VZCZCXRO7280
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #0346/01 0411243
ZNR UUUUU ZZH
R 101243Z FEB 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 1636
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 000346 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/I, EEB/OIA; PLEASE ALSO PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EINV ETRD ECON PREL PGOV IZ
SUBJECT: BASRA SEEKS INVESTMENT 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY 
 
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Summary 
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¶1. (SBU) Basra has several business and investment 
organizations that are encouraging new investment in the 
province.  Basra, like all of Iraq, is suffering from 
infrastructure constraints, but the situation is improving. 
The Basra Investment Commission is getting good advice and 
training from the U.K. and others and enhancing its 
investment promotion capabilities.  International companies 
are beginning to take a new look at the province, many 
Basrawis have registered new businesses and some expatriate 
Iraqis are getting involved again.  This cable contains 
market sensitive information.  End summary. 
 
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Basra Investment: Starting to Move Forward 
------------------------------------------ 
 
¶2. (SBU) Basra has several organizations seeking to increase 
private investment in the province but, in general, they lack 
private sector expertise and experience.  The Basra 
Investment Commission, the Basra Chamber of Commerce (an 
older organization, now getting new members), and the Basra 
Business Center, which is becoming more active, are some of 
them.  U.K. advisors who have been working with the Basra 
Investment Commission note that those Basrawis who are most 
knowledgeable about investment tend to already be doing 
business successfully abroad, while those left behind are 
&willing amateurs.8  Investment Promotion Advisor Trevor 
Killen states that he is starting with the basics:  what is a 
private sector economy and what is a private sector company? 
Abdul Al-Hafiz Al-Afi of the Basra Business Center told us 
that provincial economic activity is 80-85 percent still 
public-sector based. 
 
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Infrastructure Constraints 
-------------------------- 
 
¶3. (SBU) Basra, like the rest of Iraq is suffering severe 
infrastructure constraints.   Electricity remains unreliable 
) usually three hours on, four hours off daily, despite the 
growing private generation &black market8 capacity. 
Internet technology is spotty and very expensive.  Roads are 
adequate but need improvement; the airport has great 
potential to become a regional hub but needs significant 
upgrades.  The five ports, despite progress made in the 
deep-water port of Umm Qasr, are still in a process of 
renovation.  There are some rundown hotels, but no adequate 
place where an international conference can be held.  Several 
contacts suggested that improvements in electricity and 
information technology would most quickly improve the 
investment climate the quickest. 
 
¶4. (SBU) Nevertheless, investors from the region -- Turkey, 
U.A.E., Kuwait -- as well as some European and U.S. companies 
are beginning to show interest.  Construction and 
infrastructure improvements are underway.  A U.K.-based real 
estate investment company called Deutsche Land (which owns 
Frankfurt Airport,s main airport center) is interested in 
developing the Basra airport and is working with the Ministry 
of Transportation, which owns the land and buildings, on a 
50-year lease (market sensitive).  The British Consul General 
at the Basra Provincial Reconstruction Team said that, &It 
will do Basra a world of good when potential private 
investors can fly into the airport, catch a taxi and go to a 
nice hotel.  But that will take some time.8 
 
--------------------------- 
Basra Investment Commission 
--------------------------- 
 
¶5. (SBU) Contacts noted that the Basra Investment Commission 
(BIC), which was formally established in October 2008, is 
Q(BIC), which was formally established in October 2008, is 
&moving from strength to strength.8  Basra Investment 
Commission Chairman Dr. Haider Ali Fadhel handed us a glossy 
brochure in English entitled: &The 2009 Investor Guide to 
Basra Province,8 which highlights the initial ten year tax 
holiday and 50-year leases that the National Investment Law 
(NIL) offers for investors who make their investment through 
the BIC.  It boasts that Basra province has the country,s 
only outlet to the sea.  Tourism and healthcare facilities 
are entitled to special exemptions.  The BIC does not yet 
have any representation outside Iraq, but has participated in 
events such as a conference in Istanbul in December 2008 with 
 
