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

221401Z Nov 05

UNCLAS SECTION 01 OF 03 AMMAN 009052 
 
SIPDIS 
 
SENSITIVE 
 
USDOC FOR 4520/ITA/MAC/ONE/PTHANOS 
TREASURY FOR OASIA - LARRY MCDONALD 
 
E.O. 12958: N/A 
TAGS: PREL ECON EAID EINV IZ JO
SUBJECT: NEW COMPANY TO BOOST IRAQI INVESTMENT IN JORDAN 
 
 
Summary 
------- 
 
¶1.  (U) After eight months of discussion and bureaucratic 
delay, the Rafidain Development Company, a new high-profile 
Iraqi investment company in Jordan was officially 
established in Amman on September 25.  The company was 
organized following a February 2005 meeting between Jordan's 
King Abdullah and a dozen prominent Amman-based Iraqi 
business figures, at which the King offered incentives for 
investment by Iraqis in Jordan in projects targeting the 
Iraqi market and/or utilizing Iraqi inputs.  Projects being 
considered include a power plant, a Dead Sea hotel, a flat 
glass factory, food processing factories, and a hide 
processing plant.  Despite the good initial response, many 
Iraqi businessmen doubt the value to Iraq of pursuing such 
large projects in Jordan, as well as the company's staying 
power.  End Summary. 
 
Background 
---------- 
 
¶2.  (U) While Jordanian-Iraqi economic and commercial 
relations are burgeoning, much of this activity has been 
concentrated in trade, financial, and real estate 
transactions, rather than in industrial or agricultural 
investment.  According to official GoJ statistics, Jordanian 
domestic exports to Iraq grew from $142 million in 2000 to 
$517 million in 2004.  In the first six months of 2005, 
Jordanian domestic exports to Iraq reached $282 million; in 
contrast, official Jordanian imports from Iraq totaled only 
$12 million.  Unpublished figures provided by the GoJ 
Ministry of Planning show that transit trade to Iraq grew 
from $49 million in 2000 to $317.5 million in 2004.  GOJ 
figures indicate that Iraqi direct investment (primarily 
real estate) in Jordan rose 12 percent in 2004, reaching 
$416 million; Iraqi investment in Jordan in 2002 and 2003 
was $348 and $371 million, respectively. 
 
¶3.  (SBU) Prior to the King's February 2005 initiative, 
investment in Jordanian real estate or other ventures did 
not provide any entitlement to Jordanian residency or other 
perquisites.  According to press reports and meeting 
attendees, the King explained that he would like to 
strengthen the economic and commercial bonds between the two 
countries through long-term "win-win" job-creating 
investments that would benefit both.  To encourage such 
investment, the King announced a program of tax and 
residency concessions to individual Iraqis investing more 
than $70 thousand in such projects. 
 
Iraqi Investment in Jordan Gets Boost 
------------------------------------- 
 
¶4.  (SBU) After many months of preliminary activity and 
bureaucratic delay, the Rafidain company (no connection to 
Iraq's troubled Rafidain bank) was officially registered and 
elected its Board of Directors on September 24.  Board 
members include several well-known Iraqi Sunni, Sh'ia, and 
Kurdish business figures, including Noaman al-Rawi 
(Chairman), Talal al-Gaaod (Vice-Chairman), Majid al-Sadi, 
Abdul Jabar al-Kubaisi, Mohammed al-Bunnia, and others. 
 
¶5.  (SBU) The initial capital base of the Rafidain company 
is approximately $60 million; additional; according to Board 
members, additional capital will be sought by expanding the 
investment base and through joint venture partnerships.  The 
company is the fruit of a high-profile February 3, 2005 
meeting of Iraqi businessmen with Jordan's King Abdullah II, 
at which he encouraged stepped-up Iraqi direct investment in 
Jordan to more closely bind the two economies and satisfy 
the needs of the Iraqi market.  The company currently has 
139 individual investors, each providing between $70 and 
$700 thousand in initial capital. 
 
Major Projects Considered - But Not For Iraq 
-------------------------------------------- 
 
¶6.  (SBU) Al-Rawi and al-Gaaod explained to Emboff that pre- 
feasibility studies have been prepared by Deloitte Touche 
for fifteen large investment projects, varying in scope from 
$5 million to hundreds of millions.  Potential industrial 
sector projects include a $100-$150 million flat glass 
factory to be pursued in 50 percent partnership with the 
U.S. company Guardian Glass or with an unnamed British firm. 
There is currently no flat glass factory in Jordan, and, 
according to Talal al-Gaaod, the major glass factory in Iraq 
is moribund. 
 
