Bremer sees economic freedom as vital to Iraq's future

The successful reconstruction of Iraq will require that newly acquired political freedoms be accompanied by economic freedoms and the reversal of "decades of economic mismanagement" by the former Ba'athist regime, says Ambassador Paul Bremer, the top U.S. civilian administrator in Iraq.

"The nation's liberation would be incomplete if Iraqis were secure in the persons but not their property; if Iraqis looked forward to rising political representation but stagnant living standards," he said to a June 22 plenary session of the World Economic Forum (WEF) meeting in Jordan.

The Iraqi economy was in a shambles even before the war, Bremer said, noting that more than 50 percent of Iraqis were unemployed and about one-third of gross domestic product (GDP) went to military spending. About 60 percent of the population still depends on government food rations.

"Between militarization, misguided central planning and outright theft, for decades Iraq has experienced pervasive misallocation of resources," Bremer said.

In the coming months, policies will be set in motion to re-allocate resources from state enterprises to more productive private firms in Iraq, Bremer said. U.S. planners expect small and medium-sized firms in Iraq to play a vital role in providing employment, and believe that lifting barriers to trade will help raise productivity.

Bremer said such changes must be accompanied by fundamental reforms. Reducing subsidies to state-owned enterprises should coincide with the establishment of a humane social safety net, he said. Similarly, a private sector cannot thrive without "a clear commercial code, honest courts, low barriers to entry and transparent corporate governance arrangements."

He acknowledged the difficulty of the task, but said Iraq begins the process with clear advantages, including potentially fertile farmland, an educated population and oil wealth.