FOREIGN FIRMS BUY IRAQ's BUSINESSES
Foreign firms to bid in huge Iraqi sale

Rory McCarthy, Baghdad
Monday September 22, 2003
The Guardian

Iraq was effectively put up for sale yesterday, when the US-backed administration unveiled a sweeping overhaul of the economy, giving foreign companies unprecedented access to Iraqi firms which are to be sold off in a privatisation windfall.

Under the new rules, announced by the finance minister, Kamil Mubdir al-Gailani, in Dubai, foreign firms will have the right to wholly own Iraqi companies, except those in the oil, gas and mineral industries. There will be no restrictions on the amount of profits that can be repatriated or on using local products. Corporate tax will be set at 15%.

Mr Gailani said a free and open market was the quickest route to prosperity. "Our objective is simple to state: promote Iraqi economic growth and raise the living standards of all Iraqis as soon as possible," he said.

The reforms won the backing of the US treasury secretary, John Snow, who said they were "policies that make sense... that offer real promise."

The news came as President George Bush said in an interview with Fox News that he was unsure how far the US would have to yield to the United Nations to make way for a new resolution on Iraq.

He said he would declare in his speech on Tuesday to the UN general assembly that he "made the right decision and the others that joined us made the right decision" to invade Iraq.

Yesterday, one Iraqi businessman warned that the economic reforms would "destroy the role of the Iraqi industrialist". Wadi Surab told the BBC that Iraqi entrepreneurs would be unable to compete with foreign companies in privatisation tenders.

The rules give foreign firms greater access to business in Iraq than in most developing countries, where local industries are often shielded from overseas buyers. For some Iraqis such unfettered access is a concern, yet the privatisation of Iraq's 192 public sector companies is not up for debate.

The most valuable contracts on offer have already gone to US corporate giants.
Kellogg, Brown and Root - a subsidiary of Halliburton which was once run by the American vice-president, Dick Cheney - won a contract worth up to $7bn (£4.3bn) to repair Iraq's oil infrastructure.

Bechtel, a San Francisco-based firm, won the $680m chief contract to start rebuilding other essentials, such as roads and schools.

One of the most high-profile contracts still up for grabs - for mobile phone licences - is to be announced shortly. Fifteen bids have been put forward, including some from Iraqi businessmen who plan to involve more Iraqis in the business of reconstruction.

"There is a big business class of Iraqis that we haven't seen yet. We want to get them back doing things for their own economy," said Mohamed Shaboot, an Iraqi businessman educated in the US who has spent 10 years in Baghdad.

Mr Shaboot and several other Iraqis have formed a consortium, called Zagil, which has submitted a bid to run one of three new mobile phone networks. The consortium's proposal for the licence includes a pledge to sell half the company to ordinary Iraqis.

Mr Shaboot said: "We are trying to get Iraqi investors to put in some of the money that they have made abroad back into their country. This is the first step towards really rebuilding."

There are few mobile phone contracts left in the world that offer such potential. Many expect at least 2 million subscribers within a few years.

But the licence, worth at least $200m, will not be won easily. The US-led authority in Iraq, the coalition provisional authority (CPA), stipulated that bidders must have run mobile phone networks in other countries. Some argue that key contracts should be reserved for Iraqis. But among the elder Iraqi businessmen, some are struggling to adapt to the new business climate.

Farouk al-Obeidi, the vice-president of al-Maimana group, one of the country's most established construction and trading firms, has a file on his desk containing some of the CPA's requests for bids to provide equipment. "This is a chaotic situation. Out of these 50 offers, I've only been able to submit proposals for three and none of them has won," he said.


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