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[casi] Brilliant(ine) Bremer III: Operation Iraqi Prosperity

1) Brilliant(ine) Bremer III:
 "Operation Iraqi Prosperity"

2) Some Kurds not yet stuck on the brilliantine trail:
 "Why don`t the Americans use indigenous labor in rebuilding Iraq?"

3) Another underwhelmed person, this time from the opposite camp:
"U.S.-led occupation in Iraq called 'stumbling block' to entrepreneurs"



OpinionJournal - Featured Article

June 21, 2003

Operation Iraqi Prosperity
Success depends on the birth of a vibrant private sector.

Friday, June 20, 2003 12:01 a.m. EDT

BAGHDAD--Much has been written since the war about the political liberation
of Iraq, one of the remarkable events in the history of human freedom. Never
before in warfare have so many been freed with so few casualties, in so
short a period of time, with so little damage done to the country and its
people. The removal of Saddam Hussein also offers Iraqis hope for a better
economic future. For a free Iraq to thrive, its economy must be transformed.

Tomorrow, I will lead a delegation of Iraqi business and financial leaders
to a special meeting of the World Economic Forum in Amman, Jordan, where we
will discuss the economic aspects of the Coalition's overall strategy. Iraq
faces unique problems, but we have the experience of formerly socialist
countries, as well as analysis of successful capitalist ones, to inform our
perspective. While the ultimate future of Iraq's economy will be determined
by the Iraqis themselves, economic growth will depend on the birth of a
vibrant private sector. And this will require the wholesale reallocation of
resources and people from state control to private enterprise, the promotion
of foreign trade, and the mobilization of domestic and foreign capital.

In the near term, any economic plan for Iraq must address the consequences
of the conflict that liberated it. The first prerequisite to growth is the
establishment of law and order. Looters and saboteurs have destroyed
offices, stores, factories, and government buildings. Deliberate attacks on
oil facilities and electricity lines continue to undermine our efforts and
hurt the Iraqi people. Fortunately, we have made the streets of Baghdad
safer, and Coalition forces are working to root out the last remaining
vestiges of the former regime.

The formation of a political system reflecting the goals and viewpoints of
all Iraqis is the second prerequisite. Here too, the Coalition has made
progress. With the crucial assistance of a number of forward-looking Iraqi
citizens, we are on track to realize the president's vision of a free Iraq
led by a democratically elected, representative government.

Against that backdrop, my primary focus now is working with Iraqis to put
their country on the right economic path. The immediate situation is
daunting, but it could have been much worse. Humanitarian crisis was
avoided. Early operations by Coalition forces protected Iraq's oil
infrastructure, and production has already resumed. Iraq should export more
than $5 billion worth of oil in the second half of this year.

Still much work remains. To address the population's immediate liquidity
needs, we have placed more than $400 million of purchasing power in the
hands of the Iraqi people through the rapid payment of public-sector
salaries, pensions, and emergency payments. Baghdad's streets are now alive
with traders and merchants selling goods that were unobtainable only a few
months ago. The Coalition has committed billions of dollars to further spur
economic growth by funding infrastructure and development projects around
the country.
But simply rebuilding government buildings or repairing damaged pipelines
will not bring about sustainable growth. That growth will require a
transformation from three decades of economic mismanagement and neglect and
a Stalinist industrial structure. Most production in Iraq was undertaken not
by private firms seeking to meet the demands of the market, but by
state-owned enterprises overseen by government officials, with Saddam
himself at the top. Capital allocation was made on political and
bureaucratic bases, not in response to market forces. More than one-third of
the economy was geared toward supporting Iraq's voracious military
establishment, which contributed little if anything to consumer welfare.

Because these state-owned enterprises did not face market discipline, they
destroyed value rather than created it. To keep these firms afloat, the
former regime oversaw a vast system of costly subsidies, which distorted
prices and raised the financing requirements of the government. Bad fiscal
policy led to bad monetary policy, as the Central Bank of Iraq was often
forced to print money in order to finance government deficits. Predictably,
inflation raged and, in only a few years, the domestic currency weakened to
less than a hundredth of its value.
The international economic policies of the old regime were just as damaging
as the domestic ones. The sanctions of the 1990s, brought about by Saddam's
hostile military adventures and its subsequent intransigence before the
international community, isolated the country from the rest of the world.
Even before the sanctions, foreign investment from outside the Arab world
was outlawed. In fact, an Iraqi businessman marveled at a recent meeting on
foreign investment. "Under the old regime," he said, "they would have cut
our throats."

What will it take to undo this legacy? The central lesson from past
transitions is that the private sector must be encouraged to rapidly
allocate resources to their most productive uses. In other transition
economies, the switch from value-destroying public enterprises to
value-creating private ones has been accomplished by stimulating the growth
of small and medium-sized private enterprises, which are best able to create
jobs quickly. This encouragement takes place by reducing the subsidies to
state-owned firms and establishing a clear and transparent commercial code
(as well as honest judges to enforce it). More generally, a well-established
system of property rights must be established in order for the economy to

The most difficult part of the transition will come from reductions in the
subsidy system. But first, an adequate social safety net must be put in
place for workers affected by the closure of certain state-owned firms.
While subsidy cuts will be a crucial component of economic policy, it must
also be merciful.

