February 22, 2010

Culture, contract clash hits Iraq airport

NAJAF, Iraq

Najaf’s airport was meant to be a symbol of Iraq getting back to business, and in many ways it’s been a success, creating jobs and spurring a construction craze in the Shiite shrine city.

But an increasingly bitter dispute between local authorities and the Kuwaiti contractor brought in to run the facility is casting a cloud over one of Iraq’s proudest postwar accomplishments and prompting accusations of political meddling.

The standoff serves as a warning to other companies considering answering Baghdad’s calls to snap up investment opportunities and pump needed development money into the country.

It highlights how risks go beyond bombings to widespread corruption, uncertain legal protections and inadequate government oversight.

Najaf International Airport opened a year and a half ago to great fanfare. It was a landmark in developing Iraq’s mainly Shiite south, which ousted ruler Saddam Hussein had largely neglected.

Since then, foreign carriers such as Gulf Air have moved in, ferrying planeloads of pilgrims to Najaf, home to some of Shiite Islam’s holiest sites.

The dispute, however, has left unclear who exactly is in charge.

Najaf’s provincial council seized control of the facility last month. It accuses Kuwaiti contractor Aqeeq Aviation of investing only a fraction of the US$50 million promised for the airport, forcing the government to pay for some terminal fixtures and leaving the airstrip without adequate navigation and landing equipment.

Aqeeq, a division of Kuwaiti investment company al-Aqeelah, in turn blames the Najaf authorities.

It says it pumped millions into the airport, though it does not claim it paid the full amount.

That, it argues, is because local authorities broke the contract at several key points, including failing to turn over administration of most of the airport, such as the new passenger terminal.

Najah al-Balaghi, an Aqeeq executive who continues to list his title as CEO and managing director of the airport, blames the problems on Najaf officials’ inexperience working with the private sector and what he calls their “lack of basic knowledge about policies and law.’’

He said that if Najaf officials believe Aqeeq violated its contract, they should take the matter to court. Instead, they blocked access to the company’s local bank account before taking over operations last month.

Political posturing between Iraq’s Shiite-dominated parties also plays a role ahead of parliamentary elections on March 7.

Al-Balaghi said his company was caught in the middle when control of the Najaf council shifted to Prime Minister Nouri al-Maliki’s party in local polls a year ago and tussling over the airport heated up.

Aqeeq’s parent company is still deciding whether to fight for its rights at the airport or simply walk away, al-Balaghi said. Either way, he advises caution over putting money into Iraq for now.

“There is huge potential but an ambiguous regulatory and legal framework,’’ he said. “What happened to Aqeeq is likely to happen to any other private potential investor.’’

Associated Press

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