VZCZCXRO5331
RR RUEHDE
DE RUEHAM #1019/01 0981524
ZNR UUUUU ZZH
R 071524Z APR 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 2184
INFO RUEHAD/AMEMBASSY ABU DHABI 1209
RUEHLB/AMEMBASSY BEIRUT 2827
RUEHRL/AMEMBASSY BERLIN 0353
RUEHEG/AMEMBASSY CAIRO 3595
RUEHDM/AMEMBASSY DAMASCUS 3851
RUEHKU/AMEMBASSY KUWAIT 0876
RUEHMK/AMEMBASSY MANAMA 0664
RUEHRH/AMEMBASSY RIYADH 1921
RUEHTV/AMEMBASSY TEL AVIV 1114
RUEHDE/AMCONSUL DUBAI 0417
RUEHJI/AMCONSUL JEDDAH 0805
RUEHJM/AMCONSUL JERUSALEM 4951
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 AMMAN 001019 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PLEASE PASS TO USTR 
STATE PLEASE PASS TO USAID 
 
E.O. 12958: N/A 
TAGS: ECON EINV EAID JO
SUBJECT: AFTER SLUGGISH START, AQABA'S INDUSTRIAL ESTATE NOW SHOWS 
MODEST GROWTH WITH ROOM FOR IMPROVEMENT 
 
REFS:  A. Amman 1000 
       ¶B. 07 Amman 3909 
 
¶1. (U) Summary:  Investment in the southern town of Aqaba has 
traditionally focused on tourism (ref A).  Aqaba's Special Economic 
Zone, however, offers an industrial estate, the Aqaba International 
Industrial Estate (AIIE), which provides significant tax advantages 
for businesses and is also designated a Qualifying Industrial Zone 
(QIZ).  41 companies are currently contracted to operate in the 
AIIE, although most remain at the land-registry stage.  Light 
industry has only recently begun to take advantage of these 
opportunities because of the slow growth in the related business 
services and a lack of labor; nevertheless plans are underway to 
market and develop the remaining two-thirds of the estate. 
Continued growth in the industrial estate should be a catalyst for 
the development of supporting business services, which will be the 
real key to the expansion of Aqaba's light industrial sector.  End 
Summary. 
 
AQABA'S INDUSTRIAL ESTATE OFFERS 
TAX BREAKS AND CUSTOMS EXEMPTIONS 
--------------------------------- 
 
¶2. (SBU) As part of Jordan's efforts to foster economic development, 
the government has created a variety of geographically demarcated, 
policy-favored zones including free zones, special economic zones, 
and industrial estates (ref B).  In southern Jordan, Aqaba is home 
to both the Aqaba Special Economic Zone (ASEZ) and the Aqaba 
International Industrial Estate (AIIE), in which USAID invested 
$20.3 million between 2001 and 2003.  AIIE is owned by the 
semi-governmental Jordan Industrial Estates Corporation and is 
privately managed by the U.S.-based Parsons Brinckerhoff 
International (PBI) (ref B). 
 
¶3. (U) The AIIE provides companies with electricity, 
telecommunications, water, roads, sewers, flood protection, and 
administrative buildings.  Aqaba also offers investors in the AIIE 
close proximity to Jordan's only port and access to a new air cargo 
terminal under development at the King Hussein International 
Airport.  Businesses within the AIIE benefit from Aqaba's flat 
corporate income tax of five percent; an exemption from customs 
taxes on fees on traded goods, except for cars; and no property 
taxes.  NOTE:  The AIIE is also designated as a Qualifying 
Industrial Zone (QIZ), but according to the Ministry of Industry and 
Trade, there have been no exports to date under the QIZ Agreement. 
END NOTE. 
 
A PHASED APPROACH FOR REGIONAL GROWTH AND DEVELOPMENT 
--------------------------------------------- -------- 
 
¶4. (SBU) AIIE Director Sheldon Fink explained that the industrial 
estate has been divided into phases, with each phase representing 
the development of a particular piece of land.  He noted while only 
half of the phase I land has been fully-developed with factories and 
businesses, all of the land is assigned and all of the 
infrastructure including roads and utilities is operational.  The 
equally-sized second phase of land is currently in the planning and 
marketing stage.  The marketing literature prices the Phase II land 
at $42 - $80 per square meter, with prices based on lot size.  Fink 
is currently negotiating with approximately 25 potential tenants, 
including several manufacturers that are much larger in square 
footage and number of employees than any of the current businesses. 
Land is also available for a third phase, if needed. 
 
INDUSTRIAL INVESTMENT STARTING TO TAKE OFF 
------------------------------------------ 
 
¶5. (SBU) There are currently 41 companies contracted to operate 
within Phase I, a 60-hectare division of the estate.  28 of the 
companies are wholly or partially Jordanian-owned.  Although many of 
these companies are still at the land-registry stage, several have 
recently begun to operate in the light industry sector, including 
advertising material fabrication, shoe packaging and logistics, 
seismic equipment lab testing, and steel fabrication and engineering 
work.  About 20 percent of the businesses are expected to be used as 
 
AMMAN 00001019  002 OF 002 
 
 
warehouses, including most of the largest enterprises by size. 
 
¶6. (SBU) Once the companies are fully functional, 2,500 employees 
are expected to work in the AIEE.  Company sizes will range from 
five employees at a ceramics distribution center to 250 at a steel 
fabrication and engineering business.  Finding qualified local labor 
within Aqaba has been a challenge for developing the industrial 
sector in this region of Jordan.  Fink said unskilled positions in 
factories and warehouses would most likely be filled by foreign 
workers, predominantly Egyptians.  While the law allows companies in 
the AIIE to have as many as 70 percent foreign workers, he estimated 
that the workforce would be at least 50 percent Jordanian.  He 
explained that skilled and professional positions would be filled by 
Jordanians, who relocate from Kerak, Amman, Irbid, and the Gulf. 
Indeed, Walter Luhs, a technical manager at a laser software and 
hardware company in AIIE, said his German firm was drawn to Aqaba 
because of the large number of qualified engineers in Jordan, given 
a growing shortage of engineers in Germany, as well as the scenery 
and the tax advantages.  Luhs said he received 1,500 Jordanian 
applications from across Jordan for his 45 engineering positions. 
 
COMMENT 
------- 
 
¶7. (SBU) Aqaba's industrial estate has taken longer than some of the 
other QIZs to get up-and-running because it faces the same business 
challenges as all of Aqaba: a lack of locally-based skilled and 
unskilled workers and supporting services, as well as remoteness 
from Jordan's economic hub Amman.  Businesses that are investing in 
Aqaba today for tax purposes are overcoming these challenges by 
relying on foreign labor and services from Amman for equipment 
repair and material acquisition.  One example was in a handicrafts 
workshop where all of the raw materials and the sewing machines were 
from Amman.  Today, Aqaba, like all cities in Jordan, is still 
highly tied to Amman where the majority of businesses are located. 
While Aqaba provides Jordan's only port, many containers are 
off-loaded in Aqaba onto trucks and sent directly to distribution 
centers in Amman.  Even some goods intended for Aqaba must first 
pass through Amman.  One would hope this modest growth in the 
industrial estate would be a catalyst for the further development of 
supporting business and logistical services, which will be the real 
key to the expansion of Aqaba's light industrial sector. 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
HALE