Companies begin to rethink profitability of working in Iraq


Tue, Jun 29, 2004 - Page 12

When the US in December announced the 63 countries eligible for primary contracts in the reconstruction effort in Iraq, the outcry could be heard in Paris, Moscow, Berlin and other capitals that didn't support the US-led invasion and weren't allowed to compete for the lucrative deals.

But since then, the tide has turned, and some companies may very well be glad they weren't tempted to do business in Iraq. With the security situation continuing to be unstable, insurance premiums have skyrocketed and significantly cut into profits.

Almost 40 employees of US-based Halliburton have been killed in Iraq. Three employees of General Electric died recently when a car bomb exploded. In March, four Americans employed by Blackwater USA were killed in an ambush in Fallujah and dragged through the streets amid the cheers of dozens of bystanders.

On average, there are some 40 attacks on civilians and soldiers every day in Iraq, three times as many as in the beginning of the year.

The US Congress last autumn approved US$18.6 billion for the reconstruction in Iraq and Afghanistan, but attacks and bureaucratic hurdles mean that the distribution of the money is tricky. Contracts dished out up to the beginning of June only accounted for US$3.7 billion of that money.

By the time the US hands over sovereignty to the Iraqis on June 30, that sum is expected to rise to US$10 billion.

More than 95 percent of the contracts have gone to US firms, according to a list from the Coalition Provisional Authority, while a small number of subcontracts were awarded to companies in Britain, Australia, Egypt and the United Arab Emirates.

The firms that have profited the most from contracts include California-based construction company Bechtel, oil services firm Halliburton, which was once run by US Vice President Dick Cheney, Halliburton subsidiary Kellog Brown and Root, and engineering firms Fluor and Parsons.

Once Iraq's transitional government takes over tomorrow, and can award its own reconstruction contracts financed with oil revenues, foreign companies may get a bigger share. But some already have said "No" to what could be huge boosts to their bottom lines.

The safety of employees takes highest priority, said Gillian McCormack, a spokeswoman for Canadian construction firm SNC-Lavalin.

Russian electronics firm InterEnergoServis pulled out of Iraq after three of its employees were killed last month. A South Korean firm also quit Iraq after losing two employees in an attack.

For US firms, doing business in Iraq has also become something of a nightmare.

While there is no shortage of volunteers, employers have to lure them with high salaries. A truck driver who makes US$30,000 a year in the US often makes three times the sum in Iraq.

Rising insurance premiums add to the cost, with some experts estimating that they will account for 30 percent of personnel costs, up from 10 percent. Many US firms have started to hire more and more Iraqis rather than foreigners to keep expenses low.