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Last Updated:  Tuesday, 11 March, 2003, 16:11 GMT
The business of rebuilding war zones

By James Arnold
BBC News Online business reporter

A bombed bridge in Serbia
One man's interrupted commute is another man's opportunity
Development agency USAid has shortlisted five US companies for a $900m contract to rebuild Iraq - so is post-war reconstruction an American stitch-up?

For Tam Dalyell, a Labour member of parliament, it was "vomit-making".

Indeed, there is something nauseous in the news that the US Government is handing out contracts for rebuilding post-war Iraq - to American companies - before the first shots have even been fired.

One of the firms is Halliburton, the company once led by Vice President Dick Cheney (although given the firm's Middle East expertise it would have been more of a surprise if it was not on the shortlist).

But at a total of $900m, the current batch of controversial deals represent a tiny fraction of what promises to be an unprecedented reconstruction bonanza.

It is US development aid that is being spent here, not "Iraqi money" flowing from Iraqi oil wells.

And by signing up contractors before the war begins, Washington is signalling a potentially cheering truth: the post-war reconstruction business is not just getting more lucrative, it's getting far more efficient, too.

Overwhelming generosity

Lucrative it certainly is, however.

Of the $66bn given out in international aid in 1999, a big year for reconstruction, almost one-quarter went to war-torn countries.

Iraqi oil refinery
This will need a refit for a start

Hard cash is most obviously needed for rebuilding roads, bridges, schools, hospitals and other physical infrastructure.

But even more expensive and long-lasting is the work involved in resettling refugees, clearing up pollution, rebuilding civil society and generally putting the economy back on its feet.

Over the past few years, this sort of thing has created a gigantic surge in the average post-war aid bill: while $4bn of aid went into Lebanon in the 10 years after its civil war ended in the early 1990s, some $5.4bn poured into smaller Bosnia in half the time.

Rebuilding Afghanistan - which didn't have much infrastructure in the first place - is predicted to cost $15bn, while estimates for Iraq have crept as high as $100bn.

Scenting an opportunity

Understandably perhaps, this tidal wave of cash has sharpened appetites among corporate contractors.

Donors encourage this: while efforts like the Marshall Plan - the vast push to revive Europe after World War II - were largely state affairs, modern governments are keen to outsource as many functions as possible to the private sector.

Now, a fairly narrow coterie of international firms has developed a reliable sideline in post-war clean-ups.

Construction firms such as the US's Fluor and Bechtel, Britain's Costain and Balfour Beatty, and France's Spie are usually the first in; service providers such as British Crown Agents and Swiss SGS are rarely far behind.

The invisible hand

Sometimes, this results in a sordid scramble or stitch-up.

Kuwaiti oil installation
Getting things rebuilt quickly is now the priority
Company agents have been known to hit the warzone in advance of the victorious troops.

And hackles were raised in boardrooms around the world when the US Army Corps of Engineers blithely handed out all rebuilding contracts to American firms in advance of the 1991 Gulf War.

But for the most part, the companies' wish to make a profit coincides with the aid recipients' wish for a speedy recovery.

Indeed, the main hitch in this otherwise neat alignment of interests lies with the banks, governments and other agencies that disburse the cash, and whose prevarication often slows things down to a crawl.

Spending better

Trouble is, growth in post-war aid budgets has outstripped bureaucratic ability, argues Colin Adams, chief executive of the British Consultants and Construction Bureau, a trade body for reconstruction contractors.

George W Bush
Is the US too cosy with its corporate chums?

Administrative muddle reached its peak in the aftermath of the Bosnian war, where aid was provided on a bilateral basis by a bewildering galaxy of governments and agencies.

"Everyone wants to be seen financing the prestige projects, and because there is no coordination, you can get terrible duplication of effort," says Mr Adams.

Things have started to improve: Kosovo, quickly taken under the wing of the European Commission, was a relatively tidy project - although expensive at $2.3bn.

And Afghanistan has been an object lesson in efficiency.

Almost all Afghan projects, even many of those financed by freewheeling non-governmental organisations, pass through a single coordinating body, the Afghan Assistance Coordination Agency (AACA).

Local heroes

The row over the US contracts for Iraq highlights another sticking-point - the role of nationalism.

The $900m comes through USAid, a government agency obliged to prefer US firms unless a particular statute is invoked (as it has been for its Afghan activity).

This is quite normal: almost all countries insist their own companies should benefit from the aid they give out; one of the few that does not is Britain, whose companies capture a hefty slice of the post-war business worldwide.

But even a dose of national bias is preferable to the administrative chaos seen in the mid-1990s, Mr Adams argues.

And governments, for all their faults, generally move much faster than agencies such as the European Commission or World Bank, whose money is scrupulously doled out in plodding competitive tenders.

After all, getting the bridge rebuilt fast is more important than the nationality of the firm that builds it - as any Afghan will tell you.

The BBC's Jane Bennett Powell
"The contract would cover restoring power and water supplies"

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