Iraq's Economic Progress Overshadowed by Violence

By Monisha Bansal | July 7, 2008 | 8:22 PM EDT

( - Despite the massive disruption from the U.S.-led effort to oust Saddam Hussein from power in 2003 and the dozens of terrorist attacks that followed, the Iraqi economy is progressing and the political system is meeting expectations, according to Iraq's minister of finance.

"I take issue with those who focus on conflicts," Ali Abdul Ameer Allawi said at the Heritage Foundation in Washington, D.C., Wednesday, one day after a video aired containing threats by al Qaeda's top terrorist in Iraq - Abu Musab al-Zarqawi - against U.S. and coalition forces as well as Iraq's fledgling government.

Allawi said the Iraqi economy is adapting to the new political order. "All those who talk about the inability of the Iraqi political class to provide acceptable working accommodations ignore the progress that has been achieved," he said.

The invasion of Iraq and the toppling of the Saddam regime resulted in the "shutdown of much of the central economic administrative structure" in Iraq, according to the CIA World Factbook. "Although a comparatively small amount of capital plant was damaged during the hostilities, looting, insurgent attacks, and sabotage have undermined efforts to rebuild the economy," the Factbook states.

Allawi acknowledged Wednesday that the U.S. presence in Iraq has opened some of the "fissures, not cracks" in Iraqi society, but argued that the United States did not create the economic and societal problems. "The former regime destroyed a lot of the underpinnings of Iraqi society," he said.

In spite of the attacks on oil pipelines and the Iraqi infrastructure, hurting the country's ability to reach energy export volume goals, the CIA Factbook states that "total government revenues have been higher than anticipated due to high oil prices."

"Once security is established I think Iraq is poised to have great economic success," Allawi said, adding that "the political process has in fact met a lot of the expectations made of it."

Iraq has a new prime minister designate. Nuri al-Maliki was selected late last week by the Shia United Iraqi Alliance, the largest party in the Iraqi parliament. Maliki, who abandoned an alias that he used when Saddam was in power, will have a four year term to head the fragile unity government comprised of Shia, Sunnis and Kurds.

As the new Iraqi government shifts from a centrally based economy, almost entirely dependent on oil, to a market based economy, it's crucial that the country's private sector be given the opportunity to succeed, said Sinan al-Shabibi, governor of the Central Bank of Iraq, who also spoke at the Heritage Foundation event.

Even as long ago as last summer, Iraqi business activity was accelerating. More than four in ten businesses had added employees since the 2003 invasion and 77 percent were anticipating growth in the national economy in 2006 and 2007, according to polling conducted by the Center for International Private Enterprise (CIPE) and Zogby International. Only 3 percent of businesses thought the economy would slow down.

CIPE, a division of the U.S. Chamber of Commerce, provides training, grants and technology to entrepreneurs in Iraq and works with political parties to develop economic goals and platforms for the country.

"We have a once in a lifetime opportunity to rebuild a country from scratch. There is no second chance," said Suhaib Albarzinji, a CIPE program officer working in Iraq.

But Scott Lynch, communications director for the anti-war group Peace Action, said Allawi's remarks Wednesday amounted to "rhetoric of the (Bush) administration, or the administration's mouthpiece."

"There is no economic data to back up" Allawi's assertions about the Iraqi economy, Lynch said. "They have a believability problem," he told Cybercast News Service . "It's hard to believe the GDP (gross domestic product) of Iraq is going up."

The 2005 CIA World Factbook pegged the per capita gross domestic product for Iraqis at $3,400. By way of comparison, the latest average GDP for residents of the United States is $42,000.

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