Global Policy Forum

By Emad Mekay

Arab business and political leaders on Sunday challenged U.S. plans to transform Iraq's economy into a free market, ''open for business'' to the world's multinational companies. Washington's leading official in the occupied land, Paul Bremer, told the globe's business and political elite gathered at a meeting of the World Economic Forum (WEF) that the changes will include introducing property rights and anti-trust laws, cutting subsidies, opening up the country to trade and foreign investment and privatizing government businesses.

"I want to say to them (businessmen) that I am optimistic that the coalition will succeed in transforming the Iraqi economy from a closed, dead-end system to an open vibrant place to do business," said Bremer. "Without the discipline of the market, state-owned enterprises not only failed to create value, they destroyed it," he added.

Former president Saddam Hussein's regime collapsed in April after three weeks of a U.S.-led attack. Adnan Pachachi, Iraq's former foreign minister and a veteran member of the opposition to Saddam, said he agreed only in part with Bremer, adding that privatization should not expand to important sectors like education and oil. "We had some wasteful projects (under Saddam Hussein) that should be eliminated through privatization, I think. But there are certain things which should be kept in the public sector, like oil," said Pachachi, who now heads the Independent Iraqis for Democracy (IID) in Iraq.

Bremer, who was a businessman for 14 years before he joined the U.S. administration to rule Iraq, said privatizing state-owned firms would help provide employment and fuel economic recovery.

"Iraq will find that opening its borders to trade and investment will increase competitive pressure on its domestic firms and thereby raise productivity," he said. He promised better standards of life for Iraqis under the new free market economy. "But for this to happen, Iraq's private sector needs a clear commercial code, honest courts, low barriers to entry and transparent corporate governance arrangements," said Bremer. "Countries around the world are rediscovering these prerequisites to growth and a burgeoning academic literature confirms their importance in empirical data.'' The negative impact of the transition on workers and pensioners, who may be affected by the closure of certain state-owned firms, will be cushioned by Iraq's oil revenues, he added. But an Iraqi in the audience who introduced himself as a businessman challenged the U.S. plans, saying Bremer has no legitimacy in the country. "You don't represent Iraq," he said. "There are many Iraqis here who cannot talk like you." What Iraqis need most, said the man, is security, not economic privatization.

On Friday, Human Rights Watch (HRW) said that donors who meet at the United Nations later this week to pledge money to Iraq's reconstruction must make security a priority. "Lesson number one from Afghanistan is that, without security, there will be no reconstruction," said Rory Mungoven, HRW global advocacy director. "Lesson number two is that without protecting human rights, there will be no genuine security either," he added in a statement.

Bremer said the United States' immediate priorities are reforming Iraq's financial sector in order to provide liquidity and credit for the economy, followed by simplifying regulations to lower barriers for new firms, "domestic and foreign".

In the next phase, officials would change Iraq's commercial laws, lift restrictions on property rights and develop anti-trust and competition laws.

Washington is devising a system that would cushion the effects of the transition from a state-owned to a private sector, financed by oil revenues, which are expected to reach $5.5 billon by the end of the year, he said. Iraqi is expected to begin selling oil via its system of pipelines in July, although a series of explosions and fires have delayed the project to date. The country was due to start exporting oil stored in tanks in Turkey on Sunday.

One option to create a safety net, Bremer said, was to distribute some oil revenues to Iraqis as "dividends", similar to the system used by the U.S. state of Alaska. Or, revenues could be deposited in a national "trust fund" used to finance public pensions or other elements of a social safety net during the transition period, he said. Arab League Secretary General Amr Moussa suggested Sunday that implementing the long-term course of free market decisions described by Bremer without the approval of some sort of Iraqi government risked being questioned and overturned by local representatives in the future. Moussa said Iraq's Arab neighbors would be much more comfortable and willing to help if those decisions were reached through consultations with Iraqis and within a broader framework of political reform.

Washington now says it plans to set up an "Iraqi political council" in July. Members of the council will represent "the major strands of Iraqi society"; their job will be "to assist in the management of the Iraqi management." But that is not enough, said Moussa.

"What we want to see is an Iraqi government, call it provisional, call it temporary. We want to deal with an Iraqi government," he said. "This is not criticism of the U.S. Please listen to us--we want to help, Iraq is an Arab state and we are concerned."

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