This report is based on a survey conducted in late 2019 in 20 secondary schools in Sulaymaniah City, Kurdistan Region of Iraq. The survey was designed to find out effects of social media sites on students’ educational attainment.
The youth’s new life style is all presented on the different social media sites in Iraq. The number of users and amount of time spent on social media sites are expected to expand as smart-phone industry expands. Studies show that youth are the most represented among social media users. This report and descriptive statistics behind it is based on survey conducted to understand how Iraqi youth use social media, especially teenagers in the secondary schools. The study looks into the time spent on the social media and the type of social media sites are used in addition to the purpose behind using it. Moreover, the survey is trying to find out the effects of parental role on the young social media users.
As an activity of a Social Science class, four students with the supervision of their teacher (The author of this report) at the Azmar College for Gifted Students surveyed 1,700 students in 9th grade classes in 20 public and private secondary schools in Sulaymaniah. 1,650 students filled out the survey-forms. Of this number, 1538 students properly filled up the survey-forms (51% female and 49% male) as the Figure above illustrates. The schools were chosen randomly and from both types of public and private equally, trying to include all poor, middle class, and affluent neighborhoods in the city. The sample population is chosen to give an overall picture of both social and economic conditions of the students.
This white paper contains the final report of the Emergency Cell for Financial Reform, which was formed pursuant to the Cabinet Resolution No. (12) adopted in its session held on May 12, 2020, with the aim of managing the financial situation in light of the current financial crisis, and developing the necessary solutions to achieve financial reform and improve the performance of the financial institutions. The Emergency Cell for Financial Reform has developed the economic reform program stipulated in the Domestic and Foreign Borrowing Law No. (5) of 2020, with the aim of restructuring the Iraqi economy to address the upcoming challenges.
The Emergency Cell for Financial Reform (ECFR) was chaired by the Prime Minister, and the cell’s meetings were presided over by Minister of Finance, and included representatives from the economic ministries and the concerned state institutions, including Ministry of Finance, Ministry of Planning and Ministry of Oil, as well as the Central Bank of Iraq. ECFR held more than twenty (20) official meetings between May and August, 2020 and received detailed statements and reports from all concerned state agencies, as well as from the representatives of the private sector.
ECFR has completed preparing its report, known as the “White Paper”, referring to the approach followed in it, through which the government provides its recommendations on the key challenges, with the aim of crystallizing a common base to be agreed upon and approved, followed by presentation of the necessary legislations and, accordingly, the implementation procedures.
The White Paper was designed to present, in a locally and internationally reliable manner, a combination of strategies and policies needed to address the economic and fiscal challenges of Iraq that have largely exacerbated. The White Paper was written with a deep awareness and recognition of the urgent need that implementation of the core economic reforms can no longer be postponed or carried forward. We can no longer hope that oil prices will somehow rise again, giving us the fiscal space to carry forward the reforms indefinitely.
Given that accurate and systematic diagnose of the economic challenges and their deep roots is the essential basis for identifying the required remedies, nearly half of the paper has been devoted to describing the economic and financial challenges and analyzing their roots and implications, as well as the opportunities that can be utilized if the reforms are implemented. This section describes the key macroeconomic conditions of the country, as well as the reasons and the need for the reform and restructuring. Then, the White Paper continues to discuss the main axes of the reform proposals in the main sectors that drive the economy.
A number of technical appendices that support the White Paper have been developed, which will be released separately for researchers interested to obtain more details about the reasons behind our recommendations and our conclusions. A detailed action plan will be launched that will include the required actions, the agency responsible for implementation, the timeframe and the monitoring strategies. It was considered to postpone the launch of the action plan pending the approval of the reforms included in this draft, to reflect the comments of the Council of Ministers and the parliament representatives as the final action plan will depend on the final approved version of this paper. The details of the legislations to be amended will be provided after the due approval of the White Paper.
In his recent article “Iraq’s Government Investments: Between Ambitions and Stumbling,” Dr. Mudhr Mohammed Salih, former Deputy Governor of the Iraqi Central Bank and financial adviser of the Iraqi Government, fairly described the political and administrative dynamics that prevent investment in infrastructure; basically showing how endemic corruption, institutional limitations, and red-tape groups take away resources from infrastructure investment. As a result, the article suggests that Iraqi government’s direct dealing with international partners as the most likely feasible option to keep some investment in the underfunded infrastructure, assuming that direct dealing with international partners would help bypass impediments. Certainly, this can be one of the options, but it cannot be neither a sustainable and nor an easy one. Download PDF
This article is an attempt to touch on some other approaches that could help address the investment deficit before the one suggested by the Dr. Mudhr’s article.
The same challenges that have brought Iraq to the current investment deficit are likely to hinder the international partners’ engagement as long as the challenges are not tackled in their roots. The ruling elite and political parties’ patronage networks that have created the tough investment climate can ruin whatever the approach the Oil for Reconstruction Deal with China might achieve. As the challenges are so systemic and institutionalized, it is unlikely to find a solution by engaging international partners to bypass the impediments.
Mohammed Hussein
is policy director and political-economy analyst at ICPAR. He holds a master’s degree in specialized economic analysis: Economics of Public Policy, from the Barcelona Graduate School of Economics.
Dr. Mudher’s article realistically shed light on the ongoing fiscal challenges and how they have limited the resources for public investment. Additionally, it described how the investment management is not based on economic calculations but rather on political deals. Therefore, direct government to government deal with international partners is the only available option. This approach is understandable, but for how long can Iraq depend on it? One of the big challenges is tackling the obstacles that prevent the Iraqi government from scaling up infrastructure investment. The obvious answer is to blame the ruling elite and populist blocs that manipulate public funds to feed their patronage networks and satisfy constituents rather than considering the whole economic needs and infrastructure.
So, who can help addressing the investment deficit, which certainly can’t be short-term and neither an easy solution? The governments are too weak. The Iraqi parliament is overwhelmed by populist MPs. The private sector, as in any other conflict-ridden economy, is too weak and mostly informal. Non-state armed groups starkly use public resources for their ends and sometimes to challenge state institutions. This tough reality shows why there is neither a reformist leadership to start tackling the root causes of the investment deficit nor a leadership that can resolve problematic issues through bypassing them and working with international partners.
Looking at the government move to change the status quo; the cabinet is trying to get the parliament ratify another borrowing bill in late October to authorize more internal borrowing and finance public spending. It withdrew the 2020 budget draft bill, in which total spending is set to increase by 10 trillion IQD compared to the 2019 budget law, but investment allocations decreased by almost 2 percent. Moreover, the reality is much worse than the figures in the budget laws. Usually, Iraqi governments spend less than the allocations in budget laws. Till July 2020, investment spending was about 1.7 percent of the total spending, while it is about 23 percent in the proposed budget draft. Similarly, actual investment spending in 2019 was 15.3 percent of the total spending but nearly 25 percent in the budget law, according to Iraq’s Finance Ministry accounts. Figure 1 reports both investment and current spending in the past three years up to July 2020.
Figure 1illustrates all the investment and current spending of the federal government according to the published data on the website of Iraq’s Finance Ministry
Where to Navigate for Sustainable Solutions?
As Dr. Mudher’s article links the investment deficit to the structural economic and political impediments, the poor investment management can’t be addressed without structural institutional reform. Here, institutions refer to all the regulatory and policy actions that shape law-enforcement, property rights, competitive open market, and general stability that create a proper environment to allocate scarce resources. Such a reform certainly can’t be short-term. Even the recently published government White Paper set three years expectation to tackle some of the impediments. However, many crucial reform steps can be taken now.
In the short-term, some impediments can be addressed to revitalize part of the non-oil economic activities in the fast-job creating sectors such as agriculture,tourism, and services sectors. It just needs to shift the current fiscal policy towards investing more in the infrastructure. It does not need to wait for the oil price recovery if the cabinet, alongside with the parliament, work together on changing the fiscal approach and reforming the regulatory frameworks to restructure the current fiscal approach. Allocating more funds for infrastructure right now does not need waiting for oil price recovery. It needs slashing the bloated payroll to fund public investment that makes taxi drivers and farmers benefit from better streets and bridges. It is not going to be an easy trade-off in the 2021 budget law, but it is doable. If there is no political leadership to take the risk for the needed reforms and no parliament blocs to help with the needed regulatory reforms, no international partner can help.
In addition to the fiscal approach, Iraq’s unwritten social contract also plays a big role in allocating public resources to short-term political gains rather than capital investment. The core of the impediments is systemic. It is an evolutionary result of several decades of “Socialist Political Economy” of the Baath Regime and then the post 2003 Muhasasa System, where various groups compete over public resources to satisfy constituents by oil rents and public jobs. Therefore, the investment barriers are institutional and political. They are located in parliament as well as state institutions controlled by the red-tape groups. Simply, they are politically devised man-made problems, and their solutions can be found only within the same arena. Again, it is not something the international partners are willing (or able) to resolve.
To set realistic expectations, the investment deficit, as well as most of the other economic issues, can be addressed with a comprehensive reform programme, similar to the White Paper. The reform programme needs to design a new transitional social contract based on which the economic role of the state, relationship between government and private sector, and the whole market dynamics should be redefined. It needs to start with reforming what can be fixed today (as the aforementioned solutions) and then lay foundations for other medium–and long-term solutions. However, changing or establishing a new social contract means a long social and political process.
Iraq’s oil rent can’t satisfy a 40 million population, so the old (unwritten) social contract in most rentier states can’t work anymore. Even the agreed Iraqi Constitution in 2005 is apparently not working properly with regard to the distribution of oil wealth by Iraqi governments, including the Kurdistan Regional Government (KRG); both cannot provide jobs and subsidized services (health, schooling, food distribution, electricity, and refined oil products) as they used to do. In return, citizens are not keeping their voices quiet towards whatever the ruling elite does. They do not give up their rights in exchange for having public jobs and subsidized services that are not available anymore. Iraq cannot afford a rentier model similar to the Arab Gulf States. The ongoing salary protests in the KRG and the recent anti-corruption protests in the major Iraqi cities highlight the new dynamics. It emphasizes the need for a new social contract as well as a new governance-model that can deliver services and provide jobs.
