Economy Booms Again in Southern Baghdad Province

American Forces Press Service

June 6, 2008 - When Army Capt. Shawn Carbone first took a good look at the economy in Iraq's southern Baghdad province, he found it similar to his studies of America during the Great Depression of the 1930s. "Most of the historically strong businesses were gone," said Carbone, economics team leader for the Baghdad 7 Embedded Provincial Reconstruction Team. "The owners had left and packed up. The businesses were shut down, and there was mass unemployment across the board."

There were many reasons for the economic troubles of Iraqis in the area the 3rd Infantry Division's 2nd Brigade Combat Team took control of in June 2007. A lack of security forces had left a gap that al-Qaida in Iraq terrorists filled by using the area as a base.

Farms and businesses were damaged, and violence caused many to flee -- some of whom have yet to return. Sectarian strife heated up following the 2005 elections, which left many in the area without a voice in government.

Basic needs, such as electricity and water, went largely unmet.

Carbone saw an opportunity to help turn things around. His training in economics at Niagara University, in his hometown of Niagara, N.Y., prepared him for the task of helping the citizens of southern Baghdad province.

"It's rewarding, because it's an experiment in economics," Carbone said. "This is from the ground up. It's much like our depression-era economics. I've actually sent e-mails to my professors, asking them their opinions on some of these things and researched books on depression-era economics."

After security was established, the biggest obstacle to economic recovery, Carbone said, was the centralized nature of the economy in the past. Local industries such as a chicken hatchery, a poultry processing plant and a meat processing facility, for example, received inputs from and sold their goods to the Iraqi government at set prices.

"Cooperation is the biggest thing," Carbone said. "From where I sit, these businesses are complementary. But they never had a capitalist society, which is all about bringing down costs."

Now the government is in a state of transition and moving toward free trade.

"Everyone is going through the change," Carbone said. "Some of the government systems are not yet in place, but that's where we're heading."

In an effort to revive the local economy, the Baghdad 7 Embedded PRT worked in conjunction with 2nd Brigade Combat Team Civil Affairs, using money as their main tool. Armed with State Department and U.S. Agency for International Development funds, soldiers and civilians on the team looked for projects that would benefit the community as a whole.

Civil affairs soldiers used their battalion's bulk funds to stimulate individual small businesses through a series of $2,500 micro-grants. Though most of the projects focused on agriculture, which dominates the local economy and employs the largest percentage of people, other avenues were explored, as well.

Army Maj. Douglas Betts, commander of Company A, 415th Civil Affairs Battalion, said soldiers on the ground identified who could best use the grants.

"The troop commanders and company commanders are all very smart guys," Betts said. "They know what they're doing, and they know what's best for their areas."

Micro-grants were given to businesses ranging from chicken farms to Internet cafes. Most recently, a women's beauty parlor opened up in Arab Jabour, something that would have been impossible in that area until recently.

Betts said soldiers have found other creative ways to involve women in business. One example he gave was women's sewing cooperatives, which grew out of women's committees looking for ways to employ themselves and raise revenue for their causes.

"Captain [Trista] Mustaine in the EPRT did a great job with sewing co-ops. That's a new one to me," Betts said.

"One [co-op] that I know is basically made up of war widows," Betts said. "These ladies want to do something for orphans and school children. They are actually making clothes and selling them. I thought that was pretty original."

The only condition that comes attached to the micro-grants is that business owners attend business training and meetings of their local business associations, Betts said. The formation of local business associations has been vital in helping citizens to help themselves. The focus now is in getting business owners weaned off of coalition forces funding and to get them working with their own government.

Basil Razzak, a bilingual, bicultural advisor with the Baghdad 7 Embedded PRT, said it took some adjusting for local farmers and businessmen to get used to the new economic model.

"Up until now, it was all supervised by the government. Everybody belonged to the government," Razzak said. "I remember at one business association meeting, the chairman said, [to Carbone], 'You are our boss.' He said, 'I'm not your boss. I'm here to help you and support you, but it's your organization and you can conduct your meeting as you like.'"

Razzak, a Canadian citizen who grew up in Baghdad and holds a degree in administration and economics from the University of Baghdad, said the capitalist spirit is slowly, but surely, taking hold here.

"They are open to new ideas, Razzak said. "They realize the era of state-owned business is gone. They are willing to work and cooperate."

Carbone said the stimulus coalition forces provided to the local economy already has produced unexpected results. As more businesses reopen and new ones appear, local entrepreneurs have taken it as a sign that it's OK to reopen their shops.

"When they start to see these places opening with the help of coalition forces, some of the people have come back and opened up on their own," Carbone said. "That's something we didn't expect."

One business owner who received significant coalition help has been encouraged to invest even further in his business. The owner of a meat processing plant in Arab Jabour received a grant to get his facility running again after shutting down operation in 2006. Prior to that, the factory employed more than 90 people.

He noted that one factory owner who received a grant then pitched in $200,000 of his own money. "The money is out there," Carbone said.

"The biggest thing was that when the owner came back to the area and saw that the security situation had changed progressively, he was more willing to reinvest and start over," he said.

Betts said he sees signs that businesses have returned to stay in the area.

"I've noticed it in the short time that I've been here," Betts said. "When we first went out, there were some shops, but there weren't that many. But I've noticed in the past several months, in Sayafiyah especially, a lot more of those businesses. They look better, and they're repainted. People are repairing their shops and restocking supplies."

Betts said the greatest benefit of the renewed prosperity was a population that was employed and able to meet their needs.

"That's the key to security. People that are able to take care of themselves and their families are not out there planting bombs and killing people for money," Betts said. "I want to see a strong economy, because that's the cornerstone of stability."

(From a Multinational Corps Iraq news release.)