Iraqi Dinars Blog

THE WASHINGTON POST

How Iraq can build a robust economy
Sunday, March 6, 2011

The big idea: The unmet challenge of economic development lies at the heart of our world’s most pressing social issues.

The scenario: Thinking about growth may seem a luxury in Iraq, a nation beset by war and deep in the throes of political change, but the path to rising living standards runs directly through how firms, large and small, domestic and foreign, play a constructive role in rebuilding the Iraqi economy.

For most MBAs, the phrase ‘global business opportunity’ conjures China or India, but most of the tough challenges faced by firms occur in places more like Iraq than in the BRIC economies. In nations like Iraq, one can readily appreciate the foundations of economic growth and productive commercial activity, largely by their absence. So, how can firms and their managers best create jobs and incomes for Iraqi people in the long run?

One irony of development is what economists call the ‘resource curse.’ Countries with abundant, extractable, nonrenewable resources such as oil and gas too often are dependent on that single economic sector. They lack competitiveness in other sectors. Power is entrenched in controlling the vital sector. And that power is wielded in ways that strangle internal investment and productive risk taking. Consequently, the incentives to build human capital and to create new firms to challenge incumbents or serve new markets are weak. Such are the conditions in Iraq.

The resolution: While efforts are underway to create a more diversified economy, the nation must channel its natural resource abundance into economically and socially valuable institutional change. The heart of the Iraqi economy is oil, which represents more than 90 percent of all exports from Iraq and generates 70 percent of GDP. Iraq has the fourth-largest proven oil reserves in the world -115 billion barrels – though this estimate is decades old. Many believe that Iraq may have at least another 100 billion barrels of reserve. Yet, Iraq’s volume of oil exports rank only 14th or so worldwide. Sagging infrastructure, inadequate electricity supplies and lack of investment constrain field development and the generation of revenue and jobs that could spark more rapid growth. Iraq exported just over 1.9 million barrels of crude oil a day in 2010, or 23 barrels annually per person – well under its target of 25 to 30 barrels.

The lesson: The financial capital needed to increase export capacity is critical to fund what is most needed in Iraq: infrastructure services, schools, hospitals and better housing. But what can lead Iraq’s economy toward robust and sustainable growth? Macroeconomic stability, a precondition of growth, is emerging. Inflation is in single digits, and the Iraqi dinar’s crawling peg to the U.S. dollar has delivered steadiness to the banking and price systems.

Still, challenges persist. More than 40 percent of the population is under age 14. Male life expectancy is over 60. High jobless rates and a limited role for women in the labor force mean that big production increases are unlikely. Security concerns and an inchoate democracy make the risk of investments high. But the economy has improved and, at times, grown rapidly in recent years.

The future of Iraq’s economy can be bettered through greater commitments to economically productive institutions and by firms willing to invest wisely while the future remains highly uncertain.

- Peter L. Rodriguez

Rodriguez is associate professor of business administration, associate dean for international affairs, and director of the Center for Global Initiatives at the Darden School of Business at the University of Virginia.

As war ebbs, Baghdad blast walls start coming down

By REBECCA SANTANA
ASSOCIATED PRESS

BAGHDAD — At a time when other parts of the Arab world are in turmoil, Iraq is feeling stable enough to begin removing some of the tall concrete blast walls that went up as protection against bombings and insurgents during the height of the war.

Iraqis have seen it before. In 2009 Prime Minister Nouri al-Maliki started taking down walls, only to restore them when a series of government buildings were bombed.

But in the past couple of weeks they’ve been coming down again, starting in Baghdad, and if this time it’s for good, traffic jams will ease, trade will pick up and Baghdadis will be rid of an ugly symbol of everything Iraq has gone through since the 2003 U.S.-led invasion.

“We’re delighted with this. At least it will give us a feeling that the security crisis we have lived through is finished,” said Qassim Karim, a 50-year-old flour trader, as Iraqi workers loaded uprooted barriers onto flatbed trucks with cranes.

Iraqis have been creative in dealing with the thousands of gray walls that both protect and blight Baghdad. They’ve painted them with pretty murals, chipped passageways through them, used them as advertising space.

Standing about as tall as basketball hoops, the walls were put up here and in other cities by American and Iraqi forces to shield markets and buildings from bomb blasts, disrupt insurgents’ communications and hinder the movement of car bombs and weapons.

They are the first thing arriving visitors see when they come out of Baghdad International Airport. They encircle almost every government building, military installation and mosque, channeling pedestrians through designated entrances and exits. During the height of the insurgency, whole neighborhoods were walled in.

The first wall being removed is at Sadr City, a slum of about 2 million people in eastern Baghdad.

From here the Mahdi Army, a Shiite militia, terrorized Sunnis, attacked American troops and posed a dire threat to al-Maliki’s authority.

In 2008, American troops put up what they called “Phase Line Gold” – a concrete wall on a main road that split Sadr City.

It was a deadly undertaking, laying down a few hundred meters (yards) of wall at a time, mostly at night, under almost constant attack.

“The fighting along the wall to put Gold up was brutal,” said Phillip J. Dermer, a retired U.S. Army colonel who at the time was the senior adviser to the head of the Baghdad Operations Command running military operations in the city. “You could tell the intensity of the fighting by the damage on either side of the line.”

The aim was to hem in the insurgents and push back the rocket teams firing into the Green Zone, the seat of the Iraqi and American government operations, Dermer said.

“You get a controlled environment in which to work in and to operate from,” he said. “Nobody could get in. Nobody could get resupplied. They can’t get out.”

But the walls exacted an economic and social price, and Iraqis now view them with a mixture of grudging gratitude and downright hostility.

Surrounded by well-ordered, dusty stacks of flour at his warehouse by the wall in Sadr City, Karim said he was selling between 200 and 300 tons a month before the wall went up. That number dropped to as low as 110 tons a month after Phase Line Gold went up, but is recovering as the barrier falls.

Buildings pockmarked with bullets testify to the intense fighting that once defined this neighborhood.

Abdulla Abdul Sahab, 65, who was watching the walls come down, said they served their security purpose but also cut off his neighborhood from the school and health clinic.

“You could see hills of garbage next to the walls,” he said.

Now the Baghdad Provincial Council says it wants the U.S. to pay $1 billion for traffic jams, paralyzed businesses and damage allegedly caused by the walls to the sewage system and sidewalks. In a statement, the council said the blast walls were “put up under the pretext of security.”

The populist move demonstrates the anger that many Iraqis feel toward the U.S. over the war.

Some of the walls will stay indefinitely, including those that protect the Green Zone. But another place where they are coming down is Samarra, 95 kilometers (60 miles) north of Baghdad, home to the al-Askari shrine revered by Shiites. The move is significant because the shrine was severely damaged in a 2006 al-Qaida bombing that provoked a Sunni-Shiite bloodbath.

The Baghdad military spokesman, Maj. Gen. Qassim al-Moussawi, told The Associated Press that the decision to remove the walls followed a meeting between al-Maliki and senior security officials.

Al-Moussawi said Phase Line Gold went first because security was good there. But Hadi Jalo, a Baghdad political analyst, said it was also a political move.

Sadr City is the stronghold of anti-American cleric Muqtada al-Sadr. In 2008 he and al-Maliki were enemies. Now they are partners in the ruling coalition. The next test, he said, would be how quickly walls are removed around Sunni communities, who are less closely bound to al-Maliki.

And if the walls are needed again, they won’t be far away. Al-Moussawi said they will be used to form a security cordon around Baghdad.

–

Associated Press writers Saad Abdul-Kadir, Hamid Ahmed and Sinan Salaheddin contributed to this report.

Iraq expects private investment in its economy to triple to $30 billion [36 trillion Iraqi dinars] this year, as energy, agriculture and housing projects accelerate now that the country has formed a new government, a senior government official said on Tuesday.

Investment exceeded $10 billion last year, Salar Mohammed Ameen, vice chairman of the National Investment Commission (NIC), told Reuters on the sidelines of an energy conference in Istanbul.

Some $4 billion of investment will be in Iraq’s electricity sector, Ameen said.

Bruce Tupholme from www.iraqidinars.com issues updated statement on current Iraqi Dinar Speculation , Click on link to view

Source : STRATFOR

Bruce Tupholme from www.iraqidinars.com issues statement on current Iraqi Dinar Speculation , Click on link to view

The new Iraqi government is pictured at a swearing-in ceremony in Baghdad on Tuesday, Dec. 21, 2010. Iraqi lawmakers unanimously approved the new government, which will be headed by incumbent Shi’ite Prime Minister Nouri al-Maliki (bottom right). The installation of the officials ends nine months of political deadlock that threatened to stall economic development and suck the country back into sectarian violence. (AP Photo/Karim Kadim)

BAGHDAD (AP) – Parliament swore in a new Iraqi government Tuesday after nine months of bitter political haggling, solidifying the grip that Shi’ites have held on political power since Saddam Hussein‘s ouster while leaving open the question of whether the country’s disgruntled Sunni minority will play a meaningful role.

