I. INTRODUCTION

II. Government Policy:

III. LEGAL ENVIRONMENT

IV. ENCOURAGEMENT LAWS

V. CONCLUSION

This report provides an analysis of the Information Technology sectors of Jordan, Egypt, Israel and Lebanon through an examination of their respective government policies, legal environments, and investment encouragement laws. The report also includes a summary of current economic indicators and IT sector information.

The information contained in this report was compiled using a variety of research methods, including a literature review, in-depth desk research, and personal interviews conducted with representatives of IT organizations and institutions in Lebanon, Jordan, and Egypt. A bibliography and contact information are provided in Annex 1.

Information Technology is one of Jordan’s fastest growing economic sectors. Jordan’s highest priorities are to build a world-class telecommunications infrastructure and to create an educated work force. In April 2000, Jordan signed with the World Trade Organization’s Information Technology Agreement (ITA). Under the terms of the ITA, tariffs on specific information technology product imports are gradually reduced to zero over a five-year period (ending December 2004).

Furthermore, by signing the WTO agreement, Jordan unequivocally committed itself to enforcement of intellectual property rights (IPR) laws. All local and foreign copyrights, trademarks, patents, and other trade-related rights are protected in Jordan.

According to Jordanian IT firms’ activities, the IT sector includes the following fields:

All services related to technical support, trade, assembly, engineering, design, procurement, consulting, research and development, and value-added production are considered to be components of Jordan’s dynamic and growing IT sector.

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The IT industry in Egypt is currently a focus of economic development efforts. Egypt realizes that if it is to keep pace with other countries in the region, investment in the information technology sector is needed. Egypt has also recently signed the World Trade Organization Information Technology Agreement (ITA).

Presently, the Egyptian labor force has an acute shortage of IT-trained workers relative to the size of the country’s population. According to the US-Egypt President’s Council report (www.us-egypt.org), Egypt needs another 5000 IT professionals per year. Despite this shortage of skilled labor, its IT sector continues to expand at a rate of 35 percent annually. The Egyptian government is presently the largest single buyer and user of IT services and products in the country, accounting for one quarter of total demand, followed by the banking sector. The private sector and individual consumers fall into third and fourth place, respectively. The scope of information technology-related services offered in Egypt are similar to those found in Jordan.

Israel signed the WTO Information Technology Agreement before Jordan or Egypt. In those years, Israel has made great strides in propelling its IT sector to the fore, providing a wide range of employment and investment opportunities. During this period, the Israeli government was also able to identify needed administrative and regulatory reforms and implement them, further accelerating the growth of its IT sector.

Three additional factors contribute to the robust health of the Israeli IT sector. First, Israeli universities and specialized technical training institutes provide the sector with a steady stream of highly educated, well-trained graduates. Second, all persons serving in the military receive specialized technical training, further expanding the country’s skilled labor pool. Third, a large percentage of immigrants from the former Soviet Union are scientists, engineers, and technicians with over 50 percent of these immigrants holding university degrees.

In May and December of 1994, the Lebanese Ministry of State, supported by the United National Development Program (UNDP), formed a small nucleus consisting of an Institutional Development Unit (IDU) to coordinate long-term reforms and a Technical Cooperation Unit (TCU) to guide and implement rehabilitation activities. Japan and the World Bank provided additional support to develop a program that addressed Lebanon’s urgent need for administrative reform.

As part of this effort, the World Bank funded the creation of the Information Technology Ministerial Committee. The project was founded on the premise that the IT sector in Lebanon would not achieve stable and sustainable growth in the absence of unified policies and generally accepted recognition of best practices and standards. The project sought to define government standards for data exchange and transmission, and to coordinate public awareness efforts related to the growth of the IT industry.

The Jordanian government has implemented recent reforms to its academic curricula to introduce computer-based education in public and private schools. Public and private educational and training institutions specializing in IT-core and IT-related fields are considered to be national development flagship centers.

The Jordan Investment Board (JIB) is the government authority invested with the responsibility of attracting local and foreign investment in Jordan. The JIB facilitates investment applications and the completion of necessary procedures under the Investment Promotion Law No. 16 of 1995. As of June 2000, a total of 12 information technology projects with a total investment of JD 13 million were registered with the JIB. Amman Chamber of Commerce records as of June 2000 indicate that 645 computer firms are active in the city environs.

