Economic Implications for Jordan of Joining the WTO Government Procurement Agreement

Access to Microfinance & Improved Implementation of Policy Reform

(AMIR Program)

Funded By U.S. Agency for International Development

Jordan and the WTO Government Procurement Agreement: An Economic Impact Assessment

Deliverable for Policy Component Government Procurement Negotiation Support

June 2002

This report was prepared by Montague Lord under the direction of Charles Krakoff and Chemonics International Inc., prime contractor to the U.S. Agency for International Development for the AMIR Program in Jordan.

Table of Contents Table of Contents............................................................................................................... iii Tables................................................................................................................................. iv Acronyms............................................................................................................................ v Executive Summary ........................................................................................................... vi Chapter 1: Introduction ....................................................................................................

A. Background ................................................................................................. 1 B. Jordan’s Interests in the GPA ..................................................................... 2 C. Approach and Organization of the Study.................................................... 3

Chapter 2: Jordan’s Major Industries............................................................................ 4

A. Identifying the Key Goods and Service Industries ..................................... 4 B. Importance of Government Procurement to Jordan’s Industries ................ 5 C. Procurement of Goods and Services ........................................................... 5

Chapter 3: Industry Impact Assessment ...................................................................... 8

A. Measuring the Distribution of Benefits and Costs. ..................................... 8 B. Impact of Domestic Government Procurement Changes in Sourcing ...... 10 C. Impact of Foreign Market Enhancement to Public Sectors ...................... 15 D. Netting Out the Effects ............................................................................. 22

Chapter 4: Implications for Jordan’s Entity Offer ...................................................... 24

A. The Entity Offer. ....................................................................................... 24 B. Key Elements of the Strategy ................................................................... 25 C. Strategy for Formulating an Offer ............................................................ 26 D. Threshold Values ...................................................................................... 27 E. Entity and Product Offers ......................................................................... 28 F. Services Coverage under Annex 4............................................................ 31 G. Implications for Jordan’s Offer................................................................. 33

ANNEXES

A. GPA Member Offers in Services under Annex 4 ..................................... 38 B. Illustrative Draft Offer for Jordan............................................................. 44

References ................................................................................................................. 55


List of Tables Table 2.1: Importance of Selected Industries to Manufacturing Activities in Jordan Table 2.2 Importance of Government Procurement to the Study Industries Table 2.3: Major Items Procured by GOJ Table 2.4: Procurement of Goods of Jordanian Origin Table 2.5: Government Procurement of Services (JD 000) Table 2.6: GOJ Procurement Pattern of Construction Works Table 3.1: Changes on Procurement Sources before and After GPA Accession Table 3.2: Impact of GP Changes in Sources on Production Output Table 3.3: Impact of GP Changes in Sources on Service Sectors Table 3.4: Impact Assessment Based on Share in Above Threshold Contracts Table 3.5: Government Consumption in GPA Member Countries Table 3.6: Imports of Key Jordanian Products by GPA Member Countries Table 3.7: Estimated Public Sector Imports by GPA Member Countries Table 3.8: Geographic Distribution of Jordan's Exports Table 3.9: Export Gain Effects from Increased Market Access Table 3.10: Output and Export Gain Effect from Increased Market Access Table 3.11: Impact of GPA Accession on Jordan's Employment Levels, by Industry Table 4.1: Comparative SDR Threshold Values of GPA Members Table 4.2: Distribution of Central Government Procurement by Entity Table 4.3: Central Government Procurement of Products, 2000 Table 4.4: Alternative Strategies for GPA Negotiations Table 4.5: Number of GPA Members Making Offers in Same Service Sub-Sectors Table 4.6: Alternative Strategies for GPA Negotiations and Services Table 4.7: Possible Offers by Jordan for Annex 4

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Acronyms

AMIR Access to Microfinance and Improved Implementation of Policy Reform Program

CNS ERP

Computer Networking Services Effective rate of protection

FTA Free trade agreement GATT General Agreement on Tariffs and Trade GDP Gross domestic product GOJ Government of Jordan GPA Government Procurement Agreement GSD General Supplies Department GTD Government Tenders Directorate HS Harmonized system ISIC International Standard Industrial Classification MFN Most-favored nation MIT Ministry of Industry and Trade NRP Nominal rate of protection SDR Special drawing rights TRIPS Trade Related Aspects of Intellectual Property Rights WTO World Trade Organization



Executive Summary Background The value of government procurement in the industrialized countries ranges from 8 to 12 percent of the combined gross domestic product, which in 2002 represents anywhere from US$1.2 to US$1.9 trillion. Since the bulk of economic activity in the industrialized countries is subject to the WTO Government Procurement Agreement (GPA), access to that market represents a major opportunity for Jordan. At the same time, however, Jordan needs to determine whether the benefits of greater access to the public sector markets of the GPA member countries outweigh possible domestic adjustment costs associated with accession to the Agreement. During the course of negotiations to join the World Trade Organization (WTO), the Government of Jordan (GOJ) committed itself to negotiate its accession to the GPA by presenting a so-called entity offer to the WTO Government Procurement Committee. Under the timeframe specified by Jordan’s National GPA Committee earlier this year, the GOJ plans to submit on offer to the WTO Government Procurement Committee in September or October of 2002. As part of an integrated set of activities leading up to that offer, the National GPA Committee has requested that an impact analysis be undertaken for the industries most affected by government procurement policies. The present study aims to fulfill that request by examining the costs and benefits associated with the elimination of discriminatory procurement practices for the products produced by eight industries, which together account for nearly three-fourths of government purchases. Those industries cover (1) food and beverage, (2) chemicals, (3) pharmaceuticals, (4) paper, printing and packaging, (5) information technology (IT), (6) construction services, (7) furniture and fixtures, and (8) medical supplies. The analysis draws heavily on recent work funded by the AMIR Program and carried out by Computer Networking Services (CNS) to establish a database on government procurement covering 1997-2000, as well as an earlier study by the AMIR Program that developed the methodology for assessing the impact of the GPA on the Jordanian economy. Jordan’s accession to the GPA would have both costs and benefits to the country. One of the main benefits of accession for consumers would likely be associated with gains in the efficiency of Jordan’s current procurement system, since the introduction of competitive tendering practices would reduce costs. In other countries these cost-cutting measures have saved governments as much as 20 percent on their expenditures on goods and services, and those savings have been used to enhance the national welfare by bolstering other government programs. Although Jordanian industries supplying the government under current discriminatory procurement policies would probably face competition from abroad, they would also have access to the large government procurement markets of the current GPA signatory countries. Other costs consist of those related to the introduction of new administrative responsibilities and the adoption of new legislation. Moreover, Jordan would need to maintain a statistical reporting system to ensure transparency that goes beyond the newly established data base.



Administrative costs, however, are expected to be relatively small compared with the adjustment costs of industries and new market export benefits from GPA membership. For that reason, the present study focuses on possible adjustment costs and market access benefits as the two dominant effects likely to arise from its membership in the Agreement. The study aims to (a) identify the top goods and services procured by the Government during the period 1997-2000, (b) determine the domestic and foreign origin of the goods and services, (c) identify the most important government entities engaged in the procurement process, (d) measure the impact of accession to the Agreement on the domestic production for each of the selected industries, (e) estimate the export market potential for the industries resulting from the opening to Jordanian businesses of the government procurement market of the GPA member counties, and (f) synthesize the net impact of Jordan’s membership in the GPA on those industries. The study also examines the implications of these findings for Jordan’s offer. Measuring the Distribution of Benefits and Costs Jordan’s membership in the GPA could have significant effects on the welfare of producers and consumers (public and private), and therefore impact on the country’s overall welfare. On the producer side, the potential benefits of the GPA arise from a possible export expansion brought on by increased access of Jordanian industries to the public sectors of GPA member countries, while the potential costs to those industries arise from the diversion of purchases by the GOJ from domestic suppliers to foreign suppliers. Consumer benefits and costs, whether from the public or private sector, are more difficult to measure but equally important. They consist of the cost savings arising from the purchase of more competitively priced goods and services from either domestic or foreign suppliers, less the cost involved in bringing about changes needed to obtain those benefits. To measure the impact of these practices on domestic production in Jordan, we selected the industry sub-sectors whose products account for the bulk of current government purchases. By merging information from the CNS procurement database on the domestic and foreign supply-based composition of government purchases with industry supply and distribution information, we derived the level and composition of public versus private consumption of each of the sub-sectors, as well as imports of those sub-sectors by the public and private sectors. Following well-known academic studies and an earlier study for Jordan by the AMIR Program, we assume that the share of imports demanded by the government converges to that of the private sector once discriminatory procurement practices are eliminated, and that the export expansion will be proportional to the expanded market for public procurement in GPA member countries. Our calculations show that the overall adjustment of production for the selected industry following the elimination of discriminatory procurement practices would be small. They would only equal -0.4 percent for the combined output of the selected industries, which represents a change of less than -0.3 percent of Jordan’s total manufacturing activity. The medical supplies industry would have the largest adjustment cost. Other industries having significant adjustment costs, albeit smaller than that of the medical supplies industry, are the paper, printing and packaging, food and pharmaceuticals industries. If domestic industries could provide goods of the same quality as those purchased from abroad, then there would be positive adjustment benefits to the radio, television and communications industry, the chemical industry



and, to a lesser extent, the furniture industry as the government switched to domestic product sources under non-discriminatory trade. In service the two main activities are software consultancy and supplies, and construction activities. For both of these activities, GPA-induced changes in Government procurement sources would have a negative, albeit small, impact. Construction activities engaged in pre-erection work at construction sites, assembly and erection of prefabricated construction, building completion and finishing work would experience no negative effects from the Agreement, since tender values are usually below the threshold values. Construction work for civil engineering could experience the largest adjustment effects from of Jordan’s acceding to GPA, but that these adjustments would be small. For installation work, adjustment costs would be insignificant, and for construction work for buildings, they would be small. Jordan’s export-related gains would be proportional to the enlarged market for selected products in GPA member countries because of the one-time expanded access to the public sector. The combined size of the markets for Jordan’s main industries represents over US$1.5 trillion of private and public sector purchases from abroad. Of this amount, nearly 12 percent or US$183 billion represents public sector purchases. For Jordan, the one-time expansion in exports from accessing the public sector component of the GPA member country markets could generate 3.7 percent of additional export revenue from Jordan’s export sales. That figure roughly translates into a JD 50 million of additional annual export revenue if Jordan were able to export all of its products to those markets. Naturally, only a sub-set of Jordan’s export products are likely to be purchased by the public sector in the GPA member countries. Within the selected industries, our results indicate that (a) domestic output adjustments would benefit the radio, television and communications industry and, to a lesser extent, those of pharmaceuticals and furniture, (b) the medical supplies industry is likely to experience significant adjustment costs because of increased competition from foreign suppliers, (c) adjustment costs to the food and paper, printing and packaging industries are likely to be small to the industries themselves, but significant to Jordan’s overall industrial production because of the importance of these industries to the country, (d) for individual sub-sectors, the largest benefits from increased foreign market access are expected to occur in metal furniture and fixtures, basic industrial chemicals, ratio, television and communications, and synthetic resins, plastic materials and man-made fibers, while the largest adjustment costs are expected to occur in canning and preserving of fruits and vegetables, plastic products, and surgical, medical and dental equipment. Implications for Jordan’s Offer Jordan’s initial offer needs to consider the interests of domestic industries, domestic procuring entities, and GPA member countries. The key elements of the offer are the government entities to be included, the threshold levels for the different entities, and the products and services to be covered by the Agreement. The impact assessment of the GPA on domestic industries can provide important guidelines for the draft offer, but since negotiations are undertaken bilaterally on a request-offer basis, Jordan’s offer must be adaptable to the special interests of all parties. The commonly included entities, products and services are therefore an appropriate starting point for the initial offer list.



Since Jordan is eligible for special and differential treatment under the Article V of the GPA, it need not offer all the sub-sectors normally offered by the developed member countries of the GPA. Commonly used arguments for excluding sub-sectors based on national development plans include infant industry, preference to small firms, and regional trade preferences. Offsets are included in Israel’s offer. A strategy aiming to minimize the domestic producer impact of the GPA and maximize the foreign market opportunities would seek to exclude the entities with the largest amount of government procurement. In such a situation, the entity offer should exclude medicaments, medical instruments and other products identified in this study, although it is unlikely that GPA member countries will allow such broad-based exclusions in their negotiations with Jordan. Moreover, the loss of efficiency gains from this strategy might not minimize the overall domestic impact of the GPA accession, since the loss of efficiency might outweigh the domestic producer impact. The Annex to this study presents an illustrative offer by Jordan that encompasses these criteria.



Chapter 1: Introduction A. Background The value of government procurement in the industrialized countries has been estimated by various studies to range from 8 to 12 percent of their cumulative gross domestic product (GDP).1 Based on preliminary estimates of the value of that GDP in 2002, government procurement currently represents anywhere from US$1.2 to US$1.9 trillion. Since the bulk of economic activity in the industrialized countries is subject to the WTO Government Procurement Agreement (GPA), access to that market represents a major opportunity for Jordan. At the same time, however, Jordan needs to determine whether the benefits of greater access to the public sector markets of the GPA member countries outweigh possible domestic adjustment costs associated with accession to the Agreement. During the course of negotiations to join the World Trade Organization (WTO), the Government of Jordan (GOJ) committed itself to negotiate its accession to the GPA by presenting a so-called entity offer to the WTO Government Procurement Committee. Under the timeframe specified by Jordan’s National GPA Committee earlier this year, the GOJ plans to submit on offer to the WTO Government Procurement Committee in September or October of 2002 (AMIR, 2002). As part of an integrated set of activities leading up to that offer, the National GPA Committee has requested that an impact analysis be undertaken for the most important industries supplying goods and services to the Government. The present study aims to fulfill that request by examining the costs and benefits associated with the elimination of discriminatory procurement practices for the products produced by eight industries, which together account for nearly three-fourths of government purchases of goods. Those industries cover (1) food and beverage, (2) chemicals, (3) pharmaceuticals, (4) paper, printing and packaging, (5) information technology (IT), (6) construction services, (7) furniture and fixtures, and (8) medical supplies. The analysis draws heavily on recent work funded the AMIR Program and carried out by Computer Networking Services (CNS) to establish a database on government procurement covering 1997-2000, as well as an earlier study by the AMIR Program that developed the methodology for assessing the impact of the GPA on the Jordanian economy (AMIR, 2001). The study aims to (a) identify the top goods and services procured by the Government during the period 1997-2000, (b) determine the domestic and foreign origin of the goods and services, (c) identify the most important government entities engaged in the procurement process, (d) measure the impact of accession to the Agreement on the

1 These figures refer to general (central, provincial and local) government for the OECD member countries, as compiled by the OECD (2002) from EC (1997, 2000); Francois et al. (1996); Trionfetti (2000); and Hoekman (1997).

