US embassy cable - 05AMMAN3649

C O N F I D E N T I A L SECTION 01 OF 06 AMMAN 003649 
 
SIPDIS 
 
DEPT PASS USTR 
 
E.O. 12958: DECL: 05/09/2020 
TAGS: ECON, EAID, EFIN, PGOV, JO 
SUBJECT: JORDAN HAS A PROMISING NEW ECONOMIC TEAM, BUT CAN 
IT WIN PARLIMENT'S CONFIDENCE? 
 
REF: A. A) AMMAN 3358 
     B. B) AMMAN 3252 
     C. C) AMMAN 1422 
 
Classified By: Classified by Charge David Hale for reasons 1.4 (B) and 
(D) 
 
 1.  (C)  SUMMARY: Jordan's new economic team only took 
office as part of the new cabinet on April 7 but has already 
shown its eagerness to move ahead with economic reform.  It 
has quickly moved to resolve several long-standing economic 
and investment problems.  In an initial series of calls with 
the Charge, nearly all of the ministers admitted they felt 
pressure from King Abdullah to move forward the economic 
reform agenda.  But all were already developing dynamic 
agendas for advancing policy and, in many cases, moving to 
make their own ministries more effective and efficient. 
Aggressive Finance Minister Bassam Awadallah heads the team 
but he is backed by strong, private sector oriented ministers 
in nearly every position in the economic ministries. It is a 
team suited to the King:  they are of his generation, western 
educated, private sector oriented, reformist, and goals and 
performance-driven hard chargers.  However, those very 
qualities (and the Palestinian-Jordanian roots of some of the 
reformers) make them anathema to many of the loyalist old 
guard in the country.  The team is under intense fire already 
from parliament, where 45 MPs have raised objections to their 
personalities and, indirectly, their objectives, as well as 
the opaque selection process that created this government. 
PM Badran is struggling to defend a team he openly admits was 
not of his own chosing.    END SUMMARY. 
 
--------------------------------- 
Awadallah: The Leader of the Pack 
--------------------------------- 
 
2.  (C) Of the three new ministers in the key economic 
portfolios--Finance, Industry and Trade, and Planning and 
International Cooperation--Bassem Awadallah brings to his job 
the lion,s share of the collective political clout of the 
new economic team.  As Minister of Planning and International 
Cooperation for four years prior to his resignation in 
February of this year (ref A), Awadallah clashed repeatedly 
with Finance Ministers Michel Marto and Mohammed Abu Hammour 
over Awadallah,s preference for a relatively loose fiscal 
policy; now the shoe is on the other foot.  A confidante to 
King Abdullah, Awadallah is now working with Ministers of 
Planning and of Industry and Trade who have been drawn into 
the government from the private sector and in whose selection 
he had a hand.  (COMMENT:  While both are tough, competent, 
and well-connected, neither is likely to present a challenge 
to Awadallah on economic policy within the cabinet; they will 
have enough on their hands restructuring and running their 
ministries.  END COMMENT)  Awadallah is the de jure and de 
facto #3 in this government, after Prime Minister Adnan 
Badran and Deputy Prime Minister for Parliamentary Affairs 
and Minister of Political Development Hisham Tal. 
 
3.  (C) In his first month on the job as Minister of Finance, 
Awadallah has focused primarily on working with the donor 
community to drum up additional assistance to Jordan. 
Presenting the outside world with a considerably bleaker 
fiscal picture than did his predecessor Abu Hammour, he has 
mounted a strong push both for debt relief from G8 countries 
and for increased aid by GCC countries to offset rising crude 
oil prices.  In return, he has promised donors a transparent 
reform plan to radically improve Jordan,s fiscal position 
through fuel subsidy elimination, pension reform, and 
privatizations.  Distracted by his duties in coordinating 
Jordan,s May 20-22 World Economic Forum, Awadallah has not 
yet been able to concentrate fully on following up these 
commitments with a roadmap to achieve them.  His adviser Omar 
al-Wir expects concrete plans for each element of 
Awadallah,s long-term strategy to be announced sequentially 
in June and early July. 
 
