Iraq earmarks $15 billion for infrastructure reconstruction

November 2, 2008 at 12:00a.m.

A joint venture with U.S. banks has been proposed.

BAGHDAD (AP) — Iraq has earmarked some $15 billion — nearly 25 percent of its 2009 draft budget — to help rebuild the country’s crumbling infrastructure, energy and oil facilities, the finance minister said Saturday.

But Bayan Jabr stressed those funds fall far short of the hundreds of billions of dollars Iraq needs to put its shattered economy back on its feet and appealed to foreign investors to help bridge the gap.

Speaking at a U.S-Iraqi investment conference in Baghdad, Jabr said a government study determined Iraq needs some $400 billion to upgrade its existing infrastructure and build new facilities.

“That is why we have to resort to investment in Iraq ... in many sectors including electricity, oil, oil byproducts, refineries, housing, infrastructure and banks,” he said.

Jabr said Iraq’s 30 private banks are still grappling with a capital shortage, despite the government’s increased credit support.

“That is why we think there is a great chance for banks in the U.S., Europe and the neighboring countries to start joint ventures with our banks and to enter the Iraqi market,” he said. “In this way, we can give more chance to credits and to other fields.”

He said the country’s “primitive” insurance market presents a similar opportunity for foreign companies.

Iraq’s economy has recovered slowly since the 2003 U.S.-led war, and the state budget has received a boost from high oil world prices this year.

But Planning Minister Ali Baban warned that Iraq, which is dependent on oil revenues for more than 90 percent of its national capital budget, must wean itself off its oil dependence.

Crude oil prices have fallen from a record $147.27 a barrel on July 11 to below $60 this week, before rebounding slightly Friday to around $67.

“This is an extremely dangerous situation for the Iraqi budget to depend totally on oil prices,” Baban said.

“That makes Iraq’s economy greatly exposed which is something Iraq has to get rid of as soon as possible.”