Jordan’s Apparel Industry

MAGIC ShowLas Vegas 2006

Ministry of Industry and TradeThe Hashemite Kingdom of Jordan

The Hashemite Kingdom of Jordan

• A population of 5.4 million.

• 35,000 square miles.• Bordering five

markets...

...and accessing a billion

consumers

FDI Performance Indicators (UNCTAD)

Under PerformersBelow PotentialAbove

PotentialFront Runners

1988-1990

Jordan

Morocco

Lebanon

Japan

Italy

Saudi Arabia

UAE

Syria

Tunisia

Egypt

Bahrain

Ireland

Singapore

USA, China

1993-1995Syria

Lebanon

Jordan

Saudi Arabia

Japan

Italy, USA

Morocco

Tunisia

Egypt

Bahrain

Singapore

Ireland

China

2000-2002Syria

Lebanon

Japan ,Italy

Saudi Arabia

UAE ,Egypt

Bahrain, USA

Morocco

Tunisia

Jordan

Singapore

Ireland

China

Macroeconomic Stability1999 2004 2005

Inflation(%) 0.6 3.4 3.4

Ext. Debt (% of GDP) 95.5 67.4 57.3

Exports ($ bn) 1.48 3.29 3.9 (Nov)

Real GDP Growth(%) 3.4 7.7 7.7

GDP Per Capita($) 1,734 2,163 2,306(Estimated)

Market Cap. ($ bn) 18.4 37.75.8

Foreign Res. ($ bn) 1.99 4.82 4.8

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.

Attractive Investment Environment

People are our greatest asset:• Well educated population.• Over 91% literacy rate. • 180,000 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.• Excellent labor relationship.

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 & Quota Free

QIZ & FTA

QIZ35% 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

FTA35% Domestic content:

35% made in Jordan (Entire Country)

Up to 15% made in USA

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

QIZ and FTA Rules of Origin

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”

“Materials Produced”

OR

Double Substantial Transformation

Fabric cut into component

pieces in QIZ or Jordan

Foreign Fabric Component

pieces sewn or assembled in QIZ or Jordan

= Double Substantial Transformation

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.

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 FTA’s apply yarn forward rules of origin)

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 FTA’s apply yarn forward rules of origin)

Jordanian Apparel Exports to the USA Per Agreement (US $)

0200,000400,000600,000800,000

1,000,0001,200,000

2000 2001 2002 2003 2004 2005

QIZ FTA NTR

The Jordanian Apparel Sector

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

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. • 90% of bilateral trade between Jordan & Israel is

attributed to QIZ.• Major international buyers sourcing from Jordan: JC Penney, Levi’s, Liz Claiborne, Gap, Gloria

Vanderbilt, Victoria’s Secret, Jones Apparel, Perry Ellis, PVH, Sara Lee, Banana Republic, Wal-Mart, Target…

Jordanian Apparel Exports

Examples of Items Exported under the QIZ (zero custom duties):

• Manmade fibers knitted Sweaters and pullovers (61103030) (NTR 32%)

• Women’s girl’s trousers, shorts, breeches knitted of synthetic fibers (62046335) (NTR 28.6% )

• Women’s trousers, shorts, breeches knitted of artificial fibers (61046920) (NTR 28.2%)

• Cotton knitted Sweaters and pullovers (61102020) (NTR 16.5%)

Jordanian Apparel Exports

Examples of Items Exported under the FTA (zero custom duties):

• Cotton knitted T-shirts (6109100) (NTR 16.5% )

• Women’s woven cotton trousers, shorts, breeches (62046240) (NTR 16.6%)

• Men’s cotton woven trousers, shorts (62034240) (NTR 16.6%)

• Women’s woven cotton blouses and shirts (62063030) (NTR 15.4% )

• Wool knitted Sweaters and pullovers (61101100) (NTR 16%)

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.

• Established on-the-job technical training program for Jordanian workers aiming at replacing guest workers.

Future Outlook for the Jordanian Apparel Exports

Complete package of logistics improvements that includes:

• Aqaba Port improvements

• Land Transportation (liberalization of monopoly)

• Quarterly QPR (Qualified Product Request)

Future Outlook for the Jordanian Apparel Exports

• Complete package of exemptions and tax and fiscal incentives for the Apparel sector.

• FTA with Turkey (Mid 2006)– Flexibility of sourcing Turkish fabrics– Cuts down on lead time– Potential for exporting to the EU market under the

Pan-Euro-Med accumulation system

• A similar agreement was reached with Israel to increase the potential of exporting to the EU under the same scheme

Thank You