VZCZCXRO0791
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK RUEHMOS
DE RUEHGB #0724/01 0661322
ZNR UUUUU ZZH
R 071322Z MAR 06
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 3122
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RHMFISS/HQ USCENTCOM MACDILL AFB FL
RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 000724 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA-I/ECON 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EINV EAID IZ IR KS KU CH
SUBJECT: PST BAGHDAD: ECONOMIC DEVELOPMENT ACTIVITIES 
IN BAGHDAD PROVINCE 
 
¶1.  INTRODUCTION: This cable is the first of many 
cables that Provincial Support Team - Baghdad (PST-B) 
will produce during the remainder of 2006.  Cables 
from PST-B will focus on economic, political, and rule 
of law issues concerning Baghdad Province. 
 
¶2.  INTRODUCTION CONT'D: Despite a largely non- 
permissive environment within Baghdad Province, the 
Baghdad Provincial Governorate has unilaterally moved 
to jumpstart economic development and reconstruction 
within the province.  Evidence is apparent with recent 
overtures made to foreign governments as well as 
interest by foreign companies who see Baghdad as a 
potentially profitable location despite its security 
risks.  The following are examples of attempts by the 
Baghdad Provincial Council (PC) to improve the 
economic condition of the Province.  END INTRODUCTION. 
 
¶3.  IRAN. Baghdad Province is negotiating with the 
Islamic Republic of Iran a substantial loan for 
infrastructure and economic development.  The long- 
term loan, just shy of $1.0 billion, may be issued at 
a subsidized rate of interest.  (NOTE: We have yet to 
find out the exact terms of the loan.  END NOTE.) 
 
¶4.  Elements of the PC and the Amanat (City Hall) have 
negotiated with Iranian companies to implement water, 
sewage, road, and asphalt projects within Baghdad 
province.  Two notable Iranian companies, ARSA 
Construction Corporation and the Al-Asfahan Company 
(phonetic), have been the most proactive in 
negotiating with the province in an effort to break 
into the reconstruction/development sector.  Some PC 
members believe there is an advantage to entering into 
contracts with Iran because of its proximity and the 
"shared infrastructure" network. 
 
¶5.  KOREA.  The ROK is actively nurturing its contacts 
with the Provincial Government to strengthen political 
and economic ties.  One of South Korea's military 
representatives in Baghdad intends to bring a number 
of PC members to Seoul to meet with Korean commercial 
interests to discuss the potential of opening the 
Baghdad commercial market to Korean goods and 
services.  Additionally, they hope to facilitate an 
entree into the reconstruction and development sector 
in Baghdad by South Korean companies. 
 
¶6.  The ROK is considering providing $5.0 million to 
the PC for development projects.  While we do not know 
the terms of the prospective grant/loan, it would 
likely provide a substantial boost to the PC's 
development coffers.  At least one PC member has 
implied that this funding would be used to build a 
street light network utilizing solar power to run the 
system.  The network would be added to areas currently 
at risk and would allow Baghdad municipal workers to 
clean streets in the evenings when there is less 
vehicular traffic. 
 
¶7.  EGYPT, LEBANON.  The PC would like to develop 
trade/economic relationships with Egypt and Lebanon. 
According to the Chairman of the PC's Reconstruction 
and Development committee, Egypt and Lebanon are seen 
as neutral countries that are not historical enemies 
of Iraq and that have a number of companies in a good 
position to enter the Baghdad market. 
 
¶8.  CHINA.  In late fall 2005, former PC Chairman 
Mazin Makiya traveled to Beijing and helped negotiate 
a contract with the Zhongzing Telecommunications 
Equipment (ZTE) Company, Ltd., one of China's largest 
telecommunications companies.  The Iraqi company 
Baghdad Connection has the contract with ZTE to 
provide wireless phone service within Baghdad 
province.  Fulfillment of the contract is being 
delayed by red tape at the Ministry of Communications 
over the issuance of code numbers needed to receive a 
signal when making telephone calls.  The contract has 
the potential to generate jobs for many Iraqi 
nationals, something sorely needed in Baghdad. 
 
¶9.  KUWAIT.  The Kuwaiti Government plans to provide 
the Amanat a loan of $30 million for infrastructure 
and development projects in the province. 
Additionally, the Kuwaiti Government has expressed a 
desire to connect some of it companies with 
 
BAGHDAD 00000724  002 OF 002 
 
 
representatives from Baghdad Province to discuss 
potential joint ventures and other business 
opportunities. 
 
------- 
COMMENT 
------- 
 
¶10.  COMMENT: Although foreign investment and 
development assistance in Baghdad is not flooding into 
the province, a fair number of private investors and 
donor countries are willing to explore business 
development and reconstruction opportunities despite 
the security challenges.  This trend potentially bodes 
well for Baghdad province and may, in the long-term, 
generate benefits for the foreign companies initiating 
business early.  Western business interests are 
noticeably absent from the list of companies willing 
to explore business development in the province.  This 
is likely attributable to the high profile such 
companies would have if they established themselves in 
Baghdad. 
 
¶11.  COMMENT, CONT'D:  The real benefactors of 
business development and reconstruction by foreign 
interests would clearly be the people of Baghdad.  New 
development and reconstruction contracts and the 
infusion of foreign capital would create jobs and 
bring in sorely needed capital.  This development 
would reduce the monetary appeal of supporting the 
insurgency, as the formerly unemployed would 
presumably have a greater desire to work for the 
betterment of the city, the province, the region, and 
the country.  END COMMENT. 
 
KHALILZAD