Lounsbury: November 2003 Archives

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November 23, 2003

Reliability, enforceability

How did I know this was going to happen?

My cell is not roaming as it should - ah I knew it would happen. So what is the problem, the question posed itself? Is it the -to use a phrase that I did not coin- the "neanderthalically incompetent" telecom provider of the Hashemite Kingdom. (A subject that in real life provokes me to tirades. Tariffs and bulk rates.) Or is it the office.

Now, this is really my fault. You know that severance package included the old Fund paying for my phone until December end. Among other things. Well the incompetent fucks, now that they have learned that their ludicrously stupid "rescue plan" is fucked - laughed out of the room I am told - etc. they're trying to screw me. Phone has been shut.

Fuck it, on one level. However, there's a lesson here. A general lesson that also is a lesson about Middle Easern issues in general. Enforceability. There is none. Or rather it is challenging such that a severance agreement is essentially unenforceable in a legal context. The enforcement was when they were angling for retaining me for the "rescue", etc. , then they wanted to remain on my good side. That option off the table, well, fuck it. What am I going to do, sue? Sure, waste my money. Not worth the effort.

Now, this is minor and simply a point of irritation, however it is generalized throughout the system. Then you begin to see some real and serious efficiency loseses. Imagine, you have to build this into literally every stage of your business planning, the realisation that many contracts are utterly unenforceable, or if enforceable, only after expending let's ay 100 times the effort in the West.

Clearly it makes you risk averse. It also makes you want to operate on a delivery first, payment second basis - although equally for the service provider there is the desire to operate on the opposite. Trust becomes a matter of personal ties, personal ties a matter of family... And bingo, you have a clan or tribal economy with all the inefficiencies that implies.

Anyway, on a personal level I got it restored after some calls to the right people, but again, inefficiencies.

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Filed Under: Jan-Dec 2003

November 20, 2003

Istanbul

I am happy to report the people I am to meet are not dead, so that is a positive. Nasty business this, and surprising hitting Turkey.

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Filed Under: Jan-Dec 2003

November 18, 2003

Observation, cultural.

As I mentioned, I have begun consulting on a project here, interesting work but can't speak to it.

However, I'd like to share a meeting - doing some relationship development, introducing some of the firm principals to my contacts. Discussion was on a sensitive topic.

Now, my local side contacts I know well, I had a post-Iftar sit down with them to rap about the sensitivities, set up the meet and generally lay the basis for going forward. Conversation went well of course, and we spoke frankly to certain sensitivities re "wasta" - connections, influence - and corrupt practices. Even the senior fellow, who I had not met before, spoke freely and frankly. Of course, we largely spoke in Arabic. Or better, Arablish - that fine little business langauge here.

Last night we had our post-Iftar sit down with the American principals and the local side. I was intrigued at how different the interaction was. First, my local side their interaction was oddly different. The frankness rather faded a bit, above all with the Old Man, the senior fellow. I can't attribute that to knowing me, I met him only a week ago and we spoke freely and frankly. Langauge? Perhaps me speaking in Arabic put him at ease.

Certainly I felt oddly ... not uncomfortable but I noticed how bluntly direct and... brusque the American principals were. I almost felt rubbed the wrong way. Yet at the same time, I recall they were as direct when I was meeting them.

I was thinking about this last evening: I think that I switch cultural modes of expression depending on the environment, and it feels funny when they are mixed.

It was also interesting to see through almost Arab eyes, my own, the differences as the meeting went on. It went well, I may add, and I think I will put together a deal between the two parties, get a bit of a success bonus, but nevertheless the interaction intrigued me - as did my peculiar sense of being neither here nor there.

Well, intriguing to watch if nothing else.

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Filed Under: Jan-Dec 2003

Iraq: on losing

In many ways this article says all that needs to be said:

Fear Grows Among Iraqis in U.S. Employ
Several American Allies Killed in Mosul
By Daniel Williams
Washington Post Foreign Service
Tuesday, November 18, 2003; Page A14
http://www.washingtonpost.com/wp-dyn/articles/A54195-2003Nov17.html

The US lacks langauge capacity, going after the "eyes and ears" is easy. I might add that I have not terribly much confidence in the translators themselves. By personal observation in other contexts, the translators people pick up in such circumstances are rarely good, and usually come with agendas. Certainly there is no lack of agendas in Iraq.

However, the real question is how to avoid disaster.

