U.S. Dept. of State
August 12, 2002
Washington – On August 6 and 7, a group of Iraqi-born economists met together at the Department of State in Washington to analyze Iraq’s present economic situation and a future free of Saddam Hussein’s dictatorship. At the conclusions of their deliberations, the Washington File spoke with one of the participants, Dr. Salah Al-Sheikhly, an internationally recognized economist who worked for ten years in the senior levels of Iraq’s state planning institutions.
Al-Sheikhly is representative of a generation of Iraqi professionals. After receiving his doctorate in Great Britain in 1968, Al-Sheikhly returned to Baghdad. “At age 26, I was associate professor of development economics at Baghdad University…I then held a several positions in the government including Director of the Bureau of Statistics, and Deputy Director of State Planning, and Governor of the Central Bank. In 1976, I headed the Iraq Foundation, Iraq’s development assistance program, active in regions from South American, Africa and the Arab world. We had significant programs in Afghanistan in those years,” he explained.
“When I think of those years, 1968-1978, they were the best ten years…There was a wealth of professional talent (working in Baghdad); we were young and eager to implement our dreams. I was 36 years old when I headed the Central Bank…If we had doubts about Saddam Hussein in these early years, we thought he’d reform. After all, he was a contemporary, just two years older than me.”
In 1978, the United Nations invited Al-Sheikhly to head the Arab Bureau of the United Nations Development Program (UNDP) based in New York. Several years later, Al-Sheikhly said the “harassments began” and he was prevented from assuming his previous role in Baghdad as Saddam Hussein instituted broad actions against individuals and their relatives whose opinions he viewed as political dissent.
Al-Sheikhly believes he became a target of the regime in retaliation for the political activities of his cousin, a former minister who was jailed in the early 1980’s and subsequently killed in Baghdad. In 1983, Al-Sheikhly decided to join an international think-tank associated with St. John’s College, Oxford, rather than return to Baghdad. “At St. John’s, we were among the first to examine the financial and trade developments that are now called the ‘new economic order,'” he noted.
Al-Sheikhly notes that he and his Iraqi-born colleagues have not allowed their economic acumen “to rust.” “People talk of the Iraqi Diaspora as if we have been idle. On the contrary, economists like myself have been working within the agencies of the United Nations and other international institutions. We have been consultants in many Arab countries. And many of us gathered around the table (in Washington) have extensive experience within the kinds of financial institutions that can assist Iraq enter the new world economy,” he noted.
What would he expect to find today if he were to resume his position as head of Iraq’s Central Bank? Al-Sheikhly replied, “Chaos, because the Central Bank no longer performs its institutional role in the economy. It doesn’t regulate exchange rates or interest rates; these decisions are controlled by the regime. In reality, Saddam and his sons control the printing presses and they are just manufacturing more money.”
Recalling the dynamism of Iraq businessmen, Al-Sheikhly said, ” I believe professionals still exist inside Iraq but they need to be marshaled. The current system offers few rewards – no jobs, no incentives, just a high cost of living crushing real economic growth.”
Asked about the Iraqi claim that U.N. sanctions have destroyed the Iraqi economy, Al-Sheikhly said he believes this claim is wholly political. “When I left the Central Bank in 1976, the nation had a surplus of approximately $40 billion. By 1990, the end of the first Gulf war waged against Iran, Iraq’s debt amounted to $42 billion. The reason why the Iran economy fared so much better (than the Iraqi economy) after the war was because Iran restricted its expenditures early on in the war. Saddam thought he could flood the consumer market at the same time he was waging war.” Al-Sheikhly underscored the debilitating effects of Iraq’s decision not to sell oil from 1990-1996, followed by politically motivated halts in production. As a result, he said, Iraq’s $42 billion of public and commercial debt has not been serviced in 12 years, rising to $130 billion.
This debt was one of several issues discussed among the Iraq economists who gathered in Washington August 6-7. They form the “Public Finance Working Group,” one of over a dozen expert working groups meeting as part of the State Department’s “Future of Iraq” project. The finance working group will produce a series of reports that Al-Sheikhly believes can serve as a basis for further discussions with other economists and Iraqi-born political activists working to shape Iraqi’s future.
The group hopes their recommendations will assist a new government in bringing Iraq’s economy in line with world markets and promote private sector development. The task they have set for themselves now is to study and report on three areas critical to Iraq’s economic future. One group of economists will give a comprehensive assessment of the current state of Iraq’s economy. A second group will examine Iraq’s need and ability to interact with the major international economic institutions. The third group will propose economic measures likely to ensure stability and development in the critical period following regime change in Iraq.
Asked if their findings would be made public, Al-Sheikhly said, “We are producing the reports first for ourselves. However, I anticipate we will be using our conclusions and reports to educate the politicians, all of whom need to understand the reality so that we are able to work effectively following regime change in Iraq. Without a firm economic baseline from which to base decisions, one risks falling into a vicious cycle,” he said.
Al-Sheikhly said he was remaining in Washington to consult with members of the Iraqi National Alliance (INA, with whom he is aligned) and five other Iraqi opposition parties meeting with senior Bush administration officials August 9. He regarded this as a very important opportunity to come together as opposition parties and jointly engage the administration in a dialogue on the future of Iraq.