Textiles remain a key pillar of Jordanian industry

Garments, accessories and textiles trade has been one of the kingdom’s great success stories, with exports continuing to grow despite the global economic slowdown and enduring regional challenges. Industry players hope that the years ahead will see a major breakthrough in trade with the EU, a development that will not only be good for Jordan’s economy, but will also provide some relief for some of the many Syrian refugees who face continuing hardship in the kingdom.

Demand Growth

While garments and textiles have a long history in the Jordan valley – Petra was an ancient trading centre for the entire region – in recent times the garment segment has mainly catered to the local market. However, in 1998 Jordan signed an agreement with the US to set up a qualified industrial zone (QIZ) at Irbid. This was an extension of pre-existing QIZs along the boundary between Israel and the Palestinian Territories – zones set up as part of the peace dividend following the 1993 agreement between Israel and the Palestinian Authority, and the Jordan-Israel peace treaty of 1994. The QIZs allowed exemption from tariffs and quotas for goods manufactured within the zones when exported to the US. The caveat being that the goods had to be manufactured using a certain percentage of inputs from each country, creating an incentive for cooperation among previously hostile parties. At the same time, companies within the QIZs were exempt from income and social security taxes, while foreign entities could fully repatriate capital and profits, and enjoy full ownership.

While initially hesitant to exploit these advantages for political reasons, the QIZ at Irbid became more popular over time, as the numerous business benefits became evident. In 1998, 12 more sites were given QIZ status, and in 2005 Egypt launched its own QIZ initiative, establishing a similar arrangement with the US. Textiles and garments were one of the first industries to see the potential for these initiatives. Until then, exporting to the US had been hampered by high tariffs. With the QIZs, however, Jordanian textile companies could export to a major market at a highly competitive price. The impact on Jordan’s exports was dramatic. In 1997 Jordan exported less than $5m worth of goods to the US, compared to $274m in imports. By 2001 the kingdom was exporting $164m, while imports stayed at a similar level at $280m. In 2002 Jordan recorded its first positive trade balance with the US.

Fta In, Mfa Out

Given the success of the QIZs, Jordan and the US signed a wide-reaching Jordan-US Free Trade Agreement (JUSFTA) in 2001. This brought similar benefits to industries outside the QIZs and was phased in completely by 2010. By 2012 only one QIZ was still exporting to the US under the original agreement, with all others exporting under JUSFTA, which does not require any inputs from neighbouring countries but still offers zero tariffs.

Another landmark move was the phasing out of the global multi-fibre agreement (MFA) beginning in 2005, which, by opening up the market to free competition, also made some of the benefits of QIZs and JUSFTA redundant as far as garments and textiles were concerned. The end of the MFA also brought more intense international competition for Jordan’s garment and textiles industry. Bangladesh, Vietnam, China and other Asian countries have moved to leverage lower wages to become highly price competitive in the US and elsewhere.

Workers’ Rights

Yet in spite of this, the industry has continued to grow and prosper, while also addressing labour issues. In 2008 the Jordanian government invited the UN’s International Labour Organisation (ILO) and the International Finance Corporation to launch its “Better Work Jordan” campaign. Consultation committees were set up in factories, bringing together workers and management, and in 2012 a national minimum wage committee was established and agreed to raise the minimum wage. Collective bargaining processes, the right for migrant workers and Jordanians to join unions, and other ILO core conventions were also implemented.

Despite an initial downturn after the abolition of the MFA, exports to the US began to pick up again after the full implementation of JUSFTA. The latest figures from the Central Bank of Jordan (CBJ) show that clothing made up some JD979.13m ($1.4bn) in exports in 2015, up from JD908.2m ($1.3bn) in 2014. Jordanian garment firms have concentrated on areas such as man-made fibres and sportswear that previously had high tariffs. They now supply a wide range of major US retail outlets.

In addition, The Jordan Times reported in October 2016 that the US Department of Labour had lifted restrictions on the garment and textile imports from Jordan. The kingdom has previously been added to a list of countries that allowed child labour and violated international anti-human trafficking laws. However, through increased inspections and changes to legislation the country has been able to address these violations of labour law. Through cooperation with the International Labour Organisation and local non-government organisation Tamkeen, the Jordanian government has stepped up inspection campaigns in industries known for these violations, as well as improving legislation to include appropriate wages and better working hours.

Sector Bodies

The Jordanian Garments, Accessories and Textile Exporters’ Association (JGATE) is the main organisation for companies active in the sector. JGATE lobbies on behalf of its member companies, as well as promoting the sector’s activities. The original QIZs are still the main production sites for the industry, with some 65 factories in these and in several satellite units manufacturing a wide range of goods. The satellite units are located in areas around the kingdom noted for high unemployment and can only employ Jordanian citizens.

They also gain from various regional development incentive schemes and form part of government efforts to bring business to poorer areas. The sector is noteworthy for its high number of both female and foreign workers. On the latter point, Sri Lanka, India, Nepal and China are major sources of labour, with companies from these countries among the first to move into the QIZs, back in the late 1990s. Workers from these countries are used to lower wages than Jordanians, an important factor in a labour-intensive business where Bangladesh and Vietnam are key competitors.

Workforce Development

Taking into account that stitching and needlework are traditionally female roles in most societies, as well as social conventions against married women working, the majority of those working in the sector are single, expatriate women, generally young and at the lower end of the educational scale. This puts a special onus on employers to ensure staff development and quality control, with JGATE also working closely with the ILO, the unions and the government to ensure a safe and well-regulated work environment. Another recent move forward was the development of a standard work contract for all those employed in the industry, regardless of their country of origin.

The garment and textiles industry is now also looking to employ more Syrian refugees. Somewhere between 630,000 and 1.26m Syrian refugees are estimated to be living in the kingdom. Many live in poverty, having been unable to work legally until now, with little or no savings.

Jobs For Refugees

JGATE has initiated a project, in collaboration with the UN High Commission for Refugees and the Jordanian Ministry of Labour, to employ some 2000 Syrian refugees in the segment’s factories. The success of this plan is likely to hinge on the EU. At the London Support Syria Conference in February 2016, Jordan put forward a proposal for the creation of new special economic zones in which the Syrians could be employed. These zones have the advantage of low export tariffs to the EU, encouraging many businesses to locate there.

“Garments will be one of three Jordanian products that the EU will open up to, if the negotiations are successful,” Dina Khayyat, JGATE’s chairwoman told OBG. “Some 13 areas of Jordan will hold the zones where this can be done, and if it happens, EU brand names can start moving production here.”

In July 2016 the EU decided on its new goods of origin rules, under which it now includes Jordan for preferential treatment. The decision has been welcomed as a positive one, and it could mean employment for many Syrians. Moreover, the garment, accessories and textiles segment could see a further boost in the years ahead. There is plenty of room for further growth – while Jordan’s garment exports are strong, the country is still some way behind giants such as Bangladesh and Vietnam.


You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Jordan 2016

Industry & Retail chapter from The Report: Jordan 2016

Cover of The Report: Jordan 2016

The Report

This article is from the Industry & Retail chapter of The Report: Jordan 2016. Explore other chapters from this report.

Choose a chapter from The Report: Jordan 2016

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart