The Telegraph
Monday , July 2 , 2012
Since 1st March, 1999
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Baghdad discovers magic of malls

- ‘Veneer’ economics vs thirst

Baghdad, July 1: One has a designated prayer room. Another frisks patrons at the entrance, requiring them to check their pistols, like coats in a fancy restaurant.

They are good places to escape the desert heat, and in a conservative Islamic culture, they are one of the few places where young couples openly flirt or women smoke cigarettes in public.

American-style malls, fixtures in most of Iraq’s wealthy Persian Gulf neighbours, have come late to war-torn Baghdad.

Big malls are being built across the capital. The largest will include a five-star hotel and a hospital, and at one already in operation, a truck arrives each week carrying frozen Big Macs from a McDonald’s in Amman, Jordan.

The construction boom is generally hailed as proof of Iraq’s progress and return to normality, more than nine years after the American invasion and six months after the last combat troops departed.

But economists and other experts see a dark side. They say the emerging consumer culture masks fundamental flaws in an economy that, like those of other energy-rich countries like Saudi Arabia and Qatar, stifles productive enterprise by relying almost solely on oil profits and the millions of government salaries those profits finance as part of the country’s vast patronage system.

“Basically, Iraq is trying to build a consumer society, not on state capitalism like in China, but on socialism,” said Marie-Hne Bricknell, the World Bank’s representative in Iraq.

One of Washington’s principal aims was to develop a free-market economy here. Yet with so much oil wealth at hand, Iraq’s leaders have taken few steps to develop a private sector. More than 90 per cent of Iraq’s government revenues derive from oil, and with oil production rapidly expanding, the country’s annual revenues could triple over the next five years, to more than $300 billion.

With that kind of wealth rolling in, one of the greatest questions the country faces is what it will do with all that cash.

Given the statist mentality of most top Iraqi officials and widespread corruption, diplomats are generally pessimistic that the expected boom in government revenues will be used either to help develop a private sector or to pay for an ambitious public works programme — something the country, where 40 per cent of the population still lacks access to safe drinking water, desperately needs. Instead, experts worry it will finance more of what Iraq already has: corruption and a huge government work force.

Most of the major industries remain in the hands of the state, and the greatest ambition of many Iraqis is to secure a government job. Almost a third of the labour force works for the government. That is more than five million people, and the number is rising, as political parties that run government ministries use pay checks to expand their constituencies.

Because government salaries are much higher than those in the private sector, independent businesses operate at a disadvantage because, among other disincentives, would-be entrepreneurs cannot afford to hire the most skilled workers.

“Building a consumer society on top of nothing is like building a bubble that will burst in the future,” Bricknell said. With the shopping malls, she said, “you are putting a veneer over a rotting core, basically”.

For now, though, that veneer looks pretty good in a place that has suffered so much.

Ali Aboud, an Iraqi real estate developer who left for the Netherlands in 2006, recently returned to open a four-story mall with his brother. The first floor is a supermarket; the second floor is stocked with clothing; the third features furniture and home goods, while the top floor has a food court and a play area for children.

As Aboud walked through the market, he pointed out cheese from Denmark, huge frozen prawns from the Persian Gulf, frozen burgers and fried chicken.

“People come here and ask me for McDonald’s or KFC products,” he said. “There’s a lot of Iraqis who’ve lived outside the country.” Neither chain has a franchise here yet.

At the mall with the security check, Ali Saady, the manager and son of the owner, said: “Iraq is still not a place where you can let people in without searching them. The security situation is the biggest challenge. It is still not stable.”

Lamiya al-Rifaee, 40, a mother and a businesswoman, was shopping here recently and complained that the mall was not as big or as fancy as the ones she had visited in Dubai or Turkey.

But for Iraq, she said, it is a good start, and one of the few places where she will let her children out of her sight, frequently depositing them in the top-floor play area. She added: “Iraqi women really have the shopping disease.”

“People have to have fun,” said Maythem Shakir, the chief engineer of a $25-million mall project. “People have to have the same things as everyone else in the world.”