Economic reform of Iraq
Economic reform in Iraq describes decisions by the Coalition Provisional Authority to dramatically change the economy of Iraq in the aftermath of the 2003 U.S.-led invasion.
Prior to US occupation, Iraq had a centrally planned economy. Among other things, it prohibited foreign ownership of Iraqi businesses, ran most large industries as state-owned enterprises, and imposed large tariffs to keep out foreign goods.[1] After the 2003 Invasion of Iraq, the Coalition Provisional Authority quickly began issuing many binding orders privatizing Iraq's economy and opening it up to foreign investment.
Economic reform was implemented alongside reform of government institutions, the Iraqi legal system, and significant international investment to repair or replace damaged infrastructure of Iraq.
While reform efforts have produced some successes, problems have arisen with the implementation of internationally funded Iraq reconstruction efforts. These include inadequate security, pervasive corruption, insufficient funding and poor coordination among international agencies and local communities.
Foreign Investment and trade[edit]
CPA Order 39, entitled "Foreign Investment", provided that "A foreign investor shall be entitled to make foreign investments in Iraq on terms no less favorable than those applicable to an Iraqi investor," and that "[t]he amount of foreign participation in newly formed or existing business entities in Iraq shall not be limited...." Additionally, the foreign investor "shall be authorized to... transfer abroad without delay all funds associated with its foreign investment, including shares or profits and dividends...."
By this order, critics assert that the CPA drastically altered Iraq's economy, allowing virtually unlimited and unrestricted foreign investment and placing no limitations on the expatriation of profit. However, these policies accord with current international standards on foreign direct investment which most of the developed world adheres to.[6][7]
The order concluded, "Where an international agreement to which Iraq is a party provides for more favorable terms with respect to foreign investors undertaking investment activities in Iraq, the more favorable terms under the international agreement shall apply."[8]
According to critics such as Naomi Klein, this order was designed to create as favorable an environment for foreign investors as possible, thereby allowing American and multinational corporations to dominate Iraq's economy.[9]
Significant criticism has suggested these policies are fundamentally anti-democratic, that such rules can only be legitimate if passed by an elected Iraqi government free of foreign occupation.[10]
Others argue that the rules merely bring Iraq's economic law into conformity with modern norms of international trade, and that the previous government and its laws were not democratically legitimate since Saddam Hussein's government was not elected.
CPA Order 17 granted all foreign contractors operating in Iraq immunity from "Iraqi legal process," effectively granting immunity from any kind of suit, civil or criminal, for actions the contractors engaged in within Iraq.[11]
CPA Order 12, amended by Order 54, suspended all tariffs, thus removing the advantage that domestic Iraqi producers had over foreign producers.[12][13] However, a 5% "reconstruction levy" on all imported goods was later reimposed to help finance Iraqi-initiated reconstruction projects.[14]
Moral and International Law debate[edit]
Critics of the CPA argue that these policies were not only rather blatant attempts to shape Iraq's economy in the interests of American (and other) investors and against the interests of Iraqis themselves, but also that they were illegal under international law (specifically the Hague Resolutions and the Geneva Conventions) because an occupying power is prohibited from rewriting the laws of the occupied country.[23]
The CPA argued that imposing Order 39 was permitted under the United Nations Security Council Resolution 1483,[24] because it required the CPA to "promote the welfare of the Iraqi people through the effective administration of the territory," and to create "conditions in which the Iraqi people can freely determine their own political future."[25] Proponents of this position state Resolution 1483 necessarily requires radical economic restructuring, so it allowed an exception to international law regarding occupation.[26] However, others point out that Resolution 1483 "calls upon all concerned to comply with international law including in particular the Geneva Conventions of 1949",[27] which would require an occupying force to respect the laws in force in the country unless absolutely prevented.[28]