IRAQ: Egyptian Firms Unsure What to Rebuild

By Cam McGrath Reprint | | Print |

Cam McGrath

CAIRO, Jul 2 2003 (IPS) - Egyptian firms are keen to bid for building subcontracts in Iraq, but do not know what they could rebuild and where.

There have been words of encouragement from the U.S. "We strongly support any Arab involvement in the reconstruction of Iraq, whether it is Egyptian or otherwise," a U.S. embassy official told IPS.

"We think there are Egyptian companies with the skills and expertise, but it’s up to the companies themselves to get in touch with the contractors," the official said.

The U.S. Agency for International Development (USAID) has issued eight contracts worth 1.7 billion dollars for initial reconstruction work in Iraq.. All contracts have been awarded to U.S. companies, but the agency says it wants foreign companies as subcontractors.

The lukewarm response from Egyptian companies is not for lack of interest or of qualifications, say analysts. Prime contractors could benefit from farming out subcontracts to Egyptian firms, which offer skilled, cheap labour and have a long history of regional expertise.

U.S. companies may also be unwilling to send their own personnel to Iraq given the uncertain security situation and the continued attacks on U.S. interests.

"Egyptian companies have worked for a long time in Iraq and the Gulf Arab states," says Magdy Sobhy, an economist at the Al-Ahram Centre for Political and Strategic Studies (ACPSS). "In some fields they have the cheapest labour and are highly competitive."

Egyptian firms hold an undeniable advantage in the building and construction sector, which accounts for approximately six percent of Egypt’s gross domestic product (GDP).

"When it comes to trade people look to the Lebanese, but when it comes to building, Egypt is known throughout the Arab world," says economist Adel Beshai. "Egyptian building contractors have a competitive edge, and they deliver."

The local construction industry has grown dramatically since the mid-1970s when Egyptian workers migrated to the Gulf countries to work in the oil and construction sectors. Many returned to open their own construction firms, capitalising on the experience and contacts they gained abroad.

Many have work experience in Iraq, and have access to cheap, skilled labour and low-priced materials.

Given their weight in the region, many are surprised that Egyptian firms have not bid for subcontracts. Egyptian firms say they have found little more than encouraging words.

"We are more than willing, but so far there are very limited opportunities," Ismael Osman, senior advisor with the Osman Group, a heavyweight construction firm told IPS. "There is a lot of missing information."

Osman says lack of information and confusing application procedures have deterred Egyptian firms from bidding. Many do not know where to begin, and local commercial associations can only provide the limited information they receive from the U.S. government.

Company executives say they also do not have sufficient data on the nature of the subcontracts and their sites in Iraq, a basic requirement for any bid.

"If we want to make a building or repair a road, we need to take soil samples, see elevation surveys and know the type of foundation," says Osman. "How can we do this if we can’t even get a visa to visit Iraq?"

Visas are not being issued for Iraq, according to the U.S. Department of Commerce. Former Iraqi embassies are closed. Overland travel to Iraq is still possible, but coalition forces do not guarantee the safety of foreign businessmen, and could turn them back.

"It is more difficult than it looks, and it involves some risk-taking that may be unacceptable to small and medium-sized companies," says Osman.

The application process is complicated, but the perceived bias of the selection process is more likely to deter Arab applicants. "Only companies in Egypt which have past experience with American companies will get contracts," says Sobhy.

Each of the eight prime contractors has its own policy of selecting subcontractors and employees, but many contractors believe that the Central Intelligence Agency (CIA) will have the final say. Security clearance will be easier for companies that have already worked on USAID projects or have direct ties with the prime contractors.

Orascom Construction Industries (OCI) is hoping its qualification for USAID work earlier will help it land a subcontract through Bechtel, which holds a 680- million dollar contract to repair key elements of Iraq’s infrastructure. OCI has worked previously with Bechtel, and is reportedly planning to bid.

Steel and cement companies are hoping to get some of the massive orders expected from construction firms operating in Iraq. But managers of most companies IPS spoke to said they were unable to get information on what projects were available and how to place a bid.

"We are interested, but we have not received any information on the contracts in Iraq," says Ayman Rashad, assistant export manager of Al-Ezz Steel, a leading manufacturer of steel bars. "We have no contacts. Where do we start?"