Under government plans to attract investment, many investors visited Basra to explore the opportunities. A vast, chronic labour surplus in the city’s companies has discouraged many, however.
Representatives of foreign companies complain of this disguised unemployment, which has increased significantly since the 2003 invasion, making it very difficult for foreign investors to afford the large number of salaries.
Last year, Basra’s provincial council approved an ‘investment Map’ for Basra, focusing on encouraging investment in industry, services, tourism, agriculture and housing.
Officials hoped that foreign investors would come in to rehabilitate and operate companies currently owned by the state in the iron and steel, petrochemicals, fertilizers, paper and cement industries. Many of the companies had partially or completely stopped functioning.
But the labour surplus continues to hinder implementation of the government’s ambitious plan.
A total of 76 companies are owned by the Iraqi Ministry of Industry, most of which are closed. Many were destroyed during the war and others looted since. Despite equipment and machinery being dismantled and sold for scrap, the government continues to pay workers’ salaries.
Rasoul Qassem, the General Manager of the state-owned Iron and Steel Company in Basra, lamented the recent failure of negotiations with Italian and Korean companies over investment in the plant.
"The main obstacle during negotiations was our large number of workers. This is the usual obstacle standing in the way of reaching agreements between the Iraqi government and investment companies."
6,300 workers are registered in Qassem’s company. Many were reappointed to jobs after the fall of Saddam Hussein’s government. They had previously been fired for ‘political reasons’ by the Baathists.
A lot of the workers, though, were not hired until after 2003. They have no experience in the industry and none of the necessary skills. Political parties supported their employment and their claims that they had been removed by the Baathists.
"There are some 2,000 employees who were appointed by political parties represented in the government,” said Kareem Shallal, an employee.
Hsmed Kareem, a policy advisor in the Ministry of Industry explained how the parties took advantage of Paul Bremer’s Order 51, designed to help get Iraq bureaucracy and economy functional again.
"Political parties were given the opportunity to take advantage of this order and to appoint thousands of their supporters in the different government ministries and departments," he said., putting the number of ‘reappointed’ workers in the whole Iraqi economy at around 100,000.
“No investor could ever pay all these salaries. There are too many paid workers,” said a representative of an Italian company.
"The number of employees of the Ezz-Din Iron and Steel Company in Egypt with an annual iron production of 3500 million tons does not exceed 800."
Ezz-Din is one of the Middle East’s largest and most successful steel companies.
"We were required by the Iraqi government to pay a monthly salary of US$500-600 for the company's workers while production for the first phase is not expected to exceed 500,000 tons."
The Italian company was willing to sign contracts with 500 employees for the first phase of their works and double that number once the plant reached its capacity.
The government offered to pay the salaries of half of the workers employed in the factory but were unable to convince the investors who were put off by the government’s unwillingness specify a duration for their commitment.
The Ministry of Industry is currently working with local government to find jobs in other departments for thousands of employees who are currently in the pay of companies for which the government is seeking foreign investment.
Some workers argue that the government, with the transfer policy, is attempting to abandon them.
"So far, 400 employees of the Iron and Steel Company were transferred to serve other government departments," said one of the company's engineers. “It is an arbitrary solution and it won’t benefit us.”
He pointed to the lower salaries of workers in service departments and also to the re-assignment of workers whose skills may not be easily transferrable.
Trades Unions in Basra were reserved over support for foreign investment contracts Hussein Fadhel, head of Basra' trade union voiced concern over the future of local employees if the management is given to foreign companies.
“We are not against the investment law and certainly we are not against foreign companies but our main condition is to give priority to local labourers interests and to preserve their rights,” he explained.
The investment law was ratified more than two years ago. It seeks to provide a very friendly investment atmosphere for potential investors. The labour surplus, however, remains and the government has still to find any real solutions for the crisis.