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domestic production for each of the selected industries, (e) estimate the export market potential for the industries resulting from the opening to Jordanian businesses of the government procurement market of the GPA member counties, and (f) synthesize the net impact of Jordan’s membership in the GPA on those industries. B. Jordan’s Interests in the GPA Jordan has taken a number of steps to become an integrated player of the global trading system at the multinational, regional and bilateral levels. It has become a signatory to the WTO Agreement, Euro-Jordan Free Trade Agreement, Arab Common Market Agreement, and the Arab Free Trade Area Agreement, and at the bilateral level, it has signed agreements with other Arab nations, European trading partners, and the United States under US-Jordan Free Trade Agreement. When Jordan became a member of the WTO in April 2000, it agreed to negotiate accession to the GPA to its best efforts. Jordan’s accession to the GPA would have both costs and benefits to the country. One of the main benefit of accession for consumers would likely be associated with gains in the efficiency of Jordan’s current procurement system, since the introduction of competitive tendering practices would reduce costs. In other countries these cost-cutting measures have saved governments as much as 20 percent on their goods and services expenditures (Choi, 1999), and those savings have been used to enhance the national welfare by bolstering other government programs. Although industries supplying the government under current discriminatory procurement policies would likely face competition from abroad, they would also have access to the large government procurement markets of the current GPA signatory countries. Other costs consist of those related to the introduction of new administrative responsibilities and the adoption of new legislation. Moreover, Jordan would need to maintain a statistical reporting system to ensure transparency that goes beyond the newly established data base. Administrative costs, however, are expected to be relatively small compared with the adjustment costs of industries and new market export benefits from GPA membership. For that reason, the present study focuses on possible adjustment costs and market access benefits as the two dominant effects likely to arise from its membership in the Agreement. C. Approach and Organization of the Study

♦ Chapter 1 describes the objective and coverage of the study. ♦ Chapter 2 identifies Jordan’s major industries, the structure of government

procurement of goods and services, and the importance of government procurement to Jordan’s industries.

♦ Chapter 3 assesses the impact of the GPA on selected sectors in terms of the

impact of changes in the foreign versus domestic sourcing of government procurement and the impact of enhanced foreign markets.

♦ Chapter 4 derives some implications for Jordan’s offer and describes the key

elements to be addressed in the negotiation process.



♦ Annex A contains sector-specific analysis for each of the selected industries. ♦ Annex B contains an illustrative draft offer for Jordan. ♦ Statistical Appendix reports the level of import of GPA member countries in

the selected industries.



Chapter 2: Jordan’s Major Industries A. Identifying the Key Goods and Service Industries The present impact assessment uses the so-called bottom-up approach, in contrasts to the use of the national system of accounts to obtain an aggregate-level assessment of the effect that membership in the GPA would have on Jordan.2 This approach is more reliable than an aggregated approach since it allows us to measure the industry-specific effects of the GPA. Nevertheless, it requires that the analysis be based on a subset of goods and services be identified out of the universe of procurement information. For our study, we have selected seven industries producing goods, which together account for two-thirds of all manufacturing output and employ one-third of the manufacturing labor force (table 2.1). For services we have focused on two industries that are central to government procurement activities. We also provided extensive coverage of all service activities related to Jordan’s initial draft offer in Chapter 4 of this study. Since Jordan’s offer for services must be based

on the Central Product

Classification (CPC)

nomenclature, considerable effort is currently underway to classifications all GOJ procurement of services and provide that information to the National GPA Committee and the Permanent Mission of Jordan in Geneva in support of their efforts to prepare a draft entity offer.

Table 2.1: Importance of Selected Industries to Manufacturing Activities in Jordan

ISIC 2 Code Description Weight in

Manufacturing Output

Weight in Employment

3320, 3812 Furniture Industry 1.85% 6.06% 3522 Pharmaceuticals Industry 4.11% 2.5%

3411, 3412, 3419, 3420

Paper, Printing and Packaging Industry

4.09% 4.81%

3851, 3852 Medical Supplies Industry 0.16% 0.34% 3832 Manufacture of Radio,

Television and Communication

0.96% 0.46%

3511-3513, 3521, 3523, 3529, 3530, 3560, 3551,

3559

Chemical Industries 40.23% 10.38%

3111-3113, 3115-3117, 3119, 3121,

3134

Food Industries 14.4% 13.79%

Total 65.8% 38.34%

2 The bottom-up approach refers to the process of gathering procurement expenditure data directly from the national entities responsible for procurement decisions, and then measuring the effect of membership on the GPA based on those expenditures (OECD, 2002).



B. Importance of Government Procurement to Jordan’s Industries Government procurement of goods represents a fairly small share of total consumption, according to procurement data compiled by CNS (Table 2.2). Among the sub-sectors examined, the government’s share of purchases relative to total domestic output varies from 16.5 percent for medical supplies to as little as 0.4 percent for radio, television and communication. Government procurement of services averaged JD6.4 million in 1997-2000. Table 2.2 Importance of Government Procurement to the Study Industries

Note: GP – Government Procurement C. Procurement of Goods and Services The Government procured an average of JD57 million of goods and JD6.5 million of services each year in 1997-2000. Government procurement of goods was concentrated in the twenty products, which together accounted for more than 75% of the value of all procurement. Medical products were, by far, the largest procurement in that period, followed by medical, surgical, dental and veterinary instruments and appliances. Table 2.3: Major Items Procured by Government of Jordan

1997 1998 1999 2000 Average the periodHS Code Description Value

(000JD)Value

(000JD)Value

(000JD)Value

(000JD) Value

(000JD)

% of Total

300400000 Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses 15,387 14,185 17,612 19,200 16,596 39.9%

901800000 Instruments and appliances used in medical, surgical, dental or veterinary sciences…etc 2,087 2,272 2,558 3,738 2,664 6.4%

847100000 Automatic data processing machines and units thereof…etc 762 2,486 1,981 1,260 1,622 3.9%

300200000 Human blood, animal blood prepared for therapeutic or diagnostic uses, antisera…etc 1,157 631 1,148 2,495 1,358 3.3%

300500000 Wadding, gauz, bandages and similar articles 1,118 1,312 980 791 1,050 2.5%870300000 Motor cars 367 851 876 1,799 973 2.3%

ISIC 2 Code Description Average GP All

Sources (1997-2000)

Average GP Domestic Sources

(1997-2000)

Production Output

% GP in Output

% GP DS in

Output

3320, 3812 Furniture Industry 1,416 1,303 67,105 2.1% 1.9%

3522 Pharmaceuticals Industry 21,162 7,755 134,859 15.7% 5.8%

3411, 3412, 3419, 3420

Paper, Printing and Packaging Industry 9,957 8,416 135,063 7.4% 6.2%

3851, 3852 Medical Supplies Industry 6,415 884 5,373 120% 16.5%

3832 Manufacture of Radio, Television and Communication

920 120 31,238 3.0% 0.4%

3511-3513, 3521, 3523, 3529, 3530, 3560, 3551, 3559

Chemical Industries 13,782 6,387 1,079,178 1.3% 0.6%

3111-3113, 3115-3117, 3119, 3121,

3134 Food Industries 1,545 8,174 472,822 2.4% 1.7%



1997 1998 1999 2000 Average the periodHS Code Description Value

(000JD)Value

(000JD)Value

(000JD)Value

(000JD) Value

(000JD)

% of Total

870400000 Motor vehicles for the transport of goods 718 1,067 1,576 840 2.0%300600000 Pharmaceutical goods 1,816 648 377 66 727 1.7%

870200000 Motor vehicles for the transport of 10 or more people 595 396 765 1,085 710 1.7%

382200000 Composite diagnostic or laboratory reagents 609 812 710 466 649 1.6%940300000 Other furniture and parts thereof 543 475 591 692 575 1.4%870500000 Special purpose motor vehicles 35 1,781 87 348 563 1.4%401100000 New pneumatic tires of rubber 546 722 516 463 562 1.4%

940100000 Seats whether or not convertible into beds and parts thereof 337 646 583 633 550 1.3%

902700000 Instruments and apparatus for physical or chemical analysis 467 304 578 745 523 1.3%

482300000 Other paper and paperboard 265 609 262 609 436 1.0%

902200000 Apparatus based on the use of x-rays or alpha…etc 415 257 157 906 434 1.0%

842100000 Centrifuges, including centrifugal dryers filtering or purifying machinery and apparatus 301 275 492 629 424 1.0%

482000000 Registers, accounts books, exercise books…etc. 236 457 282 530 376 0.9%

854300000 Electrical machines and apparatus having individual functions 505 196 609 328 0.8%

Total 28,265 29,117 31,818 38,639 31,960 76.9%Grand Total 36,757 40,522 41,179 47,871 41,582

Domestic sources supply an average of 27 percent of all procurement. In the pharmaceutical industry, about 61 percent of all procurements by the Government are supplied by domestic producers. Domestic producers are also important suppliers of furniture. Over one half of all procurement is carried out by the Ministry of Health (64 percent of the total), followed by the Government Tenders Directorate and the Government Supplies Department, which together account for 18 percent of all procurement. Contracts having values above JD100,000 represent about 2 7 percent of the total value of tenders.

Table 2.4: Procurement of Goods of Jordanian Origin Value (000JD)

HS Code Description 1997 1998 1999 2000 Average Period

Procurement from All Sources (Average

Period 1997-2000) (000JD) Percent

300400000 Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses 6,947 6,359 6,551 7,769 6,906 16,596 41.6%

940300000 Other furniture and parts thereof 539 467 546 645 549 575 95.4%

940100000 Seats whether or not convertible into beds and parts thereof 329 594 583 584 522 550 95.0%

300500000 Wadding, gauze, bandages and similar articles 376 587 169 725 465 1,050 44.3%

901800000 Instruments and appliances used in medical, surgical, dental or veterinary sciences…etc 266 424 354 376 355 2,664 13.3%

482000000 Registers, accounts books, exercise books…etc. 213 423 248 410 324 376 86.1% 482300000 Other paper and paperboard 144 266 145 143 175 436 40.1%



Value (000JD)

HS Code Description 1997 1998 1999 2000 Average Period

Procurement from All Sources (Average

Period 1997-2000) (000JD) Percent

280400000 Hydrogen, rare gases and other non-metals 0 0 0 605 151 153 98.4% 380800000 Insecticides, rodenticides…etc 94 72 167 84 104 150 69.3%

271000000 Petroleum oils, and oils obtained from bituminous minerals other than crude 0 200 0 200 100 113 88.7%

630200000 Bed linen, table linen, toilet linen and kitchen linen 0 118 137 64 80 91 88.0% 852400000 Records, tapes and other recorded media 0 235 18 0 63 140 45.1%

300200000 Human blood, animal blood prepared for therapeutic or diagnostic uses, antiserum…etc 106 86 0 48 60 1,358 4.4%

850700000 Electric accumulators 126 109 0 0 59 61 96.6% 220700000 Indentured ethyl alcohol 0 72 75 58 51 52 97.2% 841800000 Refrigerators, freezers…etc 69 57 74 0 50 116 43.2% 382200000 Composite diagnostic or laboratory reagents 68 30 75 10 46 649 7.1% 392600000 Other articles of plastics…etc 38 81 31 29 45 173 26.0% 850600000 Primary cells and primary batteries 0 0 101 77 44 45 98.8%

Total 9,315 10,180 9,273 11,827 10,149 25,348 40.0%

Grand Total 10,394 11,066 10,615 12,975 11,263 41,582 27.1%

In services, procurement of hotel services, insurance and building cleaning activities accounted for more than one-half of all procurement of services. These procurements were primarily undertaken by Ministry of Health, Government Tenders Directorate and the Government Supplies Department Table 2.5: Government Procurement of Services (JD 000)

Average 1997 - 2000 CPC

Code ISIC 3 Code Description 1997 1998 1999 2000

Value % 641 5510 Hotel Services 998 1,717 1,818 3,631 2,041 31.9% 862 7412 Accounting, book-keeping and auditing

activities 0 0 0 3.5 0.9 0%

831 7111 Renting of land transport equipment 0 0 0 230 57.5 0.9% 84 7250 Maintenance and repair of office computing

and accounting machinery 609 136 207 310 315.5 4.9%

84 7414 Business and management consultancy activities

5.7 15.3 52.2 67.1 35.1 0.5%

873 7492 Investigation and security activities 13.0 0 184.8 125.0 80.7 1.3% 874 7493 Building cleaning activities 330.2 1,028.8 674.8 1,293.3 831.8 13.0% 812 660 Insurance 208.2 1,241.1 717 1,865 1,007.8 15.7%

7123 6023 Freight transportation 0 100 101.9 100 75.5 1.2% 84 7220 Software consultancy and supply 0 0 2.9 4.5 1.9 0% --- 9301 Washing and dry cleaning of textile and fur

products 0 0 7.6 0 1.9 0%

--- ---- Unspecific (General Services) 0 3,075 4,726.5 0 1,950.4 30.5% Total 2,199 7,325 8,493 7,638 6,414 100%

(1) Based on AMIR’s database information, updates were included when studying specific GPA impacts on sectors.



In the engineering services sector, the Government procured an average of JD6.2 million a year in 1997-2000. Nearly half of this value represented contracts above the threshold value of JD100,000. Figure 2.1 shows the distribution of contracts between local and foreign suppliers. Although domestic producers dominate, foreign suppliers are the ones that usually receive contracts above the threshold value. The major central government entities using these services are Ministry of Housing and Public Works, which accounted for 38.8 percent of all purchases, followed by the Ministry of Education (23.6 percent). Aqaba Authority was the only sub-central government entity that procurement engineering services. Among other government entities, the water authority (Jordan Valley Authority and Ports Corporation) was the largest procurer of engineering services. Foreign

14.6%Combined

19.8%

Local65.6%

Figure 2.1 Distribution of Tenders Values

According to Supplier (Avg. 1996-2000) Government procurement of construction works averaged of JD173.8 million a year in 1997-2000. Thirty-one (31) percent of its contract values were above the threshold value of SDR 5,000,000. The share of domestic suppliers with contacts above that threshold was equal to 46 percent of all contracts. Table 2.6: GOJ Procurement Pattern of Construction Works

Year Total

Procurement (JD Million)

Value Above Threshold

(JD Million)

% Above Threshold

% of Share of Local Contractors in Above

Threshold 1997 157 8.6 5.5% 100% 1998 250 109.8 43.9% 43.6% 1999 120 29.1 24.3% 17.1% 2000 168 67.8 40.4% 56.3%

Average (1997-2000) 173.8 53.8 30.9% 46.3%

Our analysis is based on the CNS database and, for engineering services, the MMIS database. Additionally, other procurement data was collected from other sources for the eight sectors examined in the next chapter of this study.



Chapter 3: Industry Impact Assessment A. Measuring the Distribution of Benefits and Costs Jordan’s membership in the GPA could have significant effects on the welfare of producers and consumers (public and private), and therefore impact on the country’s overall welfare. On the producer side, the potential benefits of the GPA arise from a possible export expansion brought on by increased access of Jordanian industries to the public sectors of GPA member countries, while the potential costs to those industries arise from the diversion of purchases by the GOJ from domestic suppliers to foreign suppliers. Consumer benefits and costs, whether from the public or private sector, are more difficult to measure but equally important. They consist of the cost savings arising from the purchase of more competitively priced goods and services from either domestic or foreign suppliers, less the cost involved in bringing about changes needed to obtain those benefits. The economic benefits and costs from GPA accession can be broken down into the following components: 1. Costs of GPA Membership

(a) Economic cost of possible reductions in domestic procurement supplies and employment;

(b) Administrative costs of maintaining procedural requirements to ensure transparency and due process; and

(c) Cost of collecting and reporting procurement statistical data.