Jordanian customs policy has exempted key computer hardware and software products from import tariffs since 1999. Investors receive eligibility for exemptions from customs fees and duties on imported fixed assets as soon as the JIB approves their investments. The Customs Department grants most imported IT products easy and unconditional access at customs and border points.

Jordan is also actively promoting its IT sector in global markets. On October 24, 2000, the United States and Jordan signed a Free Trade Agreement (FTA). The purpose of the FTA is to eliminate tariffs on virtually all trade between the two countries over a ten-year period and by doing so, to remove impediments to the mutually beneficial import and export of goods and services. The FTA also contains provisions that protect workers’ rights and the environment.

The Free Trade Agreement will be implemented in four stages.

Overall, the new FTA builds on other US-driven initiatives, with the Qualifying Industrial Zones (QIZ) retaining their duty and quota-free status. QIZ status will continue to provide investors with generous production and manufacturing incentives, including the ability to import raw materials form anywhere in the world duty-free.

One of the Egyptian government’s initial efforts to actively develop its high technology sector was the creation of the Information Decision Support Center (IDSC).  The IDSC is charged with implementing and managing the country’s technological development, while its subsidiary, the Technology Development Program (TDP), is specifically charged with technological development in industry. Closely related, the Regional Information Technology and Software Engineering Center (RITSEC) was established in 1992 through multilateral donor funding.

As part of its mission, the IDSC established the Information Technology Institute (ITI) in 1993.  Its purpose was to increase the number of Egyptian IT professionals by providing specialized IT training. Currently, IDSC’s primary strategic objective is to position Egypt’s IT sector as a leader in the developing world. Information technology conferences and trade events to bolster public awareness of IT are scheduled in coming months at the Cairo International Convention and Exhibition Center, organized by the Ministry of Communication and Information. More details can be found at www.ebd-con.com.

The Egyptian government’s incentive programs for investors help create a favorable financial environment for the growth of its IT sector. The IT sector, in general, receives a tax reduction on its generated revenues, while industrial concerns located in one of the high technology parks, Sinai Technology Valley (STV) receive additional benefits.  Government incentive programs combined with the energy of IT entrepreneurs may lead to a significant expansion of IT sector growth in Egypt.

The following are articles that pertain to different areas of the Egyptian Investment Law, which are executive regulations for Law No. 8 of 1997 on Investment Guarantees and Incentives.

The provisions of this Law shall apply to all companies and establishments of any legal structure which are established following the date of enforcement of the Law, whose activities include any of the following:

Profits of companies or establishments and the partner’s shares in such profits shall be exempted from tax on revenues of commercial and industrial activities, or the tax on stock company’s profits, as applicable, for a period of five (5) years starting from the first fiscal year following the beginning of production or exercise of activities.

Foreign companies may incorporate as an entity in Egypt under either the Commercial Companies Law or the Investment Guarantees and Incentives Law No. 8 of 1997 (hereinafter referred to as the "Investment Law"). The targeted sectors include: infrastructure; manufacturing and mining; transport; software and computer systems development and production; medical services; certain financial services; oil field services; agriculture; reclamation of desert land; hotels and tourism (Article 1 of the Investment Law). Investment guarantees and incentives outlined in the law are limited to commercial activities falling within these sectors.

The Israeli government formed a number of support organizations and committees aid the development of its IT sector. Such committees include a policy unit at the Ministry of Finance, a Parliament-level IT committee and other IT bodies in other ministries. In addition, there are many other IT organizations that provide information and policy guidelines pertaining to education and vocational development. Furthermore, the government promotes the establishment of Technological Incubators.

The incubators are supportive frameworks that enable novice entrepreneurs with innovative concepts to translate those ideas into commercial products and to establish their own company. Within the framework of the technological incubators, the government provides the entrepreneurs with the following benefits:

The government offers a grant of 85 percent of the project’s approved budget up to $140,000 per year for two years. (Total grant - $280,000). The remaining 15 percent must come from the entrepreneur’s resources, or from an outside investor.

