The Trebil border crossing between Jordan and Iraq was reopened in late August after being shut for over two years over security fears. Trade has begun to trickle, but it will be quite some time before Jordanian exporters are able to claw back their original market share.
By Dina al Wakeel
Iraq has been absorbed in fighting its own demons since the toppling of Saddam Hussein in 2003. From sectarian tensions between its Sunnis and Shiites, to fighting extremism embodied by ISIS that has not only ravaged towns and killed civilians, but also severed several vital trade routes between Iraq and its neighbors.
ISIS launched several attacks on the area adjacent to the border crossing with Jordan, terrorizing drivers and collecting hefty taxes from trucks carrying Jordanian merchandise into Iraq, which prompted Iraq to close Trebil, about 320 km from Amman and 575 km from Baghdad, in 2015.
Today, as the Iraqi government—aided by a US-led coalition—pushes to regain its power over its territories, defeating ISIS in their Mosul stronghold, the state has been simultaneously working to revive its bilateral trade agreements with the likes of Saudi Arabia and Jordan.
And after regaining control from ISIS of the main highway to Baghdad, Iraq and Jordan decided to finally reopen the crossing to passengers and vital trade in late August.
While this move was welcomed by both Jordanian and Iraqi businesspeople, businessmen in the Kingdom acknowledge that reentering the Iraqi market will not be a walk in the park.
Prior to the closure of Trebil, Iraq was the Kingdom’s main export market, accounting for almost a fifth of domestic exports or about $1.2 billion a year, according to the IMF.
But according to The Jordan Times, this trade exchange came to a complete halt through land crossings since the summer of 2015 due to security concerns, dropping from JD915 million in 2014 to JD533 million and JD353 million in 2015 and 2016, respectively. Jordanian exporters were forced to think of alternative routes, using expensive sea routes to the Umm Qasr port in Southern Iraq, or another land route through Saudi Arabia and Kuwait.
This has dealt a heavy blow to Jordanian truck drivers whose losses have exceeded JD670 million during the past six years and a half, according to Mohammad Dawood, head of the Jordan Truck Owners Association. Before that, between 200 and 400 Jordanian trucks crossed into Iraq on a daily basis, he said.
Also during this period Iranian, Chinese, and Turkish goods managed to cement their position in the Iraqi market across multiple sectors, including pharmaceuticals, food supplies, and others.
While trade between Iraq and Iran has reached $6 billion in the last two years, Turkish exports jumped to $4.5 billion, a 30 percent increase from the same period last year, during the first half of this year.
Jordan also needs to speed things up, as Iraq has recently signed agreements with Saudi Arabia to boost bilateral trade. The two countries have agreed to open the Arar and Jamima crossings, for both pilgrims and trade. Not only that, but the Iraqi Minister of Transportation Kadhim al-Hamami was recently quoted as saying it was also possible that the railway between the two countries will be reopened to unleash economic activity.
But not all is lost.
“There are many positive aspects to the reopening of the road, especially that Iraq is a market with 30 million consumers with a high buying power,” said Majid AlSadi, president of the Iraqi Business Council in Jordan.
Jordanian products are also known for their good quality, added AlSadi, and they are different from the Chinese, Turkish or other products. Additionally, the Iraqi consumers also got accustomed to buying them since the 1980s.
Jordan has always been a hub for Arab and foreign investors who have in mind the Iraqi market. Its proximity to Iraq and the special economic zones across the Kingdom make it lucrative for many business people.
However, high running costs, and an ever-changing taxation system, coupled with the unrest in the region and the closure of both the Iraqi and Syrian border crossings have pushed many potential investors away.
Currently, the Iraqi Business Council is in talks with the Iraqi investors who left to the likes of Turkey seeking a friendlier investment climate to convince them to come back and do business here after the reopening of the border. AlSadi expects more capital to come back.
“Before we can regain our previous customers in Iraq, there must be sacrifices in terms of prices, delivery timing, and of course we also need the government’s support,” AlSadi said.
But with a growing debt that has reached JD26.472 billion, accounting for 94.4 percent of GDP, the government is in a difficult financial position and nobody is expecting the support.
Dawood said despite the border closures and the losses his association’s members endured, the government still charged each truck owner JD325 each year.
“This is unfair for the truck owners, [the government] should’ve tried to facilitate things for us due to all the hardships we’ve been facing and on top of that the losses,” he said.
