Jordan's Garment Association Cites Shortage of Labor as

UNCLAS SECTION 01 OF 03 AMMAN 004993

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EEB/TPP/ABT, NEA/ELA, NEA/RA, DRL, G/TIP
STATE PASS TO USTR (CMILLER, AROSENBERG, LKARESH, MMOWREY)
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA

E.O. 12958: N/A
TAGS: ECON ELAB ETRD EAID KTEX JO
SUBJECT: Jordan's Garment Association Cites Shortage of Labor as
Main Impediment to Growth in Apparel Sector

REFS: A) Mowrey-Pisani Email dated 12/10/07
B) AMMAN 4038
C) AMMAN 3992

AMMAN 00004993 001.2 OF 003


SENSITIVE BUT UNCLASSIFIED. NOT FOR DISTRIBUTION OUTSIDE USG.


1. (U) This contains an action request for USTR. See para 16.


2. (SBU) Summary: Jordanian garment exports to the U.S. fell 6.4%
during the first nine months of 2007. During a December 13 lunch,
the newly elected Board for the Jordan Garments, Accessories,
Textiles Exporters' Association (JGATE) cited a shortage of labor as
the main reason for the decline, in addition to competition from
Egypt. Many claim that factories cannot find local labor because
the Qualifying Industrial Zones (QIZ's) are located too far from
local communities or for cultural reasons, including the view that
sewing is "women's work" and a culture of shame in some communities
that frowns on women working outside the home. To overcome this
challenge, JGATE has been exploring with the Government of Jordan
(GOJ) an idea to establish satellite factories in areas of high
female unemployment. End Summary.

JGATE: Promoting the Jordanian Garment Industry
-------------- --


3. (SBU) DCM hosted a December 13 lunch with eight newly elected
members of the JGATE board, chaired by Farhan Ifram, CEO of El Zay
Ready Wear Manufacturing Company. JGATE is a non-profit, private
sector association of 35 active members, most of whom own or manage
factories in the QIZs. The association aims to increase garment
sector competitiveness and expand export capacity in Jordan through
activities in networking, attracting investment, professional
development, product/manufacturing development, training in export
readiness, and advocacy. JGATE has played a role in representing
private sector interests with the GOJ on labor. For the past two
years, USAID Jordan has provided JGATE approximately $40,000/year to
cover training for their members, as well as travel expenses for
JGATE members to attend buyer events in the U.S.

Garment Exports to U.S. Dropping
--------------


4. (SBU) USITC figures for January-October 2007 show that Jordanian
garment exports to the U.S. dropped 6.4% to $997.6 million, but
still represent 86% of Jordan's total exports to the U.S. Ifram
noted, however, that the volume of exports fell even further,
indicating that Jordan is moving to higher-value goods, which is a
good sign for the sector.


5. (SBU) One explanation given for the decline in exports was
competition from Egypt. Ifram said that factories manufacturing
denim or other water-washed garments have moved to the QIZ's in
Egypt, because water is cheaper, sometimes even free. Labor costs
in Egypt are also less costly, so competitors can underbid Jordan.
He acknowledged, however, Egypt has other problems with on-time
deliveries, efficiency, and quality, which has helped Jordan retain
a competitive edge in high-end products.

Shortage of Labor
--------------


6. (SBU) All JGATE members cited lack of labor as the main reason
for the fall in garment exports (Ref B). As of August 31, 2007,
there were 36,634 migrant and 15,212 Jordanian workers in the QIZs,
compared to 36,149 migrant and 17,928 Jordanian workers in April

2006.


7. (SBU) JGATE factory owners expressed an interest in hiring local
labor, which costs significantly less than foreign workers, but said
that they have not been able to attract new Jordanian workers to
their factories. Dana Bayyat, Executive Director of CCKM Apparel,
said that her factory's business had actually expanded, with the
recent addition of a new buyer - Fruit-of-the-Loom - for the first
time in Jordan. She tried to get 300 additional local workers but
failed. Approval was also still pending for foreign worker permits.
She worried that she was not going to get the labor needed to fill
the orders and feared turning away business, noting that the "buyers
won't come back a second time."


8. (SBU) Given the high rate of unemployment in Jordan, officially
estimated at 14%, the lack of Jordanian employment in apparel is
often perceived as cultural. There is a prevailing "culture of
shame," especially in rural areas home to the QIZs, that frowns on
women working outside the home and mingling with men. As an

AMMAN 00004993 002.2 OF 003


example, one factory owner noted that fathers generally want their
daughters home before dark, which is 5pm in the winter time and not
feasible given the commute time to the remotely located QIZ's.
Mohammad Khourma, the CEO of PrimeFive Garment Manufacturing
Company, related that he held an open house for families after one
young woman told him she wanted a job, but her family objected.
After the event, he hired her, and eventually three of her sisters
also started working in the factories. The four of them pooled
their earnings to send their brother to university.


