Restoring hope: economic revitalization in Iraq moves forward

Military Review, March-April, 2008 by Paul A. Brinkley

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Counterinsurgents achieve the most meaningful success by gaining popular support carol legitimacy, for the host government, not by killing insurgents. Security plays an important role in setting the stage for other progress, but lasting victory comes from a vibrant economy; political participation, and restored hope.

--U.S. Army Field Manual 3-24, Counterinsurgency (1)

ONE OF THE CRITICAL FACTORS in the counterinsurgency strategy that is demonstrating early but measured progress in increasing security in Iraq is the alignment and rapid application of economic development as security improves.

As discussed in the first part of this series on revitalization of the Iraqi economy, "A Cause for Hope" (Military Review, July/August 2007), the challenges in leveraging and applying American economic expertise, investment, and other stimuli to uplift the Iraqi economy have been numerous, ranging from policy to strategy to tactics.

Prior to 1991, Iraq was the most industrialized of the Arab states with a significant base of industrial operations across a wide range of sectors, and a highly skilled civilian workforce. From 1991-2003, industry in Iraq was strictly focused on internal production to meet domestic demand--United Nations sanctions prevented export of goods or international economic engagement, although some factories remained relatively modern through investments in equipment upgrades.

Following the collapse of the regime in 2003, the Iraqi workforce experienced great economic hardship with unemployment and underemployment exceeding 50 percent. (2) These conditions directly contributed to insurgent sympathy and economically motivated violence. The Task Force for Business and Stability Operations in Iraq (TFBSO) was established in 2006 by Deputy Secretary of Defense Gordon England to address the revitalization of the industrial economy in Iraq. What follows is a status report on this revitalization effort and the ongoing transition of the Iraqi industrial economy to a free-market state that is integrated with global financial, supply; and trade infrastructures.

TFBSO and the Overall Economic Mission in Iraq

Underlying every strategic objective of the task force is a core principle based on the size and scope of the U.S. presence in Iraq. For calendar year 2007, Iraq had a gross domestic product estimated at $55 billion. (3). The U.S. Department of Defense (DOD) current cost of sustaining operations in Iraq is approximately $10 billion per month. (4) Most of this cost is dedicated to sustaining the presence of our uniformed service members and civilian workforce, covering not only the direct cost of military operations, but also everything from housing to food to security at the local level.

Considering U.S. government spending as a market has underpinned the TFBSO's economic development strategy in Iraq. Careful application of this spending with an eye on local economic development, while ensuring our forces are sustained with the best possible materiel support, has fundamentally changed the way DOD considers economic reconstruction and has led to the development of new approaches to post-conflict stabilization.

Economic reconstruction in Iraq has required an interagency operational concept that leverages the collective strengths of the various U.S. government entities in Iraq. The general framework illustrated in figure 1 represents the interagency operating model that has emerged for Iraqi economic development.

While the boundaries for the model are not firmly fixed, this general structure has informed collaboration and cooperation among involved U.S. government entities. With this basic structure defined and agreed upon, the TFBSO further defined its areas of focus.

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Framework for an Industrial Economy

From its inception, the Task Force for Business and Stability Operations has operated with a broad set of focus areas, each with a dedicated team of U.S. government and business leaders engaging in all areas of the country, and has been tightly aligned to Multi-National Force-Iraq (MNF-I) and its subordinate commands. While much of the public understanding of the task force has focused on enabling and automating direct contracting with Iraqi businesses and restarting idled large state-owned enterprises shut down since 2003, these two primary focus areas led to expanded emphases on economic development for each critical tier of a modern industrial economy.

A modern industrial economy must possess the following key elements:

* A fiber-optic coin in communications backbone with corresponding local wireless access capability to enable automated transaction processing as well as broad-based access to information via the Internet.

* A banking sector and financial system infrastructure capable of automated financial management, from large-scale bank-to-bank financial transactions to personal financial transactions.

* Active industrial operations across sectors identified as competitively advantageous for economic or strategic reasons.