Battle for business

Anodier day, another incident

On the domestic front, some areas lack basic sanitation and electricity. This is a particularly acute problem, as Iraq has a population of about 25 million people, 2.5 million of whom live in Baghdad.

When it conies to doing business, it's a nightmare. Commercial activity is impeded on two fronts. A lack of law and order is hindering shippers from taking advantage of the existing transport infrastructure to export, import, store and distribute goods. In addition, potential exporters suffer from the country's lack of manufacturing and retail industries, which means trade with Iraq is currently focused on imports.

While Iraq is a major oil -producing nation, this industry was largely neglected under Saddam Hussein's regime. One reason is that as he and his cronies could not control the oil industry personally, it was left underdeveloped. Another barrier for potential traders is die virtually nonexistent banking system in Iraq. Its customs regime is also underdeveloped.

The Coalition Provisional Authority (CPA), die country's interim government, is sanctioning a United Nations force in die country to support it. This will see die UN having a more direct role in Iraq than its current peripheral one. About 5,000 additional British troops are also expected to support die CPA.

In terms of commerce, bodi die UN and die US have now opened die door to Iraq being free to trade with die rest of die world, in all goods except for arms. In May, UN Resolution 1483 lifted the trade embargo with Iraq, which has been in force since the first Gulf war in 1991. The US government has also lifted trade restrictions, through the issuance of an open general licence to companies planning to export goods to Iraq.

A UN statement since dien highlights die opportunities this provides to logistics service firms: "Multi-million dollar contracts for heavy equipment and spare parts for Iraq's oil and electricity sectors have been prioritised for immediate delivery, following consultations with the CPA, Iraqi representatives and UN agencies."

The lack of law and order in Iraq means it is easier said than done for logistics and transportation providers to take advantage. For seafreight, the only major port in Iraq is Umm Qasr, in the south-east of the country on the Persian Gulf. Other than this short coastline, Iraq is landlocked.

Until the trade embargo was lifted, the only vessels serving Umm Qasr carried goods under the UN's world food, educational and medical programmes. However, even now there is little commercial activity at the port. One of the few carriers serving Umm Qasr with commercial cargoes is the Dubai-based feeder operator, Simatech Shipping.

Hard times

This is not surprising under the circumstances. The US-based terminal operating company that handles cargo at the port, SSA Marine, has not had an easy time since taking over from the US military in April. It was given a one-year temporary management contract by the US government, after which it hopes to hand over to a permanent terminal operator.

A spokesman at a major global freight forwarder, who wished to remain anonymous, explains: "Organised gangs of looters steal anything they can. This includes power cables providing electricity to the port and town of Umm Qasr. They stripped the cable of its casing, dien trucked it to Basra, and even Baghdad."

Thankfully, because of increased security, the situation at Umm Qasr has improved for SSA Marine. Bob Watters, the company's vice-president and managing director for Asia, says: "We've installed our own power generators, enabling us to keep the port running. The gantry cranes are operational again, for die unloading of containers. Until recently we were dependant on the ships' equipment."

Despite die difficulties, some major global freight forwarders are carrying goods to Iraq, mainly consumer items such as food, clothing and air-conditioning units. They also see long-term opportunities to move huge volumes of construction materials and other project cargo. But these opportunities will not materialise until Iraq receives big capital investment by foreign-owned engineering, oil and gas and other companies. This is expected to come, but it is a slow process.

However, the logistics providers currently serving Iraq, including EGL, Exel, Panalpina, TNT Express and Menlo Worldwide, are not complaining about the volumes they carry. Most of them begin by importing goods into neighbouring countries by sea and air from Asia, Europe and others, then use local trucking firms, often Iraqi, to carry die shipments over the border. Depending on the final destination in Iraq, die logistics providers may have its own, or third-party, warehousing operations in Jordan, Kuwait, Syria, Turkey, or even die United Arab Emirates.

Menlo Worldwide, the US-based logistics company, serves the US military its main client in Iraq - from a consolidation hub in Kuwait. This facility receives imports from a variety of sources.

Fred Lucha, managing director, global freight management, says: "We use Kuwaiti and Iraqi trucking companies to move 20,000 bottles of water a day, plus food and other items, from Kuwait to all nine US camps in Iraq.

"The shipments are carried to three warehouses, in the Iraqi cities of Mosul, Basra and Baghdad, from where they are distributed to the camps. Menlo Worldwide has 17 Iraq-based employees dedicated to this operation."

Lucha adds that die logistics operator has received project cargo inquiries from power plant and engineering companies in Iraq, and has already made preparations for this potentially lucrative business. Menlo Worldwide has per tonne rates in place with trucking companies operating in Jordan (at die seaport of Aqaba and Amman airport), Turkey (die seaport of Mersin and Istanbul airport) and Dubai.

A few logistics providers have launched direct services to Iraq, including air freight to Baghdad airport. These include die integrators (door-to-door operators) DHL and TNT Express. DHL now provides several daily direct flights from Bahrain to Baghdad. It also offers trucking services from Kuwait to the southern Iraqi destinations of Basra, Talil and Umm Qasr, as well as a domestic air service within Iraq.

TNT Express operates a daily road service from Amman to Baghdad, with IKE Express, Baghdad's largest courier company. Tim Steel, TNT Express's Dubai-based general manager of associates, says: "There is a good quality highway from the Jordanian border to Baghdad. But with the looting continuing, we use armed guards for all shipments. We will open an air freight hub in Baghdad when the time is right."

EGL, which is established in die Middle East but a newcomer to Iraq, runs a weekly air service from Dubai to Baghdad. The company, which operates without local partners, has also arranged ad hoc barge shipments from Dubai to Umm Qasr. Given the unpredictable situation in Iraq, whether diis strategy will be pioneering or foolhardy remains to be seen.