Last week I have been in Cairo participating in the regional workshop on the impacts of Free Trade Agreements on Sustainable Development in the Arab World. The workshop was organized by the Arab NGO Network for Development (ANND) based in Beirut and the Third World Network (TWN) based in Malaysia.

In the workshop I presented a paper on the social and environmental impacts of the QIZs in Jordan. This is an English summary of the paper.

The Qualified Industrial Zones (QIZ) represent a missed opportunity for sustainable development in Jordan especially while considering social and environmental dimensions. The QIZ have showed a dramatic increase in trade exports to the US market by increasing the amount of Jordanian exports from US $ 13 million in 1999 to around US $ 1.0 billion in 2005. However, the remarkable increase in the export indicator masks the fact of prevailing bad labor conditions, low percentage of Jordanian labor in relation to foreign labor; capital revenues are confined to investors and not channeled properly in the national economy as the national budget receives only 1% of the trade revenues from QIZ.

The Jordan-USA Free Trade Agreement and the QIZ are characterized by favourable export conditions, allowing custom-free direct access to the US market in addition to the tax-free conditions for investors in the QIZs. This enabling economic and legislative trade system that is superior to the majority of global and regional trade conditions should have been an ingredient for better utilization of trade for sustainable development. Unfortunately the QIZs and the associated trade systems were seen as objectives by themselves and not means for enhancing development in Jordan. The basic indicator for measuring the success of the QIZs was the value of exports and not associated social development indicators. QIZs were not utilized by economic decision makers as tools for alleviating poverty, unemployment and other challenges of human development.

The high level of political polarization linked with the QIZ and its association with the implementation of the Jordanian-Israeli peace agreement has resulted in the emergence of two major and contradicting approaches for assessing the function and impacts of QIZs. While the government in its pursuit to promote the peace agreement focused on positive aspects of trade growth and relative success in employment the ideological political opposition groups combated the government with an attempt to highlight the negative aspects of the QIZs based on political and ideological perspectives. Accordingly little emphasis was put on methodological development impact studies and assessments and there is a real scarcity in scientifically based assessments that can be depoliticized and fair.

Although the exact social indicators for measuring the real social impact of the QIZs were lacking a collection of informed guesses can be drawn from the analysis of existing conditions and trends when studied within the comprehensive framework of sustainable development. These trends indicate a weak direct social benefit for local and associated communities from the QIZs mainly due to unfavorable work conditions and low payments that are exact to or even less than the minimum wages in Jordan. The absence of work security and healthy environmental conditions do contribute to the deteriorating interest from national labor to be enrolled in the QIZs. Up to 2005 the percentage of Jordanian workers in the QIZ was about 40%.

Aiming to enhancing the work conditions and maximizing social and developmental gains from the QIZ opportunities the paper provides a package of suggested actions. To begin with it asks to implement a comprehensive and methodological developmental impact assessment for the QIZs in the local communities adjacent to the QIZs or the communities that are involved in its work force. This study should numerically specify the exact gains, or lack of them in terms of development impacts and determine gaps and options for maximizing social benefits. The paper also asks for modifying the existing labor and environmental legislation to provide more stringent monitoring of work conditions and rights that are guaranteed under national laws, global agreements and bi-lateral agreements especially the Jordan-USA FTA. The paper suggests increasing the amount of revenues trickling down to the treasury and national budget through employment of minimum levels of income and sales taxes as well as introducing resource utilization taxes in the QIZs while mainstreaming these revenues in local community development projects.

It is required also to ensure full social insurance and health insurance benefits for all QIZ workers according to national laws and raising the minimum wages in the QIZs to parallel those increased by the national laws outside the QIZs in addition to improving professional training and capacity development opportunities for workers.

The paper suggests diversification of the industries in the QIZs and moving beyond the currently dominant textile and garment industries that have low added values and are vulnerable to global market risks and competitions. Finally the papers suggest internalizing the environmental externalities within the QIZ system to ensure compliance with environmental standards and meeting the environmental costs of using resources (energy, water, fiber) and waste accumulation through a system of environmental economics instruments applied by the QIZs and not to put environmental burden on the national economy at the public sector level.