Iraqi reconstruction costs could balloon, study finds

The cost of rebuilding Iraq in the wake of war and looting could soar to $60 billion, according to a study released this week by an international business development firm.

In a "best case" scenario, in which Iraq holds peaceful elections, leaders adequately perform their duties and oil production is ramped up and sustained, the total cost could be as low as $9 billion over five years, with the United States footing about 75 percent of the bill, according to the report compiled by Washington-based Equity International.

A "worst case" scenario envisions a collapse of the new Iraqi government, causing a breakdown in basic services and oil production. Iraq's neighbors would seize on its weaknesses and attack the fledgling country, forcing U.S. and coalition military forces to fend them off. Foreign investment and aid in the country would dry up, and the cost of reconstruction would spiral upward, the report concluded.

The visions between the two extremes differ in severity based on the performance of Iraq's economy and government, as well as the use of natural resources over the next few years. Based on current progress, the most likely outcomes are the best case scenario, or one in which internal factions attempting to take down the government disrupt reconstruction efforts, the report found.

The reconstruction analysis was unveiled Monday at a day-long conference in Washington. Speakers hailed form several countries, and included current and former government officials, as well as representatives of nongovernmental humanitarian relief organizations.

According to a group of experts in humanitarian causes who've recently traveled to Iraq, security is the top concern of citizens there, above restoring electricity and water. News media reports have depicted scenes in Iraqi cities varying between ordered chaos and lawlessness. In some towns, locals have assumed positions of authority, claiming their legitimacy from the blessing of religious leaders. Some have reportedly amassed their own armed security forces.

Despite U.S. efforts to establish civilian rule in the country, which included local elections Monday in the third-largest city of Mosul, Iraqi cities are still peppered with criminal gangs and paramilitary forces, said Christine Knudsen, a war specialist with Save the Children, a nonprofit organization that aims to help disadvantaged children around the world.

Sensing business opportunities regardless of the tumultuous environment, hundreds of corporate executives packed the conference, which was held at Washington's National Press Club. Speakers spoke about their vision of the future, in which large companies will win the lion's share of reconstruction contracts and share their bounty with small and medium-sized subcontractors.

In the past, when companies have bid on such contracts awarded by the U.S. government, about 80 percent have gone to U.S. companies, according to Charles Santangelo, a former State Department official instrumental in rebuilding efforts after war in the Balkans in the 1990s.

Smaller companies from the United States, Great Britain and other nations that participated in the U.S.-led military coalition against Iraq are likely to "piggy back" as subcontractors to large U.S. companies that have already won contracts, said Greg Malpass, the director of British logistics firm Coalition Suppliers Ltd. Historically, more than half of reconstruction work has been handled by smaller companies in such a fashion, said Luke Zahner, a spokesman for the U.S. Agency for International Development, which is in charge of awarding the contracts.

It appeared that non-coalition countries anticipated being cut off from the spoils of war. The head of the Turkish-Iraq Business Council implored audience members to "join forces" in the reconstruction and said that international law should govern the awarding of contracts. The Turkish government refused to allow U.S. military forces to stage operations from Turkey.

British executive Malpass said his firm was "unashamedly" seeking to help coalition countries win work in Iraq.

While AID contracts are only being awarded to U.S. companies, in keeping with federal regulations, those contractors parcel work to subcontractors from almost any nation, Zahner said. Only six countries with which the government prohibits trade may not receive subcontract work, he added.

AID has awarded eight reconstruction contracts and so far has spent $90.9 million, Zahner said. The president set aside $1.7 billion for reconstruction in the recently enacted emergency budget supplemental. That spending package also apportioned $543 million for humanitarian assistance and $200 million to replenish accounts drawn down to pay for emergency food supplies.

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