9. (SBU) Other JGATE members noted that male pride prevents many
young, male Jordanian workers from admitting they work in a garment
factory, especially if they are involved in garment construction.
In contrast to South Asia where most of the tailors are men, for
Jordanians, sewing is "women's work." All also agreed that
socializing is a big part of the Jordanian work environment, and
most do not want to sit at a machine and be required to do precise
work. One JGATE member stated that, despite the lower salaries,
Jordanian factory workers prefer to be in the warehouse where they
can gossip, drink tea, and have the occasional smoke, but then
complain they are relegated to the lower paying jobs.


10. (SBU) Another claimed, however, that the Ministry of Labor
would not approve permits for foreign workers to do the packaging or
other lower skilled jobs, so the factories have to fill those
positions with Jordanians. Factory owners have also experienced
high turnover among Jordanians, who are often on the lookout for
better opportunities in the government or white-collar jobs in
Jordan's developing knowledge-based economy. As a result, factories
remain hesitant to put Jordanians in critical jobs if they might not
be around the following month. Despite these obstacles, Dina
Khayyat, Managing Director of Ad-Dulayl QIZ, noted that the culture
is slowly starting to change. She pointed to college kids working
part time at McDonald's, something that would have never happened
when she was young.

Difficulty in Hiring Foreign Laborers
--------------


11. (SBU) Given the lack of local labor, JGATE members continue to
see the foreign labor pool as the near-term solution. They bemoaned
the excessively bureaucratic process of hiring foreign labors in
Jordan, which normally takes three to four months. Samir Maqdah, of
Central Clothing Company, identified a "chicken-egg" problem,
explaining that factories cannot hire the additional workers unless
there are more orders, but the orders depend on the additional
workers, who normally cannot come on board until months after the
paperwork is filed.


12. (SBU) In the case of Century Tailoring, Plant Manager Adnan
Ismail said has been waiting almost six months for MOL approval of
about 100 Indian workers, because the GOJ failed to tell him about a
needed MOU with the Indian government, even though the MOL had
already accepted $7,000 in guest worker application fees. In a
separate December 12 meeting with Econcouns, the owner of Eam
Maliban factory also said that the MOL had not approved a sufficient
number of guest workers for his factory, because MOL counted only
the number of empty machines and did not take into account the
regular turnover and the number of contracts that will end in the
near future.


13. (SBU) Indeed, Minister of Labor Bassem Salem, who retained his
portfolio in the recent Cabinet shuffle, has suggested in the past
that a more difficult process for hiring guest workers might
encourage hiring local labor. Earlier in the year, it was rumored
that there was an unofficial ban against hiring more Bangladeshi
guest workers, but as of September 30, the MOL told post that it had
approved 300 new guest worker applications in 2007.

How to Maintain Growth
--------------


14. (SBU) One idea to reduce the dependency on foreign workers and
increase local labor is to have already-established investors in the
QIZ's build satellite factories in areas of high female unemployment
(Ref C). JGATE has been working on this satellite factory concept
with the GOJ. Details are still being worked out, but Maqdah
indicated that some of the satellite factories might have complete
production lines, while others might only do components, such as
cutting or packaging, with the rest of the production done in the
main QIZ factories. Salem told the Ambassador December 17 that the
GOJ had identified six plots of land, some with existing structures,
for factory expansion and was looking for private sector partners.
He said the GOJ was committed to expansion and job creation, and

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would export items under the FTA agreement if the QIZ satellite
proposal was not feasible.


15. (SBU) All acknowledged that if Jordan is to remain competitive,
manufacturers will need to develop the capacity to deliver higher
value-added products (Ref B). This may require greater integration
of information technology (IT) in production. When asked whether
Jordan could add some cultural design to its products, most said
that design was a weak area in Jordan's garment sector. The
Italians had helped with a design center but it achieved little
beyond pattern-making. Maqdah noted, however, that orders for
Islamic dress from Europe and the U.S. have been increasing.


16. (SBU) Comment and Action Requested: Increasing the number of
Jordanian workers in the garment sector has been a post priority,
and the focus of a number of USAID competitiveness programs. We
applaud the initiative of the GOJ and the private sector to develop
innovative ideas and partnerships to increase employment in this
industry and would like to be as supportive as possible. Per Refs A
and C, post requests feedback from USTR on the necessary conditions
for satellite factories to qualify as QIZ designations.

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