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Zambezi Times Online

Basra's Bottom Line

LONDON, June 26 - An uneasy quiet has fallen over the makeshift headquarters of the coalition forces in the southern Iraqi city of Basra, where the stars seem to hang in the inky night sky. At the far end of the vast compound, a light flickers in a sparsely furnished office. Andrew Alderson, the Coalition Provisional Authority's 36-year-old director of economic planning and development for the south, cannot sleep. Alderson looks like a large public school boy. He has short sandy hair, ruddy cheeks and a permanent look of intense concentration. Sitting behind his computer, he starts typing a circular e-mail to friends back home in England about how much he dreads the weeks ahead.

A little over two years ago, Alderson was a banker closing multi- million-pound deals in the City of London for the investment bank, Lazard. For the past 12 months, he has been trying to make war- ravaged Basra work. It has been his job to ensure the smooth distribution of public money in the four southern provinces put under British control after last year's war. He has had to keep the power on, the schools open, the hospitals equipped and the taps flowing with clean water. He has been partly successful.

Alderson and his team are now preparing to fly back to Britain ahead of Wednesday's handover to a sovereign Iraqi government. The move is weighing on his mind. I watch as he types out his thoughts. "Tonight I sit here with a heavy heart as our departure date looms and the security situation worsens. We are at the end of the beginning. This is an unfinished deal."

The problem, he says, is that there is still so much to do. The 1.2 million people of Basra, Iraq's second-largest city, are about to be left with their taps running dry, their electricity faltering, their hospitals under fire and their schools without books. This is far from what they were led to believe would be the case before the US-led invasion; Alderson cannot help feeling partly responsible. "The infrastructure was far more broken than we realised. It was clear that nothing had been thought through. It was utter chaos," he says blankly. "We invaded the country, we have a moral responsibility to put it back on its feet." He turns back to his e- mail. "As we find ourselves literally collapsing this organisation here in CPA [Coalition Provisional Authority] South, I fear for what will follow."

In the dotcom boom of the late 1990s, Alderson was a respected capital market specialist with a telephone number-sized salary and large bonuses. He had worked on 309 deals worth more than £120bn. When he and his colleagues sealed a deal, they used to celebrate with a night out that could cost the same as the annual salary of a supermarket checkout operator. When he needed to entertain particularly important clients, he would take them to Lazard's townhouse in chic Chelsea, where rich French food and fine vintage wine would be served. But after 12 years, he decided he had to leave. "I didn't like the person I had become," he says. "I wasn't content. What was the point in making money if you don't have a life to spend it on?"

At the time Alderson was already a member of the Territorial Army, and when Lazard gave him a six-month sabbatical in 2001 he swapped his pinstripes for camouflage and headed off to help the British Army build a national park in Kosovo. He liked it so much that instead of going back to Lazard, he volunteered to go to Iraq. At first he was told he wasn't needed, but last May his mobilisation papers came through.

He still remembers the difficult early days in Basra. For six months, he and his team lived in cramped quarters in one of Saddam Hussein's former palaces. He had no running water and had to use bottles of drinking water to shower in a makeshift stall out on the main road that was regularly fired on by snipers. Official visits were tricky. "We had to entertain Iraqi ministers in rooms like boxes with sewage dripping down the walls." Eventually, the Authority put up its headquarters, a strange-looking assembly of uniform white cabins and small tropical flower beds. The food was still grim: canned drinks and hamburgers sitting in water. But Alderson was no longer sleeping in a room with 10 others and had air conditioning and full-pressure showers. As he says: "At least we weren't living out of our vehicles like the 7 Armoured Brigade who fought the war."

Alderson's living arrangements were always of much less concern to him than the fact that he had a team of only 11 people to help rebuild an area in southern Iraq more than half the size of the UK. After explaining the problem to London, the Department for International Development eventually sent $126m and by last November he had a team of 37, which included experts in health, trade, water, education and social services from all over the world. But by then, there were only seven months left before the handover, in a city that had never been properly rebuilt after it was bombed in the 1980-1988 Iran-Iraq war.

