VZCZCXRO5636
RR RUEHDE RUEHDH RUEHDIR RUEHIHL RUEHKUK RUEHTRO
DE RUEHBC #0050/01 2580802
ZNY CCCCC ZZH
R 150802Z SEP 09
FM REO BASRAH
TO RUEHC/SECSTATE WASHDC 0909
INFO RUEHGB/AMEMBASSY BAGHDAD 0487
RUCNRAQ/IRAQ COLLECTIVE
RHEHAAA/NSC WASHINGTON DC
RUEAIIA/CIA WASHDC
RUCNIRA/IRAN COLLECTIVE
RUEHBC/REO BASRAH 0947

C O N F I D E N T I A L SECTION 01 OF 04 BASRAH 000050 
 
SIPDIS 
 
E.O. 12958: DECL:  9/15/2019 
TAGS: ECON EINV ENRG EPET PGOV IZ IR
SUBJECT: BASRA INVESTMENT COMMISSION CHAIRMAN ON INVESTMENT 
DEVELOPMENTS, POLITICAL VIOLENCE, IRANIAN INVESTMENT 
 
REF: BASRAH 49, BASRAH 21, BASRAH 17 
 
BASRAH 00000050  001.2 OF 004 
 
 
CLASSIFIED BY: John Naland, PRT Team Leader, PRT Basra, US State 
Department. 
REASON: 1.4 (b), (d) 
¶1. (C) Summary.  Basra Investment Commission (BIC) Chairman 
Haider Ali told PRT EconOffs that many more investment licenses 
have been granted recently, and others are expected to follow 
soon.  He said that at least for now, most new investors are 
Iraqi, and this trend could continue until the political and 
security situation improves; later, western investors could 
follow.  In a possibly significant change, he said that the BIC 
and GOI Ministry of Municipalities have agreed on a new plan to 
avoid bureaucratic delays, and the BIC can now directly 
negotiate with investors the terms of some land leases.  Given 
the uncertainties in the run-up to the January 2010 national 
elections, Haider Ali said that many investors are taking a 
"wait and see" attitude so as to see what 
security/political/investment climate emerges.  He said that 
Iran-based investors continue their interest in the province, 
and are moving forward with a long-delayed housing complex, 
albeit on a scaled-back basis.  He bemoaned Governor Shiltagh 
and the Provincial Council's (PC) "slow reaction" to a number of 
attractive private electricity project proposals, despite acute 
power shortages, and obliquely criticized the Governor's overall 
"slow start" and lack of business acumen.  Haider Ali expressed 
his enthusiasm for the upcoming October Washington investment 
conference, to which he has been invited.  End Summary. 
 
New investments in the pipeline; new and improved BIC 
--------------------------------------------- -------- 
 
¶2. (C) In a September 9 meeting with PRT EconOffs, Haider Ali 
expressed optimism about several of BIC's recently-awarded 
investment licenses.  He also said that a hoped-for successful 
second oil/gas round could bring in more investment and jobs. 
He recounted eight very recent license awards in the industrial, 
residential, agricultural and tourism sectors, totaling some 
$520 million, seven of which went to Iraqi investors, the other 
Iranian.  (Note: While the award of an investment license is 
important, this is only one step in the process towards full 
execution, as investors must also obtain land and go through 
other legal processes.  End note) 
 
¶3. (C) Haider Ali said that he expects U.S.-based Baker Hughes 
to soon win a $165 million, three-year investment license to 
build a petrochemical plant for oil additives, a welding and 
piping workshop, storage tanks, and a housing and office 
complex, all within a 120,000 square meter site within South Oil 
Company facilities at the nearby Rumaila oil field.  (Note: 
According to Baker Hughes, this investment could eventually 
total $500 million, as it is tailored to meet the expected 
growing need for oil services from international oil companies 
expected to increase activities at Basrah Province's main oil 
fields of Rumaila, West Qurna, and Az Zubayr.  End note.) 
Haider Ali said that he recently went with Baker Hughes 
representatives to Basrah University to seek engineering 
graduates for hiring and training.  Haider Ali said that Baker 
Hughes will initially hire 20 engineers, but could need another 
700 in 2-3 years. 
 
¶4. (C) Haider Ali said that a $150 million license had been 
awarded to a well-known Basra-based industrial investor, Ali 
Jesari, to build a cast iron pipeline factory.  Another license 
was granted to a local family conglomerate to build a private 
maternity care hospital alongside an existing private hospital 
owned by the same family.  Other licenses include a $150 million 
project to recycle oil and gas waste from ships, to be built 
inside the Port of Umm Qasr, two amusement parks in Basra city, 
a cement factory, and a small reverse osmosis water treatment 
facility. 
 
