New deals also bring security equipment, electricity. Financial institutions to start operating in mid-March, with more coming soon.
Iraq’s Central Bank said Saturday it had given licenses to the National Bank of Kuwait and Britain’s Standard Chartered and HSBC, heralding the entry of foreign banks into the country for the first time in decades.
Meanwhile, a major contract to supply equipment to Iraq’s security forces was announced, and Iraq hired two companies to supply electricity to its power-starved cement producers.
The foreign banks “can start as of the middle of March. There will be another three foreign licenses announced shortly,” said an aide to central bank governor Sinan al-Shabibi.
The US-installed monetary authorities have invited international banks to apply for six five-year licenses. Each of the 15 foreign banks that applied pledged to have minimum capital in Iraq of $25 million.
The Central Bank of Iraq (CBI) said it might select other banks at a later stage, but that it had chosen HSBC, NBK and Standard Chartered Bank “to proceed to the final stage of the foreign bank licensing process.
“CBI will meet soon with these three banks to explain the remaining technical elements of the licensing process. CBI anticipates all three will be granted a license by mid-March 2004.
“The banks will be required to begin actual banking operations on (the) ground in Iraq no later than Dec. 31, 2004. These banks will bring modern banking practices, capital and know-how to the Iraqi economy.”
Joe Sarrouh, executive adviser at Beirut’s Fransabank, said conditions for qualification focused on banks with expertise outside their home country and a commitment to invest in Iraq.
“Iraq is definitely very interesting. We are talking about billions. They need everything, including capital and every type of finance.
Everyone is trying to get in,” Sarrouh said.
Standard Chartered has been expanding in the Middle East, opening branches in Jordan and Lebanon in recent years and focusing on retail. HSBC, the world’s second-largest bank by market value, already operates in 12 Middle East countries.
The National Bank of Kuwait is one of the largest Gulf banks. Kuwait hopes to be a base for firms eyeing Iraqi reconstruction but worried over security.
Socialist governments that took over the economy expelled foreign banks from Iraq in 1960s. Saddam Hussein allowed private Iraqi banks to operate in the 1990s, but 13 years of UN sanctions and over-regulation have hurt the banking system, which lags behind the world.
Few had the confidence to make deposits in Iraqi banks, especially in dollars, and most of the country’s nearly 30 million people keep their money at home, often protected with a gun, or in Jordanian and Lebanese banks.
Banks entering Iraq will face a landline network that has been mostly out of commission since the US led invasion, a rudimentary settlement mechanism and widespread lawlessness.
“Security could deter attracting top-notch bankers, who are unlikely to change jobs and come to Iraq if security remains precarious,” Sarrouh said.
Iraqi business figures say that it is unclear whether foreign banks will chose to open branches first in Baghdad or in more secure areas, such as Iraqi Kurdistan.
Also Saturday, the United States military announced that Nour USA, a privately held US-led consortium, has won a $327 million contract to supply Iraq’s new armed forces and the Iraqi Civil Defense Corps with equipment.
“Nour USA … is being awarded a $327,485,798 firm fixed price indefinite-delivery/indefinite-quantity contract to procure equipment for the Iraqi Armed Forces and the Iraqi Civil Defense Corps,” the military said in an e-mail announcing the deal.
“At this time, $39 million of the fund has been obligated. Work is expected to be completed by February 2005,” it said.
Nour, based in Vienna, Virginia, was set up specifically to bid for business in post-war Iraq and has previously won an $18 million contract to provide security in the country.
Nour’s partners include HAIFinance, a private equity group based in the United States, and the Jordan-based conglomerate Munir Sukhtian Group.
The statement said that bids for the contract were sought in November last year and that 19 consortia presented tenders to the Coalition Provisional Authority, the US-led administration in Iraq.
In another development, Iraq hired Saturday two foreign companies to provide electricity to its power-starved state-owned cement factories, which are essential to the reconstruction of the country, an interim industry ministry spokesman said.
The ministry signed contracts with Turkey’s Vapa company to install power generation systems to supply 34 megawatts of electricity to the Kufa Cement Factory, which is located in central Iraq, the spokesman said.
The ministry also signed a contract with the Iraqi-owned, British-registered Hancock Overseas Corporation to supply 35 megawatts to the Muthana Cement company, in southern Iraq, he said.
The power-generation systems are to be set up in June and the cement companies will buy electricity at an average price of 3.15 cents per kilowatt/hour, he said.
The contracts could last five years, he added.
The looting and sabotage that followed the collapse of Saddam Hussein’s regime in April 2003 caused severe damage to Iraq’s electrical facilities.
Power production in Iraq totaled 3,452 megawatts in December 2003, compared to 4,400 megawatts before the US-led invasion that toppled the former dictator, according to estimates by the US Agency for International Development.
It briefly surpassed pre-war levels on Oct. 6, peaking at 4,518 megawatts, but then it slipped due to long-term repairs and scheduled maintenance at generating plants.
Syria and Turkey are currently supplying Iraq with additional power, while Iran, Kuwait and Jordan are due to follow in July, providing 100, 200 and 150 megawatts respectively. Agencies
Compiled by Daily Star staff
© The Daily Star 2004
