WA R WITHINWA R ROOMS ZONES Iraq attempts to create a stock exchange in the midst of violent chaos By Claudia La Rocco Many of the larger companies in Mogadishu, including the bottling plant, have issued shares, although there is of course no stock exchange or financial authority of any sort in the city. Everything is based on trust, and so far it has worked, owing to Somalia’s tightly woven clan net- works: everyone knows everyone else, so it’s less likely that an unknown con man will pull off a scam. In view of Somalia’s history, S I this ad hoc stock market is not as B R O C implausible as it may sound. Until a / a t i h century ago, when Italy and Britain s a m divided what is present-day Somalia a Y . S into colonial fiefdoms, Somalis got l e a h c along quite well without a state, rely- i M ing on systems that still exist: infor- Trading on the Baghdad Stock Exchange, 1999. mal codes of honor and a means of resolving disputes, even violent ones, after nearly a decade of civil war in Kuwait in August of 1990, the through mediation by clan elders. Lebanon. It reopened in 1995. Kuwait Stock Exchange in Kuwait –Peter Maass1 During World War I, the London City was forced to close. The eight- Stock Exchange shut its doors from story building escaped major damage Cutthroat deals, take no prisoners; July of 1914 until the following year. during seven months of occupation, war rooms; the language of combat Of the 1,600 men who volunteered though Iraqi troops did make off is often used to describe the world of for the Stock Exchange Battalion of with a $5 million Unisys computer. business. But throughout history, the Royal Fusiliers, 400 did not return. But systematic looting only got as far clichéd comparison has been no mere World War II caused shorter disrup- as handwritten notes placed on metaphor for many stock exchanges. tions. In 1939, the bourse closed for everything from furniture to paint- The crippling or disruption of just six days, reopening on Septem- ings. exchanges by wars is nothing new, ber 7. It wasn’t until 1945 that the “Thank God there is no stock from the New York Stock & exchange closed again, this time market in Baghdad. That would have Exchange Board suspending trading when a V2 rocket damaged the decided who got all this,” the in seceding states in 1861, to the building. Investors solved this prob- exchange’s deputy director general, arduous history of the Belgrade lem by relocating to the basement Abdullah Al-Sederawy, told USA Stock Exchange, to the 1983 suspen- the next day. Today reporter James Cox, explain- sion of the Beirut Stock Exchange When Saddam Hussein invaded ing that the contents of the building Financial History ~ Winter 200620 www.financialhistory.org were not transported to the Iraqi since World War I. No one knew deterioration caused by a succession capital because Kuwait was liberated what to expect when the markets of wars; a decade of international before two feuding Iraqi ministries reopened; some feared stocks would sanctions; and the looting and sabo- could decide who would get what.2 tumble, while others predicted a tage that followed the 2003 war, the Still, other companies did suffer patriotic response. US government set its sights high heavy losses. The bourse did not Neither the NYSE nor the elec- after toppling Saddam Hussein; to reopen until the fall of 1992, and tronically-based Nasdaq were physi- create a liberal, market-based Iraqi then it did so as a shadow of its for- cally damaged, but a telephone economy, a key piece of its broader mer self, as the country’s economy switching operation was destroyed, goal to bring democracy to Iraq. sorted through the wreckage left by cutting off some communications —Bathsheba Crocker3 Saddam’s army. systems needed for trading. The Still, however daunting, the task American Stock Exchange, just a of rebuilding was a discreet one; the half-block from the World Trade It will be to their fortune if they do Iraqi army was vanquished, the Center site, did not escape (invest). Iraq is one of the richest threat repelled. Kuwait’s financial unscathed. It resumed stock trading countries in the world. Give me secu- institutions could proceed, relatively on the NYSE, and options trading on rity and a little time, and you will see. secure in their belief of a peaceful the Philadelphia Stock Exchange, —Talib Tabatabai, Chairman of the future. Increasingly, this is not the while construction crews worked to Iraq Stock Exchange4 case. clear the building of debris and Markets rarely thrive in uncertain worked on safety and access issues. When something blows up or conditions. As both actual wars and This