VZCZCXYZ0000
RR RUEHWEB

DE RUEHGB #1142/01 1031339
ZNR UUUUU ZZH
R 121339Z APR 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 6811
RUCPDC/USDOC WASHDC

UNCLAS BAGHDAD 001142 
 
SIPDIS 
 
SIPDIS 
 
NEA-I ECON PLEASE PASS TO DOD TFBSO 
 
E.O. 12958: N/A 
TAGS: ECON ENRG ETRD IZ
SUBJECT: WASIT STATE TEXTILE FACTORY SEWS ITSELF BACK TO LIFE 
 
¶1. (U) This is a joint PRT Wasit/Embassy reporting cable. 
 
SUMMARY 
 
¶2. (U) During a March 11 visit to the Wasit State Company for 
Textiles, Wasit PRT members observed production lines back up and 
running, after having been shuttered just two months ago.  A grant 
from the Task Force for Business and Stability Operations (TF BSO), 
a loan from the Ministry of Industry and Minerals (MIMS), and a 
significant new intra-governmental contract have been instrumental 
in restarting operations at the plant.  This State Owned Enterprise 
(SOE) continues to face significant operational challenges, such as 
raw material shortages (especially cotton), inconsistent electricity 
supply, out-dated capital equipment, and lack of contracts. 
Although much remains to be done, the restart of the factory's 
operations and its potential to generate revenue and sustain 
employment is encouraging.  END SUMMARY. 
 
COMING BACK TO LIFE... 
-------------------- 
 
¶3. (U) During a March 11 visit to the Wasit State Company for 
Textiles, Wasit PRT members observed production lines back up and 
running, after having been shuttered just two months ago.  Some 
2,000 workers are now back on the factory floor, producing T-shirts, 
berets, and uniforms.  A January PRT visit to the company had found 
most of this SOE's 5,500 employees had stopped coming to work in 
protest of non-payment of wages, forcing the factories to close. 
Revenue from this SOE provides 40 percent of workers' wages and its 
parent, MIMS, provides 60 percent.  High production costs and lack 
of raw materials, however, dried up revenue streams, and left the 
SOE unable to cover its portion of the payroll. 
 
...WITH A HELPING HAND 
-------------------- 
 
¶5. (U) A grant from the Department of Defense's Task Force for 
Business and Stability Operations (TF BSO), a loan from MIMS, and a 
significant new intra-governmental contract played an instrumental 
role in restarting operations at the plant.  In February, a 1.35 
million USD grant from TF BSO allowed the SOE to purchase the needed 
raw materials of polyester and acrylic, from two Iraqi companies, Al 
Rathath Company and Al Bashrah Al Iraqya Company.  These companies 
reportedly import these materials from Turkey, the United States, 
and East Asia.  The factory's director general, Hamid Al-ssfi, said 
the SOE received a loan from MIMS to cover its 40 percent share wage 
costs for the next three years.  The SOE has reportedly secured a 
1.5 million USD contract with the Ministry of Defense for underwear 
orders.  Al-ssfi also stated MIMS had awarded an 850,000 USD grant 
to the factory for a cotton gin purchase.  To date, the SOE has 
reportedly received 600,000 USD of this amount, but has not yet 
purchased the machinery. 
 
¶6. (SBU) Although press reports in Wasit indicated the factory had 
received 13 million USD in loans from the Government of Iran, 
factory management denied having received any money.  Al-ssfi 
reported that the Iranians had provided 100 million USD to MIMs to 
support five of its SOEs, and that 12.5 million had been allocated. 
To date, he said, the factory had not received this allocation nor 
knew when it would (NOTE: MIMS Deputy Minister Mohammed al-Ani 
confirmed to Embassy econoffs in February of this Iranian soft loan, 
the majority of which MIMs had budgeted for state owned sugar, 
rubber, vegetable oil, and textile factories.  Al-Ani was not 
convinced these loans would actually be dispersed, however, as they 
required action in the Council of Representatives.  END NOTE.) 
 
CONDITIONS REMAIN FAR FROM IDEAL 
-------------------------------- 
 
¶6. (U) The SOE continues to face significant operational challenges, 
such as raw material shortages (especially cotton), inconsistent 
electricity supply, out-dated capital equipment, and lack of 
contracts.  Al-ssfi stated that electricity was supplied at only 25 
to 35 percent of the factory's demand, blaming this deficit for 
raising his cost of goods sold.  His finished goods prices are 
therefore too high to compete with imports, primarily from Iran and 
China.  Al-ssfi said his cotton inputs were primarily from Kirkuk 
and Ninewa provinces, but requested US assistance in procuring 
US-produced cotton. 
 
¶7. (U) Employment also remains a major challenge to the SOE. 
According to Hamid, his employment rolls swelled by 3,500 to 5,467, 
when the GOI reassigned many workers following the 2003 regime 
change.  Hamid added there 2,006 of his employees are completely 
idle, yet continue to receive monthly wages. 
 
COMMENT 
------- 
 
¶8. (U) PRT Wasit was especially encouraged by the number of women 
and disabled persons, such as amputees, working in the factory. 
Employees were also candid in sharing their satisfaction of being 
back at work.  However, much of the equipment lay idle during our 
visit, and we will need to work with management to address the 
factory's power supply issues, open a new production line to utilize 
its entire work force, and upgrade its capital equipment.  Once 
these issues are successfully resolved, PRT Wasit believes the 
enterprise can eventually be a significant employment and revenue 
generator.  Embassy econoffs are working through FCS to identify 
American suppliers of cotton that could sell to the factory.  END 
COMMENT.