By Emma Clark
BBC News Online business reporter
UK companies are waiting to see what role they will play in the reconstruction of Iraq.
Iraqi infrastructure will need to be re-built
Reconstruction of a war zone has long been a touchy subject.
Companies are reluctant to discuss the business of re-building for fear of appearing mercenary in the midst of conflict.
But the process of reconstruction has become a crucial adjunct to modern warfare, as victors take responsibility for rehabilitating their enemies.
Recently, fears that British companies may lose out on contracts to rebuild Iraq has thrust the debate into the open.
British companies were said to be incensed by a $600m project soliciting bids from US companies to rebuild Iraqi infrastructure, including seaports, airports, roads and bridges.
The US Agency for International Development (USAID), which is coordinating the $600m project, has been in informal discussions with US construction companies such as Bechtel and Halliburton.
Following a meeting last week between British companies and UK government officials, the Trade and Industry Secretary Patricia Hewitt telephoned USAID to lobby on behalf of UK business.
"Our concerns were strongly expressed in the meeting with government that we did not want to see a rerun of the Kuwait liberation in the early 1990s when the US sewed up the majority of the contracts through their Corps of Engineers," said the trade association, the British Consultants and Construction Bureau (BCCB).
In her phone call, Ms Hewitt "underlined the expertise" of UK companies in reconstruction projects, and particularly in the Middle East, according to a spokesman at Trade Partners UK, part of the DTI.
Contrary to press reports at the weekend, no specific assurances were given by USAID, but the Trade and Industry Secretary was given a "sympathetic" hearing.
The role foreseen for UK companies in Iraq would be as sub-contractors.
A spokeswoman for USAID said the agency had waived a provision to allow US contractors to sub-contract work to non-American companies.
However, she was unable to confirm whether UK companies would be favoured over firms from other countries.
Nevertheless, partly through Ms Hewitt's lobbying, construction companies such as Balfour Beatty, Amec and Carillion Plc are believed to be high up on the list.
Setting an example
To some extent, British companies are the victims of policy differences between the US and the UK.
Whereas the US favours its own companies when disbursing reconstruction aid to prime contractors, the UK's key priority is humanitarian needs.
Roads in Baghdad will need re-building
Form April 2001, the UK untied its aid from any link with trade, believing that this would offer better value for money.
"British industry has nothing to fear from aid untying," said Clare Short, the Secretary of State for International Development, at the time.
"UK consultants are consistently successful at winning contracts from the fully untied funds of international organisations."
The UK hoped that by untying aid, it would set an example to the rest of the world's bilateral donors.
However, the BCCB trade association is keen for the British government to play a more active role.
Chief executive Colin Adams says: "If the British government wants to see British companies playing a part in Iraq, they must give them an incentive.
"They can't just rely on US projects to get the UK companies in there."
Mr Adams agrees there are "sound reasons" for untying aid, but is calling for "reconstruction finance" from the DTI to help establish UK companies in Iraq.
He added: "The BCCB would very much like to the see the Ministry of Defence identifying potential projects for British firms."
Clare Short's Department for International Development has earmarked £20m for humanitarian needs, but has yet to offer money for reconstruction.
Ms Short told the House of Commons on Monday that she was waiting for the United Nations to provide a mandate for economic reconstruction of Iraq.
This would be a precondition for the provision of any reconstruction aid from donors such as the World Bank.
"We are expecting a flash appeal [from the UN] and we will make a proper contribution," said Ms Short.
But again UK companies are not expected to receive any preferential treatment and will be competing against other bidders.
Most, however, seem pretty sanguine. "We will be waiting to see what opportunities there are and deciding whether we pitch for them," says a Balfour Beatty spokesman.
Another official from a construction company admitted that the situation was frustrating, but added it was a matter "of getting on with it".