UM QASAR, Iraq — While the American political elite are using Iraq as an excuse for fighting internal political wars, a different reality is taking shape in parts of this war-torn nation. Wherever some measure of security is assured, that is to say in more than 80 percent of Iraq, towns and villages long left to die a slow death are creeping back to life.
Nowhere is this slow but steady return to life more startling than in Um Qasar, in the southeast extremity of Iraq on the Gulf. Four years ago, this was a jumble of rusting quays, abandoned houses, gutted buildings, and a wall of mud erected by an ever-receding sea. By the spring of 2003, Um Qasar’s population had dwindled to a few dozen, along with hundreds of stray dogs. There was even talk of abandoning it altogether.
Today, however, Um Qasar is back in business as a port with commercial and military functions. Hundreds of families that had left after the first Gulf War in 1991, have returned to join many more who have come from all over Iraq to seek a fortune.
The boom in Um Qasar is part of a broader picture that also includes Basra, the sprawling metropolis of southern Iraq, the Shiite holy cities of Najaf and Karbala, the Fayli stronghold of Mandali on the Iranian border, and much of Baghdad, not to mention the Kurdish provinces in the northeast.
When the International Monetary Fund and the World Bank reported two years ago that the Iraqi economy was heading for a boom, skeptics dismissed that as misplaced optimism. Now, however, even some of those who opposed the toppling of Saddam Hussein admit that many Iraqis share that optimism. Newsweek has just hailed the emergence of a booming market economy in Iraq as “the mother of all surprises,” noting “that Iraqis are more optimistic about the future than most Americans are.” The reason, of course, is that Iraqis know what is going on in their country while Americans are fed a diet of exclusively negative reporting from Iraq, focused on terrorist attacks, and motivated by an almost irrational hatred of the Bush administration.
The growing dynamism of the Iraqi economy is reflected in the steady increase in the value of the national currency, the dinar, against the three currencies in direct competition with it in the Iraqi marketplace: The Iranian rial, the Kuwaiti dinar, and the US dollar, since January 2006.
No doubt, part of the dinar’s strength reflects the rise in Iraq’s income from oil exports to almost $40 billion in 2006, an all-time record. But oil alone does not explain all, since both Iran and Kuwait are bigger exporters than Iraq. The fact that civil servant salaries have increased by almost 30 percent, with a further 30 percent due to come into effect early next year, has also helped boost demand. But a good part of the boom is due to an unexpected flow of foreign capital. This has been facilitated by the prospect of a liberal law on direct foreign investments, something that exists only in such free-trade parts of the region as Dubai and Bahrain. None of Iraq’s six neighbors offers such guarantee for the free flow of capital to and from the country.
Since the fall of Saddam Hussein in 2003, the number of private companies in Iraq has increased from a mere 8,000 to more than 35,000 this year. Each week an average of 60 new companies spring up in Iraq’s booming areas.
A good part of the investment in southern Iraq, including Um Qasar, comes from Kuwait and the United Arab Emirates.
“Whatever happens, Iraq is Iraq,” says a Kuwaiti businessman, building hotels in the south. “Iraq will always remain the country with some of the world’s largest oil reserves and the Middle East’s biggest resources of water.”
One hears similar comments from local and foreign businessmen investing in real estate in Najaf and Karbala. Over 200 million Shiite Muslims regard the cities as holy. Najaf and Karbala have always been dream destinations for pilgrims from as far away as Latin America and Australia. Under Saddam Hussein, however, few foreign pilgrims were allowed. With the despot gone, pilgrims are pouring in — and with them the fresh money that is transforming both holy cities.
Some of the money brought in belongs to Iraqi expatriates who are returning home, albeit in smaller numbers compared to two years ago.
That good business is possible in Iraq is reflected in the performance of the new companies, most of which did not exist three years ago. One privately owned mobile phone company is expected to report revenues of more than $500 million this year, a sevenfold increase in three years. Another private firm marketing soft drinks has seen profits double since the end of 2003. The number of luxury cars imported has risen from a few hundred in 2002 to more than 20,000 this year.
But what about continued terrorist attacks? Most foreign investors coming to make money in Iraq shrug their shoulders.
“Doing business in any Arab country is always risky,” says a Turkish investor who has set up a trucking company and a taxi service. “In some Arab countries, you risk nationalization or straight confiscation by the ruler. In other Arab countries, you must give a cut to one of the emirs. Here, you face possible terrorist attacks. But such attacks are transitory; they cannot go on forever, while the dangers you face in other Arab countries are permanent features of life.”
The relatively low cost of labor is another attraction to investors. Wages in Iraq, where unemployment is estimated to be over 30 percent, are less than a quarter of the going rates in Kuwait. Nevertheless, the Iraqi boom appears to be attracting some Iranian laborers from areas close to border — men and women who come in for a few days to make some money before returning home.
Although Prime Minister Nuri Al-Maliki’s government has slowed down the pace of privatization, as set by Paul Bremer, the American pro-consul, in 2004, the foundations of the command economy created by Saddam Hussein continue to crumble.
The transition from a rentier economy in which virtually the whole of the population depended on government handouts to a free-market capitalist one entails much hardship for some segments of society.
Many pensioners and some civil servants find it hard to make ends meet as prices rise across the board. The end of government subsidies on virtually everything — from bread and sugar to gasoline and water — is also causing hardship.
But judging by the talk in teahouses and the debate in Iraq’s new and pluralist media, most people welcome the switch to capitalism and regard it as an exciting adventure.
As trucks are loaded with a variety of imports destined for Baghdad, we ask the drivers what they think would happen if the multi-national force, led by the United States, left Iraq soon.
Most shrug their shoulders, unable to make any prediction.
One driver has something to say.
“Why leave?” he asks. “Do I abandon the goods that have come from such a long way before they reach their destination?”
Translated into practical politics, this amounts to a plea for “staying the course,” which means not allowing the terrorists to impose their agenda. But the man in Um Qasar does not know that in the United States the phrase “staying the course” drives the cut-and-run party up the wall.