Lebanon is considered a leader in global system mobile phone networks and is currently considering the addition of a third network, which should create attractive opportunities for Canadian companies. It has allocated US $1 billion to refurbish and extend its Public Switched Telephone Network.

Jordan is currently in the early stages of developing its IT sector; therefore, securing venture capital and other forms of project financing are priorities in its sector development program. The government plans to carry out three action plans in order to attract IT venture capital funds to Jordan.

The first action plan is to develop and attract venture capital funds. Efforts will be directed toward establishing a comprehensive US-Jordanian IT venture capital fund similar to initiatives in Israel. If this is successfully implemented, tax breaks could be offered by the government to encourage local and foreign investors in this fund.

The second action plan is to provide funding for software development and other ancillary IT services on preferential terms. The Industrial Development Bank will extend access to debt financing with full government support.

The final action is to facilitate IT firm initial public offerings on the Amman Stock Exchange. Laws and regulations will be adjusted so that IT firms can go public without making available past profit/loss records, as is required on other exchanges.

The European Union has pledged EUR 6 million to establish the Middle East Technology Fund to support the development of a regional information technology industry. The METF, jointly run by the Egyptian Financial Group, will invest in private sector IT firms including software, media, telecommunications and related enterprises. Also in the financial arena, Telecom Egypt is expected to be the largest capitalized company on the stock exchange, surpassing the Egyptian Company for Mobile Services (MobNil), owned by a consortium of foreign investors and Egyptian investors.

Venture capital funds are very active in Israel and there are several funds with $100M and over. Israel also benefits from a strong network of economic ties with the world’s major economic powers.  Israel enjoys a unique combination of free trade agreements with the US and Europe, its two major trading partners. The governments of Israel and the United States support the Bi-National Industrial R&D Foundation, where pairs of Israeli and American companies receive matching funds for joint R&D projects.

At the end of 1999, the Government reactivated the Investment Development Authority of Lebanon (IDAL). In the first semester of 2000, IDAL attracted foreign investment valued at approximately US $500 million, creating nearly 3,000 job opportunities. IDAL accomplished this through the implementation of the "one-stop shop" service concept. Foreign investors submit applications for registration of proposed investment projects, and all subsequently required forms, applications, documents and fees can be submitted in one place, until the final permit is issued.

The primary sources of foreign aid for private sector development in Lebanon in late 1999 and early 2000 were France (US $9.2 million), the United Nations (US $8.8 million), the European Union (US $ 6.4 million), and the United States of America (US $5.9 million).

The following support institutions were created through the Jordanian REACH initiative, which seeks to provide a secure atmosphere for development of public and private sector investment.

The NIC is one of the centers of the Higher Council of Science and Technology. It is responsible for the development and management of a national information system in Jordan. The NIC is Jordan’s largest domain administrator.

RSS is a non-profit organization, financially and administratively independent from the government. It conducts scientific and technological research and as well as work related to economic development in Jordan, with special attention to industrial research and services. The RSS operates the country’s most advanced IT upgrading and training centers.

The JCS is Jordan’s first association for computer professionals. The JCS is a professional, scientific and social society that concerns itself in the affairs of the individuals and companies operating in all information technology-related lines of work. It endeavors to improve the level of professionalism in this sector through the work of its committees.

INT@J is Jordan’s newest IT industry organization. The mission of INT@J as a voluntary non-profit, private organization is to effectively represent, promote and advance the Jordanian software and IT services industry in the global market.

JTC is Jordan’s telecommunications provider. JTC’s services are designed to meet the needs of customers, generate viable returns for business, secure a competitive position, and meet its license obligations to support the economic and social development of the kingdom.

TRC is Jordan’s regulatory agency overseeing the telecommunications services industry in Jordan. TRC seeks to create an effective working relationship among the state, consumers, service providers and equipment suppliers so as to facilitate the growth of high-quality, cost-effective and reliable telecommunications services.

The widespread use of E-commerce by national agencies would stimulate growth among local private IT businesses. The main emphasis at present is on government provision of information and inter-agency communication. The objective will be achieved by a group of IT professionals who are making a host of basic government services available online, specifically those provided directly to citizens; for instance, licensing and permits, investment promotion and facilitation services, tax filing, health care smart cards, and electronic payment of utility bills.

