US embassy cable - 04AMMAN8596

C O N F I D E N T I A L SECTION 01 OF 04 AMMAN 008596 
 
SIPDIS 
 
E.O. 12958: DECL: 10/11/2014 
TAGS: ECPS, EAID, EINV, BEXP, PGOV, JO 
SUBJECT: ICT EVENTS SPOTLIGHT EMERGENT SECTOR OF JORDAN'S 
ECONOMY 
 
REF: A. 2003 AMMAN 6457 
 
     B. AMMAN 7336 
     C. AMMAN 5403 
 
Classified By: Charge d'Affaires David Hale for reason 1.4 (b) 
 
1. (U) SUMMARY: Three recent and ongoing events have thrust 
Jordan,s growing information and communications tecnology 
sector once more into the spotlight.  The industry, which has 
benefited from active royal patronage and substantial USAID 
and other donor support, has successfully carved out a niche 
as a provider of software solutions and as an e-learning 
innovator.  Leading companies in the sector have cooperated 
closely with ICT policymakers within the GOJ to form a 
coherent sectoral strategy, and the GOJ has furthered the 
process by investing large amounts of (primarily donor) money 
in two large, long-term infrastructure projects.  The focus 
on Jordan,s comparative human resources advantage in IT is 
beginning to pay dividends, and greater strides are likely 
once Jordan,s fixed-line telephony market is liberalized 
early next year. END SUMMARY. 
 
2. (U) Jordan held its third biennial ICT Forum Sep. 13-15. 
A weeklong visit by Cisco CEO John Chambers and his keynote 
address at the Forum drew wide public attention to Jordan,s 
IT sector.  Coming on the heels of this conference, Federal 
Communications Commission Chairman Michael Powell,s visit to 
Jordan September 24-26 reinforced the message of USG support 
of Jordan,s ICT sector, and of the particular importance of 
a strong regulator in furthering sectoral growth.  Last week, 
Jordanian ICT companies were once again on display, with a 
large delegation at Dubai,s GITEX ICT expo. 
 
-------------------------------- 
UNDER KING,S WING, ICT TAKES OFF 
-------------------------------- 
 
3. (SBU) The growth in the IT sector has been initiated 
largely by King Abdullah, and the Palace has put a great deal 
of political capital in to the promotion of Jordanian ICT 
both within the country and abroad.  Jordanians are well 
aware that the emerging ICT industries of the GCC states are 
heavily staffed by Jordanian nationals, and they want 
Jordan,s own economy to get more than mere remittances from 
this lucrative industry.  Abdullah served as a catalyst in 
the 2001 development, by a USAID-funded consultant with the 
assistance of several leaders of prominent ICT firms, of a 
five-year ICT development master plan labeled REACH.  REACH 
has since been annually updated with specific goals. 
 
4. (SBU) From this strategy has sprung several new 
initiatives.  One of these was the formation of the 
Information Technology Association of Jordan (INTAJ), a 
sectoral organization of export-oriented ICT firms, which has 
received considerable funding support from USAID.  The latter 
association has taken responsibility for the updating of the 
REACH master plan, and acts as a more coherent voice of the 
subsector it represents than does its predecessor (and 
sometime competitor), the Jordan Computer Society (JCS), 
which counts among its membership hundreds of companies 
ranging from INTAJ members to (primarily) importers and 
agents of foreign computer hardware, accessories, and 
software, consumer electronics, and machinery incorporating 
IT inputs. 
 
5. (SBU) Exemplary of the more focused and aggressive posture 
adopted by INTAJ was its role in a late 2003 dispute with 
pre-shipment quality assurance and safety inspection program 
DAMAN (ref A), which was creating substantial delays in the 
import of essential ICT components and causing substantial 
monetary losses to INTAJ member companies.  INTAJ, speaking 
for the sector, negotiated with the Jordan Institute of 
Standards and Metrology (JISM), the primary GOJ stakeholder, 
an agreement providing for an exemption from routine 
inspections for products made by an agreed list of prominent 
international ICT component manufacturers.  More recently, 
INTAJ successfully pressed the GOJ for an exemption for ICT 
imports from a recently imposed 2 percent prepaid income tax 
on all imports. 
 