¶5. (C) Haider Ali said that BIC had recently awarded an 
investment license to a Kuwaiti firm to build a new hotel close 
to the Basra International Airport.  (PRT has long advocated to 
airport authorities the need for such a hotel.)  He also said 
that he heard indirectly that the Ministry of Transportation had 
directly awarded a local firm the right to refurbish the old UK 
Division headquarters building next to the PRT, to convert it 
into a hotel. 
 
¶6. (C) Haider Ali expressed enthusiasm about a new BIC 
initiative to begin an on-line job database for engineers, 
technicians, and lawyers, for the growing number of prospective 
investors.  He said that he now has about 3000 CVs, and BIC has 
begun to advertize on radio, TV, and Basrah University to seek 
more CVs for this matchmaking service.  He also expressed 
enthusiasm about BIC's recently updated website, 
investbasrah.com, now in seven languages.  He said that he began 
working with regional media giant al Arabiya, and BIC will begin 
placing weekly spots with the network in an attempt to "improve 
Basrah's image." 
 
BASRAH 00000050  002.2 OF 004 
 
 
 
At least for now, national investors are the best way forward 
--------------------------------------------- ---------------- 
 
¶7. (C) Noting the preponderance of strictly local investors 
seeking and gaining approval for projects (apart from large 
hydrocarbon investments, which are generally contracted on the 
national level by western firms), Haider Ali said that this 
trend might be the best, and only, way forward to bring about 
more stability, until and if a more stable security, political 
and investment climate emerges.  He also indicated that the 
population -- and political sensitivities -- might also not be 
quite ready for large scale foreign investment, or at least from 
outside of the Arab/Persian Middle East.  And Haider Ali said 
that for many western investors, there is still "too much 
uncertainty, change of government, change of rules," and this is 
all "hard for these outsiders to understand." 
 
Important change in land use laws could speed up investments 
--------------------------------------------- --------------- 
 
¶8. (SBU) In what could significantly speed up some new 
investment projects in the province, Haider Ali said the BIC and 
GOI's Ministry of Municipalities had recently agreed to a new 
streamlined procedure for establishing the terms and conditions 
for the leasing of land (he said that this new procedure had 
also been established for Najaf and Babil provinces).  The 
Ministry of Municipalities recently granted the BIC the right to 
directly set land and rental terms for investment projects.  One 
of the principle stumbling blocks hampering approved investments 
from actually taking off has been the inability of investors to 
obtain favorable land lease terms (i.e. lease duration and 
price).  After the BIC issues an investment license, the 
investor often must confront an interminable delay -- or 
outright rejection -- in obtaining the needed multi-year land 
lease from the respective GOI line ministry controlling the 
identified land.  A four-person committee comprised of 
representatives from the DG of Taxes, Ministry of 
Municipalities, Ministry of Finance and BIC will work out a 
procedure by which the BIC can establish a set price and lease 
duration for investors to lease land.  Once the terms are set, 
they would go to the Ministry of Municipalities for rapid 
approval. 
 
¶9. (SBU) Note: While a lot of the prospective land for 
investment use that lies within Basra city limits is controlled 
by the Ministry of Municipalities, a lot of other land, 
particularly larger parcels and outside city limits, is 
controlled by other ministries, typically Transportation and 
Finance, and this new procedure will not apply to them.  End 
note. 
 
The 300 pound elephant in the room: security in the run-up to 
January 2010 national elections 
--------------------------------------------- 
 
¶10. (C) While Haider Ali expressed overall optimism about 
Basra's medium and longer term investment outlook, he was more 
restrained about the uncertain political and economic climate in 
the run-up to the January 2010 national elections, and the 
possibly of political violence.  Haider Ali is a cautious 
technocrat and generally reluctant to talk about these issues -- 
"it is all about power, and I try to stay out of it."  But when 
pressed, Haider Ali admitted that "security questions," election 
issues, and uncertainty about possible changing rules under a 
new national government, are still the "top questions investors 
ask me about."  He also said that other investor concerns 
include the uncertain investment law, and the "muddled" 
intra-governmental relationships, particularly among and between 
directors general of state owned companies (e.g. South Oil, 
South Gas), and other national and provincial authorities. 
 
¶11. (C) Haider Ali reluctantly agreed that for some investors, a 
"watch and wait and see" attitude until after the elections and 
formation of a new national government is understandable and 
even advisable.  (Note: During a recent discussion with PRTOffs, 
per ref A, Colonel Hazam, head of the Iraqi Intelligence 
Service's Fusion Center for the Basra region, predicted an 
increase in violence leading up to the elections.  End note.) 
Other PRT contacts also fear that the situation could get worse 
in the coming weeks. 
 
