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[casi] Iraqi Gov Council and Bremer's privatization

Hi all,

The - meanwhile handpicked - Iraqi Gov Council and Bremer's privatization

""I certainly believe that privatization is the way to go for Iraq, to put
its obsolete state-run Stalinist industry system back into productive use,"
he said.
"But I recognize that it's a sensitive subject, and I don't see any
consensus among the Iraqis on it.

==> So it will be a subject for the (soon-to-be- named) Iraqi governing
council to discuss."




Thursday, July 10, 2003

Imports inundate Iraq under new U.S. policy
Consumers revel, but manufacturers cut jobs, close down

Robert Collier, Chronicle Staff Writer   Thursday, July 10, 2003

Baghdad -- Along the streets of this city, sidewalks are crowded with huge
boxes containing televisions, kitchen appliances, air conditioners and

Almost overnight, it seems, Baghdad has been turned into a vast emporium of
imported goods.

It's part of a bold yet risky economic strategy by the U.S. occupation
authorities, who have eliminated all import taxes for goods coming to Iraq
at the same time they are pumping hundreds of millions of dollars into the
economy through cash payments to government workers.

As a result, many Iraqis are getting their first taste of the consumer-
oriented good life in many years, and they are snapping up imported goods
right and left.

But the boom has come at a high price because it has accelerated the closure
of hundreds of factories. After 12 years of economic crisis and strict
import regulations under U.N. sanctions, Iraqi manufacturers cannot begin to
compete with the price and quality of foreign goods. The closures, in turn,
have thrown large numbers of people out of work, increasing social tensions
at a time when public dissatisfaction with the U.S. occupation is growing to
dangerous levels.


Nevertheless, some Iraqis welcome the change. Tarik Assad seemed the paragon
of prosperity Tuesday as he lugged a new kitchen stove into the trunk of his
car in Baghdad's Kerradeh district. The four-burner, Chinese-made model had
cost only $90 -- a great bargain, he said.

Under Saddam Hussein, the same model cost about $150, more than a month's
salary in Assad's job as an accountant for the national oil ministry. Now,
the $90 is less than half his new monthly salary of $200.

"Thank God," he said. "My wife will be happy."

Like many of Iraq's 1 million state employees, Assad was recently given a
two-month, lump-sum payment by the U.S. occupation authorities, who are
trying to dampen public anger with a flood of cash. Salaries for lower and
midlevel positions were increased -- in some cases dramatically -- while pay
for top- level officials was cut.

With so much new cash in the economy, shopkeepers are busy trying to keep up
with the buying frenzy.

"Most of my customers are state workers who recently were paid," said store
owner Mohammed Basem. "For many people, this is the first time they've
bought an appliance in many years."

Basem said his store is now grossing $7,000 to $12,000 per day. Under
Hussein, it was bringing in only $2,000 to $7,000 per month.


The losers in the new economy, however, are complaining loudly. Textile
plants and clothing factories have been devastated by the influx of cheap
clothing, much of it made in China.

Other homegrown operations have also been damaged by the open-door import

Under Hussein's regime, for example, imported beer and sodas were subject to
150 percent customs duties. After the war, local bottling plants were shut
down and imported beverages -- now free of tariffs -- have taken over the
market. Streets and highways throughout the nation are festooned with
pyramids of brightly colored Saudi and Syrian soda cans, stacked up by
vendors to advertise their wares.

"Without customs duties, the domestic producers cannot sell," said Khamis
Al-Abed, head of a large consortium that includes one of Iraq's largest
soft- drink distributors. "It's not a very good economic policy."

Even before the war, Iraq was in severe recession. Last year, the gross
domestic product was $25 billion, according to U.S. estimates, one-fifth of
its 1979 level. This year, it is expected to fall to about $15 billion.

The nation's farmers are also being jolted by the elimination of most
agricultural subsidies, which were generous under Hussein.

Mohammed Juad Hussein, whose Al-Helli Chicken Co. has been dormant since
March 30, used to be one of the nation's largest chicken butchers. Now, he
says he simply can't compete against containers full of American Tyson
chicken legs, which are shipped to the Middle East at bargain-basement
prices because Americans prefer white meat to dark.

Hussein says domestic Iraqi chicken costs $1.30 per kilo (2.2 pounds) to
produce, while it retails for only $1.25. Before the war, heavy government
subsidies cut his costs, and most production was sold back to the government
at a guaranteed profit that worked out to about 13 cents per kilo.

He has laid off all but 20 of the firm's 140 workers. The fate of the rest,
he says, "is in the hands of Allah."


Iraq's new economy is largely the work of L. Paul Bremer, the U.S.
administrator of Iraq, who has argued forcefully in favor of a free-market
system, including rapid privatization of state-owned industries.

"We have succeeded in opening Iraq's borders and bringing modern free-trade
policies here," he said last week. But he acknowledged that his policies are
running into heavy opposition from Iraqis.

"I certainly believe that privatization is the way to go for Iraq, to put
its obsolete state-run Stalinist industry system back into productive use,"
he said. "But I recognize that it's a sensitive subject, and I don't see any
consensus among the Iraqis on it. So it will be a subject for the
(soon-to-be- named) Iraqi governing council to discuss."

The debate may be repeated throughout the Middle East. In early May,
President Bush proposed a U.S.-Middle East free trade area to cover the
region's 22 nations. He called the proposal "an expanding circle of
opportunity, to provide hope for the people who live in the region."

Many Iraqis say the U.S. economic shakeup in Iraq is ill-advised. "We need a
free trade system, but only within an institutional basis, as part of a
comprehensive package," said Hamid Al-Jumaily, a professor at Al-Nahrein
University in Baghdad and one of the country's leading economists.

"At present, there is no economic policy as such, either by (private)
business enterprise or by government. Just opening the borders and
eliminating tariffs isn't free trade."

E-mail Robert Collier at

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