Iraq starts to fix itself
Source: BI-ME , Author: Trevor Lloyd-Jones
Posted: Wed September 10, 2008 12:00 am

IRAQ. Most of us are sick of hearing about all the horrible things that happen in Iraq without ever hearing about any of the good ones. That's not because horrible things don't occur every day somewhere in the country. It is that such accounts do not form part of the solution, and this is a view held with particular passion by Americans working for the improvement of Iraq, such as Maurey Blake Bond, Business Development Director for the Iraqi American Chamber of Commerce & Industry (IACCI).

He cites the success of projects such as those managed under the I-BIZ (Iraqi Business and Industrial Zone) programme, the work of the US Army Corps of Engineers and Multi-National Corps-Iraq (MNC-I) or C9 as examples of those many micro-economic miracles that usually fail to make the headlines.

I-BIZ is an initiative intended to give Iraqi companies better access to US contracts, to establish security to let Iraqi companies develop, and train individual Iraqis in skills such as carpentry, plumbing and electrical work. It consists of a contracting office, two Iraqi industrial plants - one for producing concrete and the other for crushing rock into gravel - alongside a shipping and receiving yard and a skills training area. It also has the potential to save the US government a significant amount of money by using cheaper Iraqi labour for many jobs usually performed by other contracted foreign nationals.

The I-BIZ is only one small tactical victory in need of a much larger strategic or political triumph. Some scholars and foreign policy experts claim that one of the major lessons of Vietnam is that tactical victories do not equal success at the strategic or political level. But as a collection of many small steps, it is part of a series of US-military sponsored economic reconstruction programmes that are helping to put Iraqi citizens – small-engine mechanics, well drillers, plumbers, air conditioning repairmen, carpenters and welders – back into employment.

“I-BIZ is a programme that provides secure locations on or next to military bases for privately-owned, small and medium sized Iraqi businesses employing Iraqi workers,” explains Bond. The programme, he says, injects money into the Iraqi economy while boosting social stability by providing jobs to Iraqis so that they can support their families.

I-BIZ-affiliated ventures employ more than 1,400 Iraqis with annual salaries totaling more than US$10 million. Successful businesses that participate in the I-BIZ programme include building trades, vehicle-repair, retail shops, cement and asphalt, metal cutting, trucking and generator repair.

The I-BIZ programme is growing, Bond said, noting it is now being implemented on 11 coalition bases, with plans to expand it to 14 bases before the end of the year.

The successful Iraqi First LOGCAP (Logistics Civil Augmentation Programme) and Iraqi-Based Industrial Zone programmes are direct results of the directives of Army General David Petraeus (commander of Multi-National Force Iraq) early in 2007.

The Iraqi First LOGCAP programme provides a conduit for Iraqi businesses to sell their products and services to coalition customers.

“The movement is to put Iraqis first in purchase decisions,” says Bond. LOGCAP, he said, is the name of the military logistics contracting and purchasing system.

LOGCAP is the coalition’s largest service contract in Iraq, and is a prime example and one of the programmes in which Iraqi First is being applied.

“We are helping to direct more and more jobs supporting this contract to Iraqis,” continues Bond. “In addition, the military is directing more purchases of products to Iraqi suppliers. The goal is to have Iraqi workers and Iraqi suppliers to be a significant part of the total logistics support.”

Today, about 4,000 Iraqi citizens are holding jobs as part of the Iraqi First-LOGCAP programme. At some installations, Iraqi citizens make up more than 50% of the work force. Iraqis also have a growing presence in both professional and administrative positions. Another new initiative is exploring ways to hire Iraqis through Iraqi-government-sponsored vocational technical schools.

The Iraqi First-LOGCAP programme is also about buying Iraqi products for use on US Army bases. This is significant since the US military in Iraq bought more than US$182 million worth of Iraqi products and services over the past year. For example, a recent business transaction with an Iraqi plastics factory resulted in the reopening of three plastic-bag production lines.

LOGCAP-affiliated purchases have involved more than 200 Iraqi vendors providing thousands of items and products. Iraqi-supplied goods and services, include construction materials, metals, tools, plastic spoons, heating and cooling equipment, as well as maintenance, laundry and food service and supply services.

For now, many visitors to Baghdad admit they shocked at what they see in terms of the local electricity, water or sanitation systems. Iraqis, meanwhile, express genuine concern about how much better Americans are living in Iraq than Iraqis themselves. But things have started to change, by all accounts, and some Iraqis have started to see that some things might be improving for them, too.

