Iraq is to become a free-market economic laboratory, with levels of foreign ownership and privatization never before seen in the Arab world, its U.S.-appointed government announced Sunday.

The entire Iraqi economy, almost totally state-owned under deposed dictator Saddam Hussein, will be privatized and opened to unlimited foreign investment — with the notable exception of its oil industry, which will remain a state monopoly and part of the Organization of Petroleum Exporting Countries. At least 192 state companies will be sold to foreigners.

In a surprise announcement, Kamel al-Kilani, the Iraqi finance minister chosen by the Governing Council, outlined his sweeping plans for Iraq, which is still struggling to impose security, restore basic services and does not yet have any plans for elections.

He also announced that Iraq would introduce the first income tax in its history, and expected to attract loans of up to $75-million (U.S.) from wealthy nations next week. Its emerging government would be largely financed by its oil reserves, he said, considered the second-largest in the world.

The announcement marked the opening of a meeting in Dubai of the group of seven leading industrial countries and the boards of the World Bank and the International Monetary Fund, the organizations that will play a major role in rebuilding Iraq.

"We are providing Iraqi citizens the freedom and opportunity they were denied for so long," Mr. al-Kilani said. "The reforms will significantly advance efforts to build a free and open market economy in Iraq."

The privatization of the economy is being engineered by the U.S. firm BearingPoint Inc., formerly known as KPMG, to which the U.S. State Department recently awarded a one-year contract worth $79.6-million (U.S.) for rebuilding and privatizing the Iraqi economy, and opening the country to foreign trade.

While European nations said this weekend that they want U.S. control of Iraq's government to end within the year if they are to assist the United States in its increasingly expensive occupation, it appears that the Governing Council is acting quickly to reform the economy before this happens.