and auditing and statement of account
regulations.

Here is several companies that operating in Jordan. At Jordan’s Automotive located

in Fort Myers, FL 33966 our team of trained Acura technicians are ready to handle whatever
problems crop up in your Acura vehicle because we understand what the luxury brand is all
about. Acura the luxury brand of Honda combines reliability and entry-level luxury in an
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affordable package that offers stylish design and a plethora of features and amenities. While
the Japanese luxury brand may not have the worldwide prestige of German competitors,
Acura is focused on offering reliability and luxury to fit a wide range of tastes.

Jordan’s Automotive has a team of trained Audi automotive technicians in Fort Myers,
FL 33966. They are ready and able to handle any problem that your Audi may experience.
Our technicians regularly keep up on the latest news about Audi and know what the Audi
brand is all about. Audi is a German luxury automaker known for its reserved luxury cars that
range from hatchbacks to high-end sports cars, running against the likes of Mercedes-Benz,
BMW and in some instances, Lamborghini. Audi is the pinnacle of German luxury, blending
subtle styling and plentiful amenities in package that also sports Audi’s world-famous
Quattro all-wheel-drive system.

CCI is the fifth-largest bottler in the Coca-Cola system in terms of sales volume. CCI
produces, distributes and sells sparkling and still beverages of The Coca-Cola Company
(TCCC) across Turkey, Pakistan, Kazakhstan, Azerbaijan, Kyrgyzstan, Turkmenistan,
Jordan, Iraq, Syria and Tajikistan. CCI employs more than 10,000 people and has a total of
25 plants, offering a wide range of beverages to a consumer base of 380 million. In addition
to sparkling beverages, the product portfolio includes juices, waters, sports and energy drinks,
teas and iced teas.

There are several benefits of investing in Jordan likes unique and strategic location,
stable political environment, free market oriented economy, a package of incentives and
exemptions to encourage investment, access to major international market, free zones and
industrial estates, qualified and competitive human resources, world class infrastructure and
communications, attractive investment climate and high quality of life.

One of the benefits is unique and strategic location. Jordan being very strategic
because it is situated at the convergence of Europe, Asia and Africa. It is also a transportation
hub of the Middle East. Jordan access to the Red Sea through the Port of Aqaba and other
ports via neighboring countries. Jordan also had attractive investment climate which is to
attract more investor to invest in Jordan. Income and social services tax exemptions for up to
10 years. Total customs exemptions on imported fixed assets. Besides, revenues on exports
are also exempted from income taxes. Export industries are not subject to customs duties on
imported raw material and also free repatriation of capital, profits and salaries.
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In 2001, a special economic zone was created in Aqaba, in an effort to halt declining
activity at the port and to facilitate the implementation of commercial activities to make
Aqaba a major redistribution centre between the East, Europe and neighboring countries. In
order to attract foreign investors to these zones, many administrative facilities and tax
incentives are available to potential investors likes customs duty and VAT exemptions,
simplified formalities for foreign workers allowing an investor to recruit up to 70 percent of
foreign labor, income tax liability limited to 5 percent (except for insurance companies, bank
and land transportation business ventures), the opportunity of acquiring land at reduced prices
for the construction of infrastructure (hotel, hospitals, schools, housing) and the absence of
restrictions of financial transactions and investment.
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4.0 CONCLUSION

Jordan is the country that worth to conduct Foreign Direct Investment in it as it will
benefit its investors with many taxes and duties exemptions that will make the FDI become
successful. The factors influencing are important for automobile industry as for one FDI to
become a successful one, they need to import fixed assets from the home country to the host
country, and more importantly Jordan provides 100% tax exemptions to the assets that the
investors bring in. As Perodua is a well-known automobile producer that produced the
affordable cars for their users thus they need to reduce their production costs as low as they
could. Building their facility in Jordan will expose Perodua to a new conducive environment
to work with as well as expanding their market size. Jordan is also stable in their political
condition also so Perodua will operate without thinking of unnecessary risks.

Jordan also can provide Perodua with their powerful human resources as 87% of
Jordanians are literate while 17% of them pursued their higher education thus make future
Perodua’s workforces more reliable. Jordan would always welcome and appreciate new
investors like Perodua therefore the taxes exemptions provided are most likely to attract new
potential investors. Apart from the fact that other famous car producers built their facility in
Jordan such as Jaguar and Mercedes Benz, Jordan is also famous of their refining petroleum
activities that operated well there. In a nutshell, Jordan is a suitable and a country that deserve
a chance for Perodua to think and consider of conducting Foreign Direct Investment as
Jordan will give out so much benefits to its investors especially Perodua.
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5.0 REFERENCES AND APPENDICES

World Bank. (2017). Doing Business 2017: Equal Opportunity for All. Washington DC.
World Bank.
Timoth A. (2014). Academic Research International. The Foreign Direct Investment (FDI)
Environment in Jordan: A Descriptive Overview, Vol. 5, 230-232.
U.S Commercial Service. (2014). Doing Business in Jordan: Country Commercial Guide for
U.S. Companies. The Department of Commerce.
10 Reasons to Invest In Jordan. Retrieved from https://www.ase.com.jo/en/10-reasons-invest-
jordan
Unknown (2017). Jordan Economy. Fanack: Chronicle of the Middle East and North Africa.
Retrieved from https://fanack.com/jordan/economy/
Amanda, B. (2017). Geography of Jordan. ThoughtCo. Lifelong Learning. Retrieved from
https://www.thoughtco.com/geography-of-jordan-1435073
Publication. (2017) Jordan’s Economic Outlook- October 2017. The World Bank. Retrieved
from http://www.worldbank.org/en/country/jordan/publication/jordan-economic-outlook-
october-2017
Nawaf A. (2016). Jordan: A Growing Economy Welcoming Foreign Investors. Greenfield
Advisors. Retrieved from https://www.greenfieldadvisors.com/jordan-a-growing-economy-
welcoming-foreign-investors/
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APPENDIX A: How Jordan And Comparator Economies Rank On The Ease Of Starting A
Business

Source: Doing Business 2017 database

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