The Jordan Industrial Joint Gateway Project: A River Runs Through It

Making the Case for ChangeIndustrial Zones in Jordan, with a minimumpercentage of value added in Israel, are eligiblefor export to the United States without tariffs.This creates a strong incentive for cross-bordertransactions, as goods go back and forth acrossthe Israeli-Jordanian border in preparation forexport. This sort of joint economic activity hasbeen publicly promoted as a means of creatinggreater economic ties between Israel and Jordanthat will lead to more normal peaceful relationsbetween the two countries. Therefore, thesetypes of joint projects enjoy strong politicalbacking in both countries and are supported bymany NGOs.The project sponsor is FIBI Investment HouseLtd., which is a subsidiary of FIBI Holdings, theSafra banking group’s business arm in Israel.The project is located on the banks of the JordanRiver, 8 kilometers south of the Sheikh HusseinBridge. The Jordanian side will be more than 50hectares in size to start, with plans for expansionto 127 hectares in the future. The project alsoentails the construction of a new bridge betweenJordan and Israel that will be used to facilitatetrade and export activities.The Jordanian part of the enterprise will requirean investment of $30 million. The IFC isconsidering a $15 million loan. When complete,the project may employ up to 14,000 Jordanians,with a large percentage of the goods producedtraded through Israel, under the free tradeconditions described above.Overview of Key ProblemsSiting Issues & the Role of the EA.Environmental groups are firmly opposed to thecurrent siting of the project, arguing that theJordan River Valley has not been subject toindustrial development and should remain aprimarily agricultural/rural region. These groupsare not opposed to the development of a newindustrial project. On the contrary –environmental organizations in Jordan haveopenly expressed support for the aims of thisproject. However, if construction continues atthe current site, the Jordan River Valley will beirreparably and negatively affected. Both Israeliand Jordanian environmental authorities havediscussed the need for a binational naturereserve along the Jordan River. NGOs from thethird riparian, the West Bank, have alsoprotested the site, and joined the call for a naturereserve. Allowing this project to move forwardwill make it much more difficult to create such areserve and to preserve the character of thevalley. Planning documents from before 1998make no provision for industrial developmentalong the river, and the Jordanian environmentalauthorities have written a letter urging theirgovernment not to develop industry along theriver banks.In reply to the charge that the environmentalauthorities are generally opposed to JordanRiver Valley industrial development, the IFCand project sponsor state correctly that, legallyspeaking, it is the Jordan Valley Authoritywhich controls the land, and that all permitshave been secured. In Israel, the Ministry ofEnvironment finally agreed to the projectfollowing intense political pressure on DaliaItzik, the Minister of Environment, and a minorsite change. (The site on the Israeli side wasmoved away from the banks of the river, to afield a few hundred meters away.) Israel hasactually stated its intention to apply for WorldHeritage status for the Jordan River Valley fromUNESCO, a decision in line with all planningdocuments that precede 1998, when the projectwas first proposed.Not only will the industrial complex andassociated infrastructure impact the Jordan RiverValley, but they may also lead to additional,unplanned development as people move into thearea for jobs. The site is located in a rural area,far from sources of labor, infrastructure andother advantages of an urban location. Whileideally such issues would be considered andaddressed in the environmental assessment,which would in turn inform the decision onsiting, in this case preparation of the EA started2The Jordan Industrial Joint Gateway Project: A River Runs Through It

Profiling Problemonly after construction at the current site hadbegun. Since the EA in this case is taking placeafter the onset of construction, it seems unlikelythat the EA will seriously explore alternativessites to the project.Inadequate Consultation. The project sponsorhas failed to adequately consult either with localenvironmental organizations or withenvironmental authorities in both Israel andJordan prior to the start of construction.Environmental organizations have beenattempting to engage the sponsor on this issuefor close to 18 months. For most of this time, theproject sponsors have refused to engage indialogue with NGOs. The project sponsors havenot only left environmental NGOs out of theprocess, they did not consult with theenvironmental authorities in Israel or Jordanuntil all key planning decisions were made. AnIsraeli official with the Ministry of Trade andIndustry told Friends of the Earth – Middle East(FoEME) that it was an unfortunate mistake thatenvironmental officials were not brought intothe discussion during the planning phase.Unclear Development Rationale. The project isdesigned to take advantage of the proximity toIsrael to establish a Qualified Industrial Zone(QIZ), as described above. The QIZ arrangementallows products manufactured in Jordan to beexported to the US under Israel’s Free TradeAgreement with the US – provided that a certainminimum of the value added was in Israel. Thusproducts manufactured in QIZs could beexported to the United States without tariffs,giving industries located in them a clearadvantage.Jordan joined the WTO in May. Recently, theUS Trade Representative’s office announcedthat a US – Jordan Free Trade Agreement willbe signed by the end of the year. Thus Jordanwill have free trade status with the United Statesin the future. Against this background, theadvantages of QIZ status are minimized overtime along with a substantial part of the rationalefor a cross-border site. When asked about this inthe Israeli press, the sponsor claimed that the sitestill had border proximity in its favor, ‘takingadvantage of the comparative advantages ofeach country.’ (Globes, June 19). Neither theIFC nor the sponsor have been forthcoming withan explanation of what these ‘comparativeadvantages’ are, why border proximity makes adifference, and how the environmental costsassociated with this site (a new bridge, forexample) outweigh the negative impacts.The Jordan Gateway Project, if completed,would not be the only QIZ. Nine other QIZ’s inJordan have been completed or approved, andnone of them are close to the border with Israel.The QIZ in Irbid is full, and is undergoing a 50per cent expansion in size. It seems that lack ofborder proximity is not a barrier for the potentialtenants of QIZ’s. Furthermore, sites located in ornear urban areas enjoy many advantages – likeaccess to skilled labor – that the Jordan GatewayProject site lacks.Finally, NGOs and government planningdocuments have designated the region for touristdevelopment, taking advantage of the area’sheritage and environment. In pursuing industrialdevelopment, the IFC is making a moresustainable course of development harder toachieve.Necessity of IFC Financing. Given that theproject sponsor has begun construction prior tosecuring the IFC loan, it appears that the projectsponsor does not need IFC support in order to goforward with the project. The IFC’s limited,publicly-financed resources may be better spenton projects with greater development rationalesthat are truly in need of IFC financing.NGO AdvocacyConstruction began in the face of mountingopposition from all of the major environmentalgroups in the region. Once FoEME learned thatthe IFC was considering a loan, they sent a letterto the IFC alerting them to the project'sproblems. Soon after, letters were sentBy Abd al-Rahman Sultan & Charles Lenchner 3

Making the Case for ChangeFor further information contact:Friends of the Earth Middle East.Charles Lenchner, Abd al-Rahman, International Finance CorporationNeeraj Jain, IFC Investment OfficerEml: Fax: 202-974-4397Niels Vestergaard, IFC Environmental SpecialistEml: Fax: 202-974-43896The Jordan Industrial Joint Gateway Project: A River Runs Through It