2. Benefits of GPA Membership

(a) Economic efficiency of procurement system. By accepting the GPA’s principles of transparency and nondiscrimination, Jordan could develop a fair and competitive procurement system. The direct benefits accrue to procuring entities in reducing their cost of purchasing goods and services of the same or better quality, thereby improving the distribution of government expenditures. At the national level, it reduces taxpayer contribution to excess rent that can be redirected to other government programs.

(b) Access to a wider external market that includes public sector procurement in GPA

member countries. The GPA may be an increase in exports as a result of better access to government procurement markets of other signatories of the agreement.

3. Net Benefits of GPA Membership

(a) Net benefits to public sector equal total gains from improved efficiency and lower costs less administrative costs from (a) administrative costs of maintaining procedural requirements to ensure transparency and due process (1(b) above), and (b) costs of collecting and reporting procurement statistical data (1(c) above).

(b) Net benefits to private sector equal total gains from greater access to a wider external

market that includes public sector procurement in GPA member countries (2(b) above)



less cost of possible reductions in domestic procurement supplies and employment (1(a) above).

(c) Net benefits to country equal total reduction in taxpayer contribution to excess rent (2(a)

above) plus larger volume of exports to GPA member countries (2(b) above) less possible reductions in domestic procurement supplies and employment (1(a) above).

This chapter provides quantitative evidence of the impact on national welfare and market access of removing Jordan’s discriminatory government procurement policies. In particular, we are concerned with measuring the net benefits to the country from improved market access and changes in production and employment patters. In the following sections, we examine the change in production and employment patters in selected sub-sectors of Jordan, and the changes in market access likely to follow Jordan’s accession to the GPA. The final section of this chapter synthesizes the findings by presenting the net benefits of membership for the country as a whole. While measuring efficiency gains from more competitive tendering and outsourcing is somewhat more difficult, we can incorporate an estimate of these gains in our final calculations following the results of the Domberger, Hall and Lee (1995) study, which found that governments can save at least 20 percent of their procurement expenditures without loss of quality of the goods and services being purchased. B. Impact of Domestic Government Procurement Changes in Sourcing Discriminatory procurement practices in which the government purchases goods and services only from domestic suppliers, regardless of price differentials from foreign suppliers, effectively impose a tariff or non-tariff barrier (NTB) to trade. Discrimination takes the form of a tariff equivalent when there is a price preference margin in which a government selects domestic suppliers as long as their price differential with foreign suppliers does not exceed a certain ratio, for example, 10 percent. More often, discrimination takes the form of outright exclusion of foreign bidders. In either case, non-government demand continues to be allocated between domestic and imported goods on the basis of their actual prices plus import duties. 3 In Jordan discriminatory procurement practices take the form of preferences being given to domestic suppliers, regardless of price differentials “as long as specifications, quality degree, criteria and other conditions in the supplies offered and required for purchasing” are the same as those of foreign suppliers (WTO, 2000, 2001a-2001d). For government works and engineering services, only Jordanian contractors and consultants can carry out any construction project and render engineering services, unless a foreign development loan stipulates that foreign contractors and consultants must be allowed to bid. Jordan has therefore adopted outright exclusion practices as a means of preventing foreign bidders from participating in the public sector tendering process, as well as applying domestic content

3 In practice, the situation can be complicated if rules of origin are not effectively applied. In those cases domestic firms can import products for re-sale to the government after marginal processing that allows them to qualify for the preference for domestically produced goods.



requirement that only allow foreigners to participate in government purchase commitments only if the government also purchases some of the components from domestic firms. To measure the impact of these practices on domestic production in Jordan, we selected the industry sub-sectors whose products account for the bulk of current government purchases. By merging information from the CNS procurement database on the domestic and foreign supply-based composition of government purchases with industry supply and distribution information from the GOJ Department of Statistics, we derived the level and composition of public versus private consumption of each of the sub-sectors, as well as imports of those sub-sectors by the public and private sectors. Following the work of Lowinger (1976), Deardorff and Stern (1979), and an earlier study for Jordan prepared by the AMIR Program (AMIR, 2001), we assume that the share of imports demanded by the Government converges to that of the private sector once discriminatory procurement practices are eliminated, and that the export expansion will be proportional to the expanded market for public procurement in GPA member countries. Based on this approach, we were able to derive the effects of the GPA on government procurement from domestic sources. Tables 3.1 and 3.2 present the estimated adjustment costs for sub-sectors and their product groupings. These costs refer to producer output changes resulting from increased foreign competition and do not take into account the output benefits from the export expansion associated with increased access to foreign government procurement markets. Those benefits are discussed and measured in the next section. Some key observations about the results follow:

• The overall adjustment of production for the selected industry following the elimination of discriminatory procurement practices would only equal -0.4 percent, which represents a change of less than -0.3 percent of Jordan’s total industrial activity.

• The medical supplies industry would have the largest adjustment cost, relative to other

industries, and measured in terms of percentage change in production levels. • The other industries having significant adjustment costs, albeit smaller than that of the

medical supplies industry, are the paper, printing and packaging, food and pharmaceuticals industries.

• If domestic industries could provide goods of the same quality as those purchased from

abroad, then there would be positive adjustment benefits to the radio, television and communications industry, the chemical industry and, to a lesser extent, the furniture industry as the government switched to domestic product sources under non-discriminatory trade.

• Within product groupings, the largest adjustments for sub-sector would occur in canning

and preserving of fruits and vegetables, manufacture of surgical, medical dental equipment, instrument and supplies, orthopedic and prosthetic appliances, and manufacture of pulp, paper and paperboard.



Table 3.1 Changes on Procurement Sources before and After GPA Accession

Share of Imports in Total Government Consumption

ISIC 2 Code Industry Sector Without

GPA With GPA

Impact on Imports Shares

Furniture and Fixtures 8.0% 24%

3320 Furniture and Fixture except Primarily of Metal 7.5% 24% Furn

itur

e &

Fi

xtur

es

3812 Furniture and Fixtures Primarily of Metal 95.0% 3%

Ph ar ma

ce 3522 Pharmaceuticals 63.4% 84%

Paper, Printing and Packaging Industry 15.5% 48% 3411 Manufacture of Pulp, Paper and Paperboard 7.8% 84%

3412 Manufacture of Containers and Boxes of Paper 15.2% 74%

3419 Manufacture of Pulp, Paper and Paperboard Articles 22.1% 6%

Pape

r, Pr

intin

g an

d Pa

ckag

ing

Indu

stry

3420 Printing, Publishing and Allied Industries 19.6% 21%

Medical Supplies Industry 87.2% 96%

Med

ical

Su

ppli

es

3851 + 3852

Manufacture of Surgical, Medical Dental Equipment, Instrument and Supplies, Orthopedic and Prosthetic Appliances

86.2% 95%

ITC

Pr

o d.

3832 Manufacture of Radio, Television and Communication 86.9% 73%

Chemical Industries 53.7% 33% 3511 Manufacture of Basic Industrial Chemicals Except Fertilizers 91.8% 91.8% 3512 Manufacture of Fertilizers and Pesticides 16.0% 25% 3513 Manufacture of Synthetic Resins, Plastic Materials and Man-Made Fibers 7.8% 89% 3521 Manufacture of Paints(1), Varnishes and Lacquers 19.3% 15%

3523 Manufacture of Soap, Cleaning Preparations, Perfumes, Cosmetics..etc. 12.5% 21% 3529 Manufacture of Chemical Products n.e.c. 91.4% 94% 3530 Petroleum Refineries 4.3% 14%

3551+ 3559

Tire and Tube Industries 100% 94% Che

mic

al In

dust

ries

3560 Manufacture of Plastic Products n.e.c 16.3% 30%

Food and Beverage Industry 29.4% 45%

3112 Manufacture of Dairy Products 59.3% 52% 3113 Canning and Preserving of Fruits and Vegetables 10.9% 91% 3115 Manufacture of Vegetable and Animal Oils and Fats 2.2% 71%

3116 Grain Mill Products 77.9% 28% 3117 Manufacture of Bakery Products 23.5% 6%

3119 Manufacture of Cocoa, Chocolate and Sugar Confectionary 38.5% 40%

3121 Manufacture of Food Products n.e.c 23.3% 55%

3134 Soft Drinks and Carbonated Water Industries 21.0% 4%

Food

Indu

strie

s

3111 Slaughtering, Preparing and Preserving Animal Meat and Poultry 28.3% 60%

(1) Need to be updated after the completion of database update



Table 3.2 Impact of GP Changes in Sources on Production Output

Production Output (JD 000)

ISIC 2

Code Industry/Sector Without

GPA With GPA % Change

Weight in Manufacturing

Industry

Effect on Total Manufacturing

Output

3320 Furniture and Fixtures, Except Primarily of Metal

64,723 64,632 -0.1% 1.8% -0.002%

3812 Furniture and Fixtures Primarily of Metal 2,382 2,583 +8.4% 0.05% +0.004%

Furn

iture

&

Fixt

ures

Total Industry 67,105 67,215 +0.16% 1.85% +0.002% 3522 Manufacture of Drugs and Medicines 134,859 131,039 -2.8% 4.11% -0.12%

Phar

m.

Total Industry 134,859 131,039 -2.8% 4.11% -0.12% 3411 Manufacture of Pulp, Paper and

Paperboard 36,532 34,049 -6.8% 1.11% -0.075%

3412 Manufacture of Containers and Boxes of Paper

8,615 8,380 -2.7% 0.24% -0.007%

3419 Manufacture of Pulp, Paper and Paperboard Articles

46,130 46,525 +0.9% 1.4% +0.013%

3420 Printing, Publishing and Allied Industries 43,786 43,332 -1.0% 1.34% -0.013%

Pape

r, Pr

intin

g &

Pa

ckag

ing

Total Industry 135,063 132,286 -2.0% 4.09% -0.082% 3851+ 3852


5,373 4,873 -9.3% 0.16% -0.015%

Med

ical

Su

pplie

s In

dust

ry

Total Industry 5,373 4,873 -9.3% 0.16% -0.015% 3832 Manufacture of Radio, Television and

Communication 31,238 32,008 +2.5% 0.96(1)% +0.024%

ITC

Pr

od.

Total Industry 31,238 32,008 +2.5% 0.96(1)% +0.024% 3511 Manufacture of Basic Industrial

Chemicals Except Fertilizers 106,599 110,229 +3.4% 2.94% +0.1%

3512 Manufacture of Fertilizers and Pesticides

265,268 265,241 0% 7.89% 0%

3513 Manufacture of Synthetic Resins, Plastic Materials and Man-Made Fibers

27,700 27,606 -0.3% 0.84% -0.003%

3521 Manufacture of Paints, Varnishes and Lacquers

28,537 28,745 +0.7% 0.86% +0.006%

3523 Manufacture of Soap, Cleaning Preparations, Perfumes, Cosmetics. etc.

116,474 116,035 -0.4% 3.25% -0.013

3529 Manufacture of Chemical Products n.e.c 4,211 4,094 -2.8% 0.13% -0.004 3530 Petroleum Refineries 467,056 467,034 0% 14.32% 0% 3560 Manufacture of plastic Products n.e.c 68,579 67,278 -1.9% 2.05% -0.04% 3551+333 3559

Tire and Tube Industries 2,068 2,255 +9.1% 0.06% +0.006%

Che

mic

al In

dust

ries

Total Industry 1,351,760 1,353,758 +0.14% 40.23% +0.052%

(1) Estimated



Production Output

(JD 000)

ISIC 2

Code Industry/Sector Without

GPA With GPA

% Change

Weight in Manufacturing

Industry

Effect on Total Manufacturing

Output

3112 Manufacture of Dairy Products 43,285 43,274 0% 1.33% 0% 3113 Canning and Preserving of Fruits and

Vegetables 9,330 5,880 -37% 0.26% -0.096%

3115 Manufacture of Vegetable and Animal Oils and Fats

95,489 94,057 -1.5% 2.95% -0.044%

3116 Grain Mill Products 88,794 89,035 +0.3% 2.74% +0.008% 3117 Manufacture of Bakery Products 72,421 72,463 +0.1 2.22% +0.002% 3119 Manufacture of Cocoa, Chocolate and

Sugar Confectionary 13,823 13,830 0% 0.42% 0%

3121 Manufacture of Food Products n.e.c 32,384 32,073 -1.0% 0.98% -0.001% 3134 Soft Drinks and Carbonated Water

Industries 87,711 88,256 +0.6% 2.61% +0.016%

3111 Slaughtering, Preparing and Preserving Animal Meat and Poultry

30,173 29,215 -3.2% 0.93% -0.03%

Food

Indu

stry

Total Industry 473,410 468,083 -1.12% 14.4% -0.15%

Grand Total 2,198,808 2,189,262 -0.43% 65.8% -0.29%

In service the two main activities are software consultancy and supplies, and construction activities. For both of these activities, GPA-induced changes in Government procurement sources would have a negative, albeit small, impact.

Table 3.3 Impact of GP Changes in Sources on Service Sectors

ISIC 3 Code Service Impact of GPA Accession

on Gross Output 7220 Software Consultancy and Supply -2.5%

4510 - 4540 Construction Activities -3.8% (1)

(1) For the construction works impact analysis, the assumption was made that under GPA, domestic contactors will loose their entire share in above threshold contracts

Construction activities engaged in pre-erection work at construction sites (CPC 511), assembly and erection of prefabricated construction (CPC514), building completion and finishing work (CPC 517) would experience no negative effects from the Agreement, since tender values are usually below threshold values. The following table shows the average government consumption, values above threshold, domestic shares of above threshold, as well as the perceived impact on the construction work for buildings (CPC 512), the construction work for civil engineering (CPC 513) and installation work (CPC516).



Table 3.4 Impact Assessment Based on Share in Above Threshold Contracts

CPC Code Description

Average GP (1997-2000) (Million JD)

Average Above Threshold

(1997-2000) (Million JD)

% Above Threshold

% Local Content Impact

512 Construction Work for Buildings 71.8 12.7 17.6% 71.7% -1.4%

513 Construction Work for Civil Engineering 90.7 39.0 43.0% 35.1% -2.1%

516 Installation Work 4.8 2.1 45.1% 100% -0.32% The analysis suggests that construction work for civil engineering could experience the largest adjustment effects from of Jordan’s acceding to GPA, but that these adjustments would be small. For installation work, adjustment costs would be insignificant, and for construction work for buildings, they would be small.

