Thursday, July 15, 2010

How Basra’s Port Holds Up Iraq’s Development

At the end of June 2010 Reuters ran a report on the problems facing Basra’s port at Um Qasr that affect the development of the entire country. Um Qasr has been neglected by the government, and doesn’t have the capacity to handle the amount of trade heading there. That affects all of Iraq, which depends upon Basra for most of its imports and oil exports.

One major problem that Basra’s port faces is a lack of infrastructure. 80% of Iraq’s imports and the majority of its oil exports flow through Um Qasr, yet ships wait for hours or days lined up waiting to unload their cargo. It can take four days for example, to handle 5,000 tons of cargo. Once the items are off the boats, the province’s poor roads can delay transporting them to the rest of the country. Members of the South Oil Company and State Port Authority admitted that the port simply doesn’t have the equipment to handle the number of ships heading there. That’s because there has been a lack of investment in the facilities for the last thirty years due to international sanctions and wars. This led one foreign company official to proclaim Um Qasr the worst port in the Middle East.

This is holding up all kinds of projects in Iraq. Foreign oil companies that won contracts to manage Iraq’s petroleum fields can’t get equipment and supplies because Um Qasr is so backed up. That’s forcing the Oil Ministry to ask Kuwait for a special border crossing just for the energy companies to use.

Another problem is red tape, high fees, and corruption. Shippers claimed that Um Qasr has the highest fees in the world, which on average are around $1,000, but at Basra are approximately $8,000. Companies also have to pay bribes to government officials to get their boats tended to, and their cargo unloaded. The bureaucracy is another issue as foreign companies have complained about delays with paper work and licenses to get their equipment through the port.

The Iraqi government is aware of these problems, and has plans to build a $6 billion port at Fao at the tip of Basra. That could take years to complete, and the new port will probably suffer from the same issues the current one does. Iraq needs not only more ports, but also investment and maintenance at their current facilities, a streamlining of regulations to ease trade, and a crackdown on corruption. Few of these appear to be top priorities with Baghdad right now, so they’re likely to continue to plague Iraq.

SOURCES

Reuters, “Iraqi port buckles under oil demand,” 6/29/10

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