U.S. Plans To Reshape the Iraqi Economy


May 1, 2003 the

Street Journal

reported that the Bush administration has “drafted
sweeping plans to remake Iraq’s economy in the U.S. image.”
According to this report, the U.S. is planning to privatize state-owned
enterprises, create a modernized Baghdad stock exchange, a reformed
central bank, and rewrite the tariff and tax code systems. The plan
was officially released on June 6. “Economic Recovery, Reform
and Sustained Growth in Iraq” is the USAID request for proposals
(RFP) for “economic governance” work during the U.S. occupation
of Iraq, and it makes clear what the United States has planned for
the future of Iraq. 

document, which outlines work in Iraq beginning this past summer
and running through 2006, is important for several reasons. First,
it continues the trend in recent USAID RFPs for work supporting
the U.S. occupation by “limiting competition” to only
ten firms. The firms eligible to apply for this contract are: Bearing
Point; Booz, Allen and Hamilton; Nathan; IBM Global Services; Development
Alternatives, Inc.; Carana; Abt Associates; Chemonics; Deloitte
& Touche; and Financial Markets International, Inc. The


reported that at least part of the work is expected to be given
to Bearing Point, formally KPMG, which was recently awarded a similar
$40 million three-year USAID contract for the financial, legal,
and regulatory reconstruction of Afghanistan. 

RFP is also important because it contradicts stated U.S. policy
in Iraq. The refrain from occupation leadership has been that an
elected Iraqi government will make decisions regarding the future
of the Iraqi economy, but the timelines laid out in the RFP make
this impossible. One example of this is the new Iraqi currency.
Accused of attempting to “dollarize” the Iraqi economy,
the U.S. has pumped over $400 million into the Iraqi economy while
repeatedly assuring critics that an elected Iraqi authority will
decide the future of Iraqi monetary policy. Yet, the RFP calls for
the contractor to “prepare a currency, and organize and carry
out an extremely rapid and thorough exchange of currencies, eliminating
the current currency and substituting a replacement currency designed
and prepared and produced in large quantities to a very high standard
of excellence. The currency exchange is to be carried out effectively
and simultaneously throughout Iraq. Old currency units are to be
collected and destroyed.” According to the RFP, the design
and planning for the new Iraqi currency is to be completed by October
2003 and its introduction is planned for January 2004. Given that
L. Paul Bremer recently postponed indefinitely  the creation
of a representative Iraqi government, it is difficult to believe
that this process will be lead by, much less advised by, elected
Iraqi leadership.  

plans for the privatization of Iraqi state-owned enterprises and
commercial banks is covered by the RFP. As reported in the


, the planning for this privatization began on June 8,
despite similar promises that this process would be led by an Iraqi
government. Timothy Carney, U.S. advisor to the Industry Ministry,
claimed, “The need for foreign investment in the economy is
too great to delay.” The comprehensive privatization program
is made up of two parts—the Mass Privatization Program and
the Strategic Investor Sales. In the first year of this plan (begun
this August) Iraqi industries will be identified for consolidation,
liquidation, and privatization and new Iraqi laws will be drawn
up to make these plans legal. The privatization of selected Iraqi
industries is then scheduled to take place over the next two years.
While the establishment of an Iraqi government has been put on hold,
the selling off of Iraqi resources seems to be right on schedule. 

RFP goes on to outline plans to “rationalize” and “modernize”
the Iraqi banking and financial sectors, create taxation, legal
and regulatory regimes to facilitate this process, along with the
further integration of Iraq into international economic networks.
It also calls for a public relations campaign to sell these fundamental
changes to the Iraqi people. It is clear that the U.S. views these
changes as the spoils of war. The document explains rather understatedly,
“it should be clearly understood that the efforts undertaken
will be designed to establish the basic legal framework for a functioning
market economy; taking appropriate advantages of the unique opportunity
for rapid progress in this area presented by the current configuration
of political circumstances.” 

plan calls into question the common critique of the U.S. occupation
of Iraq as unfocused and disorganized. Rather, it clearly demonstrates
U.S. priorities and goals in Iraq along with their plans to actualize
them. What remains unclear is whether ongoing Iraqi resistance and
worldwide protest of U.S. power will derail these plans.


Adam Horowitz
is an activist and student in New York City.