Iraq dreams big with infrastructure projects

Reuters News
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Posted: Aug 21, 2011 11:34 AM
Iraq dreams big with infrastructure projects

By Aseel Kami

BAGHDAD (Reuters) - In Iraq where renovating a single street can take years, government plans for a multi-billion dollar high-speed train to rival Japan's bullet train have been greeted with skepticism by many Iraqis struggling to get even basic electricity services.

The $10 billion project to build a railway connecting Baghdad to the southern provinces is the latest in a series of large-scale infrastructure proposals by Iraq's government to try to rebuild the OPEC oil-producing country after years of war.

Iraq needs development in almost every sector in a country where piles of rubble and incomplete buildings are commonplace more than eight years after the 2003 U.S.-led invasion that toppled Saddam Hussein.

Most Iraqis, fed-up by the lack of jobs and pre-occupied with food rations and security concerns, have to contend with an acute water shortage and receive only a few hours of electricity a day from the national grid.

Baghdad, the capital, is plagued by badly paved roads and blast walls erected to protect buildings from bombings.

"The government cannot even accomplish projects that are much easier than the high speed train," said Ahmed Saleh, an architectural engineer. "The airport road they kept talking about for three years is still in bad shape."

Some analysts said the government was indulging in wishful thinking, refusing to acknowledge that a lack of funding, technical capabilities and continuing violence have put the break on development and foreign investment.

Violence from Iraq's war has fallen sharply since the height of sectarian strife in 2006-2007, but almost daily attacks, bombings and assassinations make security costs a huge part of foreign investment expense.

While oil investment is flowing into the country, investors in other sectors often complain about bureaucracy and red tape. Political infighting in the government is also helping delay projects in areas such as electricity and telecommunications.

"In reality it is not possible to implement these projects on the ground," said Yahya Kubaisi, an analyst at Iraq's Institute for Strategic Studies. "They are just dreams and wishful thinking by government officials."

OIL-Fueled RECOVERY

Rebuilding Iraq's roads and transport system is vital for foreign oil companies to transport equipment as they develop the country's petroleum industry.

Iraq, which has the world's third biggest crude reserves, hopes to rebuild the country using its oil revenues, which account for more than 95 percent of state income.

But Iraq has little public transportation, relying mostly on taxis and minibuses and a dilapidated railway system connecting the provinces.

Baghdad signed a memorandum of understanding with French engineering group Alstom in June to build a 650 km-long railway and an express train, an official in the Transport Ministry said.

An initial agreement to build an overground urban metro line in Baghdad for $1.5 billion was also signed with Alstom in May. The first part of the project is expected to be completed in 2014.

Other large scale projects include the Sadr city slum "10 x 10" plan to build 150,000 flats, stores, parks and cinemas over 10 years. It was first announced in 2008, but Iraq has yet to award the deal to anyone.

The government says projects like the high-speed train and urban metro are achievable and blames the slow progress on budget shortfalls.

"The projects the ministries have put forward are realistic and serious," said Iraq's Planning Minister Ali al-Shukri.

"Their plans and estimated costs are ready but the issue all ministries face is that of financing."

Iraq's 2011 budget was $82.6 billion based on an average oil price of $76.50 per barrel and the deficit at $13.4 billion.

The Finance Ministry drew the 2012 budget at $98.3 billion based on oil prices of $85 a barrel with a deficit of $13.7 billion. It still needs cabinet and parliamentary approval.

STAGGERED PAYMENTS

Shukri said the government was leaning toward staggered payment contracts, where payments will be divided over a longer period of time, with interest, in order to go ahead with such big projects.

In addition to an overground metro, Baghdad is also looking at the construction of an underground rail transport system.

Plans for the underground, which date back to the 1980s, were first revived about three years ago. So far, the design of the metro is still being drawn up.

Baghdad Mayor Saber al-Issawi said part of the 2012 budget had been allocated to funding the metro, estimated to cost $3-4 billion, and asked for patience, saying infrastructure projects took a lot of time across the globe.

"Preparation of huge projects, even in advanced countries take three, four or even five years," he said.

"It is a matter of time."

(Reporting by Aseel Kami; Editing by Serena Chaudhry and Elizabeth Piper)