ZARQAWI'S HOMETOWN

C O N F I D E N T I A L SECTION 01 OF 04 AMMAN 009226

SIPDIS

E.O. 12958: DECL: 10/27/2009
TAGS: PGOV ECON SENV EINV ETRD SOCI JO IZ
SUBJECT: ZARQAWI'S HOMETOWN

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


1. (C) SUMMARY: Zarqa, Jordan,s second-largest city, is the
home of the bulk of Jordan,s heavy industry and infamous
terrorist Abu Mus,ab Al-Zarqawi. Zarqa has been on a losing
streak for the past decade. Underrepresented in the
Jordanian government and the Parliament because of its large
Palestinian population, the city,s fading, old-style economy
and serious pollution problems leave its largely young, poor,
and unemployed population with little to hope for. As a
result, disaffected youth are prey to extremist messages and
recruitment. Aware of the dangers, the GOJ is trying to make
the city more liveable and produce job growth. Unless and
until these changes turn the city around, however, Zarqa
seems likely to be an increasing source of problems for the
GOJ. END SUMMARY.

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"JERSEY CITY" OF JORDAN
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2. (SBU) Zarqa is not a pretty place. Stretching into
Jordan,s eastern desert, at the northeastern point of the
crescent formed by the Greater Amman megalopolis, Zarqa
presents the casual visitor with a bleak facade of row upon
row of concrete blocks housing its lower-income population,
on the outskirts of which lie scattered, smoke-belching
factories. The city began as a settlement of Circassians and
Chechens, established in 1902 and later linked to Damascus
and the rest of the Ottoman Empire by the Hijaz railway. The
establishment of first a British (later converted to Jordan
Armed Forces) military base in the 1920s, and then a
petroleum refinery in 1954, attracted Jordanians eager for
work, and this population of economic immigrants was
supplemented with political immigrants, as Zarqa (1948) and
Rusaifeh (1967) refugee camps were erected around Zarqa after
wars with Israel. The crossroads location of the city, the
availability of water supplies, and the easy access to oil
derivatives made Zarqa an attractive place in which to locate
much of Jordan,s heavy industry base, whose establishment
was made possible by a closed Jordanian economy and a
paternal GOJ posture towards such industry.


3. (SBU) The relatively recent and primarily private
sector-driven expansion of Zarqa, along with the presence of
the refugee camps, has left it with perhaps the highest
concentration of Palestinian-origin Jordanians of any city in
Jordan. The population of Zarqa is younger - and poorer -
than that of Amman (though neither as young nor as poor as
many of the areas of Jordan outside of the Greater Amman
area) and Zarqa governorate has the lowest household income
of any governorate in Jordan. The highly concentrated
population, only a short bus ride from better-off Amman, does
however seem uniquely suited for developing a culture of
disaffection. If the role played by Amman in Jordan is
something like New York City and Washington, DC rolled into
one, Zarqa would best be described as Jordan,s Jersey City.


4. (SBU) The unfortunate corollary of Zarqa's state-sponsored
industrialization has been a level of pollution - in all
forms - so serious and so obvious that Zarqa stands head and
shoulders above the rest of the pack as Jordan's worst
environmental hotspot. Successive Ministers of Environment
have pointed to Zarqa as their number one priority, but with
the exception of a recently completed, largely USAID-funded
wastewater treatment plant, little has changed. The Ministry
shut down a politically-connected steel plant earlier this
year, but the plant has reopened with a grace period to
implement a plan for reducing dust and smoke. The Zarqa
Chamber of Industry has recently put forward a proposal in
which several Chamber members would put up part of the
startup money, supplemented with substantial USAID
assistance, for a $5 million industrial wastewater treatment
plant, which they will run on a commercial basis. Both this
group and the Ministry of Water, however, point to each other
as the culprit in the lack of progress on this proposal.