To demonstrate the Jordanian government’s support for and commitment to the IT sector, the King has made numerous visits to the United States and the EU to attract IT investment. International enterprises such as Hewlett-Packard and Microsoft have already established offices in Jordan.

There are many tax incentives afforded to qualifying companies under the Investment Law, including 5, 10, or 20 year tax holidays, depending on where the company is set up; waiver of certain fees and duties; fixed customs duties; and exemption from tax of certain profits and dividends. 

The Information and Decision Support Center (IDSC) was initiated to support the Egyptian Cabinet’s decision-making process in socioeconomic development. It also acts as a catalyst for building Egypt’s information infrastructure. Ever since its initiation in 1985, IDSC has been working on the process of building up Egypt’s Information Technology (IT) industry and decision support infrastructure, in addition to developing a base for the nation’s software and hi-tech industries.   IDSC evolved around Egypt’s dedicated efforts to join the international IT revolution, and institutionalizing the decision- making process through accessing information. IDSC was also established with the long-term vision of providing public access to information, particularly business people and investors. 

The Regional Information Technology and Software Engineering Center (RITSEC), was established in January 1992, as a joint project between the United Nations Development Program (UNDP), the Arab Fund for Economic and Social Development (AFESD); and is hosted by the Government of Egypt-the Cabinet Information and Decision Support Center (IDSC). It was created as a regional, non-profit organization. RITSEC provides technical, professional and developmental services to the agencies, institutions and governmental organizations in the Arab region.

Established in 1993, it is a national center providing specialized software application development programs for fresh graduates. It also offers professional training programs through various IT courses for the government, ministries and local decision support centers all over Egypt. In 1996, the second branch was established in Alexandria to achieve wider expansion of IT.

JSI is structured as an umbrella corporation, which holds equity in each of its start-up ventures. The start-ups are provided with an administrative and technical infrastructure and with management and marketing assistance during the two years of their tenure at JSI. A start-up is usually considered to have successfully "graduated" from the incubator after it has concluded a joint development and/or business agreement with a strategic partner or investor.

New candidate ventures present their product, market data and entrepreneurial credentials to the incubator's management. Project screening is based primarily on market potential and technical soundness. After JSI's positive evaluation, the incubator applies for a development grant from the Chief Scientist of Israel's Ministry of Trade and Industry. The Chief Scientist's approval serves as an additional check on the venture's viability.

MATIMOP is a public non-profit organization, founded by the three major associations of manufacturers in Israel. Functioning as the interface between Israeli companies and their international counterparts, to promote joint development of advanced technologies, MATIMOP encourages participation in the many international programs for bi-lateral and multilateral cooperation in industrial R&D.

MATIMOP is the major channel for information and assistance regarding cooperation between companies and organizations from Israel and the European Community. Tasks in this area include:

Established in 1991, Ashkelon Technological Industries (ATI) is a business center for the development of companies operating in the technological field. ATI acts in cooperation with the Chief Scientist of the Department of Trade and Industry of Israel and the research departments of major universities. Any project that is technological and has the potential to produce technology or products for a substantial international market can be considered for inclusion in the business center.

There are currently no official hi-tech support centers in Lebanon. However, the Lebanese government is working vigorously in order to develop such institutions in the public and private sectors. Intensive action has been taken to enforce intellectual property rights (IPR) hence; input is being directed towards regulation and legislation.

The Government of Jordan is committed to modernizing and liberalizing its telecommunications sector in keeping with the country's vision of becoming the hub of the new Middle East. As part of this process, new laws have been introduced to encourage private sector investment in all sectors.

Jordan aims to establish IT as the third-largest source of revenue for the country. The plan is to create 30,000 new jobs in the IT sector, generating exports of $550 million per year of software and attracting foreign investment of around $150 million.

In Jordan, Internet solutions are moving slowly but surely. The Jordanian government is striving to turn the Kingdom into an Internet and IT hub, and encouraging the development of high-tech enterprises in the Kingdom. However, experts believe that one fundamental area of development relates to regulation and legislation. They argue that such a hub requires a reshuffle in the current laws and regulations regarding the use of Internet and IT in conducting business online.

