VZCZCXRO3898
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #0758/01 0781252
ZNR UUUUU ZZH
P 191252Z MAR 09 ZFF5
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 2291
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 BAGHDAD 000758 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EINV EIND IZ
SUBJECT: BRINGING IT BACK HOME; AN IRAQI BUSINESS RETURNS 
 
BAGHDAD 00000758  001.2 OF 002 
 
 
¶1. (SBU) Summary: In a recent meeting with an Iraqi owned 
electrical equipment manufacturer which re-opened in 2008, 
the owners expressed optimism for 2009 and made special 
mention of plans to expand their business with a self funded 
4 Million USD manufacturing facility.  While noting that 
gross sales exceeded their goal by over 30% in 2008, the 
company cited inefficiencies relating to imports and lack of 
expertise within the GOI regarding electrical specifications 
as barriers to even better performance.  Post sees anecdotal 
evidence that this example is indicative of a broader trend 
of returning Iraqi businesses and capital from abroad.  End 
Summary. 
 
A View from the Merchant Class 
------------------------------ 
 
¶2. (U) Econoff and PRT advisor recently met with the owners 
of Baghdad based El Ebtida ("Innovation") Company to discuss 
their views on the current business climate in Iraq.  El 
Ebtida is an electrical design, manufacturing and engineering 
firm based in Baghdad, but with offices in Amman and Dubai. 
In business for over 20 years (with its operations in Iraq 
shut down from 2003-2007) El Ebtida's focus is power 
distribution from the sub-station level down to individual 
panel distribution for commercial and residential clients. 
El Ebtida has representation agreements with the German firm 
Schneider Electric and the French Socomec, and does business 
with several other international firms. 
 
3.(SBU) As members of a Shia family from Najaf, the two 
brothers who own El Ebtida expressed frustration over the 
difficulty of doing business during the Saddam era, both 
before and especially during sanctions.  Long members of 
Iraq's merchant class, the brothers described learning 
business from their father, also an engineer, who helped them 
establish El Ebtida in 1988.  While profitable, they found 
the business and security environment they encountered in 
2003 to be untenable and chose to shutter their operation and 
move their families and what assets they could to Jordan and 
the UAE. 
 
A Change of Heart 
----------------- 
¶4. (U) One owner stated that "When we left Iraq in 2003, I 
said we would never come back," and went on to describe how 
he worked to transfer assets out of the country, all the 
while fearing that Saddam's agents were listening to his 
phone calls and would arrest him. (Note: During the previous 
regime, it was illegal to transfer cash out of the country. 
End Note) One brother went to Dubai and the other to Amman to 
join others in the Iraqi Diaspora who gathered in the two 
cities.  They continued to utilize their regional contacts to 
conduct business, invested in real estate and worked to 
re-establish themselves and their families abroad. 
 
¶5. (U) When asked what prompted the decision to return to 
Iraq, the brothers both cited PM Maliki's confrontion of the 
Mahdi Army in southern Iraq in April of 2008, stating "we 
were inspired by this, it showed that Iraq has leaders who 
were willing to move beyond traditional alliances.  He is a 
strong leader."  The brothers began returning to Baghdad 
immediately after and soon took up residence in the city once 
again; both plan to bring their wives and children back at 
the end of the current school year. 
 
Investing in the Future 
----------------------- 
 
¶6. (U) The owners of El Ebtida were forthcoming with their 
financial information and indicated that they worked 
successfully with the Ministry of Electricity, the Ministry 
of Oil and the National Oil Company.  Citing gross sales of 
over 6.8 million USD last year, El Ebtida sees continued 
growth for 2009 as they pursue a more diversified client base 
Qgrowth for 2009 as they pursue a more diversified client base 
and expansion of direct business with international companies. 
 
¶7. (U) El Ebtida presented plans for a new electrical 
component manufacturing facility set to begin in this summer. 
 Planned for over 2500 square meters and two levels, the new 
plant will employ approximately 40-50 new employees and 
require a capital expenditure of approximately 4 million USD. 
The owners appreciated PRT advisor's offer to show them a 
nearby industrial park that may prove a suitable location for 
the new facility. El Ebtida also informed us of a monthly 
training program on electrical technology which they offer at 
no cost to key GOI ministries in order inform and educate 
their existing and possible future clients. 
 
Challenges Remain 
----------------- 
 
 
BAGHDAD 00000758  002.2 OF 002 
 
 
¶8. (SBU) While El Ebtida sees a bright future for the Iraqi 
economy in the coming years, the brothers expressed concerns 
as well.  Due to poor transport services in Iraq, sourcing 
components and parts from Europe, the U.S. and Asia presents 
logistical challenges that decrease efficiency while 
increasing costs.  While not an ideal or efficient solution, 
El Ebtida noted that it is faster and cheaper to ship its 
component parts to Aqaba port in Jordan and bring them in via 
truck, rather than to utilize Basra Port.  In addition, El 
Ebtida expressed frustration with the lack of technical 
expertise and understanding within the GOI relating to modern 
electrical design and engineering standards.  The owners feel 
that in many cases, GOI ministries were un-informed and 
unaware of what they were purchasing.  This lack of expertise 
and imperfect information, in El Ebtida's opinion, can result 
in the purchase of inferior products and designs driven 
primarily by price alone. 
 
Comment 
------- 
 
¶10. (SBU) We continue to see evidence that as the security 
environment improves, businessmen currently resident abroad 
are returning, albeit quietly.  As it works to accelerate 
economic development and to diversify Iraq's economy away 
from its dependence on oil exports, the GOI needs to put in 
place the conditions that will convince other Iraqi 
businesses that it is time to bring their talent and capital 
back home. 
BUTENIS