¶7.  (SBU) Other industrial ventures being considered include 
ceramics, polypropylene bags, pharmaceutical plants, 
electrical appliance assembly, leather and wool processing 
(possibly using Iraqi inputs), and food, tobacco, and 
cigarette packaging.  Non-industrial projects being 
considered include hotels in Amman and the Dead Sea, and a 
500-Mmegawatt power plant to be built near the Iraqi border. 
According to al-Rawi and al-Gaaod, at GOJ urging, all but 
the hotels and power plant would be built at the new Ma'an 
industrial estate in Southern Jordan, which Rafidain would 
participate in developing in parallel with investors from 
Saudi Arabia and the United Arab Emirates. 
 
Jordanian Concessions 
--------------------- 
 
¶8. (SBU) According to al-Rawi and al-Gaaod, the King 
promised active GOJ support for the company's investments. 
Al-Rawi added that the King has also promisedoffered a range 
of incentives to company investors, providing them with many 
of the rights enjoyed by Jordanian citizens (subject to the 
approval of Jordanian security authorities), including tax 
and regulatory treatment as Jordanian citizens, legal 
residency status in Jordan for the investor and his 
dependents, Jordanian license plates for their cars, and VIP 
treatment at government departments.  Al-Gaood noted that 
the GOJ has promised to provide further incentives and 
concessions to the company on a project-by-project basis. 
 
¶9.  (SBU) Current investor residency requirements in Jordan 
specify that the investor should provide a bank guarantee 
for $75,000; however, according to al-Gaaod, the Jordanian 
Government has agreed to accept a proven JD 50,000 (about 
$70,000) minimum investment in the al-Rafidain company in 
lieu of the bank guarantee.  Adnan al-Azab, the Director 
General responsible for residency at the Ministry of 
Interior, confirmed to Emboff that the GOJ is providing 
company board members with investor's passports, but 
cautioned that these passports will not necessarily be given 
to every investor in the company.  He reiterated that each 
case would be referred to the General Intelligence 
Department (GID) for approval prior to granting Iraqi 
investors residency or investors passports. 
 
Organizing a Management Team 
---------------------------- 
 
¶10.  (SBU) Al-Gaaod explained that the company is currently 
in the process of preparing its offices and recruiting the 
management team.  The company is seeking a world-class 
executive to run the company regardless of nationality.  The 
international accounting firm Deloitte Touche is the 
company's auditor and consultant for future projects.  Al- 
Rawi noted that the Board of Directors is encouraging new 
investors in an effort to increase the company's capital, 
and Al-Gaaod opined that the number of Iraqi investors in 
the company will rapidly increase to 1,000 or more soon as 
concrete operations get under way. 
 
¶11.  (SBU) Al-Rawi and al-Gaaod noted that the Board has 
decided to limit investment in the company to Iraqis and to 
amounts between JD 50,000 and JD 500,000 ($70,000 and 
$700,000) in reflection of the King's desire to target Iraqi 
investors, and "to avoid a power struggle" between large and 
small investors.  Al Gaood called the company "a unique 
experience in modern corporate thinking" for Iraqi high 
flyers used to running their own (or family-based) 
companies. 
 
Some Iraqis Are Skeptical 
------------------------- 
 
¶12. (SBU) While company organizers display confidence, other 
potential Iraqi investors are more cautious about the 
company's goals and prospects.  Sa'ad al-Janabi, a leading 
Iraqi businessman and politician who was granted Jordanian 
citizenship by King Hussein, asked skeptically why none of 
these commercial projects are connected to Iraq.  He 
described the Iraq-Jordan linkage goals as "big talk" and 
said that he will wait to "see the action first" before 
deciding whether to invest. 
 
¶13.  (SBU) Raid Rahmani, a well known medium-size Iraqi 
business figure, was more critical, claiming that "Iraqis 
need to use their money to develop projects in Iraq, not 
Jordan.  How else can we get rid of terrorism and 
insurgents?"  Hassan Aldahan, a member of the Iraqi Stock 
Exchange, said that he will watch the company's evolution 
before deciding to invest: "If the board members bring in 
professional management, why not?  But if they plan to 
manage the company themselves, I will stay away." 
 
Comment 
------- 
 
¶14.  (SBU) King Abdullah's personal promotion of productive 
investment by Iraqi business figures in Jordan is consistent 
with his desire to deepen Jordanian economic and commercial 
ties with Iraq, while stimulating domestic job creation. 
However, over the eight months since his initiative, the 
focus of the scheme has drifted in the minds of investors 
and GoJ officials from commercial tie-ins to Iraq to simple 
profit making in Jordan.  The plan has also apparently 
become entangled with the additional GoJ goal of promoting 
development in the restive southern city of Ma'an, the 
graveyard of earlier investment schemes. 
Despite its capital, potential, and prominent leadership, 
the jury remains out on the prospects of the Rafidain 
company, which could still degenerate into little more than 
a back-door to Jordanian residency and tax concessions. 
Note: This cable was drafted before the 11/9 Amman hotel 
bombings by Iraqi suicide bombers.  End Note. 
 
Hale