23 June 2003
Bremer Reviews Progress, Plans for Iraq Reconstruction
(Political and economic transformation now underway) (2290) The chief U.S. administrator in Iraq, Paul Bremer, says the first order of business in Iraq is to provide security and maintain law and order. Outlining U.S. goals for Iraq in a June 22 address to the World Economic Forum (WEF) extraordinary meeting in Jordan, Bremer said a new Iraqi army will begin enlisting soldiers in two weeks and reported that coalition combat forces and 30,000 Iraqi police officers --- an increase of over 200 percent in the past 30 days -- are now working to maintain order throughout the country. He stressed that the coalition will not permit remnants of the Saddam Hussein regime that are still engaged in sabotage "to turn the clock back for the Iraqi people." Describing plans for Iraq's political transformation, Bremer said that a political council would be established within the next month. The council "will have real authority from the first day" and will represent the major strands of Iraqi society. The coalition will also help convene a broad constitutional conference "run entirely by Iraqis" to draft a new constitution, he said. The bulk of Bremer's remarks focused on plans for transforming Iraq's economy following decades of economic mismanagement. Goals include reallocating resources from state enterprises to more efficient private firms by reducing subsidies and special deals for state enterprises. A "humane safety net" will be created to ease the transition to a market economy, he said. Other priorities include regulatory simplification, development of anti-trust and competition laws, lifting unreasonable restrictions on property rights, and reforming Iraq's financial sector to provide liquidity and credit for the Iraqi economy, Bremer said. He also suggested ways that Iraq's oil resources could be used to provide direct benefits the Iraqi people -- possibly through a fund that distributed oil profits to citizens as "dividends." Such a proposal, and others along those lines, could be debated "when an interim Iraqi authority is convened in the months ahead," Bremer said. The three-day economic forum meeting on the shores of the Dead Sea began on June 21 and attracted more than 1,000 global leaders in politics, business and civil society. The U.S. government sent a large, high-level delegation that included Secretary of State Colin Powell. Following is a transcript of Bremer's address: (begin transcript) Address by Ambassador L. Paul Bremer III, Chief Administrator in Iraq World Economic Forum, Jordan June 22, 2003 After thirty years of totalitarian rule, the people of Iraq are free. In the last few months, they have begun to enjoy life on their own terms, and also started to embrace the responsibilities that freedom entails. Iraqi citizens have joined neighborhood watch groups, helping the Coalition make Baghdad's streets safer. They have joined district advisory councils, making the first steps towards a vibrant civil society. Along with Coalition combat forces, more than 30, 000 Iraqi police officers, an increase of over 200 percent in the past 30 days, are working to establish the rule of law throughout the country. Today, I am joined by a delegation of distinguished Iraqi business leaders and officials, while a separate delegation of Iraqi's attends a U.N conference in New York. On conference panels, at press events, and in informal meetings with peers from across the globe, both delegations have Iraqi's representing Iraq, free to contribute their ideas and experiences to international audiences. They are joined by a group of Iraqi reporters -- part of our travelling press pool -- here to cover discussions. They are members of the burgeoning, indigenous free Iraqi press -- including over 100 newspapers that have sprung up across Iraq since the liberation. For decades, none of these individuals had the right to speak freely. Now they can. And I am proud to welcome them as they participate in transforming a country rich in history into one of the great nations of the modern world. Let me say a word about the President's vision for Iraq and about our Coalition's plan to realize it. President Bush and Prime Minster Blair have clearly stated their vision. It is of a free Iraq, at peace with its neighbors and governed by a representative government chosen by democratic elections. How then to we intend to achieve this goal? We are working on three important areas. The first job of any government is to provide security and to maintain law and order. With the help of the Iraq's, we have confronted looting and sabotage, secured critical sites, and called police officers back to work. Last night two thousand Iraqi police officers patrolled Baghdad streets alongside Coalition soldiers. Within two weeks we will start introducing soldiers into a New Iraqi Army, which in time will secure Iraq's borders. Today Iraqis feel safer leaving their hoes, Baghdad traffic jams are back, and there is exuberant retail activity on the streets. Iraq will continue to face difficult challenges in the area of security, as remnants of the regime engage in continued acts of violence and political sabotage -- acting with the same cruelty and disregard for the welfare of Iraq in their last days as they did in their first. But let me be clear. The Coalition will not let the last vestiges of Saddam's regime turn the clock back for the Iraqi people, whose best days are yet to come. As we provide for Iraq's security we have begun its political transformation. In the next month, we will announce the establishment of a Political Council to assist in the management of the Iraqi government. The Political Council will be representative of the major strands of Iraqi society. It will have real authority from its first day. It will nominate ministry heads and form commissions to recommend policies concerning issues significant to Iraq's future from reform of the educational curriculum, to plans for a telecommunications infrastructure, to proposals doe stimulating the private sector. We will also convene a broader Constitutional Conference, run entirely by Iraqis to draft a new constitution. That document will be the subject of intense public debate and once adopted, it will provide the foundation for national elections for a free and sovereign Iraqi government. Let me turn to our third and most immediate priority: Ensuring that political freedom is accompanied by economic freedom. The nations' liberation would be incomplete is Iraqi's were secure in their persons, but not their property; if Iraqis looked foreword to rising political representation, but stagnant living standards. Just as forming a vibrant political climate in Iraq will entail many challenges, so too creating a vibrant economy in Iraq will not be easy. I mentioned the political sabotage during past several weeks, which must be stopped. Less obvious to the outside world but more damaging to Iraq's economy is the legacy of decades of economic mismanagement of the Ba'athist regime. Put simply, Saddam Hussein's regime devastated Iraq's economy form the inside out. Even before the war over 50 percent