TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS

UNCLAS SECTION 01 OF 02 AMMAN 007495

SIPDIS

SENSITIVE

STATE FOR NEA/ELA
STATE ALSO FOR EB/TPP/ABT - E. HEARTNEY
COMMERCE/ITA/OTEXA - M. D'ANDREA
PASS TO USTR - A. HEYLIGER

E.O. 12958: N/A
TAGS: KTEX ECON ETRD JO
SUBJECT: TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS
AND PROJECTION OF FUTURE COMPETITIVENESS - JORDAN

REF: STATE 146213

SENSITIVE BUT UNCLASSIFIED. FOR USG USE ONLY. NOT FOR
DISSEMINATION ON THE INTERNET.


1. (U) Following is post's response to reftel request for
data and answers to questions on Jordan's textiles and
apparel sector. Post will provide septel further analysis of
Jordan's unique position as a country with a growing apparel
industry attempting to serve both the U.S. and European
markets based on preferential trade agreements.


2. (SBU) Answers below are keyed to questions in reftel
paragraphs 4 and 5, which are repeated here. Data for
calendar years 2003, 2004 and the first half of 2005.
(SOURCE: GOJ Department of Statistics):

2003 2004 2005
(first half)

A. Total industrial
production
(USD billions) 2.03 bn 2.40 bn 1.25 bn


B. Total textile
and apparel
production
for exports
(USD millions) 188-243* 276-358* 138-178*


C. Item B/Item A
(percentage) 9.3-11.9 11.5-14.9 11.0-14.2


D. Textile/apparel
percentage share of:
-- Imports 10.3 9.7 7.9

-- Exports 29.4 31.4 29.7
of which QIZ 24.83 28.45 25.96
Non-QIZ 4.59 2.98 3.70


E. Total manufacturing
employment 171,198** 161,998** na


F. Total textiles/
apparel employment
(% of all mfr.
jobs) 26.5 33.7 --


* NOTE: Jordan does not report accurate data on gross
industrial outputs; the GOJ relies on incomplete
self-reporting by factories. The textile/apparel range
is a crude estimate of gross output values
based on 27-35 percent value added to the FOB price of
exports. (No data available for the small domestic
production market.)

** NOTE: The employment data are based on an
unsophisticated employment survey that tries to discern
all economically active residents in Jordan and, among
those, individuals employed in the manufacturing sector.


3. (U) QIZ factories are exporting duty free to the U.S.
garments with 8 percent Israeli content (and before 2005,
quota-free). More than 95 percent of QIZ factory output is
in apparel, which constituted more than $920 million in QIZ
exports to the U.S. alone in 2004. QIZ apparel are shipped
direct to buyers such as Macy's, Lee, Levi's, JC Penney,
Walmart, Nordstrom's, and Gap. QIZ factories now account for
more than 95 percent of all apparel workers in Jordan, by
most estimates. The Ministry of Industry and Trade (MOIT)
tracks the QIZ labor force, and reported in September 2005 a
total of 53,353 QIZ employees, of which 33,928 (64%) are
foreign. According to a textile union leader, there may be
an additional 1,400 apparel workers outside the QIZs, some in
factories, but most in small production shops. This source
reported that most production shops have been absorbed into
the QIZ system as subcontractors and that there are fewer
textile workers outside this system than in previous years.


4. (SBU) -- Are host country producers receiving lower
prices due to heightened international competition?

ANSWER: Producers report competition consistent with the
previous year.


-- Have the manufacturers received more, less, or the same
number of orders as in years past? Have foreign investors,
including Asian investors, closed factories or otherwise
pulled out of local production?
ANSWER: Orders were slow in coming at the beginning of the
year, but then picked up dramatically in March. Most of the
50 factories shipping direct under the QIZ program have
enough orders to last the year. Over the next several weeks,
managers will learn whether next season's orders will come to
Jordan.
-- The USG has approved seven safeguards in 2005 to restrict
the growth of Chinese imports in those product categories,
and the European Union has reached an agreement with China to
limit import growth of certain textiles and apparel products.
Have the U.S. safeguards or the EU deal affected the export
prospects for your host country manufacturers? Has your host
government implemented, or is it considering implementing
safeguards or other measures to reduce the growth of imports
of Chinese textiles and apparel products into the host
country?

ANSWER: Safeguards probably resulted in more orders going to
Jordanian firms, hence export prospects increased. Jordan is
not likely to impose safeguards.


-- Has increased global competition affected local labor
conditions by causing employers to reduce wages, seek
flexibility from government required minimum wages, or
adversely affected union organizing?

ANSWER: Jordan's Ministry of Labor would not permit wages to
fall below the minimum set by law. However, the former trend
of wage increases in QIZs has now halted. Foreign workers
have contracts, but will not see as many opportunities to
earn bonuses as before.


-- Has the government or private industry taken action to
increase the host country's competitiveness, such as
improving infrastructure, reducing bureaucratic requirements,
developing the textiles (fabric production) industry, moving
to higher value-added goods, or identifying niche markets.
Does post think that the host government or private
industry's strategy will be successful?

ANSWER: The GOJ has taken an aggressive posture to do all
that it can within WTO parameters to improve the industry's
competitiveness. A strategy that aims to exploit a QIZ-type
arrangement with Europe (a nearby market) and continuing
access to the U.S. market - either under the QIZ or the
bilateral Free Trade Agreement (FTA) - appears to be one that
will sustain the industry at a baseline level for some years
to come.


-- If your host government is the partner in a free trade
agreement or a beneficiary of a preference program such as
AGOA, CBTPA, or ATPDEA, will this be sufficient for the
country to remain competitive?

ANSWER: The FTA is necessary but not sufficient to sustain
Jordan's industry. The combination of access to both Europe
(through the Euro-Med Agreement) and the U.S. (through QIZs
and the FTA),is the main factor that will allow the apparel
industry to be competitive in some areas.


-- Overall, if not already addressed, does post think that
the host country can be competitive in textiles and apparel
exports with the end of global textiles and apparel quotas?

ANSWER: Overall, Jordan can be competitive. However,
recruiting local labor to the factories (note the 64 percent
foreign labor force, mentioned above) remains a continuing
problem.
RUBINSTEIN