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Wednesday, April 7, 2010 as of 11:14 AM ET

Foreign Policy

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U.S. Taxpayer Money Creating Jobs – in Iraq

September 6, 2010 - 7:58 PM | by: Malini Wilkes

With temperatures still hitting triple digits every day, Ahmed Saad stays busy installing and repairing air conditioners in his western Baghdad shop.

He recently expanded his business and added staff after getting a $6,000 loan, thanks to the U.S. Agency for International Development.

“Before, there were only two workers,” Saad said in Arabic. “Now I have six workers.  I bought more spare parts.  I also have work outside the shop. I go to some companies and ministries.”

The U.S. estimates the unemployment rate in Iraq is 18 percent.  By unofficial estimates, it could be as high as 30 percent.  Sanctions under Saddam and seven years of war have taken their toll.

“There are no good jobs in the private sector,” laments Adnan Kamil, as he shops in a Baghdad market, “Doctors and restaurant owners are doing well, but the rest of the businesses remain poor.”

Iraq used to have a state-run economy, and the government still accounts for 43 percent of employment.

But why should the U.S. spend taxpayer money creating jobs in Iraq, when we have such high unemployment at home?

The worry is that a lack of jobs translates to a lack of security.

“This is a critical time in Iraq,” says Alex Dickie, mission director for USAID in Iraq.  “Stability in Iraq is part of our U.S. government strategic interest in Iraq.”

The U.S. is pushing programs with familiar-sounding goals—encouraging lending to small businesses to stimulate job creation.

USAID says its loan programs, administered through private banks and nonprofits, have created 65,000 jobs since 2003.  The agency says an investment of $80 million taxpayer dollars has leveraged more than $500 million in loans over seven years, and the default rate is under 5 percent.

Dickie says when loans are repaid, “The monies get back in the fund and the institution is able to re-lend to other institutions.”

U.S. officials say another goal is to encourage entrepreneurship and unleash the private sector in Iraq.

Even a few hundred dollars can make a difference to someone trying to start or grow a business.  Alaa Salim is the Iraqi director of a microfinance organization that is overseeing a loan program.

“We look for those people who have a small project, needs someone to help him continue this project,” he says in accented English, “We give him first push.”

Interest is high – 12 to 18 percent.  But U.S. officials say that’s the market rate, and they have to set similar terms to sustain the lending programs even after Americans pull out.

Saad, the car repair shop owner, says he put up his house and sold his mother’s jewelry to secure his loan and invest in his business, but he has no regrets.

“In the old regime, there were no such loans,” he says. “If I lose this shop, I don’t know what I would do.”

Fox’s Delimir Babic and Baghdad staff contributed to this report.

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