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April 30, 2008

KPMG chief leads commission to redevelop southern Iraq

KPMG chief leads commission to redevelop southern Iraq

KPMG International chief executive Michael Wareing has been appointed the inaugural commissioner of a new body that aims to help Iraq revitalise its ailing economy.

The Basra Development Commission (BDC) is a high-level group of global business advisers that will focus on implementing a strategic plan for economic development in the southern city, involving both the public and private sectors. It was recently established by the UK and Iraq governments to help the business community progress despite ongoing infrastructure and security problems. Located near most of the country’s oil fields, a sea port and an international airport, Basra is a vital economic gateway for the country. The commission is being trialled in this region as a potential model for other parts of the country.

At this early stage, the BDC comprises teams of senior advisers from the UK Department for International Development (DFID), the Iraq government and a specialised external consulting organisation.

Development roadmap Wareing, the only commissioner who has been appointed to date, told IAB that over the next three to six months the body will focus on drafting a blueprint for development in the region.

He said: “[The aim is] to bring together all of the different things that need to be done, both from an industry point of view, including the oil and gas industry, the ports and shipping industry, the agriculture industry, and the banking and finance industry, and also in terms of the individual issues, for example, higher education and training. There’s an enormous agenda potentially in terms of things that need to be looked at and addressed.”

The commission will identify and tackle a range of problems associated with Iraq’s economic stagnation. Wareing highlighted the poor state of infrastructure, Iraq’s legal framework, a lack of higher education and investment as key areas where he hopes global business leaders can help.

“There are quite a lot of issues around the legal framework – everything from land ownership to passing legislation through the Iraqi government, which will set out the framework to how the oil and gas industry will be operated within the country. From an Iraqi and Basra point of view, [this] is really significant,” he explained.

“We’re creating something called the Basra Investment Promotion Agency, and also the Basra Development Fund. That will provide direct finance to small- and medium-sized businesses looking to either set up or expand within the area. The British government has announced that it will put an amount of money into that fund in order to get that working. That will be very much local employment as well, where a lot of this needs to be targeted.”

As well as supporting local business, the commission is looking further afield to find business expertise with an affinity for the country. Wareing explained: “There’s quite a lot of interest in terms of looking at expatriate Iraqi businessman who have, for varying reasons, relocated outside of Iraq and are currently operating in nearby countries. We are intending, over the next few months, to engage with those people to look at what the circumstances would be that would encourage them to go back in.”

On the education issue, he said there are problems with the current education system, contributing to a lack of higher education and under-developed institutions.

He said it was important to “equip young people for jobs in business but also to make sure they are doing something creative with their lives and they’re not just unemployed and sitting out in the streets”.

He continued: “In a number of those areas there are a lot of best practice things that you can take from the UK and also from other countries from around the world where things like this have been done. Northern Ireland would be an obvious example. Also, by happy coincidence, it had something to do at some level with my appointment [as] I’ve been quite involved in the UK in a number of charities involved in homelessness and youth unemployment. If we can do something which actually touches that, then that in itself could have quite a positive effect.”

In addition to charity expertise, Wareing brings a vast amount of international business experience to the role. He joined KPMG in 1973 and held a number of senior positions in the UK firm before taking up regional and international roles. He was appointed global chief executive in 2005. He will continue in his KPMG role but also make time to visit Basra and neighbouring countries as the head of the BDC.

Economic hub

The southern city of Basra is a located near 70 percent to 80 percent of Iraq’s oil reserves, one of the country’s most important natural resources. According to the US Energy Information Administration, Iraqi oil reserves run to 115 billion barrels, the world’s fourth-largest proven amount. Therefore, revitalising this industry, which had slowed to a crawl as a result of years of UN-imposed economic sanctions, and was then further devastated by the recent Iraq conflict, is widely accepted as vital in the redevelopment of the war-torn country.

Home to an estimated 1.7 million people, Basra is Iraq’s second-largest city and is serviced by an international airport and the country’s only deep-sea port, which spills into the Persian Gulf. The city is the last of the four provinces held by UK forces since the 2003 conflict to transfer responsibility for security to Iraqi-led forces. Wareing says it is for these reasons that Basra and this project is an important litmus test for the rest of the country. Although the security situation is improving, he remains realistic about the dangers of a region the UK government is warning travellers to avoid.

“Obviously, business has been very much affected by the security problems and also by problems with the infrastructure… I can only go on the briefings that I have been given so far and I think it’s pretty clear that the security position has improved during the last 12 months – certainly in terms of attacks on coalition forces within the last six months,” Wareing says.

“Having said that, the situation is somewhat confined to a small number of areas within that [region] where the forces are basically constrained to, so we don’t have people openly travelling around the city as was the case a couple of years ago. If you are comparing to two years ago then it is still very difficult.

“There’s a lot of potential there from an economic point of view. The belief and hope, which has been proven to be right elsewhere, is that if we can do something to help improve the economic environment, it could and should have a direct impact on the security environment.”

Wareing plans to visit the Basra this year but has been advised not to publicly disclose details of his trip. He will be offered levels of security similar to those granted to high-level government officials.

Perception battle Another challenge for the BDC, Wareing admitted, is to ensure the project isn’t perceived as an attempt by the West to influence the redevelopment of Iraq’s oil fields for political reasons. The UK government has already poured vast amounts of funds into infrastructure projects across the country since 2003. According to the DFID, the UK government has committed £744 million ($1.5 billion) to Iraq, which includes a commitment of £1 million for the initial start-up costs for the BDC and its partnering economic initiatives.

In total, global donors have pledged about $15 billion towards Iraq’s reconstruction, according to the US Government Accountability Office.

Wareing said he wouldn’t have taken the role if he believed it was for the wrong reasons. He said the support of the UK government was one of the reasons that convinced him the formation of the BDC was a genuine attempt to help the Basra business community find its feet.

However, he said Iraqi involvement and control is key: “That is why we were so anxious to make sure that the Iraqi government really genuinely owned and were fully supportive of the commission itself because clearly this is only something that can work if it’s Iraqi people doing things to help the situation in Iraq. It can’t be done for them from the outside.”

Arvind Hickman

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