Iraq is benefiting from a construction boom - in no small part due to the infusion of more than US$20bn in reconstruction money. The reconstruction has fuelled a demand for many building materials and at the top of the list is cement. In addition to electricity shortages and the lack of clean water, the country is now experiencing a shortage of cement. With building projects mushrooming all over Iraq for the first time in 30 years, local observers say prices have skyrocketed. Apparently the price for one tonne of cement has gone up three to five times since before the war - from about US$20 then to US$125 now.
The problem is supply. June Reed, the US Embassy Private Sector Development advisor in Baghdad, says most of Iraq’s 13 plants are operating at about 25 percent capacity, or not operating at all. "The state-owned enterprises that relate to cement are very old, some have plants and equipment that is 30-years old, outdated, generally not profitable, certainly not efficient," she said. Iraq’s chronic electricity and fuel shortages, in part caused by sabotage and insurgent attacks, have also shut down plants.
Salah Kambour at the Iraqi Ministry of Industry and Minerals says Iraq is rich in limestone and clay. He says Iraq used to export its cement, but now: "We are importing cement from everywhere: from Turkey, from Lebanon, from Egypt, also from Kuwait, and from China! So from everywhere cement is coming!" he said.
Kambour says the production of Iraq’s cement plants is about half the current demand. But even if the plants are repaired and provided with new equipment, they could only potentially produce about about half of the country’s projected demand.
The American Embassy in Baghdad’s commerce counselor, Andrew Wylegala, says privatization can help bridge this production gap and that across the board free-market reforms promise the best future for Iraq’s other state-owned industries. "Clearly the private sector is the way forward, the work that has been done through official funds and through reconstruction efforts, was always intended and has made good headway in setting the stage so private sectors players could come in and continue the job," he said.
In a move toward that goal, the Ministry of Industry announced that two cement plants will be the first state-owned companies to be partially purchased by privately owned companies. Kambour hopes it pays off. "We hope they can get the know-how, to reach the design capacities, so the bad need of cement can be satisfied," he said.