Iraqi Factory Struggles to Survive in a Free Market The Iskandariyah bus factory was Saddam's pride and joy, at one time employing thousands, but as the open market drains away its once guaranteed business, the factory has been forced to remake itself.
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Iraqi Factory Struggles to Survive in a Free Market

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Iraqi Factory Struggles to Survive in a Free Market

Iraqi Factory Struggles to Survive in a Free Market

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MELISSA BLOCK, host:

Four years of warfare and deepening crisis have crippled the Iraqi economy. If the country is ever to rebound, it will have to decide what to do with 192 state-owned factories - once the backbone of the economy.

NPR's John Burnett reports on one Iraqi factory that has kept its gates open.

JOHN BURNETT: It is 133 degrees on the black top that leads into the state company for automotive industry in the town of Iskandariyah, 30 miles south of Baghdad. A debonair figure in a dark blue suit, spotless dress shirt, and shiny shoes yells at a smudged worker to open the door.

Sheikh SABAH AL-KHAFAJI (Owner, Automotive Factory): (Foreign language spoken)

BURNETT: Sheik Sabah al-Khafaji strides into a cavernous building strewn with shards of metal.

(Soundbite of metal scraping)

BURNETT: He has a message for the world.

Sheikh AL-KHAFAJI: We want to say we are in life. We are stay living.

BURNETT: That's the exception. State-owned companies are shuttered all over Iraq. After regime changed four years ago, the highly centralized Baathist government that placed orders for cigarettes, bicycles, detergent, milk and tomato paste, collapsed. Then the factories' cash balances were raided for reconstruction.

Today, according to the U.S. military, four out of the nearly 200 state-owned companies have reopened - a clothing factory in Najaf, a porcelain sink plant in Ramadi, a leather facility in Baghdad, and the bus factory albeit at lower production. During boom times in the 1980s, the factory produced six to 10 buses a day.

Sheikh AL-KHAFAJI: Now, we only manufacture six to 10 per month, because there's no market for that.

BURNETT: Why is there no market for your buses?

Sheikh AL-KHAFAJI: Because they import buses and they don't buy from our factory.

BURNETT: So the free market has been rough for the factory?

Shiek AL-KHAFAJI: Yes, it's a free market, but you know, we have a good chassis, a good bus.

BURNETT: To survive, the bus factory has diversified. It builds towers for refineries, fabricate steel to repair blown bridges, and under a $6 million contract with the U.S. government, it assembles modular buildings and armors -big yellow buses built on Swedish chassis.

The bigger question for the bus factory and every other state-owned factory is whether in post-Baathist Iraq, with its capitalist-loving American overlords, will the plants privatize or die as so many did in the former Soviet Union?

Major Craig Whiteside is the industrial liaison at the nearby U.S. military base.

Major CRAIG WHITESIDE (Industrial Liaison; U.S. Army): At what point do they make a break from the socialist underpinnings of their factories and their business models and say, that's it, we're going for it? Because otherwise, they'll die off because they cannot compete with the free market that's out there.

BURNETT: What the factory needs most is new equipment like welding machinery.

(Soundbite of welding)

BURNETT: A 28-year-old welder named Ali Oweid Fayel stands near his torch in a dirty denim shirt and sandals.

Mr. ALI OWEID FAYEL (Welder, Automotive Factory): (Through translator) We are using antiquated, outdated machinery in this factory. We still use an old hand welder. We don't have anything innovative.

BURNETT: There are also personal issues for the workers who live in nearby Iskandariyah, a violent town right on the Sunni-Shia fault line.

Mr. FAYEL: (Through translator) Every day we risk our lives when we come to work. We can expect a suicide bomber to blow us up at any time.

BURNETT: Unemployment in Iraq is thought to be 60 percent, the Pentagon is so keen on employing an idle work force to get them to stop killing U.S. troops that it created the position of Deputy Undersecretary of Defense for Business Transformation, Paul Brinkley, an intense 40-year-old former hi-tech executive, choppers around the country surrounded by former Delta Force commandos as a sort of one-man chamber of commerce. His portfolio is to reinvigorate Iraqi industry. And currently, Sheikh Sabah is his rock star.

Mr. PAUL BRINKLEY (Deputy Undersecretary of Defense for Business Transformation, Iraq): That's a factory I can bring businessmen to. They see a skilled work force. They see people who can manufacture buses and tractors and irrigation equipment and all the things they can do in Iskandariyah, and suddenly they're interested in potentially taking advantage of that work force to access this market. That's the philosophy we're applying. Now, it's difficult.

BURNETT: Difficult in the extreme. Currently, the bus factory employs about 450. The other 3,000 workers from the Saddam years have been furloughed. They sit at home collecting 40 percent of their salaries, which Sabah, back in his office, says is not enough to keep him from joining the insurgency.

Sheikh AL-KHAFAJI: Because when they have no job, they are thinking about bad things. When they have no money, someone give them money and do maybe bad things.

BURNETT: This is not how the script was supposed to go. U.S. troops were supposed to be greeted as liberators, Iraqi exiles were supposed to flood the country with new investment, skilled state workers were supposed to jump in to the robust new private sector. Like everything else over the past four years, it hasn't turned out that way. But Sabah al-Khafaji is a survivor. He just signed a contract to maintain transport trucks from Kuwait, and he has other good prospects as well. Said a U.S. Army officer, I wish we had more like him.

John Burnett, NPR News, Baghdad.

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