AMMAN (JT) -- The hike in fuel prices and the minimum wage increase will raise the manufacturing cost on each piece of garment from 15 per cent to 22 per cent, according to the CEO of Jordan Garment Exporters Association (JGate).
JGate CEO Rashed Darwazeh said the association received scenarios from five different factories on the effect of the increase in labour salaries and fuel prices.
"A scenario of one factory that manufactures 1.8 million pieces of garments showed that the cost will rise by JD250, 000 per year, a 20 per cent increase," he indicated.
Darwazeh stressed that indirect costs will be the main affected area. Such costs are not directly related to the manufacturing process as they cover transportation services, garments' washing and ironing as well as boilers.
"The cost of nearly everything that depends on oil and supports factories will increase since their operations rely heavily on diesel," he remarked.
Hatem Halawani, chairman of the Jordan Chamber of Industry administration committee, said in a statement received by The Jordan Times early this week that industrialists were shocked with the big rise in industrial fuel from JD88 per tonne to JD140. According to the statement, 90 per cent of the Kingdom's exports are industrial.
Labour-wise, a survey in 2004 showed that Jordanian workers in 88 Qualifying Industrial Zones (QIZs) and non-QIZ factories receive an average salary of JD107.51.
Accordingly, the rise in the wages will affect the whole industry since the basic salary will increase from 85 to 95 under the government's new decision.
He pointed out that around 50,000 workers are employed at the QIZ plants throughout the Kingdom.
"Two things govern the QIZs in Jordan," Darwazeh indicated: "The Jordanian Labour Law and the US Buyers Compliance Law; the latter dictates that no cases of discrimination among employees is allowed regardless of nationality."
"This constitutes a problem for the industry since salaries of foreign workers, mostly from Bangladesh and Sri Lanka, will increase to equal those of Jordanian workers," he remarked.
Darwazeh added that if the government regarded the rise as a hike in living expenses under the Labour Law, then the case of increasing only Jordanian workers salary might be justified to the US.
JGate presented the Ministry of Industry and Trade with several solutions that will lower costs in manufacturing.
Suggested ideas were substituting foreign workers with Jordanian labour, introducing water recycling plants and establishing a special exceptional electricity rate category for encouraging industrialists.
Those measures, according to Darwazeh, will cut 28 per cent of entire QIZ costs, ensure sustainable industry and enable the factories to be more competitive.
Garment industry exports $1 billion annually, mostly to the United States, and generates 200 million as returned value to the Kingdom.
Labour Minister Bassem Salem said that the raise in the minimum wage was decided by a committee grouping workers, employers and two government representatives. He stressed that the raise will not affect competitiveness and investment climate in the Kingdom.
© Jordan Times 2005
