Shortage of Concrete Slows Iraq’s Recovery

February 7th, 2006 - by admin

Ben Gilbert / San Francisco Chronicle Foreign Service – 2006-02-07 08:25:10

Iraq’s New Barrier to Progress:
Cement Factories Fall Far Short of
Demand for Reconstruction

Ben Gilbert / San Francisco Chronicle Foreign Service

BAGHDAD (February 4, 2006) — The most obvious sign of Iraq’s need for concrete is apparent in the US-protected Green Zone in central Baghdad, where once-broad boulevards now channel traffic through mazes of 12-foot-tall concrete barriers.

Enormous concrete blocks stand shoulder to shoulder like walls of overgrown gray dominoes around compounds, government buildings and American bases in the capital and elsewhere in Iraq. As the first line of defense against car bombs, the barriers frequently become casualties in the daily attacks.

“You bring it, you place it, and it explodes, over and over,” said Mohammed Salih, a construction contractor and civil engineer in Baghdad.

The concrete barriers illustrate Iraq’s increasing hunger for cement. The country is undergoing a construction boom, fueled in part by more than $20 billion in reconstruction money that has poured in since 2003.

Cement is in extremely short supply because it’s required in nearly everything being built, including roads, houses and apartment complexes, Iraqi and American officials said.

Most of Iraq’s 13 state-owned cement plants creep along at about 25 percent capacity, or they’re not operating at all. The industry suffers from the same problems that plague the rest of the country’s aging infrastructure.

Frequent insurgent attacks on oil and electricity lines hamper the flow of power and fuel that cement plants need to function. June Reed, the private sector development adviser at the US Embassy in Baghdad, said many of the factories maintain inflated workforces whose members may or may not show up to work. And the plants are jury-rigged with archaic technology that’s nearly impossible to maintain.

“Some plants have equipment that is 30 years old,” Reed said. “They’re generally not profitable, and certainly not efficient.”

The shortage has sent cement prices skyrocketing. Since 2003, the cost of 1 ton of cement has zoomed from about $20 to about $125.

That’s a stunning rise in a country that once had such an abundance of raw materials to make cement that it exported it.

The current level of production is around 3 million tons per year — far less than what is enough to meet demand.

Salah Kambour, director general at the Iraqi Ministry of Industry, doesn’t have a handle on the level of demand because he doesn’t have any “real figures or statistics.” He does know that demand is so great that the country has to rely on imports.

“We are importing cement from everywhere,” said Kambour. “We are bringing it from Turkey, Lebanon, Egypt, Persia, from Kuwait and from China. So from everywhere cement is coming to Iraq.”

Kambour said that if the security situation improves, demand could rise to 30 million tons per year. By contrast, the most Iraq’s cement plants can produce by operating at 100 percent capacity is 15 million tons per year.

Privatization could be a key to turning the situation around. Last month, the Ministry of Industry took steps in that direction when it announced that two existing cement plants, one each in the north and south, will be the first state-owned companies to be partially auctioned off to private investors.

Kambour said the investors will receive 45 percent ownership in the two plants in exchange for capital, expertise and equipment. The remainder will be owned by the government, stock market, workers and state-run companies.

“One of the most important things here is to bring electricity to the plant by buying generators,” he said. “We hope to also get the know-how to reach very soon the production capacity, or 95 percent of the production capacity, so the bad need of cement in Iraq could be satisfied.”

Thomas Delare, the US Embassy’s commerce counselor in Baghdad, predicts private plants will increase efficiency and productivity at the plants.

“Iraq has to get started on privatizing, so that you can … employ people in real jobs at real salaries, and get new technology in,” he said. “Why shouldn’t a Western firm or a regional firm come in here and help you rebuild a company that has fallen on sad times because they haven’t had any capital investment here for 20 years?”

Andrew Wylegala, a commerce official at the US Embassy in Baghdad, said the sooner business reforms come, the better, so Iraqis can pick up where the US reconstruction projects leave off.

“Clearly the private sector is the way forward,” Wylegala said. “The work that has been done through official funds and through reconstruction efforts … has made good headway in setting the stage so private-sector players could come in and continue the job.”

The Ministry of Industry seems to be in the lead in encouraging private investment.

In addition to the two cement plants scheduled to be privatized, the ministry has attracted investors to bid on 20 new, privately owned cement plants over the next three years. The investment, said Reed at the US Embassy, will come from international and Iraqi investors, who she hopes will pledge $3 billion toward the plants.

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