WASIT STATE TEXTILE FACTORY SEWS ITSELF BACK TO LIFE

UNCLAS BAGHDAD 001142 SIPDIS SIPDIS NEA-I ECON PLEASE PASS TO DOD TFBSO E.O. 12958: N/A TAGS: ECON ENRG ETRD IZ SUBJECT: WASIT STATE TEXTILE FACTORY SEWS ITSELF BACK TO LIFE ¶1. (U) This is a joint PRT Wasit/Embassy reporting cable. SUMMARY ¶2. (U) During a March 11 visit to the Wasit State Company for Textiles, Wasit PRT members observed production lines back up and running, after having been shuttered just two months ago. A grant from the Task Force for Business and Stability Operations (TF BSO), a loan from the Ministry of Industry and Minerals (MIMS),and a significant new intra-governmental contract have been instrumental in restarting operations at the plant. This State Owned Enterprise (SOE) continues to face significant operational challenges, such as raw material shortages (especially cotton),inconsistent electricity supply, out-dated capital equipment, and lack of contracts. Although much remains to be done, the restart of the factory's operations and its potential to generate revenue and sustain employment is encouraging. END SUMMARY. COMING BACK TO LIFE... -------------- ¶3. (U) During a March 11 visit to the Wasit State Company for Textiles, Wasit PRT members observed production lines back up and running, after having been shuttered just two months ago. Some 2,000 workers are now back on the factory floor, producing T-shirts, berets, and uniforms. A January PRT visit to the company had found most of this SOE's 5,500 employees had stopped coming to work in protest of non-payment of wages, forcing the factories to close. Revenue from this SOE provides 40 percent of workers' wages and its parent, MIMS, provides 60 percent. High production costs and lack of raw materials, however, dried up revenue streams, and left the SOE unable to cover its portion of the payroll. ...WITH A HELPING HAND -------------- ¶5. (U) A grant from the Department of Defense's Task Force for Business and Stability Operations (TF BSO),a loan from MIMS, and a significant new intra-governmental contract played an instrumental role in restarting operations at the plant. In February, a 1.35 million USD grant from TF BSO allowed the SOE to purchase the needed raw materials of polyester and acrylic, from two Iraqi companies, Al Rathath Company and Al Bashrah Al Iraqya Company. These companies reportedly import these materials from Turkey, the United States, and East Asia. The factory's director general, Hamid Al-ssfi, said the SOE received a loan from MIMS to cover its 40 percent share wage costs for the next three years. The SOE has reportedly secured a 1.5 million USD contract with the Ministry of Defense for underwear orders. Al-ssfi also stated MIMS had awarded an 850,000 USD grant to the factory for a cotton gin purchase. To date, the SOE has reportedly received 600,000 USD of this amount, but has not yet purchased the machinery. ¶6. (SBU) Although press reports in Wasit indicated the factory had received 13 million USD in loans from the Government of Iran, factory management denied having received any money. Al-ssfi reported that the Iranians had provided 100 million USD to MIMs to support five of its SOEs, and that 12.5 million had been allocated. To date, he said, the factory had not received this allocation nor knew when it would (NOTE: MIMS Deputy Minister Mohammed al-Ani confirmed to Embassy econoffs in February of this Iranian soft loan, the majority of which MIMs had budgeted for state owned sugar, rubber, vegetable oil, and textile factories. Al-Ani was not convinced these loans would actually be dispersed, however, as they required action in the Council of Representatives. END NOTE.) CONDITIONS REMAIN FAR FROM IDEAL -------------- ¶6. (U) The SOE continues to face significant operational challenges, such as raw material shortages (especially cotton),inconsistent electricity supply, out-dated capital equipment, and lack of contracts. Al-ssfi stated that electricity was supplied at only 25 to 35 percent of the factory's demand, blaming this deficit for raising his cost of goods sold. His finished goods prices are therefore too high to compete with imports, primarily from Iran and China. Al-ssfi said his cotton inputs were primarily from Kirkuk and Ninewa provinces, but requested US assistance in procuring US-produced cotton. ¶7. (U) Employment also remains a major challenge to the SOE. According to Hamid, his employment rolls swelled by 3,500 to 5,467, when the GOI reassigned many workers following the 2003 regime change. Hamid added there 2,006 of his employees are completely idle, yet continue to receive monthly wages. COMMENT -------------- ¶8. (U) PRT Wasit was especially encouraged by the number of women and disabled persons, such as amputees, working in the factory. Employees were also candid in sharing their satisfaction of being back at work. However, much of the equipment lay idle during our visit, and we will need to work with management to address the factory's power supply issues, open a new production line to utilize its entire work force, and upgrade its capital equipment. Once these issues are successfully resolved, PRT Wasit believes the enterprise can eventually be a significant employment and revenue generator. Embassy econoffs are working through FCS to identify American suppliers of cotton that could sell to the factory. END COMMENT.