Kuwaiti business expect Iraq reconstruction windfall
KUWAIT: Kuwait wants to rebuild Iraq. Or at least, it wants to be the broker who helps the rest of the world to do so. The country's powerful chamber of commerce has entertained business delegations from all across the world with one goal in mind: convincing foreign investors of the advantages of investing in the war-torn country by joining forces with Kuwaiti businesses.
To serve as the logistics hub and much touted 'door to Iraq' Kuwait is also investing heavily in its infrastructure projects including a new port in the northern part of the country and a rail line from Kuwait City to the Iraqi border.
Kuwait's business elite - both top merchants and ruling family members - are behind the effort to develop the north. Hoping to exploit Kuwait's strategic location, the north including Bubiyan and Abdally will be key transit/logistics points for any investors shipping supplies and materials into infrastructure hungry Iraq.
Last month, Kuwait hosted a four-day international trade exhibition for the reconstruction of Iraq to encourage local and foreign companies to invest in Iraq's rebuilding.
Kuwait Chamber of Commerce and Industry (KCCI) is also spearheading the private sector's efforts to lure foreign companies to invest in Iraq and take part in its reconstruction. KCCI's Chairman and prominent businessman Ali Al-Ghanim asked a Chinese business delegation last month to invest in Iraq through entering joint-ventures with Kuwaiti companies.
A few days later, another trade mission, the Romanian business delegation visited KCCI, and a similar message was sent: Iraq is where the money is and Kuwait is the gateway into the country.
But why is KCCI assuming the role of the promoter for Iraq's investing opportunities?
As the KCCI represents Kuwait's major merchant families such as Al-Ghanim, Al-Sayer, Al-Bahar, Al-Wazzan, Al-Sager, Al-Marzouk, and Al-Humeidi, investing in Iraq will certainly benefit Kuwaiti businesses.
Many merchants want to cash in on the lucrative business opportunities that Iraq can bring into Kuwait especially with the US Army presence in the region. Kuwait's strategic location is a vital factor to the success of its logistics sector and companies in Kuwait are in an advantage to tap this profitable market.
For instance, Kuwaiti logistics giant, Agility - also known as Public Warehousing Company (PWC) - has benefited from the presence of the US army in Iraq by using Kuwait as the gate into the country.
In 2005, Agility won a $3.2 billion contract with the US Department of Defense (DOD) to supply US forces stationed in the Arab Gulf. In September, Agility announced partnership with US-based DynCorp in a $50 billion deal with the US military as a part of a ten-year contract. Seeking a major logistics partner to help facilitate the US military withdrawal expected during the next couple of years, the US DOD's deal could be worth billions of dollars.
A few months following the Iraq War and the regime change in 2003, Kuwait announced its plans to build a new port on Bubiyan Island, as part of a $1.2 billion infrastructure project to reshape the north. The new container port terminal on Bubiyan is to serve the export and import requirements for the reconstruction of Iraq.
The Bubiyan project along with other construction projects in the north are also backed up by key Al-Sabah family members.
United Real Estate Co. (URC), a subsidiary of Kuwait Projects Company (KIPCO), is headed by the son of Sheikh Nasser Sabah Al-Ahmad Al-Sabah, the Amiri Diwan Minister and son of HH the Amir Sheikh Sabah Al-Ahmad Al-Sabah. KIPCO, which is headed by the Amir's other son Sheikh Hamad, is a shareholder in Iraq's Bank of Baghdad through its subsidiary United Gulf Bank.
Last year, URC announced its plans for a KD 250 million ($855.7 million) project to develop Abdally border passage between Kuwait and Iraq. The project aims to regulate customs and trading activities in the northern part with Iraq and other neighboring countries.
Moreover, Kuwait has a political interest in Iraq's stability, because it simply means securing its own safety, especially with the rising tension in the region and a possible US war against Iran. By securing a stable Iraq through generating more investments towards the rebuilding process, Kuwait can concentrate on its internal agenda of reforms and attracting more Foreign Direct Investments (FDI).
But playing on the "Kuwait as a trade gateway into Iraq" idea is not new. Kuwait has been publicizing the same concept since 2004, and Iraq's political instability and lack of security didn't improve much since then.
The idea of investing in Iraq is revived again because it is time for Kuwaitis to get involved in the multi-billion dollar reconstruction process. So far, the United States has allocated $38.28 billion as of the end of 2006, while other donors have pledged over $15 billion.
There is so much money flowing in the rebuilding process and the returns could be substantial. Kuwait wants to benefit from the cash flow pumped into its neighboring country by benefiting from its geographical position.
But why go through Kuwait?
Al-Ghanim says that Kuwaiti investors "will have a priority over other businesses" citing Iraq's President Jalal Talabani during his last visit.
During the visit of the Iraqi President to Kuwait, he stressed on his government's interest that Kuwaiti businesses contribute in developing Iraq's economy... He (Talabani) said Kuwaiti companies will have a priority in Iraq ," said Al-Ghanim. "Iraq and Iran are open markets and many sectors are available for investments, especially to Kuwaiti businesses.