We're the Military and Airpower Guys of Jonah Goldberg of National Review Online + a stray we found wandering around looking lost. All original material JHD, BHD, JR, WT, and KA 2003-2010 http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html Sat, 24 Mar 2012 15:32:09 Z Movable Type 4.12 en Copyright 2012 http://www.rssboard.org/rss-specification Final installment of my interview with Ambassador Charles Ries, the senior American heading up economic transition and development in Iraq (click for Part I and Part II)... According to Ambassador Ries, a healthy Iraqi economy will be built upon two major sectors (petro-chemical and agricultural), as well as the smaller sectors of tourism and light manufacturing. Growth and development of these areas will fuel Iraq's economic reconstruction and recovery. The petrochemical sector awaits only the Hydrocarbon Law to open up opportunities to the large "outside" firms that will be able to explore, develop and produce in greater volume than currently.... http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html Tue, 11 Mar 2008 06:08:28 -0600 That means foreign goods (including agricultural goods) will be cheaper than domestic goods. That will make it hard for anything, light industry, agriculture, tourism, etc. to compete with imports. (Tariffs are no solution; they will just jack up the exchange rate to offset their effect.) While Iraq needs many things to rebuild their infrastructure like cement, etc. However, other countries around the region, including Dubai, India even Saudi Arabia have extensive building projects underway that competes for these resources. In short, there is a huge market for things like cement. I would also keep in mind that, while the cost is rising on the external market for oil and having some impact internally, Iraq still subsidizes its oil and gasoline to the public, though much less than it used to. You have to know the difference between what effects the external market and what will effect the internal market. ]]> http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html#comment-70631 http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html#comment-70631 Tue, 11 Mar 2008 12:53:02 -0600 My understanding from the interview is that pouring oil revenue back into infrastructure rebuilding is exactly what has been and will be done. http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html#comment-70621 http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html#comment-70621 Tue, 11 Mar 2008 09:00:35 -0600 Big problem is the so-called "Dutch Disease". As long as oil prices remain high, this will result in an overvalued exchange rate. That means foreign goods (including agricultural goods) will be cheaper than domestic goods. That will make it hard for anything, light industry, agriculture, tourism, etc. to compete with imports. (Tariffs are no solution; they will just jack up the exchange rate to offset their effect.) What might help would be plowing oil revenues into imports of things that don't compete with domestic production, especially foreign assets (i.e., a trust fund), and infrastructure rebuilding. http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html#comment-70619 http://www.thedonovan.com/archives/2008/03/on_iraqs_econom_2.html#comment-70619 Tue, 11 Mar 2008 08:43:57 -0600