VZCZCXYZ0005
PP RUEHWEB

DE RUEHAM #2366/01 2251049
ZNR UUUUU ZZH
P 121049Z AUG 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC PRIORITY 3301
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
INFO RUEHEG/AMEMBASSY CAIRO 3746

UNCLAS AMMAN 002366 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA and EB/TPP/ABT/ATP 
STATE PASS USAID 
STATE ALSO PASS EXIM 
USDA FOR FAS 
CAIRO FOR FAS AGMINCOUNS KURZ 
 
E.O. 12958:  N/A 
TAGS: EAID EAGR ECON SOCI JO
SUBJECT:  Jordanian Request for Assistance to Address Food Security 
Needs 
 
REFS: A)  Amman 2177 
- B)  Amman 2066 
- C)  Amman 1903 
- D)  Amman 1754 
- E)  Amman 1639 
- F)  Amman 1392 
- G)  Amman 1149 
- H)  Amman 1034 
- I)  Amman 1030 
- J)  Amman 816 
- K)  Amman 815 
- L)  Amman 670 
- M)  Amman 518 
- N)  Amman 407 
- O)  Amman 26 
- P)  07 Amman 3813 
 
¶1.  (SBU) Summary and action request: Jordan is a net importer of 
food, and the continuing global increase in food and agricultural 
commodity prices could not have come at a worse time.  Government of 
Jordan (GOJ) efforts to lower its debt burden, such as buying back 
$2 billion in debt from Paris Club members including the U.S., and 
eliminating fuel subsidies, are steadily being negated by high 
inflation, increased payments to the poor through its safety net 
program, and attempts to stabilize bread prices by subsidizing 
wheat.  Public criticism of the GOJ response to economic woes, 
initially muted, is now growing following steady increases in food 
prices, five continuous months of gasoline price increases, and the 
five-fold increase in the price of diesel.  These price hikes, 
particularly for commodities such as wheat, and continued subsidies 
for cooking fuel and fodder, contributed to the need for a budget 
supplemental (ref C).  The GOJ has cut duties and taxes of staples 
and called on merchants to lower their profit margins, but is 
running out of measures to curb price spikes.  As a result, senior 
GOJ officials have unofficially requested U.S. food assistance in 
the form of low- or no-interest loans, donations, training, and the 
reinstatement of programs such as PL-480 and PL-14.  Action request: 
Post welcomes State and Agriculture guidance on assistance programs 
or other measures to address Jordan's growing needs in this area. 
End summary and action request. 
 
¶2.  (U) Jordan is a net importer of food, purchasing up to 95 
percent of consumable items from abroad, including sugar, rice, 
powdered milk, tea, coffee, corn, vegetable oil (excluding olive 
oil), cheese, chick peas, vermicelli, and lentils.  Between August 
2007 and August 2008, the price of lentils increased 155 percent, 
followed by both milk and vegetable oil by 70 percent, American rice 
by 65 percent, dairy products by 50 percent, and sugar by 25 
percent.  Ironically, the lower the grade of the product, the higher 
the price increase, thus affecting most those who can least afford 
it.  Additionally, in the past two years, the cost of wheat and 
barley - 95 percent of which is imported - as well as soybean cake, 
has increased by at least 300 percent; consequently the prices of 
all by-products have soared. 
 
¶3.  (U) Amidst these changes, salaries have remained stagnant and 
more and more families, which spend on average 40 of their income on 
food, are going without.  Note: According to the U.S. Department of 
Agriculture, the average American family spends 9.9 percent of 
household income on food.  End note.  A Jordan Department of 
Statistics (DOS) survey released June 18 reported 13.7 percent of 
Jordan's 5.7 million residents are now at or below the poverty line, 
and spending JD46 ($65) monthly per person for basic necessities. 
Note: The Ministry of Planning and International Cooperation in 2006 
set the poverty line at $784 per person per year.  According to the 
recent DOS statistics, families spend $780 per person on basic 
necessities including food.  End note.  DOS also announced a 
"critical" increase in the prevalence of acute malnutrition among 
children under the age of five.  As prices have increased, Jordan's 
purchasing power has dropped by 25 percent, a result, in part, of 
the decrease in the value of the U.S. dollar to which the Jordanian 
Dinar is pegged. 
 
¶4.  (U) Along with the increase in prices for imported items, the 
cost of domestically produced consumable goods has also risen. 
Local agricultural production contributes less than 3 percent to GDP 
and is an inefficient user of Jordan's scare water resources, but 
the average price increase of agricultural producers was 12.4 higher 
in 2008 than in 2007, according to a July DOS report.  DOS further 
documented that the June 2007-June 2008 year-on-year increase of 
food from Jordan's Consumer Price Index (CPI), of which 40 percent 
represents food items, reached 17.7 percent; the overall CPI 
increase for the same period was 16.6 percent.  These changes are 
reflected in the prices of locally produced items which have 
 
increased dramatically: onions by 234 percent; broad beans, 220 
percent; eggs, 86 percent; tomatoes, 73 percent; cauliflower, 58 
percent; meat, 50 percent; okra, 44 percent; corn, 36 percent; 
bananas, 23 percent; cucumbers, 19 percent; string beans, 7 percent; 
and potatoes, 6 percent. 
 
