In early January, Prague-based trading company Inekon Group signed a 328 million euro (9.5 billion Kč/$400 million) contract to cooperate with the Iraqi S.J. Company on the construction of a cement manufacturing plant.

The contract, signed two months after Inekon received a license from the Iraqi government, is the largest a Czech company has won in the country since U.S. President George W. Bush announced the official end of hostilities in May 2003.

It also signals that Czech companies are looking to return to a country torn by war and instability despite the security risks. During the 1970s, Czech businesses, mainly in the petrochemical sector, including the Škoda Group, had a strong presence in Iraq, but they started pulling out after the Persian Gulf War in 1991.

"Our companies had a very strong visibility in Iraq in the past, and it's good they are catching up," said Martin Tlapa, deputy industry and trade minister.

Inekon received a 660,000 euro subsidy as part of the Czech Republic's program to aid reconstruction in Iraq. The company is one of 11 Czech investors in Iraq to receive money from the program.

In addition to the subsidy, Inekon will be able to finance construction projects through loans from the Czech Export Bank and state-controlled export insurer EGAP.

Because it is a trading company, Inekon will subcontract construction projects at the cement plant to three Czech businesses: Zlín-based construction firm PSG International, Přerov-based engineering firm PSP Engineering and CZMT, an Ostrava-based manufacturer of electronics.

Josef Hušek, Inekon's general director, said the company's global experience managing development projects was one of the main reasons it won the contract in Iraq.

"Two years ago we were working on restructuring a cement company in Tajikistan, a project worth 73 million Kč," he said. "Obviously, this helps in negotiations on other projects."

Inekon had 1 billion Kč ($42 million) in turnover last year. Its primary focus is on the railway industry, but it's also involved in the chemical and construction industries.

High risk

Given the past success of Czechoslovak and Czech companies in Iraq and the relationships many Iraqi businessmen made during studies here, local companies stand a good chance of winning more contracts in Iraq, said the Industry and Trade Ministry's Tlapa.

The interest is certainly there. The volume of Czech government-supported projects in Iraq grew last year to 8.6 billion Kč from 290 million Kč in 2004, according to data from the ministry. In the past two years, the government has paid out 179 million Kč in subsidies to companies with projects in Iraq.

Iraqi President Jalal Talabani said during a visit to Prague last October that Czech companies could contribute to the reconstruction of key infrastructure in Iraq.

Tlapa and some would-be investors have said, however, that the political situation in Iraq and threat to foreigners are concerns for investors. Indeed, late last year, Jiří Krejča, director of the Czech branch of currency exchange Travelex, which in the past was involved in engineering projects in Iraq, said that many investors were discouraged by the low level of security in the country.

"Two and a half years ago many entrepreneurs, whom I know only from working in Baghdad, were getting ready for a big project in Iraq," he said last spring.

"[But] the situation is not good, and the high security risks, alongside weak protection for possible investments, have changed the plans of most entrepreneurs."

Today, Czech businessmen still complain that high security risks increase costs and put their projects and workers at risk.

"The potential in Iraq is enormous, and we could make many more deals than we have so far," said Josef Cílek, general manager of Technoexport. "However, should security become worse, our business in Iraq could drop."

Technoexport has in the past two years exported petrochemical technology and equipment worth of tens of millions of U.S. dollars to Iraq.

Despite the risks, a growing number of Czech companies appear to be interested in doing business in Iraq, and investors already in the country are looking to expand.