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[casi] Privatising state-owned sectors

Tuesday July 8, 3:38 PM EDT
By Mona Megalli

BAGHDAD, July 8 (Reuters) - U.S. civilian administrator Paul Bremer said on
Tuesday Iraq should consider privatising its state-owned sectors and
allowing foreign investment in its oil industry before a permanent sovereign
government takes over.

Bremer said that a soon-to-be-appointed governing council of Iraqis needed
to give clear backing to the entry of foreign capital to reassure private

"Privatisation is obviously something we have been giving a lot of thought
to," Bremer told reporters. "When we sit down with the governing is going to be on the table."

Bremer said although he has the authority to change Iraq's legal code, in
place since the toppling of Saddam Hussein in April, foreign investors need
some assurance any legal changes could survive once an elected Iraqi
government takes over.

"The governing council will be able to make statements that could be seen as
more binding and the trick will be to figure out how we do this," Bremer

"Everybody knows we cannot wait until there is an elected government here to
start economic reform."

Bremer said Iraqis should consider developing their oil resources rapidly
with foreign investment but did not specify if it had to be privatised or
what terms should be used.

A plan under study to securitise oil revenues, or use future oil revenues to
back spending on reconstruction, would also have to be put before the
governing council, he said.


"We the coalition, would not undertake anything like that without the
governing council agreeing, because you are effectively mortgaging the
future income that belongs to the Iraqi people," Bremer said.

The Iraqi council, made up of 25-30 appointed Iraqi politicians, will also
have to consider foreign investment in the telecommunications sector and the
tendering of licences to operate a wireless telephone system.

He said his administration would recommend the tendering of three licences
to build a mobile telephone network in the north, center and south of the

Bremer did not say which system the network should use -- the GSM system
used in Europe or a U.S.-based system not found in other countries in the

Iraq should consider foreign investment because it will not be able to
generate enough revenue to balance its budget for the next 18 months, he

A budget just approved by Bremer for the second half of 2003 assumes oil
production will rise to 1 million barrels per day by the end of the summer
and to 1.5 million bpd by the end of the year, Bremer said.

Bremer's aides said oil would generate $3.5 billion of the budget's $3.88
billion in revenues and assumed an oil price of $20 per barrel.

Bremer said the $6 billion budget would have a deficit of around $2 billion
which it would cover by drawing down on its capital resources that include
$1.7 billion in seized assets held by the United States, money seized in
Iraq as well as funds found in the central bank.

Iraq is also aiming to reach oil output of 2.5 to 3 million bpd by the end
of 2004, something that could be achieved with about $1-$1.5 billion spent
to repair sabotage and damage to its ailing oil system.

Bremer said his administration was considering many options to increase
security for the country's oil network, including the use of tribal leaders
to patrol their territories.

2003 Reuters Limited.

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