“One estimate for the cost of the Iraq war on the Arab economies is put at $100 billion, about 15 percent of the GDP of the Arab economies, including $20 billion for the Iraqi economy itself. The Gulf Cooperation Council economies are projected to lose $68 billion.”
Mushtak Parker
LONDON, 24 March 2003 — We are only a few days into the US-led Iraq war, and the reconstruction costs are piling up fast. The human, psychological, and environmental costs similarly are escalating. The night of a thousand cruise missiles raining on Baghdad, signaling Day Three of the campaign for regime change in Iraq, was probably the most devastating bombing onslaught on a single city in the history of warfare.
Muslim countries have failed dismally in their efforts to pre-empt this war. Since Muslim countries have failed the people of Iraq politically — some of them actually supported and bank-rolled Saddam Hussein prior to his invasion of Kuwait, and most others failed to speak out against him even after the first Gulf War, perhaps they could redeem some integrity by playing their part in the economic reconstruction of a post-Saddam Iraq.
Allowing the US, Japan, the UK and its European allies to dominate the post-war reconstruction of Iraq would be a further insult to the Iraqi people, and a blow to the Muslim psyche.
The hope must be that the war will be over sooner than later, and the final toll in human lives and injuries; in destruction of infrastructure and basic utilities; and in environmental damage would be minimal and contained.
Iraq’s neighboring countries should already be planning ahead their role in the reconstruction, instead of harking only on the cost of the Iraq war on their own economies.
One estimate for the cost of the Iraq war on the Arab economies is put at $100 billion, about 15 percent of the GDP (gross domestic product) of the Arab economies, including $20 billion for the Iraqi economy itself. The Gulf Cooperation Council (GCC) economies are projected to lose $68 billion. These estimates are based on past wars in the region, although warfare today is proven to be much more precise because of great advances in technology, especially IT, avionics, lasers, and satellites.
Saudi companies, for instance, won contracts from Iraq to the tune of SR376.4 million in February, bringing the total for the first two months of the year to SR547 million. Some 100 Saudi companies are registered in Iraq to do business with the country. Other countries such as Turkey would claim that they stand to lose the most.
Turkey argues that it is a vital trading partner of Iraq (especially cross-border and direct trade), and two Iraqi oil export pipelines go through Turkey to the southern Mediterranean terminals near Iskenderun. Before the invasion of Kuwait, Turkish bilateral trade with Iraq touched almost $10 billion a year. It would indeed turn out to be a missed opportunity if Muslim countries, especially neighboring states fail to take the main chance.
Geopolitical and geographic advantages will only filter through erratically depending on sub-contracts offered by the main American contractors, who are already earmarked for the major infrastructure contracts especially in the oil & gas, water and sanitation sectors, roads, bridges and other such infrastructure rehabilitation and rebuilding work. Countries and international agencies such as the Islamic Development Bank (IDB) must use their imagination and push their cost and supply advantages to play a much more proactive role in post-War Iraqi reconstruction.
The business case is already made. Iraq is potentially a very rich country. It has proven oil reserves second only to Saudi Arabia of over a 100 years at current rates of consumption, and potentially more estimated reserves than the Kingdom. Regional countries are familiar with the culture and the religion of Iraq. They enjoy transport access and cost advantages. The Gulf countries in particular are awash in liquidity, and Iraqi reconstruction could play a vital conduit for such funds.
The IDB should effectively have an “Iraq Reconstruction Committee” in place to see how it can help a founder member rebuild itself. For Islamic banks Iraq presents a unique market opportunity. Iraq’s hour of need will soon be reconstruction. Helping to develop the infrastructure and economy of a fellow Muslim and emerging country is part of the ethos of Islamic finance.
Following the peace in Lebanon, after years of a brutal civil war and an invasion by Israel, Beirut has managed to reconstruct. And Islamic financial groups such as the Jeddah-based Dallah Al-Baraka Group, have played a role through a $500 million Lebanon Reconstruction Fund.
Iraq is a much bigger and wealthier economy than Lebanon. It would indeed be folly for Islamic and other Arab banks to lose out on Iraqi reconstruction opportunities, especially given the fact that Iraq has one of the best collateral in the world.