Iranian investors still interested in Basra 
------------------------------------------- 
 
¶12. (C) Haider Ali confirmed a "continuing and active" interest 
on the part of Iran-based investors in Iraq, and said that Basra 
Province appears to be a particular focus.  He said that a 
 
BASRAH 00000050  003.2 OF 004 
 
 
long-stalled proposal for a housing and shopping center (refs B 
and C) by the Iran-based Karman construction firm could be 
poised to move ahead, subject to final financing and mortgage 
terms, albeit on an initially smaller scale than originally 
envisioned.  (Note: According to other BIC contacts, Karman, and 
its parent Abb Hayatt, which Haider Ali said owns some 2000 
companies in Iran, are owned by former Iranian president 
Rafsanjani's brother-in-law.  End note.)  What had originally 
been a single, $1.5 billion housing/shopping mall/hotel complex 
will now move forward in separate stages.  The first stage will 
be a $226 million project in Zubayr neighborhood of Basra.  The 
initial phase will be a 5,000-unit housing complex, comprised of 
1500 houses and 20 multi-story buildings.  The second phase 
envisions malls and markets; the third, several hotels.  These 
subsequent phases would be open to other investors to bid on. 
 
¶13. (C) Haider Ali said that Iran-based businesses have also 
expressed interest in building consumer appliance assembly 
facilities in the province, to make items such as liquid crystal 
display (LCD) flat screens, washers, dryers, and dishwashers. 
(Note: Unlike other local contacts, Haider did not express any 
reservation -- pro or con -- about possible growing Iranian 
economic presence.  Whether this is due to economic pragmatism, 
cautious diplomacy, indifference, or even a pro-Iran bent is 
hard to gauge.  End note.) 
 
Proposals for new power plants; criticism of Governor Shiltagh 
--------------------------------------------- ----------------- 
 
¶14. (C) Haider Ali, a mechanical engineer with experience in 
electricity generation projects, lamented that many "excellent" 
private electricity generation proposals being sent directly to 
the Governor and Provincial Council are not being acted upon, 
all amidst severe electricity shortages.  He cited three recent 
proposals, from the Kuwait Al-Ghannim family business (one of 
the largest trading families in the Middle East), and two others 
from Lebanon and Iran, in the range of 600 megawatts, which 
would involve Ministry of Electricity fuel supply guarantees, 
and costing between four to six cents per kilowatt hour.  He 
mildly criticized what he said was Governor Shiltagh's so far 
"slow start" demonstrating progress to an impatient public.  He 
said that the governor "does not really understand" investment 
and the importance of it to Basra's future, and that he is "too 
busy fighting politics and power."  He singled out PC Chairman 
Jaabar as being much more "clever and decisive," and "able to 
get things done." 
 
Biography 
--------- 
 
¶15. (C) Haider Ali is a regular PRT contact.  The previous, 
UK-led PRT worked closely with him and his organization, and he 
has attended a number of international investment conferences, 
including ones in London, Turkey, Japan, and Northern Ireland. 
(He also enthusiastically confirmed his attendance at the 
October 20-21 Washington investment conference.)  He is clearly 
anxious to promote the culture of economic investment in Basra. 
Relatively young for his position at 35, he holds a masters 
degree in Mechanical Engineering from the University of Basra, 
where he currently teaches while also pursuing a doctorate in 
the same field.  Haider Ali has also carried out several 
engineering studies related to electricity generation and tower 
construction, and has supervised projects relating to water, 
roads, and electricity distribution.  He is close to former 
Basra Governor Mohammed Wa'eli, from the Fadillah party, and who 
appointed him to this position.  Due to his closeness to Wa'eli, 
some contacts had speculated that the new provincial government 
would appoint a new chairman, or that his days could be numbered 
(Governor Shiltagh's son recently told PRTOffs that Ali is in 
the "wrong party," and will soon be replaced).  Nonetheless, 
Haider Ali has remained, and many attribute his staying power to 
a positive attitude, and some solid progress in investment 
promotion.  An openly devout Shi'a Muslim, Haider Ali is married 
and has three daughters.  He speaks decent English. 
 
Comment 
------- 
 
¶16. (C) While Haider Ali's enthusiasm and impressive list of new 
investments is encouraging, most PRT contacts -- Haider Ali 
included -- right now have a "wait and see" attitude in terms of 
investment.  Given that we are now in full election season, and 
uncertainties exist regarding possible political violence, a new 
national government, and new investment rules, this is 
understandable.  However, if the situation remains generally 
calm in the coming months, and the next national government is 
reasonably pro-business and does not change the rules too much, 
Basra could continue on its slow but steady road towards greater 
 
BASRAH 00000050  004.2 OF 004 
 
 
investment. 
NALAND