- The Washington Times - Monday, September 22, 2003

DUBAI, United Arab Emirates — Iraq’s leadership council yesterday announced sweeping free-market reforms that would permit foreign investment but said it would keep oil under government control.

The measures, designed to reverse decades of economic decay, pave the way for a sell-off of the state-owned companies that dominated Iraq’s economy under Saddam Hussein — if buyers can be found. The changes would allow 100 percent foreign ownership of Iraqi firms, except those in the oil sector.

Yet even the council’s U.S. backers conceded that big multinationals were not likely to rush to Iraq until violence and instability are brought under control.

“Capital is a coward,” U.S. Treasury Secretary John W. Snow said at an international banking conference at which the changes were announced by Iraq’s new finance minister, Kamil Mubdir al-Gailani.



“It doesn’t go places where it feels threatened. Companies will not send employees to places that aren’t secure,” said Mr. Snow, who nevertheless applauded Mr. al-Gailani’s blueprint as “policies that make sense … that offer real promise.”

As if to underline the security concerns, military authorities in Baghdad reported that three American soldiers were killed in a mortar attack and a roadside bombing west of the capital, and appealed for information that would help investigators track down those who tried to kill a prominent female member of Iraq’s Governing Council.

Two soldiers from the 205th Military Intelligence Brigade were killed when mortars struck a U.S. base at the Abu Ghraib prison on the western outskirts of Baghdad about 10 p.m. Saturday. Thirteen soldiers were wounded in the attack. No prisoners were hurt.

Shortly before the Abu Ghraib shelling, a soldier from the 3rd Armored Cavalry Regiment was killed when a roadside bomb exploded near his Humvee outside Ramadi, about 60 miles west of the capital, the military said.

The deaths followed an assassination attempt Saturday against Aquila al-Hashimi, one of three women on the 25-member Governing Council and a strong candidate to become Iraq’s representative at the United Nations.

Mrs. al-Hashimi, a Shi’ite Muslim and career diplomat, was seriously wounded by six gunmen in a pickup truck who chased her while she was in her car near her home on Saturday. The assailants escaped.

In Dubai, Mr. al-Gailani told the private bankers at the economic conference that his objective in opening up the country to foreign investment was to “promote Iraqi economic growth and raise the living standards of all Iraqis as soon as possible.”

He also pleaded for international aid to meet its immediate humanitarian needs and to lay a “strong economic foundation for our eventual success.”

“We ask the world to help us,” he said. “Seize this opportunity.”

Washington has been seeking financial help from other nations to rebuild Iraq, with a conference of donors set for next month in Spain.

While acknowledging that “some challenges” facing Iraq were owing to the U.S.-led war, Mr. al-Gailani said that “the true source of our problems stem from decades of economic mismanagement and corruption by Saddam Hussein.”

According to World Bank figures, Iraq’s total economic output grew from $3.6 billion in 1970 to $47.6 billion in 1980, thanks to the oil boom during the decade. Iraq was a leader in the Arab world in health, education and culture, with a thriving middle class.

But during the 1980s, as Saddam waged a devastating war with Iran, growth stalled and debt soared as Iraq bought weapons. When sanctions were imposed after his 1990 invasion of Kuwait, the economy collapsed. The gross domestic product was $27.9 billion in 2001.

The planned reforms mark a sharp departure to what former businessman Mr. al-Gailani called a “free and market-oriented economy,” whose success would set Iraq apart from its Arab neighbors.

He pledged that Baghdad would “allow up to 100 percent foreign ownership in all sectors except natural resources.”

Iraq’s vast oil reserves — the world’s second-largest after Saudi Arabia’s — would remain in government hands.

“They’re going to run government finances based on oil revenues,” Mr. Snow said.

Six foreign banks will be permitted full ownership of local Iraqi banks in the next five years, Mr. al-Gailani said. Other foreign banks will be allowed to purchase 50 percent stakes in local banks.

Individuals and corporations will have to start paying a 15 percent maximum tax starting Jan. 1, and a 5 percent “reconstruction surcharge” will be levied on all imports except humanitarian goods.

Foreigners will not be allowed to own land, but they will be permitted to lease it for up to 40 years.

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