Deploying to the Middle East on the Eve of the US Elections

I am on a flight to Kuwait en route to my fifteen month tour of duty in Iraq with the New York National Guard. Yesterday I started out the day by casting my vote through an absentee ballot and then boarding a plane to begin my journey to Iraq. The irony of participating in a democratic US election and deploying to fight for an Iraqi free election on the same day was not lost on me. Going into combat for the first time, I have been very introspective about this deployment. Voting and deploying on the same day has made me think about our entire system, our individual rights and individual responsibilities. What do we expect from our country, and what does our country expect from us as citizens? My conclusion was that in America, we get so much but so little is asked from us by our country in return. Many people may not realize at first how little is asked of our citizens.

There are only four things asked of our citizens: pay your taxes, serve on jury duty, serve in the military when called upon, and vote. Since America implemented the all-volunteer military in 1973 we have not had a single American called to serve who did not volunteer. Every one of us in the military is a volunteer. Therefore the average civilian American only has three duties to perform: pay taxes, serve on jury duty and vote. That is all that is asked of our citizens.

During President Reagan’s first inaugural address in 1981, he spoke of a soldier who had also served with the 42nd Infantry Division, one who had served during World War I. President Reagan pointed towards the graveyards at Arlington Cemetery and said “Under one such marker lies a young man- Martin Trepov- who left his job in a small town Wisconsin barber shop in 1917 to go to France with the famed Rainbow Division. There, on the western front, he was killed trying to carry a message between battalions under heavy artillery fire. We are told that on his body was found a diary. On the flyleaf under the heading, "My Pledge," he had written these words: "America must win this war. Therefore, I will work, I will save, I will sacrifice, I will endure, I will fight cheerfully and do my utmost, as if the issue of the whole struggle depended on me alone." We are again asking our soldiers to make this level of commitment.

We must ask every one of our citizens to adopt this same commitment of sacrifice and determination in meeting their responsibilities on November 2nd. In the next couple of days the fate of the direction of the world will be determined and each of us should be expected to participate. Since August when I was notified that I was being recalled to the Army, the outpouring of support from family, friends and business associates has been tremendous. I continually receive requests asking how people can help me and our troops. It seems that most Americans feel helpless or impotent in the war and are looking for some way to meaningfully contribute. Unfortunately for those who want to help, the Army is giving us everything we could ask for- I am amazed at all of the equipment and supplies that we have received- all of it brand new. It is quite encouraging. There really isn’t anything we need at this point.

The greatest gift an American can give to the troops right now is to show their support for our troops is to put a personal effort into this year’s election over the next couple of days. Do not just vote- dedicate the time to perform the research to understand the issues and vote with conviction and knowledge.

Today I flew over with more than 300 National Guard soldiers from the 42nd Infantry Division (Rainbow) into Kuwait. This is the same unit that Martin Trepov died serving. Statistically, it is eerie to think that some of these soldiers will never set foot on American soil alive again. It's impossible to know which ones. But we are again asking our soldiers to sacrifice, endure and fight cheerfully as if the issue of the whole struggle depended on them alone. As with Martin Trepov fought and died serving in the Rainbow Division in 1918 and we will hav more citizen-soliders who die serving in the Rainbow Division. I hope that on election day, every American will keep this in mind and “will do their utmost to vote, as if the issue of the whole struggle depended on them alone.” Voting is not only a right, but a duty, a responsibility.

As I write this, the fourth game of the World Series is about to begin. The last time the Red Sox won the World Series was in 1918. In 1918, the Rainbow Division fought for the first time under General Douglas MacArthur. Although I am a New Yorker, the unit I have been assigned to is all Massachusetts National Guard, which is part of the Rainbow Division. We have been talking about the “Curse of the Bambino”, but I think the real curse is the “Curse of MacArthur” Now that the 42nd Infantry Division (Rainbow) is heading to combat, the Red Sox might finally have the luck to win the Series!

