Qualifying Industrial Zone - History

History

The concept behind a Qualifying Industrial Zone is credited to be the brainchild of Omar Salah, a Jordanian businessman. In 1993, in anticipation of the Israel–Jordan peace treaty, Salah traveled to Israel with the intention of doing business with Israeli businessmen. He was also interested in business ventures that could take advantage of the eight-year old free trade agreement between the United States and Israel that allowed Israeli goods to enter the US markets duty free. After the treaty was signed in 1994, a business venture was struck between Salah and Delta Galil, where labor was transferred to Irbid in northern Jordan, to take advantage of low labor costs that were forty to seventy percent lower than in Israel. Salah had envisioned that by exploiting Israeli resources such as labor, finances, and contacts, and then leveraging it to produce value-added goods, the economy of Jordan would be benefited. In addition, he surmised that economic cooperation between the two nations would help foster peace in the region.

Additional business ventures followed and Salah then set up a public share-holding company Century Investments. For doing business with Israel, many Jordanian organizations criticized Salah and boycotted the purchase of output in Jordan. Despite the heavy criticism, Salah nevertheless received tacit support from King Abdullah of Jordan. To combat the boycott, Salah began to work with multinationals with a larger international stake. He then actively lobbied the Jordanian government to set negotiate a free trade agreement with the United States on the lines of the United States-Israel Free Trade Area Implementation Act of 1985. Faced with little enthusiasm by the Jordanian government, Salah scrutinized the Presidential Proclamation (No. 6955) that was part of the Palestinian agreement signed between the Palestine Liberation Organization and Israel in 1993. In the agreement, the areas on the border between Israel and Jordan were designated as "Qualifying Industrial Zones", and goods produced here would not have tariff and quota restrictions to the US markets. Since the Hassan industrial estate in Irbid, where Salah had factories located, was situated far from the bordering areas, it did not qualify for QIZ status.

Salah then lobbied the Jordanian government for extending these regions into other parts of Jordan. Government officials were luke-warm to the idea and told him that it would be "naive to assume" that the United States would give Jordan this status. Unfazed by this response, Salah traveled to the United States and lobbied hard with the US State Department, the White House, and the US Trade Representative that it was in US interests to extend the QIZ into Jordan's interiors. Lawyers in the United States then told Salah that even if a small portion of Israeli territory was associated with a QIZ, the proposal might materialize. Soon, USTR officials began to travel to Jordan to work on the deal.

Finally, in 1997, an agreement was signed at the Middle East and North Africa (MENA) conference at Doha that established a QIZ agreement with Jordan. On 6 March 1998, the Al-Hassan Zone in Irbid was designated the first QIZ in Jordan.

After the setting up of the first QIZ, few Jordanian companies took advantage of QIZ benefits due to the general hostility in doing business with Israel. Instead, Chinese and Indian companies quickly took advantage of the vacuum to set up business establishments. The lack of local enthusiasm was criticized by the Jordan Times for missing the "golden opportunity". Gradually though, more Jordanian businesses began to set up business establishments as political hostilities began to be overshadowed by business economics. Soon after 1998, an additional twelve sites were given QIZ status by USTR.

Positive results from the Jordanian QIZ led to the Government of Egypt negotiating a separate QIZ protocol with the United States in Cairo on 24 December 2004. The protocol came into effect in February 2005.