Kuwaitis Bullish About the Prospects in a Postwar Iraq

War rages to the north, and an Iraqi missile slammed into downtown Kuwait’s seafront recently, damaging one of the city’s biggest luxury malls. Just one day later, however, the Kuwait Stock Exchange closed at an all-time high.

Lest that be taken as a one-day surge of patriotism, it closed even higher the next day -- and again on Tuesday, the third day after the missile attack.

To get some idea of why so many Kuwaitis are so bullish these days, consider the almost evangelical views of Loay Sami Fahad al Ibrahim, vice chairman of the company that owns a fast-food chain called Shrimpy.

Shrimpy, which specializes in fried seafood, is already hugely popular in Kuwait. It will be the next big thing in Iraq, the fast-food magnate predicts.

“The Iraqi market will be very hungry for fast food,” he said. “Right now there is no McDonald’s in Iraq, no Burger King, no Domino’s pizza, no Baskin Robbins, no nothing. Most Iraqis, they have never even seen a Starbucks. The regime has denied the people these simple pleasures of life.”

Listening to Al Ibrahim, one could conclude this war is being fought to make the world safe for Cinnabon, another popular chain in Kuwait. Whatever the reasons, though, it is clear that Kuwaiti investors across broad swaths of the economic spectrum are betting very big on their stake in postwar Iraq.

There are other reasons for the boom times here, the most obvious being the roughly 250,000 American and British troops who have been staging in the country for the war.

Providing everything from bottled water to portable toilets, service companies have cashed in on a huge surge in demand. Hotels, car-rental agencies and cell-phone companies have been deluged by a separate army of foreign reporters. A Kuwaiti supermarket does a brisk business selling protective clothes for a chemical attack. “Same suit used by the U.N. inspectors in Iraq,” the store proclaims.

But the biggest factor in the soaring stock market is the anticipated reconstruction of Iraq, a multibillion-dollar enterprise for which many Kuwaiti businessmen believe their country is perfectly poised.

“Kuwait is the natural gateway to Iraq,” said Ebrahim M. Makarem, counsel to the Commercial Bank of Kuwait and several other large companies.

“Iraq will need so many things to rebuild,” he said, drawing a parallel to the role that Hong Kong has played in opening up mainland China for investment. “And so many of those things will come through Kuwait.”

The two countries have a long history of rich economic ties. Kuwait, though much smaller, has a much more extensive port system and has long served as a way station for goods headed to and from Iraq, which is virtually landlocked except for the small port of Umm al Qasr.

Many Kuwaitis fondly recall the weekend trips they used to take to Basra, Iraq’s second-largest city, barely two hours up the road, before the two countries found themselves at war in August 1990. Many even owned villas in southern Iraq.

But skeptics say that for a variety of reasons, the Kuwaitis’ bullishness is misplaced.

The most obvious is the deep enmity built up since the Iraqi invasion and occupation of Kuwait, which was reversed by a U.S.-led coalition in the 1991 Persian Gulf War. Ever since, there has been a near-total severing of ties, and Iraq and Kuwait have had one of the most tightly sealed borders in the world.

Bad feelings run strong on both sides.

Even as he extolled investment prospects in postwar Iraq, a Kuwaiti electronics and appliances titan gestured to a poster in his office depicting the destruction inflicted on Kuwait by Iraqi forces. It included the assertion by Kuwait’s emir, Sheik Jabbar al Ahmed al Sabah, that the “savagery and brutality” of the 1990 attack was “unparalleled in the long history of humanity.”

Nor do Iraqis seem poised to welcome Kuwaitis with open arms, even if they have a lot of money to spend. Iraqis have been told for years by the country’s rulers that Kuwait is a wayward, uppity province of Iraq whose people have hoarded fabulous oil wealth that should have been shared with all Iraqis.

Further complicating the issue is the claim by Kuwait that Iraq still owes it tens of billions of dollars in reparations for the invasion, and must also return the land and villas that many Kuwaitis owned before the attack.

Moreover, Kuwait’s proximity to Iraq does not guarantee a share of the investment pie, even in the Arab world. Other wealthy Middle Eastern countries, such as Qatar and the United Arab Emirates, have just as much money to invest, and without the same history of enmity.

Throughout the Persian Gulf, businesspeople are calculating how to invest in Iraq -- sizing up the risks, figuring when the time will be right, and assessing what they expect will be formidable competition from each other and from other foreign investors.

Hussam abu Issa, vice chairman of the Qatar-based Salam International Investment Corp., was in Baghdad earlier this year to discuss business opportunities. He expects to return there soon enough.

Iraq, Abu Issa said, “is a gold mine.”

Compared with Afghanistan, it does not have as far to go to return to a level of prosperity -- despite more than a decade of crippling sanctions.

Iraq has an educated, skilled population eager for development; it has natural resources; an industrial base in steel, cement and petrochemicals; and a good location.

“Anything you can think of, it has a potential in Iraq: hotels, oil and gas, communications, even tourism,” Abu Issa said in an interview in Doha, Qatar. “What they need is the infrastructure.”

Despite Iraqis’ hostility and competition from counterparts in other countries, and despite growing concerns that the war will be much slower and more difficult than many Kuwaitis had believed, Kuwait investors show no signs of letting up.

The two biggest Kuwaiti mobile phone companies are setting up movable transmission towers in the northern desert that could be rushed across the border to start up service in Iraq. As other companies have sought such a toehold, real estate prices in what had been a dusty no man’s land at the border have shot up fivefold in recent months.

Some businesspeople in Kuwait say that the heavier-than-expected devastation in the initial days of the war only increases the demand for reconstruction work. Noting that the United States has a huge stake in a successful rebuilding of Iraq, they are confident that the money to pay for all this will come from somewhere.

While people in many Arab countries say the war could inflame economic and social tensions, it is very hard to find such hand-wringing here.

At the Kuwait Stock Exchange, which is the second-largest in capitalization in the Arab world after Saudi Arabia’s, the optimism is all but tangible.

“We will keep hitting new highs, I am sure of it,” said Ahmed Samad Musa, a stockbroker at the exchange, where men dressed in robes and head scarves jostle to make trades and waiters are constantly about, serving coffee and tea.

“It is obvious that Iraq will have huge needs to make itself into a great nation,” said Musa, “and just think about it, where is the closest place you would go to start meeting those needs?”

Executives such as Al Ibrahim, the official with the Shrimpy food chain, believe the war will be over soon and that the economy of Iraq will be poised to boom -- with 24 million hungry people. He said he has already been talking with both Iraqi exiles and American businesspeople about joint ventures for restaurants there.

“I remember when McDonald’s first came to Kuwait -- you had to wait an hour in line for your cheeseburger,” recalled Al Ibrahim. “Some day soon, it will be the same with Shrimpys in Iraq.”