Iraqi industry stakes future on winning over foreign investors

The country must get to grips with security if it is to move forward economically, a senior minister tells our correspondent  
Times Online, July 15 – HIS workers get kidnapped. His factories and offices are under attack. Yet, Iraq’s Industry Minister, Fawzi Hariri, says he is optimistic about the future.

“If for one minute I felt I was fighting a losing battle, I wouldn’t be here,” Mr Hariri told The Times from his ministry, a week after men dressed in Iraqi security uniforms tried to storm the compound and grab a Sunni official.

The minister, an Assyrian Christian from the Kurdistan Alliance, is betting that Iraq can revive its moribund economy in the next few years. He is pinning his hopes on a foreign investment law that could be passed as soon as September.

The legislation, first proposed under the US occupation by Iraq’s interim governing council in 2003, would allow full foreign ownership in the private sector and investment of up to 45 per cent in state-owned companies.

The Oil Ministry is also hoping to pass a hydrocarbon investment law this year to encourage major energy conglomerates to come to Iraq. Until now, no big energy group has set up shop. Mr Hariri says a major hurdle is convincing Iraqis that they will benefit from direct foreign investment and ownership. “We need to prove that the investment law . . . is good for the country.”

The Industry Ministry counts 65 state-owned companies and 200 factories — in petrochemicals, agriculture, pharmaceuticals, electrical parts, food, textiles and steel.

“If we get the right investment — we’re talking about $1 billion [£545 million] — we can rehabilitate these government factories to produce up to 20 per cent of our GDP,” Mr Hariri predicted.

Once the investment law is approved, Mr Hariri plans to move quickly to set up joint ventures with foreign firms. A long-term goal is to sell off many of Iraq’s publicly owned companies — an idea first proposed in 2003. “We’ll have to go down that road in phases,” he said.

Mr Hariri suggested that the ministry could push for a law authorising the selling off of state industries two or three years after the first joint ventures have been set up and Iraqis have been given the chance to see the benefits of privatisation. He laments the collapse of Iraq’s once lucrative state industries. Today, the country imports products that it can produce on its own, such as fuel and cement. It is a far cry from the times when Iraq exported goods around the Middle East and Asia. But Iraqi industry has withered from years of trade sanctions, governmental neglect and war.

Even where factories are in one piece, they suffer from fuel and electricity shortages. Most factories receive about 20 per cent of their daily power requirements. “We can’t provide jobs on any given day.” Mr Hariri is certain that, once the ministry’s factories are renovated, they will create new jobs.

The ministry and its companies employ 160,000 people, but many of them are paid not to work owing to the industrial sector’s low production. For instance, Iraq’s cement plants currently produce less than 2.5 million tonnes per day, compared with their capacity of 10 million tonnes.

But all of Mr Hariri’s plans are tied to security. On June 22, 34 Shia workers from the Nasr cement factory in Taji, 35 kilometres north of Baghdad, were kidnapped as they left work. Gunmen hijacked the minibuses that were taking the labourers back to their homes in eastern Baghdad. Another 30 workers managed to escape. So far 11 bodies have been recovered from the river Tigris. Now only 60 of the plant’s 1,500 employees are showing up for work.

But Mr Hariri was encouraged by those who survived the ordeal. “I met 20 of those who managed to escape. They expressed a determination to work. We need a break in the security situation. Once we get that break, we will be able to move forward. We won’t look back.”