Iraq struggles to build schemes

24 October 2012

There are not enough contractors capable of delivering desperately needed infrastructure

Iraq’s construction market is an anomaly. Unlike the rest of the world where contractors complain that there are not enough opportunities and winning work is becoming increasingly difficult, the opposite is true in Iraq.

“I was recently approached by an Iraqi assuring me that he could get me a major housing construction contract,” says a UAE-based contractor.

Given how work-hungry contractors in the UAE currently are, the response was admirable, yet surprising. “I said no. Yes, I want work, but I want a project that I can deliver. That is not the case in Iraq.”

The UAE contractor’s position highlights the conundrum that Iraq currently faces. With oil production increasing – Iraq’s output reached 3.17 million barrels a day in August – the government is running a budget surplus, a unique position in today’s post-credit crunch world.

The surplus will get bigger in time. As the government’s top line increases, its bottom line is struggling to follow the same trajectory. The Construction and Housing Ministry says that last year it had to return two third of its budget because it could not spend it.

The problem for the ministry is that there are not enough contractors in Iraq that are capable of delivering all the infrastructure that the country desperately needs. Some international companies have come into the market, but the successes have been largely limited to Turkish firms working in the Kurdish north that can rely on their domestic supply chain.

Elsewhere, the progress has not encouraged large numbers of international firms to establish operations in Iraq. If the government can persuading companies to make that leap, then they will find that building is the easy part.

The immediate challenge is convincing companies that Iraq is a safe place to work and is now ready for the construction boom that most in the region are still waiting for.

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