4.  (C) Awadallah also has yet to substantially alter the key 
personnel of the MOF, but al-Wir assures us that he is 
drawing up plans to recruit outsiders for key positions and 
to shake up the ministry; there will likely be a substantial 
turnover of personnel at the ministry within the next two 
months.  While we do not yet know the specific heads that 
will roll, our attention will be focused on the stagnant, 
corruption-ridden Customs Directorate, whose Director-General 
has survived months of attempts by Finance Minister Abu 
Hammour to bring about his resignation.  A successful 
restructuring of this Directorate alone would be a 
substantial victory for reform, increasing GOJ income and 
removing a significant obstacle to trade. 
 
--------------------------------------------- --------------- 
A Sharp Lawyer at Trade:  Promoting Investment, Free Trade, 
QIZs 
--------------------------------------------- --------------- 
 
5.  (C)   Minister of Industry and Trade (MOIT) Sharif Zu,bi 
is already showing his reform stripes:  he charged out of the 
starting blocks with three reform initiatives within the 
ministry in his first three weeks and made clear to his staff 
his top priority is radically enhancing Jordan,s investment 
climate, according to two senior officials in the ministry. 
The reforms were not grand  -- getting rid of import 
licensing requirements for 21 commodities; eliminating the 
need for ministry approval of bakeries; and similarly getting 
out of the convention-approval business.  (The last reform 
measure on regulating exhibitions is not yet ready for public 
release, but will be announced soon, according to the office 
director who handles such convention approvals.) 
 
6. (C)  The minister,s focus on investment is foremost and 
unequivocal, Trade Policy Department Director Maha Ali told 
us.  Zu,bi wants to facilitate investment now, she said, and 
to establish a climate in which businesspeople can be 
reassured that Jordan is a good place to invest.  The Jordan 
Authority for Enterprise Development (JAED) would be a 
keystone of this investment reform effort, she said.  JAED is 
the umbrella organization including the Jordan Investment 
Board, the Jordan Export Development Corporation (JEDC) and 
the Jordan Industrial Estate Corporation (JIEC).  The 
Minister of Industry and Trade chairs the JAED Executive 
Board and essentially supervises the work of the three 
investment agencies, directors.  To date, however, JAED has 
been more a concept than a reality.  Zu,bi plans to cut 
through some of the legal issues holding JAED back, Ali said, 
and will seek amendments to key legislation.  (Details will 
follow septel.)  Zu'bi also moved quickly on resolving a 
dispute involving the largest U.S. investment in Jordan, the 
Jordan Bromine Company.  Although details of the settlement 
are still being finalized (and will likewise be reported 
septel), Zu'bi was the driving force in getting the parties 
to an agreement. 
 
7.  (C)  Zu,bi is "all for free trade," said Planning 
Minister Suhair Al-Ali.  She noted that he would spend much 
of the first half of May on a whirlwind tour of the region, 
starting in Morocco (another U.S. FTA partner).  He supports 
efforts to broaden Jordan,s FTA into a regional Middle East 
Free Trade Area (MEFTA) and plans soon to make a new proposal 
on cumulation of content to USTR, she said.  Jordan has 
already proposed to Israel that it consider entering into an 
agreement on cumulation under the U.S.-Jordan FTA (allowed by 
one of the FTA clauses), but has not heard back from Tel 
Aviv, Ali said. 
 
8.  (C)  On the Jordan-Israel Qualifying Industrial Zones 
(QIZs), the source of some 45,000 jobs and over $800 million 
in annual exports to the United States, Zu,bi has already 
met three times with the QIZ investors, managers, and estate 
developers to discuss their problems.  QIZs are a "top 
priority" for the minister, noted Bilal Hmoud, the new head 
of the MOIT Industrial Development Department.  But QIZ 
investors "want everything" to bolster their competitive 
situation in the global economy, said Hmoud.  Zu,bi has 
promised to take their package of proposals to the Prime 
Ministry later in May.  But first, the QIZ group was told by 
Zu,bi they must be "concise and precise" about what they 
want from government and what they will do as a private 
sector partner.  Then Zu,bi will make a presentation of 
feasible solutions for the QIZs at the PM,s office. 
 
