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Kurdistan experiences rise in living standards, but
companies are going bust.
Aziz, owner of the International Company for Public
Projects, is one of about 70 firms in Iraqi
Kurdistan that have gone out of business in recent
months - ironically, as a result of the relatively
stable security situation and a rise in living
standards.
Companies have been struggling to keep up with
demands for increased wages, the rising cost of raw
materials and competition from the influx of foreign
firms who deem the region safe enough to invest in.
“If the government doesn’t help us out, we won’t
have the strength [to keep our firms going],” said
Aziz, whose business recently lost 230,000 US
dollars.
The seriousness of the situation prompted the
Kurdistan Contractors Union to call on the Kurdish
authorities to suspend certain projects because of
the rising costs.
Twana Hama Salih, of the Sagram General Contracting
and Transportation Company, said wages and the price
of materials have increased threefold since the
summer of 2003, causing difficulties project
implementation.
The union also requested that local companies should
be exempted from fines imposed because of delays in
work.
"Kurdish contractors have reached the stage of
bankruptcy," said Nawroz Jamal Khafaf, head of the
union. “The authorities issued projects one after
the other without taking into consideration the
situation."
The state-controlled Reconstruction Projects
Institution has issued 750 tenders for construction
and road building projects in the eastern part of
Iraqi Kurdistan, which is governed by the Patriotic
Union of Kurdistan. Foreign companies have won more
than 30 per cent of these contracts.
Herish Muharram, manager of the Reconstruction
Projects Institution, said the selection of
contractors has been fair as it was based on
competitive bidding. He added that foreign companies
are often selected for more complicated projects
because they have the expertise to handle them.
“Projects need modern techniques and foreign
companies have this capability,” said Muharram.
Although Kurdistan has allowed overseas investment
since 1991 when it became a semi-autonomous region,
foreign companies started coming here only since the
fall of the Saddam Hussein regime in 2003.
To encourage them, the authorities have issued a
special decree that exempts the newcomers from
customs fees and taxes for five years. They will
also be given land, free of charge, in exchange for
investing locally.
As part of the decree, the authorities also
established the Board of Promoting Investment, which
is charged with coordinating foreign investment
projects. The board now has almost 100 projects in
the works.
These incentives for foreign investors have upset
local company owners, a number of whom accuse
officials of unfairly favouring foreign companies.
Resident businesses say this is partly to blame for
driving some of them into bankruptcy.
"Much facilitation is given to foreign companies,”
said a company owner, who wanted to remain
anonymous. “Some projects are not even tendered out
and are directly handed to the foreign company
because a party official promised it would happen
that way."
An public works and reconstruction official, who
also preferred not to be named, said five contracts
have been awarded to locals, only to be taken back
and then given to Turkish companies.
"Our problem is mixing politics with
reconstruction,” the official said. “People in
authority in Kurdistan build friendly relations with
neighbouring countries at the expense of the
projects."
But Sheelan Khanaqa, head of media relations for the
Board of Promoting Investment, said all contractors
are treated equally. "We don't discriminate against
Kurdish or foreign investors,” she said. “The issue
has to do with the background and the level of
seriousness of the companies."
Ali Izaddin Muhammed, owner of the Balambo Company,
said it would be better if the projects were
implemented jointly between local and foreign
companies, as that would benefit the former in terms
of skills and experience.
“We are to able to do most of the projects that were
given to the foreign companies except for tunnel
work, which exceeds our capacity," said Muhammed.
Even overseas firms have faced difficulties because
of the cost of materials and labour.
The increasing wage demands have been caused by
insufficient numbers of workers and now there are
moves to encourage Arabs to make up the shortfall.
To date, the latter haven’t found it easy to find
employment here because of fears that they might
bring the violence of central Iraq in their wake.
Indeed, at the end of last year they were asked to
leave the region because of security concerns.
Abdul-Wahid Abdul-Faraj, an official in charge of
public works and reconstruction contracts, said part
of the problem is that his colleagues want to see
Kurdistan rebuilt in a matter of months.
“During certain weeks, we issue [contracts for] 20
projects,” he said. “But we want to make many
changes in the new year in our work plans and to
insist that foreign companies bring their own staff
and material so we don’t have these problems
anymore.”
Talar Nadir is an IWPR trainee journalist in
Sulaimaniyah.
www.iwpr.net
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