This article highlights the joint efforts of the US military divisions and government programs in rebuilding Bab al-Sham in Iraq. Beginning in March 2009, the Industrial Advisor from Baghdad ePRT Northeast, embedded with the US Army’s First Brigade Combat Team, First Cavalry Division, began to work in an industrial center called Bab al-Sham, on the northern edge of Baghdad. The development team helped formalize a group into a registered nongovernmental organization called Noor Association representing Bab al-Sham’s factory owners. The three main problems—inadequate electrical power, competition with imports, and lack of loan capital—were largely beyond the reach of the project team; however, the team worked with Noor Association to address them. The project team and Noor Association began an effort to lobby the Ministry of Electricity to provide power in a continuous block of eight hours during the business day. It is believed that perhaps the key factor in the project’s success was that the project team served to enable efforts already underway, and worked within legal and cultural constraints to empower individuals to help themselves.
Engineers play a significant role in society—developing new products, enabling the exploration of our planet and space, designing life-saving equipment for our soldiers, and even accompanying military forces into battle. It should be no surprise that engineers also play a key role in the reconstruction of Iraq. Engineers from the military and from civilian engineering and construction firms have worked for years to rebuild Iraq's infrastructure, providing electricity, water, and sewers to millions of Iraqis.
As members of Provincial Reconstruction Teams, engineers have also worked to rebuild Iraq's industrial base and to develop a sustainable economy for the people of the country.
The teams operate in Iraq under the U.S. State Department and are led by civilian Foreign Service Officers. Their mission is to increase Iraqi civil capacity in a variety of areas, including rule of law, agriculture, economics (including industry), and governance. Some Provincial Reconstruction Teams are embedded with Army Brigade Combat Teams. These so-called ePRTs rely on the Army for security and movement, and work closely with their Army counterparts on joint projects.
Beginning in March 2009, the Industrial Advisor from Baghdad ePRT Northeast, embedded with the U.S. Army's First Brigade Combat Team, First Cavalry Division, began to work in an industrial center called Bab al-Sham, on the northern edge of Baghdad. The ePRT Northeast had ten subject matter experts—specialists in rule of law and women's issues, governance, urban planning, essential services, agriculture, public health, economics, and industry.
The U.S. Army unit responsible for the area had made frequent patrols into Bab al-Sham and had recognized the potential of the area. Though the local infrastructure was very poor, private businessmen were continuing to operate small factories. Security in the area had improved in the preceding years, and factory owners were returning to reopen closed plants.
Reports vary, but it is widely believed that at Bab al-Sham's peak, more than 600 factories operated there, employing approximately 7,000 workers. At the time of writing this in early 2010, there were approximately 150 factories operating, employing slightly more than 1,000 workers. The average company size was five workers. The largest operating factory, a food processing plant, employed 70 workers.
Bab al-Sham has historically received little infrastructure support from the Iraqi government. Sitting at the northern edge of the city of Baghdad, it has been all but ignored in recent years by the Amanat, Baghdad's public works department. While geographically located within the limits of the city, it is more closely related to the rural district of Istiqlaal.
Even its name is outward looking. “Bab al-Sham” means “Gate to the Levant,” the region that includes Syria, Jordan, Lebanon, Palestine, and Israel.
In many ways, Bab al-Sham resembles many factory towns in rural China—clusters of factories filled with workers operating relatively primitive equipment in poor lighting, while other workers squat on the floor performing assembly and finishing operations. Development in China demonstrates that these kinds of factories, given the right regulatory and economic platform (currently developing in Iraq), can operate profitably and eventually develop into modern manufacturing facilities.
According to a recent survey, 55 percent of companies are involved in plastics. They include plastic recyclers, plastic hose extruders, extrusion blow mold container manufacturers, and injection molders. Plastics factories employ 61 percent of the workers.
Construction materials factories are the next largest segment, representing 15 percent of operating factories and 17 percent of workers. These factories manufacture tiles and bricks used in residential and commercial construction. The third largest segment is metal fabrication, representing 15 percent of factories and 11 percent of workers—general machine and fabrication shops, and manufacturers of water tanks, steel pipe, and production machinery.
The factories in Bab al-Sham are all privately owned. Previous industrial revitalization efforts, largely undertaken by the U.S. Department of Defense Task Force for Business and Stability Operations, focused on large Iraqi state-owned enterprises, in an effort to counter the ongoing insurgency through increased employment. The results of this effort have been mixed.