REACH 1.0 is the original strategy developed to enhance Jordanian information technology in both sectors of the economy (private and public), which also reviews the software and IT services development strategy. The reviewing process of the IT development strategy commenced on July 12, 2000, amid increased concerns as to the adequacy of the existing recommendations, infrastructure and laws. After 10 weeks of consultation, the contributors and organizers finalized the recommendations of REACH 1.0. At the beginning of this year (2001), REACH 1.0 was updated and renamed REACH 2.0. REACH 2.0 is a progress report containing the original objectives of REACH 1.0 as well as the progress attained by Jordan’s IT sector. The objectives of REACH 2.0 are listed below.

REACH 2.0 objectives:

According to the recommendations of the leaders of the five committees, which reviewed various industry components (capital and finance, e-regulations and regulatory frameworks, human resources development, telecommunications and infrastructure, and IT industry development issues) many articles of the existing Labor, Companies, Securities, and Investment Promotion laws should be amended.

The package will focus on:

Other amendments to the current Companies Law proposed by the Capital and Finance Committee of Reach 2.0 envisaged halving the declared capital requirements for public share-holding companies (from JD 500,000 to JD 250, 000) and entrusting founders, not a ministerial committee as is presently the case, with evaluating companies’ in-kind shares. Most importantly, companies should be allowed to issue shares directly via the Amman Stock Exchange, and not be required as they are currently under the Securities Law to go through banks or financial institutions.

The following briefs are some of the accomplishments that have stemmed from the establishment of REACH.

The board of the Telecommunications Regulatory Commission approved the proposal by Jordan Telecommunications Co. (JTC) to reduce its tariffs. The reduction in JTC tariffs became effective 1 August 2000, and will help Internet Service Providers (ISP) and end-users to enhance affordability of telecommunications and support social development. JTC has proposed the new tariff package to the Regulatory Commission. The package aims at making telecommunications services more accessible and affordable to the public. It focuses on services closely related to Internet and data communications.

Back in 1997, JTC adopted a long-term tariff-restructuring program. After privatization, the company has accelerated implementation of the program in order to align tariffs more closely with actual costs and to comply with license obligations and price regulations. In determining tariffs for various telecommunications services, commercial objectives of the company have been taken into account, as well as political, economic and social needs and the ability of customers to pay.

The Copyright Law No. 22 of 1992 affords protection to original works in literature, arts and science irrespective of the type, importance or purpose of such work. Works encompassed by such protection include, books and booklets, oral works, musical compositions, audio and visual works, sculptures, maps, three-dimensional works and software programs.

The author is the person in whose name the work is published as well as the translator of any work, the performer and authors of encyclopedias and anthologies. The pecuniary rights afforded to an author consist of the right of publication of the work, its reproduction, translation and public broadcasting. However, any such rights are afforded after the deposit of two copies of the work to be protected with the National Library.

Jordan currently enforces intellectual property rights, which paved the way for its accession into the WTO. In a seminar held in February 2000, officials from the World Intellectual Property Organization (WIPO) said that the main objective behind implementing the property laws in Jordan is to protect the rights of producers and help people to attain best quality products. The seminar was held at the University of Jordan (UJ), in cooperation with WIPO and the National Library. Experts and academics from Jordan and abroad took part in the event.

Sharif Sa'adallah, Director of the Arab Bureau for Development and WIPO's representative to the seminar, told participants that intellectual property laws help to assert economic creativity in the Arab world. He said that such laws would assist Arab governments to promote lawful commercial exchange in line with principles of protecting intellectual property in fields such as economic, cultural and social development.

UJ's President Walid Maani said that Jordan has achieved progress in the field of intellectual property rights when it was admitted to the World Trade Organization (WTO) last December. Al Maani pointed out that the University of Jordan plans to introduce next year a new Master of Arts degree program in the field of intellectual property at the Faculty of Law. Sources at the Ministry of Trade and Industry said that Jordan would implement the new Patents and Inventions law in April soon after Parliament ratifies the WTO agreement.

Software piracy in Jordan costs the economy more than $3 million annually. Jordan's level of software piracy has decreased from 80 percent in 1998 to 75 percent in 1999, a change that has been attributed to new copyright laws and law enforcement activities by the Business Software Alliance (BSA). According to a recent study by the International Planning and Research Corp. (IPR), piracy was reduced by 12 percent over the past five years, but 75 percent of software used in the country is still pirated.

