US sets up Iraqi trade bank

Business Day

July 23, 2003

WASHINGTON - The US governor Iraq, Paul Bremer, has created a Trade Bank of Iraq, opening a global race for a potentially lucrative contract to run it, an official says.

Bremer, on a week-long visit to the United States to brief officials on the reconstruction, signed an order creating the trade bank at the weekend, Treasury Department spokesman Tony Fratto said.

The bank would issue and confirm letters of credit - basically payment guarantees - to smooth trade flows, boosting imports such as heavy construction equipment and also freeing up exports, particularly of oil.

Bremer, the US-appointed civilian administrator of Iraq, would name a president of the Trade Bank of Iraq "well before August", Fratto said.

The newly installed bank president would then select a banking consortium for a one-year extendable contract to operate the facility.

"We hope to be able to name the operating consortium of banks by August," the Treasury Department spokesman said.

The Iraqi governing council and Bremer would "advise and consent to the selection" of the winning banking consortium without actually making the decision, he said.

"It is a wide net that we are casting. The president of the Trade Bank of Iraq will make the selection but no countries are being ruled out except for those that the administrator, Paul Bremer, might recommend," he said.

The contract would include the provision of training and support so that the institution could later operate by itself, he said.
Eventually, the US authorities hoped there would be no need for a trade bank, and that Iraqi commercial banks would be able to write the letters of credit themselves.

But for now, the creation of the trade bank was critical.

"There are no creditworthy entities, banks or anything else, in Iraq right now, so you can't get letters of credit to trade with Iraq. That is what the trade bank will do," Fratto said.

"We think it will provide great benefits to the country."