-------------------------------- 
New Planning Minister Settles In 
-------------------------------- 
 
9.  (C) Minister of Planning and International Cooperation 
Suhair al-Ali has to date set a slower pace than Zu,bi. 
Al-Ali has not yet taken any steps to significantly 
restructure her ministry, preferring first to ensure that the 
ministry,s ongoing work is being handled competently.  USAID 
reports that already in her brief tenure, they have seen a 
definite shift in the MOP from an insistence on early release 
of direct "local currency" (i.e., 
non-programmatic aid) funds to an approach centering on 
ensuring GOJ fulfillment of the negotiated conditions 
precedent for those funds, release.  The former Citibank 
country director for Jordan brings a much more relaxed style 
to the job than did her struggling predecessor Tayseer Smadi 
or the hard-charging and highly turf-conscious Awadallah. 
 
10.  (C) While she has not previously served in the GOJ, 
Minister al-Ali is no stranger to the circles of power in 
Jordan.  She is the scion of a prominent Palestinian family 
and a personal friend of both King Abdullah and Queen Rania. 
Perhaps more importantly, however, she has worked closely  - 
and by all accounts harmoniously - with Awadallah in the 
past.  A fellow alumnus of Georgetown who attended the 
university at the same time as Awadallah, Al-Ali handled (at 
Citibank) the MOP,s USAID-funded $4.4 million wholesale 
funding facility, supporting four microcredit programs whose 
activities were coordinated by the MOP.  Also while at 
Citibank, she was involved in creating a capital market and 
project finance training program in co-ordination with 
Awadallah who was then the Planning Minister.  At Citibank, 
she was reputed to be a competent manager, but not a 
risk-taker; she is unlikely to significantly shake up her 
ministry or to challenge Awadallah,s assumption of roles 
traditionally allocated to the MOP.  She will, however, 
likely soon face the need to significantly re-staff her 
ministry as Awadallah brings his people into the MOF. 
 
--------------------------------------------- --------------- 
Cabinet on Short Honeymoon; Fighting A "Bureaucratic 
Blizzard" 
--------------------------------------------- --------------- 
 
11.  (C)   Ali said Zu,bi had given positive feedback on the 
fate of economic reforms in the cabinet in the first few 
sessions.  However, so far none of Zu,bi,s reforms have 
required inter-agency consultation or cabinet approval and, 
for all of their expressed hopefulness, MOIT insiders are 
making no predictions about Zu,bi,s ability to deal with 
the "old school" bureaucratic gamesmanship that has in the 
past slowed some of Jordan,s trade- and investment-related 
reforms.  Ali points to overlapping portfolios in different 
ministries as one problem that might stifle Zu,bi,s 
innovations, but noted that the King,s National Agenda might 
help Zu,bi overcome rivalries that in the past had resulted 
in policy gridlock.  Hmoud said that parliamentary 
recalcitrance and a bureaucratic mind-set at the Prime 
Ministry were two challenges Zu,bi had yet to confront.  He 
put Zu,bi squarely in the "new school" camp, however, and 
expressed confidence in the minister, who had been gathering 
information on the obstacles he faced as he prepared to plow 
through what Hmoud called the "bureaucratic blizzard". 
 