The first words of Arabic that Alderson learned were, "shway, shway" - little by little. No wonder. Bereft of a team of civil servants, he was forced to adopt unusual levels of creativity. At one point, he recalls scribbling a list of possible new ministries for the region on two sheets of A4 paper. It didn't take him long to cross off Youth & Sport, or Culture: "I can't bandaid this economy, so I have had to make strategic, tough decisions. That's the difference between sympathetic development and nation building."

In January, Alderson realised that Iraq's central bank in Baghdad had not sent down $14m to pay the salaries of all the state employees who had been working without pay since the start of the war almost 10 months earlier. One of the Authority's team, Major Frances Castle, was sent up to Baghdad to collect the money, which had been packaged up into big bales on a palette. She spent a day sitting on the palette in the sun before a Hercules aircraft was found to fly the money down. Alderson, Castle and her team then took 10 days to count the money by hand before distributing it to 110,000 people. To prevent this and other payment problems happening again, he recommended that each ministry have its own bank account, into which the central ministry of finance in Baghdad could put funds. The process has started but is still incomplete.

One day, I watch as Alderson straps on his flak jacket and climbs into an armoured vehicle to go to the city centre for an appointment with the governor of Basra's central bank. Travelling around the city is still very risky for any westerner. Bandits wearing stolen police uniforms set up random checkpoints to trap potential kidnap victims, and Alderson and his team have not been allowed out of the CPA headquarters without private security guards. But his appointment is important: he needs to talk to the bank's general manager in Basra, Zuhair Ali Akbar, about how to ensure people have access to credit. Credit had once been more easily available, but in the lawless postwar climate Iraqis stopped paying back their loans. The banks responded by insisting on a year's worth of interest for a six-month loan. Farmers haven't been able to buy equipment and hundreds of small businesses are in danger of going broke.

Ali Akbar is round and jolly and clearly excited to see Alderson. But he doesn't understand the credit problem that Alderson wants to discuss. Ali Akbar is frustrated that the banks can't issue loans because people aren't paying them back. Further, how can farmers be expected to pay a year's worth of interest in advance, as demanded by Baghdad? The exorbitant payments are ruining businesses, Alderson says. "There's too much cash on the streets. Cash is stashed in the market place, under beds, buried beneath rocks. The banking system is completely broken." Something has to be done about the high interest payments. The general manager looks to Alderson for help. Alderson knows I speak Arabic so together we try to explain the situation. I pull out two bank notes and offer one to Alderson as if I'm a bank about to give a farmer a loan. I say that before Alderson can have the money, he has to find some extra cash to pay me the interest up front. Alderson says that's impossible - he can only afford to pay the interest gradually. Ali Akbar's face creases into a smile of comprehension. By the end of the week a credit scheme for farmers has been agreed.

But Basra has plenty of other banking problems, not least the central bank itself. Looters ransacked it at the start of the war and stole billions of dinars, as well as the chairs, the tables and the carpets. The basement vaults were blown open, and more than a year later there is still no place for money to be stored safely. Upstairs, rows of women sit around a conference table counting the bank's cash out of plastic laundry baskets. The bank still can't open for business.

The introduction of the new Iraqi dinar has helped reduce the amount of counterfeit money in the economy and has enabled the bank to begin to wrest control of the exchange rate away from money- changers. But small improvements such as this often seem dwarfed by the immensity of Basra's other problems.

Water supplies have improved and are almost back to pre-war levels, which were in any case inadequate. Alderson and his team flooded some of the marshes in the south and the water has brought cooler breezes that offset the searing desert heat. But at the beginning of this month, the director of irrigation switched off the water pumps that keep Basra's fresh water canal full. In 45 degress C heat, the water level fell to just one metre. At the time of writing, it looked as if the city would be left without water within a week. The irrigation director had no alternative, Alderson says. "The pumps were about to fail. He had to turn them off before they did."

Alderson and his team have worked hard to have tenders arranged for $2m-worth of new pumps so the problem does not recur. But he fears it may not prevent water shortages through the summer months. "The leaks have run for so many years they now show up on Iraqi maps as lakes," he says wryly. "The reality is that the system is so broken we are constantly firefighting and our prophecies about the lack of water as the summer approaches are beginning to ring true."

