Snip ~ "I thought security was going to be a major concern," Richeson said. "The issue that was mainly raised was: 'How do we get paid?'" July 5, 2011
New project aims to help Iraq rebuild, boost Michigan economy - Iraqi official, an MSU graduate, promoting plan
Sami Al-Araji has a hefty business proposal for the people of Michigan.
His native country of Iraq needs millions of new housing units as it works to rebuild the war-torn nation. And Al-Araji, a graduate of Michigan State University, wants Michigan businesses to design and build at least 100,000 housing units.
The project is pegged at $5.5 billion to $6 billion and is expected to create or support an undetermined number of jobs.
Al-Araji is chairman of the Iraqi National Investment Commission. He recently visited with local and state economic development leaders to promote the project.
"(Al-Araji) proposed that Michigan and Iraq work together in order to provide mutual benefit to both partners, using Michigan's intellectual, academic and manufacturing knowledge and products and exporting those to the Republic of Iraq to help rebuild the country," said Tremaine Phillips, chief program officer for Prima Civitas Foundation, the East Lansing-based organization that is acting as a liaison between the Iraqi government and Michigan businesses.
Prima Civitas is forming a group of interested businesses to work on a proposal.
The idea is to gather a consortium of Michigan businesses - including developers, architects, construction companies - to bid on the project. It would involve planning, designing and building 100,000 housing units - some apartments, some single family homes - along with necessary infrastructure.
The development also could include public facilities such as schools and hospitals. If successful, the project could lead to other opportunities, such as building hotels, shopping centers and offices.
Lansing-based architecture, engineering and planning design firm C2AE hopes to participate. The company, which employs 115, including 65 locally, is interested in jobs such as planning the underground utilities, designing the housing development or working on the engineering and architecture of the housing units, said President and CEO Bill Kimble.
"We would likely focus on one of those areas," he said. "They're going to have to bring multiple entities together because of the magnitude of the project." If it got the project, C2AE would likely add five to 20 new employees, Kimble said.
The company is comfortable working overseas. It already has projects in India and China, Kimble said.
MSU a factor
Several factors play into Iraq's need for more housing: a high population growth rate, the return of refugees, families displaced internally due to the war and increasing urbanization, according to the National Investment Commission.
Iraqi builders don't have the financial and technical resources needed for large-scale developments, according to the commission.
But why go to Michigan for the work?
A big reason is Al-Araji's connection to MSU. He received his bachelors and doctorate degrees in mechanical engineering from MSU in 1967 and 1973.
"It really boils down to the fact that he retains a pretty soft spot and warm feelings for MSU and for Michigan," said Patrick McRae, an international trade specialist with the U.S. Department of Commerce in Grand Rapids.
Al-Araji could not be reached for comment, but spoke on the issue for a "Spartan Sagas" feature for MSU's website.
"I'm here just to see how we can marshal the resources available in the state of Michigan and the academia in Michigan represented by Michigan State University and other universities ... to participate in the development plan of Iraq," he told MSU.
Michigan also has a large Iraqi population. There were more than 36,700 Iraqi-born residents in Michigan, according to the U.S. Census's American Community Survey estimates for 2005-09. There's an Iraqi Consulate General in Detroit, and the American Arab Chamber of Commerce is headquartered in Dearborn.
But the Iraqi government is looking globally for business. Turkey, Germany, South Korea, China and other countries are involved.
Global partners
McRae said he expects American firms will be more involved in the planning, design, engineering and supply end of the project, while foreign firms or local workers would complete more of the labor on the ground.
"For a Michigan firm to go take on a construction project in an unfamiliar part of the world such as Iraq, it would be difficult at best without a partner heavily experienced in the region," he said. "This is where Turkish firms as potential partners come into play."
Security poses another concern.
American companies working in Iraq have contracted with regional partners that provide security contractors, said Deanna Richeson, managing director for the export office at the Michigan Economic Development Corp.
"I thought security was going to be a major concern," Richeson said. "The issue that was mainly raised was: 'How do we get paid?'"
Project financing involves a mix of public and private agreements.
The Iraqi government will make certain guarantees that businesses will be paid. With those in hand, financial institutions should back a portion of the project, McRae said.
A mortgage program has been proposed for the housing. Many of the units are expected to be purchased by Iraqi government employees, who have begun to set aside part of their incomes for the homes, he said.
The cost of public buildings would be covered by a mix of government and private funds, too, McRae said.
Grants may help
The MEDC is working to increase access to capital for export projects through various financing tools, Richeson said. It also applied for a $3 million federal grant, with a $1 million match from the state, to help cover companies' expenses for entering new export markets.
The project is a good opportunity for Michigan businesses, said Jean Schtokal, international trade expert and lawyer at Foster Swift Collins & Smith in Lansing.
"It's not without risk, and the big issue for these folks is going to be being sure that their price and their margin cover all the cost," Schtokal said.
