This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 AMMAN 007495 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ELA 
STATE ALSO FOR EB/TPP/ABT - E. HEARTNEY 
COMMERCE/ITA/OTEXA - M. D'ANDREA 
PASS TO USTR - A. HEYLIGER 
 
E.O. 12958: N/A 
TAGS: KTEX ECON ETRD JO
SUBJECT: TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS 
AND PROJECTION OF FUTURE COMPETITIVENESS - JORDAN 
 
REF: STATE 146213 
 
SENSITIVE BUT UNCLASSIFIED.  FOR USG USE ONLY.  NOT FOR 
DISSEMINATION ON THE INTERNET. 
 
¶1.  (U)  Following is post's response to reftel request for 
data and answers to questions on Jordan's textiles and 
apparel sector.  Post will provide septel further analysis of 
Jordan's unique position as a country with a growing apparel 
industry attempting to serve both the U.S. and European 
markets based on preferential trade agreements. 
 
¶2.  (SBU)  Answers below are keyed to questions in reftel 
paragraphs 4 and 5, which are repeated here.  Data for 
calendar years 2003, 2004 and the first half of 2005. 
(SOURCE:  GOJ Department of Statistics): 
 
                     2003        2004       2005 
                                        (first half) 
¶A. Total industrial 
   production 
  (USD billions)    2.03 bn     2.40 bn    1.25 bn 
 
¶B. Total textile 
   and apparel 
   production 
   for exports 
  (USD millions)   188-243*    276-358*   138-178* 
 
¶C. Item B/Item A 
  (percentage)     9.3-11.9   11.5-14.9  11.0-14.2 
 
¶D. Textile/apparel 
  percentage share of: 
    -- Imports      10.3         9.7        7.9 
 
    -- Exports      29.4        31.4       29.7 
  of which   QIZ      24.83       28.45      25.96 
         Non-QIZ       4.59        2.98       3.70 
 
¶E. Total manufacturing 
   employment      171,198**   161,998**     na 
 
¶F. Total textiles/ 
   apparel employment 
   (% of all mfr. 
   jobs)            26.5         33.7        -- 
 
 
* NOTE:  Jordan does not report accurate data on gross 
industrial outputs; the GOJ relies on incomplete 
self-reporting by factories.  The textile/apparel range 
is a crude estimate of gross output values 
based on 27-35 percent value added to the FOB price of 
exports. (No data available for the small domestic 
production market.) 
 
** NOTE:  The employment data are based on an 
unsophisticated employment survey that tries to discern 
all economically active residents in Jordan and, among 
those, individuals employed in the manufacturing sector. 
 
¶3.  (U) QIZ factories are exporting duty free to the U.S. 
garments with 8 percent Israeli content (and before 2005, 
quota-free).  More than 95 percent of QIZ factory output is 
in apparel, which constituted more than $920 million in QIZ 
exports to the U.S. alone in 2004.  QIZ apparel are shipped 
direct to buyers such as Macy's, Lee, Levi's, JC Penney, 
Walmart, Nordstrom's, and Gap.  QIZ factories now account for 
more than 95 percent of all apparel workers in Jordan, by 
most estimates.  The Ministry of Industry and Trade (MOIT) 
tracks the QIZ labor force, and reported in September 2005 a 
total  of 53,353 QIZ employees, of which 33,928 (64%) are 
foreign.  According to a textile union leader, there may be 
an additional 1,400 apparel workers outside the QIZs, some in 
factories, but most in small production shops.  This source 
reported that most production shops have been absorbed into 
the QIZ system as subcontractors and that there are fewer 
textile workers outside this system than in previous years. 
 
¶4.  (SBU) -- Are host country producers receiving lower 
prices due to heightened international competition? 
 
ANSWER:  Producers report competition consistent with the 
previous year. 
 
 
-- Have the manufacturers received more, less, or the same 
number of orders as in years past?  Have foreign investors, 
including Asian investors, closed factories or otherwise 
pulled out of local production? 
ANSWER:  Orders were slow in coming at the beginning of the 
year, but then picked up dramatically in March.  Most of the 
50 factories shipping direct under the QIZ program have 
enough orders to last the year.  Over the next several weeks, 
managers will learn whether next season's orders will come to 
Jordan. 
--  The USG has approved seven safeguards in 2005 to restrict 
the growth of Chinese imports in those product categories, 
and the European Union has reached an agreement with China to 
limit import growth of certain textiles and apparel products. 
 Have the U.S. safeguards or the EU deal affected the export 
prospects for your host country manufacturers?  Has your host 
government implemented, or is it considering implementing 
safeguards or other measures to reduce the growth of imports 
of Chinese textiles and apparel products into the host 
country? 
 
ANSWER:  Safeguards probably resulted in more orders going to 
Jordanian firms, hence export prospects increased.  Jordan is 
not likely to impose safeguards. 
 
 
--  Has increased global competition affected local labor 
conditions by causing employers to reduce wages, seek 
flexibility from government required minimum wages, or 
adversely affected union organizing? 
 
ANSWER: Jordan's Ministry of Labor would not permit wages to 
fall below the minimum set by law.  However, the former trend 
of wage increases in QIZs has now halted.  Foreign workers 
have contracts, but will not see as many opportunities to 
earn bonuses as before. 
 
 
--  Has the government or private industry taken action to 
increase the host country's competitiveness, such as 
improving infrastructure, reducing bureaucratic requirements, 
developing the textiles (fabric production) industry, moving 
to higher value-added goods, or identifying niche markets. 
Does post think that the host government or private 
industry's strategy will be successful? 
 
ANSWER:  The GOJ has taken an aggressive posture to do all 
that it can within WTO parameters to improve the industry's 
competitiveness.  A strategy that aims to exploit a QIZ-type 
arrangement with Europe (a nearby market) and continuing 
access to the U.S. market - either under the QIZ or the 
bilateral Free Trade Agreement (FTA) - appears to be one that 
will sustain the industry at a baseline level for some years 
to come. 
 
 
--  If your host government is the partner in a free trade 
agreement or a beneficiary of a preference program such as 
AGOA, CBTPA, or ATPDEA, will this be sufficient for the 
country to remain competitive? 
 
ANSWER: The FTA is necessary but not sufficient to sustain 
Jordan's industry.  The combination of access to both Europe 
(through the Euro-Med Agreement) and the U.S. (through QIZs 
and the FTA), is the main factor that will allow the apparel 
industry to be competitive in some areas. 
 
 
-- Overall, if not already addressed, does post think that 
the host country can be competitive in textiles and apparel 
exports with the end of global textiles and apparel quotas? 
 
ANSWER:  Overall, Jordan can be competitive.  However, 
recruiting local labor to the factories (note the 64 percent 
foreign labor force, mentioned above) remains a continuing 
problem. 
RUBINSTEIN