Thank you for all of your continued support- God Bless America!
Dan

Oil Rich Countries: Why are the people always poor? Dealing with the "Dutch Disease"

The number of oil rich countries that have very poor economies is alarming. There are various theories as to why this occurs, but it is something we need to keep in mind as we try to help re-build Iraq, an oil-rich, but currently very poor country. The number of countries that are oil rich but have poor populations is staggering: Iran, Iraq, Venezuela, Nigeria, Indonesia, and several others. Changing Iraq will hopefully be a blueprint for other oil rich countries to follow.

The following article is from a nobel prize winning economist, Joseph Stiglitz, published in the British newspaper "The Guardian":

For some nations, natural resoures are a curse - but it needn't be so
Joseph Stiglitz
Wednesday August 18, 2004
The Guardian

There is a curious phenomenon that economists call the resource curse - so named because, on average, countries with large endowments of natural resources perform worse than countries less well endowed.

Yet some countries with abundant natural resources do perform better than others, and some have done well. Why is the spell of the resource curse cast so unequally? Thirty years ago, Indonesia and Nigeria - both dependent on their oil - had comparable per capita incomes.
Today, Indonesia's per capita income is four times Nigeria's. Indeed, Nigeria's (as measured in constant dollars circa 1995) has fallen.

A similar pattern holds true in Sierra Leone and Botswana. Both are rich in diamonds. Yet Botswana averaged 8.7% annual economic growth over the past 30 years, while Sierra Leone plunged into civil strife. The failures in the oil-rich Middle East are legion.

Economists put forward three reasons for the dismal performance of some richly endowed countries.
First, the prospect of riches orients official efforts to seizing a larger share of the pie, rather than creating a larger pie. The result of this wealth grab is often war. At other times, simple rent-seeking behaviour by officials, aided and abetted by outsiders, is the outcome. It is cheaper to bribe a government to provide resources at below-market prices than to invest and develop an industry, so it is no surprise that some firms succumb to this temptation.

Second, natural resource prices are volatile, and managing this volatility is hard. Lenders provide money when times are good, but want their money back when, say, energy prices plummet. (As the old adage has it, banks only like to lend to those who do not need money.) Economic activity is thus even more volatile than commodity prices, and much of the gain made in a boom unravels in the bust that follows.

Third, oil and other natural resources, while perhaps a source of wealth, do not create jobs by themselves, and often crowd out other economic sectors. For example, an inflow of oil money often leads to currency appreciation - a phenomenon called the Dutch disease.

The Netherlands, after its discovery of North Sea gas and oil, found itself plagued with growing unemployment and workforce disability (many of those who could not get jobs found disability benefits to be more generous than unemployment benefits).

When the exchange rate soars as a result of resource booms, countries cannot export manufactured or agriculture good, and domestic producers cannot compete with an onslaught of imports. So abundant natural wealth often creates rich countries with poor people.
Fortunately, as we have become aware of these problems, we have learned much about what can be done about them.

Democratic, consensual and transparent processes - such as those in Botswana - are more likely to ensure that the fruits of a country's wealth are equitably and well spent. We also know that stabilisation funds - which set aside some of the money earned when prices are high - can help reduce the economic volatility associated with resource prices.

Moreover, such fluctuations are amplified by borrowing in good years, so countries should resist foreign lenders who try to persuade them of the virtues of such capital flows. The Dutch disease, however, is one of the more intractable consequences of oil and resource wealth, at least for poor countries. In principle, it is easy to avoid currency appreciation: keep the foreign exchange earned from, say, oil exports out of the country. Invest the money in the US or Europe. Bring it in only gradually.

But in most developing countries, such a policy is viewed as using oil money to help someone else's economy.

Some countries, notably Nigeria, are trying to implement these lessons. It has proposed creating stabilisation funds and, in future, it will sell its natural resources in transparent, competitive bidding processes. Most importantly, the Nigerians are taking measures to ensure that the fruits of this endowment are invested, so that as the country's natural resources are depleted, its real wealth - fixed and human capital - is increased.

Western governments can help with common-sense reforms. Secret bank accounts not only support terrorism, but also facilitate the corruption that undermines development. Similarly, transparency would be encouraged if only fully documented payments were tax deductible. Violent conflict is fed by western governments' massive sales of arms to developing countries. This should be stopped.

Abundant natural resources can and should be a blessing, not a curse. We know what must be done. What is missing is the political will to make it so.

