VZCZCXRO5539
PP RUEHBC RUEHDA RUEHDE RUEHDH RUEHIHL RUEHKUK
DE RUEHGB #1171/01 1241241
ZNR UUUUU ZZH
P 041241Z MAY 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 2926
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 03 BAGHDAD 001171 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV PGOV PREL IR IZ
SUBJECT: DEVELOPMENT IN KARBALA: PROGRESS AND CONTROVERSY 
 
REF: BAGHDAD 1100 
 
This is a PRT Karbala Reporting Cable 
 
(U)  This message is Sensitive but Unclassified; handle 
accordingly.  Not for distribution on the Internet. 
¶1. (SBU) Summary:  At least three development plans have been 
posited for Karbala since Iraq's liberation.  The province's 
de facto operational blueprint (the so-called &Shahristani8 
plan) was devised in mid-2008 and has been blessed by Prime 
Minister Maliki, although it is widely disliked by many 
Provincial Council (PC) members.  A competing Iranian 
company's plan for redeveloping the area around the al-Husayn 
and al-Abbas shrines has stirred controversy and may be 
revised as well.  Meanwhile, we expect that the political and 
bureaucratic impediments that have held back reconstruction 
progress will be lowered in the coming months.  End Summary. 
Plans Aplenty 
¶2. (SBU) At least three development plans have been posited 
for Karbala Province since Iraq's liberation.  In 2006, 
Parsons Brinkerhof produced a "basic plan" outlining for the 
first time a coherent scheme for organizing services and 
infrastructure, although its recommendations seem largely not 
to have been implemented.  The Karbala Governor's Planning 
Office in early 2008 solicited bids for a $700,000 provincial 
development plan.  None of the proposals came in at near the 
asking price, and the contract eventually was awarded to 
engineers from Babil University for $1.3 million.  However, 
they failed to produce a scope of work and the project never 
commenced. 
¶3. (SBU) The Provincial Investment Commission (PIC) in 
mid-2008 launched its own effort to map Karbala's future.  It 
hired Bloom Properties, a land-development company from the 
UAE, affiliated with the sons of Shaykh (1971-2004) Zayid bin 
Sultan al-Nahayan, to come up with a master plan for the 
province.  This proposal encompassed the establishment of a 
"new Karbala City" on the shores of Lake Razzaza, far west of 
the old city center, and sketched out a re-zoning scheme that 
would convert "agricultural" lands near the al-Husayn and 
al-Abbas shrines into commercial real estate.  This plan does 
not seem to have gained any traction with the PC. 
Baghdad Involved... 
------------------- 
¶4. (SBU) Also in mid-2008, the PC contracted the 
Iraqi-British Shahristani Company to produce a provincial 
master plan.  Like the PIC scheme, it calls for extending 
development to the shores of Lake Razzaza (albeit not the 
establishment of an entirely new city there).  It also 
incorporates a greenbelt and features the redevelopment of 
older neighborhoods.  This plan, blessed by Prime Minister 
Nouri al-Maliki and the Ministry of Municipalities -- and 
therefore carrying the weight of federal funding -- is 
Karbala's de facto current operational blueprint. 
¶5. (SBU) The Sharistani plan forecasts the steady growth of 
Karbala's urban tourism infrastructure while reserving lands 
away from the city center for agricultural use. 
Knowledgeable contacts, including Karbala Chamber of Commerce 
members, describe it as practical, if not exactly visionary. 
One PC member is outspoken in her dislike for the plan and 
wishes to revisit it.  Its primary virtue, according to local 
business leaders, is that it will enable downtown properties 
that have been zoned "agricultural" for as long as anyone 
here can remember to be re-cast for residential or commercial 
use. 
...Along with Iran 
------------------ 
¶6. (SBU) According to a contact close to the PC leadership, 
the Shahristani plan left intentionally vague the sensitive 
issue of redevelopment around the al-Husayn and al-Abbas 
shrines.  He said that Abd al-Mahdi al-Karbala'i and Ahmad 
Qshrines.  He said that Abd al-Mahdi al-Karbala'i and Ahmad 
al-Safi, imams (respectively) of the al-Husayn and al-Abbas 
shrines and Grand Ayatollah Ali al-Sistani's representatives 
in Karbala, told then-Governor Aqeel al-Khazali and other PC 
leaders in mid-2008 that the marja'iyah (Shi'a religious 
leadership) reserved the right to determine the scope and 
complexion of change around the shrines.  Late last year, 
Imams Karbala'i and Safi issued a solicitation for bids to 
redevelop the shrines area.  A knowledgeable contact reports 
that proposals were received from companies based in France, 
the UAE, the UK and Iran.  (Note:  See reftel for more on the 
shrines' independent agenda.  End Note.) 
¶7. (SBU) By early 2009, rumors that the marja'iyah had 
selected an Iranian company to renovate the area around the 
shrines -- to the tune of $40 million -- began to circulate 
around Karbala.  In March, Imams Karbala'i and Safi confirmed 
that an Iranian firm, the al-Kawther ("Heaven") Company, had 
"won" the contract (while refusing to divulge details such as 
its dollar-value), prompting skepticism from business and 
political figures here concerning the probity of the 
marja'iyah's selection process.  In response, the PC 
announced a two-month period of public comment on 
al-Kawther's plan (it expires in mid-May). 
 
