Philip Thornton
America Puts Iraq Up For Sale
Mon Sep 22 02:40:00 2003
64.140.158.37

America Puts Iraq Up For Sale
By Philip Thornton in Dubai and Andrew Gumbel

The Independent - UK 9-22-3

Iraq was in effect put up for sale yesterday when the American-appointed
administration announced it was opening up all sectors of the economy to
foreign investors in a desperate attempt to deliver much-needed
reconstruction against a daily backdrop of kidnappings, looting and
violent death.

In an unexpected move unveiled at the meeting in Dubai of the Group of
Seven rich nations, the Iraqi Governing Council announced sweeping
reforms to allow total foreign ownership without the need for prior
approval.

The initiative bore all the hallmarks of Washington's ascendant
neoconservative lobby, complete with tax cuts and trade tariff
rollbacks. It will apply to everything from industry to health and
water, although not oil.

But it is still likely to feed concerns that Iraq is being turned into a
golden opportunity for profiteering by multinational corporations
relying on their political connections.

Already, the biggest reconstruction contracts have been allocated to
American firms such as Bechtel and Halliburton, which have ties to the
Bush administration. They were selected behind closed doors, with no
opportunity for competitors to present bids.

Iraq is far from an ideal environment for business, however, and the new
initiative seemed calculated to overcome qualms overseas companies have
had about the risks to both people and capital.

It remains to be seen whether the prospect of buying into Iraq's most
essential services, pricing those services at will and repatriating
profits in their entirety will be a strong enough lure to offset the
continuing inability of the US military to make the country secure from
resistance fighters and heavily armed criminal gangs.

Wholesale privatisation is a dramatic departure from Saddam Hussein's
centralised management of the Iraqi economy, which was reasonably
successful in capitalising on the country's oil wealth to build modern
hospitals, schools and other infrastructure, at least until the
upheavals of the 1980-88 Iran-Iraq war, the 1991 Gulf War and the
imposition of United Nations sanctions after that conflict.

One Arab expert said: "There's a fear that privatisation of too many
things will lead to things being sold off for a mess of potage." Kamel
al-Gailani, the Finance Minister in the provisional government, said the
moves would open Iraq to free- market competition that would deliver
investment, job creation and long-term economic growth.

"We are providing Iraqi citizens with the freedom and opportunities they
were denied for so long under the Baath party to realise their economic
potential," he said. "The reforms will advance efforts to build a free
and open market economy in Iraq, promote Iraq's future economic growth,
[and] accelerate Iraq's re-entry into the international economy and
reintegration with other countries."

The moves presented by Mr Gailani, approved by the US and UK's coalition
provisional authority, include:


> 100 per cent foreign ownership in all sectors except natural

resources;


> direct ownership as well as joint ventures and setting up branches;



> full, immediate remittance to the host country of profits, dividends,

interest and royalties.

Privatisation of everything from electricity and telecommunications to
pharmaceuticals and engineering could see hundreds of previously
state-owned companies sold off.

There will be a tax holiday for the rest of this year, and income and
business taxes for investors will be capped at 15 per cent from next
year.

Trade tariffs will be slashed to show that Iraq is a "country that
embraces free trade". A 5 per cent surcharge will be levied on all
imports, other than humanitarian goods such as food, medicine and books,
to fund the reconstruction effort.

America defended the decision to offer such a generous package of tax
breaks to entice investors. "Capital is a coward," said John Snow, US
Treasury Secretary. "It doesn't go places where it feels threatened.
Companies will not send employees to places that aren't secure." Iraq's
vast oil reserves, the world's largest apart from Saudi Arabia's, would
remain in government hands. "They're going to run government finances
based on oil revenues," Mr Snow said.

Five months after the overthrow of Saddam, there are no visible signs of
reconstruction. Clean water and electricity are still not available to
most people and entire neighbourhoods are still without phone lines.

Washington is desperately seeking help with footing the $100bn bill it
estimates rebuilding Iraq will cost.

© 2003 Independent Digital (UK) Ltd

http://news.independent.co.uk/world/middle_east/story.jsp?story=445744