Identifier
Created
Classification
Origin
08AMMAN655
2008-03-02 06:23:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Amman
Cable title:  

DOMESTIC IT SECTOR GROWS DESPITE LURE OF DUBAI

Tags:  EINT EINV TINT JO 
pdf how-to read a cable
VZCZCXRO2339
RR RUEHDE
DE RUEHAM #0655/01 0620623
ZNR UUUUU ZZH
R 020623Z MAR 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 1935
INFO RUEHAD/AMEMBASSY ABU DHABI 1197
RUEHLB/AMEMBASSY BEIRUT 2807
RUEHEG/AMEMBASSY CAIRO 3560
RUEHDM/AMEMBASSY DAMASCUS 3821
RUEHKU/AMEMBASSY KUWAIT 0862
RUEHMK/AMEMBASSY MANAMA 0656
RUEHRH/AMEMBASSY RIYADH 1905
RUEHTV/AMEMBASSY TEL AVIV 1054
RUEHDE/AMCONSUL DUBAI 0401
RUEHJI/AMCONSUL JEDDAH 0796
RUEHJM/AMCONSUL JERUSALEM 4893
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 AMMAN 000655 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ELA and EEB/CIP/BA (A. Gibbs)

E.O. 12958: N/A
TAGS: EINT EINV TINT JO
SUBJECT: DOMESTIC IT SECTOR GROWS DESPITE LURE OF DUBAI

REFS: A. Amman 504

B. 07 Amman 4717

C. 07 Amman 4207

D. 07 Amman 3654

UNCLAS SECTION 01 OF 02 AMMAN 000655

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ELA and EEB/CIP/BA (A. Gibbs)

E.O. 12958: N/A
TAGS: EINT EINV TINT JO
SUBJECT: DOMESTIC IT SECTOR GROWS DESPITE LURE OF DUBAI

REFS: A. Amman 504

B. 07 Amman 4717

C. 07 Amman 4207

D. 07 Amman 3654


1. (U) Summary: The Jordanian information technology (IT) sector
grew an estimated 25 percent in 2007, and is exploiting strong
technical, entrepreneurial and Arabic cultural awareness skills. A
growing mobile and broadband internet telecommunications sector is a
strong complement, and the government's e-government initiative
provides a solid growth opportunity. Still, the Jordanian IT sector
is criticized by officials and industry leaders for containing too
many small businesses, lacking managerial skills, and lacking
sufficient financing. Rapid growth in the Gulf is pulling Jordanian
engineers away, and threatens the domestic industry. End Summary.

GROWTH AND STRENGTHS OF THE IT SECTOR
--------------


2. (U) Information technology is one of the most promising sectors
for Jordan. Int@j, the Jordanian IT industry association, estimates
that the sector generated revenues of USD 770 million in 2006 and
likely approached USD 1 billion in 2007. Minister of Information
and Communications Technology (MOICT) Bassem Rousan told EconOffs
that his ministry needs to start a campaign to educate parliament
and Jordanians about what IT is and the role it plays in the
economy. Hazem Malhas, CEO of Optimiza, Jordan's largest IT
company, said that the IT sector should be considered to include not
just IT consulting firms, but also the talented IT sections within
Jordanian banks and telecommunications companies.


3. (SBU) Rousan said that in addition to strong technical skills,
Jordan's IT competitive advantage is technical workers with Arabic
language skills and understanding of the tribal aspects of culture
in the Gulf states. Malhas elaborated that this is especially
important when competing against Indian IT companies for work in
Saudi Arabia, and is also an advantage over Egyptian competitors.
Rousan said Jordan is home to one 150-seat IT call center, and a
second 350-seat call center will open this month. He added Cisco is
also about to increase its number of technical customer service
positions in Jordan to support the Middle East region.

TELECOM SECTOR GROWTH COMPLEMENTS IT
--------------


4. (SBU) Post interlocutors agree that the growth of the
telecommunications sector, particularly the ubiquity and low prices
of mobile phones, has been good for the economy, especially the IT
sector. Rousan described efforts to encourage private sector
internet service providers to use Jordan's fiber optic loop for
education to offer broadband services to areas outside of Amman.
Mamoun Balqar, Vice-Chairman of the Telecommunications Regulatory
Commission, said that the second WIMAX service roll-out by ATCO
Clearwire has rightfully been delayed to ensure a technical success
(Ref B). Rousan said both this fiber optic loop and the roll-out of
WIMAX should help to break the hold that Jordan Telecom/Orange has
on telecommunications services. Malhas and Balqar agreed that WIMAX
should have a significant impact on broadband penetration and use,
and should lower prices for all internet connectivity which will
help Jordan's economy.

