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October 12th, 2008
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Home » Archives » Business

Return to Iraq

Czech firms reviving old business ties in war-scarred nation

By Victor Velek
Staff Writer, The Prague Post
March 12th, 2008 issue

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Czechoslovakia built the majority of Iraq's refineries during the Cold War, which several Czech companies are now working to restore.
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Technoexport's previous contracts in the Middle East include work on an oil refinery in the Mediterranean seaport of Baniyas, Syria.
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JAN PŘEROVSKÝ/THE PRAGUE POST
Kryštof taps historic ties for contracts.
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Until the late 1980s, Iraq was a business paradise for Czechoslovak companies.
Czechoslovakia’s state enterprises built the majority of Iraq’s refineries and flooded the oil-rich country with a number of other products, ranging from tractors and firearms to turnkey industrial facilities.
The situation changed with the Gulf War in the early 1990s. By the dusk of the U.S.-led invasion in 2003, Czech exports to Iraq stood well below $1 million (16.5 million Kč).
But the ties between the countries have not entirely been forgotten. Several companies have rediscovered Iraq, banking on exploiting connections that remain from their formerly strong collaboration.   
Technoexport, a Prague-based trading and export company, is one of the frontrunners in renewing interest in Iraq. The company has a long history and a Rolodex full of contacts in the Middle East, said CEO Pavel Kryštof.
Many current employees at the state-owned company, which was started in 1953, have been with the firm prior to the eclipse of Iraqi-Czechoslovak trade, Kryštof said, which has helped Technoexport get up to speed in post-invasion Iraq.
Last year, Technoexport was awarded contracts worth 2.5 billion Kč to supply crude distillation units for oil refineries in Baghdad and Basra. Its partner in the commission, the Brno-based company Prokop Engineering, started work on the projects last fall and plans to complete them by 2010.
It took several years to finalize the contracts, said Libor Bastl, a business director at Prokop.
“Winning a contract in Iraq and getting started on the construction work requires a lot of patience,” Bastl said, describing a lengthy sequence of bureaucratic procedures accompanying state tenders.
“The system of tenders in Iraq is very complicated,” agreed Kryštof. “Frequent changes of ministry leaders and executives are also a problem.”
Because of these and other intricacies, such as cultural differences between Europeans and Arabs, it is highly recommended for newcomers to the Iraqi market to join forces with a partner familiar with the region, Kryštof said.
However, Inekon Group, a tram producer and exporter of industrial plants, ventured to Iraq to do business on its own. The firm managed to earn a contract worth 328 million euros ($499 million/8.2 billion Kč) for constructing a cement works in northern Iraq in early 2006.
“It is not that difficult to succeed [in Iraq],” said Inekon’s head, Josef Hušek. The surviving Czechoslovak goodwill and lasting personal and business links between the two countries open up many doors for Czech companies, he added.    
On the other hand, contractors face extraordinary difficulties in finalizing acquired commissions. This can be seen in the fate of Inekon’s cement works project. Although the contract was signed more than two years ago, the works have not started, mainly due to disturbances in the Kurd-populated north.
Recently, Inekon representatives left for Iraq, trying to give the paralyzed project new impetus, Hušek said.
Postwar dreams
In 2006, the value of Czech exports to Iraq stood at $22 million. Last year, it more than tripled, climbing to $76 million. The government sees it as a sign of a new era.  
“The [export] prospects are relatively good,” said Zuzana Opletalová, spokeswoman for the Foreign Affairs Ministry.
“The Iraqis have good experience with Czech products,” she said. “The major problem remains, of course, the security situation.”  
“We recommend all companies to contact our embassy in Iraq before going to the country,” Opletalová said. It can help “check their potential business partners” and provide up-to-date security information, she explained.   
Due to the well-known security risks, firms send as few employees to Iraq as possible.
“There are no more than 10 Czechs operating in the country [on the refinery project],” said Technoexport’s Kryštof. Inekon plans to have only a handful of Czech supervisors in place, according to Hušek.
The growth of exports notwithstanding, the expectation of a quick return of Czech producers to Iraq was overoptimistic and perhaps naive, some point out.
Despite much effort aimed at restoring the bygone trade ties since main military operations ended in 2003, businesses have achieved little success, SAID Dagmar Kuchtová of the Czech Confederation of Industry (SPD).        
The SPD organized two business missions to Iraq, promoted Czech firms at several local trade fairs and participated in state-sponsored projects for Iraqi businesspeople.
“Unfortunately, it has by no means translated into significant business benefits for Czech companies,” Kuchtová said. “Generally speaking, the expectation of a massive return of Czech firms to the Iraqi market hasn’t materialized.”        
According to Prokop’s Bastl, the extraordinary position Czech businesses enjoyed in Iraq up to 1990 stemmed from special, artificial conditions of their closed economies. Nowadays, there is no chance of restoring it.
“Up to 70 percent of Iraqi refineries were made by Czechoslovakia,” he said. “This dominant standing is impossible to achieve in today’s globalized market. The political support no longer exists and business competition in Iraq is immense these days.”

Victor Velek can be reached at vvelek@praguepost.com


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