Identifier
Created
Classification
Origin
04AMMAN8596
2004-10-18 14:00:00
CONFIDENTIAL
Embassy Amman
Cable title:  

ICT EVENTS SPOTLIGHT EMERGENT SECTOR OF JORDAN'S

Tags:  ECPS EAID EINV BEXP PGOV JO 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.

181400Z Oct 04
C O N F I D E N T I A L SECTION 01 OF 04 AMMAN 008596 

SIPDIS

E.O. 12958: DECL: 10/11/2014
TAGS: ECPS EAID EINV BEXP PGOV JO
SUBJECT: ICT EVENTS SPOTLIGHT EMERGENT SECTOR OF JORDAN'S
ECONOMY

REF: A. 2003 AMMAN 6457


B. AMMAN 7336

C. AMMAN 5403

Classified By: Charge d'Affaires David Hale for reason 1.4 (b)

C O N F I D E N T I A L SECTION 01 OF 04 AMMAN 008596

SIPDIS

E.O. 12958: DECL: 10/11/2014
TAGS: ECPS EAID EINV BEXP PGOV JO
SUBJECT: ICT EVENTS SPOTLIGHT EMERGENT SECTOR OF JORDAN'S
ECONOMY

REF: A. 2003 AMMAN 6457


B. AMMAN 7336

C. AMMAN 5403

Classified By: Charge d'Affaires David Hale for reason 1.4 (b)


1. (U) SUMMARY: Three recent and ongoing events have thrust
Jordan,s growing information and communications tecnology
sector once more into the spotlight. The industry, which has
benefited from active royal patronage and substantial USAID
and other donor support, has successfully carved out a niche
as a provider of software solutions and as an e-learning
innovator. Leading companies in the sector have cooperated
closely with ICT policymakers within the GOJ to form a
coherent sectoral strategy, and the GOJ has furthered the
process by investing large amounts of (primarily donor) money
in two large, long-term infrastructure projects. The focus
on Jordan,s comparative human resources advantage in IT is
beginning to pay dividends, and greater strides are likely
once Jordan,s fixed-line telephony market is liberalized
early next year. END SUMMARY.


2. (U) Jordan held its third biennial ICT Forum Sep. 13-15.
A weeklong visit by Cisco CEO John Chambers and his keynote
address at the Forum drew wide public attention to Jordan,s
IT sector. Coming on the heels of this conference, Federal
Communications Commission Chairman Michael Powell,s visit to
Jordan September 24-26 reinforced the message of USG support
of Jordan,s ICT sector, and of the particular importance of
a strong regulator in furthering sectoral growth. Last week,
Jordanian ICT companies were once again on display, with a
large delegation at Dubai,s GITEX ICT expo.

--------------
UNDER KING,S WING, ICT TAKES OFF
--------------


3. (SBU) The growth in the IT sector has been initiated
largely by King Abdullah, and the Palace has put a great deal
of political capital in to the promotion of Jordanian ICT
both within the country and abroad. Jordanians are well
aware that the emerging ICT industries of the GCC states are
heavily staffed by Jordanian nationals, and they want
Jordan,s own economy to get more than mere remittances from

this lucrative industry. Abdullah served as a catalyst in
the 2001 development, by a USAID-funded consultant with the
assistance of several leaders of prominent ICT firms, of a
five-year ICT development master plan labeled REACH. REACH
has since been annually updated with specific goals.


4. (SBU) From this strategy has sprung several new
initiatives. One of these was the formation of the
Information Technology Association of Jordan (INTAJ),a
sectoral organization of export-oriented ICT firms, which has
received considerable funding support from USAID. The latter
association has taken responsibility for the updating of the
REACH master plan, and acts as a more coherent voice of the
subsector it represents than does its predecessor (and
sometime competitor),the Jordan Computer Society (JCS),
which counts among its membership hundreds of companies
ranging from INTAJ members to (primarily) importers and
agents of foreign computer hardware, accessories, and
software, consumer electronics, and machinery incorporating
IT inputs.