C. Impact of Foreign Market Enhancement to Public Sectors The size of the world government procurement market is enormous. Estimates of the non-defense related government procurement market for the GPA signatory countries put its size at near US$1 trillion (Hoekman, 1998, and Choi, 1999). For all industrialized countries, a new study by the OECD on the level of government procurement, estimates total procurement from both consumer and investment expenditures to be US$4.7 trillion. Data on procurement market is only broadly available for the industrialized countries, but since all GPA members except Korea and Israel are industrialized countries, the information is fairly complete. For those industrialized countries, the size of government procurement ranges from 8 to 10 percent of their GDP, with no

Table 3.5 Government Consumption in GPA Member Countries

Total Government

Expenditures

Government Consumption of Goods and

Services

Percent of GDP

Percent of Total

Expenditures

Percent of Total

Consumption Canada 21% 27% 12.1% Hong Kong (China) 9% 13% 11.8% Iceland 10% 20% 11.8% Israel 29% 32% 11.4% Japan 10% 14% 11.9% Korea 11% 17% 12.7% Norway 20% 29% 14.3% Singapore 10% 20% 13.1% United States 16% 19% 10.5% European Union 19% 24% 11.6%

of which: Austria 20% 26% 12.3% Denmark 27% 33% 12.5% Finland 22% 29% 13.1% France 19% 24% 11.6% Germany 20% 26% 12.1% Greece 14% 16% 9.6% Ireland 14% 21% 10.7% Italy 16% 21% 11.6% Netherlands 14% 19% 11.6% Portugal 18% 22% 11.0% Spain 16% 21% 10.8% Sweden 26% 33% 13.3% United Kingdom 17% 20% 11.1%



significant dispersion among the countries (Trionfetti, 2000). These figures refer to the general government, which encompass central, state or provincial, and local governments, and are based on the system of national accounts rather than data on procurement expenditure gathered directly from the national entities responsible for procurement decisions. We can estimate the magnitude of government procurement in GPA member countries from the data collected by Trionfetti (2000). Table 3.5 shows the range of general government overall consumption and, more specifically, procurement of goods and services relative to both GDP and total public and private expenditures. Consumption by the central government, comprising central, provincial and local, represents between 10 and 13 percent of total consumption in the national accounts of those countries. Using this information, we can estimate the size of general government procurement in the GPA member countries for the export products of the key Jordanian industries affected by accession to the Agreement by using the following formula:

The formula states the larger market fothe public sector, amarket.4 We followdeveloping countriprice, and that thedemand curve, i.e.increase.5 Table 3.7 shows tindustries in the Gtrillion of private apercent or US$183

5 In contrast, Baldwin aprivate sectors both faclike the United States, lsupply at free trade pricwelfare; and (ii) when procurement ban raisesnational welfare.

4 Technically, the formlevel of import demanddemand will, ceteris pacountries to that markeprimary commodities, a

MMIS Management C

Percentage change in Jordanian exports of i = (Percentage change in GPA market access for Jordan for i) X (Percent of Jordanian exports directed to GPA market for i) where i refers to a product, e.g., medical instruments.

that the percentage change in Jordan’s exports will be proportional to r selected products in GPA member countries because of its access to djusted for the share of that GPA market in Jordan’s total external Evenett and Hoekman (1999) in assuming that Jordan, like other

es, faces an infinitely elastic foreign supply curve at a given world public sector, like the private sector, faces a downward sloping , if price declines, then the quantity demanded of the product will

he overall size of the markets for selected products of Jordanian PA members. The total size of the markets represents over US$1.5 nd public sector purchases from abroad. Of this amount, nearly 12 billion represents public sector purchases. The figures for product

nd Richardson (1972) adopt the large-country assumption that that the public and e an upward-sloping supply curve. This assumption, which is useful for countries ed them to conclude the following: (i) if government demand is less than domestic es, a procurement ban has no effect on domestic prices, net imports and national

government demand is greater than domestic supply at free trade prices, a the price paid by the government and domestic output, reduces total imports and

ula states that Jordan’s export demand has a unitary elasticity with respect to the in the geographic market, since a change in the level of foreign market import ribus, cause a proportional change in the demand for the exports of all supplying t. For the methodology used to model a country’s exports, see Lord (1991) for nd Lord (1998) for manufactured goods.

onsultants 16


groupings summarize the statistical appendix to this report correspond to data from the United Nations PC-TAS database. Based on these data, we have estimated the size of the public sector component in these countries using the information provided in Table 3.6. Jordan has yet to exploit the US and EU markets under the preferential market arrangements, but it is likely that these markets will become increasingly important in the near future. Table 3.8 shows that, at present, the GPA member countries only absorb about 30 percent of Jordan’s total exports. Of these, Israel accounts for about one-third of the total imports from Jordan for this group of countries. Most of Jordan’s exports are directed to other Middle Eastern and North African countries. The overall benefit to Jordan’s exports can be readily calculated from these data. It is reasonable to assume that, from an economic perspective, Jordan is a small country in the global economy and therefore faces a price elasticity of export demand in its foreign markets that approximates infinity. Consequently a one percent change in foreign market import demand by GPA member countries resulting from an opening up of their public sector components to Jordan would lead to a proportional change in the demand for

Table 3.6 Imports of Key Jordanian Products by GPA Member Countries, 1998-2000 Average (1000 US$)

Furniture Pharmaceuticals Paper &

Packaging Medical Supplies Chemicals

Food & Beverages

Radio, TVs and Comm. TOTAL

Canada 3,127,345 2,891,343 3,886,416 24,073,183 16,892,935 4,604,882 15,611,005 71,087,108

Hong Kong 1,344,661 775,098 2,588,331 41,623,804 12,849,245 4,291,494 35,212,487 98,685,121

Iceland 60,273 60,814 54,654 184,737 216,493 81,107 106,542 764,620

Israel 297,153 532,972 595,878 4,037,750 2,482,961 592,197 2,506,464 11,045,375

Japan 3,466,726 3,517,784 3,585,742 42,394,149 22,340,806 14,943,995 26,023,607 116,272,809

Korea 172,136 448,863 1,852,997 26,865,577 12,045,409 2,284,774 21,118,255 64,788,012

Norway 804,547 701,510 852,989 2,810,985 2,777,134 652,642 1,624,436 10,224,244

Singapore 495,907 378,031 747,931 35,769,687 6,804,451 1,622,050 31,239,897 77,057,954

United States 3,481,577 10,877,151 8,061,392 38,816,617 25,427,136 12,079,288 26,966,311 125,709,473

European Union 41,351,540 41,643,329 59,541,991 310,543,319 229,504,873 89,977,582 209,388,713 981,951,347

of which:

Austria 1,528,285 1,784,044 1,798,566 6,238,666 4,964,277 2,041,365 3,839,602 22,194,805

Belgium-Lux 2,225,966 4,263,313 4,058,540 11,047,122 23,183,656 7,403,917 5,976,556 58,159,070

Denmark 777,759 797,786 1,359,223 4,290,290 3,787,592 2,252,829 2,883,132 16,148,611

Finland 319,238 670,083 517,626 4,632,981 2,996,198 796,839 3,552,115 13,485,081

France 3,894,938 6,060,184 7,955,864 28,391,420 30,921,481 13,345,992 17,908,138 108,478,018

Germany 7,294,017 7,372,581 10,849,215 45,040,476 40,074,815 17,120,487 28,107,697 155,859,289

Greece 159,343 676,795 539,833 1,537,853 1,730,936 1,408,028 899,263 6,952,051

Ireland 332,262 1,002,835 783,893 7,024,272 4,095,154 1,827,925 5,049,503 20,115,844

Italy 993,731 4,695,643 5,285,683 18,920,798 24,286,687 10,002,249 11,248,834 75,433,625

Netherlands 2,014,608 3,173,546 4,327,289 20,273,907 15,287,723 7,746,097 13,117,183 65,940,353

Portugal 364,933 837,875 793,182 1,680,531 2,068,985 11,863,011 3,120,706 2,996,799

Spain 954,408 3,064,294 3,411,904 12,131,648 13,624,905 4,911,760 7,526,378 45,625,297

Sweden 981,639 1,289,021 1,012,979 8,904,919 5,536,736 1,863,048 6,089,722 25,678,063

United Kingdom 19,510,412 5,955,329 16,848,195 138,988,259 56,017,913 17,576,516 101,121,605 356,018,229

Total 54,601,866 61,826,896 81,768,321 527,119,809 331,341,442 131,130,011 369,797,717 1,557,586,063



Jordan’s exports. Since the public sector component of total imports of the GPA member countries represents, on average, 11.7 percent of total imports, and since Jordan directs 31.8 percent of its exports to these countries, then the total one-time expansion in exports from accessing the public sector component of the GPA market would generate 3.7 percent of additional export revenue from Jordan’s sales to these countries. That figure roughly translates into a JD 50 million of additional annual export revenue if it were able to export all of its products to those markets. Naturally, only a sub-set of Jordan’s export products would be purchased by the public sector in the GPA member countries. Table 3.9 presents the net benefits that could accrue to individual industries were they to fully exploit the enlarged markets after Jordan’s accession to the GPA. The net benefits are calculated as the proportional increase in exports of Jordan’s industries relative to the percentage increase in imports from access to public procurement market in GPA member countries minus the reduction in Jordanian production resulting from the increased foreign market access to the Jordanian public sector. Some of the key findings are as follows:

Table 3.7 Estimated Public Sector Imports by GPA Member Countries, 1998-2000 Average (1000US$)

Furniture Pharmaceuticals Paper &

Packaging Medical Supplies Chemicals

Food & Beverages

Radio, TVs and Comm. TOTAL

Canada 379,072 350,466 471,081 2,917,962 2,047,628 558,167 1,892,243 8,616,619

Hong Kong 158,195 91,188 304,509 4,896,918 1,511,676 504,882 4,142,646 11,610,014

Iceland 7,091 7,155 6,430 21,734 25,470 9,542 12,534 89,955

Israel 33,960 60,911 68,100 461,457 283,767 67,680 286,453 1,262,329

Japan 413,937 420,034 428,148 5,061,988 2,667,559 1,784,358 3,107,296 13,883,321

Korea 21,859 56,999 235,301 3,411,502 1,529,576 290,130 2,681,683 8,227,049

Norway 114,935 100,216 121,856 401,569 396,733 93,235 232,062 1,460,606

Singapore 65,037 49,578 98,089 4,691,107 892,387 212,728 4,097,036 10,105,961

United States 366,482 1,144,963 848,568 4,085,960 2,676,541 1,271,504 2,838,559 13,232,576

Eur. Union 4,814,135 4,848,105 6,931,862 36,153,369 26,718,895 10,475,166 24,376,977 114,318,510

of which: - -

Austria 188,097 219,575 221,362 767,836 610,988 251,245 472,566 2,731,668

Belgium-Lux 255,986 490,281 466,732 1,270,419 2,666,120 851,450 687,304 6,688,293

Denmark 97,220 99,723 169,903 536,286 473,449 281,604 360,392 2,018,576

Finland 41,867 87,880 67,885 607,604 392,944 104,503 465,851 1,768,535

France 451,587 702,630 922,419 3,291,759 3,585,099 1,547,361 2,076,306 12,577,162

Germany 884,123 893,646 1,315,056 5,459,452 4,857,553 2,075,211 3,406,994 18,892,035

Greece 15,358 65,233 52,032 148,227 166,837 135,714 86,676 670,077

Ireland 35,441 106,969 83,615 749,256 436,816 194,979 538,614 2,145,690

Italy 115,215 544,422 612,833 2,193,716 2,815,848 1,159,681 1,304,213 8,745,927

Netherlands 233,578 367,947 501,715 2,350,598 1,772,490 898,098 1,520,833 7,645,258

Portugal 39,993 91,822 86,924 341,995 328,416 184,168 226,738 1,300,056

Spain 103,179 331,275 368,854 1,311,530 1,472,963 531,001 813,662 4,932,465

Sweden 130,885 171,869 135,064 1,187,322 738,232 248,406 811,963 3,423,742

United King. 2,167,824 661,703 1,872,022

15,443,140 6,224,213 1,952,946

11,235,734 39,557,581

Total 6,374,704 7,129,614 9,513,945 62,103,565 38,750,232 15,267,391 43,667,490 182,806,940 Source: Appendix Tables 1- 27 and Table 25.



• The chemical industry is likely to benefit greatly from a broader foreign market

access, in terms of both the percentage gain in industrial output, and improvements in the industry’s trade balance (see Figure 3.1).

• Net improvements in the trade balance, albeit much smaller than in the chemical

industry, are likely to accrue to the furniture, ITC and foods industries.

• The pharmaceuticals and paper and paper, printing and packaging industries may suffer a small deterioration of their respective trade balances.

• The trade balance of the medical supplies industry is likely to remain virtually

unaffected by the removal of discriminatory procurement practices.

Table 3.8 Geographic Distribution of Jordan's Exports to GPA Member Countries and World (Percent)

1998 1999 2000 1998-2000 Canada 0.0% 0.0% 0.1% 0.1% Hong Kong (China) 0.1% 0.1% 0.1% 0.1% Iceland 0.0% 0.0% 0.0% 0.0% Israel 3.3% 7.3% 11.7% 7.4% Japan 1.4% 1.3% 2.0% 1.6% Korea 1.3% 1.0% 1.2% 1.2% Norway 0.0% 0.0% 0.0% 0.0% Singapore 0.1% 0.1% 0.2% 0.1% United States 0.8% 1.2% 9.5% 3.8% European Union 9.2% 7.5% 7.1% 8.0%

of which: 0.0% 0.0% 0.0% 0.0% Austria 0.0% 0.0% 0.0% 0.0% Denmark 0.0% 0.0% 0.3% 0.1% Finland 0.5% 0.7% 0.5% 0.6% France 0.2% 0.1% 0.4% 0.2% Germany 0.6% 0.8% 1.0% 0.8% Greece 0.5% 0.6% 0.7% 0.6% Ireland 0.0% 0.0% 0.0% 0.0% Italy 1.9% 1.6% 1.0% 1.5% Netherlands 3.4% 1.6% 0.4% 1.8% Portugal 0.2% 0.3% 0.2% 0.2% Spain 0.9% 0.7% 1.0% 0.9% Sweden 0.0% 0.1% 0.0% 0.0% United Kingdom 1.1% 1.0% 1.7% 1.3%

Sub-Total 16.1% 18.6% 31.8% 22.2% M. East and N. Africa 40.9% 38.9% 50.8% 43.5%

Other 42.9% 42.5% 17.4% 34.3%

World 100.0% 100.0% 100.0% 100.0%

Source: Appendix Tables 1- 27 and Table 25.




• At the sub-sector level, the largest improvements in trade balances would occur in containers and boxes of paper, bakery products, plastic products, basic industrial chemicals except fertilizers, soft drinks and carbonated water, paints, varnish and lacquers, soap, cleaning preparations, perfumes, cosmetics, fertilizers and pesticides.

• The only significant deterioration in the trade balance is like to occur in canning

and preserving of fruits and vegetables and, to a lesser extent, in pulp, paper and paperboard. The canning industry is, however, fairly small.

