When Jay Hallen tried to step inside the building that once housed the Baghdad Stock Exchange, squatters greeted him - with a gun. Finding a new location quickly moved to the top of his agenda.
Mr. Hallen was hired by the Coalition Provisional Authority (CPA) to oversee the establishment of the new Iraq Stock Exchange, where trading is expected to start within a few weeks.
"When this opens, it will be a big sign that normalcy has returned to Iraqi life," Hallen says in a phone interview from Baghdad. "There's great excitement about an economy that's been suppressed and is ready to boom."
Stock exchanges play an important role in national economies: They provide companies with capital from domestic and foreign sources; they give opportunities to smaller investors who want the option of quickly converting stock into cash; and by showing which companies' or sectors' stock prices are rising relative to others, they signal where new money should be invested.
As nations have embraced capitalism in the past 15 years, stock exchanges have proliferated around the world. But they're no panacea. As Romanians and Mongolians and others are finding out, sometimes the hard way, what matters most is the infrastructure - the set of rules and enforcement mechanisms that governs the process. And getting that right can be tricky in places not in tune with free enterprise, experts say.
In Iraq, the big challenge is to replace a corrupt system with something far more open and democratic.
"We're trying to export what it is that's made the US so successful ... and a large part of [that] has been our ability to finance companies and get them to grow," says William Bautz, former chief technology officer at the New York Stock Exchange. "[Introducing] reforms is going to make it a stronger country.... In the long run, [that will] pay off for peace in the Middle East."
Mr. Bautz is an adviser to the newly named Iraq Stock Exchange through the Financial Services Volunteer Corps (FSVC), a nonprofit group in New York that assists developing economies. Last November, he took part in a planning conference in Amman, Jordan, where the volunteers helped Iraqi brokers and officials set up securities laws in line with international standards.
The exchange also got a new board of directors. "The former exchange was corrupt, and it was largely in place for Saddam and friends to buy their way into private enterprises," Hallen says. "If one of those people forced his way onto your board, you really had no choice but to concede."
Technology is another issue. Previously, each company kept its own records, so the exchange needs an electronic depository to track prices, trades, and shareholder identity numbers. Temporarily, the depository will be based in Egypt or Jordan, neighbors that have more sophisticated capital markets and are eager to help.
The 1990s saw dramatic growth in the number of stock exchanges around the world. At the start of the decade the World Federation of Exchanges had 38 members. Today it has 54. And small regional federations include dozens of other exchanges - in places such as Oman, Kazakhstan, and Romania - that don't yet qualify for WFE membership.
As Iraqis move forward, they can draw lessons from countries that have been transitioning from state-owned economies.
"In Russia and [some other former Soviet countries] there were mass privatization schemes intended to jump-start this process ... and those have had mixed success," says Robert Strahota, an FSVC volunteer and assistant director of international affairs at the US Securities and Exchange Commission. "Many of the companies that were state-owned weren't well prepared to become private."
In some Eastern European countries, thousands of people lost their life savings because investments were allowed before there were any protections against fraud.
"Any random person could just make random claims and run off with the money - and that's why you ended up having riots in the streets [in Albania]," says Michael Goldstein, a finance professor at Babson College in Massachusetts.
One of the clearest cautionary tales: nearly three-quarters of Albanians had invested in pyramid schemes by the time they collapsed in 1997.
On the other hand, Poland has been a clear success, Mr. Goldstein says, because it took the time to prepare companies and investors. Poland also had familiarity with capitalism from its precommunist days.
In Iraq, companies were listed on the stock exchange as far back as the 1940s. But the market was small, and it will take time to educate people about the new system and widen the circle of investors.
"It's not like people will [immediately] log onto the Internet and start day trading, and it's not like there's a lot of Merrill Lynch brokerage offices in all the [towns,]" Goldstein says.
For staff at the 52 licensed brokerages in Iraq, the opening bell of the new exchange will be a welcome sound. (A consultant from the Philadelphia Stock Exchange has offered to bring a small replica of the Liberty Bell.) Nearly a year has passed since trading stopped and bombs started falling in Baghdad. In the interim, some brokerages have continued to pay their staff.
"It's been a long wait, but it's worth it ... because we really want the market to have integrity," says Hassan Aldahan, who owns a brokerage and is involved in creating the new exchange.
It will take another six months to prepare the permanent building in the heart of Baghdad's financial district. In the meantime, brokers hungry for action will have to make do. Their temporary home will be a former Italian restaurant on the property of the Al Mansour Hotel.