Identifier
Created
Classification
Origin
05AMMAN9052
2005-11-22 14:01:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Amman
Cable title:  

NEW COMPANY TO BOOST IRAQI INVESTMENT IN JORDAN

Tags:  PREL ECON EAID EINV IZ 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.

221401Z Nov 05
UNCLAS SECTION 01 OF 03 AMMAN 009052 

SIPDIS

SENSITIVE

USDOC FOR 4520/ITA/MAC/ONE/PTHANOS
TREASURY FOR OASIA - LARRY MCDONALD

E.O. 12958: N/A
TAGS: PREL ECON EAID EINV IZ JO
SUBJECT: NEW COMPANY TO BOOST IRAQI INVESTMENT IN JORDAN


Summary
-------

UNCLAS SECTION 01 OF 03 AMMAN 009052

SIPDIS

SENSITIVE

USDOC FOR 4520/ITA/MAC/ONE/PTHANOS
TREASURY FOR OASIA - LARRY MCDONALD

E.O. 12958: N/A
TAGS: PREL ECON EAID EINV IZ JO
SUBJECT: NEW COMPANY TO BOOST IRAQI INVESTMENT IN JORDAN


Summary
--------------


1. (U) After eight months of discussion and bureaucratic
delay, the Rafidain Development Company, a new high-profile
Iraqi investment company in Jordan was officially
established in Amman on September 25. The company was
organized following a February 2005 meeting between Jordan's
King Abdullah and a dozen prominent Amman-based Iraqi
business figures, at which the King offered incentives for
investment by Iraqis in Jordan in projects targeting the
Iraqi market and/or utilizing Iraqi inputs. Projects being
considered include a power plant, a Dead Sea hotel, a flat
glass factory, food processing factories, and a hide
processing plant. Despite the good initial response, many
Iraqi businessmen doubt the value to Iraq of pursuing such
large projects in Jordan, as well as the company's staying
power. End Summary.

Background
--------------


2. (U) While Jordanian-Iraqi economic and commercial
relations are burgeoning, much of this activity has been
concentrated in trade, financial, and real estate
transactions, rather than in industrial or agricultural
investment. According to official GoJ statistics, Jordanian
domestic exports to Iraq grew from $142 million in 2000 to
$517 million in 2004. In the first six months of 2005,
Jordanian domestic exports to Iraq reached $282 million; in
contrast, official Jordanian imports from Iraq totaled only
$12 million. Unpublished figures provided by the GoJ
Ministry of Planning show that transit trade to Iraq grew
from $49 million in 2000 to $317.5 million in 2004. GOJ
figures indicate that Iraqi direct investment (primarily
real estate) in Jordan rose 12 percent in 2004, reaching
$416 million; Iraqi investment in Jordan in 2002 and 2003
was $348 and $371 million, respectively.


3. (SBU) Prior to the King's February 2005 initiative,
investment in Jordanian real estate or other ventures did
not provide any entitlement to Jordanian residency or other
perquisites. According to press reports and meeting
attendees, the King explained that he would like to
strengthen the economic and commercial bonds between the two

countries through long-term "win-win" job-creating
investments that would benefit both. To encourage such
investment, the King announced a program of tax and
residency concessions to individual Iraqis investing more
than $70 thousand in such projects.

Iraqi Investment in Jordan Gets Boost
--------------


4. (SBU) After many months of preliminary activity and
bureaucratic delay, the Rafidain company (no connection to
Iraq's troubled Rafidain bank) was officially registered and
elected its Board of Directors on September 24. Board
members include several well-known Iraqi Sunni, Sh'ia, and
Kurdish business figures, including Noaman al-Rawi
(Chairman),Talal al-Gaaod (Vice-Chairman),Majid al-Sadi,
Abdul Jabar al-Kubaisi, Mohammed al-Bunnia, and others.


5. (SBU) The initial capital base of the Rafidain company
is approximately $60 million; additional; according to Board
members, additional capital will be sought by expanding the
investment base and through joint venture partnerships. The
company is the fruit of a high-profile February 3, 2005
meeting of Iraqi businessmen with Jordan's King Abdullah II,
at which he encouraged stepped-up Iraqi direct investment in
Jordan to more closely bind the two economies and satisfy
the needs of the Iraqi market. The company currently has
139 individual investors, each providing between $70 and
$700 thousand in initial capital.

Major Projects Considered - But Not For Iraq
--------------


6. (SBU) Al-Rawi and al-Gaaod explained to Emboff that pre-
feasibility studies have been prepared by Deloitte Touche
for fifteen large investment projects, varying in scope from
$5 million to hundreds of millions. Potential industrial
sector projects include a $100-$150 million flat glass
factory to be pursued in 50 percent partnership with the
U.S. company Guardian Glass or with an unnamed British firm.
There is currently no flat glass factory in Jordan, and,
according to Talal al-Gaaod, the major glass factory in Iraq
is moribund.


