Jones Day's Emad H. Khalil On Iraq: A Guarded Optimism

Editor: Could you give our readers something of your background and

I am the co-head of Jones Day's project
development and finance practice, and my own practice encompasses a broad range
of corporate finance activity, including mergers and acquisitions, banking,
restructurings and securities. Currently I am focused on representing developers
and lenders in infrastructure projects throughout Asia and the Middle East.
Prior to joining Jones Day I was a partner at a Middle East practice boutique,
where I spent a considerable amount of time working out of their Dubai and Abu
Dhabi offices. Prior to that I was associated with Cravath, Swaine & Moore
in New York.
I should also mention that, while I was raised in New York and
educated at Cornell and Harvard, I was born in Cairo and am fluent in

Editor: Can you tell us how you came to Jones

After having practiced for six years or so in a
Middle East transactional practice, one of my partners, Mark Haddad, and I came
to the conclusion that if we wished to take our practice to the next level and
take advantage of the opportunities we saw opening up in both Asia and the
Middle East, we were going to have to move to a much larger platform. That, of
course, was Jones Day.

Editor: Was this practice in place when
you came or have you built it?

Something of both,
really. Jones Day had been involved in the Middle East since at least the
mid-l980s, much of this work involving Saudi Arabian-based companies and
including a considerable volume of project development and finance deals. We
provided something of a complement to that practice, having an ongoing project
finance practice and, of very great importance, the strong contacts that are so
necessary to doing business in the region. I think it has been a very happy
marriage. I should also mention, in this regard, that I have been, in connection
with the World Bank, a principal adviser to the Hashemite Kingdom of Jordan on
developing modern securities legislation and a legal adviser to the Palestinian
Legislative Council.

Editor: Can you give us an overview of Jones
Day's Middle East practice?

We are involved to a
considerable degree representing inbound investors, people from all over the
world interested in doing business in the Middle East. Much of this concerns
energy related work, but we are also involved in all other areas of major
investment and dispute resolution. The other aspect of our Middle East practice
is concerned with Middle Eastern clients. Much of this work is transactional,
but it also involves litigation, and it takes place both in the Middle East and
everywhere else that Middle Eastern investors have

Editor: I understand the firm has clients involved in
Iraqi reconstruction. Can you tell us about that?

Day represents literally half of the Fortune 500, so we have a great many
clients with at least an interest in doing things in Iraq. This ranges from
construction to oil and gas infrastructure projects to manufacturing. We have
received numerous inquiries, mostly from people in the construction industry.
There is a great deal of interest in Iraqi reconstruction, and this interest is
not only from American corporations but also European and Asian. There are other
Jones Day clients who are trying to sound the waters, as it were. They may not
be ready to make a move right now, but they are trying to understand the
landscape. They are in communication with us in anticipation of entering the
Iraqi arena at some point in the future.

Editor: Speaking of the
future, can you tell us about Iraq as an investment

At this point the situation in Iraq is
somewhat uncertain, and, as a result, the major corporations that have an
interest in the country are taking their time and assessing their potential
investments very carefully. I think everyone believes there are tremendous
investment opportunities in Iraq, but they are attempting to position themseves
for the opportune moment to take the plunge, rather than actually taking it.
Needless to say, a great many people were hopeful that once Saddam's regime was
eliminated there would be an enormous inflow of investment dollars. If that has
not happened, it is, of course, a reflection of the correlation between security
on the ground and the inflow of investment dollars from the private sector. I
think the market is telling us that Iraq is not yet a secure enough place for a
substantial flow of investment dollars to begin.

Editor: Do you
think the security situation is getting better?

That is
a difficult question to answer unless you are actually on the ground. I think it
is probably better than it was a few months ago in most parts of the country,
and there may be places that are really quite secure now. However, the press is
filled with accounts of attacks and bombings, and these accounts are read in the
board rooms and executive offices of potential major corporate investors -
people who are interested in Iraq but reluctant to move when doing so means
sending their people into harm's way - and as a result few of them, including
many of Jones Day's clients, have actually taken this step. What we are seeing,
however, is a considerable number of mid-size and entrepreneurial enterprises
coming into the country.

Editor: These are Middle Eastern

There are some Middle Eastern concerns, but
there are also a great many American, European and Asian concerns, mid-level in
size, and involved in a multitude of activities all across the Iraqi economy.
The activity at this level is really quite robust. Unfortunately, it does not
involve the volume of investment that is going to have the dramatic impact on
the Iraqi economy that people have been hoping for. That is going to take
investment on the part of the major players. And, as I say, they are not ready
as yet.

Editor: And you feel that this is a function of the
security situation?

I think it is a direct function of
the security situation. There is more to it than security, of course. For
example, what is law and order going to look like? Are contractual undertakings
going to be enforced by the courts? What about the contractual undertakings of
the government? And so on. But until the security situation is addressed, these
other considerations cannot be addressed. I believe that once Iraq becomes a
place where business can be conducted in safety and security, things will fall
into place. These other questions will be sorted out then, but not

Editor: One of the ongoing themes of our publication is
the progress of the rule of law in the international arena. Do you have any
sense of where we are with this in Iraq?

I think we are
really in the early stages, although we are heading in the right direction.
Prior to the war, Iraq suffered under a regime that did not respect the rule of
law. Prior to that regime, however, a well-founded civil code, modeled after
that of Egypt, which was itself based upon the French civil code, provided a
basis for the rule of law in Iraq. A great deal has been lost during the past 25
years, and the legal system must be rebuilt. But because the country did have
experience with the rule of law, did have respected law schools and legal
scholars and jurists, a functioning court system and highly educated and gifted
lawyers, that effort is not going to have to start from ground zero. There are
very good people concerned about the rule of law in Iraq, and given the
historical foundations of the Iraqi justice system, I have a guarded

Editor: The political situation is also a question mark
at this point. Have you got any thoughts how this is going to

My views are just as speculative as those of
the next person. Anyone who has done business in the region understands that it
is a very complicated part of the world. Iraq itself is very different from
Morocco and Saudi Arabia and Egypt. It is a mistake that many people make, I
think, to believe that what works in one Middle Eastern country will work in
others. About the only thing that I can see clearly is the need for a compromise
among the Shi'ites, the Sunni Arabs and the Kurds in Iraq. If that occurs, just
about anything is possible. The other thing that is necessary, I think, is the
tranfer of authority to local institutions. The sooner this takes place, the
sooner we will have a compromise, or at least the chance for a compromise, among
the major groups that constitute the country.

Editor: Do you
think Iraq can become an economic model for the Middle

The answer to that is both yes and no. No, in the
sense that I think it is a mistake to think of the Middle East as some sort of
one-dimensional cultural, economic and social entity. It is a very complicated
place, with a bewildering array of political systems, religions - and competing
groups within the same religious groupings - cultures, ethnic groups, economic
and social systems and countries adhering to very different principles, all the
while professing some sort of unity. If Iraq achieves economic success in the
future, people throughout the region are going to be greatly encouraged. That
does not mean, however, that what has worked in Iraq is applicable to, say,
Syria or Algeria.

On the other hand, there are universal themes that are
being played out on the Iraqi stage at the present moment, and Iraq can become a
model for the region if, for example, a functioning democracy that is accepted
by the Iraqi people takes hold. Economic well-being is based upon a number of
things, and everyone in the region is entitled to them. They include the rule of
law and the transparency of governmental institutions, respect for human rights,
a government that is elected by and responsive to its people and capable of
assuring them the basic safety and security without which no economy can
function. In this sense Iraq is a test case, and its experiences are applicable
to other Middle Eastern countries.

Published March 1, 2004.