Iraqis embark on shopping spree
Imports, dollars propel commerce to new level
chicagotribune.com.
By Laurie Goering
Tribune foreign correspondent
July 20, 2003
BAGHDAD -- Hassan Kadhem, a former antiques dealer, knows a good business opportunity when he sees one. When Saddam Hussein's regime disappeared, and the country's Draconian tax and customs laws went with it, Kadhem traded the past for the future.
As duty-free goods began streaming over Iraq's borders from Jordan and Turkey, he opened a shop selling satellite dishes, banned in Iraq under Hussein, and air conditioners, which used to carry an 85 percent import charge.
Today, with temperatures topping 110 degrees and Iraqis eager to tap into once-banned international news and entertainment, Kadhem's Baghdad shop makes $200,000 to $250,000 a month in sales. A quarter of that is profit.
"We have a good business now," said Kadhem, 31, whose prewar sales rarely passed $2,000 a month. "Prices are down, and people have dollars. All their salary is going to this."
In the three months since the end of Hussein's government, Baghdad has turned into a giant free market shopping zone.
Customers denied imported goods because of years of U.S. sanctions, hefty Iraqi customs charges and poverty are racing to buy refrigerators, air conditioners, washing machines, televisions and CD players.
Outside appliance shops in the city, huge piles of boxed chest freezers, and broiler ovens and stoves nearly block the sidewalks. Half of the cars in the city seem to have satellite dishes on the roof, held in place by eager hands thrust through windows. Even everyday goods, from milk to meat to clothing, are cheaper.
"Prices are going down on everything. There are no taxes, no customs," said Mohammed Joad, 65, a retired customs official who works at a fabric store in one of the city's biggest appliance districts.
"It's a good time to be a buyer in Iraq," he said, gesturing out the door at the sea of double-parked cars outside, their owners shoving boxes into trunks. "Everyone is on the streets."
Baghdad's boom has been fueled in part by the elimination of Iraqi sales taxes, which once averaged 5 to 10 percent, and customs duties, which soared to 50 percent on imported televisions and refrigerators, and 85 percent on air conditioners. With no government to impose taxes or duties, prices for many consumer goods have fallen by up to 60 percent.
The buying spree also has been spurred by an influx of U.S. cash into Iraq's economy. For about two months, the U.S.-led coalition running Iraq has been paying former and current government workers' salaries, mainly in dollars.
While many workers are receiving salaries commensurate with their old paychecks, others--particularly teachers, retirees and other dramatically underpaid groups--have received huge raises. Joad, who used to get a $2-a-month pension from Iraq's government, now gets $40 a month. With that, and some savings, he has bought an air conditioner and a boombox for his wife.
U.S. cash streams in
The influx of U.S. cash--and money looted from Iraqi's banks at the end of the war--also has led to a strengthening of the Iraqi dinar, which has helped put consumer goods within reach of even those who aren't getting U.S. dollars.
The result is that many families who haven't bought appliances in years are venturing into the shops, and families with cash to spare are stocking up, before Iraq gets a new government and a new tax and customs structure. Even the U.S. interim administration and international non-governmental organizations are adding to the boom. Their employees are buying air conditioners and office furniture to replace things looted from the offices, ministries and the houses they are taking over.
Mohammed Ali, 50, an Iraqi electrical plant worker, spent an evening recently strolling with his wife, Alia Laiby, amid the piles of boxes on Baghdad's sidewalks, looking for a new washing machine.
The last one they owned, they said, broke 10 years ago, and since that time Laiby has been doing the washing by hand. In the past two months, however, the couple, both electrical workers, have received $480 in U.S. salary payments, about $80 more than normal, and they had enough to buy a $160 washing machine.
"I feel richer now," Ali said. "If they keep paying us in dollars, our life will get better."
Iraq's import boom hasn't been good for everyone. Most Iraqi factories, some of them looted, remain closed, and prospects for their reopening are dim until there is a new government. Hundreds of thousands of workers at the plants are out of jobs.
Other factories that have reopened face stiff competition from imports and are struggling to adapt to a changing market.
The beverage market
Abdul Karim Ali, one of six owners of the private Al Murad soft drink bottling plant in Baghdad, said the flood of imported beverages initially drove down the selling price of a crate of his soft drinks nearly 20 percent.
Cola syrup, which the factory was once required to buy through one of Hussein's relatives, used to cost $215 a unit but now goes for $180 on the free market. Gas canisters, however, have gone from 10 cents a pound to $1, he said, because of costlier fuel and transport problems.
Still, his factory is regaining market share, he said. Hot weather has driven up demand, and buyers are figuring out that his fresh sodas taste better than some of the outdated cans imported from Turkey and Iran, he said. Production is back to 100 percent, and all 56 plant workers are on the job.
Abdul Karim Ali hopes Iraq's new government can find a middle ground between the controls of Hussein's regime and the free market chaos ruling Baghdad.
"Everyone likes free markets, but we need a few controls," he said, particularly in regards to health standards and other consumer protections. "We need something between 100 percent control and 100 percent free markets."
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