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FUTURE OF IRAQ'S AIR INDUSTRY IN DOUBT,
REPORT REVEALS
February 2004
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the full report 
NEW YORK, February 9, 2004-Iraq's national air transport
sector may end up in the hands of oligarchs, the Open Society
Institute (OSI) warned in a report released today. Despite
Coalition Provisional Authority (CPA) claims that it intends
to return control of Iraq's air industry to the Iraqi people,
a document obtained by OSI shows that a backroom deal has
already sold off 75 percent of the country's air sector to
a single family.
The secret deal is one among a number of suspect agreements
that have occurred under the radar in a chaotic post-war Iraq.
"This does not bode well for the reconstruction of Iraq's
economy," said Isam al Khafaji, director of OSI's Iraq
Revenue Watch project. "The CPA should be making sure
that public industries are protected."
There are no mechanisms in place in Iraq to combat the ill
effects of rapid privatization, and the report, titled "Controlling
Iraq's Skies," cautions that Iraq risks following a similar
path as Russia, where a class of oligarchs emerged after the
fall of communism by buying up state assets at below market
prices.
The CPA, which now controls Iraq's air industry, has publicly
acknowledged the economic potential of the air transport sector,
and has called for increased investment. But neither the CPA
nor the Iraq Governing Council have allowed the domestic air
transport sector to compete with foreign companies. Royal
Jordanian airlines is currently using Iraqi airports and their
equipment, while Bechtel Corp. and Halliburton have been contracted
to manage the airports. Iraq's national carrier, Iraqi Airways,
was denied permission to lease planes to fly pilgrims to Mecca
for the annual hajj.
As Iraqi Airways languishes, plans are being made to privatize
it without any public bidding. Iraq Revenue Watch obtained
a contract to establish a joint venture named al Iraqiyya
Air. It was signed by the Iraqi Ministry of Transport and
three members of the powerful Khawwam al Abdul Abbas family,
which, according to local news reports, had close ties with
Saddam Hussein's regime and were oil smugglers under United
Nations sanctions. While the contract requires the Ministry
of Transport to surrender Iraqi Airways planes, agreements,
and other valuable assets, it is not clear what the other
signatories are contributing to the deal.
"Controlling Iraq's Skies" recommends that this
contract be frozen and an investigation be launched by the
International Advisory and Monitoring Board, as well as by
the CPA Inspector General. The report also calls on the CPA
to compensate Iraqi Airways for damage to its facilities committed
by occupying forces, and fees for the use of its facilities.
Read
the full report
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