Feature: Iraq's post-war economy founders

By BETH POTTER  |  May 22, 2003 at 1:55 PM
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BAIT AL KHALIFA, Iraq, May 22 (UPI) -- Every May, Hekmat Khalid, 68, sets up his stand next to the highway to sell succulent, cool watermelons to drivers roaring south to Baghdad.

This spring is a little different. Not as many travelers are out on the road since the U.S. invasion of Iraq, meaning some of the watermelons have gone bad in the heat. A nearby Iraqi tank next to the road still has a missile in firing position; and Khalid's melon field, about 50 miles north of Baghdad, also holds a sand-bagged bunker.

Like other farmers, Khalid can't make any money if he doesn't sell his produce. Agriculture in Iraq is an important part of the economy -- the majority of which comes from the fertile crescent between the Tigris and Euphrates Rivers while the rest of the country is largely dry and desolate.

Near Kahlid, dates, apples and grapes are grown, and either sold on the road and trucked to central markets.

"I have 10 children. They need to be fed," Khalid says, waving a cutting knife in the air for emphasis. "After this harvest, I'll sell apples, then grain."

Under the U.N. oil-for-food program in place in Iraq for most than 10 years, every family received some sort of food aid, according to James Morris, a U.N. World Food Program spokesman. To get the official agricultural sector going again, the oil-for-food program will be used to pay grain farmers an estimated $7 million for the spring harvest, Paul Bremer, the new U.S. interim administrator, said recently.

But while grocery stores and vegetable markets are now back in business for the most part, factories still sit empty, five weeks after the U.S. military took over the capital. Most factories are looted and have no machinery or goods, like a Volkswagen car parts plant and grain refineries near Baghdad.

"We're going to have to find a way to revive the Iraqi economy and purge it of subsidies and state companies," Bremer said. "But our immediate priority is to get money back into the hands of the Iraqi people."

To do that, the United States last week made emergency salary payments of $20 to former government workers. It then paid retirees a similar amount in Iraqi dinars.

Food prices immediately jumped and exchange rates fell rapidly. A pound of eggplant or apples previously costing about 75 cents, for example, rose to about $1.30 in one day.

The U.S. military says five banks have reopened, though a quick street survey indicates bank doors are closed and unregulated money changers on the street are controlling the money supply.

Oil refineries are coming back on line slowly, with supplies at about 35 percent of demand at the moment, with long lines of cars surrounding gas stations 24 hours per day.

Businessmen willing to take the risk of importing big ticket items from Jordan and Kuwait appear to be doing a brisk business in TV satellite dishes, which were not allowed under Saddam Hussein's regime, and other electronic goods. Many Iraqis are buying cars in Jordan to export in their own country after finding out there are no customs duties at the border. Luxury car sales companies are also taking advantage of the customs free-for-all.

"We used to pay about $2,000 in duty per car," says Abdil Hamid al Masawi, as he surveys the 10 used Mercedes sedans in his covered sales lot. "President Bush has said no customs for 90 days, so now we'll have more competition from individuals."

Officials at the U.S.-run Office for Reconstruction and Humanitarian Assistance cannot confirm or deny the customs waiver, but U.S. soldiers at the border say they have no mechanism for collecting taxes at the moment.

Men hold Thuraya satellite phones out to cars on a busy street in Baghdad and restaurants are bustling.

In general, however, most workers remain home, scared of the looters and angry that they haven't been paid more than one "emergency salary."

"What can we eat without a salary?" asks Sadi Kariman, 54, bitterly. "U.S. soldiers already make high salaries. Now our oil will be used to pay them."

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