By Leila Fadel
Thursday, October 7, 2010; A12
BAGHDAD - As the first American trade delegation to Iraq in three decades prepared to wrap up its visit Thursday, the senior official who led the group warned potential U.S. investors that they should not delay getting into the Iraqi market, despite the many hazards of doing business here.
"Opportunities to create partnerships and to engage is not a year and a half from now, or two years from now, where perhaps you will see a continued reduction in attacks or violence," said Francisco Sanchez, the U.S. undersecretary of commerce for international trade. "If you want to really play a role here, you have to be here now."
Sanchez arrived in Baghdad on Monday with representatives of 14 U.S. companies, including General Electric and Boeing. Five of the firms were newcomers to Iraq, while the others had made some earlier forays. His comments Wednesday appeared to reflect U.S. officials' concern that American businesses risk losing ground to more aggressive international competitors.
"If they wait . . . until everything is in a nice neat order, then they're going to cede opportunities to businesses from other parts of the world," Sanchez said, in reference to Iraq's massive reconstruction needs and relatively untapped consumer market.
The United States is outranked by Turkey and Syria and virtually tied with China in the total value of their exports to Iraq. Other than government contracts, the United States "consistently ranks in the bottom" when it comes to private investment in Iraq, according to a 2009 study by Dunia Frontier Consultants.
U.S. companies have largely shied from investing in Iraq because of concerns about security and corruption, the difficulty of getting visas, murky business regulations and Iraq's weak and arbitrary legal system.
"Potential investors should prepare themselves for significant security costs; cumbersome and confusing procedures for business visas or new business registrations; long payment delays on some Iraqi government contracts; and sometimes unreliable, non-transparent dispute resolution mechanisms," according to a State Department assessment in March. "Allegations of corruption are still endemic, and the legacy of central planning and inefficient state-owned enterprises continue to inhibit economic development."
The visiting trade delegates got a firsthand taste of some of those constraints this week. They were transported from the airport to the U.S. Embassy in armored vehicles and met with Iraqi businessmen and officials inside the heavily fortified Green Zone, which has come under intense rocket and mortar fire in recent days.
Sanchez noted the problems posed by corruption, saying he had urged Iraqi officials to implement policies conducive to a more transparent business climate. Still, he said, "it's not unique to Iraq. . . . One of the biggest barriers around the world is corruption."
Iraq is ranked fifth from the bottom on Transparency International's Corruption Perceptions Index - tied with Sudan and ahead of only Burma, Afghanistan and Somalia. Iraq's ranking has dropped drastically since 2003.
Some U.S. businesses are investing in Iraq. Boeing and General Electric have won large contracts here. This week, the technology and manufacturing company Honeywell International opened an office in Baghdad to provide equipment for Iraq's oil and gas sectors. The company said that it would proceed with caution but plans to expand.
Iraq is anxious to encourage more U.S. investment. The deputy prime minister, Roj Nouri Shawis, told the delegation that the country has had many "successes" in terms of security gains and smoother business practices.
An ideal business climate remains a distant prospect, however. \The delegates' visit to Baghdad ends just as Iraq enters its eighth month without a new government, and U.S. officials say they worry that the political impasse has stalled legislation that could ease foreign investment and has the potential to worsen security.