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Re: [casi] re Washington Post article

Dear Colin and CASI members

This posting is in reply to the "Washington Post article" more importantly
it is a "look" at the Iraqi economy.

a- The Ration system:

1-    Each and every Iraqi family has a ration card. Some times this card is
required as additional proof of residency. The ration system provide the
most basic needs it includes rice, flower, sugar, soup and detergents,
powdered milk, tea, vegetable gee, and dried peas and lanterns. The rations
are delivered from central stores to the "distributors or small privately
owned stores" near ones residence. The rations are transported by truck to
every corner of the country and to all the 22 million Iraqis. It is
estimated to total more than 350,000 tons each month. Each one of us
receives the same quantity and quality of goods.

2-    UN figures for food basket items distributed from Dec 1996 to 10 April
2002 are US$    8,154,041,284 for the period of 64 months. To get the true
picture let us divide the 8+ Billions by 64 months and then divide by 22
millions one gets US$ 5.79 per person per month. The truth is that OFF
provides only US$ 5.79 per month for food.

3-    This US$ 5.79 foodstuff is "sold" to the individual for equivalent of
US$ 0.12 (i.e 12 cents) . The government subsidy for the food basket is
nearly 94%.. If one considers the local cost of warehousing, transport and
other administrative cost then it is nearly totally subsidized.

b- Oil for food Program and government planning

1- The first two or three phases of the program were used mainly to provide
people with the absolute basic necessity of food and medicines. It was
thought that the program was a temporary one and for limited time.  Once the
revenue was sufficient (phase 4 --) the program had another goal which was
importing the necessary foreign components for rebuilding of the
infrastructure. By phase 7 or 8 the program allocated money for the housing
and construction sector as well as the other important sectors.

2- It was thought that encouraging the construction and housing sector
(labor intensive with minimal import requirement) will lead to
revitalization of the economy. To achieve that goal the government imported
huge quantity of steel rods, bathroom set, electrical fittings, wood, glass,
pipes and fittings..etc

3- As a further encouragement the government subsidized these imports. Steel
rods for example were reduced from nearly US$ 300 to less than US$ 100 per
ton. This subsidy was achieved by actually adopting a very low (artificial)
exchange rate when pricing the goods.

4- The government "gave" land "free" for the people to build houses. Any one
with a valid building permit can buy these subsidized building materials
based on the "covered" area of the house. Further more the government
entered into contracts with international companies to build housing

5- All these government measures and subsidies have snowballing effects on
other sectors like transport, buildings raw material and others. It
generated a lot of work opportunities which intern resulted in a lot of cash
flow which revitalized the whole economy.

6- To overcome problems with the transport sector the government relaxed its
privet sector import restrictions. They allowed the privet sector to import
used cars and trucks with very little taxes. This resulted in a very
substantial inflow of used cars and trucks from all over Europe and
Southeast Asia. These "New" cars were used to generate income to the drivers
and owners. By the way all those BMW's and the Mercedes cars that the
reports are talking about are privately imported that way.

7- Furthermore the government imported thousands of brand new cars and again
subsidized the pricing of them and is selling them at almost half price. A
brand new Nissan taxi for about US$6000. A brand new Peugeot 406 for less
than US$ 9000.

8- Public transport buses (nearly 1000 British Leyland buses) were scraped
few years ago. It is now replaced by new fleet of Chinese double-decker
buses with a German engine!! British Leyland lost it lucrative and captive
market. I hope to god that they will not be permitted to enter the market

C- Sources of Foreign Currency:

1- Since I believe that the continuation of the sanctions are illegal and
are imposed on us by US/UK belligerency then I refuse to call Iraq's export
of oil outside the MOU as smuggling. It is just selling oil outside the MOU.

2- Iraq exports other commodities. These exports, whether government export
or privet sector export, go to the bordering nations like Turkey, Iran,
Syria, Jordan, or Saudi Arabia or through them to other countries. These
exports generate back flow of foreign currency.

3- Religious tourism from Iran (200000-300000 yearly) and from other
countries is another source of foreign currency.

4- Iraqis living abroad are sending money to family members and friends
either to pay old debits or as help to family members or send money to
purchase property for them.

5- Speculative currency traders living abroad are buying the "worthless"
Iraqi Dinars hoping that at some time in the future they will be able to
double their money many times over. This is long term investment which was
proved valid in Lebanon few years ago. I might add that the Iraqi Dinars are
kept in the country so the net result is that foreign currency is flowing

6- Iraqis as well as some Arabs are taking advantage of the depressed
property values to buy properties in Iraq as an investment. They are sending
foreign currency in to buy these properties. I know that it is difficult for
most members of CASI to understand that Arabs are buying properties and
register them in the name of Iraqi friends, since the non Iraqi can not own
property, with a simple IOU document based on personal trust.

7- The free trade agreement with Arab countries meant freer flow of goods
and capital between them. Iraq being a relatively large market companies
started to establish small local assembly plants for their goods inside
Iraq. The company outside Iraq will supply the necessary parts, and that is
foreign capital, to be assembled in Iraq and sold as an Iraqi product.