It is harder and harder to think about this question and feel optimistic. Certainly getting monies flowing into Iraq I hope will help. I also hope that the idiocy of this "shock and awe" airstrikes on guerillas will end in favor of more of a spy game. I remain firmly convinced that only by minimizing Iraqi casualties, minimizing "collateral damage" and by engaging in no small bribery can the negative evolution be stopped.

Will that happen?

Sadly I think not, everything I hear suggests the Bush Administration is in a muddle, stumbling along with reactive policies more aimed at trying to get good spin for elections than truly working on the problem.

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Filed Under: Jan-Dec 2003

November 17, 2003

[EDIT] Iraq: Further Discouragement, a local view (a long tirade and analysis in one)

I just came away from a fundamentally discouraging conversation with the head of the US Embassy's economic section here. They're deeply involved with Iraq issues, a lot of the economic planning is running through Amman. In fact, as I noted on a blog elsewhere, I recently had some meet and greets with the folks who are working on consulting on the Baghdad stock exchange - they're running out of here as (i) Iraq is too fucking dangerous to risk high priced folks; (ii) there are historical linkages between the exchanges, so the synergies are natural.

(Let me add this aside: I was having a convo re the situ with one of the Corporate lawyers along on the team, a NYC based chick with substantial experience in East Euro. post communism. I advanced the ob that the situation was somewhat like E. Europe and she went ballastic. Nothing like E. Europe, in E. Europe we were loved and people were "not fucking shooting at consultants." Now I am not sure about the loved, and in fact I agreed, but I was surprised by the vehemence. I presume she's a Republican by nature, but anyone on the ground here can see things are going to shit and there needs to be changes.)

[EDITED to add not: oops I left out the key word that reversed her meaning.

Back to the point, rapping with the aforementioned Embassy contact, I noted I had the above convo (the aside) and observered CPA needed help. My man seemed quite moved on this point, stating that at present efforts are in complete chaos with the June end of occupation thing - there was no prep on this, it's been pulled out of the fucking hat with no clear idea of how to handle transition. He indicated no one knows what is going on, planning for the $20 bill is in chaos as former plans were no way along this sudden volte face. DoD is fighting to retain responsibility over economic issues, although they've done a piss poor job so for (my ob not his, this charcterization), and State and USAId are pushing back (his ob, not phrasing though).

Most worringly, this fellow, very senior, was really pessimistic on current policy. Normally he's pretty cagey, but this time no. I think, like me, he's getting a sense of impending doom. I'm really very serious about that, I feel feel failure creeping up, and perhaps spectacular failure.

I find the military response so far to be deeply puzzling, for example. Given my sense of what the intel is, was and will be, I deeply feel that airstrikes, use of missiles on distant targets and the like can only go wrong. What is needed is counterinsurgency work, which involves on the ground, involves care and involves winning back the population. My Iraqi contacts have grown more and more disgusted, and airstrikes -however much they may preserve precious US soldiers' lives, are a penny wise pound foolish approach (in terms of lives). Certainly they never helped the French in Algeria.

Further, I recall from the Iraqi conference I attended a few weeks back now (bloody hell, behind on my summ of that) an Iraqi standing up to denounce the constant references to the Sunni Triangle. Evidently a Sunni (and pro American by the way) he expressed a growing sense of frustration and denounced the characterization in re issues in the "Sunni Triangle" stating clearly, "this is turning people against you."

Yet the Administration's response so far is chaostic, unplanned, reactive and has the air of desperation.

I no longer feel that the economic opportunities I saw a year ago in connection with this policy, for all that I thought it politically stupid, will appear. The risk of a real crash is now growing and I am not at all, on my ring side seat, encouraged by the application of responses.

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Filed Under: Jan-Dec 2003

November 11, 2003

Iraq: Phone Licenses (bis) - I questioned the Orascom award, well take a look here

Well, as those of you who have been reading my comments for a while know, I found the Iraq phone license awards, in particular the Central region award peculiar. I know the Orascom group well and I found it very strange indeed that these folks, who had severe cash flow problems with severe debt issues that led them to dispose, mere months before, of their Jordanian license, won a difficult contract for central Iraq, the demographic heartland.

In The Financial Times we have the following story:
US authorities in Iraq probe phone contracts
By Demetri Sevastopulo in Washington
Published: November 11 2003 0:32
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1066565782112&p=1012571727088

Quoting the essentials:
"US authorities in Iraq have put on hold hundreds of millions of dollars worth of mobile telephone contracts, while they investigate allegations that the bidding process was hijacked by associates of the new Iraqi governing council."

