Jordans Apparel Industry Laying Down the Foundations

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Jordans Apparel IndustryLaying Down the
Foundations
Ministry of Industry and Trade The Hashemite
Kingdom of Jordan

• Istanbul
• June 2007

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Rigorous Reform

• Comprehensive Reform Process
• Monetary Fiscal
• Legal and Judicial Reform
• Public Sector Reform
• Increased Transparency
• Investment in Educational Vocational Training/
  Human Capital
• Public Private Partnership

3
Macroeconomic Stability
1999
2004
2005
2006
Inflation ()
0.6
3.4
3.4
6.3
95.5
67.4
57.3
49.3
Ext. Debt ( of GDP)
Foreign Res. ( bn)
1.99
4.82
4.8
6.1
Exports ( bn)
1.48
3.25
3.61
4.1
18.4
37.6
4.9
29.7
Market Cap. ( bn)
Real GDP Growth ()
3.4
7.7
7.2
6.4
GDP Per Capita ()
1,734
2,130
2,325
2,675
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Attractive Investment Environment

• Investment Promotion Law Incentives
• Income and Social Services Tax
• Exemptions up to 100 up to 20 years.
• Customs and Sales Tax
• Capital goods and machinery are exempted from
  custom duties sales tax.

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Attractive Investment Environment

• People are our greatest asset
• Well educated population.
• Over 91 literacy rate.
• 192,000 students currently enrolled in
  universities.
• 17 of the population receives higher education.
• 24 universities (14 private, 10 public).
• 60 community colleges.
• 35 vocational training centers training over
  10,000 people each year.
• Competitive wage structure.

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Active Investment Promotion

• Attracting high value added, high and medium
  market niche products investments.
• A variety of investment methods are possible
  Greenfield investment, joint ventures, and/or
  subcontracting agreements with Jordanian
  manufacturers.

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Investments that Benefited from the Investment Law
Million USD
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Investments that Benefited from the Investment
Law 2006-2002 (According to Nationality)
Million USD
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International Gateway

• Member of (WTO).
• Jordan US Free Trade Agreement (FTA).
• Qualifying Industrial Zone (QIZ) Agreement.
• Greater Arab Free Trade Agreement (GAFTA).
• Euro-Jordanian Association Agreement.
• Aghadir Agreement .
• Jordan Singapore FTA.
• and 120 other bilateral trade agreements
• Access To One Billion Consumers..
• Duty Free

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Euro-Jordanian Association Agreement

• Agreement signed 24th of November 1997, and went
  into effect in May 2002.
• Access to 25 European Countries.
• Full tariff exemptions to all goods originated in
  Jordan.
• Establishes a free trade area with the EU with
  full liberalization by 2014.

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Pan- Euro-Med accumulation System

• Allows diagonal cumulation of origin between 43
  European and Mediterranean Countries.
• Went into force July 2006.
• Aghadir Agreement was signed Between (Jordan,
  Egypt, Tunisia and Morocco).
• Signed a Protocol with Israel to allow
  cumulation.
• Negotiating an FTA with Turkey
• Flexibility of sourcing Turkish fabrics.
• Cuts down on lead time.

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QIZ FTA

• QIZ
• 35 Regional content
• 11.7 made in the QIZ.
• (Restricted to QIZ approved areas)
• 8 made in Israel
• Balance made in QIZ, West Bank/Gaza or Israel
• Up to 15 made in USA

• FTA
• 35 Domestic content
• 35 made in Jordan
• (Entire Country)
• Up to 15 made in USA

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QIZ and FTA Rules of Origin

• 35 Content
• Cost or value of materials produced
• Direct costs of processing operations performed
• ___________________________________________
• ? 35 of the appraised value of the article

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QIZ and FTA Rules of Origin
Materials Produced

• Raw materials, parts, components etc. that are
  wholly the growth, product, or manufacture of
• ((QIZ, Israel, Gaza or West Bank) or Jordan)

• Raw materials, components etc. which undergo
  a double substantial transformation

OR
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Double Substantial Transformation
Fabric cut into component pieces in QIZ or Jordan
Component pieces sewn or assembled in QIZ or
Jordan
Foreign Fabric
Double Substantial Transformation
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QIZ FTA

• Saving up to 37 on custom duties through 100
  duty-free access under the QIZ.
• Almost 98 of Jordanian exports reached zero
  custom duties under the FTA.
• Only 100 apparel items are still subject to
  custom duties under the FTA and have reached 40
  of their NTR (Normal Trade Relations (WTO) duty
  rates.

