- 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.
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- © 2003 Independent Digital (UK) Ltd
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- http://news.independent.co.uk/world/middle_east/story.jsp?story=445744
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