Privatizing Iraq's state-owned enterprises is an extremely difficult task, fraught with legal, economic, and social difficulties. The private sector, specifically the manufacturing sector, offers an opportunity to employ thousands of workers while diversifying and stabilizing Iraq's economy.
Bab al-Sham was ripe for industrial development—or redevelopment. The members of a reconstruction team have a variety of tools which can be used in their development efforts. The State Department and Defense Department have programs to provide microgrants, but there are strict rules governing who may receive the grants, and for what purpose. The most valuable tool in the team members’ tool box is knowledge. Most subject matter experts have worked internationally and in developing economies, and are able to provide consulting services in addition to monetary grants for very specific needs.
Bringing a district back
A development team assembled to work in Bab al-Sham consisted of the ePRT industrial advisor as team leader, supported by Army Civil Affairs soldiers, and engineers from the Army Corp of Engineers Joint Reconstruction Operations Center. None of the efforts would have been possible without the security and logistics support provided by soldiers of A Company, 1st Squadron, 7th Cavalry Regiment, the U.S. Army unit operating inside Bab al-Sham.
Initial efforts focused on spending as much time as possible in Bab al-Sham, visiting factories and meeting owners. A survey of approximately 25 factories consisted of touring the facilities and meeting the owners to gather basic information about the businesses. The factory surveys were followed by more extensive studies to understand the businesses’ operating models, to gauge current performance, and to identify key bottlenecks that limited company performance.
In addition to the various company-specific issues that surfaced as a result of the ongoing studies, there were three main issues that all company owners complained of.
One was the lack of adequate electrical power. Bab al-Sham was receiving power in blocks of one and a half to two hours every six hours, for a total of eight hours each day. Another complaint was competition with imported products, which often sold below the cost of local production. Owners also reported a lack of loan capital to finance factory upgrades and expansions.
Grants to individual businesses cannot exceed $3,000 under the State Department's program and $5,000 under Defense Department's. While this level of funding is appropriate for a very small businesses, manufacturers work on a larger scale. Capital to purchase new production equipment is on the order of $100,000.
The two-part solution
A solution was needed which would help individual business owners when possible, and more important than that, would set the stage for sustainable growth in the area at large. Regulations also prohibit using grant money as a loan pool or as loan collateral. Non-governmental organizations, however, are eligible to receive larger amounts of money for training, consulting, and equipment. Given these funding rules, a two-part plan was developed.
The first part was to establish, train, and mentor a factory owners association, which would operate much as a traditional chamber of commerce, bringing factory owners together to solve common problems and providing a conduit for development funds.
The second part was to study factories to understand what specific training and assistance they required. The factory studies would help inform the services that were offered by the association. These services would initially be funded by the development team, but would eventually be paid by association members’ dues and fees.
Factory owners had for several years been meeting to discuss solutions to their problems. The development team helped formalize that group into a registered non-governmental organization representing Bab al-Sham's factory owners. Several months after it was formed, the organization, known as the Noor Association, had enrolled more than 130 dues-paying members. While initial membership fees were quite low, the fact that factory owners were willing to pay at all is testament to their desire to work hard for the benefit of their factories and community.
The members formed committees focused on subjects including external relations, responsible for establishing and maintaining relationships with the government of Iraq and with other business associations; vocation/education, responsible for determining and recommending business and vocational skills training for factory owners and their employees; and research and studies, both of markets that the factories may choose to enter and of services which the association may decide to offer; as well as committees on publicity, auditing, finance, and administration.
The next step in the establishment of the Noor Association was training. Running a successful non-governmental organization, or NGO, is a complex operation. The government of Iraq has financial management and reporting requirements that must be met. Officers of the NGO must develop programs that benefit members, and must collect dues and fees in order to sustain the organization. A third-party trainer was hired by the development team to deliver training and mentoring to the officers and several founding members in NGO management, all of whom were also owners of factories in Bab al-Sham.
Studies of factories in Bab al-Sham had identified several opportunities for training that would benefit a majority of the factory owners. They included finance and accounting, in order to better prepare owners to apply for loans.
The factory owners also needed help with essentials of marketing. Having spent their early years in a command economy, they lacked tools to analyze the market and position their products appropriately. This was especially important, given the competition with imports. Factory owners needed to identify market niches in which they could compete with imports.
