Cutting Iraq’s excessive fat is not enough

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Cutting Iraq’s excessive fat is not enough

 

Iraq is like a fat man who desperately needs to lose weight - was the image the Iraqi minister of Oil, Adil Abdulmahdi painted during the recent Sulaimani Forum of the American University (AUIS).

It was an image that stuck, in relation to what the economic world calls the Dutch disease, or how a country that earns big on oil, neglects to work on incentives to build a strong private sector. A disease that has brought Iraq into serious problems when the oil prices went down to an all-time low.

The fat is made up by the 7 million employees of the Iraqi state, gone up from a mere 850,000 in 2004, said the Iraqi minister. “Fat people have less energy and more health problems. If we do not get rid of this fat, we will go down a bad road.”

He was calling for major reforms, repeating what has been said by many: that now is the correct moment to do so. Meaning that if the painful task of cutting government jobs is not conducted at a time that the state is suffering from budget deficits, it will never happen once the oil price goes up again and the need for reform becomes less pressing.

Kurdish Deputy Prime Minister Qubad Talabani copied the image, when he explained that for his government it’s also a priority to overcome the economic burdens. “Once you lose your economy you cannot fight, nor solve political disputes,” he said. “We know the defaults, diagnosed our disease and now have to take the medication.”

At the same time, he made clear that the combination of high expenditures and a loss of revenues cannot be solved overnight.

It took the Kurdish government 24 years to grown this fat: with 1.4 million civil servants, 220,000 pensioners, 420,000 people on social security and 30,000 contract employees who together every month need to be given 880 billion dinars.

“We cannot fire people by the thousands. We have to slim down the government bit by bit,” Talabani said.

He has asked all ministers to work out how many civil servants they really need, and in the meantime the ministries have already cut costs almost by half, while some even work with a mere 35 percent of their original budget.

The result is already visible, as most government projects have been halted. Roads are no longer repaired, electricity cuts have become more frequent and longer. The Kurdish government wants to privatise the electricity sector, hoping to lose a number of its own employees this way.

But sending away people and cutting cost is not enough. Also the ‘organogram’ of the government has to change, Talabani said, “we used a law of 1940 to set it up, they did not even know Excel then.”

To illustrate what problems the government has to cope with because of the lack of modernisation in the past, he mentioned that the salary payments for those 1.4 million civil servants “is done by hand and takes three weeks. We are working to make it electronic so we can stop people from taking two or three salaries, and some getting paid who are not even there.”

Modernising the government, is the message both the Iraqi and the Kurdish government are sending to their people. And at the same time a shift to more private jobs. A tourism conference organised in Erbil was meant as a signal where those jobs could be found, although not a very realistic one. As long as the threat of the Islamic group ISIS still is so near, tourists will not want to run the risk of being kidnapped or becoming the victim of an attack.

The needed reforms are far more painful than for a normal human to lose a few pounds. A state does not stop eating; it has to cut the excess fat away from different places in the system.

And Iraq is far beyond cutting some fat away, it needs to, as Qubad Talabani correctly stated, change the organogram of its governments. It has to make a painful change from a rentier state, a system of clientelism tying people by jobs, money and gifts, to a lean state that employs only those it needs for the system to work at its best.

Who will suffer are those who got used to their dependence on the government. To sitting in offices waiting for the time to pass without doing much. 

The task both the Iraqi and Kurdish government face is far more than a slimming course. They need to change a mentality. And that is a hard job that will take energy, vision and years to succeed.

And not doing it because it is difficult is not an option. Then the fat man will surely collapse, bringing the economy to a standstill and leading to social unrest that will threaten the very state itself. It seems for Iraq, there are no easy solutions left.

http://rudaw.net/english/opinion/25032016