Coll 17/10(1) 'Internal: political situation; relations with HMG' [‎367v] (739/982)

a orordins 1 to the asreement embodied in the Treaty of Alliance. It is true that
this amount is to be represented by 6 per cent, preference shares which are to
be non-cumulative, with very little hope of a dividend, for the first twenty years
of the corporation’s existence, but the preponderating financial interest and the
British control remain. Actual cash for the whole, or any part of this asset,
mav not be realisable, but some tangible benefit in one way or another wi^
undoubtedly be secured from the Iraqi Government when they eventually acquire
His Majesty’s Government’s interest in the railways. There are numerous
advantages to British industry arising out of this dominant interest in the Iraqi
railways which will be described later on in this despatch.
5 Letter No. 3, attached to the treaty of 1930, provides that “ the Iraq
Government will normally engage British subjects when in need of the services
of foreign officials.” There are 242 British officials in the employ of the Iraqi
Government, including sixty-one in the railways and fifty-nine in the port of
Basra and the Fao Bar Dredging Service, who annually receive not less than
£250,000 in salaries. The rates of pay drawn by these officials are sufficiently
generous to warrant the assumption that 25 per cent, of their emoluments,
say, £60,000 annually, is remitted to England for expenditure or investment
there. It is true that the numbers of these officials employed will gradually tend
to decrease as the Iraqi becomes more and more qualified to take over the various
technical and specialist posts now held by British subjects, but there are no
signs at present of a landslide in this direction.
6. The Iraq (British Officials) Provident Fund receives annually about
£60,000 in contributions from the Iraqi Government and the British officials.
Practically the whole of this amount is remitted to the United Kingdom for
investment, where it is eventually paid out to retirants from the fund. The fund
itself is worth approximately £400,000, and has been built up in this way. The
amounts paid out annually to retirants in the United Kingdom average £50,000.
All these remittances represent fresh money flowing from Iraq into Great Britain
to provide pensions for British subjects.
7. There are other economic benefits which accrue to the United Kingdom
from this source. British officials are mainly employed in the technical and
engineering departments of the Government and, when stores, machinery and
other Government requirements have to be purchased abroad, their connexion
with the Government usually results in orders being placed with British firms.
With but few exceptions, the whole of the heavy material and equipment required
for the Posts and Telegraphs Department, the port of Basra, the railways and
the Irrigation and Public Works Department has been purchased in the United
Kingdom. This process has, to some extent, been developed by the valuable
association with the Crown Agents for the Colonies and by a growing realisation
that British goods can be relied on for quality and durability. When
municipalities launch out into public utility schemes, British industry usually
reaps the advantage. I would mention, as two examples out of many, the electric
power plants recently purchased for the Basra and Mosul municipalities at a
cost of £60,000 and £45,000 respectively. I have not before me figures showing
4 ? e n Va ^ Ue or( ^ ers which have been placed with British firms on behalf
°r hrovernment Departments and public bodies, but I estimate that the business
thereby falling to Great Britain has not been less than £200,000 annually. It
is practically certain that, if the Iraqi Government employed foreign experts of
a nationality other than British, this business would have gone elsewhere. In
he future, as the number of British officials tends to decrease, greater
responsibility will devolve on the Embassy and consulates, especially on the
commercial secretary, to assist British firms to overcome the foreign competition
w ic will undoubtedly develop as the spending power of the country increases.
. Under article 6 of the annexure to the Treaty of Alliance, the Iraqi
overnment are bound to ensure that the armament and essential equipment of the
Iraqi army and air force shall not differ in type from those of the Imperial
hun C nno aiS ° u Govern p ent employ a mission of British officers at a cost of
. t0 , a n dvise them on militar y matters. Although it is not
f n ? ed that warlike material and equipment shall be purchased
T? n ’ • ^ Wld n ? rmall y h a PPen so long as the British military mission
A • j? ' or ias l' ance , the whole of the aircraft required for the Royal Iraqi
Britich r fir^ m0 Tu tmg ^twenty-seven machines to date, has been ordered from
e maintenance of strong and well-equipped land and air forces