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Unlocking Iraq’s potentials: strategy and constraints


k98nights
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Unlocking Iraq’s potentials: strategy and constraints

Posted on 16 February 2011. Tags: Agriculture, Banking & Finance, education, Electricity, Industry & Trade, Investment, Oil & Gas

By Tariq Abdell, Iraq’s political risk analyst, and Founder & CEO of Mesopotamia Insight.

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

As Iraq-business news celebrates its one year anniversary, MENA region is witnessing a fundamental political upheavals and changes, costing Mubarak of Egypt and Ben Ali of Tunisia their presidencies, as result of decades of unpopular and undemocratic policies and, most importantly, for injudiciously disenfranchising a crucial segment of their societies: their younger constituents.

Unarguably, Iraq is undergoing major socio- economic changes, among them, the formation of a new and inclusive government, following months of political horse-trading, improved security conditions due to a strong and nonsectarian Army, and surge of foreign companies and investors’ interest in Iraq’s potentials. However, Iraq’s severely languished infrastructure, lack of basic services, impoverished and disgruntle population – decades of wars and despair- could easily jeopardize its hard-earned achievements.

According to the Iraqi Institute for economic reforms, Iraq’s agricultural output had fallen from 8% to 3.5%, industrial output from 7% to 1.5%, estimated poverty rate of almost 23%, unemployment still hover above 18%, the appropriation of credit to the economy as % of GDP is 3.37 % in 2008, current power output at 6,5000 megawatts is less than half of Iraq’s needs, national debt amounts to $33 billion.

Given the aforementioned challenges, it’s an absolute imperative for the Iraqi government to devise a comprehensive and inclusive post-conflict reconstruction strategy that takes into account Iraq’s budget constraints, which estimates overall expenditure at $81.86 billion and income at $68.56 billion, leaving a shortfall of $13.3 billion. Drawing on past experiences (BRIC countries, for instance) and the support of the international agencies (IMF and WB, for instance), Such a strategy ought to:

  • Create a conducive and transparent business environment, compatible with Iraq’s new constitution, that is legally and politically permissive (adoption of a new investment law, for instance), and susceptible to attract foreign capital, foster Iraq’s political capital, and reinvigorate the efficiency of its institutions . According to the world bank, Iraq ranks 166 on the ease of doing business -next to Afghanistan.
  • Institute an independent and inclusive Petroleum Council — reflecting the geographic distribution of Iraq’s energy resources — that is responsible for formulating oil strategies (hydrocarbon law, for instance), deflecting the politicization of the oil sector, enforcing transparency and accountability as bulwarks against corruption , and robust enough to reign in SOC, NOC, and IOCs.
  • Set a mechanism that will allow for an equitable distribution of the oil revenues and avoid the resource-rich nations’ deleterious disease, the resource war. Historically, the bulk of Iraq’s oil revenues are distributed along ethno-sectarian, political, and tribal allegiances, as opposed to inclusive and growth-oriented economic policies.
  • Foster strategic partnership with the private sector and academia. For instance, GOI could seek foreign companies’ expertise to help revamp its oil sector by introducing technological know-how, the industry best practices, and foster a professionally literate workforce. With such perspicacious initiative, Iraqi government will definitely enhance its oil sector efficiency, boost production, and, eventually, spur economic recovery.
  • Revive Iraq’s strategic industries(Petrochemicals, for instance) to curtail its dependence on a single commodity, fossil fuel, and, consequently, avoiding its hasty depletion. Furthermore, given Iraq’s acute electricity and water crisis, direct solar energy is by far the most abundant renewable energy source in Iraq which can be used for power generation for domestic and international markets , and seawater desalination to help alleviate southern provinces’ clean water shortage.

Conversely, in the absence of a concerted and inclusive national development strategy that reflects the needs and aspirations of the Iraqi people (e.g., more jobs, better wages, universal access to basic services, health care, and education) and help resuscitate the country’s weakened economy, Iraq may risk reverting to its years of lawlessness, sectarianism, and chaos, which is far worse than Egypt and Tunisia combined. Irrefutably, “A nation’ s strength ultimately consists in what it can do on its own, and not in what it can borrow from others.” Indira Gandhi

http://www.iraq-busi...nd-constraints/

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That's a great post and a great article. Hopefully someone important is reading it as well. Many of the ideas in reference to rebuilding the infrastructure will require a currency with a value more significant than their current value. Hopefully, someone in the GOI understands this and we will see an RV someday. Hopefully...

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