VZCZCXRO5177
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHAM #3909/01 2660451
ZNR UUUUU ZZH
R 230451Z SEP 07
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 0368
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHEE/ARAB LEAGUE COLLECTIVE

UNCLAS SECTION 01 OF 03 AMMAN 003909 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ELA, EEB 
STATE PLEASE PASS TO USAID 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PGOV JO
SUBJECT: Jordan's Economic Zones Aim to Attract Investment and 
Address Poverty and Unemployment 
 
Refs: A) Amman 3806 
B) Amman 2017 
C) Amman 263 
 
¶1.  Summary:  Jordan has taken an approach of developing 
geographically delineated, policy-favored commercial zones to 
attract investment and promote economic development.  In addition to 
industrial estates and free zones, King Abdullah recently announced 
the launch of a fourth economic development zone in Ma'an, based on 
the model of the special economic zones in Aqaba, Mafraq and Irbid. 
All aim to alleviate poverty and create jobs in these impoverished 
areas of Jordan through development of industrial centers supported 
by logistics, transport, utilities, and information technology 
services.  While the various commercial zones have succeeded in many 
of their goals, their future role may diminish as customs duties and 
tariffs continue to decrease in line with Jordan's free trade 
agreements and World Trade Organization commitments.  In a 
relatively small country, the creation of additional economic 
development zones may become redundant and distract from a larger 
liberal policy of making all of Jordan "special."  End Summary. 
 
 
Jordan's Zone Approach 
---------------------- 
 
¶2.  As part of Jordan's efforts to foster economic development and 
enhance the investment climate, the government has created 
geographically demarcated, policy-favored commercial zones, 
including industrial estates, free zones, and special economic 
zones.  The goal is to encourage "clustering" among related firms 
within an industry and linkages to other industries.  Some of these 
zones actually overlap or have multiple designations.  For example, 
the industrial estate in Karak, situated just east of the Dead Sea, 
has a free zone within it, and the industrial estate in the Red Sea 
port city of Aqaba is within the boundaries of the Aqaba Special 
Economic Zone.  Many are also designated Qualifying Industrial Zones 
(QIZs).  NOTE: According to a Jordan-Israel-U.S. agreement, approved 
goods produced in thirteen designated QIZs in Jordan can be imported 
into the United States duty- and quota-free if 35 percent of the 
product's content comes from the QIZ, Israel, the West Bank/Gaza, 
and/or the U.S.  (Ref C).  END NOTE. 
 
Industrial Estates 
------------------ 
 
¶3.  The semi-governmental Jordan Industrial Estates Corporation 
(JIEC) currently owns five public industrial estates in Irbid, 
Karak, Aqaba, Amman, and Ma'an.  There are also several 
privately-run industrial parks in Jordan, including al-Mushatta, 
al-Tajamouat, al-Dulayl, Cyber City, al-Qastal, Jordan Gateway, and 
al-Hallabat.  These estates provide basic infrastructure networks 
for a wide variety of manufacturing activities, reducing the cost of 
utilities and providing cost-effective land and factory buildings. 
Investors in the estates also receive various exemptions, including 
a two-year exemption on income and social services taxes, total 
exemptions from building and land taxes, and exemptions or 
reductions on most municipalities' fees. 
 
Free Zones 
---------- 
 
¶4.  Jordan also has public "free zones" (FZs) in Zarka, Sahab, 
Karak, Karama, and Queen Alia Airport that are run by the 
publicly-owned Free Zone Corporation (FZC).  Over 30 private free 
zones have also been designated, which are administered by private 
companies under the supervision of the FZC.  Considered outside the 
Jordan Customs jurisdiction, the free zones provide a duty- and 
tax-free environment designed for the storage of goods transiting 
Jordan.  Firms located in such zones can avoid import duties and 
fees, company income taxes, licensing fees for construction, 
building and land taxes, and value-added taxes on goods exported or 
transiting internationally across Jordan (Ref C).  Non-Jordanians 
working in the FZ's are also exempt from personal income tax and 
social services tax. 
 
Economic Development Zones 
-------------------------- 
 
¶5.  The Aqaba Special Economic Zone, created in 2001, was the first 
special economic zone with the goal of alleviating poverty and 
creating jobs in that area (see reftels for additional background). 
Offering special tax exemptions and a flat five percent income tax, 
ASEZ has attracted over USD 2 billion in foreign direct investment 
in recent years, mainly in hotel and property development.  Given 
this success, the Government of Jordan (GOJ) plans to replicate the 
model throughout the country, and is currently doing so in Mafraq 
and Irbid in the north, and in Ma'an in the south.  However, the 
 
AMMAN 00003909  002 OF 003 
 
 
World Bank has cautioned that the Special Economic Zones generally 
have the disadvantage of favoring isolated free market enclaves 
while distracting attention from countrywide trade liberalization 
and reform. 
 