-------------------------------------------- 
"Sectoral" Ministers Largely Remain in Place 
-------------------------------------------- 
 
12.  (C) Awadallah, Zu'bi and Al-Ali are clearly the troika 
of this economic team and will be the drivers of reform. 
Encouragingly - and in contrast with the majority of the 
ministries in the new cabinet - the bulk of the other 
ministries dealing with sectors of the Jordanian economy 
retain their ministers.  Minister of Energy and Mineral 
Resources Azmi Khreisat, who unveiled an ambitious strategic 
plan at the beginning of his tenure as minister in October 
2003, has outlived his own pessimistic predictions and 
provides continuity to guide the energy sector,s ongoing 
transformation.  This root-and-branch project includes the 
privatization of all power generation and distribution 
(transmission would remain under government control), 
hundreds of millions of dollars worth of BOO and BOOT power 
generation projects, a wholesale upgrade of Jordan,s power 
transmission backbone, the opening of Jordan to exploration 
by foreign oil, gas, and mining corporations, and 
preparations for the upcoming expiration of the Jordan 
Petroleum Refinery Co. monopoly on production, importation, 
and distribution of fuel products.  Minister of Tourism and 
Antiquities Alia Hattough-Bouran, who entered the cabinet at 
the same time as Khreisat, is also continuing with the 
implementation of an ambitious strategic plan for her sector. 
 This plan, designed with heavy USAID assistance and launched 
in 2004, envisions a large-scale opening of the Ministry,s 
facilities to private management and investment and a renewed 
focus on support of private-sector efforts to promote Jordan 
as a destination, along with substantial changes in GOJ 
policy to reduce barriers to the industry,s success. 
 
13.  (C) Also returning are Minister of Transport Saud 
Nseirat and Minister of Information and Communications 
Technology Nadia al-Saeed, who entered the Cabinet at the 
most recent reshuffle in October 2004.  Since assuming 
office, Nseirat has moved forward aggressively on 
high-priority reforms such as the restructuring of the Civil 
Aviation Authority, improvements to the management of Aqaba 
port, the privatization of several transport-related 
corporations partially or fully owned by the GOJ, and plans 
for several rail projects.  Saeed has efficiently continued 
her predecessor,s reform program, focused on promotion of 
e-government and coordination of efforts to improve IT in 
Jordan,s schools, along with rhetorical support for the 
ongoing deregulation of Jordan,s telecommunications sector. 
New to his position is Yousef Shraiqi, the Minister of 
Agriculture (and former Minister of the environment); not a 
strong personality, he is regarded as a quick study and a 
competent worker by Embassy personnel who have worked with 
him.   Also new is Labor Minister Bassem Al Salem, bringing 
to his post a background in banking.  Al Salem hopes to pull 
the government out of the supervision and management of 
Jordan's Social Security Corporation (SSC), a move he hopes 
will de-politicize the SSC and fundamentally transform the 
investment climate in Jordan. 
 
----------------------- 
From NGO to the Cabinet 
----------------------- 
 
14.  (U)  Jordan's economic team may get a boost from an 
unexpected quarter, the Ministry of Environment.  Newly 
appointed Minister of Environment Khaled Irani (ref B) had 
been a consistent champion of environmentally friendly 
development.  His prior job was as the Director of the Royal 
Society for the Conservation of Nature (RSCN), whose 
operations are notable for their support of development and 
use of private sector tools to protect and conserve natural 
resources.  For example, RSCN's modern headquarters building, 
paid for in large part by USAID funding, is home to one of 
Amman's trendiest restaurants, the "Wild Jordan Cafe."  RSCN 
under Irani has also developed several environmentally 
friendly ecotourism destinations.  As Environment Minister, 
he will doubtless continue with a nuanced policy that links 
rural development, incomes, conservation and eco-tourism. 
RSCN, an NGO, is also unique in the region for its role as 
the day-to-day manager and custodian of Jordan's national 
parks under an agreement with the ministry he now heads, the 
Ministry of Environment.  Irani is young, smart, open-minded 
and brings to his environmental portfolio a strong skill set 
that includes NGO experience, hands-on business management 
skills, and a deep understanding of the value of economic 
tools for conservation. 
 