The Iraqi-American Chamber of Commerce and Industry (IACCI) the organisers of the 1st Oil & Gas Expo in Baghdad’s secure airport zone (5-7 December 2008) is a professional, full service organisation with over 10,500 Iraqi and international members, including Iraqi ministries and local governments. The dedicated staff of IACCI comprises over 300 employees, with seven offices in Iraq, a branch in Jordan, and an office in the United States. With a distinguished track record of 16 regional job fairs and four international trade shows throughout Iraq, IACCI stands alone as the most innovative advocate of the Iraqi private sector to date.

IACCI continues to promote Iraqi business development through networking forums, capacity building, and training and development. With its strong presence and extensive trade show experience in Iraq, IACCI is the most qualified organization to coordinate the Iraq Oil & Gas Expo and Conference, and it is looking forward to making this historic event a tremendous success for all who participate.

With the second largest oil reserve in the world Iraq is on the precipice of being one of the fastest growing economies in the world. IACCI says it is committed to make sure that Iraq’s potential becomes a reality.

BI-ME: Aside from the Oil & Gas Expo please can you describe the work of the Chamber, its services and role in coordinating business relations in Iraq?

MB: We are continually facilitating business meetings at Iraq’s airports and especially the new Baghdad International Airport (BIAP) Business Centre.

It is not well known, but the Centre is a huge and secure complex inside the secure airport perimeter, with hotel, conference and ready-made office facilities. We work with the Director of the BIAP Business Centre, Majid Michael, to coordinate regular business get-togethers to facilitate efforts of Iraqi companies to acquire reconstruction business contracts.

In addition to organising several full-scale B2B conferences in Baghdad and Sulaimaniyah, we are working with all agencies working in Iraq, from initial website contacts to the Ministry of Oil, the Joint Contracting Command Iraq (JCCI), MNF [Multi-National Force Iraq], the Army Corp of Engineers and dozens of projects carried out under the I-BIZ programme.

BI-ME: What is it like to live and work in Iraq? What is the daily security situation in Baghdad and what advice can you give foreign business men and women looking to set up in Iraq?

MB: I always say to people, come to Iraq to see for yourself. You cannot do business by remote control and without getting to know the determination, the skills and the friendship of the Iraqi people. From a personal point of view, I am living and working outside the Green Zone in the heart of Karrada, the business district of Baghdad and my daily life is very safe. The record of IACCI is without a single security incident.

The Iraqi First Initiative is key to doing business in Iraq. This means that we are continually working in a coordinating role between the relevant Iraqi ministry, the Iraqi company and the international company.

In terms of the trend now in Iraq, I would say that we are seeing new and different types of contracts. The tendency on the Iraqi side is to look at the price and the embedding. By that I mean the element of training and engagement by the foreign partner. They don’t look at all at where you are from and this is shown by the companies working in Iraq now, from China, to Turkey, Kazakhstan, India, Russia, US, Arab companies as well as expatriate Iraqi businessmen. Rather than the mega reconstruction contracts, we are seeing more mid-sized contracts with Iraqi input, and the key is to show engagement with the country and the people.

BI-ME: Watching the developments in Iraq from the outside is rather like looking at the previous new boom economies in China and in India, when companies were saying ‘yes we are coming, we are looking at the market’, but in reality progress is slow. What do you say to those companies that are interested in working in Iraq, but who are delaying?

MB: The companies that come this year will benefit and will be at the front of the line. The ministries have shown that approach and the companies working here now will reap the returns. Some multinationals have been visiting many times but they are slow to engage and on the political level there is now some frustration with this. The Iraqi government is saying that with its oil reserves and with such potential, it should be given more urgency and more status in the scope of world investments, and I would agree with that.

Reconstruction in Iraq is now about Iraqi reconstruction. On some level you can’t go on saying ‘we’ll come and do business in three years’. Every day, every week more and more people are coming to Iraq and normal market networks will become more established so that the trade shows will become less important.

The more companies that know, so more of them will come direct to the market. There are currently four to five times more civilian contractors in Iraq than there are military personnel and this number is continually increasing on the tide of the private sector.

Iraq is in a situation where they have leverage. They don’t have to go travelling around the world to peddle their oil and gas business. For the government of Iraq there is nowhere else to go, only up.

BI-ME: One situation that is being watched very closely is the new petroleum law and the service contracts to uplift Iraqi oil production. Can you give us any insights into that series of events?

MB: Iraq urgently needs foreign investments and the short-term service contracts are meant to inject foreign expertise and investment into the oil sector, allowing the Iraqi companies to build up their own abilities and stopping short of full privatisation. The deals aim to boost oil output by 100,000 bpd at each of six of Iraq’s largest producing oilfields, adding to current production of around 2.3 million bpd.

Sometimes the pace of change, and the determination to change, runs ahead of events in Iraq. Oil Minister Hussain al-Shahristani had expressed frustration over delays in finalising the contracts. When he suddenly announced the contracts were to last just one year, instead of 18 months, the multinational oil companies decided to pull out. This change was the reason for the deals not going ahead in June. Since then, Royal Dutch Shell has signed a US$4 billion gas contract, and China's CNPC is in negtiations for a US$3 billion oil contract.

