Small Firms Have Big Role in Iraq
A bus pulled up in front of a restaurant last week and 43 Iraqis got out -- but they weren’t there to negotiate Cabinet positions. This wasn’t politics, it was business. And it wasn’t Baghdad, it was Beverly Hills.
The Iraqis were small-business owners who had come to meet with more than 40 Americans from small to medium-size companies. At Lawry’s restaurant, the visitors spent five hours schmoozing with their American counterparts about buying, selling, financing and delivering the goods. Contacts were made, future orders foreshadowed.
But something more important than deals was in the air: a sense of the future of a country -- and an economy that can be built anew only if thousands of ordinary family-owned companies can get on with the construction.
Big contracts to rebuild oil and electric power industries are essential, of course. But progress will come to Iraq only if private businesses replace the old state monopolies of Saddam Hussein’s dictatorship.
“The successful way to change economies is not to reform state companies but to get a lot of small companies started,” says Robert Looney, an economist with long service in the Middle East who now teaches at the Naval Postgraduate School in Monterey, Calif.
The U.S. government now seems to understand this. The U.S. is playing a more useful role, experts say, after the first postwar year when the Coalition Provisional Authority issued a lot of rules that further gummed up Iraq’s crippled economy.
The gathering was co-sponsored by the U.S. Commercial Service, an arm of the Department of Commerce that helps small and mid-size firms with contacts and exports around the world. The goal was to provide a boost for Iraqi and U.S. companies.
The other sponsor was the Iraqi-American Chamber of Commerce and Industry, a phenomenal example of the new Iraq. Founded in Los Angeles only two years ago after the fall of Hussein’s regime, it already has 5,700 members, including 300 in the U.S.
As battles continued to rage in their homeland, Raad Ommar and Sabah Khesbak, two engineers who had come to the U.S. decades earlier and ultimately set up their own companies, called a meeting of Iraqi Americans like themselves. It was decided that opportunities would open up in Iraq if private companies could break the cycle of dictatorship and corruption that had brought the country to ruin.
The two entrepreneurs went to Baghdad that summer and by September had attracted 800 members to their new organization. The following year, 1,500 attended a chamber conference that had to be held in Turkey because of violence in Baghdad. What was the draw? “People wanted to do business in the new way, not the old way under Saddam,” Ommar says.
The recent U.S. trip -- for a construction industry convention in Las Vegas and the Southern California meeting -- was a revelation. Many of the Iraqi businesspeople, heirs to thousands of years of merchant tradition, got their first exposure to new techniques, technology and business methods. The U.S. Commercial Service and the chamber essentially were chaperons for business people from different worlds.
“They pre-screen companies and people so that when you meet there is a higher level of trust,” says David Gibbs, president of Giles Scientific Inc., based in Santa Barbara. His firm makes microbiology analyzers to assess levels of contamination in food and water. Iraq has a serious need for such devices, and Gibbs said he made “good contacts” with Ranj Co., a contracting firm in the Kurdish region of northern Iraq, and with Al Haikal Co., a Baghdad trading firm serving hospitals.
Hirsch Pipe & Supply Co., a Van Nuys distributor of plumbing supplies worldwide, made contact with Diyar Group, a contracting firm in Irbil, in the Kurdish region. Ten hotels are going up in the Kurdish area, but the French and German builders want to use their own suppliers. “But we can supply pipe cheaper and better than the Germans and French,” said Greg Mariscal, export director for Hirsch.
Now Diyar Mohammed Kadir, chairman of the Kurdish firm, wants to see more American suppliers. His region is receiving a lot of dollar investments from Kurds in other countries who are investing in their homeland.
Water treatment is another big business opportunity in Iraq, where sewage systems have decayed or been destroyed.
“We need to privatize the water systems” because the Ministry of Health takes years to build anything, said Majeed al Hameed, managing director of Water Wheel Contracting Co. in Baghdad.
As if on cue, Larry Stocker of BSL Global Water Solutions, a Costa Mesa firm, offered Hameed details of a relatively inexpensive $500,000 water purifying container that can serve neighborhoods and small towns.
There are obstacles galore to doing business in Iraq, of course. Finance is one. A new banking system is still on the drawing board, says Thomas Burr of Los Angeles’ City National Bank, who met with Iraqis last week. And letters of credit issued by Iraq’s trade bank are not readily accepted. But the U.S. Export-Import Bank has set up a $500-million program of guarantees through J.P. Morgan Chase to facilitate U.S. exports.
The U.S. still must play its crucial role of security. “The continued presence of the U.S. military is essential,” says one entrepreneur fervently, “and don’t let anybody kid you, everybody in Iraq recognizes that.”
Still, conditions are improving. “In Basra [Iraq’s port city in the south], many construction projects are underway,” says Khesbak, who has companies in Tustin and Baghdad.
“Iraq has many resources and is capable of being a very rich country,” he added. “It is not only the oil, it is the people.”
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James Flanigan can be reached at jim.flanigan@latimes.com.
