DEVELOPMENT IN KARBALA: PROGRESS AND CONTROVERSY

UNCLAS SECTION 01 OF 03 BAGHDAD 001171 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EINV PGOV PREL IR IZ SUBJECT: DEVELOPMENT IN KARBALA: PROGRESS AND CONTROVERSY REF: BAGHDAD 1100 This is a PRT Karbala Reporting Cable (U) This message is Sensitive but Unclassified; handle accordingly. Not for distribution on the Internet. ¶1. (SBU) Summary: At least three development plans have been posited for Karbala since Iraq's liberation. The province's de facto operational blueprint (the so-called &Shahristani8 plan) was devised in mid-2008 and has been blessed by Prime Minister Maliki, although it is widely disliked by many Provincial Council (PC) members. A competing Iranian company's plan for redeveloping the area around the al-Husayn and al-Abbas shrines has stirred controversy and may be revised as well. Meanwhile, we expect that the political and bureaucratic impediments that have held back reconstruction progress will be lowered in the coming months. End Summary. Plans Aplenty ¶2. (SBU) At least three development plans have been posited for Karbala Province since Iraq's liberation. In 2006, Parsons Brinkerhof produced a "basic plan" outlining for the first time a coherent scheme for organizing services and infrastructure, although its recommendations seem largely not to have been implemented. The Karbala Governor's Planning Office in early 2008 solicited bids for a $700,000 provincial development plan. None of the proposals came in at near the asking price, and the contract eventually was awarded to engineers from Babil University for $1.3 million. However, they failed to produce a scope of work and the project never commenced. ¶3. (SBU) The Provincial Investment Commission (PIC) in mid-2008 launched its own effort to map Karbala's future. It hired Bloom Properties, a land-development company from the UAE, affiliated with the sons of Shaykh (1971-2004) Zayid bin Sultan al-Nahayan, to come up with a master plan for the province. This proposal encompassed the establishment of a "new Karbala City" on the shores of Lake Razzaza, far west of the old city center, and sketched out a re-zoning scheme that would convert "agricultural" lands near the al-Husayn and al-Abbas shrines into commercial real estate. This plan does not seem to have gained any traction with the PC. Baghdad Involved... -------------- ¶4. (SBU) Also in mid-2008, the PC contracted the Iraqi-British Shahristani Company to produce a provincial master plan. Like the PIC scheme, it calls for extending development to the shores of Lake Razzaza (albeit not the establishment of an entirely new city there). It also incorporates a greenbelt and features the redevelopment of older neighborhoods. This plan, blessed by Prime Minister Nouri al-Maliki and the Ministry of Municipalities -- and therefore carrying the weight of federal funding -- is Karbala's de facto current operational blueprint. ¶5. (SBU) The Sharistani plan forecasts the steady growth of Karbala's urban tourism infrastructure while reserving lands away from the city center for agricultural use. Knowledgeable contacts, including Karbala Chamber of Commerce members, describe it as practical, if not exactly visionary. One PC member is outspoken in her dislike for the plan and wishes to revisit it. Its primary virtue, according to local business leaders, is that it will enable downtown properties that have been zoned "agricultural" for as long as anyone here can remember to be re-cast for residential or commercial use. ...Along with Iran -------------- ¶6. (SBU) According to a contact close to the PC leadership, the Shahristani plan left intentionally vague the sensitive issue of redevelopment around the al-Husayn and al-Abbas shrines. He said that Abd al-Mahdi al-Karbala'i and Ahmad Qshrines. He said that Abd al-Mahdi al-Karbala'i and Ahmad al-Safi, imams (respectively) of the al-Husayn and al-Abbas shrines and Grand Ayatollah Ali al-Sistani's representatives in Karbala, told then-Governor Aqeel al-Khazali and other PC leaders in mid-2008 that the marja'iyah (Shi'a religious leadership) reserved the right to determine the scope and complexion of change around the shrines. Late last year, Imams Karbala'i and Safi issued a solicitation for bids to redevelop the shrines area. A knowledgeable contact reports that proposals were received from companies based in France, the UAE, the UK and Iran. (Note: See reftel for more on the shrines' independent agenda. End Note.) ¶7. (SBU) By early 2009, rumors that the marja'iyah had selected an Iranian company to renovate the area around the shrines -- to the tune of $40 million -- began to circulate around Karbala. In March, Imams Karbala'i and Safi confirmed that an Iranian firm, the al-Kawther ("Heaven") Company, had "won" the contract (while refusing to divulge details such as its dollar-value),prompting skepticism from business and political figures here concerning the probity of the marja'iyah's selection process. In response, the PC announced a two-month period of public comment on al-Kawther's plan (it expires in mid-May). BAGHDAD 00001171 002 OF 003 ¶8. (SBU) While the firm's nationality predictably