· Joseph Stiglitz, professor of economics at Columbia University, is a Nobel prize winner and author of Globalisation and Its Discontents

The Iraqi Economy: Reforms Pave the Way for Growth

The attached link is to a one-page article on the US assistance to Iraq. It also provides a graphic display of the per capita GDP- vividly displaying the damage done to the Iraqi people by the regime of Saddam Hussein, and the effects of the wars that he initiated.

http://www.usaid.gov/iraq/pdf/AYearInIraq_economic.pdf

USAID is the United States Agency for International Development. In my role in Commerce within Iraq I will work with representatives from USAID to understand the projects that they are undertaking and to work as an advocate for our Area of Operations (AO), much the same way as a member of Congress works to gain funds for their district.

Speech by Tom Foley with Prime Minister Allawi regarding Iraq Economy

My job requires considerable research into all aspects of Iraqi and International Commerce in order to help provide the best advice and direction. The number of people who have reached out to help me in this role are numerous- everyone seems to feel impotent when discussing the Iraq situation, and when given the opportunity, my experience has been that people will jump through hoops to help use their connections and expertise if asked to do so. I have had the privilege of meeting some incredible people already who have been selfless with their time and expertise to help re-build Iraq. One person who stands out as being an expert in the field above all others is Tom Foley.

Tom Foley was the Director of Private Sector Development for the CPA (Coaliton Provisional Agency) under L. Paul Bremer for the first year after the fall of Baghdad. He is one of the foremost experts on the current state of the Iraqi economy and the challenges faced in Iraq.

Below is a speech that Mr. Foley delivered along with Prime Minister Allawi. This speech is several months old and the security situation has changed somewhat, but the overall economic update is still valuable. I have met Mr. Foley through BENS (Business Executives for National Security www.bens.org) and spoken with him by phone recently. He is very passionate about the future success of Iraq and has been very helpful in introducing me to key people to help in my role in Iraq. Below is his speech which he gave along with Dr. Allawi, the Prime Minister of Iraq:


TOM FOLEY’S REMARKS ENCOURAGING TRADE AND INVESTMENT IN IRAQ

"Good morning. Thank you for having me and Minister Allawi here to talk to you about Iraq. Before we start talking about the situation and opportunities there, I want to thank you and your government on behalf of the CPA and the people of Iraq for your cooperation in
the effort to liberate the Iraqi people. Your efforts and sacrifice will be well-rewarded, I am sure, by the emergence of a stable and fair representative government in Iraq that is a responsible leader in the Middle East and member of the global community. My objective today is to bring you up to date on what is going on in Iraq. I will try to convince you that Iraq presents an exceptionally attractive business opportunity for foreign investors. I will also try
to convince you that if you aren’t already there, you should go there now and get started because many of the best opportunities will go to those who are there first.

I am the Director of Private Sector Development for the CPA in Baghdad. I have been in Baghdad since August. I have general responsibility for getting the economy going and growing. This includes oversight responsibility for most of the 192 State-owned enterprises and development of a privatization plan for them. I am also responsible for developing trade and foreign investment. If there is one measure of what I am trying to achieve it is job growth.
In one sense, I have an extremely challenging job. That is because there have been a lot of big problems associated with getting Iraq’s businesses and economy going again. Big problems like no electricity, and plants that have been stripped of every piece of equipment, every wire and every electrical switch, and then set on fire. Problems like no credit, no ability to cash a check, and no means for wiring funds. At one limousine company I oversee, a tank drove through a wall to their garage and completely flattened three Mercedes limousines inside. Not a piece of any of these cars was standing more than six inches off the ground. These are not the normal everyday business problems you face - at least I hope they aren’t - but they are typical of the problems we have been facing in Iraq.

But looked at another way, my job is easy. That is because there are such powerful and positive economic forces at work in Iraq that the economy will get going and growing whether I do anything or not.

These forces include Iraq’s amazing economic assets like its oil, its 25 million person consumer market, its rich agricultural base, much of the water in the Middle East, its bright and hardworking labor force, and its strategic location right in the center of the region.
These assets and forces have been underemployed and mismanaged under Saddam for over 35 years. Now that they have been unleashed, they will be hard to hold back. Evidence of this is the very strong pent-up consumer demand in Iraq. Goods headed for stores in the Karada district of Baghdad are sold off the truck at the storefront and never even make it onto store shelves. A new cellular phone system, forbidden under Saddam has just been introduced. There are lines a block long waiting to buy a phone.

