Iraqi Based Industrial Zone aims to employ Sons of Iraq

(Mr. Hashim Al Mahdi started an IBIZ container repair business on base. He currently employs 17 former Sons of Iraq.)

Abdul Rabman Amhomed shakes his head. He is mayor of Yethrib, a town that was once controlled by insurgents near Joint Base Balad. “The terrorists prevented work with the coalition,” he said. “Now we have defeated the terrorists, but we have many unemployed…Most of the terrorists used the uneducated and young.”

Exactly the kind of unemployed men who joined the U.S.-funded Sons of Iraq program and helped solidify the safety of towns like Yethrib. The Mayor says he has about 800 Sons of Iraq employed in or around his town. Each man earns about $300 a month. But the last of these contracts are set to expire in March 2009. Others say sooner.

Then what will these young, usually armed men do and who will pay them? The central government has been slow to act, the Mayor admits.

But he’s not the only one concerned. On Joint Base Balad (JBB), the huge logistics supply thirty miles north of Baghdad, the U.S. military is encouraging Iraqi businesses to bid on contracts previously awarded to large foreign contractors. This initiative gives priority to local contractors and incentives for them to employ the former Sons of Iraq. It’s called IBIZ- Iraqi-Based Industrial Zone and was pioneered by Indiana’s 76th Infantry Brigade Combat Team in collaboration with the regional contracting command and the 2/320th Field Artillery Regiment who control the area around the base.

Mayor Rabman said 300 of his Sons of Iraq have been processed to work in this zone. “The situation will worsen if we can’t find jobs for them,” he said.

“The money spent on contractors we can control,” said Lt. Col. Patrick Thibodeau, of Reelsville, IN, the IBIZ Project Manager. Often individual military units operate unilaterally, barely tolerating each other, rather than synchronizing their efforts. But at JBB, using a joint board process, the idea was to look holistically at how to get local Iraqis involved in on-base businesses and how these initiatives could have the greatest impact on local employment and security. Thibodeau called it “effects-based contracting.” He said many of his counterparts were former field artillerymen like him, who adapted the concept of military targeting in the field to economic targeting of specific business groups.

(Lt. Col. Patrick Thibodeau)

They targeted bidders “core competencies”, since in the past they’d been overwhelmed by bidders who were actually middle men out to secure and sell U.S. contracts, usually lowering the quality of the end product. They focused on local businesses who could meet current demands and start employing Iraqis as soon as possible.

The contracts also stipulated that 80 percent of the employees should live within 40 kilometers of the base and provided incentives for hiring former Sons of Iraq from the area. The challenge for the locals, many being farmers, is they lack the skills and the capital to make realistic bids.

Thibodeau, who’s a small business owner back in Indiana, compares it to the initiatives of an inner-city enterprise zone designed to assist disadvantaged groups in starting their own businesses. “We’re done kicking in doors. The Army’s not built for economic development, but that doesn’t mean we can’t,” he said.

After months of planning IBIZ, the joint team selected an Iraqi contractor who invested $2 million of his own money to build the asphalt plant just completed on base. Paving crews are expected to begin repaving many of the base’s roads and employ close to 50 employees. A container repair business that started in August to service the 9,000 shipping containers on base has an apprenticeships program that has trained and employed 30 Sons of Iraq and is scheduled to take on up to 40 more men in the next six months. The Host Nation Business Center that opened this week will implement the “Iraqi First program”, a Gen. Petraeus initiative which gives priority to Iraqis bidding on U.S. contracts with all other things being equal.

(An employee watches the opening ceremony of the new asphalt plant on October 6th.)

The second of such businesses to open its doors on base, and the first to be “de-scoped” in theater (the process by which a contract is re-awarded to a local contractor because it’s cheaper) was a small service center that offers oil changes and routine maintenance on commercial vehicles.

But the opening was not without challenges. The local sheik who headed the business had to comply with a U.S. law requiring workman’s compensation insurance for all employees, even though KBR, which holds a similar contract on JBB, has been “grand-fathered” from complying with this law. The sheik, three of whose sons are now changing oil on American trucks, ponied up $18,000 for the insurance. This single garage, 7-man shop will now be a tiny, albeit real competitor to the giant presence of KBR here.

But Lt. Col. Thibodeau says it’s not about the big contractors being the bad guy. “It’s no secret to KBR we prefer direct contracts, (with Iraqis). They understand. They have an Iraqi-first initiative going on as well.” At an average rate of $15 dollars a day, employing Iraqis on base is just that much cheaper than bringing in third-country nationals. But the process is way behind, probably for security reasons.

“I never thought it could be done,” said Chief Mike Cobb of Columbus, IN. In terms of Iraqis providing support services to the military. Cobb said he believed it should be the Army (doing it) first, but since it’s KBR, he thought why shouldn’t Iraqis be working and getting some of the profits?

Still, “I didn’t think Iraqis could work on American vehicles.” Chief Cobb admits with a smile he was wrong. “They’re so smart and envious of American vehicles,” that they learned how to do a 21-point inspection and change the oil in a matter of days,he said.
(A local employee changes the oil on an American vehicle at the new service station.)

Mr. Ghalib Assa’at, the new service station manager, said he’s worked with the Americans since 2003 as a combat interpreter. He’s been a wanted man, been shot at and had vehicles blow up from under him for working with the Americans, but “I stayed with them because I knew this was the future of Iraq.” His uncle, Shiek Shehab, the station’s owner, was one of the first local power brokers to start working with the coalition, he said.