In order to further legitimize and establish the Noor Association, its chairman requested that all training be offered through the association. The development team readily agreed, and at the time of writing, finance and accounting training was in progress, and additional business and technology training was in development.
The Noor Association quickly became a key advocate not only for factory owners but for Bab al-Sham as a whole. Due to past violence in Iraq, society as a whole had become insular. Groups that could greatly benefit from mutual cooperation would never meet, though they might be across the street from each other.
This problem extended beyond the much-publicized Sunni-Shia divide and into tribal and geographic divisions as well. In the case of Bab al-Sham, plastics manufacturers should have been exploiting the growing market for drip irrigation products, most of which were being imported from Turkey and other surrounding countries. The area around Bab al-Sham is largely agricultural. Recognizing the opportunity, officers of the Noor Association began to meet with agriculture associations and farmers to understand equipment requirements and to identify opportunities to test their products.
The Noor Association also undertook a broad survey of all factories, open and closed, in Bab al-Sham. This project was supported and funded by the development team, but allowed the officers of the association to make key contacts with many factory owners, and also offered an opportunity to recruit members. The survey data provided the association's officers with a deeper understanding of the factories in Bab al-Sham, informed future member services, and guided advocacy efforts.
The three main problems—inadequate electrical power, competition with imports, and lack of loan capital—were largely beyond the reach of the project team. Nonetheless, effort was made to address them.
The number of hours of continuous power each day is not sufficient to warm up and operate production equipment. Backup generators in Bab Al-Sham are often not large enough to run all of a factory's equipment simultaneously. Factory owners have to purchase the fuel on the black market at double the price of government fuel allotments. (Why the factory owners were unable to receive their government-supplied fuel allotments remains a mystery.)
The project team and Noor Association began an effort to lobby the Ministry of Electricity to provide power in a continuous block of eight hours during the business day. The Ministry of Electricity initially resisted, stating that feeder lines supplying power to Bab al-Sham supplied both industry and residences, and that providing a continuous block of power wasn’t beneficial to residents.
After months of effort, it was discovered that a single switching station provided power to the factory district of Bab al-Sham and that four feeders provide power exclusively to factories. After much effort by the Noor Association and the project team, the Ministry of Electricity agreed to provide power on all four feeders from 8 a.m. to 4 p.m. every day.
This single accomplishment will have a significant positive effect on the factories of Bab al-Sham, improving their margins and allowing them to expand and employ more workers.
The power lines in Bab al-Sham, after years of neglect, had degraded to the point that they were insufficient to handle the increased power draw, which was expected after a continuous block of power was supplied. The project team worked with the U.S. Army to develop a project to replace critical conductors and upgrade transformers to meet the new demand, and to provide some margin for future growth. At the time of writing, the grid upgrade project was in the approval process, with support from all the necessary approvers.
Control of unregulated imports is clearly a national-level problem, and the development team and Noor Association elevated the problem through every channel available. Improved electrical service will reduce the local cost of production, which will improve competitiveness.
Factory owners also actively sought market niches in which they could compete. For example, a factory owner who once produced biscuits and cookies, after studying the market, discovered that he could compete by manufacturing flavored corn puffs, which, light and bulky, were relatively expensive to transport. The factory owner, by making small changes, was able to remain in a market he was familiar with, but in a niche that was profitable.
Addressing the lack of investment capital is another problem that requires national-level input. Lack of a modern commercial code in Iraq limits private investment, and the Iraqi banking system has not historically managed loan portfolios.
The system is improving, and several Iraqi banks are now actively seeking commercial loan customers. The project team first addressed this problem by providing training, through the Noor Association, in finance and accounting. The training included a mentoring portion to assist the factory owners in developing standard financial statements and preparing business cases for presentation to bank loan officers. The project team and Noor Association also actively sought lenders, and introduced them to the potential of Bab al-Sham factories.
When my tour in Iraq ended in February 2010, it appeared that the development effort in Bab al-Sham was a success. Most important, it is likely that Bab al-Sham will continue to improve after the development team's departure.
At the time of writing, three new companies had opened in the area, and countless closed factories were being cleaned and prepared for future operation. The provision of a continuous block of power will have an immediate and dramatic impact on business performance and employment. The capacity of many factory owners has been increased, and the area has an enthusiastic advocate in the Noor Association.
Perhaps the key factor in the project's success was that the project team served to enable efforts already under way, and worked within legal and cultural constraints to empower individuals to help themselves.