Special Economic Zones: a sustainable solution?

Taina Renkonen

A vast industrial zone, King Hussein Bin Talal Development Area, lies half-empty in the North-Eastern Jordan. Although now largely underused, it has a key role in the government’s latest plans of turning the current humanitarian crisis into an economic development opportunity. If these visions materialize up to five Special Economic Zones (SEZ) will be established around the country to provide legal work opportunities for Syrian refugees and Jordanians alike. KHBTDA, situated just 12 miles from the Za’atri Camp, would be one of them.

New measures are indeed necessary as the vast majority of Syrian refugees in Jordan live in dire circumstances. According to a recent World Bank Group and UNHCR report nearly 90 percent of the Syrian refugees are either poor or at risk of becoming poor in the near future. Although humanitarian programs have been able to provide some assistance to the most vulnerable, declining humanitarian assistance and lack of economic opportunities, especially legal work opportunities, keeps many refugees in a poverty trap.

As ARDD-Legal Aid’s recent legal analysis demonstrates, tight labor laws and regulations effectively exclude Syrians from the local labor market. According to the Ministry of Labor, only 7 000 Syrians have work permits, amounting to no more than 1% of the population.  The need to pay for rent and other basic necessities has ensured that between 160 000 and 200 000 Syrian refugees work without permits.  Those who have managed to find work, usually do so in the informal sector in low-paying jobs, often in hazardous conditions, and very few have acquired jobs that match their previous experience or education. In addition to poverty, this leads to immense loss of human capital as professional skills and qualifications erode over time. Loss of qualifications and skills will have developmental consequences; both in host communities as well as the future of post-war Syria.

Although granting refugees work rights might seem like the most obvious cure to alleviate their plight, the situation is not that simple. The Jordanian economy has long suffered from high unemployment rate among Jordanians, currently sitting at 13.6 %. Research conducted by FAFO indicates in contrast to public opinion that refugees have modestly worsened the unemployment situation in Jordan, indicating rather that there are structural development challenges within the economy. However creating opportunities for refugees without equally creating them for Jordanians would create an untenable position that would further perpetuate tensions between the communities.

The idea of using SEZs to address the refugee situation in Jordan gained global audience in the Syria Donors Conference held in London a couple of weeks ago, where the representatives of the World Bank and the Jordanian government promoted it to world leaders as a win-win situation for all involved.

According to the plan, foreign investments would give a boost to Jordan’s economic growth and SEZs would be an engine helping the country to transform from a service-based economy to a major manufacturer. As a result, the government suggests, tens of thousands of new jobs would be created. Equal employment opportunities for both Syrians and Jordanians would be guaranteed through a quota system. At the same time, providing legal jobs would allow reorganization of the Jordanian labor market which is now characterized by a sizable informal sector. Investors would enjoy tax breaks as well as availability of Syrian workers, many of whom have previous experience in manufacturing.

If successful, these zones would allow refugees to transition from aid-dependency towards a more economically sustainable future.  Refugees would not only earn their livelihoods legally but could maintain and develop their skills. If Syrian companies are allowed to operate in these zones, SEZs would potentially lay the foundation for a Syrian exile economy as well as Syria’s post-war recovery.

To make Jordan attractive for investments, the Jordanian Government has called upon the European Union to introduce significant trade concessions to the Kingdom. As the primary reason for refugees to leave Jordan and make the journey to Europe is the difficult living conditions, providing Jordan with trade concessions might be a worthwhile trade-off as the EU hopes that creation of new work opportunities would encourage more refugees to stay put and not to seek asylum in Europe.

While all this sounds very promising, the project is still at its initial stage and there is little certainty about anything. Although Jordan’s King Abdullah estimated that together with other measures, up to 200 000 new jobs created and German chancellor Angela Merkel assured EU’s commitment to the project, it is hard to predict the scope of investments the SEZs will eventually receive. The final number of jobs for Syrians and Jordanians alike is, of course, dependent on that.

Another important question is whether SEZs in Jordan will create just jobs. Evidence from SEZs around the world has shown how labor rights have been compromised under stringent production targets, and as a result, extremely low wages, forced overtime, and different forms of abuse. Jordan’s own track record is not any better: wages in its existing SEZs are exempted from the minimum wage (200 Jordanian dinars) and migrant workers are reportedly facing harsh working conditions. As the Guardian journalist Patrick Kingsley notes, even if the minimum wage would be paid in the new SEZs, there is no certainty refugees would be better off. Thus, SEZs will not be a true win-win unless wages are reasonable, labor rights are enforced and workers have access to legal avenues to ensure their rights. If the rights and conditions of workers are not ensured in these SEZs, refugees will continue working under precarious conditions, even if this time under the guise of legal work.

Even if a balance between attracting investments and providing reasonable wages and working conditions was achieved, SEZs will not provide an easy way out of the management of the refugee crisis. This is precisely because the demand for work is much higher than the possible supply of jobs. Establishment of SEZs is further no quick solution. Implementation of the plan will take time and meanwhile the untenable situations of refugees will continue. This means that further solidarity expressed through more resettlement places is still necessary. To ensure the rights, dignities and futures of Syrian refugees in Jordan, there is no substitute for political will to ethically solve the refugee crisis and ultimately, its root cause, the Syrian conflict.