Tuesday, July 07, 2009

Replacing Bases With Businesses

Daniel Rice and John Nagl (a man who knows a thing or two about counterinsurgency) have a piece in today's WSJ calling for a surge in investment in Iraq's private sector:

Private capital is already at work in Iraq, demonstrating the validity of this model both for economic development and for increasing employment. For example, Iraq currently imports over $100 million of tomato paste from its neighbors every year, despite the fact that it has enormous agricultural potential in the irrigated farmland between the Tigris and Euphrates rivers. Until recently, Iraqi farmers had no incentive to grow tomatoes on a commercial scale because there were no tomato-paste processing plants within reasonable transportation distances. In 2008, a private-equity fund invested in the Harir Tomato Paste and Juice processing facility, which had been defunct since the invasion in 2003. With only one Western employee and 200 direct Iraqi employees, the Harir plant is now profitable and has given thousands of Iraqi farmers a market for their produce.

This model could be replicated in factories throughout Iraq in multiple industries if an enterprise fund is approved by Congress. We suggest a $250 million Iraq enterprise fund. While this would only account for one-third of 1% of annual U.S. spending in Iraq, it would have an important amount of financial leverage; the sum could open 10 $25 million enterprises strategically located throughout the country. Instead of spending billions of taxpayer dollars for short-term programs, the enterprise funds could create long-term growth and employment in Iraq while giving U.S. taxpayers a return on their investment in the form of a share of profits going back to the USAID -- while appreciably diminishing support for the insurgency.

As we withdraw from Iraq's cities we must seek to replace our bases with businesses. An enterprise fund for Iraq is a good way to start the process of achieving victory through economic development.

Short-term spending programs were necessary to help stabilize the situation in Iraq and build upon the security improvements. Now, it's time to look at ways we can help the Iraqis build a foundation for long-term economic growth. Enterprise funds seems like a good place to start.

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