Taking the Challenges as Business Opportunities for the Private Sector
The investment deficit and underfunded infrastructure would not be addressed only by the Iraqi government given the fiscal constraints of low oil price. Involving the private sector in smartly designed solutions is very much needed. Policies should be designed to take most of the current challenges as business opportunities. For instance, transforming neighborhood-generator owners and employees to private bill-collector firms would help fix much of the shortages in the electricity and running water sectors in addition to providing more money for investment in these sectors. With some smart electric and water meters, they can collect the bills better than state employees. They, ultimately, reduce some of the public funds wasted in these sectors and help the government increase revenues for infrastructure investment. Under such arrangements, private generator owners keep their jobs guaranteed while the state gets rid of the polluting deiseal generators. Such a solution makes citizens, the government, and generator-owners better off at a time when 50 percent of energy billed gets lost due to the lack of proper billing mechanism, effective metering, and commercial management systems, according to a 2019 World Bank report.
Besides, until the fiscal deficit will be eased land for reconstruction can be another option. Iraqi governments can give valuable urban and commercial lands to private companies in exchange of building roads, bridges, schools, and hospitals. Such a deal will improve the underfunded infrastructure and revitalize the construction labour market as well. Here, local and international companies might be involved to compete on viable deals directed to improve the neglected infrastructure.
Likewise, the high poverty and unemployment rates can be taken as an opportunity to supply cheap labor force provided the public sector stops the competition with the private sector by offering attractive salaries and benefits. This is what Iraq’s private sector needs, in addition to other protectionist measures, for being price competitive against imports. Here, the role of government to provide enforcement and parliament to afford suitable regulatory frame are needed. A reformist leadership is needed to translate the ongoing food security concerns into an opportunity for food processing factories and provide market for agricultural products.
Some of the aforementioned solutions can be taken now. They need a functional government and reformist leadership rather than oil money or international partners’ engagement. They can lay foundations for some of the solutions Iraq needs to revitalize its fast-growing sectors like agriculture, tourism, services, construction, and small industries. Even to address Iraq’s vulnerability towards external shocks (oil price fluctuations) these solutions are crucially needed as they increase non-oil economic activities.
What would prevent the current cabinet and parliament to address the investment deficit in the 2021 budget draft, to put aceiling on current spending and increase infrastructure investments? Why parliament does not initiate some regulatory reforms that are needed to ease business registration process, stimulate local and foreign investments, and reform the financial sector? These questions should be discussed and answered in public in a transparent manner. Problems and solutions are located here, and this is where public debates should start. If Iraqi citizens and civil servants are convinced of the harmful effects of double payroll recipients, ghost employees, and armed groups in the border-ports that take much of the public funds needed to pay salaries and provide services, they would have an incentive to be involved in any proposed reform effort. They would defend their interests against the corrupt ways of manipulating public funds. Here, a smart leadership would involve most of the Iraqis in the battle of corruption.
Lack of investment in non-oil infrastructure is an outcome of wrong fiscal policies which have been focusing on current expenditures and neglecting monitoring and evaluation of public investment projects. The issues are apure outcome of political and regulatory mismanagement. They have to be addressed by the same means. The Iraqi economic and policy challenges are properly identified in most of the reports by Iraqi economists and international institutions that have been published as well as development plans like Vision 2030, National Development Plan 2018-2022. However, they are not reflected in the investment strategy of the post 2003 governments, neither in most of the policies that have been made to organize the economy.
To sum up, this article is not to overlook the role of international partners that certainly can play a vital role in funding infrastructure investment. However, they cannot help that much if Iraqis do not take the lead in reforming the economy and addressing the investment impediments. Only addressing the root causes of the investment deficit can put Iraq on the path of sustainable development.
Chronic conflicts and wrong economic policies have pushed most of Iraq’s industries and producers out of business. They faced great losses at the local market and could not compete with cheaper and better-quality imports. Now, the market is import-dependent to the extent that the Iraqis producers are left with a small share in the local market. The chronic instability and endemic corruption have kept them from addressing the import-dependency. Crude oil exports, comprising more than 98 percent for the country’s exports and 93 percent of the public revenue, have been used to cover the import dependency. However, the oil revenue is not available anymore in the same bulk, and revitalizing the country’s private sector and economy basically needs robust protectionist policies such as tariff, import quota, and subsidies.
Since 2018, the Federal Government of Iraq (FGI) has placed tariffs on some products and put quota on some industrial and agricultural products. It has a farm-support program to buy grain products (wheat and barley) in prices higher than their market prices. As a result, some local food producers and industrial sectors have recovered. Now, Iraq is near to self-sufficiency in wheat and barley. Local soft drink factories recovered, and Iraqi cement and aluminum products also compete with imported products. Wheat production in 2020, in spite of the COVID-19 disruptions, is estimated to be 6 million metric tons (MMT), while the total consumption is estimated at 8.8 MMT.
Beside the structural economic, political, and security issues in Iraq, currency depreciation in Iran, Turkey, and Syria has made Iraq the dumping ground for neighboring countries cheap imports. The cheap imports could be favorable for Iraqi consumers, but they will put most of the Iraqi producers out of business unless some anti-dumping measures will be taken given the fixed value of Iraqi Dinar (IQD) against USD and relatively high production cost due to unfavorable business environment.
These policies have already shifted the dynamic of some of the Fast Moving Consumer Good (FMCG) product competition landscape in the market. It might be the early to start forcing the importing companies to bring in their operation into the country or replace them with locally produced products. However, it is clear that the current government’s agenda and loud voices in the mainstream would continue to expand the existing protectionist policies to safeguard local products. This will lead to significant changes in the market share of many products and competition of many FMCG products.
A Sizeable Market Outside of International Corporation’s Map
Iraq’s tough business environment and instability did not only keep the import-dependency but rather pushed out local investors to look for outside opportunities. The country looks like a funnel that can’t circulate the oil revenues within the economy, and most of the Iraqis’ income directly is spent on imported goods. Despite increasing oil revenues and bringing in heavy cash into the economy for the great part of the last 17 years, Iraqis’ general well-being did not improve. Youth unemployment is about 36 percent and national poverty rate is expected to reach 38.7 by the end of this year, under a high moderate forecast scenario of the World Bank Group.
The structural issues have pushed many well-known FMCG brands and companies away from directly engaging in Iraq. They have left the market at the hand of local traders who mostly overlook sustainability of the market and building long term success for short-term wins. With the consumer behavior adopted on the cheapest products, the market has been full of low-quality products despite the income growth for many Iraqis. This caused many local businesses to think about production as the quality of the consumed products has lowered down by most of the competing importers to take a greater market share. The local businesses adapted by functioning as packaging factories and competing imported FMCG in many sectors.
Leaving Iraq for local traders by most of the international FMCG corporations and not investing in a 40 million population market directly allowed the rise of many packaging companies in the neighboring countries such as Turkey and Iran. It also led the local businesses to shift to production since there was no need for a history of any sectors. The market becomes full of packaged products from many companies with no background or expertise. The local businesses could not only compete with foreign production, but also provide better services and products since they are more aware of the consumer demands.
According to an interview with Dolphin Sea CEO, “As Iraq goes through constant crises, many businesses moved into trading and especially FMCG; however, the competition got so tight, so it is hard to make any money while the risk is much higher compared to the past because every company looks for cheaper products. Consequently, a lot of new players enter the market, but only few remain.” The high level of competition and risk has forced many to think about producing from Iraq, where some market incentives are available. Here, they have leverage to pressure governments to assist them more and limit the access of the foreign brands into the market.
The Government Support
For years, Iraqi Governments promised to support the local products, but the support was never provided properly due to pressures from the neighboring countries or interests of politically linked traders and importers. The political elite who is mainly in the import business have played a big role in canceling out the government support until 2018, when great youth pressure for employment appeared. The Iraqi government started to impose customs-duty on products that have local substitutes such soft drink products, snack products, fresh foods, and agricultural products.
Unemployment rate, which is estimated at 17 percent, along with the youth protests made the FGI implement the new tariff code. It also pressured the Kurdistan Regional Government (KRG) to follow the same tariff-code, which was severely neglected to promote trading and make Iraq slowly become a hub for regional companies.
However, it is clear for the both politicians and businesses that the current situation is not sustainable and Iraq has to support local productions; otherwise it will face more social and political unrests not just from the young generations but also farmers and low-income people.
In Oct 2019, when young people took the streets of the Baghdad, it was clear that big changes were coming, and the status quo must change sooner or later. They were not just protesting to change the political structure but rather the whole economic regime in favor of local producers. The banner of “Made in Iraq” was visible among the young protesters as a sign of supporting local producers against neighboring countries’ cheap imports.
Aside from pressuring the government to make economic changes, Iraqi market is one of the biggest markets in the region with good consumption capacity. This has given the Iraqi Government an upper hand to implement its rules on all the companies not only FMCG ones.
Companies Are Bowing Down
As FGI increased taxes or banned imports like potato chips and soft drinks, some companies have faced tough choices of whether losing their market share or bring in their operation into Iraq. Previously, the market was dominated by the Iranian and Turkish brands. Extra tariffs revived local brands but also pushed many players to start setting up their production lines inside the country, and it also pushed some others to think about bringing in their operation into Iraq.
