TRACKING CHANGES IN TEXTILES AND APPAREL

UNCLAS SECTION 01 OF 03 AMMAN 008145

SIPDIS

SENSITIVE

STATE FOR NEA/ARN
STATE ALSO FOR EB/TPP/ABT E. HEARTNEY
COMMERCE FOR ITA/OTEXA - M. ANDREA

E.O. 12958: N/A
TAGS: KTEX ECON ETRD ELAB JO
SUBJECT: TRACKING CHANGES IN TEXTILES AND APPAREL
EMPLOYMENT AND PRODUCTION AFTER QUOTA ELIMINATION - JORDAN

REF: STATE 184238

SENSITIVE BUT UNCLASSIFIED. FOR USG USE ONLY.


1. (SBU) SUMMARY: The textiles and apparel sector continues
to increase its share of Jordan's GDP, due largely to the
contribution of Qualifying Industrial Zones (QIZs) and their
duty-free, quota-free exports to the United States, which
stood at USD 584 million in 2003. In 2002-2003,
manufacturing employment dipped in Jordan after the Iraq war,
due to the loss of Iraq trade protocol arrangements. Textile
employment increased to almost a quarter of the manufacturing
workforce, according to data based on a household survey used
in Jordan. The best estimates available put the apparel
workforce at 55,000 to 60,000 employees. The high
absenteeism found in modern QIZ textile factories is evidence
that the culture of "manufacturing employment" is still a new
concept to many here, though Jordanians are catching on. The
Government of Jordan (GOJ) leadership is attuned to the
imminent challenge of apparel trade liberalization and loss
of quotas in 2005, but is seeking to gain from FTA tariff
advantages. END SUMMARY.

The Government Data
--------------


2. (U) In response to reftel request, following are data
for calendar years 2002 and 2003 for Jordan, which benefits
from a bilateral Free Trade Agreement and the QIZ arrangement
under the U.S.-Israel FTA. (SOURCE: GOJ Department of
Statistics; no FY02 and FY03 data are available.):

2002 2003

A. Total industrial
production (USD) 4.6 billion 5.0 billion


B. Total textile
and apparel
production (USD) 457 million* 532 million*


C. Item B/Item A
(percentage) 10.0 10.7


D. Textile/apparel
percentage share of:
-- Imports 6.09 6.16
-- Exports 23.07 28.63
-- Re-Exports 4.40 2.03


E. Total manufacturing
employment 218,389** 217,290**


F. Total textiles/
apparel employment
(percentage of all
manufacturing jobs) 14.8 22.0


G. Nat'l Population 5,329,000 5,480,000


* NOTE: Jordan does not report accurate data on gross
industrial outputs; the GOJ relies on incomplete
self-reporting by factories. The textile/apparel number
combines the (less accurate) reported gross output produced
by factories for domestic consumption plus the (somewhat more
accurate) export data. Both are based on total production
input values.

** NOTE: The employment data are based on an unsophisticated
household survey that tries to discern all economically
active residents in Jordan and, among those, individuals
employed in the manufacturing sector. The survey is
conducted four times a year -- Feb, May, Aug, Nov -- and then
combined to yield an "annual" composite. The composite
includes sectoral employment data expressed as a percentage.

(COMMENT: Relevant GOJ offices do not have the necessary
depth in human resources to collect and analyze employment
data on a monthly basis. We believe that the household
survey data are a somewhat reliable, crude but consistent
measure of general employment trends. END COMMENT.)


3. (U) QIZ factories are exporting to the U.S. garments
with 8 percent Israeli content duty- and quota-free. More
than 95 percent of QIZ factory output is in apparel, which
constituted more than $550 million in QIZ exports to the U.S.
alone in 2003. QIZ apparel are shipped direct to an
impressive list of buyers such as Macy's, Lee, Levi's, JC
Penney, Walmart, Nordstrom's, and Gap. QIZ factories account
for more than two thirds of all apparel workers in Jordan, by
most estimates. The Ministry of Industry and Trade (MOIT)
tracks the QIZ labor force, compiling data on total employees
two times a year, based on interviews. The MOIT's QIZ labor
force data follow:

2002 2003 2004 (Aug)
QIZ Labor
Force 24,243 28,639 31,190

(NOTE: These are totals of combined domestic and foreign
workers at the end of the period, not averages. We cannot
vouch for the thoroughness of the MOIT survey.)

Employment in QIZ Factories
--------------


4. (SBU) Post conducted its own up-to-date employment survey
of QIZ factories which export to the U.S. Over a two-week
period in September, we interviewed personnel managers at 59
QIZ garment companies, asking a series of questions about
general employment. As QIZ factories employ workers from
outside Jordan under 2-3 year contracts, we asked for those
numbers, as well. Regarding machine operating line
employees, we also asked the number of employees who reported
to work that day. (NOTE: These QIZ factories have contracts
to export direct to the U.S. Another roughly 30 subcontract
QIZ factories have more widely fluctuating workforces.)

QIZ Factory Employment:

Management staff 1,297
Average annual line employees 32,223


Foreign line employees now 22,390
Jordanian line employees now 18,332
TOTAL line employees now 40,722

Employees who reported to work today 36,220


It is notable that of 40,722 line employees, only 36,220
reported to work, yielding an absenteeism rate of 11 percent.
(COMMENT: Factory owners have noted to us the missing
domestic workers, who intermittently go off to take care of
family obligations such as harvesting olives or attending a
wedding. These numbers are testimony to the anecdotal
information that Jordan's formerly rural and largely tribal
population is still learning to cope with the demands of
modern industrial society. END COMMENT.)

Private Estimates of Textile/Apparel Workers
--------------


5. (U) The Association of Textile Workers reports there are
45,356 QIZ workers (both direct and subcontract factories) of
which 23,581 are Jordanian. According to a textile union
leader, there are an additional 10,000-15,000 apparel workers
outside the QIZs, some in factories, but most in small
production shops. Based on these reports, Jordan could have
an estimated 55,000 to 60,000 apparel workers.

COMMENT
--------------


6. (SBU) The GOJ has a long way to go before it can
adequately track either employment or production data. At
the same time, the GOJ has focused strong resources on
supporting the apparel sector in the quota-free QIZs and is
working to capitalize on tariff-free benefits afforded by the
FTA in some apparel categories. Tariffs in other major
garment categories do not zero out until 2010 under the FTA.
The GOJ requested tariff reduction acceleration for virtually
all apparel categories during FTA Joint Committee talks last
June.


7. (SBU) A National Committee formed by the MOIT has
recommended training in the mid-term an additional 12,000
garment machine operators and another 700 middle managers and
design/production planners. These would replace foreign
workers as their contracts expired. The committee aims to
reach USD 3 billion in garment exports by 2010 (this assumes
FTA tariff reductions are accelerated) and a total workforce
of 88,000. These are ambitious goals fueled by the
tremendous success of the quota-free QIZs over the last five
years. Jordanian manufacturers at least have the momentum
going in their direction, with experience in meeting
commitments to a strong base of buyers. The Government of
Jordan is doing all that it can to show investors from South
and East Asia that they can continue to sell garments "Made
in Jordan" to the U.S. market with the tariff reductions
afforded by the FTA.


8. (SBU) It remains to be seen if Jordan's ambitious goals
in the textiles and apparel industry can be met. At least
until 2008, it is expected that growth will continue. Much
will depend on the USG's response to Jordan's request for
tariff reduction acceleration if growth is to be as rapid as
it has been in the past few years.
HALE