Foreign firms to bid in huge Iraqi sale
Rory McCarthy, Baghdad
Monday September 22, 2003
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
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
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
Bechtel, a San Francisco-based firm, won the $680m chief
contract to start rebuilding other essentials, such as roads and
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
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.