The construction of new homes and infrastructure projects is essential if normality is to return to southern Iraq. Building went on patrol with the Royal Artillery to visit to some key construction projects under way around Basra
The black armoured van boils in the afternoon sun. The heat is made worse by the 12 kg of body armour that the jounalists have to wear. The helmeted heads, protected torsos and automatic weapons of two soldiers appear from the lookout gap in the roof of the van. This is part of a patrol of the 26 Regiment Royal Artillery.

The patrol passes through a rural area to the south of Basra, slowly. Captain Aled Evans says of the journey: "The traffic has got worse. Sometimes it takes an age to get through town." Car ownership has rocketed since the war ended, but there are only eight petrol stations to service 1.4 million people. There has been no real investment for 30 years and as a result, the petrol pumps are in dire need of replacement.

The patrol passes by a burned-out factory. Evans points out the rows of cars next to it: "A fence has been put around a load of cars and that's it, there's a car lot."

Demand for white goods is also huge. Where shops once sold carpets, they now offer bargain air-conditioners and fridge–freezers. This is going to exacerbate problems in the summer, when there is unlikely to be enough electricity to power the city. The situation is so desperate that Basra's authorities are considering an electricity-for-crude-oil exchange with Iran, between whom tensions still run high as a result of the war in the 1980s. Not that Basra is good at handling crude oil anyway. The nearest refinery runs at 50% efficiency, compared with 95% in Kuwait, and it would cost $500m to build a new one.

What's more, $2.3bn of the $2.9bn that Basra is due to get from America's Project Management Office has been allocated to electricity and water.

The convoy comes to a halt at the al-Hussain police station. Construction sites surround it as people rebuild their bombed homes.

About a dozen Iraqi policemen stand in the street smoking, chatting, laughing and toting automatic weapons.

Policing jobs were important to Basra's economy, even before the war. The CPA refurbished the Olympic Committee building last year. When the job was completed six policemen came up to the project managers explaining that they had been the guards for the building before it had been bombed and demanded their wages.

As Evans looks at one of the construction projects, and says: "People are throwing up houses left, right and centre". There is a planning system of sorts, but this is largely ignored as the poor rush to put up homes. As a result, the manufacture of cement blocks for construction has become a lucrative business for many Iraqis, who sell them at the roadside. Builders merchants are becoming commonplace, bringing in aggregates from a quarry 20 minutes' drive from Basra.

Wealthy returning exiles are also snapping up land. In al-Muthanna province by the Euphrates, these exiles are buying 10 × 10 m plots of land for as much as $30,000 each. Prices would be little different in parts of Cambridge or Norwich.

Patrick Nixon, regional co-ordinator of CPA South for the past seven weeks, and the figurehead of the four provinces, says these exiles will be good for business: "Their money from abroad, coupled with local skills, promises a bright future – providing security is sustained."

Our next stop is al-Quibla in south-west Basra. It is an extraordinary sight. Mudpools in front of houses double as depositories for human waste. Children play around these pools. In front of the shops, there are small canals filled with urine, excrement and rubbish. The smell is worse than at the Ham Dan Sewage works in south-east Basra.

Mudpools in front of houses act as depositories for urine and excrement. Children play in these pools

Al-Quibla is also one of the 12 areas where water pumps do not reach people's taps. Mott MacDonald has costed up new pipes that will take water directly from 14 water treatment plants located by the Shatt al-Arab, Basra's main river, to these areas. Work will start next week, and people will dig 10 ft a day to install the pipes. The project, which is funded by DfID, should be up and running by the end of May.

Udah Salim runs a fruit stall in al-Quibla market. Since the war he has been able to import oranges and apples from Iran and Kuwait. He says: "It is now cheaper as more goods have come in." However, most of Basra is facing an inflationary spiral as wages increase dramatically. An Iraqi contractor said that he was paying his skilled engineers $500 a month, roughtly 10 times the salary of the Saddam era.

Even Nixon concedes: "There is a risk of inflation - Iraqis could be victims of the coalition's success in creating jobs."

Jassim Mohammad Maky, a welder, is more concerned about the immediate problem of his house than forthcoming inflationary pressures: "I have applied for money from Iraqi authorities. My house was damaged from shooting between the Iraqi and Allied troops." As the damage happened during war, the occupying forces will not pay out, so incoming Iraqi leaders will have to process his application.

Housing is an obvious problem. The CPA's Bremer and Iraqi housing minister Baqir Jabor al-Zubiadi last week signed seven residential construction contracts worth more than $100m. Called Project Iraqi Renewal, it will house 18,000 people and create 14,000 jobs. The first contract is in Basra.

Another patrolman, Bombardier Ashton, points out a mosque with a road linked to it, built by the army. When the army arrived the mosque could not be reached because of flooding. Their team spent $20,000 on the project. The army can spend up to $75,000 on emergency fixes at any one time. They are known as quick impact projects.