Okay, not surprising really.

Is it worth the delay? I don't know, certainly I would have grave performance concerns in re Orascom - and I don't trust the group.

"When the Iraqi Ministry of Communications last month awarded three Middle Eastern consortia two-year licences to build and operate wireless phone networks, the deals were heralded as a breakthrough for regional operators willing to invest in the new Iraq.

But the US-led Coalition Provisional Authority in Iraq has been advised to postpone signing the contracts, according to a US administration official speaking on condition of anonymity. CPA lawyers in Iraq made the recommendation to delay signing the contracts for 10 days to allow time to investigate claims of cronyism by the Iraqi authorities in awarding the licences, the official said."

Now here is the part which is the most interesting - and may I say, well, you heard my doubts first?

"The request is understood to focus on the role of Nadhmi Auchi, the Iraqi-born billionaire businessman, in the Orascom group, one of the successful consortia."

Well, I know my market. I was surprised, however to find the implication that the Governing Council people had such influence over the process.

"The CPA has become concerned that evidence of corruption would reflect badly on the US authority, which played a central role in evaluating the bids."

No kidding, it rather seems perhaps they were duped? Not surprising. They have few people with regional experience, and fewer people with regional business experience.

Now this part I find amusing:
"The delay to the signing of the mobile phone licences comes amid broader US concern about the workings of the Iraqi governing council. Senior US officials have voiced frustration that the interim body of 25 hand-picked Iraqis is putting their own political and economic interests first."

Welcome to the Middle East kiddies, and welcome to the workings of a society that has not put much weight in highly theoretical national level identification, despite the facile appeals on the part of Iraqis themselves to "Iraqi people" and the like - they usually mean, "My Family, and then the rest of the guys."

And I was amused by this too:
"Another senior CPA official said the US occupying authorities have been struck by the resilience of corrupt business practices in Baghdad, where members of the new Iraqi regime have used power for personal gain."

Again, welcome to the Middle East my little innocents. Transformation indeed, all this talk of transformation is blather for the pre-fooled and the starrey eyed Neo Con dupes.

Finally: "Commenting on the Iraqi ministry's award of the licences, a US official said on Monday: "The question is who did what due diligence, and when?" Amid increasing suggestions of cronyism in handing out contracts, the CPA is preparing to establish a new Iraq Infrastructure Reconstruction Office to oversee how contracts are awarded."

Indeed, and yet what level of due diligence is really possible? I have done plenty of due diligence in this region, and it is in fact a deep pain in the ass. Lies, opaquesness, a sense that foreigners are naturally screwable out of their money.

However, at the same time, as I have noted many times, expectting contracting in Iraq to be like in the states, expecting one can impose "best practices" uniformly across the country is to engage in "transformation" fantasies.

I do expect and hope CPA will do its best to limit corruption, but frankly, getting things rolling is more important than making things perfect. Indeed I was more encouraged by this article from The Washington Post on some Iraqi efforts to ge their cement factory up and running.

Success, Traced in Cement
Iraqis Rebuild Factory at a Fraction of Estimate
By Ariana Eunjung Cha
Washington Post Staff Writer
Monday, November 10, 2003; Page A01
http://www.washingtonpost.com/ac2/wp-dyn/A20273-2003Nov9?language=printer

I would not want to hold up the no doubt half assed reconstruction effort on the cheap as the model for getting things done in general, but rather suggest that compromises are going to be necessary early on. Enabling Iraqis to get things sort of kind of running and then, as economic activity recovers, go for the nice new reconstruction - to the extent one can seperate the activities of course - is likely a better bet. Unfortunately this also suggests tolerating in the short term all kinds of bad practices that really do need to be changed or at least to see some degree of movement for the economy to truly become the "beacon" the simpletons speak of.

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Filed Under: Jan-Dec 2003

November 09, 2003

Iraq further articles to share

Quickly then, must be off now, a few articles I want to draw attention to.

Among the most important, in my opinion:
Another American Casualty: Credibility
By Zbigniew Brzezinski
Sunday, November 9, 2003; Page B01
http://www.washingtonpost.com/ac2/wp-dyn/A14360-2003Nov7?language=printer

Brilliant and well put. A must read.

Then this, which I find credible:
November 09, 2003
Chalabi plays favorites in the game of Iraqi reconstruction
http://www.menareport.com/story/TheNews.php3?sid=262911&lang=e&dir=mena

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Filed Under: Jan-Dec 2003

November 05, 2003

Arab REgion Business News: A subject I have to return to.

