US embassy cable - 02AMMAN3641

UNCLAS SECTION 01 OF 02 AMMAN 003641 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS USTR FOR NED SAUMS 
COMMERCE FOR 4520/ITA/MAC/ONE/PTHANOS 
STATE PASS USAID FOR MSCOVILL 
 
E.O. 12958: N/A 
TAGS: ETRD, EINV, ELAB, IS, JO 
SUBJECT: AQABA AUTHORITIES HOST QIZ PROGRAM 
 
------- 
SUMMARY 
------- 
 
1.  (u)  Aqaba Chief Commissioner Akel Biltaji hosted a group 
of some 50 QIZ exporters and park managers for a two-day 
program in the Special Economic Zone to tout improved port 
services and to sell the Aqaba International Industrial 
Estate as an investment option.  Participants were pleased 
with the program, which reinforced some good news about 
improvements to lead-times for door-to-door shipment from 
QIZ's to the U.S. via Aqaba.  The program also raised 
questions, though, about choices the Aqaba Special Economic 
Zone Authority has made to accommodate expatriate labor in an 
effort to attract foreign investment.  End summary. 
 
---------------------------- 
AQABA QIZ PROGRAM JUNE 26-27 
---------------------------- 
 
2.  (u)  Akel Biltaji, Chief Commissioner of the Aqaba 
Special Economic Zone Authority (ASEZA), hosted a two-day 
program in Aqaba at the end of June for QIZ exporters and QIZ 
park managers.  The aim of the program, which received 
extensive support from the USAID-funded Jordan-US Business 
Partnership (JUSBP), was twofold:  first, to expose QIZ 
exporters to the services offered by the Port of Aqaba and 
recent and planned improvements to port services; and second, 
to encourage exporters to invest in the Aqaba International 
Industrial Estate, a QIZ-qualified light industrial park 
built with USAID assistance and slated to begin operation at 
the end of 2002.  Representatives from all of Jordan's main 
QIZ parks attended, along with several of their clients. 
Also in attendance were representatives of local and 
international shipping lines. 
 
----------------------------------- 
SPOTLIGHT ON PORT, ASEZA ADVANTAGES 
----------------------------------- 
 
3.  (u)  Port Director Saud Soror highlighted strong, 
consistent growth in port business in recent years in a 
presentation on day one.  He noted in particular a 16% 
increase in container transshipment through the port in the 
first quarter of 2002, and further noted that the increased 
volume coincided with fewer ship visits - an indicator that 
larger container ships are now using Aqaba, a good growth 
sign.  Soror also highlighted improvements to port 
infrastructure totaling $10-12 million in the past 2-3 years, 
in particular the addition of a third gantry crane that has 
significantly decreased lead times to be on par with 
international standards and lowering freight costs for 
importers and exporters. 
 
4.  (u)  A day two presentation by ASEZA representatives 
highlighted the business advantages offered in the ASEZ.  The 
ASEZA reps promised quicker business registration times, 
streamlined customs operations, and expediting for visa 
applications.  More importantly for the assembled QIZ 
exporters, they highlighted fast turnaround times for work 
permits for laborers employed in the zone, and lower permit 
fees compared to the rest of Jordan.  ASEZA reps also noted 
regulations in the zone allow an investor to draw up to 70% 
of its labor force from overseas, with the further promise 
that, if an investor found he needed a higher percentage, 
"come to us, we're flexible." 
 
-------------------- 
LEAD TIMES IMPROVING 
-------------------- 
 
5.  (u)  Perhaps the most important presentation for QIZ 
operators, though, was a lengthy discussion of door-to-door 
shipping times through both Aqaba and Haifa.  During the 
presentation, agents for both Maersk and APL confirmed a 
long-term commitment to shipping through Aqaba and said they 
were working hard to reduce lead times from Aqaba to New York 
through the use of larger, more frequently scheduled feeder 
vessels.  The Maersk rep said the company had already added 
four new feeders from Aqaba to Salala, had instituted 
fixed-day sailing from Aqaba, and had just opened a field 
office in Amman.  The APL rep noted the company was looking 
at establishing a feeder route through Genoa, which could cut 
3-5 days off current shipping times. 
 
6.  (u)  Local shipping magnate Amin Kawar told a surprised 
assemblage that door-to-door shipping times from QIZ's to New 
York through Haifa and through Aqaba are reaching parity.  He 
attributed this to long overland shipping times from the QIZ 
parks to Haifa, which he said average 7-8 days.  By 
comparison, the trip from factory to boat in Aqaba might take 
as little as 2-3 days.  With overland transportation reforms 
being finalized by the GOJ (according to Biltaji), transit 
times from QIZ to Aqaba could be cut to one day.  These 
improvements could easily make up the current difference of 
11-16 days between using Haifa and using Aqaba.  With lead 
times converging, most exporters agreed Aqaba, at up to 
$1,000 less per container to ship ($1500-$1700, versus $2500 
per container through Haifa) would become a more desirable 
shipping point almost overnight.  Kawar told us on the 
margins of the conference that, in fact, some 40% of QIZ 
exports already used Aqaba as the primary shipping port - 80 
containers per week, versus 100 per week through Haifa. 
 
------- 
COMMENT 
------- 
 
7.  (u)  The increasing frequency with which Aqaba is being 
used as an export point for QIZ containers is good news.  It 
means more jobs for Jordanian truckers and for Jordanian 
dockworkers, and provides an incentive for Aqaba authorities 
to continue their commitment to smoothing port operations. 
The bad news is, no one knows Aqaba is already so widely 
used.  The general consensus is that Haifa is still 
overwhelmingly the port of choice for QIZ exporters.  This 
serves to reinforce unenlightened arguments among economic 
conservatives that the QIZ initiative provides no real 
benefits to Jordan - jobs go to the Chinese, profits go to 
foreign investors, and containers go to Haifa.  We will 
continue to work with the GOJ, local chambers of industry, 
and the sector to get the facts out. 
 
8.  (sbu)  Of more concern in the long run are the labor 
incentives ASEZA advertises to foreign investors.  Offering 
cheaper, faster work permits to larger percentages of foreign 
workers runs counter to ASEZA's long-term strategy for 
creating jobs for residents in poor neighborhoods of Aqaba 
and Ma'an.  These incentives are not likely to lead to 
relocation of existing QIZ's in Jordan, due to investment 
perqs that are available in Jordan proper but not in Aqaba. 
They will prove a disincentive to hire local labor, though, 
until the GOJ shows a stronger commitment to demand-driven 
skills training for Jordanians, or until the GOJ starts 
focusing its investment promotion efforts on responsible 
companies that show a long-term commitment to the kingdom and 
to worker training.  USAID is working with the GOJ to develop 
such a skills training program targeting Jordanian workers in 
the textile sector. 
Gnehm