Opening Iraq to the rest of the world also promises to pay big dividends. By
limiting foreign investment, Iraq was denied the chance to import capital,
management know-how and new technologies that would have raised productivity
and living standards. Access to all these resources should be encouraged,
both by domestic investors free to shop in the world marketplace or by
foreign investors with specific expertise. Domestic and international
reforms are related, as many countries have found that opening their borders
to trade and investment forced their domestic industries to face more market
discipline and become more productive.
Following a disciplined, market-based approach will require difficult
decisions and entail near-term sacrifices. For this program to be
successful, it must be endorsed by the Iraqi people. But higher living
standards--and political freedom--cannot emerge if economic freedom is
denied. And so rebuilding the Iraqi economy based on free market principles
is central to our efforts.

Mr. Bremer is the chief civilian administrator in Iraq.



Why don`t the Americans use indigenous labor in rebuilding Iraq?

18 June 2003 - By Rizgar Khoshnaw

I am not only puzzles to see that the American companies are choosing
foreign labor in Iraq, but they are making all of the decisions on who gets
the huge and lucrative contracts. Such actions taken by the American
companies will surly backfire on them in the future. This move is contrary
to what they had promised in the past.

I recently read that Mr. Paul Bremer, the Iraq civil administrator, had
"laid off" a half of million military personnel in Iraq and now the number
of unemployed Iraqis stands at ten million people. With an abundance of
Iraqis willing, ready and able to work, why shouldn’t they have the
opportunity to join in the rebuilding of Iraq? They are very well educated,
in desperate need of income and capable of doing the work to rebuild their
own economy and country.

There is absolutely no need for the importation of Indian workers, as it is
the case of KBR, an American company that has employed Indians to rebuild
Iraq. Furthermore, there is no need for Indonesia to send 100,000 workers to
Iraq to "help" rebuilding Iraq as their president, Megawati Sukarnoputri,
has mentioned to the press. I personally would like to tell the president,
Thanks for the "offer" but we do not need your labor force; we have plenty
of our own. As we say in America: Thanks, but no thanks!

How can the Americans win the "hearts and minds" of the Iraqi people if they
don’t even give them the opportunity to participate in rebuilding their own
country? Furthermore, is it not the Iraqi money that is being used to pay,
and I might add over pay, for these contracts?

The Iraqi people will never accept such treatment from the "liberators" for
long. At some point, they will realize that they are being "taking to the
cleaners" by some of these foreign companies. As we say in America: The
truth will always come out; it is only a matter of time.

Already there has been an investigation conducted on an American company
based in Washington, DC (I will refrain from naming it at this time) that
has been found to over charged for their services- a contract worth $167

I am 100% certain we will see plenty more of these companies being
investigated once the work begins. Personally, I will be one that will be
investigating/tracking some of these contracts as I have done in the past
six years with the oil-for-food program. It was only few weeks ago that I
mentioned this very company to some American politicians and told them that
they are over charging Iraq for the "service" that they will be providing
the Iraqi people. I was right!

For six years, I informed the Kurds that we are being cheated in the
oil-for-food program and now I would like to tell them: Please be careful of
this oil-for "rebuilding" program. Prior to writing my book on the
oil-for-food program, I had investigated many companies as well as
individuals and I have found that it was very easy for them to over charged
for products and services. I hope this "rebuilding" of Iraq program does not
follow the same footsteps as the oil-for-food program-and if they did, Iraq
will be financially bankrupt in no time at all!

Having studied economics in an American university, I was taught that in
order to revive a sluggish economy (or a dead economy in the case of Iraq)
money must be spent by the government, jobs must be created for the locals,
investments must be flow in and so on. What I am witnessing in Iraq at these
very early stages, which are extremely crucial, that the locals are not
playing a part in the employment pool that the US is putting together.

For two months the Iraqis were promised salary payments and when they
received one, it was a lousy $20 a month that was distributed. Even if this
money was enough to live on, that is not the correct path to take in order
to help the Iraqis get on their feet. Once again, as we say in America:
Teach a man how to fish and not feed him a fish a day!

The Iraqis desperately need jobs, not handouts! And to add insult to injury,
these "hand outs" that they received is THEIR own money that the US military
has found in Iraq-not taking into account the billions of dollars of Iraqi
frozen money in foreign banks. So far out of the billions of dollars that
was recovered in Iraq, only few millions have been distributed to the
Iraqis, which are the rightful owners to begin with.

Finally, I would like to tell my fellow Kurds to be ware of what the
Americans are promising us when it comes to rebuilding our region. We must
make sure that our future oil money is not spent freely on any projects that
others see fit for us. I do not want to see our money wasted as it was in
the oil-for-food program-over ONE billion dollars was spent to "repair" the
electricity in Kurdistan and we all know the result! We should demand that
the Americans use indigenous labor and not import labor from some third
world country and pay them exuberant salaries with our oil money. Lets not
forget how our 13% oil-for-food share was administered in "our" behalf!