6. (SBU) Abdullah has gone to bat for the ICT sector in other 
ways as well, using his visits to Europe and the United 
States and Jordanian-hosted international conferences such as 
the World Economic Forum to raise the profile of Jordanian IT 
companies.  This aggressive approach has produced results not 
only in terms of high-profile overseas deals made by 
Jordanian IT firms and of partnerships between (primarily 
U.S.-based) foreign and Jordanian ICT corporations, but also 
in terms of cooperation between foreign ICT corporations and 
the GOJ itself.  For instance, a partnership agreement signed 
in May 2004 between the GOJ and Microsoft, under which the 
GOJ committed to equip all of its computers with licensed 
Microsoft software (purchased at a reduced rate) in return 
for Microsoft,s commitment to train GOJ employees on the 
software,s use, to assist in the ongoing e-government 
project, and to match GOJ investments in a variety of 
projects employing Microsoft products. The strategic 
partnership signed between the GOJ and Cisco, and Cisco's 
subsequent strong role in supporting and funding e-learning, 
is another product of Abdullah's activism on the part of the 
sector, which has resulted in a close personal relationship 
between Abdullah and Chambers and a deep involvement by 
Chambers in promoting Cisco's support to Jordan. 
 
--------------------------------------------- -------- 
GOJ ENHANCES ICT EDUCATION; CREATES COMPETITIVE NICHE 
--------------------------------------------- -------- 
 
7. (U) Perhaps the most ambitious of these public-private 
partnerships are those surrounding education: the Education 
Reform for a Knowledge Economy (ERfKE), one of whose aims is 
to provide all of Jordan,s schools with Internet-connected 
computers; the Jordan Education Initiative, which aims to 
provide e-learning platforms and content for those computers; 
and the National Broadband Network (NBN), which aims to lay a 
broadband link between all Jordanian schools.  The ERfKE is 
the beneficiary of $380 million (over five years) in direct 
GOJ funding, World Bank and EIB soft loans (which USAID 
assistance helped to secure), and direct grants from USAID 
and donor agencies of the UK, Canada, Japan, and Germany, 
approximately a quarter of which goes to ICT.   The ICT 
component of the program so far has equipped over 1,650 
schools with computers and connected almost 1,000 to the 
Internet.  The GOJ has allocated to the NBN $79 million in 
funds from the Socio-Economic Transformation Plan (SETP, 
funded completely by donor grants), whose network design was 
laid out by USAID-funded consultants.  Cisco is providing 
free technical support and project management assistance and 
reduced-price components in return for exclusive use of Cisco 
components in certain parts of the network.  The NBN has 
already linked all six Jordanian universities to each other, 
and plans to have 226 Jordanian schools (out of 3200) 
connected within three years.  The fiber going to the rest of 
the schools, along with 75 Knowledge Stations (community 
access centers in poor and rural areas of Jordan), will be 
easier to build.  The GOJ hopes to link them all by 2012 with 
either fiber or, in some isolated areas, wireless broadband 
connectivity.  In addition, the NBN has been configured to be 
able to double as a telecommunications network to serve other 
GOJ needs, including a nationwide first responders network 
and inter-agency e-government link. 
 
8. (SBU) It is the JEI, however, that is the most potentially 
transformative part of the GOJ,s ICT education drive.  Over 
41 foreign public and private partners, including USAID, 
MEPI, Microsoft, Cisco, IBM, Hewlett Packard, and Dell, have 
invested over JD 15 million ($21 million) in over twenty 
different e-learning content development projects, in 
partnership with domestic Jordanian firms.  Innovative 
Jordanian companies such as Rubicon (now in a partnership 
with Cisco), Menhaj (now in partnership with Microsoft), and 
Integrated Technology Group (ITG) have rushed to take 
advantage of the funding available through the JEI.  Firms 
like these, in producing products to meet GOJ demands, have 
given Jordan a strong edge in production of innovative - and 
especially Arabic-language - e-learning software. Several are 
now negotiating with the educational systems in other 
countries, particularly in the Gulf, to license their 
software for those markets and have scored some major 
successes.  ITG recently began implementation of an agreement 
with Apple and the Government of Bahrain to essentially 
become the sole e-learning provider to all Bahraini schools, 
and, in a coup of which the GOJ is particularly proud, 
Rubicon has sold a math e-learning program to the State of 
New Jersey. 
 