of Iraqi's were unemployed. And the former regime expanded at least one third of GDP in the military. Still today over 60% depend of government food rations. Between militarization, misguided central planning and outright theft, for decades Iraq has experienced pervasive misallocation of capital. The precious nature of this devastation is common to regimes that enjoy neither political or economic freedom. In modern economies, firms supply what consumers want. In Iraq, state owned enterprises were forced to produce what central planners demanded. Without the discipline of the market, state-owned enterprises not only failed to create value, they destroyed it. To keep these firms afloat, the former regime fed them with costly subsidies on the form of cheap energy, tax breaks, and uncollected debt arrears. The Central Bank of Iraq was forced to print money, and predictably, inflation raged and the domestic currency weakened. In the past 15 years, other countries have attempted to break this cycle. The experience of these economies shows that there is no substitute for a vibrant private sector. Markets allocate resources much more efficiently than politicians. So our strategic goal in the months ahead is to set in motion policies which will have the effect of reallocating people and resources from state enterprises to the more-productive private firms. A fundamental component of this process will be to force state enterprises to face hard budget constraints by reducing subsidies and special deals. Lower subsidies will allow us to reduce Iraq's taxes while maintaining a level playing field for its private firms to compete. Reducing subsidies will also reduce the temptation to print money with the attendant risks to inflation and interest rates. Following these policies will help accomplish many of our goals for Iraq's macroeconomy: vigorous competition, fiscal discipline, and low inflation and interest rates. But we recognize that these policies will exacerbate political and social strains unless they are accompanied by the establishment of a humane social safety net. For economies in transition, as in the United States, small and medium-sized private enterprises play a vital role in providing employment. In Iraq's case, small firms have the best chance of creating jobs quickly and fuelling the economic recovery. But for this to happen, Iraq's private sector needs a clear commercial code, honest courts, low barriers to entry, and transparent corporate governance arrangements. Countries around the world are rediscovering these prerequisites to growth, and a burgeoning academic literature confirms their importance in empirical data. We will need to learn from and apply best practices in these areas too. By improving domestic economic policy, Iraq will be able to participate fully in the global marketplace. Today, Iraq's workers, factories and consumers rely on equipment and technologies from the 1950s and 1960s. Free trade and investment will allow Iraq to benefit from the ideas and technologies that have lifted living standards around the world. It is not just a question of buying better machines or obtaining better blueprints. By limiting foreign investment, Iraq has been denied the chance to benefit from the world´s best know-how that also raises economic growth. Like other countries, Iraq will no doubt find that opening its borders to trade and investment will increase competitive pressure on its domestic firms and thereby raise productivity. Iraq starts this process with many advantages: potentially fertile farmland, an educated population eager to join the international community, and oil wealth. In fact, just this weekend the first Iraqi oil tanker will be departing Turkey. Iraqi´s oil industry is back in business, only this time for the Iraqi people, not Saddam Hussein. In my brief time in Iraq, I have been repeatedly impressed with the extraordinary technical capabilities of Iraqis working in government and industry. They just need the opportunity to put these skills to productive work. We will give them that chance. To take full advantage of these assets, Iraq´s resources cannot be restricted to a lucky or powerful few. Iraq's natural resources should be shared by all Iraqis, and every Iraqi should have the opportunity to participate fully in the country´s economic life. One way to share Iraq's blessings among its people would be with a special program funded with oil revenues. Some profits from oil sales could be distributed to Iraq´s citizens as "dividends", along the lines of the system used by the State of Alaska. Alternatively, oil revenues could be deposited in a national "trust fund" used to finance public pensions or other elements of a social safety net needed to ease the transition from a state-dominated to a private sector economy. In either case, every individual Iraqi would come to understand his or her stake in the country's economic success. I believe this type of proposal could be profitably debated when an interim Iraqi authority is convened in the months ahead. Let me summarize for you our immediate priorities in this demanding, but exciting economic transformation. It is to: -- Start a thoroughgoing reform of Iraq's financial sector in order to provide liquidity and credit for the Iraqi economy. -- Simplify the regulatory regime so as to lower barriers to entry for new firms, domestic and foreign. -- Review Iraq's body of commercial law to determine which changes are needed to encourage private investment. -- Lift unreasonable restrictions on property rights. -- Develop anti-trust and competition laws. -- Develop an open market trade policy providing for a level playing field with regional trade partners. -- Encourage the adoption of laws and regulations to assure that Iraq has high standards of corporate governance. -- Develop accelerated training programs for business managers in best practices and business ethics. For the past 14 years, I have been a businessman. I know many of the businessmen and women in the audience today. And I want to say to them that I am optimistic and that the Coalition will succeed in transforming the Iraqi economy from a closed, dead-end system to an open vibrant place to do business. Opportunities for productive investment abound, and we aim to be sure they are realized. I spoke earlier about President Bush's vision for Iraq. Just yesterday in his weekly radio address, he spoke to that vision again when said, "we are working to improve the lives of the Iraqi people after three decades of tyranny and oppression." The President is committed to this mission. This means providing political freedom in a secure environment. But it is also a historical axiom that political and economic freedom go hand in hand. The transition to a free-market economy will take time, but there are many people ready to help. Working together, we can bring about an Iraq that is both free and economically prosperous, and only then will we meet the President's goal of truly improving the lives of the Iraqi people. Thank you. (end transcript) (Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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