Iraq: Sovereignty, Security, and Justice

October 13, 2004

Unedited transcript prepared from a tape recording

Proceedings:
MS. PLETKA:  --American Enterprise Institute.  I'm going to introduce this event, and Michael Rubin, my colleague, is going to moderate the panel and introduce our panelists.

One of the reasons why in the height of the political season we're having an event on Iraq, other than out of habit, is because Iraq has become the center of the American political scene and the American political debate.  This is the wrong war in the wrong place at the wrong time.  We thought it might be interesting to have actually Iraqis talking about whether it was the wrong war at the wrong place at the wrong time.

It's really become almost an article of faith among certain people in the United States that life was a lot better for Iraqis under Saddam Hussein and that, in fact, life would have been a lot better for the United States had we not gone in and gotten rid of him.

I think for my mind, the extension of that premise is that life would have been a lot better had we left Milosevic in power.  Perhaps life would have been a lot better had we left Aristide in power.  Perhaps life would be a lot better if the Soviet Union still existed.  But it's an arguable premise, and rather than having Americans argue about it, we thought it might be interesting to bring a different perspective, that of Iraqis.  Was it worth it?

With that very brief introduction, we're going to cover a variety of areas today.  I have one request of everybody, and that is that you please, out of courtesy to everybody involved and to our C-SPAN audience, turn off your cell phones.  Thank you very much.

MR. RUBIN:  I want to welcome you all here today.  It's a pleasure to be here with three distinguished guests who I happen to know much more in the Iraqi context, but it's much more interesting to see them in Washington as well to hear what they have to say to an American audience.  I'm used to hearing them speak to an Iraqi audience.

At any rate, I'll go from left to right.  I want to introduce Rend Rahim, who many of you know as Ambassador-designate of Iraq to the United States.  She's much more famous within the Iraqi context not only for her ambassadorship and for being one of the most influential Iraqi women--not just Iraqi women but Iraqis today--but for more than a decade of work bringing human rights issues to the forefront, working on everything from the marshes to democracy and helping coordinate aid and any number of other subjects.  She truly is respected.  It was wonderful in the streets of Baghdad to see people come up and recognize her after years abroad and thank her for her work.

She'll start off speaking today, but before she does, I want to introduce Basil Al-Rahim, who is one of the leading Iraqi economic experts.  He's long been active in Iraqi politics and policies in exile when Saddam Hussein was still in power, and as you can see from his bio, he's a distinguished businessman and investment banker and merchant banker as well.

Last, but not least, Salem Chalabi.  Salem Chalabi is well known for any number of ways.  I'm also glad to say he's a former Yalie as well.  But Salem has been one of the most active member Iraqis with regard not only to Iraqi constitutional issues, the Transitional Administrative Law--this was featured in an article in the Wall Street Journal about Salem Chalabi's work with regard to that, and really reforming Iraq after 35 years of dictatorship.  And as you also know, he's been at the forefront both since Iraq's liberation and before on issues of transitional justice and rule of law.

With that, I'll end my introductory remarks, and today we will start with Rend Rahim.

AMBASSADOR RAHIM:  Thank you, Mike.  It's a pleasure to be here, as always, and we had to fight hard against the Yalies in this country.  There are far too many of them.

Dani said something about instead of Americans arguing about whether it was good to go into Iraq and remove Saddam Hussein, let's let Iraqis argue it.  There's nothing to argue about amongst Iraqis, Dani.  I don't think certainly the Iraqis sitting here--and I don't think you will find Iraqis in Iraq, possibly any Iraqis in Iraq, who will argue that Saddam was better for Iraq, that Saddam was doing fine, or Iraq was doing fine under Saddam, and that it is not an unmitigated, unqualified good to have had Saddam Hussein removed.

I think there has been a lot of discussion about, well, should we have gone in, now we know there are no weapons of mass destruction.  Was it a wise move?  Was it timely?  And so on and so forth.  I think all this hindsight hand-wringing is really just kind of a luxury that the U.S. and certainly Iraq can't afford.  Saddam Hussein had the desire to use weapons of mass destruction.  He had actively developed them.  He had used them.  The sanctions were fraying.  We now know from the   (?)  report that a great many countries and many individuals were conspiring with Saddam Hussein in order to rebuild his military.

In any case, insofar as Iraqis are concerned, I think the greatest victory for Iraq was the day that Saddam was toppled, and that Iraqi history had virtually died, and that the removal of Saddam Hussein gave Iraq as a country, as a nation, a new lease on life.  And it instilled hope in a nation that had lost all hope in the future.

Having dispensed with that, I want to talk about where we are now and try to set sort of the ground for what my colleagues on the panel are going to be talking about.

One of the most important turning points since liberation was the handover of sovereignty to an Iraqi government.  This gave Iraqis a confidence that they now have a government that is for them and of them and can instill confidence in the population that things are going to be done with the interest of Iraqis in mind.

I and many Iraqis have long advocated that sovereignty should have been given to Iraqis very, very early on, from the word "go," and that the delay in handing sovereignty to Iraqis was, in fact, detrimental to the situation in Iraq.

On June 28th, an Iraqi government took over that may not have been elected, but it was indeed seen by most Iraqis as very broadly representative at least of a wide segment of Iraqi political interests and social backgrounds.

The interim government, as it's called, has not had a very easy time.  It has worked very hard, but it has faced a lot of obstacles and challenges.  And obviously the most dramatic one and the overarching issue in Iraq that the government has had to deal with is the issue of security.

Security, we were hoping that security would improve after the takeover by an Iraqi government, but, in fact, it has not.  However, the government is trying to tackle that in two different ways.  One of them, of course, is the use of military force and--or the threat of military force, and there has been success, as you know, in places like Najaf, in Samarra, and it looks like the threat of military force may have or will have success in Fallujah.  As recent reports indicate, there is something of a breakthrough in Fallujah.  The situation in Fallujah is not uniform anymore, and people, the citizens of Fallujah, are beginning to turn against the foreign insurgents.

Now, what you probably also know is that the effort by the government to disengage the population of Fallujah from the foreign terrorists has been going on since June.  This is not something that began just a week or two ago.  And what we're seeing is a gradual maturing of this process of dialogue that the government has been engaging in with the people of Fallujah.  It is also engaging in dialogue with citizens in other cities in order to win them over and turn them against foreign fighters.  So force or the threat of military force are beginning to yield results right now.

The other side of the equation is that the Iraqi government is very serious about building the capabilities of its own Iraqi security forces--the army, the national guard, the police force.  This process has been very slow.  The vetting of new recruits has been slow.  Training has been slow.  And, above all, equipping has been abysmally slow.

Unfortunately, the building of capabilities is not entirely in the hands of the Iraqi government.  This is very dependent on the U.S. and the coalition, also on NATO and other countries.

The vetting process is a very difficult and tricky one because we do not want a repeat of what happened in April when we had to confront insurgents in Fallujah and some of the national guard and the police escaped and would not fight.  This has not happened since then.  What we saw in Najaf, for example, is national guard battalions that were very able and willing to engage with the Mahdi army.  However, it's important to accelerate this process, to equip these people.  The equipment in terms of personal armor, in terms of vehicles, in terms of weapons has been extremely slow in being implemented and delivered to the Iraqi army.

The third prong in security is really something that is much broader, and that is the co-optation of wider and wider segments of Iraqi society.  I think the Iraqi government and Iraqis as a whole understand that the insurgency and the attendant terrorist activities are not done by one group, but are a mixture, sort of a confluence of interests.  The organizational, motivational, and perhaps financial clout comes from relatively small groups of foreigners who are infiltrating into Iraq.  They are first and foremost supported by old Baathists who are intent on seeing the regime, if not in the names of Saddam Hussein and his cronies, but at least some form of Baathist regime comeback, and some hard core Salafi Islamist fundamentalists in Iraq.

Then there are groups who are motivated by fierce nationalism, a dislike of foreign troops, but who essentially are interested in joining the new order in Iraq.  They do not reject it lock, stock, and barrel.  They are willing to accept it.  But they want to be included and they want to be given a place in it that they feel happy with, that they feel they deserve.

The government is trying to disengage those people who either out of fear for their own future, their own political future, their own place in society, or out of a misguided sense of nationalism, is trying to disengage them, win them over away from the extremists, the hard-liners, who really reject the new order completely and have no time for it and want to fight it.  This co-optation, as I said, has been going on since June and really even earlier.  It's beginning to bear fruit now.  We are beginning to see the results of that.

The true test of that is going to be in the elections that the government wants to hold--and is determined to hold, I should add--in January 2005.  If sufficient numbers of people and sufficient segments of society are willing to participate in the elections, then we will know that there has been a measure of success in this co-optation and bringing people into the political fold.

