US embassy cable - 05AMMAN9014

C O N F I D E N T I A L SECTION 01 OF 03 AMMAN 009014 
 
SIPDIS 
 
E.O. 12958: DECL: 11/20/2015 
TAGS: ECON, JO 
SUBJECT: MINIMAL ECONOMIC IMPACT OF TERRORIST BOMBINGS, SO 
FAR 
 
 
Classified By: AMBASSADOR DAVID HALE. REASON: 1.4 (E) & (G) 
 
1. (U)  SUMMARY: There has been little negative impact to 
date on Jordan,s economy as a result of the terrorist 
bombings of three hotels in Amman on November 9, according to 
the general consensus among leading private sector and 
government contacts.  While tourism-related businesses are 
suffering to a small degree, most are expected to rebound by 
the end of the month.  The banking and finance sectors have 
fared well, with the Amman Stock Exchange remaining stable 
and banks reporting no significant withdrawals of deposits. 
Companies that produce manufactured goods report no impact on 
sales.  Investment in the short-term has not been affected as 
investment leaders have, like most Jordanians, come together 
publicly and announced the desire to continue with investment 
plans in real estate and business development. 
 
2. (C)  COMMENT: Minimal economic fallout from the bombings 
can partially be credited to a stable and liquidity-rich 
capital market.  It may also result from the influence 
indirect government funds like the Social Security 
Corporation and direct government funds like the Jordan 
Investment Board wield in the financial markets, and the 
relatively permanent investments of regional Arab 
institutional investors.  While the positive short-term 
response is welcome, the outlook for long-term future 
investment cannot yet be measured.  Given the small size of 
this economy, most contacts agree that a second major 
attack could have more lasting effects.  END COMMENT AND 
SUMMARY. 
 
Tourism and Related Sectors 
--------------------------- 
 
3. (U)  In the immediate aftermath of the bombings, most 
hotels in Amman reported a significant drop from the 
full-occupancy at which they were operating.  The Radisson 
SAS, where a bomber destroyed a banquet hall and killed over 
20, reported a drop to 26%; the Hyatt re-opened November 17 
with 50% occupancy.  The Radisson General Manager projected 
over 50% occupancy by the end of the month, and expected to 
reach full-occupancy by the end of the year.  Sabih Al-Masry, 
the Chairman of Astra - the large Jordanian company that 
locally owns the Grand Hyatt - told EconCouns November 16 he 
expects his hotel to recover fully, and plans to continue to 
develop multi-million dollar resort properties at the Dead 
Sea and Aqaba.  Hotels at the Dead Sea, Petra, and Aqaba 
report no fall in occupancy since the attacks, according to 
hotel management at individual hotels there. 
 
4. (U)  The tourism sub-sector of business conferences, a 
strong driver of the service economy in Jordan, has received 
both cancellations and new bookings.  The UN,s World 
Intellectual Property Organization (WIPO) postponed a 
regional conference scheduled for Amman in early December, 
while the World Tourism Organization and the World Travel and 
Tourism Council have reportedly shifted executive conferences 
scheduled for early next year to Amman from parts of Europe 
in a show of support.  Some security units of innovative 
pharmaceutical company members of PhRMA would not allow their 
personnel to travel to a PhRMA Euro-Med regional conference 
scheduled for Jordan; PhRMA moved the event to Dubai. 
Thuraya Husseini, General Manager of Lawrence Conferences and 
Seminar Services, reported to EconOff that conference 
cancellations are more the exception than the rule and that 
"most events are taking place." 
 
5. (U)  In the port town of Aqaba, the Jordan Times reported, 
cruise ships continue to dock, with "1,000 passengers docking 
the day after the attacks, an additional 1,600 scheduled to 
dock through the end of November, and 1,000 in December." 
 
6. (U)  In the aviation sector, an even more limited drop in 
numbers was reported.  Royal Jordanian's (RJ) head of 
Passenger Services Mua'th Majali told EconOff of  "a few 
cancellations" on flights from the US and Europe in the days 
following the attacks; one week after the bombings, however, 
Majali says RJ is operating at "full passenger loads on the 
Chicago-Amman and New York-Amman routes." 
 
