Iraqi interim finance minister Kamel al-Keylani has announced plans to transform Iraq’s statist economy into a free-market system. He said Iraq will allow private ownership -- including “up to one-hundred percent foreign ownership” -- in all sectors except natural resources. Iraq’s oil reserves, the second largest after Saudi Arabia’s, will remain in government hands for now.
The privatization plan will open Iraq up to the world for trade and investment. Among other things, Iraq will allow six foreign banks to purchase and take over a certain number of Iraqi banks. Other foreign banks will be allowed to buy fifty-percent stakes in local banks. Foreigners will be permitted to lease land for as long as forty years. Outside investment was severely restricted by United Nations sanctions imposed after Saddam Hussein invaded Kuwait in 1990. Those sanctions have been lifted.
The new economic policy will also slash Iraq’s top tax rate for individuals and businesses from forty-five percent to fifteen percent starting January 1st. But obtaining that revenue will depend on setting up a workable system of tax collection.
Mr. Keylani said the reforms are aimed at promoting “Iraqi economic growth and [raising] the living standards of all Iraqis as soon as possible.” During three decades of Baath Party rule, Iraq had one of the world’s most centralized economies. Most companies were state-owned or operated. As Mr. Keylani said, “The true source of our problems stems from decades of economic mismanagement and corruption by Saddam Hussein.”
U.S. Treasury Secretary John Snow said the plan offers a “real promise” of economic revival in Iraq, which is struggling to cope with high unemployment and crumbling infrastructure. Critical to Iraq’s economic success will be ending the terrorist attacks. As Mr. Snow said, stability is necessary to attract substantial foreign investment.
As U.S.-led forces work to restore security, Iraqi citizens will be able to take advantage of the economic freedom and opportunity they were denied for so long.