------- 
COMMENT 
------- 
 
15.  (C)  This is an economic team facing many challenges. 
King Abdullah will not be patient if the team does not show 
results quickly.  And the challenges faced are daunting. 
Although economic growth is currently strong, at over 7%, 
perceptions among the populace are widespread that an elite 
few in Amman are enjoying the lion's share of the wealth 
generated, a perception reinforced by the mansions going up 
on the outskirts of Amman and the increasing numbers of 
Humvees and other luxury cars cruising the roads.  The 
government faces a growing bulge of new entrants to the 
workforce over the coming years.  Employing those young 
people will require an invigorated economic reform program, 
changing laws, regulations, and mentalities in order to 
attract the foreign and domestic investment needed to create 
jobs.  Water constraints on continued development loom large 
in the future and the government has several very expensive 
projects planned to try to address them.  Jordan will 
continue to be vulnerable to the vicissitudes of its region 
-- continued unrest in Iraq or Israel would deter needed 
investors.  Jordan's own internal security vigilance is also 
key, as a successful major terrorist attack in the country 
would stop the current recovery in the tourism sector in its 
tracks and further slow investment. 
 
16.  (C)  Facing the county's debt challenges will remain key 
and take up much of Awadallah's time at the beginning of his 
term.  A debt management law requires the government to get 
the country's sovereign debt/GDP ratio to 80% by end 2006, a 
factor complicating the government's desire to wean itself 
off foreign aid and foreign oil assistance.  Awadallah will 
have to move this agenda ahead in the face of a Parliament in 
which many members detest him (Ref C) and want him out of 
government.  Many traditionalist East Bankers in the 
legislature resent him bitterly for his perceived arrogance 
(and his West Bank roots), and the fact that the Social 
Economic Transformation Program he 
previously managed was not included in the government budget 
approved by Parliament.  Widespread rumors that Awadallah was 
put in the cabinet under U.S. pressure may mean that his 
reform initiatives could be branded as American directives. 
 
17.  (C)  These economic ministers must whip their own 
ministries into shape, convince suspicious parliamentarians 
worried about their own prerogatives and special interests, 
and face the economic, social and fiscal challenges cited 
above.  Fortunately, this economic team has the best 
credentials of any in years.  Its members are already 
demonstrating energy, creativity and pragmatic approaches to 
problems.  Jordan has made substantial economic reforms since 
Abdullah became King; this team has a real chance to raise 
economic reform in Jordan to another level. 
 
18.  (C)  Perhaps the biggest challenge of all, however, will 
be to win parliament,s confidence.  Despite a series of 
meetings with the King and Prime Minister Badran, the 45 East 
Bank stalwarts who have publicly declared their opposition to 
the cabinet are standing firm.  If the Islamic Action Front 
either joins the opposition or abstains, the team will fail 
the vote.  Badran is proving an uncertain political operator, 
a role for which he has little experience and no aptitude. 
Cabinet and palace insiders have told Charge there is an 
intense internal debate on an appropriate strategy to gain 
confidence; Badran advocates dumping key but controversial 
figures such as Awadallah in order to satisfy the Lower House 
(and quixotically telling most of his visitors that these 
ministers were not of his choosing).  Failing that, he is 
inclined to call parliament into session at the latest date 
possible (November) while getting Awadallah and others to 
deliver something significant such as G-8 debt relief. 
Awadallah, Muasher and others recognize there will be little 
to deliver by November, and a strategy of delay will reflect 
the reality of their fear to face up to parliament.  The King 
is contemplating half measures, such as replacing Umayya 
Touqan, Central Bank Governor and a Jordanian-Palestinian, 
with a southern East Banker.  He and the leading reformers 
blame outgoing GID chief Saad Khayr for inciting this 
opposition; most of the MPs who oppose the new cabinet were 
packed into the Lower House during the 2003 gerrymandered 
elections masterminded by Khayr.  But while Khayr was, until 
his departure for Washington, telling his parliamentary 
allies to drop their objections, the opposition seems to have 
developed a momentum and sustainability of its own. 
Throughout the history of this parliament, the palace and 
government have resorted successfully to outright bribery to 
gain majorities for unpopular actions, and may do so again; 
but the price keeps rising, in terms of both cash and 
credibility of all those involved. 
HALE