Address to the Donors’ Conference
Madrid, Spain

October 24, 2003

Madame Foreign Minister, Mr. President and members of the Governing Council, Chairman Young, Excellencies, ladies and gentlemen, Let me offer my thanks to the government of Spain for hosting this important conference.

We all know the importance of the task which brings us here, but we must not forget those who died bringing liberation, peace and dignity to the people of Iraq. I am thinking of the brave men and women of the Coalition who fought to make the world safer and to free Iraq from terrible tyranny. I also think of Sergio de Mello, a true friend of Iraq, of the members of the World Bank needs assessment team and the many Iraqis who died in the terrorist bombing of UN Headquarters in Baghdad on August 19, 2003.

Against the backdrop of that terrible tragedy, I am especially grateful for the Secretary General’s assurance of continued UN involvement on the ground in Iraq. We must not allow terrorists to deter the UN’s important contribution to building a new Iraq.

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It is a pleasure to see here many of the faces I saw at the World Economic Forum conference in Amman in June. 

Since then wonderful things have happened in Iraq.

The process of transition to a fully sovereign Iraqi government is well-advanced. The Governing Council has been welcomed to a wide range of meetings, including the Arab League, the United Nations General Assembly and, last week, the Summit of the Organization of the Islamic Conference. 

Iraq now has a remarkable group of talented ministers. They have real authority. They run Iraq’s ministries, determining budgets and policies. They are responsible for personnel. 

As Secretary Powell noted, five members of the Governing Council and 15 Iraqi ministers are here at this conference. I hope you will take the opportunity to meet them. These Iraqi officials were intimately involved in the crafting of Iraq’s budget and setting the very reconstruction priorities that we are addressing here in Madrid.

The Coalition wants to restore Iraq to full sovereignty as soon as practicable, in accordance with the recent Security Council resolution. The remaining steps to full sovereignty are clear. 

Iraq must write a constitution, have the constitution ratified and hold elections for a new government. When that government is installed, the Coalition will hand over the remaining power it holds and Iraq will have a sovereign, democratic government that the international community will recognize as legitimate.

We in the Coalition have urged the Governing Council to move quickly to complete these remaining steps, in particular, quickly to convene a conference to write Iraq’s new constitution. The UN Security Council has called upon the Governing Council to publish no later than December 15, 2003 a timetable for the drafting of a constitution and the holding of elections under that constitution. Dr. Pachachi said this morning that the Governing Council intends to meet this deadline.

At the grass roots level democracy is taking hold even faster. In Baghdad alone some 800 men and women have been selected by their fellow citizens to represent them in neighborhood, district and city councils. Nationwide, 85 percent of Iraq’s cities and towns now have either town or provincial councils. Other organizations, from Parent Teacher Associations to the Bar Association and sports federations across the country are electing their own leaders. Iraqis all over the country are getting their first experience with participatory democracy.

The economic situation has also advanced. In the six months since liberation, Iraq has taken remarkable steps to reshape an economy laid waste by a quarter century of useless wars, gross mismanagement and ill-conceived policies. Electric power has returned to pre-war levels. Hospitals, health clinics and schools have reopened across the country. Markets are offering a wide range of goods and services.

The Iraqi Government recognizes that if it is to succeed it will have to get away from the state-dominated economic system imposed by Saddam.

Just as political power must devolve from the center as Foreign Minister Zubayri mentioned, so must economic power be distributed away from the government to a newly vibrant private sector.

The Iraqi government has already taken important steps to lay the policy and legal foundations for a healthy economy. 

Iraq needs to be open to the world. So to promote trade, the government has put in place a zero tariff—except for a temporary, five-percent reconstruction fee.

To encourage much-needed capital investment, the government has adopted a liberal regime for foreign direct investment. It permits foreign firms to establish wholly owned companies or to purchase 100 percent of Iraqi firms. Foreign firms will receive national treatment and may remit profits and capital freely. I would note that some reports mistakenly interpreted this law to mean foreigners may purchase state owned-enterprises; no state-owned enterprises are for sale at this time. Decisions on that matter will be made in due course by Iraqi authorities.

To promote the creation of a modern financial services network to support this new trade and investment, the government has:

· Given the Central Bank full legal independence.

· Passed a commercial banking law which assures that banks are properly capitalized and that management is fully capable. Foreign banks are welcome on equal terms with national banks.

· And the government has issued a new currency, which will float freely against other currencies.

No modern economy can function without modern communications. Here too, the Iraqi government has taken steps. It is urgently repairing the country’s telephone backbone services and two weeks ago the Minister of Communications announced the award of three mobile telephone licenses which will, for the first time, give Iraqis access to mobile communications.

These are all good signs. But economic transitions are painful. So the Iraqi government is developing a social safety net. For example, after the oil-for-food program ends in November, Iraq will retain the food basket program until private markets can respond effectively to the food needs of the population. We are thankful for the assistance of the UN agencies and NGO’s in assuring that the needier Iraqis are not left behind.

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Of course no discussion of contemporary Iraq can exclude security. Too many people believe security stands apart from other issues. It does not.

As part of the reconstruction effort, the Coalition and the Iraqi government are working together to encourage more Iraqis to take part in their own security. A major part of President Bush’s supplemental budget request provides for accelerated training of the new Iraqi Army and a professional Iraqi police service.

In this respect security is not a condition of reconstruction in Iraq. It is part of reconstruction.

I should add that the security conditions in Iraq have not stopped reconstruction. In the past five months, the Coalition has completed over 14,000, individual reconstruction projects, large and small, all across Iraq. Each project is proof to the Iraqis that theirs is a future of hope. 

Security is more than the absence of suicide bombers. Security is also the broad sense of well-being that comes with a decent job, dependable public utilities, functioning courts and clinics and schools. Providing these essential services, which so many donors have generously agreed to do, will improve well-being and security. The process will not be easy. There will be bumps along the path. But the direction and momentum are clear. 

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In sum, Iraq’s progress towards a constitution, elections and sovereignty is well advanced. Additionally, Iraq has already implemented a series of economic measures which will prove very attractive to private investors from inside and outside Iraq. Reconstruction efforts are going forward everyday.

I urge you to join now in that reconstruction effort. All the Iraqi people, Sunni and Shia, Kurd and Arab, from the marshes to the mountains, need your assistance. As Dr. Pachachi said, it is a vast and historic undertaking. 

The countries represented in this hall may have disagreed in the past. We may disagree today on one point or another. But by our presence we signify that we agree on one major point: The Iraqi people need help to realize their future of hope; we are ready to contribute.