Water is not the only critical service in trouble. Two of Iraq's three oil refineries are down for servicing; only Basra's refinery is producing any petrol, benzine, diesel or kerosene. Fuel smuggling is rampant and petrol queues have increased. Astonishingly, Iraq, one of the world's most oil-rich countries, still relies on oil imports. Electricity supplies are improving but distribution problems persist because of sabotaged power lines. Most residents of Basra now receive up to 16 hours a day of electricity, though those who did not have power before the war are still without. At best, Basra's electricity runs three hours on, three hours off because of the shortage of power in the south. CPA officials say that if no new power stations are built, the Iraqis will be expected to live without electricity for several more years. Emergency standby generators will do nothing to help - at present there is not enough diesel to fuel them. Newly installed powerlines are almost immediately blown up by bandits who steal the copper and sell it for more than $2,000 a tonne. "It has been immensely frustrating," says Alderson, "because both the [fuel] ministry and the advisers in Baghdad have perpetuated a policy of refurbishing old equipment which may increase reliability but does nothing to increase generation capacity."

At the town's hospitals, a whole new set of problems is evident. On the day I visit the city's main hospital there has been a shooting. It seems that armed Shia groups have fired on doctors they believe are working with the coalition forces. An Iraqi nurse tells me: "Doctors are afraid to do anything for relatives of certain groups. If a dead body comes in, they start shooting." Dr Khalid Mayah, director of the Teaching Hospital, frets about what will happen when the coalition leaves. "The doctors here have been so isolated for so many years. it is important the coalition forces stay to help them move forward," he says.

Iraq's ports are another source of concern. We go to Umm Qasr, Iraq's largest port, about 60km south of Basra. It was from here that Sinbad the Sailor set out to restore his lost fortune on the seven voyages in The Arabian Nights. Sinbad is buried alive, sold into slavery and assailed by giant birds, serpents, and other monsters, but he manages to return to Basra a rich man. Modern-day Umm Qasr has not been so fortunate. Alderson's working draft for the port says in the next 10 years it will become part of "the most important freight transportation platform in the Mid-east for the nation of Iraq and its neighbours". Appearances are not encouraging - gigantic, rusty vessels sit in the water, their carcasses looming into the sky. The port is plagued with corruption. Staple supplies such as wheat and rice are regularly stolen. Some CPA members privately predict that Basra will be seriously short of food by the end of the month. The Iraqi police are doing little to prevent the theft. Two months ago, more than 1,000 containers of wheat and rice were stolen by truck drivers in collaboration with port authorities. The CPA now checks all trucks leaving the port. But a port authority official tells me mullahs are still threatening drivers as they leave the port, demanding they hand over food.

Apart from the replacement of pictures of Saddam Hussein with those of Shia leaders, it is hard to find visible signs of improvement in Basra. The streets are piled with rubbish and the fetid stench of sewage is everywhere. We visit a family living on the outskirts of Basra. Kabeela Taleb welcomes us into the tiny, dank hut she shares with her husband and five children. The stench of the sewage is stronger inside the hut than out. Kabeela's husband is asleep on the floor, one arm shielding the slices of light let through the hut's wooden slats. "Nothing has changed," says Kabeela. "My children are ill all the time and the sewage stays outside my house. When are they going to do something about it?" Alderson nods his head sympathetically and gestures to the woman to try to make her believe he is doing all he can.

On the way back to the CPA compound, we have to take a detour: a road has been closed because a makeshift bomb planted on a dog has blown up near one of the British bases.

Among his team, Alderson is affectionately known as the "Banker of Basra" and is regarded as an optimist. He has been awarded an MBE and there is no doubt that he has achieved a substantial amount. But, as he knows more than most, it is not enough. "I have accepted that when all is said and done, a year is not enough to rebuild the economy that has been as badly ravaged as this has been by such an evil regime," he says.

Sometimes, being here is like being stuck in a never-ending dream, a little like Scheherazade in The Arabian Nights, who can only stay alive by weaving an ongoing series of stories, each with an ending that dovetails into the next. "The irony is that when we wake up on June 30, the nightmare will begin."

Lina Saigol
Source: FT mergers and acquisitions correspondent

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