First Published: 2003-09-23

 
Iraq's economic reform plan raises nationalist fears
 

Iraqis fear hasty package of reforms will lead to foreign domination over economic decision-making in Iraq.

 

Middle East Online

By Rouba Kabbara - BAGHDAD

The economy is being Americanised, said one Iraqi expert

A sweeping package of reforms to open Iraq to foreign investment announced by the new government has raised fears in Baghdad of foreign domination of the national economy, including the coveted oil industry.

"The measures which have been announced will lead to foreign domination over economic decision-making and largely sign away the independence" of Iraq, said Ridha al-Qoreishi, a financial and monetary expert and academic.

The package, which aims to rebuild an economy devastated by years of sanctions, wars and tyranny, was unveiled by interim finance minister Kamel al-Kilani on Sunday in Dubai.

It covers Iraq's foreign direct investment code, the banking sector and tax regime and would enable 100-percent foreign ownership in all fields, except oil.

"Measures of such scope should come from an elected national government," Qoreishi said, urging the new US-installed authorities "not to accept the foreign diktat and to act in the national interest."

He was sceptical that Iraq's vast oil wealth - the second biggest proven reserves in the world after Saudi Arabia - could be kept out of the equation for long.

"This is a prelude to including oil ... the cornerstone of the national economy," Qoreishi charged.

"The United States will have control of all the Arab oil in the Gulf, or 60 percent of the crude in the world, which reinforces their hold over the world economy."

Qoreishi agreed that "the Iraqi economy needs to be reformed" after decades of dirigisme under the Baath party of former president Saddam Hussein.

However he alleged the US administration in Iraq was seeking to make structural changes which would be in its own interests "and not those of the country."

"The economy is being Americanised," said another Iraqi expert, who asked not to be named.

Under the reforms, foreign companies will be able to buy Iraqi firms outright, forge joint ventures with Iraqi partners and open branches in the country.

Foreign banks will be allowed to enter Iraq, with a total of six foreign banks allowed to buy up to 100 percent of local banks within the next five years.

The first two foreign banks in Iraq will benefit from a fast-track entry process, while after five years there will be no limits on foreign bank entry into the country, the minister's statement said.

The reforms also hand the Iraqi Central Bank full legal and operational autonomy.

"These are wild measures and they will destroy Iraqi operators," warned businessman Ali al-Dabbagh.

"The Iraqi businessman will be at the mercy of big (foreign) companies," said Dabbagh, co-owner of a family firm called Tigris Building Contractors.

"Foreign investment should be limited to a maximum 49 percent stake in any project," he said, voicing opposition to those who advocate quick rebuilding in the aftermath of the fall of Saddam Hussein in Aprim.

"Following the removal of the regime of Saddam Hussein, what use is such haste?" he asked. "Let rebuilding take five years rather than two so long as we don't sell our country."

Dabbagh said such wide-ranging reforms "should be worked out in line with the constitution and not a decision by a minister."

However, Ali al-Obeidi, dean of the economy faculty at Baghdad's Al-Mustansariyah university, defended the reform plan.

"The situation must change whatever the cost," he said. "Opening up is always in our interest."

He stressed nonetheless "the need to keep oil in the hands of the public sector".

Economists believe that Iraq, for all its unexploited oil riches, still faces a daunting task in rebuilding its industrial and transportation infrastructure ruined by decades of war, neglect and UN sanctions.

Kilani said his government hoped to win financial commitments of around 70 billion dollars for reconstruction from donors at a key aid conference in Madrid next month.

 

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