March 3, 2015 / 10:19 AM / 3 years ago

Iraq battles to rebuild despite war and oil slump

Workers at a concrete plant for the Bismayah residential project in Baghdad, February 26, 2015. REUTERS/Thaier Al-Sudani

BAGHDAD (Reuters) - On a main highway south of Baghdad, dozens of buildings rise up from the Iraqi plains, the first blocks of a multi-billion-dollar city emerging from a landscape more accustomed to conflict and crisis than glitzy new development.

Bismayah New City, which aims to house half a million people within four years, dwarfs any construction project Iraq has attempted in a generation.

Cranes tower over a handful of completed apartment blocks, scores of buses ferry thousands of workers across the 18 square km (7 square mile) site, and a huge production complex churns out pre-cast concrete walls and pillars.

On this largely barren piece of land, about 20 km (12 miles) from Iraq’s once proud but now war-damaged, dilapidated and overcrowded capital, developers plan to build 100,000 homes.

The fact that the project is even going ahead after Iraqi authorities lost swathes of territory to Islamist militants and billions of dollars to an oil price slump, underlines both the scale of its ambition and the obstacles it must overcome.

South Korea’s Hanwha Engineering & Construction [HANWHE.UL], which signed an $8 billion contract to build Bismayah, aims to hand over the first apartments this summer.

But it has already had to adapt to the unique challenge of work in Iraq, adjusting its supply lines after last June’s Islamic State offensive cut off cement deliveries.

It also had to contend with the departure of foreign workers when the IS advance pulled up just short of the capital. And Iraq’s plunging oil revenues throw into question the government’s ability to deliver critical services, including water supplies, to the new site.

Inside the new city limits, guarded by a private security force as well as heavily armed troops, Hanwha senior vice president Sangsoo Kim said the project is six months behind its scheduled completion date of 2019.

“We are trying to catch up to schedule but unless the situation and circumstances improve, a delay of some time is inevitable,” he said, speaking in front of the first batch of finished apartments.

IRAQ‘S LOST YEARS

No one disputes the chronic need to rebuild in Iraq.

International sanctions imposed over Saddam Hussein’s 1990 invasion of Kuwait were lifted after the 2003 U.S.-led invasion and occupation of Iraq, but brutal sectarian conflict hobbled economic recovery.

In the capital, more concrete has been used to erect anti-blast barriers than to build houses - a visible reminder for the city’s 7 million residents of Baghdad’s wasted decades.

“In the last 30 years we didn’t build much,” says Sami al-Araji, head of the National Investment Commission which is spearheading the home-building initiative.

Araji says Iraq needs up to 3 million new homes over the next decade and his commission has plans for two other new cities - in south Baghdad and outside the oil city of Basra.

His offices in Baghdad’s heavily defended Green Zone are filled with glossy leaflets and architects’ designs for the new cities. They boast hospitals, cinemas, an Olympic-sized swimming pool, waterfront residences and skyscrapers like Dubai, Abu Dhabi and Qatar across the Gulf.

Those upstart neighbors were sleepy backwaters when Baghdad’s economy crashed in 1990. But even with projects like Bismayah, which Araji and Hanwha describe as the biggest of its kind in the world, Iraq will struggle to catch up.

As well as the ongoing conflict, businesses complain of widespread corruption and crippling bureaucracy.

“We have been, and still are, a centrally guided economy,” Araji said. “We are moving with force toward a market economy (but) the investment culture is very new in Iraq.”

NUCLEAR FEARS

Araji’s commission is trying to make up for the lost years, seeking foreign investment in electricity - to address a shortfall of 12,000 megawatts - as well as refineries, transport, telecoms and health.

In the housing sector, his commission and local provincial organizations are working to provide 400,000 to 450,000 units.

To ensure the success of Bismayah, by far the biggest of those schemes, apartments are offered for a down-payment of just$6,300, or 10 percent of the total cost of the smallest 100 sq meter homes, with the balance repaid over 20 years.

The monthly installments are less than the minimum government wage, making them affordable for many people. Flats in Baghdad are much more expensive and purchasers usually have to pay the whole sum in one go.

Even so, and despite heavy promotion on state television, Bismayah has to overcome concern from potential buyers.

Six km (four miles) to the west lie the remains of the Osiraq nuclear reactor, bombed in 1981 by Israeli jets. Some Iraqis believe the land around Osiraq is contaminated.

At Bismayah, where the 8,000-strong labor force has operated for many months, workers laugh off those concerns, but point to other pitfalls which still threaten the project.

Although the first apartments are ready to hand over by the summer, they say no water supply has been delivered to the city’s purification plant, making the flats unlivable for now.

The other mega projects in Baghdad and Basra, where 70,000 homes are slated to be built, face similar obstacles. Officials say that in Baghdad there is not even agreement yet to use the land, much of which remains a military base.

“A lot of work has been done,” Araji said. “But the actual implementation on the ground, it (will take) about eight years.”

Reporting by Dominic Evans; Editing by Mark Trevelyan

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