BANGKOK, March 13: Asia-Pacific building firms, among the first into Kuwait after the 1991 Gulf war, will fight over valuable scraps of reconstruction work in post-war Iraq.
US and British companies are likely to carve up the big deals after any US-led war, but analysts say the US could reward allies such as Australia and Pakistan with small-scale contracts to rebuild residential areas and communications networks.
China’s growing political clout and its permanent seat on the UN Security Council could land the country’s construction firms major contracts, if Beijing goes along with a US sponsored resolution giving Iraq a deadline to scrap its alleged chemical and biological weapons or face invasion.
“The liberators will be the Americans and British, so there’s not a huge chance for Asian companies, except in minor projects like communications,” said Jassem al-Saadoun, head of the Kuwaiti-based Al Shall political and economic research firm.
“But if they strike a political settlement, the French, Russians and Chinese will also be a part.”
With reconstruction cost estimates ranging from $10 billion to as much as $100 billion, even a small slice of the contracts would be a boost for Asia-Pacific firms.
“Massive destruction after a war brings opportunities: houses roads and bridges to be build and money to be made,” said Song Yanming, an executive at the state-owned China State Construction Engineering Corp, which is owed $500m by Iraq for irrigation work after the Gulf War.
REWARDS FOR ALLIES: The major work will be to restore oil production facilities to pre-1991 capacity, pumping up power generation and rebuilding 1,500 kilometres of road. But schools, hospitals and homes will also need to be rebuilt.
Australia, a key US ally, will want a role for firms such as BHP Steel and cement maker Adelaide Brighton, which are keen to increase their Middle East exposure at a time when domestic building is slowing, analysts said.
And Bovis, a unit of developer Australia’s Lend Lease, which did the clearing work at the World Trade Centre, is well positioned to rebuild hospitals and schools.
“One of the firm’s main field of speciality is health care and hospitals, but it has also built military housing in the United States,” said Stephanie Fisher, construction sector analyst at Macquarie Equities in Sydney.
Private construction companies from Pakistan, a US ally in its crackdown on Al-Qaeda, are likely to vie for low-cost home building projects, analysts say, noting these companies already are involved in Afghanistan’s reconstruction.
But Pakistani cement firms D.G. Khan Cement and Lucky Cement could find it harder to compete.
“The prospects for Pakistani cement are not good because Iran is much cheaper, but some private engineering firms might get contracts on a political basis,” said Mohammed Sohail, head of research at Investcap Securities in Karachi.
Companies from South Korea and Japan, which helped bankroll the 1991 Gulf war and got a big piece of the reconstruction in return, will likely miss out on the bonanza.
Japan’s main building firms, Kajima Corp, Taisei Corp, Shimizu Corp and Obayashi Corp, have been battered domestically and are desperate for new work in the Middle East. But they are being squeezed out.
“The Japanese have already lost contracts in the neutral zone between Saudi Arabia and Kuwait,” al Saadoun said. “Japanese power is less than it used to be and the power of the Americans and English is growing.”
Korea’s biggest building firm Hyundai Engineering and Construction will be eager to get a part of Iraqi reconstruction to make up for millions of dollars lost in unpaid work for the Iraqi government in the late 1980s and early 1990s.
“In the case of Hyundai they executed about $900 million in construction about 10 years ago but didn’t get any money from Iraq,” said Chun Hyun-shik, construction sector analyst at LG Investment and Securities.
US BONANZA: If history is a guide, US firms will rule the roost.
In the first year after the 1991 Gulf War, US firms took nearly 60 per cent of 872 Kuwaiti reconstruction contracts, worth around $8 billion, US commerce department data showed.
Companies from Japan, which together with Germany largely funded the war, won 22 contracts, leading the interest from countries that did not supply troops for the war.—Reuters