VZCZCXYZ0001
PP RUEHWEB

DE RUEHAM #2017/01 1330929
ZNR UUUUU ZZH
P 130929Z MAY 07
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC PRIORITY 8486
INFO RUEHGB/AMEMBASSY BAGHDAD 5008
RUEHLB/AMEMBASSY BEIRUT 2616
RUEHEG/AMEMBASSY CAIRO 3138
RUEHDM/AMEMBASSY DAMASCUS 3592
RUEHRH/AMEMBASSY RIYADH 1774
RUEHTV/AMEMBASSY TEL AVIV 0578
RUEHJM/AMCONSUL JERUSALEM 4445
RUEHJI/AMCONSUL JEDDAH 0757
RUCPDOC/DEPT OF COMMERCE WASHDC
RUFTNAB/COMUSNAVCENT

UNCLAS AMMAN 002017 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
STATE PLEASE PASS TO USTR 
STATE FOR EB 
STATE FOR NEA/ELA 
 
E.O. 12958: N/A 
TAGS: EAID ECON EINV ETRD EWWT PGOV SENV SOCI JO
SUBJECT: Developing Aqaba - The Gateway to Jordan 
 
REFS: A) 04 Amman 2554; B) 04 Amman 2553 
 
¶1. (SBU) SUMMARY:  During a May 2-3 trip to Aqaba, the Ambassador 
discussed the significant achievements in development of the Aqaba 
Special Economic Zone (ASEZ) with local officials, shipping agents, 
students, young entrepreneurs, scientists, and environmental 
activists.  The private sector has invested over US$2 billion in 
large scale projects in real estate, airport services, logistics, 
and the container port in Aqaba in recent years.  A pending project 
to relocate the main port further south and turn the current 
property into a commercial and residential waterfront has lagged, 
however, due to contract issues with the Jordan Phosphate Mining 
Company.  While economic growth has been the driving force in Aqaba, 
local authorities recognize the need to ensure parallel social 
development, address environmental issues, and build the necessary 
infrastructure to support fast-paced development.  Following the 
motto "Build It, and They Will Come," the Aqaba Development 
Corporation is positioning Aqaba to become a logistical hub that 
will attract more business and investment, particularly in the 
shipping industry which is feeling the impact of a drop in the 
transit trade with Iraq.  End Summary. 
 
---------- 
Background 
---------- 
 
¶2. (U) As described in reftels, the Aqaba Special Economic Zone is a 
375 square kilometer area launched in 2001 as a duty-free, low tax 
multi-sectoral development zone.  It encompasses 27 kilometers of 
coastline, Jordan's only sea port and container port, King Hussein 
International Airport, and the city of Aqaba with about 100,000 
people.  The Aqaba Special Economic Zone Authority (ASEZA) manages 
and regulates municipal functions for the zone; as a decentralized 
agency, it enjoys relative autonomy from Amman, although any surplus 
in ASEZA's budget returns to the federal treasury.  The Aqaba 
Development Corporation (ADC), a private shareholding company owned 
by ASEZA and the GOJ, has the mission of implementing the King's 
vision of turning the area into a leading leisure and business hub. 
 
 
-------------------------- 
Development Moving Forward 
-------------------------- 
 
¶3. (SBU) In a meeting with the Ambassador, ADC's CEO Imad Fakhoury 
enthusiastically endorsed the scale of development plans in Aqaba as 
"realistic" and achievable over the next 20 years.  Comparing ADC to 
the New York/New Jersey Port Authority, he said that ADC was able to 
manage the initial challenge of building its departments and people, 
experiencing lower than expected turn-over.  With development plans 
underway and largely financed by the private sector on a 
Build-Own-Transfer (BOT) basis, he expected ADC to receive a "death 
certificate" in ten years or possibly transform itself into a 
monitoring body. 
 
¶4. (U) Fakhoury noted that the private sector has invested over US$2 
billion in projects in real estate, ports, the southern industrial 
zone, and the airport since 2001, and projected that investment in 
Aqaba will continue to grow to least US$3.8 billion.  Investment 
projects have included a $700 million public-private partnership to 
upgrade and expand the container port, whose now-streamlined 
operations were taken over by the Danish company APM Terminals.  The 
Tala Bay, Saraya, and Ayla real estate development projects are 
under way with the goal of turning Aqaba into a resort destination 
that rivals neighboring Red Sea resorts.  A Logistics Village (USD 
70 million) was launched through a BOT 21-year concession agreement 
with Jordan's Kawar Group and Agility/OPM Singapore.  A newly 
constructed 70,000 square meters warehousing facility is also ready 
for use. 
 
