WASHINGTON, 13 April 2003 — In the Gulf port of Umm Qasr, where local dock workers are now being paid in US dollars instead of “Saddam’’ dinars, the transformation of Iraq’s economy has already begun.
It won’t stop there. An advance team of 13 Treasury Department specialists is about to enter Iraq to gather intelligence about its cloistered economy. In Washington, the World Bank and International Monetary Fund have assigned task forces to lay the groundwork for a wide range of postwar monetary, fiscal and private sector reforms.
The overarching objective is no less ambitious than the war itself: to restore a once-vibrant economy reduced to Third World status by decades of war, sanctions, graft and blunder. Experts say it will take longer — and probably cost more — than the US-led military offensive that ended Saddam Hussein’s authoritarian regime and its command-and-control economic policies.
Many experts and officials say the place to start is on the street, where the necessities of life are denominated in dinars, about 2,500 to the dollar at last count.
“One of my colleagues from the State Department was asking, ‘What do we do the first month? How do we pay the salaries?’’’ said Salah Al-Shaikhly, who ran Iraq’s central bank in the 1970s.
His advice: Show up with stacks of dollars. Ones and fives, nothing bigger. Use them to pay the estimated 1.5 million Iraqis who work for the government and often hold second and third jobs as well. They do most of their daily business in cash and, if that revenue stream is interrupted, what’s left of Iraq’s economy could implode.
“Many salaries are no higher than $5,’’ said Al-Shaikhly, who teaches economics at St. John’s College in Oxford, England, and has been advising Bush administration officials on postwar reconstruction. “They’ll go to the market and change it to 12,500 dinars, which is a decent month’s salary.’’
That’s what has been happening at Umm Qasr, one of the first sites secured by US and British troops. Locals have been lining up for temporary jobs and receiving their pay in dollar bills. The practice is expected to spread to other sites as the grunt work of reconstruction begins in earnest.
“They definitely need to keep that money flowing,’’ said Rubar Sandi, an Iraqi-American investment banker in Washington who is being sent to Baghdad to help coordinate reconstruction activities.
Doling out dollars is only the first step on the road to economic recovery. Before it’s over, officials say, Iraq will have a new currency, a restructured central bank and finance ministry, a reduced debt load, access to foreign aid and investment capital, and inducements to pursue trade liberalization and privatization of state-run industries. “It isn’t simply recovering from 25 days of conflict,’’ said US Treasury Secretary John W. Snow. “The task ahead is recovering from 25 years of economic misrule and mismanagement.’’
Optimists see an opportunity to turn Iraq into a showpiece of First World economic policy, a place where oil revenue and foreign capital are deployed wisely to revitalize old industries and germinate new ones, from travel and tourism to telecommunications. For a typical Iraqi — whose annual income was estimated by the World Bank at $1,100 in 2001 — the payoff could take the form of new jobs, better pay, checking accounts, charge cards, home mortgages, cars, computers, cell phones.
“I think Iraq has the potential of becoming probably the most advanced and the wealthiest country in the region,’’ said Hasan Alkhatib, a computer engineer who fled Iraq in 1976 and eventually founded IP Dynamics, a software company in San Jose, Calif.
Alkhatib said Iraq could revitalize its agricultural production, revive failed industries and create new products and services. Iraq’s archeological riches make it a potential magnet for tourism, he said. Its location makes it a logical transportation hub, and its antiquated telecommunication and information systems are ripe for technological innovation.
“I would give it maybe 20 years,’’ said Alkhatib, a member of the State Department’s Future of Iraq project. “I’d bet you that Iraq, if it has a democracy, will match the successful European countries in its economy.’’
Other administration advisers say they would settle for something approaching the Iraq they knew before Saddam got his hands on the controls in 1979. “I would work on electricity, water, sewage systems, hospitals, schools and the oil sector,’’ said Aiham Alsammarae, an electrical power plant consultant in Chicago and another Future of Iraq participant. “Just the essentials.’’