Brands like Lays started its production plant in Iraq motivated by high rate of the consumption in the market and trying to avoid the high taxes. Lays now has around 25 percent if not more of the potato chips according to industrial sources working in the snack market. In the long run, the market is expected to be fully covered by the local brands as new products are starting operating across the country. In addition, with a new protectionist strategy, the local producers for the first time have a chance to compete not just with the imported products but also with the other local brands.
Dramatic oil revenue crash as a result of the COVID-19 impacts in the international oil market has exposed FGI and KRG to huge fiscal deficit, but it also forced them to look for increasing their non-oil revenues and address the increasing public pressure for job opportunities and more stable economy. Leaders in the both governments have showed that revitalizing the private sector is where change needs to start. The new economic reality has pushed Baghdad and Erbil ruling elites to discuss various strategies to develop Iraq’s private sector in order to cope with the risen unemployment and poverty rates. Finance Minister Ali Allawi is expected to come up with his white paper regarding the economic issues by the end of this month.
Also, the Iraqi Government extended its support for the soft drink industry too. The sector was majorly dominated by the local water production companies for bottled drinking water, and Coca Cola and Pepsi which both have production plants in the country. But unlike the snack industry, the soft drink market is much bigger especially considering many factors such as improper water distribution in Iraq and hot weather that encourages a high level of soft drinks consumption across the year for many of the consumers.
According to an ICPAR estimate which are based on interviewing many stakeholders across the country, the market volume of the bottled water in 2020 is around 2 billion liters. The estimated carbonated drinks are also around 1 billion liters. These estimates make Iraq one of the biggest countries for soft drinking consumption in the region. With the current installed industries in the country and the protection from the government, this can be the threshold for the current local players to expand their operation for many other sectors and create a health competitive environment that benefits the consumers and the economy.
Currently, the local brands are trying to use the government protection to fill the gap in juice market. Previously, the Aujan Group Holding’s Rani was dominating the market, but with high taxes and import-bans the brand hardly survives in the market. According to an ICPAR source, the size of their sales in Iraq was over 250 million units annually, and losing this market has pushed the brand to work on setting a production plant in Baghdad. With the competitiveness from Rani, the local brands will need to keep up their productions and fight for their shares in an over 1 billion liter market.
Protectionist Policies and long-term Growth
There are many examples in modern history to show how protectionist policies boost or hinder economic growth; however, what is essential is these policies should be limited to certain timelines, not for long term periods that might destroy the competitiveness in the market and eventually harm consumers. There are many sectors in the economy that need protection from the government, but this should be to help these businesses to set their work and find a fair ground to compete with the imported and cheap products from Iran and Turkey.
Regardless of what will be the best scenario for an economy like Iraq, opening more businesses in many diverse sectors, mostly in the FMCG sector, will pressure the government for their protection. Such a created pressure would shape the market for the long term, favoring the local brands over the imports. This could create an important opportunity for investment and therefore reshape the whole economy in the long run.
The ongoing political and economic dynamics has the risk of leading the market towards more protectionism which is likely to create a path to large scale stagnation of the Iraq’s economy. It might leave consumers with no choice but to use inferior local products. Thus, protecting the local production should be understood in its long run effects and benefits not just blindly implemented which can easily make the consumers the hostage of the local producers.
Last month, Iraqi government renewed licenses of the three major telecom operators (AsiaCell, Zain Iraq and Korek) for 5 more years in addition to an extra 3 years extension as compensation for damages the ISIS war caused to the companies’ facilities and sites. The license-renewal decision, sparked a big political controversy, and is conditional on improving internet services to 4G, which is very needed given the poor connectivity and desperate needs to improve private sector businesses enabling an environment in the country. This article is going to shed the light on the controversy around the renewal decision that might hinder launching the 4G services. Download PDF
Currently, Iraq’s three operators hold licenses for 2G and 3G airwaves with TeleGeography notes set to expire in 2022. The renewal decision for 8 more years without enjoying enough transparency in the contract raised some MPs and politicians’ doubts, accusing the cabinet for facilitating an elicit deal and wasting public revenue instead of forcing the operators to pay back their debts and late penalties. The license fee is $233,674,667.2 per each company, with the addition of another amount that will be calculated later, on the additional frequencies.
Shiraz Jalal
is business analyst in ICPAR. Her research focus is on Iraqi private sector and labor market. She holds executive master of Business Administration from University of Kurdistan Hewler.
Outlining its plan, the Iraq’s current cabinet stipulated that in exchange for the extension, operators must pledge to first launch 4G services by early 2021; second, they must pay off half of their debt burdens. However, the renewal decision made several MPs and parliamentary committees call on the government to make the companies payback all their debts. While the Iraqi government set June 6, 2021 for national election, the political controversy might lead to preventing the license and hinder the telecom operators’ efforts to launch the 4G services.
Sparking Political Controversy
Thabet Al-Abbasi, Head of the Parliamentary Integrity Committee stated that a lawsuit has been filed to prevent the renewal of licenses and operators will be obligated to fully payback all their debts with its interests and late penalties. Similarly, a member of the Parliamentary Finance Committee, Majed Al-Waeli, submitted a request to the Presidency of the House of Representatives with the signatures of approximately 100 MPs to reject the renewal decision. On August 25, 2020, based on a lawsuit, Al-Karkh Court in Baghdad ordered to suspend all the procedures of renewing and extending work-license of the major telecom companies.
The Integrity Committee, in a public announcement, stated, “We are surprised by the cabinet’s decision to renew the licenses of mobile phone companies despite their poor performance during the past period, considering their outstanding debts owed to the public treasury.” It also stated, “We were surprised by the set of a requirements to pay only 50% of the outstanding debts owed by them. We were waiting for the government to enforce the operators to pay their full outstanding debts with their interest and late penalties, as Iraq is going through a stifling financial crisis. This money can be used as a source of revenue”. This is to call on the Council of Ministers to reconsider the renewal decision and follow up the lawsuits in this regard through the legal division of the Media and Communications Commission (MCC) and prioritize “Iraqi citizens’ national interests”.
Meanwhile, the Parliamentary Media and the Communications committee also called on PM Mustafa Al-Kadhimi to cancel the renewal decision till the contract with the operators is studied and transparency will be provided to the public. The committee along with a few members of the Parliament, submitted complaints to the Public Prosecution, the Court of Appeal, and the President of the Supreme Judicial Council, trying to prevent the operators working based on the renewed licenses.
After the official claims from the MPs and parliamentary committees, the first Deputy Parliament Speaker Hassan Karim Al-Kaabi in an official letter recommended the cabinet to suspend its renewal license decision for the telecom operators, responding to the MPs’ demands.
Contrary to the growing parliamentary opposition, the Media and Communications Commission of Iraq (MCC), a public institution, defended the decision of the cabinet by an official statement, issued on July 9, 2020, to state, “In light of the ongoing controversy regarding the extension of licenses for the mobile telecom operators in Iraq, the MCC would like to clarify to public opinion that the details and terms of the extension took into account national interests and keeps pace with modern technologies in the world of communications”.
MCC insisted that the contract with the operators is based on the Iraqi constitution and laws; the contract is a result of a long-term analysis considering the public interest requirements of economic growth. It also illustrated that granting three more years license as compensation for the ISIS war damages is not for free, but at a discount rate.
According to the MCC’s statement, the license-renewal decision was made based on certain criteria such as their share of GDP, the licensing period, the amount of the frequency spectrum, the regulatory wage, the availability of infrastructure, taxes, and fees. It also considers other contractual concessions (international telecommunications services and infrastructure) and the additional operational costs compared to neighboring and regional countries in addition to some requirements of the operational environment (electricity, protections, infrastructure) in the Republic of Iraq.
Responding to the mounting critiques, PM Al-Kadhimi stated that his government was trying to provide 4G service by the end of 2020. He also mentioned the tough trade-off between interests of the telecom operators and MPs that made him get the companies fully committed to the Iraqi regulations and government in return for the license renewal.
Behind the Controversy
Not-renewing the license means the 4G cannot be launched. It will finally affect Iraq’s National development planning strategies and further deteriorate already poor business enabling the environment to slow down the economic activities that depend on connectivity.
Given the endemic corruption in Iraq’s state institution and the overwhelming populist trend, it is unlikely the deal would be redesigned in favor of Iraqi customers and telecom operators. The controversy, so far, has divided the politicians into two groups. First, those who seek public and consumers’ interests for clear political reasons, but it is not clear they properly understand the tough business environment the telecom operators have survived in; ultimately, they might miscalculate an economic viability for the both government and the operators.
Second, there are some blocks and MPs who criticize the license renewal decision just to score points against the PM Kadhimi’s cabinet. This group unlikely offers anything to add to the deal except for making the tough business environment even harder for the operators.
Immad Muhammad, political analyst, believes that “the conflict between the political blocs and the prime minister is not technical but rather has political dimensions, as these blocs, such as Al-Fateh and State of Law, are trying to score against PM Al-Kadhimi.
Given the vibrant political controversy, there are some concerns about the telecom operators’ ability to launch the 4G service in 2020. The license renewal decision would be taken to the expected election campaigns and then causing bureaucratic hinders for the companies, while the 4G services are needed to provide high speed connectivity for e-business.
Policy recommendations:
There are two government bodies that oversee telecommunication licensing in Iraq – the MCC and the Ministry of Communications (MoC). The MCC is the primary regulatory body in charge of promulgating policy for frequency management, and licensing wireless and telecommunication services. It is also authorized to regulate the operators according to Iraq’s constitutional article of 103. To avoid such a controversy and provide, guarantee consumers’ rights, and provide a proper environment for the telecom operators, Iraqi authorities need to take the following steps:
1- MCC should pursue full transparency regarding the deals based on which the new licenses were awarded to the companies.
