This effectively bars a large swathe of Arab companies from tendering for some of post-war Iraq’s most lucrative contracts. 

Critics say the move may increase US companies' strangle-hold on the country's economy.

“It seems that none of the companies in the Middle East will be able to bid in these conditions,” Bahraini telecommunications company Batelco said in an interview with Reuters.

In a document posted on the Coalition Provisional Authority’s Web site, bidders are informed that if they are more than five percent owned by the state, they won't be eligible for Thursday’s tender of three Iraq cell phone licences in Amman, Jordan.

Germany and France shunned

The new restriction also knocks out German and French flagship companies Deutsche Telekom and France Telecom. France and Germany were the most vociferous anti-war critics.

Both countries also vetoed a UN vote on war with Iraq, making the invasion illegal under international law.

Deutsche Telekom is 42.8 percent owned by the German government while the French government owns 30.2 percent of France Telecom.

The licences will initially have a life span of two years though the contracts are expected “to be continued” or extended by any new Iraqi government, the website said.

Three licences

There will be three licenses awarded for mobile phone networks that will cover, separately, northern, central and southern Iraq. Applicants are required to bid for at least two regional licenses

The new restriction also applies to Batelco, a Bahrain-based company, which invested $5 million on a start-up network that brought cell phones to life in Iraq for the first time.

The company shut down its network last week after pressure from US authorities. Mobile phones were banned under Saddam Hussein’s government.

The CPA is not currently enforcing Iraqi law restricting foreign firms from operating in the country.

Also, “it is expected that the CPA will formally suspend certain laws in the near future to aid Iraq’s economic recovery,” the CPA said on their website, boosting the hopes of foreign competitors that the virgin market will be biddable.

US-dominated contracts

The US authorities, who until earlier this month, banned any non-US company from winning reconstruction contracts in Iraq, are under increasing pressure to be more transparent.

Bankrupt telecommunications company Worldcomm Inc., going under the name of MCI, was the company chosen to supply US forces with a wireless network in Iraq. The service is barred to Iraqis, Reuters said.

Worldcomm was charged with fraud after it inflated reported revenue by some $9 billion. The company agreed to pay penalties of $500 million for its actions, the largest fine ever levied by the US Securities and Exchange Commission.

The new licence holders will serve more than 16 million people living in major cities including Baghdad, Basra, Kerbala and Arbil.