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By Charles A. Radin
Globe Staff
Boston Globe Online
http://www.boston.com/
May 27, 2003

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BAGHDAD -- The head of the US-led occupation of Iraq said yesterday that the initial phase is ending and that he is turning his attention to rejuvenating and overhauling the Iraqi economy.

L. Paul Bremer III, who took over the administration of Iraq two weeks ago, said at a news conference that occupation officials are talking with banks in the United States, Britain, and other countries to provide credit on favorable terms to foreign companies that trade with Iraq.

''This will be a symbol that Iraq is open for business and an incentive to those who want to export to Iraq,'' Bremer said. Occupation officials also are moving to hire back some of the hundreds of thousands of men who were employed by the Iraqi Army before it was dissolved by his decree last week, he said.

Iraqis and foreign diplomats say they fear that unless such actions are taken swiftly, the huge number of unemployed former military men could be a new source of instability.

''We are nearing the end of the first phase'' of the occupation, Bremer said. ''We've established control, we've turned the water and power on,'' and have gotten government ministries and local police back in operation.

''The primary task of the next few weeks is to figure out in what order'' steps should be taken to invigorate the economy, he said. ''A free economy and a free people go hand in hand. History tells us that broadly held resources protected by private property is the best way to protect freedom.''

Bremer said the occupying powers ''would like to see market prices, we would like to see privatization of key elements'' of the economy, but would not attempt at this time to change the government-run rationing system on which most Iraqis depended for food under the previous regime.

Many Iraqis and foreign observers -- pointing to still-frequent blackouts, nightly gunfire, and short supplies of gasoline and natural gas -- say the coalition is far short of the level of accomplishment claimed by Bremer.

One US soldier was killed and one was wounded in an ambush in northern Iraq yesterday, wire services reported. And another soldier was killed and three were wounded when their Humvee ran over a land mine in Baghdad.

But critics of the coalition also acknowledge that some progress is being made, in Baghdad and in outlying cities.

Municipal workers are cleaning and repairing buildings damaged in the looting that followed the fall of the capital to coalition forces. Uniformed traffic police are at an increasing number of major intersections. Private business openings and school attendance also are rising.

Crews at the huge power plant that dominates the southern skyline of the capital, at which only one of four towering smokestacks had been in use since the end of the war, activated a second stack yesterday. Efforts by US troops to help clean up the masses of garbage that have accumulated on the streets are widely appreciated.

Ramiro Lopes da Silva, the United Nations humanitarian coordinator for Iraq, said that while many problems remain, progress is being made. He credited Bremer with the improvements.

In the immediate aftermath of the war, ''there was a lot of talk about grandiose plans, but no decisions,'' da Silva said. ''Since Ambassador Bremer arrived there are decisions. He is defining a framework'' for reconstruction of the country, ''and the clearer that framework is . . . the easier it is for us to define issues and to fill the gaps.''

He warned that steps must be taken to provide employment and reintegration into society for 300,000 to 400,000 members of the Iraqi armed forces who are now out of work. He said if funds were available and the occupying forces agreed, the United Nations would try to create short-term employment for these men ''who are lost now.''

Bremer bristled when asked about the issue.

''I've seen media references to this decree'' dissolving the armed forces, saying it ''threw 400,000 people out of work,'' Bremer said. ''This is not true. That was done by something called the freedom of Iraq.''

However, he acknowledged that such a large body of men could not be ignored and that the administrators of the occupation are moving to hire some of them to provide security at government offices, public facilities, and other fixed locations where vandals are hampering attempts to repair the damage done by warfare and looting.

He also said ''we do intend to create a new army of free Iraq.''

Bremer said his emphasis on economic steps next did not mean efforts to build democracy and return control of Iraq to its people were being put off, but he took another step back -- his second in two weeks -- from setting a time frame for the selection of an interim government.

US officials initially indicated that they hoped to hold a congress of Iraqi political groups by late May to select an interim government that could take office in June. Last week, Bremer said it would be at least mid-July before such a conference could be convened.

Yesterday, he said, ''in the summer, I believe you will see substantial steps. Exactly what those steps will be, we are still talking to the Iraqis about.''

Bremer also announced that forces of the US-led coalition that ousted longtime dictator Saddam Hussein in early April have recovered $250 million of unknown origin from a submerged vault in the central bank of Iraq. The find brings to about $2 billion the amount of cash that has been recovered and that will be used to help finance reconstruction of the country.

About $768 million was found in the Republican Guard compound in Baghdad, $112 million in a gardener's shed on the grounds of Hussein's main palace, and about $600 million in various locations in Hussein's hometown of Tikrit and in the northern city of Mosul. Two truckloads of gold bullion, for which no value has yet been set, also were reported to have been recovered last week.

At another news conference yesterday, former New York City police commissioner Bernard Kerik, who has been appointed senior American adviser to the Interior Ministry, which formerly had authority over police and domestic security, pledged that coalition forces and Iraqi police will aggressively pursue efforts to take weapons off Baghdad's streets.

He said that the weapons bazaars operating in the city will be banned and that the coalition policy of disarming irregular forces and civilians carrying unregistered guns would have a significant impact on the security of ordinary citizens.

''Is it bad? Yes, it's bad,'' Kerik said of the current situation. ''After the war, everybody has weapons, everybody has guns. The more weapons we take off the streets, the better it's going to be.''

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