2- In case the cabinet would enforce to cancel out the license renewal, the contract can be renewed in two phases: First to extend the current contract which is set to be expired in 2022, for another year so the operators can keep providing their telecommunication services and connectivity to Iraqi citizens, winning time to broker a viable deal in which everyone will be better off. Second, the authorities can issue a tender for the 4G services, so the operators can compete to win the deal in a transparent and proper business manner;
3- The telecom operators must be obliged to payback all the liabilities based on a viable and fair time schedule. The debt payback should not be in a way that affects the companies’ capital investment to pursue the 4G services;
4- The government must protect the companies from all the outlaw groups and people that usually depend on extortion.
5- To improve the poor business enabling environment, the telecom operators should be encouraged to provide Internet of Things (IoT) or the Information Communication (ICT) platform, supporting development of e-commerce and digital economic activities.
Regarding the telecom operators, it is a right time to calculate their damages and economic losses for all the sites destroyed during ISIS war and preview armed groups conflicts in certain provinces. Requesting fair compensation for the economic damage and revenue-loses, they can ask the Iraqi government to write-off part of their debts, or provide them license in a discounted rate. The process must be based on a clear and acceptable criterion that all the companies can be enjoyed.
Editor’s note: The article was revised after the Al-Karkh Court’s order to suspend the procedures of renewing and extending work-license of the telecom companies in Iraq.
*Shiraz Jalal is business analyst in ICPAR. Her research focus is on Iraqi private sector and labor market. She holds executive master of Business Administration from University of Kurdistan Hewler.
For Iraq and the Kurdistan Region of Iraq (KRI), the COVID-19 pandemic could not have come at a worse time, adding sever public health, financial, and economic crises to the months of the political turmoil triggered by anti-government protests in major cities and towns, from Baghdad to Basrah. The plummeting international oil prices and general economic implication of COVID-19, as a result of the lockdown measures to contain the spread of the virus, have necessitated several measures and digitalizing economic activities is just one of them.
In a line with the most desired policy-goal of diversifying the country’s oil-depended economy, Iraq needs to design a comprehensive plan to promote digitalization of its economy. It certainly needs to be part of any economic reform and private sector development programme that is currently discussed to save Iraq from the overwhelming financial and economic crises. The digitalization is expected to lay foundations for sustainable economic growth and create jobs in several services sectors.
Shiraz Jalal
is business analyst in ICPAR. Her research focus is on Iraqi private sector and labor market. She holds executive master of Business Administration from University of Kurdistan Hewler.
Given the country’s relative advantages and demographic pattern, adding about 800 thousand new entrants to the labor market annually, developing digitally enabled sectors such as banking, trade-in services, public administration, connectivity, and construction would help solving many issues, including the endemic corruption and deficiency in public administration. It also helps creating private jobs for millions of Iraqi graduates who are currently unemployed or under-employed in the country’s military labor market and over-crowded public administration.
Digital infrastructure is the backbone of any digitally enabled economy and job market. This implies the availability and affordability of high-speed internet, which has not been seen in Iraq. Currently Iraqis are suffering from bad internet speed all over the country as they are provided with 2G and 3G data services, and the poor infrastructure is not going to help creating an enabling environment required to foster digital economic activities, which is expected to be one of the key pillars of diversifying Iraq’s economy, according to a World Bank report.
To provide and upgrade the digital infrastructure, 4G frequencies is essential. It is the main requirement to deliver any digital-service, transactions, and enabling environment that Iraq’s economy desperately needs. Just next to Iraq, Gulf Cooperation Council (GCC) nations—are already testing 5G technologies that enable faster speeds, better quality, and a whole new range of applications that connect devices and systems at a large scale. In a catchup effort to allocate of 4G frequencies, Iraqi mobile operators would be able to upgrade their networks and provide faster, more reliable, and higher-quality mobile broadband services with right investments in the place.
Potentials to Growth and Challenges
Iraq is seeing the commercial roll out of the ultra-fast 4G network currently with the service providers- Zain Iraq, Asiacell, and Korek Telecom reaching a crucial phase of the Long-Term Evolution (LTE) programme that will deliver the fourth generation network in the country.
The three mobile-phone operators have formally advertised their readiness to launch 4G. They have completed the “testing stage” of the 4G LTE mobile broadband network, and they are also provided with work-license. They are expecting to begin commercial launch in the coming months once they will gain greenlight from the National Communications and Media Commission of Iraq (CMC) and the Ministry of Transport & Communication.
The 4G LTE network provides speeds that is three-to-six times faster than the current 3G network. It can enable customers to instantaneously access high-bandwidth content and watch high-definition video, transfer large files, view multimedia-rich websites and use interactive mobile apps.
Now, the Iraq’s three mobile operators hold licenses for 2G and 3G airwaves which TeleGeography notes are set to expire in 2022. The current Iraqi government allows the country’s operators to renew their licenses for the next five years – but conditional on the exchange for the extension. Operators must pledge to launch 4G services by early 2021. Additionally, they must pay off half of their debt burdens and unpaid taxes. Even the issue sparked some political discussions as the government is facing budget deficit and trying to increase non-oil revenues by increasing taxes and collecting old debts from firms, including the mobile phone operators.
Digital Economy
The COVID-19 public health and economic implications have pushed us further into the digital world. Behavioral changes associated with the social distancing measures to contain the virus are likely to have lasting effects when the world economy recovers. Therefore, many customers are expected to prefer purchasing services and goods through digital transactions, paying digitally for services and goods that are delivered without any direct interaction between consumers and providers.
Even without such a required enabling environment, some successful stories have appeared. Despite of the ongoing challenges and poor infrastructure, several tour-agencies in Baghdad immediately shifted their services from tour-organizers to home delivery service providers and online-ordering service providers after the COVID-19 restrictions pushed them out of business in March and April, according to an ICPAR rapid assessment on the COVID-19 economic implications in June 2020. The quick adaptation was an outcome of their street-smart approaches not any tailored training and educational courses.
The government of Iraq (GOI) has offered its support for efforts and various policy recommendations to digitalize Iraq’s economy and deviate from the heavy cache-based transactions. It is committed to lay foundations for any regulatory and policy framework needed for the digital economy by investing in the required infrastructure. However, the COVID-19 multi-faceted crises and financial strains have limited the GOI’s capacity.
The Iraq’s National Payment System (NPS) suffers several infrastructural challenges, starting from electricity provision to the network connectivity, so they certainly hold it back from providing viable accesses to the digital payments regardless of all the efforts recently made towards developing the digital payment system.
However, Iraq has set ambitious targets in its NPS Strategy to catch up in the next five years on debit card ownership, cashless transactions, mobile money and electronic payments. The NPS Strategy for Iraq aims to guide a range of diverse stakeholders in their actions and goals to develop payment systems, instruments, and regulations. The stakeholders range from the Central Bank of Iraq (CBI) to commercial banks, government agencies, non-bank e-money providers, telecommunications and technology companies, as well as the end users of payment products: Iraqi citizens and businesses. A recent positive development is the issuance of e-Wallets: the GoI through the CBI has licensed two Payment System Providers (PSPs) to deliver this service. Usually, Iraq has been in the list of the economies financially un-secured, and it is difficult it is for banks in U.S.A, UK, EU or other developed countries to process the payments.
As part of its COVID-19 initiatives, CBI facilitated the process for Iraqi citizens to open e-wallets from their homes through a simplified e-KYC35 process using only their IDs. The GoI is currently running a campaign to promote the usage of cashless and contactless payments solutions (i.e. e-wallets/ POS/ POC and ATM’s) through the launch of the e-wallet scheme, the issuance of a promotional public information campaign including video etc.
Digitalizing the Iraqi economy is certainly needed for any economic reform and private sector development programme, which recently overshadowed policy discussions in Baghdad. This will help detecting much of the corrupt and elicit activities within the economy and public administration. It also helps creating many jobs and improve efficiency in many sectors in addition to facilitate the business enabling environment Iraq’s private sector desperately needs. The process is doable while Iraqi policy makers are discussing economic diversification and deviating from the heavy oil dependency under the ongoing demographic and political pressures in Iraq’s major cities.
The Covid-19 containment measures and restrictions showed the food security weakness of Kurdistan Region of Iraq (KRI) and Iraq, since they depend heavily on importing most of food items. The disruption in the international trade and supply chain failure may threaten the food availability in Iraq, and with the current economic crisis in the country, more than anytime, both KRI and Iraq have to take steps forward to rebuild their agriculture sector, and their failure will not just create a weak economy, but also unload many other long-term problems and dependencies, which will threaten the political and social stability of Iraq in both short and long term. This article is an attempt to explain what food security is, and what are the natural endowments and challenges that KRI has to do to rebuild its agriculture sector. And finally, what is needed to be done to make both KRI and Iraq more self-sufficient when it comes to food security.
As a concept, food security in the national level means secured food for a certain population in a geographical area to avoid the threat of hunger. The Food and Agriculture Organization (FAO) defines food security as providing healthy food with high nutrition quality for all the individuals. It implies countries’ capacities in providing food and agricultural products in their national boundaries for all citizens or importing products that can’t be produced in a sufficient amount. It basically means allowing everyone an access to food items as a universal right. The term does not only imply the availability of food items but also the purchasing power of the individuals to afford buying required food. This concept is used as a standard to evaluate food shortages and hunger because of draught, war, or any other human or natural reasons.
Abdulmutalib Raafat Sarhat
is natural-resources analyst at ICPAR and lecturer in the University of Garmian. His research focus is on Iraq’s water resources. He holds MSc in Civil & Environmental Engineering (Water Resources Management) from The University of Adelaide, Australia.
1- Moral Aspect: Since food is essential for human survival, it must be the priority of the governments and stakeholders; therefore, sources of food should be protected in a way that does not affect individuals’ lives, now and in the future. It is a universal right for everyone to have access to food regardless of political, religious, and social backgrounds. In addition, avoiding food-dependency, market monopoly should be part of policy priority in addition to guarantee anti-fraud policies and setting up a strict quality control measures and enacting the law of protecting local producers.
