Sydney, 30 April 2004

Speech to the Rebuilding Iraq Subcontracting Conference - Building Foundations for Prosperity

Representative of the US Department of Commerce, William Lash

Representatives of prime contractors

Australian business representatives

Ladies and gentlemen

I am delighted to welcome you all here today for the Rebuilding Iraq – Sub-contracting Conference.

Today Australian and regional businesses will have the opportunity to meet directly with representatives of some of the prime contractors recently announced under the US$18.6 billion US Supplemental funding for Iraq’s reconstruction.

I welcome the representatives of these companies to Australia

• we appreciate them taking the time out of their busy schedules to come here and give us their insights and practical advice on how to secure sub-contracts in Iraq.

The recent awarding of these prime contracts is a welcome strong signal of the priority the US is placing on ensuring rapid progress towards Iraq’s reconstruction and stabilisation.

I would also like to congratulate the Head of the Program Management Office, Rear Admiral David Nash (in absentia), whom I had the pleasure of meeting in Australia in February, on his determination and ability to achieve these first milestones in what is an ambitious agenda for Iraq’s reconstruction.

Rebuilding essential infrastructure and services for the people of Iraq, following decades of neglect and mismanagement, will be vital to Iraq’s economic recovery

• and will lay the groundwork for a stable, peaceful and prosperous future for the people of Iraq.

What we do today to help get Iraq back on its feet again will have a major impact on Iraq’s ability to fulfil its economic potential in five, ten years time, to the benefit of all Iraqis, people of that region and the entire global community.

The Australian government is committed to helping the people of Iraq achieve this goal.

I am proud of the significant contribution Australia’s public and private sector is making to this process.

And there are many more opportunities for the private sector in Australia, and across our own region to contribute to this important process.

We will learn about some of those opportunities today.

During my visit to Iraq in December I saw first hand the enormity of the task ahead.

I am pleased to say that good progress is being made.

But the challenges of doing business in Iraq should not be underestimated.

Challenges

I recognise that security concerns are in the forefront of your minds, and understandably so.

The Australian Government continues to keep the situation in Iraq under close review, as reflected in our robust consular travel advice.

The security situation in parts of Iraq remains uncertain.

Foreigners in Iraq, including Australians, remain at significant risk of being targeted or indirectly involved in terrorist and other attacks.

The recent kidnappings of foreigners in Iraq are the latest in a series of terrorist actions designed to discourage international involvement in Iraq’s reconstruction and rehabilitation.

Innocent Iraqis are also falling victim to terrorist attacks. The recent bombings in Basra killed not only Iraqi police, but many civilian bystanders including school children.

The continuing presence of Coalition forces will be important to ensure stability.

We remain firmly committed to continuing engagement in Iraq.

And we are not prepared to yield to the attempts by terrorists, and others violently opposed to a peaceful transition, to intimidate countries and companies to withdraw their assistance.

Some have been discouraged, but by far the majority are continuing their vital work.

Those attempting to derail the country’s rehabilitation and transition to a new representative government are not representative of the majority of Iraqis.

Most Iraqis welcome the assistance the international community is providing and the end of the former regime

• and are opposed to the violence and disruption perpetrated by this tiny minority.

Brutally oppressed by Saddam’s regime, most Iraqis recognise that their best interests lie in a stable, democratic system of government – which the Coalition and the UN are assisting the Iraqis in creating.

A recent opinion poll (Oxford Research International) showed only 15% of Iraqis surveyed wanted the Coalition to withdraw immediately.

The best way to counter those attempting to derail the country’s rehabilitation and political transition is for the Coalition to stay committed to the task

• and to push ahead with reconstruction and the political process to form a legitimate, representative Iraqi government to take over on 30 June.

We hope and expect the security situation will improve over time.

The Australian Government personnel in Iraq have rigorous security arrangements in place to ensure their safety and allow them to do their vital work in Iraq.

Business people choosing to go into Iraq need to take the issue of security risks very seriously

• and to arrange appropriately robust security and emergency measures.

In addition to the security challenges, there is also a high level of regulatory and legal uncertainty.

A future elected government may not feel bound by decisions made by the CPA or the Interim Iraqi Government

• possibly including commercial agreements .

And communication and business information deficiencies remain significant obstacles to commercial activity.

Progress

Despite these many challenges, we can mark the progress that has been made in Iraq.

Iraq’s economy has demonstrated rapid economic growth so far this year, albeit from a low base.

Oil production has exceeded targets with production around 2.5 million barrels per day, which is expected to increase to 2.8 million by the end of 2004.

Crude oil exports are around 1.7 million barrels per day, making a strong contribution to the Iraqi budget.

The work of the CPA has seen the creation of over 400,000 jobs for Iraqis, addressing significant long-term unemployment problems in Iraq,

It is estimated that the US$18.6 billion supplemental funding package will create another 1.7 million jobs this year.

The Iraqi dinar is stable at around 1400 to the US dollar.

After hyper-inflation under the Saddam’s regime, inflation is now stable at around 20 per cent.

The local banking system is now operational in Iraq, and licences have been issued to several international banks to establish operations in Iraq.

Peak electricity output is around 4,500 MW – slightly above the pre-war average and more evenly distributed across the country.

A continued program of capacity increases and maintenance are aimed at increasing electricity generation to 6000 MW by mid-year, to meet the peak of demand expected in mid-summer.