9. (U) Outside of these major public-private initiatives, ICT 
educational partnerships are also on the rise.  Jordan 
currently hosts computer training centers - some of which 
provide degrees - funded by ICT majors including Microsoft 
and Cisco (expanded as part of the GOJ,s overall partnership 
with these corporations), IBM, and Oracle.  Jordan,s 
technical universities are forming partnerships with private 
U.S. technical institutions as well, ranging from a recently 
announced Amman "Entrepreneurship Center" coordinated with a 
similar center at the Massachusetts Institute of Technology 
to the long-running ICT training arrangement between 
for-profit New York Institute of Technology and Irbid,s 
tech-focused Yarmouk University. 
 
----------------------------- 
E-GOVERNMENT STANDS UP SLOWLY 
----------------------------- 
 
10, (U) Slower to develop, but probably of equivalent 
long-term importance, has been the introduction of the 
Jordanian government to the information age.  Leading the 
charge in this arena has been the Ministry of ICT, which is 
working, in close association with USAID, to computerize 
Jordanian ministries and agencies, to connect them to each 
other and to the Internet, and to develop web-based 
applications to help the ministries and agencies in 
interfacing with the consumers of their services.  After an 
initial exploratory phase in which several of these web-based 
applications were developed with USAID help, the GOJ has 
opted to concentrate on computerizing and connecting the 
government first, allowing the government-to-citizen 
interfacing to grow more organically from government 
institutions that themselves see the need for such interfaces 
and understand the technology well enough to give these 
concepts their full buy-in. 
 
11. (SBU) Six GOJ entities have so far been linked together, 
with a further four expected to be on the network by the end 
of the year, and a total of eighteen by June.  The connection 
of the remaining 108 departments should be facilitated by the 
built-out NBN fiberlink between Jordanian schools, and should 
be completed at relatively low cost by 2009.  As part of this 
process, the Ministry of ICT is working to hive off a part of 
itself into the National IT Center, which will operate as 
part of the Prime Ministry to coordinate all IT activities of 
all GOJ entities, including JEI and the e-government program. 
 USAID funded the creation of the precursor unit to the 
National IT Center, and is now working to help with its 
unbundling. 
 
12. (SBU) The money put into the GOJ e-government program, 
while not attaining the heights reached by JEI, has still 
been enough to attract Jordanian firms, to which the GOJ has 
directed most of its contracts.  This has allowed such firms 
to build their businesses in a large niche where Jordanian 
firms have traditionally had a regional competitive edge: the 
provision of software and network solutions based on products 
produced in the developed world.  Firms like Eskadenia and 
Estarta are gaining the experience needed to compete with 
South and East Asian and Western companies for large 
contracts being offered especially in the Middle East - 
especially in GCC countries, which are racing to upgrade 
their ICT infrastructure while high oil prices make surplus 
government monies available.  Still, it remains to be seen 
whether such firms could thrive without the GOJ as a client; 
as of 2002, the most recent figures available for the ICT 
sector, the GOJ consumed over a quarter of all goods and 
services produced by Jordan,s IT companies. 
 
13. (SBU) The e-government program has also given the GOJ 
more scope to bargain with world-class ICT firms - by 
expanding the size of the its ICT use, the GOJ has made 
itself a more attractive candidate for partnerships like the 
Microsoft licensing agreement and a soon-to-be-launched 
agreement with Bearing Point to train GOJ personnel in 
management techniques. 
 
 
------------------------- 
JT AS SECTORAL BOTTLENECK 
------------------------- 
 
14. (SBU) While the sector has made substantial progress over 
the past several years, more complete exploitation of 
Jordan,s domestic IT capabilities may await the opening of 
Jordan,s fixed-line infrastructure. This sector has been and 
is currently under the legal monopoly of Jordan Telecom (JT), 
whose privatization and then strategic partnership with 
France Telecom (FT) over the past five years have brought it 
a long way - but not all the way - towards a competitive 
model.  However, as part of Jordan,s WTO accession process, 
Jordan pledged to work to end its fixed-line monopoly by 
January 1, 2005, and Jordan,s Telecommunications Regulatory 
Commission (TRC) is doing its best to work out the modalities 
of the opening. 
 
