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Viewing cable 07BAGHDAD3672, PRT NINEWA: LOCAL BUSINESS SAY WHAT IT WOULD TAKE

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Reference ID Created Released Classification Origin
07BAGHDAD3672 2007-11-06 03:17 2011-08-24 16:30 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Baghdad
VZCZCXRO8627
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3672/01 3100317
ZNR UUUUU ZZH
P 060317Z NOV 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 4226
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUEKJCS/DIA WASHDC PRIORITY
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY
UNCLAS SECTION 01 OF 02 BAGHDAD 003672 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV PREL EAGR EAID PTER IZ
SUBJECT: PRT NINEWA: LOCAL BUSINESS SAY WHAT IT WOULD TAKE 
TO BOOST COMMERCE 
 
REF: BAGHDAD 3349 
 
1. This is a Ninewa Provincial Reconstruction Team (PRT) 
message. 
 
Summary 
------- 
 
2. (SBU) Provincial Reconstruction Team Ninewa (PRT) 
regularly engages the Iraqi private sector in and around 
Mosul, a region known for its historically active traders, 
agricultural processors and construction material 
manufacturers.  However, the restrictive security 
environment, an energy crunch (reftel), a lack of credit 
(septel) and an ignorance of market economy operations 
constrain these potentially profitable industries in this 
northern Iraqi province.  This cable condenses the views of 
provincial entrepreneurs, as described to the PRT over the 
last three months. 
 
Security Constrains Market Activity 
----------------------------------- 
 
3. (SBU) Security, particularly in the sense of 
transportation security and extortion by criminal or 
terrorist elements, is a clear hindrance to both trade and 
the development of any profitable -- and, thus, high-profile 
-- business in Ninewa.  Coalition Forces and the Iraqi 
Security Forces are addressing this issue, which also 
includes security-related delays at the province,s Syrian 
border crossing.  Nonetheless, business owners in Mosul and 
outlying towns complain that they cannot move safely between 
towns and to the border. 
 
Fuel Shortages, Dual Price Structure Hurt Business 
--------------------------------------------- ----- 
 
4. (SBU) Fuel and electricity shortages are macro-level 
issues that directly and negatively affect all commercial 
activity in Ninewa.  Legal provincial fuel deliveries depend 
solely on the huge Baiji Oil Refinery, Salah ad Din province, 
which is incapable of meeting the province,s demand.  The 
Ministry of Oil allocation for Ninewa is estimated to cover 
only 50 percent of the province,s need, while security and 
other factors limit the delivery of even that meager amount 
to about 75 percent of the allocation (about 35 to 40 percent 
of demand).  This fuel shortage impedes commercial transport 
and agricultural operations (reftel).  (Note: The allocation 
problem persists even though the Governor speaks daily with 
the Oil Distribution Manager for northern Iraq.) Further, in 
an environment of unmet electricity delivery off the national 
grid, this fuel shortage is particularly harmful since many 
Ninewa businesses and irrigation pumps rely on gasoline- and 
diesel-fed generators.  GOI support for artificially low gov 
ernment fuel prices, together with impediments to official 
and private fuel imports, impede supply and create a black 
market in fuels.  Support for increased government and 
private imports and a unified fuel price structure where the 
official fuel price matches the world market price are 
systemic changes in the fuel economy that would have direct 
benefits for Ninewa businesses, eliminate rent-seeking 
behavior and cut out black market profiteers. 
 
Credit Crunch Limits Commerce 
----------------------------- 
 
5. (SBU) Access to increased credit is the third major 
commercial issue in Ninewa.  While local businesses may 
initially say that they want more "foreign investment," they 
will explain that what they actually want is direct 
assistance to overcome high prices and low supplies of fuel, 
electricity and other inputs.  Rather than direct cash 
assistance, increased access to credit would help them solve 
their own problems through a system of revolving credit, 
purchase and repayment.  Support for increased lending at the 
state-owned banks and lending institutions, a reduction in 
the Central Bank of Iraq deposit rate, and bottom-up support 
of microlending institutions would all help increase the 
credit available to entrepreneurs who already have the 
commercial skills and connections to be successful in Ninewa. 
 
Training, Preparation for Int'l Market Important, Too 
--------------------------------------------- -- 
 
6. (SBU) In the context of the four major commercial issues 
facing Ninewa,s immature commercial environment -- security, 
energy, credit and training -- assistance in training and 
 
BAGHDAD 00003672  002 OF 002 
 
 
mentoring to build commercial skills and connections is the 
area that American companies could be most effective. 
Emerging from decades of state direction and subsidization 
under Saddam,s regime, Iraqi businesses lack the skills, 
first, to manufacture internationally competitive products 
and, second, to effectively market them on the international 
stage.  Capacity building to boost the Iraqi ability to 
engage the newly liberalized Iraqi market could include 
training in accounting, business model creation, proposal 
writing and market research to help Iraqi companies identify, 
produce for and sell to local and regional markets. 
 
Comment: Areas for Specific US Opportunities 
-------------------------------------------- 
 
7. (SBU) In specific industries, the most promising 
possibilities in Ninewa for American investment and 
cooperation are in the construction and agricultural 
processing fields.  Building on the backbone of an existing 
state-owned cement factory that is in the process of 
privatization, coupled with a high -- and domestically unmet 
-- demand for building materials, American public and private 
engagement with the construction and construction material 
industry may be particularly fruitful.  Iraqi companies are 
already asking about everything from large-scale investment 
in the cement plant to project-level coordination on civic 
structure construction. 
 
8. (SBU) Similarly, American engagement with downstream 
agricultural processors to capitalize on Ninewa,s robust 
farming economy would likely offer a profitable means to help 
meet the domestic shortage of basic foodstuffs.  In this 
field, businessmen are already reaching out to American 
investors interested in supporting local tomato and sesame 
processing plants.  In both construction and agricultural 
processing, there is an established production base, a known 
market and, given Ninewa,s location near Syria and Turkey, 
an opportunity to expand incrementally beyond the Iraqi 
market as local capacity develops. 
CROCKER