This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 AMMAN 003514 
 
SIPDIS 
 
USDOC FOR 6100/KMURPHY 
OSD FOR OCPA 
STATE PASS USTR FOR NED SAUMS 
 
E.O. 12958: N/A 
TAGS: EINV ETRD PREL IZ JO
SUBJECT: IRAQ'S PRIVATE SECTOR INDUSTRIALISTS LOOK FOR LEG 
UP 
 
REF: A. AMMAN 3190 
     ¶B. AMMAN 3456 
 
¶1.  (u)  Summary:  In a meeting with econoff hosted by the 
local AmCham, a visiting delegation from the Iraq Federation 
of Industries requested a meeting with CPA Chief Ambassador 
Bremer, and sought support for the establishment of a joint 
US-Jordanian-Iraqi Chamber of Commerce.  Federation Board 
Members described the state of key industrial sectors and 
asked for help in re-constituting private sector industry in 
Iraq through sector reform and match-making with potential 
foreign joint venture partners.  While conditions in industry 
were described as seriously deficient, the Federation is 
confident Iraqi private sector businesses can help now to 
rebuild the country's infrastructure, if they are given the 
opportunity.  An overview of selected sectors as provided by 
federation is listed at the end of this cable.  End Summary. 
 
IRAQI INDUSTRIALIST SEEKS SPECIAL SOMEONE 
 
¶2.  (u)  Five board members of the Iraqi Federation of 
Industries, visiting Amman to participate in a June 5 
reconstruction conference (ref b), met econoff June 10 at the 
Amman Chamber of Industry to describe the state of their 
industries and to request assistance in jumpstarting Iraq's 
private manufacturing sectors.  The Federation met earlier in 
the week with GOJ economic ministries and technical staff, 
and inked a "cooperation agreement" with the Jordan 
Businessmen's Association (a business executives' 
association) on June 9. 
 
¶3.  (u)  Federation Vice President Hamzah Habib said the 
first priority of the Federation was to gain a meeting with 
CPA head Ambassador Bremer.  Habib said Iraqi private sector 
companies were being left out of the rebuilding effort, and 
said the Federation believed an introduction to OCPA would 
give them a chance to show their capabilities and offer their 
services.  To this end, Habib asked that Embassy pass Bremer 
a verbal invitation to visit the Federation's "provisional" 
office (the previous office has been bombed, burned out, and 
looted) at the al Auchi building, opposite the old 
Agriculture Ministry and next to the Babylon Bank. 
 
¶4.  (u)  Habib said the Federation hoped to create soon a 
joint U.S.-Jordanian-Iraqi Chamber of Commerce that could 
facilitate match-making and other commercial activity among 
associations from the three countries.  He said he had 
already spoken with the Amman Chamber of Industry and the 
Jordanian AmCham, JABA (both of whom were present) about 
cooperation in this regard.  Econoff noted there would 
undoubtedly be interest in the U.S. and Jordanian private 
sectors in business opportunities in Iraq, and welcomed the 
Federation's cooperation with JABA and ACI as a first step 
toward exploring those opportunities with the U.S. private 
sector.  (JABA reps later told econoff they were developing a 
plan to serve as a bridge between the National U.S.-Arab 
Chamber of Commerce and/or the U.S. Chamber of Commerce with 
credible Iraqi businesses.) 
 
ADVENTUROUS SPIRIT A PLUS 
 
¶5.  (u)  Habib said the Federation represented over 25,000 
private sector entities covering all sectors of the Iraqi 
private economy.  These entities, he said, collectively 
employed over 3 million people in their heyday.  He noted, 
though, that since the Saddam Hussein regime began funneling 
production away from the private sector and into the hands of 
State-Owned Enterprises (SOE's) and foreign firms in 1995, 
the private sector had stagnated.  As a result, Habib 
estimated 90-95% of private businesses were non-operational 
and virtually all employees were out of work.  He attributed 
lack of access to contracts and raw materials since 1995 as 
key contributors to the collapse of the private sector, 
adding that these troubles continued in the present day and 
were compounded by the absence of a financial system - which 
had already wiped out business savings and frozen out access 
to credit for rebuilding businesses.  Nevertheless, he said, 
some businesses were still operating, and could prove willing 
and able partners to foreign firms with a high tolerance for 
adventure (i.e., risk and ambiguity). 
 