The statistical evidence of an economy quickly picking-up steam also confirms the visual and anecdotal evidence. Unemployment, estimated at over 50% last summer, is now in the mid-20’s and declining. There are a number of factors providing this stimulus to the economy. In addition to pent-up consumer demand, there is a lot of economic activity related to repairing buildings and infrastructure damaged during and after the war. Incomes of many public employees have been increased. CPA and the US government have hired lots of people and are spending lots of money. Additional new jobs have been created by the Iraqi Government hiring new police, a
new army, and 100,000 people into a public works program.

Also stimulating the economy is an estimated $5-7 million per day being repatriated to Iraq. If these repatriated funds are being spent, which we presume they are, they represent a 15% boost in demand in Iraq’s non-oil sector economy. In the months ahead the US Government Supplemental funds will begin being spent. It is estimated that $7 billion or more will be
spent in each of ’04 and ’05 and some 40% of those amounts will be spent locally in Iraq. That means an additional 30% increase in non-oil sector demand. There is only one way to describe what will happen as all of these pressures converge - and that is a major economic boom – probably within 12-18 months.

While we are speaking about the supplemental funds, let me explain the difference between them and foreign trade and investment, which is my focus today. The supplemental funds are US government funds generated from US taxpayer dollars and are a gift from the American people to the people of Iraq. The funds must be spent according to US laws which require that the business be bid competitively. Foreigners, in most cases, are eligible to compete for
these contracts. The awarding of these contracts is being conducted through the Program Management Office of the CPA in Iraq and various US Government Agencies and Departments in the US. Awarding of these contracts does not fall under my area of responsibility, but information about them is available from a variety of sources including the CPA internet sites
www.iraqcoalition.org and www.rebuilding-iraq.net.

What I am interested in addressing today is long term foreign investment and trade relationships in Iraq. This includes companies who are looking to export products to Iraq, import products from Iraq, or, most importantly, invest in Iraq, by building a plant, or
opening a chain of stores, for example. These investments will bring badly needed capital and technology to Iraq to support economic growth and create new and better jobs for Iraqis. Until
recently, such investment in Iraq was virtually impossible. But Iraq is now a free and open market, and we encourage and welcome all who want to come and participate.

There are lot of people already in Iraq getting business and making investments. Many of them are regional players because they have natural advantages in that they can drive in, they speak the language, understand the culture, and in many cases, have wellestablished relationships. They also probably already have experience operating in environments with similar risks and
challenges such as Lebanon and Palestine. But a lot of non-regional multinationals are already there, too. For example: Pepsi, GE, Siemens (UK), John Deere, AIG, Banco San Paolo d’Italie,
Caterpillar, Maersk Shipping, KPMG, Finmechanica, Merck, Motorola, and MCI. A number of others have committed to come soon; IBM, Starwood Hotels, Hong Kong Shanghai Bank, Hewlett- Packard, Price Waterhouse Coopers, Standard Chartered Bank, and
Nestle.

And these are only the ones we know about. Many regional players and most foreign multinationals don’t check-in with us. The same goes for the more entrepreneurial businesses who find what they need and go directly to customers and partners without talking to us.
There is no requirement to check-in with CPA prior to doing business in Iraq.
Companies big and small should be taking advantage of opportunities in Iraq and should be doing so now. You should be doing it not just because you will have very good returns on your
investments, but because there won’t be another situation any time soon when a market with this much potential opens-up after such a long sleep.

There are two issues that seem to give many business people some concern about doing business in Iraq today. They are security and legal uncertainties. Let me try to put them in perspective for you.