Moreover, United States Trade Representative, Charlene Barshefsky confirmed that both the United Arab Emirates (UAE) and Jordan have been removed from the USTR's Special 301 Watch-list. The news was announced with the release of the results of the USTR's 2000 "Special 301" annual review, a report that examines the adequacy and effectiveness of intellectual property protection in over 70 countries, according to a press release from Spot On Public Relations.

The Telecommunications Law of 1995, Chapter XII – Concluding Provisions provides privacy, data protection and consumer protection.

The Consumer Affairs Department of TRC is responsible for safeguarding the interests of those who make use of telecommunications services through receiving and following up complaints and analyzing annual reports of the licensees, monitoring prices of services, and promoting public awareness of the importance of telecommunications facilities.

Another action intended by Jordan is to amend the Labor Law in order to provide software developers with basic protection rights. Articles 19 and 20 of the Labor Law will be amended in the near future. The Ministry of Labor, Information, Industry and Trade, and Parliamentary Committees will work jointly to achieve this objective.

The fifth action is to adopt more competitive taxation policies. The 15 percent corporate tax rate allowed for manufacturers in the Income Tax Law should apply to software development and other value-added IT services activities.

Egypt is a contracting party to the Berne Copyright Convention and Paris Patent Convention. It is also a member of the World Intellectual Property Organization. The Egyptian government is currently drafting amendments to the Copyright Law, which aims at enhancing copyright protection by enforcing civil and criminal penalties. 

Law 38 of 1992 amended the 1954 Copyright Law.  Under Law 38, computer software was specifically protected and penalties for piracy were increased substantially. In March 1994, Law 29 classified computer software as a literary work, which provides protection for a 50-year period.

Although Egypt is a signatory of the Washington Semiconductor Convention, there is no specific legislation protecting semiconductor chip layout design. The lack of sophisticated hardware design and production facilities and the continued predominance of hardware importation obviate the need for such specific legislation.

Currently, Israeli law offers protection for intellectual property in the following ways: 

The list of patentable items includes, among other things, inventions with applications in industry or agriculture, medicines, testing methods, and new chemical substances. Patents remain in force for 20 years from the date of application. 

A trademark may be filed with the Registrar of Patents and Trademarks. If accepted, it is valid for seven years from the application date, and renewable for periods of fourteen years. 

All literary and artistic work, including computer software, is protected by copyright for the author's lifetime plus 70 years. No registration is required. 

New and original designs and models not previously published in Israel may be registered with the Registrar of Patents and Trademarks and receive protection for five years, renewable for up to a further ten years.

Freedom of Information, 1998: The Israeli government’s information is public property and the public has a right to see it.  There are exemptions to protect national security, privacy, and commercial information.  The intelligence services are all exempt. 

This law is similar to the U.S. Privacy Act, which safeguards against an invasion of privacy through the misuse of government records.

According to the International Intellectual Property Alliance (2001 Special 301 Report), there has been little enforcement against copyright piracy in Lebanon, despite the passage of the new copyright law in 1999. The law adds exceptions authorizing educational institutions to make "copies" of a computer program they have acquired an original copy of, and students to make one copy of a computer program for their own use. Moreover, the Business Software Alliance (BSA) and Software and Information Industry Association (SIIA) have reported that Lebanon has one of the highest rates of software piracy in the region. The establishment of such awareness caught the attention of technology manufacturers worldwide. The Lebanese government has taken some actions to reduce piracy such as censorship police intercepting private videos at the border. Nonetheless, Lebanon has not yet been able to achieve the same levels of copyright protection as offered by other countries in the region.

The Investment Promotion Law No. 16 of 1995 (The Investment Law) was enacted with the aim of encouraging foreign investments in Jordan. The implementation of the Investment Law is vested in the Investment Promotion Corporation, which was also established as a separate entity there under.

The most salient features of the Investment Law are:

The Council of Ministers is authorized to add any other sectors in the future in accordance with the country’s needs.

