Good story.
fortune.com
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BAGHDAD
Entrepreneurs in Iraq Tangle in U.S. Red Tape
American agencies and nonprofits are streaming into Baghdad to spur the country's small companies. But do lessons in writing business plans really help?
FORTUNE SMALL BUSINESS
Saturday, November 27, 2004
By Arlyn Tobias Gajilan
Iraq's economy probably won't grow on milk-and-cookie companies alone, but it's a start. That's the opinion of Sadik Hamra, whose 15-year-old Baghdad company, Hamra Cookies, employs 160 people. "Small companies like mine can do a lot for our country," says Hamra. Until now he has sold only cookies, but he hopes to buy an adjacent dairy soon so that he can expand into the milk business (and hire another 100 Iraqis desperate for jobs). To make that happen, he says, he needs about $4 million. That amount would be hard to come by in any country, let alone Iraq. The few Baghdad banks now extending loans demand collateral of 200% to 800% of the amount requested. That is a deal breaker, even for relatively successful firms such as Hamra's. In short, he says, "My company needs America."
U.S. officials in charge of Iraq's reconstruction are realizing that they need Hamra too—and other entrepreneurs like him. Iraqi small businesses, they hope, could do for that country what small businesses have done in the U.S.: spur the economy and create jobs. "We can rebuild Iraq, one business at a time," says Greg Wong, 43, the U.S. Department of Commerce's new senior commercial officer in Baghdad. Wong showed up in Baghdad this summer to coordinate the host of organizations now trying to help Iraqi companies get established and grow. The biggest is the U.S. Army's Operation Adam Smith, a multimillion-dollar plan to revitalize Baghdad's commercial districts and eventually build a business incubator at Baghdad University. The U.S. State and Commerce Departments are trying to establish U.S.-style chambers of commerce, first in Baghdad and later around the country. And more than a dozen nongovernment organizations, such as the Volunteers for Economic Growth Alliance and CHF International, are in Iraq, hoping to mentor entrepreneurs and distribute grants and loans. Funded by the U.S. Agency for International Development, they are offering loans of $100 to $5 million.
Unfortunately, for all the money and all the energetic, well-meaning Americans being thrown at the problem, their efforts so far have produced few success stories. Lessons in writing business plans aren't of much use to Iraqi entrepreneurs whose shops and customers are threatened by shellfire and snipers and only occasionally have electricity. The roads over which supplies and finished goods must travel are preyed upon by bandits and kidnappers. Even picking up the phone is a hassle. Land lines are virtually useless; most Iraqis rely on cellphones. But the country has three wireless phone systems: Iraqis use one service, U.S. officials such as Wong make calls on another, and Middle Easterners from outside Iraq use a third. And the three systems do not connect with each other reliably.
Some enterprising business owners, both American and Iraqi, have found ways to navigate the hostile environment. Secure Global Engineering, a Middletown, R.I., construction firm with 45 employees, had never ventured overseas until this year. But in March, CEO Stephen Johanson, 53, set up an operation in Baghdad, quickly secured some $5 million in reconstruction contracts, and now has as many as 700 Iraqis on his books. Rather than go it alone or hire an American private-security firm, Johanson partnered with a small Iraqi contractor who had political connections. Before a single shovel was dug into the ground, Johanson and his Iraqi partner (who asked not to be named) got the blessing of 54 of the area's tribal sheikhs. Says Johanson: "Finding local partners and settling security concerns is essential to doing business in Iraq."
Similarly, some Iraqi entrepreneurs are doing just fine, but they tend to own businesses catering to men and women in the U.S. military. Inside Baghdad's heavily fortified Green Zone, where the majority of Americans live, is an army-built pedestrian mall of 35 stores. Set up in January as a convenience for U.S. soldiers, government workers, and civilian contractors, the market gives entrepreneurial-minded Iraqis a chance to earn some badly needed U.S. dollars. Here you can get everything from a stale $7 carton of Marlboros to $5 bootleg DVDs and sequined belly-dancing outfits for $20.