Iraq has 18 state oil companies, including NOC in the north and SOC in the south, and 90,000 Ministry of Oil officials. Some 5,000 of these officials will be attending Oil & Gas Expo to learn latest technology.

Many of the international companies were seeing this for the first time and they have had to understand that people and knowledge transfer will be a key dimension in the tenders, and in the industry in the future. The service contracts are for the oil and gas industry broadly, not just drilling and exploration. Iraq’s industry has requirements everywhere, in construction, security, engineers and especially in any technical or pipeline capacity and in water resources.

Iraq is on the verge of something fantastic. It is also on the verge of something terrible. The world needs to engage and now is the time for the oil companies to engage.

On the security considerations, there are still issues but there have been big improvements in 2008 so that Iraq is at the point where such major changes are possible.

BI-ME: What do you say to the criticism that the Iraqi private sector is underdeveloped and that it consists of mostly the monolithic former state companies? Also there is talk of a legacy of corruption and the accusation that government officials are sometimes out of touch with business in the rest of the world. How do you address these issues?

MB: I say to companies that you need to come and look for yourselves and invest and take a long-term relationship that moves with the way Iraq is moving. It is true that in many cases oil industry executives know about the technology, the business case or the logistic requirements, more than a government official. In financing, there is no knowledge in Iraq of export finance or international financial instruments. So credit underwriting and due diligence is a key hurdle if Iraq wants to engage with international banks and this is one of the things the government wants to change.

The oil message is ‘come to Iraq at a time when it is offering a solution to the world energy difficulties’. It is time for boots on the ground. Many of the Chinese, Russian and European oil companies – in fact the IOCs that had relationships with the old Iraq – are coming back, not just the US companies.

BI-ME: How would you compare the business climate now in the north and south of Iraq? What is the relationship of the oil contracts in the north and the south?

MB: It is true the KRG [Kurdistan Regional Government] is further ahead in free markets and in making a completely secure situation for business. The oil and gas relationship between the north and the south is a lot stronger than it was. The oil companies that wanted to get down to business went straight to the regional government. But at the end of the day, the regional government reports to the central government.

My understanding is that the northern oil contracts drawn in the 2003-2004 period might have to be redrawn. Having said that the experience gained in the northern oil fields, the management, the actual accounting and the financing are there now and this is a benefit to the country.

BI-ME: In terms of consumer products, the new shopping malls in the north, and the social changes in Iraq, where are the markets heading?

MB: What you see now in the streets of Baghdad are boxes and boxes of electronic products such as air conditioning units, generators, toys, machine tools and refrigerators being traded in the street. Pepsico recently signed a deal with a distributor for Iraq. Baghdad Soft Drinks Co will produce and distribute Pepsi, Seven-Up and Mirinda soft drink brands in a deal expected to generate 2,000 new jobs at the factory over the next few years.

In another example, Mercedes has signed an agreement with the government to set up a training centre and to study renewing production of trucks and buses. Everyday there are 20 international flights now arriving in Baghdad. The airport zone offers huge areas of secure development land with logistics next door. Five years from now all of this will translate into a full consumer boom and there is pent up demand.

BI-ME: Finally, for the benefit of our readers, could you outline the benefits of IACCI membership and what are the next steps they need to take to know more about the opportunities in Iraq?

MB: With operations in the north and south of Iraq and 400 staff we are active across all business sectors and we offer access to the kind of contracts that you could not get from any other source. For new entrants we recommend an office in the airport or the new office towers and from there we can help with advice on customs, shipping, licences, translation or any element of faciliting business.

Attendees to the Oil & Gas Expo and trade show exhibitors will be listed in the directory that will become the reference document for all the Iraqi government departments. ICCI membership gives access to all trade shows and relationships that we handle through networking forms. We also host local district trade shows in Karbala, Sadr City and other regional centres and a how to do business in Iraq conference at which a wide range of companies can participate and meet the ministries and government departments.

Doing something in Iraq is a risk. Doing nothing easy, but if you stay away the consequences for the Iraqi people and security all around the world is at risk.

Note: The Iraqi Oil Ministry is the organisation responsible for the 1st Oil & Gas Expo and Iraqi American Chamber of Commerce and Industry is the organiser.

For booking information and to see the invitation from the Minister, log on to www.iraqenergyexpo.com

Other important trade shows coming up in Iraq include the DBX Kurdistan International Tradeshow (11-14 November in Sulaimaniyah). the Baghdad International Expo (15-17 December in Baghdad), Baghdad Business to Business (15-17 February 2009) and Job Fair Iraq.

See also www.i-acci.org

 

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