Mr. Al Mahdi who has worked as a contractor on JBB since 2003, said the key to boosting the number of skilled Iraqis who work on base is providing a place for them to live and store their equipment here. He said he's already invested between $80,000-150,000 in the container repair project and has hired Sons of Iraq from several nearby towns. "If a farmer who has five or six sons can get just one or two in IBIZ, it would be enough to feed his whole family," he said.

The risk takers who built early relationships with the Americans, men like Mr. Al Mahdi and Sheik Shehab, who controls a tribe of about 3,500 Iraqis, will be in positions to capitalize on contracts while U.S. forces remain on JBB. And with the bustling traffic circles and busloads full of arriving and departing Army and Air Force units, it doesn’t seem like U.S. forces are leaving the base any time soon.

There are over 30 different Iraqi business projects in the country, according to Maj. General Timothy McHale, whose in charge of MNF-I logistics and resource management. “They (the Iraqis) take the risk by putting the money up, but we lease the land. They get the benefits of security right away. More important now, they get a customer base.” The General spoke of an Iraqi man at Camp Victory in Baghdad who began by cleaning the palace facilities, and then bid and won a contract for his own cleaning crew. Now the man has launched a car wash station employing 25 people, General McHale said.

(Maj. Gen. Timothy McHale speaking with the owner of the asphalt plant set to employ up to 50 locals and provide services inside and outside the base.)

This is the story that development aid agencies dream of- a man picking himself up by his own bootstraps. At JBB the owners of these new companies seem to be already rich men. Obviously, with all the risk that goes into selecting an Iraqi contractor, the military must chose someone who has the proven start up capital, but it's also hard to imagine how the money made on base will filter out into the poor countryside if they don't find ways to employ many of the Sons of Iraq who worry out loud that they could lose their job any day now.

When asked if only the Sheiks and powerful are getting the contracts, Lt. Col. Thibodeau responded, "I'm not trying to influence who's powerful and who's not. I'm trying to make a safe area where there's commerce."

The bigger the number of jobs, the bigger the potential impact. With more than 10,000 third-country national employed on base, from Turkish contractors driving convoy trucks to Filipinos cutting hair and cleaning bathrooms, and only about 500 Iraqis employed here, the numbers show a long way to go to before any real economic impact is made on the area. But with IBIZ, at least the thinking has clearly shifted to the local economic impact.

The on-base U.S. contractor, AAFES who runs the PX and all other retail businesses cleared $67 million last year on Joint Base Balad. Granted they give a percentage to the soldier’s welfare and recreation fund, but what if Iraqi businesses could capture a portion of this windfall of solider discretionary spending?

To this end, the crown jewel of IBIZ planning is a proposed retail zone with spaces for up to 40 Iraqi retail businesses just outside the base gates. It would be 100 percent Iraqi built, owned and operated and has a target goal is to take 5 percent of the AAFES market and generate 5 percent in new profits using “the flow of soldiers discretionary spending power to spend on the local economy,” said Capt. Kent Anderson of Columbus, IN who heads the retail zone project. Soldiers would probably be buying unique local items they could send home to their parents and wives, and not cutting much into the X-Box and IPod margins the PX offers.

The retail zone, still in the blueprint phase, would be constructed just “outside the wire” so locals and soldiers could shop under protection of guard towers and metal detectors. Locals have a large curiosity to encounter soldier beyond the “battle rattle”, Anderson said. Guardsmen like Capt. Anderson with an MBA in international business, say that the excitement of Iraqis in the surrounding towns he visits is palpable. To facilitate the opening of the retail zone, Iraq’s largest private bank, Warka, is opening a small branch location on JBB, he added.

“Iraqis understand how to work,” Anderson said. “They had nothing under Saddam and still had to (find a way to make things) work,” implying with the right systems and support they can flourish. “(IBIZ) is a gesture of great goodwill, and a small economic impact. The real economic impact is themselves.”

“How can life improve without jobs?” asked Mr. Khalid Mahdi, a host nation business advisor. “Small and medium enterprises employ the most local people. And these businesses are the ones we deal with.” He emphasized that projects like the retail zone are so important because they have a greater impact on the outside economy.

“We’re not looking to spend more tax payers money,” Thibodeau said. “We’re looking for where it could be redirected to Iraqis.”

The bottom line, Lt. Col. Thibodeau said, is there's an immediate potential for 500 Iraqi jobs to be created around JBB with contracts totaling $30 million dollars. A lot will be in construction and commodities, he said, with “soft jobs” or cottage industries expanding the effects of the actual jobs and paychecks.

Having locals deliver products and services directly to the bases could decrease the risk of soldiers being exposed to danger on convoys that deliver basic commodities. “It’s private sector economy with the potential to save lives,” Thibodeau said. Especially since the 4,000 soldiers of 76th IBCT’s main mission has been convoy security.

And Thibodeau said he hasn’t dived into a bunker in months. Indirect mortar attacks on JBB are down significantly. Could this be part of the “effects-based contracting” starting to convince local Iraqis that they will get a slice of the contracting money? Time will tell. Unfortunately the 76th and the 2/320th only have a short time left in country. One can only hope the IBIZ systems they've developed will be taken up by the next unit with the same passion.