Peace with Israel brings dividends, but Jordan still trying to spread the wealth

Business with Israel pays off in Jordan

IRBID, Jordan — Manager Rami Kurdi snapped off a quick celebratory salute to his workers as the factory’s bell rang, marking the completion of the day’s 1,000th tracksuit in record time.

For Kurdi and the employees at the Century Standard Textile plant, one of several that manufacture clothing for top brands like Calvin Klein, Victoria’s Secret, Nike and Reebok, the new record was a source of personal pride.

It’s also the sign of the success of a key economic prize from Jordan’s peace with Israel. The factory is one of dozens in Jordan’s Qualified Industrial Zones, where companies that use a percentage of Israeli inputs can export duty-free to the United States. The QIZs, as they are known, have become the strongest engine for Jordan’s economic growth.

“Peace with Israel has paid off,” Kurdi said. “It made us so busy getting clothing to Americans that it’s hard to keep up with the demand.”

But more than 10 years after the QIZs’ creation, Jordan is struggling to ensure that the general public feels the benefit.

The QIZs have generated 36,000 jobs, but 75 percent have gone to Asian workers, mainly from Sri Lanka, India, Bangladesh and China, because Jordanians lack the necessary experience, said Abdalla Jahmani, the director of the QIZ in the northern city of Irbid. While 109 companies and subcontractors have opened in the 13 QIZs around the country, 80 percent of them are owned by non-Jordanians, mainly Arab and Asian investors using the QIZs to gain access to the U.S. market.

“We asked the government to shut them down because they’re not providing bread and butter for Jordanian families,” said Jamil Abu Bakr, a spokesman for the Muslim Brotherhood Movement, Jordan’s largest opposition group.

Government officials, however, maintain that QIZ firms — mainly textile factories — provided jobs for 9,000 Jordanians so far, a significant number considering that many lacked the professional skills for the fledging industry. Thousands more are being trained and will take over from Asian workers this year, said Elias Farraj, an adviser at the Jordan Investment Board.

Farhan Ifram, chairman of Jordan’s textile exporters’ association, said the QIZs have also boosted Jordan’s hard currency reserves through exports.

“Workers and factory owners are also spending their money in Jordan on utilities, rent, services, transportation and shipping, and customs, which is benefiting many economic sectors,” he said.

Spreading the wealth from the QIZs is important, since the United States and other proponents of the program have touted such economic benefits as a potential enticement for other Arab states to follow Jordan’s path in a Mideast peace. Egypt is the only other Arab country that has signed a peace agreement with Israel, in 1979.

The QIZs began to develop just two years after Jordan signed its historic treaty with Israel in 1994. The U.S. Congress backed the establishment of the zones in the country to boost Mideast stability through economic integration.

The agreement was aimed at alleviating Jordan’s economic difficulties that in part stemmed, at the time, from $7.3 billion in foreign debts and rampant unemployment.

In the zones, factories manufacture products with 8 percent contribution from Israel, along with a 35-percent value added content from Jordan, giving them duty free status in the U.S. Egypt concluded its own QIZ deal with the United States in 2005.

Exports from the Jordanian QIZs to the U.S. have shot up 100-fold, from $15 million in 1997 to peak at $1.5 billion in 2006, or roughly 20 percent of the country’s gross domestic product.

The zones have also brought Jordan and Israel closer economically, even if tensions remain stumbling blocks because of the faltering peace process.

Over the past decade, Israel — which previously was the main Mideast textile exporter to the U.S. — has helped its Arab neighbor develop greater skills and access in the textile industry. Ten Israeli factories opened shops in the QIZs. Exports from the QIZs go through Israel’s Mediterranean port of Haifa to reduce shipping costs from Jordan, which has only one sea outlet via the Red Sea.

The Israeli training has helped Jordan’s new garment industry take hold. Arab, Chinese and other Asian manufacturers, eager to export to the world’s largest consumer market, have also entered the QIZs with millions of dollars in investments, helping it weather the global downturn.

“I have 20 percent more orders than in 2007, which means I’m fully booked until October,” said Eric Tang, chief executive officer of a joint Hong Hong-Indian venture with a factory in Al Tajamouat Industrial City.

Now Jordanian industry is hoping for an even greater boost from new, wider free-trade deal with the United States which went into effect Jan. 1. The agreement lifts U.S. duties from all products manufactured in Jordan, even outside the QIZs, though the zones still offer an advantage in infrastructure and ease of working through bureaucracy.

Jordan has also struck similar trade deals with Canada and Turkey, said Ifram, the chairman of the textile exporters’ association, adding that a planned 2011 accord with Turkey will push Jordanian products to Europe’s lucrative and diverse market.

The QIZs were also advantageous to Israel, hiking its exports to Jordan 2.5 times from $66 million in 2001 to nearly $160 million last year — even during heightened political tension over the Israel-Palestinian conflict.

“It’s a success story, which other Arabs should learn from,” said Gabby Bar, an Israeli trade ministry official who c-chairs Jordan’s QIZs.