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Security issues still dog Egypt’s few reconstruction players In the spring of last year, businessmen in Egypt – along with those from every other country in the region – flocked to numerous reconstruction conventions in the hope of landing lucrative contracts in Iraq, eagerly drawing up business plans for penetrating the newly opened, post-war market. But, over a year later, those business plans are collecting dust, and the one Egyptian company that scored major reconstruction contracts – Orascom Group – is struggling to fulfill its obligations as firefights break out in and around its worksites. Most observers agree that the dismal Iraqi business climate is largely the result of US government missteps, along with a simmering guerrilla war that appears to be far from over. So far, the US government has spent only a fraction of what has been allocated by congress to Iraq reconstruction – and the few projects under way are dogged by complaints of mismanagement and whispers of corruption. In fact, the majority of projects currently in progress have been funded, it turns out, by Iraqi oil revenue, according to the New York Times, which ran a withering criticism of the US reconstruction effort in an August 9 editorial. “Part of the blame rests with the Pentagon’s planning failures and the occupation authority’s reluctance to consult qualified Iraqis. Instead, the administration brought in American defense contractors who had little clue about what was most urgently needed,” the writer charged. “Occupation officials also felt free to
tap into Iraqi revenues, which are subject to far less oversight
and looser controls than congressionally appropriated funds.”
Additionally, frequent bombings, shootings, kidnappings and beheadings have served to produce a less-than-inviting environment for private companies. “Unless there is trade law, a code, all trade with Iraq will be border trade. Nobody’s going to sacrifice his goods under such security conditions,” said Khalid Khalifa, deputy director general of the Federation of Egyptian Industries. Many of the attacks – always carried out by a shadowy “Iraqi insurgency” – have been against vehicles delivering goods for the US military or for private companies. Two Egyptian truck drivers have already been kidnapped, with the first abducted near Falluja, west of Baghdad, and held for several weeks before being released on June 17. A second Egyptian driver was kidnapped on July 21, along with six colleagues of different nationalities. As of press time, they were still being held by their guerrilla captors after talks aimed at their release broke down. The only publicly traded Egyptian companies to have landed major contracts in Iraq have been the sub-divisions of the sprawling Orascom business empire. Its telecommunications unit, Orascom Telecom (OT), is rolling out mobile phone services in central Iraq, while its construction arm, Orascom Construction Industries (OCI), has received several contracts for building and repairs from the US Army Corps of Engineers. Orascom’s mobile phone service has been emphatically embraced in Baghdad. As the only mobile phone operator in the capital, OT is signing up customers as fast as they can hand out SIM cards. But the network’s hasty set-up has left coverage spotty, failing to extend far beyond city limits. Pedestrians screaming into their mobile phones – either to be heard better or merely out of frustration – are common sights in the streets of the capital. What’s more, worsening violence countrywide has slowed the construction of cell-phone transmission towers, which means the company may have difficulty meeting the deployment deadlines laid out in its contract. “The lack of security reduces the number of subscribers,” said Hussein Abdel-Halim, head of research at local brokerage house Sigma Capital. “So access to the network is reduced.” If there isn’t access in certain areas, OT stands to lose its potential customers there, Abdel-Halim pointed out. He also noted that the violence – or the perpetual threat thereof – not only affects business, but also personally affects company employees. “There was a bombing at a hotel they were staying at. So it’s not just about ‘affecting business.’” Orascom construction arm OCI has faced similar delays as a result of insurgent violence, but they haven’t proven as costly. The company’s workers have often had to stay home when their worksites turned into battle zones in the continually shifting conflict between US-led forces and followers of rebel Shia cleric Moqtada Al Sadr. “Their contracts usually state that employees don’t have to go into places if there is fighting. But they actually make more money when there’s fighting in the places they need to go,” said Abdel-Halim. The same security concerns hampering Orascom’s work are also deterring those Egyptian companies trying to do business on their own in Iraq, without the help of US-granted contracts. Additionally, the transitional state of the Iraqi government means no commercial laws have been established to serve as a foundation for bilateral trade and investment. “There is no trade without [government] legitimacy,” said Khalifa. “The question of legitimacy is still a big hurdle to fostering trade.” Establishing trade ties with Iraq is especially urgent for the many Egyptian companies that relied on Iraqi commercial links before the war. Food producers, medical suppliers and engineering firms made up the bulk of pre-war trade, which totaled some $2 billion per year – all of which evaporated on April 9, 2003. But, according to Khalifa, the current degree of instability means there is no guarantee that Iraq-bound trucks delivering commercial cargos would make it to their destinations – and if they didn’t, there’s no law to compensate companies whose goods are stolen or destroyed on the war-torn country’s bomb-laden roads. Still, there are some private Egyptian exporters willing to brave the risks in the hope of securing direct trade contacts with Iraqi importers. “There are still some efforts that are being considered to knock at the Iraqi door, supplying dairy products and pharmaceuticals,” Khalifa said. “But that has not yet produced tangible results.” Jill Carroll |
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