Background
Besides the adventure of visiting Iraq and associated with it personal excitement and insecurity, I believe the idea to held this CEE Economic Transformation: Lessons Learned for Iraq's Reconstruction Conference in Baghdad (20-21 September), on the eve of so many important events developments was absolutely useful and perhaps crucial.

The group consisted of eighteen 1990's reformers from eleven post communist countries most of who are currently involved in design and promotion of free-market reforms at home and across the globe. There were four finance ministers, three central bankers, and number of minister of trade and other areas, a prime minister and former members of parliament, managers of privatized state owned utilities and infrastructure companies, three think-tankers. The Conference was moderated by Ambassador Mirek Belka, himself ex-finance minister of Poland¹. To my knowledge, after similar groups advised reforms in Serbia, this is the first such councilium; it was sent outside Europe; and the public standing of the members was higher than many groups of top advisers.

The events that coincide are the debates on additional US budget for Iraqi reconstruction, Dubai IMF/World Bank Annual Meeting and France-Germany-Britain talks on the top regarding Iraq.

I think the group managed to legitimize, if not formulate, some policies to be undertaken by the CPA. It was due to the fact that participant shared common philosophy of economics and that in their respective countries their political involvement has been bold and timely. All participants were volunteers, they were not paid for the consultation and their risk insurance was offensively minimal.

Messages
Part of the problem discussing economic reconstruction of Iraq is to separate economics from security and the need for prompt action from legitimacy. In addition, there are two "holly cows" in Iraq: its foreign debt and petrol/fuel prices and prospects. On these tricky issues there was a relative but strong consensus on the following:

• An action on economic front will help the security front;
• Bold reforms produce legitimacy, it is quite unpractical to wait public opinion to ripe;
• Foreign debt must not be waved completely (as Paris Club suggested in June), due to its discipline functions in the economy and the fact that there are some productive parts in it, and chunks owned to individuals and contactors;
• Oil prices should be immediately adjusted to those in the neighboring countries (they are currently ten times lower), to prevent smuggling and distorting impacts on other prices.

Feasibility of all these
A number of impression and observations provide insights on whether all abovementioned is feasible.

Privatization must be much easier task to implement in Iraq than in any Central or East European country, at least from a technical point of view. If one discounts the crude oil exploitation and refining, there are less than 200 enterprises to sell. Half of them - comparatively a very good share - are functioning relatively well. Due to recent international constellations, markets for Iraqi products can only rebound.

Currently, the foreign debt is traded at 10-15%. This is perhaps the share that can be retained, not to be cancelled, irrespectively the Paris Club June idea to discharge all claims.

IMF and the World Bank have already suggested flat tax, at 15%. This threshold is probably too high, but there is room to lower it over time.

Iraq is not one resource dependant economy, or at least there is potential not to be such economy. It has the highest in the region fresh and renewable water resources, option for agriculture and - due to Babylonian heritage and cooler climate to the North - tourism.

The structure of the economy is more destroyed in terms of ownership, business attitudes and entrepreneurship compared to any of the countries represented in the group. It is, however, the social fabric that was torn and partially destroyed by both previous regimes and wars and social controversies. The situation resembles only semi-protectorates of the Balkans, in political terms, and Serbia - in terms of economic deconstruction (estimated at 65-70% of GDP).

The administrative capacity of the Coalition Provisional Authority (CPA), i.e. the interim government - to the extent there was opportunity to judge - is higher or equal to that of European emerging democracies in 1990-1991. There might be a speculation on how sorrow is a situation of "weak government" of Iraq - a fashionable complaint among political scientist around the globe. "Weakness" is typical for post-totalitarian constellations and thanks to it the change is possible.

The path towards sound monetary foundations, liberalization and privatization to provide for competition and openness, combined with low, simple and transparent taxes could limit the government of Iraq to essential tasks - securing the rules of the game on first place, rigidly and with needed strength. The legitimacy of these rules depends heavily of the ability of the coalition forces and CPA to ensure public order and security.

There is no universal economic and political remedy for such situations. The analogies can only help the imagination.

As one of the participants mentioned, there is one principal advice: "to be ready for broad and real compromises in the situation when the political regime is still nascent, there is no constitution, the boundaries and the territorial structure are unclear, and there is a huge mass of challenges, an uncontrolled stance of which leads to the inevitability of a direct confrontation, and, in some cases, to a civil was'. Economists, IMF and the World Bank simply do not deal with such situations. At the same time, inactivity and indecisiveness on the economic is just another recipe for disaster

With regard to the imagination, the mission seems to have been useful, judging from the headline and quotations in Financial Times and New York Times. It worth mentioning that whenever Iraqi or international members of CPA were opposing the message listed above, they were using the same rhetoric as the one that blocked reforms in some CEE countries.

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¹The event initiated and organized by the Coalition Provisional Authority (CPA) in Baghdad, the Department of State, USAID and the International Resources Group. Participants from Bulgaria were Martin Zaimov, executive director of Postbank, ex-deputy governor of Bulgarian National Bank, and the author of this lines.