¶5. (SBU) Fakhoury spoke proudly of the "world class," open skies air 
airport in Aqaba, which is currently managed by Aqaba Airport 
Corporation, a subsidiary of ADC, and earmarked for privatization in 
¶2007.  He also highlighted a new cargo terminal that he hopes will 
attract more traffic to and from Iraq.  The airport lost US$2 
million initially, he said, but he expects it to go into the black 
in 2007.  Fakhoury also mentioned that the airport lost cargo 
shipments to Turkey and the UAE when Russian aircraft were denied 
entry due to noise levels.  Although an exemption was eventually 
given, Aqaba's airport lost credibility with the market in 
Fakhoury's view. 
 
Relocation of the Port Stuck 
---------------------------- 
 
¶6. (SBU) ADC's biggest challenge right now, according to Fakhoury 
and Acting ASEZA Commissioner Dr. Bilal Bashir, is relocating the 
main port further south to increase port capacity and turn the 
current property into a cruise terminal and commercial and 
residential waterfront, similar to those in Baltimore or Boston. 
Fakhoury commented that the 300 hectares of port land represent the 
most strategic real estate holding today in Jordan, and will be sold 
to the highest bidder to subsidize the port relocation. 
 
¶7. (SBU) Fakhoury said that the project is currently stuck due to 
legal issues with the Jordan Phosphate Mines Company (JPMC), whose 
lead investor is the Sultan of Brunei.  He lamented that JPMC's 
contract with the Government of Jordan (GOJ) gives the JPMC the 
upper-hand, and said he will need to hold tough negotiations lasting 
at least two to three months in order to gain agreement on moving 
the berths.  Another bone of contention for Fakhoury is that the GOJ 
set fixed tariffs for the JPMC for ten years, after which time 
tariffs can only be raised by the rate of inflation. 
 
------------------------ 
Are Aqabites Benefiting? 
------------------------ 
 
¶8. (SBU) During a meeting with the Ambassador, MP Mohammed Al Badri 
addressed concerns of long-term residents of Aqaba.  Al Badri 
complained that development and investment in Aqaba, before and 
during the ASEZA regime, was not benefiting Aqabites.  ASEZA hired 
few locals, and complained that they lack the skills needed in the 
job force.   Aqaba was becoming divided, he said, and he urged the 
Embassy to encourage greater community development efforts by AZESA 
in the future.  Specifically he mentioned inadequate schools, lack 
of a single university in the area, and the need for a full service 
hospital (the Islamic Center Society is building a new Islamic 
hospital next to the old public hospital - underscoring what Al 
Badri considered insufficient social spending in Aqaba). 
 
Economic and Social Development 
------------------------------- 
 
¶9. (SBU) The Ambassador raised Badri's concerns with the Acting 
Commissioner for ASEZA, Dr. Bilal Bashir.  The Commissioner 
responded that there are two tracks of development in Aqaba - 
economic and social.  While economic development might be the 
driving force, Bashir reassured the Ambassador that ASEZA is not 
ignoring social needs such as upgrading schools and ensuring housing 
for people who are expected to be relocated from the poor community 
of Shalala by the end of the year. 
 
¶10. (U) Instead of seeing real estate as a get-rich-quick prospect, 
investors are showing increasing interest in corporate social 
responsibility (CSR) programs that develop the workforce and benefit 
their businesses, Bashir said.  Fakhoury also highlighted community 
development as a priority, noting that ADC has its own CSR 
department that works with the Jordan River Foundation.  ADC is 
implementing programs in health care, women's empowerment, and 
education, including $1.5 million in scholarships for 60 students 
from the poorer old city.  He expressed interest in starting up an 
American University in Aqaba, and the Ambassador suggested looking 
at some U.S. universities that might be interested in starting 
branches in Jordan. 
 
¶11. (SBU) Bashir believes that there are job opportunities for the 
unemployed in Aqaba, but people remain resistant.  ASEZA established 
an employee center to help match employers with job-seeking 
candidates.  USAID is also providing assistance through vocational 
training for entry-level jobs, such as for cooks and waiters, and 
through university-level courses on the tourism and hospitality 
sector. 
 
