Jordan Times
Monday, March 16, 1998
$100 million 'facility' shields Israeli firms
investing in Jordan from risks
By Ghalia Alul
AMMAN — Israel has set up a $100 million
"facility" to protect Israeli companies investing in
Jordan from "political and trade risks," an Israeli
diplomat said Sunday.
The fund will operate through the Israeli Foreign Trade Risk
Insurance Corporation (IFTRIC), head of the embassy's trade
office, Shaul Sasson, told the Jordan Times.
The establishment of the facility was announced in a joint
communiqué that was issued last Wednesday after a meeting in Tel
Aviv between His Royal Highness Crown Prince Hassan and Israeli
Prime Minister Benjamin Netanyahu.
The joint statement committed both countries, which signed a
peace treaty in 1994, to work on future projects in the vital
areas of water, infrastructure, trade and transport.
The insurance facility will help promote joint ventures between
Jordanian and Israeli companies as well as other activities in
the Kingdom, according to the communiqué.
"This insurance company will protect Israeli exporters from
both political and economic risks," Mr. Sasson said.
He added that the IFTRIC will insure up to 80 per cent of losses
that Israeli companies might face in Jordan even if they are
operating through a mother company abroad.
Jordanian and Israeli officials believe the move will encourage
more Israeli businessmen to shift operations to Jordan or to
expand already existing ones.
The relatively cheaper labour and operational costs have given
Jordan an edge over Israel's economy though the latter remains
technologically far more advanced than Jordan.
Mr. Sasson said 30 Jordanian textile companies are cooperating
with 17 similar Israeli firms to reexport finished goods to U.S.
markets.
Only three of these Israeli firms have entered into joint
ventures with Jordanians, he said.
"Most of these companies are sub-contracting for Israeli
firms. The design is Israeli, and the sewing takes place in
Jordan before the goods return to Israel to be reexported to the
U.S," he added.
Other Israeli companies are "looking for investments in
Jordan while some are in the negotiating process," Mr.
Sasson said. "...We expect these investments to create more
than 2,500 jobs, not only in Irbid, but in Zarqa, Rusaifa, Sahab
and other cities," he added.
Trade cooperation between Jordan and Israel, still low, is most
evident at Irbid's Qualifying Industrial Zone (QIZ) — a
status that grants Irbid-based industries duty free access in
U.S. market.
The American move is aimed at backing the peace process by
showing some of the much-promised economic dividends, many
Jordanians are still awaiting.
Jordan and Israel, in the presence of U.S. Secretary of State
Madeleine Albright, signed the QIZ agreement during the Middle
East and North Africa economic conference in Doha last November.
The accord stipulates that each Jordanian and Israeli
manufacturer contributes and maintains at least one third of the
minimum 35 per cent content required under the Legislation and
Proclamation for duty free treatment in the U.S.
In addition to the eight Jordanian-Israeli joint ventures
existing at the zone in Irbid, six new ventures, including a
plant to assemble Motorola cellular telephones and a hospital
supplies factory, are being set up.
Mr. Sasson also said that seven joint industrial companies were
already operating in different parts of Jordan.
But he said he did not have the names of these firms.
The issue of Israeli investments in Jordan remains a highly
sensitive matter for many of the Kingdom's 4.2 million population
who remain opposed to peace with Israel in the absence of an
overall settlement to the Arab-Israeli question.
Mr. Sasson added that Israel was keen on cooperating with
Jordanian firms working in the area of software production
because of the "huge shortage in software engineers in
Israel."
The cost of employing a software engineer in Israel is between
$5,000 to $10,000 a month, he said.
"Cooperation in the software industry is the future for both
sides," he indicated. "Since Jordan has well educated
people, we are willing to pay good people at a lower cost."
In order to win similar treatment granted by QIZ in European
markets, Israel and Jordan have addressed a joint letter urging
the European Union (EU) to recognise cumulation of origin between
the two countries to allow joint products duty-free entry to the
countries of the EU.
Both Jordan and Israel already have the privilege of entering EU
markets without custom duties under separate association
agreements.
But unlike the QIZ status, their joint products will not be
allowed free entry to the EU.
According to the joint statement, the two sides will establish a
joint committee to harmonise rules of origin and relevant
administrative and customs procedures to encourage more trade .
Bilateral trade levels between Jordan and Israel did not exceed
$35 million in 1997.