The strip's most popular shop is Big John's. "We are like Wal-Mart," says Jamal "Big John" Tayem, a burly, barrel-chested 45-year-old Iraqi who was a Russian-studies professor during Saddam's reign. Unemployed after the war, he says he saw the arrival of American soldiers more as an opportunity than an occupation. With a wink, Tayem says, "I knew I could work with Americanskis."
His English may be accented with an unusual mixture of Arabic and Russian tones, but his business sense is decidedly American. "We pay attention to customer service," says Tayem, who prides himself on being on a first-name basis with his clientele of American servicepeople. Nearly twice the size of the other stores on the strip, at 300 square feet, and the only one to offer air conditioning, Big John's also has outdoor speakers playing everything from George Michael to OutKast. Tayem does a brisk business, and although he is vague on how much he nets each week, he makes change for customers from a thick wad of $20s and $50s.
But ventures such as Big John's, which operate within the embrace of U.S. security and sell primarily to Americans, are not the kind that Wong and the U.S. government have in mind when they talk about rebuilding the country "one business at a time." Instead, they're working to leverage the country's ancient mercantile tradition and build a modern, thriving economy. While those efforts may pay off eventually, they haven't yet.
For example, one part of the army's Operation Adam Smith aims to create American-style chambers of commerce throughout Baghdad. Finding local business owners to join up isn't the problem, according to Army captain Reid Nahm, 26, a West Point graduate. Nahm is in charge of convening a weekly chamber meeting in Al Rashid, a manufacturing district about 15 minutes southwest of downtown Baghdad. "A lot of them come thinking we're going to hand out money at these meetings," says Nahm, who hopes to attend Harvard Business School next fall. "But we're the Army. We don't hand out money."
Instead, Adam Smith supplies lectures on topics such as marketing strategies and accounting. On a recent Thursday the attendees received a lesson in writing business plans, to help them attract lenders and investors. Sipping cold cans of free Sprite and Coke, 25 chamber regulars spend 90 minutes squirming in their white plastic patio chairs, listening dutifully, even though most of them already run companies and don't think business plans are their biggest problem.
They are told that one-on-one help sessions can be arranged by logging on to the website of the Iraqi Business Center (another Army creation designed to help Iraqi businesses bid for U.S.-funded subcontracts). But few Iraqis have computers at their offices or homes, and finding a place to log on elsewhere is expensive and inconvenient.
"Going to an Internet cafe costs about $10," says Ahlam Najm as she carefully tucks a few stray hairs under her headscarf. The Al Rashid chamber's only woman member, Najm, in her 60s, was a commercial lawyer before the war but now runs a small construction company with her son-in-law. Like everyone else at the Al Rashid chamber, she is there to try to land lucrative American subcontracts and is under the mistaken impression that showing up for regular face-time with Nahm or any other Army official will get her closer to that goal. "If they see me regularly, they will eventually trust me," she says through an interpreter. She has been attending meetings for more than two months, and she is headed to an Internet cafe that day to try the IBC site. Yet she still does not have a contract. "God willing, something good will come of it," she says.
Patience is also running thin among Iraqi contractors attending a Sunday-morning bidding session. Mohammed Salah, who owns a 25-person engineering company called the White Camel Group, makes an observation that can only bring a smile to a U.S. entrepreneur: "America, I think, has too much paperwork." He recently filled out a 15-page application in hopes of winning a contract to pave a small Green Zone driveway. "After all that, still nothing."
Sadik Hamra, the owner of the cookie company, is waiting too. Over the past year he has applied for four U.S.-sponsored loan programs administered by a variety of organizations. Most Americans would consider the application relatively standard. But for Hamra, the process seemed, well, foreign. Open accounting and financial reporting was to be avoided in Saddam's Iraq. "You never showed your real bottom line," says Hamra. Doing so only gave all kinds of officials and Hussein-family cronies a better idea of how much of your money they could steal. The ultimate sign of a business's success was if Saddam's sons Uday or Qusay offered to "help."
Hamra still has faith in the U.S. government, but right now faith is all he has. As of presstime, he was still waiting for a response from Uncle Sam about his loan applications. |
