Currency News

Promise of Iraq

BAGHDAD — When the United States invaded Iraq, it did so thinking that it could turn the country into an economic dynamo fueled on oil reserves that are among the largest in the world. “Iraq is open for business,” L. Paul Bremer, the top U.S. administrator in Iraq at the time, said in 2003.

But the fighting never really stopped, and the U.S. vision was never really realized. Now, with American troops gone, the question is: What can Iraq build on its own? So far — with the nation’s leaders locked in a political crisis and insurgents launching spectacular attacks — the signs are not good.

A view of these obstacles, playing out on a smaller scale, can be found behind 10-foot blast walls on the floor of the city’s tiny stock exchange. Investor Saad Jaleel began the year hopeful, buying $1,600 worth of shares in the Iraqi Middle East Investment Bank. But by the third day of trading, watching the market creep down, he stopped.

“People are just waiting and worried, because of the political and security situation,” said Jaleel, 52, a former stationery store owner.

The stock exchange, with only 45 actively traded companies, is hampered by Iraq’s dysfunctional business climate, which, analysts say, lacks adequate laws to govern investments, taxation and property issues. Three massive generators are parked outside the building, keeping the lights running. Just showing up is an act of courage.

Two blocks away are the charred remains and rubble from a Dec. 22 car bombing, which occurred outside a government anti-corruption agency and killed more than a dozen people.

But Jaleel remains bullish about his country and said he will get back to trading this week. “Within three years,” he said, “we will have total change.”

Tough business climate

Iraq sits on an estimated 143 billion barrels of proven oil reserves, according to the World Bank, which recently projected that growing oil exports will boost the country’s gross domestic product by 12 percent this year, among the fastest rates in the world.

But part of that growth reflects dramatic business activity in the country’s semiautonomous Kurdish region. And, more broadly, the challenge for Iraq is that the oil revenue passes through the government, which traditionally hasn’t spent the money well or done enough to diversify the economy, according to U.S. and Iraqi officials.

Iraq ranks 159 out of 227 countries in per-capita income, according to U.S. government statistics. The World Bank ranks Iraq 164 out of 183 countries in terms of ease of doing business, down five spots from the year before. Corruption rankings, according to Transparency International, are worse.

But rather than try to improve the country’s standing, political leaders in recent weeks have spent their time fighting one another, trading accusations of terrorism and incompetence, moving to consolidate power and boycotting the parliament. The political drama has made it more difficult to do business, with government bureaucrats unsure not only how to process work but also who runs their agencies.

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