Eventually, Iraq Will Be One Hot Business Prospect

It won’t happen immediately, but sometime in the next year or so the rebuilding of Iraq will be the hottest business prospect in the world. It will make the much ballyhooed rebuilding of Kuwait--which is shaping up at less than $20 billion worth of business--look like chicken feed.

This is a country of 18 million people, an economy that before the Gulf War was capable of producing $50 billion in goods and services a year, including $20 billion in oil revenues.

Right now, Iraq’s economy is under economic sanctions. The only business it can do with the outside world is smuggling, and that doesn’t amount to much.

And after almost a year of sanctions, Iraq is broke. It cannot sell its oil. Roughly $4 billion in foreign bank accounts is frozen. And the Baghdad government’s foreign currency reserves are almost depleted at only $14 million.

But once sanctions are lifted, Iraq is prepared to buy. The Ministry of Industry has a purchase list that runs on for pages.

First it must repair or replace war-damaged electric power plants, railroads and bridges. Iraq needs equipment to repair its oil production and refining. Right now it is producing low-grade gasoline from damaged refineries, but seems incapable of producing lubricating oil. In the car repair shops of Baghdad, mechanics are still using lube oil stolen from Kuwait.

In agriculture, irrigation pipelines need major work. Iraq could resurrect development plans it began three years ago, after the end of the 1980-88 Iran-Iraq war. Those plans called for building a 2,000-mile railroad, as well as dams and a giant new power plant.

To pay for it all, Iraq has enormous oil reserves and a capability to get back up to prewar production of 3.5 million barrels a day within a year.

But Iraq faces massive economic problems, even after sanctions are lifted, says Professor Human al Shuma of Baghdad University, a leading economist. Iraq’s oil production will return to a world market that has been getting along without it.

Also, Iraq still has $40 billion of hard currency debts to pay, and the United Nations has ruled that it must pay 30% of its oil revenue as reparations to Kuwait and other countries damaged by the Gulf War, such as Turkey.

Still, that could leave Iraq with about $14 billion a year to spend. And unlike the past, it could spend it productively, not wastefully on military hardware and ambitions.

The Iraqis need to develop their economy. The birthrate is high, and Iraq has a sizable educated class. Its 10 universities educate 170,000 students, and there are 30 technical institutes, the equivalent of two-year junior colleges, teaching industrial and managerial skills.

Furthermore, Iraq’s 1-million member army is being reduced to a much smaller force. Jobs are needed for the veterans.

The hitch, of course, is sanctions, which have shut down Iraq’s foreign trade and much of its domestic economy for the past year. An easing of sanctions is likely, as early as this week, to allow Iraq to sell some oil to finance purchases of food and medicine. The easing is an acknowledgment that medicines are truly in short supply here, that disease is rising and that the country, which is struggling now to get enough food, could soon face famine.

But a lifting of overall sanctions, the key to Iraq’s rebuilding, will depend on a change of government by the Iraqis or a change of heart by the United Nations.

The Iraqis will have to make the first move, either by Saddam Hussein leaving the scene or by a dramatic change in attitude by his government.

Attitudes don’t appear to be changing much yet, though signs of progress do crop up. Some Iraqi officials actually talk hopefully of their country being part of America’s New Deal for the Middle East. Prof. al Shuma, for one, has written in the government-controlled press calling for glasnost to end secrecy and covering up of mistakes in the economy.

Given the outside pressures, and the internal needs of this country, change is inevitable for Iraq. And if change comes peacefully, this country could begin at last to fulfill its impressive economic potential.

Japan was Iraq’s leading trading partner before the Gulf War--Toyota is the car of choice here--and Japanese companies will be back as soon as sanctions are lifted. Germany was a major trading partner too.

But American business won’t take a back seat. In 1989, according to an Iraqi government official, Chevrolet was to build a car production plant here--the first auto production plant of any kind in the Middle East. U.S. companies can’t do anything now, but they should begin making plans. Because the time will come when Iraq will be seen not as a menace but as a prospect for investment.