5. (SBU) Exemplary of the more focused and aggressive posture
adopted by INTAJ was its role in a late 2003 dispute with
pre-shipment quality assurance and safety inspection program
DAMAN (ref A),which was creating substantial delays in the
import of essential ICT components and causing substantial
monetary losses to INTAJ member companies. INTAJ, speaking
for the sector, negotiated with the Jordan Institute of
Standards and Metrology (JISM),the primary GOJ stakeholder,
an agreement providing for an exemption from routine
inspections for products made by an agreed list of prominent
international ICT component manufacturers. More recently,
INTAJ successfully pressed the GOJ for an exemption for ICT
imports from a recently imposed 2 percent prepaid income tax
on all imports.


6. (SBU) Abdullah has gone to bat for the ICT sector in other
ways as well, using his visits to Europe and the United
States and Jordanian-hosted international conferences such as
the World Economic Forum to raise the profile of Jordanian IT
companies. This aggressive approach has produced results not
only in terms of high-profile overseas deals made by
Jordanian IT firms and of partnerships between (primarily
U.S.-based) foreign and Jordanian ICT corporations, but also
in terms of cooperation between foreign ICT corporations and
the GOJ itself. For instance, a partnership agreement signed
in May 2004 between the GOJ and Microsoft, under which the
GOJ committed to equip all of its computers with licensed
Microsoft software (purchased at a reduced rate) in return
for Microsoft,s commitment to train GOJ employees on the
software,s use, to assist in the ongoing e-government
project, and to match GOJ investments in a variety of
projects employing Microsoft products. The strategic
partnership signed between the GOJ and Cisco, and Cisco's
subsequent strong role in supporting and funding e-learning,
is another product of Abdullah's activism on the part of the
sector, which has resulted in a close personal relationship
between Abdullah and Chambers and a deep involvement by
Chambers in promoting Cisco's support to Jordan.

-------------- --------------
GOJ ENHANCES ICT EDUCATION; CREATES COMPETITIVE NICHE
-------------- --------------


7. (U) Perhaps the most ambitious of these public-private
partnerships are those surrounding education: the Education
Reform for a Knowledge Economy (ERfKE),one of whose aims is
to provide all of Jordan,s schools with Internet-connected
computers; the Jordan Education Initiative, which aims to
provide e-learning platforms and content for those computers;
and the National Broadband Network (NBN),which aims to lay a
broadband link between all Jordanian schools. The ERfKE is
the beneficiary of $380 million (over five years) in direct
GOJ funding, World Bank and EIB soft loans (which USAID
assistance helped to secure),and direct grants from USAID
and donor agencies of the UK, Canada, Japan, and Germany,
approximately a quarter of which goes to ICT. The ICT
component of the program so far has equipped over 1,650
schools with computers and connected almost 1,000 to the
Internet. The GOJ has allocated to the NBN $79 million in
funds from the Socio-Economic Transformation Plan (SETP,
funded completely by donor grants),whose network design was
laid out by USAID-funded consultants. Cisco is providing
free technical support and project management assistance and
reduced-price components in return for exclusive use of Cisco
components in certain parts of the network. The NBN has
already linked all six Jordanian universities to each other,
and plans to have 226 Jordanian schools (out of 3200)
connected within three years. The fiber going to the rest of
the schools, along with 75 Knowledge Stations (community
access centers in poor and rural areas of Jordan),will be
easier to build. The GOJ hopes to link them all by 2012 with
either fiber or, in some isolated areas, wireless broadband
connectivity. In addition, the NBN has been configured to be
able to double as a telecommunications network to serve other
GOJ needs, including a nationwide first responders network
and inter-agency e-government link.


8. (SBU) It is the JEI, however, that is the most potentially
transformative part of the GOJ,s ICT education drive. Over
41 foreign public and private partners, including USAID,
MEPI, Microsoft, Cisco, IBM, Hewlett Packard, and Dell, have
invested over JD 15 million ($21 million) in over twenty
different e-learning content development projects, in
partnership with domestic Jordanian firms. Innovative
Jordanian companies such as Rubicon (now in a partnership
with Cisco),Menhaj (now in partnership with Microsoft),and
Integrated Technology Group (ITG) have rushed to take
advantage of the funding available through the JEI. Firms
like these, in producing products to meet GOJ demands, have
given Jordan a strong edge in production of innovative - and
especially Arabic-language - e-learning software. Several are
now negotiating with the educational systems in other
countries, particularly in the Gulf, to license their
software for those markets and have scored some major
successes. ITG recently began implementation of an agreement
with Apple and the Government of Bahrain to essentially
become the sole e-learning provider to all Bahraini schools,
and, in a coup of which the GOJ is particularly proud,
Rubicon has sold a math e-learning program to the State of
New Jersey.


