Iraqis sample free enterprise

Mohammed Hussein sweeps a hand toward shelves laden with TVs and baby walkers from China, plastic chairs from Syria, and coolers from Iran - and proclaims that his business has never been better.

"My profits have roughly doubled" since before the war, Mr. Hussein says at the bustling corner store in the northern Iraqi city of Mosul. Newfound prosperity contributes to Hussein's positive view of the US military presence, which he calls "very reassuring."

Standing nearby, however, Ghalibe Shaker offers a darker view of the American-led occupation. "There is no income," says the out-of-work military factory worker. "Things are worse than under Saddam."

Across Iraq, these two attitudes reflect a schism in the country's economy - between a large, moribund state-run sector and a small, private economy that appears to be growing more vibrant, partly due to new, free market incentives.

The US-led coalition aims to help Iraq move "from a centrally planned economy, dominated by value-destroying, state-owned enterprises to a free market," says Paul Bremer, the top US civilian administrator.

To be sure, more immediate challenges to rebuilding Iraq continue to mount. A surge in apparent economic sabotage by anticoalition forces in recent days saw a Baghdad water main ruptured with explosives and a large oil pipeline fire set off in northern Iraq, causing lost revenues of millions of dollars each day. Other attacks this summer have targeted the electrical grid and oil infrastructure.

Yet in the long run, transforming the Iraqi economy is likely to prove as important to the country's stability as today's short-term efforts to secure basic services, provide cash payments to state workers, and revive the oil industry.

The transition to a market-based system involves major risks, not the least being a possible increase in Iraq's already high unemployment rate of more than 50 percent. "Unemployment may rise even higher in the months ahead as other economic reforms are implemented," Ambassador Bremer warned in a speech last month. Iraq, he added soberly, "will be a poor country for some years to come."

Today, one of the major economic initiatives under way involves efforts to expand Iraq's private sector by promoting free trade, commerce, and investment.

Trade, for example, received a boost when the Coalition Provisional Authority (CPA) suspended all tariffs, duties, and fees through the end of this year. An independent Trade Bank of Iraq has been established to provide financial services to facilitate imports and exports, and the Washington-based Export-Import bank is now free to support US exports to Iraq. In May, the United Nations lifted sanctions that had severely restricted trade with Iraq for more than 12 years.

Free trade is bringing dramatic benefits to some businessmen such as Hussein in Mosul, 70 miles from the Syrian border. "Now I pay no customs so my goods are much cheaper and people are buying things they didn't purchase before the war," says Hussein. For example, he says, with the price of a color TV halved, "no one buys black-and-white televisions."

Satellite TV receivers are also hot items in Mosul and other large cities, where cardboard boxes of imported electronics and other appliances often spill out of shops onto the sidewalks.

A freer movement of people across borders is also boosting business in some localities. In the Shiite holy city of Najaf, south of Baghdad, for instance, an influx of Muslim pilgrims from Iran has meant more customers for retailers like Luay Al Abudi.

"I sell to a lot of tourists from Iran," says Mr. Abudi, who stocks Japanese and Chinese electronic goods in his store at Najaf's main marketplace. Overall sales revenue is still below what the prewar rate, but the influx of visitors has helped, says Abudi, who makes about $200 to $300 a month.

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