REBUILDING Business in Iraq still risky

Iraqi business fairs are sprouting up in the United States.
DOHA, Qatar (AP) -- A new Iraq flush with free-flowing oil money, untapped markets and a teeming population is a tempting proposition for profit-hungry U.S. companies dealing in everything from credit cards to consumer goods.
But entrepreneurs hoping to cash in could be facing a letdown. Concerns about sanctions, security, the government vacuum and cultural hurdles foretell some nasty surprises and risky business for the optimists, analysts say.
"There's a lot of hype," said Walid Khadduri, editor in chief of the Cyprus-based Middle East Economic Survey. "Iraq will not be an easy market."
Pushing ahead
Some companies are already pushing ahead in postwar Iraq, with mega-firms such as Bechtel Corp. winning multimillion-dollar contracts to rebuild the country. Iraqi business fairs are sprouting in the United States and cater to companies eager for a slice of reconstruction spending that could hit $600 billion over the next decade.
Fueling the frenzy are expectations that U.S. companies will get first crack, said Bart Fisher, secretary of the U.S.-Iraq Business Council, a Washington-based group lobbying for American investment and free-market reforms in Iraq.
"It's a huge opportunity," Fisher said. "People are very, very interested, and they want to be first in the queue."
In its favor
Iraq has a fairly well-educated and entrepreneurial people, and its population of 24 million is a healthy size for large sales. Its proven oil reserves are the world's second-largest, and the fertile Euphrates and Tigris river valleys once sustained a thriving agriculture industry.
The Office of Reconstruction and Humanitarian Assistance, led by retired U.S. Lt. Gen. Jay Garner, is assessing Iraqi government agencies to be privatized. One official there said "everyone under the sun" is showing interest in investment.
But the investment carries some big risks, said Erinc Yeldan, a professor of Middle Eastern economics at Bilkent University in Ankara, Turkey.
Sporadic fighting still plagues the country, and the lack of a government means there is no one to enforce business contracts. It could be months or longer before a government forms. Years of economic sanctions have created a thriving criminal underworld.
Yeldan said many Iraqis are leery of U.S. outsiders and the free-market principles they want to impose. Some have already said they want nothing do with Garner.
No big consumer market
Yeldan dismissed expectations for a big consumer market, saying most of Iraq's middle class was impoverished by the U.N. sanctions, which were imposed after Iraq invaded neighboring Kuwait in 1990.
President Bush is campaigning hard for the United Nations to reverse the embargo so Iraq can start trading with the outside world and spend its oil money on imports other than food.
But other countries have so far stymied the action, saying they want Washington to better spell out what kind of reforms it has in mind for Iraq.
Countries that were highly vocal in opposing the conflict, such as Russia, France and Germany, have signaled a readiness to focus on the future, but want to make sure their companies don't get left out on reconstruction contracts.
Khadduri cast doubt on the ability of oil revenue to provide much of an economic boost. In a best-case scenario, he calculates oil will generate around $20 billion annually, barely enough to cover reconstruction estimates for the initial years.
Before the war, the Iraqi government budget was usually around $15 billion a year, including military spending, he said.
It will take time
Business advocates such as Fisher acknowledge that it will take months, at least, for Iraq to stabilize enough to attract a steady flow of foreign investors. But he said entrepreneurs that are serious are already checking out the opportunities.
His group is hosting an Iraqi business fair in Chicago on May 15 and about 200 companies are expected, he said. Companies with the most to gain in the early stages are in the insurance, banking, education and defense sectors, he said.
"There is good money to be made," Fisher said.