GETTING DOWN TO BUSINESS WITH JORDAN
(Article by David Lipkin, 'Ma'ariv', July 25, 1994)
Tangible and rapid joint economic cooperation is how Israeli experts
define the economic talks between Israel and Jordan. Reciprocal use of
infrastructure, importation of food products, leather goods, and quarried
materials will open the new age between the neighbors. In the meantime,
the Jordanian economy is waiting for the results of the summit in
Washington.
The Jordanians surprised the Israelis at last week's economic talks. They
offered a series of practical proposals for establishing future economic
relations, with the goal of opening the markets through reciprocal
granting of most favored nation status. There will be significant and real
cooperation, according to a number of the Israeli participants in the
Jordanian negotiations. Everything, they say, now depends on the political
agreements.
Israeli representatives to the talks came away deeply impressed by their
Jordanian counterparts, who arrived with prepared working papers on the
future of the economic relations between the two nations. Unlike talks
with other Arab parties, time was not wasted on general issues and
declarations of intent, rather the talks focused on particulars. The
Jordanians didn't speak in slogans, rather they brought up ideas and
suggestions for advancing economic relations. The head of the Finance
Ministry's international division, Dr. Ehud Kaufmann, left the talks
yesterday (24.7.94) and concluded, that if the peace process progresses,
the Jordanians will cooperate in every area in which they can benefit.
The Jordanians were likewise surprised by the Israeli delegation. Set
before the Jordanian delegation was a huge Israeli book listing a large
number of proposed joint Israeli-Palestinian regional economic projects.
The projects include development of a highway system between the two
nations, development of tourism and transportation projects, joint
cooperative industrial proposals for taking advantage of the Dead Sea's
riches and more. The proposals were developed by the Finance Ministry and
crystallized by Dr. Yossi Vardi and Rafi Benvenisti.
>From last week's round of negotiations it appears the Jordanians are ready
to quickly advance along the path of economic cooperation, and the
Israelis were surprised by the openness of the Jordanians' proposals. The
Jordanians are ready for reciprocal use of facilities for foreign trade.
Obviously, the Jordanians want to take advantage of Israel's
telecommunications infrastructure, its existing financial system, and the
country's ports in order to increase trade levels. They also do not reject
the possibility that Jordan will serve as a shipping point for Israeli
goods destined for Persian Gulf nations.
With Jordan serving as a transit point, indicated an Israeli source,
Israeli firms will invest in Jordan. In the beginning, logistics centers
for distribution and marketing Israeli products will be set up. At a later
date, service centers will be established to take advantage of the
professional expertise in the neighboring kingdom.
The Jordanians apparently realize the potential of the Israeli market and
they want to integrate themselves as importers to take advantage of their
relations with Israel. The Jordanians will compete against other importers
into Israel, and will most certainly be able to offer their goods at less
expensive prices.
In the Working Paper it is very clear Jordan is eager to penetrate the
Israeli market, while concurrently, Israel will be expected to penetrate
the Jordanian market only gradually. Government offices now examining this
Jordanian request, are not immediately ruling out flexibility in the
matter and are dealing concretely with the a section in the GATT treaty
which allows this approach.
The Jordanian delegation to the talks worked professionally. A majority of
the economists hold degrees from well-known US universities and are well
versed with the material. American representatives participating in the
discussions worked as facilitators and mediators, as is done by investment
bankers during business negotiations in mergers and acquisitions.
Research done in Israel shows that in reality Jordan is a small market
relative to that of Israel, even though its population is around 4
million. There are those who argue that opening economic relations with
Jordan will contribute to an increase in Israeli exports by not more than
$500 million annually. These estimates are based on the fact that Jordan's
production per capita is only $1,200, and on Jordan's current economic
situation.
Jordan's 1992 GNP was $4.5 billion, or about 7 percent that of Israel.
Jordan was hit badly by the Gulf War, during which its close economic ties
with the Gulf nations were cut and their support withdrawn. Removing these
financial sources from Jordan forced the country into large debts
approaching $700 million, which Jordan is now requesting that the US erase
them as a form of economic aid.
Jordan is very dependent upon imports: during the past years Jordan's
imports have stood around $3.3 billion annually. Some 44 percent of
Jordan's exports were potash-based phosphates, primarily to the Far East.
But Jordan has not succeeded in penetrating the markets of wealthy
nations. The rest of its exports are food and light industrial products to
other Arab nations.
A research paper by Professors Nadav Halevi and Ephraim Kleiman for the
Armand Hammer Fund for Economic Cooperation in the Middle East of the
Pinhas Sapir Center for Development at Tel Aviv University, reaches the
conclusion that if Jordanian imports were given preferable terms over
imports from other nations, a number of Israeli light industries might be
hurt by the competition. If the Israeli market, which is relatively large
compared to the Jordanian market, is opened to them, Jordanian factories
would be able to take advantage of their position and increase production.
Israel also would be able to begin exporting to the new market medium
technology-based products such as agriculture equipment, industrial
inspection systems and more.
According to the research, Jordanian imports would initially consist of a
number of foodstuffs, leather products, quarried products, and scrap
metal. As opposed to these, quite a number of Israeli firms would be able
to compete in Jordan against products that are imported there from
geographically distant sources. Israeli exports would be processed food
products, chemicals, textile yarns, paper and cardboard products,
footwear, electronics, and industrial machinery.
Nadav Halevi is convinced that preferential trade conditions will increase
trade between the two nations, even though Jordan fears the exposure of
its young industrial base to established Israeli concerns. Therefore, it
is incumbent on the two sides to fix a phased schedule for reducing
limitations.
Halevi dismisses the creation of a Free Trade Zone or customs union, and
recommends giving Jordan trade conditions similar to those granted to
Third World nations. This will be done so as not to break any
international trade agreements which Israel has signed. Initially, Israel
should expand the list of items which the Palestinian Authorities are
allowed to import on preferential terms from Jordan, or increase the
amounts of these items allowed to be imported into the Palestinian
Authority on the assumption that a certain amount will reach Israel.
Another problem to be addressed is how to manage competition between
Israel and Jordan regarding potash and phosphates in international
markets. Halevi stresses that every trade agreement with Jordan is
required to include an agreement on competition between similar products
in international markets.
Ehud Kaufmann is optimistic about business dealings with Jordan, as
opposed to the pessimism of most Israeli experts. He believes that Jordan
has great potential for growth. If Israel can be a component of this
development and of the realization of Jordan's potential Israel's
economy will profit.