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Big Plans for Small Business in Iraq

The U.S. wants to build confidence in a wary private sector by boosting imports.

May 31, 2003|Warren Vieth | Times Staff Writer

BAGHDAD — Before the United States can rebuild Iraq's economy, it will have to rebuild Sabah Abdul Rehman's confidence, one brick at a time.

Rehman, a 48-year-old civil engineering technician in the southern city of Basra, is the kind of entrepreneur-in-waiting who U.S. experts say is needed to revive Iraq's shriveled private sector. Years ago, he started a construction business, but his ambition was a casualty of Saddam Hussein's aggression and the everyday thuggery engendered by the dictator's regime.

And he's not certain he would fare better now that U.S. authorities are occupying the president's palace.

"This decision is very dangerous," said Rehman, who is once again weighing the security of salaried work against the allure of business ownership. "Losing anything is very horrible to me."

As the U.S.-led coalition turns its attention from toppling an abusive regime to establishing an acceptable replacement, experts say the Bush administration must move quickly to convince ordinary Iraqis that they too can profit from Hussein's removal, that foreigners will not reap all the rewards of Iraq's reconstruction and that upward mobility won't be reserved for the privileged few.

U.S. officials acknowledge the need to sow the seeds of a new entrepreneurial class in Iraq, where private businesses were heavily taxed and regulated -- and sometimes shut down -- during the 24 years of Hussein's rule.

"Saddam Hussein deliberately tried to create this situation," said Humam Shamaa, a senior professor of economics and finance at Baghdad University. "He tried to minimize the private sector and increase the number of people who depend on the salary of the state."

The coalition has taken several steps in recent days to resuscitate Iraq's business sector.

U.S. and British military units have increased security patrols to deter the rampant looting that has crippled many industrial facilities and kept some businesses from staying open. They're conducting training programs for oil company police and other security personnel and allowing them to carry automatic rifles at key locations.

Within two weeks, allied authorities plan to launch a trade credit program to help Iraqi businesses buy merchandise from other countries. Iraqi importers will deposit their purchase payments in Iraq's central bank, which will guarantee the transactions. International banks will supervise the transfer of funds.

They have also declared a temporary "tariff holiday" that will allow essentially all goods to enter and exit Iraq duty-free. The goal is to stimulate the economy by boosting imports. Details are still being worked out, but the holiday is expected to last until the end of the year.

More private-sector initiatives are under discussion by the allies' economic reconstruction team.

"We have other plans to help small businesses, a variety of programs," a top official with the U.S. Office of Reconstruction and Humanitarian Assistance said this week. "We'll be moving in the not-too-distant future into that phase."

'It's So Degrading'

Sajed Younis Dabbagh hopes that day arrives soon.

Dabbagh, 55, closed his wholesale import business, Al Yaktin General Trading, when U.S. bombs began falling on Baghdad in March. It was a good thing: During the fighting for control of Iraq's capital, Dabbagh's warehouses and showrooms were struck by bullet sprays, tank shells and at least one missile.

Reconstruction agency officials told Dabbagh to keep his doors shut, his warehouses empty and his 17 employees at home until the issue of damage compensation can be resolved.

Dabbagh, whose import manifest includes refrigerators, luggage, electronics, meat, cheese and margarine, has been conferring with fellow Baghdad traders.

They want U.S. officials to set up a screening process to certify legitimate traders. They want coalition forces to step up security to keep looters at bay. But most of all, they want reconstruction officials to make their plans known, then carry them out.

The other day, Dabbagh stood in line for four hours in blistering heat for an opportunity to ask an ORHA representative what to expect next. He got less than a minute of her time and no new information.

"It's so degrading," he said.

It will take time to nurture a private sector decimated by two decades of wars, sanctions and government misconduct. In the meantime, some Iraqis express fear that outside financial interests will overrun local businesses, and that the country may conclude it would be better off with another command-and-control economy than with Western-style capitalism.

"I think the United States did not calculate the psychological factor," Baghdad University economist Waleed Dankasly said. "The Iraqi people need to feel better about themselves. The factor of confidence is very important. There has to be encouragement."

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