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  Jan Svejnar

Michigan Business School professor proposes strategy for economic reconstruction of Iraq

9/24/2003 --

ANN ARBOR, Mich.---University of Michigan Business School Professor Jan Svejnar will present a framework for Iraq's economic reconstruction during the U.S.-Arab Economic Forum in Detroit Sept. 28-30.

Svejnar, executive director of the William Davidson Institute and professor of international business and economics, will chair and participate in a panel discussion on "The Future of the Iraq Economy: Preparing for Take-off" at 2:30 p.m. Sept. 30 at the Detroit Marriott Renaissance Center.

In his paper "A Strategy for the Economic Reconstruction and Development of Iraq," Svejnar says that a viable economic rebuilding plan in Iraq must go beyond oil.

"A strategy based almost exclusively on oil will subject Iraq to a number of corrosive problems faced by oil-dependent states---low investment in human capital, rising unemployment and inequality, corruption, and declining living standards as the long-term relative price of oil declines and the size of the population increases," he says.

A proposed strategy, he says, must contain a series of rapid legal, institutional and economic measures within a consistent, credible and well-publicized framework.

"Since Iraq functioned as a command economy, the strategy draws on recent developments in Iraq and lessons from other command economies that transformed themselves into market economies," he says. "The lessons indicate that one must pay particular attention to establishing a functioning infrastructure, legal system and institutions."

Svejnar's plan calls for a number of reforms in a three-phase process:

Phase 1---The preparatory phase in which the government, with international assistance, establishes a currency board or adopts the dollar or Euro as currency; revives the oil sector and re-establishes free exports; re-opens schools, hospitals and other key institutions; creates laws conducive to a market economy; reforms existing financial institutions; and designs new labor market programs.

Phase 2---The initial and relatively short reform phase in which the government introduces principal systematic reforms: liberalizes prices, opens up the economy and introduces new social safety net; allows firms to operate on the basis of prices rather than commands; and encourages the entry of new firms.

Phase 3---The main reconstruction and development phase during which the government implements major economic adjustment measures: gradually reduces subsidies and privatizes state-owned firms; carries out major infrastructure projects; facilitates re-allocation of labor and launches re-training and educational programs; and completes development of a functioning financial sector.

To view Svejnar's paper: For more information on the U.S.-Arab Economic Forum: and for information on the William Davidson Institute:

For more information, contact:
Bernie DeGroat
Phone: 734.936.1015 or 734.647.1847