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QIZ FTA

• Saving up to 37 on custom duties through 100
  duty-free access under the QIZ.
• Almost 98 of Jordanian exports reached zero
  custom duties under the FTA.
• Only 100 apparel items are still subject to
  custom duties under the FTA and have reached 40
  of their NTR (Normal Trade Relations (WTO)) duty
  rates.

Flexibility and freedom to import raw
materials from anywhere in the world (use of
third country fabric Fulfills Rules of Origin
requirements under QIZ and FTA if it undergoes
double transformation) (Other FTAs apply yarn
forward rules of origin)
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Jordanian Apparel Exports to the USA Per
Agreement (US )
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The Jordanian Apparel Sector

• Leadership and Government are fully committed to
  sector support and development.

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The Jordanian Apparel Sector

• 30 of the Jordanian exports (over 1 billion).
• Employs over 50,000 people, mainly in rural areas
  with a majority of female workers.
• Major international buyers sourcing from Jordan
• JC Penney, Levis, Liz Claiborne, Gap, Gloria
  Vanderbilt, Victorias Secret, Jones Apparel,
  Perry Ellis, PVH, Sara Lee, Banana Republic,
  Wal-Mart, Target

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Future Outlook for the Jordanian Apparel Sector

• Track record in mass and middle market segments
  and the potential to enter higher and specialized
  market niches.
• Focus on value-added products.
• Introducing design capabilities and the creation
  of middle and upper management in the industry.

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Future Outlook for the Jordanian Apparel Sector

• Enforcement actions to meet labor compliance
  challenges.
• Legal reforms to support enforcement and
  compliance -to bring the Jordanian labor law more
  in line with international standards.
• Working with Private Sector to enhance
  compliance a joint industry-government code of
  practice known as the Golden List.
• Working with International Organizations ILO
  Decent Work Country Program ILO IFC Better
  Factory Program.

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Future Outlook for the Jordanian Apparel Sector

• Established on-the-job technical training program
  for Jordanian workers aiming at increasing
  Jordanians and replacing guest workers
• World Bank Skills Development Program
• National Training and Employment Project
• Technical/Vocational Training Reforms
• Rehabilitating employment offices throughout the
  country
• Launched EU-funded Institutional Strengthening
  of the Ministry of Labor Project.

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Future Outlook for the Jordanian Apparel Sector

• Latest developments in environmental-related
  aspects
• 1. Institutional Strengthening Legal Upgrading
  project in cooperation with EU
• Completed re-structuring More integrated
  approach in addressing environmental protection
  (Monitoring Assessment Division, Inspection and
  Enforcement Div, Licensing Guidance Div).

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Future Outlook for the Jordanian Apparel Sector

• New by-law for Inspection Enforcement that
  includes clear inspection enforcement
  procedures and defined roles of Inspectors and
  Environmental Rangers.
• Incorporating Integrated Licensing and CP in the
  current legislation in addition to EIA
• Adoption of the EU waste catalogue.
• New Investment law grants tax exemptions to
  environmental and energy-friendly investments.

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Future Outlook for the Jordanian Apparel Sector

• 2. Trade and Economic- related Tools
• Introducing economic incentives to encourage
  investment in environmental and energy-friendly
  industries (e.g. establishing the Environmental
  Protection Fund)
• Enhancing Trade and Environment synergies to
  concurrently facilitate trade while protecting
  the environment.

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Future Outlook for the Jordanian Apparel Sector

• Setting conditions for granting environmental
  permits for new Industrial Zones based on
  environmentally sound infrastructure equipped
  with water treatment and waste management
  systems.
• Enhancing partnership with the private sector in
  establishing Wastewater Treatment Plants in the
  QIZs.

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Future Outlook for the Jordanian Apparel Sector

• Complete package of logistics improvements that
  includes
• Aqaba Port improvements
• Land Transportation (liberalization of monopoly)
• Quarterly QPR (Qualified Product Request)

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Opportunities for Cooperation between Jordan and
the MEDA Countries

• Strategic Alliances, using MEDA fabrics,
  manufacturing in Jordan and exporting to the USA
  under the Jordan US FTA.
• Cumulation of origin among the MEDA countries to
  export to the EU.
• Building on the Jordanian exports to the USA, to
  exports to Europe.
• Using MEDA accessories for exporting to the USA
  under the US FTA.

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For further Information please contact Gina
Farraj Shalhoub Gina.f_at_mit.gov.jo Tel[phone]

• Thank You