R 281341Z APR 09
FM REO HILLAH
TO SECSTATE WASHDC 1185
INFO IRAQ COLLECTIVE
REO HILLAH 1258

UNCLAS HILLAH 000035 
 
 
E.O. 12958: N/A 
TAGS: ECON EIND PGOV IZ
SUBJECT: BABIL'S MAGIC CARPETS FAIL TO FLY 
 
¶1.  Summary:  A state-owned carpet factory in Babil produces 
attractive handmade carpets.  But the factory loses money 
because its costs are even higher than the price the government 
sets for rugs, which is itself above competitive levels with 
imports.  Despite the high quality of the carpets, the factory 
is a long way from being able to compete in the local market. 
End Summary 
 
Woven by Hand, Produced by the State 
------------------------------------ 
 
¶2.  The Handmade Carpet factory in Hillah, in operation for 
fifteen years, has over two hundred female weavers producing 
carpets.  The factory, a state-owned enterprise (SOE) under the 
Ministry of Industry and Minerals (MIM), is one of two hand-made 
carpet SOEs in Babil province.  According to factory manager 
Engineer Kaddum Al-Awadi, Babil has two carpet SOEs that 
collectively produce 60 percent of the rugs made by the seven 
handmade rug SOEs in Iraq. 
 
¶3.  MIM provides the factory with designs.  Although one can 
spot some large (two-by-three meters and up) traditional 
patterns, the majority of the output appears designed for the, 
as yet non-existent, tourist trade:  smaller rugs depicting the 
Ishtar Gate, Lion of Babylon, and Hammurabi stele.  Still, the 
carpets are high-quality and attractive. 
 
¶4.  The PRT economic team visited the factory on April 22.  The 
weavers, many of them accompanied by young children, sit on the 
floor in cavernous work spaces in front of primitive hand-looms 
made of metal industrial pipes. 
 
 
Produced at a Loss, Still Too Expensive for Local Market 
--------------------------------------------- ----------- 
 
¶5.  Al-Awadi said that the average worker weaves a square meter 
every two months with salaries between USD 150 and USD 500 per 
month based on education and experience.  In the past, bonuses 
were given to workers based on productivity but that practice 
was discontinued.  Weavers all receive a year of training before 
beginning work and, despite the monotony of the job, Al-Awadi 
said he has no problem finding new employees. 
 
¶6.  Like other SOEs, the factory is primarily designed to create 
jobs not profits.  MIM administratively fixes prices from USD 
350 to USD 500 per square meter (depending on whether cotton, 
wool or silk): about half labor input costs.  If the carpets can 
be sold at the fixed price, then the factory is able to cover 
non-labor input costs.  Still, Al-Awadi explained that the set 
price has little relation with local market conditions as the 
factory ships almost all carpets to MIM's central office in 
Baghdad. 
 
¶7.  The only local sale of carpets is an order of 100 small 
rugs, most of which were still on the looms, to the local 
Investment Commission to use as gifts to dignitaries and 
potential investors.  Other attempts to sell carpets locally 
have failed -- the owner of Hillah's largest department store 
told us he would love to sell the carpets but their price is 
more than double that of comparable imports.  Al-Awadi said he 
would like to explore selling carpets internationally and the 
PRT economic team agreed to link the factory with a Task Force 
for Business Stability Operations carpet marketing consultant 
who could explore international marketing possibilities, but 
pricing will remain a challenge. 
 
HILLASK