Iraqi Council: Open All Sectors of Economy except Oil

Sep 21, 2003
Iraqi Council Announced Plans to Open All Sectors of Economy Except Oil to Foreign Investors
By Paul Geitner - The Associated Press

DUBAI, United Arab Emirates (AP) - Iraq's leadership council announced Sunday it will open all sectors of its economy except oil to private investment, hoping to rebuild an economy mismanaged under Saddam Hussein's rule and battered by international sanctions and war.
The wide-ranging reforms, undoing years of rigid control of the economy imposed by Saddam's one-party rule, will permit the sell-off of Iraq's numerous state-owned companies to foreigners and introduce new taxes.

"Our objective is simple to state: Promote Iraqi economic growth and raise the living standards of all Iraqis as soon as possible," Iraqi Finance Minister Kamil Mubdir al-Gailani said in a speech to a banking think tank in Dubai.

The reforms "will significantly advance efforts to build a free and open market economy in Iraq" while promoting its future growth and re-entry into the global economy, al-Gailani said in a statement.

U.S. Treasury Secretary John Snow applauded the blueprint for a new Iraq economy as "policies that make sense ... that offer real promise" but cautioned that security in a nation still facing daily violence would be a prerequisite for recovery.

"It's awfully important that we see Iraq move forward well and become a place of peace and security," Snow said in Dubai, where the International Monetary Fund and World Bank hold their annual meetings this week.

Under three decades of rule by Saddam's Baath party, virtually all companies were state-owned or state-controlled, with the exception of some small businesses. Since sanctions were imposed in 1991, there has been no foreign ownership, though previously there had been some joint ventures, particularly in tourism. Under Saddam, there was no income tax or sales tax, though there was a tax on some private businesses.

Al-Gailani said the reforms would be implemented in the near future. He pledged Iraq would "allow up to 100 percent foreign ownership in all sectors except natural resources."

The reforms will allow foreign banks to enter Iraq, with some restrictions. Six foreign banks will be permitted to purchase up to 100 percent of local Iraqi banks in the next five years, al-Gailani said. An unlimited number of foreign banks will be allowed to purchase up to 50 percent of local banks, and Iraq will establish an independent central bank, he said.

Al-Gailani announced a 15 percent maximum tax rate for individuals and corporations starting Jan. 1 and a 5 percent reconstruction surcharge on all imports except for humanitarian goods.

Under the reforms, foreigners will not be allowed to own property, but they will be permitted to lease it for up to 40 years, he added.

Until Iraq can stand on its own, al-Gailani also pleaded for international aid to meet Iraq's immediate humanitarian needs and to lay a "strong economic foundation for our eventual success ...

"We ask the world to help us," he said. "Seize this opportunity."

Snow said that revenues from Iraq's vast oil reserves - the world's second largest after Saudi Arabia's - would be used to fund the government. Iraq's oil industry and economy have been held back for years by U.N. sanctions imposed after Saddam attacked neighboring Kuwait in 1990, setting off the first Gulf War.

The flow of oil has resumed, but the process of getting it up to speed has been hampered by the need for renovations and persistent sabotage attacks blamed on Saddam loyalists.

Following the latest war, Washington has been seeking financial help from other nations to rebuild Iraq, with a conference of donors set for next month in Spain.

But Snow stressed that Iraq must become secure to attract investment. U.S. troops are subject to frequent deadly attacks and there have been several disturbing incidents of friendly fire by the Americans.

"Capital is a coward," Snow said in a luncheon speech after he met in the morning with al-Gailani. "It doesn't go places where it feels threatened."

A World Bank official praised Iraq's plans.

"The steps they are taking are major steps forward in terms of creating an environment for investment," regional World Bank director Joseph Saba said in an interview Sunday with The Associated Press.

This story can be found at: http://ap.tbo.com/ap/breaking/MGAN85V4VKD.html