has elicited concern among many of Karbala,s residents, the projected demolition of existing homes and businesses around the shrines has created considerable local controversy. Knowledgeable contacts insist the overwhelming majority of Karbalans oppose al-Kawther's scheme. A local journalist claims the PC has received more than 500 messages from citizens opposed to the razing of buildings near the shrines. On April 26, several hundred residents and business-owners staged a noisy demonstration near the al-Husayn shrine demanding that the PC overrule the marja'iyah and cancel al-Kawther's contract. Ground-Level View -------------- ¶9. (SBU) Planning Karbala's redevelopment is one thing, undertaking it is another. PRT members met on April 28 with Ali al-Sahaf and Shaker Mohammad Ali, partners in a real-estate and construction company called Mushkat. The company was formed three years ago by expatriate Iraqis who returned from Syria, where they had a development company called -- like the Iranian firm -- al-Kawther. (Note: They insist there is no relation between the two companies; that they have the same name is merely a coincidence. End Note.) Claiming to have purchased more than $100 million in land in Karbala Province, and employing 52 full-time employees and 120 laborers, Ali and Shaker are attempting to work within the Shahristani master plan. They have won approval to build 2,500 single-family homes eight km west of the city center, toward Lake Razzaza. They also have begun construction of a 550-apartment housing and commercial complex approximately 400 meters northwest of the shrines and just outside the Iranians' projected redevelopment zone. ¶10. (SBU) According to Ali and Shaker, the problem in Karbala is not the building process itself as construction is evident all over the province. The issue, they said, is securing permission to build. Properties closer to the city center invariably must be re-zoned (much of the land remains classified as "agricultural"),and this is extremely time-consuming. For example, they said, their single-family home project -- involving un-zoned desert land -- took nine months to win official approval from all the ministries (they counted eight) involved, as well as from the PC and the PIC. By contrast, permit applications for the project near the shrines were submitted more than two years ago and still no approvals have been produced. ¶11. (SBU) Like other builders here, Mushkat cannot afford to wait indefinitely and has begun construction on the apartments; the first building will be finished in about two months. Ali and Shaker said that, despite the risk, creating "facts on the ground" is the only commercially viable means of proceeding here. They claim that no one who has begun construction before obtaining the required approvals has had their projects rejected (rejection would mean no access to water, sewage, and electrical services). They pointed to Karbala's largest hotel, the al-Safir ("Ambassador") as proof; completed last year, it still lacks approvals but has water, sewage and electricity. (Note: We are aware, however, of a number of other hotels built without license to which the provincial government has yet to provide utilities. End Note.) Investors Lack Confidence -------------- ¶12. (SBU) Despite the propensity of developers here to proceed with construction before receiving official permission, potential investors understandably are gun-shy and insist on the security provided by a transparent and Qand insist on the security provided by a transparent and predictable approvals process. This, according to Ali and Shaker, is where the United States can help. They urged the PRT to press the PC to streamline the system for acquiring approval to build, particularly as it involves re-zoning. Evidently feeling a cash pinch, they also made a pitch for U.S. investors to get involved: "This is an unparalleled opportunity for American companies to invest in a developing market unaffected by the financial turmoil elsewhere in the world." Comment -------------- ¶13. (SBU) Entrepreneurs such as Ali and Shaker are precisely what Karbala needs to kick-start its economy and address the housing shortage here (according to the PIC, the province requires at least 35,000 units of housing for residents). Unfortunately, they have been far ahead of the politicians, whose glacial decision-making pace conceals a multitude of sins (ranging from ignorance to incompetence to corruption). With the new, Da'wa-dominated PC under public pressure to show progress on long-delayed improvements here, we expect that the political and bureaucratic impediments that have held back reconstruction will be lowered in the coming months, enabling Mushkat and similar enterprises to realize their visions and profit. As for the redevelopment of the area around the al-Husayn and al-Abbas shrines, we doubt that any amount of public outcry will enable the PC to wrest BAGHDAD 00001171 003 OF 003 jurisdiction over this issue from the marja'iyah. However, it may prompt Karbala'i and Safi to send the Iranian al-Kawther Company back to the drawing board to come up with a less objectionable plan. End Comment. HILL