Rebuilding Iraq's economy after a U.S.-led invasion to remove Saddam Hussein from power should be just as important as developing its government, Heritage Foundation analysts say.

America should offer guidance to Iraq's federal government after the war to improve the country's frayed economy, which is nearly entirely run by the government and is having hard times-including $140 billion in foreign debt. To do so would help Iraqis achieve a better life away from war and terrorism and increase stability in the volatile Middle East, Heritage experts Ariel Cohen and Gerald P. O'Driscoll say in a paper released today.

"The road to economic prosperity in Iraq will not be easily paved," caution Cohen, a research fellow in Russian and Eurasian Studies, and O'Driscoll, director of Heritage's Center for Trade and International Economics and a former vice president of the Federal Reserve Bank of Dallas. "But structural reform and comprehensive privatization is a win-win strategy for the people of Iraq, its future government, the region and the United States."

According to Cohen and O'Driscoll, the best ways for Iraq to create a better economy include:

• Reforming the legal system to recognize property rights.
• Hiring Iraqi expatriates and Western-educated Arabic speakers with financial, legal and business expertise to fill key government positions.
• Deregulating prices.
• Preparing state-owned assets-including industries, utilities, transportation, ports, airports and pipelines-for sale to the private sector.
• Keeping the budget balanced and taxes and tariffs low.
• Educating the Iraqi people about the economic changes through a public-information campaign.

Such economic reforms would have to be undertaken by a new government. Heritage experts John Hulsman and James Phillips argue in another paper that the United States can help Iraqis develop a new form of government. However, they stress, America must refrain from indulging in "top-down, highly centralized nation-building"-a policy that proved unsuccessful in Haiti, Somalia, Kosovo and Bosnia.

Instead, write Hulsman, a research fellow in European affairs, and Phillips, a research fellow in Middle Eastern affairs, the United States should help Iraq's long-suffering opposition movements work toward developing a decentralized, federal democratic government. This system, they maintain, offers Iraq's three major groups-Sunni Arabs, Shiite Arabs and Kurds-"the best means of assuring local autonomy, protection against the return of a tyrannical central government, a fair share of the political settlement … and an equitable disbursement of Iraq's oil and tax revenues."

The United States and its allies can start laying the groundwork for an effective new government now, the Heritage analysts write, by helping unify the various Iraqi opposition movements and encouraging them to form a government in exile.

However, they stress, neither the United States nor the United Nations should carry the responsibility for building a post-war political system.

"It will be up to the Iraqis themselves to establish a state after Saddam Hussein's regime falls and its weapons of mass destruction are destroyed," Hulsman and Phillips write. "They must take ownership over the constitutional outcome before their respective polities, rather than hide under the notion of an American or U.N. diktat."

In fact, the United States should remain in Iraq to achieve its war aims and to protect vital U.S. interests, write Heritage analysts Baker Spring and Jack Spencer in a third paper.

"Post-war U.S. military activities should be focused on securing war aims with a post-war force intended to stabilize Iraq, not to administer the country or create a new government," write Spring, Heritage's F.M. Kirby fellow in national security policy, and Spencer, a policy analyst for defense and national security. "Troops that remain after the invasion should be hunting terrorist cells, and destroying Iraq's stockpile of weapons of mass destruction."