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Tuesday, February 24

Rebuilding Iraq includes reopening its stock exchange

By The (Wilmington) News Journal

Policing Wall Street might seem like a lark compared with Ann Exline Starr's new gig: getting Iraq's stock market trading again.

Instead of commuting from Hockessin, Del., to the very public Philadelphia Stock Exchange, the regulator will be meeting with Baghdad brokers in their home country over the next six months.

Among the primary objectives: figuring out who still owns shares of Baghdad Soft Drink Co. and the heavily damaged Basra and Baghdad Sheratons, among other businesses.

It won't be easy. Before the U.S.-led invasion on March 20, 2003, halted official buying and selling, Iraq's roughly 114 listed companies were not required to follow generally accepted accounting principles.

Basics such as ensuring that companies are independently audited will come first. Luxuries like upgrading to computer trading from quotes scribbled on a board will have to wait.

"We're just trying to get the Iraq stock market up and running again by the end of the month - with the companies that were in it before - but without coming in like a steamroller," Starr said before she left for Baghdad. "We can't impose our way of doing business on them, and it can't be successful if they don't have a stake in it themselves."

Starr has been commissioned by the Coalition Provisional Authority to help recreate the Iraqi stock market. The temporary governing body, which is led by the United States and the United Kingdom, considers re-establishing an equities market key to stabilizing Iraq before it cedes control of the nation to a transitional government as scheduled for June 30.

"It'll be a central part of rejuvenating the economy, by establishing a fair pricing mechanism on companies," and giving them a way to raise capital, said Jay Hallen of the Coalition-led Office of Private Sector Development, which will oversee the stock market project in Iraq. "It will also become important if and when the privatization of state enterprises occurs."

Before trading was suspended last March, the Baghdad Stock Exchange was dominated by Saddam Hussein's Baath Party, whose ranking members routinely sat on corporate boards.

Trading was minuscule - about $130,000 a day three days a week, compared with more than $39 billion daily on the New York Stock Exchange. All shares of all Iraqi stocks were worth between $18 million and $30 million total.

Non-Iraqis were barred from owning stocks on the exchange, which Saddam formed in response to U.S. sanctions following the 1991 Gulf War. The Office of Private Sector Development and Iraqi officials are now working with the nation's remaining brokers, estimated at 40 to 50, to learn which, if any, had ties to the Baath Party.

"We're starting with a clean slate - I think," said Starr, who took with her a miniature replica of the Liberty Bell, a gift from the Philadelphia exchange intended to be used to start and end the trading day when the Baghdad Stock Exchange is back.

But the confidence inspired by new securities regulations may not be enough to get people to again gather in one place to trade stocks, observers said. Suicide bombers and other attacks are still killing civilians. Terrorists have especially targeted institutions of authority.

And, although forbidden under the rules of the former exchange, stocks are still being bought and sold in private transactions, which are physically safer.

Credibility is another concern. "We have to be careful not to apply a 300-year-old system to an emerging market," Starr said, in part because a new market will have to be accepted as legitimate by Middle Eastern neighbors and traders.