AQABA AUTHORITIES HOST QIZ PROGRAM

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