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Open Investment Policy Looks Like 'World Occupation' to Iraq Merchants

September 23, 2003|Mark Fineman | Times Staff Writer

BAGHDAD — In the marble-floored corporate offices of Al Hafidh General Trading Co., Waleed and Hani Hafidh vented the rage of many Iraqi businessmen Monday over the country's new wide-open foreign investment policy.

Puffing furiously on imported cigarettes, the brothers asserted that the economic reform package unveiled by Iraq's recently appointed finance minister in the United Arab Emirates on Sunday will destroy the country's small yet burgeoning private sector, create a permanent "world occupation" of its economy and render the Iraqi people "immigrants in their own land."

The policy, which won high praise from U.S. officials present, including Treasury Secretary John W. Snow, allows 100% foreign ownership of any non-oil venture in Iraq. It also treats foreign corporations the same as Iraqi companies and permits up to six foreign banks to set up shop with branches throughout Iraq.

That, said the Hafidh brothers, will ruin their banking and importing businesses. If, that is, foreign companies decide to risk investing in the violent country.

Despite months of economic anarchy that has earned the Hafidhs and other businessmen record profits through duty-free sales of imported televisions, air conditioners, washing machines, refrigerators and computers, Iraq's private sector is utterly unprepared to compete with multinational corporations, the Hafidhs and others say.

"We were very happy when the regime changed. We thought everything would be free," said Waleed, 51. "Now we feel betrayed."

Indeed, for the past three months, Waleed was among a handful of private-sector leaders who pushed for limited economic protections during weekly private meetings with L. Paul Bremer III, the American who heads the U.S.-led Coalition Provisional Authority. The economic initiative was drawn up by the unelected, 25-member Iraqi Governing Council and its U.S. advisors and approved by both the council and Bremer.

Waleed and other Iraqi businessmen had told Bremer that the nation's investment policy should mirror those of other Persian Gulf nations, which limit foreign ownership of any company based in those countries to 49%.

When the new policy was announced Sunday by Iraqi Finance Minister Kamel Keylani in speeches at this year's meetings of the International Monetary Fund and World Bank governors, Waleed and his brother were in shock, they said.

"Everything we asked for was thrown onto the trash heap," said Waleed, echoing the thoughts of many businesspeople in the Iraqi capital, some of whom appeared on Arab satellite television Monday to air their grievances.

Other critics argued that the policy was premature, rushed into place to lure corporate investment and hefty contributions from foreign governments to limit the American investment in rebuilding a nation still seen by many as a war zone.

"It's the wrong approach," said Sam Kubba, who heads the American Iraqi Chamber of Commerce in Washington. "It's a recipe for disaster because it gives the impression that they're trying to sell off all the Iraqi resources. They should go about it much more slowly. Start by getting a democracy in place first and letting the people elect a government."

Kubba, who has been encouraging U.S. companies to partner with Iraqis in investment here, said American businesses are also wary of the Governing Council's legitimacy in implementing such programs.

Still others in Iraq criticized Bremer's administration for not better explaining the need to open the economy so suddenly and so wide.

"Why won't Bremer stand up and say how great our needs are?" said Ali Dham Jabburi, who owns a carpet shop. "Then we will know whether to accept such investment policies."

Added Hammam Shamaa, a French-trained economics professor at Baghdad University: "Iraqis have had 35 years of brainwashing about imperialism, about colonialism, so they need a transition period to understand what the free market is.

"We have to put a great effort into explaining to Iraqis how the economic plan will be done and how the Iraqis will have a share in it," Shamaa said. "Right now, the Iraqis understand nothing."

Responding to the torrent of criticism, a member of the Iraqi Cabinet, which was selected by the Governing Council -- which itself was appointed in consultation with the Coalition Provisional Authority -- conceded that the country was ill-prepared for such radical new policies. But Mohammed Tofiq, the minister of industries and minerals, insisted Monday that Iraq simply had no choice but to rush them into action.

An occupied land where car bombings, firefights and attacks on U.S. troops have become daily affairs, Iraq is desperate to find a way to compete with other countries in the region, he said. Given the country's security problems, he said, owning the world's second-largest oil reserves simply isn't enough in the urgent short term.

"We need foreign investment," Tofiq said. "Our unemployment rate is 60%. We have to create jobs."

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