Figure 3.1GPA Trade Balance Effects on Industries

-5,000 -1,000 0

Furniture & Fixtures

P harmaceuticals

P aper, P rin ting &P ackaging

M edical S uppliesIndustry

Radio, T V andCommunication

Chemical Industries

Food Industry

3,000 7,000 11,000 15,00

Jordan and the WTO Government Procurement Agreement: An Economic Impact Assessment Table 3.9 Export Gain Effects from Increased Market Access and Resulting Trade Balances

Exports (JD 000) Imports (JD 000) Trade Balance (JD

000) Change in Trade

Balance

ISIC 2 Code Industry/Sector

Without GPA

With GPA

Without GPA

With GPA

Without GPA

With GPA

JD 1000

% Change


3320 Furniture and Fixtures, Except Primarily of Metal 8,307 8,616 17,941 18,236 -9,634 -9,621 14 0.1% Furniture & Fixtures

3812 Furniture and Fixtures, Primarily of Metal 21 22 72 66 -51 -44 7 14.1%

Total Industry 8,328 8,638 18,013 18,302 -9,686 -9,665 21 0.2% Pharmaceuticals 3522 Manufacture of Drugs and Medicines 111,352 115,441 98,851 103,215 12,501 12,226 -275 -2.2% Total Industry 111,352 115,441 98,851 103,215 12,501 12,226 -275 -2.2%

3411 Manufacture of Pulp, Paper and Paperboard 21,685 22,489 62,921 65,561 -41,236 -43,072 -1,836 -4.5% 3412 Manufacture of Containers and Boxes of Paper 6,304 6,537 5,770 5,812 534 725 191 35.8% 3319 Manufacture of Pulp, Paper and Paperboard Articles 717 743 2,936 2,928 -2,220 -2,185 35 1.6% 3420 Printing, Publishing and Allied Industries 11,809 12,247 8154.235 8225.074 3,655 4,021 367 10.0%

Total Industry 40,514 42,016 79,781 82,526 -39,267 -40,510 -1,244 -3.2% 3851+ Medical Supplies

Industry 3852


2,142 2,223 59,513 60,104 -57,370 -57,881 -511 -0.9%

Total Industry 2,142 2,223 59,513 60,104 -57,370 -57,881 -511 -0.9% Radio, TV and Communication 3832 Radio, Television and Communication 5,952 6,176 71,497 71,372 -65,546 -65,196 349 0.5%

Total Industry 5,952 6,176 71,497 71,372 -65,546 -65,196 349 0.5%

3511 Basic Industrial Chemicals except Fertilizers 65,282 67,713 98,885 97,545 -33,603 -29,832 3,771 11.2%

3512 Manufacture of Fertilizers and Pesticides 211,432 219,307 18,365 18,392 193,068 200,916 7,848 4.1%

3513 Manufacture of Synthetic Resins, Plastic Materials and Man-Made Fibers 17,407 18,056 81,696 81,751 -64,289 -63,695 594 0.9%

3521 Manufacture of Paints, Varnish and Laqures 7,512 7,791 3,738 3,737 3,774 4,054 281 7.4%

3523 Manufacture of Soap, Cleaning Preparations, Perfumes, Cosmetics..etc. 39,115 40,572 20,141 20,579 18,975 19,993 1,018 5.4%

3529 Manufacture of Chemical Products n.e.c 2,803 2,907 19,861 19,538 -17,058 -16,630 428 2.5%

3530 Petroleum Refineries 73 76 75,484 75,506 -75,411 -75,430 -19 -0.03%

3551+3559 Tyre and Tube Industries and Manufacture of Rubber Products nec 555 576 29,245 29,194 -28,690 -28,618 73 -0.3%

Chemical Industries

3560 Manufacture of plastic Products n.e.c 17,005 17,638 21,036 21,174 -4,032 -3,536 496 12.3%

Total Industry 361,184 374,636 368,450 367,415 -7,267 7,221 14,487 199% 3112 Manufacture of Dairy Products 1,093 1,134 45,194 45,012 -44,100 -43,878 222 0.5% 3113 Canning and Preserving of Fruits and Vegetables 5,029 5,216 7,357 8,334 -2,328 -3,118 -790 -34.0% 3115 Manufacture of Vegetable and Animal Oils and Fats 58,422 60,588 86,881 88,153 -28,459 -27,565 894 3.1% 3116 Grain Mill Products 340 352 45,194 45,012 -44,854 -44,660 194 0.4% 3117 Manufacture of Bakery Products 2,273 2,357 4,651 4,439 -2,378 -2,081 297 12.5%

3119 Manufacture of Cocoa, Chocolate and Sugar Confectionary 1,216 1,261 8,396 8,419 -7,179 -7,158 21 0.3%

3121 Manufacture of Food Products n.e.c 3,981 4,129 34,131 34,443 -30,150 -30,314 -164 -0.5% 3134 Soft Drinks and Carbonated Water Industries 1,575 1,633 3,556 3,392 -1,981 -1,759 222 11.2%

Food Industry

3111 Slaughtering, Preparing and Preserving Animal Meat and Poultry 2,492 2,584 39,782 40,192 -37,290 -37,608 -317 -0.9%

Paper, Printing & Packaging


C. Netting Out the Effects Table 3.10 brings together the various effects on the industries resulting from the elimination of discriminatory procurement practices. Some of the key findings are as follows:

• The net gain of 0.6 percent output expansion is largely due to the anticipated growth of chemical exports to the GPA member countries, most notably in the

Table 3.10 Output and Export Gain Effect from Increased Market Access

Change in Exports

Change in Imports

Change in Production

ISIC 2 Code Industry/Sector

1000 JD %

1000 JD % 1000 JD %

3320 Furniture and Fixtures, Except Primarily of Metal 309 3.7% 295 1.6% 218 0.3% Furniture & Fixtures 3812 Furniture and Fixtures, Primarily of Metal 1 3.7% -6 -8.9% 201 8.4% Total Industry 310 3.7% 289 1.6% 420 0.6% Pharmaceuticals 3522 Manufacture of Drugs and Medicines 4,089 3.7% 4,364 4.4% 269 0.2% Total Industry 4,089 3.7% 4,364 4.4% 269 0.2%

3411 Manufacture of Pulp, Paper and Paperboard 804 3.7% 2,640 4.2% (1,679) -4.6%

3412 Manufacture of Containers and Boxes of Paper 234 3.7% 43 0.7% (1) 0.0% 3319 Manufacture of Pulp, Paper and Paperboard Articles 27 3.7% -8 -0.3% 422 0.9%

Paper, Printing & Packaging

3420 Printing, Publishing and Allied Industries 438 3.7% -8 -0.3% (17) 0.0% Total Industry 1,501 3.7% 2,666 3.3% (1,276) -0.9%

3851+ Medical Supplies Industry 3852


310 3.7% 223 3.7% (417) -7.8%

Total Industry 310 3.7% 223 3.7% (417) -7.8% Radio, TV and Communication 3832 Radio, Television and Communication 224 3.8% -125 -0.2% 994 3.2%

Total Industry 224 3.8% -125 -0.2% 994 3.2%

3511 Basic Industrial Chemicals except Fertilizers 2,431 3.7% -1,339 -1.4% 6,061 5.7%

3512 Manufacture of Fertilizers and Pesticides 7,875 3.7% 27 0.1% 7,848 3.0%

3513 Manufacture of Synthetic Resins, Plastic Materials and Man-Made Fibers 648 3.7% 55 0.1% 555 2.0%

3521 Manufacture of Paints, Varnish and Lacquers 280 3.7% -1 0.0% 488 1.7%

3523 Manufacture of Soap, Cleaning Preparations, Perfumes, Cosmetics. etc. 1,457 3.7% 439 2.2% 1,018 0.9%

3529 Manufacture of Chemical Products n.e.c 104 3.7% -323 -1.6% (12) -0.3%

3530 Petroleum Refineries 3 3.7% 22 0.0% (19) 0.0%

3551+3559 Tire and Tube Industries and Manufacture of Rubber Products nec 21 3.7% -52 -0.2% 208 10.1%

Chemical Industries

3560 Manufacture of plastic Products n.e.c 633 3.7% 138 0.7% (667) -1.0%

Total Industry 13,452 3.7% -1,035 -0.3% 15,479 1.1% 3112 Manufacture of Dairy Products 41 3.7% -181 -0.4% 29 0.1% 3113 Canning and Preserving of Fruits and Vegetables 186 3.7% 977 13.3% (3,263) -35.0% 3115 Manufacture of Vegetable and Animal Oils and Fats 2,166 3.7% 1,272 1.5% 734 0.8% 3116 Grain Mill Products 13 3.7% -181 -0.4% 253 0.3% 3117 Manufacture of Bakery Products 84 3.7% -213 -4.6% 127 0.2%

3119 Manufacture of Cocoa, Chocolate and Sugar Confectionary 45 3.7% 24 0.3% 51 0.4%

3121 Manufacture of Food Products n.e.c 148 3.7% 311 0.9% (164) -0.5% 3134 Soft Drinks and Carbonated Water Industries 58 3.7% -164 -4.6% 604 0.7%

Food Industry

3111 Slaughtering, Preparing and Preserving Animal Meat and Poultry 92 3.7% 410 1.0% (866) -2.9%

Total Industry 2,834 3.7% 2,255 0.8% (2,496) -0.5% Total All Industries 22,720 3.7% 8,637 0.9% 12,973 0.6%



form of basic industrial chemicals. • Domestic output is also expected to benefit the radio, television and

communications industry and, to a lesser extent, in those of pharmaceuticals and furniture.

• The medical supplies industry is likely to experience significant adjustment costs

because of increased competition from foreign suppliers.

• Adjustment costs to the food and paper, printing and packaging industries are likely to be small to the industries themselves, but significant to Jordan’s overall industrial production because of the importance of these industries to the country.

• Within individual sub-sectors, the largest benefits from increased foreign market

access are expected to occur in metal furniture and fixtures, basic industrial chemicals, ratio, television and communications, and synthetic resins, plastic materials and man-made fibers, while the largest adjustment costs are expected to occur in canning and preserving of fruits and vegetables, plastic products, and surgical, medical and dental equipment.

The employment effect has been measured using the commonly

adopted assumption that production is

linearly homogeneous in all the industries. Consequently, any change in output is associated with a proportional change in both employment and capital. While perhaps a heuristic assumption, it allows us to approximate the

employment effect in Jordan of the GPA. Overall, the effect is insignificant (-0.04%), but it reflects offsetting adjustments between employment changes in the chemicals and food industries. Even in those industries, however, the changes are small are likely to approximate the normal turnaround in employment that takes place during any one year.

Table 3.11 Impact of GPA Accession on Jordan's Employment Levels, by Industry

Employment No.

Chang in Employment

Industry/Sector Without

GPA With GPA Number

% Change

Weight in

Manufac-turing

Industry Furniture & Fixtures 8,602 8,649 47 0.5% 6.06%

Pharmaceuticals 3,510 3,517 7 0.2% 2.50% Paper, Printing, Packaging 6,781 6,751 -30 -0.4% 4.81%

Medical Supplies 488 450 -38 -7.8% 0.34%

ITC 649 670 21 3.2% 0.46%

Chemicals 14,884 15,048 164 1.1% 10.38%

Foods 19,560 19,332 -228 -1.2% 13.79%

Grand Total 54,474 54,417 -57 -0.10% 38.34% Impact on Employment in Manufacturing Sector -0.04%

Number of Employees 57 Impact on Total Employment 0.01%

Notes: (1) Employment levels based on 1998 data. (2) Employment for the ITC Products is estimated.



Chapter 4: Implications for Jordan’s Offer A. Key Components of the Offer The main body of the GPA does not in itself contain the obligations of its member countries, but rather sets out the obligations in Appendix I of the Agreement. Appendix I is composed of five annexes, the first three of which comprise the government entities at the central and sub-central level, as well as all other entities that procure in accordance with the GPA provisions; the other two annexes specify the covered services. Procurement activities encompass those of central and sub-central (local) government entities, as well as other public entities and corporations that are under the control or influence of the national government. Procurement refers to purchases of both goods and services, including construction services. For most members, the threshold for central government contracts of goods and services covered under the GPA is Special Drawing Rights (SDR) 130,000; for local governments, SDR200,000; and for other entities, SDR400,000. For construction contracts, the threshold is SDR5 million. However, in the case of services contracts, only those listed in the agreement are covered. Jordan will need to prepare an offer containing the lists of government agencies it has committed to complying with the Agreement, and the lists of construction and other services subject to the Agreement. The three other appendices (Appendices II-IV) catalog the government publications used to announce tender notices, qualification lists, procurement rules and procedures. A description of each of these appendices follows:

Appendix I: Defines the coverage of a country’s obligations under the Agreement in terms of procuring entities and services, including construction services, and contains five Annexes:

Annex 1: Central Government Entities Annex 2: Sub-Central Government Entities Annex 3: All Other Government Entities Annex 4: Services, other than construction Annex 5: Construction services

Appendix II: Specifies the publications used by countries for the publication of notices of intended procurements — paragraph 1 of Article IX, and of post-award notices — paragraph 1 of Article XVIII.

Appendix III: Specifies the publications used by countries for the publication annually of information on permanent lists of qualified suppliers in the case of selective tendering procedures — Paragraph 9 of Article IX.



Appendix IV: Specifies the publications used by countries for the publication of laws, regulations, judicial decisions, administrative rulings of general application and any procedure regarding government procurement covered by this Agreement — Paragraph 1 of Article XIX.

B. Special and Differential Treatment for Developing Countries Under Article V of the Agreement, developing countries receive special and differential treatment in negotiation of commitments (coverage), and the possibility of invoking exclusions from the rules on national treatment for certain entities, products or services. On the one hand, the development objectives of developing countries must be taken into account in the course of negotiations over their procurement obligations under the Agreement. On the other, developed countries should endeavor to include entities that procure both products and services of export interest to developing countries. For developing countries, development objectives refer to the following: (a) safeguard the position of the balance-of-payments, (b) promote the establishment or development of domestic industries, (c) support industrial units that are wholly or substantially dependent on government procurement, and (d) encourage economic development through regional or global arrangements approved by the WTO. In practice, there are few guidelines to developing countries define what constitutes appropriate measures for special and differential treatment in support of their development objectives when submitting their offers on entities, products or services. Of the 27 countries listed as members of the GPA, which include the individual members of the European Union, only Korea is classified as a developing country under the World Bank’s country classification list.6 If Korea is to serve as an example of what constitutes special and differential treatment, then developing countries have few prerogatives over the treatment given to them by developed countries. When Korea became a member of the GPA, it was only able to negotiate limited exceptions to its entity offers by central, sub-central or other government entities.7 In its procurement of services, Korea did negotiate the ability to extend its offers of the sub-sectors listed in Annex 4 only to those members including those same sub-sectors in their Annex 4. 6 Before joining the GPA under the WTO, Korea made three attempts to become a member of the GPA under the GATT system between 1979 and 1982. Each time it submitted offer lists that were increasingly expanded versions of the original one presented in 1979. All of those initiatives were unsuccessful because the offer list did not meet the expectations of the GPA members. Like in the case of Jordan under the US-Jordan Free Trade Agreement , the United States raised the issue of Korea joining the GPA under its bilateral trade negotiations under the Super 301 in 1989 to avoid possible trade frictions in the area of government procurement (Choi, 1999). 7 The exemption refers to procurement of satellites under the Aviation and Space Industry Development Promotion Law for five years from Korea’s entry into the GPA. Some entities (National Railroad Administration, airports in the case of the central government, and urban transportation) are excluded for the suppliers and service providers of the European Communities, Austria, Norway, Sweden, Finland and Switzerland until such those members give comparable and effective access to Korea in their markets. Similarly, sub-central and other government entities are excluded for goods and services (including construction services) of Canada until the coverage with Canada can be resolved.



