|Private sector vie for role in postwar Iraq economy
|The $680 million deal between the US administration and the San Francisco-based Bechtel Co. to rebuild postwar Iraq triggered fears in the Arab economies as to the aftereffects of war.
Bechtel didn’t spare any effort in laying down its employees in Baghdad, taking advantage of the political push that prevails inside Iraq following the US victory in its war against the former Saddam Hussein’s regime.
Bechtel’s deal aims at repairing everything in the country: Infrastructure, roads, government buildings and hospitals. Bechtel was granted 18 months to finalize the project under the supervision of the US Agency for International Development (USAID).
Arab economists and businessmen regard the American agreement as a double-edged sword for their economies. For Jordan, many believe the strong relationship established over the years between Iraq and Jordan as well as the Kingdom’s proximity to Iraq, will favor Jordan’s private sector awareness and competitiveness. However, others still fear a long-term US military hold over Iraq will have a negative impact on Iraq’s neighbors.
"I believe Jordanian companies are not in a position to take part in the rebuilding of Iraq," said Dr Mohammed Saqr, professor of economics at the University of Jordan. "These companies need to have a political will to push them to the competitive edge as to be in parity with American companies."
Saqr pointed that none of the Arab private sectors will play a part in the postwar Iraq if they decided to act individually and selfishly. "The Americans know well that Iraq was the treasure tub for its neighbors, who secured billions of dollars in business dealings over the past decade or so," he said. "This is no longer existing. Iraq today is America’s treasure tub. The American administration wants to jumpstart the US economy out of recession by engaging American companies to rebuild Iraq."
Jordanian businessmen are likely to take part in the forthcoming "The Iraqi Reconstruction Conference" which is scheduled to take place in Washington DC, next month. Participants will tackle the issues of relief; reconstruction and development of Iraq.
According to USAID administrator, Andrew Natsios, costs of the reconstruction of Iraq range between $50-$100 billion. He said half of the money will go to subcontractors with both American and international firms.
Bechtel plans to open its subcontracting process to foreign firms, but won’t seek any before it finishes plans with USAID. Bechtel likely won’t have trouble finding companies eager to work with it in Iraq. Hopes for Jordanian companies to take part in Iraq’s reconstruction were felt at the Amman Stock Exchange last week, when shares surged and the price index reached its highest peak in 10 months at 181 points.
Several listed companies at the stock market witnessed big demands on their shares, speculating on these companies’ role in providing services and products to Iraq. Shares of companies producing cement, cables, steel, detergents and food products have experienced increased demand, making these companies well positioned to participate in the reconstruction of postwar Iraq.
Unfortunately, Jordanian pharmaceuticals are not likely to have a sizable share in Iraqi markets due to the fierce competition from their American counterparts.
Many economists believe some of the local companies will eventually have their chances in postwar Iraq, either directly or through subcontracts by American companies working there.
Saqr disagrees, "Many businesses in the Kingdom will not get an easy access to the reconstruction process. The economic growth in Jordan will suffer the fallout of this on the long run," he told The Star.
Nonetheless Saqr considers concerted efforts by the Jordanian and Arab private sectors as the means to ensure their role in Iraq’s development, and only through an international mandate.
"Jordanian and Arab companies can go to Iraq under the UN authority and through the reinstitution of the oil-for-food program which was launched by the UN in 1996," Saqr told The Star. "If the Americans agree to return to the UN its mandate to supervise the reconstruction process, then Jordan and most of the Arab companies will reclaim their part in Iraq’s development."
Saqr’s remarks echo recent complaints made by local businessmen who regard the war as a blow to their businesses with Iraq. They were working on deals won under the oil-for-food program and estimated at hundreds of millions of dinars. There are still no specific statistics for Jordan’s losses, but the government made it clear the Kingdom is expected to lose around $1 billion in trade. This is in addition to the $1 billion Jordan is expected to bear in view of the halt in Iraqi oil supplies since 20 March.
"There is no Iraqi authority to deal with. We have to deal with the Americans to give us a piece of the cake," Saqr said.
He warned the recent American proposal to lift the 13-year-old UN sanctions on Iraq is a pretext for the US administration to allow its firms to acquire the lion’s share in the development projects. "The Americans even refuse to give access to British companies to repair the damages at the Iraqi electricity and water networks in Basra, only to spare the mending for American firms," Saqr pointed out.
President George Bush’s call to revoke the UN sanctions on Iraq drew angry reactions from member states at the UN Security Council. The Europeans accuse Bush’s administration of showing favoritism and ignore foreign companies and governments, who complained of being frozen out.
"The American veto to the British not to allow them to take part in Iraq’s reconstruction sends a clear message to all that even the US’ close allies are not welcome in Iraq. They all will have to wait for their turn, if there is any," the professor said.
Othman Budeir, a Jordanian businessman and former president of Amman Chamber of Industry, notes the private sector in Jordan needs first to make the initiative and form strategies to ensure their chances in the reconstruction of Iraq. Such an initiative, said Budeir, is important for the local private sector to be well equipped and competitive enough to guarantee its presence in Iraq.
"Now the sanctions will be lifted allowing Iraq to trade freely with the rest of the world, its trade patterns would change and Iraqis may choose to establish new trade ties based on economic rather than political interests," said Saqr. "Accordingly, Jordanian and Arab companies which used to trade with Iraq before the war will have to reorganize their businesses and streamline with the developments."