resumption, on Monday crashes in Iraq, there isn’t much sus- business have become more global morning, was both somber and defi- pense over whether it’s an accident or affairs in recent history, and terror- ant. A heavy police presence, includ- a deliberate act of destruction. In the ism continues to erase the line ing bomb-sniffing dogs, reinforced midst of so much violence, it would between battlefield and civilian activ- the feeling of a city under siege. Bags seem impossible to create the condi- ity, economies have had to adjust to were checked and those entering the tions necessary for a viable stock ever-higher levels of uncertainty. building had to pass through metal exchange to exist. But, as Peter Maass’ Exchanges cannot simply close their detectors. The stars and stripes were reporting on the incredible situation in doors and wait for the violence to draped across the white columns. Mogadishu demonstrates, what seems end. Instead, both psychologically Four years later, New Yorkers like insurmountable chaos can pro- and through tangible security mea- have grown used to bomb scares, vide enterprising businessmen with sures, they must adjust to a world in building evacuations and random surprising opportunities. which the ever-present threat of searches. For many, despite occa- Now, the world watches as the attack is commonplace. sional jitters during the morning sub- fledgling Iraqi economy seeks to find In September 2000, 15 people way commute, a new sort of fatalistic its footing and the fledgling nation were killed when a bomb exploded in complacency has set in. For months seeks to find its way out of a war the underground parking lot of after the attacks, though, the city, zone. For many, such as Iraqi Indus- Jakarta’s struggling exchange. The especially its financial heart, try Minister Hajim al Hussani, the week-long closure of the bourse gar- remained raw. On November 12, two are inextricably linked: “The nered very little attention from the when American Airlines Flight 587 way to eliminate [the insurgency] outside world, which likely dismissed crashed into a city neighborhood will only be by creating job opportu- it as just the latest political violence shortly after take off, killing 265 peo- nities in the private sector. And the in Indonesia’s troubled history. ple, everyone assumed it was another development of the private sector The response was far different a strike on New York. The Dow depends on the improvement of the year later, on September 11, when plunged as much as 198 points in security situation.”5 two hijacked planes brought Amer- early trading before investors learned The old Baghdad Stock Exchange ica’s financial center to its knees. The terrorism likely wasn’t the cause. (BSE) existed for about 11 years New York Stock Exchange, Nasdaq under Saddam Hussein, who created Stock Market and American Stock To establish even a marginally func- it in 1992. Initially consisting of 64 Exchange shut down that Tuesday tioning economy out of the wreckage companies, the exchange grew to morning, and remained closed for of Iraq would have been a daunting include at least 114 companies, as the rest of the week. It was, as widely task. Despite decades of a heavily reported by Maher Chmaytelli of reported, the longest halt in trading controlled, state-run economy; the Agence France Presse, in an article www.financialhistory.org21 Financial History ~ Winter 2006 S I B R O C / s r e t u e R / l o o P / n a h K d e e a S Iraqi stock brokers walk past a bell presented by the Philadelphia Stock Exchange in commemoration of the opening of the Iraq Stock Exchange, July 18, 2004. from November 3, 2002. At that Jamil Qays were optimistic: “It will month.)6 Not surprisingly, certain time, the BSE’s capitalization had end at some point, demand will people’s portfolios were more suc- grown to 274 billion dinars ($137 resume, along with production and cessful under this system than others. million), up from one billion dinars profit. Think long term.” Still, trading continued until just in 1992 (about $20 million). Mark- Three years later, many Iraqi before the US-led invasion of Iraq: ers and white boards were used to investors and foreign observers are “‘The brokers were all waiting for mark transactions, “with traders saying the same thing. Under the old the bombs to start dropping,’ said watching through opera glasses.” regime, the Baghdad Stock Exchange Siro Pedros, 50, of the Nineveh Bro- Leading up to the 1990s, Iraq’s was a haven for cronyism, manipu- kerage Co., who has been a stock- economy was one of the strongest in lated by officials who used it for broker in Baghdad since 1997.