Total telephone subscriptions (include mobile phones) have passed the one million mark, 20 per cent higher than under the previous regime.

Three mobile telecommunications companies have acquired service provider licenses and mobile telephones are selling at a rate of over 15,000 a week.

The Trade Bank of Iraq has issued over 100 letters of credit covering imports worth US$500 million, providing certainty for traders exporting to Iraq, and supporting a return to normal trade.

And I welcome Iraq’s steps to re-join the global economic community, having been granted ‘observer’ status at the World Trade Organisation in February this year.

Australia’s contribution

I am proud of the contribution Australia has made to this progress.

Through Australia’s A$120 million in humanitarian and technical assistance to Iraq, our advisers in the Coalition Provisional Authority have assisted the establishment of sound economic and trade policy frameworks and in the rebuilding of Iraq’s industries and administration.

Australian Treasury economists played a central role in preparing Iraq’s first credible budget in 30 years and in establishing the rates of pay necessary to draw Iraqi public servants back to work.

Australian agricultural experts, under the leadership of Trevor Flugge, ensured Iraqi farmers received payments for their crops; supervised the refurbishment of the agriculture ministry; and drew on their own experience to assist Iraqi farmers reap the summer grains harvest.

• This work is continuing and has drawn strong support from Iraqis.

An Australian procurement expert is playing a pivotal role in ensuring that vital food supplies are reaching the vast number of Iraqi people who continue to depend on the food ration basket.

An Australian electricity expert is working with the Program Management Office to assist the rehabilitation of this critical sector.

And we have undertaken to provide training for key Iraqi officials on the WTO principles of international trade.

Australian companies are also making a major contribution to Iraq’s reconstruction:

• AWB Ltd will have exported 1.66 million tonnes of wheat supplies to Iraq by June

• Worley Group is assisting the rehabilitation of the oil sector in the north of Iraq

• SAGRIC and CSIRO are working on the rebuilding of Iraq’s agriculture sector, and restoring Iraq’s southern marshland

• GRM International is advising on Iraq’s economic recovery, including the future of the public distribution system

• ANZ bank is assisting the work of the Trade Bank of Iraq to facilitate trade, and

• Multiemedia is providing satellite-based internet and communications bandwidth services linking Iraq back up with the rest of the world.

And opportunities exist to do much more.

International Assistance

Australia recognises and welcomes the huge commitment the United States has made to the rebuilding of Iraq

• both in terms of the military commitment and sacrifice, and its ongoing assistance through funding and provision of expertise.

International private sector participation will also be critical to Iraq’s recovery

• through international donor-funded reconstruction of infrastructure and services

• through regionally funded initiatives

• and through the resumption of normal trade and investment flows.

The Iraqi themselves must be closely involved in the reconstruction process.

I thus welcome the emphasis on Iraqi participation, capacity-building and employment creation in the specifications for US-funded contracts.

Iraq Market Outlook

With the right groundwork Iraq could once again become one of the region’s strongest economies.

When I visited Iraq and its neighbours in December I witnessed the stimulus the new expenditure and political change in Iraq is having on the region.

And beyond the immediate rehabilitation, Iraq has great future potential as a big trading partner for Australia.

Of course, Iraq is currently a substantial export market for Australian wheat, with total wheat exports to Iraq since March 2003 at more than 1.6 million tonnes, worth in excess of A$500 million.

But we are also exporting a range of other goods including Mitsubishi Magnas for the Iraqi Police Force, cheese and communications systems.

We have already established a trade finance facility to assist our exporters.

And our aim, over time, is to expand our trade and investment profile with Iraq to reflect that of our trading relations with other countries in the region, including in services and manufactured goods, is being realised.

The Government is working actively to assist Australian businesses choosing to pursue commercial opportunities in Iraq

• and to keep business well informed about Iraq reconstruction projects and spending programs.

We have done this through trade visits that I made to Washington and Baghdad last year, through conferences such as this and the roundtable with Admiral Nash in February.

And through visits to Australia by key Iraqi leaders such as Iraqi Governing Council representatives Jalal Talabani and Nasir Al-Chadirji, and interim Iraqi Ministers for Trade and Agriculture.

We plan on maintaining an active visits program.

Austrade offices are situated throughout the Middle East – in Dubai, Riyadh, Amman, Cairo, Tehran, Istanbul and Ankara.

The Department of Foreign Affairs and Trade’s Representative Office in Bagdad and embassies in the region are also able to provide information and assistance.

And I am pleased to announce that Austrade has appointed a Trade Commissioner for Iraq, Mr Greg Hull, to be resident in Baghdad, starting early May.

Greg, who is here today, will establish and track commercially relevant relationships within the CPA, the Program Management Office, Iraqi Ministries and of course links into the private commercial sector.

Conclusion

While internal issues in Iraq create a challenging and complex working environment, we need to ensure we also see the medium and long term outlook.

Iraq holds significant future prospects.

If Iraq is to prosper it needs not only political stability but long term sustainable growth.

Australia’s contribution to Iraq, both Government and private, is helping the Iraqi people overcome Saddam’s corrosive legacy by assisting them build the foundations for a better future.

The ongoing international public and private sector contribution and commitment to Iraq will be critical to its success.

I welcome you again to the Rebuilding Iraq – Sub-contracting Conference

Today you will have the opportunity to meet and strengthen links with business colleagues who are engaged in Iraq’s reconstruction.

Thank you