Baghdad beckons

Five years after the overthrow of Saddam Hussein, Iraq is opening its doors to foreign investment with a clutch of production-sharing deals, designed to get the country's war-battered factories up and running once more.

On the dusty outskirts of Al Kirkuk, 250 kilometres north of Baghdad, a cluster of decaying industrial units lie idle and empty.

The Al Kirkuk Cement Factory, left abandoned by the thousands of workers that once stoked its kilns, is a neglected monument to a once-great industrial machine shattered by decades of war and economic sanctions.

That may be about to change. The cement plant is one of 400 Iraqi state-owned factories that are being offered to foreign investors as either joint ventures or through production sharing partnerships.

Around 45 contracts are being offered in an initial programme that Iraq's Industry & Minerals Minister Fawzi Hariri hopes will yield up to US$2bn in foreign investment.

Arabian Business has learned the Iraqi government is also about to let contracts for a US$1bn petrochemical plant, a steelworks worth US$600m, two fertiliser factories valued at a minimum of US$200m each, and then a handful of paper mills and food processing plants.

Hariri signed two deals in Dubai last week that could mark the beginning of a new dawn for Iraqi industry - as well as usher in a new era of foreign private investment into the war-ravaged country.

The private-public partnerships covered the Al Kirkuk Cement Company and Al-Qaim Cement.

The Iraqi company Al-Sharq Al-Awsat is leading a German-backed consortium in its bid to restart the deserted plant in Al Kirkuk, while the Al-Qaim cement plant in the far Western region near the Syrian border has been secured by another consortium featuring the Iraqi company Al-Jawhara Al-Khalijiyah, and its Romanian partner Uzen.

"The way I think about investing in Iraq is that in monetary terms, for every dollar you invest in Iraq you get ten dollars back," Hariri tells Arabian Business.

"For that same dollar you invest anywhere else, you will get one dollar, two dollars or even just 50 cents in certain countries. That's an element of risk that is worth taking."

The element of risk is a significant component of any foray into a country so traumatised by religious, political and criminal divisions.

Many international companies remain unconvinced that the security situation is stable enough to make working in Iraq a viable proposition, and just last week leaders of Iraq's biggest militia - the Mahdi Army of cleric Muqtada Al-Sadr - warned that the country could soon face an escalation of violence.

Speaking at an LSE lecture on the Iraqi economy last month, Ambassador Charles Ries, Minister for Economic Affairs and Coordinator for Economic Transition at the US embassy in Baghdad, said that full privatisation remained "politically unacceptable" in Iraq at present.