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"THEY JUST DON,T GET IT"
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5. (SBU) Once a kind of showpiece of Jordan,s economy, Zarqa
now seems increasingly out of step with King Abdullah,s
vision of a "new Jordan." The opening of Jordan,s economy -
its deregulation, lowering of tariff and nontariff barriers,
and cutting of subsidies - has left old-line, heavy
industries of the kind that form the backbone of Zarqa
increasingly exposed to more competitive imports. While
Zarqa industry is far from collapse, its growth has slowed
substantially, and the city,s economic growth is no longer
able to keep up with the expanding labor force. This fact is
reflected in recently published Jordanian poverty statistics
that show a nationwide fall in the poverty rate in the period
1997-2002 from 21.3 to 14.2 percent, but a rise in the
poverty rate of Zarqa governorate - the only governorate in
Jordan to show a rise over that period.


6. (SBU) Emblematic of the problems faced by Zarqa's industry
is the Jordan Petroleum Refinery Co. (JPRC),the foundation
of Zarqa,s heavy industry base. The refinery,s expensive
construction, initially financed by Jordanian private sector
stalwarts with substantial GOJ support, only made economic
sense when paired with a 50-year concessional agreement that
began in 1957. This concession gave JPRC the exclusive right
to refine crude oil entering Jordan and to sell and import
all oil derivatives, while limiting the company,s profit
margin to seven percent. In practice, as the GOJ Ministry of
Energy was given the task of procuring crude supplies for
JPRC, the Ministry would set the prices both of JPRC,s
inputs and final product in such a way as to guarantee that
the profit margin did not fall below seven percent.


7. (SBU) This concessional agreement is now close to its
expiration, the GOJ has announced its intention to end its
expensive subsidy program within five years, and the JPRC,
which has made only a few, incremental improvements since its
foundation, now faces a stark choice: find $700 million for a
complete revamp of the refinery, or face probable extinction
in the face of cheaper and higher-quality fuel product
imports. The latter possibility would at a stroke wipe out a
bulwark of Zarqa,s middle class: the 6,000 relatively
well-compensated refinery workers. The minor restructuring
that JPRC has planed to date - spinning off and/or
outsourcing non-core functions such as its fleet of delivery
trucks - has already provoked the wrath of its powerful
union, which has twice in the past two years extracted
concessions from the refinery after threatening work
stoppages.


8. (C) Coupled with the loss of their privileged status in
the domestic market over the past five years, Zarqa,a
industry has had to deal with the more recent loss of another
protected market: Iraq. The fall of the Saddam regime in
April 2003 marked the end of the Iraq-Jordan trade protocol,
under which Iraqi oil was traded directly for Jordanian
products. Jordanian industrialists took full advantage of
this arrangement, setting up or expanding production of goods
such as pharmaceuticals and vegetable oils. The trade of
uncompetitive goods has not survived the end of the protocol,
and some of the factories have consequently felt considerable
pain. Adding insult to injury, Zarqa-based contractors and
construction suppliers have had a difficult time securing
contracts in the reconstruction of Iraq. (In a revealing
statement, the Chairman of the Zarqa Chamber of Industry
announced in April 2004 that due to the Chamber,s moral
opposition to the "occupation," his members would no longer
continue their efforts to support Iraq,s reconstruction.
This measure would not negatively affect Zarqa,s economy, he
added, because his members weren,t getting any contracts
anyway.)


9. (SBU) Even in cases where opportunities do present
themselves, Zarqawis show themselves to be no different than
other Jordanians in picking and choosing the ones they will
accept. The CEO of EAM Maliban, a recently established Sri
Lankan garment factory at Ad-Dulayl Qualifying Industrial
Zone (QIZ),on the outskirts of Zarqa, complained that after
enduring tendentious bureaucracy in his quest to set up the
factory and a training center, he had finally opened both,
only to find that he could not attract even one serious
applicant to the training center from the Zarqa region. In a
subsequent meeting at the recently and expensively remodeled
Zarqa Chamber of Commerce (which now boasts a machine that
reads the fingerprints of the Chamber,s few dozen employees
upon their entry and exit, replacing the passe punch-card
system),the Chamber,s board members all regretted the
inability of the factory to generate any interest in its jobs
in a city with such high unemployment, but unanimously agreed
that helping to solve this and similar problems was outside
the Chamber,s scope of work. Emboffs were then treated to a
lecture elaborating on the common Jordanian argument that the
current 85 JD ($120) minimum monthly wage is too low to
attract entry-level workers, who would rather remain
unemployed, and positing a doubling of the minimum wage as a
solution to this problem -- a rather surprising argument to
hear from business owners.