This evening I was sitting watching the evening business reports on al-Jazeerah and al-Arabiyah and a thought struck me: I am learning rather a lot about European and American business conditions, investing trends, etc. and literally nothing about the very region these fellows cover, supposedly.

In some ways this is not at all extraordinary: capital flight has meant vast sums of Arab money are in the Euro and American markets (although well placed sources characterize capital flows now as being to Europe, Asia and staying in the region. Arab flows to the US have all but dried up). Further to that, there is no transparency here. Even audited reports have to be kicked around a bit. Enron deceptions are, well, 'adi here. In addition I can't say that even the Arabsat journo standards are really all that amazing, but then business journalism, with rare exceptions such as FT is not the most ... critical field of journalism. A reader here, by the way, had a note on advert market that I would dearly like to quote from or use.

So, we have a combination of lack of press freedom; a tradition of punishing the messenger; little transparency, even from listed companies (I love being told to write a letter of justification in order to get an annual report as a potential investor. The concept of investor relations is utterly absent.); poor business journalism skills by any standard and a region only recently having begun to open up to liberalization of markets - journalists tend to come from backgrounds that put them ill at ease with economic liberalization.

That combination means that on Arab TV one is likely to learn less about the eocnomy than if one follows say, The Economist or at least EIU.

It's really sad, truly sad. Lack of information in the economic field really tends to bound potential entrepreneurs imaginations - or worse, leads them to try to model themselves after the half assed visions of Western economic developments rather than having a clear idea of how to tackle the actual economic landscape.

More to push underdevelopment.

If I thought I could overcome the barriers, I would fund a ARab Biz & Econ. media group. There are some good pubs by the way. For those readers who can follow Arabic, I highly recomend the monthly, al-Iqtisaad wal-'Aamaal (which they translit. with a K, lebs.) - the October issue by the way had a long interview with Bremmer. I meant to write up a comment on it, now I have reminded myself, I shall have to add it to the growing list of things I have to do.

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Filed Under: Jan-Dec 2003

Knowledge Question: figures on US MENA spending

Wondering if anyone out there knows of a nice little site that may have pulled together the recent data on US spending in the Middle East? You know, the MEPI program, latest Iraq approp. and prior approp on recon. Afraid I am a bit ignorant when it comes to getting information on US budgeting.

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Filed Under: Jan-Dec 2003

Iraq: the violence ticks on

Attacks on the green zone, Spanish diplomats pulling out. Well, I suppose the Administration and the "pre-fooled"'s media campaign of roughly two weeks ago that the "Media" is exagerating problems in Iraq is stillborn.

It makes me recall my arguments on the SDMB with the "pre-fooled" -Sam Stone, december etc - who blithely kept telling me that my reports, reporting back from what I was hearing from Arab, Iraqi, and UN as well as CPA contacts said things were not progressing, etc., were wrong. I did not have the big picture, or whatever. I am sure Stone in particular is in full back-peddle or shamed silence now.

I wonder what those claims would look like now? In many ways it is a deep pity I was right. I would be looking at some really interesting opps for raising an Iraq Fund, etc., instead of this demi-world of "well it has to get better" blather. Now, raising funds, I am not going to gainsay, but at the same time, no, it does not have to get better, it can bloody well get worse. I am hopeful, I would add, that the massive appropriations bill, US $18 odd billion for reconstruction, for all that is it six motherufcking months late, will help get things going.

I remain worried, however, that the idiot ideologues who see Iraq as a blank slate on which they can inscribe their wet dream policies, flat taxes, perfect markets, etc. "transforming" the Middle East will be pushed aside in favor of pragmatism and pragmatic approaches to reworking the Iraqi economy above all, to help get buy in on the Iraqi side. Without that, well let me pimp my favoriate movie in this connection, The Battle of Algiers aka la battaille d'Alger. Colonial warfare, no holds barred. A must see, I note.

Now, a few items on this subject to draw attention to:
Iraqification: Losing Strategy
By Fareed Zakaria
Tuesday, November 4, 2003; Page A2
http://www.washingtonpost.com/wp-dyn/articles/A60368-2003Nov3.html

An excellent piece on the dangers of rushing Iraqification for short terms reasons. I find myself oddly in the camp of the same gullible fools who lapped up the initial war justifications, in fearing the Adminsitration will pull a humiliating and transparent 'Iraqification' withdrawal and compound their errors.

