dubai, United Arab Emirates – Hoping to rebuild an Iraqi economy mismanaged under Saddam Hussein’s rule and battered by international sanctions and the US-led war, the interim government said Sunday it will open all sectors of its economy except oil to foreign investors.
“The reforms will signiﬁcantly advance efforts to build a free and open market economy in Iraq, promote Iraq’s future economic growth, accelerate Iraq’s re-entry into the international economy and reintegration with other countries, and the development of domestic Iraqi institutions,” Iraqi Finance Minister Kamil Mubdir al-Gailani said in a statement.
US Treasury Secretary John Snow applauded the blueprint for a new Iraq economy as “policies that make sense…that offer real promise” but cautioned that security in a nation still facing daily violence would be a prerequisite for substantial economic recovery.
“It’s awfully important that we see Iraq move forward well and become a place of peace and se-curity,” Snow said in Dubai, where the International Monetary Fund and World Bank hold their annual meetings this week.
In a statement announcing the foundations of Iraq’s new economic policies, al-Gailani pledged that Baghdad would “allow up to 100 percent foreign ownership in all sectors except natural resources.”
The reforms will allow foreign banks to enter Iraq, with some restrictions, in the new policies that mark a sharp departure from the tight economic controls that were in place for years under Hussein’s one-party rule. Six foreign banks will be permitted to purchase up to 100 percent of local Iraqi banks in the next ﬁve years, al-Gailani said. An unlimited number of foreign banks will be allowed to purchase up to 50 percent of local banks, he said.
Al-Gailani announced a 15 percent maximum tax rate for individuals and corporations starting Jan 1 and a 5 percent reconstruction surcharge on all imports except for humanitarian goods. Foreigners will not be allowed to own property, but they will be permitted to lease it for up to 40 years.
, he added.
“Working with our partners in the (U.S.-led) Coalition Provisional Authority, we are providing Iraqi citizens the freedom and opportunity they were denied for so long,” the Iraqi said.
Snow said that revenues from Iraq’s vast oil reserves _ the world’s second largest after Saudi Arabia’s _ would be used to fund the government. Iraq’s oil industry and economy have been held back for years by U.N. sanctions imposed after Saddam attacked neighboring Kuwait in 1990.
Following the latest war, Washington has been seeking ﬁnancial help from other nations to rebuild Iraq, with a conference of donors set for next month in Spain.
But Snow highlighted that Iraq must become secure to attract investment. U.S. troops are subject to frequent deadly attacks and there have been several disturbing incidents of friendly ﬁre by the Americans. In addition, oil pipelines have been repeatedly sabotaged by explosions blamed on Saddam loyalists.
“Capital is a coward,” Snow said in a luncheon speech to a banking group after he met in the morning with al-Gailani. “It won’t go places where it feel threatened.”
Snow added: “We won’t have economic security in the region until we have security.”
With ﬁnance chiefs from around the world gathered in Dubai for the ﬁrst such high-powered money summit in an Arab nation, China has come under pressure to be more ﬂexible about the value of its currency.
Finance ministers from the wealthy Group of Seven nations gathered here Saturday and urged currency exchange levels that better reﬂect economic fundamentals _ and although they didn’t mention China by name they are clearly worried that its yuan is undervalued as China’s trade surplus gets bigger.
China on Sunday reiterated its goal of looser exchange rates but would not be drawn into any timetable. Always sensitive to any outside interference in its affairs, China made no commitments on letting the yuan, also known as the renminbi, or “People’s money,” rise against the U.S. dollar.
The deputy governor of the Bank of China, Li Ruogu, on Sunday defended Beijing’s stance and reiterated that greater ﬂexibility is intended when China thinks the time is right.
“A stable yuan is not only good for us, it’s good for our immediate neighbors and for the whole world,” Li said.
China’s central bank has kept the yuan ﬁxed at about 8.28 to the U.S. dollar since 1994. It is allowed to ﬂuctuate, but not by much.
“We’re committed to liberalization, but I can’t give you a very clear timetable of how long it will take,” Li said.