Additionally, if enough and a sufficient diversity of individuals and groups actually run for election, run as candidates, and the population of Iraq sees diversity in the political process and in the process of elections, then, again, we can say that the Iraqi nation as a whole endorses and wants to become part of the new Iraq, part of the transformation of Iraq.  The elections are, in fact, going to be a touchstone for the willingness of Iraqis to accept a new political order, to accept a new vision of Iraq, and to be part of that vision.

The fourth element that I want to talk about which is part and parcel of the transformation, of giving legitimacy to the new type of Iraq that we want to build, is dealing with the population in terms of addressing their needs and in terms of saying that government is in the service of the people, government and politics are an act of service and not merely an act of wielding power.

The process of improving the lives of Iraqis, of delivering services that Iraqis need, has also been very slow.  This is all tied to the security situation, but not entirely.  We hear very often, especially in the United States, objections that so much of the funds that Congress has allocated to Iraq, so many of the projects that the U.S. and the Iraqis indeed wanted to implement have been stalled because of security.  This is only partly true.  There are many parts of Iraq where construction projects, development can be undertaken and yet has not been.

So far the emphasis has been on very large, technologically complex, nationwide projects which are, for the most part, contracted by large American companies, employ a lot of foreigners, and not enough Iraqis.  Not only do these projects not create a trickle-down effect, but also they are very open to the targeting of terrorists.

We are told that there is a reassessment of the development policy and strategy for the $18.4 billion that Congress has allocated.  It has been very clear for a long time what that strategy ought to be, and I have heard in Washington that this review of strategy has been going on since May.  It's difficult to understand why it should take over five months to figure out something which is quite simple.  We need smaller projects, locally based projects.  We need projects that bring immediate benefits to the population at the local level.  We need more Iraqis engaged.  We want more of the money to be spent in Iraq and to be disbursed to Iraqis as contractors, as workers, and as direct beneficiaries.

There doesn't seem to be anything very difficult to understand about this, especially when a recent report on how much actual money is spent in Iraq of these contracts estimated that only 27 percent actually reached Iraq and was spent in Iraq.  My estimate--when I was running the Iraq Foundation, we did some rough calculations--was that only between 15 and 20 percent of those contracts were actually spent in Iraq, and, therefore, that was the only trickle-down effect of those big contracts inside Iraq.

That focus has to shift, the focus away from big projects given to American companies, requiring high technology, requiring a large number of Americans, has to shift away from Iraqi-based effort and the assistance and collaboration of Iraqi ministries has to be far higher and far more important in defining the priorities, deciding what those projects are, and also overseeing the implementation of projects.

I have two minutes, and I want to emphasize that one of the biggest challenges that the government now has and which touches on its legitimacy, on security in the country, is to target projects in post-conflict cities--in other words, cities like Najaf, like Samarra, like Sadr City, which have recently concluded peace negotiations with the government, where the government is back in control and where the level of terrorism, insurrection, the influence of foreign fighters has either been removed completely or abated.  Those cities need emergency development funds immediately.  That should take priority.

And, again, I think in that respect progress has been slow.  The government doesn't necessarily have the necessary vehicles in order to implement these emergency projects.  What we need is something that is similar to FEMA here in the U.S., which goes out into these post-conflict areas and begins immediately.  As soon as the tanks come in, the development crews need to move in.  There should not be any time lag.

I should stop now and give a chance to everybody else.  Thank you.

MR. RUBIN:  Thank you, Rend.

We will have time for questions and answers following the speakers' comments to elaborate further on some of these issues.  One of the greatest issues, topics of conversation in restaurants and tea houses and private living rooms throughout Iraq has to do with the future.  By the end of January 2005, there should be elections.  The elected transitional National Assembly is supposed to draw up a constitution.  We're fortunate today to have Salem with us, who is one of the leading experts on Iraqi constitutional issues.  So with that, I turn the floor over to Salem to talk about some of the issues which Iraqis now face.

MR. CHALABI:  Thank you, Michael.  I'd like to thank the American Enterprise Institute for inviting me to talk.

As Michael said, I'm going to try to focus on some of the future constitutional issues that arose in light of our experience earlier this year with the Transitional Administrative Law, which we refer to generally as "the TAL."

Over the last two years, I was intricately involved in a number of constitutional-related matters in Iraq.  I was fortunate enough to be one of two key Iraqis involved with the drafting and negotiations of the TAL.  And I'm going to try to expand on some of the lessons.

The basic thing I noticed during this--in our discussions and negotiations at the time, which I guess should not be a surprise to anybody, is that when we began to discuss matters, people began--or communities began thinking more communally and less as Iraqis.  So people began to focus more on their communal interests and less on the whole country's interest.  And this worried me, and if we don't address it properly in the next process, after the next elections in January, and with the constitutional committee that's going to form, I worry that it could lead to some fragmentation.

I spent two weeks in Kurdistan last month, and I sensed that the Kurds are moving forward in developing their region very rapidly, and rightly so.  I mean, they need to move forward, as does the rest of the country.  And I sensed that they began--I am talking among Kurds generally, not only politicians but others, that they began to feel that they need Iraq or to be part of Iraq less and less and, therefore, may not be as willing to compromise in the future constitutional debate that will commence.

We in the Iraqi opposition over the last 12 years, especially those of us involved in kind of political, legal, or constitutional issues, had come across the proposal put forth by the Kurds in 1992 for a Federal Iraq as the best way forward to protect the Kurds in light of their experience, historical experience with the central government.

During this time, the term "federalism" became very kind of popular in the nomenclature of the Iraqi opposition, but possibly for pragmatic reasons, the ideas behind federalism or how it would be implemented were not expanded on or clarified.  It's just a name, the term, the one that was focused on.  And at most meetings of the opposition, the term "federalism" was raised, and Arabs had to pay just lip service to it, the Arabs in the opposition, both Shi'ites and Sunnis, and others, because they didn't want to discuss it, get into details so as not to upset the Kurds, their Kurdish compatriots and allies against Saddam Hussein.

As the years went by, the Arabs in the opposition began to accept the need for federalism so far as it related to the Kurds.  Once we returned to Iraq, we began to encounter a new dynamic, which was the feelings of those Iraqis who had stayed inside Iraq and did not have these long-term relations with Kurdish leaders and parties, nor with the whole concept of federalism.

It was alarming to me arguing matters with the Iraqis, lawyers, non-lawyers.  I attended a meeting of the Iraqi Bar Association in July of last year in which I spoke about federalism and favored it.  And I was alarmed by just the silence.  People just did not understand what we were talking about.

So it's an uphill struggle, and it's been 35 years of indoctrination by--or maybe even eight years of indoctrination by the central government that Iraq is one that Kurdistan--or the northern region is part of the whole country, people were not willing to accept the difference, the distinctness of Kurdistan.

I recall one long conversation I had with the current Minister of Justice.  We were waiting for a meeting, and the other people--actually, Dr. Alawi was late, and so the current Minister of Justice and I were talking about various issues, including the TAL.  And we moved on to the issue of federalism.  And the sense I got from the discussion is that there is widespread opposition internally among the Arabs of Baghdad and the rest of the country, both Shi'ites and Sunnis, to the gains that these Arabs perceive the Kurds got in the TAL.

Two nights ago, in London, I had dinner with an Iraqi judge, a senior--a court of (?)-ation or Supreme Court judge, who reiterated the same point, stating that in his opinion the Kurds had not only gotten one-third of Iraq, but they also got one-third of the central government.  So there is this kind of feeling among the Arabs that we need to address this.

Why am I raising this issue?  Because I want to point out that as we move forward toward drafting the permanent constitution, this is going to become a hot issue.  The lines drawn in the TAL may need to be redrawn, and we may need to focus on this issue for several other reasons.

First, looking forward, I think we need to get a strong indoctrination campaign for the Arabs of Iraq, both Shi'ites and Sunnis, on the benefits of federalism.  You know, deal with one issue relating to this indoctrination campaign later.  This needs to commence soon and needs to involve not only civil society institutions but the actual drafting committee.  My thought is that this drafting committee would have a strong public relations campaign, and to me--this brings me to another point, which is that the process of drafting the constitution to me is much more important than the actual draft that we come out with.

If the process is somehow flawed or not inclusive enough, then whatever constitutional structure emerges would be much more open to criticism and even rejection.  Rend earlier spoke about the elections.  Well, if certain communities don't participate in the elections and, therefore, are not represented in whatever drafting committee of the constitution, then this will give less legitimacy to the constitution and create new problems for us in the future.

The TAL has been heavily criticized for being drawn up behind closed doors, which actually it was, I mean basically.  But this was partially due to the timetable and the fact that people felt excluded from the process.  Had it been more inclusive, I would imagine there would have been significant comments and criticism of the TAL, and we would have delayed the transfer of sovereignty, and this to us was a primary goal.  So we had to move quickly and, I guess, try to work within those parameters.

Another point I want to raise on our experience with the TAL, which I hope that we can learn for the future, is that we may need some sort of interlocutor or mediator between the various parties.  I will give one example.

When we were doing the TAL, Ambassador Bremer and his staff played a pretty decent mediatory role.  They committed one error, which I'll get to in a second, but they were principally involved in negotiating with the Kurds.  As a result of conclusions drawn at the time, following several meetings with the drafting committee that things were becoming very, very heated between Kurds and non-Kurds.  And I recall a meeting in which the Kurds took several positions which led to the Arabs in the meeting to react negatively.  Dr. Pa-  (?)  , who was the chairman of the drafting committee, recognized that this meeting was going nowhere and that further meetings would keep being stalled.  And so he requested some sort of behind-the-scenes intervention by the CPA.

And the CPA, we know that the CPA at the time had more leverage than possibly the U.S. Embassy would have now.  But the issues are far more heated.  This is a permanent constitution.  It's not an interim one.

The mistake I thought that the CPA committed, which actually made--in their mediation which made for a kind of stronger sense by communities to protect themselves was that they focused solely on negotiations on the Kurdish issue at the expense of other communities.  I was put in a position of having to be the sole interlocutor between the small drafting committee and all the Shi'ite members of the Governing Council, as well as, you know, their staff, as well as other Shi'ite political groups, and I had to go on several trips to Najaf to explain what we were doing on this draft.

There was no kind of involvement by the CPA with other community--with the non-Kurdish community, and so these people felt that there was a deal being done behind the scenes at their expense, and they felt excluded.  And to me this was a lesson that we really need--I mean, the process needs to be as inclusive as possible from day one with respect to drafting the permanent constitution.  And without some form of interlocutor, I worry about our ability to work together, to be honest.

I also want to point out on the federalism issue something that emerged in the discussions on the TAL that is beginning to gather ground.  I know that this may come as maybe a surprise to some, but it's a view that people are beginning to put forward that there should be more than just one region in Iraq, being Kurdistan and the rest of the country.  To speak bluntly, the issue is a request put forward by several Shi'ite political parties and people inside Iraq to have one or more regions that are Shi'ite, similar to the Kurdish one.  And these would be positioned obviously in the South.

There have been many meetings now held in the South.  This issue is gaining momentum.  The TAL puts limits on the type of regions that would be created:  the numbers of governorates that can join together; you can have no more than three governorates; you exclude Kirkuk and Baghdad from any region, et cetera.

The whole process is still at its infant stage, and the reason people are beginning to talk about this is there's a feeling, I think, in the South that 80 years of Sunni-dominated central government cannot change quickly, and so it's better for the Shi'ites to limit the powers of the central government and push power down, divest it down to the regions.  This is, after all, what the Kurds demanded and got and received in the TAL.

I guess, clearly, the implications of any such regions evolving, Shi'ite regions, are huge for Iraq, and possibly for the region.  But at the very least, they need to be discussed seriously and plans need to be made with respect to them.  If the matter is ignored or pushed below the surface, things can explode.

I recall a meeting I had in London, actually, about six weeks ago with Ayatollah Sistani when he was in London, and we spent two hours explaining the whole concept of regions, of the Shi'ite region, and he seemed to be somewhat agreeable to that concept as one way of protecting what he feels are his constituents.

The whole idea is that there appears to be a perception that the Shi'ite areas in the South have been ignored historically, not only politically but also economically, and, therefore, there's a perception that this needs to be addressed through some formula that provides on the economic side for, say, a significant portion of the oil proceeds from the southern oil fields going to these southern governorates or regions.

Anyway, I have two minutes.  Obviously, the elections and the--I mean, as it relates to this, the elections will be critical because the TAL provides that any laws with respect to the establishment of regions needs to be put by an elected body.  And this would obviously come out once the Transitional Assembly is put in place.  And that's why people are now focusing on putting the lists together for the TAL, and I am seeing the beginnings of development of one Shi'ite list, for example, that would include some of the main Shi'ite political parties and it would be supported by Ayatollah Sistani to push this idea forward.

Anyway, I will stop here.  I had a few other comments to make on the TAL that I'll keep for later.  Thank you.

MR. RUBIN:  Thank you very much, Salem.

I spent about 17 months in Iraq, both as an academic and also working for the Coalition Provisional Authority.  I've always been amazed by the discrepancy between what Americans and Europeans talk about, especially those who have no direct experience in Iraq, and the depth of detail on issues which Iraqis speak about.  And to be perfectly blunt, it's much easier to be critical of the situation in Iraq when you don't know what the situation is and all your information comes from filtered television cameras.

At any rate, one of the key issues which many Iraqis discuss beyond what Rend and Salem talked about is the economy.  On October 15, 2003, a new issue of the Iraqi dinar was released that's free floating.  It was released at 2,000 dinar to the dollar.  When I was at a currency auction in Basra last February, it was down to 1,100 dinar to the dollar.  Recently, and throughout all the troubles of April and so forth, it has been relatively stable at between 1,400 and 1,500 dinars to the dollar.  Frankly, it's been much better performing than the Canadian dollar.

I'm glad, therefore, to have with us one of the leading experts on the economy of Iraq, and with that, I'm going to turn the microphone over to Basil Al-Rahim.  Thank you.

MR. AL-RAHIM:  Michael, thanks very much, and that's a kind introduction.  I don't know if there are any leading experts on the Iraq economy because information is so hard to come by.  But I want to go all the way to China, ancient China, to start my little discussion about the economy in Iraq.

The Chinese have a very old saying.  They say, "You fill people's bellies and empty their minds."  When they're out with their bellies empty on the street with nothing to do, people get angry.  And as people get angry, bad things happen.

The economy, of course, is the way--to my simple mind, is the way to approach people, get them occupied, gainfully employed, and looking after their own lives, as opposed to trying to make everybody else's life miserable.

Two years ago, just before the liberation, a very senior official from the Coalition Authority asked what they should do to gain acceptance by the average man on the street in Iraq.  And it was a very simple and straightforward question, and at the time I had a very simple and straightforward answer.  I said, "Just stand on the street corners where you find these people and distribute cash."

This was not a frivolous or flippant answer, and really, you have to understand the country and where it was coming from when I gave that answer.  Remember that 80 percent or more of the population had been reduced to living on ration cards.  The country was controlled and the economy was pilfered by a very small sliver of an elitist psychotic regime.  Cities were crumbling.  Infrastructure was dilapidated.  And those lucky enough not to be targeted were living in abject poverty.

So distributing free money wasn't as crazy as it sounds if you look at the numbers.  Iraq has a population of 25 million people.  If you assume every household is five people, that's five million heads of households.  If you give each head of household $50 a month, that's $250 million a month in expenditure; $250 million a month distributed to people, $50 per person, would go a very long way because people were living on average on $5 a month.  And it would only be 6 percent of what the current monthly military budget is.  So it's really the cost of a few sorties by the Air Force or bombs or whatever you call it.

Anyway, this is all history now.  I would like to fast forward to say--to put Iraq, the Iraq economy in perspective as to where it was, what's happening now, and where it can go.

In 1979, the economy of Iraq was $128 billion at the then current purchasing power parity, and the population was 14 million people.  So when you push the numbers, that gives you an average GDP per capita of around $7,500.  In 1979, that was equivalent to the GDP per capita of Spain.

Today, the GDP of the country is anybody's guess, but it's certainly at the $25 billion level, or thereabouts.  Population has gone up to 25 million.  So the GDP per capita in the last 25 years has dropped from $7,500 to under $1,000.

If you look at the resources that Iraq has--and I'll talk about that in a second--and project that since 1979 this economy should have grown at 4 percent a year only--and this is an economy that can grow faster than that--then from 1979 until today, at a compounded annual growth rate of about 4 percent, the economy should be at about $330 billion.  Instead, it is under 25.  So this just puts the whole picture in perspective as to where that country should be and where it is right now.

Let's remember that Iraq has six very unusual resources that have rarely--and to my mind I can't think of any single example, six resources that have converged at one point in one time in modern history.  These resources are:  oil and minerals, of course, and I'll just very quickly tell you that the proven reserves are 113 billion barrels.  But the last time a proper survey was done was over 25 years ago, and it is estimated that the proven reserves are three times that amount.  At 330 or 340 billion barrels of oil, that's 50 percent more than the reserves of Saudi Arabia today.  The country also has abundant gas and a number of minerals, including phosphate, uranium, sulfur, et cetera.