For their part, developed member countries have, in many cases, taken exemption to Korea’s effort to gain special and differential treatment. For instance, the European Union did not extend the benefits to Korean suppliers and service providers of its government entities in airports and urban transport until such time as Korea opens its market to the European Union in these same areas. The same restrictions by the European Union apply to sub-central government entities excluded by Korea in its Annex 2, as well as small and medium size enterprises that Korea included in its general notes in an effort to promote those types of domestic enterprises. Finally, there are EU restrictions on Korean suppliers when the threshold level applied by Korea for any type of entity is less than that applied by the European Union for the same type of entity. Similar restrictions to Korea’s suppliers are applied by Iceland, Liechtenstein and Norway. In the case of the United States, construction services procured from Korea by sub-central and other government entities only applies to a threshold above 15 million SDRs. The United States also initiated a case against certain Korean procurement practices with respect to the construction of the Inchon International Airport, stating that those practices violated Korea’s obligations under the GPA (Priebe and Pitschas, undated). C. Strategy for Formulating an Offer Jordan’s initial offer needs to consider the interests of domestic industries, domestic procuring entities, and GPA member countries. The key elements of the offer are the government entities to be included, the threshold levels for the different entities, and the products and services to be covered by the Agreement. The impact assessment of the GPA on domestic industries can provide important guidelines for the draft offer, but since negotiations are undertaken bilaterally on a request-offer basis, Jordan’s offer must be adaptable to the special interests of all parties. The commonly included entities, products and services are therefore an appropriate starting point for the initial offer list. From the onset, it is important that Jordan express a genuine interest in acceding to the GPA in terms of the initial and subsequent offer lists that it submits. Naturally, however, the initial offer list should contain the minimum number of government entities, public corporations and products and services that are likely to be expected by the GPA member countries.8 Exceptions and exclusions need to be justified on the basis of Jordan’s developing country status, national security, preferences given to small and medium size enterprises, regional trade arrangements, and infant industry status accorded to some sectors. In the end it is unlikely that Jordan will be able to exclude a significant number of entities or products from its offer. Korea, for instance, finalized its negotiations with an offer list of 42 out of a total of 45 central government entities, 15 local government entities, and 23 public corporations. 8 This strategy was followed by Korea, even though it participated in the GPA negotiations under the GATT (Choi, 1999).



D. Threshold Values

Threshold values are established for procurement contracts on goods and services, including those related to construction, by central and sub-central government entities and all other entities owned or controlled by the government. The obligations of the GPA do not apply to all procurements by all government entities. Rather, the GPA allows a member to apply the Agreement only to procurements by entities that exceed a certain threshold value; and, with respect to those procurements by the covered entities that exceed the threshold value, the GPA allows the member to limit the kinds of services and construction contracts that will be subject to the Agreement. In addition, the GPA allows a member to exempt from coverage of the Agreement procurements necessary to protect national security, public morals, order or safety, human, animal or plant life or health or intellectual property. Moreover, as mentioned earlier, developing country members are authorized to negotiate exclusions of specified entities, products or services from national treatment.

Despite these caveats, the total value of the thresholds, summed across all entities, is fairly homogeneous among the GPA member countries. The exceptions appear in the conditions applied to Korea, Japan and Israel, where considerably higher threshold values for procurement contracts are applied to construction services. Higher thresholds in these countries, however, are partially offset by lower thresholds on procurement contacts for goods and service by sub-central entities. Japan also has a lower-than-average threshold for procurement contracts for goods and services by other entities owned or controlled by the government (Table 4.1).

Table 4.1 Comparative SDR Threshold Values of GPA Members

Federal Government Entities 1/ Sub-Central Entities 2/ All Other Entities 3/

Goods Services 4/ Construction 5/ Goods Services 4/ Construction 5/ Goods Services 4/ Construction 5/

Canada 130,000 130,000 5,000,000 355,000 355,000 5,000,000 355,000 355,000 5,000,000

European Community 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

Hong Kong 130,000 130,000 5,000,000 na na na 400,000 400,000 5,000,000

Israel 130,000 130,000 8,500,000 250,000 250,000 8,500,000 355,000 355,000 8,500,000

Japan 130,000 130,000 4,500,000 200,000 200,000 15,000,000 130,000 130,000 15,000,000

Korea 130,000 130,000 5,000,000 200,000 200,000 15,000,000 450,000 450,000 15,000,000

Liechtenstein 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

Netherlands for Aruba 130,000 130,000 5,000,000 na na na 400,000 400,000 5,000,000

Norway 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

Singapore 130,000 130,000 5,000,000 na na na 400,000 400,000 5,000,000

Switzerland 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

United States 130,000 130,000 5,000,000 355,000 355,000 5,000,000 400,000 400,000 5,000,000 1/ Specified in Appendix I: Annex 1 2/ Specified in Appendix I: Annex 2
3/ Specified in Appendix I: Annex 3 4/ Covered in Appendix I: Annex 4 5/ Covered in Appendix I: Annex 5 Source: WTO (2000).


Jordan therefore has a fairly limited scope for negotiation on the threshold values for procurement contracts for goods and services, and that scope is mainly limited to procurement contracts by sub-central entities and all other entities owned or controlled by the government. In the case of central government procurement contracts for goods and services covered under the GPA, the threshold value for procurement of both goods and services is always SDR130,000. In most cases, the threshold for procurement contracts on construction services by the central government is SDR5 million. The major exception is Israel, which has a threshold of SDR8.5 million on procurement contracts on construction services.

E. Entity and Product Offers Most government procurement in Jordan tends to occur at the central government level. Although local government plays an important part in the country, the value of procurement by these entities is relatively small in the overall public sector. The size of central government procurement by entity is shown in Table 4.2, while Table 4.3 lists the main products purchased by the government, defined as those that represent at least 1 percent of total central government procurement.

Table 4.2 Distribution of Central Government Procurement by Entity, 1997-2000 Average

Percent of Total

Ministry of Health 72.7% General Supplies and Government Tenders Department 12.6% Ministry of Education 5.5% Ministry of Finance 3.2% Ministry of Agriculture 1.4% Ministry of Interior 1.2% Energy and Mineral Resources Ministry 0.7% Ministry of Water and Irrigation 0.6% Ministry of Post and Telecommunication 0.5% Ministry of Social Development 0.5% Ministry of Youth 0.2% Ministry of Culture 0.2% Ministry of Justice 0.2% Ministry of Labor 0.2% Ministry of Planning 0.2% Ministry of Foreign Affairs 0.1% Ministry of Awqaf Islamic Affairs and Holy Places 0.1% Ministry of Industry and Trade 0.1% Ministry of Information 0.0% Ministry of Municipal and Rural Affairs and the Environment 0.0% Ministry of Defense na Ministry of Tourism and Antiquities na Ministry of Public Works and Housing na Ministry of Transport na

100.0%



Government procurement is heavily concentrated in medical products. Two-thirds of all goods procured are for medical purposes and the Ministry of Health accounts for nearly three-fourths of procurement. Transportation equipment (cars, buses, trucks and parts) account for another 10 percent of all procurement, and furniture and other office supplies represent 6 percent of all procurement. GPA coverage is usually limited by excluding entities rather than products from the offers made by member countries. For developing countries, however, there is, in principal, the right to exclude some products based on their development needs. Outside of the GPA, Ninni (2001) has found that in emerging and developing economies, government procurement policies are already used to protect industries.9 Within the GPA, the usual arguments advanced for the exclusions and exemptions, according to Choi (1999), are developing country status, national security, preference to small firms, regional development, infant industry, internal political reality, and cultural differences. For Jordan, Article V on special and differential treatment of developing countries, development objectives must ensure that (a) the balance-of-payments position is safeguard, (b) establishment or development of domestic industries is promoted, (c) industrial units wholly or substantially dependent on government procurement are

supported, and (d) economic development through regional or global arrangements approved by the WTO is encouraged. A strategy aiming to minimize the domestic producer impact of the GPA and maximize the foreign market opportunities would seek to exclude the entities with the largest amount of government procurement. In such a situation, the entity offer should exclude medicaments, medical instruments and other products listed in Table 4.3, although it is unlikely that GPA member countries will allow such broad-based exclusions in their negotiations with Jordan. Moreover, the loss of efficiency gains from this strategy might not minimize

9 Indeed, Ninni (2001) found that only Taiwan uses government procurement to nurture its dynamic domestic industries. All other countries in his survey use procurements to shelter domestic industries from foreign competition.

Table 4.3 Central Government Procurement of Products, 2000

HSCode Description Percent of

Total 3004 Medicaments 43.9% 9018 Medical instruments 8.5% 3002 Vaccines 5.7% 8703 Motor vehicles 3.8% 8704 Trucks 2.7% 8702 Buses 2.5% 8471 Data processing machines 2.1% 9022 X-ray machines 2.1% 3005 Adhesive Dressing 1.8% 9403 Furniture 1.5% 8421 Clothes-dryers 1.4% 9401 Chairs 1.4% 2804 Oxygen and other gases 1.4% 4823 Adhesive paper 1.4% 4820 Binders and folders 1.2% 9027 Gas and smoke detectors 1.2% 3822 Laboratory reagents 1.1% 4011 Tires of automobiles 1.1% 8306 Statuettes and other ornaments 1.0%

Sub-total 85.7% Total all products 100.0%



the overall domestic impact of the GPA accession, since the loss of efficiency might outweigh the domestic producer impact. If Jordan is able to exclude selected products from its offer, then it will need to determine the strategy for their exemption. Table 4.4 illustrates the types of industries that would be excluded from the offer list to support existing development policies. A strategy aiming to promote industries with high nominal protection but low effective protection would exclude products originating from manufacturers of pharmaceuticals, medical and surgical equipment, and agricultural and forestry machinery. Likewise, a strategy to promote those industries already enjoying high levels of both nominal and effective rates of protection would exclude manufacturers of fabricated metal products, glass and glass products, rubber products, furniture, basic chemicals, and rubber tires and tubes. The type of information required to select these products are nominal rates of protection (NRP), which are readily available, and effective rates of protection (ERP), which require calculation of protection on the final products as well as the intermediate goods used to produce each of those products. A broader approach requiring less calculation would target for exclusion from the offer list types of products classified according to factor intensity. One strategy using this approach would target high-technology and capital intensive products in which supports the GOJ’s current development objectives. Products excluded from the offer list using this strategy include those produced by manufacturers of pharmaceuticals, medical and surgical equipment, chemical products, inorganic chemicals, dyeing and tanning, and oils and perfume materials. Another strategy would target labor-intensive industries to support the employment objectives of the GOJ’s development plan to minimize the GPA impact on employment. Products excluded from the offer list using this strategy would include those produced by manufacturers of furniture, made-up textile articles, jewelry, leather and manufactures, travel goods and handbags, and clothing. The Annex provides a list of products classified at the 2-digit HS level in terms of their factor intensity. Yet another approach to selecting products to exclude from the offer would either minimize the impact of the GPA on procurement changes by the government or, more broadly, minimize the overall output effect at the industry level from the GPA. Table 6.1 illustrates some of the products that would be excluded from the offer to the WTO because of the large impact that international competition is likely to have on their industries. However, it is important to emphasize that lack of data on the origin and distribution of goods in both the public and private sectors of the economy required us to make important assumptions when calculating the effects of the GPA on the production of domestic industries. Nevertheless, the results provide guidelines for the types of industries that are most likely to be affected by Jordan’s membership in the GPA.



F. Services Coverage under Annex 4

Most members submit a positive list of services in Annex 4. The description and classification of these services is based on the Central Product Classification (CPC) nomenclature of the Universal List of Services of the World Trade Organization (WTO, 1991).10 11 Annex B presents the services offered by GPA member countries in Annex 4 of Appendix I.

Commonly Offered Sub-Sectors - Although members are not obliged to offer the same services as others, there is clearly an element of reciprocity in their offers. Canada, Korea and the United States, for instance, do not extend the benefits of the GPA to various suppliers and service providers until those providers open their markets to them. Table 4.2 provides a broad overview of the pattern of offers made by existing GPA member 10 When Jordan became a member of the WTO in April 2000, it undertook commitments in the General Agreement in Trade in Services (GATS) under the Schedule of Specific Commitments. Under these commitments, Jordan should base its schedules on the classification list developed by the WTO and published under the document entitled Services Sectoral Classification List , MTN.GNS/W/120. This classification, informally referred to as W/120 , is closely correlated with the Provisional CPC. Since the Uruguay Round the Provisional CPC has been revised and replaced by CPC v 1. However, GPA commitments in Annex 4 continue to use the Provisional CPC. 11 Each subclass of CPC consists of services, as well as goods, that are predominantly produced in a specific class or classes of the International Standard Industrial Classification. For correspondences between CPC and ISIC Rev.3 for goods and services, and between CPC and the Harmonized System (HS), see UN (1998).

Table 4.4 Alternative Strategies for GPA Negotiations and Products to Exclude from Offer

Strategy Illustrative Products to Exclude from Offer List

Promote High-Tech Industries Pharmaceuticals Medical

equipment Chemical products

Inorganic Chemicals

Dyeing, Tanning Materials

Essential Oils, Perfume Materials

Promote Labor-Intensive Industries Furniture* Made-up textile

articles* Jewelry* Leather and Manufactures*

Travel Goods & Handbags* Clothing*

Promote Industries with High Rates of Effective Protection

Fabricated metal products*

Glass and glass products*

Rubber products* Furniture* Basic

chemicals* Rubber tires and tubes*

Promote Industries with High Nominal Protection but Low Effective Protection

Pharma-ceuticals*

Medical, surgical equipment*

Agricultural and forestry machinery*

Promote High Export Growth Industries Medicines* Wooden office

furniture* Paper, paperboard*

Containers. of paper* Soaps* Carpets*

Minimize Impact on Government Procurement from Domestic Industries

Metal furniture* Medicaments* Manifold business forms*

Seats with wooden frames*

Wooden office furniture* Swivel seats*

Minimize Impact on Domestic Output

Seats with metal frames*

Chemical preparations for photographic uses*

Bed linen* Medical furniture*

Seats with wooden frames*

Medicines*

* Refers to sub-categories of products within classification grouping.



countries, while Table 4.3 provides a more detailed look at the most commonly offered service sub-sectors by GPA members. The analysis shows a clear tendency for countries to provide offers in comparable sub-sectors (see Table 4.5). For example, although there is only one sub-sector offered by 11 GPA member countries (data processing services), there are 8 sub-sectors offered by 10 GPA members and another 4 offered by 9 members.12 On average, each GPA member countries offers under 30 sub-sectors out of a possible total of 133 service sub-sectors in the Universal List of Services. The extent to which GPA members concentrate their offers in the same sub-sectors can be appreciated by the fact that the 30 most commonly offered sub-sectors account

for nearly 60 percent of the total offers. Figure 4.1 provides a visual representation of this concentration in a few number of sub-sectors. Out of a total of 414 offers made by 13 members, 207 offers (50 percent of the offers) are in 25 sub-sectors. Sixty-six percent of the offers are in 38 of the 133 sub-sectors, and 80 percent are in 56 sub-sectors.

Table 4.5 Number of GPA Members Making Offers in Same Service Sub-Sectors

Number of GPA Member

Number of Service Subsectors

11 1 10 8 9 4 8 1 7 6 6 7 5 9 4 7 3 14 2 20 1 40 0 17

Source: Annex B.

Special and Differential Treatment - Since Jordan is eligible for special and differential treatment under the Article V of the GPA, it need not offer all the sub-sectors normally offered by the developed member countries of the GPA. Commonly used arguments for excluding sub-sectors based on national development plans include infant industry, preference to small firms, and regional trade preferences. Offsets are included in Israel’s offer. Table 4.6 presents alternative criteria for selecting service sub-sectors to be excluded from Jordan’s offer. They include the promotion of high-tech industries, promotion of labor-intensive industries, promotion of high export-growth industries, minimization of the impact on government procurement from domestic industries, and minimization of the impact on domestic output. 12 The sub-sectors are consultancy services related to installation of computer hardware, software implementation services, data base services, market research and public opinion polling services, management consulting services, advertising services, sewage services, maintenance and repair of equipment, accounting, auditing and bookkeeping services, services related to manufacturing consulting, building-cleaning services, refuse disposal services.