2- Social Aspect: Protecting the society through providing food for all individuals and controlling population growth scientifically can be compatible with country’s resources and economy.
3- Political Aspect: Any country that does not have food security, its political and national security is under threat, and it can be easily pressured and even destabilized by foreign entities.
Major Objectives of Food Security:
1- Any food security policy is aiming to achieve the following main objectives:
2- Availability: Food items should be available to a point that suffices all individuals’ needs within a strategic food-storage plan. Availability does not mean accessibility and here the income decides which people have accessibility.
3- Food safety: Food items and agricultural products should have information tags on them which explain the quality of the food and its expiry date. Food safety is actually a questionable area in KRI and the whole Iraq due to the chaotic imports through dozens poorly controlled border crossings. In addition, this includes the food items produced in Kurdistan, especially the agricultural products for which farmers use several types of pesticides. Products that requested usage of certain pesticides should not be supplied to market after a certain time, known as Safety Period, which regards protecting consumers’ health. Because agriculture sector in Kurdistan is weak and there is no supervision from Ministry of Agriculture and Water Resources (MAWR) over the farmers, there is nothing called food safety in the region.
4- Accessibility: All individuals, regardless of their incomes, must have access to food products.
5- Ensuring these three objectives and controlling challenges that hinder achieving them are the main factors to enjoy food security. Another greatest threat on food security is lack of water due to strong connection between food security and water security. Exacerbated by the global warming, KRG and Iraq are facing constant draughts and less flow of the main rivers into Iraq. This will not just damage the agriculture sector and make achieving food security a wishful thinking, but it can easily paralyze the country in many aspects and cause great migration influxes within Iraq or to the rest of the region. To avoid major crises in the future, Iraq’s food security level must go higher than it is now.
6- There are the following three Levels of food security:
7- Absolute food security can be achieved when a country provides enough or more than the demanded amount of food items. This has been described as self-sufficiency. Here, the country is able to export food products.
8- Relative food security means a country has the capacity of producing sufficient amount of some products, but it still needs to import some products to meet local demand due to lack of production capacity or unavailable conditions for producing certain products. Then, it has to depend on imports to meet the local demand with some consideration of prices of local products.
9- Food insecurity is the situation when a country does not have enough agricultural infrastructure, or it may have sufficient infrastructure without a solid plan to achieve food security. This condition leads to food dependency, and there are two types of food dependency which are short term and long term.
Closely looking at level of food security in Iraq generally and KRI specifically, it is clear that the region suffers from long term food insecurity. In fact, Kurdistan looks like a market for imported food products as it depends on few countries to provide food items for the sake the interest of few groups and families.
Usually, the food insecurity happens in countries or regions that lack sufficient land and water resources, but this is not a case in KRI, which has gigantic agricultural lands and water resources. But small portion of the lands and water resources have been invested or directed to provide food security, which is a clear indicator of poor governance and mismanagement of resources. Therefore, the rate of dependency of imported food in Iraq, including KRI, is the fifth in the world which is 81.5; following Lebanon with 82.5 and Kuwait at 93.5. This means that with any conflict in the region or any global crisis, Iraqis will have difficulty in providing food on their table even if they have income. The food availability and accessibility has always been a great issue for Iraqis whenever the country faced any crisis, as after 1991 with the international sanctions and 2014 with the rise of ISIS. Iraq does not have any flexibility when it comes to food security and it has always had this problem despite a great oil wealth and natural endowment.
Key factors behind food dependency could be poverty, unemployment, low production capacities, low human resources, overcrowding labor market of army and armed groups, neglecting the agricultural experts and skilled labors, youth migration, and monopoly of the market by the vicious circle of ruling elites and families. Most of these factors are working to hinder food security in KRI and the whole Iraq. Iraq has a pile of challenges to overcome in achieving long term food security and with the current situation in the country; a great political will and strength are needed to tackle some if not all of these challenges.
To achieve food security, certain natural and human conditions are required. Most of these conditions are available in Iraq and Kurdistan, but they are not properly used and mostly wasted to miss-management and lack of suitable policies, as they are pointed out bellow:
1- The water resources: There are still enough surface and underground water resources in KRI in spite of losing huge amount of it to pollution and dams built in Iran and Turkey. However, the main problem is still poor water-management as the water resources are used wastefully and unscientifically. Having such a great water resources, can lead to provide food security and boost agriculture sector if properly managed. Ultimately, it is going to help economic growth in the whole country.
2- Availability of agricultural lands, grazing areas and forests: Kurdistan has tremendous agricultural lands which are mostly fertile fields and can help easing the ongoing economic crisis in the region in few years if they are utilized fully. However, what is happened in Kurdistan is utilizing the land unscientifically and limiting them to change their purpose from agriculture for commercial and residential use that only benefit few.
3- Having good climate: despite the misuse of the resources and changes in Kurdistan’s environment, the region still enjoys suitable land and climate for planting and producing most of products, especially the strategic products that can realize self-sufficiency and boost productivity to the level of importing certain food items, wheat for example.
4- Having human resources and engaged private sector: As for this factor too, there are no major challenges except for proper policy to reform the agriculture sector. With a great and cheap labor hand, there is a big potential for growth in the region’s agriculture, and introducing new policy and technology can help resolving the region’s high unemployment rate. Then, the burden on the government will be relaxed if the agriculture sector will be prepared to attract local and foreign investments. Again, this could happen once the ongoing monopoly will be broken and allow private sector boost through food industry and agriculture projects; which means limit political elite’s grip in the region’s economy.
5- Having livestock and fishing resources: supporting the livestock and fishing areas is very important component to agriculture in a way to limit dependency on imported food items.
Again, KRI has proper infrastructure and lots of potentials to revive its agriculture sector and provide food security. However, there are some obstacles that hinder achieving food security, and they need to be taken to consideration.
1- Lack of sovereignty; it means sovereignty in providing security of food, water, and natural resources. Natural resources are considered permanent and future strategic infrastructure anywhere, and it is part of the future generations’ rights. Moreover, food security will not be achieved without having sovereignty over these resources. According to UN Article No 1803: “States and international organizations shall strictly and conscientiously respect the sovereignty of peoples and nations over their natural wealth and resources in accordance with the Charter of the United Nations and the principles contained in the resolution.” Thus, the authority that runs an area has to have decisions and take its responsibility in protecting and utilizing these resources. Unfortunately, the KRI’s ruling elite lacks any adequate governance, and they have fully surrendered to the regional powers’ interests such as Iranians and Turkish ones. The neighboring regional powers have taken advantages of the weak ruling elite and manipulated KRI’s resources, trying to keep it as a market for their imported agricultural products.
2- Lack of a serious political willingness from the KRI’s ruling elite to invest or redirect resources into agriculture sector. Since 1992, the agriculture sector has been neglected, while there is a huge bureaucracy, within the region’s Ministry of Agriculture and Water Resources (MAWR) with the main task to provide capital investment in the agriculture sector and incentivize farmers and investors to increase their productivity. Facing double economic sanctions from UN and Saddam Hussein Regime, the KRI’s agriculture sector in 1990s experienced a bit of resurrection for two reasons. First, the people had no labor-market choices except for agriculture due to UN economic sanctions against Iraq. Second, as a result of the sanctions and Iraq’s devaluated currency and deteriorated economy people could not afford expensive imported goods. This is a clear example to see how the sector can be grown if there are enough reforms and polices to incentivize agricultural activities and productivities.
3- Migration to city centers: this will cause great damage if not solved as it is happening in the KRG. This problem has not been addressed yet and will need great efforts to rebalance the rural areas’ population. In 1970s and 1980s, the Saddam Hussein Regime forcefully displaced a great portion of farmers in Kurdistan for political reasons and demographic changes in certain areas; however, in 1990s and even after 2003, KRG had a chance to encourage farmers’ return to their villages and revitalize those areas and achieve food security. After 30 years, this is impossible because of generational life-style changes and adopting to urban centers’ economy. Thus, to protect the environment, reviving the agriculture sector and achieving food security, new polices and legislations are needed to reform agriculture sector. Many farmers have received financial support without having any agricultural projects or used the aid in other sectors due to lack of supervision by MAWR.
4- Therefore, a strong government has to have firm decisions and regulatory capacity on land owners to plant their fields at least up to 75 percent annually. This needs proper supervision, and if they did not follow this regulation the government has to take back agricultural lands from the owners. Most of the lands were taken from the land lords during the agricultural reform in 1958. However, the continuation of the current situation will cause deep food security issues in the future and this makes the government’s role meaningless.
5- Lack of government supports for farmers; in most of the developed countries governments support farmers and meat production projects through providing planting seeds, poultry and livestock food, and supporting them to market their products. Trying to encourage local production and limiting imports of basic goods, they also protect national wealth through rotating the money spent on foods in the local market. However, these steps have not been taken in KRG and in many cases; the farmers have thrown away their products as a form of protest against the KRG’s ruling elite.
6- Weak agricultural guidance: reviving the agricultural sector needs a strong guidance system which directs farmers to use their resources in the best manner; without this, it is impossible to increase farming productivity and then achieve food security. In fact, MAWR does not do its job in this regard and needs a push to retake its responsibilities.
7- Private sector: reviving the agriculture sector and achieving food security requires an active participation from private investors in many aspects, such as food manufacturing, marketing, exporting and providing some other services. Unfortunately, the private sector in KRI has been monopolized by the ruling elite. If the agricultural sector, similar to other sectors, would be used for the ruling elite’s narrow interests, it will be hard to expect much productivity. It is very crucial to attract private and foreign investors into the KRI’s agriculture and parallel to that monopoly and misuse of political power to gain wealth should be uprooted, because if investment comes to the sector with the current market and political condition, it will only help the political elite become richer and control more resources while the rest of the population will become poorer. Breaking this monopoly will unlock a great potential in the KRI’s economy that can create many job opportunities and makes the region better secured.