Then there is this, from the writer of the "talking points memo" website, which I have grown to like although its politics moderately annoy me.

However, the writer, Marshall, rightly skewers the Orewellian habits of the present Administartion in rewrting its own past comments.

Frankly there is nothing I hate worse than that, it is intellectually dangerous, and leads one into terrible errors - certainly the habit did nothing for the Soviets who were past masters of such games.

Silly word games and weapons of mass destruction
http://www.hillnews.com/marshall/110503.aspx
(also see http://www.talkingpointsmemo.com/)

I also wish to share this:
OP-ED COLUMNIST
Death by Optimism
By NICHOLAS D. KRISTOF
Published: November 5, 2003
http://www.nytimes.com/2003/11/05/opinion/05KRIS.htm

Do read it, Kristoff makes some very fine points on the degree to which our fine fellows, Rummy, Wolfie et al. fooled themselves. Selective reading of information, ideological blinders, imposing what one "knows" on actual data. I rather like Kristoff's sly comparision btw Sadaam's habits and Bush's.

Well, a quote is inorder: " Evidence suggests that Mr. Bush and Dick Cheney may have actually believed that our troops would be, as Mr. Cheney predicted, "greeted as liberators." The administration chose to rely not on intelligence but on wishful thinking, and it became intoxicated by the siren calls of Ahmad Chalabi, a silver-tongued charlatan.

I wish administration officials were lying, because I would prefer hypocrisy to delusion � at least hypocritical officials make decisions with accurate information.

Policy by wishful thinking is crippling our occupation. Initially, U.S. officials didn't restrain looting because they regarded it as celebratory high jinks. Then, confident that security was in hand, they disbanded the Iraqi Army. They didn't push hard to bring in international forces." (emphasis added)

I rather agree.

Ah yes, one more quote, as I can not resist: " Mr. Cheney has cited a Zogby International poll to back his claim that there is "very positive news" in Iraq. But the pollster, John Zogby, told me, "I was floored to see the spin that was put on it; some of the numbers were not my numbers at all."

Mr. Cheney claimed that Iraqis chose the U.S. as their model for democracy "hands down," and he and other officials say that a majority want American troops to stay at least another year. In fact, Mr. Zogby said, only 23 percent favor the U.S. democratic model, and 65 percent want the U.S. to leave in a year or less.

"I am not willing to say they lied," Mr. Zogby said. "But they used a very tight process of selective screening, and when they didn't get what they wanted they were willing to manufacture some results. . . . There was almost nothing in that poll to give them comfort."

Sure, we're making some progress in Iraq. A hand grenade sells for $2.50 now, compared with 10 cents a few months ago. But U.S. troops now face 25 to 30 attacks daily, compared with 15 to 20 in September. Last month 33 Americans were killed, twice as many as in September."

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Filed Under: Jan-Dec 2003

November 04, 2003

My Thoughts on Israel, Arabs and the Occup of S. Liban, c. 1980s

My dear Publius asked me:
" Actually, I do have a bit of a special request: what do you know about the attitudes of the Lebanese Shi'a towards Israel during and after the '82 invasion of Lebanon? In particular, I'm curious as to why you feel the Shi'a turned against the Israelis so decisively after initially welcoming them as liberators from the PLO and its cronies (or so I've read). Was it just inevitable that the the honeymoon period would end, or was it a matter of unnecessarily heavy-handed Israeli policy (i.e., that unpleasant incident during the Imam Hussein celebrations in Nabatiyeh) backfiring on the invaders? Also, any comments on how this might apply to Iraq?"

Well, now you're delving into an area where I expect your reading is as good as mine (or so your comment indicates), so let me give a sort of qualitative overview type answer.

A couple things I think explain the dynamic.

First, however much the Shi'a hated the PLO's crony shadow government, their corruption and violence, once there was a Jewish occupation, it was inevitable that things would turn. Had the Israelis come in quick and gone, there would not have been the same dynamic - regardless of what the Israelis did. The issue of the Jewish state touches raw nerves in the region, even among the most moderate. Xian or Muslim, the Arabs generally feel like they got fucked over (which they did, although of course their sheer idiocy, tribalism, incompetence and general stupidity in the period did much of the fucking over, a self fucking over if you will - but then many Arabs are aware of this and feel shame, and in this region, shame must be externalized on the other.).