9. (U) Outside of these major public-private initiatives, ICT
educational partnerships are also on the rise. Jordan
currently hosts computer training centers - some of which
provide degrees - funded by ICT majors including Microsoft
and Cisco (expanded as part of the GOJ,s overall partnership
with these corporations),IBM, and Oracle. Jordan,s
technical universities are forming partnerships with private
U.S. technical institutions as well, ranging from a recently
announced Amman "Entrepreneurship Center" coordinated with a
similar center at the Massachusetts Institute of Technology
to the long-running ICT training arrangement between
for-profit New York Institute of Technology and Irbid,s
tech-focused Yarmouk University.

--------------
E-GOVERNMENT STANDS UP SLOWLY
--------------

10, (U) Slower to develop, but probably of equivalent
long-term importance, has been the introduction of the
Jordanian government to the information age. Leading the
charge in this arena has been the Ministry of ICT, which is
working, in close association with USAID, to computerize
Jordanian ministries and agencies, to connect them to each
other and to the Internet, and to develop web-based
applications to help the ministries and agencies in
interfacing with the consumers of their services. After an
initial exploratory phase in which several of these web-based
applications were developed with USAID help, the GOJ has
opted to concentrate on computerizing and connecting the
government first, allowing the government-to-citizen
interfacing to grow more organically from government
institutions that themselves see the need for such interfaces
and understand the technology well enough to give these
concepts their full buy-in.


11. (SBU) Six GOJ entities have so far been linked together,
with a further four expected to be on the network by the end
of the year, and a total of eighteen by June. The connection
of the remaining 108 departments should be facilitated by the
built-out NBN fiberlink between Jordanian schools, and should
be completed at relatively low cost by 2009. As part of this
process, the Ministry of ICT is working to hive off a part of
itself into the National IT Center, which will operate as
part of the Prime Ministry to coordinate all IT activities of
all GOJ entities, including JEI and the e-government program.
USAID funded the creation of the precursor unit to the
National IT Center, and is now working to help with its
unbundling.


12. (SBU) The money put into the GOJ e-government program,
while not attaining the heights reached by JEI, has still
been enough to attract Jordanian firms, to which the GOJ has
directed most of its contracts. This has allowed such firms
to build their businesses in a large niche where Jordanian
firms have traditionally had a regional competitive edge: the
provision of software and network solutions based on products
produced in the developed world. Firms like Eskadenia and
Estarta are gaining the experience needed to compete with
South and East Asian and Western companies for large
contracts being offered especially in the Middle East -
especially in GCC countries, which are racing to upgrade
their ICT infrastructure while high oil prices make surplus
government monies available. Still, it remains to be seen
whether such firms could thrive without the GOJ as a client;
as of 2002, the most recent figures available for the ICT
sector, the GOJ consumed over a quarter of all goods and
services produced by Jordan,s IT companies.


13. (SBU) The e-government program has also given the GOJ
more scope to bargain with world-class ICT firms - by
expanding the size of the its ICT use, the GOJ has made
itself a more attractive candidate for partnerships like the
Microsoft licensing agreement and a soon-to-be-launched
agreement with Bearing Point to train GOJ personnel in
management techniques.


--------------
JT AS SECTORAL BOTTLENECK
--------------


14. (SBU) While the sector has made substantial progress over
the past several years, more complete exploitation of
Jordan,s domestic IT capabilities may await the opening of
Jordan,s fixed-line infrastructure. This sector has been and
is currently under the legal monopoly of Jordan Telecom (JT),
whose privatization and then strategic partnership with
France Telecom (FT) over the past five years have brought it
a long way - but not all the way - towards a competitive
model. However, as part of Jordan,s WTO accession process,
Jordan pledged to work to end its fixed-line monopoly by
January 1, 2005, and Jordan,s Telecommunications Regulatory
Commission (TRC) is doing its best to work out the modalities
of the opening.


