"U.S. contractors are importing labor and expatriating the benefits," complained one Iraqi construction manager to the Financial Times. "Where's the benefit accruing to Iraq?"

Unemployment is rampant in post-war Iraq, with an estimated 7 million Iraqis out of work.

Officials interviewed claim that Iraqi workers pose a "security threat" either as targets or potential recruits for guerrilla fighters determined to thwart rehabilitation of the country's infrastructure.

"We don't want to overlook Iraqis, but we want to protect ourselves," said Colonel Damon Walsh from the Coalition Provisional Authority. Walsh also told the Financial Times that the military has never outsourced resources on this scale, noting that at least 20,000 more U.S. troops would be needed if not for migrant laborers.

Workers for the Saudi-based Tamimi Company, which was contracted by Halliburton subsidiary Kellogg Brown and Root to provide food service for U.S. troops and administrators, live in temporary housing on the site of the Baghdad palace. The workers are paid three dollars per day and get time off once every two years.

Kellogg Brown and Root received an over two billion dollar open-ended contract from the U.S. for subcontracting in Iraq.