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Messy Business In Iraq

By Rory McCarthy

08 October, 2004
The Guardian

For 29 years Mohsin Awad has worked as a mechanic at the May 1 plant of the State Company for Woollen Industries. It is a menial but respectable job that pays a comfortable salary and comes with a small house nearby at a peppercorn rent. Like the 150,000 employees of Iraq's state-owned industries, he presumed it was a job for life.

Then came the war last year. A wave of looting, electricity shortages and the cumulative effect of 10 years of sanctions and two decades of war have dragged Iraq's industries virtually to a halt. The 59 state-owned firms make up nearly all Iraq's industrial output but they are barely running at half capacity.

Mr Awad's six-day working week has been cut to just three days, but he still receives a full salary. "I'm pretty happy about it," he said. "It means I can spend time with my family and the salary is reasonable enough. But we worry about privatisation. We know it is coming but we wonder whether the new owner of our factory will succeed in making a profit and paying all our salaries."

Changes are coming already. Staff have been told that those living in company housing will have to pay 18% of their salaries on rent.

"We have a lot of unemployment already. If the government privatises there will be even more unemployed and that will bring protests in the streets," said Mr Awad, 50.

For all the talk of the rapid reconstruction of Iraq, this is the central dilemma facing Hajim al-Hassani, the man now in charge of Iraq's industry. Most of the industries he oversees are hugely inefficient and over-staffed, but sacking thousands of workers would only worsen the already dangerous security crisis.

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"I have close to 150,000 employees but you really only need half of those people. But because of security and humanitarian reasons you need to keep them. These people need to be taken care of," he said.

From his office window, Dr Hassani overlooks the rest of the industry ministry, which is still burnt out and in ruins after the looting that followed the war last year. His voice is almost drowned out by the drilling of builders next door. He admits he was not expecting to become minister. For the past two decades he had lived in Los Angeles, running an investment and trading company and an internet firm that eventually collapsed ("It failed miserably and we lost a lot of money. We sold it for pennies," he said.) He returned to Iraq after the war to a senior position in a moderate Sunni political party that sat on the governing council.

Last year there was great pressure from the US occupation authorities to press ahead with privatisation, he said. "They wanted to privatise from the beginning but we thought it would be rushing things. I believe in a market economy but how you do it is where we differ. It is going to take some time and you have to qualify the factories and you have to get the private sector ready to compete."

Iraqi officials agreed that privatisation should wait until an elected government comes next year. In the meantime, Dr Hassani has been trying to encourage foreign investors to help rebuild his industries. The industry ministry has received no donor money and spends more on salaries each month than it receives in sales from the state companies. Only the petrochemical, cement and steel industries bring any profit. Last year the ministry was allocated $66m to rebuild factories. He estimates he needs at least $500m.

"We had no money to improve our factories and it put us in a very difficult position," he said. "There are many firms who want to come but the security situation is making people hesitate. I told them the courageous ones will win."

Some deals have been signed. Leasing agreements will allow Iraqi and western firms to invest in around eight industrial plants for periods of up to 20 years. Each contract will stipulate that employees cannot be sacked.

One firm that investors have shown interest in is the State Company for Construction Industries, which produces bricks, plastic piping and gravel and should have plenty of orders as Iraq is rebuilt. But the firm's director, Ali Salim Omar, paints a bleak picture of his company's health.

Electricity shortages, the cost of fuel and poor security have badly affected his factories. Around 700 of his staff of more than 3,000 are at home being paid for not working. Last year the Americans gave his firm $500,000 to help repair its 18 factories but it cost him $400,000 just to install one power supply at just one of them.

At the same time the Americans doubled the salaries of his staff last year. His balance sheet is heavily in the red.

"All our companies are suffering, it is not just us," he said. "There are many promises and projects that have been proposed but we really cannot do anything yet." He attended a business conference in Kuwait where many foreign firms talked of investing in the future. "People were rushing to take part in our firm but the biggest problem is security. I told them Iraq is a gold mine. But nothing has changed yet."







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