|Iraqi firms suspicious,
confused by new economy
Securing US contracts proves difficult
American firms often choose to deal with those they have
successfully worked with in the past - frustrating many local business
Special to The Daily Star
BAGHDAD: For a reminder of the challenges that Iraqi
businesses face in the post-Saddam economy, the average Baghdadi need only look at the
walls with which American companies and officials have fortified their hotels, compounds,
Bremer walls the concrete slabs that protect against explosions and
obstruct car bombers have sprung up all over Baghdad as terrorist attacks have become
more frequent in the past month. One popular rumor is that the Americans have been paying
up to $1,000 for each of the three-meter high walls, named after the top US overseer here.
But the boom in Bremer walls hasnt been good news for Iraqi manufacturers of
concrete and cement. There is little if any Iraqi cement in a Bremer wall, and many of the
concrete companies that supply the walls are either foreign or from Kurdish Northern Iraq.
That is hard on Iraqs three cement companies, all state-owned and internationally
known for their quality product. It also galls Arab Iraqi concrete makers, who suspect
that contracts given to Iraqi Kurds, who supported the US during the war, are part of the
Even if there is a better Iraqi company, the Americans would not give them the
business, said Faro al-Khaffaf, the chief executive of concrete manufacturer
Al-Khaffaf Co., who said he could produce a Bremer wall for $100.
But is the suspicion that US contracts are unfairly out of reach of average Iraqi
Foreign and Kurdish firms got the jump on the wall contracts after the war because the
US-led temporary government, the Coalition Provisional Authority (CPA), needed the walls
in a rush and Iraqi industry south of the Kurdish controlled regions, including all three
Iraqi state-owned cement companies, was at a standstill.
The actual price paid for a Bremer wall is an elusive figure. But the rushed nature of the
contracts and the continued risk of fulfiling them would justify a high price tag,
according to international construction experts in Iraq. And while prices have fallen
substantially in the months since the invasion, truck convoys carrying the walls are often
attacked by insurgents.
The Bremer wall imbalance will probably sort itself out Iraqi cement plants may soon
overcome electrical problems and begin producing again but the suspicion and confusion
represented by the Bremer walls will not go away so easily. That is because after decades
in isolation, cut off from foreign standards, investment, and competition, Iraqis have
suddenly come face to face with the global economy, and the experience is not what they
The Iraqi people expected great things from America, that America has magic, that
what it wants is done, said Sadoun al-Dulame, executive director of the Iraq Center
for Research and Strategic Studies, an independent think tank in Baghdad. But
its not easy to rebuild the damage of 30 years.
That damage is visible throughout the country. Iraq suffered from the depredations of
three major wars, inept central planning, and the systematic looting of the country
both by its leaders and the mobs that hit the streets when those leaders vanished.
Unemployment runs somewhere between 50 and 75 percent, according to various estimates. Its
per-capita production of $2,400 ranked 162nd worldwide in 2002, according to the CIA World
Factbook, and the nations economy may have shrunk since then, though in the absence
of accurate statistics, the rate of growth is anyones guess.
Less visible is the damage done to Iraqs human capital. The systematic ideological
and criminal degradation of Iraqis destroyed the educational achievements of what was once
one of the most advanced countries in the Middle East.
Most Iraqis coming back from abroad expected to find the same educational standards
that they had left in the 70s or 80s, but unfortunately thats not the case
said Sabah Khesbak, a communications engineer who left Iraq in 1978 to get a doctorate in
the US and returned to Iraq this year as an American citizen.
Khesbak said that he saw the effects of totalitarian rule on the professional habits of
his Iraqi colleagues.
They have no initiative, they dont show up on time, or dress properly. They
skip workdays with the most improbable excuses. Theyre closed-minded and they seem
to be helpless and hopeless, he said.
Iraqi professionals often have little knowledge of international business standards,
according to American officials, who offer training to local businesses on such subjects
as how to write resumes and business plans. Bids submitted to Americans are often
hand-written, in Arabic.
Even for the most conscientious firms distributing US aid, spreading contracts among many
Iraqi businesses is difficult. Iraqis will misrepresent their ability to perform
contracts, according to a US Army officer who deals Iraqi businesses.
A lot of them lie. Theyll tell you they can do anything. They say they can get
100 generators tomorrow and they cant, he said speaking on the condition of
anonymity. In a dangerous environment where speed and reliability is of the essence, US
firms tend to reward those ones with whom theyve done business successfully in the
past, he said.
This gives an advantage to foreign businesses, especially those from Iraqs
neighboring countries where Arabic is spoken and which have proven track records and know
what Americans expect.
While many of these foreign firms will immediately turn around and hire Iraqi companies to
do the work and split the profits, there is a growing feeling among Iraqis that the
country is being deprived of its economic self-determination. And the recent decision by
the CPA, the American-led acting government in Iraq, to open the country to foreign
investment in all sectors except oil and to slash import duties, has increased that sense
We dont want to refuse foreign assistance or investment, said Dulame, of
the Iraq Center for Research and Strategic Studies. But Iraqis dont want to
put Iraq up for sale.
It may be a while, however, before anyone wants to buy Iraq. Aside from rumors about South
Koreans and expatriate Iraqi Jews snapping up Baghdadi real estate, foreign investors are
for the most part noticeable only by their absence. Ongoing security problems, and the
impossibility of getting business insurance in such a climate have kept many away. And
American inspired investment laws might not last once Iraqis become self-governing.
But if and when international private capital arrives en masse, the shakeout of the Iraqi
economy could have serious social implications. The most vulnerable sector of the economy
is manufacturing, where Iraqs 200-odd state-owned firms dominate. These companies,
with over 500,000 workers on their payrolls, are the largest employers outside the central
government. Just as disbanding the Iraqi Army and the instant creation of 400,000 angry
unemployed soldiers escalated the countrys security problems, workers laid off from
manufacturing jobs will not be raging at impersonal market forces. Theyll be angry
While KBR just began holding weekly meetings to announce contract tenders to small Iraqi
businesses, and there is no single place, either on the internet or on some sort of
bulletin board, where all American tenders are listed. This gives the well-connected an
advantage, and fueling suspicion among those outside the loop that they are purposefully
being kept in the dark. Nor is their a list of contract winners.
This is for security reasons, according to American officials, who worry that those
businessmen will be the victims of reprisals or crime. But the lack of transparency allows
all kinds of accusations about corruption and cronyism to go unchallenged.
And while Iraqis may have had unreal expectations about the rosy future after American
liberation, American officials made similar predictions to the American people.
Politicians from abroad are dreamers. They make a lot of promises. But you cannot
change things overnight, Dulame said. I wish I could hear that from George
W. Bush or Paul Bremer. If there are problems, let the Iraqi people know these