State for Sale: The Privatization of Iraq
Wertheim, Stephen, Harvard International Review
Millions of protestors excoriated Operation Iraqi Freedom as a war only for oil. Now some are wondering if these complaints went far enough. As the US-backed Iraqi Governing Council proposes opening the country to unfettered foreign investment, critics now fear outside domination of entire economic sectors, from electricity, to healthcare. Foreign businesses, for their part, fear investing money in an insecure environment, it seems the Iraqi authorities cannot please everyone--or anyone.
But total pessimism over the Iraqi rebuilding effort is misplaced. Both Iraqi citizens and foreign business seek the same thing: a stable government that makes Iraq safe for living and investing. Yet privatization, if executed as rapidly and sweepingly as officials suggest, could undermine stability while leaving Iraqis on the sidelines of their own country.
The privatization plan came not directly from Washington, but from Iraqi Provisional Finance Minister Kamil Mubdir al Gailani at a September 21, 2003, meeting in Dubai, United Arab Emirates. Al Gailani's plan offered attractive opportunities for foreign investors. With no preference given to local firms, all investors could purchase 100 percent of every Iraqi economic sector except natural resources. Foreigners' profits would be fully repatriated while tariffs would be capped at just five percent and corporate taxes at 15 percent. Until the tax plan starts in 2004, a corporate tax holiday would complete the seeming investment paradise.
Unlike the proposed privatization plan, however, a real paradise would focus investment on the Iraqi people. Many Iraqis already feel a lack of ownership in their own country. Full privatization could render them without ownership--literally--as Iraq becomes one of the world's most economically open developing countries. One Iraqi businessman complained about the privatization plan: "Before, Saddam Hussein took our money out of the country, and now the big corporations do.... What's the difference?"
One difference lies in those who profit. After months of foreign-led reconstruction, Iraqis are wondering whether foreigners really have Iraqi interests at heart. The US-based Bechtel Corporation won early civilian reconstruction contracts without bidding, while fellow US company Halliburton snagged rights to rebuild Iraq's oil sector. Even the Iraqi Governing Council criticized the US authority's recent moves, such as the US$1.2 billion spent for police training in Jordan despite lower costs in Iraq and offers from France and Germany to provide the training for free. …