BAGHDAD 00001171  002 OF 003 
 
 
¶8.  (SBU)  While the firm's nationality predictably has 
elicited concern among many of Karbala,s residents, the 
projected demolition of existing homes and businesses around 
the shrines has created considerable local controversy. 
Knowledgeable contacts insist the overwhelming majority of 
Karbalans oppose al-Kawther's scheme.  A local journalist 
claims the PC has received more than 500 messages from 
citizens opposed to the razing of buildings near the shrines. 
 On April 26, several hundred residents and business-owners 
staged a noisy demonstration near the al-Husayn shrine 
demanding that the PC overrule the marja'iyah and cancel 
al-Kawther's contract. 
Ground-Level View 
----------------- 
¶9. (SBU) Planning Karbala's redevelopment is one thing, 
undertaking it is another.  PRT members met on April 28 with 
Ali al-Sahaf and Shaker Mohammad Ali, partners in a 
real-estate and construction company called Mushkat.  The 
company was formed three years ago by expatriate Iraqis who 
returned from Syria, where they had a development company 
called -- like the Iranian firm -- al-Kawther.  (Note:  They 
insist there is no relation between the two companies; that 
they have the same name is merely a coincidence.  End Note.) 
Claiming to have purchased more than $100 million in land in 
Karbala Province, and employing 52 full-time employees and 
120 laborers, Ali and Shaker are attempting to work within 
the Shahristani master plan.  They have won approval to build 
2,500 single-family homes eight km west of the city center, 
toward Lake Razzaza.  They also have begun construction of a 
550-apartment housing and commercial complex approximately 
400 meters northwest of the shrines and just outside the 
Iranians' projected redevelopment zone. 
¶10. (SBU) According to Ali and Shaker, the problem in Karbala 
is not the building process itself as construction is evident 
all over the province.  The issue, they said, is securing 
permission to build.  Properties closer to the city center 
invariably must be re-zoned (much of the land remains 
classified as "agricultural"), and this is extremely 
time-consuming.  For example, they said, their single-family 
home project -- involving un-zoned desert land -- took nine 
months to win official approval from all the ministries (they 
counted eight) involved, as well as from the PC and the PIC. 
By contrast, permit applications for the project near the 
shrines were submitted more than two years ago and still no 
approvals have been produced. 
¶11.  (SBU)  Like other builders here, Mushkat cannot afford 
to wait indefinitely and has begun construction on the 
apartments; the first building will be finished in about two 
months.  Ali and Shaker said that, despite the risk, creating 
"facts on the ground" is the only commercially viable means 
of proceeding here.  They claim that no one who has begun 
construction before obtaining the required approvals has had 
their projects rejected (rejection would mean no access to 
water, sewage, and electrical services).  They pointed to 
Karbala's largest hotel, the al-Safir ("Ambassador") as 
proof; completed last year, it still lacks approvals but has 
water, sewage and electricity.  (Note:  We are aware, 
however, of a number of other hotels built without license to 
which the provincial government has yet to provide utilities. 
 End Note.) 
Investors Lack Confidence 
------------------------- 
¶12. (SBU) Despite the propensity of developers here to 
proceed with construction before receiving official 
permission, potential investors understandably are gun-shy 
and insist on the security provided by a transparent and 
Qand insist on the security provided by a transparent and 
predictable approvals process.  This, according to Ali and 
Shaker, is where the United States can help.  They urged the 
PRT to press the PC to streamline the system for acquiring 
approval to build, particularly as it involves re-zoning. 
Evidently feeling a cash pinch, they also made a pitch for 
U.S. investors to get involved:  "This is an unparalleled 
opportunity for American companies to invest in a developing 
market unaffected by the financial turmoil elsewhere in the 
world." 
Comment 
------- 
¶13. (SBU) Entrepreneurs such as Ali and Shaker are precisely 
what Karbala needs to kick-start its economy and address the 
housing shortage here (according to the PIC, the province 
requires at least 35,000 units of housing for residents). 
Unfortunately, they have been far ahead of the politicians, 
whose glacial decision-making pace conceals a multitude of 
sins (ranging from ignorance to incompetence to corruption). 
With the new, Da'wa-dominated PC under public pressure to 
show progress on long-delayed improvements here, we expect 
that the political and bureaucratic impediments that have 
held back reconstruction will be lowered in the coming 
months, enabling Mushkat and similar enterprises to realize 
their visions and profit.  As for the redevelopment of the 
area around the al-Husayn and al-Abbas shrines, we doubt that 
any amount of public outcry will enable the PC to wrest 
 
BAGHDAD 00001171  003 OF 003 
 
 
jurisdiction over this issue from the marja'iyah.  However, 
it may prompt Karbala'i and Safi to send the Iranian 
al-Kawther Company back to the drawing board to come up with 
a less objectionable plan.  End Comment. 
 
 
 
 
 
 
HILL