AMMAN: Worsening sectarian violence has greatly hampered business activity in the last six months but Iraq’s enormous long-term potential means western firms are keen to retain a foothold there, international executives say.

Businessmen from some 1,000 foreign companies attending the “Iraq Rebuild 2006” exhibition in the Jordanian capital said the insurgency was damaging efforts to spend billions of dollars on planned projects across the country.

“Security is top priority.... with any country and safety comes first and unfortunately Iraq does not have that....you cannot walk the street because kidnapping has become a business,” Siraj Khan, Iraq country manager for UK Trade and Investment, a government agency sponsoring 30 British firms at the fair.

Citing a 40 per cent growth in the value of UK business deals in Iraq last year, Khan said prospects would improve once a national government was formed that brought political stability.

“It’s slow progress, no one expects things to happen overnight. Nobody knows what’s going to happen, nobody likes doing business in a country where there is instability,” he said.

But forging long-term ties with Iraqi partners that can weather current conditions was what most western firms were seeking, he added.

“We are trying to promote more with the Iraqis now...the Americans are there but eventually the contracts will run out and we want to deal with Iraqi businesses,” Khan added.

The violence between Sunni and Shia communities that many fear is driving Iraq to the brink of civil war has radically transformed business dealings in the last six months, businessmen say.

It has greatly hindered the flow of goods and people between Sunni and Shia neighbourhoods both within Baghdad and outside and has wreaked havoc with trade, businessmen said.

“Goods movement has become much more difficult from an area that is, for example, predominately Sunni area to another Shia one...trucks have to unload cargo onto other trucks to safely cross,” said Mahdi Kanbar Agha, an Iraqi businessman who runs Antemina International, an import/export business, with offices in Baghdad and in the Middle East.

Many Arab and Western businessmen who used to make frequent visits to Iraq since the US-led invasion in 2003 have now stopped going. They now confer in Amman or other safe locations with their local partners.

“I am afraid of going there...and my Iraqi partners are not getting out of their homes. They are conducting their business from their homes by telephone,” said Ramzi Batmani, export manager of Jordan Engineering and Tools Company which, through its Iraqi subsidiary, has construction contracts with US prime contractors in Iraq.

Many firms say worsening sectarian violence has brought to US-fostered activity to a halt and has even made some businessmen nostalgic about the fortunes they made during the period of UN sanctions after the 1991 Gulf War.

But despite all the problems, many western companies are not willing to give up on a country with enormous natural resources and which offers lucrative deals in the longer term.—Reuters