Second, as I believe you can see in the Occupied Territories, it strikes me that Israel is stuck with a number of unreconstructed neo-Colonialist habits. I think of this in terms of parallels between East and West Germany and de-Nazification. A loaded comparision, I know, by the way, but it's the best one I can think of. Actually an altnerate might be American attitudes towards race versus Latin American. But let me get back to the E. and W. Germ. analogy.

Generally speaking it's fairly widely agreed that the uprooting of Nazi ideology, above all racism, has been far more thorough in the West than it was in the East. In the West, in a democratic context, the Germans were forced and chose to confront the demons of the past - not to say anything or anyone is perfect by the way. In the East, under Sov. occupation, the New Soviet Man was ipso facto, by virtue of the socialist system, etc., "free" of such things - actually another parallel arises in my mind, between the emerging respect for minorities and confrontation with racism in the West, versus the denial, coverup and frankly in my view rampant racism in the Soviet Union.

The analogy I am drawing here then is with the Israeli experience, where esp. the Ashkenazim fleeing from Europe and genocide, obviously imported much of Europe's racialist-cultural superiority thinking with them. It certainly showed up early on in intra-Jewish tensions between Sephardim and Ashkenazim, but also in their writings about the Arabs, I believe the Israeli historian Beny Morris drew attention to parallels btw early cap. Z Zionist settlers oddly mixed feelings towards the Arabs, largely as prim. savages, and those from the Americas re the Indians. Might not have been Morris, btw, could have been another Isr. hist. I read.

Now, this is not to paint with two broad a brush, but generally my sense is that Israelis never confronted a certain 19th cent. quasi-racialist dehumanization of the Arabs, as they were in part quite rightly protected by their own very legit sense of suffering.

At the same time, it strikes me that the habits of Israeli security apparat. dealing with Arabs show this: e.g. as I comment on a few months back here, the use of snipers with live ammunition to break up demos (even if unruly) of Israeli Arab citizens is truly extraordinary and very much suggests a deep dehumanization of even their Arab citizens.

Now, this is not to fall into the trap of just condemning the Israelis - I focus on that here bec. it is rarely heard in reasonable terms in the West.

The Arabs suffer from very similar blindnesses: e.g. in re race and ethnic discrimination, very often Muslim Arabs use the pretext of Quranic injunctions against discrimination to declare themselves free of discrimination, although if you speak to any dark skin Muslim dealing with lighter skinned Arabs, they will (if there is a degree of trust) bitterly complain about prejudice.

Blindness.

So, returning to the issue of the occup. of Southern Lebanon, I suggest that the unconscious habits of the Israeli security apparat. made tensions inevitable.

Further to that, as we see in Iraq, an occupier has an uneviable position in this modern era of political consciousness, where it is easy for a violent minority to push the occupying forces into a set of habits in response to attacks, that progressively alienate the population.

Actually, in regards to the US forces and shall I say, not very well prepared soldiers in a strange cultural climate, I can see much of the above playing out.

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Filed Under: Jan-Dec 2003

Iraq spending passed.: commentary

And none of this idiotic loan business either.

A good day. I predict that well spent, this money will help turn the corner in Iraq.

On the actual package, this bit from AP reporting (which was cut, I noted from the NYT take up of the piece) is in fact among the most important bits, although the journo editors did not get it:

Senate OKs $87.5 billion Iraq aid package
Approved on voice vote
Tuesday, November 4, 2003 Posted: 0538 GMT ( 1:38 PM HKT)
http://edition.cnn.com/2003/ALLPOLITICS/11/03/sprj.nilaw.senate.iraq.ap/
" A business consultant told the lawmakers that U.S. t
axpayers are paying excessive reconstruction costs because small- and medium-sized Iraqi businesses that win contracts are charged exorbitant interest rates by Iraq's most powerful families. The consultant, Timothy Mill, urged the creation of a lending fund from $500 million in seized Iraqi assets. "

Bingo, exactely what I have been telling you all - although I would say it would be better to have mixed money and oversight in there - in regards ot the oligarchical families and financing the SME sector.

I've written to Embassy and the like to kick this around with them, we desperately need to get some movement on ideas like this in order to see some practical paths for financing real change in Iraq. I passionately believe that if one brings means to finance the aspirations of the excluded "potential but always excluded entrepreneurs" - the middle boys - one checkmates the oligarchs' dead hand and one begins to win the battle people say they want to fight.

Sadly I note that not one big metro edition picked up this key observation. Not one.