15. (SBU) Minister of ICT Fawaz Zu,bi, in his Sep. 26 
meeting with Chairman Powell, expressed his belief that the 
upcoming phase of liberalization will be critical to the 
future of the ICT sector.  The high international tariffs 
imposed by JT have made some of Jordan,s more 
internationally focused ICT companies uncompetitive, as has 
the slow roll-out and high prices of broadband access and 
other fixed-line services.  Zu,bi believes that FT,s stress 
on profit maximization since the conclusion of its strategic 
partnership with JT has not been consonant with GOJ goals. 
He hinted to Powell that rather than expand FT,s control of 
JT, as FT is requesting, he would be looking seriously at 
ending their management contract.  More broadly, Zu,bi 
praised the National Broadband Network (whose building JT had 
resisted) as giving the GOJ leverage against JT and giving 
the TRC space to move against JT if necessary, and said that 
regardless of whether FT remains at the driver,s seat of JT, 
the GOJ would retain a "golden share." 
 
16. (SBU) Despite the support of Zu,bi, who in any case 
plans to voluntarily depart the MOICT in the upcoming Cabinet 
reshuffle (ref B), the TRC is contemplating the strong 
probability of a nasty battle with JT and other incumbents 
over the opening of the fixed-line sector.  The prospect of 
such a fight, the sequel of a battle between the TRC and the 
mobile telephony sector's two incumbents over the awarding of 
a third GSM license (ref C), has left the TRC scrambling for 
support.  The visit of Chairman Powell, and the rhetorical 
backing he gave to the TRC,s upcoming project, were 
invaluable in this respect. 
 
17. (SBU) The GSM license fight also left the TRC aware of 
its own organizational deficiencies, and during Chairman 
Powell,s visit, TRC CEO Muna Nijem asked for his advice in 
the areas of dispute resolution and enforcement, spectrum 
allocation, and especially public relations.  Chairman Powell 
stressed the need for the TRC to articulate an overall vision 
of the direction in which the sector should be going, but to 
always be ready to admit when it had made the wrong decision 
and reverse course.  FCC agreed to provide further advice and 
support to the TRC in the areas of public relations and 
dispute resolution, in a series of videoconferences with TRC 
staff and visits by FCC personnel over the upcoming year, in 
cooperation with a USAID-financed advisor already in 
residence at the TRC. 
 
------- 
COMMENT 
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18. (SBU) The strong level of GOJ support for Jordan,s 
nascent ICT sector is the primary reason for the growth that 
the sector has experienced to date.  With heavy donor 
assistance, the GOJ is creating a voracious demand for ICT 
services that it is turning to the Jordanian private sector 
to supply.  It remains to be seen whether Jordan,s ICT 
sector will be able to stand on its own if and when 
public-directed funding recedes to more "normal" levels, but 
initial signs are good; exports are rising along with the 
more GOJ-driven domestic sales as Jordanian firms develop 
more experience cooperating and competing in an international 
arena.  The ongoing improvements to Jordan,s ICT 
infrastructure and education should only continue to drive 
costs down and create a more fertile arena for domestic ICT 
firms. 
 
19. (SBU) In its support of Jordanian ICT, USAID appears to 
have picked a winner: strong GOJ buy-in and international 
donor and private support has proved to be a multiplier to 
USAID,s relatively modest initial expenditures, and a 
wealth-creating industry is springing up where there was none 
before.  The GOJ,s pursuit of partnerships with high-profile 
(and primarily US-based) ICT firms should help to further 
strengthen trade ties and over time substantially increase 
traditionally weak U.S. investment in Jordan.  And the ICT 
initiatives developed by Jordan, especially in terms of 
ICT-based curriculum reform, are already being viewed as a 
model by several regional states for whom curriculum is a USG 
priority.  Strong and sustained U.S. support for the TRC over 
the next several months, during which its program for the 
liberalization of the fixed-line sector must be formulated 
and approved, will however be critical to removing the last 
great internal obstacle to the competitiveness of the ICT 
sector: the stranglehold held by JT (septel). 
 
20. (U) Chairman Powell did not have the opportunity to clear 
this cable prior to its release. 
HALE