NEW YORK — “Jordan is the eye of a hurricane,” said Costanzi Yaghnam, a Jordanian apparel factory owner. “We’re surrounded by turmoil, but then you have an oasis that’s calm and beautiful.”
With Israel on one side and Iraq on the other, Jordan is seen as an outpost of peace and relatively pro-Western attitudes in the Middle East. That has prompted the U.S. government to extend some trading perks.
Yaghnam is an example of a Jordanian entrepreneur who has taken advantage of the kingdom’s rapidly growing apparel manufacturing industry.
For the year ended in June, Jordan exported $483.4 million worth of apparel and textiles, an 89.2 percent increase over the previous year, according to Commerce Department data. That made Jordan the U.S.’s 28th-ranked supplier of imports in those categories.
Yaghnam, who speaks flawless English and has an MBA from Purdue University in Indiana, is chief executive officer of El Zay, an apparel manufacturing company with one factory about 15 miles outside of Amman, the capital, and another factory under construction. His current plant is the only country’s manufacturing facility that is also its own Qualified Industrial Zone, a geographical area within Jordan that receives duty- and quota-free trade status with the U.S.
Established in 1996, QIZs were created in a trade initiative between Jordan, Israel and the U.S. that stipulated garments manufactured in Jordan using some Israeli content would receive preferential treatment. Roughly 27 percent of a garment’s f.o.b. cost has to be generated in Jordan and about 8 percent, often trimming, has to come from Israel, while the remaining percentage value come from other countries.
El Zay employs about 570 people — nearly all are Jordanian —and can produce about 180,000 men’s tailored suits and close to 230,000 men’s shirts per year.
Yaghnam founded his company 10 years ago through a venture with European apparel giant GFT, who sent a 16-member team of Italian technicians to Jordan to set up the factory, supplying technical assistance and training for two years.
“The next step is that we want to be a major supplier for the American market,” said Yaghnam. “We’re looking to diversify production into casual wear and women’s wear and are hoping to be able to get a license from an American brand and start marketing the brand in our area as well.”The country is ruled by King Abdullah II, 41, and Queen Rania, 33. King Abdullah, 41, is the son of the British-born Princess Muna and was educated in Western schools. Yaghnam said the monarchs have played a key role in strengthening the country’s relations with the U.S. and securing trade advantages.
“It has totally happened because of the monarchy,” said Yaghnam, in reference to the king and queen’s diplomatic efforts to bring about more trade advantages for the Jordan.
But the country still has its work cut out for it. One challenge facing Jordan is to attract more U.S. investment. Most apparel factories have been built by Chinese, Indian and South Korean companies, who sometimes import workers from abroad.
Main Trend, for example, which has manufactured fleece and outerwear garments for U.S. brands such as Land’s End and Columbia, is owned by a Chinese company. It purchased a factory there three years ago and employs about 1,300 people in a QIZ called Al-Tajamouat.
“They have two-year contracts with operators that have been imported from Bangladesh and China that will cut and sew garments, though obviously a percentage of labor has to be Jordanian,” said David Parkes, president of Concept III Textiles, which works as an agent for Main Trend in the U.S. “The Jordanians do the less skilled work because [the country] doesn’t have a history of garment workers, but they’re training them.”
Freight time for garments imported to the U.S. is similar to products out of Asia and Main Trend has not experienced any shipping delays because of the war in Iraq, Parkes said. The company that owns Main Trend also owns a fabric mill in Taiwan called King Whale.
However, when quotas are lifted in 2005, some worry that Asian apparel manufacturers will pull out and head home. David Holt, president and chief executive officer of the Jordan-U.S. Business Partnership said around 90 percent of the country’s QIZ exports are clothing and textiles, suggesting that the country could benefit from some diversity in its manufacturing base. If foreign investors no longer face quota regulations at home, then some advantages of manufacturing in Jordan will be lost, Holt added.Further, a recent study on the effects of 2005 by the American Textile Manufacturers Institute put Jordan on the top of a long list of countries that would lose market share to China. The ATMI looked at the runup of Chinese imports in the few categories on which quotas have already been lifted in the 10-year phaseout period. It predicted China could hold a 65 to 75 percent share of the U.S. market within a year after the end of quotas. For the year ended June, China held 13.8 percent of the U.S. import market.
Regarding Jordan, the study projected the country could be in a position to lose $447 million worth of exports to the U.S. While the figures are speculative, the $447 million number represents 92.5 percent of the $483 million worth of apparel exported to the U.S. for the year ended June.
“There will potentially be a glut of unemployed yet experienced garment and textile workers, who, as a body, could seriously impair wage structures and destabilize the job market,” said Holt. “The material supply lines that have been established with Asian countries for threads and fabrics through the existing foreign investors’ networks may dry up.”
Holt said the Jordanian government is in the process of creating a “transition committee” that would seek to create a long-term plan for the kingdom’s garment and textile industry. The committee comprise government officials, industry representatives and private-sector executives and try to diversify the country’s industrial capacity.
“First, Jordan’s private sector for QIZ and non-QIZ companies must adopt a more rapid integration strategy to bind together procurement and design capabilities, thus generating incrementally stronger value-added products for a more discerning U.S. and European market,” said Holt. “Second, the dominance of clothing, which is 95 percent of the industry output, must be reduced through product diversification with more balanced exports directed toward a broad range of textiles, such as for the home furnishings and industrial markets.”
He also said the country should emphasize its firm stance on ethical employment and human rights issues. Jordan labor law is highly protective of workers and offers protection for female laborers, Holt said.
Besides the QIZ initiative, Jordan and the U.S. also have a free-trade agreement that was established in 2000 that has provisions addressing labor and environmental commitments.“These are not sweatshops,” said Concept III’s Parkes. “They’re fully equipped garment manufacturing facilities and they have very strict requirements regarding human rights standards. Jordan is a great place to make garments right now.”
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