Mafraq Economic Zone 
-------------------- 
 
¶6.  Jordan created a second economic zone - the King Hussein Bin 
Talal Economic Zone - in November 2006 in the city of Mafraq.  It 
comprises 20.5 sq km of currently empty land that will be built 
around industrial activities, supported by logistics and transit 
services.  High-end villas, low-cost labor accommodations, and 
community services and utilities will also be built to support 
employers' needs.  Implementation of development projects estimated 
at over USD 1 billion is expected to take some 15 years from start 
to finish.  The Mafraq Zone hopes to provide 29,000 new "direct" 
jobs by 2025, as well as indirect jobs for an available labor force 
of around 240,000 workers within a 50 kilometer radius. 
 
¶7.  Given its location at the intersection of two major highways 
(Syria-Aqaba and Irbid-Baghdad) and access to the Amman-Damascus 
railroad, the Mafraq Zone aims to be a "junction" point for 
logistics, according to General Manager of the Mafraq Development 
Company Rami Al-Qusus.  The zone is also adjacent to the King 
Hussein airbase, which has an international runway that has been 
used for training by the Royal Air Force.  The airport currently 
only services cargo but will be converted for mixed use in the 
future.  Qusus told Econoff that he is looking for any opportunities 
to increase business at the airbase, including support of U.S. 
government transport for Iraq. 
 
¶8.  The Mafraq Zone will target four priority industries:  chemicals 
(including pharmaceuticals); engineering and electrical equipment; 
food processing; and textiles, apparel, furniture and other 
manufactured articles.  Initial investments include a USD 21 million 
production facility by Petra Engineering Industries, which has been 
successfully exporting air conditioners to the U.S. under the 
U.S.-Jordan FTA; a USD 49.4 million modern cable manufacturing 
facility by MESC Specialized Cables in association with Fujikura 
(Japan); a factory to manufacture freezers and cooling units by 
Future and Ugur; and a USD 20 million aluminum manufacturing plant 
by Emaar Industries and Investments MultiForms. 
 
¶9.  Qusus highlighted that he does not want Mafraq to be considered 
a special economic zone with a separate law or separate customs, 
like ASEZ, that would then not allow exports to receive preferential 
treatment under some of Jordan's free trade agreements, particularly 
the Greater Arab Free Trade Agreement.  NOTE: The U.S.-Jordan FTA 
does apply to the Aqaba Special Economic Zone.  END NOTE.  He is, 
however, working with the GOJ to arrange special customs, tax, and 
other bureaucratic regulations to increase the zone's investment 
appeal relative to other economic zones in Jordan.  In particular, 
he plans to establish a one-stop shop and conduct post-audits of 
investors, rather than pre-audits, in order to speed up the process 
of granting licenses.  He also wants 24-hour service for a land-air 
freight system so that goods that land via air in Amman can be 
directly loaded onto trucks and transported to Mafraq, where they 
would then clear customs.  Another proposal is exemption of duties 
on construction materials. 
 
Irbid Economic Zone 
------------------- 
 
¶10.  The Irbid Economic Zone was launched in May 2007 by King 
Abdullah as a healthcare, education, and information technology free 
zone in the northern city of Irbid.  Its proximity to the campus of 
the Jordan University for Science and Technology (JUST) encourages 
partnerships between the firms in the zone and the university 
students.  The zone aims to create 23,000 jobs and reduce 
unemployment in Irbid, where around 17.5 percent of its one million 
inhabitants are jobless. 
 
¶11.  In particular, the Irbid development projects will include 
hospitals, clinics, and medical facilities to increase the 
healthcare staff in Jordan and service some 100,000 patients from 
Arab states who seek treatment in Jordan annually.  During the May 
2007 World Economic Forum held in Jordan, an agreement was signed 
with anchor tenants of the zone to establish a nursing college for a 
total investment of US$35 million.  COMMENT:  The focus on such 
service sectors seems appropriate given that Irbid also has the 
nearby Sahab Industrial Estate and Al-Hassan Qualifying Industrial 
Zone (QIZ) that caters to manufacturing industries, specifically in 
apparel.  END COMMENT. 
 
Ma'an Economic Development Zone 
------------------------------- 
 
AMMAN 00003909  003 OF 003 
 
 
 
¶12.  On September 9, the King launched the fourth Economic 
Development Zone in Ma'an, a governorate 210 kilometers south of the 
capital.  It is an important transport hub situated on the modern 
Desert Highway linking Jordan with Saudi Arabia.  The Ma'an Zone 
covers all of the districts in Ma'an Governorate including Shobak, 
Petra, and Southern Badia.  Plans for the zone include 
infrastructure projects estimated at USD200 million, and the 
creation of 7,000 jobs by the end of 2025.  King Abdullah recently 
met with the local community and civil societies in Ma'an, publicly 
stressing the strong role they need to play in developing 
appropriate proposals for the zone. 
 
Comment 
------- 
 
¶13.  Jordan's various commercial zones have helped promote trade, 
investment, and economic development, particularly in impoverished 
areas.  Some have noted, though, the future role of such zones may 
diminish as customs duties and tariffs continue to decrease in line 
with Jordan's free trade agreements and World Trade Organization 
(WTO) commitments, and central and local government continue to 
reform delivery of their services and reduce the need to cut through 
bureaucracy.  In a relatively small country, the creation of 
additional economic development zones may become redundant and 
distract from a larger liberal policy of making all of Jordan 
"special." 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
HALE