Monday, January 08, 2007

The situation in Iraq

There is no question that the current situation in Iraq is dramatic, and that a lot of work will be needed to stop the country from going over the precipice. However, this is no time to loose our heads, as they say.
Don Surber notes that despite all the talk of civil war etc., Iraq is still better off now than it was under the regime of Saddam Hussein, even when you look just at the number of average civilian casualties:
AP played the numbers game this week with reports about how many people have died in Iraq. I always have a problem reducing people to numbers but AP said that 16,273 violent deaths in Iraq in 2006 -- 14,298 of them civilians. Most of the dead are civilians, which the enemy targets. Prairie Pundit pointed out that is a war crime. Our side prosecutes its soldiers who flout this convention.
With 16,273 deaths in 2006, is Iraq still at war? AP called fighting in the Sudan "the world's worst humanitarian crisis" after the U.N. estimated 200,000 people died violently since 2003 -- or twice the carnage of Iraq in the same time period. Sudan's population is estimated at 6.5 million; Iraq's is four times that.
By the way, the 16,273 violent deaths in 2006 compares favorably to the 600,000 documented deaths under Saddam Hussein. Many more are likely. Hussein's carnage averaged 70 to 125 civilian deaths every day for the 8,000 days he reigned. His 20,000 civilian deaths a year (on average) were considered "peace" while last year, under war, there were 14,298 civilians deaths.
Meanwhile, despite all the problems, the Iraqi economy seems to be doing remarkably well. According to a report by Global Insight, an economics consultancy, the Iraqi economy grew by 17 percent in 2005 and is projected to have grown 13 percent in 2006. Newsweek reports:
Civil war or not, Iraq has an economy, and—mother of all surprises—it's doing remarkably well. Real estate is booming. Construction, retail and wholesale trade sectors are healthy, too, according to a report by Global Insight in London. The U.S. Chamber of Commerce reports 34,000 registered companies in Iraq, up from 8,000 three years ago. Sales of secondhand cars, televisions and mobile phones have all risen sharply. Estimates vary, but one from Global Insight puts GDP growth at 17 percent last year and projects 13 percent for 2006. The World Bank has it lower: at 4 percent this year. But, given all the attention paid to deteriorating security, the startling fact is that Iraq is growing at all.
How? Iraq is a crippled nation growing on the financial equivalent of steroids, with money pouring in from abroad. National oil revenues and foreign grants look set to total $41 billion this year, according to the IMF. With security improving in one key spot—the southern oilfields—that figure could go up.
However it's spent, whether on security or something else, money circulates. Nor are ordinary Iraqis themselves short on cash. After so many years of living under sanctions, with little to consume, many built up considerable nest eggs—which they are now spending. That's boosted economic activity, particularly in retail. Imported goods have grown increasingly affordable, thanks to the elimination of tariffs and trade barriers. Salaries have gone up more than 100 percent since the fall of Saddam, and income-tax cuts (from 45 percent to just 15 percent) have put more cash in Iraqi pockets. "The U.S. wanted to create the conditions in which small-scale private enterprise could blossom," says Jan Randolph, head of sovereign risk at Global Insight. "In a sense, they've succeeded."
Iraqna isn't the only success story. There is also Nipal, a money-transfer service that is the backbone of Iraq's cash economy, as well as a slew of successful construction firms in Kurdistan. Such companies are not waiting for Iraq's political crisis to resolve itself. Yet imagine how they would prosper if it did, and how quickly they would be joined by others.
But again, that's the remarkable thing. In a business climate that is inhospitable, to say the least, companies like Iraqna are thriving. The withdrawal of a certain great power could drastically reduce the foreign money flow, and knock the crippled economy flat.
Do read the whole thing. Meanwhile Amir Taheri comments in the New York Post:
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 Qasr, in the southeast extremity of Iraq on the Persian Gulf. Four years ago, this was a jumble of rusting quays, abandoned houses and gutted buildings. By the spring of 2003, its population had dwindled to a few dozen, along with hundreds of stray dogs. There was even talk of abandoning it altogether.
Today, however, Um Qasr 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 - joining many more who have come from all over Iraq. The boom in Um Qasr is part of a broader picture that also includes Basra (the sprawling metropolis of southern Iraq), the Shi'ite "holy" cities of Najaf and Karbala, Mandali on the Iranian border and much of Baghdad.
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."
The relatively low cost of labor is another attraction to investors. Wages in Iraq, where unemployment is 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 the border - people who come in for a few days to make some money before returning home.
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, I 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. "Why leave?" one driver asks. "Do I abandon the goods that have come from such a long way before they reach their destination?" This amounts to a plea to "stay the course." The man in Um Qasr does not know that in the United States the phrase "staying the course" drives so many up the wall.
I have the feeling that much of the ground work in putting the country on the right track has already been laid, and it is for this reason that I think that the Keane-Kagan plan (see Winds of Change for more comment), which seems to be the most likely strategy the Bush Administration will adopt (we'll see what the Democrats will do, though their power to influence war decisions is somewhat limited) - taken together with Nouri al-Maliki's recent reversal of policy towards militias - may have a good chance of succeeding.

No comments: