Chinese firm wins Iraq reconstruction contract

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Last updated at: (Beijing Time) Tuesday, February 10, 2004

Chinese firm wins Iraq reconstruction contract

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After some six months of difficult negotiations, the Zhongxing Telecom Co. (ZTE) has recently signed a contract with the Iraqi Ministry of Communication to supply telecommunications equipment to the war-worn country. Based in Shenzhen City, Guangdong Province, ZTE ranks among China's largest telecommunications manufacturers.

Valued at over US$5 million it was the first contract to go to a Chinese company in post-war Iraq. It was won in the face of some resistance on the part of the US-led Coalition Provisional Authority. But as ZTE's project manager Dong Baoping said, "After all, Chinese communications equipment is of a high quality and enjoys a good reputation in Iraq. Even before the war, ZTE was one of Iraq's main suppliers in the sector."

In 2003, ZTE set up a special working group to open up the post-war Iraqi market. It was a busy time as the members of the group shuttling back and forth between Iraq and Jordan in search of the right business opportunities.

"On the one hand, the Iraqis themselves wished to continue working with China but on the other the Coalition Provisional Authority seemed to spare no effort in its desire to see all the contracts go to American companies," revealed Dong.

After the war, the Iraqis wanted to bring in Chinese firms to get their damaged communications equipment back into action. This however did not find favor with the Coalition Provisional Authority who went ahead and signed a contract worth US$25 million with Lucent Technologies without consulting the Iraqis.

However, the Iraqis were not satisfied with the Lucent deal. So ZTE seized the opportunity and entered into extended consultations with high-level Iraqi technical personnel, finally winning their support.

In calling for tenders, the Iraqi side took a firm stance when dealing with the Coalition Provisional Authority. And so in the end, ZTE had an opportunity to win the contract in competitive tendering. The success comes as a confidence booster for other Chinese companies wanting to become involved in the reconstruction of Iraq.

Chinese firms lose out to US monopoly

US President George W. Bush put the "contracts controversy" back in the international spotlight on the sidelines of the recent Summit of the Americas held in Monterrey, Mexico. On Jan. 13 he made a commitment to the new Canadian Prime Minister Paul Martin that Canadian firms would be eligible for the second round of US-financed reconstruction contracts in Iraq. It was only in December of last year that the Bush administration put an embargo on firms from countries that had opposed the Iraq war preventing them bidding for the lucrative reconstruction projects.

Post-war Iraq is being eyed as a place of boundless business opportunities. Since a number of US corporations including the Bechtel Group and Halliburton Co. were first awarded contracts by the US Agency for International Development (USAID) back in July 2003, the reconstruction of Iraq has attracted commercial interest from all round the world. Nevertheless the Coalition Provisional Authority has dominated the tendering process as it controls almost all the reconstruction funding.

What's more, though China is not actually blacklisted, sources in the interim Iraqi Governing Council (IGC) say that in practice the United States is excluding Chinese firms from the work of reconstruction.

Under the circumstances, Chinese firms could hold out little hope of having a role in rebuilding war-ravaged Iraq. Several Chinese companies did go to Iraq to bid for reconstruction projects, but all returned empty-handed prior to the ZTE success.

Today's obstacles confronting Chinese firms wishing to do business in Iraq contrast sharply with the pre-war situation when China was one of Iraq's five major trading partners.

With the lifting of international sanctions, post-war Iraq has opened its markets to the West. As it reconstructs, the country has begun to rely heavily on technologies and equipment brought in from Western countries. Against this background, Chinese companies feel that it's becoming more and more difficult for them to do business in Iraq.

Post-war instability delays reconstruction

Since US President George W. Bush announced the end of major combat operations on May 1, 2003, the situation in Iraq has remained unstable. Things got steadily worse as one bomb attack followed another. The capture of Saddam Hussein on Dec. 13, 2003 did bring a slowdown in the guerrilla attacks but they still average over 20 a day.

Preoccupied as they are in dealing with Saddam loyalists and terrorists, the coalition troops in Iraq have little time to devote to the country's reconstruction. Over half a year has now gone by since the end of the war, but a workable and systematic plan for reconstruction is not yet in place.

The US-appointed IGC did produce a financial budget together with a reconstruction and development plan to cover the latter half of 2003 extending through 2004. But with international donations not in place and oil production capacity severely compromised, the measures could not be implemented. One thing is clear it will be some time yet before the major reconstruction projects get underway.

Under such circumstances, most Chinese companies have seen their business interests in Iraq brought to a standstill. For instance, two Chinese oil companies were in negotiations with pre-war Iraq over the exploitation of two medium-sized Iraqi oil fields. After the war, Baghdad was in no position to develop new fields as it concentrated its efforts on just getting its existing oil fields back into production. The Chinese companies are still maintaining close contacts but for now, signing these particular contracts is not on the Iraqi agenda.

Source: china.org.cn

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