IRAQ: Reconstruction Gathers Pace as Violence Dips

AMMAN - International companies are encouraged by signs of declining violence in Iraq, but red tape and graft could offset the improved security situation, executives taking part in a huge reconstruction expo said on Monday.

Businessmen from some 1,000 foreign companies are attending the 'Iraq Rebuild 2005' exhibition in the Jordanian capital, one of the largest since the end of the war.

They said more opportunities are springing up as a new Iraqi government nears formation and U.S. contractors look to award billions of dollars in sub-contracts.

"The indicators show that it's changing from the chaos shortly after the war to what appears to be a more stable business environment," said David Dicker, director of overseas operations of UK-based SDA Protec, whose firm provides integrated security systems for large infrastructure projects and is investigating Iraqi partnerships.

"We could be in a position to do good business in the next two years," Dicker added, referring to signs that the violence that has beset the country for months has subsided for the first time since the US-led invasion in 2003.

Companies with billions of dollars of U.S.-funded projects are seeking to recruit new Iraqi sub-contractors.

Months of violence have forced many Western firms to depend on Iraqi partners who know better how to deal with the graft and cronyism they encounter, the executives said.

"Bureaucracy is a bit difficult. It doesn't mean the interest isn't there but you have to do it with an Iraqi partner that you trust," said Tim Grant from London-based satellite tracking firm Track 24.

For many global firms that seek a share of the hundreds of millions of dollars worth of projects clear, consistent guidelines are lacking.

"Although there is money to rebuild Iraq there is no set plan for the disbursement of funds," said Stephen Curtis of UK-based Cussons Technology that supplies engineering equipment.

"Finding the right (partner) is not necessarily the easiest task. There are lot of people claiming to have the right connections, it's very difficult to verify," said Curtis, whose firm had a presence in Iraq in the 1980s before U.N. sanctions.

Many Iraqi businessmen say a major problem is that a sizeable amount of money the U.S. has set aside for rebuilding is being squandered by cronyism.

This has been a factor in delaying reconstruction even in relatively stable areas of Iraq.

"It will take a year or two for things to stabilize," said Tawfiq al-Abadi, chairman of the Al-Abadi contracting group in Iraq's second largest southern city of Basra.

Echoing complaints of other businessmen in the southern Shi'ite south, Abadi said the absence of consistent laws and difficulties with red tape and favoritism were the biggest headaches, not security.

"The government is not stable and we still need several approvals from many groups to get a deal. American and Western firms distribute projects to Iraqi firms not on an equal basis but by favoritism," he added.

But firms providing logistics and transportation to the military strike a more optimistic note on prospects for 2005.

"I believe there will be less insurgent attacks and we will be able to move the cargo more effectively and so less expensively. We have half the number of attacks we saw previously," said John Connolly, Vice President of The Paxton Companies, one of a few U.S. transportation firms in Iraq.

Although business doubled in the last quarter of 2004 compared to the previous quarter, Connolly said it would still be several years before he could envisage many U.S. transportation firms setting up in Iraq.

"I think it will be another couple of more years before many companies are interested," he said.

• 174 War & Disaster Profiteers Campaign