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Iraq: Baghdad Factory Owner Wrong-Footed By Instability

The U.S.-led occupation of Iraq has opened new opportunities for businessmen to import cheap products into the country. Iraq is now flooded with cheap Asian goods and second-hand cars, and the country's small and medium-sized businesses are suffering due to the lack of border controls, insecurity, and economic disorder.

Baghdad, 2 December 2003 (RFE/RL) -- Ali Abdel Karim Sebhan is the owner of a shoe factory in the Baghdad district of Wassirya. The factory employs 50 people. Sebhan's father and three brothers work in the factory. Production at the factory began in 1984 and quickly expanded, even during the period of UN sanctions imposed on Iraq after the first Gulf war. While the sanctions made it impossible to make transfers through Iraq's Central Bank, Sebhan says, "it was possible to get materials from abroad, and we felt we had a state behind us."

Sebhan says the situation radically changed in April when President Saddam Hussein's regime was toppled and the Iraqi state as he once knew it ceased to exist. He says the situation in Iraq today presents many challenges, the most important of which are the lack of security and the constant power outages.

"After the coming of the Americans, the situation changed dramatically. Manufacturing became very difficult because of the lack of security. We need electric power, and the power supply is not available. Concerning the workers, [public] transportation has changed, and it has become very difficult [for employees to get to work]," Sebhan said.

He says his employees cannot work overtime because it is not safe to travel home in the evenings. The workers are paid per piece, and despite their willingness to stay longer, the factory shuts down at 6 p.m. Before the war, the factory continued to function until 10 p.m.

Sebhan says electricity cuts are also playing havoc with production. He admits that the factory has not been paying electricity bills since the U.S.-led occupation, but he says outages are so frequent that the factory is more often without electricity.

"We have electricity for six hours per day. It is almost the same as having nothing," Sebhan says. "We have days, weeks, or months with no electricity at all," Sebhan said.

He says the factory paid $10,000 for an electric generator, which only forced its production costs higher. Sebhan says a pair of shoes produced in his factory now costs from $5 to $10 per pair, an increase of more than 20 percent since the occupation began.

In addition to the outages, he says cheap imports from China and other Asian countries are making life unbearable for Baghdad businessmen. He says Asian producers are dumping cheap, low-quality products into the country. During Hussein's rule, Sebhan says, the Iraqi state defended local producers with import tariffs, and the quality of imports was checked. Now, Iraq's borders are open to any kind of goods, and there is no state to defend local producers and consumers.

Sebhan says his factory makes a profit of 20 percent but that it is not enough to expand, especially when there are no banks to offer loans.

"We are not satisfied with 20 percent [profit]. We would like to increase it, but the problem is that we will be in a conflict with our prices, [not able to sell our shoes] because products are coming from abroad at cheap prices. You have to be on the same [price] level [as the importers]," Sebhan said.

Sebhan says he is having to readjust by buying lower-quality raw materials to keep the prices of his shoes low. But he says this means that his dream of exporting the factory's shoes to other Middle Eastern countries is all but shattered.

Despite the hardships, many workers say they are happy with their jobs at the shoe factory, which offer them regularly wages. One of them is 41-year-old tailor Adnan Ubaid. Ubaid has a family of three and says the equivalent of $20 per week is enough for him to make ends meet. He started working in the factory less than one month ago.

"Concerning why the work [here] is good, it is steady work, and it is organized. I used to work in a different factory, and the reason I left was that the market is going up and down, the dollar is going up and down. [My former] boss did not offer continuous work, but here the work is steady," Ubaid said.

He says he is now being paid in Iraqi dinars and knows he will get the money for which he agreed to work, not less because of fluctuations in the dollar.

Not all of the workers are content, however. Those with bigger families say the disorder in Baghdad is substantially affecting their incomes.

Khalil Ibrahim is 53 years old and has worked in the shoe factory for 12 years. He says he has 13 members in his family. He lives on the other side of Baghdad and must leave work early to get home safely.

"Before the war, it used to be better. I used to work until 10 o'clock [in the evening], and our weekly salaries were very good. We managed to make a living. But now, it is totally different. Now, there is no security," Ibrahim said.

He says he now works for only six hours a day and earns the equivalent of $35 per week, compared with $75 a week before the war.

Asked about social guarantees and pensions, Ibrahim says he is more concerned about how to feed his kids now than with what might happen in 10 years.

"The age when I might need a pension might never come," he says.