The huge economic potential in Iraq is attractive for business, but ten years after the US invasion, Western companies hesitate to go there. However, the German company, Trapp, is an example of how it can work.
The first time Ernst-Joachim Trapp went to Iraq was 17 years ago. "Back then, our company had its first contract in Iraq. But my father, who ran the firm at the time, didn't speak English. I had learned English in school starting when I was six, so they took me along as a translator."
That was in 1952. Iraq became a major client for the company. "We've built hundreds of kilometers of roads, factories, dams and much more in the country." The good business ended with UN sanctions and the first war against Saddam Hussein in the early 1990s.
The family-run business was founded in 1872. Today, Trapp, at age 77, has also brought his son into the firm. But he is still fascinated by and focused on Iraq. Trapp is vice president of the German-Arab Society.
After a long break, the company has now taken the step back into Iraq. "It's about expanding a fertilizer factory:" Trapp had built the original plant in the 1980s, together with the German construction company, Hochtief. Now, there's a need for new additions to the factory.
"Iraq's economic potential is very big," Steffen Behm explains, an Iraq expert for the German Chamber of Commerce. "It's one of the strongest growing economies in North Africa and the Middle East and the country has a lot of catching up to do in the aftermath of the embargo and the two Gulf wars," says Behm.
Whether in the oil and gas sectors, in terms of infrastructure, or environmental technology, there are many areas where there's a need for modernization. "There are opportunities in almost all sectors," Steffen Behm says, "starting with consumer products and electrical engineering, to medical equipment and construction technology."
German companies are slowly returning to Iraq. "In the past five to six years we've seen a positive trend," Behm explains. In the past years, German firms have exported products and services worth some 1.3 billion euros to Iraq. Before the US invasion ten years ago, it was in the low hundreds of millions. But the pre-war figures illustrate that there is still room to grow. In the early 1980s, German exports amounted to around four billion euros.
Behm doesn't think that US or British companies are still privileged because of their countries' contributions to the fall of Saddam Hussein. The UK, for instance, exported just 350 million euros worth of goods in 2012, significantly less than Germany.
No easy business
"German companies are very interested in Iraq," Behm said, " but there are still many obstacles." The difficult security situation keeps many companies from investing in Iraq. Firms, instead, tend to concentrate on the quieter Kurdish north. "That's a good opportunity to get started under relatively normal conditions," he noted.
Another big problem is the political instability. Since parliamentary elections in 2010, there has been infighting between Shiites, Sunnis and Kurds and the ongoing power struggle is hampering economic investment from abroad, says Behm, adding that the introduction of new laws and regulations are often blocked. An important example is the oil law, which would regulate the marketing of crude. It has been deadlocked for years.
Iraq is still too centralized in many areas, Behm explains. Around 90 percent of the country's economy, he estimates, is controlled and influenced by the government, which hinders quick decision-making.
Businessman Trapp also complains about the "administrative inefficiency. Everything takes ages and then gets changed yet again." Negotiations for Trapp's latest project began in 2011, but it took one and a half years to seal the deal - in September 2012. Construction still hasn’t started. The reason is that Trapp is still waiting for the necessary financial guarantees from the authorities and a local bank. The duration of this process "doesn't seem to be unusual for Iraq," Trapp says. Other companies have reported similar experiences.
Times are changing
It used to be different. "It's changed a lot, especially these delays and uncertainties. Before, Iraqis were called the 'Prussians of the Orient'. They stuck to the contracts, there was no corruption, everything was orderly, very precise and meticulous. That's all gone. Today it is very, very difficult to move things forward," says Trapp.
The security situation is also a big problem. "As a company, you can hardly dare to send people there when there's a danger that they might be kidnapped. "Luckily, the new project of his company is set in a rather safe part of the country. Also, Trapp is only providing consulting and planning. The actual construction work is being done by an Iraqi partner.
But Trapp is confident about the country's potential. "Once the political situation is somewhat back to normal again, there will be a boom" and German companies will be a part of it, he hopes.