The second major resource the country has, of course, is the water, which is a scarce resource, commodity in that part of the world.  The two major rivers cross the country from north to south.

With those rivers, the third resource is the arable land.  Iraq has more arable land than Egypt, which supports a population of 70 million people.  Iraq had always been a net exporter of grain and other foodstuffs.  And even today when you walk in the markets, certainly in Baghdad or any of the cities, there is an abundance of fresh fruit, vegetables, livestock, at very, very cheap prices.

The fourth resource that Iraq has is a professional population.  Yes, it does require an upgrade and a polish because these people have been in a black box for 13 years.  But there is, nevertheless, a bid cadre of doctors, engineers, teachers, and all sorts of other professionals.

The fifth resource is archaeological and religious sites.  Anywhere you go out in the countryside in Iraq and take a little pick axe and dig for ten minutes, you'll come across a forgotten city that nobody has discovered yet.  It's true.  On top of the archaeological sites, Iraq has a lot of religious sites, and it has religious sites not just for the Shia but it has religious sites for the Shia, the Sunnis, Christians, and Jews.  So the tourism potential of that country is tremendous.  Today, Najaf and Karbala alone are expected to attract two million Shia visitors a year.

And the last resource is that there's an international interest in Iraq.  This is not spinning out somewhere in the Milky Way.  Everybody is focused on Iraq.  Everybody wants to do business, wants to go there, not only economically but also politically.  And the interesting thing is that interest is reciprocated by the Iraqis.  The Iraqis do want to open up.  They want to get involved with the world that they feel they've been shut out of for the past 25 years.

Where does that put us today?  What we need is to look at the big picture, look at the economy, and tie it all in.  Unfortunately, that has not been done to date simply because there have been so many other pressing matters, whether it's security, sovereignty, constitution, et cetera.  However, I think the time is here.

There is a very pressing need for a coherent and well-communicated economic master plan.  The objective should be to deliver a ten-fold growth in GDP over the next five years.  This is hyper-growth, and it is achievable given the resources.

The idea is not to revert back to a central planning model but to have a clear road map and targets on GDP growth that create the enabling conditions--the regulatory, the infrastructure, the financial incentive schemes--that are necessary to achieve this growth.

The challenge is not just to grow but, rather, how quickly we can achieve this turbo-charged growth.  The six resources that we mentioned can all be made to work together to move in a synergistic manner and achieve these objectives.  The question is:  Can we create an economic miracle in Iraq?  And my opinion is, yes, we can.

However, there are very quickly a number of sectors I will talk about where questions remain to be resolved, and wave your hand whenever you--

MR. RUBIN:  I will.

MR. Al-RAHIM:  Okay.  First, the oil sector.  That's the single most important sector.  The oil sector is expected to account for 50 percent of the economy going forward.  Right now it accounts for 95 percent of the economy.  However, there is still not a clear communicated strategy in this sector, now or in the future.  We've divided the sector into three parts, of course:  upstream, midstream, and downstream.

Upstream, what are the production targets in the short, medium, and long term?  Keeping in mind that Iraq needs to maximize production as quickly as possible.  Oil in the ground has no value to anybody.  Oil should be pumped and transformed into hospitals, schools, roads, factories.  Iraq is currently pumping about 2.5 million barrels a day, and it can go up to 8 million barrels a day.  However, that will require about $150 billion worth of investments over the next few years.

What is the strategy of awarding concessions, production-sharing agreements?  And what are the alternatives [inaudible]?  These are important questions that have to be answered and -- [tape ends].

-- pipelines, [inaudible], and other major distribution infrastructure.  This can and should be privatized.  There are ways where the government can retain a golden share, where it can control the final--have the final say-so on how these companies are managed or these important infrastructure systems are managed.  But there is no reason why these assets should be owned by the government.

And, of course, the downstream sector, which involves refining and petrochemicals, that is the sector where the government--it is completely controlled by the government again and where the government has to get out of it altogether.  It's not just refining but the whole petrochemical sector is important because Iraq can be a world player, a world leader in the petrochemical sector.

Of course, we shouldn't forget about gas because today all the gas that comes out of Iraq is just being flared(?).  Gas is important not just for the power sector but also because it's a feedstock for a lot of the petrochemicals.

Moving on quickly from oil to the financial sector, perhaps the second most important sector, today there are 18 private banks in Iraq, and there are about four government-owned banks, two that dominated 90 percent of the banking sector.  These two right now are mired in international litigation and, for all intents and purposes, not functioning.  The 18 remaining banks have an average capitalization of under $5 million, which is really probably the average capitalization of your neighborhood grocery store.

There is at this point no critical support for this sector, and without putting the banking and financial sector in operation, it will be very difficult to get the economy up and running.  I'll give you an example.  Today, if you are an Iraqi businessman or industrialist, there is nowhere for you to get any financing, so everything has to be done out of cash in pocket.

The stock market is also antiquated and needs to be totally revamped, and this is an important part of generating capital and wealth.

Finally, very quickly, I'll talk power.  Right now Iraq is generating 4,500 megawatts power.  It needs today 20,000 megawatts of power, and more when the economy takes off.  As far as industry is concerned, 80 percent of the industrial capacity of the country, or thereabouts, is owned by the state and currently operating at anywhere between 0 and 40 percent of capacity.  There is an effort now to start the privatization process.  Of course, a single key to all of this is empowering the private sector, and that's a whole different discussion because a raft of measures and regulations need to be put in to revitalize the private sector.

Finally, because I've got my notice, what does the street want?  The street wants something very simple.  They want food on the table, a little money in their pocket, and to be able to send their children to school and buy medicine if anybody in their family is sick.  The street generally wants to go to bed on a full stomach, watch TV, and not have to worry too much.  They prefer to grow old in a peaceful and reasonably comfortable environment.  People are generally tired of ethnic, radical, or cultural [inaudible].  If we give them an economic alternative, I think we can achieve filling their bellies and emptying their minds and making everybody live happily ever after.

Thank you.

MR. RUBIN:  I'd like to thank our three speakers.  We have a lot of time for questions.  The only--you've seen I try to run a tight ship here.  I would ask that you only ask one question, not stand up and say "I have three or four quick questions to ask."  One question.  And, also, that question, like "Jeopardy," be phrased in the form of a question rather than in the form of a five- or ten-minute speech.

With that, I will turn over the floor--and the last point, actually, will be to wait until one of the research assistants comes with the microphone before you ask your question.  I'm going to start out by recognizing Conan McKia (ph), who--hopefully someone will come with the microphone.  Thank you.

MR.           :  Thanks.  I will try to phrase this in a question, but it was more in the way of a comment.  Everyone on this panel are my very good friends, and so it's very awkward to point out a deep contradiction or a deep frightening, glaring--glaringly frightening situation implicit in comparing the remarks of Basil with the remarks of Salem.

The potential that Basil--I need to preface my question was this.  The potential that Basil talks about is completely held hostage to the danger that Salem talked about in terms of the rise of confessional politics in Iraq.  I think Salem put his finger--and the very first sentence of his remarks were very, very important--put his finger on what will be the central question of Iraqi politics, namely, the rise of confessional politics.  And Salem was implying Shi'ite politics, but he put it all on the back of the Kurds.  And I was to discuss that point.  This is my question for Salem.

The question is as follows:  Glaringly--it's remarkable, quite remarkable, that the single biggest mainstay of the idea of Iraq today inside the government is actually coming from the Kurds, contrary to the point that you were making.  Now, I do not--of course, the point can be made that this is just a pretense, that the Kurds do not really mean it, they're not behaving like responsible Iraqis in government today.  I'm talking about the Kurdish leaders in the North.  I'm talking about the Kurdish ministers in government.  I'm talking about the general Kurdish presence and the Kurdish position towards the government today in Iraq.

One could say that they don't really mean it, but I go with what I see and what I observe.  And from observing, while the Kurdish street, the Kurdish masses, the Kurdish up in the North may feel confused and may have very different opinions [inaudible], from what I see the Kurdish leaders, they're behaving remarkably--given the history that you yourself pointed out--like Iraqi patriots, like believers in the idea of Iraq.  Of course, a federal Iraq, not any kind of Iraq.

