VZCZCXYZ0000
RR RUEHWEB

DE RUEHAM #0026/01 0060919
ZNR UUUUU ZZH
R 060919Z JAN 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 1339
INFO RUEHEG/AMEMBASSY CAIRO 3459
RUEHRH/AMEMBASSY RIYADH 1873
RUEHDM/AMEMBASSY DAMASCUS 3768
RUEHLB/AMEMBASSY BEIRUT 2761
RUEHRC/USDA FAS WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS AMMAN 000026 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ELA AND EEB/TTP/ABT 
CAIRO FOR FAS AGMINCOUNS PKURZ 
FAS FOR OFFICE OF GLOBAL ANALYSIS 
FAS FOR OFFICE OF TRADE PROGRAMS 
FAS FOR GRAIN & FEED DIVISION 
 
E.O. 12958: N/A 
TAGS: EAGR ETRD PGOV BTIO JO
SUBJECT: GOJ ELIMINATES CUSTOMS DUTIES AND TAXES ON 13 FOOD ITEMS IN 
RESPONSE TO RISING COSTS 
 
REF: A. 07 AMMAN 4682 
 
 ¶B. 07 AMMAN 4622 
      ¶C. 07 AMMAN 3813 
 
¶1. SUMMARY: Jordan's Cabinet agreed on January 2 to abolish customs 
fees and sales tax on 13 common foodstuffs in response to rising 
world food prices.  Prime Minister Dahabi also called upon the 
private sector to lower its prices and profit margins on these 
products or risk government pricing.  Food accounts for 40 percent 
of Jordanian household budgets, and 90 percent of food is imported. 
The Cabinet is also working to eliminate fuel and fodder subsidies 
while simultaneously helping citizens by creating a social safety 
net.  While rising food prices have had a negative effect on the 
local economy, a growing interest in American products, combined 
with the Free Trade Agreement, may present a new opportunity for 
American food and feed suppliers.  END SUMMARY. 
 
¶2.  In response to rising food prices, Jordan's Cabinet decided 
January 2 to abolish customs fees and sales tax on 13 common 
foodstuffs including sugar, rice, powdered milk, cheese, tea, 
coffee, palm oil, chick peas, vermicelli, wheat flour, corn flour, 
and lentils.  All of these products are considered staples, are 
imported from abroad, and do not compete with local products.  Prime 
Minister Nader al-Dahabi called upon the private sector to 
correspondingly reduce the prices of these products and limit their 
profit margins "as a matter of national responsibility."  Dahabi 
added that non-compliance would result in government pricing, and 
said that Ministry of Industry and Trade (MOIT) regulations allow 
for mechanisms to specify and control commodities.  The Cabinet also 
abolished customs fees on feed corn.  Wheat and barley are already 
tax exempt, and both are imported exclusively by the Jordanian 
government.  Previous attempts to dampen the impact of rising world 
food prices included cutting costs within state-run stores and 
launching open air markets so that farmers could sell directly to 
consumers (Refs B, C). 
 
¶3.  Food accounts for 40 percent of most Jordanian household budgets 
which have been hit hard by rising worldwide food costs (Ref A).  A 
resource-poor country, Jordan is a net importer of food with 90 per 
cent of consumable items imported from abroad.  In 2007, Jordan 
imported 95 percent of its wheat, whose price jumped 300 percent; 
all of its rice needs, which increased in price by 30 percent; 100 
percent of its powdered milk, which doubled in price; and a variety 
of other dairy products whose average prices increased 60 percent. 
Accordingly, Jordan's import costs for food and live animals have 
skyrocketed.  They almost doubled from JD 530 million ($747M) in 
2002 to JD 928 ($1.3B) million in 2006, and are projected to reach 
JD 1.3 billion ($1.8B) for 2007.  As prices have increased, however, 
Jordanian purchase power has dropped by 25 per cent, a result of the 
decrease in the value of the U.S. dollar to which the JD is pegged. 
 
¶4.  Within this context, the new Cabinet is committed to 
implementing an ambitious economic reform plan, which includes 
lifting subsidies on fuel and fodder, yet is dedicated to softening 
the impact of reform measures on average citizens.  To offset 
expected price increases, the GOJ plans to implement a $424M social 
safety net program and the Prime Minister has vowed to improve 
citizens' living conditions, including through examining the role of 
the Civil Service Consumer Corporation (CSCC), once a government 
tool for maintaining price controls and a barometer of economic 
conditions.  The GOJ is now considering issuing credits to the CSCC 
and its counterpart, the Military Service Consumer Corporation 
(MSCC), to cover both outlets' purchases of bulk supplies at lower 
prices, a savings that can be based on to the consumer.  The 2008 
budget also includes raises for government workers and pensioners to 
offset cost of living increases. 
 
¶5.  While rising prices, anticipated inflation, and economic reform 
present challenges for Jordanians and the GOJ, there are business 
opportunities for American food and feed suppliers.  Of its total 
annual consumption, Jordan has imported only $150M in food and 
agriculture products from the U.S., one-tenth of agricultural 
imports.  Given the Free Trade Agreement and a growing desire for 
American products, the potential for bilateral trade is much higher. 
 One significant obstacle to increased trade, however, is the small 
size of the market.  With Jordan's population of only 5.7M and a GDP 
of approximately $11B in 2006, many American suppliers consider the 
market too small.  For those who do not share this opinion, there 
are market opportunities in dairy products, feed, and de-boned meat. 
 
 
 U.S. cheese imports to Jordan jumped from zero to 70 tons in 2006 
and are expected to continue to increase.  The local poultry 
industry, the most sophisticated agri-business in Jordan with more 
than $1.4B in investments, satisfies 85 percent of local 
consumption.  It is dependent on imported corn, soybean cake, and 
barley.  Similarly, the Jordanian food processing industry is 
totally dependent on imported, mechanically de-boned meat (MDM) to 
produce poultry mortadella; current sources for the industry's MDM 
input are the U.S., Brazil, and Israel.  Local importers have 
already approached post about increasing their purchases from the 
U.S. and the MOIT is examining credit programs for the purchase of 
wheat and other fodder. 
 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
HALE