The jury is still out on joint Jordanian-Israeli ventures
In 1996, the United States established several Qualifying Industrial Zones (QIZs) in Jordan and Egypt, seeking to reward the countries for being the only Arab states to have signed peace treaties with Israel.
The idea behind the QIZs is to have labour-intensive products manufactured for tax-free export to the United States. That was done under the condition in Jordan that 8% — with the percentage a bit higher for Egypt-made products — of the product material input come from Israel.
In November 1997, The Irbid Qualifying Industrial Zone, Jordan’s first QIZ, was created.
QIZ legislation authorised the US president to proclaim the elimination of duties on articles produced in the West Bank, Gaza Strip and QIZs in Jordan and Egypt.
This US initiative envisaged the normalisation of Arab countries’ relations with Israel by setting up a single economic zone stretching across the Middle East. The United States widely promoted the QIZ as a step to bolster Arab-Israeli peacemaking.
The incentive to agree to this arrangement was regarded by the Jordanians as an opportunity to create jobs. In reality, the majority of workers in the QIZ are Asian workers, mainly from China, Sri Lanka, Pakistan and Bangladesh.
Among the local workers, half come from Palestinian refugee camps near the QIZs and find themselves, paradoxically, tied into an economic agreement that normalises the very relationship that segregates them from their homeland.
Although the QIZs significantly increased Jordan’s exports to the United States, their effect on the economy and creating quality jobs was low, experts said.
Of the total 45,000 jobs created by the country’s six QIZs, only 25% were taken by Jordanians and they receive an average of $210 a month, which is less than the minimum wage of $270, Ahmad Awad, director of the Phenix Centre, which specialises in labour studies and research, said in an interview with The Arab Weekly.
“The jobs created by the QIZs do not follow the internationally recognised decent work standards,” Awad said.
“The bad working conditions at many of the factories reflect a bad image of Jordan and they were used as an excuse to accuse Jordan of human trafficking.”
According to experts, more than 95% of factories in the QIZs are working in the textile and garment field, which they said did not transfer know-how to Jordan.
“The apparel sector does not need much innovation. With the overwhelming majority of the QIZs factories being in this business, there is no actual added-value to the kingdom and the Jordanian economy,” Awad said.
Economist Husam Ayesh agreed, saying, although QIZ exports stand at about $1.4 billion annually, less than 15% of the volume goes to the local economy in terms of collaboration with local companies or local production input.
“It is good that the QIZs employ some 10,000 Jordanians and have increased exports, but if QIZs continue to work without being developed or towards attracting high added-value industries, they will eventually fail and lose attractiveness,” he told The Arab Weekly.
The US-Jordan Free Trade Agreement (FTA), the first with an Arab country, was signed into law on October 24, 2000, phasing out tariffs on the majority of apparel, textile made-up goods, footwear and travel goods in stages. Under the QIZ initiative, these goods enjoyed immediate elimination of tariffs and quotas and required a lower level of Jordanian inputs. Thus for some high-tariff goods, QIZ-produced products enjoyed a comparative advantage until January 1, 2010, when the US-Jordan FTA came into full force, changing the face of QIZs forever.
Today, wanting to get away from the political and social problems of dealing with Israel, experts and investors said some 70-80% of factories at the QIZs have stopped using the QIZ agreement. Instead, they follow the FTA with the United States, which went into full implementation a few years ago. That gives all industries free access to the US market without having to import anything from Israel.