Figure 4.1Cumulative Distribution of Offers in Service Sub-Sectors

0%

25%

50%

75%

100%

1 23 45 67 89 111 133

Sub-Sectors



Table 4.6 Alternative Strategies for GPA Negotiations and Services to Exclude from Offer

Strategy Illustrative Products to Exclude from Offer List

Promote High-Tech Industries

Software implementation services*

Data processing services*

Data base services*

Technical testing and analysis*

Packet-switched data transmission services*

On-line information and data base retrieva*l

Promote Labor-Intensive Industries

Refuse disposal services*

Sewage services*

Sanitation and similar services*

Passenger transportation*

Freight transportation*

Building-cleaning services*

Promote High Export Growth Industries

Engineering services*

Integrated engineering services*

On-line information and data base retrieval*

Electronic data interchange (EDI) *

Printing, publishing*

Data base services*

Minimize Impact on Government Procurement from Domestic Industries

Integrated engineering services*

Architectural services*

Engineering services*


Maintenance and repair of road transport equipment*

Printing, publishing*

Minimize Impact on Domestic Output


Freight transportation*

Voice telephone services*

Packet-switched data transmission services*

On-line information and data base retrieval*

Electronic data interchange (EDI) *

* Refers to sub-categories of services under the Central Product Classification (CPC) scheme.

G. Implications for Jordan’s Offer

The strategy proposed for Jordan’s submission should reflect a mutual recognition of GPA parties, as well as the development status of Jordan. As a first step, the submission should focus on the entities and services sub-sectors that are most commonly offered GPA member countries, since there is an element of reciprocity in the offers that have been made by these countries. Secondly, those services that are central to Jordan’s develop priorities should be excluded. Finally, a sub-set of the services should be presented in the initial offer, with the understanding that negotiations will likely lead to the full inclusion of the sub-set or a variation thereof. Threshold Values - If Jordan were to negotiate threshold values equal to the maximum thresholds applied to existing GPA members in each type of entity for each type of procurement contract, then its threshold values would be as follows:

• Central Government Entities o Goods 130,000 SDR o Services 130,000 SDR o Construction Services 8,500,000 SDR

• Sub-Central Entities o Goods 355,000 SDR o Services 355,000 SDR o Construction Services 15,000,000 SDR

• All Other Entities o Goods 450,000 SDR o Services 450,000 SDR o Construction Services 15,000,000 SDR




The total of these threshold values would, however, exceed that of any other GPA member country. Specifically, the total would equal nearly 2.5 times that of the European Union and other European countries (Norway, Liechtenstein and Switzerland), as well as that of Canada. It could, nevertheless, reach the total level allowed to Israel by applying to all entities the maximum values indicated above for procurement contracts on goods and services, except in the case of procurement contracts on construction services, it would need to apply to all entities a threshold value of 8,500,000 SDR. The resulting total value of all thresholds would be the same as that of Israel, and below that of Korea and Japan.

Services, Other than Construction (Annex 4) - If Jordan were to follow the pattern of offers commonly made by GPA member countries, then a submission of 48 sub-sectors would match nearly three-fourths (74 percent) of the number of offers made by GPA member countries in Annex 4. Table 4.7 presents the services that would be included (others being excluded) of the Universal List of Services, as contained in document MTN.GNS/W/120. Since Jordan has the right to special and differential treatment as a developing country, it can invoke a number of development-based arguments to exclude some of the services covered in Table 4.7. Applying the criteria used in Table 4.6, twenty-two (21) service sub-sectors could be eliminated from the initial list. The resulting number of sub-sectors offered would equal 27, which nearly matches the 29 sub-sectors that on average have been offered by existing GPA member countries.


Table 4.7: Possible Offers by Jordan for Annex 4 based on Most Commonly Offered Sub-Sectors

Importance based

on GPA Offers

CPC Sector and Sub-Sector

Number of GPA Member Offers

Number of

Offers Ranking

Output

of Affected Industry (000JD) Possbile Criteria for Exclusion from Offer

1. BUSINESS SERVICES A. Professional Services

862 Accounting, auditing and bookkeeping services 9 10 6,829 863 Taxation Services 4 38 6,829 8671 Architectural services 6 23 25,209 Minimize government procurement impact

8672 Engineering services 7 17 na Promote export-growth industries / minimize gov. procurement impact

8673 Integrated engineering services 5 31 na Promote export-growth industries / minimize gov. procurement impact

B. Computer and Related Services 842 Software implementation services 10 3 1,615 Promote high-tech industries 843 Data processing services 11 1 1,615 Promote high-tech industries / Promote export-growth industries 844 Data base services 10 4 Promote high-tech industries / Promote export-growth industries

845+849 Other 10 14 874 Promote high-tech industries D. Real Estate Services

822 On a fee or contract basis 7 15 3,500 E. Rental/Leasing Services without Operators

83106-83109 Relating to other machinery and equipment 4 42 526 832 Other 1 14 3,166

F. Other Business Services 871 Advertising services 10 7 8,982

864 Market research and public opinion polling services 10 5 80

865 Management consulting services 10 6 32,686 866 Services related to maconsulting 9 11 44,239 8676 Technical testing and analysis serv. 7 18 na Promote high-tech industries 873 Investigation and security 6 21 2,837

633+8861-8866 Maintenance and repair of equipment 10 9 874



Importance based

on GPA Offers



Number of

Offers Ranking

Output


874 Building-cleaning services 9 12 9,214

88442 Printing, publishing 6 24 63,001 Promote export-growth industries / minimize gov. procurement impact

2. COMMUNICATION SERVICES 7512 B. Courier services 7 16 9,237 7521 Voice telephone services 5 30 244,610 Minimize domestic output impact

7523** Packet-switched data transmission services 5 33 244,610 Promote high-tech industries / min. dom. output impact 7523** Electronic mail 4 34 244,610 7523** Voice mail 5 35 244,610 Promote high-tech industries 7523** On-line information and data base retrieval 6 26 244,610 Promote high-tech industries / Promote export-growth industries 7523** electronic data interchange (EDI) 6 27 244,610 Promote high-tech industries / Promote export-growth industries 7523** enhanced/value-added facsimile services 5 36 244,610 Promote high-tech industries

6. ENVIRONMENTAL SERVICES 9401 A. Sewage services 10 8 8,163 Promote labor-intensive services 9402 B. Refuse disposal services 9 13 8,163 Promote labor-intensive services 9403 C. Sanitation and similar services 7 19 8,163 Promote labor-intensive services

7. FINANCIAL SERVICES A. All insurance and insurance-related services

8121 Life, accident and health insurance services 4 39 na 8129 Non-life insurance services 4 40 na

81299* Reinsurance and retrocession 4 41 na 8140 Services auxiliary to insurance 6 22 na

11. TRANSPORT SERVICES A. Maritime Transport Services

7211 Passenger transportation 1 25 17,022 7212 Freight transportation 3 29 17,022

B. Internal Waterways Transport 7221 Passenger transportation 1 25 17,022



Importance based

on GPA Offers



Number of

Offers Ranking

Output


7222 Freight transportation 1 29 na C. Air Transport Services

731 Passenger transportation 5 25 286,337 732 Freight transportation 5 29 286,337 734 Rental of aircraft with crew 4 37 286,337

E. Rail Transport Services 7111 Passenger transportation 0 25 17,022 7112 Freight transportation 0 29 17,022

F. Road Transport Services 7121+7122 Passenger transportation 6 25 229,949 Promote labor-intensive services / min. gov. procurement impact

7123 Freight transportation 4 29 227,058 Promote labor-intensive services / min. dom. output impact

6112+8867 Maintenance and repair of road transport equipment 7 20 105,875 Minimize government procurement impact

Note: Classification based on the Universal List of Services, as contained in document MTN.GNS/W/120.



Annex A: GPA Member Offers in Services under Annex 4

CPC Sector and Sub-Sector CANADA UNITED STATES

EUROPEAN UNION

HONG KONG, CHINA ICELAND ISRAEL JAPAN KOREA LIECHTENSTEIN ARUBA NORWAY SINGAPORE

SWITZER-LAND

1. BUSINESS SERVICES

A. Professional Services

861 a. Legal Services

862 b. Accounting, auditing and bookeeping services

863 c. Taxation Services

8671 d. Architectural services

8672 e. Engineering services

8673 f. Integrated engineering services

8674 g. Urban planning and landscape architectural services

9312 h. Medical and dental services

932 i. Veterinary services

93191 j. Services provided by midwives, para-medical personnel

B. Computer and Related Services

841 a. Consultancy services related to installation of computer hardware

842 b. Software implementation services

843 c. Data processing services

844 d. Data base services

845+849 e. Other

C. Research and Development Services

851 a. R&D services on natural sciences

852 b. R&D services on social sciences and humanities

853 c. Interdisciplinary R&D services

D. Real Estate Services

821 a. Involving own or leased property

822 b. On a fee or contract basis

E. Rental/Leasing Services without Operators

83103 a. Relating to ships




EUROPEAN UNION


SWITZER-LAND

83104 b. Relating to aircraft

83101+83102+83105 c. Relating to other transport equipment

83106-83109 d. Relating to other machinery and equipment

832 e. Other

F. Other Business Services

871 a. Advertising services

864 b. Market research and public opinion polling services

865 c. Management consulting services

866 d. Services related to man. consulting

8676 e. Technical testing and analysis serv.

881 f. Services incidental to agriculture, hunting and forestry

882 g. Services incidental to fishing

883+5115 h. Services incidental to mining

884+885 i. Services incidental to manufacturing

887 j. Services incidental to energy distribution

872 k. Placement and supply services of Personnel

873 l. Investigation and security

8675 m. Related scientific and technical consulting services

633+8861-8866 n. . Maintenance and repair of equipment

874 o. Building-cleaning services

875 p. Photographic services

876 q. Packaging services

88442 r. Printing, publishing

87909* s. Convention services

2. COMMUNICATION SERVICES

7511 A. Postal services

7512 B. Courier services

C. Telecommunication services

7521 a. Voice telephone services

7523** b. Packet-switched data transmission services

7523** c. Circuit-switched data transmission services

7523** d. Telex services

7522 e. Telegraph services

7521**+7529** f. Facsimile services




EUROPEAN UNION


SWITZER-LAND

7522**+7523** g. Private leased circuit services

7523** h. Electronic mail

7523** i. Voice mail

7523** j. On-line information and data base retrieval

7523** k. electronic data interchange (EDI)

7523** l. enhanced/value-added facsimile services

n.a. m. code and protocol conversion

843*** n. on-line information and/or data processing

D. Audiovisual services

9611 a. Motion picture and video tape production

9612 b. Motion picture projection service

9613 c. Radio and television services

7524 d. Radio and television transmission services

See Annex 5 3. CONSTRUCTION AND ENGINEERING SERVICES

4. DISTRIBUTION SERVICES

621 A. Commission agents' services

622 B. Wholesale trade services

631+632 C. Retailing services

6111+6113+6121

8929 D. Franchising

5. EDUCATIONAL SERVICES

921 A. Primary education services

922 B. Secondary education services

923 C. Higher education services

924 D. Adult education

929 E. Other education services

6. ENVIRONMENTAL SERVICES

9401 A. Sewage services

9402 B. Refuse disposal services

9403 C. Sanitation and similar services

7. FINANCIAL SERVICES

812** A. All insurance and insurance-related services

8121 a. Life, accident and health insurance services




EUROPEAN UNION


SWITZER-LAND

8129 b. Non-life insurance services

81299* c. Reinsurance and retrocession

8140 d. Services auxiliary to insurance

B. Banking and other financial services

81115-81119 a. Acceptance of deposits

8113 b. Lending of all types

8112 c. Financial leasing

81339** d. All payment and money transmission services

81199** e. Guarantees and commitments

81339** h. Money broking

8119+**81323* i. Asset management

81339**or 81319** j. Settlement and clearing services for financial assets

8131or 8133 k. Advisory and other auxiliary financial services

8131 l. Provision and transfer of financial information

8. HEALTH RELATED AND SOCIAL SERVICES

9311 A. Hospital services

9319 B. Other Human Health Services

933 C. Social Services

9. TOURISM AND TRAVEL RELATED SERVICES

641-643 A. Hotels and restaurants (incl. catering)

7471 B. Travel agencies and tour operators services

7472 C. Tourist guides services

10. RECREATIONAL, CULTURAL SERVICES

9619 A Entertainment services

962 B News agency services

963 C Libraries, archives, museums and others

964 D Sporting and other recreational services

11. TRANSPORT SERVICES

A. Maritime Transport Services

7211 a. Passenger transportation

7212 b. Freight transportation

7213 c. Rental of vessels with crew

8868** d. Maintenance and repair of vessels

7214 e. Pushing and towing services




EUROPEAN UNION


SWITZER-LAND

745** f. Supporting services for maritime transport

B. Internal Waterways Transport



7223 c. Rental of vessels with crew

8868** d. Maintenance and repair of vessels

7224 e. Pushing and towing services

745** f. Supporting services for internal waterway transport

C. Air Transport Services



734 c. Rental of aircraft with crew

8868** d. Maintenance and repair of aircraft

746 e. Supporting services for air transport

733 D. Space Transport

E. Rail Transport Services



7113 c. Pushing and towing services

8868** d. Maintenance and repair of rail transport equipment

743 e. Supporting services for rail transport services

F. Road Transport Services

7121+7122 a. Passenger transportation


7124 c. Rental of commercial vehicles with operator

6112+8867 d. Maintenance and repair of road transport equipment

744 e. Supporting services for road transport services

G. Pipeline Transport

7131 a. Transportation of fuels

7139 b. Transportation of other goods

H. Services auxiliary to all modes of transport

741 a. Cargo-handling services

742 b. Storage and warehouse services

748 c. Freight transport agency services





EUROPEAN UNION


SWITZER-LAND

749 d. Other

95+97+98+99 12. OTHER SERVICES NOT INCLUDED ELSEWHERE

Note 1: All members except the United States present a positive list of services included in their offer. The United States presents a negative list of services excluded from their offer.

Note 2: Services sector classification list based on Central Product Classification (CPC) from World Trade Organization (WTO) document MTN.GNS/W/120.


Annex B: Illustrative Draft Offer for Jordan1

ANNEX 1 Central Government Entities which Procure in Accordance with the Provisions of this Agreement Supplies Threshold: 130,000 SDR Services (specified in Annex 4) Threshold: 130,000 SDR Construction Services (specified in Annex 5) Threshold: 8,500,000 SDR 2 List of Entities:

• Ministry of Justice • Ministry of Health • Ministry of Foreign Affairs • Ministry of Industry and Trade • Ministry of Planning • Ministry of Municipal and Rural Affairs and the Environment • Ministry of Information • Ministry of Youth • Ministry of Tourism and Antiquities • Ministry of Finance • Ministry of Awqaf Islamic Affairs and Holy Places • Energy and Mineral Resources Ministry • Ministry of Culture • Ministry of Agriculture • Ministry of Public Works and Housing • Ministry of Education • Ministry of Labor • Ministry of Social Development • Ministry of Water and Irrigation • Ministry of Post and Telecommunication • Ministry of Transport

Notes to Annex 1 The General Notes apply to this Annex.

(Continued)

1 Highlighted text indicates that the item indicated is subject to negotiations with the GPA member countries. The coverage is limited to Appendix I. The remaining three (shorter) appendices contain the list of publications of Specifies the publications used by Jordan and other signatories for notices of intended procurements (Appendix II), qualified suppliers in the case of selective tendering procedures (Appendix III), and laws, regulations, judicial decisions, administrative rulings of general application and any procedure regarding government procurement covered by this Agreement (Appendix IV). 2 Range for existing GPA member countries: 4,500,000 SDR to 8,500,000 SDR.



