Violence by emboldened Iraqi insurgents is forcing international contractors to evacuate staff, damaging reconstruction seen as crucial to stabilising the country, officials and businessmen said today.
They said that more than 100 US nationals working in the electricity sector, including General Electric staff, had left. British company Foster Wheeler had stopped sending employees after winning an oil sector contract last month, and Bechtel was rebasing a number of workers in neighbouring countries.
"The impact will be most obviously felt in the electricity network as summer approaches and demand rises. It is highly doubtful that they will raise output," a senior contractor said.
US officials in charge of the sector had expected outages to decrease as production is forecast to rise to around 6,000 megawatts by July compared with 4,200 megawatts before the war.
The total number of foreign workers leaving Iraq is not clear.
Halliburton, another major US contractor, has chosen not to evacuate employees but to restrict foreign employees to their bases until the violence subsides.
Companies are ordering the restrictions and evacuations despite the fact that both private and public organisations involved in reconstruction already spend heavily to protect themselves against insurgents.
One Western official in charge of an $80 million project in central Iraq said more than $30 million was spent on security. The insurgents have stepped up operations in the last few weeks to include kidnapping and more attacks on foreign civilian convoys.
The violence has spread to areas once seen as secure, such as the Shi'ite Muslim south, where suicide bombers attacked several police stations yesterday.
In the latest example of the dangers facing foreigners, a gunman shot dead a South African security guard in a Baghdad supermarket, after accusing him of being Jewish.
US officials admit there has been a deterioration in security, but say the reconstruction programme, which has been criticised for a slow start, will continue largely unaffected.
"We are on schedule," said Ms Amy Burns, a spokeswoman for the Programme Management Office, which manages around $8 billion of U.S.-funded rebuilding projects.
Washington committed $18.4 billion in grants to help rebuild Iraq last year. Iraqi officials are counting on a further $15 billion of non-US reconstruction pledges.