U.S.-led occupation in Iraq called 'stumbling block' to entrepreneurs

By Sharon Behn
 June 18, 2003

    A Washington-based merchant banker who just returned from Baghdad, where
he invested $1 million in several new businesses, says the U.S.-led
occupation authority has become an obstacle to private entrepreneurs with
the cash, ideas and expertise to quickly rebuild Iraq.

    Rubar Sandi, chief executive of Washington-based CorporateBank Business
Group, described the Pentagon's Office of Reconstruction and Humanitarian
Affairs (ORHA) as a bureaucratic web hobbled by infighting and

     "In 10 days, I managed to do more than ORHA has done in two months," he
said in an interview. "ORHA is a stumbling block," he said.

    During his first trip, Mr. Sandi purchased four hotels and started a
company to provide security and translation services for would-be investors.

    ORHA blocked him from flying commercial airlines in and out of Iraq and
from opening a cellular telephone company.

    ORHA has since changed its name to the Coalition Provisional Authority

    The organization's staff, made up of American and Iraqi-American
advisers, was barricaded behind the walls of one of Saddam Hussein's former
palaces and not particularly helpful, Mr. Sandi said.

    "The Iraqis who came from the United States have imprisoned themselves
in Saddam's palaces," Mr. Sandi said. "It's pathetic."

    Mr. Sandi, who hired 300 Iraqis on his first visit last month, plans to
return later this month and plans to invest an additional $10 million

    U.S. officials disagreed with Mr. Sandi's view that coalition
bureaucrats are hampering private investment in Iraq.

    "That assessment is simply not true," said Cmdr. Chris Isleib, a public
affairs officer at the Pentagon.

    Mr. Isleib noted that in addition to a recently announced $100 million
building initiative, CPA Chief L. Paul Bremer "is pumping money into the
hands of Iraqi citizens through salary payments" and getting the oil
industry moving.

    He also said Mr. Bremer and former ORHA leader Jay Garner had helped
appropriate more than $2 billion for Iraqi efforts. Much of that money is to
go to contractors.

    Struck by the level of insecurity and disorganization as well as
numerous business opportunities within that chaos, Mr. Sandi hired a number
of armed guards and established a security company. He bought a fleet of
cars and sport utility vehicles and created a transportation company.

    He found a number of bilingual Iraqis and set up a translation company.
And he's renovating hotels trashed by looters shortly after the war ended.

    He is also in negotiations to buy a private bank with 20 branches across
the country.
    The idea, he said, is to supply incoming businesses with all the
services the U.S. authority has not been able to provide: security,
transportation, language services, decent lodging and a way to move money.

    But Mr. Sandi ran into resistance when he tried to obtain permission
from the CPA to enter the telecom world. That, he was told, was impossible
despite the fact that the telephone system in Iraq has all but collapsed.

    He registered his security company in the Kurdish north, which has been
largely self-governing since the end of the Gulf war in 1991.

    Mr. Sandi, an Iraqi exile who made his fortune in the United States,
said he has the help of an extended family and network of friends who never
left the country.

    He also has a number of significant backers and investors who, like him,
are willing to take a calculated risk to get in on the bottom floor.

    Holding photographs of himself in Baghdad as a teenager, at school and
with his arms draped around his friends dancing at a wedding, Mr. Sandi
talked in a shocked voice of how decayed the capital looked.

    "It's like a Dumpster, a junkyard," he said, blaming not just
deteriorated services, but also decades of mismanagement and corruption
under Saddam.

    But business is beginning to flourish, and not everyone is bad off. Mr.
Sandi, chairman of the U.S.-Iraq Business Council, stayed with a wealthy
trader in his brownstone mansion in one of the tonier parts of Baghdad.

    Mr. Sandi said he has been deluged with phone calls from U.S.
engineering, construction, telecom, automobile and beverage corporations
keen on investing in Iraq — including General Motors Corp., Urban Retail
Properties Co. — as well as Japanese, Korean and Singaporean investors.

    "I think it's good to see this beginning," World Bank President James
Wolfensohn said of the growing private-sector interest in Iraq.

    "Countries interested to participate [stretch] from Brazil to India, and
they are all ready to come in," he added. Suddenly, Mr. Wolfensohn said,
"everyone is the best friend of Iraq."

    The heads of 15 U.S. companies — including McDonald's Corp., Motorola
Inc., Bank One Corp., Kepner-Tregoe Inc. and Farley Inc. — recently attended
a luncheon in Chicago, where they listened to Mr. Sandi speak on business
opportunities in Iraq.

    But the level of private-sector interest is matched by businesses'
apprehension about Iraq's lack of legal frameworks.

    "They are looking for safety, security, information on how to register,
taxes, intellectual property rights, how to repatriate their money, labor
laws," he said, all "unanswerable questions."

    Mr. Sandi, who fled Iraq after joining the failed Kurdish uprising
against Saddam in 1976, said he is convinced that given the CPA's inability
to swiftly sort through the tangled web of Iraqi politics and culture,
private investors are the key to putting the country back on its feet.

    "The business community will force the emergence of stability and
policy," he said in an interview. "Let's start the private initiative. I
think that will solve a lot of problems."

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