Now, let me make a dramatic jump, a quick jump.  The question is--the question is:  You said--and you used the Kurds as an example of the divisive forces in Iraqi society.  I'm saying the experience since April 2003 is the opposite.  So comment on that, please.  Why are the Kurdish leaders in government today behaving very, very responsibly, like Iraqis, like believers in the idea of Iraq?  So the danger of fragmentation and disunity is not coming from that source, which is the one we all expected it to come from, for natural, logical, completely understandable historical reasons, which you yourself alluded to.  It's not coming from there.  It's coming from somewhere else.  And we need to talk about where it's coming from.

MR. RUBIN:  We need to--actually, you're making me into an empty [inaudible].

MR.           :  Sorry.

MR. RUBIN:  So I'd actually like to turn that over to the panel.

MR. CHALABI:  I guess I just want to reiterate that you feel that the Kurds are acting responsibly and, therefore, my comments are incorrect and, therefore, you're asking why I made them?  Is that--

MR.           :  [inaudible].

MR. CHALABI:  You misconstrued what I was saying.  I was giving examples of where I saw tensions arising.  You say that, you know, you sense that I said the Kurds did not really mean it by participating in the government or--et cetera.  I dis--I actually did not say that.  I feel that they're in the government, they want to make sure that the government does not deviate from what their interests are, the federal structure.  But since the federal structure is not yet clearly designated, clearly identified, they are sitting and waiting.  And I see this happening.  One has to look at the psychology, which is years and years of distrust, of empty promises made by the central government.  Now they're part of it, and they can hold it.

I mean, I'll give an example of where they're sitting back and watching and not wanting to necessarily cooperate and not wanting necessarily to create problems.  The telecom sector, for example, the TAL--I mean, we had long discussions on the telecom issue, and I'm giving this as an example that's non-political.  It was decided that that is purely a central government power, to regulate the telecom sector.  And yet the central government gave three licenses, one in the North, one in the central, and one in the South.  And yet in the North, in the Urbil area, they did not recognize this, and they gave their own license.

This is the kind of example I'm saying where nobody has really tested the--I mean, nobody has tested the TAL at its--or the whole government structure at its margins.  And it is at the margins that I think we may have problems, and that's why I'm raising this issue.

MR. RUBIN:  Other panelists will answer the question, and then we're going to go on to other people, and there will be more time for discussion.

AMBASSADOR RAHIM:  Thanks, Michael.  I think the Kurdish leaders with vision have recognized the potential of Iraq, as Basil spoke about it.  To my mind, in my conversations with them, I've come away feeling that some of these leaders now say why do we want to confine ourselves in a third of Iraq when we have all of Iraq--not that it will belong to the Kurds, but that we can have access to all of Iraq?  And I qualify this as Kurds with vision.  Not all Kurds feel that way.

But I'll give you an example.  Some of the most successful Iraqi contractors working in Iraq today and working throughout Iraq today are Kurdish contractors and Kurdish companies.  They have acquired a track record and experience from 1991 to 2003 that has given them strength to bid for contracts throughout Iraq, from the CPA and now from the IRMO (?) and so on.  So these people feel, Why cut ourselves out of this miracle in the making?

I have one more quick comment about the TAL, Salem.  When the TAL--and I wasn't involved, although I attended a couple of the meetings in the discussions and the negotiations of the TAL.  Of course, there was a great fear when the TAL was signed in March that the provision that gives any three--if two-thirds, a two-third majority in any three governorates oppose the draft constitution, then they have a veto power.  That was one provision.  And everybody said, Ah, this gives the Kurds veto power over a future constitution.  Another provision said that if any three governorates, currently existing governorates, wished to unite, they can do so, after a referendum and so on.  And, again, people thought, Ah, these are the Kurdish governorates and so on.

As Salem has been saying and as I have been looking at the situation, increasingly those two provisions look as if they will apply to numerous regions in Iraq, whether it's the three governorates in the deep South--Basra, Amarah, and Nasiriyah--or the so-called sort of religious governorates--Karbala, Najaf, and Amarah and so on--or indeed the Sunni governorates.  The situation looks much more complex and diverse today in terms of the political potential and the political alliances than it did back in March.  Would you agree with that, Salem?

MR. CHALABI:  I do.  I mean, the points that you made about what became Article 61(c) of the TAL, which was that it gives any three governorates, two-thirds of these three governorates vote against it, it's a vision of Iraq that I think is critical to include, which is that the future of Iraq should respect minorities at the extent--at the wishes of the majority.  And to me this was one of the reasons that at least I favored this article; whereas, others may not have from the various communities.  So it was critical to include, and it's a vision that is not supposed to--I mean, in our discussions, it was not only Kurdistan it was directed to, but other regions.  And that's what we're heading--and we wanted the three other--I mean, the establishment of regions to be not--I mean, Kurdistan is a region.  We all accept that.  It's the other regions that was the issue at stake.

MR. RUBIN:  Yes, please identify yourself.

MR. FELDMAN:  Yes, my name is Mark Feldman.  The other day I heard a sound bite of one of the President's statements on Iraq, and if I got it right, he was very clear in speaking to a future free, democratic, and federal Iraq.  And I don't know that I've heard that phrase in a presidential speech before.  I'd ask Michael whether it's a new statement.  And the panelists, I'd like to ask what they understand the President to be saying in the context of the discussion we've just had.

MR. RUBIN:  I would just add it isn't the first time he said it prominently, but it is the first time that federalism has been raised, I believe either at the presidential level or with a number of other U.S. officials.  But I'll turn that over to the panel.

AMBASSADOR RAHIM:  I personally have heard the President mention that word before, and as Salem said, federalism was something that was conceived and adopted by what was then the Iraqi opposition but never elaborated.  And I think it's very fuzzy still what we mean by it, or at least there are many understandings of it.

MR. RUBIN:  I'm actually going to now go from this row down forward, so first Charlie, then Eli, and then in the front.

MR. WOLFSON:  Charlie Wolfson (ph) with CBS.  Given the recent experience of the election in Afghanistan and the fact that it took the UN two or three years and several hundred international employees, plus tens of thousands of locals to organize it, what can you say about how the election will actually go forward in January in any internationally approved, quote, free and fair way?

MR. AL-RAHIM:  You know, I'm not a political commentator at all, and I know very little about politics, but I can tell you something that--Iraq is not Afghanistan.  Iraq was on its way to becoming an industrialized country in the '50s.  So I'll just make that comment and stop there, and maybe some of the other panelists want to add.

AMBASSADOR RAHIM:  The Iraqi government appears intent on having elections in January.  However, what concerns me is people say that security may hamper elections.  I am less concerned with security hampering the elections.  I am, of course, somewhat.  I am much more concerned that we are not up to speed with the technical requirements and putting the mechanisms in place for the elections.  And in a sense, our elections are going to be a little more complicated because, remember, in Afghanistan they were only electing a President.  We are electing a parliament, and the system is going to be like Afghanistan, a national--all of Iraq will be in one district.  But we are going to be depending on the lists, system of lists.  And so technically, mechanically more complicated, and we are far from being on target.

MR. RUBIN:  Eli, please, from the New York Sun.

MR.           :  Thank you.  Former Ambassador Rahim, you said in your comments the vetting of new recruits was very difficult, the equipping of the Iraqi security forces was slow, and you gave the impression that the training wasn't going so well.  So, in your estimation, can Iraq make the goal that Prime Minister Alawi and President Bush have said, I think training some 150,000 security forces by the end of the year?

AMBASSADOR RAHIM:  I doubt that anybody said by the end of 2004.

[Inaudible comment.]

AMBASSADOR RAHIM:  125,000 by two thousand--I think that's very ambitious.

MR. RUBIN:  Salem?

MR. CHALABI:  There's training and there's training, I think.  I mean, training--I mean, I attended--as somebody interested in human rights, I attended a police training seminar back in April as part of the training of what was at the time called the ICDC, the Iraq Civil Defense Corps.  And it is a--I saw a few things that were interesting.  One is the whole idea of respecting the rights of people who are detained is a completely new phenomenon to the Iraqi police forces.  They are used to beating people up, et cetera, and this was kind of new to them.  It is actually, I mean, a psychological detriment.  Honestly, I mean, they think that we won't be able to do our jobs properly.

Second is there was a severe shortage of equipment.  This is being addressed now, but at the time the people were afraid that, you know, they were basically given blue shirts and blue trousers and given some very basic training, not given much ammunition, and told to go out.  Again, as I said, this is being addressed now.

I actually think that there needs to be significantly more training, and so I doubt that we'll get 125,000 well-trained people.  We'll get 125,000 maybe poorly trained people, with maybe a few well-trained people.  There are some units that are actually better trained than others now, and there is focus on that.  So I hope that that's given you more beef.