¶12. (U) The Ambassador met with approximately 20 students and 
graduates of the USAID-funded NAJAH program that connects 
out-of-school young people to their community and the economy.  The 
participants reflected on how the program gave them confidence, 
taught them basic job interviewing skills, and changed their 
perception of their role in society.  Some noted that they did not 
know of the job opportunities available in Aqaba before the program, 
and appreciated the chance to meet prospective employers.  Others 
who previously thought some of the jobs were not good enough for 
them are now enjoying new-found employment in hotels and 
restaurants. 
 
¶14. (SBU) Bashir thanked the Ambassador for all the support that the 
USG has provided the zone over the years through USAID.  He 
reiterated the fact that ASEZ is at a critical juncture and that 
there should be no break in USG assistance provided by USAID 
programs. 
 
------------------------------- 
Other Challenges to Development 
------------------------------- 
 
Infrastructure - Electricity and Water 
-------------------------------------- 
 
¶15. (SBU) The capacity of the infrastructure, particularly the 
electrical grid, to support further development in Aqaba remains a 
challenge.  In addition to a USAID study on water, electricity and 
housing that is near completion, Spain is providing a grant to do a 
master plan on electricity requirements.  Fakhoury mentioned the 
need to think strategically about outsourcing municipal services. 
 
¶16. (U) The Ambassador discussed with Bashir the pressure that 
economic growth in Aqaba has placed on water resources.  In 
particular, the conversation focused on the need to use water from 
the nearby Disi aquifer efficiently.  Disi is a fossil aquifer that 
serves as Aqaba's main source, currently supplying 17 million cubic 
meters (MCM) annually.  Bashir indicated that Aqaba has just 
received permission to increase its withdrawal from Disi to 35 MCM 
annually. 
 
¶17. (U) The Ambassador inaugurated a USAID-funded urban landscaping 
project that reuses treated wastewater.  Efforts to demonstrate 
treated wastewater applications in urban, industrial, and 
agricultural landscapes have dramatically influenced public 
acceptance of the technology that allows for greater efficiency of 
Jordan's scarce water resources.  Purple irrigation pipe, signifying 
treated wastewater, can now be seen all over Aqaba.  The Jordan 
Phosphate Company in Aqaba is currently using large quantities of 
treated wastewater in their applications.  Today, Jordan uses 
approximately 83 million cubic meters of treated wastewater in 
urban, agricultural, and industrial applications. 
 
Environmental Issues 
-------------------- 
 
¶18. (U) During a visit to Aqaba's Marine Science Station (MSS), 
where USAID has provided grants through the Middle East Regional 
Cooperation (MERC) program to do research on the health of the 
marine environment, MSS Director Marouf Khalaf indicated that the 
bio-diversity of Aqaba's coral reef rivals that of the Great Barrier 
Reef.  Although Bashir commented that Aqaba is cleaner than it used 
to be, most interlocutors in Aqaba expressed concern about the 
negative impact of development on marine life. 
 
¶19. (U) While pointing out the rich coral reef through a 
glass-bottom boat, Fadi Sharaiha, Executive Director of the Royal 
Marine Conservation Society, noted that a team of 75 divers recently 
collected two tons of trash within 30 minutes, and voiced concern 
about the port relocation damaging the virgin reef in the south. 
Fakhoury acknowledged that moving the port south will do some damage 
to the coral reefs, and said he plans to hold a town hall meeting in 
mid-May to reassure environmental activists and the public of his 
commitment to maintaining international environmental standards. 
According to Fakhoury, ADC has funded studies on coral, and intends 
to create an environmental fund to transplant coral.  The Ambassador 
also suggested that a public awareness campaign might help address 
some of the environmental issues created by an expanding tourism 
industry. 
 
--------------------------------------- 
Shipping Industry Ready to Take on More 
--------------------------------------- 
 
¶20. (U) The Board of the Shipping Agents Association met with the 
Ambassador to discuss current challenges in the shipping industry. 
Chairman Rudain Kawar noted that the Association enjoys good 
relations with the ADC, with whom it has worked as a strategic 
partner in privatizing the Marine Services Company and developing 
the new Logistics Village.  Kawar painted a positive picture of 
Aqaba as the "Gateway to Jordan" and potential logistical hub for 
the Levant.  He noted that Aqaba has traditionally been an in-bound 
port, which ultimately makes imports more expensive given that the 
containers leave Jordan empty. 
 
