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Rebuilding Iraq

Insurrection, decades of neglect and high expectations by Iraqis complicate a daunting task.

October 05, 2003|Alissa J. Rubin | Times Staff Writer

BAGHDAD — A visitor to Baghdad today no longer sees plumes of smoke rising along the skyline and desolate streets lined with boarded buildings.

Instead, the roads are clogged with traffic, crowds throng the markets, stores are stuffed with merchandise, and sign makers are doing a booming business.

But beyond these beacons of normality is a sobering reality: From the task of clearing neighborhood drains so that sewage won't overflow into the streets to overhauling the country's massive oil refineries, the sheer immensity of the job of rebuilding a country neglected for 30 years is only now coming into focus.

As the U.S. Congress battles over how much money to spend on Iraq and what strings to attach to it, many questions loom. Not least are: How deep are the needs, and what effect will the deadly insurrection against U.S. forces have on the willingness to write checks?

Further complicating matters is Iraq's unusual combination of First World expectations about the quality of life -- rooted in many adults' memories of the country's affluence and culture during the oil-rich period of the 1970s -- and an aging Third World infrastructure, which underpins an economy driven in recent years by handouts and corruption.

Economists and policymakers here say that the lack of security is perhaps the biggest impediment to the revitalization of the country's economy and civic life.

"Economic revitalization and security are part of a vicious circle. One cannot happen without the other," said Hammam Shamaa, an Iraqi economist trained in France who teaches at Baghdad University.

"Before foreign investors, or even investors from the Iraqi diaspora, come into Iraq, the climate has to be established to allow them to do business," he said. "At this point, that climate does not exist."

The U.S.-led Coalition Provisional Authority is trying to move money into the economy by reopening the country's ministries, returning tens of thousands of people to work. The result is a surge in shopping, a brisk business in satellite dishes and a flourishing trade in cars and small electronics, but Shamaa and others say such boosts do little to change the underlying economic structural problems.

"Iraq has long-term unemployment of between 60% and 70%," said Kevin Kennedy, the acting U.N. administrator in Iraq. He spoke from a plastic chair in his heavily fortified compound, which since an August bombing that killed at least 20 people has had 10-foot-high sandbag barricades and multiple guards.

"The goods the coalition is putting in do have an impact, but mostly it increases consumption, not investment," Kennedy said.

He also noted that many Iraqis rely on the monthly food basket they receive as part of the oil-for-food program instituted under U.N. sanctions. The CPA has vowed to continue providing the food, which many Iraqis sell for badly needed cash.

"Iraq has been living with this very unique system under sanctions and oil for food," Kennedy said. "Everybody in this country gets a food handout to ensure their basic survival."

Furthermore, while the distribution of salaries will continue, it is unlikely that those who had their jobs eliminated by the Americans -- including the 400,000-strong Iraqi army and the thousands more in the security services -- will receive their payments indefinitely. When those end, it will add to the drag on the economy and probably fuel the country's insecurity until private business takes off and provides significant new jobs.

In the meantime, just the day-to-day running of the country in 2004 will cost an estimated $15 billion, according to coalition budget experts. That is roughly the amount of income expected in 2004 from the country's oil exports, according to the latest internal estimates. Iraq's minister of planning has told local media that the operating cost could be even higher -- as much as $19 billion.

Those figures are separate from the roughly $20.3 billion for reconstructing the country, bolstering security and investing in infrastructure now under debate in Congress.

Before the war, the Bush administration had counted on oil revenue funding at least part of the reconstruction. But administration officials have conceded that their initial projections of reconstruction costs proved too low and their estimates of Iraqi oil export revenue were too high.

Another pot of money, to be pledged by international donors, will be discussed at a conference this month in Madrid. Experts from the World Bank and the International Monetary Fund have calculated that Iraq needs $35.6 billion over the next four years to rebuild its infrastructure and public sector services.

The web of forces at work -- and the difficulty of spending money in a way that makes a real difference in people's lives -- is readily apparent in the ancient city of Samarra, a settlement of 180,000 on the fertile, reed-lined banks of the Tigris River about 110 miles north of Baghdad.

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