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Key Text Rebuilding Bridges: Opportunities and Challenges for Responsible Private Sector Engagement in Iraq’s Reconstruction

Author: J Nelson and J Moberg
Date: 2003
Size: 12 pages (943 KB)

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Summary

What role can the private sector play in establishing peace and prosperity in Iraq? How can foreign investors operate responsibly as well as profitably? This policy paper for the Prince of Wales Business Leaders Forum focuses on the business risks and opportunities that foreign companies face operating in Iraq. The authors propose guidelines to manage risks in a post-conflict environment suspicious of the motives of US and UK companies.

The reconstruction of Iraq is the most ambitious state-building programme since the Marshall Plan. It has critical implications for the region and beyond. Decades of misuse of vast oil reserves, years of sanctions, and the war have shattered Iraq’s infrastructure and economy. Despite the political, economic, social and religious challenges of rebuilding the country, there is long term economic potential. Iraq has the world’s second largest oil reserves, mining, agricultural, and tourist potential, a large potential consumer market, and high levels of education and technical competence among certain parts of the population. These are opportunities for foreign investors. However, the enormous potential good that the private sector can offer is being undermined by the perception that it is out for profit at any cost and is using crony capitalism to achieve this goal. Three issues feed this lack of trust relating to foreign private sector engagement:

Contracts for reconstruction and humanitarian relief have been initially awarded to US businesses with real or perceived links to the Bush administration. There is cynicism regarding how such contracts are awarded
A widespread perception that the war was about gaining access to cheap oil for the US economy and its allies, and suspicion over plans to privatise the oil industry
Fears over how companies will behave once they are operating or investing in Iraq.

Iraq differs from many other recent post-conflict countries in its huge potential for long term growth and high level of human capital. However, experiences from private sector engagement in other post-war contexts are relevant. In addition, lessons from legal, institutional, and market reconstruction in former-Soviet countries are relevant to Iraq. Rebuilding a vibrant economy, driven by sound macroeconomic frameworks and a diversified private sector, will be vital to ensuring peace and creating prosperity. While Iraqis and Iraqi businesses need to be at the core of economic transformation, foreign companies have an important role. These companies need to manage risk and make a profit without being accused of profiteering or opportunism. Policy makers in governments funding the reconstruction need to make sure that:

Transparent, open and competitive bidding processes in awarding contracts are followed
Contractor reporting is also public, and includes economic, social, and environmental contributions to the country (not just meeting technical terms of contracts)
There is a clear demonstration that oil revenues will contribute to Iraq’s future development, not solely benefiting foreign-based shareholders. There also needs to be transparency about the size, distribution and use of oil revenues
Foreign companies are required to effectively manage risk and build trust. The authors outline an eight point plan for companies to follow which includes accountability, transparency, local involvement, and commitments to environmental and social best practice.

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Source: Nelson, J., and Moberg, J., 2003, 'Rebuilding Bridges: Opportunities and Challenges for Responsible Private Sector Engagement in Iraq’s Reconstruction', International Business Leaders Forum, IBLF Policy Paper 2003, Number 3