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Last Updated: Thursday, 12 June, 2003, 00:53 GMT 01:53 UK
Global firms scramble for Iraq work

By Steve Schifferes
BBC News Online, Washington

Companies from around the world are converging on Washington to bid for work rebuilding Iraq - but are finding many obstacles in their way.

Bomb damage
Getting Iraq back on its feet will be an expensive task
Hundreds of corporate representatives have been meeting in Washington this week at a Defence Weekly conference aimed at explaining how they can take part in the Iraq reconstruction process.

Companies from as far afield as Turkey, the United Arab Emirates, Latvia and Britain - as well as many US firms - are finding the process is still fraught with difficulty.

The inability to bring the private sector fully into the Iraq reconstruction effort will make it more difficult to mobilise the resources needed for the huge task ahead.

We were ill-prepared for the task of reconstruction
Richard Perle, former US Assistant Defence Secretary
Former Assistant Secretary of Defence Richard Perle warned the conference that bureaucratic obstacles could delay the full exploitation of Iraq's resources, and that the process would be speeded up once the Iraqis were in charge of their own country.

But he admitted that, because the war moved so quickly, the US was "ill-prepared for the task of reconstruction" and had planned mainly for a humanitarian catastrophe that never materialised, with many stockpiled tents and emergency food rations.

Who to talk to?

The difficulty for many companies is the lack of someone in Iraq to negotiate with.

Iraq Power Group, a private company with financial backing from the US and the UAE, wants to build small power stations in Iraq to supplement the failing national grid.

Recommended security equipment for firms in Iraq
Bodyguards and body armour
Vehicles with 3 days fuel supply
Tracking device
All food and water
Satellite phones
Medical evacuation plan
Prefabricated buildings with full security perimeter
source: GlobalOptions
IPC's Sergio Picon told the BBC that they had partners in Iraq to supply power, but they needed guarantees that they would be paid by companies or municipalities.

But the US Export-Import Bank, which could provide such guarantees, needs a foreign government agency to negotiate with.

Peter Saba, chief operating officer of the bank, said that they were looking at creative solutions - such as financing through a third country such as Jordan or Kuwait - to get around the problem.

And he said, in the longer term, they wanted to increase the funds available for reconstruction by issuing bonds based on Iraqi's future oil revenue.

Mr Perle is an enthusiastic supporter of this approach, which he said could release up to $100bn over the next few years.

Deal-making and consortia

This external financing, however, could prove an alternative route to companies who otherwise will have to bid to become subcontractors to the US firm Bechtel, which has been awarded the main contracts so far to rebuild Iraq by USAID.

Tatyana Olkhovich, the US representative of the British construction firm Atkins, explained that they had bought a US company to improve their bidding prospects.

But she told BBC News Online that unless companies were able to find out in advance when new contracts were being issued, it would be too late to join a consortium that would improve their chances of winning work.

Other foreign firms are hoping that their political connections can improve their chances of gaining contracts.

The former Prime Minister of Latvia, Valdis Birkavs, is now heading a consortium of six leading Latvian construction companies who hope to rebuild bridges, roads, and power stations in Iraq.

He told the BBC that Latvia's early support for the Iraq war as a member of the coalition of the willing should help their case.

Mr Perle, for one, thinks that it would be "not surprising" if the Iraqi government refused to give contracts to French or German firms on the grounds that their governments had opposed the liberation of their country.

Problems on the ground

Very differing visions of conditions on the ground facing businesses wanting to work in Iraq were presented by conference participants.

Neil Livingston, a former counter-terrorism expert at the State Department, warned that the security situation was still very unsettled.

He said that with the US Army unable to guarantee security, company personnel needed to travel with armed bodyguards, in convoy with armoured vehicles,and should wear body armour and helmets when travelling in insecure areas.

And he warned that they would have to take their own food and water, organise medical care for their staff, and bring satellite phones for communication.

On the bright side, he reported that Baghdad's hotels were open, cheap and not full - but many lacked basic services like air-conditioning.

Later, US car giant GM's Iraq representative told the BBC he might delay his trip to the region until security improved.

Development priorities

Rubar Sandi, a leading Iraqi businessman who has advised the US State Department, says that Iraq has enormous potential, with its skilled workforce and huge natural resources.

But he was very critical of the US administration which was running Iraq, warning that the lack of services - and the dismissal of 400,000 troops who had added to ranks of the unemployed - was fomenting dissent, and allowing the Baathist party to regroup.

He pointed out the huge opportunities for foreign companies in the telecoms, water, electricity and oil sectors, with potential to expand oil production to 2.5m barrels per day, yielding a revenue of $20bn per year.

Mr Sandi is nothing if not a deal-maker, and he spent much of the time at the conference discussing his plans for hotels, banking and construction projects in Iraq with other business people from around the world.

If Iraq is to be rebuilt, it is private sector firms like these who will play a key role.

But to be effective, the deals will need to increasingly originate in Baghdad rather than Washington.

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