MR. RUBIN:  Mike in the front, and then I'm going to go to Barbara, and move over to the other side to have some balance.

MR.           :  Thank you.  Mark  (?)      Report.  I have one question that has two parts.

First, to the three panelists, how many years in the last three decades have you lived inside Iraq?

And second, Ambassador Rahim, you said in the eyes of Iraqis the removal of Saddam Hussein has been marvelous, a good thing.  There's no question about it.  When you say Iraqi people, who are you talking about?  Ordinary Iraqis who lived inside Iraq for the last three decades, or some selected, wealthy, and English-speaking elites who lived outside the country?

MR. RUBIN:   Okay.  We'll start with Rend, and then throw it open to the other panelists.

AMBASSADOR RAHIM:  I mean ordinary Iraqis who have lived all their lives in Iraq, who have had their sons imprisoned by the security services, who have had people barging into their homes in the middle of the night and taking away their men and their daughters; families who have had members disappear for years and are presumed dead.

When I go into an office in Baghdad, as I did in June 2003, I went and visited an organization called the Free Prisoners Organization.  Their business was to compile data on missing individuals and trying to match it up with the data on executed individuals.  They were mobbed every day--and I went several times--by hundreds of families, mostly women, by the way, who have lists of their kin who have disappeared and they want to come up and match their names.  And I talked to some of these women, and one of them said that three of her five sons have been missing since 1984, and she wants to find out the truth.  She was wearing  (?)  .  She spoke not a word of English.  She had never been out of the country, probably never out of her neighborhood.

No, I'm not talking about English-speaking, Western-educated people who are happy.  I am talking about every man and woman in the street who have been the victims of this regime.

MR. RUBIN:  Basil?

MR. AL-RAHIM:  In answer to your question, I would tell you I have not lived there the past three decades, but I am back there almost every month.  And I don't travel in a secure convoy with guards.  I actually travel in a small Nissan taxi with one driver and walk around everywhere because that's the only way you get a feel for what's going on in the country and in the town, and especially from my perspective as somebody involved in the financial sector or in business or with money.  You have to really count the bills.  You know, I'm not sitting there--there are no international transfers, et cetera.

So I make a point of coming into contact with people on the street.  So that answers your question.

MR. CHALABI:  Rend's answered the question very succinctly.  In the last year and a half, I've been living in Iraq, and I've come across a lot of people.  The feeling I got from--I mean, apart from those that Rend spoke about, the victims of the regime, the feeling I got from, say, lawyers and others is they care about, as Basil said, the dollars in their pockets, money in their pockets, and they saw that the last 10 years, definitely, or 12 years have reduced that significantly.  And they were worried about this, and so they welcomed the change.  And so in the interaction I had with people, they were happy that there are new people that will hopefully bring money in and so on.

Clearly, the security situation has created a problem for them.  And also, they want to learn.  I mean, I sat with a large number of lawyers in the Bar Association and gave a speech once about what it means to be a lawyer.  And I sensed that people are in awe.  They see that life in the rest of the universe went past them, and they were just--or not the universe, the rest of the world went past them, and they were just stuck in some kind of historic--so I do feel that people are happy.  Obviously, the security situation is something that they feel bad about, but generally they're willing to overcome that.

MR. RUBIN:  I'm actually just going to throw a few words in here before turning the floor over to Barbara Slavin (ph) from USA Today for a question.

First of all, according to the Guardian newspaper of London, I believe it was on August 16, 2002, one in every six Iraqis fled Iraq during the reign Saddam Hussein.  It's actually an amazing figure when you come to think about it.  The reason I say this is Iraq is not China and Taiwan where there were some ethnic differences and so forth between the communities.  One out of every six, that spanned families, that spanned classes, that spanned ethnicities.  It was really a myth, frankly, of Foggy Bottom and some others who didn't want some action on Iraq to say that there's a huge discrepancy between so-called exiles and so-called internal Iraqis and so forth, that the idea that people didn't speak to their family members is frankly something that it's easy to talk about in Washington.  But whenever anyone steps on the ground in Iraq and asks people about their family members overseas and so forth, when I used to teach up in Iraqi Kurdistan, easily 50 percent of my students had family overseas and they talked to them regularly and so forth.  It's really just a myth which is reflective of too much time in Washington and too little time in Baghdad.

With that, I'll turn the floor over to Barbara.

MS. SLAVIN:  Thanks, Michael.  Thank you to all of you.  I was curious if you could, Mr. Chalabi, perhaps talk a little bit about the single--about the party lists and how this system is going to work.  There's been a lot of concern expressed by Michael Rubin, among others, that it's going to cut out independence, that it's going to make it more difficult for people from individual constituencies to be elected, that there will be some sort of, you know, corrupt decision at the top to fix the lists and so on.  How is this being put together?  And also, in your view, if Sunni areas are not able to fully participate, will this be a legitimate election?  Will it do what it's supposed to do?

Thank you.

MR. CHALABI:  I'll answer your second question first.  I was on the committee that actually came up with the--you know, the election committee that drafted the law and so on.  The beauty of having this one-party list is that you can vote anywhere in the country.  You can have Sunni candidates from Baghdad being elected by people in Kurdistan or by people in the South and so on.

The danger right now is--and in November, it's supposed to start, voter registration.  And if we have a problem with voter registration, people would be allowed to go and register in less troublesome areas.  So you can have people from Fallujah go and register elsewhere, and that's--we're trying to take that into account.

To answer your first question, the way this process is supposed to work--and we had many meetings on this--is that with one list, the list can be composed--there are going to be 275 seats in parliament.  The list can be composed of 275 members, or it can be composed of one member.  If it's composed of 275 members, the way the math--the way it would work is if that list gets 100 percent of the votes, they would get--the guy at the bottom of the list would get elected.  In more likelihood, the way the math works is that you need something like 26,000 votes, and I don't know whether you'd want me to go into more details, but if you assume that, say, 10 million Iraqis register and you may assume that something like 7 million Iraqis actually vote on voting day, you just divide 7 million by 275, and you get--whatever--27,000 or something.

So once a list gets 27,000 votes, it can--it will get the first guy on the top of the list elected.  So an independent who wants to run or--what's happening now, and it's more likely to happen, is a tribal leader from, let's say, Nasiriyah or Ramadi wants to run, he can run as part of just one list of that tribe, as long as he registers his list and it's acceptable.  And if he gets 27,000 votes, he will get in.

He would likely run against maybe some on the national list, but it's his voters in Nasiriyah or Ramadi--he has enough voters, those 27,000 voters, to get in at that site.

The lists that have maybe 3 million--I mean, that may be able to get 3 million or so voters, the issue there becomes one of priority on the list and how you begin to work that out.  It's a very difficult and technical issue.  And I think that people--I mean, you could have these independents, provided they had enough support.  They're going to have to run against these nationalists who may have--in that region that that independent person is running, they may have presence there.  But he could compete with them, and if he gets those 27,000 votes, he's going to get in.

I hope that answers it.

MR. RUBIN:  I have in a series of articles made my own thoughts clear, and generally when I'm moderating a panel, the focus stays on the panelists.  So, with that, I'm going to take the next question.  First you and then you in front of him.  I'm sorry that I'm not--please introduce yourself and your institutional affiliation, if any.

MR. MORROW:  Thank you.  My name is Jonathan Morrow from the U.S. Institute of Peace.  Thank you to all the panelists for a very informative presentation.

The institute is very interested in the processes by which constitutions are made in conflict situations, post-conflict situations around the world, and Iraq in particular.  I have a question for Mr. Chalabi.  I think you mentioned the possibility of a constitutional commission being established at some point in the future, so a fairly technical question.  How do you see such a commission being established, composed?  How might it operate given the very tight time frame established by the TAL?  And how might the international community support this constitutional process to make it, as you say, as inclusive as possible?

MR. CHALABI:  First of all, to answer your issue about the process, I read a long piece by Neil  (?)  of the U.S. Institute of Peace on processes, and so that's where some of the ideas that you've been promoting got inculcated into the TAL.

The TAL is a very clear on how this constitutional drafting committee will work.  After elections, the elected body is going to appoint a committee.  This was one of the long series of debates we had, and it led to a fatwa by Ayatollah Sistani that says that the entity that drafts--the committee or whatever entity that drafts the constitution has to have--has to have been elected.  So it's not drafted by a select group who self-selected themselves.  And so you have elections.  That transitional assembly will establish a small drafting committee that responds to it.

The way the international community can give assistance is through coordination with that committee.  My idea at the time was to have that committee establish a series of offices inside Iraq so that people can comment.  And this was a long period of discussions I had with Dr. McKia here, that you bring in people's comments on various ideas that were strongly held views on some issues.

