Business | Features
Reconsructing opportunities
The Iraqi First programme, created in 2006 to give money for reconstruction and military work to local firms rather than the Western companies, awarded $1.6 billion to some 3,500 Iraqi businesses last year.
- By Jack Fairweather, Financial Times
- Published: 23:39 June 8, 2008
When the US invaded Iraq much of the country's business elite fled, fearing reprisals for their close ties with Saddam Hussain's regime. In their place a generation of entrepreneurs has emerged, to take advantage of the US and Iraqi government contracts.
But as the role of the US shrinks and the Iraqi government takes on more responsibility for reconstruction, Iraq's new business class fears the disappearance of the opportunities and the business environment that have allowed it to flourish.
"If the Americans leave Iraq, I will leave Iraq," says Mohammad Al Shamari, a 35-year-old businessman from the Shia Al Khadimiya district of Baghdad.
Four years ago, Shamari translated his small shop selling falafels to US soldiers into a $15,000 contract to provide sandwiches and office equipment directly to a burgeoning US base.
The postwar period was indeed a heady time for contractors across Iraq, with little oversight, and $20 billion from seized Iraqi assets distributed among contractors. Large American companies such as Bechtel monopolised the reconstruction industry, with Iraqi business picking up only small subcontracts.
But Shamari moved in quickly, using the brief window that followed the March 2003 invasion of relaxed security and trust between Iraqis and Americans to make contacts and secure business deals. He went on to win a succession of contracts to supply Iraqi security forces with food, along with building roads and supplying concrete barricades to the US bases.
"The Americans didn't care that I was poor, or the tribe I came from. They just cared that I could get things done," he says.
Vibrant community
Major Doug Paley, head of the Iraqi Assistance Centre that finds jobs for Iraqis with western and Iraqi companies says: "There's a real hunger out there to make money, and a vibrant young business community who are starting from scratch. When we started here, there was almost no local capacity for reconstruction projects. Now that's changed."
By his own estimation, Shamari is now a millionaire, with a restaurant in Jordan and a boat in Dubai, the embodiment of an Iraqi version of the American dream. He has also bought two houses in Baghdad once owned by members of the Saddam regime. "There's nowhere else to invest money in Iraq at the moment," he says.
But a far greater concern for Shamari is the increasing role of the Iraqi government in awarding contracts as the security situation improves and the US military, the largest contracting agency in Iraq, allows ministries to take the lead in reconstruction.
The military's Iraqi First programme awarded $1.6 billion to some 3,500 Iraqi businesses last year. The scheme was created in 2006 to award money for reconstruction and military work to Iraqi firms rather than the western companies that had previously dominated the scene.
"We've seen the Iraqi government take big strides forward in terms of streamlining its contracting process, and the Iraqi business community is responding to those opportunities," said Commander Anthony Grow who supervises the Iraqi First programme.
Accusations
In a country where an estimated 18 per cent of the workforce are unemployed, with a further 50 per cent underemployed, and most of the economy still dominated by moribund state agencies, comments such as Commander Grow's do little to reassure businessmen such as Mr Shamari.
Ali Hatchami, a cement factory owner in Hilla, who made his fortune supplying concrete crash barriers to bases, says he has struggled to win contracts with the Iraqi government, which he accuses of recreating the world of cronyism of the former regime.
"My family is not well known in government, so I don't get many contracts, and the ones I do get I have to spend so much more time and money getting," says Hatchami.
"Considering the risks we are taking for doing any kind of reconstruction, I will leave soon as I've made enough money."
The directors of the Al Liq'aa Mustakbal company do not have the option of leaving, at least not yet, as they make their fortune. They refer to Iraqi contractors who deal directly with US military such as Shamari and Hatchami as "the dead".
"You either get dead rich or just dead very quickly, even with the improved security," says Esmail Abd, co-founder.
His construction company, founded in 2004 by two engineering graduates, has steered away from directly supplying US military bases and focuses instead on US contracts for building schools and health clinics.
The company, which operates mainly in Sunni areas, is very conscious of its security, moving offices four times in three years and rarely visiting work sites.
"It's difficult to maintain quality control of our projects, but we spend a lot of time making sure we reach the standards that the Americans insist upon," says Abd.
Abd has few good things to say about the increasing role of the Iraqi government in the reconstruction process. "There is no oversight of Iraqi government projects, and 100 per cent corruption," he says.
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