¶5.  (SBU) The impact of rising food prices has been exacerbated by 
world oil prices, regional developments, and environmental factors. 
Following the February elimination of fuel subsidies, consumer 
prices for petroleum prices have risen for five consecutive months 
(refs B, D, and F).  Surging oil prices have also contributed to 
increases for imported goods, annulling in the eyes of many traders, 
benefits associated with importing American products under the 
U.S.-Jordan Free Trade Agreement.  Officially, 450,000 displaced 
Iraqis reside in Jordan and are entitled to the price cuts and 
subsidies offered to Jordanian citizens.  For many consumer 
products, the actual impact of the Iraqi presence is negligible, but 
the perception that they contribute to current economic woes is 
widespread.  The U.S. and international community have provided 
assistance, but the Iraqi population remains a burden for the 
educational and health sectors and represents another user of 
Jordan's precious water resources.  Jordan is also experiencing a 
drought, further affecting the already limited ability of its 
inefficient agriculture sector to address domestic needs (ref E). 
The drought began as farmers struggled to overcome the effects of a 
winter frost, rising fertilizer costs despite Jordan's 
potash/phosphate wealth, and an anticipated seed shortage. 
 
Actions Taken to Address the Food Crisis 
---------------------------------------- 
 
¶6.  (U) The GOJ took immediate steps to address the food crisis, 
abolishing in January customs fees and sales tax on 13 common 
foodstuffs: sugar, rice, powdered milk, cheese, tea, coffee, palm 
oil, chick peas, vermicelli, wheat flour, corn flour, and lentils 
(ref O).  The Prime Minister further called upon the private sector 
to reduce the prices of these products and limit their profit 
margins "as a matter of national responsibility."  To offset price 
increases, the GOJ also implemented a $424 million social safety net 
program to put cash in the hands of the neediest citizens. 
 
Parliament subsequently requested the GOJ increase the pay-outs and 
the budget supplemental included the appropriate funding (ref C). 
 
¶7.  (SBU) As prices continue to rise, however, the GOJ will not be 
able to sustain a high level of public assistance without 
bankrupting the treasury.  Jordan continues to explore all options. 
Officials confirmed in late July that the cost of the most common 
type of bread would remain fixed at JD .16 ($.22) per kilogram, with 
GOJ Spokesperson Nasser Judeh explaining, "the biggest challenge 
currently facing the government is the hike in prices and 
alleviating their impact on people... Now, we are taking the needed 
internal economic measures to meet that goal."  Note:  The Ministry 
of Industry and Trade purchases and sells wheat at heavily 
subsidized prices (ref H).  End note.  The King also decided that 
much of a Saudi grant will be directed toward improvements in 
impoverished communities.  He further announced he would personally 
pay $7 million in annual fees for public school students so that 
families could use the funds for other needs.  Despite these 
efforts, the food crisis is affecting the entire Kingdom, and Jordan 
will soon run out of options for independently addressing the 
crisis. 
 
¶8.  (SBU) In response to GOJ requests for assistance in managing the 
purchase of imported consumables, Post facilitated Jordanian 
participation in a risk management workshop sponsored by the 
American Soybean Association.  Five officials from the Ministry of 
Finance and the Ministry of Industry and Trade, as well as 25 
Jordanian private sector agricultural executives, gained hands-on 
training in hedging.  A number of food importers also attended an 
FCS-sponsored workshop on using the FTA.  The purpose of the 
workshop was three-fold: to promote the benefits of exporting to or 
importing from the U.S. using the U.S.-Jordan FTA; to teach 
companies how to identify the harmonized codes for their products 
and whether they are tariff-free under the FTA; and to identify 
necessary shipping documentation and best practices.  Additionally, 
while current USAID programs in Jordan are not 
food/agriculture-specific, they do address human and institutional 
capacity building.  USDA-FAS has also invited two GOJ officials to 
attend a regional workshop on food safety, and further extended to 
three GOJ officials an opportunity to participate in study tours in 
the U.S. that include professional training tailored to their needs. 
 
 
Possible Areas for Cooperation 
 
------------------------------ 
 
¶9.  (SBU) GOJ and Post efforts are not sufficient to address 
Jordan's growing needs.  Jordan is a beneficiary of considerable 
bilateral assistance; however, none of it addresses food needs. 
Historically dependent on foreign assistance, the GOJ has worked 
hard to transform the country into a market-based economy, 
implementing a series of difficult economic reform measures, 
acceding to the World Trade Organization, and negotiating free trade 
agreements with countries around the world.  Jordan has used wisely 
the billions of dollars of economic and security assistance that the 
U.S has invested since 1952 to develop a knowledge-based society and 
improve health care services.  U.S. assistance to address the 
current food crisis would also be used judiciously.  Moreover, with 
U.S. food assistance, this close ally would ultimately be able to 
continue economic reform measures, conserve scarce water resources, 
including measures to improve pricing and distribution policies, and 
thereby augment other U.S. efforts in support of Jordan's political 
and economic stability.  Areas of opportunity for U.S. assistance 
include: 
 
--  Reinstating PL-480 or providing financial assistance to defray 
the high transportation costs of American wheat.  Jordan has sought 
to supplement its needs through agreements with Syria and 
Kazakhstan, but both countries have both since experienced 
shortages.  GOJ officials also lauded PL-14 and requested a similar 
program. 
 
--  Providing grants for purchasing wheat as well as financing 
mechanisms for the low-interest (GOJ seeks rates below 0.5 percent) 
purchase of wheat to be paid back over a 20-30 year period.  Note: 
EXIM is ready to do business in Jordan, but the GOJ says it cannot 
afford the quoted rate of $2.23 for every $100.  End note. 
 
--  Creating an emergency credit program for the purchase of wheat 
and rice. 
 
Visit Amman's Classified Web Site at 
http://www.state.gov.sgov.gov/p/nea/amman/ 
 
RUBINSTEIN