MUST HAVE OWN RAW MATERIALS 
 
¶6.  (u)  Habib said the primary hurdle to restarting 
production was lack of access to raw materials.  Under 
Saddam, what little raw materials Iraq had were funneled to 
SOE's, which were also subsidized when buying inputs from 
abroad.  Private sector enterprises, by and large, could not 
compete with SOE's preferential treatment or economies of 
scale.  Similarly, private sector companies during the 
sanctions years lost all access to spare parts and 
replacement equipment.  As a result, Habib said that the 
small percentage of operational equipment in the private 
sector was at least a decade old, and some machinery dated 
back to the 1970's.  He said this resulted in Iraqi 
businesses being relatively more labor-intensive than 
regional counterparts.  He noted further that, despite the 
age of much of the equipment, industries in lower-tech 
sectors like construction materials and wood working could 
still be relied on to produce for the local market. 
 
GULF NEED NOT APPLY 
 
¶7.  (u)  Habib said Iraqis were eager to see SOE's privatized 
as soon as possible, and said his members looked forward to 
having opportunities to enter into joint ventures with 
prospective buyers of existing SOE's.  He added that 
preserving SOE's as active entities remaining under state 
control would be totally unacceptable to the Iraqi people. 
Habib expressed the opinion that the CPA "should not let 
companies from the Gulf" take over privatized SOE's.  He said 
sale to the Gulf of these key Iraqi assets would deeply anger 
many Iraqis, who had poor relations with, and deep distrust 
of, their Gulf neighbors.  Habib said the only "acceptable" 
partners for Iraqi interests in the privatization process 
were "the Americans and the Jordanians," the former because 
they had freed the Iraqi people and the latter because they 
had strong ties to the Iraqis. 
 
SNAPSHOT ATTACHED 
 
¶8.  (u)  Following are brief outlines of selected industry 
sectors provided to econoff by the Federation.  The numbers 
are probably not accurate, but could serve as good ballpark 
figures. 
 
Woodworking -- 
 
Number of private sector entities:  2,000 
Entities with "significant" employment (>50 workers): 20% 
Entities currently active:  5-10% 
Sector employment:  500,000 
Critical needs:  raw materials, equipment upgrades 
Specializations: doors/treatments, furniture, school desks 
 
Contact:  Engineer Sabah Kubba 
Tel (Thuraya): 00-88-216-2166-3554 
e-mail: mawi@uruklink.net 
 
Construction Materials -- 
 
Number of Private sector entities:  12,000 
Entities with "significant" employment (>100 workers): 10% 
Entities currently active:  5-10% 
Sector Employment:  600,000 
Critical needs: raw materials, access to contracts, spare 
parts 
Specializations: cement, brick, marble, granite, mosaic tile, 
ready-mix concrete 
 
Contact 1: Mr. Saleh al Jalaby (Chalaby) 
Tel (Thuraya): 00-88-216-2123-4043 
e-mail: s.chala@uruklink.net 
 
Contact 2: Mr. Ahmad Abu Jiss 
Tel (Thuraya): 00-88-216-5115-9744 
e-mail: objuss@uruklink.net 
 
Chemicals -- 
 
Number of private sector entities: 1,500 
Sector Employment: 750,000-1,000,000 
Critical needs: access to raw materials 
Specializations: paints, solvents, detergents, emulsions 
Prior business: claims prior business interest from Proctor 
and Gamble 
 
Contact:  Mr. Hamzah Habib 
Tel (Thuraya):  00-88-216-2123-7982 
e-mail:  none 
 
Engineering/Machinery/Metalworking -- 
 
Number of Private Sector entities:  7,000 
Entities currently active:  20% 
Sector Employment:  3-400,000 (production and servicing) 
Critical needs: raw materials, spare parts 
Specializations:  machinery, spare parts, steel finished 
goods (incl. furniture, doors, etc.) 
 
Contact:  Dr. Thabet al Badawi 
c/o Federation of Industries (or Mr. Habib above) 
 
Note:  Badawi believes the machinery sector can provide an 
immediate benefit to reconstruction efforts.  He noted that 
Bechtel's assessment of priorities at ref b conference 
highlighted the contractor's commitment to, in the first 
stage, repairing existing equipment instead of upgrading or 
replacing equipment.  Badawi said Iraqi firms are uniquely 
placed to be able to service and fabricate parts for this 
outdated equipment, alleviating the need for Bechtel to find 
outside companies that can reverse-engineer old parts and 
machinery. 
GNEHM