Identifier
Created
Classification
Origin
04AMMAN9945
2004-12-16 12:04:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Amman
Cable title:  

QIZ'S PRESS GOVERNMENT; EDGY ABOUT EGYPTIAN QIZ'S,

Tags:  ETRD PREL KTIA JO 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 AMMAN 009945 

SIPDIS

SENSITIVE

STATE FOR NEA/LEA
STATE PASS TO USTR

E.O. 12958: N/A
TAGS: ETRD PREL KTIA JO
SUBJECT: QIZ'S PRESS GOVERNMENT; EDGY ABOUT EGYPTIAN QIZ'S,
MFA, PORT ACCESS, TRUCKERS "DISRUPTION"

SENSITIVE BUT UNCLASSIFIED. FOR USG USE ONLY.

UNCLAS SECTION 01 OF 02 AMMAN 009945

SIPDIS

SENSITIVE

STATE FOR NEA/LEA
STATE PASS TO USTR

E.O. 12958: N/A
TAGS: ETRD PREL KTIA JO
SUBJECT: QIZ'S PRESS GOVERNMENT; EDGY ABOUT EGYPTIAN QIZ'S,
MFA, PORT ACCESS, TRUCKERS "DISRUPTION"

SENSITIVE BUT UNCLASSIFIED. FOR USG USE ONLY.


1. (SBU) SUMMARY: In an unprecedented series of meetings
with high government officials, Qualifying Industrial Zone
(QIZ) factory owners and zone operators have been pushing
hard for reforms in key areas affecting their operations,
from paperwork to Aqaba Port congestion to handling of a work
"disruption" by a truckers' cartel in Aqaba. With the
impending end of apparel quotas and consequent loss of a
major QIZ advantage taking its toll, QIZ businesses are
talking about pulling up stakes and relocating to countries
where the costs in time and money are fewer or more
predictable. The new Egyptian QIZs are cited as one
attractive site, given their lower wages. The government of
Jordan is listening -- right up to the highest levels. The
trade minister met with 21 QIZ owners on December 14. The
King is meeting with a QIZ group on December 22 to review
progress since a meeting in mid-October. While the GOJ has
the political will to take action, the clock is ticking as it
transforms its transport sector and governmental services to
be more accommodating to the highly competitive garment
industry that is undergoing a sea change after the expiration
of the Multi-Fiber Arrangement (MFA). It will take a major
commitment to do enough on time; at stake is Jordan's USD 1
billion garment export industry and tens of thousands of
jobs. END SUMMARY.


2. (SBU) Minister of Industry and Trade Ahmad Hindawi met
with 21 QIZ factory owners and zone operators on December 14
to review the government's action on a two-week-old work
disruption by the Jordan Truck Owners Association (for all
the puffing, the so-called strike in fact has had no impact
on truck operations, which continue unabated according to
Jordan,s Transport Minister). While listening in daily
negotiations to the truckers' demands to keep a ticket queue
system that guarantees work to all independent carriers but
stifles competition, the government has decided to stand by a
decision to exempt from the system trucks carrying QIZ
containers, according to multiple sources. The containers
carry mostly raw inputs -- cloth, yarn, and thread -- from
the Far East that are transformed in QIZs into garments. QIZ

factories have for months expressed their dismay at the
first-come-first-served ticket queue system that did not
reward efficient cargo handling or timely delivery. Truckers
were known to disappear with a QIZ load for days at a time
while they sold Aqaba duty-free goods along the way or went
home to visit family. After the late delivery, they could go
back to Aqaba, get another ticket and start all over again.
Under the new system now in operation, QIZ factories can
select the trucking company they contract to take their
containers under a direct appointment system at the port.
For those factories still using Aqaba, the "system is much
better" said a manager from Camel Factory in southern Kerak,
which relies heavily on Aqaba.

Government Steadfast
--------------


3. (SBU) A senior MOIT official told us December 14 the
government was steadfast behind its decision to exempt QIZ
loads from the ticket queue system and that this was
supported by the GOJ cabinet. Owing to the absence of the
Prime Minister, he said, GOJ negotiators from Labor and Trade
ministries were staying low-key. When the PM returns, expect
a "more forceful" approach, said the MOIT official.

QIZs Going to Dubai
--------------


4. (SBU) In the meantime, QIZ operators have been paying
about three times more than the cost through Aqaba to get
their raw inputs via land transport from Jabal Ali port in
Dubai. Over a year, they are spending tens of millions of
dollars extra above what land transport costs from Aqaba.
But they also avoid Aqaba port congestion and can predict
when their inputs will arrive. A typical Jordanian QIZ
shipping via Dubai can make an order for cloth from Shanghai
port and predict its arrival to within a day about a month
later, according to factory logistics managers. Aqaba port,
apart from being farther away from Shanghai and supported
mainly by feeder ships out of Jeddah, is taking ten days on
average to clear QIZ containers from a docked ship.
Jordanian truck owners continue to press for their "fair"
ticket system with new "guarantees," paying little heed to
the fact that 80 percent of QIZ factories have already voted
with their feet to predictable Dubai.


5. (SBU) The Aqaba Development Corporation (ADC) and the
Aqaba Container Terminal (now under the contracted private
management of AP Moller Terminals) are trying hard to address
these and other processing problems to attract back the
"lead-time" driven QIZ garment industry. In a seminar
December 14, ADC's dynamic CEO, Imad Fakhoury, led a pitch
showing all of the improvements the port has made. However,
he said it would take another six to eight weeks before a
container could be unloaded and on a truck in just seven
days; for now this "dwell time" is 12 days. They are
spurred to act rapidly by news that the Haifa Port may go on
strike in early February, which could cause major problems
for QIZs' access to the U.S. during the peak season in
February/March. (Only a small fraction of QIZs use Aqaba for
exports -- to transport goods to the U.S., preferring ships
sailing directly to the eastern U.S. seaboard out of Haifa.)


6. (SBU) ADC and the Aqaba Special Economic Zone Authority
are examples of GOJ efforts to correct 25 years of
traditional trading practices in Jordan. The remainder of
the GOJ bureaucracy will have to follow suit, according to
GOJ officials, if QIZs are to stay and thrive. One QIZ zone
operator said that Egyptian labor costs will save a factory
at least USD 200,000 a month. Proposals for cost savings
include better water service, more affordable electricity
distribution, and escaping Jordanian Customs' requirements
for letters of credit on raw inputs. (Hundreds of thousands
of dollars in operating capital sit idly in order to meet
this Customs requirement, meant to guarantee that a raw input
will be transformed into a product and exported.)


7. (SBU) King Abdullah plans to meet with the QIZ group on
December 22 to measure progress made since his last meeting
with them in mid-October. One QIZ owner said she will raise
the lack of adequate air cargo planes from Jordan to handle
QIZ exports on a short-fuse order. Virtually all of the QIZ
factory owners are confident of one thing, however: Jordan
is committed to being competitive in the international
garment industry. As Imad Fakhoury told them at the ADC
seminar, "We will do whatever it takes to make Jordan a
world-class operation."
HALE