Iraq, now the spending will start

At the end of 2003 at least one IT multinational based in Dubai complained to AME Info the 'Iraq just has not happened yet'. This situation is about to change and it has big consequences for business in the Middle East.

What the US plans to do in Iraq is not unlike post-war Germany and Japan and the Marshall Plan. Then the conquering US army took over internal security, installed an administration and pumped money into the local economies.

So successful was the US economic strategy that within 20 years Germany was richer than the UK, then as now the loyal ally of the US. Up until 1990 Japan's economy was also one long boom story, with its economic success threatening US corporations.

So are we going to see the same thing happen in Iraq? Will Iraq be richer than Saudi Arabia or the UAE in 20 years' time?

It might seem very unlikely today. But stranger things have happened. Germany and Japan were bombed flat in 1945 and nobody then would have expected such a rapid economic recovery. To even suggest it would have been laughable.

What is certainly true is that no country in the Middle East has invested anything like as much as the US plans to spend in Iraq for 30 years. And while it may time sometime to show results, this sort of investment is usually enormously effective in the long term.

The only other country to have such an ambitious plan is the UAE. The Dubai Executive Office recently said that $50 billion will be invested in local real estate between now and 2010, compared with just $5 billion in the past three years.

America now plans to install a sovereign government in Iraq as it did in Germany and Japan after the Second World War, and support it with military assistance and economic aid. This is an enormous business opportunity for the region, although not for those countries that did not support the US invasion of Iraq.

Interestingly the US administration is also now agreed on the need to create an Iraqi state oil company, if only to prove to Arab public opinion that the US invasion of Iraq was for security reasons and not to grab control of the oil.

This vital national economic resource will remain the property of the Iraqi state, and not be transferred to US private sector companies. Again the restoration of friendly sovereignty rather than colonial control is the objective.