Making Peace and Profits in Iraq



Rebuilding Iraq is such a monumental undertaking, with estimated costs of at least $25 billion, that the involvement of private enterprise was inevitable. It is also controversial.

This week the Bechtel Group, one of the world's largest and most well-connected construction and engineering companies, was awarded the first major contract in the Bush administration's plan to build and restore Iraq's infrastructure. Because only a handful of firms were allowed to make bids, some members of Congress have raised questions about the contract. But there should be no debate over the importance, and necessity, of the role of private enterprise in rebuilding Iraq.

It's undeniable that businesses are more interested in private gain than the public good, and that some oil companies will profit from a more open Iraqi oil industry. Yet private enterprise can still be a constructive force in postwar Iraq. In fact, businesses have been less divisive in the Middle East than governments. There is a long legacy of conflict among states in the region, of course, and between the Middle East and the West. There is also a history of cooperation, especially when private enterprise was involved.

The creation of the Suez Canal is an example. Constructed in the middle of the 19th century, one of the great organizational and engineering feats of its day, the canal was the result of the efforts of a French entrepreneur and two rulers of Egypt.

In 1854, a retired French diplomat named Ferdinand de Lesseps visited the new ruler of Egypt, Said Pasha. The Egyptians had dug a shallow channel linking the Mediterranean and the Red Sea thousands of years before, but it had long ago been filled in. In modern times the idea of a canal linking Europe to India and Asia was championed by Napoleon at the turn of the 19th century. Lesseps appropriated the plan and convinced Said to back it. A canal, he promised, would restore Egypt as a power to be reckoned with and place it once again at the center of the world. Said was persuaded.

Lesseps and Said formed the Suez Canal Company to finance and manage the project, but their partnership wasn't smooth. Said began to suspect that he had been too quick to support the canal, and by the time he died suddenly in 1863, relations between the two had become strained. Worse, the project was sullied by the use of forced labor. Said's successor, Ismail, ended the use of forced labor and honored the Egyptian commitment to the project. By 1869, the 100-plus-mile long trench through the isthmus of Suez was completed at a cost of 400 million francs, which would be the equivalent of hundreds of billions of dollars today.

The canal was impressive as a triumph of private entrepreneurship allied with government. Lesseps, Said and Ismail faced skepticism and even hostility from most of the world. Today, those in the Middle East and the United States who look to rebuild Iraq, especially those who represent businesses, confront similar hurdles. Yet as the creation of the Suez Canal shows, only a combination of public and private investment, involving both Iraqis and non-Iraqis, will succeed in creating a stable Iraq.

There will be friction. During the building of the canal, the Suez Canal Company and the Egyptian government were allies, yes, but they also had different long-term goals; above all else, the company's shareholders wanted to earn a healthy return on their investment. Iraqis will suspect that foreign companies have their own profit in mind, and they will be right.

Many people in the Middle East remain suspicious of Americans who promise prosperity. After the completion of the Suez Canal in 1869, the paths of Egypt and the nations of Europe diverged; the Suez Canal Company became rich and powerful, while Egypt and the Middle East fell behind. The canal became an excuse for British expansion into the Middle East in the early 20th century, and in 1956, Gamal Abdel Nasser seized control of it. Today, changing patterns of international trade have decreased the importance of what was once the most vital shipping lane in the world, and Egypt's revenues from the canal have stagnated.

For a time, the Suez Canal did much of what its creators hoped: not only did it promote international commerce, it also brought East and West closer together. We can be encouraged by this legacy, even as we should be chastened by its gradual dissolution. And we should know that, despite inevitable tensions and disagreements, governments, international institutions and private enterprise can work together to create a future that resembles our dreams more than our fears.