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DISCONTENT FUELS ISLAMIST APPEAL
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10. (SBU) According to the most recent census, around
775,000 persons reside in the Zarqa governorate, representing
about 15 percent of Jordan,s population. While there is no
hard data on the number of residents who are of Palestinian
origin, most analysts estimate a figure between 80 percent
and 90 percent. As a result of electoral gerrymandering that
favors rural, East Banker-dominated areas, only 10 out of 110
seats in the Lower House of Parliament are allotted to
winning candidates from Zarqa (9 percent of the total seats).
Three of these 10 seats are currently held by members of the
Islamic Action Front (IAF).


11. (C) MP Mohammad Arsalan (East Banker - Zarqa, 1st Dist.),
told ECON/C and A/POL/C he was very concerned that Zarqa was
becoming a "poor man,s city." According to Arsalan,
Zarqa,s population growth has been primarily driven by poor
Jordanians from rural areas who seek work in greater Amman,
but who cannot afford the high cost of housing in the
capital. Instead, they live in nearby, cheaper Zarqa. The
resulting concentration of poverty in Zarqa has led to
increased social problems, a sense of discontent among many,
and an exodus of wealthier residents, Arsalan added. Recent
GOJ initiatives to improve the quality of life in Zarqa are
suggestive of the dismal state of Zarqa's public services: a
planned government hospital in Zarqa announced by the
Minister of Health, for example, would double the number of
beds available to Zaqawis - to a still unsatisfactory 820.

12. (C) Arsalan,s concerns were echoed by MP Marzouq
Habarneh (East Banker, - Zarqa, 4th Dist.). Habarneh told
Acting Pol Counselor that he was particularly troubled by
growing restlessness among idle, unemployed young men in
Zarqa and stepped-up efforts by Islamists to reach out to
them. With no jobs and an uncertain future ahead of them,
these young men are increasingly turning to Islam - including
extremist strains - to find hope and solace, said Habarneh.
(NOTE: Habarneh confirmed that at least one of the unlicensed
preachers detained by the GOJ in October - see reftel - was
operating in Zarqa.) This trend was bolstering the strength
of the already influential Muslim Brotherhood in Zarqa, whose
active network of charitable contributions and distribution
of donated goods further broadened their popular appeal.

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A FEW POINTS OF LIGHT
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13. (SBU) The GOJ - in particular, King Abdullah - views
these developments with some dismay, and is moving ahead on
several projects (such as the new hospital mentioned above)
to improve the climate within Zarqa. The most ambitious of
these projects is Zarqa New Garden City, a urban renewal plan
under development by Mawared, a public-private land
development partnership modeled on Beirut,s Solidere company
which rebuilt that city's downtown zone. Zarqa New Garden
City will be developed in several tranches on the
2500-hectare (6,178-acre) former military base, which fronts
the main downtown street of Zarqa. The initial $900 million
tranche of the development - the infrastructure for which is
planned for a mid-2005 completion - will create an
attractive, mixed-use, multi-income neighborhood. Mawared
hopes to tap what they believe to be an unexploited market
among better-off Zarqawis seeking a better quality of life.
It is also targeting the local managerial class, most of whom
now live in affluent western Amman but might want a shorter
commute. The goal is to make life in Zarqa a slightly
lower-cost alternative to western Amman, with access to all
of the amenities of the latter. To this end, the GOJ has
tendered a feasibility study on a light rail connection
between the Abdali district of western Amman and the western
edge of this new development. The development would boost
the local job market, as new, well-off Zarqawis kept their
spending in Zarqa instead of making the trek to the malls of
western Amman. Just as important, the GOJ believes that the
development will instill hope among Zarqawis that Zarqa is
"going somewhere."