8- Desertification and unorganized grazing in many areas of Kurdistan are the real threats, especially in the dry regions like Garmyan. If proper steps will not be taken to address these issues, KRI will lose invaluable resources forever.
9- Expansion of the cities on the agricultural lands and changing the nature of these lands from agricultural to commercial, real estate and residential.
10- Employing the rural people in public sector, especially within in the security forces, without any plan after 2004.
11- Not having a balancing plan between agriculture and other sectors such as industrial and energy. The KRG has been investing heavily in oil and gas sector, while ignoring agriculture. The policy led KRI to a point of weak security, lots of environmental damage, and desperate need of Green Revolution.
12- Lack of new technology and capital investment for food industry: this is a major challenge in front of agriculture sector, and so far no government institution neither policy has been used to push towards introducing new technology in KRI’s agriculture. The new technology is crucial to improve productivity in the sector, and it has proved to be key determent in boosting productivity in most of the advanced economies. Therefore, the KRI needs to deploy the top edge technologies in all aspects of agricultural activities such as irrigation, storing, manufacturing, and packaging food products.
To achieve food security, both Federal Government of Iraq (FGI) and KRI must undergo a set of reform policies, and more than anything they have to take the food security out of their political context. The task looks impossible for both Iraq and KRI, but taking any steps forward will change the direction of this country and will help even the future generations.
It is time for Iraqis not to just limit their demands within a political structure and get monthly salaries, but also to make this country better for everyone, and the place to start is agriculture sector. This will not just secure the source of food for Iraqis, but it will revitalize the economy and push the country forward in many aspects. The reforms and steps ahead needs a great public support that will not leave these issues to politicians and work and pressure the stakeholders not just revitalize the sector but also create a fairer society and limit the concentration of wealth into few hands.
The Iraq’s ruling elite has managed to survive the recent popular protests in the Shiite majority cities, towns, and neighborhoods, holding on the key state institutions and sustaining their sectarian based political regime with Sunni Arabs and Kurds; however, multiple major crises are looming as Covid-19 associated crises will overwhelm the Iraqi government, especially as oil prices plummeted and the Iraqi government’s revenues reduced by more than 42% . Download PDF
The entire current political and financial crises have caused an uncertain situation and the question is for how long the ruling elite will keep the business as usual situation. It’s clear holding on power will disappoint the protesters who have taken streets for demanding better governance, employment opportunities, and reducing corruption, and the ruling elite may gamble on everything to stay in power.
Mohammed Salah
is an Erbil based freelance-journalist and English translator worked for various media organizations
On April 9th, 2020, Iraqi President Barham Salah designated Mustafa al-Kazimi, Head of Iraqi National Intelligence Service, to form a transitional cabinet, mandated to prepare for earlier elections after passing new election law and changing Iraq’s High Electoral Commission. Kazimi is already in an intensive talk with the same ruling political parties to nominate members of his cabinet from those selected by the parties. This is a clear sign to replicate the same political model based on which all the post 2003 Iraqi governments have been formed, and it is one of the reasons that brought hundreds of thousands Iraqi youth to streets and ask for changing the whole political regime.
The history of this sectarian political regime dates back to 2003 regime change. The rivalry between Shiite and Sunni Arab political groups and parties cost thousands of Iraqi lives in 2000s and finally gave birth to the so called Islamic State of Iraq and Syria (ISIS). It has weakened institutions and destabilized the country and undermining Iraq’s national identity. Still the ruling elite tries to survive at the expense of the country’s major interests and by ignoring the popular demands of the protesters, from whom more than 600 activists have been killed or assassinated and more than 20 thousand more were injured, according to human rights groups.
Historically looking, the Shiite-Sunni division was caused by disagreements on political, theological, and doctrinal issues, but their current division is more about power struggle and conflicts over resources. The same is true about Arab-Kurd conflicts, which used to be over Kurdish rights and dream of independency, but gradually it evolved into oil and financial disputes. Now, rarely the Kurdish right and their historical struggle over disputed territories and Kurdish aspiration to establish an independent state makes into the high-level meetings while the majority of their talks are about KRG’s share in the national budget and Erbil-Baghdad disputes over Kurdistan’s oil sector.
Long Lost Dream of Democracy Led Iraq to Where It Is
The majority of the ruling political elite are leaders of the opposition parties who were fighting Saddam Hussein Regime till 2003, when the U.S. led coalition invaded Iraq and toppled down the regime. Many of them lived in exile for most of their adult lives, all over Europe and the United States of America, preparing for the transitional period that was supposed to liberate Iraq from Saddam Hussein’s dictatorial regime to a newly elected democratic government. However, not only they failed and created a failed state, but the current sectarian based regime (locally known as Muhasasa) actually descends from the opposition leaders’ conferences prior to the US invasion of Iraq.
Among the participants of the Iraqi opposition parties’ conference in London, there was Jalal Talabani (first Iraqi president after the regime change and leader of Patriotic Union of Kurdistan). He defined the mission of the conference as “restoring unity to Iraq as a people, territory and entity”. Similarly, Masoud Barzani, leader of the Kurdistan Democratic Party (KDP) who became president of Kurdistan Region of Iraq in 2005 also asserted on “a spirit of reconciliation and preservation of the [national] interest”. Ahmed al-Chalabi, founder of Iraqi National Congress and later interim oil minister, was describing the opposition parties’ conference-task as “a new way of thinking and the consolidation of democratic principles.” Shiite leader Mohammed Baqir al-Nassari said the attendees wanted Iraqis to be free and “to be able to express their opinions toward the government as they want, regardless of whether the leader is Sunni or Shiite or Kurdish”.
At the end of the conference, the opposition figures published a 10-page statement, which emphasized their desire to root out sectarianism, which was defined as Saddam Hussein’s persecution of the Shiite community in addition to build a new political regime based on human rights and equality. Over the past 17 years, the same opposition parties consolidated the sectarian divisions, weakened Iraqi institutions further, and tried to crack down on the peaceful protesters that demanded better governance. They are using the same oppressive methods, which they were victims of during the rule of Saddam Hussein Regime, such as assassinating and kidnapping activists.
Contrary to their previous claims, the opposition parties, through their ethno-sectarian lines, further deepened the existing divisions left after Saddam Hussein Regime. Their procedural democracy has changed five prime ministers and prevented emerging of a new brutal dictator like Saddam Hussein, but it has weakened Iraq’s state institutions to the extent that law enforcement institutions can’t function in areas where militias operate. The procedural democracy has only enacted the sectarian power-sharing rule in which a bunch of political parties, who represent Shiite, Sunni Arabs, and Kurdish communities, distribute power and state resources between their patronage networks.
The ruling elite’s ethno sectarian inter-fighting was largely fueling the civil war and conflicts that took hundreds of thousands Iraqi lives between 2005 and 2017. While the very same politicians who had made endless speeches about reconciliation, unity and democracy, used violence to maximize their stakes in the state institutions and feed their patronage networks on the state resources. Their power-sharing system has encouraged rampant corruption. Ministerial portfolios, civil service jobs and government contracts have been distributed along ethno-sectarian party lines.
It did not take long for ordinary Iraqis to see the dysfunctionalities and start demanding the reform. However, the ruling elite’s deep parasitical control over Iraq’s resources and institutions, while acting like warlords, not only gave them the limitless illegal resources to oppress the protestors, but also showed that the political elite will not shy from any solution to stay in power even if they destroy the country or act in a foreign interest. The nature of dealing with the protests now or in the future will radicalize the protesters and increase their demands and if this situation does not end peacefully, the entire political institutions may destroy in the future.
The Post Covid-19 Iraq
Prime Minister designate Mustafa al-Kazimi is proceeding with his efforts to form a transitional cabinet while Iraq is facing huge financial, political and health crisis. The implications of the lockdown polices and curfews are expected to raise national poverty rate, 20% in 2018, and unemployment rate, around 10% in 2019, while the Iraqi government, as well as the Kurdistan Regional Government, still don’t have a proper database to show where the impoverished people live, if they decide to move forward with the program to help them during this pandemic.
Six months of continues protests and calls for reform, the ruling elite still failed to designate anyone outside of the establishment, and the protesters will probably go back to take streets to keep demanding for employment opportunities and better governance as they see the government formation process is going contrary to what they have been demanding.
To address all these challenges, Al-Kazimi’s transitional government must act fast and do whatever it takes as the following:
– The transitional government has to take some immediate austerity measures, such as slashing salaries of top government officials, MPs, and military generals and leaders in addition to cutting all the non-necessary public expenditures or politically-driven corrupt resource-allocations. The government has to do whatever it takes to provide salaries of civil servants, pensioners, and members of security forces.
– It has to start pushing for a meaningful restructure of Iraq’s electoral commission and truly amend the election laws. Free and fair elections, should be held under international community’s observation in no later than April 2021.
– The transitional government need to disarm all militias and armed groups that previously helped in the fight against ISIS. Without keeping weapons only under control of security forces, it will be impossible to conduct fair elections since most of the militias work for the ruling political parties’ agendas.
– It is not realistic to believe that this government has time and resources to diversify the Iraq’s economy, the most rigorous and important task any government can take in this petroleum-dependent state. However, it can start some right bases for and make proper polices to help its subsequent government to follow up with. At least it can’t worsen the situation and give public jobs as political bribe, like what outgoing Prime Minister Adil Abdul-Mahdi did in the last few months of his cabinet, when he hired about 500 thousand new people in public sector.