¶21. (SBU) Kawar acknowledged that three years ago, the container 
port was in bad shape and poorly managed.  At one point, ships were 
forced to wait for nine days at port, causing significant congestion 
and ship surcharges.  Since APM Terminals took over, he said, the 
port has dramatically improved, experiencing minimum shut-downs and 
delays. 
 
¶22. (SBU) Kawar asked that the USG encourage the use of Aqaba with 
U.S. buyers as a shipping option for products coming out of the 
Qualifying Industrial Zones (QIZs).  He said that the shipping time 
from Aqaba to the United States has now been cut to 20-21 days, 
making it more competitive with the 18-day direct line from Haifa to 
New York.  In fact, Kawar indicated that Aqaba ended up shipping 
about 250 containers per week when Haifa service was interrupted 
during the 2006 conflict in Lebanon.  The upgraded container port, 
cheaper services, and improved customs operations, he argued, are 
selling points for Aqaba.  NOTE: In subsequent discussions with 
Econoff, several investors in the Al-Hassan QIZ indicated that they 
have only recently become aware of the improved shipping times, and 
while they agree that Aqaba would be the more economical and 
desirable option, they said that shipping agents need to do a better 
job of selling their services and rebuilding trust.  END NOTE. 
 
Drop in Transit Trade from Iraq 
------------------------------- 
 
¶23. (U) Kawar indicated that in the past three months, there has 
been a drop in cargo of about 12% that has only recently begun to 
pick up.  He opined that this is due to a general market slowdown 
and lack of liquidity for traders importing goods, as well as rising 
inflation of 6.4%. 
 
¶24. (SBU) In general, Kawar believes the container port is 
underused, particularly in serving Iraq.  Kawar commented that the 
transit trade with Iraq has dropped significantly.  While this is in 
part due to security, he noted that conditions in Iraq's western 
province of Al-Anbar have improved over the last six months.  In a 
separate meeting, Fakhoury also confirmed that it is difficult for 
Iraqis to drive into Aqaba, as the Army officers at check-points are 
strict and have difficulty distinguishing between legitimate 
business and security threats.  Many Iraqis, Kawar added, are now 
leaving Jordan because the GOJ is not renewing their residency 
permits.  Some of the shipping agents commented that this was a 
mistake, given the positive contributions that many Iraqis have made 
to Jordan's economy.  The Ambassador assured the group that USG is 
working with the Jordanian Government to balance security, business 
and humanitarian priorities. 
 
Competition from Syria 
---------------------- 
 
¶25. (SBU) Kawar also argued that Aqaba is losing bulk cargo business 
to Syria.  In particular, he commented that Suez Canal rates - i.e., 
$4.75 per ton or $100,000 per cruise vessel - make the Aqaba route 
uneconomical to some businesses, mainly for cargo coming from the 
Black Sea and cruise vessels.  As an alternative, Kawar said 
companies are choosing to truck cargo by land through Syria, because 
Jordan has an axle weight maximum of 20 tons per truck, whereas 
Syria can ship as much as 60 tons per truck.  He asked whether the 
USG could assist in persuading the Egyptian government to lower Suez 
fees for cargo destined for Jordan. 
 
Slow Industrial Growth 
---------------------- 
 
¶26. (U) Fakhoury noted that industrial growth in Aqaba has been 
slow.  The one textile factory shut down after its owner died. 
There is a bid out for a sugar refinery, but the feasibility of the 
sugar industry in Aqaba is questionable.  Fakhoury also mentioned 
that the Arab Free Trade Agreement does not apply to the Aqaba 
Special Economic Zone, so investors tend to establish factories 
outside Aqaba. 
 
Comment 
------- 
 
¶27. (SBU) ASEZA and ADC have made significant progress in moving 
forward development plans to turn this once sleepy port town into a 
bustling tourist and commercial center.  The local authorities seem 
more in-tune with community needs today than in years past, although 
they admit that more needs to done to bring social development in 
line with economic growth and ensure that Aqabites benefit from 
investment. Continued USAID assistance will be crucial in this 
regard. 
 
HALE