Financial Markets 
----------------- 
 
7. (C)  The Amman Stock Exchange (ASE) opened on November 14, 
the first working day after the bombings, with a 1.5% drop in 
market capitalization followed by a quick rebound and a 2% 
gain the next day.  Volume was heavy on the first day, but 
not alarmingly high since.  The ASE,s capitalization of $25 
billion can be broken down to approximately 25% 
government-owned, 32% Jordanian private sector, 33% 
non-Jordanian Arab institutional investors, and 10% non-Arab 
foreign investment.  This mix favors a capital base 
stabilized by the government and supported by petrodollars 
invested in long-term markets such as real estate and 
telecommunications. 
 
8. (C)  Additionally, the Finance Ministry auctioned a 
six-month Treasury bill on November 14 at a 6.4% interest 
rate, more than one percentage point lower than the Treasury 
bills auctioned the month prior to the attacks.  A higher 
interest rate would have signaled private-sector concern 
about Jordan's economic and political stability; the lower 
rate may be seen as strong confidence in the government.  The 
lower rate may also be an indicator of heavy petrodollar 
liquidity in the capital market.  The fact that private banks 
hold over 50% of their deposits in liquid assets such as 
government bonds and CDs further supports this possibility. 
 
9. (SBU)  Some skeptics have argued to Embassy officials that 
the financial market,s resilience is not healthy, and is an 
indicator of GoJ interference in a sector that should be free 
of such influence.  Henry Azzam, CEO of Amwal Invest, a 
prominent investment bank, characterized the financial market 
response as "beyond finance."  He sensed "patriotism and not 
fundamentals is supporting the market."  He also theorized 
that the Social Security Corporation had stepped in to 
support the stock market. 
 
Investment & Trade 
------------------ 
 
10. (U)  Major real estate developers continue to exude 
confidence in the market in Jordan with no plans to slow down 
construction.  Sabih Al-Masry,s plans for a $500 million 
project in Aqaba comprising a resort, hotel, and residence 
are still on schedule, as are those for a resort planned to 
open at the Dead Sea in early 2006.  Yousef Hayek, advisor to 
multi-billion dollar construction company Consolidated 
Contractors International, says "Construction in Jordan is 
booming and will continue to do so."  The only impact is the 
potential "design re-engineering of security facilities" for 
some projects. 
 
11. (U)  An informal sampling of factory managers in 
Qualifying Industrial Zones - in which Jordanian-produced 
goods with Israeli content receive preferential access to US 
markets - said they have not seen any signs of changes in 
buyer behavior or in orders, which are for production into 
the first quarter of 2006.  (Note: Any serious consequences 
of potential buyer wariness would not be seen for at least 
three months. End Note.) 
 
Focus on Security 
----------------- 
 
12. (C)  Most leaders - government and private sector - seem 
less concerned with a loss of business or a decline in the 
economy, and more focused  on obtaining stronger physical 
security for their assets.  Many of Post,s contacts believe 
that Jordan has a looser standard on physical security checks 
of individuals and vehicles than is the case in neighboring 
Arab countries.  The immediate addition of metal detectors 
and early vehicle checkpoints in Amman by most small and 
large businesses (hotels, restaurants, retail outlets) as 
well as at government buildings demonstrates a galvanized 
citizenry resolved to confront the security problem. 
 
13. (C)  A number of QIZ owner-developers are reviewing and 
enhancing their existing security arrangements in order to 
provide a secure supply chain for over $1 billion in goods 
shipped to US ports annually.  In the Kerak QIZ, the 
government estate manager placed additional personnel in the 
walled, gated compound and added an extra layer of security 
checks for vehicles and personnel.  At the private Ad Dulayl 
QIZ, owner Jack Khayyat said that his personnel were now 
doing 360-degree checks on all vehicles entering the QIZ 
area, at the request of factory owners. 
 
14. (C)  COMMENT: While investor, government, and business 
leaders remain undeterred by the attacks, there is major 
concern about the impact of a second attack.  Recent threats 
by Abu-Mus,ab al-Zarqawi,s al Qa,ida to further target 
tourist hotels, QIZs, embassies, and military bases augment 
this concern.  The fear that another attack could come soon 
is driving the quick ramping up of physical security and the 
strong cooperation between the government and private sector. 
 As leaders in both government and the private sector 
recognize, the impact of further attacks could weaken an 
economy that relies so heavily on petrodollars. 
Additionally, if future attackers again were Iraqi, the 
political backlash against the large Iraqi community here 
could weaken one of the current props of Jordan,s economy. 
HALE