Identifier
Created
Classification
Origin
09AMMAN834
2009-04-07 13:12:00
CONFIDENTIAL//NOFORN
Embassy Amman
Cable title:  

AQABA'S ECONOMY TREADING WATER AMID CREDIT CRUNCH

Tags:  ECON EINV PGOV JO 
pdf how-to read a cable
VZCZCXRO1645
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHAM #0834/01 0971312
ZNY CCCCC ZZH
R 071312Z APR 09
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 4820
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 000834 

SIPDIS

E.O. 12958: DECL: 04/05/2019
TAGS: ECON EINV PGOV JO
SUBJECT: AQABA'S ECONOMY TREADING WATER AMID CREDIT CRUNCH

REF: A. 08 AMMAN 2383

B. 08 AMMAN 1455

Classified By: Ambassador R. Stephen Beecroft
for reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 000834

SIPDIS

E.O. 12958: DECL: 04/05/2019
TAGS: ECON EINV PGOV JO
SUBJECT: AQABA'S ECONOMY TREADING WATER AMID CREDIT CRUNCH

REF: A. 08 AMMAN 2383

B. 08 AMMAN 1455

Classified By: Ambassador R. Stephen Beecroft
for reasons 1.4 (b) and (d).


1. (C) Summary: During a visit to Aqaba, contacts told the
DCM that most real estate development projects in the city
were on hold due to the lack of financing. Although trade
volume through Aqaba's port remains steady, some question
whether the fundamentals of Aqaba's economy are strong enough
to maintain enthusiasm for investment in the city. A
controversial transfer of land occupied by the general cargo
port to Emirati investors is behind schedule. End Summary.

Construction Halted
--------------


2. (C) Contacts in both business and government told the DCM
that a dearth of financing from the Gulf and tightening
credit lines from Jordan's Central Bank had effectively
halted construction on most real estate development projects
in Aqaba. With the exception of a few nearly completed
hotels, Aqaba is a city of motionless cranes and
half-constructed buildings. Contacts portrayed the lack of
financing as a temporary problem, emphasizing that most
projects were merely paused rather than canceled. The Aqaba
Special Economic Zone Authority (ASEZA) Chief Commissioner
Hosni Abu Gheida complained that Jordan's central bank was
"being difficult" and "completely closing" credit lines in
spite of Aqaba's solid fundamentals. (Note: ASEZA serves as
Aqaba's local government as well as the administrator of the
local economy. End Note.) Gheida remained optimistic that
Aqaba would "boom again" once the economic storm had passed.



3. (C) The non-real estate indicators of economic activity
in Aqaba seem to be holding steady -- volume at the general
cargo and container ports remains constant, while shipments
from Aqaba's phosphate port are reportedly down slightly. A
local businessman in the textile sector, however, said that
sales were down in Aqaba just as they were in the rest of
Jordan. He accused ASEZA of massaging economic statistics to
maintain the perception of economic growth needed to lure
investors. The sales manager of the Aqaba Movenpick Hotel
told Econoff that bookings were slowly rebounding from the

lows of the Gaza crisis in December and January but still
reflected the global economic downturn.


4. (C) Sheldon Fink, manager of the Aqaba Industrial Estate,
a business park set up to attract international investors,
said that his goal was "to break even this year" in the hopes
of a return to business as usual in 2010. He portrayed the
slump as a wakeup call for ASEZA, which had offered little in
the way of government support for investors under Abu
Gheida's leadership. Now that the momentum of investment was
slowing, ASEZA found itself courting developers more
aggressively and doing more to keep existing projects afloat.
Fink warned that if the downturn pushed further into 2010
than expected, there was a real possibility that real estate
projects could be cancelled, leading to a serious challenge
to ASEZA and the growth assumptions of its economic model.
Nevertheless, Fink (generally a skeptic about ASEZA's
capacity) confided that the situation is better than he
expected a year ago, and that he is moving forward with a
deal to export energy from Aqaba to neighboring Eilat because
he remains optimistic about Aqaba's long term future.

Port Deal Developments
--------------


5. (SBU) In 2008, Jordan's government sold the land
currently occupied by Aqaba's general cargo port to an
Emirati holding company for 500 million dollars -- money
which was used to buy back Jordan's debt from Paris Club
members. At the time, members of Jordan's political elite
heavily criticized the deal, which coincided with several
other high-profile privatizations of public land (Ref A).
Ghassan Ghanem, Vice Chair of Aqaba Development Corporation
(which currently owns the port) emphasized to the DCM the
positive aspects of the deal, noting that the up-front costs
of infrastructure development would be the responsibility of
the developers, and that ASEZA would receive three percent of
all revenue generated by the project.


6. (C) Despite ADC's rosy view of the port deal, the group
still has significant work to do if it is to abide by the
terms of the contract and avoid costly penalties. The first
area slated for transfer in July 2009 is a residential zone
of still-occupied apartment blocks and two story villas which
must be razed and cleared. Ghanem said that ADC was nearly
finished with a compensation agreement that will be presented
to residents of the area, and expected that it would be

AMMAN 00000834 002 OF 002


released in the coming weeks. Anticipating legal challenges
and the time necessary to clear the area, it seems highly
unlikely that the first tranche of land will be ready for
transfer in time. On the up side, the planning and
construction of the new general cargo port seems to be on
schedule.


7. (C) Ghanem told the DCM that there were "hidden
provisions" in the port contract which could be used to
permit the construction of casinos in the new development,
and predicted that gambling (at least for non-Jordanians)
would be a reality in five years. He brushed aside the
public furor of summer 2008 over the now-cancelled Dead Sea
casino project, calling it a "public relations operation"
designed to prepare public opinion for legalized gaming.

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


8. (C) Aqaba's business elite is taking the economic
slowdown in stride for the time being. Forward momentum on
the city's many construction and development projects has
stalled, but there are no signs that Aqaba's economy is
losing ground. Aqaba's political and economic chieftains are
keeping a positive attitude and hoping that the economy
recovers quickly, knowing that the cancellation of a large
real estate project could spook international investors and
put a rapid end Aqaba's real estate boom. If investors flee,
it would put Aqaba's leadership, already the subject of
doubt, under the microscope.

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