EU-Jordan rules of origin scheme beneficial but yet to reach full potential — stakeholders

AMMAN — The simplified rules of origin (RoO) scheme between Jordan and the European Union (EU) has been established in 2016 and is still in effect. Fifteen companies have joined the scheme, 10 of which have exported their products to the EU countries, according to figures from the Ministry of Industry, Trade and Supply. 

The total value of exports stood at around 56 million euros in 2019, compared with about 19.2 million euros the year before, according to the figures.

“The total value of exports in the first eight months of this year has amounted to around 80 million euros, which went to Spain, Cyprus, France, Belgium, Hungary and the Netherlands,” ministry spokesperson Yanal Barmawi told The Jordan Times over the phone on Monday.

As for the number of total exports to Europe, both through the RoO of other partnerships with the EU, has amounted up to JD109 million until the end of the third quarter of 2020, compared with JD111 million for the same period last year, according to a report shared by member of the Jordan Chamber of Industry’s (JCI) board of directors, Ehab Qadri.

Qadri, who is also representative of the garment and textile industries’ sector at the JCI, mentioned in the report that the sector’s share was 88 per cent of the total exports shared by four companies in the sector at a total of 70.2 million euros. 

The EU delegation to Jordan, shared data with The Jordan Times that “confirmed the success” of the textile and clothing sector, which under the Jordan-EU Association Agreement has increased the rate of use of preference from 15 per cent in 2017 to 65 per cent in 2019.

“This suggests that after the introduction of the simplified rules of origin scheme, most Jordanian exporters of textile and clothing to the EU were able to qualify for the preferential tariff treatment,” the EU report added.

The EU report cites data from the government, which mentions that since the RoO scheme has come into force, 153,642 work permits have been issued to Syrian workers in different sectors.

In 2019, the majority of the new work permits were issued in the agriculture sector, forestry, and fishery (45.9 per cent), construction (23.4 per cent), manufacturing (10.4 per cent), hospitality and food service activities (7.7 per cent), the EU report said.

It added that in December of 2019, 7,742 work permits were issued, an increase of 106 per cent compared with the work permits issued in December 2018, the report states, adding that from July 19, 2016 to December 31, 2019 women received 5 per cent (8,082) of the work permits.  

“The relaxation of the rules of origin scheme in the context of Jordan's trade with the EU can play an important role, but is not enough in itself to ensure access to new markets,” EU Ambassador to Jordan Maria Hadjitheodosiou told The Jordan Times on Tuesday. 

“It is also necessary to raise the awareness of the business community about the scheme, and identify and address the challenges businesses face in taking advantage of this scheme. Another important element is the need for continued cooperation with the labour inspection department,” Hadjitheodosiou said.

“Exporting to international markets is part of a package, and in that regard, developing market intelligence and improving the quality of Jordanian products are equally essential areas that need to be addressed,” she added. 

The RoO scheme began in 2016 as a form of response to the Syrian refugee crisis, and is one of the most important outcomes of the London Donors Conference, aimed at limiting the repercussions of the refugee crisis.

In the beginning, the 10-year scheme focused on simplifying the rules of origin under the Jordanian-EU partnership agreement for 52 industrial products manufactured in industrial facilities within 18 development areas and industrial zones, according to a report shared with The Jordan Times by Director General of JCI Maher Mahrouq.

The report noted that the exportation comes under the condition of employing at least 15 per cent Syrian refugees of the total number of employees in the first two years of the agreement, which should increase to 25 per cent at the start of the third year of the implementation of the RoO scheme.

However, in 2018, the relaxation of the rules increased further after discussions between the Kingdom and the EU, and by December of that year, the EU provided a new set of incentives and facilitations to Jordan, according the report. 

The new facilitations included all industrial and development zones in the Kingdom, prolonged the end date to the end of 2030 instead of 2026, and reduced the minimum number of Syrian refugee employees to 15 per cent in the entire duration of the agreement without further increase. 

The new relaxation rules also reduced the minimum number of jobs required for Syrian refugees from 200,000 to 60,000 for all economic sectors, which when achieved, allows any company in the Kingdom that meets the previous standards to export to the EU under the RoO scheme, without heeding the employment of Syrian refugees’ demand, the report stated.