But we also would have an office that would be an interlocutor with the international community to be able to get international experience on things.  But one of the things I didn't get to in my talk is the fact that on many issues that were left right to the end, such as the role of Islam, it was a room of maybe eight people who were sitting, and people were coming up with solutions of how to configure the role of Islam in that particular article.  I was just listening, and I thought that none of them had actually any clue of how it would work in reality.  And so legislation has essentially stopped currently because the way the solution came out is that Islam is a source of legislation, but you cannot have any legislation that violates the basic tenets of Islam.  What are they?  I mean, it wasn't the five tenets, and we didn't have an Islamic scholar there to explain the basic tenets of Islam.  And so people came up with these formulations that sounded nice, but then to counter that, you cannot have a law that violates general human rights conditions or democracy, democratic values.  What the hell is that?

I mean, so we do need international presence, and hopefully through a special liaison office in the committee to be able to get more kind of--get more input, substantive input into the process.

MR.           :  My name is Mustafa  (?) .  I'm a lawyer.  And my question has to do with the commercial legal framework.  Obviously, foreign investors interested in investing in Iraq are concerned about the commercial legal framework because [inaudible] law, et cetera.  Almost a third of CPA [inaudible] dealt with the commercial laws, bankruptcy, central bank, banking, company law, et cetera.  My question is:  To what extent are these commercial laws being applied today?  And what is--are they sustainable?  Are they likely to survive over the next 18 months?

MR. CHALABI:  We worked on a number of these commercial laws together, Mustafa.  Unfortunately, I'm seeing that they're being ignored.  To be frank, you mentioned, for example, the company law and foreign investment laws.  We're not heading towards implementation.  People feel more comfortable going back to the old system.  And so, in practice, these laws are being frozen because they don't know--I mean, the CPA, when it was there, was pushing and was taking the lead in this.  In the absence of the CPA, the country is--not the country, but the current officials are wary of pushing the process forward in the same way because they just don't have that experience.

So I worry about this, actually.  It's a critical concern of mine.  You mentioned bankruptcy and banking.  Banking law is moving forward in a--I mean, it's not moving forward, but it's where it was when you left.  Bankruptcy law, again, people are now thinking of reformulating it.  There are some laws or proposed ideas that were put forth by the CPA but we never got there, such as insurance law and the establishment of insurance.  Those are being considered now.  But it's a mixed bag.  It's not moving at the same kind of rapid pace that we had hoped it would.

MR. AL-RAHIM:  I just want to add that some of those laws were good, and some of those law were, frankly, misguided completely.  I can tell you that there are a few laws that will not survive.  One of them is Law Number 39, which effectively establishes a free-for-all in the country for anybody who wants to come and buy anything they want, carry it off anywhere at any time, in any way.

It's something to say Iraq should move into a complete free market economy, and I think every--I certainly am fully supportive of that.  And the rest of--a large number of the business community would also be supportive of that.

However, to come and say we are going to do it overnight, tomorrow, go from a black box, as this country has been in for the past 35 years and certainly 12 years of sanctions, to complete WTO is nonsensical.  And it's nonsensical because what you will do there is deal a death blow to the local private sector.

So there's issues, and some of these laws were well meaning, but not properly thought through.  And I think those will certainly fall by the wayside.

There's other examples, but I'll just stop there.

MS.           :  Hi, I'm Pam [inaudible] with United Press International.  This is a question for Ambassador Rahim.

There's a big fight brewing in Fallujah, and while there are negotiations that are ongoing, I can tell you that the U.S. military doesn't think that any peacefully negotiated settlement will actually mean anything.  They think it's going to go back to exactly what occurred in April and May, which is establishing Fallujah as a safe harbor for much of the insurgency.  And they think that without clearing it, it's just going to continue to be a problem.

I'm wondering if you can talk about that, what your hopes are or what your thoughts are on the possibility of an actual peaceful settlement that would mean something, and also the consequences of what that final battle in Fallujah would mean for the future of Iraq.

AMBASSADOR RAHIM:  You know, I don't think it's useful to predict or to doom a process that is underway and say that, well, we should not go into any kind of talks or agreements because they're about to fail.  I think they should be taken all the way to the end.  And, yes, I think the  (?)  of the Iraqi government has said that it is going to be--going to stay wary and somewhat cautious about any agreement that is reached in Fallujah because, as you say, of prior experience.  But--and this is a personal opinion--I don't think you should stop these discussions because you already prejudged that they are going to be a failure.

At the same time, the government has said that the use of force is always an option and will always remain an option and that it cannot be excluded under any circumstances, and that the ultimate objective is to bring the rule of law to Fallujah and to clear Fallujah certainly of the foreign fighters that we suspect are there.  That is the bottom line, that the Iraqi law enforcement troops and personnel should be able to go into Fallujah and maintain law and order there.  That is what it amounts to.  Hopefully this can come through peaceful ways; if not, the government, I believe--and I believe quite rightly--does not exclude the use of force.

[Inaudible comment.]

AMBASSADOR RAHIM:  Look at the consequences of having done nothing about Fallujah in April.  Those are the consequences that we should think about because we know what they are.

MR. RUBIN:  Before we go to the next question, I would just like to point out that if you actually look at the facts and the figures, in April during the so-called siege of Fallujah, when people on the sidelines in London, in Washington, and elsewhere, and some in the human rights community were complaining about the violations of the siege, throughout all of Iraq there were five car bombings.  In the month after the siege was lifted, there were about 40 car bombings which killed several hundred Iraqis.  Unfortunately, some of the human rights advocates didn't speak up on behalf of those who were victimized as a result of lifting the siege.  Sometimes the political flavor of the month is contrary to what necessarily one wants to achieve with regards to stability and human rights.

That said--

AMBASSADOR RAHIM:  We have to distinguish between places that export terrorism and places that suffer from terrorism.  We know that acts of terrorism are widespread, and I know that in the press lately there has been talk of, well, you know, last week or last month six governorates experienced terrorist attacks.

The terrorist acts happen over a wide scale, but what we should look at are those regions which are exporting terrorism, and those are very finite, and those are the ones that you really need to go after, whatever it takes, and Fallujah is one of them.

MR. RUBIN:  Yes, the gentleman right up front before I go over to Brian Bennett.

MR.           :  Yes, my name is Sabid  (?)  , Al-Jazeera TV.  I would like to ask Mr. Salem Chalabi about the idea of the  (?)  zone that you talked about.  How much coordination is there between the interim government of Iraq and the American Embassy right now?  And how is this relationship going to develop after the election?  How much--what percentage, and especially in operations like in Fallujah and Najaf and others.

MR. CHALABI:  Right now there is clearly a lot of coordination.  The initial first month of Dr. Alawi's premiership, a lot of the members of the former CPA who chose to stay continue psychologically to believe that they were in the same--they were operating in the same manner that they had before.

Starting in early July, this changed, and they are--they had been essentially advisers with a capital A.  Now they're advisers with a lower case A.  I mean, they are--actually, I mean, the lead is being taken by the cabinet and the senior officials of each ministry.

On the security front, we had a lot of discussion -- [tape ends].

-- insisted on the U.S. component of the MNFI, insisted that they had the right to unilaterally make decisions, military decisions or security-related decisions.  And this was maintained.  There is to be coordination and consultation as opposed to--and there is, this is happening.

The interesting thing is, in fact, something that was not envisaged is happening, which is that the cabinet is requesting--is making decisions that MNFI is catching up with.  So, for example, some of the very detailed--or some of the military offensives in Najaf and elsewhere, it was Iraqis that wanted to push particular offensives or on particular days and so on that the MNFI had to catch up with, and not the other way around.  It wasn't that they were telling them do this and do that and so on.

So this is something that we had not thought of at the time.  But there is obviously close cooperation, not as much as--in the security, there's very close cooperation.  In the non-security issues, there is close cooperation but not as much as with the CPA when it was in place.

MR. RUBIN:  Yes, Brian Bennett from Time Magazine, before we have two questions on this side.

MR. BENNETT:  Yes, as you know, we're facing a U.S. presidential election right now, and I was wondering if you think that the outcome of that election will have any ramifications at all for life on the ground in Iraq and if you can see any difference between the administrations of the two proposed candidates.

AMBASSADOR RAHIM:  We take absolutely no position on the U.S. elections.  It is entirely an internal affair.

MR. RUBIN:  Do any of the other panelists have any comments?