Now, I want to draw attention to the following:
OP-ED CONTRIBUTOR
Make Baghdad Pay
By MARK MEDISH
Published: November 4, 2003
http://www.nytimes.com/2003/11/04/opinion/04MEDI.html

Let me quote and comment:

"The economic consequences of regime change in Iraq could get worse if the United States, Great Britain and their coalition partners act on radical impulses to make grand gestures. A case in point is Iraq's sovereign debt.

[.. ommited figures]

What is to be done? Already we hear calls from the right and the left to impose what might be called a "zero option"; that is, cancellation of Iraq's debt. From the right, Richard Perle and William F. Buckley Jr. have called for freeing Iraq of its "odious debt" on moral grounds. From the other end of the political spectrum, Oxfam and Jubilee Iraq have taken much the same position, while Joseph Stiglitz, the Nobelist, is advocating relief on more prudent grounds, citing the lessons of the 1919 Treaty of Versailles, which required Germany to pay heavy war reparations."

What I find most amusing is the ideological hacks like Perle and Buckley - I am surprised by his presence here- have jumped on this. Ah well, I suppose one can rarely count on ideological consistency when suddenly it's your idea on the line. Like my dear fellow business men who rail on against others tax breaks and subsidies, but of course ours are just fine.

What I am most disgusted with is the volte face of the ideologue-conservatives, who (rightly in many respects) argued against just such concepts (odious debts, debt cancellation) only a few years ago when the third world debt relief movement was hitting the media - I am thinking of esp. 2000-2001 I believe. Now suddenly they (the ideologues) have a dog in the fight, ah well now the idea doesn't seem something to be dismissed.

Base Hyprocrites.

Returning to the commentary:
"These recommendations, though doubtless well intentioned, are misguided. A country like Iraq, with the world's second-largest proven oil reserves, should be expected to be able to pay its obligations. Furthermore, the moral charge that the debts are odious is simply too sweeping. Acting on it would be bad for Iraq and would set a damaging precedent for the international financial system."
(emphasis added)

As I have argued in the past.

Now to some meat:
" For Iraq to normalize its external financial relations, it must respect one of the first principles of the rule of law: contracts should be honored. Without this presumption, markets cannot work. The threshold for overturning the presumption must be kept high to prevent chaos. In the case of Iraq, the threshold has not been met.

Several myths have gained currency in the debt debate. The first is that Iraq's debts are invalid because they were accumulated under Saddam Hussein's regime. This is overbroad and misleading. First, much of the debt, including the bulk of what Iraq owes to banks and corporations, went to finance civilian construction � roads, hospitals, apartments and utilities. By contrast, military-related debt can and should be separated out and perhaps even forgiven.

It's worth remembering, too, that much of Iraq's debt was incurred in the 1970's and 1980's, before sanctions were imposed, when the United States was willingly doing business with the Hussein regime."
(emphasis added)

Indeed, in

Further point worth quoting here:
"But there is an important difference between punitive reparations and commercial debt incurred by a country for civilian projects. Moreover, in the last decade countries like Poland, Egypt and Yugoslavia have escaped their heavy debts not because their debts were forgiven but because the financial community created reasonable long-term repayment plans."
(emphasis added)

As I have argued should be done.

Some final wise words:
" Iraq is entitled to have its special case heard. So far it has been granted an official moratorium through 2004. When the international community decides to begin tackling the wider debt problem, it should follow several simple maxims: avoid radicalism and bad precedents; promote an orderly, market-friendly debt repayment schedule based on financial analysis; and encourage creative solutions, including debt swaps.

Finally, for solutions to be meaningful, Iraq must negotiate with creditors on its own behalf. This, after all, is a major aspect of sovereignty.

The Iraqis should also favor an orderly debt repayment process. The country has been a financial rogue state for the past 12 years. What the new Iraq needs is a reputation for honoring its word."

Wise advice. Why does it have to come from a Clinton Admin. official. Once upon a time I would have expected such advice to have been coming from Republicans. It's shameful that people like Buckely, Perle etc. allow short term political expediency to overcome the clear

Posted by The Lounsbury at 11:00 AM | Comments (0) | TrackBack
Filed Under: Jan-Dec 2003

The monthly reader poll [edited, mvoed forward]

[Edited, moved forward one day:]

Another late night, fucking data and fucking impossible to deal with inconsistencies.

But I just recalled my newly minted tradition of the monthly reader's poll of observations, comments or whatever.

