|QIZs create economic base, better ‘work ethic’ needed
|The recent row in one of Al Hassan Industrial Zone’s factories over labor rights is raising questions about rules and procedures governing the work of Qualified Industrial Zones (QIZs) in Jordan.
The row was settled between the employees—who went into strike for several days—and the factory manager. Yet, the affair posed questions about the benefits of the QIZs to Jordan.
Economists and investors agree these zones increase exports. Statistics show Jordan’s exports surged to $541 million in 2002, an 84 percent rise over 2001. At least 10 percent of these are made through Jordanian-based raw materials, according to a QIZ agreement sighed between Jordan, Israel and US in 1997. It pumps some $50 million a year in the treasury. In November 1997, Al Hassan zone was established as the first QIZ following the US Congress’s endorsement in support of the peace process in the region.
American officials see the zones in the Kingdom as the ‘dividends of peace’ between Arabs and Israelis. Jordan was among the three countries in the region classified for QIZ status. The aim of these zones was to encourage Jordanian exports to US markets. It is an invitation to all national and international companies to take advantage of the benefits these zones provide investors, including free foreign currency transaction and full repatriation of capital, profits and salaries. Each QIZ is an industrial park from which goods are exported duty-free and quota-free.
With 10 qualified zones operating in Jordan today, the Kingdom’s annual exports make about half of Jordan’s international trade in any one year. "I believe the QIZs helped put Jordan on the world’s investment map," said Dr Mohammed Halaiqa, former minister of national economy. "These industrial zones are there to encourage regional trade cooperation and transform peace into actual businesses." Halaiqa told The Star the zones today act as opponents to the Free Trade Agreement between Jordan and the US. Unlike the QIZs, the FTA allows Jordanian exports to American markets without Israel being included.
The QIZ agreement between Jordan, Israel and the US verifies any product is eligible for export to US markets only if eight percent of its final make up is by Israeli manufacturers. The agreement also stressed Jordanian and Israeli manufacturers may each maintain at least 20 percent of the total production cost of the QIZ manufactured goods, excluding profits. The costs include raw materials, packing materials, wages and product designs.
" The FTA and QIZs give the same opportunity for investors and businessmen to reach US markets," Halaiqa said. "The FTA provides extended portion for Jordanian-based materials at 35 percent of the exported product, tripling that made under QIZ rules. And Jordanian investors can have businesses with the US directly and free from any Israeli intervention."
Meanwhile, tariffs and quotas for many goods under the FTA are phased out over time. Thus far, investors may find the QIZs at an advantage, because of the high tariffs their goods may be subjected to under the FTA agreement. Over recent years there was rapid growth in QIZ businesses in Jordan, four zones were established in less than two years. It raises frequent questions by economists and businessmen about the purpose of having such a high number of QIZs in the Kingdom, where politics often influence the economy.
"One may ask why the government established an industrial zone in Al Dhlayel near Zarqa or the one recently established near Karak?" Halaiqa asked. "Investors would think twice to go there since these zones are far away from the capital. Businesses in these zones won’t flourish if there is no will to invest there."
The government says industrial zones in the southern and eastern regions aim at developing the social and economic life in remote and rural areas. They provide thousands of jobs to Jordanians. But many investors complain young Jordanians are not interested in working in these zones, due to low wages and restricted labor regulations. And economists warn the employment situation in these QIZs is deteriorating.
Despite the fact industries in the qualified zones generate good profits every year, they still lack the fundamentals to secure healthy working conditions and labor rights. Almost half of the 20,000 workers in the QIZs in Jordan are foreigners, coming from South Asian countries.
For many investors and manufacturers at the QIZs, recruiting foreign labor has many advantages. "Foreign employees are more energetic, harder workers and easy to control," said a Jordanian businessman, who preferred anonymity. "Foreign workers can work harder and longer than Jordanians, who only look for bigger wages at less working hours. And there are industries where foreign workers can accomplish more than Jordanians," he added.
Economists warn, however, the work conditions at these QIZs are deteriorating. They still lack the fundamentals to secure healthy working conditions and labor rights. There are also disputes among investors to bring in cheap labor from the Asian countries, rather than invest in Jordanian human resources.
Many economists often wonder if the Jordanian labor laws are binding in these QIZs. Disputes in the qualified zones often take place because of the inferior wages and inefficient working conditions. Such disputes leave workers deprived of their basic rights.
Nevertheless, many Jordanians suggest these zones give significant opportunity for young Jordanians, especially women, to gain experience in dealing with the latest technology in industry and commerce, and increase the chance of the younger generations for better job opportunities.
Halaiqa agrees the QIZs are not subject effectively enough to labor rules and regulations. He stressed the need to fortify the monitoring procedure at these zones to make sure that working conditions are according to regulations.
"The Ministry of Labor and the labor unions in Jordan have often issued warnings and fines against investors who violate the labor laws," he explained. "These are technical problems, and can be solved through financial settlements. Investors must guarantee first the rights of their workers before starting a business."
Halaiqa asserts the influence of QIZs in Jordan will shrink over time due to the great opportunities the FTA has for the economy in the long run. " Businesses at the qualified zones will remain. Though investors will find the FTA with the US a better haven for their businesses."