Iraq Faces Globalization in Rebuilding Economy

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One of the hopes of the U.S. security push in Iraq is that its battered economy will be revived. But one challenge to manufacturing in Iraq is globalization. Vendors' tables at heavily guarded markets are crowded with cheap goods from Iran, Syria and China — and Iraqi products are hardly visible.

RENEE MONTAGNE, host:

This is MORNING EDITION from NPR News. I'm Renee Montagne.

One of the hopes of the current U.S. security push in Iraq is that it will give the battered economy a chance to survive and revive. U.S. commanders regularly take VIP visitors on tours of heavily guarded markets to demonstrate that economic stability is tied to security.

Those same markets show one important reason why it's going to be hard to revive Iraq's manufacturing sector, and that's globalization. Vendors' tables are crowded with cheap goods from Iran, Syria, and China. Iraqi products are nowhere to be found.

NPR's Corey Flintoff reports from Baghdad.

(Soundbite of crowd noise)

COREY FLINTOFF: This is the Bab al-Sharji market in Baghdad where vendors hawk their wares over the roar of generators and plastic CD players. It's one-stop shopping for everything from groceries to hardware, all spread on tarps and tables outdoors. Even by Iraqi standards, some of the merchandise here is unbelievably cheap.

(Soundbite of clicking)

FLINTOFF: This butane cigarette lighter will last a steady smoker about a month, and if light is all you need, it also contains a flashlight. But wait, there's more. When you flick it...

(Soundbite of clicking)

SELIM(ph): See? It flash red and blue, similar to the police cars.

FLINTOFF: Selim bought this useful novelty at Bab al-Sharji.

SELIM: It cost me 250 dinars, which is around 17 cents.

FLINTOFF: Even though smoking is pervasive in Iraq, an Iraqi manufacturer would go broke trying to compete in the lighter business with cheap imports from China. But of course it's not just novelties. It's cook pots and watches, panties and polo shirts, light switches, and car parts.

Mohammed Abas(ph) (Market Vendor): (Through translator) If I, for example, ask for an Iraqi water pump, I don't find it.

FLINTOFF: Mohammed Abas, who's 32, buys and sells in the market.

Mr. ABAS: (Through translator) When I ask which is better, the Iraqi or the imported, they tell me of course the Iraqi. And when I ask why don't they sell the Iraqi one, they tell me the Chinese one is cheaper.

FLINTOFF: The U.S. Defense Department is trying to revive some Iraqi factories as a way to get people back to work on the theory that when people have some economic hope, they're more likely to renounce violence.

Paul Brinkley is an under secretary of Defense who leads a task force to improve business and stability in Iraq. He says the security situation is a concern.

Mr. PAUL BRINKLEY (Deputy Under Secretary of Defense for Business Transformation, Department of Defense): But the alternative is to sit back and let the country continue to sit in over 50 percent of unemployment, and there's not a human population anywhere in the world with 50 percent unemployment among a skilled work force that isn't going to experience unrest and violence.

FLINTOFF: Brinkley's group says it has identified Iraqi factories with the potential to get back into operation. And he's helping to distribute some $50 million that the U.S. Congress appropriated to help. He said recently in Baghdad that he and his Iraqi counterparts have found a U.S. outlet for some Iraqi-made clothing.

Mr. BRINKLEY: They make extremely nice menswear clothing, Italian-style suits. I mean, very nice clothes. And there's several retailers looking at the samples, discussing terms.

FLINTOFF: Brinkley said a deal has already been struck with a Memphis-based company called Shelmar, which wants to put Iraqi clothes on the rack in time for fall.

Not everyone is impressed by Brinkley's program to restart Iraqi factories or by the amount of money behind it.

Mr. TAYR OFILI(ph) (Economist; Former Iraqi Housing Minister): When he say $50 million to start with, is very small money. Fifty million can do nothing.

FLINTOFF: Tayr Ofili is an economist, a Kurdish lawmaker in Iraq's former housing minister. He says neither the U.S. nor the Iraqi government should involve itself in trying to revive small-scale, state-owned factories that can't compete in the face of global markets. He says they should concentrate instead on projects that will provide Iraqi business people with the basic services they need to start their own businesses; reliable electricity and water, for example, as well as security. Ofili says businesses can't compete when it's costly and dangerous to obtain supplies.

Mr. OFILI: For example, textile factory cannot work without raw material. Where is this raw material coming from? Sometimes, you buy raw material for some products more expensive than buying the actual finished product.

FLINTOFF: The Pentagon's Paul Brinkley has a counterpart from the State Department. He's Charles Ries, a former ambassador to Greece and the current coordinator for economic transition in Iraq. Ries acknowledges that Iraqi business people are struggling with an exceptionally fast pace of change, after enduring years of a state-run production system under Saddam Hussein and an economy locked down by years of international sanctions. But he says globalization could bring Iraqi producers raw materials at world market prices that they never had before.

Mr. CHARLES RIES (Principal Deputy Assistant Secretary for European and Eurasian Affairs, Department of State): And this is a case where globalization helps Iraqi producers and retailers. They have access to spare parts, access to new equipment, capital equipment for their factories.

FLINTOFF: Reis says the same world system that brings benefits will also bring products that Iraqis may not be able to compete with. But he predicts that there will always be a local market for some goods.

Mr. RIES: This is a country of 28 million people. And for things that are heavy or customized to Iraqi or local regional preferences, they can still be quite competitive.

FLINTOFF: In other words, outside manufacturers may not be able to make money by delivering things like concrete blocks, porcelain toilets or glass to Iraq. And there are some things that Iraqis just prefer to have made at home, such as favorite foods.

Iraq, historically part of the Fertile Crescent, used to export more than 50 percent of its agricultural production to neighboring countries. Now the country is importing most of its food, and that shows up in the fruit market.

KAISELYN KOTUM(ph) (Market Vendor): (Through translator) The Iraqi orange is more expensive than the Syrian or the Egyptian.

FLINTOFF: Kaiselyn Kotum is 35, a produce seller since the U.S. invasion. He holds up a fat orange.

Mr. KOTUM: (Through translator) We sell the Egyptian orange for 1,500 dinars. We rarely have Iraqi oranges, but when we do, they go for 3,500. Before, we never imported oranges.

FLINTOFF: The Iraqi economist Tayr Ofili says agriculture is one area where Iraq can compete in the world arena.

Mr. OFILI: The food we grow in this country, it's much, much cheaper than the food we're buying from neighbors. China cannot feed us, no way.

FLINTOFF: The State Department's Charles Ries says one thing the global economy can bring Iraq is capital.

Mr. RIES: Foreign investment is a very sensible way to get cutting-edge modern expertise and connections that will allow the country to be richer and better off faster, but those are decisions Iraqis will have to make.

FLINTOFF: And that, of course, brings us back to the security situation. Until foreign investors feel it's safe and stable enough to invest in Iraq, schemes for reviving the country's economy may be stuck on a very small scale indeed.

Corey Flintoff, NPR News, Baghdad.

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