7. (SBU) Other industrial ventures being considered include
ceramics, polypropylene bags, pharmaceutical plants,
electrical appliance assembly, leather and wool processing
(possibly using Iraqi inputs),and food, tobacco, and
cigarette packaging. Non-industrial projects being
considered include hotels in Amman and the Dead Sea, and a
500-Mmegawatt power plant to be built near the Iraqi border.
According to al-Rawi and al-Gaaod, at GOJ urging, all but
the hotels and power plant would be built at the new Ma'an
industrial estate in Southern Jordan, which Rafidain would
participate in developing in parallel with investors from
Saudi Arabia and the United Arab Emirates.

Jordanian Concessions
--------------


8. (SBU) According to al-Rawi and al-Gaaod, the King
promised active GOJ support for the company's investments.
Al-Rawi added that the King has also promisedoffered a range
of incentives to company investors, providing them with many
of the rights enjoyed by Jordanian citizens (subject to the
approval of Jordanian security authorities),including tax
and regulatory treatment as Jordanian citizens, legal
residency status in Jordan for the investor and his
dependents, Jordanian license plates for their cars, and VIP
treatment at government departments. Al-Gaood noted that
the GOJ has promised to provide further incentives and
concessions to the company on a project-by-project basis.


9. (SBU) Current investor residency requirements in Jordan
specify that the investor should provide a bank guarantee
for $75,000; however, according to al-Gaaod, the Jordanian
Government has agreed to accept a proven JD 50,000 (about
$70,000) minimum investment in the al-Rafidain company in
lieu of the bank guarantee. Adnan al-Azab, the Director
General responsible for residency at the Ministry of
Interior, confirmed to Emboff that the GOJ is providing
company board members with investor's passports, but
cautioned that these passports will not necessarily be given
to every investor in the company. He reiterated that each
case would be referred to the General Intelligence
Department (GID) for approval prior to granting Iraqi
investors residency or investors passports.

Organizing a Management Team
--------------


10. (SBU) Al-Gaaod explained that the company is currently
in the process of preparing its offices and recruiting the
management team. The company is seeking a world-class
executive to run the company regardless of nationality. The
international accounting firm Deloitte Touche is the
company's auditor and consultant for future projects. Al-
Rawi noted that the Board of Directors is encouraging new
investors in an effort to increase the company's capital,
and Al-Gaaod opined that the number of Iraqi investors in
the company will rapidly increase to 1,000 or more soon as
concrete operations get under way.


11. (SBU) Al-Rawi and al-Gaaod noted that the Board has
decided to limit investment in the company to Iraqis and to
amounts between JD 50,000 and JD 500,000 ($70,000 and
$700,000) in reflection of the King's desire to target Iraqi
investors, and "to avoid a power struggle" between large and
small investors. Al Gaood called the company "a unique
experience in modern corporate thinking" for Iraqi high
flyers used to running their own (or family-based)
companies.

Some Iraqis Are Skeptical
--------------


12. (SBU) While company organizers display confidence, other
potential Iraqi investors are more cautious about the
company's goals and prospects. Sa'ad al-Janabi, a leading
Iraqi businessman and politician who was granted Jordanian
citizenship by King Hussein, asked skeptically why none of
these commercial projects are connected to Iraq. He
described the Iraq-Jordan linkage goals as "big talk" and
said that he will wait to "see the action first" before
deciding whether to invest.


13. (SBU) Raid Rahmani, a well known medium-size Iraqi
business figure, was more critical, claiming that "Iraqis
need to use their money to develop projects in Iraq, not
Jordan. How else can we get rid of terrorism and
insurgents?" Hassan Aldahan, a member of the Iraqi Stock
Exchange, said that he will watch the company's evolution
before deciding to invest: "If the board members bring in
professional management, why not? But if they plan to
manage the company themselves, I will stay away."

Comment
--------------


14. (SBU) King Abdullah's personal promotion of productive
investment by Iraqi business figures in Jordan is consistent
with his desire to deepen Jordanian economic and commercial
ties with Iraq, while stimulating domestic job creation.
However, over the eight months since his initiative, the
focus of the scheme has drifted in the minds of investors
and GoJ officials from commercial tie-ins to Iraq to simple
profit making in Jordan. The plan has also apparently
become entangled with the additional GoJ goal of promoting
development in the restive southern city of Ma'an, the
graveyard of earlier investment schemes.
Despite its capital, potential, and prominent leadership,
the jury remains out on the prospects of the Rafidain
company, which could still degenerate into little more than
a back-door to Jordanian residency and tax concessions.
Note: This cable was drafted before the 11/9 Amman hotel
bombings by Iraqi suicide bombers. End Note.

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