Identifier
Created
Classification
Origin
09BAGHDAD816
2009-03-25 15:26:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Baghdad
Cable title:
PRT KIRKUK: FAILURE TO PRIVATIZE LAYLAN CEMENT
how-toVZCZCXYZ0001 PP RUEHWEB DE RUEHGB #0816 0841526 ZNR UUUUU ZZH (CCY ADX 004719D5 MSI7875) P 251526Z MAR 09 FM AMEMBASSY BAGHDAD TO RUEHC/SECSTATE WASHDC PRIORITY 2382 INFO RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
UNCLAS BAGHDAD 000816
C O R R E C T E D C O P Y (ADDED CAPTION)
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EIND EINV IZ
SUBJECT: PRT KIRKUK: FAILURE TO PRIVATIZE LAYLAN CEMENT
FACTORY
REF: BAGHDAD 222
This is a PRT Kirkuk reporting cable.
UNCLAS BAGHDAD 000816
C O R R E C T E D C O P Y (ADDED CAPTION)
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EIND EINV IZ
SUBJECT: PRT KIRKUK: FAILURE TO PRIVATIZE LAYLAN CEMENT
FACTORY
REF: BAGHDAD 222
This is a PRT Kirkuk reporting cable.
1. (SBU) SUMMARY: The Laylan Cement Factory, a State Owned
Enterprise Joint Venture (SOE JV)recently lost its contract
with the GOI Ministry of Industry and Materials (MoIM). GOI
officials cited of lack performance and inability to meet
contractual obligations for terminating the relationship with
the investor. The termination of the SOE JV contract at
Laylan Cement leaves one MOIM SOE JV currently in production.
(Reftel A) END SUMMARY.
2. (U) The Laylan Cement Factory is one of 17 state owned
cement producers in Iraq. On 20 August 2008, the GoI
Ministry of Industry and Materials (MoIM) and Kirkuk Cement
Company Ltd. (KCC) executed an agreement for refurbishment
and operation of the former Laylan Cement Factory in Kirkuk
Province which provided for operation of this state owned
enterprise (SOE). MoIM retained ownership of the factory
under the agreement and KCC, a partnership consisting of
German, Iraqi and Middle Eastern investors, took over
operation and production in exchange for an estimated 60%
share of factory output. PRT conducted discussions with the
current and former managers of the factory to gather
information regarding the status of the agreement and factory.
3. (U) The current factory manager (as of 8 February 2009)
confirmed that MoIM terminated its agreement with KCC as of 5
February 2009, due to KCC,s default and failure to perform
contractual obligations. Principal performance deficiencies
included failure to meet the milestones related to
refurbishment of factory operations. The Manager provided
copies of official MoIM correspondence to KCC citing
performance deficiencies, lack of progress, and failure to
provide a monthly allotment of 30,000 metric tons of cement
to MoIM per contract agreement. He further stated that KCC
failed to meet any of the 31 specifically identified progress
milestones up to the time of their termination. Four
resident representatives of the German investors at the
factory have now departed.
4. (SBU) According to the Manager, factory output continued
to decline after implementation of the agreement, due to lack
of technical maintenance and spare parts. He further alluded
to worker unrest during the "German tenure" due to lack of
payment for overtime wages and expected bonuses. He noted
that workers would demonstrate their dissatisfaction by
turning off machinery in order to negatively affect
production output.
5. (SBU) The previous manager claims his supervisors at MoIM
initiated his removal because of potential legal initiatives
MOIM may pursue against KCC. He confirmed KCC's contractual
termination and mentioned the partnership's lack of
investment in the factory, lack of performance and lack of
initiative as the principal reasons for their termination.
He used the phrase "wrong people for the wrong job" to
characterize KCC, and opined that they did not understand the
business or operation they had contracted to undertake.
6. (SBU) The previous manager also mentioned that the two
remaining investors in the partnership initiated discussions
with MoIM with the intent of negotiating a restructuring of
the contract and are currently seeking a 60 day grace period
within which to develop a restructured deal with MoIM. He
believes MOIM is close to providing approval for the 60 day
grace period.
