Jordan Times | 2 February 2009
Garment factories hit by high production costs
By Hani Hazaimeh
AMMAN - Some garment factories in the Kingdom’s Qualifying Industrial Zones (QIZ) are relocating to other countries because of high production costs, according to the Jordan Garment, Accessories and Textiles Exporters Association (JGATE).
Rising operational expenses have also led to a 16 per cent drop in garment exports to the US, which amounted to around $948 million in 2008, compared to $1.139 billion the previous year, JGATE President Farhan Ifram told The Jordan Times on Sunday.
"Around eight garment companies shut down their businesses and left the country last year due to the sharp increase in operational costs," he added.
Meanwhile, other factories are implementing their expansion plans in countries such as Egypt and Bangladesh instead of the Kingdom, due to their low operational costs and the availability of cheap labour, Ifram said, noting that factories in the Kingdom need to import expatriate workers.
The Egyptian garment sector is a strong competitor as investors do not have to worry about travel, work permit or residency fees, according to the JGATE president, who pointed out that wages in Egypt are much lower than in the Kingdom.
But this will change starting in 2010, when the entire industrial sector will benefit from the US-Jordan Free Trade Agreement (FTA), according to Ifram.
Signed in 2000, the FTA was America’s third free trade agreement and the first ever with an Arab state.
Under the agreement, which offers significant and extensive liberalisation across a wide spectrum of trade issues, tariff and non-tariff barriers to bilateral trade in virtually all industrial goods and agricultural products will be eliminated in January 2010.
"All exports to the US will enter into the country duty-free. This will make Jordanian products very competitive compared with other countries, as they will be much cheaper," he added.
Currently, only products manufactured in the QIZs are exempt from customs duties in the US.
According to the Labour Ministry and JGATE figures, around 46,000 workers are employed by the QIZ sector, only a quarter, or 11,600, of them Jordanians.
Jordanians refuse to work in QIZ factories not only because of the low salaries, but also due to the nature of the profession, Ifram said (see related story on page 3).
"This job requires employees to do the same task for at least eight hours, day after day, which makes it a boring profession for them," Ifram said, noting that this makes it even more difficult for the garment sector to attract local workers.
Adham Ali, a 21-year-old Jordanian working in Al Hassan Industrial Estate, said he joined a QIZ company three months ago, after being unable to find any other job in Irbid.
"I work for eight hours plus another two as overtime, which increases my salary by 20 per cent," Ali told The Jordan Times.
But he has applied to the army-run National Company for Training and Employment, which oversees a nationwide project to train young Jordanians on skills highly demanded by the construction sector.
"If my application is accepted, I will quit this job and join the company, since my salary will be much more than I make now," he added.
According to Ifram, the garment sector started facing problems early last year due to the unprecedented increases in the prices of oil derivatives and the cost of living.
"We expect this year to be even worse, as our biggest market, the US, is going through an economic recession," the JGATE official said, noting that they had asked the government for an incentive package, to minimise the impact of the global financial crisis, but the issue still hasn’t been tabled for discussion.