U.S. says Iraq’s economy grows, but the insurgency still costly
BAGHDAD, Iraq – Iraq’s economy is expected to grow by 4 percent this year and by double digits in 2006 as reconstruction efforts begin to bear fruit, a U.S. official said Thursday. But the cost of the insurgency remains high, both in financial and emotional terms.Iraqi merchants complain that business has dropped off because bombings have terrorized customers and say the government must do more to help them.Dan Speckhard, the U.S. official in charge of reconstruction in Iraq, said 16 percent to 20 percent of reconstruction money goes to providing security for businesses. He said the cost of rehabilitation projects is high because the security situation is “tenuous and difficult.”Nevertheless, Speckhard said, Iraq’s “fundamentals are there.””Iraq’s economy will grow at 4 percent this year and accelerate into the double digits next year,” Speckhard said. “Per capita income is nearly double what it was two years ago, (and) sales of consumer and durable goods are booming.”Speckhard spoke to reporters a day after President Bush said economic progress in Iraq is lifting hopes for a democratic future despite “fits and starts” in the reconstruction program.Although unemployment remains a problem, more than 30,000 new businesses registered with the government in the last year, Speckhard said.In Baghdad, where 23 percent of Iraq’s 27 million population lives, business owners have charted ups and downs.Kadhim Morshed Salloum, a clothing merchant, said that in the weeks after the fall of Baghdad, “demand increased and commerce flourished.””But during the last six months, the market has been fluctuating for various reasons,” he said. “Many families stopped going to the market because of the security situation. Before, many women used to come by themselves, but now they go out only with their husbands or brothers.”A constant complaint in Baghdad has been electricity, and it has become part of the battle against insurgents, said Brig. Gen. Bill McCoy, the commander of the U.S. Army Corps of Engineers in Iraq.Power plants in Iraq have the capacity to generate 10-12 hours of electricity a day for most of the country, and those outside of the capital mostly receive it, he said. But Baghdad remains a problem, with an average of only four hours a day in November because of downed transmission lines.Iraq’s oil sector, also hampered by unrelenting insurgent attacks, appears set to pump less crude in 2005 than last year’s disappointing showing and far less than under Saddam Hussein. The only bright spot is that near-record oil prices have softened the blow by boosting export earnings.The attacks have made it all but impossible to attract foreign expertise needed to rejuvenate the rusty infrastructure, drill new wells or take any number of steps toward increasing production or exports.U.S. officials have long cited progress in Iraq marked by setbacks along the way.For example, Bush pointed to the northern city of Mosul, 225 miles northwest of Baghdad, as an example of progress in curbing the insurgency and building up the local economy.Maj. Gen. Rick Lynch, a coalition deputy chief of staff, said U.S. forces have not pacified Mosul although they do have control of the city and have killed many al-Qaida in Iraq leaders who were based there.”We have had a reduction in enemy activity in Mosul, to include last month a 40 percent reduction in enemy activity, but they are indeed still there and we continue to conduct operations against them,” he said. On Thursday, a car bomb exploded near a U.S. patrol in Mosul, causing no casualties.Despite tenuous security, Hamid Shabki, a Mosul official, said about 25 reconstruction projects were under way there, each worth about $25 million.”We started with 20 schools in different parts of the province, a heart surgery center, improving electricity” in addition to two sewage networks and a center for a dentist, he said.In his speech, Bush also cited progress in Najaf, a largely peaceful Shiite city 100 miles south of Baghdad.Haidar al-Mayali, the local official in charge of rebuilding, said the Iraqi government has spearheaded 76 projects involving contracts for $48 million.He added that coalition forces are working on 63 projects including 21 involving water purification in different parts of the province. Eight other water purification projects are still under construction, he said. Two hospitals were renovated at a cost of $20 million, and $15 million has been allocated to build 10 new health centers, al-Mayali said.While the Najaf province received $50 million from the Iraqi government for reconstruction projects, the southern province of Basra was earmarked only for $620,000. That’s a small amount of money for a province that suffered from wars and negligence during Saddam’s rule.Ismail Khalil, a Basra municipal official, said there have not been any major projects thus far.Kadhim al-Moussawi, head of the media department in Basra, said there haven’t been any new projects for hospitals or clinics. “Development in the medical sector is only 5 percent from what is needed,” he said.The security situation slightly worsened over the past six months, police Lt. Col. Karim al-Zeidi said. Currently an average of four explosions a month occur in the province whereas previously there used to be one a month, he said. He gave no reason for the increase but residents say it’s a result of power struggles among rival Shiite militias who virtually control the city.Engineer Sabah Hassan, who works at the Basra power station, said there are more power cuts now than a few months ago.Speckhard said the Iraqi government has started receiving more financial support from the World Bank, Japan and other donors.But Speckhard added that Iraq continued to have a serious unemployment problem. Reliable figures are unavailable.A study by the Brookings Institution estimates that as of September, unemployment stood between 27 percent and 40 percent nationwide – down from 60 percent in the months after Saddam’s fall in April 2003.”The size of the challenges that Iraq faces in its infrastructure are very significant and what we are doing is helping you get started on improving that infrastructure,” Speckhard told an Iraqi reporter on Thursday.—Associated Press reporters Qassim Abdul-Zahra in Baghdad, Sindbad Ahmed in Mosul, Abdul-Hussein al-Obeidi in Najaf, Abbas Fayadh in Basra and Jim Krane in Dubai, United Arab Emirates, contributed to this report.