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Restarting The Factories Of Iraq

Former Iraq viceroy Paul Bremer.
by Pamela Hess
UPI Pentagon Correspondent
Washington (UPI) Jan 09, 2007
When then-viceroy Paul Bremer took over the civilian administration of Iraq in 2003, he had an intricate plan to transform the state-owned socialist economy into a beacon of free enterprise in the heart of the Middle East. Central to his plan was the sale of some 200 state-owned enterprises to the highest bidder to bring in fresh capital, streamline operations and boost profits. That in turn would drive the rest of the economy.

The ambitious "shock therapy" plan failed. Foreign investors could not be lured into the uncertain political and security situation in Iraq, hundreds of thousands of Iraqis' livelihoods depended on the state-run manufacturing plants.

Not a single state-owned enterprise has been transitioned to private ownership.

All of the 193 state-owned enterprises have sat idle since 2003 with the exception of a single heavy industrial plant not far from Baghdad. More than 500,000 Iraqis, however, are on the payrolls of the idle factories, drawing some $800 million a year off the already strained Iraqi budget, according to a study prepared for the U.S. State Department.

Three years on, a small Pentagon office has conceded the ideological battle for now and is attempting to restart the state-owned enterprises. The idea now is not to remake Iraq's economy, but rather to put the Iraqi people back to work.

Two dozen Defense Department employees, contractors and manufacturing industry executives traveled to Baghdad Saturday to begin the process.

Paul Brinkley, the director of the task force to improve business and stability operations in Iraq, told reporters the goal is to jump start Iraq's stalled economy, re-employ thousands of workers, and hopefully drain the financial lure of insurgent attacks. U.S. officials report that Iraqis are being paid $50 to $300 to set roadside bombs.

Brinkley's office was originally directed to de-bug U.S. contracting rules in Iraq, to remove the red tape that keeps Iraqi forms from winning U.S.-funded reconstruction contracts. The former chief of U.S. military forces in Iraq, Lt. Gen. Peter Chiarelli, brought Brinkley and his team to one of the idle state-owned factories last year. It was immediately clear the impact restarting industry would have on both the economy and security. The task force was born in May 2006.

Brinkley has assessed more than 30 state-owned enterprises and selected the first 10 to be restarted. They are geographically dispersed throughout the country -- most of them in high-threat areas -- and run the gamut from rubber and cement manufacturing to fertilizer, phosphates, automotive and pharmaceuticals. They are in Baghdad, Fallujah, Ramadi, Mosul, Sinjar and AL Qaim near the Syrian border, Bayji, Najaf and Taji.

Brinkely asked that the specific locations and names of the factories not be published for security reasons. They are likely to be targeted by insurgents or militias, he said.

Despite the violence in many parts of Iraq, Brinkley believes the factories may be being protected.

"We have factories in areas of great unrest that have not been looted," he said. "What we think is chaotic is actually controlled. Someone has made it clear: don't touch that factory."

Brinkley acknowledges the security risk.

"From a security perspective, an Iraqi worker who finds out his job is back ... knows better than anybody what risks he is taking by going back to work. We have an obligation to give him that opportunity back," Brinkley said. "The alternative is to do nothing."

The plan is to make a minimal capital investment, about $5 million, to ramp up the factories beginning this month.

"I don't want U.S. funds spent on this. I want Iraqi's money spent on this," he said.

Some can be restarted almost immediately; others will take three to six months to become workable again.

The next step is to create demand for the factories' products by having the U.S. Defense Department place orders for items it is already buying in the region and importing into Iraq. Cement for roads, blast walls and other reconstruction projects is a likely first order, Brinkely said. The Pentagon is spending $4 billion a year just buying products to use in Iraq. He hopes to funnel about $1 billion of that into the Iraqi economy through direct orders with the state-owned enterprises in 2007.

By the end of 2007, if all 10 enterprises are running again, some 11,000 Iraqis will be put back to work.

"When an Iraq doesn't have a job there is an exponential impact on their livelihood," Brinkely explained.

The typical American worker supports four people. In Iraq, a worker usually supports 13 people, he said.

Brinkley is also asking U.S. firms to place orders with Iraqi enterprises so to connect Iraq into the global supply chain. Already Caterpiller and Dow Chemicals have expressed interested.

"I've been almost humbled by the reaction," he said.

He also hopes there will be a cascading effect of jobs created around the state-owned enterprises - small machine shops, supplies stores, restaurants and services for the thousands of newly employed.

Brinkley has a permanent team of 35 that rotates in an out of Baghdad every two weeks, with more than 20 scheduled to join soon.

Source: United Press International

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