Kuwaiti contracts alone won't be cure for recession.

Kuwait contracts alone won't be cure for local recession

Oil-rich Kuwait wants to rebuild, following a half-year of plundering and destruction by occupying Iraqi military.

Kuwait's communications systems, hospitals, oil industry, desalination plants, homes, airports, and buildings have been ransacked, destroyed, or both.

Routine maintenance of much machinery and infrastructure has been delayed so long that replacement or major repair is necessary. The small kingdom - 2 million residents, mostly foreign laborers - may want more weaponry.

Estimates on the cost of rebuilding Kuwait range from $50 billion to $500 billion - roughly equal to 1 percent to 9 percent of annual U.S. gross national product.

Thankful for the U.S.-led restoration of the throne, the Kuwaiti monarchy has hinted American companies will get the lion's share of rebuilding deals.

For Southland companies, the chance to rebuild Kuwait appears a doubly large bonanza, both because Los Angeles has a concentration of construction, engineering and high-tech firms with products and services to sell and because of the recession.

"With the way things are now in the domestic construction industry, any piece of business would be appreciated," said Joseph Crider, president of Los Angeles-based Reliance Steel & Aluminum, a $390 million-in-sales metal distributor that provides goods to the oil and construction industries. Crider added, "we don't sell to Kuwait directly but we do sell to many who may do work there."

Already, San Francisco-based Bechtel Group Inc. has inked a letter of intent to manage reconstruction of Kuwait's petro-chemical industry, an estimated $50 billion to $100 billion job.

Hundreds of Kuwait oil wells are aflame, and the emirate's four refineries have been blasted. The refineries alone will cost $12 billion to fix, by some estimates.

Work is beginning; Alhambra-based Santa Fe International, part of the royal Kuwait Petroleum Corp., has a unit in Texas building a $13 million oil drilling rig, to be ready for delivery in three weeks.

"We will be reworking and redrilling the oil wells. As soon as we are allowed to, we are going back," said John Mika, Santa Fe spokesman. Mika said he could not estimate the cost of redrilling a well.

Despite the gargantuan scale of the Kuwaiti reconstruction, dollars won't be flowing from sheik-loosened spigots overnight, warned Joseph Jacobs, chairman of Pasadena-based Jacobs Engineering Group Inc., a major contractor of large-scale projects.

"Sure, we expect to get a lot of work in Kuwait, but the key word is `rate.' At what rate will this work be done? We are talking to people right now, but we won't a sign any contracts for weeks, maybe even months," said Jacobs.

The repair work in Kuwait will go on for years, and many projects will have to be put on hold as other projects get priority, said Jacobs, company founder and 45-year industry veteran. "There are physical limitations - for example, there are limited facilities for importing workers and feeding them. The work will proceed at a slower pace than generally recognized," said Jacobs.

To help Kuwait get organized, the U.S. Army Corp of Engineers has signed a $46 million, 60-day contract to supervise initial emergency repair work, such as that required by water, power and sanitation systems.

After, or even during, the emergency rebuilding, one of the first orders of business - and first contracts - may be to financially tote up the damage done by the Iraqis, so that a bill for reparations can be presented, said Reed Gardiner, managing director for CPA firm Price Waterhouse in Woodland Hills and Mideast expert who has worked in Saudi Arabia.

"It is entirely likely that a Big Six firm will be hired to do such work," said Gardiner. "In the past OPEC has hired Price Waterhouse to monitor production of the various member states, so the idea of hiring a CPA firm to do work like that is not foreign to them."

In addition to CPA firms, law firms are reconnecting Mideast ties, so that they'll be in place to haggle contracts and dot and cross Kuwaiti bureaucratic i's and t's.

Los Angeles' premier law firm, the 310-lawyer Gibson, Dunn & Crutcher, has sent back to Saudi Arabia a lawyer who left during the Iraqi invasion of Kuwait, said Ron Beard, managing partner. "We have been active in Saudi Arabia since 1981, having represented companies to the Saudis and having represented the Saudi government. We hope to work in Kuwait."

On a more practical side of life, Kuwait must now set about resupplying a domestic population, even with such basics as water.

The Iraqis set off explosions in the desert nation's major desalination plant, which may mean a $1 billion to $2 billion reconstruction job. "To build a average-sized power plant and desalination plant in California would cost $2 billion," said David Dean, mechanical engineer with the Metropolitan Water District. "I don't know how much it would cost in Kuwait."

Whatever the cost, local firms are angling for a fraction of the action. "We are one of the largest engineering firms in water supply and wastewater treatment," said Robert Uhler, spokesman for Pasadena-based James M. Montgomery Consulting Engineers Inc. "We are hoping to play a role in the rebuilding of that plant."

While the giants, such as Irvine-based Fluor Corp. (the nation's largest heavy construction contractor), and Pasadena-based Parson Corp. (also a major contractor) are sure to land the largest deals with the Kuwaitis, there are hundreds, perhaps thousands, of smaller firms that are hoping for supply goods and services also. Example: Manhattan Beach-based TEAM International Inc., an importer-exporter that is proffering U.S.-built hand tools to the Mideast.

"We have the hand tools, American-made hammers, saws, wrenches, tape measures," said Andrew Olson, president. "You know, Tinker Bell isn't going to fly over Kuwait and then overnight you have the microwave towers up. There's a lot of handwork that goes on."

Hoping to sell food products to Kuwait is Chaman Agarwalla, president of Glendale-based Axil Global Trade Inc. "Before the invasion, we were establishing relations there," said Agarwalla. "We hope to sell milk products, rice, fruit juice, anything they want. We will sell to Kuwaiti importers, although right now it is hard to reach anybody."

The work of restoring Kuwait's airfields could mean business for Southland contractors in various high-tech industries, including the Los Angeles-based Hughes Aircraft Co. The air traffic control system in at Kuwait's main airport was wrecked and Hughes makes such systems, noted Richard Dore, Hughes spokesman.

Long Beach-based Douglas Aircraft Co., a division St. Louis-based McDonnell Douglas Corp., may sell MD-11 or MD-80 airliners to Kuwait to replace those blown up by Iraqis.

Additionally, Los Angeles-based Northrop Corp. makes fuselages for Seattle-based Boeing Co., so if Boeing sells airplanes to Kuwait some work may get done in Los Angeles as well.

Down in Orange County, the VTN Corp., an engineering firm, is vying for one of the more unusual projects: Helping to reconstruct a 125-acre amusement park in Kuwait City, site of much Iraqi plundering. The park, engineered by VTN, was built for $80 million in 1982. Among other items, the park's roller coaster was carted back to Iraq.

"A lot of work VTN did in the 1970s and the 1980s, where we have all the drawings, is what we are offering to the Kuwaitis," said Dan Montano, VTN chairman.

Despite all the work that will be done in Kuwait, and the big-time contracts, Angelenos will be disappointed if they think the rebuilding job will single-handedly pull Los Angeles out of the recession, said Michael Bazdarich, La Canada-based economist and consultant to investment managers and banks. "I don't think the rebuilding will reverse the recession. A lot of them will be subcontracted out to other firms, from Southern Europe, Taiwan and Korea, with the American firms serving as project designer and manager," said Bazdarich. "Too, it will take time for these contracts to be signed. By the time the money is flowing, it may make the recovery a bit stronger, but the recession could be over."