BAGHDAD 00000346  002 OF 002 
 
 
35 Turkish companies participating.  Foreign investors are 
&testing the waters,8 contacts noted. 
 
¶6. (SBU) In accordance with the National Investment Law, the 
BIC may approve investment licenses in the province for 
anything up to USD 250 million.  Killen is also facilitating 
some business incubator models and training for investment 
promotion overseas.  U.K. Provincial Reconstruction Team Team 
Leader Keith MacKiggan said there is no substitute for good 
mentoring and &train the trainer.8  Haider Ali Fadhel told 
us that Basrawi incomes are fairly good, but well-off 
Basrawis currently have to go abroad for things like eye 
surgery.  &To repair a ship, it has to go to ports in Dubai 
or Iran,8 Haider noted.  When these skills and capacities 
return to Iraq, it will keep money in the province, Haider 
notes.  He said two U.S. companies had approached the BIC 
thus far, one interested in recycling trash and one 
interested in agricultural products.  Some South Korean 
companies are also looking into infrastructure investment. 
 
--------------------------------------------- - 
NICs and PICs ) Better Public Relations Needed 
--------------------------------------------- - 
 
¶7. (SBU) Khalid Abultiman, an expatriate Basrawi businessman 
living, until recently, in Dubai and head organizer of an 
upcoming Trade Exhibition and Conference complained to us 
about the National and Provincial Investment Commissions 
(NICs/PICs).  &These investment bodies are supposed to have 
the answers, but they really are uninformed,8 Khalid told 
us.  Better leadership may help, but in his view they do not 
understand their role in investment promotion and are just 
bureaucrats collecting a paycheck.  There are so may smart 
Iraqis outside the country who know about investment, but 
they are just pushed aside when they make inquiries.  The 
Government of Iraq, both central and provincial, needs to 
take on a better public relations role, by explaining the 
benefits of foreign investment in improving the economy, 
creating jobs, and providing services.  Letters of Credit, 
meant to expedite trade, take so long ) about three months 
) and the process is so bureaucratic that most trade-related 
transactions are carried out in cash.  Basrawis need to play 
a role too, by showing the benefits of investment, Khalid 
noted.  Credit is also still hard for small companies to get, 
and that must also improve.  The Basra Exhibition is 
currently scheduled for February 20-24 in Basra International 
Airport,s reception hall. 
 
------------------------------ 
Expatriate Iraqis Coming Back? 
------------------------------ 
 
¶8. (SBU) Abdul Al-Hafiz Al,Afi of the Basra Business Center 
said that there are a small number of family-owned and 
family- dominated companies in Basra.  Thousands of new 
companies have registered since 2003, many are &learning as 
they go.8  Khalid Abultiman recently moved his family back 
to Baghdad.  Some Basrawi families who have owned property in 
Basra since the 1920s are starting to look at bringing some 
money back from abroad.  When the conditions are right, local 
and expat Basrawis will launch new businesses.  &A couple of 
years ago, investors got burned.  Kuwaitis and others lost 
money.  But they are coming again to at least have a look, 
dip a toe in the water.8 
 
-------------------------- 
Comment:  Still Early Days 
-------------------------- 
 
¶9. (SBU) It is still early for investment in Basra.  The 
security situation only really began to stabilize only after 
March 2008 after the Charge of the Knights campaign (Prime 
QMarch 2008 after the Charge of the Knights campaign (Prime 
Minister Maliki's successful military operation in March 2008 
against Iranian-supported militias in Basra).  The improved 
security is only now beginning to lead to increased banking 
and business activity.  Royal Dutch Shell, as part of its USD 
three billion flared-gas capture project, is establishing a 
presence in Basra, which will encourage others to do the 
same.  The signs are evident that investor interest is 
growing.  When expatriate Iraqis, who are well aware of 
changing conditions in the country, start repatriating money 
and opening businesses in significant numbers, it will send 
an even stronger positive signal to foreign investors.  End 
Comment. 
 
CROCKER 
CROCKER