15. (SBU) Minister of ICT Fawaz Zu,bi, in his Sep. 26
meeting with Chairman Powell, expressed his belief that the
upcoming phase of liberalization will be critical to the
future of the ICT sector. The high international tariffs
imposed by JT have made some of Jordan,s more
internationally focused ICT companies uncompetitive, as has
the slow roll-out and high prices of broadband access and
other fixed-line services. Zu,bi believes that FT,s stress
on profit maximization since the conclusion of its strategic
partnership with JT has not been consonant with GOJ goals.
He hinted to Powell that rather than expand FT,s control of
JT, as FT is requesting, he would be looking seriously at
ending their management contract. More broadly, Zu,bi
praised the National Broadband Network (whose building JT had
resisted) as giving the GOJ leverage against JT and giving
the TRC space to move against JT if necessary, and said that
regardless of whether FT remains at the driver,s seat of JT,
the GOJ would retain a "golden share."


16. (SBU) Despite the support of Zu,bi, who in any case
plans to voluntarily depart the MOICT in the upcoming Cabinet
reshuffle (ref B),the TRC is contemplating the strong
probability of a nasty battle with JT and other incumbents
over the opening of the fixed-line sector. The prospect of
such a fight, the sequel of a battle between the TRC and the
mobile telephony sector's two incumbents over the awarding of
a third GSM license (ref C),has left the TRC scrambling for
support. The visit of Chairman Powell, and the rhetorical
backing he gave to the TRC,s upcoming project, were
invaluable in this respect.


17. (SBU) The GSM license fight also left the TRC aware of
its own organizational deficiencies, and during Chairman
Powell,s visit, TRC CEO Muna Nijem asked for his advice in
the areas of dispute resolution and enforcement, spectrum
allocation, and especially public relations. Chairman Powell
stressed the need for the TRC to articulate an overall vision
of the direction in which the sector should be going, but to
always be ready to admit when it had made the wrong decision
and reverse course. FCC agreed to provide further advice and
support to the TRC in the areas of public relations and
dispute resolution, in a series of videoconferences with TRC
staff and visits by FCC personnel over the upcoming year, in
cooperation with a USAID-financed advisor already in
residence at the TRC.

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


18. (SBU) The strong level of GOJ support for Jordan,s
nascent ICT sector is the primary reason for the growth that
the sector has experienced to date. With heavy donor
assistance, the GOJ is creating a voracious demand for ICT
services that it is turning to the Jordanian private sector
to supply. It remains to be seen whether Jordan,s ICT
sector will be able to stand on its own if and when
public-directed funding recedes to more "normal" levels, but
initial signs are good; exports are rising along with the
more GOJ-driven domestic sales as Jordanian firms develop
more experience cooperating and competing in an international
arena. The ongoing improvements to Jordan,s ICT
infrastructure and education should only continue to drive
costs down and create a more fertile arena for domestic ICT
firms.


19. (SBU) In its support of Jordanian ICT, USAID appears to
have picked a winner: strong GOJ buy-in and international
donor and private support has proved to be a multiplier to
USAID,s relatively modest initial expenditures, and a
wealth-creating industry is springing up where there was none
before. The GOJ,s pursuit of partnerships with high-profile
(and primarily US-based) ICT firms should help to further
strengthen trade ties and over time substantially increase
traditionally weak U.S. investment in Jordan. And the ICT
initiatives developed by Jordan, especially in terms of
ICT-based curriculum reform, are already being viewed as a
model by several regional states for whom curriculum is a USG
priority. Strong and sustained U.S. support for the TRC over
the next several months, during which its program for the
liberalization of the fixed-line sector must be formulated
and approved, will however be critical to removing the last
great internal obstacle to the competitiveness of the ICT
sector: the stranglehold held by JT (septel).


20. (U) Chairman Powell did not have the opportunity to clear
this cable prior to its release.
HALE