7. (SBU) COMMENT: The Laylan Cement Factory is one of two
SOE joint venture initiatives to move into production and at
this juncture, it appears to have been unsuccessful. From
Qthis juncture, it appears to have been unsuccessful. From
the perspective of MoIM, responsibility is attributable
solely to the private sector partnership. PRT has not been
able to reach the German investors to hear their perspective,
but it seems that MoIM's expectations of production
improvements in the factory were overestimated. PRT will
continue to monitor activity at the factory and work with the
GoI and any future investors as applicable. END COMMENT.
BUTENIS
C O R R E C T E D C O P Y (ADDED CAPTION)
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EIND EINV IZ
SUBJECT: PRT KIRKUK: FAILURE TO PRIVATIZE LAYLAN CEMENT
FACTORY
REF: BAGHDAD 222
This is a PRT Kirkuk reporting cable.
1. (SBU) SUMMARY: The Laylan Cement Factory, a State Owned
Enterprise Joint Venture (SOE JV)recently lost its contract
with the GOI Ministry of Industry and Materials (MoIM). GOI
officials cited of lack performance and inability to meet
contractual obligations for terminating the relationship with
the investor. The termination of the SOE JV contract at
Laylan Cement leaves one MOIM SOE JV currently in production.
(Reftel A) END SUMMARY.
2. (U) The Laylan Cement Factory is one of 17 state owned
cement producers in Iraq. On 20 August 2008, the GoI
Ministry of Industry and Materials (MoIM) and Kirkuk Cement
Company Ltd. (KCC) executed an agreement for refurbishment
and operation of the former Laylan Cement Factory in Kirkuk
Province which provided for operation of this state owned
enterprise (SOE). MoIM retained ownership of the factory
under the agreement and KCC, a partnership consisting of
German, Iraqi and Middle Eastern investors, took over
operation and production in exchange for an estimated 60%
share of factory output. PRT conducted discussions with the
current and former managers of the factory to gather
information regarding the status of the agreement and factory.
3. (U) The current factory manager (as of 8 February 2009)
confirmed that MoIM terminated its agreement with KCC as of 5
February 2009, due to KCC,s default and failure to perform
contractual obligations. Principal performance deficiencies
included failure to meet the milestones related to
refurbishment of factory operations. The Manager provided
copies of official MoIM correspondence to KCC citing
performance deficiencies, lack of progress, and failure to
provide a monthly allotment of 30,000 metric tons of cement
to MoIM per contract agreement. He further stated that KCC
failed to meet any of the 31 specifically identified progress
milestones up to the time of their termination. Four
resident representatives of the German investors at the
factory have now departed.
4. (SBU) According to the Manager, factory output continued
to decline after implementation of the agreement, due to lack
of technical maintenance and spare parts. He further alluded
to worker unrest during the "German tenure" due to lack of
payment for overtime wages and expected bonuses. He noted
that workers would demonstrate their dissatisfaction by
turning off machinery in order to negatively affect
production output.
5. (SBU) The previous manager claims his supervisors at MoIM
initiated his removal because of potential legal initiatives
MOIM may pursue against KCC. He confirmed KCC's contractual
termination and mentioned the partnership's lack of
investment in the factory, lack of performance and lack of
initiative as the principal reasons for their termination.
He used the phrase "wrong people for the wrong job" to
characterize KCC, and opined that they did not understand the
business or operation they had contracted to undertake.
6. (SBU) The previous manager also mentioned that the two
remaining investors in the partnership initiated discussions
with MoIM with the intent of negotiating a restructuring of
the contract and are currently seeking a 60 day grace period
within which to develop a restructured deal with MoIM. He
believes MOIM is close to providing approval for the 60 day
grace period.
7. (SBU) COMMENT: The Laylan Cement Factory is one of two
SOE joint venture initiatives to move into production and at
this juncture, it appears to have been unsuccessful. From
Qthis juncture, it appears to have been unsuccessful. From
the perspective of MoIM, responsibility is attributable
solely to the private sector partnership. PRT has not been
able to reach the German investors to hear their perspective,
but it seems that MoIM's expectations of production
improvements in the factory were overestimated. PRT will
continue to monitor activity at the factory and work with the
GoI and any future investors as applicable. END COMMENT.
BUTENIS