For Iraqis, a Bumpy Reentry Into Global Economy

BAGHDAD — After decades in isolation, cut off from foreign standards, investment, and competition, Iraqis have suddenly come face to face with the global economy, and the experience is not what they expected.

The damage wrought from the depredations of three major wars, inept central planning,and the systematic looting of the country both by its leaders and the mobs that hit the streets when those leaders vanished, is visible throughout the country. Unemployment runs somewhere between 50% and 75%. Its per-capita production of $2,400 ranked 162nd worldwide in 2002, according to the CIA World Factbook, and the nation’s economy may have shrunk since then, though in the absence of accurate statistics, the rate of growth is anyone’s guess.

“The Iraqi people expected great things from America, that America has magic, that what it wants is done,” said Sadoun Al-Dulame, executive director of the Iraq Center for Research and Strategic Studies, an independent think tank in Baghdad. “But it’s not easy to rebuild the damage of 30 years.”

For a reminder of the challenges in the post-Saddam economy, the average Baghdadi need only look at the walls with which American companies and officials have fortified their hotels, compounds, and bases.

“Bremer Walls” — the concrete slabs that protect against explosions and obstruct car bombers — have sprung up all over Baghdad as terrorist attacks have become more frequent in the past month. One of the more popular rumors in this city full of rumors is that the Americans have been paying up to $1,000 for each of the walls mordantly named for the American administrator in Iraq, L. Paul Bremer III.

But the boom in Bremer Walls hasn’t been good news for Iraqi manufacturers of concrete and cement.There is little if any Iraqi cement in a Bremer Wall. And many of the concrete companies that supply the walls are either foreign or from Kurdish northern Iraq.That galls Arab Iraqi concrete makers, who suspect that contracts given to Iraqi Kurds, who supported America during the war, are part of the spoils. And to many Iraqis, Bremer Walls are a symbol of how American business practices have shut them out.

“Even if there is a better Iraqi company, the Americans would not give them the business,” said Faro Al-Khaffaf, the chief executive of Al-Khaffaf Co., a concrete manufacturer who said he could produce a Bremer Wall for $100.

But is the suspicion that American contracts are unfairly out of reach of average Iraqi companies warranted? In the case of Bremer Walls, probably not.

Foreign and Kurdish companies got the jump on Bremer Wall contracts after the war because the Coalition Provisional Authority, the American-led acting government in Iraq, needed the walls in a rush and Iraqi industry south of the Kurdish-controlled regions was stagnant as the damage caused by war and looting still takes its toll. All three Iraqi state-owned cement companies are practically at a standstill.

Less visible is the damage done to Iraq’s human capital. The systematic ideological and criminal degradation of Iraqis destroyed the educational achievements of what was once one of the most advanced countries in the Middle East.

Most Iraqis coming back from abroad expected to find the same educational standards they had left in the 1970s or 1980s,but unfortunately that’s not the case, said Sabah Khesbak, a communications engineer who left Iraq in 1978 to get a Ph.D.in America and returned to Iraq this year as an American citizen. Mr. Khesbak said that he saw the effects of totalitarian rule on the professional habits of his Iraqi colleagues. “They have no initiative, they don’t show up on time, or dress properly.They skip workdays with the most improbable excuses. They’re closedminded and they seem to be helpless and hopeless.”

Iraqi professionals often have little knowledge of international business standards, according to American officials, who offer training to local businesses on such subjects as how to write resumes and business plans. Many of the resumes they receive begin with the phrase “In the name of God the merciful” and continue on for several pages. Bids submitted to Americans are often handwritten, in Arabic.

Even for the most conscientious companies distributing American aid, spreading contracts among many Iraqi businesses is difficult. Iraqis will misrepresent their ability to perform contracts, according to a U.S.Army officer who deals with Iraqi businesses. “A lot of them lie. They’ll tell you they can do anything.They say they can get 100 generators tomorrow and they can’t,” he said, speaking on the condition of anonymity.

In a dangerous environment where speed and reliability are of the essence, American companies tend to reward those with whom they’ve done business successfully in the past, he said.

This gives an advantage to foreign businesses, especially those from Iraq’s neighboring countries where Arabic is spoken and which have proven track records and know what Americans expect.

While many of these foreign companies will immediately turn around and hire Iraqi companies to do the work and split the profits, there is a growing feeling among Iraqis that the country is being deprived of its economic self-determination. And the recent decision by the CPA to open the country to foreign investment in all sectors except oil — and to slash import duties — has increased that sense of vulnerability.

“We don’t want to refuse foreign assistance or investment,” said Al-Dulame, of the Iraq Center for Research and Strategic Studies. “But Iraqis don’t want to put Iraq for sale.”

It may be a while, however, before anyone wants to buy Iraq. Aside from rumors about South Koreans and expatriate Iraqi Jews snapping up Baghdad real estate,foreign investors are for the most part noticeable only by their absence. Ongoing security problems and the impossibility of getting business insurance in such a climate have kept many away. And American-inspired investment laws might not last once Iraqis become self-governing.

But if and when international private capital arrives en masse, the shakeout of the Iraqi economy could have serious social implications. The most vulnerable sector of the economy is manufacturing, where Iraq’s 200-odd state-owned companies dominate. These companies, with more than 500,000 workers on their payrolls, are the largest employers outside the central government. Just as disbanding the Iraqi army and the instant creation of 400,000 angry unemployed soldiers escalated the country’s security problems, workers laid off from manufacturing jobs will not be raging at impersonal market forces.They’ll be angry at America.

And although the disruption caused by the sudden arrival of a bewildering new economic order was to a certain extent inevitable, American policies have helped exacerbate the confusion.

While Kellogg Brown and Root, the Halliburton subsidiary charged by the U.S. with distributing the majority of American reconstruction aid in Iraq, just began holding weekly meetings to announce contract tenders to small Iraqi businesses, there is no single place, either on the Internet or on some sort of bulletin board, where all American tenders are listed. This gives the well-connected an advantage and is fueling suspicion among those outside the loop that they are purposefully being kept in the dark. Nor is there a list of contract winners. This is for security reasons, according to American officials, who worry that those businessmen will be the victims of reprisals or crime. But the lack of transparency allows all kinds of accusations about corruption and cronyism to go unchallenged.

And while Iraqis may have had unreal expectations about the rosy future after American liberation, American officials made similar predictions to the American people.

“Politicians from abroad are dreamers.They make a lot of promises. But you cannot change things overnight,” Mr. Al-Dulame said. “I wish I could hear that from George Bush or Paul Bremer. If there are problems, let the Iraqi people know these problems.”

The Bremer Wall imbalance will probably sort itself out. Iraqi cement plants may soon overcome electrical problems and begin producing again within the month. And Iraqi concrete manufacturers are finding Bremer Wall buyers who are not American. The crumbling, honeycombed surfaces of the concrete walls outside the Syrian Embassy,for example,bear the telltale signs of the local model.

But for most Iraqis who are testing the waters of the global economy, the suspicion and confusion represented by the Bremer Walls will not go away so easily.

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