Muthanna's Provincial Investment Commission: Successes and

UNCLAS SECTION 01 OF 02 BAGHDAD 001237

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EINV ETRD PGOV ECON IZ
SUBJECT: Muthanna's Provincial Investment Commission: Successes and
Challenges

REF: (A) 08 Baghdad 3682


1. (U) This is a PRT Muthanna Reporting Cable.


2. (SBU) SUMMARY: Muthanna's Provincial Investment Commission (PIC)
is one of the most active in Iraq, with 17 projects licensed to date
and four of those are in various stages of completion. Challenges
remain, however, especially in acquiring rights to land from the
Ministries of Finance and Municipalities/Public Works for these
projects. Both PIC board members and businessmen alike believe that
land is the number one impediment hindering many of these
investments. END SUMMARY.

MUTHANNA'S PIC: A MODEL FOR IRAQ
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3. (U) Muthanna's Provincial Investment Commission (PIC) is one of
the most active in Iraq. As of early May, the PIC had issued 17
licenses for projects across a variety of industries, including
tourism, entertainment, agriculture, retail trade, housing, and
heavy industry. In total, these investments could bring in some 360
million dollars to Muthanna. In addition, the PIC is evaluating
another 25 proposals valued at approximately two billion dollars.
Companies from Turkey, China, Germany, Australia, Kuwait, and
elsewhere are currently proposing investments in Muthanna. In
addition, some local Iraqis have returned home from living abroad to
start businesses in Muthanna.

STATOIL AND CHUCK-E-CHEESE IN MUTHANNA?
--------------


4. (U) While licensing is a necessary step in the investment
process, construction starts are an even more important step. To
that end, on May 7, the PRT conducted a site visit to a new auto
care center outside Samawah. The owner/manager envisions a
substantial project, to include a petrol filling station (already
completed),an auto service station, a car dealership, and a family
restaurant. The owner's inspiration came from the many STATOIL
stations he saw when he lived in Sweden for some 15 years. The fuel
station phase of the project was fully operational when the PRT
visited, and the installed pumps were imported from Sweden.


5. (U) The PRT also visited the site of a future children's
entertainment center in central Samawah. The project will be under
construction for the next year, but the foundation had already been
laid at the time of the PRT's visit. The investor, a local
businessman, was interested in this project after seeing a similar
facility in the UAE and a "Chuck-E-Cheese" restaurant in Michigan.


6. (SBU) Finally, the PRT visited the Samawah offices of the Sawa
Beach Company. The company is negotiating joint ventures to
renovate and operate two cement plants, one in Muthanna and the
other in Najaf. The Muthanna project would rehabilitate the newer
of the two cement plants in the province so that it can once again
produce to its design capacity. This would allow more of southern
Iraq's cement needs to be produced in Iraq; currently, only
one-tenth of Iraq's cement needs are produced within its borders.

LAND TITLES AS THE MAIN ROADBLOCK
--------------


7. (SBU) Uniformly, the businessmen and PIC representatives viewed
land issues as being the major roadblock preventing licensed
projects from getting started. The projects already underway have
been successful only because the businessmen have owned the land
themselves. In particular, the PIC board members complain that the
Ministry of Finance and the Ministry of Municipalities and Public
Works own most of the land that could be used for investment.
Although these local officials continue to work with interlocutors
in Baghdad for a solution, they are not sanguine about a solution
anytime soon.



8. (SBU) Privately, PIC representatives lament that investment is a
new concept in Iraq and many of the ministerial representatives in
Baghdad are not accustomed to organizations outside of government
investing in large scale programs. Under the previous regime,
Iraq's economy was heavily centralized with nearly 200 state owned
enterprises. Therefore, Baghdad controlled nearly all economic
activity, with the exception of small scale production. Ministers
and other government officials may be working with that mind set.
In addition, there may be obstacles of graft and official corruption
impeding progress on these land issues.


9. (SBU) COMMENT: Muthanna's PIC continues to be ahead of many of
its provincial peers in terms of attracting investment interest and
issuing licenses for projects. With the exception of a few projects
where the investor personally owns the land, most of these will
require a land lease or purchase before any further progress can
take place (reftel). Only pressure from multiple stakeholders --
provincial, business (both national and international),and
diplomatic at the national level -- can break this logjam. END
COMMENT.

BUTENIS