Arab companies set to miss out on Iraq reconstruction

 

 

Arab aid has flown into southern Iraq but few Arab contractors have secured contracts so far

Iraq’s neighbours were quick off the mark in sending convoys of relief supplies to the war-torn country. State news agencies reported that Saudi Arabia, Iran Kuwait and the United Arab Emirates (UAE) sent water and medicine to Basra, Iraq‘s second largest city. Iran contributed 500 tons of food and medicine while Saudi Arabia sent a fully-equipped field hospital.

 

 

 

On the business side, however, certain Arab contractors who bring unmatched regional expertise in the construction and desalination sectors have been bypassed in the handing-out of contracts. Not one Arab company has been named in a shortlist of contractors drawn up by USAID.

 

USAID’s administrator, Andrew Natsios, publicly stated that he expects the major contractors to award “many” subcontracts to regional firms. Although USAID is not allowed to hand out contracts to non-US companies because of a restricting clause in its charter, Arab companies hope to be a part of the equation at the subcontracting stage.

 

Kuwait, Turkey reap benefits of pro-US stance

In the region, Kuwaiti and Turkish companies, whose governments were staunch US allies, are the only ones so far to have been picked to work on Iraq’s shattered infrastructure.

Kuwait was the launching pad from which almost 300,000 US and British troops invaded Iraq while Turkey provided overflight rights and allowed US troops to provide logistical support from its territory.

 

The first Arab company to have been chosen to participate in the reconstruction is a Kuwaiti company called Kharafi National. It is to install a pipeline from Rawdhatain, in northern Kuwait, to the port of city of Umm Qasr.

Another Kuwaiti company, Kuwait Pipe Industries, was subcontracted to provide expertise with the project. The client was Kuwait’s Ministry of Electricity and Water.

 

According to Middle East Economic Digest, further work is expected in southern Iraq. Kuwaiti contractors have been approached to supply temporary reverse osmosis desalination units to the area which is among the worst affected by a breakdown in the domestic water supply network since the outbreak of the conflict.

 

“There is an Arab proverb that says: one who is already wet does not fear the rain, says Volkswirt Aziz Alkazaz, an economic specialist in Hamburg’s Oriental Institute.

“That is the case with the Kuwaitis who fought with the Americans. However, there is vehement opposition in Kuwait by the Islamists against that involvement and the relationship with the US. There has been an internal, very hard discourse on this.”

 

Turkey has been one of the most successful countries in the region in the contract jackpot. Turkish newspaper Zaman reported that representatives of the Turkish construction sector have welcomed non-diplomatic requests from the US for cooperation, calling the move an “auspicious development”.

 

Turkey had last-minute reservations about allowing US troops to launch a full-scale invasion from its land

The spokesman for the Turkish Constructors Association, Nihat Ozdemir, said that he is hoping Turkish companies get 20 percent of the construction sector jackpot.

”I am hopeful for that,” he said. “In order to achieve this, the support of the state and good organisation are necessary. We are also in coordination with the foreign ministry.”

 

 

 Turkey’s economy is set to do well with the reopening of trade with Iraq. According to Foreign Ministry Iraq Coordinator Ambassador Ahmet Okcun, at least $30 billion will be spent on construction projects in Iraq, with the possibility of the figure increasing to $360 billion in the long-term.

 

 

Turkey is also looking to benefit from possible Iraqi oil exports. “If Iraq is going to have a new outlet for its oil then Turkey will use that special position,” said Okcun.

Not so fast, say Iraq’s other neighbours.

 

“Turkey might keep the volume of its exports to the north and will retain the transit fees for oil but if Iraq is going to have a new outlet for its oil then Turkey will lose that special position,” says Al Kazaz.

“The Faw peninsula would be reopened at last as would the Al-Bakr deep sea oil port next to Umm Qasr. And Iraq has other outlets, possibly through Syria which will be eager to keep that connection.”

Inflexibility

 

But political preference is not the only constraint for Arab companies looking to invest in Iraq. A long history of toeing the government line and a tendency to remain active only within their own countries, are further limitations for them.

“Traditionally there have been hardly any Arab companies or contractors working on cross-border deals,” says Oliver Klaus, a journalist with MEED. “ There are no Syrian companies working in Bahrain and no Saudi companies in Syria for example.

“In the case of Iraq, they’re all hoping to get involved and it would be in the American interest to have Arab companies participating in on-the-ground reconstruction.

“It will create some good sentiment if even at the subcontracting level they give the job to Arab companies. On a construction level, there will be Arab companies hoping to take part, certainly from the Gulf.

The diplomatic benefits of employing Arab companies at the subcontracting level are not lost on the region’s analysts.

 

“By using qualified and highly professional Turkish and Saudi companies whose overheads are low, they’re hitting two birds with one stone while at the same time appearing more inclusive,” says Syrian economist Samir Seifan.

 

“The big profits will be made in the engineering and equipment sectors while the cheap labour part will be left to local companies.”

 

 

Political constraints

 

Another major constraint for Arab firms applying for contracts, is what political line their leaders take.

 

“Arab companies are declaring that they will not cooperate with a government that has not been elected by the Iraqi people and recognised by their own governments,” says Alkazaz.

The Egyptian and French presidents’ strongly antiwar stand has translated into no contracts for their companies in Iraq

“The Saudis and Egyptians have declared that they’re eager to participate in the reconstruction, but the situation has to be suitable from a legal standpoint.”

 

For their part, Arab countries have been criticised for being short-sighted in their handling of the war and its consequences. In the recent Riyadh summit held between Iraq’s neighbours, Egypt and Bahrain, the assembled foreign ministers issued a joint declaration underlining the need to uphold Iraq’s territorial integrity and calling for a “central” UN role in the post-war situation.

 

 

“All the eight countries, who have concerns and interests in Iraq, have called for the withdrawal of US and British troops, but no one provided a timetable,” said an Arab diplomat who attended the conference.

 

“All of them want to see foreign troops out of Iraq, but they all know that a withdrawal now would create a big vacuum, and as a result, would hurt them more,” the diplomat told AFP.

 

The eight countries could not reach a consensus on whether they should deal with US military rule in Iraq.

 

Turkish Foreign Minister Abdullah Gul said Ankara would prefer to deal with a civil government in Baghdad, without explaining if it was prepared to work with a US military administration.

 

But Egyptian Foreign Minister Ahmed Maher said none of the participants at the meeting could live with a military government in Iraq and the Iraqi people should already have been engaged in picking their own government.

 

Equally, an unstable post-war Iraq, replete with unknown forces and political imponderables, is causing some companies to shy off from taking the plunge in the country.

“Every company that invests money, work and planning would like to have a steady legal basis,” says Alkazaz. “As long as that legal basis has not been created I can’t see operations beginning soon.

“Maybe Arab governments would promote such engagement for their companies. But they’re hesitating because they don’t know the reaction of the political parties in Iraq. Although they say that Saddam is gone, what is the alternative to him now?”

 

In Iraq itself, there is little doubt that, whatever the feelings of the local population towards the US presence there, the opportunity for relatively well-paid employment will eclipse any anti-US political opinions.

“You might see Iraqis willing to work for American companies because they’re unemployed and forced to make money anyway possible and from wherever it may come from,” says Alkazaz.