Jordan is divided into three zones: A, B and C, depending on the degree of economic development. Locating a project in each zone grants special incentives. These are decided by the Kingdom, by virtue of Regulations for Investment Sectors and Zones No.2 of 1996. All three sectors in total hold more than 20 locations where industry, hotels, and hospitals are the main criteria.

(a) Exemptions granted on the basis of location of the project:

(b) Exemptions granted to all projects:

All projects encompassed by the law enjoy the following exemptions from taxes and fees:

Taxes are defined in the Investment Law to be " taxes that are levied by virtue of the laws in force on different fixed assets except for municipality fees", whereas fees are defined to include "import, customs and other fees provided for in other legislation in force that are levied on different fixed assets except for municipality fees".

The Patent Law No. 32 of 1999 states that the right to a patent shall be granted as follows:

1. To the employer, if the invention is a result of an employment contract.

The Investment Law, Law No. 230 of 1989, is designed to provide incentives to foreign firms to conduct business in Egypt. Generally, the investment activity must be in a permitted field, such as housing, industry, tourism, agriculture, oil services, and irrigation. A company formed under the Companies Law may be converted into a company formed under the Investment Law by submitting an application to the Investment Authority. This authority requires that the invested capital of the shareholders be increased equal to the value of the assets of that company formed under the Companies Law.

The Investment Law (1989) provides for a few incentives to foreign investors, the most significant of which are:

The Law for the Encouragement of Capital Investments was intended to encourage investments in new technology by providing grants to help cover the production costs and equipment. The project must be implemented within three years of the date of the original letter of approval. At least 25 percent of the project must be executed within one year.

As of 1997 industrial enterprises, on the Grant Path located in Priority Zone "A", are entitled to tax exemptions for the first two years and reduced tax rates for the remaining period of benefits (i.e. two years exemption and five years of reduced taxes).

Company Tax Exemption (Alternative Program)

When high-tech companies become extremely profitable very quickly they can suffer from heavy taxes. To encourage the ongoing development of these companies, which ultimately benefit the Israeli economy the government offers reduced taxes or tax exemption for up to10 years.  This is how in 1998, ECI Telecom managed to enjoy paying a 6% tax rate on a profit of $176.2 million, how Converse paid only 9% on profit of $123.3 million and how Checkpoint paid only 5% tax on a profit of $73.8 million. Moreover, only new equipment and buildings will be included in the project. However the Investment Center’s administration may grant approval to projects that include second-hand, imported equipment that is not technologically outdated and which was never used in Israel before. The following points are the requirements to obtain tax exemption:

A company that waives its project’s right to a grant will receive complete exemption from company tax on its undistributed income. If dividends are distributed, the company will pay the tax it would have paid had this Alternate Program not been chosen.

The period of exemption is determined according to the National Priority Zone in which the approved project is located.

There are also various groups in Israel such as the IT Policy Group found at the Ministry of Finance. Other organizations of this sort are the National Committee for IT Infrastructure and Internet and Information Technology Committee in Parliament.

The government offers a grant of 85 percent of the approved budget up to $140,000 per year for two years (Total grant - $280,000). The remaining 15 percent must come from the entrepreneur’s resources, or from an outside investor.

The Steering Committee on Technological Incubators approves from 7 to 9 projects each month. The projects that graduate from the incubators may apply to the Office of the Chief Scientist within the framework of its regular R & D assistance programs.

4. Lebanon

The Lebanese government’s policy is to encourage companies with high value-added production to set up in the Free Zones and to pursue projects for the improvement of Lebanon's infrastructure. Therefore, the government has established a separate entity called IDAL (Investment Development Authority of Lebanon. Its role is to help the Free Zones by playing a supervisory role in their administration and operation, with the following incentives:

- Legislation protecting the industrial and trade properties applies to the Free Zone.

- Only four percent customs duties are imposed on imported construction material and machinery intended for developing the Free Zones infrastructure, (buildings, storage areas and warehouses).

- Companies located in the Free Zones will benefit from a 10-year corporate tax holiday

and will be exempt from registering their employees in the Social Security on condition

that they provide their employees with equal or better benefits.

