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In Baghdad, business is done almost exclusively in cash and with a careful eye on security.
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By Larry Kaplow

INTERNATIONAL STAFF


Sunday, March 04, 2007

BAGHDAD, Iraq — In Iraq these days, it sometimes seems as if you have to chase people down to give them your money.

As a Baghdad-based correspondent for the past four years, I have used a satellite television service that requires annual renewal. Paying the bill is difficult. The office of the satellite service moves frequently, and now, with a kidnapping threat hanging over him, the manager is running the business from Amman, Jordan.


He doesn't take checks or credit cards. So I either had to find a way to wire him money or get money to a Jordanian who would drop off the cash, which is what I did.

Financial transactions are a way of sizing up the state of a country, its adherence to things such as laws and contracts, and the overall security and value of the economy. Like the satellite company owner, hundreds of thousands of businesspeople and professionals have fled, draining Iraq of its expertise and its secular middle class.

For those remaining, business is done almost exclusively in cash, with a careful eye on security.

Typically, if someone buys a house or a car in Baghdad, it's a cash transaction. The buyer gathers his dinars in thick blocks and takes trusted friends or family members along to help protect him and to count out the cash with the seller's friends and relatives.

While big-business owners have checking accounts or bank guarantees, the banks are too antiquated and distrusted to be of much use to most Iraqis. A couple of banks recently started issuing debit cards. But few people have them, and few businesses accept them.

For most Iraqis and many foreigners, common transactions involve risk. Paying in cash means paying in person, a potentially dangerous task.

For example, paying my mobile phone bill has become tougher. The company is based in Baghdad's Mansour area, which has grown increasingly violent in the past year. Lately, I've thought it was too dangerous to visit or send my translator with the money. We still have a little credit built up. After that runs dry, we'll have to figure out some way to get the cash there.

If you're an Iraqi who owns a home, there are property taxes to be paid, also in cash. Iraqi government employees are paid in cash. Retirees collect pensions in cash from banks.

American military officials lament that the weak banking system requires that Iraqi troops get paid in cash, requiring them to get leaves once a month and take their money home, often a dangerous trip.

Only a few Iraqi banks are capable of accepting electronic transfers from out of the country. That complicates things for people like me. I receive money through a transfer from my American company, Cox Newspapers, to a Jordanian bank. From Jordan to Baghdad, the transfer is completed by a Jordanian contact who transfers the funds based on "hawaleh," an honor system of accounting that has been moving money around the Middle East for decades.

In the police state days of Saddam Hussein, money was sometimes stolen from the government-run Rasheed Hotel, but you could walk the streets with a wad of cash and never worry about crime. Now, it's the opposite. Recently in Baghdad, heavily armed gangs have robbed armored cars transporting bags of cash between local banks and the central bank.

Though the money trucks are usually part of a police convoy, the robbers can usually outgun them with their own convoys of masked men. Many Iraqis suspect that they must have some link with the security forces to be able to act so brazenly.

When foreign banks were issued licenses several years ago to do business in Iraq, U.S. officials hailed it as a sign of progress. But the omnipresent dangers have dissuaded foreign banks from opening, and security problems have forced many Iraqi banks to close.

There is a sectarian element to the bank closings. Many people think that Shiite militias try to close down banks in Sunni areas so the Sunnis will have to leave their neighborhoods to pick up monthly pensions or make other transactions. That forces them into Shiite neighborhoods, where they are vulnerable to attack.

An American general said recently how pleased he was that after months of security and logistical work, the Army was able to help reopen a bank in a particularly bad part of the city. I asked to embed with the unit responsible, but in the weeks before the embed came through, the bank closed again.

Complicating matters, Iraq's inflation rate last year was nearly 50 percent. Iraqis found the price increases frightening and infuriating.

While dollars are accepted in Baghdad, Iraqi dinars are preferred, especially for small transactions. And lately, the dinar has rallied.

U.S. and International Monetary Fund officials worried that the value of the dinar would collapse and pressed the Iraqi Central Bank to bolster the currency and cheapen the dollar locally.

A few months ago, a dollar was worth about 1,450 dinars; now, it is worth about 1,300 dinars. It's probably smart policy, but it makes things tougher on my employees, who get paid in dollars.

Finally, while Iraqis in Baghdad want to be paid in cash, they don't want to be paid in just any cash. They want the bills to be crisp and new. Any that are worn or torn will be rejected.

[e-mail]. Larry Kaplow has been Cox Newspapers' Baghdad-based correspondent since early 2003
http://www.statesman.com/insight/content/editorial/stories/insight/03/04/4iraqcash.html