US embassy cable - 04AMMAN686

UNCLAS AMMAN 000686 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ARN 
PASS TO USTR - E. SAUMS 
USDOC 4520/ITA/MAC/OME/NWIEGLER 
 
E.O. 12958: N/A 
TAGS: ETRD, KTEX, PREL, IS, JO 
SUBJECT: QIZ'S HAVE ANOTHER BANNER YEAR 
 
REF: AMMAN 7292 
 
SENSITIVE BUT UNCLASSIFIED 
 
1. (SBU)  Exports to the United States from Jordan's 
Qualifying Industrial Zones (QIZ's) jumped up the charts to 
USD 586.6 million in 2003, a 54 percent increase over 2002. 
Garments represented about 95 percent of the exports, 
according to the confirmed statistics from the Ministry of 
Industry and Trade.  With the United States being the 
destination for about a third of Jordan's overall export 
totals, the U.S. has replaced Iraq as Jordan's number one 
trade partner.  Non-QIZ exports are expected to be over USD 
100 million.  Jordan should  surpass total exports of USD 700 
million to the U.S. in 2003. (The GOJ Department of 
Statistics, which tracks trade figures outside the QIZs, has 
not released year-end figures.) 
 
2. (SBU)  Jordanian officials are claiming that the QIZs now 
employ over 30,000 workers, a figure accurate at least in the 
peak garment manufacturing seasons.  If sales by QIZ 
factories continue at the current pace, the year-long average 
employment of about 25,000 will certainly increase in the 
coming year. 
 
Growth Despite Persistent Problems 
---------------------------------- 
 
3. (SBU)  Over the course of the year, there were slowdowns 
in the overall strong growth rate that reflected three major 
problems faced by Jordan-based QIZ's this past year:  the 
Iraq war, the Aqaba port congestion that followed the war's 
end, and the Israeli port and labor problems that persisted 
in the fall.  Even in these weak growth periods, sales 
increased by 20 percent compared to the same period in the 
previous year. 
 
4. (SBU)  According to QIZ factory managers, Aqaba port 
congestion remains -- with delays of an additional 7-10 days 
in receiving raw inputs the norm.  Shipping out of Haifa port 
to U.S. destinations also remains a problem, according to 
factories that have long used that shipping route, including 
ship congestion and unpredictable loading of containers. 
 
5. (SBU)  Recruiting of labor is also a recurrent problem. 
The government program to train 4,000 workers this year does 
not appear to meet the demand.  Factories are scaling up 
their wage and bonus packages to attract and retain garment 
workers.  QIZ companies are also mounting their own training 
programs, but lack raw recruits. 
 
Moving to the FTA? 
------------------ 
 
6. (SBU)  A big question mark for QIZ factories is what the 
specified Israeli content will be if/when Jordan and Israel 
renegotiate the 8 percent required rate of Israeli content 
which reverts to 11.7 percent in February.  If they cannot 
count on the specified Israeli content of QIZ products 
remaining at 8 percent, some QIZ factories are looking at 
apparel groups that have tariffs reduced to zero under the 
Jordan-U.S. FTA.  For example, a factory in the Tajamouat QIZ 
is seriously looking at producing cotton ladies' skirts and 
exporting them under the Jordan-U.S. FTA because the U.S. 
tariff went down to zero from 2.1 percent this year. 
HALE