Ashton adds that kids throwing stones is a regular experience. "Just kids being kids," he laughs. It does not feel that way when the children accurately hit the vans with the stones as it drives away. A soldier on look-out gets hit on the side of the head, whilst several jagged-edged stones find their way into the vehicle, narrowly missing the civilians observing the patrol.

The final stop is at one of the petrol stations. Four of its eight pumps are not working. The wait to get petrol will be longer than the usual two hours. Some crafty people fill cans when they eventually reach a pump. They will then try to sell these to fellow drivers. The price will be exorbitant – petrol from the pump is less than the cost of water – but the action is not illegal. Nevertheless, the army is cracking down on it.

To ease the petrol crisis six new stations are being built to increase Basra's capacity by 48 pumps.

At the station the patrol is mobbed by Iraqis. Some are desperate. One says that he has lost his mother and writes in English on the notepad of a journalist accompanying the patrol that he needs medicine and has to go to the hospital.

A time of waste: Basra’s nightmarish utilities projects

Basra is in a race against the summer to renovate the area’s water infrastructure. Nasser Hussein (pictured) the manager of R0 Water Plant to the north of Basra, does not think that Bechtel will be able to refurbish the plant in time for the August deadline: “It may taken seven months.”

If it cannot pump the water into town, Basra might be forced to tap the Shatt al-Arab through 14 smaller plants by the river. The river is highly saline and is polluted by hundreds of shipwrecks including Saddam’s yacht blown up by the Americans last year. Wally Weeks, Coalition Provisional Authority South water and sanitation adviser, says: “It’s desperate. If the pump taking water to stations from R0 breaks down, there is no choice but to take salty water from the river. It happens about four or five times a year.” Not that the water pump from R0 meets World Health Organisation standards anyway – it is simply defined as “safe”.

Many of R0’s problems are caused by another utility shortage – electricity. A pump halfway between Basra and Nasira 250 km to the north, is damaged. It was broken in the riots last year and is working on back up generators. It pumps only half the water it should do through the freshwater canal to R0. The pump will eventually be fixed with US supplemental money.

Electricity is a major problem. Basra will need 700-900 MW of power this summer, higher than previous years’ because of the surge in white-goods ownership.

Colin McBride, head of utilities at CPA South, says the organisation has only been able to perform a “sticky-plaster job” so far. A new power station would take three years to build. He says: “There’s not going to be enough power for summer. Realistically we are going to get 400-500 MW. That’s 12 hours of power a day. There could be civil consequences if the situation isn’t managed properly.”

The electricity and water problems should be eased by the end of 2005. US money is coming in to rebuild the utilities network. A new water pipeline around Basra, with five reservoirs across the city, is to be built at a cost of $250m. CPA recently designed this system in just 10 days – in Europe such a project would be given years to design.

I dream of a new iraq

Hatem Abdulla Albachars dreams of a new Iraq.

“I look forward to seeing my country rebuilt. Rather than spending money on guns, we will be spending it on schools, hospitals and roads.”

The US has earmarked $18.6bn to be spent on reconstruction in Iraq through the Project Management Office. The CPA will formally hand over power to the Iraqis at the end of June. Although the Iraqis will rule, 1000 people from the PMO and others from organisations such as Department for International Development will maintain a presence. Unlike some Iraqis, 43-year-old Hatem does not resent the international presence. The contractor he owns, al-Kublatan, has blossomed since Saddam was ousted, growing from 10 to 50 people in less than a year. Hatem also runs transport and supplies companies, and in his spare time he is a journalist and politician.

Hatem has asked Basra governor Wael Abdul Latif for a 500 m stretch of land along Shatt al-Arab adjacent to Saddam’s palace. Here he wants to restore Basra’s 1960s status as the “Venice of the Middle East” by building cafes, shops, pool halls, a boat club and hotels.

Hatem would own the land and the revenues of the project for 30 years before handing it back to the government. Latif’s people are obviously impressed – they have asked him to increase the stretch of land to between 2 km and 3 km. Hatem says he is now in talks with Kuwaiti contractor Dreem for funding. Kuwaiti companies are keen to get a piece of the action in Iraq. Hatem has just been awarded a contract to clean the street of Basra backed with necessary equipment from Kuwaiti firm al-Kharafi.

This contract is important. Sewage and rubbish are rife in Basra. Pumps to Ham Dan, a sewage plant, were broken last year, and a 1.8 km stretch of sewer in central Iraq has been left unbuilt. An Indian contractor downed tools last year as the war drew near. US giant Bechtel has earmarked $40m to $60m to refurbish Ham Dan, but this project will take at least a year. A $60,000 landfill has been established due west of Basra, although it will barely dent the city’s waste problems.

Hatem is a serious contractor and is fast becoming a major figure in Basra. But many of the 600 contractors that have emerged since the war have been criticised as “one-man-and-his-barrow firms”.

Hatem’s vision of a return to the Venice of the Middle East is a powerful one. But driving through the streets of Basra to the airport conjures a rather different image: poverty, neglect and the destruction of warfare.

Basra stories