E-GOVERNMENT IS AN OPPORTUNITY FOR GROWTH
--------------


5. (SBU) Malhas cited the government's e-government initiative (Ref
D) as an opportunity for the IT sector, as well as a challenge. He
said that the large size of the initiative would allow small
businesses to hire and develop staff, but that just 30 percent of
the e-government funds were spent last year. Rousan said that a
variety of firms have been involved thus far, but acknowledged that
the e-government effort has highlighted problems with the tendering
process. Rousan noted that good e-government can reduce corruption
by increasing transparency and changing the relationship between
citizens and government. Rousan said he has been working with USAID
to develop a law that will cover e-commerce, e-crime, e-signature
and funds transfer. He said the law will most likely not be ready
until next year's parliament session.


AMMAN 00000655 002 OF 002


WEAKNESSES OF THE SECTOR AND ENVIRONMENTAL THREATS
-------------- --------------


6. (U) Rousan and Malhas agreed that the greatest weakness of the
Jordanian IT sector is that it is comprised of many small companies.
Minister of Industry and Trade Amer Hadidi highlighted at a
February 24 SME conference that 98% of businesses in Jordan are
small and medium-sized enterprises, and that they employ 33 percent
of the workforce. Malhas said there are no regional information
technology firms - only small national and very large international
systems integrators - and that he has grown his 450-employee
business through mergers. Rousan said he is trying to convince
companies to merge in order to be able to compete for bids against
the large, international system integrators. Both also believe that
Jordanian companies need to specialize in particular industry
sectors, such as insurance or banking, or particular functional
areas, such as accounting or inventory management, in order to win
competitive bids.


7. (SBU) A second weakness in Jordan's IT sector is the lack of
readiness of recent graduates for the workforce. Rousan said that
Jordan has 6,000 technical graduates per year, and that while the
university technical programs are good, graduates are "not quite
ready" for the workplace (Ref C). He said MOICT is working with
universities and vendors to integrate certification programs, such
as Cisco CCIE into the undergraduate programs. Rousan and Malhas
agreed that Jordanians have strong technical and engineering skills,
but often lack complementary marketing and management skills.


8. (SBU) Malhas also described financing as a challenge to the
growth of small IT businesses with a dearth of venture capital firms
and little private equity (Ref A). He said Jordan suffers from a
lack of "smart money" which combines advice and financing. Hadidi
said at the SME conference that financing was the greatest challenge
for small and medium-sized enterprises since their activities are
often difficult for banks to understand and can outgrow the
resources of family-based financing.

LURE OF DUBAI AND SAUDI ARABIA
--------------


9. (SBU) Interlocutors agreed that one of the largest threats to the
domestic IT sector was the overwhelming growth in Dubai, Saudi
Arabia, and other Gulf areas. A January 2008 report by IDC, a
global IT researcher, said that IT spending growth is 12.4 percent
in the Middle East, with nearly half of the spending in UAE and
Saudi Arabia. Rousan said that part of his job is to convince
companies that it is cheaper to keep (or put) IT positions in Jordan
than relocating Jordanians to Saudi Arabia or the UAE. Malhas said
that his business, while headquartered in Jordan, has offices in the
Gulf to focus on its many Gulf clients. Rami Al-Karmi, CEO of @
Your Service Group, agreed that the difficulty of GOJ procurement
makes it easier to find work elsewhere.


10. (U) Across industries, business owners lamented the loss of
talented employees to the Gulf. Mustafa Nasereddine, Executive
Director of Talal Abu-Ghazaleh consulting, said at a February 27 IT
competencies conference that the industry cannot stop migration, but
should attempt to keep people and encourage their return. Marwan
Hejazen, Country Commercial Officer for DHL, noted that all
Jordanian businesses are recruiting from the same small pool of
fluent English-speaking, college-educated professionals. He said
this pool also considers working in the Gulf, and that offers from
abroad were altering Jordanians' expectations for domestic salaries.
Malhas said that the rate of growth in the Gulf is unprecedented,
and that Dubai was in essence "building Chicago in five years." He
said that the growth in multi-national corporations in Dubai was
drawing not only IT professionals, but also very large numbers of
Jordanian lawyers, accountants, and doctors.

Visit Amman's Classified Website at
http://www.state.sgov.gov/p/nea/amman

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