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By TIM ARANGO
Published: June 30, 2012
BAGHDAD — 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.
Mario Tama/Getty Images
Some experts fear that growth of a consumer culture masks underlying economic problems.
American-style malls, fixtures in most of Iraq’s wealthy Persian Gulf neighbors, have come late to war-torn Baghdad, but Iraqis are taking to them now like Valley Girls, as a consumer society fueled by the country’s booming oil profits begins to flourish here.
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 normalcy, 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-Hélène 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 percent 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 program — something the country, where 40 percent 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. According to statistics from the Iraqi Ministry of Planning, almost a third of the labor 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 paychecks to expand their constituencies.
“The state’s payrolls have massively expanded, not with technocrats but with party functionaries, because the state has become a way of funding party loyalty,” said Toby Dodge, a professor at the London School of Economics, at a recent panel discussion in London about Iraq. “That’s directly undermined and hindered the state’s ability. So we have a huge state.”
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. The World Bank ranks Iraq 153rd out of 183 countries on the ease of doing business.
“Building a consumer society on top of nothing is like building a bubble that will burst in the future,” Ms. 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 Mr. 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 K.F.C. 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, United Arab Emirates, 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. Here, she said, “I can watch my kids playing safely and get whatever I need in the stores.”
She added, “Iraqi women really have the shopping disease.”
The fifth-floor gym and beauty salon are off-limits to men. “We have a gym for fat women who want to lose weight,” said Huda Abdul Allah, the owner. She explained: “We wanted to make something fancy, like in Dubai. We live in a society that doesn’t allow women to go to such places without privacy.”
A huge mall under construction on the edge of the upper-class neighborhood of Mansour will eclipse any of the existing malls, and it is aiming to be a place for Iraqis to indulge in American-style consumerism. Boutiques will sell Western brands like Ecco shoes, Zara suits and Timberland outdoor apparel, and there are plans for a video-game arcade, several cinemas, more than a dozen restaurants and a bowling alley. It is billed not only as a shopping mall but also a “full entertainment resort.”
“People have to have fun,” said Maythem Shakir, the chief engineer of the $25 million project, which is being underwritten by a group of wealthy Iraqis and built by a Turkish company. “People have to have the same things as everyone else in the world.”
The oil-financed consumerism on display in Baghdad comes with historical precedent. In “The Modern History of Iraq,” the American historian Phebe Marr described a similar trajectory in the 1970s when, she wrote, “the era of prosperity rapidly created a consumer society dependent on government employment.”
Today, some experts see the accumulation of power in the hands of Iraq’s leader, Prime Minister Nuri Kamal al-Maliki, coupled with expanding oil revenues, and worry that history will repeat itself. The brief period of prosperity decades ago created a populace dependent on the government for its livelihood and acquiescent to the brutal rise of Saddam Hussein, who used oil profits to build up his stocks of weapons and pursue a disastrous war with Iran.
“Oil was a source of curse for the people, because its revenues were used to build armies, attack Iraq’s neighbors or the Iraqi people themselves, and it was not invested in the infrastructure and development of the various economic sectors of the country,” said Hussain al-Shahristani, the deputy prime minister who oversees energy policy, in a recent interview with the Iraq Oil Report.
For now, though, oil wealth translates into malls and Western brands, which are sought after by many Iraqis.
“This is a kind of freedom,” said Mahdi al-Saadi, one of the owners of the Mansour mall. “Iraqis will spend money right away. They have been deprived of choice, of big brands.”
Yasir Ghazi and Omar al-Jawoshy contributed reporting.
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Published: June 30, 2012
BAGHDAD — 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.
Mario Tama/Getty Images
Some experts fear that growth of a consumer culture masks underlying economic problems.
American-style malls, fixtures in most of Iraq’s wealthy Persian Gulf neighbors, have come late to war-torn Baghdad, but Iraqis are taking to them now like Valley Girls, as a consumer society fueled by the country’s booming oil profits begins to flourish here.
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 normalcy, 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-Hélène 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 percent 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 program — something the country, where 40 percent 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. According to statistics from the Iraqi Ministry of Planning, almost a third of the labor 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 paychecks to expand their constituencies.
“The state’s payrolls have massively expanded, not with technocrats but with party functionaries, because the state has become a way of funding party loyalty,” said Toby Dodge, a professor at the London School of Economics, at a recent panel discussion in London about Iraq. “That’s directly undermined and hindered the state’s ability. So we have a huge state.”
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. The World Bank ranks Iraq 153rd out of 183 countries on the ease of doing business.
“Building a consumer society on top of nothing is like building a bubble that will burst in the future,” Ms. 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 Mr. 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 K.F.C. 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, United Arab Emirates, 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. Here, she said, “I can watch my kids playing safely and get whatever I need in the stores.”
She added, “Iraqi women really have the shopping disease.”
The fifth-floor gym and beauty salon are off-limits to men. “We have a gym for fat women who want to lose weight,” said Huda Abdul Allah, the owner. She explained: “We wanted to make something fancy, like in Dubai. We live in a society that doesn’t allow women to go to such places without privacy.”
A huge mall under construction on the edge of the upper-class neighborhood of Mansour will eclipse any of the existing malls, and it is aiming to be a place for Iraqis to indulge in American-style consumerism. Boutiques will sell Western brands like Ecco shoes, Zara suits and Timberland outdoor apparel, and there are plans for a video-game arcade, several cinemas, more than a dozen restaurants and a bowling alley. It is billed not only as a shopping mall but also a “full entertainment resort.”
“People have to have fun,” said Maythem Shakir, the chief engineer of the $25 million project, which is being underwritten by a group of wealthy Iraqis and built by a Turkish company. “People have to have the same things as everyone else in the world.”
The oil-financed consumerism on display in Baghdad comes with historical precedent. In “The Modern History of Iraq,” the American historian Phebe Marr described a similar trajectory in the 1970s when, she wrote, “the era of prosperity rapidly created a consumer society dependent on government employment.”
Today, some experts see the accumulation of power in the hands of Iraq’s leader, Prime Minister Nuri Kamal al-Maliki, coupled with expanding oil revenues, and worry that history will repeat itself. The brief period of prosperity decades ago created a populace dependent on the government for its livelihood and acquiescent to the brutal rise of Saddam Hussein, who used oil profits to build up his stocks of weapons and pursue a disastrous war with Iran.
“Oil was a source of curse for the people, because its revenues were used to build armies, attack Iraq’s neighbors or the Iraqi people themselves, and it was not invested in the infrastructure and development of the various economic sectors of the country,” said Hussain al-Shahristani, the deputy prime minister who oversees energy policy, in a recent interview with the Iraq Oil Report.
For now, though, oil wealth translates into malls and Western brands, which are sought after by many Iraqis.
“This is a kind of freedom,” said Mahdi al-Saadi, one of the owners of the Mansour mall. “Iraqis will spend money right away. They have been deprived of choice, of big brands.”
Yasir Ghazi and Omar al-Jawoshy contributed reporting.
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