US embassy cable - 04AMMAN7394

UNCLAS AMMAN 007394 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, JO, FINV 
SUBJECT: DAS DIBBLE VISIT: JORDANIAN ECONOMY 
GROWING, MORE REFORM MEASURES TO COME 
 
 
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  SUMMARY 
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  1.   (SBU) Since the establishment of the Qualifying Industrial 
  Zones (QIZ) and conclusion of the Jordan-U.S. Free Trade 
  Agreement (FTA), Jordan's economy has flourished, despite the 
  considerable bumps during the Iraq War. Jordan's reform program 
  has achieved fiscal and monetary stability; inflation is under 
  control; and the economy is growing. More needs to be done to 
  reduce public debt and, over time, decrease dependency on foreign 
  aid. USG support and American investment remain key to Jordan's 
  strategy. End Summary. 
 
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  GOOD PROGRESS, BUT HARD WORK REMAINS 
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  2.    (SBU) During a meeting with visiting NEA DAS Elizabeth 
  Dibble on August 25, Minister of Planning and International 
  Cooperation Bassem Awadallah provided an upbeat assessment of 
  Jordan's economy, coupled with a recognition that the GOJ needs 
  to do more work on fiscal issues and debt.  With slow but steady 
  privatization reforms moving forward, total government debt is 
  being paid off.  Public sector debt stands at 90% of GDP or JD6.9 
  billion (9.66USD billion).  Each year the government is using all 
  of the annual USG cash transfers (the FY 2004 transfer amount was 
  $238 million, including $100 million supplemental) to pay down 
  both U.S. and multilateral debt. Awadallah told Dibble that on 
  his next visit to Washington in September he wants to continue 
  discussing assistance issues, the Red-Dead Canal and ways for 
  Jordan to do well by doing good toward Iraq. 
 
 
  3.    (U) Awadallah's upbeat message was echoed by several 
  prominent Jordanian business leaders during a separate meeting 
  with Dibble and the Charge.  They expressed concerns over the 
  expiration of the Multi-fibre Arrangement and the potential 
  threat from China's textile industry for Jordan's QIZs. 
  Jordanian textile producers have been looking for ways to combat 
  this threat by turning themselves into "total package providers" 
  and not just manufacturers; Jordanian businesses are seeking 
  larger niches within the U.S. market to establish themselves with 
  known US brand names. 
 
  4. (U) Contrasting with the significant economic 
  benefits of the QIZs, the business leaders say the 
  FTA is only just now starting to produce visible 
  benefits. They are having difficulty meeting U.S. 
  buyers' standards while enticing foreign investors 
  to back projects through the FTA.  At the same 
  time, many Jordanian importers are unaware of the 
  advantages under the FTA of using U.S. inputs.  The 
  Jordanian business community recognizes the need to 
  work creatively to turn the FTA into a success 
  story like the QIZs. 
 
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  CAPITALIZING ON OPPORTUNITIES IN IRAQ 
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  5. (U) Following the end of the Iraq War, the 
  Jordanian services sector saw an opportunity to 
  turn Jordan into a business hub for Iraq's 
  reconstruction and for the region.  The GOJ 
  redoubled efforts to improve the business and 
  investment climate in Jordan.  A number of foreign 
  firms (e.g. Bechtel, GE, KBR and Lucent) have 
  established a temporary (and potentially permanent) 
  presence in Jordan to support their work on Iraqi 
  reconstruction. The GOJ believes that Jordan's 
  proximity to Iraq, lower cost base (compared to 
  neighbors such as Israel), and easy immigration 
  formalities for Iraqis (compared, for example, to 
  Kuwait) will continue to attract corporations 
  looking for a regional base for their Iraq 
  operations. 
 
  6. (SBU) The GOJ views a stable new Iraq as an 
  important national interest, but believes Jordan 
  will have to rely on donor aid to fund most of 
  Jordanian government efforts to facilitate 
  reconstruction there.  Jordan is selling itself as 
  the perfect platform to reach the region, 
  especially Iraq.  However, the GOJ realizes it must 
  continue to market Jordan's advantages, and work 
  with the Iraqi Interim Government (IIG) to improve 
  the border crossing procedures and transportation 
  links such as the roadway between the port of Aqaba 
  and Iraq. 
 
  HALE