I'm afraid my customer service quotient has been low as the obvious obsessions have taken over. I still, owe, I know the report on the conference. Will find time, after I finish this White Paper and the analysis.

Posted by The Lounsbury at 12:15 AM | Comments (0) | TrackBack
Filed Under: Jan-Dec 2003

November 03, 2003

On Kurds & Investing

Joan wrote in comments: "Would be it smart to steer money up north to the Kurds? They've been on their own for awhile, and they're desperate to keep as much independence as possible. Economic success would be especially important to them right now."

Well, there we have the dangerous nexus of politics and making money.

First, I do not see Kurdistan as a viable long-term independent entity. If Iraqi Arab nationalism does not undo it, the Turks will. As regretable as this may seen, Kurdistan puts a lot of countries borders in play, in a highly unstable set of circumstances. That will not result in any peaceful or stable resolution, however superficially appealing.

Given the uncertainty, and potential for expropriation, directing investment to the Kurdish north, if we are speaking to fixed investments of any size, is not really a safe bet, any more than the more clearly unstable central region. The southern region may be the safest relative bet, although this is highly bet as well.

In the end, the Kurds' desperation to keep a quasi-independance is not a good objective reason to direct investment there, and indeed may very well be a reason to proceed with extreme caution. Now, if one is looking for places to invest in smaller projects, let's say in the less than one million range, and above all with minimal investment in fixed assets, then one should think about the Kurdish region as a distribution platform, perhaps warehousing and light assembly or packaging work. I looked at a deal involving Nestle which would have worked off of Turkish connexions. Extreme instability, however, led to the conclusion that it was not worth going in early. In the present conditions in Iraq, the pirates, the fly by nights and the black marketeers just can not be beaten.

In the end, if we want to see serious investment in Iraq, the proper conditions need to be established. Not bullshit pretending things are fine when they are not, but roll-up-the-sleaves-admit-things-are-fucked and get realistic about achieving step by step improvements. The money goes a long way to helping that, the ~$18b, but itsnly going to seriously help if it is mobilized in the proper context and with realistic goals. Not this khayali pie in the sky 'transformation' bullshit, but rather step-wise movement of a sickly Arab socialist economy riven by semi-anachronistic tribalism and ethnic cleavages and dominated by clan economics, to an economy and society that while not "transformed" has the tools to make progress in the right direction.

That's one reason I see utilizing things like venture funds as a way to get real change. You get investment in small players, help break out of the clannish structures and give people hope and realistic means to achieve material aspirations. This is not, let me repeat that, not going to remake Iraqis into little Americans, nor transform the region. That's messianic crap. What it may do, however, is provide a modest wedge to get realistic movement towards a model that can heal the largely dysfunctional socio-economic structure of Iraq and in many ways its neighbors. I would be very happy if we fixated on the economics - obliged social transformation (social engineering in the typical red meat conservative parlance) pushed by foreigners is going to fail so I prefer to let the Iraqis, on their own get movement in human rights, social blah blah. It'd be great if Iraq evolves a constitution with progressive rights for minorities, women, etc. but let them decide that on their own. Fake obliged progress unsupported by the population is what we've seen in most of the Arab world's faux secular regimes, no need to set up yet another Potemkin village for the ideological hand wringers and Islamophobes.

Posted by The Lounsbury at 01:15 PM | Comments (0) | TrackBack
Filed Under: Jan-Dec 2003

November 02, 2003

Some random thoughts on Iraq funds

Having been asked to write a memo and analysis of things here, and how to make a Fund with US money work, I've been scurrying around trying to gather informaiton and the like. Frankly, I sometimes wonder if Funds work in this region, the barriers to efficient operation are immense and without close oversight, there are strong tendancies to corrupt practices. Ergo the present mess I am working with.

On the other hand, I see venture type funds as one of the few ways to push real change, and open up real economic opportunities for the excluded masses. The single most nefarious influence in this region is the nexus of corruption, state and private, with oligarchs who are more willing to spend their resources squabbling over a decling pie than to try to bake bigger pies. Even when they talk Western style, the habits that emerge are those of the zero sum game and every family network for itsself. Forcing rationalization is huge pain in the ass. Families keep zombie companies alive for "prestige" reasons and so little Mahmoud will have a business to run.

I suppose I shall try to craft a set of recommendations that are sensible, but then will anyone pay attention, or will expediency work against getting things done for the long term best result?

Posted by The Lounsbury at 02:03 PM | Comments (0) | TrackBack
Filed Under: Jan-Dec 2003