14. (SBU) Older GOJ initiatives are bearing more tangible
fruit. Ad-Dulayl QIZ and the idiosyncratic one-factory
El-Zay QIZ are posting impressive growth figures (e.g., 39
percent growth in exports from Ad-Dulayl over last year) and
already account for over sixty percent of Zarqa's total
exports. The QIZs are also stimulating local employment,
despite the apparent lack of active interest by the local
population alluded to by EAM Maliban. QIZ factory owners
are doing their best to recruit Jordanian staff. Even the
imported laborers, who still form a majority at Ad-Dulayl,
have provided substantial knock-on benefits to the local
economy (evidenced by store signs lettered in Tamil); the
local population of the village surrounding Ad-Dulayl has
quadrupled since the QIZ was founded, a clear sign that
those workers who are willing to put the effort in can each a
point beyond entry-level where they can make a livable wage.


15. (SBU) The Zarqa Free Zone, established by government
order in 1983 and the crown jewel of Jordan,s Free Zones
Corporation, has also been the site of substantial growth and
job creation. The zone, which has volume of trade five times
as large as the combined total of Jordan,s other three
public free zones, saw its combined incoming and outgoing
trade grow 66 percent in 2003 over 2002, largely due to the
dramatic expansion in transit trade to Iraq. However, some
of the new activity in the zone (e.g., Jordan,s first
assembly plant for "SamSync" branded personal computers,
scheduled to open in November),show longer-term prospects
for job growth. Zarqa Free Zone estimates the number of
people working inside it at roughly 2,000, and innovative
projects like SamSync seem likely to drive this number
further.


16. (C) Apart from government and private industry, civil
society groups are starting to play an active role in meeting
the needs of Zarqa residents. Community and women,s rights
activist Nadia Bushnaq, for example, has established a
thriving center in Zarqa that provides a variety of services,
aimed primarily at women, that include computer classes,
vocational training, legal advice, abuse counseling, and a
job bank that matches potential employers with those looking
for work. During a tour of the center, which has expanded
its programs several times since (in part with USG funds),
Bushnaq told Emboffs that due in part to the influx of the
rural poor (many with limited education and job skills),
social problems in Zarqa ranging from drug use to spousal
abuse were unfortunately on the rise. According to a survey
that her center conducted, approximately 50% of households in
Zarqa contained at least one adult who was unemployed or
underemployed. While Bushnaq was justifiably proud of the
center,s work, she said that their resources were limited
and more civil society groups were urgently needed to provide
assistance in Zarqa.

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ZARQA,S MOST (IN)FAMOUS SON
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16. (SBU) Ahmed Fadil Nazzal Al-Khalayleh is Zarqa,s best
known, if not favorite, son. Under the nom de guerre Abu
Mus,ab Al-Zarqawi, he has indelibly linked Zarqa with
terrorism. Zarqawi himself is not particularly
representative of Zarqa, however. An East Banker born to the
Bani Hassan, Jordan,s largest tribe, he stands in sharp
contrast to the vast Palestinian majority in Zarqa, most of
whom have never lived anywhere else.


17. (C) While Zarqawi,s background may be an anomaly for
Zarqa, his brand of disaffection is not, and his message
finds takers among East Bankers and Jordanian-Palestinians
alike. The relative economic decline, rising poverty, and
political underrepresentation of Zarqa have created a large
underclass of young men with few prospects, for whom
Zarqawi,s revolutionary Salafist call to action offers the
illusion of a purposeful life. The royal interest in
revitalizing Zarqa - if only to present an alternative vision
to its youth - is prudent, but the GOJ's plans will take some
time to bear fruit. The growth in new industries is more
promising, but we are not convinced this will be enough in
the near term to offset the decline of some of the mainstays
of Zarqa,s economy. Zarqa will remain a concern for the
regime for the foreseeable future.
HALE