Jordan’s Textile And Apparel Sector: Small But Significant

The textile and apparel industry in the Hashemite Kingdom Of Jordan — a Middle Eastern country
sandwiched between Israel, Saudi Arabia, Iraq and Syria — is relatively small, but it is one of
Jordan’s main industrial sectors. In that country, which has a population of more than 6.5 million
and a labor force of nearly 1.8 million, the textile and apparel industry employs approximately
60,000 people, according to the World Bank, and the apparel sector accounts for approximately 30
percent of export earnings. In 2011, Jordan’s exports of textile yarn, fabrics, made-up articles,
related products and apparel totaled US$1.05 billion, according to the Central Bank of Jordan’s
(CBJ’s) preliminary figures.

Trade Agreements

Jordan’s textile and apparel industry has benefited from numerous free trade agreements
(FTAs) the country has signed as part of efforts to strengthen international cooperation and trade
and increase its exports. Jordan has signed FTAs with the United States, European Union, European
Free Trade Association, the Greater Arab Free Trade Area, Morocco, Turkey, Singapore and Canada.

Both the Jordan-United States FTA and the Qualified Industrial Zone (QIZ) agreement have
significantly increased Jordan’s access to the U.S. market. The Jordan-United States FTA went into
force in 2001 and allows Jordanian products to enter the United States duty-free. The QIZ agreement
went into force in 1996 and allows Jordanian products made in designated areas and containing
Israeli inputs to enter the United States duty-free and quota-free. Together, the agreements have
contributed to an increase in Jordan’s apparel and textile exports to the United States from US$50
million annually before 1999 to US$1 billion in 2010, according to a MENA Knowledge and Learning
report published by the World Bank in February 2012. In 2010, the United States constituted 93
percent of Jordan’s total apparel exports, the CBJ reports.

According to the U.S. Department of Commerce International Trade Administration’s Office of
Textiles and Apparel’s (OTEXA’s) Nov. 5, 2012, Major Shippers Report, Jordan accounted for
approximately US$959.3 million and approximately 179.9 million square-meter equivalents of total
textile and apparel imports into the United States in the year ending September 2012. Textiles and
apparel produced in Jordan’s QIZs accounted for approximately US$63.1 million of those exports to
the United States.

Jordan’s exports to the United States go through two main seaports in the Middle East, Aqaba
and Haifa, which are among the fastest suppliers to the East Coast and offer shipping lead times of
less than three weeks.

The Jordanian textile and apparel industry’s U.S. customers include brands and retailers such
as Gap, JCPenney, Levi Strauss & Co., Liz Claiborne, Calvin Klein, Tommy Hilfiger, Walmart,
Kmart, Limited, Sears, Columbia, New York Laundry and Victoria’s Secret.

Possible Setbacks

Jordan has been faced with numerous issues impacting its textile and apparel industry. A
decreasing natural gas supply to the country and increasing oil prices have necessitated the import
of more expensive fuel to generate electricity. This energy crisis, combined with regional tensions
and the global economic downturn, has contributed to a slowdown in Jordan’s economic growth.

Another problem within Jordan’s textile and apparel industry is labor unrest. Several of the
country’s news agencies have reported strikes by factory workers demanding increased wages,
improved health insurance coverage and other benefits. Earlier this year, the Institute for Global
Labour and Human Rights reported labor violations at a Jordanian apparel factory, alleging that
hundreds of guest workers were forced to work overtime hours without adequate pay or health

Jordan is working to improve labor conditions and human rights in the textile and apparel
sector and elsewhere. In 2008, Better Work Jordan — a partnership between the International Labour
Organisation and the World Bank’s International Finance Corp. — was launched with the goal of
improving compliance with labor standards in the apparel-manufacturing sector. The Ministry of
Labour has mandated that all apparel-producing and -exporting factories participate in the program,
which aims to boost the domestic workforce and to make the sector more competitive internationally
by producing higher-end products.

More than two-thirds of jobs in Jordan’s textile and apparel sector are held by guest
workers, primarily from Bangladesh, India and Sri Lanka. The Ministry of Labour has urged employers
in the sector to reduce their dependence on foreign employees — especially considering Jordan’s
high unemployment rate, which was 12.9 percent in 2011, according to Jordan’s Department of
Statistics. Last year, the Jordan Garments, Accessories, & Textiles Exporters’ Association
announced there were 5,000 available jobs for Jordanians in apparel factories, but the organization
was unable to fill the openings. The Ministry of Labour is offering vocational training programs to
Jordanian workers in conjunction with Better Work Jordan’s efforts to boost domestic employment.

The Ministry of Labour has announced plans to raise the minimum wage from 150 Jordanian
dinars (US$211) per month to 190 Jordananian dinars (US$267) per month beginning in 2013. Employers
in Jordan’s apparel sector have warned that such a wage increase would cause their operational
expenses to rise 15 to 20 percent. Increasing production costs in Jordan already have led some
textile and apparel factories in Jordan’s QIZs to relocate production to other countries such as
Egypt and Bangladesh that have lower operational costs and less expensive labor.

The Future

The Jordanian government has set up a comprehensive five-year national program for economic
reform, and is receiving financial support from the International Monetary Fund, which has approved
a three-year US$2.06 billion Stand-By Arrangement to help implement the program. The IMF recently
forecast that Jordan’s gross domestic product will increase by 3 percent in 2012 and will continue
growing for the next five years.

Jordan has a good opportunity to attract foreign investment in the textile and apparel
sector, as many countries in the region — particularly Iran, Iraq, Syria, Lebanon and Egypt — are
experiencing political unrest. The sector holds great potential for the Jordanian economy,
especially if it is given adequate support by the government.

Recently, the Ministry of Labour signed an agreement with the Shahin Garment Factory, the
King Abdullah Fund for Development and the Jordan Enterprise Development Corp. under which it will
help fund the opening of new apparel factories and the training of 575 unemployed Jordanians to
work in those factories. Such government actions are imperative for boosting the textile and
apparel sector’s growth.

October/November/December 2012 online issue