MR. CHALABI:  I can just speak very briefly.  I think that--if I was putting myself in the--under the hat of a member of the resistance, for example, I would prefer that John Kerry wins.  And they are trying to--their behavior indicates this to be the case.  I mean, I--they want it disrupted because they may feel that John Kerry doesn't have--and, again, this is if I'm speaking wearing a hat of the resistance, this would be what I think, that John Kerry does not have the investment, political investment in the Iraq situation that President Bush does.  That's all I would say.

MR. RUBIN:  I would just add one point, just from my own observations as someone who goes to Iraq, not with the frequency of our other guests, but I'll be going in the near future and I would just leave it at that.  That one of the issues that isn't discussed--and this is more discussed up in the North and up in Turkey--is in regard to John Kerry's position with regard to the Armenian Genocide Resolution in Turkey.  It's something that's hit the Turkish newspapers quite a bit, although it hasn't been focused on a bit here.  Some people would be in favor of it.  Some people wouldn't be.  I would just lay that out as an observation as someone who travels frequently to Turkey and to the North of Iraq.  There's an Armenian church in Za-(?)  , as you all know, and so forth.

With that, I would go back.  One of the prerogatives of being moderator is I get to have the research assistants run all over the room and get some exercise, so I'll send them back to this side of the room.  First the lady in the back, and then the lady from, I believe, the Kuwait News Agency.

MS.           :  Thank you, everyone.  Elise   (?)    with CNN.  I'd like to look over to the donors' conference in Tokyo.  Ambassador Rahim, you spoke a little bit about the need to focus on locally based projects.  As you know, the United States has said it wants to divert some of this money to more security and oil sector.

Kind of pulling everything together in terms of what we've spoken about today, what does the international community need to do to leverage its assistance not only in order to stop the insurgency but to jump-start the economy in the way that Basil is talking about?  How do you balance the two?  And if you were to jump-start the economy, is this really what the insurgency would--would this really curb the insurgency?  It seems what we've heard so far from the insurgency, maybe not a better, you know, economic life is what they're looking for.  They're just--a lot of these are former Baathist elements.  So looking ahead to what's going on in Tokyo now, how do we pull that all together?

Thank you.

AMBASSADOR RAHIM:  Well, I'll talk about one dimension of it, and maybe Mr. Al-Rahim will talk about another one.

The donors have so far given a total of $1 billion of the $13 billion that were pledged in Madrid this time last year.  Of that, 600 has gone to the UN Trust Fund and $400 million has gone to the World Bank.

Of course, this is far less than we had anticipated.  Some time ago people were talking about the absorptive capacity of Iraq, can Iraq absorb this much money?  And the sad thing is that there has been so little money spent in Iraq that Iraq is parched.  It's not a question of absorption.  It's a question of getting enough money at this point to just give some life to the economy and some life to the infrastructure.

But even in the case of the UN's $600 million and the World Bank's $400 million--and this is not to blame the two international organizations in any way, but they have had--they've allocated everything or they've committed--they've committed everything.  But they haven't disbursed even a small portion of what they have.  And these are the bottlenecks that we're seeing.  We're seeing a bottleneck certainly starting at the donors.  They're not giving enough money to the two trust funds.  The trust funds, when they get the money, are not processing it fast enough and spending it in the country.  At every stage, there are problems and delays.  And it is very hard to figure out what the source of these delays is.

The World Bank often says, well, we're not in-country, we had to move out to Amman.  Well, for heaven's sake, go in-country.  If you can't be there continuously, go there periodically.

In any case, it's extremely important, A, for donor countries to accelerate their donations to the World Bank and to the UN.  Also, by the way, some donor countries have been giving funds directly to Iraqi ministries, and in a sense this has been the most effective vehicle.  The ministries have been able to put those funds out, to use them, to do things with the money that they get.

So perhaps one way for the donor countries to take is to give more of the funds directly to the ministries to implement projects identified and implemented by the ministries.  But one way or the other, we have to accelerate this process.

MR. RUBIN:  I'm actually just going to jump in before we go to the questioner right here, just one anecdote.  I went out to a village right near Baqubah in the Sunni Triangle, and I visited a school there, which had broken windows, didn't have a fresh coat of paint, a lot of the furniture is broken, and so forth.  I went back and I told USAID about it, and the response I got was:  No, that's not the case; the money's been allocated.  That oftentimes the matrix with which the U.S. government and others are used to defining success is the allocation of money rather than the expenditure of money.

Currently, with much of the aid money, when it's distributed through USAID, when it's distributed through the Office of Transition Initiatives and so forth, it has to be distributed through Iraqi nongovernmental organizations, which means there's a certification process for Iraqi NGOs.  There has to be a competition and so forth.  Whereas, when it comes to fixing the schools, the questions which I would encourage people to ask are:  Is the Ministry of Education of Iraq giving the money to rebuild these schools?  And if not, how can we get that money there faster through the Iraqi government?

Forensically, when we try to reproduce what Saddam Hussein spent on Iraq prior to liberation, I think for fiscal year 2002, before liberation, not counting teacher salaries, he spent a total of $5 million.  Just $5 million on schools throughout all of Iraq, so there's a lot of work to be done, which is why some of the urgency.

With that short aside, I'll turn this over to a questioner from, I believe, the Kuwait News Agency.

MS.           :   (?)  .  I have a question.  Obviously, one of the biggest problems with the Saddam regime was corruption, internal corruption.  Recently in the Nation Magazine, there was a report that said U.S. Envoy James Baker--and I believe the Carlyle Group--was looking to profit around a billion dollars at least from deals with Kuwait regarding reparation.  And my question is:  Since we're in this stage of infancy, as you put it, what kind of laws or discussion has been posed within a legal framework to ensure that there won't be a conflict of interest between policymakers, politicians, and officials and companies, especially foreign companies, who are looking to profit from rebuilding Iraq?

MR. AL-RAHIM:  That article appeared in London yesterday, and I don't know if it's hit the Washington papers.  But without going into the issues raised--or the specific story behind that, right now there are not many anti-corruption laws, conflict-of-interest laws, sort of Chinese walls that need to be put in to prevent this type of abuse taking place.  But that's not just at the Iraqi level.  That was also true at the CPA level and at a variety of different levels, that it is--the whole system was operated very much like a club.  And obviously, in order to have open, transparent markets, the proper regulations need to be put in.  And that is part of empowering the private sector at a grass-roots level to create a level playing field that everybody can participate in.  It's still not fully in place.

MR. CHALABI:  If I can add, the CPA established--or actually at the time the Governing Council and the CPA together established an anti-corruption entity, a commission that's supposed to deal with corruption.  And there are--in each ministry there is  (?)   , an inspector general who's independent of the minister to look into corruption.

To be honest, there is a--people are scared to actually carry out their--I mean, they put something, it looks nice on paper, but to try to implement it, people are worried.  I'll give a couple of examples.

The inspector general of the Ministry of Defense three weeks ago came across something that looked like it needed investigation.  And she started the investigation process, but when she uncovered stuff, she stopped.  And who knows why?  Whether it was cabinet intervention, et cetera, or whether there was no person on the judiciary who was willing to take the process forward.

Something similar happened with the Minister of Interior six weeks ago, and that went a bit further, and a particular judge issued a summons, and he was immediately reprimanded for this.

So on paper, there may be some things--there's a law that prohibits internal intra-Iraqi corruption, but it's not yet been implemented effectively.

What's more troubling for me also is the fact that--and this was subject to intense negotiations--that Iraqi law does not apply to any foreign contractors who are working under contracts with--that had previously been with the CPA that continue.  And there, there's a tremendous amount of corruption that we hear about.  And the CPA had an inspector general who came in belatedly, in April, and he was supposed to--I mean, his term was up at the end of June.  And now there's nobody to take that role.

MR. RUBIN:  I'm just going to use the last minute or two to wrap things up.  We started on time.  We'll end on time.  I wanted to thank our three panelists for their comments.  As you can see, there seems increasingly to be a discrepancy between the issues with which Iraqis are concerned and some of the five-second sound bites with which increasingly Americans are concerned.  One of the temptations--I have a reputation occasionally for being a troublemaker, and when I lived in Baghdad outside the green zone, I was always tempted to go the mosque behind the Sheraton and Palestine Hotels and hang a big banner on it saying, "Get another backdrop," because of all the television cameras which constantly used the same mosque, which as people who have been in Baghdad know means you're sitting in the parking lot of the Sheraton or the Palestine Hotel and not leaving the complex.

There are a lot of real issues out there.  A lot of them are quite complex.  And so I'd like to thank Rend, Basil, and Salem for shedding some light on some of the issues, not just looking back but also looking forward, at what Iraqis are looking at as the months ahead transpire.

Thank you very much.

[Applause.]