I think that taking all those factors into consideration one can understand
the comments in the media that "thing are getting a lot better in Iraq". It
is a combination of government decisions, the MOU , the adventurism and most
importantly the will of the people to make a better life

I want to end by quoting the Minster of Oil  "We know it is difficult for
those without thousands of years of history to understand, but oil is not
the only resource of the Iraqi people."

Best Regards

Ghazwan Al-Mukhtar

Baghdad, Iraq

----- Original Message -----
From: "Colin Rowat" <>
To: <>
Sent: Sunday, May 19, 2002 6:30 PM
Subject: RE: [casi] re Washington Post article

> Hi Tim,
> Thanks for your e-mail, and for the points raised in it.  Before
> specific comments that have been made in this exchange, I want to note a
> general difficulty: all of us, myself included, are trying to assess the
> state of Iraq's economy on the basis of anecdote.  The reason that we have
> national statistics is precisely because anecdote is an unreliable guide
> these sort of aggregate indicators.  Nevertheless, in the absence of
> data, this is the best that we can do.
> > "People were penniless and the government strictly rationed milk
> > and sugar to ensure that the country's embargoed food supplies
> > covered necessities.  But those days are past."
> >
> > How about some evidence? Is not the government still rationing
> > food? Has the nutritional status of Iraqi children improved?
> > Colin, you say the ration is "adequate".Why then are such a high
> > number of children chronically malnourished, if not because
> > sanctions, in one form or another continue to starve and kill.
> > What's an "adequate"  level of death from sanctions?
> It's certainly the case that, under 'oil for food' nutritional intake has
> increased.  Indeed, one of the reasons that the Iraqi government returned
> negotiations seems to be that it realised that it could not 'tough out'
> sanctions: its ability to provide a food ration had declined
> OFF increased the income available to do so, and that has helped to
> stabilise the nutritional situation.  Yes, the food ration continues to be
> distributed and, yes, the general sense is that it represents a
> share of household's monthly income.
> On the ration's adequacy, my posting yesterday may have been careless.  I
> wrote, "One of them wants to slap journalists who ask why people are
> complaining, given that the ration is adequate."  Perhaps I should have
> written, "One of them wants to slap journalists who ask why people are
> complaining, given that the journalists perceive the ration to be roughly
> adequate."  The last update on the ration that I've seen from the UN was
> the Phase X 150 day report from last November (see
> <begins>
> 38. The prevailing socio -economic conditions do not
> allow a large portion of the Iraqi population to
> adequately complement the food basket, although the
> prices of food basket commodities have generally
> remained stable during the reporting period. Even
> though the distribution plans from phases VIII to X
> correspond approximately to the recommendation,
> contained in my supplementary report submitted to the
> Security Council in February 1998 (S/1998/90,
> para. 31), of 2,463 kilocalories and 63.6 grams of
> protein per person per day, the food ration distributed
> during the period provided only 2,229 kilocalories and
> 50.48 grams of protein per person per day.
> <ends>
> I don't have any insight into why the government's ration is less than
> it has planned for in the distribution plans.  This has been the case for
> some time, though.  More generally, though, kilocalories do not equal
> wellbeing.  (See, for example, the WFP/FAO's September 2000 assessment,
> which raises concerns about adult obesity in Iraq:
>  Even at the
> most basic level of life or death health depends on more than just
> kilocalories.  As Tun Myat, the director of the UN's humanitarian
> in Iraq, put it last November in New York: "The biggest killer of children
> is not lack of food or medicine but of water and sanitation - clean water
> and sanitation are absolutely necessary for the children of the country".
> Humanitarian staff that I speak to in Iraq consistently stress the
> complexity of public health.
> While Myat doesn't mention it in his briefing, it seems to be the case
> the Iraqi government has largely abandoned the targeted nutrition
> that began some years ago.  When infants contract diarrhoea, especially in
> the summer, they need very rapid medical intervention to keep from dying.
> The Iraqi government has largely failed to provide this, in part because
> seems to have removed control over the nutrition programme from
> level health agencies and placed it under the centralised control of an
> institutute established in the 1980s to deal with obesity.
> And, of course, being human means more than just surviving; I think that
> failure to recognise this is what angered the aid official to whom I
> referred to in my previous e-mail.
> > "the country's resurgence". If this rings true to you then please
> > explain to me what it means. In the context of what sanctions
> > have done to the country this phrase seems to me an obscenity.
> >
> > "the growing prosperity". If this is correct - if there IS
> > growing prosperity - is it for the majority or the minority? This
> > is not a trivial question.
> I don't want to defend every phrase in the Washington Post article, both
> because it's not my article and because I don't see this as productive.
> facts seem to be: Iraq continues to suffer under sanctions, but some
> improvements are occurring, and in part because some Iraqis are refusing
> be defeated by the sanctions.  These improvements seem to be most evident
> Baghdad, but even there they benefit some much more than they do others.
> Best,
> Colin Rowat
> work | Room 406, Department of Economics | The University of Birmingham |
> Birmingham, B15 2TT, UK | | (+44/0) 121 414 3754 |
> (+44/0) 121 414 7377 (fax) |
> personal | (+44/0) 7768 056 984 (mobile) | (+44/0) 7092 378 517 (fax) |
> (707) 221 3672 (US fax) |
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