The first time George Heinlein met with Iraqi officials to discuss building sports stadiums, he arrived without a translator and endured almost an hour of discussion in Arabic -- none of which he understood.
More than two years later, the Kansas City-based businessman has more than $500 million in Iraqi contracts and enough cultural savvy to schedule a monthlong break in construction during Ramadan, the Islamic period of fasting during daylight hours. He doesn’t blink when camel is served for lunch, either.
Heinlein runs one of several companies that have benefited from a State Department push to get more U.S. companies into Iraq. As foreign competitors from China and France rush to invest in Iraq, Secretary of State Hillary Clinton has mobilized her agency to help companies like Boeing Co., PepsiCo Inc. and Heinlein’s 360 Architecture compete and prosper there.
“It’s time for the United States to start thinking of Iraq as a business opportunity,” Clinton said June 3 to executives who came to her agency to learn more about doing business there.
As the U.S. role in Iraq shifts from military cooperation to a civilian partnership led by the State Department, Clinton has focused on commercial diplomacy -- building economic links - - as a way of fostering government transparency, political stability and stronger ties.
“Commercial diplomacy works hand in hand with strengthening ties in various areas of foreign policy and national security,” Robert Hormats, the State Department’s Under Secretary for Economic Affairs, said in an interview.
As part of that effort, the State Department is helping companies like Heinlein’s, which designed the New Meadowlands Stadium in East Rutherford, New Jersey, for the New York Jets and the New York Giants football teams.
“There’s no doubt the State Department and the Department of Commerce helped us out,” Heinlein said in a telephone interview, recalling how his company won a Ministry of Youth and Sport contract over 14 other firms vying to master plan and design an Olympic-quality ‘sports village’ in Basra, the oil-export hub in southern Iraq.
Even with the “tough” environment, Iraq’s economy is projected to grow faster than China’s in the next two years, Clinton said in her remarks to the executives.
The International Monetary Fund projected in May that the country’s GDP growth will be 12.1 percent this year, while non-oil growth will be 5 percent. Companies willing to invest will have the support of embassies and consulates along with the Departments of Treasury, Energy and Agriculture and the Export-Import Bank.
In 2010, U.S. exports to Iraq totaled $1.64 billion, down 7 percent from the $1.77 billion in 2009, according to the U.S. Census Bureau. The U.S. ran a goods-trade deficit with Iraq of $10.5 billion last year, reflecting about $12 billion in oil imports from Iraq.
In the first five months of this year, U.S. exports to Iraq totaled $1.17 billion, up 59 percent from $737.1 million in the comparable 2010 period.
“Iraqis are looking to rebuild every sector of their economy, not only their oil sector, but agribusiness, transportation, housing, banking, and many others,” Clinton said. “We want to go on record unequivocally in encouraging American business to begin that process, and we will do everything we can to support you in it.”
Heinlein’s company reached out for help midway through competition for the contract, when the field narrowed to three companies, including a Turkish business and one from Kuwait.
“We were getting word that the other teams, their ambassadors to Iraq were putting a lot of pressure on the Ministry of Youth and Sport and others to try to make their teams successful,” Heinlein said.
360 Architecture won the contract to build a 65,000-seat soccer stadium, smaller venues and athlete apartments for Basra’s ‘sports city’ and just won two more stadium projects.
Heinlein admits there are difficulties. Traveling to and from Baghdad is strenuous, often involving long waits for visas. And dealing with security is a part of life there, Heinlein said.
“We’ve arranged our own security,” he said. “So far we haven’t had any issues.”
Within the State Department, Deputy Secretary Thomas Nides will oversee efforts to help companies like Heinlein’s. In Iraq, U.S. Ambassador James Jeffrey is working to establish an American Chamber of Commerce to provide additional support.
On the Ground
About 30 companies attended the State Department event, including some U.S. corporations already at work in Iraq. Exxon Mobil Corp. and Occidental Petroleum Corp. are part of a group that has exceeded its target of increasing oil production by 10 percent, according to the State Department’s bureau of Management and Resources.
Pepsi is sold throughout Iraq and General Electric Co. has contracted with the government to provide 56 gas turbines valued at an estimated $3 billion to improve electricity supply.
Citigroup Inc. is engaging with Iraqi financial institutions and with corporations that wish to invest in Iraq.
Sean McCormack, a Boeing spokesman, said his company has received “strong” support from the administration as it has worked to replenish Iraq’s commercial aviation fleet by selling thirty 737 airplanes and ten 787 airplanes to the Iraqi government.
Firms in Iraq face serious hurdles that Clinton said she wouldn’t “sugarcoat.”
The World Bank rated Iraq 166th out of 183 economies for “ease of doing business,” an assessment that includes dealing with construction permits, protecting investors, enforcing contracts and registering a property.
Iraq also ranks 175th out of 178 on the Bank’s corruption index. In a fact sheet, the State Department said that the government of Prime Minister Nuri al-Maliki and the U.S. are participating in programs to fight corruption. When Heinlein got help from the administration, he had to guarantee that the project would involve no bribery.
The IMF is also working with Iraq on its budget, banking and financial systems controls, according to State’s bureau of management and resources.
“Iraqis have done some things, but they need to double down on regulatory regime that will govern investment,” said Lionel Johnson, vice president for Middle East Affairs at the U.S. Chamber of Commerce in Washington. Johnson spoke just days before taking a delegation of interested U.S. companies to Iraq.
On previous trips, he has met with Iraqi officials to convey what those companies need to operate with confidence. “Transparency and good governance,” Johnson says. “It’s an economy that is evolving, but it needs to evolve toward a more rules-based economic and fiscal environment.”
The Chamber is pushing the U.S. administration to get more deeply involved in efforts to establish U.S. companies in Iraq. Japan, Korea and Germany have sent cabinet-level delegations to Iraq to promote their country’s companies.
“We need to do that if we’re going to get somewhere in Iraq,” said Johnson, who did similar work with Vietnam at Citigroup. “It’s fine for the Chamber to do it, but it’s a real vote of confidence if you have a delegation led by a cabinet secretary,” he added.
Clinton pointed out the advantages for companies willing to go there. The country “has one of the largest customer bases in the entire Arab world, it has one of the world’s largest supplies of oil, and it has one of the best educated workforces in the region” with a literacy rate of 78 percent, she said.
As it rebuilds, Iraq also has enormous requirements, including the need for roughly 5 million new housing units. That’s the sort of concrete business opportunity the Chamber wants to promote to groups such as the National Association of Home Builders, Johnson said.
Other companies are already taking advantage of those prospects. While Chinese, French, Jordanian and Iranian companies are lining up to do business, “very honestly, we see too few American companies alongside our soldiers and our diplomats,” Clinton said.
International companies have been much more aggressive in Iraq than their U.S. counterparts, Johnson said.
“Our trading partners are very, very active, with the encouragement of their governments, because they see the prospect of this being a success,” he said. “Our companies have stepped up, but not commensurate with the level of opportunity there.”
“The irony is that it is the United States that has invested the huge sums of blood and treasure to stabilize Iraq and position it to move into 21st century,” he said, “and it would be a real disappointment if others capitalized.”