Merchants are also waiting for the road to be completely cleared of any bandits or the remnants of ISIS. A US company has been contracted to take that responsibility, but hasn’t started operations yet. For now, Jordanian truck drivers hand over their cargo to their Iraqi peers in the area between both borders due to safety concerns, said Dawood.
“The road is vast and there is the Anbar desert, where there could be some remnants of ISIS fighters. So to make sure that our truck drivers are safe we decided that during the first six months they would deliver their truckloads to their Iraqi peers and then we will see how things develop,” explained Dawood.
Moreover, both governments are currently in talks for a possible waiver of the 30 percent custom fees that are imposed on Jordanian goods.
A Change in Strategy
AlSadi believes that Jordanian foodstuff have particularly high potential in the Iraqi market due to their high quality and reasonable prices compared to others, as well as agriculture, and pharmaceuticals. As for engineering products, which are usually procured through government agreements, then companies here will need to wait until January for the new budget to be approved.
Although some vegetables and fruit trucks have already made their way into Trebil, vegetable exports are expected to officially resume in November, Saadi Abu Hamma, president of the Jordan Exporters and Producers Association for Fruits and Vegetables, was recently quoted as saying.
Some 120 to 200 tons of Jordanian fruit is already passing each day into Iraq since the crossing reopened last month, Abu Hamma said.
“We are now in discussion with Iraq and we expect the start of exports of vegetables to the Iraqi market in November,” Hamma told Xinhua news agency. Prior to the closure of the borders, Jordan exported some 500 to 600 tons of produce per day to Iraq.
Yet, Khaled Kanaan, managing director of Mawared Investment Jo. and also chairman of the Jordan Iraqi Economic Council, believes with the new geopolitical alliances in Iraq, Jordan needs to start thinking differently about its relationship with its eastern neighbor.
“I believe the Iraqi-Jordanian relationship that we got used to for 30 years has changed,” said Kanaan. “Today we have new circumstances with new alliances and a changed Iraqi economy.”
The Iraqi-Jordanian relationship in the past was built on the exporter-importer basis, Kanaan explained, Jordanians export and the Iraqis import, and the Jordanians were well looked after.
“Then after 2003, conditions changed in Iraq but Jordan still couldn’t depart from this old way of doing business,” he said.
Kanaan believes that the Iraqi-Jordanian file should not remain supervised solely by one or two ministries which still view things in a traditional manner, constrained to export and import goods. Alternatively, this requires an all-inclusive effort on a national level encompassing multiple government agencies working jointly with private sector business and professional associations representative of the economy sectors that will drive the bilateral economic agenda.
Furthermore, instead of the traditional way of doing business and concentrating on the merchandise that Jordan got accustomed to exporting, services should be the next focus of Jordanian businesses eyeing the Iraqi market.
“Iraq has other sources when it comes to importing merchandise based on relationships that they built during the past few years. But there are other opportunities for Jordan,” said Kanaan. “Today we talk about reconstruction. I sit on the World Bank Working Group for Reconstruction of Syria and I am also an active participant in the discussions concerning Iraq. Part of the discussions that we are having is what can Jordan do? Most importantly HOW?”
According to Kanaan’s strategy, Jordan needs to establish for itself a value added niche that the Iraqis want; human skills, engineering services, professional services, banking services, logistics, health care, renewable energy, and IT, where Jordanians are known to excel.
Endorsed by the Iraqi government, the Jordan Iraqi Economic Council promotes joint socio-economic growth and integration through the development of joint businesses and investments between the two countries. Its members, said Kanaan, are high-ranking Jordanian and Iraqi businessmen.
“We are looking at a new form of relationship to enhance economic and mutual investment opportunities between both countries, not trade which is cared for by others. We need to look at new dynamics of doing business and this is where the Jordanians have lagged behind so far,” noted Kanaan.
For now, Jordanians and Iraqis are quite hopeful the reopening of Trebil will be a shot in the arm for the ailing Jordanian economy.
“The opening of the Trebil border crossing with Iraq represents a lifeline for the national economy as a whole and will give a strong impetus to growth in the trade, service and productivity sectors,” Issa Murad, president of the Amman Chamber of Commerce said in a statement. “Border crossing points are a major artery for all domestic goods.”