The new government led by Shi’ite incumbent Prime Minister Nouri al-Maliki got off to a shaky start as disagreements among coalition partners prevented Mr. al-Maliki from naming 13 of his 42 Cabinet ministers. And the fragile coalition must address enormous and pressing challenges such as the heavy cost of rebuilding from the devastation seven years of war has wrought and lingering sectarian tensions that periodically explode into violence.

Another urgent priority will be leading the country through the withdrawal of American troops, scheduled for the end of next year. More than 4,400 American troops and tens of thousands of Iraqis died in a war that has yet to bring stability and prosperity to this oil-rich Middle Eastern nation.

Lawmakers approved 29 ministers, including Mr. al-Maliki, to form the new government. The remainder of the 42-member Cabinet is made up of acting ministers who will be replaced at a later date because of ongoing disputes between coalition partners.

“The most difficult task in the world is forming a national unity government in a country where there is a diversity of ethnic, sectarian and political backgrounds,” Mr. al-Maliki said before the vote.

He vowed to create a government that would combat terrorism, address the still-festering sectarian divisions and repair relations with neighboring Sunni-dominated Arab countries, who are largely suspicious of the Shi’ite-led government.  The new Cabinet members were sworn in immediately following the nationally televised vote that approved them.

Iraqis elections on March 7 did not give any single bloc a majority in the 325-member parliament, leading to nine months of political jockeying to form the new government. Although Mr. al-Maliki‘s coalition came in a close second to a Sunni-backed coalition led by former Prime Minister Ayad Allawi, it was Mr. al-Maliki who was able eventually to patch together the necessary support needed to keep his office.

The new government includes members of all of Iraq‘s major political and sectarian factions, including Shi’ites, Sunnis and Kurds.  The vote Tuesday was largely a display of unity that belies the still festering problems between the Shi’ite majority and the Sunni minority that used to make up the backbone of the insurgency. Sunnis dominated the regime under Saddam.

Mr. Allawi, who at one point vowed to never join an al-Maliki-led government, told lawmakers ahead of the vote that his bloc of 91 lawmakers would support and cooperate with the new government.

One of the key questions leading up to the government formation was the role that the Sunni-backed Iraqiya coalition would play. U.S. officials lobbied heavily for Mr. Allawi to be included in some fashion, fearing that leaving him and the Iraqiya coalition out of the government entirely or excluding it from meaningful roles would incite a return to the type of sectarian violence that at one point almost tore the country apart.

Mr. Allawi is slated to head a new council overseeing foreign policy and security-related issues, but there are already disagreements between his coalition and Mr. al-Maliki‘s about how much power the council will have.  Iraqiya only recently dropped its long-standing demand that Mr. Allawi should have the first shot at forming the government. Mr. Allawi‘s concession came after he was assured that Sunnis will not be excluded from the government.

Other members of Iraqiya to garner top Cabinet posts were Saleh al-Mutlaq, who will be deputy prime minister, and Rafia al-Issawi, who will be finance minister.  Kurdish lawmaker Hoshyar Zebari will hold onto the influential Foreign Ministry post.

But 13 of the ministries are still to be decided, reflecting the challenges Mr. al-Maliki faces in including all the country’s sects and political affiliations in the new government. He has named acting ministers to fill those ministries after disputes with his erstwhile Sadrist allies about who among the Sadrists would get Cabinet posts.

It was al-Sadr’s support – in a deal brokered by Iran – that largely enabled Mr. al-Maliki to build the framework for a majority coalition.  The Sadrist alliance holds 40 of parliament’s 325 seats. Their partnership with Mr. al-Maliki always has been tenuous and came as a surprise because the two had been enemies since 2008, when the prime minister launched an offensive crushing al-Sadr’s militia in eastern Baghdad and the southern city of Basra.

The ministries still to be decided include the critical defense, interior and national security posts. Those positions are watched closely in Iraq for any sign that they are being abused by one side or another across the sectarian divide.  The role of the those positions will become even more important as Iraq takes over more security responsibilities from American troops, who are scheduled to leave the country by the end of next year.

In addition to his role as prime minister, Mr. al-Maliki will serve as acting defense, interior and national security minister.  The Iraqiya alliance narrowly defeated Mr. al-Maliki at the March election, garnering 91 seats to Mr. al-Maliki‘s 89 seats. But after months of wrangling, Iraqiya could never find enough support to form a majority government.  Mr. al-Maliki has served as prime minister since May 2006.

Copyright 2010 The Associated Press. All rights reserved.