The spread of coronavirus, Covid-19, globally means more populations in lock downs while slowing major economic activities, but for Iraq, it goes beyond the normally expected health and economic crises. The country’s political economy is designed in a way that any economic lose might lead to conventional conflict over resources. The pandemic dramatically decreased revenues of Iraqi Federal Government (FGI) and Kurdistan Regional Government (KRG) due to the recent oil price crash. The revenue-lose would force governments to pursue some painful readjustments that would probably embroil the country to devastating security instability and conflicts.
The simplest model to anticipate the Iraq’s short-term expected uncertainties is conflict over resources. Major actors of the expected conflict are government backed militias, ruling political parties’ patronage networks within state, and finally, but the most vitally, young protesters who have been taking streets to demand better employment opportunities and overhaul the current political regime. Additionally, FGI and KRG have been in constant long standing oil and financial disputes, and it is hard to expect them finding sustainable solution considering strains the Covid-19 associated crisis put on their budgets.
Mohammed Hussein
is policy director and political-economy analyst at ICPAR. He holds a master’s degree in specialized economic analysis: Economics of Public Policy, from the Barcelona Graduate School of Economics.
Iraq is the second largest oil exporter in OPEC after Saudi Arabia and exports about 3.5 million barrels per day which is more than 93% of the whole country’s exports that generates about 90% of state revenues, according to the Iraqi Ministry of Finance. The new oil price crash certainly will pose huge economic hardship for the caretaker Prime Minister Adil Abdul-Mahdi, and it will be the greatest challenge for both the transitional period in the country and any new prime minister.
Iraq’s draft 2020 budget was based on a projected oil price of $56 per barrel, while the market price is less than $29 per barrel. Before the Covid-19 associated disruptions, Iraq’s fiscal policies were not functioning in a sustainable manner. Iraq closed the 2019 fiscal year with 27 trillion IQD (equivalent to almost $22,631,559) deficits, about 20% of the total budget (127 trillion IQD), while average price of Iraq’s oil was $64 per barrel in 2019. For 2020, Iraqi government increased the number of its civil servants by more than 17% (almost 500 thousand) just to appease protesters. Salaries of the civil servants took 57% of the 2018 budget, and it will take about 67% of the projected 2020 budget, according to Mudher Mohammed Saleh, the economic adviser of Iraqi PM.
All these figures confirm that Iraq can’t proceed with its 2020 draft budget, and it has to take several painful fiscal and economic measures amid risen concerns about its ability to provide salaries of the civil servants. As the Figure 1 shows, Iraqi government lost more than $4 billion in its monthly oil revenues, which is about 58% of the 2019 monthly revenues.
Figure 1 is a simple comparison between Iraqi government’s revenues in 2019 and estimated revenues in 2020. The source of the 2019 oil revenues is Iraq’s Oil Ministry. The 2020 estimated oil revenues per crude oil barrel at $30 and Iraq’s oil at $26. Taking out the production cost and oil produced and refined inside the country and sold in subsidized prices.
Likewise, the KRG’s total revenue is already slashed by 40%; if only oil prices were considered its oil revenues also slashed by 60%. However, the region’s internal revenues decreased to almost zero according to Rebar Ahmad, KRG’s Interior Affairs’ Minister. Even considering everything the same, a hard year is awaiting the KRG. The following graph shows the KRG’s current and pre-Covid19 revenues.
Figure 2 is presenting the estimated KRG’s current revenues based on the assumption that the Iraqi Federal Government keeps paying the region’s monthly transfer (national budget share) without any disruption and the region’s independently exported oil revenue ($300 million per month in 2019) would be slashed by 45% take into account the current international oil price and the constant discounts KRG has made in its oil sells. The KRG’s data is taken form Kurdistan Parliament’s Committee of Oil and Natural Resources. Revenues of the KRG’s monthly independent oil sales used to be more than $650, but it was invested mostly to pay back its debts to oil traders and financial dues of international companies operate in the region. After current oil price crash, the KRG will have to reduce the amount of the payments to oil traders and international oil companies if not also to slash its payroll and executive expenditures by more than half.
Expecting Conflicts
All armed militias and political parties’ patronage networks basically live on Iraq’s and KRG’s public funds. When their revenues are reduced or cut fully, possibilities of their inter-fighting conflicts arise as the following:
– Conflicts between the non-state armed groups that are organized under the umbrella of the Public Mobilization Union (PMU), funded by FGI. Conflicts between armed groups are funded by Kurdistan Government’s Ministry of Peshmerga such as KDP’s 80-Forces and PUK’s 70-Forces, which are funded by public but reporting to the Kurdistan Democratic Party (KDP) and Patriotic Union of Kurdistan (PUK). In Federal Iraq, some of the armed units and parties are already in a constant conflict over the nomination of Prime Minister Designate Adnan al-Zurfi. In Kurdistan Region, media war has already started between KDP’s and PUK’s affiliated security institutions, blaming one another for spying to foreign entities and involving in various criminal activities.
– Conflict between major political blocs in Baghdad while they are in the process of government formation talks after President Barham Salah designated former Najaf governor Adnan al-Zurfi to form a transitional cabinet till the upcoming election. Most of the blocs have paramilitary wings within/outside PMU such as Badr Organization, Asa’ib Ahl al-Haq, Sadrist Movement, KDP, PUK. The armed political parties and groups only obey state institutions and orders which suit them, and most of them have long record of manipulating state resources for their partisan and militia interests.
– Disadvantaged ordinary citizens who might lose their incomes as a result of the Covid-19 associated financial crisis. They would probably join the ongoing protests in the major Iraqi cities, frustrating by the dare economic situation. These people are mostly labors of private sector service businesses or self-employed. Many of them have expressed their political willingness and demands by the ongoing protests.
To reach more resources, the militias have gotten involved in the regional conflicts which already some of the political parties and armed groups are engaging in while attacking the U.S. led Coalition Forces in Iraq. They have managed to translate their regional and international supports (from Iran, Saudi Arabia, and the U.S.) to receive supports and also extend their local influences and grab more resources by manipulating public funds to enhance their patronage networks in state institutions; using public jobs and government contracts.
Iraq’s oil revenue, so far, has fed the conflicting groups sufficiently and allowed them to keep this interconnection between economic resources and holding political power at expense of state institutions and public interests. The Coved-19 economic disruptions and international oil price-crash have not left enough resources to finance government expenditures and feed all the parasite militias and political parties. Therefore, conflicts are looming and the stronger groups are expected to kill out weaker ones and create a food chain pyramid which naturally leads to great conflicts. The most likely Conflicts
Before Covid-19, Iraq has been in deep political turmoil as protesters are taking streets to demand regime change, economic reform, and better governance which forced the current PM Adil Abdul-Mahdi to resign and become the caretaker PM since December 1st, 2019. On March 17th, 2020 President Barham Salah designated Adnan al-Zurfi, to form the transitional cabinet. However, the designation divided major Iraqi political parties and blocs into supporters and foes.
Major Shia blocs like Fatah Alliance, State of Law and their affiliated political parties and aemed groups have rejected the nomination, while Sairoon Bloc, Nasr Coalition, and PUK have supported him, lasting the ongoing polarization to infinite. The two contradicting political stands are in the process of consolidating their influences and maximizing their gains during the government formation talks.
The first group is trying to prevent Zurfi from forming the government and the second one is trying to shape the transitional government in a way that will let them come back as the dominant ruling party in the upcoming elections. The both groups, as well as Zurfi, are equally rejected by the protesters and activists who have taken streets since October 1, 2029 to demand better governance, less corruption, and more employment opportunities.
Similar to the Baghdad’s political atmosphere, conflicts are looming Kurdistan Region. The nature of the expected conflict is slightly different here. The strong party system of the KDP and PUK is still functional enough to prevent any farther frictional conflicts, but the parties’ inter-conflict is most likely what needs to be tracked.
KDP’s and PUK’s armed groups and security institutions are always possible potential for such a conflict. Plus, the KRG is expected to face popular protests by the public employees and people who might lose their incomes due to the new Covid-19 financial crisis like the daily violent civil unrests in 2018, 2017, and 2015, when civil servants were protesting for their delayed salaries. The KRG is always three months late in paying its civil servants, and it has not paid salaries of December 2019. Plus, there are always possibility of political conflicts to shake the ongoing power sharing deal between the region’s main ruling parties KDP, PUK, and Gorran.
These are just usual conflicts with each financial crisis, similar to what happened in 2014 when the KDP’s armed forces pushed out Gorran Movement from the KRG’s cabinet and prevented Parliament Speaker Yousif Mohammed from reaching the parliament which ultimately led to closure of the parliament for more than 2 years. Similar incidents are expected to a point that can lead to paralyzing the KRG, as most of the civil unrests are started from areas controlled by PUK, and this might be used by PUK to pressure the KDP or even look for new government.
Besides, it is still not clear how both FGI and KRG are going to settle down their long standing oil and financial disputes, while they have just lost such a big amount of their oil revenues. Staying within the current understanding will be also hard as FGI may have hard time to abide by its financial obligations, which will make hard sending the KRG’s monthly budget, and by that KRG will be crippled if not paralyzed financially with the current oil prices. It is clear they are heading towards tough economic and financial crises, and both ruling elites in Baghdad and Erbil hardly can find suitable solutions while they do not have enough cash in hands to pay for their civil servants and help heavily damaged small businesses in the after math for Covid-19 crises.
What Needs to Be Addressed
What brought Iraqi people to this dare economic situation is not only Covid-19 economic disruptions but the oil-dependent economic policy, adopted by multiple Iraqi regimes since 1970s and further consolidated by the current ruling elite. Although the Iraqi state leaders, including current Outgoing Prime Minister Adil Abdul-Mahdi, have always argued for diversifying the economy, they did nothing but farther deepened Iraq’s dependency on oil exports at expense of other sectors. The Figure 3, which is World Bank’s Data about Iraq’s fuel and agricultural exports for 12 years, show how the previous Iraqi governments only depended on oil exports and neglected all the other sectors, especially agriculture which is still the main job creator.
