Playing on home ground

With security so fragile in the region, American reconstruction heavyweights must turn to Iraqi firms, says Basil Sabbah, CEO of Sabbro.

  • E-Mail
By  John Irish Published  January 4, 2004

When it comes to Iraq’s reconstruction, little is ever mentioned of Iraqi firms playing a role in restoring day-to-day activities. The majority that do, undertake the smaller, more menial contracts, but ultimately nowhere near the multibillion-dollar contracts that American giants such as Bechtel and Halliburton are awarded. One exception is Sabbro. Created in 1952 under the name Sabbah Brothers Corporation, it is currently subcontracted by Kellog, Brown & Root (KBR) for several lucrative projects across Iraq. Nine months ago, Basil Sabbah rejoined the company and took over as the CEO, based in Denver (Sabbah’s cousin Saaed runs the office in Baghdad). In that time he established relations with American firms looking to do work in Iraq. Basil Sabbah, CEO of Sabbro and a former Shlumburger and Halliburton employee highlights how he sees the coming months. A lot of the reconstruction seems in vain considering the insecurity in Iraq. How do you see the situation? The security situation is very bad and my guess is that oil and gas will probably be one of the last sectors to truly see a big boom. The US military is providing a certain level of security, but they’ve moved away from protecting fixed installations. We’re waiting for the new Iraqi army to protect these installations, but that hasn’t happened. It’s an impossible task unless you have an army of 20,000-30,000 people protecting them, which is what Saddam had. Until the security force is fully functional, you’ll end up with a lot of sabotage on oil infrastructure. Would you say American companies in Iraq are becoming impotent and must subcontract more to Iraqi firms? Absolutely. That’s the key. It has taken companies like Bechtel quite some time to realise that. Initially, when they moved in, they took the model they use for the rest of the Gulf area. You come in, find a local subcontractor, have them as a point person, and then subcontract everything out to expat labour. Eventually, they realised that there was an absolute need to use Iraqi companies and labour because the unemployment rate is so high. Of course, it’s a difficult and different situation for these companies. You can’t just go to Baghdad and say ‘who is the biggest contractor in town, these guys have a thousand people and we’ll give them a subcontract.’ These companies just don’t exist, so it is taking a shift in strategy to rehabilitate the likes of Bechtel. So does that mean Iraqi firms will get a large part of the $18 billion up for grabs next year? We’ve been involved in the new round of contracts that are going to come out and in the course of our discussions with different companies they do realise that using Iraqi subcontractors and workforce is critical. If you look at the tender documents, the US government is making a conscious effort to utilise an Iraqi workforce. I don’t think any company that proposes using Chinese or Indian labour will win anything. You seem to be doing a lot of work for KBR. Surely, it makes more sense for you to go it alone? That’s true, but it’s the mechanism. As an Iraqi company, we don’t stand a chance of getting a US government contract alone. We looked into it to see how we could qualify and go directly to the source, but the requirements in gaining a federal contracts are stringent. You have to be in existence for over three years in the US and meet all US federal requirements, which are very strict with regard to financial systems. Right now, the funding is really US-based, so when you go after a US federal contract, it’s almost impossible for non-large US companies to be the prime contractor. It is to our advantage, because we have a US office, but that’s not the case for other Iraqi companies, and they have been held back as they don’t have a US presence and can’t work with non-US firms. Also, from a size perspective, we’re not big enough to take on some of these contracts. You have to be able to self-fund for quite a number of months, with working capital in the millions or even hundreds of millions. The other issue that disables a lot of Iraqi companies is the banking industry. There’s no mechanism for an Iraqi company right now to go to a bank in Baghdad and ask for working capital to execute these contracts. If there’s one thing that’s debilitated Iraqi companies, it’s the lack of access to capital in the country. How do you see the future? I see it as very positive, assuming the security is improved at least a bit. At the moment, it is right on the borderline where nobody will be able to do much work if it gets any worse. If it is maintained, we’ll probably grow at a decent rate to around 500-600 [in Iraq and Denver] people within six months. It will be interesting to see whether all this funding will reduce the amount of attacks or not. If you look at Bechtel, its staff is basically held up in compounds under heavy security and it is very difficult for them to get any work done. What happens with these major security problems is that you end up paying exorbitant amounts to get the work done. Is there a point where these large corporations will decide to pull out? I think it is an unlikely possibility, because the sums of money that are involved are so huge. If you’re talking about 20-30 million dollars then that might be the case, but we’re talking billions of dollars, where companies are likely to take a much larger amount of risk. If it deteriorates a lot more than now, you may get that scenario. Finally, if you had one thing to say to the American administration what would it be? Two things: one, do a lot more homework before you take on propositions like Iraq beforehand, but at the same time to commend the US admin for their commitment to rebuilding the country, not just in words but by allocating the funds to it. The US talks a lot about rebuilding nations and then the money never appears, but in this case it has.

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code