(CNN) — In what is being called a “milestone” for Iraq’s future, the U.N. Security Council voted Wednesday to free the Baghdad government from sanctions that started during the Saddam Hussein era.

“The adoptions of these important resolutions marks the beginning of the end of the sanctions regime and restrictions on Iraq’s sovereignty, independence and recovery,” Iraqi Foreign Minister Hoshyar Zebari told the council.  “Our people will rejoice for having turned a chapter on the aggressive, belligerent and defiant behavior of the previous regime toward international law and legitimacy.”

One resolution ends the oil-for-food program and another ends sanctions relating to weapons of mass destruction. A third ends the Iraqi Development Fund as of June 30.  The move is a major step for Iraq toward regaining full sovereignty and improving its standing in the international community.

The country will be able to have free and unrestricted international financial and trade dealings and to handle its own oil revenues. And it will be able to start a civilian nuclear power program if it is interested.

U.S. Vice President Joe Biden, who chaired the Security Council meeting Wednesday, praised Iraq’s progress toward democracy and meeting its international obligations.

Biden issued a statement saying the “Security Council welcomes the positive developments in Iraq,” including its forging of democracy, its development, and the performance of security forces.

“Politics has emerged as the dominant means for settling differences and advancing interests,” Biden said.

U.N. Secretary-General Ban Ki-moon called the development a “milestone.”  “Its people have known tremendous hardship,” he said. “They continue to struggle with insecurity and appalling violence. They lack jobs and basic services. But today we recognize how far the country has come in key aspects of its journey to normalize its status in the community of nations.”

Iraq invaded Kuwait in 1990, triggering the Gulf War. In 2003, the United States led an invasion of Iraq, citing Saddam Hussein’s weapons of mass destruction activities as one of the reasons. But, none of those weapons were discovered.

While Wednesday’s vote ends sanctions imposed on Iraq from the days of the Hussein regime, other differences remain between Iraq and Kuwait.  Zebari said Iraq is committed to settling those unresolved issues bilaterally with Kuwait and his country is “committed to fulfill its remaining obligations” under Chapter 7 of the U.N. sanctions.

“Iraq still has some way to go to resolve all outstanding issues with brotherly, neighborly Kuwait,” he said. “There has been positive cooperation and exchange between our two governments to resolve and settle all pending issues between our two countries, emanating from Saddam Hussein’s aggression and invasion of Kuwait in 1990.”

Unresolved issues include demarcation of the Iraqi-Kuwait border and efforts to locate missing Kuwaitis and third-party nationals, and continuing to pay war reparations.

After eight months of excruciatingly complex and drawn out negotiations at both the intra and intercommunal level, the Iraqi factions have finally agreed upon some semblance of a preliminary government. The ongoing lengthy process underscores the extent of influence Iran enjoys in its western neighbor and the fact that this is not your normal jockeying for power that one sees in most countries after an election.

What we have here is a very preliminary form of government emerging as a result of negotiations between the various factions. Today’s session of parliament elected a speaker and his two deputies. The speaker is a Sunni which was the case in the outgoing parliament, and he has two deputies one each from amongst the Shia and Kurdish communities.

In addition to the election of the speaker and the two deputy speakers the house also reelected President Jalal Talabani for another term. What is interesting here is that Jalal Talabiani was elected in two phases of voting and the Sunnis largely walked out of the session when that was taking place. So we enter into a new controversy in which the Sunnis feel betrayed by the Shiites and Kurds.

One of the most interesting and important points in this eight month saga since the election is how Iran was able to essentially checkmate the United States in the sense that the Sunni backed al-Iraqiyah block bagged the most seats in the March 7 election. Yet Iran was able to pull together both the two Shia block that came in second and third place to form a super Shia bloc and thereby claiming the right to form a government in which we now see in process.

In most countries there are democratic elections and then there’s this normal – if there is a hung parliament – is normal jockeying for power between those that bagged the most seats to cobble together a new government. In Iraq it’s much more than just a normal negotiations because essentially Iraqi is a new state. Post-Ba’athist Iraq does not have a lengthy tradition of elections or governments being formed. This is the second government since the overthrow of Saddam.

What’s significant about this new power sharing arrangement is for in the first time the Sunnis en masse were able to participate in elections and therefore pose a challenge to the domination of the system enjoyed by the Shia and Kurds thus far. What this shows is that every time there’s going to be an election for the foreseeable future, we’re going to be going through this same motion again because there is no underlying if you will understanding or formal power-sharing mechanism. It has to be built from scratch based on the results of the elections.
Source :- Stratfor