One of the world's largest lorry manufacturers has announced plans to start assembling vehicles in Iraq from next year. MAN, of Germany, said yesterday that it would build a factory in the country to aid its reconstruction.

The company's decision to set up an operation in Iraq comes despite warnings from both the German Foreign Ministry and the Foreign and Commonwealth Office that their citizens should avoid travelling to the country.

The deal was announced during a tour of Germany and Italy by Nouri al-Maliki, the Iraqi Prime Minister. Mr al-Maliki is in Europe to urge manufacturers to follow MAN's lead and set up businesses in his country.

The MAN factory will assemble dumper trucks, fuel and water tankers, semitrailer tractors and bus bodies. Many of the vehicles are expected to be used in the construction industry and to help to rebuild Iraq's infrastructure, which has been devastated by fighting during and since the removal of Saddam Hussein from power.

However, the agreement between MAN, of Munich, and the Iraq Ministry of Industry does not specify how many vehicles will be produced each year.

Peter Erichreineke, MAN's marketing director, said: “The MAN Group is aiming to make a meaningful contribution to the reconstruction process in Iraq.”

Mr al-Maliki met more than 100 German business leaders in Berlin on Tuesday night and invited them to send people to study the situation in Iraq. Daimler, another vehicle maker, has expressed interest in establishing a lorry factory in Iraq.

Despite the attempt by the Iraqi Prime Minister to encourage European companies to invest in Iraq, the German Foreign Ministry retains a travel warning. The Foreign Office advises Britons against travel to Baghdad or the surrounding area.

British companies are operating, or plan to start, in Iraq. They include BP and Shell, the oil groups.

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