Iraqi Firms Shutout by Foreign Corporate Takeover

September 13th, 2003 - by admin

by Seb Walker — Baghdad Bulletin –

BAGDHAD (August 31, 2003) Baghdad Bulletin — It’s the regular Thursday morning KBR meeting for Iraqi businessmen at the Coalition Provisional Authority conference center. Doris Carter, a contractor for the US-based KBR, is announcing the tenders available for this week’s round of work in the reconstruction process. Hands shoot up into the air as each one is announced, then there is a scramble for the application forms handed out by Doris’s colleagues.

“We need two tractors with 40-foot trailers and an operator for two months,” she yells above the melee. “Until you sit down, we cannot continue.”

KBR, formerly Kellogg, Brown and Root, is one of the companies at the forefront of carrying out reconstruction work in the new Iraq. A subsidiary of Halliburton, they were originally awarded a contract for $7 billion by the US Army Corps of Engineers to carry out repairs to Iraq’s oil fields. This was substantially reduced after the secretive nature of the awards process led to a Congressional investigation.

Outside the auditorium, morose-looking businessmen sit gloomily drinking coffee, portfolios on laps.

“We left early,” explained the representative of a company supplying heavy equipment to the oil industry. “We could send our tea-boy to the local market to get contracts of the type they are awarding today.

Everybody should stop going to these meetings as a protest against what is happening.”

After the last tenders have been handed round –– including orders for hardware (nuts, bolts and screws), lumber, and electrical supplies –– everybody files out. Many are keen to air their complaints, but none will agree to have their name printed for fear of jeopardizing future contract awards to their company from KBR.

“From the tenders which I’ve seen, it’s nothing –– very small-scale,” said another businessman from the civil construction sector. “We have engineers and equipment of the very highest level. We can handle road-building and construction – they ask us for office supplies.

“Big contracts are available –– it’s just that we’re not getting them. Some big tenders are awarded that we do not hear about. We just fill in a lot of forms then sit and wait.”

One of the most common accusations levelled against the US-led occupation is that it was simply paving the way for a subsequent corporate invasion. Monolithic US companies with strong ties to the administration of US President George Bush have been handed huge contracts to repair the damage wrought by war. But despite assurances that the underlying motivation for this work is the revival of the Iraqi economy, people are starting to doubt how much is for the sake of Iraqis and how much is for the international companies to make a fast buck.

“From the work that we are handling, 41 of 75 is the latest tally for subcontracting which has been given out to Iraqi companies,” said Francis Canavan, spokesperson for Bechtel who received a $680 million contract for handling civil reconstruction from USAID. “These range from five to six-figure contracts reaching up to the low millions.”

But it is the sizes of these contracts which are leading Iraqi businessmen to the conclusion that they are getting a raw deal. The USAID website lists a string of multi-million dollar contract awards which have been given to US companies: $4.8 million to Stevedoring Services of America for “assessment and management activities” at the port of Umm Qasr, $9 million to BearingPoint, Inc. to “support integrated and sustainable economic reform in Iraq” (which includes creating a competitive private sector), $10 million to Abt Associates to help restructure the health system. The biggest contract the businessmen at the KBR meeting had heard of was for building a new gas station.
Canavan’s explanation is that in the immediate aftermath of conflict, the contracts which have been granted constitute a period where emergency measures are necessary.

“There was neither the existing capability nor the time to give the emergency contracts out to Iraqi companies,” Canavan said.

Yet, more than 4 months since the Bush declared the end of hostilities, Iraqi companies are still finding it difficult to impose themselves on the market for carrying out the reconstruction work of their own country.

“For example, some of the tenders stipulate that you have to have certain brands for the objects that are contained within your project,” said another businessman at the KBR meeting. “This makes it impossible for us to make a successful bid since we cannot get hold of these materials.”

“The objective should be re-construction and not a transformation of the economy and the country,” said Rania Masri, from the US-based Institute of Southern Studies which on Aug. 5 launched the Campaign to Stop the War Profiteers and End the Corporate Invasion of Iraq.
Masri, an author on Iraq, believes that there should be a “full open-bidding process, with preference given to Iraqi companies. The companies would only reconstruct as it was before the war, no redesigning.”

This is a departure from a scenario many see as inevitable in post-Saddam Iraq –– privatization of public services. Iraqis are used to paying minimal bills for amenities such as water, electricity and telephones. In a country where a third of the population was employed by the state, citizens will not be accustomed to paying anything like what international companies would charge for these services. Before the invasion, electricity cost around ID 1000 per month, and Saddam even gave petrol away for free at times.

It is not certain that the administration will invite bids for the distribution of public services, but it would be follow the general pattern were this to happen. The recent low-profile appointment of Bush’s university friend, Thomas Foley, a specialist in corporate takeovers, as “Director of Private Sector Development” has been mooted as a step in this direction. Foley staff’s declined interview requests for this article.

“The USAID contract is quite specific in dollar figure and timeline,” said Canavan, when asked whether Bechtel would become involved in the distribution of amenities. “There are, however, long term needs – whether other work will come to Bechtel remains to be seen.”

Perhaps advocates of privatization are right to think that this would be the most speedy and efficient way to get Iraq’s public services up and running again. There is certainly a huge amount of investment needed.

“Privatization in itself is no bad thing, the important factor is accountability, based on need, not price,” said Pratap Chaterjee, the managing director of CorpWatch, a non-profit activist group monitoring the practices of multinational companies. “Secrecy is the problem — the lack of transparency in these deals signed behind closed doors.”

Here lies the most worrying aspect for Iraqis — nobody knows what the future holds for public services and the economy in general. The US-led administration is keeping tight control over what information is available — even to those who work in the industry. Only the relevant minister is supposed to have the authority to speak to the press, although separate visits to the ministry of industry (three times), electricity, and telecommunications proved fruitless on this count.

“I cannot speak to you,” said the Mehti Abdul-Latif, the flustered minister of electricity.

Only the assistant to the director-general of the water authority would agree to pass comment, saying he was unaware of any plans to privatize water, but professing himself unaware of the long-term plan of the US-led administration. More telling was the off-record response of senior employees at the electricity ministry.

“What do you think?”