With Fires Out, Kuwaiti Business Bonanza Fizzles : Construction: It’s now clear that the cost of rebuilding Kuwait was vastly overstated.

VTN Corp. Chairman Dan Montano is at once disdainful and disillusioned when it comes to Kuwait, a country where his Orange County engineering firm has had extensive business experience.

“We haven’t seen 10 cents worth of work there,” he said.

The reconstruction of war-ravaged Kuwait--an endeavor envisioned to be massive in scope and to cost $100 billion or more--has turned out to be something of a Middle Eastern mirage.

At the start of the week that marks the first anniversary of the air war to liberate the desert emirate, it is apparent that the extent of the war damage was overstated. Damage estimates now range between $20 billion and $30 billion--and even they may be high.

Instead of generating huge contracts and a plethora of jobs for Western companies, the reconstruction effort has benefited a select few--and left many others feeling let down. American companies should land about one-third of the rebuilding work, according to George E. Fischer, publisher of the Fischer Report, a newsletter on international business published in Newport Beach.

Though the oil-rich Kuwaiti economy is returning to normal, the country is still preoccupied with its own internal problems, including political uncertainty about this fall’s scheduled elections.

Its business climate has proved alien to the thousands of Western executives who have flocked there to hawk their wares. Kuwaiti “middlemen” promising contracts in return for fat upfront fees are everywhere, Westerners say.

“Everybody is running around with their hand out,” said a high-ranking executive at a large California construction company, echoing a sentiment expressed by other Americans.

Michael Saba, head of a trade promotion group in Champaign, Ill., known as GulfAmerica, said the vast majority of U.S. companies have returned from Kuwait disappointed. “Their expectations were unrealistic,” he said. “They did not have the experience and did not have the contacts.”

VTN did have the contacts and experience, yet it too has gotten nowhere.

The firm built an entertainment center in the early 1980s that is Kuwait’s version of Disneyland. The complex was badly vandalized during the Iraqi occupation.

After repeated and expensive attempts to capture a slice of the repair business, VTN has turned its focus elsewhere, Montano said. “We’ll believe any business when we actually see it,” he added.

The most extreme Western business expectations for post-war Kuwait appear laughable with the benefit of nearly a year’s hindsight. The air war against occupied Kuwait began last Jan. 16; the emirate was liberated from its Iraqi invaders Feb. 27.

One soothsayer predicted that it would take half a trillion dollars to repair Kuwait, and others said it could cost $100 billion to repair the damaged oil industry alone. But even more modest estimates proved exaggerated.

Though Iraqi troops thoroughly vandalized the country and set about 650 oil wells afire, they did not cripple the country’s public buildings, electrical network or transportation system.

“The buildings were not nearly as devastated as everyone thought,” said W. E. (Bull) Wilson, who directs operations in Kuwait for Blount Inc., an Alabama construction company.

Even damage to the oil industry, the heart and soul of the Kuwaiti economy, has been--and continues to be--overstated, some believe.

Today’s conventional wisdom is that it will cost as much as $15 billion to return Kuwait’s oil industry to its prewar position as a world petroleum powerhouse. But that figure is “way, way high,” according to Dwane Buktenica, a project coordinator for Bechtel Corp. in Kuwait.

The ultimate cost should be less than $5 billion, including what has already been spent to douse the oil fires and drill new oil wells, he said in a phone interview. Two of Kuwait’s three refineries and some of its petroleum-gathering equipment were not badly damaged, Buktenica said.

The Kuwaiti government plans to increase its oil production to 1.6 million barrels a day by the end of 1992--about triple the levels now and roughly the amount that was pumped before the war. Two dozen new wells have been drilled in recent months, and scores more are planned, government production officials say.

Besides Bechtel and Blount, well-known American construction companies in Kuwait include Houston-based Brown & Root. Bechtel supervised the oil-fire effort, while Blount and Brown & Root rehabilitated scores of vandalized schools in time for the new academic year.

“We pulled out all the stops,” said H. S. Frankhauser, a senior vice president for Brown & Root. “We had 61 schools to repair, and we finished the last one, literally, at midnight before school opened.”

Notably absent from Kuwait are Fluor Corp. of Irvine and Parsons Corp. of Pasadena. Both companies came close to landing major contracts but eventually lost out, industry sources say.

Fluor, however, is a leading contender to repair Kuwait’s three oil refineries as part of a contract that could cost $1 billion or more. Another major contender is said to be Foster Wheeler Corp. of Clinton, N.J. The contract is expected to be awarded shortly.

In some ways, Kuwait has already returned to normal. The downtown shopping district in Kuwait City has returned to life, and even badly damaged hotels have reopened as they undergo continued repair, recent visitors say.

Yet full normalcy remains elusive. Consumer goods, for example, have nowhere near the quality they used to, said Adnan Saleh, a Kuwaiti-born businessman and investor who lives in Los Angeles. “Kuwait used to be Beverly Hills,” he said. “Now it’s Kmart.”

The U.S. Army Corps of Engineers is gradually phasing out its civilian repair work, which began immediately after the war’s end and encompassed the emergency restoration of basics for the civilian population.

The agency awarded contracts that eventually totaled $325 million and went largely to companies from America, Britain and the Middle East. “The Corps’ objective was to jump start the economy and then leave,” said Ralph V. Locurcio, who headed the Corps’ operations in Kuwait until recently.

The repair costs included more than $50 million for electrical-grid repair, $33 million for schools and $12 million for hospitals, Locurcio said. Another $50 million-plus has been earmarked to restore the country’s fire-damaged National Assembly building. The restoration is to be completed well in advance of the fall elections.

The corps, however, may stay in Kuwait through the mid-1990s as part of a project to repair two military air bases--a job that could cost several hundred million dollars. The bases were badly damaged by allied bombing raids.

Stanley Consultants--an engineering and design firm in the small Mississippi River town of Muscatine, Iowa--was the surprise selection to do the engineering and design work for the bases’ reconstruction. About 1,400 firms reportedly applied for the job.

“We may not be a household name,” Stanley President Gregs Thomopulos said, “but we’ve had a long history with the Corps of Engineers.”