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Arab states still wary of investing in Iraq

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Arab states have steered clear of devoting resources or personnel to Iraq since a car bomb attack on the Jordanian Embassy in 2003 killed 17 people. The kidnapping and murder of the Egyptian ambassador in 2005 reinforced that position.

Since then, the US troop surge and establishment of the Sunni Awakening Movement have made significant progress in reducing insurgent attacks. But Arab officials say they are still uncertain about the staying power of the new Iraqi government.

"The Arab states have been waiting," says Hoshyar Zebari, foreign minister of Iraq. "For a long time, they were not convinced that Iraq was going to come out of this turmoil, but we have stood our ground."

Gulf Arab states, which helped fund the 1980-88 Iran-Iraq war, hold about half the country's remaining outstanding foreign debt. About $66.5 billion of debt has already been forgiven, according to US State Department estimates, most of that from members of the Paris Club, a group of the world's 19 wealthiest nations.

Debt relief negotiations have been ongoing for months, but Iraq's Arab creditors show little enthusiasm for a complete write-off.

"They have not demanded that we repay them," says Mr. Zebari, "but the issue of debt is still there."

The disinterest in Iraq is in marked contrast to the economic surge elsewhere in the Middle East. Money is pouring into other Arab states from record-high oil prices and Arab countries, on average, are experiencing a 6 percent annual economic growth rate. Cities from Dubai to Cairo are being transformed by a boom in real estate and construction, although rising inflation has caused great hardship for the masses of Middle Eastern poor.

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