Figure 3 is comparing Iraq’s oil exports to agricultural exports from 2004 till 2016. The pattern has not changed contrary to the state leaders’ promises to diversify the economy and deviate from the oil dependency. Source of the data is World Bank Group’s website.
Certainly, there is no short-term solution for Iraq’s economic problems and impending financial shortages. Fixing the oil-dependency economic model needs long-term solutions with heavy capital invest in other sectors like agriculture, industry, and tourism not to revive them but also make them competitive. Both governments do not have such a time and money to start now. Therefore, FGI and KRG have to look for faster and more immediate solutions in order to not descend to further political and security crises. And the only option is to launch a serious and comprehensive reform project that reduce corruption and cut out unnecessary public expenditures.
No reform project can be implemented if it does not start with reducing corruption in state institutions and decreasing political party’s monopoly in Iraqi market. The steps would not be easy, but the cost of not doing anything will be much higher. The business as usual situation can’t work anymore, and there must be immediate initiations on how to increase internal non-oil revenues, reduce public expenditures, and find an efficient mechanism to collect revenues in ports and border-crossing points that have been taken to pockets of armed groups’ and political parties’ patronage networks.
It is not realistic to expect such a reform project without having a responsible leadership that can fight the corrupt political parties and their militias. Who can take this responsibility and what social and political groups will support such a reform plan is the question which can’t be answered as the Baghdad’s political elite is close to open conflict and new waves protests soon may cover the whole country.
The threat of coronavirus, known as COVID 19, is knocking at the gates of Iraq, and until now, 26 cases have been confirmed in Iraq. Despite Federal Government of Iraq (FGI) and Kurdistan Regional Government (KRG) efforts to curb the spread of the virus, they are all reactionary and late. Regardless of the real impact of the new virus, Iraqis are at least mentally preparing for the worst, but one aspect that has not been thought through is the economic impact of the public fear, which may wipe out any GDP growth this year but also leave scars on the economy for years ahead.
Both FGI and KRG are taking extreme measures to contain the biggest pandemic in the 21st century; however, the efforts may be great and painful but not the most effective. The closest source of the virus for Iraq is Iran. All the reported cases are those who just came back from Iran even though it is not clear the level of the outbreak across the country. In addition, Turkey to prevent any outbreak in the country, closed border points with Iraq and cancelled all the flights. This indicates that Iraq is isolated from its main two trading partners, and the isolation can be greater if the virus spreads more.
Hemn Mohammed Awrahim
is political and economic analyst in ICPAR. He is regular contributor for Inside Iraqi Politics. He has BA, major in international studies and minor in economics, from The American University of Iraq-Sulaimani.
KRG already closed all the traffics through border-crossings with Iran except for trucks that bring oil products and other goods. FGI has done the same but with smoother hands. Both limited the number of border points to work with Iranian businesses and canceled flights from and to Iran. Meanwhile, Turkey also closed its only border-point with the KRG and Iraq. The precautionary measures immediately concerned ordinary people over supply-shortages of various basic goods such as food, vegetables, and oil products. The first signs of panic were seen when people in Sulaymaniyah waited in the long queues to fill their car-tanks, knowing that a big portion of the gasoline is imported from or through Iran. Both KRG and Iraq will face shortage of food if they close the border-points fully, as they import up to 90 percent of the needs of vegetables and fruits from Iran.
Iraq has a more than 1,000 kilometers long border with Iran, and controlling it will be impossible as many people from both sides have been interacting for decades. Also, millions of Iranians each year come to visit the holy Shiite sites in Najaf and Karbala and tourist sights of KRI. Many also come to work in Iraq. All these linkages do not just mean great economic loss for both countries but are also reshaping the whole supply chain which may need years to be fully functional.
Moreover, still the full size of this pandemic is not clear. It is very possible that the virus spreads across the region, and then what will be the both governments’ reactions? Their precautionary steps may plunge both economies into great depression.
The threat of the virus has been affecting the Iraqi economy before it reaches its borders as the demand for crude oil went down in the global market. Iraq’s economy fully depends on oil export not just to have access to hard currencies but also to function. The Iraqi market has not still recovered fully from 2014 global oil price crash and its aftermath. Despite, exporting more oil crude into the international market and higher prices globally, the local market confidence is low still. As the virus spreads in the main industrial countries, the demand for oil can easily go down much more, and Iraq till now looks clueless about that possibility.
Add-in Salt on Iraq’s Injuries
Currently, FGI is facing huge popular protests in Baghdad and major southern cities and towns of the country. They are trying to peacefully reform the political regime in Baghdad and replace the current elite and ruling political parties, blaming them for bad governance, endemic corruption, and lack of employment opportunity. Any shock in the Iraq’s revenue may put back Iraq as a state into the verge of disintegration especially since Iraqi Government promised a lot of new hiring and investment in infrastructure.
The already angry protesters find the government incapable to tackle the basic challenges in the country. Coronavirus is not just a threat to Iraqis’ health but to their economic lifeline as well, oil revenue. it could easily destabilize the whole country and cause political and economic chaos if it has not dealt with having the full picture in mind.
Currently, both Iraq and KRG are looking into options of preventing major gatherings and any other activities that might spread the virus. By now, KRG has closed schools and universities and similar steps will be taken for the Kurdish New Year (Nowruz) and many other anniversaries in March and later on. Similar steps have been taken in provinces under control of FGI by closing the Shiite pilgrims in to Shiite sites from Iran. If these steps do not curb the spread of the virus, then both FGI and KRG are in the direction to limit gatherings in public places and even service business such as restaurants, cafes and tea houses.
Local authorities have already closed cafes in Kirkuk and the town of Kalar (south of Sulaymaniyah) Sport centers, public baths, and swimming pools are closed in the majority of cities and towns. If they will keep closing services businesses, the whole service sector in Iraqi economy will be damaged. Many businesses will go bankrupt. The country’s tourist sector will be damaged. Without Iranian pilgrims Iraq’s religious tourist-sector will collapse. The Kurdistan Region’s tourism sector depends on internal Iraqi tourists; their flow also stopped as local authorities informed tour agencies to stop bringing anyone fearing from the pandemic.
The economic consequences are still not comprehensible on Iraq, but it is not fearmongering to expect a great shock in the Iraqi economy, which might leave its traces for years to come. Iraq has a very weak industrial sector (except for oil and gas sector), and its agriculture is still not supplying local market sufficiently; therefore, the service sector will be hit the hardest, and this will stop circulation of capital in the market and affecting the low-income workers and their families the most as their income will end.
The protesters in Iraq are mostly consisted of low income or unemployed youth, and the extreme precautionary measures will affect them the most. This easily can be like pouring gasoline on fire and cause great security challenges for the FGI.
For Iraq, handing coronavirus needs a comprehensive plan. It would easily develop to a huge national security and political challenges. This is a challenge for the current destabilized Iraqi state which is not clear if new elections will be held or a new person will assigned to form a new cabinet. The virus could transmit into a political and security challenge if it will not be talked in a way that will not crash local market and businesses.
Iraq Is Caught With Poor Health Infrastructure
Iraqi health sector is already facing a lot of challenges and the level of services is inefficient. The sector has been neglected for years due to internal conflicts, corruption, and mismanagement. According to the World Bank, Iraq has 1.4 hospital beds per 1,000 citizens and the number of the physicians per 1,000 people is 0.8. Both indicators show that Iraqi health sector is not ready and with that insufficient health sector, the hospitals will be packed and will become another source of infection among healthy citizens. The insufficiency in the sector has already pushed a lot of people to look into other countries or private sector to receive healthcare services. Spreading the epidemic will pressure the sector more into chaos and it is too late for any reform.
By beginning of March, the country goes through a seasonal change and temperature rise, every year thousands of people would get normal seasonal flu, but now having seasonal flu leads to many consequences. Thousands of people will be hospitalized and the seasonal flu patients and coronavirus cases will be mixed in quarantine locations which most likely spreads the virus more effectively within the neglected health institutions in Iraq. Also, Iraqis are social and the level of hygiene is low compare to the health standards normally and for this virus specifically. This is another challenge that may easily cause an out of control situation in many areas.
The spread of Coronavirus is also another test for the whole health care system and government to handle the crisis in best manner. However, the already not trusted system will push many to use other methods for solving the threat of coronavirus which can exacerbate the situations and put thousands of families in risk. Already the number of people wearing mask has skyrocketed in the public places and different messages are sent to the public through half scientific half media outlets. KRG is investing a lot to prevent a mass hysteria among the public, but with the first death because of Coronavirus, shock waves will be sent to the public, and this will cause a multi-dimensions crisis. The level of misinformation can add to a public panic and people may take similar steps as it happened in Sierra Leone with the Ebola outbreak.
Still too much is unknown about this virus and how it can be curbed. However, despite all the extreme measures by both Iraqi Federal Government and KRG, Iraq is very vulnerable. The possibility of widespread of Coronavirus may not just cause a health crisis in the country, it can easily flatten the GDP for this year and years ahead.
Figure 2 is presenting the estimated KRG’s current revenues based on the assumption that the Iraqi Federal Government keeps paying the region’s monthly transfer (national budget share) without any disruption and the region’s independently exported oil revenue ($300 million per month in 2019) would be slashed by 45% take into account the current international oil price and the constant discounts KRG has made in its oil sells. The KRG’s data is taken form Kurdistan Parliament’s Committee of Oil and Natural Resources. Revenues of the KRG’s monthly independent oil sales used to be more than $650, but it was invested mostly to pay back its debts to oil traders and financial dues of international companies operate in the region. After current oil price crash, the KRG will have to reduce the amount of the payments to oil traders and international oil companies if not also to slash its payroll and executive expenditures by more than half.
