[lbo-talk] Fascinating article on state enterprises and privatization to come in Iraq and consequences...

steve philion philion at hawaii.edu
Sat May 31 22:28:51 PDT 2003


http://www.nytimes.com/2003/06/01/international/worldspecial/01ECON.html

After Years of Stagnation, Iraqi Industries Are Falling to a Wave of Imports By EDMUND L. ANDREWS

Cutthroat pricing is not the only problem. Opening a pack of his Garnaata-brand cream-filled wafers, Mr. Thiab noted gloomily that his wafers had congealed into an unappetizing mess ?a result, he said, of the inferior flour available to him. By contrast, imported Tasteful Wafers from Iran were fresh and crisp.

"We dropped our prices to keep selling, but we cannot do business," said Mr. Thiab, who shut down most of his aging machinery three weeks ago. "Iraqis only want to buy foreign products now. They don't trust anything made in Iraq."

Mr. Thiab's problems are a foretaste of a much broader economic shock in Iraq. After 12 years of trade sanctions imposed by the United Nations, and 30 years of economic mismanagement under Saddam Hussein, Iraq's cloistered industry suddenly faces the full fury of globalization and international competition.

In the seven weeks since American forces seized Baghdad, Iraq has been transformed from one of the world's most isolated economies into a huge new free-trade zone.

{snip}

The experience of postcommunist countries in Central Europe and Russia suggests that Iraq's traditional industrial enterprises will either collapse quickly or be propped up by political leaders at great cost to the economy as a whole.

But unlike Poland or the Czech Republic, whose leaders made their own decisions, the decision-making responsibility here lies overwhelmingly with the American administrators under Mr. Bremer.

{snip}

American officials, trying to decide what to do with Iraq's 52 government-owned companies, are seeking advice from experts in Poland who went through that country's transition from communism to capitalism.

American officials and some Iraqis clearly want to privatize the state-owned manufacturers, and they see it as the only way to attract private investors.

But Ramsi Youssef Jiddou, a returning Iraqi exile who is advising the ministry, recently warned that privatizing the companies might be tantamount to dismantling them.

"We sold companies in the past, but it was not a good experience," Mr. Jiddou said. "Investors who bought the companies treated them like scrap material."

That would be consistent with what happened in some formerly communist nations. But state-owned or private, Iraqi manufacturers know they are too weak to stand on their own.

Mr. Asadi, at the state-owned electric manufacturer, is hoping for a partnership with an American company like Carrier, which makes air-conditioners.

Mr. Thiab pleaded for American officials to close off the border to imports, at least temporarily.

"I know Americans believe in free markets and globalization, but this does not work in all cases," Mr. Thiab contended. "If Americans don't protect Iraqi industry, we will all be unemployed."



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