Iraq's $100 billion stimulus for America

Fri, 27 Feb 2009 14:02:44 -0500

by Adam Choppin

Obama Administration officials looking for a cheap and easy stimulus package to create jobs at home and curry favor in the Middle East should pay attention. The Bush Administration departed having failed to address a few arcane, but important, administrative barriers that are preventing U.S. companies from grabbing a larger share of Iraq’s growing market. By enacting a few policy changes that require only executive authority, the Obama Administration could boost the economy and curry favor with Iraq’s politicians and economic elites. But it must act quickly before these pivotal Iraqis turn their backs on U.S. companies in favor of European, Chinese, and Arab firms.

With violence on the ebb, oil exports up, newfound competence on budget execution, and a clear path to control over its security, Iraq is finally on the brink of its long-promised economic boom. Infrastructure expenditures and other investments in Iraq will top half a trillion dollars over the next ten years, about as much as the war has cost American taxpayers to date. U.S. companies could easily grab roughly 20% of that business, or about $100 billion. Iraq urgently needs oil equipment, software, medical devices, agricultural machinery, and a host of other goods and services for which American companies are competitive globally. Moreover, Iraqi businessmen thirst for quality American goods and services.

While not the only measures that could improve U.S.-Iraqi business ties, these nearly costless initiatives could yield massive returns for political relations and U.S. businesses:

Visas: Augment facilities and staff to process visas for Iraqi businessmen and government officials. Business visas are by far the number one impediment to greater U.S.-Iraqi business ties. The obstacles are two-fold: 1/ insufficient facilities in Iraq to handle visa interviews; 2/ insufficient staff in the U.S. to screen applications. The result is a process that sends most Iraqi businessmen to third countries to get visas that take between four weeks and six months to process. Meanwhile Britain, Germany, and other countries are expanding their consulates in Iraq and accomplish equivalent screenings in less than a week. It is no coincidence that British and German companies are beating American companies to Iraq’s growing market. Iraqi businessmen and government contracting officers see U.S. visa policy as deliberately disrespectful and unwelcoming. For around $10m/year, nearly all of which would go towards additional American jobs, the Obama Administration could hire the necessary screening agents and consular staff to meet demand and facilitate business.

Travel Warning: Change the travel warning against Iraqi Kurdistan. The Kurdistan Region of Iraq has consistently shown its competence in preventing violence and securing its people. Since 2003, the region has seen only two significant bombings, just one more than either Madrid or London (and with fewer overall casualties). Yet the State Department refuses to modify its travel warning, as Britain, Germany, Japan and other countries have done. Since insurance underwriters and corporate lawyers often formulate corporate travel policies around State Department travel advisories, this failure imposes a direct constraint on business ties, in addition to secondary perception effects. State Department bureaucrats recognize such sub-national differences elsewhere (Philippines, Pakistan, Congo, etc.), but a culture of fear and blame at the staff level has provided no incentive to author any changes absent senior leadership.

Export Guarantees: Expand export financing to Iraq. The U.S. Export-Import Bank (Ex-Im), which provides critical export insurance and financing to U.S. manufacturers and exporters, remains closed in Iraq. Distressingly, the obstacle concerns bureaucratic reporting rules and squabbles over Iraqi debt policy among U.S. Treasury Department staff. The absence of Ex-Im in Iraq is particularly debilitating at this time of shortages in global credit, which hit small to medium-sized exporters hardest. Ex-Im activities are critical to jumpstarting U.S. exports in emerging markets and is a self-funded government activity.

More than just business is at stake in Iraq today. Close business ties with the Iraqi commercial class, a cross-section of elites and middle-class managers across Iraq’s political and sectarian spectrum, would strengthen moderate voices within Iraq over the long-term. Administrations change every 4-8 years, diplomats every 2. Business relationships often last a lifetime, and corporations look at 10 or 20-year horizons for their market strategies. Even if Iraqis and their government never actively like us, they won’t actively oppose us if their leaders and commercial classes understand us, work with us, visit our country and are visited in turn. At best, such ties can create a rare and pivotal political ally in the region.

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From 2006-2008, Adam Choppin served in the Commerce Department’s Iraq Investment and Reconstruction Task Force, which led U.S. commercial policy towards Iraq. He is now President of Fronteira Global Consulting (www.fronteiraglobal.com), which assists U.S. companies to find new business opportunities in Iraq. He is also an Adjunct Professor of International Management at the Ohio University College of Business.

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Iraq's $100 billion stimulus for America