VZCZCXYZ0036
PP RUEHWEB

DE RUEHGB #1837 1891614
ZNR UUUUU ZZH
P 081614Z JUL 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 3847
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY

UNCLAS BAGHDAD 001837 
 
SIPDIS 
 
PASS TO COMMERCE, ATTN: SUE HAMROCK-MANN 
 
E.O. 12958: N/A 
TAGS: ECON EINV PGOV ETRD
SUBJECT: IRAQ'S LATEST QUEST FOR JOINT VENTURES OF STATE 
OWNED ENTERPRISES FALLS SHORT 
 
REF: 09 BAGHDAD 970 
 
¶1. (SBU) In March 2009, Iraqi Minister of Industry and 
Minerals (MOIM) Fawzi Hariri announced a third round of Joint 
Venture (JV) opportunities in Iraq's state owned enterprises 
(SOE) (Reftel A). When announced, Hariri was optimistic 
because, he said, it contained a more diverse offering of 
companies than earlier JV rounds, in which the construction 
industry was over represented.  The 15 SOEs included in the 
current round represent the construction, engineering, 
chemical-petroleum, food-drug and textile sectors.  MOIM 
extended the bid response date into June, and the offering 
was widely advertised in international trade publications and 
press, never the less, when asked recently, Hariri became 
noticeably agitated, stating that "only 6 companies have even 
responded." Hariri intimated that the current round may 
actually lead to nothing and appeared uncertain about his 
next action. 
 
COMMENT 
------- 
¶3. (SBU) To date, only two SOE JVs have actually moved into 
an execution phase with the investor engaging in production 
in Iraq.  Of the two, only one SOE JV remains in operation 
(Al Qa'im Cement in Anbar province) out of over 50 that have 
been offered during the past 2 years. The remaining JV 
agreements remain in various states of negotiation or legal 
review within the lengthy GOI approval process.  With the 
tepid response to the current bid round, it is evident that 
MOIM has not yet realized that it will need to offer stronger 
financial incentives through the terms of their contracts in 
order to attract greater interest and participation from 
viable international investors.  More generally, the GOI has 
not recognized how unattractive the very concept of entering 
into a joint venture is to most serious investors, given that 
almost all SOEs have a long history of losing money, a 
business model that will not succeed -- but is deeply 
entrenched. 
HILL