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.
(China.org.cn by Shao Da, February 9, 2004)