First, there are security issues, but they aren’t nearly as bad as they appear on television and they certainly are manageable. Car bombs and IEDs make good news stories, but life in most parts of Iraq is back to normal despite the reported violence. I am out and about in Baghdad every other day or so. I travel unarmed, unescorted, and often alone. I drive and walk around
freely and in six months of this I have never had a problem and never even felt uncomfortable. I regularly travel the BIAP Road, the reputed “shooting gallery” between Baghdad and the airport. I have never even seen anything along that road that looked threatening. Regional players understand these security risks and accept them as just a cost of doing business. They also know and use people in their organizations who accept, and sometimes actually prefer, the risk in these environments. The legal uncertainties are similar. Your lawyer won’t be able to
give you your normal “all clear” signal about the legal environment in Iraq. But the legal uncertainties are diminishing and will continue to diminish, and there is a lot you can do to avoid legal risk. Particularly if your counsel is the type who focuses on finding ways to reduce risks rather than just cautioning you about them.

With both categories of risk you should not look at what the risks are today, but what the risks will be when you are ready to commit significant human and capital resources there. For most of you this would be many months, if not years, away. So making a commitment to get started now isn’t, in itself, risky. Your exposure to whatever risks are present won’t become significant until later when the risks are likely to be lower and, if they aren’t, you can reconsider your plans. But if you fail to commit to get started now, you will always be 3, 6, 12 months away from being established and taking advantage of the opportunities. And if you wait for today's risks to go away you may find that other risks will arise in the future to take their place – for example, others may become too well established for you to feel you will be competitive, or all the best
resources may become tied-up, or all the best opportunities may be grabbed.

So don’t languish. Decide you are not going to miss the opportunity to be part of the reconstruction and future of Iraq. Decide your challenge will not be whether you go, but when and how you go.

When you decide to become a participant in Iraq’s future, come as soon as you can - and by “you”, I mean senior level decisionmakers. When you do, you will see the opportunities and you will get more comfortable with the risks. You will also establish contacts that will enable you to more quickly plan and execute your entry which will give you a competitive advantage.
When you decide to get started, here are some tips and suggestions:

First, look for a good Iraqi partner. The language skills, cultural awareness, and knowledge of how things work that a partner brings will be critical to your success. But choose your partner carefully. The Middle East is home for every kind of middlemen, and increasingly middlewomen. Many of them over-represent their ability to help you. If they start off the conversation saying they know the President of your country and have 100 million dollars in cash looking for a home, which some will say, steer clear. Also, do not be lazy and rely on agents or representatives from
neighboring countries with whom you already have a relationship or who are more familiar with western business culture, and therefore, initially easier to deal with. They and you will not be well-received, despite what these intermediaries may tell you.

Second, don’t let yourself get frustrated. Many things we take for granted and are quick and easy in more developed economies take time in Iraq. Be patient - things are improving. For example, registering a corporation in Iraq used to take months, if one could do it at all. The company laws and regulations covering corporate registrations are in the process of being revised. Within several weeks it should be a lot easier to register a corporation there. There
will be other obstacles and frustrations, but they are being eliminated one by one. With a little patience you will be able to get done what you need to get done.

Third, let us help you get started. We have a lot of useful information and can help you meet potential partners and decisionmakers in both the public and private sectors. Visit the Business
Opportunities Section and the Private Sector Development webpage on the CPA website at www.iraqcoalition.org. Much of this information is there. You can also call or e-mail us if you need direct assistance.

Fourth, take an entrepreneurial approach. Iraq is currently an environment that favors those who are entrepreneurial. Don’t hang at home developing the perfect plan. Accept that there are
uncertainties. Focus on how to manage those uncertainties and be assured that with greater risk comes greater reward. If you can afford it, make a commitment today to go there with the idea of establishing a presence by putting some people on the ground. Give them some direction and support, but also a lot of freedom to figure out how to get done what you want to get done. It’s all moving very fast. Decision-makers at home won’t know enough soon enough to successfully micromanage activities from outside of Iraq.

Iraq is going to be a big success. I have no doubt about that. The economic potential of Iraq now being unleashed is going to make it the economic powerhouse of the Middle East. Iraq’s economy will be the engine that drives the long term institutional reforms which will bring a stable representative government and a fair and secure existence for all of Iraq’s citizens. When this outcome has been achieved, you will want to be able to say you were a part of it. So don’t miss this opportunity. Please come to Iraq now and participate in its future. Iraq’s success is vital for all of us.

I look forward to seeing you there soon. Thank you. "