"We are considering reducing and forgiving these debts owed by Iraq to China by a large margin," Shen Gofang, China's deputy foreign minister said late on Saturday on the sidelines of a meeting of Iraq's donors in Abu Dhabi. 

"The task is easier with government debt, but for the corporate debt we need to have the agreement of those companies concerned."

Shen explained that a large part of the debt was owed to Chinese companies and that they would be more willing to forgive or reduce that debt if they could bid on oil, power and infrastructure projects.
 
"If they can take a greater part in this process they are more than ready to forgive part or all of their debts owed by Iraq," he said.

"Many Chinese companies have advantages in oil field exploration, hydropower stations and telecommunications."

Iraq has forecast debt forgiveness of some 60% of the $120 billion owed after former US secretary of state James Baker visited Baghdad's major creditors to press for waivers.

Madrid conference

China pledged $25 million towards Iraq's rebuilding at a donor conference in Madrid in October which had raised about $33 billion from other countries and agencies.
 

Members of the US-appointed
IGC at Madrid Conference in 2003  

The biggest pledge, $18.6 billion, came from the United States, which has set up an office in Baghdad to award contracts for rebuilding projects against these funds.

The so-called Program Management Office is gearing up to award about $10 billion worth of construction and non-construction projects by 1 July, but half of that amount going for so-called "prime contracts" for big power and infrastructure projects are off-limits to non-coalition countries.
 
China opposed the US-led occupation's war on Iraq that ousted Saddam's regime.

Reconstruction

Shen said he was in talks with both Iraqi and US officials about the role of Chinese companies in Iraq and signalled that his country would be willing to contribute more money towards reconstruction if its companies were allowed into big projects.

"One of the key challenges in all reconstruction efforts is making sure there is good coordination between the actual authority and the international donors"

Earl Anthony Wayne,
US assistant secretary of state for economic and business affairs

The leading players in Iraq's oil and power sectors are US companies such as oil services giant Halliburton, engineering firm Bechtel and General Electric, which builds power stations.

The head of the US delegation to Abu Dhabi declined to say whether the issue of participation by non-coalition countries in big projects was discussed during the two-day meeting which ends on Sunday, but spoke about "greater coordination and flexibility" towards Iraq's donors.
 
"One of the key challenges in all reconstruction efforts is making sure there is good coordination between the actual authority and the international donors," said Earl Anthony Wayne, assistant secretary of state for economic and business affairs.