After analyzing the IT sectors of all four countries, it was evident that Jordanian and Israeli initiatives are the most relevant for Palestine today. The Palestinian IT sector is similar in many respects to the IT industries in Jordan and Israel in terms of size and market potential. Egypt’s IT initiatives are being applied to an industry and a potential market many times the size of Palestine’s, and they have adopted long-term approach to industry growth. As result, the Egyptian initiatives have limited relevance for Palestine. Lebanon’s governmental and economic policies are substantially different from those currently in place in Palestine, again limiting useful comparisons between the two countries. Therefore, the conclusions in this report will focus on Jordan and Israel in relation to strategies taken to improve their information technology sector.

Developing nations seeking long-term sustainable economic growth must reduce dependence on donor funds and establish an internal framework of institutions and policies to promote financial independence and stability. To that end, the PNA and its related organizations must create a system of laws and regulations that facilitate financing and credit mechanisms for IT firms and promote investment in IT-related projects.

For example, the Jordanian Industrial Development Bank, working in conjunction with the Jordanian government, extends debt financing to approved enterprises, offering IT firms financial leverage and reducing their start-up costs. Moreover, Jordan has adopted an unorthodox stance in its laws and regulations that apply to IT firms going public and facilitating initial public offerings on the Amman Stock Exchange. The PNA may wish to consider the Jordanian approach for Palestinian IT firms that seeks listing on the Palestinian Stock Exchange (PSE).

The Middle East Technology Fund, described in the Government Policy-IT Financing (Egypt) section of this report may provide an opportunity for Palestinian participation if certain conditions are met. The Peace Technology Fund, a joint venture between Israel and Palestine, is similar in concept to the METF. However, the political situation between Palestine and Israel has stalled PTF activity. In the future, however, it may hold promise for IT sector financing.

A combination of public and private sector institutions responsible for clearly delineated areas of regulation and enforcement will be needed to create ordered growth within the IT sector. The Jordanian REACH initiative is an excellent example of the type and scope of the organizations that create an effective environment for growth.

There are primarily six institutions that target different segments of the IT sector, but they all work towards the common goal of advancing the Jordanian IT industry. For example, the National Information Center (NIC) develops and manages the national information systems in Jordan whereas Jordan Computer’s (JCS) objective is to target individuals and companies operating in all information technology related lines of work. The overall goal is to improve the level of professionalism in this sector through an interlocking system of committees.

Egypt has also incorporated this concept of separate but related regulatory institutions into its system. Two of Egypt’s main IT institutions are the IDSC and RITSEC. The IDSC’s mission is to build Egypt’s information infrastructure. The RITSEC provides technical guidance to IT institutions in the region, primarily through the development of e-commerce, distance education and enforcement of intellectual property rights through increasing awareness.

Palestine must initiate a closely-knit and cooperative network of credible institutions that will work towards the common objective of IT sector expansion.

Palestine’s legal and regulatory environment is unique in that it is an historical amalgamation of successive rulers and occupiers. The resulting hodge-podge of legislation and regulation is difficult to navigate and difficult to enforce. The restructuring and clarification of the Palestinian legal system is a top priority of the PNA. While the process is cumbersome, it also affords an unparalleled opportunity to set in place a modern, unified rule of law that will enhance and facilitate economic development.

Examination of the laws and regulations governing the IT industry in the countries studied indicates an urgent need for coherent and enforceable governance in the areas of copyrights, trademarks, and intellectual property rights. These issues are of critical importance to the IT sector in any country. If Palestine hopes to attract foreign investors to its IT sector, those investors will need the reassurance that clearly defined and enforceable laws in these areas are ensured. Local entrepreneurs and established Palestinian IT firms will be able to expand and grow under the protection of these laws as well.

Palestine will also need to create similarly clear laws governing financial incentives and tax exemptions for foreign investors and local companies. The progress made in the legal and regulatory areas by Jordan and Israel will provide useful guidance as the Palestinian IT sector advances and develops.

As Palestine looks to its future, its promise and its limitations must be addressed. Palestine’s wealth does not lie in vast reserves of natural resources, but rather in its human potential and capacity for perseverance. Economic development in all sectors, and particularly in the field of information technology, will require strategic planning and the ability to overcome short-term obstacles in pursuit of a long-term vision. A flourishing IT sector in Palestine will be built through the cooperative efforts of government, private sector enterprise and consumers of IT products.