Monday, September 20, 2010
New class of Entrepreneurs arises in Iraq
By Jim Michaels, USA TODAY Mehdi Majeed, left, helps buyers at a Chrysler dealership in Baghdad. Traditionally, rich Iraqis have bought homes and cars outside Iraq, but that's changing. BAGHDAD — Waiters in white shirts and dark ties glide between crowded tables at the Lebanese Club, a glitzy addition to this city's growing nightlife. Wathiq Sabeeh, a 29-year-old entrepreneur, blows a cloud of smoke from his water pipe and reflects on his good fortune. "During the sectarian violence, the old rich left," Sabeeh explains. "It was a good opportunity for others." Rising government salaries and billions of dollars in reconstruction contracts pouring into the country are creating a new class of entrepreneurs with an appetite for luxury goods and services. Fancy clubs, auto dealers and even high-end fashion stores are emerging on Baghdad's dusty streets to feed those expensive tastes. The rise in entertainment venues and sellers of high-priced goods comes as many Iraqis struggle to make ends meet. In Baghdad, people go without electricity for much of the day and have to rely on aging generators even as temperatures exceed 120 degrees. Prices for gas and food are increasing. Unofficial unemployment rates range from 18% to 20%, according to the Pentagon. But behind those worrying trends is a development that receives less notice. "Every new political system must have its new class that benefits from the political system," says Bashir al-Obaidi, a 36-year-old salesman at a Mercedes-Benz dealership in Baghdad. And they are hungry for the kind of luxury items that are common in neighboring Kuwait and Saudi Arabia. Al-Obaidi sits behind his desk in a small showroom crammed with gleaming cars, including a model with a sticker price of $133,000. Traditionally, Iraqis with money buy homes and cars outside Iraq, but there are signs that may be changing. On a recent evening at the Lebanese Club, a steady stream of cars pull into the circular driveway, where customers turn their autos over to valets before walking through automatic sliding-glass doors into the club's air-conditioned interior. Recessed lighting on the floor marks a path toward large picture windows, with sweeping views of the Tigris River. Lights from the Dora oil refinery glitter in the river's dark, still waters. "I've been introduced to a Baghdad I didn't know existed," says Antoine Youssef, the club's manager. "These are high-class people," he quickly adds. "These are not the looters you see in other places." The club does not serve alcohol, though others do. Like Sabeeh, many of Iraq's wealthy families have accumulated their riches since the fall of Saddam Hussein in 2003. Sabeeh, who operates a construction firm, says he was quick to capitalize on new opportunities that came with billions in reconstruction money. He says his company won large contracts to rebuild a water treatment facility and hospital. "Before the fall, about 20 families controlled most of the wealth," says Alaa Salim, the general manager of al-Bashaer Iraqi, an organization that provides loans to small and midsize businesses. Under Saddam's dictatorship, only businessmen favored by him or his sons were allowed to gain state contracts. The U.S.-led invasion and subsequent upheaval left opportunities in their wakes. A new generation of tycoons has replaced the old. "Now you see someone you didn't know who builds a new house and drives a fancy car," Salim says. But Khalid complains that the new rich lack the education and polish of the older generation. "Some people who come to my shop are illiterate," says Namir Khalid, 44, marketing manager at the Dream House furniture store, which sells high-end furnishings, including ornate clocks for $2,000. The newer generation says it is much savvier about competing for contracts and comfortable dealing with foreigners. "The older businessmen are not able to get contracts," says Alaa Shon, a lawyer who specializes in registering companies to do business in Iraq. Shon, who sits with Sabeeh and another friend at the Lebanese Club, says the opportunities are there for those who know how to exploit them. Young people with the right outlook and skills are on a level playing field with more established businesses, he says. "The newly rich are mostly young," Shon says. "We think differently. Old people are used to working one way." The reconstruction money, oil revenue and improved security are beginning to stimulate the economy. The economy grew 4.2% last year and is expected to expand more than 7% this year, according to the International Monetary Fund. Government workers are among the highest-paid in Iraq these days, Salim says. Iraqis are feeling better about their own economic situation, according to a poll released Thursday. When asked if they expect their household financial situation to improve next year, 63% expect it to get better, according to the poll conducted June 3 to July 3 by the International Republican Institute. That's up from 46% when asked a similar question six months earlier. The survey is based on a sample of 2,988 Iraqis. Sabeeh says there are signs that some of the old families want to return to Iraq, but those that do quickly discover they have to partner with young entrepreneurs to succeed. "They can't get it on their own," he says. Najim Kareem, who owns part of a Baghdad car dealership, says the new wealth comes from a variety of sources. "Some are looters and thieves," he says. "Others are merchants." The new rich have engendered plenty of resentment in a country where unemployment is high and people are struggling with the basics. Almost 7 million people, about a quarter of the population, live in poverty, according to the United Nations. Sabeeh says even his own relatives are resentful of his rapid success. Others say that is only natural. "Some people are jumping on top," Khalid says. "Others are deep underneath."