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Financial Times: Iraq on the lookout for joint ventures

By Steve Negus, Iraq Correspondent
Published: August 30 2007 03:00 | Last updated: August 30 2007 03:00

Iraq’s ministry of industry and minerals would open up all 65 of its state-owned enterprises to joint ventures with international investors by the end of the year, the minister said yesterday.

“We have 65 facilities under our banner and all of them will be made available for joint ventures,” Fawzi Hariri told the Financial Times yesterday. He was speaking at a conference in Dubai on investment opportunities in Iraq.

Attracting foreign investment is seen as vital to the reconstruction of the economy, to creating employment and, the government hopes, reducing sectarian violence.

Mr Hariri said that the ministry was already in-volved in discussions on investing in cement companies in the southern provinces of Karbala and Muthanna, in the northern governorate of Kirkuk and in the far-western district of al-Qaem on the Syrian border.

It has spoken to the French-owned Lafarge group and Egypt’s Orascom. Mr Hariri said yesterday he also hoped to attract Mitsubishi from Japan, Dow Chemicals from the US and other companies to the ministry’s portfolio of petrochemical and heavy industry interests.

He was later quoted by the Reuters news agency as saying that Royal Dutch Shell and Dow Chemicals were in talks with the Baghdad government to renovate and expand a chemical plant in southern Iraq at a cost of up to $2.1bn (€1.5bn, £1bn), although Shell could not confirm that last night.

A source close to the ministry said that investment in joint ventures was an “initial step towards privatisation” as no law had yet been passed allowing the full sale of state assets.

Iraq’s state-owned companies have been hit hard since the US-led invasion in 2003, partly by infrastructure problems such as electricity shortages but also as the result of political decisions taken after the toppling of Saddam Hussein.

In the first year after the war, the US-led occupation authority reportedly dealt with the public sector as an economic dead weight to be shed. More recently, ministers in the Shia-led government have reportedly been distrustful of state factory officials for their connections to the former regime.

Starved of contracts and investments, large factory complexes lay idle.

Foreign partners, who may have brought in new money and technology, have been deterred by poor security and the uncertain political climate.

But Mr Hariri said yesterday that “the whole political environment” regarding joint ventures had changed in the past year. Iraq passed an investment law in October 2006 and now has a permanent government, albeit one under intense political pressure to introduce reconciliation legislation. The US has also been pushing to reinvigorate Iraq’s large state-owned companies, to drive down unemployment and undercut support for militias and insurgent groups.

However, one of its main efforts, a task force led by Paul Brinkley, the deputy undersecretary of defence, has recently come under fire for failing to meet its goals. It aims to find buyers for state factory products both in the US and in Iraq.

Mr Hariri said the companies under his control had 190,000 workers on their books but many were not working full-time. He said the situation had improved in the past 12 months, partly through Mr Brinkley’s efforts in identifying areas where production had stopped.

Copyright The Financial Times Limited 2007

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