NCPA - National Center for Policy Analysis

In Rebuilding Iraq, Don't Forget Role for Private Sector

March 27, 2003

Typically in the past, when the United States and its Western allies were involved in wars, they assumed a major financial burden in post-war reconstruction. Official assistance became the principal source of financing, with emphasis on the reconstruction of infrastructure and utilities damaged by the war. The World Bank and other international agencies were called upon to develop plans and finance the reconstruction and revival of the economy.

In the case of Iraq, it is unlikely that this approach will be followed for several reasons:

  • Most G-7 countries are facing considerable fiscal deficits and cannot afford to channel a significant amount of resources to the effort.
  • The willingness of these countries to help will also be affected by the split over the decision to go to war, inevitably putting the greatest financial burden on the United States and others involved in military action.
  • The international financial agencies will be putting their priority on social relief but not on stimulating long-term sustainable growth.

In order for investment to flow into Iraq, the country's interim government must quickly put in place an economic policy that will encourage investors and lenders to take the risks involved, experts stress.

The United States and its allies could put together a team of private business leaders as a "steering committee" to supervise and monitor the execution of such policy measures. Priority should be given to cleaning up Iraq's corrupt oil sector.

In short, major U.S. corporations should lead the effort to create capital-friendly environments in developing nations -- starting with Iraq.

Source: Robert McFarlane and Michael Bleyzer (SigmaBleyzer), "Taking Iraq Private," March 27, 2003, Wall Street Journal.

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