“The simplified rules of origin scheme has not yet reached its full potential, nor has it translated into further investments in the sectors benefiting from the new scheme, except for the textile and garment industries that benefit from an already established infrastructure and networks under the US-Jordan FTA [Free Trade Agreement],” the EU delegation said in their report.

Sector representatives in the Kingdom have, several times over the past few years, called for supporting the industrial sector to be able to export through the relaxed rules. 

The EU report said that the majority of companies in Jordan are small- and medium-sized enterprises (SMEs), which have faced difficulties when it came to using the incentives under the relaxed rules decision, mainly due to challenges related to operation and competitiveness. 

Therefore, the EU predicts that once these challenges are addressed, the SMEs will be able to take advantage from the RoO scheme.

“The EU is funding, in partnership with the International Labour Organisation [ILO], a programme to monitor labour aspects in the implementation of the EU's rules of origin initiative for Jordan. The overall objective of this programme is to promote decent work opportunities in Jordan and promote inclusive economic growth through the relaxed RoO initiative,” the report mentions.

It added that preliminary data for 2020 collected under this programme “confirms positive export figures, specifically to Spain, Cyprus, France, Belgium, Hungary, and the Netherlands”.

The relaxation of the RoO agreement comes as part of the EU’s development cooperation bilateral package in support of domestic policy reforms, the report mentions, noting that the initiative may help increasing exports and jobs significantly when accompanied with a stable and predictable business-friendly environment. 

There is an upcoming programme titled “EU Support to Economic Reforms for Growth and Jobs in Jordan”, which is valued at 64 million euros programme aimed at supporting ongoing public reforms, increasing the private sector’s competitiveness, enhancing predictability of the business legislative framework and strengthening the public sector’s efficiency.  

The European Bank for Reconstruction and Development (EBRD), the EU and the Jordan Europe Business Association (JEBA) held on Monday and Tuesday an online conference that aimed to provide a platform for discussing issues relevant to the future of the private sector in Jordan.

In the first session on Tuesday, titled “Simplified Rules of Origin, current status and the future”, International Relations Officer at DG Taxation and Customs Union in EU Brussels Guillaume Dory delivered a presentation on how the relaxation of rules helps Jordan to access the EU market and benefit from preferential rates. 

He said that tariff preferences under the agreement provide reduction or elimination of customs, noting that the EU-Jordan Association Agreement provides these preferences only for “originating goods”.

Dory explained the technical details and protocols of the agreement, including the relaxation of the rules and the new conditions set in regard to production and employment of Syrian refugee workers. 

The Jordanian authorities are to monitor the respect for these conditions, grant an authorisation number to the exporters fulfilling the conditions and ensure withdrawal when conditions are no longer fulfilled, Dory said, 

Dory highlighted the additional flexibility of the RoO measures in regard to the articles of plastics, portable car lamps, cars and car parts, and textiles. 

“The partners of the region, including the EU and Jordan, decided to modernise the rules of origin, applicable between the EU, Jordan and the partners, and we hope that as of mid-2021, there will be new additional options concerning the rules of origin for exporters, [while] the rules of origin currently applicable will still be so,” Dory said during the session.

Mohammad Hassan Smadi, vice president of Al Emlaq – Giant Industrial Group, said that they are specialised in manufacturing home detergents, hygiene products and cosmetics.

“We export to more than 41 countries at more than $100 million annually, and we exported to Europe, but not through the relaxed rules of origin, rather through other agreements, such as the free trade agreement,” Smadi said.

Smadi noted that he contacted partners in other sectors, asking them about their experience with the RoO scheme, and he found that some sectors exported up to $25 million worth of products while others only exported samples of $32 only. 

He said that for some sectors, previous agreements were more beneficial than the current RoO scheme in its last form, demanding that the update of mid-2021 should include the foodstuffs and other goods to be able to export more products. 

“There also was not enough proper marketing of Jordanian industry, to encourage European traders to purchase from it, and the two sides should have supported the agreement further; the EU should further promote Jordanian products and Jordan should increase the activities that aim at marketing the various industries,” Smadi said. 

The session also hosted General Manager of Winner International Plastic Industries Co. Ahmad Tayseer Abu Jday and Executive Manager of Jerash Garments and Fashion Manufacturing Co. Oryana Awaysheh.