ANNEX 2 Sub-Central Government Entities which Procure in Accordance with the Provisions of this Agreement Supplies Threshold: 355,000 SDR 1 Services (specified in Annex 4) Threshold: 355,000 SDR 2 Construction Services (specified in Annex 5) Threshold: 8,500,000 SDR 3 List of Entities: Municipalities (204 in number) Village (142) and common service (170) councils Notes to Annex 2 1. The General Notes apply to this Annex. 2. Nothing in this offer shall be construed to prevent any provincial entity from

applying restrictions that promote the general environmental quality in that province, as long as such restrictions are not disguised barriers to international trade.4

3. Province-specific exceptions: in addition, a limited number of individual provincial

exceptions may be specified at a later date in accordance with commitments received from such provinces.5

(Continued)

1 Range for existing GPA member countries: 200,000 SDR to 200,000 SDR. 2 Range for existing GPA member countries: 200,000 SDR to 200,000 SDR. 3 Range for existing GPA member countries: 5,000,000 SDR to 15,500,000 SDR. 4 Included in the Notes to Annex 2 of Singapore. 5 Included in the Notes to Annex 2 of Singapore.



ANNEX 3 All Other Entities which Procure in Accordance with the Provisions of this Agreement Supplies Threshold: 450,000 SDR 1 Services (specified in Annex 4) Threshold: 450,000 SDR 2 Construction Services (specified in Annex 5) Threshold: 8,500,000 SDR 3 List of Entities: o The Central Bank of Jordan o Hedjaz Jordan Railway o Social Security Corporation o Telecommunications Regulatory Commission o Jordan's Securities Commission o Postal Saving Fund o Institute of Public Administration. Notes to Annex 3 The General Notes apply to this Annex.

(Continued)

1 Range for existing GPA member countries: 130,000 SDR to 450,000 SDR. 2 Range for existing GPA member countries: 130,000 SDR to 450,000 SDR. 3 Range for existing GPA member countries: 5,000,000 SDR to 15,500,000 SDR.



ANNEX 4 Services Of the Universal List of Services, as contained in document MTN.GNS/W/120, the following services are included (others being excluded), subject to the Notes to this Annex and the General Notes.

CPC Description

862 Accounting, auditing and bookkeeping services 863 Taxation Services 822 On a fee or contract basis 83106-83109 Relating to other machinery and equipment 832 Other 871 Advertising services 864 Market research and public opinion polling services 865 Management consulting services 866 Services related to maconsulting 873 Investigation and security 633+8861-8866 Maintenance and repair of equipment 874 Building-cleaning services 7512 Courier services 7523** Electronic mail 8121 Life, accident and health insurance services 8129 Non-life insurance services 81299* Reinsurance and retrocession 8140 Services auxiliary to insurance 7211 Passenger transportation 7212 Freight transportation 7221 Passenger transportation 7222 Freight transportation 731 Passenger transportation 732 Freight transportation 734 Rental of aircraft with crew 7111 Passenger transportation 7112 Freight transportation

Note to Annex 4 1. The General Notes apply to this Annex. 2. The Agreement shall not apply to service contracts awarded to an entity which is

itself a procuring entity listed in Annex 1 or 2 on the basis of an exclusive right which it enjoys pursuant to a published law, regulation or administrative provision. 1

3. This Agreement shall not apply to the following: 2 3 4

(a) service contracts which a contracting entity awards to an affiliated undertaking or which are awarded by a joint venture formed by a number of contracting entities for the purpose of carrying out an activity within the meaning of Annex 3 or to an undertaking which is affiliated with one of these contracting entities. At least 80 per cent of the average turnover of that undertaking for the preceding three years has to derive from the provision of such services to undertakings with which it is affiliated. Where more than one undertaking affiliated with the

1 Included in the Notes to Annex 4 of Liechtenstein. 2 Included in General Notes of Norway. 3 Included in the General Notes of Iceland. 4 Included in the Notes to Annex 4 of Liechtenstein.



contracting entity provides the same service, the total turnover deriving from the provision of services by those undertakings shall be taken into account.

(b) contracts for the acquisition or rental, by whatever means, of land, existing buildings, or other immovable property or concerning rights thereon.

(c) to contracts of employment. (d) for the acquisition, development, production or co-production of programme

material by broadcasters and contracts for broadcasting time. 5. The following items are excluded:1 2 3

a. Within telecommunication services: voice telephony, telex, radiotelephony, paging and satellite services.

b. Within banking and investments services of the financial services category: contracts for financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments, and central bank services.

c. Within management consulting services and related services: arbitration and conciliation services.

5. In architectural, engineering and other technical services related to construction

services, the following services are excluded when procured independently: 4 - Final design services of CPC 86712 Architectural design services; - CPC 86713 Contract administration services; - Design services consisting of one or a combination of final plans,

specifications and cost estimates of either CPC 86722 Engineering design services for the construction of foundations and building structures, or CPC 86723 Engineering design services for mechanical and electrical installations for buildings, or CPC 86724 Engineering design services for the construction of civil engineering works; and

- CPC 86727 Other engineering services during the construction and installation phase.

6. Publishing and printing services are not included with respect to materials

containing confidential information. 5

(Continued)

1 Included in Notes to Annex 4 of the European Union. 2 Included in Notes to Annex 4 of Iceland. 3 Included in Notes to Annex 4 of Norway. 4 Included in Notes to Annex 4 of Japan. 5 Included in Notes to Annex 4 of Japan.



ANNEX 5 Construction Services Definition: A construction services contract is a contract which has as its objective the realization by whatever means of civil or building works, in the sense of Division 51 of the Central Product Classification. Threshold: 5,000,000 SDR for entities set out in Annex 1 15,000,000 SDR for entities set out in Annex 2 15,000,000 SDR for entities set out in Annex 3 List of construction services offered: CPC Description 511 Pre-erection work at construction sites 512 Construction work for buildings 513 Construction work for civil engineering 514 Assembly and erection of prefabricated construction 515 Special trade construction work 516 Installation work 517 Building completion and finishing work Note to Annex 5 The conditions specified in the General Notes apply to this Annex.

(Continued)



GENERAL NOTES 1. Procurement in terms of Jordanian coverage is defined as contractual transactions

to acquire property or services for the direct benefit or use of the government. The procurement process is the process that begins after an entity has decided on its requirement and continues through to and including contract award. It does not include non-contractual agreements or any form of government assistance, including but not limited to, cooperative agreements, grants, loans, equity infusions, guarantees, fiscal incentives, and government provision of goods and services, given to individuals, firms, private institutions, and sub-central governments. It does not include procurements made with a view to commercial resale or made by one entity or enterprise from another entity or enterprise of Jordan. 1

2. Any exclusion that is related either specifically or generally to Federal or

sub-central entities or enterprises in Annex 1, Annex 2 or Annex 3 will also apply to any successor entity or entities, enterprise or enterprises, in such a manner as to maintain the value of this offer. 2

3. Where a contract to be awarded by an entity is not covered by this Agreement, this

Agreement shall not be construed to cover any good or service component of that contract. 3

4. The Agreement shall not apply to contracts awarded under:4 5 6 7 8 - an international agreement and intended for the joint implementation or

exploitation of a project by the signatory States; - the particular procedure of an international organization. 5.This Agreement does not apply to procurement subject to secrecy or other particular

restrictions with regard to the safety of the realm. 9 6. When a specific procurement may impair important national policy objectives, the

Jordanian Government may consider it necessary in singular procurement cases to deviate from the principle of national treatment in the Agreement. A decision to this effect will be taken at the Jordanian Cabinet level. 10 11

7. The provision of services, including construction services, in the context of

procurement procedures according to this Agreement is subject to the conditions and qualifications for market access and national treatment as will be required by Jordan in conformity with its commitments under the GATS. 12

8. The Agreement shall not apply to contracts awarded for purposes of re-sale or hire

to third parties, provided that the contracting entity enjoys no special or exclusive

1 Included in the General Notes of Canada. 2 Included in the General Notes of Canada. 3 Included in General Notes of the United States, Canada, Singapore, Norway, Korea and Liechtenstein. 4 Included in General Notes of Norway. 5 Included in the General Notes of Liechtenstein. 6 Included in the General Notes of Iceland. 7 Included in the General Notes of the European Union. 8 Included in the General Notes of Canada. 9 Included in General Notes of Norway. 10 Included in General Notes of Norway. 11 Included in the General Notes of the European Union. 12 Included in the General Notes of the European Union, Liechtenstein, Japan, Norway, Korea, Israel, and Singapore.



right to sell or hire the subject of such contracts and other entities are free to sell or hire it under the same conditions as the contracting entity.1 2 3

9. The Agreement shall not apply to contracts for the purchase of water and for the

supply of energy and of fuels for the production of energy. 4 10. The Agreement shall not apply to the acquisition or rental of land, buildings or other

immovable property, or concerning rights thereon. 5 11. Jordan will not extend the benefits of this Agreement: 6 7 8 9 - as regards the award of contracts by entities listed in Annex 2 to the suppliers and

service providers of Jordan; - as regards the award of contracts, other than for supplies, listed in Annex 2 to the

suppliers and service providers of the USA; - as regards the award of contracts by entities listed in Annex 3 paragraph

(a) (electricity), to the suppliers and service providers of Canada, Singapore and Japan;

(b) (urban transport), to the suppliers and service providers of Canada, Israel, Japan, Korea and the USA;

(c) (airports), to the suppliers and service providers of Canada, Korea and the USA;

(d) (ports), to the suppliers and service providers of Canada; (e) (water), to the suppliers and service providers of Canada and the USA

until such time as Jordan has accepted that the Parties concerned give comparable and effective access for Jordanian undertakings to the relevant markets; to service providers of Parties which do not include the relevant service contracts for the relevant entities in Annexes 1 to 3 and the relevant service category under Annexes 4 and 5 in their own coverage.

12. The provisions of Article XX shall not apply to suppliers and service providers of: 10

11 12 13 - Israel, Japan, Korea and Switzerland in contesting the award of contracts by

entities listed under Annex 2, paragraph 2, until such time as Jordan accepts that they have completed coverage of sub-central entities;

- Japan, Korea and the USA in contesting the award of contracts to a supplier or service provider of Parties other than those mentioned, which are small or medium-sized enterprises under the relevant provisions in Jordan, until such time as Jordan accepts that they no longer operate discriminatory measures in favor of certain domestic small and minority businesses;

- Israel, Japan and Korea in contesting the award of contracts by Jordanian entities, whose value is less than the threshold applied for the same category of contracts awarded by these Parties.

1 Included in the General Notes of Israel. 2 Included in the Notes to Annex 1 of Japan. 3 Included in the Notes to Annex 1 of Korea. 4 Included in the General Notes of Israel. 5 Included in the General Notes of Israel. 6 Included in General Notes of Norway. 7 Included in the General Notes of Liechtenstein. 8 Included in the General Notes of Iceland. 9 Included in the General Notes of the European Union. 10 Included in General Notes of Norway. 11 Included in the General Notes of Liechtenstein. 12 Included in the General Notes of Iceland. 13 Included in the General Notes of the European Union.



13. Until such time as Jordan has accepted that the Parties concerned provide access for Jordanian suppliers and service providers to their own markets, Jordan will not extend the benefits of this Agreement to suppliers and service providers of: 1 2 3 4 5

- Canada as regards procurement of FSC 36, 70 and 74 (special industry machinery; general purpose automatic data processing equipment, software, supplies and support equipment (except 7010 ADPE configurations); office machines, visible record equipment and ADP equipment);

- Canada as regards procurement of FSC 58 (communications, protection and coherent radiation equipment) and the USA as regards air traffic control equipment.

- Israel and Korea as regards procurement by entities listed in Annex 3, paragraph 1, as regards procurement of HS Nos 8504, 8535, 8537 and 8544 (electrical transformers, plugs, switches and insulated cables); and for Israel, HS Nos 8501, 8536 and 902830;

- Canada and the USA as regards contracts for good or service components of contracts which, although awarded by an entity covered by this Agreement, are not themselves subject to this Agreement.

14. Contracts awarded by entities in Annexes 1 and 2 in connection with activities in

the fields of drinking water, energy, transport or telecommunications, are not included. 6 7 8 9

15. The Agreement shall not apply to procurement of agricultural products made in

furtherance of agricultural support programs and human feeding programs. 10 11 12 13

16. Notwithstanding anything in the Annexes 1-5, the Agreement shall not apply to: 14

- All consultancy and franchise arrangements - Transportation of mail by air - Statutory insurances including third party liability in respect of vehicles and

vessels and employer's liability insurance in respect of employees - Purchase of office or residential accommodation by the Government 17. For construction services of the Republic of Korea and suppliers of such services,

this Agreement applies only to procurement of the entities listed in Annexes 2 and 3 above a threshold of 15 million SDRs. 15

18. Notwithstanding anything in these Annexes, the Agreement does not apply to

procurements in respect of: 16 (a) shipbuilding and repair;

1 Included in General Notes of Norway. 2 Included in the General Notes of Liechtenstein. 3 Included in the General Notes of Iceland. 4 Included in the General Notes of the European Union. 5 Included in the General Notes of Canada. 6 Included in General Notes of Norway. 7 Included in the General Notes of Iceland. 8 Included in the General Notes of the European Union. 9 Included in the General Notes of Canada. 10 Included in General Notes of Norway. 11 Included in the General Notes of Liechtenstein. 12 Included in the General Notes of Iceland. 13 Included in the General Notes of the European Union. 14 Included in the General Notes of Hong Kong, China 15 Included in General Notes of the United States. 16 Included in the General Notes of Canada.



(b) urban rail and urban transportation equipment, systems, components and materials incorporated therein as well as all project related materials of iron or steel;

(c) contracts respecting FSC 58 (communications, detection and coherent radiation equipment);

(d) set-asides for small and minority businesses; (e) agricultural products made in furtherance of agricultural support programs or

human feeding programs; and (f) national security exemptions include oil purchases related to any strategic

reserve requirements.



Offset1

1. Having regard to Article XVI and to general policy considerations regarding development, Jordan may operate provisions which require the limited incorporation of domestic content, offset procurement or transfer of technology, in the form of objective and clearly defined conditions for participation in procedures for the award of contracts, which do not discriminate between the Parties. This shall be done under the following conditions: (a) Jordan shall ensure that its entities indicate the existence of

such conditions in their tender notices and specify them clearly in the contract documents.

(b) Suppliers will not be required to purchase goods that are not

offered on competitive terms, including price and quality, or to take any action which is not justified from a commercial standpoint.

(c) Offsets in any form may be required up to 35 percent of the

contract going down to 30 percent after five years and 20 percent after nine years, beginning from the date Jordan implements the Agreement.

2. (a) At the end of each period of five and four years Jordan will

submit a report concerning the implementation of this Note.

(b) When the level of the offset has reached 20 percent, Jordan will consult with the Parties to this Agreement on the level of the use of offset by Jordan. The review shall take into consideration inter alia general and economic developments in Jordan, its trade balance, the actual performance within the framework of this Agreement and the views of the other Parties.

1 Included in the General Notes of Israel.



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Economic Implications for Jordan of Joining the WTO Government Procurement Agreement

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