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Re: [casi-analysis] Op-ed on privatisation in Iraq

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While Colin does note that according to international law the CPA is not
authorised to make radical economic changes this is exactly what Bremer has
done. As Colin remarks this  creates legal uncertainty. However Colin does
not fill out the details of the reforms. They are quite radical and would
have the efffect of alienating assets to foreign capital. Against the Iraq
constitution, foreign ownership can be up to one hundred per cent; also
total repatriation of profits is allowed. Bremer as well initiated a flat
tax regime rather than a progressive system. The US economic penetration of
Iraq is already pervasive with huge contracts won uncompetitively by
Halliburton, Bechtel and Dyncorp. Bremer's changes are probably
irreversible.While the successor to the present Iraqi Provisional Govt. may
not be chosen through quite the same US dominated processes  any attempt by
a new Iraqi government to repeal Bremers changes would be very costly in
terms of discouraging capital investment even further  What is more likely
is that former Iraqi business elites will jump on the bandwagon and attempt
to obtain their share of privatised state assets. The US intends to keep
troops in Iraq for some years to come, a reminder perhaps that a relapse
into any form of socialised production might not be welcomed
    Privatisation should be considered not in terms of efficiency but in
terms of making available new outlets for private investment and hence
profits for private capital. In the USSR under US tutelage former elites and
others were able to appropriate state assets for their own private profit,
creating a society basically run as a managed democracy by an elite of
wealthy oligarchs. While to some extent the economy is finally turning
around the result has been a horrendous disaster with steep declines in life
expectancy, and disastrous increases in prices making it almost impossible
for the elderly on fixed incomes to survive. Similarly in China the
transition to a market capitalist economy is accompanied by widespread
looting of public assets, often by those within the higher echelons of the
Communist Party.

Cheers, Ken Hanly

----- Original Message -----
 The former
> Soviet bloc countries now in transition are often cited as the closest
> parallels to Iraq, having also experienced simultaneous political and
> economic change. In 2000, economists Jeffrey Sachs, Clifford Zinnes and
> Yair Eilat published an analysis of privatization in these countries.
> They distinguished between two types of privatization reforms: First,
> "change of title" (COT) reforms - the actual sale of SOEs; and, second,
> deeper institutional reforms to reduce incentive problems, harden budget
> constraints, increase competition and strengthen state regulation. COT
> reforms were vigorously conducted throughout the transition countries.
> Institutional reform was patchier, suggesting it is more difficult to
> carry out.
> The paper's main finding was that COT reforms alone are "not enough to
> > These general results cannot be applied automatically to Iraq. Unlike
> Iraq, the former Soviet bloc countries remained sovereign throughout
> their turbulent reforms. If sovereignty makes a difference, then even
> these countries may be poor guides for Iraq. Worse, the rarity of
> foreign occupations leaves Iraq with few close recent parallels.
> One way forward may be to regard foreign occupations as "normal"
> dictatorships, but with two twists. First, occupying powers have fewer
> legal rights than do sovereign governments. As Britain's attorney
> general advised Prime Minister Tony Blair, the law of belligerent
> occupation "imposes an obligation to respect the laws in force in the
> occupied territory 'unless absolutely prevented.' ... wide-ranging
> reforms of governmental or administrative structures would not be lawful
> ... the imposition of major structural economic reforms would not be
> authorized by international law."
> A June report to the US Congress also took this view, claiming that "the
> establishment of a legitimate government" is the "second requirement"
> for Iraqi economic development.
> are archived on CASI's website at

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