US aims to restart 10 Iraqi factories in weeks

BAGHDAD, Jan 18 (Reuters) US officials have drawn up a list of 10 former state-run Iraqi factories they hope to restart within weeks to employ 11,000 people, kicking off a plan aimed at giving potential insurgents an economic reason not to fight.

Paul Brinkley, Deputy Undersecretary of Defense for business transformation, said the factories on the ''top 10 list'' are among 200 major factories around Iraq that used to employ more than 300,000 people before the March 2003 US invasion.

US policy immediately after the invasion was to promote privatisation so most state-run factories closed.

That left their employees surviving on stipends of about 30 to 40 per cent of their former salaries and had a ripple effect on the economy, for example on farmers whose produce was no longer bought by food-processing plants, Brinkley said.

''The core effort right now is to restore employment to as many of the Iraqi people as we can,'' Brinkley told a news conference in Baghdad. ''We think that will improve stability. It will undermine insurgent sympathy.'' The factory programme is billed as part of US President George W Bush's new strategy of ramping up economic aid and reconstruction, in tandem with extra troops to stem violence.

Iraq's population is around 26 million, though there has been no recent census. Unemployment stands at around 18 percent, according to Brinkley, who said another 30 percent were ''underemployed'' or working just 15 hours a week. Those figures do not include idled state factory workers, Brinkley said.

Conceding that US policy had been based on the false assumption that Iraq's industry was ''Soviet-style'' and inefficient, Brinkley said a gradual transformation to the private sector was now favored over rapid privatisation.

''It's a difficult thing to get a private sector investor to look at an empty factory,'' he said.

Brinkley said the first 10 factories were spread around the country and covered a range of industries, including cement, heavy industry, machine parts, textiles and tractors. He said only around 10 million dollars was needed to get them running.

One has already restarted and is supplying goods to US forces in Iraq. He declined to identify it, however, saying he did not want to make it a target for insurgent attacks.

''We hope we will see (the 10 factories) ... restoring their full employment over the next two or three months,'' he said.

US funding will be available where factories have been damaged by military operations, for example, Brinkley said, while the Iraqi government would pay for capital investment.

President Bush pledged an additional 1.2 billion dollars in reconstruction funds earlier this month, but Brinkley said that covered the whole range of economic projects, including restoring sewerage, water and electrical infrastructure.

REUTERS SHB RAI2039