Wednesday, April 13, 2005

BBC NEWS: US legal legacy for Iraqi economy - Free Markets!

BBC NEWS | World | Middle East | US legal legacy for Iraqi economy: "But it is the new rules governing Iraq's economy which have pitched observers into opposing ideological camps.

The rules have been welcomed by some observers - including London's Economist magazine, which hailed them as a 'capitalist's dream' - but others have dubbed them a 'corporate invasion'.

This is hyperliberal policy, but it's very good policy
Yahia Said
Economist, LSE
Orders 37 and 49 slash top tax rates from 45% to 15% - one of the lowest rates in the world. Order 54 abolishes all duties on imports to Iraq, apart from a 5% reconstruction levy. Order 39 allows 100% foreign ownership of Iraqi companies except in the oil, gas and banking sectors.

Put together, such laws have remodelled the Iraqi economy, making it one of the most open in the world.

Yahia Said, an Iraqi expert in transitional economies and post-conflict Iraq at the London School of Economics, is a supporter.

He agrees that these are all 'ideological laws' meant to have an irreversible effect.

'This is part of this whole neoconservative ideology... [designed to] create a beacon of free-market and liberal democracy in the Middle East,' he says.

'Living standards improved'

But he insists that many of Mr Bremer's decrees have had a very positive impact on the Iraqi economy.

Paul Bremer, right, receives the US's highest civil honour, the Presidential Medal of Freedom, from President George Bush in December 2004
Paul Bremer, right, enacted most of Iraq's current legal code
'For example, when he completely abolished all import duties, apart from the 5% reconstruction levy. In a country that has been starved under sanctions and embargoes, that improved living standards in Iraq,' Mr Said told the BBC News website, arguing that it gave Iraqis access to cheaper imports.

'Iraq [now] has absolutely no customs duties - as opposed to most other countries in the region where governments live off import duties and where import duties are a huge opportunity for corruption.

'Without them, you remove corruption, friction and bureaucracy, and you improve living standards.'

Free trade has really meant free imports and the removal of any kind of protection from Iraq's industry
Dr Kamil Mahdi
Economist, Exeter University
Mr Said says Iraq's ultra-low rates of income tax are also beneficial, creating an incentive for Iraqis to pay taxes, unlike in Russia, he says, where high tax rates after the Soviet collapse simply encouraged tax evasion on a huge scale.

But this view is challenged by Dr Kamil Mahdi, an Iraqi lecturer in Middle Eastern economics at Exeter University.

He charges the occupying powers in Iraq with failing to create conditions in which domestic industry - public and private - can regenerate."

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