Cautiously, Iraqis open for business

On a crisp winter afternoon in Baghdad's well-to-do Jadiriya neighborhood, families, young couples, and students from nearby Baghdad University crowd the tables outside the Hassan Ice Cream Shop.

A decade ago, when international sanctions meant sugar - among other commodities - was in short supply, ice cream shops such as the one Mohammed Hassan opened last April were illegal. Now, Iraqis are eagerly consuming what was once forbidden, and Mr. Hassan is raking in profits.

"I'm succeeding because I've filled a hole in the market," says Hassan. "I'm giving Iraqi families ice cream and a safe place to spend their free time."

Hassan's is one of the 24,000 new businesses that the Iraqi Ministry of Trade says have opened since the fall of Saddam Hussein in April 2003 and to which US officials point to support their claims that the Iraqi economy, despite ongoing security woes, is recovering.

"I think ordinary Iraqis have picked up on the sense that the economy looks better," says Thomas Delare, the counselor for economic affairs at the US Embassy in Baghdad.

The success of Hassan's parlor, in a large part, is due to location. It sits in a well-guarded neighborhood, just blocks away from the home of Iraqi president Jalal Talabani. Iraqi police stand on nearly every corner. And whereas most of Baghdad receives a few hours of electricity each day, here the lights (and ice cream freezers) rarely go out.

Elsewhere, new businesses aren't faring so well. Economists at the Baghdad Economic Forum say that as many as 90 percent of the 24,000 new businesses are idle, unable to secure the work, raw materials, and startup money to get off the ground. Security problems, unreliable electricity, and lack of finance are hobbling small businesses, analysts and local businessmen say.

Not far from Hassan's ice cream parlor, Nour Ali Haider sits behind the counter of his leather jacket store. He is the sort of self-made entrepreneur the US would like to see blossom in Iraq's nascent free market economy. In 1989, fed up with his three-dollar-a-month job in a state-owned leather factory, Mr. Haider bought a dozen leather jackets and began hawking them from a street corner. Now he owns his own store and, until recently, business was thriving.

"Before the fall of Saddam I wouldn't have been able to talk [to journalists] because I'd have been so busy," he says. "Now I can sit here and talk and drink tea with you all evening."

His is one of dozens of leather goods stores along this heavily traveled boulevard. Buyers once came from all over Iraq and neighboring Jordan and Syria to buy inexpensive Iraqi-made leather coats here. But since car bombs, kidnappings, and assassinations have become a daily ordeal for ordinary Iraqis, business has all but disappeared. Two car bombs exploded just blocks away from his store last week.

Earlier this year, struggling to feed his wife and three kids, Haider tried his hand at another trade. He started a new business selling generators, a hot commodity in electricity-starved Iraq, but it proved to be a losing venture.

"The generators I was selling were coming from China, and most of them were broken," he says. "And by the time I got into the market everybody already had generators. I lost $2,500."

Cheap imports from China and elsewhere are a sore subject for many small businessmen here. In 2003, the US-led Coalition Provisional Authority (CPA) enacted a series of economic policies to rapidly liberalize the economy. They slashed tariffs on all but a handful of goods. Inexpensive wares began pouring in, leaving Iraqi producers struggling to compete.

"Everything is being imported from outside the country with no taxes, tariffs, or any kind of planning," complains Shaalan al-Shazar, the head of Ro'a al Muhager, an eight-person engineering firm that designs machines for small Iraqi factories. "This has led to the deterioration of Iraqi industry, and now I have no work."

As an engineer, Mr. Shazar should be well placed to benefit from the $21 billion that the US is spending to rebuild Iraq. But he hasn't seen a penny. Thanks to rampant corruption, he says, only foreign companies and well- connected Iraqis get contracts.

"Who is getting these contracts?" wonders Shazar. "I don't know. Friends of translators for the US, friends of the [US] Army. I never see any of these projects advertised in the newspapers."

Owners of small Iraqi construction firms echo such sentiments. Like the abolition of tariffs, they say it's another legacy of the economic policies enacted by the CPA. In this case, the concerned law is the CPA's controversial Article 39, an investment law that gave foreign companies unfettered access to Iraq, effectively freezing many local companies out of the rebuilding effort.

But even if Shazar could get those contracts, he says it's just too dangerous to work with the Americans. "It's not that I don't want to work with the Americans, but I'm afraid."

Shazar has a centrally located office in downtown Baghdad. It was once just a 30-minute commute to get home each evening to his wife and six daughters on the city's western edge. Now, due to checkpoints and road blocks, the drive takes up to two hours. The commute has become too dangerous, so he's boarded up the office and works from home - secretly.

"My business is hidden inside my home now," he says. "There are no advertisements or signs outside. There are many insurgents in my neighborhood and if they knew that I'm a businessman and they think I have money, they will rob me or kidnap my daughter."

Now, the hope for many of Iraq's small businessmen, and indeed for the economy as a whole, is that last month's vote will herald an inclusive government that will help take the steam out of the insurgency.

"Domestic entrepreneurs and foreign investors have all been waiting for stability, predictability, and greater security," says Mr. Delare of the US Embassy. "The election doesn't guarantee any of those things, but it offers the promise that now we can put them in place."