Polish firms in Iraq face choice of business or reconstruction

By Kamil Tchorek

At this week's conference in Warsaw entitled "Opportunities for Polish Firms in the Reconstruction of Iraq", international specialists will urge Polish companies to consider the need for nation-building before the search for commercial opportunities that many consider to be Poland's just reward for 'paying the blood price' during the invasion of Iraq. Purely commercial ventures must come later, the experts will argue, when Iraq is on its feet again - and this will take a great deal of foreign help and expenditure.

Late last week, at the start of the Madrid summit on the Reconstruction of Iraq, UN Secretary General Kofi Annan asserted that "...everyone wants to see the restoration of Iraqi government - but reconstruction cannot wait." The plea for the international community to put aside differences of principle and politics was not answered in full by some states who had high hopes resting on them. Notably, the European Union declined to make the massive donation that so many were holding out for. The World Bank has assessed that Iraq now needs a total of $56 billion of contributions to fund the rebirth of a free and prosperous Iraq.

By default, the burden of assistance now lies with those businesses - some in Poland - that have expressed their wish to invest directly into Iraq. But their business models must be adapted to accommodate emergency humanitarian needs, Iraq experts argue. "There is a very short lead time on Iraq tenders," says James R. MacKenzie du Lieu of consultancy firm Fouad MT AlGhanim, speaking from Kuwait ahead of his presentation at the Warsaw conference. "This is a totally different environment to peace-time inward investment. Because there are so many urgent needs in Iraq, sometimes firms have three days with which to respond to the announcement of a tender, and four days after that they'll have to start delivering. You need to be extremely well prepared to be able to succeed in that environment."

Aside from preparation for business, the process of business activity itself is still precarious. Although military casualties and terrorist strikes feature daily in the international media, violent criminal activity, apparently less newsworthy, tends to take place unreported. A representative of one firm sub-contracted by the military in southern Iraq has told the Business Journal that armed hijackings on the road from Kuwait to Basra cost his company four vehicles last week. Another firm has lost nine vehicles to similar hijacks in the past two weeks.

"In one of the incidents last week," adds a source close to the hijack victims, "...two forty-foot containers with loads were taken. The driver and an American employee of the company were taken at gunpoint. The American seized the opportunity to escape on the same day, when the vehicle slowed down. He jumped out of the moving vehicle and hid by the road until he flagged down a military convoy. There is nothing to suggest that the incident was ideologically motivated. This is about local criminals seeking commercial gain from soft targets. There has even been an incident of a man with a Kuwaiti accent calling up the firm that owns a hijacked vehicle, saying they can have it back for $10,000."

When this story is put to MacKenzie, he accepts that such incidents are a regular occurrence and if Polish firms have an ethical concern for their employees, they must be prepared to provide adequate security. The Kuwaiti firm that he works for still refuses to operate in Iraqi precisely for fear of the safety of employees.

"Polish firms should also ensure they have the backup in Iraq to support their secured project," adds MacKenzie, "...they need fuel for generators, water, etc. In essence, they have to be able to support all their operations independently, as opposed to just looking at the project cost alone. This hidden cost could be the difference between profit and loss, success and failure."

Firouz Vakil, director of VHF advisory services, also speaking at the Warsaw conference, is concerned that Polish firms need to be more aware about how to go about winning tenders. "Many Polish firms are not knowledgeable with the funding issue - it's about nation-building and they'll win funds if it's clear to the fund providers that they have nation-building in mind. They cannot go in and expect to sell their products in an opportunistic way."

Vakil recommends Polish firms' affiliation with US bidders, so that they can take on smaller, specialized responsibilities while having the bargaining weight of a major partner. Polish reconstruction efforts should therefore be organized so that the firms are comprehensively represented to the main players in reconstruction. With offices in Warsaw, Baghdad and the United States, a Polish reconstruction organization, as Vakil sees it, would be able to coordinate bids. "If such an administrative network were put in place, specific reconstruction demands in Iraq could be matched with the supply of appropriate firms in Poland," says Vakil, "...it would have the support of the Iraqi Coalition Provision Authority and American partners."

Vakil's project would not see the creation of a new government agency, but a privately run organization subsidized at first, but ultimately funded by commission. "Every contract that this representative office wins would have a commission fee which would be ploughed back into the organization," says Vakil. Responding to the fact that lone proactive Polish firms such as Budimex have already set up offices in Iraq, Vakil suggests that participating with the official backing of the Coalition Provisional Authority - that is, gradually gaining credibility and acceptance by Iraqi civilians - is vital for the social acceptance of Polish firms in Iraq.

Representatives at the Warsaw conference generally agree that Iraqi reconstruction is paradoxical, with the need for instant solutions to the problems of supply and infrastructure on the one hand, and the slow-moving nature of public attitudes in Iraq about the presence of either military or civilian foreigners on the other. In Vakil's words: "Poles have to be active, joint partners with Iraqis. They have to do their work with the intention and appearance of wanting Iraq to be a better place for Iraqis themselves. Only after this will the business investment into the country be successful."

The International Forum, "Poland - the Middle East: Opportunities for Polish Firms in the Reconstruction of Iraq" will be held on Wednesday, October 29, at the Marriott Hotel in Warsaw.